CORNELL LAW LIBRARY m KF Oforn^U Slam #rl|ool Slibrarg Cornell University Library KF 999.M19 1913 A treatise on the law of national and st 3 1924 018 877 617 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/cu31924018877617 A TREATISE ON THE LAW OF NATIONAL AND STATE BANKS INCLUDING THE CLEARING HOUSE AND TRUST COMPANIES APPENDIX CONTAINING THE NATIONAL BANK ACT AS AMENDED INSTRUCTIONS RELATIVE ORGANIZATION OF NATIONAL BANKS Second Edition Revised and Enlarged By H. W.'^MAGEE. B. L. Member of the Los Angeles Bar, and formerly one of the Board of Bank GommissionerB of the State of California ALBANY, N. Y. MATTHEW BENDER & CO. 1913 /^^f^^f, Copyright, 1906 By H. W. MAGEE Copyright, 1913 By MATTHEW BENDER & CO. 25 Hamilton Printing Company, Albany, N. Y. PREFACE TO SECOND EDITION. The passing of progressive laws by many of the States, regu- lating and controlling the business of banking, and the recent decisions of the courts on the powers and limitations of banks, have induced the author to write a second edition on banking. When the first edition was given to the public in 1906, the question of the right of a State through its Legislature to deprive a citizen of the right of free banking, through restrictive legis- lation, had not been settled by the courts. Since that time the question has frequently* been under judicial consideration, and we believe it is now settled that the business of banking, unless conducted as authorized by the legislative authority of the State, is forbidden to an individiial. This question up to the present time has not been directly presented to the Supreme Court of the United States, but it has held in the case of Assaria State Bank v. DoUey, Il9 TJ. S. 121, that the Legislature of a State may impose " incorporation as a police regulation and as a privilege of safety." Many of the States, in view of the ruling of tbe Supreme Court and as a measure of protection to the stockholders and patrons of banks, have seen the necessity of enacting safety laws establishing conditions upon which a banking business may be put into operation, and regulating the powers and limitations of its business, officers and agents. The author has insistently contended that the very nature of the business of a bank and its relationship to its customers and the public generally place it vsdthin the scope, or class, of a public utility institution; and, therefore, subject it directly to strict regulation and control of law. A bank, then, must be conducted according to law. The busi- ness must be put into operation as the law directs. Its officers and agents who may be designated to carry on the same must do so according to law, and the object of this book is to instruct, aid and assist them in this important trust which they occupy. To this end the author has presented all the laws relating to incor- [iii] iv Peeface. poration, and the powers and limitations in the conduct of the business of banking, as defined and construed by the leading and important cases reported by the courts. The original plan, as outlined in the first work, has been followed in this edition — of giving in full the opinion of the courts in the most important cases, while in others the law prin- ciples are declared and the cases cited. The author has sought to make the present work a practical text-book for the every-day use of the banker and a reliable authority for the busy lawyer. The plan of this work is original and this edition is the result of a long and conscientious study of the powers and limitations of banks. The cases are carefully considered and are made the groundwork of the various subdivisions of the book. As in the first edition, a chapter is devoted to the Clearing House, its powers and authority as related to banking. Trust companies are also treated; while the Appendix to the work is a full and complete text of all the laws regulating and controlling National Banks, together with full instructions relative to their organization. The first edition was so favorably received that the author confidently expects this work to meet with much greater favor. H. W. Magee. Pasadena, Cal., May 1, 1913. PREFACE TO FIRST EDITION. The aim of the author in writing this book has been to make it a treatise of special value and practical service to the Banker and Lawyer. With this object in view and to accomplish this end, the laws as found enacted in the statutes and established by the courts are presented. From this authentic source, the banker, lawyer and student may be able to obtain the informa- tion desired upon all questions arising in the organization, busi- ness and management of a bank. Banking is a business which, by legislation, is placed under the control and regulation of law ; and at the present time there are but few private banks in existence in the United States. The law in some of the States forbids the privilege of banking to private persons. Therefore banks are now very largely incor- porated associations, deriving their authority from the national banking laws enacted' by Congress and the laws enacted by the States. All banks incorporated under the national banking laws de- rive their authority from the government of the United States, and are, therefore, called national banks. The national banking system originated as a financial measure in the early years of the Civil War. It was urged as a measure of currency reform and also as a means of replenishing the United States treasury. Its prime object was to stimulate and improve the sale of govern- ment bonds and to provide a national currency which would have a uniform value. The Supreme Court of the United States, in construing the purpose and object of national banks, has judicially declared that " they are institutions designated to be used to aid the govern- ment in the administration of an important branch of the public service." Banks which are incorporated under the State laws are desig- nated and called State banks, deriving their power and authority from the laws enacted by the State. [V] vi Pbefaoe. All incorporated banks obtain their powers directly from the statute laws authorizing their creation. These powers or rights are denominated and called statutory or expressed powers. They have also inherent, incidental, and implied powers, such as are necessary to carry out and into effect the full purposes of the corporation. The author has endeavored, in the treatment of the subject, to define these various powers and laws which control and regu- late the business of banking. An earnest effort has been exerted to present the law and demonstrate what a banking corporation can, or cannot, do. With this object in view all the leading cases reported, involving the rights and powers of a bank, have been reviewed and considered; and when deemed expedient the opinion of the court, as rendered in the case, has been quoted in full. This plan has been adopted for the reason that an analysis of the oases or opinion of the court frequently fails to correctly express and record the law as rendered by the court. In other instances the law principle is simply and plainly stated, and supported by citation of cases rendered by the court. And the result is the production of this work, which may rightfully be called a, ready reference or worhmg iooh on hankirtg. It is also designed and was originally intended to be a digest of the law and a work for the busy lawyer, to be used in the practice, determination and settlement of questions arising and growing out of the business of banking and in the trial of bank cases. The author has given unlimited time and care to the selection and compilation of cases directly in point, and the labor thus performed is labor saved to the busy practitioner. All subjects and questions of importance relating to and af- fecting banks and banking are presented, including a chapter devoted to (each) The Clearing House and Trust Companies. A chapter has also been added entitled Inspection and Exami- nation of Banks. This chapter is a discussion in a general way of the procedure and mode required to be followed by the examiner in the examination and checking up a bank. The Appendix to the work contains all the laws of the Na- tional Banking Act in force at the present time. In addition thereto complete and full instructions are given relative to the orgaization of national banks. Peeface. vii In conclusion this work is respectfully submitted upon its merits, with the hope that it may prove (itseK) to be a correct guide to lawful and honest banking, and a texfc-book invaluable to the banker, lawyer and student. H. W. Magee. PASADEiiTA, Cal., January 2, 1906. TABLE OF CONTENTS. [References are to pages.] CHAPTER I. Banking a Constitutional and Legislativb Petvilbbe. Section 1. Right of banking controlled by legislation CHAPTER II. State Regulation of Banking after Obganization. Section 2. State has power to regulate the business 10 CHAPTER III. Banking Without Authobitt. Section 3. Unauthorized banking ■. 15 4. A de facto corporation 16 5. Ultra vires acts 16 CHAPTER IV. Banks Classified and Defined. Section 6. Commercial and savings bank 23 7. General definition of banking 24 8. When a broker becomes a banker 24 9. Broker and banker distinguished. 27 10. Bank further defined 28 11. Private banker defined 28 12. Trust companies defined 28 13. Clearing house defined 29 14. Commercial bank further defined 29 15. Mutual savings bank defined 30 16. Capitalized savings banks defined 30 17. National banks further defined 31 18. Enlarged and specific definition under State authority 32 18a. Commercial banks more clearly defined 32 19. Mutual and capitalized savings banks more clearly dis- tinguished 33 CHAPTER V. The Oeganization of Banks and Peoof of Coepobate Existence. Section 20. Preliminary steps — Organization of national banks 35 21. Who are natural persons 35 22. Who can form a bank 35 [ix] X Table of Contents. [References are to pages.] Section 23. Married women as incorporators 36 24. Term of existence 38 25. Purpose of corporation 38 26. Location 39 27. Capital required 39 28. Requirements of law essential 40 29. Organization, when complete 40 30. Organization of branch banks 42 31. Proof of corporate existence 50 32. When the life of bank corporation commences 51 CHAPTER VI. By-Laws. Section 33. Power to make, inherent in corporations 53 34. By-law defined 53 35. Power delegated by statute 53 36. Who has power to make by-laws 53 37. Where statute provides purpose 54 38. By-laws must be reasonable 54 39. When a by-law becomes a law 54 40. By-law must be proved 55 41. Actions upon by-laws 55 42. By-law void which waives liability of stockholder 55 43. Lien created upon shares of stock 56 44. Failure to make by-laws 57 45. Reasonable by-law 57 46. Defining duties of officers 58 47. Amending by-laws 58 48. Provisions and form of by-laws 59 49. Statute prescribing time in which by-laws are to be adopted 59 CHAPTER VII. Stockholdebs' Rights and Liabilitibs. Section 50. Who may be a subscriber 61 51. Enforcement of subscriptipn 63 52. What constitutes a stockholder 66 53. Purchase and transfer of stock 69 54. Eight of stockholder 72 55. Notice may be waived 72 56. The right to vote 72 57. Right to vote by proxy 73 58. Right of stockholder to inspect records of corporation 73 59. Liability of stockholder to creditors of corporation 74 60. Liability cannot be enlarged by a by-law 74 61. When stockholder liable to corporation, liable also to creditors 75 62. Liability beyond subscription 75 63. Fixing date of liability 78 64. Extent of stockholders' statutory liability 79 65. Liability of pledgee or trustee 81 66. An assignment absolute in form may be shown to be only intended as security 82 67. Statute protecting pledgee 83 68. Individual liability of shareholders of national banks 83 Table of Contents. xi [References are to pages.] Section 69. Extent of liability 84 70. Liable for interest 84 71. Representatives of deceased shareholder liable 84 73. Married woman shareholder 84 73. Executors, administrators, guardians, or trustees not per- sonally liable 87 74. Individual liability of a stockholder in national bank, how enforced 87 75. Creditor may sue stockholder of State bank corporation . . 88 76. Enforcement of individual liability of shareholders under the National Banking Act 88 77. When right of action accrues against stockholder in na- tional bank 88 CHAPTER Vni. Bank Officers and Agents. Section 78. Directors — General discussion of duties and responsibili- ties 91 79. Directors of national banks 97 80. Directors of State hank 99 81. Directors' meetings 99 82. Place of meeting and notice 99 83. Number necessary to constitute a quorum 100 84. Directors of national banks must act as a unit 100 85. Board electing officers of bank 101 86. Vacancies in the board 101 87. Duties which cannot be delegated 101 88. Cannot delegate authority to make discounts 102 89. Cannot delegate statutory duties 103 90. Powers and limitations 104 91. Limitation of power 104 92. Assessment of shares — National banks 104 93. Directors cannot give away property of bank 104 94. Cannot settle with cashier for his deficits 105 95. Assuming debts of others 105 96. Cannot take advantage of position for profit 105 97. Discretionary power 106 9-8. Safe rule 106 99. Releasing debt 107 100. Releasing subscriber to capital stock 107 101. Securing preferred creditor 108 102. Removing employees 108 103. Courts declare that directors are trustees 109 104. Misappropriating bank funds 110 105. Rights of directors 110 106. Notice to the board 112 107. When the law imputes knowledge 112 108. Notice to a director 113 109. Director must have actual knowledge 118 110. When director is chargeable with knowledge as against himself 119 111. Directors' liability 119 112. Degree of care 122 113. Acting in good faith 123 114. Directors declaring a dividend 123 115. Excuses of directors 124 116. Compensation of directors 127 xii Table of Contents. [References are to pages.] CHAPTER IX. The President. Section 117. General qualifications 129 118. Qualifications necessary to hold oflSce 133 119. The president's powers 133 120. President's powers derived from statute 140 121. Limited and prohibited power of president 141 122. Representations and admissions, effect of 143 123. President liable to bank for acts which amount to breach of trust 143 124. President borrowing from bank 145 125. President's compensation 148 CHAPTER X. The Cashibe. Section 126. Cashier, general duties and qualifications 153 127. Cashier executive officer of the bank 155 128. Cashier's inherent powers 157 129. Cashier has inherent power to certify checks 158 130. Cashier cannot certify his own check 164 131. Power to draw cheeks 166 132. Power to receive offers for the purchase of bank securities 169 133. Cashier has inherent power to deal in bills of exchange. . 169 134. Cashier has charge of personal property 170 135. Power to endorse negotiable paper 172 136. Endorsement for accommodation 173 137. Cashier's powers and duty when " run on bank " 175 138. Cashier borrowing money — Inherent power 177 139. Inherent power to collect debts 189 140. Liability of cashier 190 ' 141. Cashier responsible for subordinates, when 192 142. Cashier — Penalty — Liable, when 193 143. Notice to cashier of bank — When notice to bank 195 144. Cashier's declaration and admissions 198 145. Cashier's acts away from bank 200 146. Limitation of power 200 CHAPTER XI. Payino and Receiving Teixees. Section 147. Functions of the paying teller 203 148. Teller's duties 210 149. Teller's torts 215 150. Receiving teller 216 151. Limitation of power 225 152. Rule as between depositor and bank correcting errors 225 153. An act prescribing punishment for mutilating, uttering, or passing United States coins 227 CHAPTER XII. The Note TEiiEs. Section 154. His duties 229 Table of Contents, xiii [References are to pages.] CHAPTER XIII. Bank Poweks Detined. Section 155. Statutory and expressed powers 231 CHAPTER XIV. Converting State into National Banks. Section 156. Steps to be taken 238 157. Incorporated banks can only be converted 239 158. Corporate relation to old bank after reorganization 240 159. Liabilities of national bank after conversion 243 CHAPTER XV. Amending Bank Chaetees. Section 160. National bank charter, how amended 247 161. Amending State bank charter 247 CHAPTER XVI. Bank Removing its Place of Business. Section 162. National bank removing its place of business 252 163. State banks removing place of business 252 164. Place of business 255 CHAPTER XVII. Inceeasing oe Reducing Capital Stock. Section 165. Law governing national banks 257 166. Increasing capital stock of State banks 260 167. Reduction of capital stock 262 168. Reducing capital of State banks 264 CHAPTER XVIII. Changing Name of Bank. Section 169. Adopting new name 266 CHAPTER XIX. Deposits. Section 170. Nature of deposits 270 171. Nature of general deposits 271 172. Special deposits 277 173. Deposits of paper 282 174. Liabilities of banks for special deposits 282 175. Nelgigence in delivery of special deposits 285 176. Bank deposits received 286 177. Kinds of deposits received 290 xiv Table of Contents. [References are to pages.] CHAPTER XX. Deposits Repaid. Section 178. When and how paid 293 ITS. Bank may refuse payment of deposit, when 297 180. Payment of trust funds 301 CHAPTER XXI. Checks. Section 181. Defined 306 182. A check must be dated 307 183. It must be drawn on bank 309 184. Cheek must be payable to a person named or to his order or to bearer 309 185. A cheek must be for the payment of a certain sum of money 310 186. A check must be signed by the drawer 310 187. Days of grace 311 188. Checks negotiable, when 311 189. Delay in presentment 312 190. What is a reasonable time 312 191. Diligence to bind the endorser 313 192. Stale checks 313 193. Holder of check rights against bank, 314 194. Certified checks 319 195. Eight of holder to look to both the acceptor and the drawer of a certified check 323 196. Drawer of certified check, when released 323 197. A bill of exchange may be accepted orally 325 198. Liability of banks — Negligence 325 199. When mistake in certification may be corrected by a bank ■ 326 200. Who may certify checks 326 201. When bank estopped from denying a forged certification. 326 202. Bank can correct mistake, when 327 203. Memorandum checks 327 204. Post-dated checks B28 205. Bank bound to honor cheeks, when 331 206. Nature and effect of check 335 207. Check as payment 335 208. Revocation of checks 337 209. Presentment for payment. 341 210. Mistake of bank in payment of check 344 211. Forged checks, bank paying 350 212. Right of bank against presenter and owner of forged paper 354 213. Alteration after signing and uttering 356 214. Right of possession to paid checks 359 215. Present rule 360 216. Equitable and safe rule 361 CHAPTER XXII. OVEBDRAFTS. Section 217. When unlawful 363 218. Usage or practice, no authority 363 219. Overdrawing may be legalized 367 220. Officer allowing overdraft, criminal act, when 368 221. Drawer liable to bank for overdrafts 368 Table of Oontents. xv [References are to pages.] CHAPTER XXIII. Certificate of Deposit. Section 222. Defined to be promissory notes 369 223. Statute of limitations 373 224. Interest 375 225. Authority of banks to issue certificates 376 226. Payment of certificate 377 CHAPTER XXIV. Bank Loans. Section 227. Nature of loans 379 228. Liabilities of any person, etc., to national banks 380 229. Restrictions against savings banks 384 230. Power to make loans 385 CHAPTER XXV. Banks BoBBO\^^NG Monet. Section 231. National bank, extent of power 389 232. State banks borrowing money 414 CHAPTER XXVI. Banks Dealing in Stocks and Bonds. Section 233. National banks, power limited 418 234. Liability of national banks holding stock as security 423 235. Commercial and savings banks dealing in stocks and bonds 423 CHAPTER XXVII. Bank Discounts. Section 236. Power to make, vested in directors 425 CHAPTER XXVIII. Dealing in Commebctal Papee. Section 237. Distinction between " discount " and " purchasing " 428 238. State banks, power not limited 435 CHAPTER XXIX. Banks Holding Public Funds. Section 239. National banks depositaries — Public moneys 437 CHAPTER XXX. Banks Dealing in Real Estate. Section 240. Limitations upon national banks 441 241. State banks dealing in real estate 447 xvi Table of Contents. [References are to pages.] CHAPTER XXXI. Ofpicbbs Bobeowing Ftjnds of Bank. Section 242. Prohibited from loaning to themselves 451 243. Restrictions and limitations 452 CHAPTER XXXII. Employing Counsei,. Section 244. Authority in president or cashier 454 CHAPTER XXXIII. DoNATiojfSBY Banks. Section 245. Power vested in stockholders 456 CHAPTER XXXIV. CONDTJCTING SAFE DEPOSIT. Section 246. Incidental power 45!> CHAPTER XXXV. Banking Hotjbs. Section 247. When binding upon the public 463 CHAPTER XXXVI. Banks Lending Credit. Section 248. When prohibited by law 466 249. Where a bank may make a guaranty 467 250. Guaranty of banks — Acts ultra vires 468 CHAPTER XXXVII. Notes and Acceptances. Section 251. When note made payable at bank — Duty of bank 470 252. Set-oflF — Estoppel 471 253. Maker's right of set-off 475 254. Special deposit, when accepted to pay note 475 255. Money deposited with bank to pay note is not payment .... 475 256. Application of deposit on note 476 CHAPTER XXXVIII. Collections bt Banks. Section 257. Subject treated — Duty of bank 477 258. Relationship existing between the parties 477 259. Endorsement 478 260. Nature of relationship between the parties 479 261. When a bank becomes bailee 480 262. Paper payable at a specific bank 486 Table of Contents. xvii [References are to pages.] Section 263. Law of place governs relation 487 264. Usage and custom 487 265. General rule as to title of paper 491 266. Form of endorsement controls title to collection 493 267. Blank endorsement 495 268. Power to collect may be revoked 496 269. Bank lien upon collections 496 270. Authority of bank to make collections 498 271. Bank suing in its own name 504 272. When bank may renounce its authority to collect 505 273. Duty of collecting bank — Care — Diligence 506 274. Duty to present — Collection 500 275. Presentment of checks 510 276. Protest — Bank's duty 511 277. Bank accepting payment for collection 511 278. Duty of bank to collect interest, when 514 279'. Collecting bank's liability as endorser 514 280. When bank liable for fraud or mistakes 517 281. Liability of initial bank for default of its agents 518 382. Who are suitable agents 519 283. Banks employing notaries — Conflict of authority as to liability 521 284. Officers of bank acting as notary 521 285. Initial bank's liability for default of its correspondent — Confliot of authorities 525 286. Review of decisions 543 287. When correspondent bank liable to initial bank 545 288. Where paper total loss 545 289. Right of creditors to proceeds of collection 546 290. Insolvency of initial or corresponding bank affecting pro- ceeds of collection 546 291. Collections completed, when 048 292. Bank's liability for negligence in failing to make col lections 549 CHAPTER XXXIX. Savings Banks. Section 293. General discussion — Nature 551 294. State regulation of business 555 295. Depositor in mutual savings bank constitutes the bank.. 557 296. Depositor has no liability in capitalized savings bank. . . . 558 297. Nature of deposit in a capitalized savings bank 558 298. Trust deposit 559 299. Rules regulating and governing depositors 559 300. Gift — Savings bank deposit in trust 561 301. Amount of deposit received may be governed by statute. . 561 302. When special deposit preferred 562 303. Notice of withdrawal, when not required 562 304. By-laws of savings banks 563 305. Pass-books 572 306. Savings banks borrowing money 574 307. Investments 575 308. Insolvency of savings banks — Appointment .of a receiver. 575 309. Rights of depositors 576 310. Depositor denied set-off 576 xviii Table of Contents. [References are to pages.] CHAPTER XL. Liens op Banks. Section 311. General and special liens 579 CHAPTER XLI. Statute of Limitations. Section 312. Runs against checks, when 589 313. Runs against certificates of deposits, when 589 314. Statute runs against stockholder's liability, when 592 315. When State statute does not govern 594 316. Fraudulent act by oflScer of bank — Statute runs, when. . . 595 CHAPTER XLII. FORFEITUBE OP BanK'S EkANCHISB. Section 317. Acts of banks which may forfeit charter 596 318. Acts constituting liability 596 319. Failure to comply with statutory provisions — Grounds for forfeiture 598 320. Nonuser of charter 598 321. Willful violation of law or bank's charter cause for forfeiture 599 322. Taking usurious interest held to be a violation of charter. 600 323. Bank may be indicted for taking usurious interest 600 324. Directors embezzling funds of bank — Mismanagement. . . . 601 325. Wrongful act of a single director 601 326. Bank doing business not authorized 601 327. Directors liable for losses resulting from violation of law. 602 CHAPTER XLIII. Insolvbnot. Section 328. Insolvency defined 603 329. Means may exist in another State 613 330. Officers taking deposit with knowledge of bank's insolv- ency — Liable, when 613 331. Officer must have actual knowledge of insolvency 616 332. Insolvency — National banks 617 333. Deposits may be recovered, when 617 334. Special deposits recoverable 620 335. Insolvency demonstrated 620 336. Set-off 620 CHAPTER XLIV. Dissolution. Section 337. Voluntary liquidation 625 338. Authority of officers in charge 625 339. Liquidation does not dissolve corporation 626 340. Liquidation dividends 626 Table of Contents. xix [References are to pages.] CHAPTER XLV. Extension op Coeporate Existence. Section 341. National banks 628 CHAPTER XLVI. Clearing House. Section 342. History of the clearing house 631 343. Character and object 632 344. Organization — Not a corporation 635 345. Rules of association 636 346. Nonmember bank not affected by clearing house rules 638 347. Settling daily charges 639 348. Presentment of collection through clearing house 640 349. Effect of clearing house customs between member banks. 640 350. Settlement between bank members of clearing house 641 351. Rules in Massachusetts where check was paid under mis- take of fact 642 352. Forged checks passing through clearing house — Bank's liability — Negligence 642 353. Rights of drawee bank against payee in endorsing forged check • 655 354. Clearing house member representing a bank not a member. 657 355. How clearing house may sue and be sued. . ._^ 658 356. General utility of clearing house and its incidental powers. 659 CHAPTER XLVII. Trust Companies. » Section 357. Distinguished from a bank 666 358. Trust companies may have banking powers 667 CHAPTER XLVIII. Inspection and Examination op Banks. Section 359. Checking up a bank 676 360. Reports required of banks 683 361. Suggestions to examiners 687 TABLE OF CASES. [References are to pages.] Ackenhauaen v. People's Sav. Bank. 110 Mich. 175, 68 N. W. 118, 64 Am. St. Rep. 338 ... . 570, 572 Adam v. Orange County Bank 17 Wend. (Mass.) 514 592 Adams v. Clark 38 Colo. 65 83, 90 V. Cross Wood Printing Co. . . 27 111. App. 313 143 ^tna Ins. Co. v. Alton City Bank. . 25 111. 221 528 .(Etna Nat. Bank v. New York City Fourth Nat. Bank 46 N. Y. 82, 7 Am. Rep. 314. . . 272 351 Agnew V. United States 165 U. S. 36, 174 Fed. Rep. 539. 686 Ainsworth v. Bank 119 Cal. 470 620 Albers v. Commercial Bank 85 Mo. 173, 55 Am. Rep. 355. . . 339 Albert v. State 65 Ind. 413 50 Aldrich v. Chemical Nat. Bank 176 U. S. 618 407 V. Skinner 98 Fed. Rep. 375 593, 594 V. Yates 95 Fed. Rep. 78 594 Alexandria Canal Co. v. Swann. ... 5 How. 83 136 Allen V. First Nat. Bank 23 Ohio St. 97 385, 453 T. Gillette 127 U. S. 589 667 — - V. Luke 141 Fed. Rep. 694 121, 602 V. Merchants' Bank 22 Wend. (N. Y.) 215 515, 541 T. Suydam 20 Wend. 319 503 Allerton First Nat. Bank v. Hoch. . . 89 Pa. St. 324 128 Alta Silver Min. Co. v. Alta Placer M. Co 78 Cal. 629 150 American Can Co. v. Williams 178 Fed. Rep. 420 273, 550 American Exch. Nat. Bank v. Metro- politan Nat. Bank 71 Mo. App. 451 521 American Express Co. v. Haire. ... 21 Ind. 4 541 V. Parsons 44 111. 312 546 V. State Nat. Bank 27 Okla. 824 348 • V. First Nat. Bank 82 Fed. Rep. 961 100 American Exp. Nat. Bank v. Lori- etta G. & S. M. Co 165 111. 103 620 American Ins. Co. v. Oakley 9 Paige (N. Y.) 496 136 American Loan & Trust Co. v. North- western G. L. Co 166 Mass. 337, 44 N. E. 340 674 American Nat. Bank v. Fidelity Co. 129 Ga. 126 300 — J- V. Hammond 25 Colo. 367, 55 Pac. 1090 191 — ^ V. Minor & Son 142 Ky. 792 580 V. Presnall 48 Pac. 556 291 Am. R. Co. V. Haven 3 Am. Rep. 377, 101 Mass. 398. 73 Anderson v. Alton Nat. Bank 59 111. App. 587 542 V. Pacific Bank 112 Cal. 598, 44 Pae. 1063 285 V. Rodgers 53 Kan. 542 521 [xxi] ^xxii Table of Cases. [References are to pages.] Andrews v. Ins. Co 37 Me. 256 21 V. SuflFolk Bank 12 Gray (Mass.) 461 518 Angel V. Rosenburg 12 Mich. 241 614 Anglo-Californian Bank, Ltd. v. Grangers' Bank 63 Cal. 359 582 Apsey V. Kimball 221 U. S. 514 89 Armour Packing Co. v. Davis 118 N. C. 548 492 Armstrong v. American Ex. Bank. . 133 U. S. 433 170 V. National Bank 90 Ky. 431 172 V. Second Nat. Bank 38 Fed. Rep. 883, 886. . 39, 43, 44 V. Warner 49 Ohio St. 37© 622 Arnison v. Smith 41 Ch. Div. 348 127 Arnold v. Hart 176 111. 442. . '. 276 Asher v. Sutton 31 Kan. 286 150 Aspinwall v. Butler 133 U. S. 595 50, 51 Assaria State Bank v. Dalley 219 U. S. 121 4, 5, 9 Athol Music Hall Co. v. Carey 116 Mass. 471 64 Atlanta Nat. Bank v. Burke 81 Ga. 597, 7 S. E. 738, 2 L. R. A. 96 350 Atlantic Cotton Mills v. Indian Orchard Mills 147 Mass. 268, 278, 17 N. E. 496, 198 Atlantic Nat. Bank v. Harris 118 Mass. 147 243, 594 Atlas Bank v. Nahant Bank 3 Met. (Mass.) 581 287 Atlas Nat. Bank v. Nat. Exeh. Bank. 57 N. E. 605, 176 Mass. 300.637, 641 Attorney-General v. North America Life Ins. Co 82 N. Y. 172 11 V. Utica Ins. Co. 15 Johns. (N. Y.) 357 4 Atwater v. American Ex. Bank 152 111. 605 605 Auburn Bolt Works v. Shultz 143 Pa. St. 256 68 Auburn Sav. Bank v. Hayes 61 Fed. Rep. 911 624 Augusta v. Earle 13 Pet. 519, 596, 10 L. Ed. 274, 311 9 Aull Savings Bank v. Lexington. ... 74 Mo. 104 575 Aurora State Bank v. Hayes-Eames Elev. Co 88 Neb. 187 333 Auten V. United States Nat. Bank. . 174 U. S. 125 404, 624 Auto Mfg. Co. V. Merchants' Bank. . 116 Md. 179 272 Ayrault v. Pacific Bank 47 N. Y. 570 545 B. Bachelder v. Central Nat. Bank 188 Mass. 25 550 Bacon v. Mississippi Ins. Co 31 Miss. 116 150 Bailey v. Mosher 11 C. C. A. 304, 63 Fed. Rep. 488 126, 602 V. O'Neal 72 Ark. 327 94 Bailie v. Augusta Sav. Bank 95 Ga. 277, 21_S. E. 717 541 Baines v. Babcock 95 Cal. 581 .. ! 88 Baker v. Beach 85 Fed. Rep. 836 87 Balfour v. Fresno Canal Co 123 Cal. 395 115 Ballin v. Ferst 55 Ga. 546 74 Ballston Spa Bank v. Marine Bank. 16 Wis. 125 182 Baltimore & Ohio R. R. Co. v. Worthington 21 Md. 275 518 Bank v. Bank 62 Kan. 788 550 V. Banking 108 Me. 79 278 v. Bennett 159 Mo. App. 1 142 V. Butler 41 Ohio St. 519 522 Table of Cases. xxiii lEeferenoes are to pages.] Bank v. Calter 101 Ga. 134 586 V. Chilson 45 Neb. 257, 63 N. W. 362 486 V. Collector 3 Wall. 495 387 V. Dadridge 12 Wheat. 64 365 V. Dunn 6 Pet. 51 143 V. Earp 4 Rawie (Pa.) 384 276 V. Floyd 142 N. C. 187 543 V. Griffin 168 111. 341, 48 N. E. 154 136 ■ V. Haskell 51 N. H. 116 198 V. Henne, 0. & L. Go 105 Cal. 376 4 V. Ingerson 75 N. W. 351 486 V. Lanier 11 Wall. 369 234, 381, 588 V. Leach 52 N. Y. 350 316 V. Martin 70 Tex. 643 215 V. Matthews 98 U. S. 621 444, 447 V. McCarthy 55 Ark. 473, 18 S. W. 759 99 V. Mclntyre 40 Ohio St. 528 244 V. Peltz 176 Pa. St. 513 472 V.Price 79 Kan. 289 70 V. Refrigerating Co 236 Mo. 407 495 V. Refund and Brookradge Co. 132 Iowa 248 344 V. Scovell 12 Conn. 303 542 V. Smith 23 C. C. A. 80 427 V. Title & Trust Co 105 Fed. Rep. 491 673 v. Vogeli 78 Kan. 264 310 Bank of Alabama v. Comegys 46 Am. Dec. 278 155 Bank of Allertou v. Hoch 89 Pa. St. 324 418 Bank of Augusta v. Earle 13 Pet. 519 4, 9, 50, 255 Bank of British North America v. Merchants' Nat. Bank 91 N. Y. 106 592 Bank of California v. San Fran- cisco 142 Cal. 276, 64 L. R. A. (N. S.) 918, 100 Am. St. Rep. 130, 75 Pae. Rep. 832 9 Bank of Commerce v. Hart 37 Neb. 197 189 ■ Union Bank 3 N. Y. 230 349 Bank of Lawreneeville v. Rockmore. 129 Ga. 582 289 Bank of Louisville v. First Nat. Bank 8 Baxt. 101 528 Bank of Manchester v. Allen 11 Vt. 302 50 Bank of Metropolis v. Jones 8 Pet. 12 143, 198 V. New England Bank 1 How. 234 498 Bank of Middleburg v. Rutland 33 Vt. 414 614 Bank of Mobile v. Brown 42 Ala. 108 310 V. Huggins 3 Ala. 206 496 Bank of New Haven v. Perkins 29 N. Y. 554, 569 170, 427 Bank of North Amer. v. Rindge 57 Fed. Rep. 279 74 Bank of Peru v. Farnsworth 18 111. 563 371 Bank of Pike v. People's Nat. Bank. 118 N. Y. Supp. 641 178 Bank of Pittsburgh v. Whitehead, Sproul & Co 10 Watts (Pa.) 397 112 Bank of Republic v. Millard 10 Wall. (U. S.) 152 272, 495 Bank of Rocky Mountain v. Floyd. . 142 N. C. 187, 55 S. E. 95. .521, 543 Bank of Shasta v. Boyd 99 Cal. 604 51 Bank of the State v. Wheeler 21 Ind. 90 155, 427 Bank of St. Mary's v. St. John's ... 25 Ala. 566, 122 N. C. 365, 157 Ind. 243, 62 N. Y. Equity, 396, 119 Bank of United States v. Davis 2 Hill 451 113 Bank of Vergennes v. Warren 7 Hill (N. Y.) , 91 156 xxiv Table op Oases. [References are to pages.] Bank of Whittier v. First Nat. Bank. 124 III. App. 102 521 Bank & Trust Co. v. Thornton (C. C. A.) 174 Fed. Kep. 752. . . 511 Bank Commissioners v. Bank of Buf- falo 6 Paige, Ch. (N. Y.) 497 Ill V. Rhode Island Central Bank. 5 E. I. 12 601 V. Security Trust Co 49 Atl. 113, 70 N. H. 536 674 Barnes v. Arnold 51 N. Y. Supp. 1109 79 V. Ontario Bank 19 N. Y. 152 156, 177, 181, 416 Bamett v. Smith 10 Foster (N. H.) 206 323 Bart Savings Inst. v. Fogg 101 Me. 188 335 Bartel v. Brown 80 N. W. 801 486 Bartemeyer v. Iowa 18 Wall. 129 4 Bashaw v. United States 47 Fed. Rep. 40 455 Bassett v. Fairchild 132 Cal. 637 128 V. Mining Co. 15 Nev. 283 99 Batchelder & Snyder Co. v. Savings Bank 108 Me. 89 20 Batchelor v. Planters' Nat. Bank. . . 10 Rep. 16 (Ky. 1880) 192 Bates V. First Nat. Bank 89 N. Y. 286 302 Bath Sav. Inst. v. Sagadahoc Nat. Bank 89 Me. 500, 36 Atl. 996 57 Baxter v. Coughlin 70 Minn. 1 616 Bayer v. Commonwealth Trust Co. . 129 S. W. 268 547 Beal V. City of Somerville 50 Fed. Rep. 647 480 Beardsley v. Johnson 121 N. Y. 224, 24 N. T^i. 380 101 Beeman v. Duck 12 L. J. Exch. 198, 11 M. & W. 251 351 Beers v. Phoenix Glass Co 14 Barb. 358 156 Belknap v. Davis 19 Me. 455 348 V. Nat. Bank 100 Mass. 376, 97 Am. Dec. 105. 348 350, 356 Bellemire v. Bank of U. S 4 Whart. (Pa.) 105 522 Bellows V. Hallawell, etc.. Bank 2 Mason, 31 269 Bellows Falls Bank v. Rutland Co. Bank 40 Vt. 377 372, 375, 591 Bell's Appeal 115 Pa. St. 88, 2 Am. St. Rep. 532 82 Benbow v. Cook 115 N. C. 324. ....]..]].. 72 Bennet v. Thorne 36 Wash. 253 75 Benton v. German American Nat. Bank 26 S. W. 975 197 Berdgers v. First Nat. Bank Sup. Ct., N. C, Feb., 1910 73 Berger, ex parte 81 S. C. 244 613 Bertolet v. Stoner 164 111. App. 605 371 Bessemer Sav. Bank v. Anderson. . . 134 Ala. 343 303 Bickford v. First Nat. Bank 42 111. 238 312, 323 Biekley v. Commercial Bank 39 S. C. 281, 17 S. E. 977, 39 Am. St. Rep. 721 289 V. Bank 43 S. C. 528, 21 S. E. 886 287 Bidwell V. Madison 10 Minn. 1 190 Binst V. Williams 81 S. C. 495, 62 S. E. 859 627 Birch V. Fisher 51 Mich. 36 375 Birmingham Nat. Bank v. Bradley . . 103 Ala. 109 354 Birmingham Trust Co. v. East Lake Land Co 101 Ala. 304 : . . 60 V. Louisiana Nat. Bank 99 Ala. 379 197 Bishop V. Globe Co 135 Mass. 132 60, 581 Bissel V. City of Kankakee 64 111. 249 457 Bissell V. First Nat. Bank 69 Pa. St. 415 200 Blaflfer v. Bank 35 La. Ann. 251 641 Table of Oases. xxv [References are to pages.] Blair v. Bank of Mansfield 10 Leg. N. S. 94 146 Blair V. Worley 2 111.177 36 Blake v. Savings Bank Co 70 0. S. 189 320 Blaker v. Hood 53 Kan. 499, 24 L. K. A. (N. S.) 854, 36 Pac. Eep. 1115.... 4, 9 Blakeslee v. Hewett 44 N. W. 1105, 76 Wis. 341 . . 521 Bleu V. Milling Co 81 Am. Dee. 132 152 Blood V. Northrop 1 Kan. 28 371 Blue V. Canfield Nat. Bank 145 Ind. 518, 43 N. E. 655 128 Board of Finance v. State ex rel. Tell City Nat. Bank 89 N. E. 367 , 669 Bohmer v. City Bank 77 Va. 445 581 Borth V. Dear 71 N. W. 816, 96 Wis. 516 79 Booth V. Farmers' & Traders' Nat. Bank 53 Ore. 576, 98 Pac. Eep. 509. . 588 622 Boothe V. Farmers' & Traders' Nat. Bank 101 Pac. Eep. 390, 98 id. 509 . . S88 Born V. First Nat. Bank 123 Ind. 78 324 Borup v. Mininger 5 Minn. 417 515 Boston Tailoring House v. Fisher. . . 59 111. App. 400 191 Bowden v. Johnson 107 U. S. 251 88 Bowen v. Needles Nat. Bank 87 Fed. Eep. 430 469 V. Needles Nat. Bank 94 Fed. Eep. 925 466 Bowman v. Cecil Bank 3 Grant Cas. 33 43 Boyd V. First Nat. Bank 128 Ky. 468, 108 S. W. 360.. 142, 574 V. Schneider 124 Fed. Eep. 239 121, 602 V. 131 Fed. Eep. 223 122, 602 Boylston Nat. Bank v. Eichardson. . 101 Mass. 287 350 Bradford v. Fox 38 N. Y. 289 335 Bradstreet v. Emerson 72 Penn. St. 124, 13 Am. Eep. 665 542 Branch v. United States 1 N. B. C. 363 275, 439 Brent v. Bank 10 Pet. 596 581 Bridenbecker v. Lowell 32 Barb. (N. Y.) 9 190 Briggs V. Central Nat. Bank 42 Am. Eep. 285 521 V. Spaulding 141 U.S. 132, 11 S. Ct. 924, 35 L. Ed. 662 122, 124, 191 Brinkerhoff v. Bostwick 88 N. Y. 52 121, 602 Brinkworth v. Hazlett 90 N. W. 537, 64 Neb. 592 79 Bristol Knife Co. v. Hartford First Nat. Bank 41 Conn. 421, 19 Am. Eep. 517. 350 Britain v. Oakland Bank 134 Cal. 282 110 V. NiccoUs 104 U. S. 757, 766 522 Brixen v. Deseret Nat. Bank 5 Utah 504, 18 Pac. Eep. 43. . . 351 Brooklyn Trust Co. v. Toler 65 Hun (N. Y.) 187 327 Brooks V. Bigelow 142 Mass. 6 495 V. Tradesman's Nat. Bank. . . 22 N. Y. St. Rep. 633 311 Brossenne v. Schmitt 91 Ky. 465 521 Brown v. Beck 83 Ga. 471, 10 S. E. 121 128 V. Daugherty 120 Fed. Eep. 526 302 V. Eastern Slate Co 134 Mass. 590 77 V.Finn 34 Fed. Eep. 124 67 V. Merrimac Eiver Sav. Bank. 67 N. H. 549, 47 Am. Eep. 171. 572 V. Eepublican Mt. Silver Mines 17 Colo. 421, 30 Pac. Eep. 66 . . 128 V. Schleier 118 Fed. Eep. 981 .. . 441, 442, 469 V. Valley View Mining Co ^ 127 Cal. 630, 66 Pac. Eep. 424. 128 Bruen v. Hone ' 2 Barb. 586 318 xxvi Table of Cases. [References are to pages.] Brummagin v. Tallant 29 Cal. 503, 89 Am. Dec. 61 . . . 591 Bruner, Secy, of State, v. Citizens' Bank 134 Ky. 283 50 Bryants, etc., Co. v. Felt 87 Me. 234 68 Buchlin v. Chaplin 1 Lans. 443 318 Bucksport & Bangor E. Co. v. Buck. 68 Me. 81 100 Bull V. Bank 123 U. S. 105 312, 313 Bullard v. National Bank 18 Wall. 589. .. . 50, 57, 382, 583 V. Randall 1 Gray (Mass.) 605 200 Bullock V. Boyd 2 Edw. Ch. (N. Y.) 292. . 276, 318 Bullock Lumber Co. v. Marbury Lumber Co 141 Ky. 229 481 Bundy v. Cocke 128 U. S. 185 61, 85, 86 V. Monticello 84 lud. 419 300 Bundy v. Town of Monticello 84 Ind. 119 587 Burden v. Burden 159 N. Y. 287 54 Burgess v. Seligman 107 U. S. 20 75, 82 Burkhalter v. Second Nat. Bank. . . 42 N. Y. 538 313 Burnell v. N. Y. C. & H. R. R. Co. . 45 N. Y. 184 460 Burrill v. Dollar Sav. Bank 92 Pa. St. 134, 37 Am. Rep. 669. 572 Burtnett v. First Nat. Bank 38 Mich. 630 274 Burton v. Burley 9 Biss. U. S. 253 39, 43 Bush V. Robinson 95 Ky. 492 77 Bushnell v. Chautauqua Co. Nat Bank 47 N. Y. 290 282 Butcher v. Butler 114 S. W. (Mo.) 564 290 Butler's University v. Scoonover. . . 114 Ind. 381, 16 N. E. 642 67 c. Cahill V. Kalamazoo Mut. Ins. Co. . 2 Doug. (Mich.) 124 54 Caldwell v. Bates 118 N. C. 323, 24 S. E. 481 127 California Nat. Bank v. Kennedy ... 167 U. S. 362, 172 Fed. Rep. 486 19, 419, 420, 636 V. Utah Nat. Bank Ill C. C. A. 128 544 V. 190 Fed. 318 542 Callahan v. Bank 69 S. C. 374 295 Cambridge First Nat. Bank v. Hall. 119 Ala. 64, 24 So. 526 300 Camden Land Co. v. Lewis 101 Me. 78 150 Camden Nat. Bank v. Green 45 N. J. Eq. 546 623 Cameron v. First Nat. Bank 4 Tex. Civ. App., 34 S. W. 178. 235 Canadian Bank v. Bingham 46 Wash. 667 348 Canal Bank v. Albany Bank 1 Hill (N. Y.) 287 349, 362 Cander v. Connecticut Sav. Bank. . . 81 Conn. 372 336 Canfield v. State Nat. Bank Fed. Cas. No. 2382 234 Carey v. McDougald 7 Ga. 84 371 Carllnville Nat. Bank v. Wilson 78 111. App. 339, 58 N. E. 250. 542 Carlisle First Nat. Bank v. Graham. 100 U. S. 699 192 Carpenter v. Nat. Shawmut Bank. . 109 C. C. A. 55 510 Carroll v. Exchange Bank 30 W. Va. 518, 4 S. E. 440 584 Carson v. Chicago Title & Trust Co. 5 A. M. B. R. 814 603 Carter v. Martin 22 Ind. App. 445 588 Case V. Bank 100 U. S. 446 457 V. Citizens' Bank 2 Woods 23 617 Casey v. Galli 94 U. S. 673 41, 50, 84, 238 Castello V. Citizens' State Bank 140 Wis. 275 378 Castle V. Corn Exch. Bank 148 N. Y. 122, 42 N. E. 518 ... . 541 Cati V. Patterson 25 Mich. 191 371 Table of Cases. xxvii [References are to pages.] Central E. E. & B. Co. v. Farmers' Loan & T. Co 114 Fed. Eep. 26S 468 Central E., etc. Co. v. Smith 76 Ala. 572, 52 Am. Rep. 353. . 191 Central Trans. Co. v. Pullman Palace Car Co 139 U. S. 24 16, 20, 420 Chadwick v. United States 141 Fed. Rep. 225 323 Chaffin V. Cummings 37 Me. 76 67 Chaflin v. Meyer 75 N. Y. 260 460 Chamberlin & Churchill v. Mam- moth Min. Co 20 Mo. 96 143 Chambers v. Miller 13 C. B. N. S. 125 350 Champion v. Gordon 70 Pa. St. 474 329 Charles River Nat. Bank v. Davis. . 100 Mass. 413 339 Charleston v. Peoples' Nat. Bank. . . 5 S. C. 103 258 Chase v. Merrimac Bank 19 Pick. (Mass.) 264, 31 Am. Dec. 163 67 V. Waterbury Sav. Bank 59 Atl. Rep. (Conn.) 37 560 Chattahoochee Nat. Bank v. Schley. ."iS Ga. 369 279 Chemical Nat. Bank v. Kohner 58 How. Pr. 267 202 V. 85 N. Y. 189 152 Cheney v. Libby 134 U. S. 68 486 Cherry v. City Nat. Bank 144 Fed. Rep. 587 188, 410, 411 Chetlain v. Eepublic Life Ins. Co . . 86 111. 220 99 Chicago First Nat. Bank v. North- western Nat. Bank 152 111. 296, 38 N. E, 739, 43 Am. St. Eep. 247, 26 L. E. A. 289 350 Chicago Life Ins. Co. v. Auditor. . . 101 111. 82 11 V. Needles « . . . 113 U. S. 574 11 Chicago, R. I. & P. R. Co. v. Union Pae. R. Co 47 Fed. Rep. 15 20 Chicot Lumber Co. v. Dardell 84 Ark. 136 686 Christie v. Sherwood 113 Cal. 526, 45 Pac. Rep. 820. 196 Chritten v. Chemical Nat. Bank 171 N. Y. 219 332 Chrystie v. Foster 61 Fed. Rep. 551 141 Chubb V. Upton 95 U. S. 665 258 Cincinnati Volksblatt Co. v. Hoff- meister . 62 Ohio St. 189, 56 N. E. 1033, 78 Am. St. Rep. 707 74 Citizens' Bank v. Houston 98 Ky. 139 511 V. Howell 8 Md. 530 542 V. Kalamazoo Bank Ill Mich. 313 60 V. SchwarzscMld 23 L. R. A. (N. S.) 1092.*.... 350 Citizens' Bank & Trust Co. v. Thorn- ton (CCA.) 174 Fed Rep. 752.. . 545 Citizens' Nat. Bank v. Appleton 216 U. S. 196 22 v. Berrv 134, 136, 454 53 Kan. 696, 37 Pac. Eep. 131. V. Brown 4 Am. St. Eep. 526 372 V. 45 Ohio St. 39 372 V. Dowd 35 Fed. Rep. 340 276, 618 V. Importers', etc. Bank 119 N. Y. 195, 23 N. E. 540. . . 351 Citizens' Savings Bank v. Blakely. . 42 Ohio St. 645 192 V. Couse 124 N. Y. Supp. 79 575 V. Wallden 52 S. W. 953 195 City Electric Street E. Co. v. First Nat. Exch. Bank 62 Ark. 33 1.38 City Nat. Bank v. Chemical Nat. Bank 80 Fed. Eep. 859 177, 182, 188 xxviii Table of Cases. [References are to pages.] City Nat. Bank v. Philips 97 N. Y. 44 243 V. Stout 61 Tex. 567 367 Clark V. Eastern Bldg., etc. Asan ... 89 Fed. Eep. 779 74 V. Metropolitan Bank 3 Duer 241 215 V. Warwick, etc 174 Mass. 434 72 Clark Nat. Bank v. Bank of Albion. 52 Barb. 592 165 Clemer v. Drovers' Nat. Bank 41 N. E. 728, 157 111. 206.. .273, 587 Cleveland v. Hampden Sav. Bank. . . 182 Mass. 110 559 Cleveland, -Brown & Co. v. Shoeman. 40 Ohio St. 176 384, 385 Clews V. Bank 20 N. W. 852 327 Close V. Glenwood Cemetery 107 U. S. 466 51 Coats V. Donnell 94 N. Y. 168 416 Cobson'a Estate, In re 3 Pa. (Super. Ct.) 244, 39 W. N. C. 486 674 Coehecho Nat. Bank v. Haskell 51 N. H. 116 200 Cochran v. United States 157 U. S. 286 687 Coekburn v. Union Bank 13 La. Ann. 289 73 Cockrill V. Abeles 86 Fed. Kep. 505 123 Coddington v. Canady 157 Ind. 243, 255, 257 94, 120 Coffy v. National Bank 46 Mo. 140 245 Cogswell V. Rockingham Ten Cent Sav. Bank 59 N. H. 43 557, 576 V. Second Nat. Bank 76 Conn. 252 237 Coleman v. National Bank 94 Tex. 608 294 Collins v. State 15 So. Rep. 214 272 Colombia Finance & Trust Co. v. First Nat. Bank 116 Ky. 367 294 Columbia Bank v. Gospel Tabernacle. 127 N. Y. 361 152 Commercial Bank v. Armstrong. . . . 148 U. S. 50 493 v. Cunningham 24 Pick. (N. Y.) 270 113 V. Hughes 17 Wend. (N. Y. ) 100 272 V. Norton 1 Hill (N. Y.) 501 156 V. Red River Val. Nat. Bank.. 8 N. D. 382, 79 N. W. 759.. 517, 541 V. Union Bank 11 N. Y. 203 541 Commercial, etc. Nat. Bank v. Balti- more First Nat. Bank 30 Md. 11, 96 Am. Dec. 554. 348, 641 Commercial Nat. Bank v. First Kat. Bank 97 Tex. 563 134 V. Pirie 82 Fed. Rep. 799 468 Commercial Trust Co. v. Mailers. . . 242 111. 50 625 Commonwealth v. Bank of Mut. Re- demption 4 Allen (Mass. ) 1 4i7 V.' Bank of Penn 3 Watts & Serg. 184 562 V. Farmers' & Mechanics' Bank 38 Mass. (21 Pick.) 542, 32 Am. Dec. 290 678 V. Phoenix Iron Co 105 Pa. St. Ill, 51 Am. Eep. 184 citing State v. Bienville Oil Works, 28 La. Ann. 204. . 74 Concord First Nat. Bank v. Hawkins 157 Mass. 548 19 V. 174 U. S. 364 31 Conklin v. Second Nat. Bank 45 N. Y. 655 382 Continental Nat. Bank v. Nat. Bank 50 N. Y. 575 327 Cook V. Cockins 117 Cal. 140 613 Cook County Nat. Bank v. United States 107 U. S. 445 620 Table of Cases. xxix [References are to pages.] Cooke V. Marshall 191 Pa. St. 315 ( 1899) 260 V. State Bank 52 N. Y. 96 316, 427 Coolidge V. Williams 4 Mass. 140 669 Cooper V. Curtis 30 Me. 488 387 v. First Nat. Bank 40 Kan. 5, 18 Pac. Eep. 937. . . 235 V.Hill ■. 36 C. C. A. 402, 94 Fed. Eep. 582. 235 Corcoran v. Batchelder 147 Mass. 541 147, 381, 453 Cordell v. First Nat. Bank 64 Mo. 600 375 Cork V. Bacon 45 Wis. 192 335 Corn V. Skillern 87 S. W. 142 70 Corn Exchange Bank v. Nassau Bank 91 N. Y. 74, 43 Am. Rep. 655 . . 351 Costella V. Portsmouth Brewing Co. 69 N. H. 405, 43 Atl. 640 57 Cousins V. Partridge 79 Cal. 228 59'! Covell V. Fowler 144 Fed. Rep. 535 69 Cowell V. Springs Co 100 U. S. 61 51 Cowing V. Altman 71 N. Y. 435 335 Cox V. Elmendorf 97 Tenn. 518 86 V. First Nat. Bank 126 La. 87 621 Cragie v. Hadley 99 N. Y. 131 117, 275, 618 Grain v. National Bank 114 111. 516 180 Crane Paris Co. v. Nat. Bank 173 Pa. St. 566 635 Crawford v. Westside Bank 2 N. E. 881 308 V. 100 N. Y. 50 299 Crawford, etc. v. Bank 110 Fed. Eep. 830 (1901) '60 Crocker v. Ball 59 Pac. Rep. 691, 10 Kan. App. 364 79 V. Whitney 71 N. Y. 161 383 Crocker Woolworth Nat. Bank v. Nevada Bank 73 Pac. Rep. 456, 139 Cal. 564. 638 Crockett & Harper v. Young 1 S. M. & M. (Miss.) 214 173 Cromwell v. Lovett 1 Hall (N. Y.) 56 335 Crosby v. Wright 70 Minn. 251 515 Cross V. Eureka Lake & Yuba Canal Co 73 CaL 302 387 Crump V. U. S. Minipg Co 7 Gratt. 352 143 Cummings v. Webster 43 Me. 192, 197 55 ■ V. Winn 89 Mo. 51 616, 617 Cunningham v. Davenport 147 N. Y. 43 559 V. First Nat. Bank 219 Pa. 310 349 Curtis V. Leavitt 15 N. Y. 9 416 D. Daggs v. Phoenix Nat. Bank 117 U. S. 549 600 Daly V. Butchers' & Drovers' Bank.. 56 Mo. 94 528, 542 Daly Bank, etc. Co. v. Board of Comrs 33 Mont. 101 674 Damarest v. Holdman 34 Ind. App. 685 287 Danvers First Nat. Bank v. Salem First Nat. Bank 151 Mass. 280, 24 N. E. 44, 21 Am. St. Eep. 450. . .348, 353, 354 Davenport V. National Bank 127 App. Div. 391, 112 N. Y. Supp. 133, 291 621, 658 V. Prentice 110 N. Y. Supp. 1056 130 Davies v. Smith 58 N. H. 16 59 V. Elmira Sav. Bank 161 U. S. 276, 283, 287 237, 624 V. First Nat. Bank 118 Cal. 600 487, 520, 542 XXX Table of Oases. [References are to pages.] Bavies v. Handy 37 N. H. 65 199 V. Knipp 92 Hun (N. Y.) 623 V. Mecca 44 Conn. 569 87 V. Memphis City R. Co 22 Fed. Rep. 883 191 V. Old Colony R. R 131 Mass. 258 287 V. Stevens 17 Blatchford, 259 67 V. Weed 44 Conn. 569 84 Dawson v. Real Estate Bank 5 Pike (Ark.) 283 586 De Feriet v. Bank of America 23 La. Ann. 310, 8 Am. Rep. 597. 348 De Haven v. Kensington Nat. Bank. 81 Pa. St. 95 280 Deadwood First Nat. Bank v. Austin Minerva Con. Min. Co 42 Minn. 327, 44 N. W. 198, 18 Am. St. Rep. 510 75 Dearbourn v. Union Nat. Bank 58 Me. 273 387 Dedham Nat. Bank v. Everett Nat. Bank 59 N. E. 62, 177 Mass. 392, 83 Am. St. Rep. 286 332, 348, 353, 637 Delafield v. Kinney 24 Wend. (N. Y) 345 140 Delano v. Butler 118 U. S. 634, 7 Sup. Ct. Rep. 39 76, 264 v. Case 121 111. 247, 12 N. E. Rep. 676, 2 Thomp. Corp., § 4304 126 Delaware, L. & W. R. R. Co. v. Ox- ford Iron Co 38 N. J. Eq. 340 382 Dernfield v. Fourteenth St. Sav. Bank 37 App. 0. Dist. Columbia 11. . 29l Despard v. Walbridge 15 N. Y. 374 82 Deweese v. Smith 106 Fed. Rep. 438 594 Dewit Co. Nat. Bank v. Michelberry. 244 III. 77 446 Dexter Savings Bank v. Friend 90 Fed. Rep. 703 152 Dicken v. Thrasher 58 Ga. 360 201 Dickens v. Beal 10 Peters 572 170 Dill V. Wareham 7 Met. (Mass.) 438 287 Dingley v. McDonald 124 Cal. 90 75 Dispatch Printing Co. v. Nat. Bank. 109 Minn. 440, 124 N. W. 236. . 354 District Township^ of Taylor v. Mor- ton 37 Iowa 550 622 Doctor v. Riedel 96 Wis. 158 476 Doe V. Northwestern Coal Co 78 Fed. Rep. 62 191 Donlau v. Provident Sav. Inst 127 Mass. 183, 34 Am. Rep. 358 572 Donner V. Lanesville Bank Wright (Ohio) 477 (1833) 60 Dorchester Bank v. New England Bank ; 1 Cush. 177 528 Dow V. United States 82 Fed. Rep. 904 368 Dowd V. Stephenson 105 N. C. 467 151 Doyle V. Mizner 42 Mich. 332 40 Drake v. Markle 21 Ind. 433 371 V. S3 Am. Dee. 358 371 Drennan & Co. v. Jasper Inv. Co. . . 45 So. Rep. 157, 53 Ala. 322. . . 149 Dreser v. Traders' Nat. Bank 165 Mass. 120 457 Driefus v. Colonial Bank & Trust Co. (L. A.) 485, 649 627 Driscoll v. West Bradley & C. M. Co. 59 N. Y. 96 583 Drovers' Nat. Bank v. Anglo-Amer. P. & P. Co 117 111. 100 520, 542 V. Clemmer 57 111. App. 107, rev'd 273 V. Potvin 74 N. W. 724 197 v. Provision Co 117 111. 100 324 Table of Cases. xxxi [References are to pages.] Dryer v. Pease 88 Fed. 978 614 Du Quoin V. Kelley 176 111. 218, 52 N. E. 919 4 Dueket v. National Bank 86 Md. 403, 39 L. E. A. 89 300 Duncan v. Jaudon 15 Wall. 165 197 V. Maryland Sav. Inst 10 Gill & J. (Md.) 299 575 Dunovan v. Flinn 118 Mass. 539 325 Dyer v. Sebrell 135 Cal. 597 623 Dykers v. Leather Mfg'rs Bank 11 Paige (N. Y.) 612 328, 337 E. Eagle Ins. Co. v. Ohio 153 U. S. 446 11 Bans V. Exchange Bank 79 Mo. 182 244 East Haddam Bank v. Scovill 12 Conn. 303 528 East River Nat. Bank v. Gove 57 N. Y. 597 288, 289 Easton v. lovra id. 220 237 Eaves v. People's Sav. Bank 27 Conn. 228, 71 Am. Dec. 59. 560 562 Edwards v. Carson Water Co 21 Nev. 469 150 v. Kearzy 96 U. S. 595 5 Eidmand v. Roman 58 111. 444 104 Ellerbee v. Nat. Exch. Bank 109 Mo. 44S 287, 435 Elliott v. Bank 128 Iowa 273 589 V. Peet 192 Fed. Rep. 699 149 Ellis V. Ohio Life Ins. Co 4 Ohio St. 628, 64 Am. Dec. 610 349 V. State 138 Wis. 513, 119 N. W. 1110, 20 L. R. A. (N. S.) 444. .614, 616 V. Woodsocker First Nat. Bank 22 R. I. 565, 48 Atl. 936 300 Ellsworth V. Dorwart 95 la. 108, 63 N. W. 599, 58 Am. St. Rep. 427 73, 74 Emerado Farmers' Elev. Co. v. Farmers & Mer. Bank 29 L. R. A. (N. S.) 567 300 Engel V. O'Malley 219 U. S. 128 12 Eshback v. Byers 164 III. App. 449 286 Espy V. Bank 18 Wall. 604 161, 199, 316 Essex Co. Nat. Bank v. Bank 7 Biss. 193, Fed. Cas. Nos. 4532, 5359 511 Estes V. German Nat. Bank 62 Ark. 7 149 Enrich v. Earling 27 L. R. A. (N. S.) 243 235 Evansville Bank v. German-Amer. Bank 155 U. S. 556 494 Exchange Bank v. Bank of N. Amer. 132 Mass. 147 637 V. Gardner 73 N. W. 591 190 V. Rice 98 Mass. 288 325 Exchange Nat. Bank v. Third Nat. Bank 112 U. S. 276 525, 544, 545 Fabens v. Mercantile Bank 23 Pick. 330 (Mass.) 528, 542 Fairfax v. N. Y. C. & H. R. R. R. Co 67 N. Y. 11 460 Fairfield Savings Bank v. Chase. . . 72 Me. 226 115 Fall, etc. Bank v. Sturtevant 66 Mass. 372 118 xxxii Table of Oases. [References are to pages.] Falls City Woolen Mills v. Louis- ville Nat. Banking Co 145 Ky. 64 543 Famous Shoe Co. v. Crosswhite 51 Mo. App. 55 339 Farleigh v. Cadman 159 N. Y. 169 561 Farley Nat. Bank v. Pollock & Bernheimer 145 Ala. 321 521 Farmer v. Gregory & Stagg 78 Ky. 475 155 Farmers' Bank v. Butchers' Bank. . 69 Am. Dec. 678 210 V. Iglehart 6 Gill (Md.) 50 581 V. McKee 2 Pa. St. 318 141 V. Scott 144 Ky. S75 89 Farmers', etc. Bank v. Wasson 48 la. 336, 30 Am. Rep. 398 57 Farmers' Bank & Trust Co. v. New- land 97 Ky. 464, 31 S. W. 38 521, 543 Farmers' Loan & Trust Co. v. Fidelity Trust Co 86 Fed. Rep. 541 113 Farmers' & Merchants' Bank v. Bank 115 Tenn. 64 351 Farmers' & Mechanics' Bank v. B. & D. Bank 14 N. Y. 624 156 V. Butchers' & D. Bank 16 N. Y. 125 326 V. Champlain Transp. Co 18 Vt. 131 424 Farmers' & Merchants' Bank v. Claney 163 Mich. 586 200 —^ V. Detroit, etc. Co. 17 Wis. 373 235 V. Planters' Bank 10 Md. 422 592 V. Third Nat. Bank 165 Pa. St. 500 658 Farmers' & Merchants' Nat. Bank V. Smith 77 Fed. 129, 135 427 V. Downey 53 Cal. 466 109 V. Illinois Nat. Bank 146 111. App. 136 21 Farmers' Nat. Bank v. Templeton. . 40 S. W. 412 136, 143 Farrar v. Walker 8 Fed. Cas. No. 4679 67 Faucet v. Bank 24 S. Dak. 248 543 Fawsett v. Nat. Life Ins. Co 5 111. App. 272 172, 494 Fawcett's Assignee v. Mitchell 133 Ky. 361 236 Fay V. Strawn , 32 111. 295 507, 542 Ferguson v. Harlem Sav. Bank 92 N. Y. Supp. 261 560 V. Staples 82 Me. 159 514 Ferry v. Home Sav. Bank 114 Mich. 321 587 Fidelity & Deposit Co. v. Nat. Bank. 106 S. W. 782 467 Fifth Ward Sav. Bank v. First Nat. Bank N. J. Law, 513 574 Finch v. Karste 56 N. W. 123 517, 549 Finn v. Brown 142 U. S. 56 86 First Nat. Bank v. Alexander 84 N. C. 30 343 V. Anderson 172 U. S. 573 234 V. Arnold 156 Ind. 487 188, 411, 417 V. Bank of Whittier 221 111. 319, 77 N. E. 563. .520, 521 . V. Barger 115 S. W. (Ky.) 726 622 V. Bennett 33 Mich. 520 143, 150 V. Burkhard 100 U. S. 686 270 V. Citizens' Sav. Bank 123 Mich. 336, 82 N. W. 66. . . 521 V. City Nat. Bank 12 Tex. Civ. App. 318, 34 S. W. 458 521 V. Converse 200 U. S. 425 21, 236 V. Cox 140 111. App. 98 268 V. Devinish 15 Colo. 229, 22 Am. St. Rep. 394, 25 Pac. Rep. 177 350 v. Dunbar 118 111. 625 117 Table of Oases. xxxiii [References are to pages.] First Nat. Bank v. First Nat. Bank. 76 Ind. 561 172 V. Fourth Nat. Bank 56 Fed. Rep. 967 505 V. Gaddis 31 Wash. 596 158 V. German Bank 107 Iowa 543 522 V. Graham 79 Pa. St. 106, affd. 100 U. S. 699 202, 280 V. Gregg & Co 79 Pa. St. 384 585 V. Harris 108 Mass. 514 431 V. Hawkins 79 Fed. Rep. 51, 33 U. S. App. 747 83 V. Hoch 89 Pa. St. 324 151 V.Hughes 6 Fed. Rep. 737 ■. 13 V. 46 Pac. Rep. (Cal.) 272 498 V. Kidd 20 Minn. 234 446 V. Ledbetter 34 S. W. 1042 195 V. Lowther-Kaufman 0. & C. Co 66 W. Va. 505, 66 S. E. 713. 197, 518 V. Lucas 21 Neb. 280 145, 150 V. Mann 27 S. W. (Tenn.) 1015 387 V. Maxfield 83 Me. 576 384 V. Monroe 135 Ga. 687 22 V. Myers 83 111. 507 377 V. Nat. Exch. Bank 92 U. S. 122. .234, 236, 404, 419, 420 V. New 146 Ind. 411 151 V. Northup 82 Kan. 638 197 V. Ocean Nat. Bank 60 N. Y. 278 201, 202, 282 V. Payne 42 S. W. 736 491, 498 V. Peary Elevator Co 10 S. D. 167, 72 N. W. 402 235 V. Pease 68 111. App. 562 332 V. Persall 125 N. W. 506 197 V. Pierson 24 Minn. 140 428 V. Sherburne 14 111. App. 566 429 V. Sprague 34 Neb. 318, 51 N. W. 846 542 V. Stapf 165 Ind. 162 300, 371 V. Stewart 107 U. S. 676 386 V. 114 U. S. 224 169 V. Strang 138 111. 347 278 V. Vogeli ■ 96 Pac. Rep. 490 301 V. Whitman 94 U. S. 343 276, 314 Firth Nat. Bank v. Banister 7 Kari. App. 785, 54 Pac. Rep. 20 235 Fisher v. Beckwith 19 Vt. 31 325 Fishkill Savings Inst. v. Fishkill Nat. Bank 80 N. Y. 162, 37 Am. Rep. 595. 192 Fitzgerald v. McGregor 133 Ga. 332 12 v. State Bank 64 Minn. 469 586 Fitzgerald, etc. Coast Co. v. Fitz- gerald 137 U. S. 98 128 Flannigan v. California Nat. Bank.. 56 Fed. Rep. 959 201 Fleekner v. United States Bank 8 Wheat. 338.170, 387, 425, 427, 600 Flint V. Pierce 99 Mass. 68, 96 Am. Dec. 691.53, 75 Florence Mining Co. v. Brown 124 U. S. 385 319 Forbes v. Mohr 69 Kan. 342 119 Ford V. Mitchell 15 Wis. 304 372 V. Roney 126 Ga. 763, 55 S. E. 499< 12 Fort Dearborn Nat. Bank v. Sey- mour 73 N. W. 724 195 Foster v. Essex Bank 9 Am. Dec. 168, 479 289 ■ v. Row 120 Mich. 1 71 V.White 86 Ala. 467 74 xxxiv Table of Oases. [Keferences are to pages.] Fowler v. Scully 72 Pa. St. 456 444 Francis v. Evans 69 Wis. 115 513 V. Hazlett 78 N. E. 405, 192 Mass. 137, 116 Am. St. Eep. 230 70 Frankfort Bank v. Johnson 24 Me. 490 104, 105, 107, 192 Franklin v. Vanderpoel 1 Hall (N. Y.) 78 :!68 Franklin Bank v. Bryam 39 Me. 489 368 V. Stewart 37 Me. 519 172 Franklin Co. in Equity y. Lewiston Sav. Bank 68 Mc. 43 21 Franklin Nat. Bank v. Newcombe. . 37 N. Y. St. Eep. (Supp.) 271.. 387 Freeman v. Savannah Bank, etc. Co. 88 Ga. 252, 14 S. E. 577 350 Freeman's Bank v. Nat. Tube Wks. 151 Mass. 413 491 French v. Banking Co 91 Me. 485 277 V. Teschemacher 24 Cal. 518 56, 77 Fresno Canal & Irri. Co. v. Warner. 72 Cal. 379 51 Fridley v. Bowen 87 111. 151 444 Fulton Bank v. New York & Sharon Canal Co 4 Paige (N. Y.) 127 142 G. Gabriel v. Bank of Suisun 145 Cal. 266 lOS Gale V. Chase Nat. Bank 104 Fed. Eep. 214 201 Gallery v. Nat. Exch. Bank 41 Mich. 169 12? Ganley v. Trov City Nat. Bank 98 N. Y. 487 285 Ganse v. Commonwealth Trust Co.. 24 L. E. A. (N. S.) 967, 196 N. Y. 134, 89 N. E. 476 670 Gardner v. Butler 36 N. J. Eq. 702 ' 128 Gardner's Estate 228 Pa. 282 591 Garrison v. Union Trust Co 130 Mich. 392 497 Gashwiler v. Willis 33 Cal. 11 104 Gatch v. Fiteh 34 Fed. Eep. 566 89 Geiger v. United States 162 Fed. Eep. 844 120 Georgetown Deposit Bank v. Fayette Nat. Bank 90 Ky. 10, 11 Ky. L. Eep. 803, 13 S. W. 339, 7 L. E. A. 849.. 348 Gerhardt v. Boatman's Sav. Inst. . . 38 Mo. 60 524 German Nat. Bank v. Burns 12 Colo. 539 , 519, 541 V. Farmers' Deposit Nat. Bank 118 Pa. St. 294 339 V. Meadowcraft 4 111. App. 630 235 German Sav. Bank v. Citizens' Nat. Bank 101 la. 530, 70 N. W. 769, 63 Am. St. Eep. 399 350 v. Wulfekuhler 19 Kan. 60 124 Germania Bank v. Bontell 60 Minn. 189, 62 N. W. 327, 51 Am. St. Eep. 519, 27 L. E. A. 635 349 Germania Safe Vault & Trust Co. v. Driskell 66 S. W. 610, 23 Ky. L. Eep. 2050 , . 673 Gibbon v. Anderson 80 Fed. Eep. 345, 19 Utah 289. 95 Gibbons v. Hecox 106 Mich. 509, 63 N. W. 519.496, 580 Gibson v. City of Erie 196 Pa. St. 7 492 V. Peters 150 U. S. 342 455 Gilbert, In re 112 Fed. Eep. 951 603 Giner v. Bank 47 L. E. A. (Tenn.) 270, 52 S. W. 923 521 Table of Cases. xxxv [Keferences are to pages.] Gintennan v. Contant Ill N. Y. Supp. 18 336 Girard Bank v. Bank of Penn. Town- ship 39 Pa. St. 92 589, 592 Giselman v. Starn 106 Cal. 651 504 Givan v. Bank of Alexandria 52 S. W. (Tenn. Ch. 1898) 923. 542 Glatt v. Fortman 120 Ind. 384 486 Gloucester Bank v. Salem Bank. ... 17 Mass. 33 348 Goddard v. Merchants' Bank 4 N. Y. 147 349 Godfrey v. Terry 97 U. S. 171 593 Godin V. Bank of Commonwealth. . . 6 Duer 76 308 Goelz V. People's Sav. Bank 31 Ind. App. 67 337 Gold Mining Co. v. Kocky Mt. Nat. Bank 96 U. S. 640. . . .147, 381, 385, 453 Goldrick v. Bristol Co. Sav. Bank. . 123 Mass. 320 564, 569 Goodbar v. Nat. Bank 78 Tex. 461, 14 S. W. 851 198 Goodloe V. Godley 21 Miss. 233 118 Goodrich v. Eutland Sav. Bank 81 Vt. 147 336 Goodshead v. Easthadam Bank 22 Conn. 530, 58 Am. Dec. 439. 192 Goodwin v. American Nat. Bank. . . 48 Conn. 550 302 v. United States An. & Life Ins. Co 24 Conn. 591 99 Goodyear's India Rubber Co. v. Goodyear Rubber Co 128 U. S. 598 268 Gorman v. Guardian Sav. Bank. ... 4 Mo. App. 180 576 Goshen Nat. Bank v. Bingham 118 N. Y. 349 325 Grand Rapids Sav. Bank v. Warren. 52 Mich. 557 78 Grangers Business Assn. v. Clark. . . 67 Cal. 634 16 Grant v. Cropsey 8 Neb. 205 199 ■ v. Duluth, M. & N. R. Co 66 Minn. 349 150 Graves v. American Exch. Bank 17 N. Y. 203 351 Gray v. Merriam 148 111. 179 460 Green v. Bank of Camas Prairie. ... 7 Idaho 576 272 V. Bennett 110 N. W. 108 625 V. Jackson 15 Me. 136 170 • V. Odd Fellows S. & C. B 65 Cal. 71 592 Greenfield Sav. Bank v. Stowell 123 Mass. 196, 25 Am. St. Rep. 67 332, 353 Greenhalgh Co. v. Farmers' Nat. Bank (Pa.) 226 Pa. 184, 75 Atl. 260. . 305, 573 GrifBn v. Bd. of Miss. Levee Comrs. 71 Miss. 767 622 V. Kemp 46 Ind. 172 313 Grissom v. Bank 87 Tenn. 350 471 Grow V. Cockrell 63 Ark. 418 431 Gruenther v. Bank 90 Neb. 280 341 Gubbins v. Bank of Commerce 79 111. App. 150 191 Guelich v. Nat. State Bank 56 la. 434, 9 N. W. 328. . . 528, 542 Guernsey v. Black Diamond Coal Co. 99 la. 471 136 H. Hadden v. Dooley 92 Fed. Rep. 274 200 Hager v. Nat. German American Bank 31 S. E. 141 195 Hahn v. Penney 60 Minn. 487, 490, 62 N. W. 1129 614 Halbert v. State ex rel. Bd. of Comrs 22 Ind. 125 622 Hale V. Walker 31 Iowa 344 82 xxxvi Table of Cases. [References are to pages.] Hall V. Marston 11 Mass. 575 475 V. Paris 59 N. H. 71 576 Hamilton v. Lumber Co 95 Mich. 436 312 Hammond v. Hastings 134 U. S. 401 60, 580 V. Hopkins 143 U. S. 224 667 Handley v. Stutz 139 U. S. 417 72 Hanna v. luternat'l Petroleum Co. . 23 Ohio St. 622, 27 O. C. C. 274 52, 99 Hannon v. Williams 34 N. J. Eq. 255 624 Hanover Nat. Bank v. First Nat. Bank 109 Fed. Rep. 421 427 V. Suddath 215 U. S. 110, 125 S. W. 248. . 576 586 Hardy v. Chesapeake Bank 51 Md. 562 332 Harkness v. Guthrie 27 Utah 248 74 Harmon v. Old Detroit Nat. Bank. . 153 Mich. 73 332, 333 Harper v. United States 170 Fed. Rep. 385 687 Harrill v. Davis 168 Fed. Rep. 196 666 Harris v. Randolph County Bank. . 157 Ind. 120 415, 417 Harrisburg Bank v. Forster 8 Watta (Pa. St.) 12 202 V. Tylor 3 W. & S. 373 143 Hartford Bank v. Hartford Ins. Co. 45 Conn. 22 581 Hatch V. Dexter First Nat. Bank . . 94 Me. 348 371 V. Johnson Loan & Trust Co . . 79 Fed. Rep. 828 301 Hatton V. Holmes 97 Cal. 208 350 Haven v. New Hampshire Insane Asylum 13 N. H. 532, 38 Am. Dec. 512. . 55 Hawkins v. Fourth Nat. Bank 49 N. E. 957 171 Hayden v. Bank of Syracuse 15 N. Y. Supp. 48 245 Hayes v. Shoemacker 39 Fed. Rep. 319 86 Haynes v. Mesley 112 Ga. 668 589 Hazlett V. Commercial Nat. Bank. . 132 Penn. St. 118 542 Head v. Providence Ins. Co 2 Cranch 127 20 Heath v. Portsmouth Sav. Bank 46 N. H. 78, 88 Am. Dee. 194. . 58 562 572 Heath v. Second Nat. Bank 70 Ind. 106 .' 444 Hebi V. Bank of Evansville 124 Wis. 73 333 Heintzelman v. Druids' Relief Assn. 38 Minn. 138 53 Heironimus v. Sweeney 55 Am. St. Rep. 333 562 Helwege v. Hibernia Nat. Bank. ... 28 La. Ann. 520 325 Henderson Trust Co. v. Ragan 21 Ky. L. Rep. 601, 52 S. W. ' 848 350 Hendrix v. Jefferson Co. Sav. Bank. 14 L. R. A. (N. S.) 686 509 Hennessy v. City of St. Paul 54 Minn. 219 19 Henry v. Northern Bank 63 Ala. 527 143 Hier v. Miller 68 Kan. 258 305 Higgins V. Hayden 53 Neb. 61 619 V. Higgins Soap Co 144 N. Y. 462 268 Hill V. Pine River Bank 45 N. H. 30O 57 V. Trust Co 57 Am. Rep. 189, 108 Pa. St. 1. 210 Hillard v. Lyons 180 Fed. Rep. 685 191 Hills V. Place 48 N. Y. 520 486, 487 Hindman v. First Nat. Bank 112 Fed. Rep. 931 201 Hines, In re 144 Fed. Rep. 142 603 Hobart Nat. Bank v. Fordtram 122 S. W. 413 495 V. McMurrough (Okla.) 103 Pae. Rep. 601 510 V. Powers 24 Okla. 145 495 Hodge V. Bank 22 Gratt. 51 143 Hodgkins v. Bank 124 N. C. 540 587 Table of Oases. xxxvii [References are to pages.] Hodgson V. McKinistry 3 Kan. App. 412 626 Hoke V. People 122 111. 511 10 Holder v. Western Ger. Bank 132 Fed. 187 542 Holly Springs Bank V. Pinson 58 Miss. 421, 38 Am. Rep. 330. . 57 Holmes v. Holmes, etc. Co 37 Conn. 278 268 V. McDonald 226 111. 169 119 Holt V. Bacon 25 Miss. 567 173 Home Machine Co. v. Sbuder 58 Ga. 64 192 Home Savings' Bank v. Peoria Trot- ting Soc 206 111. 9 117 Homer v. Nat. Bank of Commerce. . 41 S. W. 790 (Mo. Sup.) 580 Hotohkiss V. Artisans' Bank 2 Abb. Dec. (N. Y.) 403, 2 Keyes (N. Y.) 564 289 V. Mosher 48 N. Y. 478 372 Houghton V. First Nat. Bank 26 Wis. 663 200 Houston V. Kirkman 156 Mo. App. 309 ; 157 V. Thornton 29 S. E. 827 124 Houston Grocery Co. v. Farmers' Bank 71 Mo. App. 132 351 Howard v. Roeben 33 Cal. 399 292 Howard Nat. Bank v. Loomis 51 Vt. 349 384 Howe V. Hartness 11 Ohio St. 449 372 Hoyt v. Thompson 19 N. Y. 207, 18 Ind. 327 100 Hudson Real Estate Co. v. Tower. . . 161 Mass. 10 ( 1894) 68 Hulitt V. Bell 85 Fed. Rep. 98 104 Humphrey v. Nat. Bank 113 Pa. St. 417 592 Hun V. Carey. . ' 82 N. Y. 65 448 Hunt, Appellant 141 Mass. 515 377 Hurlburt v. Arthur. 140 Cal. 103 83 Huse V. Hamblin 4 Am. Rep. 244 371 V. 29 Iowa 501 371 Hyde v. Larkin 35 Mo. App. 365 139 Hygeia, etc. Co. v. New York, etc. Co 140 N. Y. 94 269 Ide V. Bremer Co. Bank 73 Iowa 58 514 Ihl V. St. Joseph Bank 26 Mo. App. 129 289 Illinois Watch Case Co. v. Piearson. 140 III. 423 268 /» r-e Cobson's Estate 3 Pa. (Super. Ct.) 244, 39 W. N. C. 486 074 7m re Gilbert 112 Fed. Rep. 951 603 In re Hines 144 Fed. Rep. 142 603 In re Jaycox Fed. Cas. 7237, 12 Blatchf. 209 666 In re Purl's Estate 125 S. W. 849 272 Indian Head Nat. Bank v. Clark 43 N. E. 912 197 Indiana Trust Go. v. Internat'l, etc. Asan 165 Ind. 597 286 Indig v. Nat. City Bank 80 N. Y. 100 470, 521 International Fair & Ex. Assn. v. Walker 83 Mich. 386 , 64 International Trust Co. v. Amer. L. & T. Co 62 Minn. 501, 65 N. W. 78 666 V. Internat'l L. & T. Co 153 Mass. 271 268 Ireland v. Globe, etc. Co 19 R. I. 180 54 Irish V. Citizens' Trust Co N. Y. (D. C.) 880 624 xxxviii Table of Cases. [References are to pages.] Iron Mountain Bank v. Mercantile Bank 4 Mo. App. 505 192 Irving Bank v. Wetherald 36 N. Y. 335 324, 327 Isham V. Post 141 N. Y. 100 522 Israel v. Bowery Sav. Bank 9 Daly (N. Y.) 507 560, 572 Jackson v. McMinnville Nat. Bank. 92 Tenn. 154, 20 S. W. 802, 36 Am. St. Rep. 81, 18 L. R. A. 663 351 V. Meek 87 Tenn. 69, 9 S. W. 225, 10 Am. St. Rep. 620 74 V. Sill 11 Johns. (N. Y.) 201 335 V. Union Bank 6 Har. & Johns. 146 528 Jacobs V. Jolley 29 Ind. App. 25 337 James v. Rogers 23 Ind. 451 415 Jarvis v. Wilson 46 Conn. 90 325 Jaselli V. Riggs Nat. Bank 36 App. C, Dist. Columbia 159 291 V. Riggs Nat. Bank 31 L. R. A. (N. S.) 763 303 Jaycox, In re Fed. Cas. 7237, 12 Blatehf. 209'. 606 Jefferson v. Hewett : . 103 Cal. 624 261 Jefferson County Sav. Bank v. Com. Nat. Bank 39 S. W. 338 487 V. Hendricks 147 Ala. 670 495 Jemison v. C. S. Bank 122 N. Y. 135 575 Jenkins v. Nat. Village Bank 58 Me. 275 386 V. Neff 185 U. S. 230 669 Jennings v. Bank of California 79 Cal. 323, 21 Pac. 852, 12 Am. St. Rep. 145, 5 L. R. A. 233 57, 387 Jochumsen v. Suffolk Sav. Bank .... 3 Allen 87 569 Johnson v. Hume 36 So. Rep. 421, 138 Ala. 564. . 70 V. Sage 4 Idaho 758 150 Jones V. Hawkins 17 Ind. 550, 559 171 V. Johnson 86 Ky. 530 107 V. Kilbreth 49 Ohio St. 413 485 V. Morrison 31 Minn. 140 456 V. Nicholl 82 Cal. 32 591 V. Wallor & Co 24 Ky. Law Rep. 878 422 Jordan Marsh Co. v. Nat. Shawmut Bank 201 Mass. 397 332 Judy V. Farmers' & Traders' Ba.nk. . 81 Mo. 404 586 Juker V. Commonwealth 20 Penn. St. 484 53 Jumper v. Commercial Bank 39 S. C. 296, 17 S. E. 980, 48 S. C. 430, 26 S. E. 725 289 K. Kahn v. Walton 46 Ohio St. 195, 20 N. E. 203. 339 Kavanaugh v. Commonwealth Trust Co 64 Misc. 303, 118 N. Y. Supp. 758 667 Kearney v. Andrews 10 N. J. Eq. 70 53 Kelley v. Buffalo Sav. Bank 72 N. E. 995 560 Kelling v. Edwards 116 Minn. 489 320 Table of Oases. xxxix [References are to pages.] Kennedy Southern E. v. Gebhard. . . 109 U. S. Rep. 527 255 Kenney v. Harlem Sav. Bank 114 N. Y. Supp. 749 560 Kent V. Dawson Bank Fed. Cas. No. 7714 487 Kentucky Flour Co. v. Merchants' Nat. Bank 90 Ky. 225 623 Kermeyer v. Newby 14 Kan. 164 335 Kershaw v. Ladd 44 L. R. A. 236, 56 Pac. Rep. 402 521 V. 34 Ore. 375 521 Keyser v. Hltz 133 U. S. 138, 134 Fed. Rep. 842 51, 61, 83, 85, 86 Kilgore v. Bulkley 14 Conn. 362 371 Kimins v. Boston Five Cent Sav. Bank 141 Mass. 33 565, 569 King V. Bowling Green Trust Co. . . 129 N. Y. Supp. 977 673 V. Miller 53 Ore. 53, 97 Pac. Rep. 542 .. . 495 Kingsley v. Whitman Sav. Bank. . 182 Mass. 252 569 Kinkier v. Junica 84 Tex. 116, 19 S. W. 359 127 Kinman v. Sullivan Co. Club 26 N. Y. App. 213 73 Kipp V. Miller 108 Pac. Rep. (Colo.) 164 90 Kirk V. Goodwin 36 Pac. Rep. 1057 521 Kirkham v. Bank of Amer 165 N. Y. 132, 58 N. E. 753 .. . 506 541, 548 Klauber v. Biggerstaff 3 N. W. 357 372 v. 47 Wis. 551, 3 N. W. 357 372 Kleekaup v. Myer 5 Mo. App. 444 640 Knight V. Old Nat. Bank 14 Fed. Cas. No. 7885, 3 Cliff 429 57 Kummel v. Germania Sav. Bank... 127 N. Y. 488, 28 N. E. 398.. 58 572, 573 Kux V. Central Mich. Sav. Bank. . . 93 Mich. 511 573 L'Herbette v. Pittsfield Nat. Bank . . 162 Mass. 137, 38 N. E. 368 (18fl4) 287 Ladies', etc. Assn., Ltd. v. Pulbrook. 81 L. T. Rep. 300 (1899), affd. (1900), 2 Q. B. 376 265 Lafayette, etc. Corp. v. Ryland 80' Miss. 29 69 Laing V. Burley 101111.591 86 Lake Erie & W. R. Co. v. Indianapo- lis Nat. Bank 65 Fed. Rep. 690 276, 618 Lakeside Ditch Co. v. Crane 80 Cal. 181 16 Lamb v. Camden & Amboy R. E. Co. 46 N. Y. 271 460 Lamson v. Beard 94 Fed. Rep. 30 166 Langdate v. Citizens' Bank 121 Ga. 105, 48 S. E. 708 559 Lanier v. Nash 121 U. S. 404 504 Lanigan v. North. 63 S. W. 62 75 Laning v. Johnson 75 N. J. L. 259 198 Lanterman v. Travous 174 111. 459 618 Lantry v. Wallace 182 U. S. 536, 97 Fed. Rep. 865 . 72 Larabee v. Dalley 175 Fed. Rep. 365 21 Latimer v. Bard 76 Fed. Rep. 536 258 Laughlin v. Marshall 19 111. 390 371 Lawrence v. Stearns 79 Fed. Rep. 878 202 V. Stonlngton Bank 6 Conn. 521 528, 542, 586 Lawson v. Richards 6 Pa. Eep. 179 331 xl Table of Oases. [References are to pages.] Lazear v. Union Bank 52 Md. 78 428 Leach v. Hale 31 Iowa e& 279, 421, 422 V. Hill 10.6 Iowa 171 325 Lead Co. V. Eeinhard 114 Mo. 218, 21 S. W. 488 99 Leather Mfg'rs Bank v. Morgan 117 U. S. 96 362 Leavenworth First Nat. Bank v. Tappan 6 Kan. 456, 7 Am. Rep. 568 .. . 349 Lebanon v. Managan 28 Pa. St. 452 372 Legendre v. New Orleans Brewing Assn ■. 45 La. Ann. 669, 12 So. Rep. 837, 40 Am. St. Rep. 243 73 Levingston v. Bank 26 Barb. 305 605 Levy V. Bank of America 24 La. Ann. 220, 13 Am. Rep. 124 348 V. Franklin Sav. Bank 117 Mass. 448 58, 564, 569 V. United States Bank 4 Dallas (U. S.) 234, 1 L. Ed. 814, 1 Binn. (Pa.) 27 349 Lewis V. Hillsboro, etc. Co 23 S. W. 338 (Tex.) 68 V. Lynn Inst. 148 Mass. 235 576 V. Switz , 74 Fed. Rep. 381 86 Library v. Association 173 Pa. St. 30 100 Life & Fire Ins. Co. v. Mechanics' Fire Co. 7 Wend. (N. Y.) 31 138 Lilly V. Hamilton Bank 178 Fed. Rep. 53 119 Lindsey v. McClelland 86 Am. Dec. 786 372 V. 18 Wis. 481 372 Linsbourg Bank v. Ober 31 Kan. 590, 3 Pac. 324 542 Lippencott v. Longleattom 6 Pa. Co. Ct. 503 235 Little V. Bank 2 Hill (N. Y.) 425 311 V. City Nat. Bank 115 Ky. 629 588 Livingston v. Trust Co 77 S. C. 305 613 Lockwood V. Mechanics' Nat. Bank. 9 R. I. 308, 11 Am. Rep. 253. . 57 Logan Co. Nat. Bank v. Townsend . . 139 U. S. 67 232, 386 Lord V. Hingham Nat. Bank 186 Mass. 161 543 Loring v. Brodie 134 Mass. 453 196 Louden Sav. Fund. Soc. v. Hagers- town Sav. Bank 36 Pa. St. 498 372 Louisiana lee Co. v. State Nat. Bank. 1 McGloin 181 637 Louisville Third Nat. Bank v. Vicks- burg Bank 61 Miss. 112 542 Lowndes v. City Nat. Bank 22 L. E. A. (N. S.) 408 119 Lowry v. Inman 46 N. Y. 125 62 Loyd V. Osborn 92 Wis. 93 510 Lucas V. Coe 86 Fed. Rep. 972 87 V. (Sovernment Nat. Bank 1 N. B. C. 872 594 V. San Francisco '. . . 7 Cal. 463 55 Lucks V. Bank 148 Mo. App. 376 574 V. Northwestern Sav. Bank . . . 128 S. W. 19 305 Lunt V. Bank of North Amer 49 Barb. (N. Y.) 221 339 Luse V. Isthmus Transit R. Co 6 Ore. 125 151 Lusk V. Stoughton State Bank 135 Wis. 311 591 Lyman v. National Bank 98 Me. 448 588 Lynch v. First Nat. Bank 107 N. Y. 179 325 V. Goldsmith 64 Ga. 42 371 Lyon V. American Screw Co 16 R. I. 472, 17 Atl. EeR. 61 74 Lyons v. Jerome 26 Wend. (N. Y.) 484 101 V. Union Exch. Nat. Bank 135 N. Y. Supp. 121 495 Table of Oases. xli [References are to pages.] M. Mahaiwe Bank v. Douglas 31 Conn. 170 356 Maine Trust & Banking Co. v. South- ern L. & T. Co 92 Me. 444, 43 Atl. 24 672 Mann v. Sec. Nat. Bank 34 Kan, 746 118 Manufacturers' Nat. Bank v. Thomp- son 129 Mass. 438 637, 638 Mapes V. Scott 94 111. 379 446 Market St. R. C6. v. Hellman 109 Cal. 571, 42 Pac. Rep. 225. 73 Ifarahall v. American Ex. Co 73 Am. Dec. 381 463 Marshall Field Co. v. Oren Ruffcorn Co 117 Iowa 157 150 Martin V. Deitz 102 Cal. 55, 41 Am. St. Rep. 151 16, 40 V. Hibernian Bank & Trust Co. 127 La. 301 541 V. Webb 110 U. S. 7 112 Martin Co. v. Martin, Wilckes Co. . N. Y. Eq., 71 Atl. 409 268 Marymont v. Nevada State Banlting Board 33 Nev. 333, 111 Pac. Rep. 295, 32 L. R. A. (N. S.) 477 9 Marysville Electric Light & Power Co. V. Johnson 93 Cal. 538, 109 Cal. 192.. 63, 65, 66 Mason v. Erie County 126 Pa. 445 622 Fisher 62 Fed. Eep. 958 276, 618 Mathews v. Mass. Nat. Bank 1 Holmes 396 190 Mathias v. White Sulphur S. Assn. . 19 Mont. 359 150 Matter of Brown 2 Story's Rep. 512 330 Coe 106 C. C. A. 181 480 Commercial Bank 2 Ohio N. P. 170, 90 N. E. 859 273 Cullman Fruit & Produce Assn 155 Fed. Rep. 372 135 Dime Sav. Inst 29 N. J. Eq. 109 576 Eysel 65 Misc. 432, 121 N. Y. Supp. 1095 292 Glen Salt Co ■ 153 N. Y. 688, 48 N. E. 1104. . . 72 Griffing Iron Co 63 N. J. Law 168-357, 41 Atl. 931 101 Nichols 166 Fed. Rep. 603 272 Reiss 30 Misc. (N. Y.) 234, 62 N. Y. Supp. 145 74 - Steinway 159 N. Y. 250, 53 N. E. 1103, 45 L. R. A. 461, aff'g 31 N. Y. App. Div. 70, 52 N. Y. Supp. 343 74 Matthews v. McClaughry 83 111. App. 224 73 May V. Jones 88 Ga. 308, 311 523 Mayer & Lowenstein v. Chatta- hoochee Nat. Bank 51 Ga. 325 281 Maynard v. Fireman's Fund Ins. Co. 34 Cal. 48, 91 Am. Dec. 672.102, 191 MeAndrews v. State Bank 25 S. D. 590 296 McBride v. American R. & L. Co 127 S. W. 229 272 V. 111. Nat. Bank 121 N. Y. Supp. 1041 . . 510, 541, 545 McOagg V. Woodman. 28 111. 84 475 McCallion v. Hibernia Sav. Loan Soc 70 Cal. 163 51 McCann v. First Nat. Bank 112 Ind. 354 263 V. State 4 Neb. 324 289 xlii Table of Oases. [References are to pages.] McCarthy v. Provident Inst 159 Mass. 527 569 MoClaine v. Rankin 197 U. S. 154 594 McClure v. People 27 Colo. 358 614 MeCormick v. Market Nat. Bank. . . 162 111. lOO 442 V. 165 U. S. 538 18, 50, 421, 442 McCrant v. Nat. Mohawk Valley Bank 104 N. Y. 414 446 McC^llough V. Wainright 14 Pa. St. 171 336 McDonald V. Chisholm 131 111. 273 151 V. Randall 139 Cal. 246 115 V. Thompson 184 U. S. 71 594 McDonough v. First Nat. Bank 34 Tex. 309 60 McEwin V. Davis 39 Ind. 109 300 McFadden v. Foulrath 114 Minn. 85 333 McFarlin v. Nat. Bank. 68 Fed. Rep. 868 258 McGhee v. Importers' & Traders' Nat. Bank 93 Ala. 192 468 McGough V. Jamison 107 Pa. St. 336 591 McGregor v. Battle 128 Ga. 577 619 McKinnon v. Morse Fed. Kep. 576 95 McKleroy V. Southern Bank 14 La. Ann. 458, 74 Am. Dec. 438 348 McLaughlin v. O'Neill 51 Pac. Rep. 243, 7 Wyo. 187 . . 79 McMahon v. Cronin 128 N. Y. Supp. 423 336 V. German-Amer. Nat. Bank . . Ill Minn. 551 336 v. Macy 51 N. Y. 155 (§ 44, 180 U. S. 295) 82, 86 McNealy Co. v. Bank 221 Pa. 399 349 MeNeely v. Woodruff 13 N. J. L. 352 73 McNulta V. Corn Belt Bank 164 111. 427, 45 N. E. 954, 56 Am. St. Rep. 203 58, 107 McVicer v. Cone Ore. 28, p. 76 51 Mead v. Young 4 T. R. 28, 2 Rev. Rep. 314 351 Meads v. Merchants' Bank 25 N. Y. 143, 9 Met. 311, 2 Duer 121 210, 310 Meakley v. McClarly 125 S. W. (Ky.) 265 89 Mechanics' Bank v. Bank of Colum- bia 5 Wheat. 326 166 V. East 4 Rale 385 485 V. Merchants' Bank 45 Mo. 513, 100 Am. Dec. 388 57, 60 V. Sehaumberg 38 Mo. 228 118 Mecklenburg County v. Reals 36 L. R. A. 285 622 Meholen v. Carlson 17 Idaho 742 .' 824 Meisenberger Co. v. Savings Bank. . . 84 O. S. 21 333 Mellor Nat. Bank v. Peoples' Bank. . 226 Pa. 261 573 Mercantile Bank v. New York 121 U. S. 138 667, 669 Mercer v. Dyer 15 Mont. 317 023 Merchants' Bank v. Baird 160 Fed. Rep. 642 467 V. Bank of Commerce 24 Md. 12, 52 545 V. Bank of Commonwealth. . . . 139 Mass. 513 347 V. Marine Bank 3 Gill 96 143 V. Rudolph 5 Neb. 527 199 V. State Bank 10 Wall. 604, 650 39, 43, 45, 48 155, 163, 254, 256, 287, 316, 363 427 V. Superior C. & C. Co 41 Wash. 653 346 Merchants' Nat. Bank v. Glenden . . . 120 Mass. 97 51 r. Goodman 109 Penn. St. 422, 78 N. W. 980. 520 Table of Cases. xiiii [References are to pagea.] Merchants' Nat. Bank v. Hansen. . 3.3 Minn. 40 432, 435 V. McNulty 36 Iowa 229 491 V. Nat. Bank 139 Mass. 513, 2 N. E. 89.. .637, 641 V. Nat. Eagle Bank 101 Mass. 281 641 V. State Bank 77 Wall. 646 210 V. Thompson 129 Mass. 438 635 V. Tracy 29 N. Y. S. 77, 113 N. W. 775, 93 Mo. 227, 74 Ohio St. 337. .•196 Merchants' & Planters' Bank v. Pen- land I B. C. 25 196 Merchants' Nat. Bank v. Wehrmann. 69 Ohio St. 160 235 Merrill v. Jacksonville Nat. Bank ... 173 U. S. 131 623 Hertz V. State Nat. Bank 131 N. Y. Supp. 1045 295 Merwin v. Butler 17 Conn. 138 465 Mester v. Q. Nat. Bank 163 111. App. 645 274 Meteye, Succession of 113 La. 1012 336 Metropolitan Bank v. Claggertt 141 U. S. 520: 240, 243 Metropolitan Nat. Bank v. Loyd 90 N. Y. 530 495 Metropolitan Trust Co. v. McKinnon. 172 Fed. Rep. 846 21, 588 Michigan Ins. Bank v. Eldred 143 U. S. 293 241 Middletown Bank v. Morris 28 Barb. 616 313 Mierke v. Jefferson Co. Sav. Bank. . 134r N. Y. Supp. 44 574 Millard v. Nat. Bank . 3 MacArthur (D. C.) 54 350 Miller v. Avisteu 13 How. (U. S.) 218 372 V. Hackley 5 Johns. 375 313 V. Knight Mfg. Co 83 S. W. 629 367 V. McGalligan 1 Iowa 531 371 V. Western Nat. Bank 33 Atl. (Pa. Sup.) 634 273 Millet V. F. & M. Bank 107 Iowa 69 22 Millikin v. Shapleigh 36 Mo. 596 584 Milling Co. v. Bank 120 Tenn. 225 520 Mills V. Hendershot 62 Atl. Rep. (N. J. Eq.) 442. . 417 Milwaukee Trust Co. v. Van Valken- burgh 112 N. W. 1083 151 Minard v. Watts 186 Fed. Rep. 245 272 Mingus V. Bank of Ethel 117 S. W. (Mo. App.) 683. . . . 621 Mining Co. v. Anglo-California Bank 104 U. S. 194 T88 Minneapolis S. & D. Co. v. Metro- politan Bank 44 L. R. A. 504 521 V. 76 Minn. 136, 78 N. W. 980. . . . 521 Minor v. Mechanics' Bank 1 Pet. (U. S.) 44, 46. .143, 363, 457 Missouri Lead, etc. Co. v. Reinhard.. 114 Mo. 218 256 Missouri State Bank v. South St. Louis Foundry 129 S. W. 433 450 Mitchfel V. Beckham 64 Cal. 117 592 Mitchell V. Bank of Indianola 98 Miss. 658 550 V. Easton 37 Minn. 335 375, 590 V. Home Sav. Bank 38 Hun (N. Y.) 255 572 V. Rubber Reclaiming Co 24 Atl. Rep. (C. H., 1892) 407.. 74 Mitzel V. B. & 0. S. W. R. R. Co. . . 147 111. App. 196 573 Mix V. Nat. Bank of Bloomington. . . 91 111. 20 51 Mobile Branch Bank v. Collins 7 Ala. 95 128 Mobile & Kansas City R. R. Co. v. Owen 121 Ala. 505 202 Mohawk Bank v. Broderick 10 Wend. 304, s. c, 13 Wend. 133 308, 313 Mokelumne Hill Min. Co. v. Wood- bury 73 Am. Dec. 658 40, 42 Monger v. Albany City Bank 85 N. Y. 580 591 xliv Table of Cases. [References are to pages.] Monsseaux v. Urquhart 19 La. Ann. 482 73 Montagu v. Pacific Bank 81 Fed. Kep. 602 281 Montelius v. Charles 76 111. 303 510 Morgan v. State Bank 11 N. Y. 404 351 Morrill V. Little Falls Mfg. Co 53 Minn. 371, 55 N. W. 547. . . . 72 Morris v. Beaumont Nat. Bank 83 S. W. 36 301 V. 37 Tex. Civ. App. 97, 83 S. W. 36 301 V. St. Paul, etc. E. Co 19 Minn. 459 269 Morris Miller Co. v. Von Pressentin. 63 Wash. 74 544 Morse v. Massachusetts Nat. Bank. . 1 Holmes 209 164 V. United States 174 Fed. Rep. 539 421 Mortimer v. Potter 213 111. 178 87 Morton, etc. Co. v. Wysong 51 Ind. 4 53 Morville v. American Tract Soe 123 Mass. 129 287 Movius V. Lee 30 Fed. Rep. 298 191 Mt. Morris Bank v. Twenty-third Ward Bank 64 N. E. 810, 172 N. Y. 244. ... 637 Mt. Sterling Nat. Bank v. Green .... 35 S. W. (Ky. ) 911 276 Muench v. Bank 11 Mo. App. 144 580 Muir V. Citizens' Bank 39 Wash. 57 . 625 Mulherin v. Kennedy 48 S. E. 437, 120 Ga. 1080 671 Mulloueh Co. v. Oregon Nat. Bank. . 61 Fed. Rep. 912, 538 276 Munger v. Albany City Nat. Bank . . 85 N. Y. 580 372, 375 Murphy v. Metropolitan Nat. Bank. . 191 Mass. 159 332 V. Wheatley 63 Atl. 62, 102 Md. 501 672 Mutual Sav. Inst. v. Enslin 46 Mo. 200 347 Myer v. Bishop 129 Cal. 204 16 Nance v. Hemphill 1 Ala. 551 3, 4 Naser v. First Nat. Bank 116 N. Y. 492 541 National Bank v. Atkinson. '. 55 Fed. Rep. 465, 471. .135, 137, 139 466 V. Bangs 106 Mass. 441, 8 Am. Rep. 349. 348 353 655 V. Bouser 38 Pa. Super. Ct. 275. .477, 49^' 497 V. Case 99 U. S. 628 384, 385, 403, 423 V. City Bank 103 U. S. 368 503 -V. Commonwealth 9 Wall. 353, 362 237 V. Earl 2 Okla. 617 454 V. Everett 136 6a. 372 495 V. Farmers' & Mer. Nat. Bank. 87 Neb. 841 333 V. Graham 100 U. S. 699 158, 278, 279, 486 V. Insurance Co 104 U. S. 54 586, 587, 626 V. Matthews 98 U. S. 621 321, 322, 383, 433 V. National Bank Fed. Cas. No. 18, 310 390, 396 V. Nolting 26 S. E. 826 354 V. Norton 1 Hill (N. Y.) 572 113 V. Ocean Nat. Bank; 60 N. Y, 278 279 V. Oil and Cotton Co 124 Tex. Civ. App. M5.. . . . . . . 215 V. Phelps 97 N. Y. 44 246 V. Sixth Nat. Bank 212 Pa. St. 238 467, 468 V. Smith 66 N. Y. 271 276 V. Stever 169 Penn. St. 574 197 V. Stewart 107 U. S. 676 321, 322 V. Washington Co. Bank 5 Hun (N. Y.) 605 590 Table of Oases. xlv [References are to pages.] National Bank v. Watsontown Bank 105 U. S. 217, 221 581 V. Whitney 103 U. S. 99 321, 322, 433 National Butchers' & D. Bank v. Hubbell 117 N. Y. 384 492 National Dredging Co. v. President, etc. F. Bank 16 L. R. A. (N. S.) 593 306 National Exch. Bank v. Bank of N. Amer 132 Mass. 147 640 National Mahaime Bank v. Peck 127 Mass. 298 473 National Pahquioque Bank v. First Nat. Bank 36 Conn. 325 545 National Park Bank v. Amer. Exch Nat. Bank 88 N. Y. Supp. 271 638 V. New York Ninth Nat. Bank. 46 N.- Y. 77, 7 Am. Rep. 310 349 National Revere Bank v. Nat. Bank. 172 N. Y. 102, 64 N. E. 799 540 National Security Bank v. Cushman. 121 Mass. 490 118 National State Bank v. Ringel 51 Ind. 393 371 V. Vigo Co. Nat. Bank 141 Ind. Sup. 352, 40 N. E. 800. 150, 152 National Union Bank v. Earl 93 Fed. 330 637 Neal V. Coburn 92 Me. 139, 42 Atl. 348, 69 Am. St. Rep. 495 348 Neeley v. Rood 54 Mich. 134 ■ 272 Neff V. Green Cfo. Nat. Bank 89 Mo. 581 300 Nevada Bank v. Portland Nat. Bank. 59 Fed. Rep. 338 192 New Orleans Nat. Banking Assn. v, Wiltz 10 Fed. Rep. 330 250 New York Security & Trust Co. v. Lombard Inv. Co 73 Fed. Rep. (CO.) 537 674 New York Trust & Loan Co. v. Helmer 12 Hun 35, affd. in 77 N. Y. (1879) 64 666 Newberry v. Detroit, etc. Co 17 Mich. 141, 151 582 Newby v. Oregon Central R 18 Fed. Cas. 38 268 Newman v. State Bank 123 N. Y. Supp. 926 311 Newport Nat. Bank v. Bd. of Educa- tion 24 Ky. L. Rep. 876 421 Niblaek v. Coster 74 Fed. Rep. 1000 197 Nichols V. State 65 N. W. (Neb.) 774 274 V. Taunton Safe Dep. & T. Co. . 203 Mass. 551 90, 672 Nicollet Nat. Bank v. City Bank. . . 38 Minn. 85 50 Noonan v. State 55 Wis. 258, 12 N. W. 379 614 North Milwaukee, etc. Co. v. Bishop. 103 Wis. 492 53 North River Bank v. Aymar S Hill (N. Y.) 262 156 Northampton Nat. Bank v. Smith . 169 Mass. 281 346 Northeast & Southwest Alabama R R. Co., Eae parte 37 Ala. 679 249 Northern Nat. Bank v. Lewis 78 Wis. 475, 47 S. W. 834 138 Northwestern Coal Co. v. Bowman & Co 09 Iowa 150 313 Northwestern College v. Schwagler. . 37 Iowa 577 269 Northwestern Nat. Bank v. Thomp- son & Sons Mfg. Co ,. . 71 Fed. Rep. (C. C. A.) 113. . . 387 Northwestern Trust Co. v. Bradbury. 127 N. W. (Minn.) 386 89 xlvi Table of Oases. [References are to pages.] o. O'Brien v. Grant 146 N. Y. 163, 166 29, 635, 637 641, 658 O'Hare v. Second Nat. Bank 77 Pa. St. 96 453 O'Leary v. Ablis 68 Ark. 259 123 O'Neil V. New England Trust Co. . . 125 Am. St. Eep. 740 303 Oakdale Mfg. Co. v. Garst 18 E. I. 484 256 Oakland Bank of Savings v. Wilcox. . 60 Cal. 126 105, 144 Oakland Gas Light Co. v. Dameron. . 37 Cal. 663 51 Olney v. Chadsey 7 R. I. 24 141, 151 Omaha First Nat. Bank v. Moline First Nat. Bank 55 Neb. 303 542 Omaha Nat. Bank v. Kiper 82 N. W. (Neb.) 102 546 Oregon R. & Nav. Co. v. Oregonian R. Co 130 U. S. 1 420 Osborne v. Furniture Co 121 N. C. 365 144 Overman v. Hoboken City Bank 2 Vroom. (N. J. L. Rep.) 563.. 638 Owen V. Owen 4 C. & P. 93, 96 281 Pacific Bank v. Stone 121 Cal. 202 135 Pacific Nat. Bank v. Eaton 141 U. S. 227 66, 259 Pacific Trust Co. v. Dorsey 72 Cal. 55 39 Paint Co. v. National Bank 4 Utah 353 505 Panhandle Nat. Bank v. Emery "8 Tex. 498, 15 S. W. 23. .143, 151 Papp V. Capitol Bank 20 Kan. 440, 27 Am. Rep. 183. . 575 Pardee v. Fish 60 N. Y. 265 375 Paris V. Commonwealth 123 S. W. 329 605 V. Knickerbocker Trust Co 122 N. Y. Supp. 521 274 Parish v. Conn 123 S. W. (Ky.) 339 616 Parker v. Carolina Sav. Bank 53 S. C. 583 108 Parrish v. Commonwealth 136 Ky. 77 614 Parsons v. Dickinson 23 Mich. 56 313 Patterson v. Poindexter 40 Am. Dec. 554 372 V. Robinson 116 N. Y. 193, 22 N. E. 372 152 V. Wade 15 Fed. Rep. 770 124 Pattison v. Syracuse Nat. Bank 80 N. Y. 82 278, 279, 284 Patton V. United States 155 U. S. 438 12 Pauly V. Trust Co 165 U. S. 606, 17 Sup. Ct. 465. 76 Pearee v. Mad. & Ind. R. R 21 How. 441 21 Feeder v. Lumber Co 86 Mich. 541, 49 N. W. 575 152 Penacook Sav. Bank v. Hubbard. ... 58 N. H. 167 350 Pendergast v. Stockton Bank 19 Fed. Cas. No. 10918, 2 Sawy. 108 57 Penfold V. Charlevoix Sav. Bank 140 Mich. 126 686 Penniniston v. Baehr 48 Cal. 565 311 Pennington Co. Bank v. Moorehead. 110 Minn. 263 349 Pennsylvania Bank v. Farmers' De- posit Nat. Bank 130 Pa. St. 209 583 Pennsylvania R. R. v. St. Louis, Alton, etc. R. R 118 U. S. 290 420 Penn. Title & Trust Co. v. Meyer. . . 201 Pa. 299 295 People V. Bendit Ill Cal. 274 353 V. Brewster 4 Wend. 498 4 V. Chicago Gas Trust Co 130 III. 286 .'.'.' 20 Table of Cases. xlvii [References are to pages.] People V. Cole 130 Cal. 13 354 V. Comstoek 115 Mich. 305 94 V.Crockett 9 Cal. 113 57 V. Crossley 69 111. 195 53 V. Devin 17 111.84 72 vf. Doty 80 N. Y. 225 28 V. Fidelity, etc. Co 153 111. ( 1894) 25 256 V. Monteclto Water Co 97 Cal. 276 602 V. Nassau Ferry Co 86 Hun 128, 33 N. Y. Supp. 244, 66 N. Y. St. Eep. 801 74 V. Nat. Sav. Bank 129 111. 618 601 ■ V. Oakland County Bank 1 Doug. (Micli.) 282 49, 599 V. Peck 11 Wend. 604 72 V. President, etc 6 Cow. (N. Y.) 216 598 V. Public Service Com 127 App. Div. 480, 112 N. Y. Supp. 133 ■. 621 V. Robinson 64 Cal. 373, 1 Pac. Rep. 156 .. . 72 V. St. Nicholas Bank 77 Hun {N. Y.) 160 639 V. Sterling Mfg. Co 82 111. 457 54 V. Throop 12 Wend. (N. Y.) 183 Ill V. Utica Ins. Co 15 Johns. (N. Y.) 358 2, 602 People ex rel. Atorney-General v. Utica Ins. Co 15 Johns. 358, 8 Am. Dec. 243.. 9 People ex rel. Hunt v. Nat. Sav. Bank 11 N. E. 170 601 People eaj reZ. Piatt V. President, etc. 1 Doug. (Mieh.) 282 254 People ex rel. Tiffany & Co. v. Campbell 144 N. Y. 166, 172, 38 N. E. 990. 669 People's Bank v. Nat. Bank 101 U. S. 181 467 People's Home Sav. Bank v. Rickard. 139 Cal. 285 70, 71 People's Sav. Bank v. Cupps 91 Pa. St. 315 562 V. Hughes 1 Mo. App. 549 201 Percy v. Millandon 3 La. 568 110 Perkins v. Smith 116 N. Y. 441 28 Perley v. County of Muskegon 32 Mich. 132 272, 622 Peterborough Hydraulic Power Co. V. McAllister 17 Ont. L. Rep. 145 235 Peterson v. Union Nat. Bank 52 Pa. St. 206 367 Philler v. Jewett & Co 166 Pa. St. 456 658 v. Patterson 47 Am. St. Rep. 896, 168 Pa. St. 468 632, 636, 658 Phipps V. Jones 20 Pa. St. 260, 59 Am. Dec. 708. 68 Phoenix v. Bonsor 38 Pa. Sup. Ct. 275 493 Phoenix Bank v. Hussey 12 Pick. 483 170 Pickard v. Sears 33 Eng. Com. Law Eep. 469 .. . 199 Pickle V. Muse 88 Tenn. 380, 12 S. W. 919, 17 Am. St. Rep. 900, 7 L. R. A. 93 . 351 Piedmont Bank v. Wilson 124 N. C. 561, 32 S. E. 889... 189 Pierce v. Boston Five Cent Sav. Bank '. 129 Mass. 425 573 Pinkney v. Kanawha Valley Bank. . 68 W. Va. 255 521 Pirie v. Chicago Title & Trust Co. . 182 U. S. 438 603 Pittsburg, C. & St. L. E. Co. v. Keokuk Bridge Co 131 U. S. 371, 389 20, 420 Pittsburg Locomotive & Car Works V. State Nat. Bank U. S. Circuit Court, 1875; 2 Cent. L. J. 692 384, 385 xlviii Table of Cases. [References are to pages.] Planters' & Farmers' Nat. Bank v. First Nat. Bank 75 N. C. 534 543 Planters', etc. Ins. Co. v. Selma Sav. Bank 63 Ala. 585 57 Piatt V. Hibbard 7 Cow. 497 460 Piatt V. Sauk County Bank 17 Wis. 222 372 Polizzotts V. People's Bank 125 La. 770 311 Pollock Bros. v. Niall Herrin Co. . . 137 Ga. 23 549 Poorman v. Mills 35 Cal. 118 371 Potter V. Merchants' Bank 28 N. Y. 641 204, 215 V. United States 155 U. S. 438 323 Potts V. Wallace 32 Fed. Kep. 272 75 Power V. First Nat. Bank 6 Mont. 251 485, 541 Pratt V. Eaton 79 N. Y. 449 575 Presbyterian Congreg. v. Carlisle Bank 5 Penn. St. 345, 348 581 Prescott V. Haughey 65 Fed. Rep. 653 121, 126 Prescott Nat. Bank v. Butler 157 Mass. 548 435 V. 98 U. S. 621 19 President, Directors & Co. v. Hamlin 14 Mass. 178 150 President, etc. v. President, etc ... . 6 How. 212 584 President, etc. & Co. v. Smeeds & Canfield 3 Cow. 662 253 Preston v. Canadian Bank 23 Fed. Rep. 179, 182 637, 641 V. Prather 137 U. S. 604 460, 587 Prewitt V. Trimble 92 Ky. 176 145 Price V. Holcomb 89 Iowa 123, 56 N. W. 407 73 V. Riverside L. & I. Co 56 Cal. 431 597 Priet V. Reis 93 Cal. 85 597 Pronger v. Old Nat. Bank 20 Wash. 618, 56 Pac. 391 192 Providence, etc. v. Kent, etc. Co 19 R. X. 561 ( 1896) 68 Prudential Trust Co., Assignment. . 223 Pa: 409 674 Purl's Estate, In re 125 S. W. 849 272 Q. Queenan v. Palmer 117 111. 619 80 Quin V. Earle 95 Fed. Rep. 728 275 Quincy First Nat. Bank v. Ricker . . 71 111. 439, 22 Am. St. Rep. 104. 348 E. Raarsdale v. Franklin 25 Miss. 143 170 Railroad v. Bank 212 Mo.. 505, 39 Pa. St. 92 589 Rankin v. Cooper 149 Fed. Rep. 1010, 183 Mo. 552. 94, 122 V. Emich 218 U. S. 27 21 V. Fidelity Ins. Co 189 U. S. 242 81 Redington v. Woods 45 Cal. 406 34.4 Reed v. Home Sav. Bank 130 Mass. 443, 39 Am. Rep. 468. 192, 576 Reese v. Bank of Commerce 14 Md. 271 581 Reeves v. State Bank 8 Ohio St. 466 541, 548 Reid V. Eatonton Mfg. Co 40 Ga. 98, 2 Am. Rep. 563 75 Republican Mountain Silver Mines, Ltd., et al. v. Brown et al 58 Fed. Rep. 644 54 Eeton V. Union Trust Co 134 Mich. 1 271 Table of Oases. xlix [References are to pages.] Rettig V. Southern 111. Nat. Bank. . 147 111. App. 193 305 Riedel v. West Jersey & S. R. Co. . . 170 Fed. Rep. 816 273 Reynolds v. Crawfordsville Bank. . . 112 U. S. 40.5 447 ,?. Simpson & Ledbetter 74 Ga. 454 234, 235, 449 Rice V. Citizens' Nat. Bank 21 Ky. L. Rep. 346, 51 S. W. 454 350 Rich V. Niagara County Sav. Bank.. 5 Thomp. & C. (N. Y.) 589. . . 289 Richards V. Gill 138 App. Div. 75, 122 N. Y. Supp. 620 89 Richardson v. Denegre 93 Fed. Rep. 572 276 Richmond v. Blake 132 U. S. 592 27 V. Irons 121 U. S. 27, 20 Blatchf. 525. . 83, 84, 86, 87, 88, 623, 625 Rider v. Morrison 54 Mo. 429 69 Ridgely Bank v. Patton & Hamilton. 109 111. 479 470, 548 Riley v. Albany Savings Bank 36 Hun (N. Y.) 513 300 Rimey v. Dunbary 39 Ind. App. 108 337 Riverside Bank v. First Nat. Bank. 20 C. C. A. 181, 38 U. S. App. 674, 74 Fed. Rep. 276. . . .324, 350 Robards v. Hamrick 39 Ind. App. 134 293 Roberts v. Hill 23 Blatchf. 312 620 V. Tucker 16 Q. B. 560, 15 Jur. »87, 20 L. J. Q. B. 270, 71 E. C. L. 560 351 Robertson v. Buffalo County Nat. Bank 58 N. W. 715 141 Robinson v. Bank 42 Ind. App. 350 293 V. Bank of Pikeville 37 L. R. A. 1186 334 ■ ^. Bidwell 22 Cal. 379 77 V. Buffalo Co. Nat. Bank 40 Neb. 235 457 V. Hall 63 Fed. Rep. 222 106 ■ V. Turrentine 59 Fed. Rep. 554 62, 85 Robinson & Co. v. Bank 146 Ky. 583, 51 Md. 562, 24 Am. Dec. 325 270 Roebling Sons Co. v. First Nat. Bank 30 Fed. Rep. 744 235, 445 Rogers v. Durant 140 U. S. 299 309 V. Huntington Bank 12 S. & R. (Pa.) 77 581 Rome Sav. Bank v. Kramer 32 Hun (N. Y.) 270 575 Root V. Olcott 42 Hun (N. Y. ) 536 189 Rose V. Douglass Township 39 Am. St. Rep. 354 622 V. 52 Kan. 451, 34 Pac. Rep. 1046. 622 Rounant v. San Antonio Nat. Bank 63 Tex. 610 349 Runner v. Dwiggins 147 Ind. 238 88 Runyan v. Lessee of Coster 14 Pet. 122 252 Ryan v. Dunlap 17 111. 40 171, 189 V. Man. & Mer. Bank 9 Daly 308 142 S. Sacket Harbor Bank v. Lewis Co. Bank 11 Barb. 218 235 Sacry v. Lobree 84 Cal. 41 609 Saginaw Bank v. Western Pa. Title, etc. Co 105 Fed. Rep. 491 372 Sahlien v. Bank 16 S. W. 373 549 Salem Bank v. Gloucester Bank. ... 17 Mass. 1 457 Samuel v. Holladay Woolw. 400 ( 1869 ) s. c. Fed. Cas. 306 53 1 Table of Cases. [References are to pages.] San Diego County v. Cal. Nat. Bank. 52 Fed. Rep. 59 276 Savage v. Birekhead 20 Pick. (Mass.) 167 190 Savings Bank v. Burns 104 Cal. 473 148 Savings Co. v. Anderson 78 O. S. 341 572 Savings Inst. v. Nat. Bank 89 Me. 500 626 Sawyer v. Hoag 17 Wall. (U. S.)610 576 Saylor v. Bushong 100 Pa. St. 23, 45 Am. Rep. 353. 339 Schaake v. Dalley 85 Kan. 598 9 Scliefifenacker v. Hoopes 113 Md. Ill 319 Schmidt v. Blood 9 Wend. 268 460 Schneider V. Irving Bank 1 Daly (N. Y.) 500, 30 How. Pr. (N. Y.) 190 339 V. Seely 40 111. 255 230 Schneitman v. Noble 75 Iowa 120 (39 N. W. 224) . . . 174 Schofield V. Goodrich Bros. Banking Co 98 Fed. Rep. 271 424 — — V. State Nat. Bank 97 Fed. Rep. 282 468 School Dist. V. De Weese 100 Fed. Rep. 705 113, 197 V. First Nat. Bank 102 Mass. 174 273 Schrader v. Manufacturers' Bank. . 133 U. S. 67 83, 84, 625 Schrick v. St. Louis Mut. House Bldg. Co 34 Mo. 423 55 Schumacher v. Trent 18 Tex. Civ. App. 17, 44 S. W. 460 541 Scott V. Armstrong 146 V. S. 499 620 V. Gilkey 153 111. 168, 39 N. B. 265 548 V. Latimer 89 Fed. Rep. 843 75 V. Nat. Bank 72 Pa. St. 471 283 V. Ocean Bank 23 N. Y. 289 482 V. United States 130 Fed. Rep. 429 686 Scovill V. Thayer 105 U. S. 143, 148 258, 260 Second Nat. Bank v. Burt 93 N. Y. 233, 244 381, 452 V. Cummings 89 Tenn. 609, 35 Am. Rep. 691. 542 V. Gibboney 43 Ind. App. 492 293 V. Hill 75 Ind. 223 470 V. Wrightson 63 Md. 81 378 Security Bank v. Nat. Bank 23 Am. Rep. 129 210 Sedalia, etc. R. Co. v. Wilkerson. . . 83 Mo. 235 68 Seeber v. Commercial Nat. Bank ... 77 Fed. Rep. 957 468 Seeberger v. McCormick ]78 111. 404 105 Seldeu v. Equitable Trust Co 94 U. S. 419 24, 25 Selz V. Collins 55 Mo. App. 55 518 Seneca Co. Bank v. Neasa 5 Denio 329 118 Sewall V. Lancaster Bank 17 S. & R. (Pa.) 285 581 Shank v. Butsch 28 Ind. 18 311 Sharp V. Nat. Bank 87 Ala. 644 386 Shattuck V. Guardian Trust Co 130 N. Y. Supp. 658 198 Shaw V. Clark 49 Mich. 384 119 Sherwood v. Savings Bank 131 Iowa 528 279 Shinkle v. First Nat. Bank 22 Ohio St. 516 444 Shipman v. State Bank 126 N. Y. 318, 27 N. E. 371, 22 Am. St. Rep. 821, 12 L. R. A. 791 351, 353 Shoemaker v. Nat. Mechanics' Bank. 2 Abb. (U. S.) 416 384 Shute V. Pacific Nat. Bank 136 Mass. 487 372, 591 Siegel V. State Bank 122 N. Y. Supp. 220 572 Simons v. Fisher 55 Fed. Rep. 905 140 V. Vulcan Oil & Mining Co. . . 61 Pa. St. 202 9fl Simpson v. Waldby 63 Mich. 439, 30 N. W. 199.541, 544 Table of Cases. li [References are to pages.] Sistare v. Best 88 N. Y. 527 575 Skillman v. Titus 3 N. J. Eep. (Vroom.) 96 328 Slaughter-House Cases 16 Wall. 36 4 Slee V. Bloom 10 Am. Dec. 273 56 Smalley v. McGraw 148 Mich. 384 121, 686 Smith V. Board et al. Co 38 Conn. 208 117 V. Brooklyn Sav. Bank 101 N. Y. 58, 54 Am. Rep. 653. 572 V. Field 19 Ida. 558 329 T. First Nat. Bank 115 Ga. 608 382, 588 V. 45 Neb. 444 381, 453 V. Janes 20 Wend. 192 313 V. Lawaon 18 W. Va. 212, 228. . . 50, 151, 388 V. Londoner 5 Colo. 365 74 V. Mechanics' etc. Bank 6 La. Ann. 610 348 V. Miller 43 N. Y. 171 312 V. Nat. Bank 191 Fed. 226 542 V. North American .Mining Co. 1 Nev. 423 261 V. Sanborn State Bank 147 Iowa 640, 126 N. W. 77». . 587 588 Smith's Cash Store v. First Nat. Bank 149 Cal. 32 592 Solomon V. Bates 118 N. C. 311, 24 S. E. 478, reaffd. 118 N. C. 321, 24 S. E. 746 119, 127 Southerland v. Oleott 95 N. Y. 93 262 Southern R. R. v. Stevens 87 Pa. St. 190 251 Spaulding v. Andrews 48 Pa. (S. E.) 411 325 Speuse V. Iowa, etc. Constr. Co. . . . 36 Iowa 407 74 Spofiford V. First Nat. Bank 37 Iowa 181 384, 386 Spokane & Eastern Trust Co. v. Huff 63 Wash. 225 348 Spurlock V. Pacific R. Co 61 Mo. 319 57 Spyker v. Spenee 8 Ala. 333 141 St. Albans Bank v. Farmers', etc. Bank 110 Vt. 141, 33 Am. Dec. 188. . 349 St. Louis, etc. R. R. v. Terre Haute & I. E. R 145 U. S. 393 420 St. Nicholas Bank v. State Nat. Bank 128 N. Y. 26, 27 N. E. 849. . . 487 521, 541 St. Paul Nat. Bank v. Cannon 48 N. W. Rep. 526 475 Stacks V. Buten 141 Wis. 235, 124 N. W. 403 . . 573 Stacy V. Dane County Bank 12 Wis. 629 528, 543 Star Fire Ins. Co. v. New Hamp. Nat. Bank 60 N. H. 442 349, 354, 362 Stark Bank v. U. S. Pottery Co. . . . 34 Ver. 144 106 Starr v. Stiles 19 Pae. Rep. 225 589 State V. Bienville Oil Works 28 La. Ann. 204 74 V. Bonnell 35 Ohio St. 10-15 72 V. Bowman 78 N. C. 509 614 V. Burlingame '48 S. W. 72 609 V. Cadwallader 154 Ind. 607 614 V. Clement Nat. Bank 84 Vt. 167 270 V. Cramer 20 Idaho 639 614 V. Darragh 54 S. W. 226, 152 Mo. 522 609 V. Dunning 130 Iowa 678 275 V. Eifert 102 Iowa 188 615 V. Fields 62 N. W. 653 616 V. First Nat. Bank (Neb.) ... 88 Fed. Rep. 947 275, 439 Hi Table of Oases. [References are to pages.] State V. First Nat. Bank 51 N. W. 587 600 V. Harper 67 Am. Dec. 363 622 V. Jackson 105 N. W. 742, 20 S. Dak. 305 94 V. 21 S. Dak. 49» 686 v. Mason 61 Kan. 102 94 v. Mitchell 96 Miss. 259, 95 id. 130, 26 L. E. A. (N. S.) 1072, 123 S. W. 339 122, 616 V. Nichols 82 Pae. Rep. 741, 4 Wash. 437 . 671 V. 99 Pac. Rep. 876 268 V. Northwestern Trust Co 101 N. W. 14, 72 Neb. 497 674 V. Overton 24 N. J. Law 435 55 V. Pacific Brewing, etc. Co. . . 21 Wash. 451, 58 Pac. Rep. 584, 47 L. R. A. 208 74 V. Quackenbush 99 Minn. 515, 108 N. W. 593. . -615 V. Richereed 167 Ind. 217, 77 N. E. 1085, 5 L. R. A. (N. S.) 874 9 V. Salmon 216 Mo. 466 333 V. Sattley 131 Mo. 464 609 V. Savings Bank 136 Iowa 79 591 v: Scougal 3 S. Dak. 55, 15 L. R. A. 477, 44 Am. St. Rep. 756, 51 N. W. 855 3, 4, 9 V. Sportsman Park Assn 29 Mo. App. 326 74 V. St. Louis, etc. R. Co 29 Mo. App. 301 74 V. Stevens 92 N. W. 420 614 V. Straig 99 Minn. 327 615 ■ v. Twining 62 Atl. 402, 73 N. J. Law 683 . . 672 v. Union Stock Yards State Bank 70 N. W. 752, 105 Iowa 549, 72 N. W. 1076 79 V. Warner 60 Kan. 94 '616 ■ V. Wheatley 65 Wash. 244 686 State ex inf. v. Lincoln Trust Co. . . 144 Mo. 562 12, 668 State ex rel. Attorney-Genl. v. Sen- eca Co. Bank 5 Ohio St. 170 600 State ex rel. Bd. of Comrs. v. Clarke 73 N. C. 255 622 State ex rel. Cascade Bank v. Yoder 39 Mont. 202 630 State ex rel. Crow v. Lincoln Trust Co 144 Mo. 562, 46 S. W. 593 673 State ex rel. Goodsell v. Woodman- see IN. Dak. 246, 11 L. R. A. 420, 46 N. W. 970 3, 9 State ex rel. Gorman v. Nichols ... 8 Pae. Rep. 741 672 State ex rel. Page v. Smith 48 Vt. 266 9'9 State ex rel. Township v. Powell. . 29 Am. Rep. 512 '. 622 V. 67 Mo. 395 622 State Bank v. Cavill 81 Neb. 484 511 V. Knapt 16 How. 369 249 V. People's Nat. Bank 118 N. Supp. 641 188 State Nat. Bank v. Newton Nat. Bank 66 Fed. Rep. 691 201 V. Reilly 124 111. 464 301 Thomas Mfg. Co 17 Tex. Civ. App. 214, 42 S. W. 716 541 State Trust Co. v. Sheldon 68 Vt. 259 374 Table of Cases. liii [References are to pages.] Steams v. Lawrence 83 Fed. Rep. 738 , 145 Stebbins v. Lardner 48 N. W. 847 202, 475 Steel Works v. Bresnahan 60 Mich. 322, 27 N. W. 524. . . 152 Steers v. Liverpool Steamship Co . . 57 N. Y. 1 460 Steger v. Davis 8 Tex. Civ. App. 23, 27 S. W. 1068 57 Stein V. Howard 65 Cal. 616 261 Stephens v. Schuchmann 30 Mo. App. 333 620 V. Overstolz 41 Fed. Rep. 459, 43 id. 771, 44 id. 13 122, 602 Stevens v. Hill 29 Me. 133 108 - V. Scott 52 N. E. 535, 172 Mass. 356 79 Stewart v. Nat. Union Bank 2 Abb. (U. S.) 424 381, 453 Stockman, Eos parte 70 S. C. 31 296 Stockton V. Mechanics', etc. Bank. . 32 N. J. Eq. 163 576, 577 Stokes V. New Jersey Pottery Co. . . 46 N. J. L. 237 151 Storth V. George 150 Mo. 1 623 Stout V. Lusk 9 Kan. App. 694 615 Streissguth v. Nat. Grerman-Amer. Bank 43 Minn. 50 541, 545 Strong v. Brooklyn Cross Town R. R 93 N. Y. 426 265 Stuart V. Bank of Staplehurst 57 Neb. 569 121 Sturges V. Bank of Circleville 11 Ohio St. 153 177, 198 Sturtevant v. Sturtevant 20 N. Y. 39 82 Stutz v. Handley 41 Fed. Rep. 531 72 Suit v. Woodhall 113 Mass. 391 113 Sullivan v. Lewiston Sav. Inst 56 Me. 507, 96 Am. Dec. 500. . . 572 Supervisors v. Kaimey 39 Wis. 468 622 Surtees v. Hubbard 4 Esp. 203 281 Swasey v. Emerson 168 Mass. 118 151 Sweet V. Barney 23 N. Y. 335 289 V. Montpelier Sav. Bank & Trust Co 84 Pac. 542, 73 Kan. 47 672 V. Stevens 7 R. I. 375 335 ■Swindell & Co. v. Bainbridge State Bank 60 S. E. 13 150, 202 Sykes v. First Nat. Bank 2 S. Dak. 242 272 V. People 132 111. 32 269 T. Talladega Ins. Co. v. Woodward 44 Ala. 287 368 Tapley v. Martin 116 Mass. 275 50 Tate V. Security Trust Co 52 Atl. 313, 63 N. J. Eq. 559 .. . 673 Taylor v. Empire State Bank 66 Hun (N. Y.) 538 561 V. Hutton 43 Barb. 195 108, 149 V. Thompson 124 App. Div. (N. Y. ) 53 121 V. Vossburg Mineral Springs Co 128 La. 363 134 Ten Eyck v. Pontiac, etc. Co 74 Mich. 226, 41 N. W. 905 100 Thatcher v. Bank of State of N. Y. 5 Sandf. 121 211, 214 Third Nat. Bank v. Allen 59 Mo. 310 362 V. Boyd 44Md. 47 387, 422 V. Buffalo Ger. Ins. Co 193 U. S. 581 588 V. Ober (CCA.) 178 Fed. Rep. 678. . 305 Thomas v. City Nat. Bank 59 N. W. 943 142 V. Exchange Bank 99 Iowa 202 621 liv Table op Oases. [References are to pages.] Thomas v. International Bank 46 111. App. 461 368 V. Railroad Co 101 U. S. 71 420, 668 V. Taylor 224 U. S. 73 122 Thompson v. Bank of Brit. N. Amer. 82 N. Y. 1 351 V. Board of Trustees 30 111. 99 622 V. Co 58 Miss. 423 99 V. German Ins. Co 77 Fed. Rep. 258 593, 594 V. St. Nicholas Nat. Bank. ... 146 U. S. 240; s. c. 113 N. Y. 325 12, 159, 435 Thornton v. State (No. 1386) Ct. of Appeals of Georgia, Jan. 7, 1909; 63 S. E. 301 120 Tift V. Quaker City Nat. Bank 141 Pa. St. 550, 79 N. W. 605, 77 Minn. 119 128 Tillinghast v. Merrill 151 N. Y. 135, 34 L. R. A. 678, 56 Am. St. Rep. 612, 45 N. B. 375 622 Times Square Auto Co. v. Ruther- ford Nat. Bank 77 N. J. L. 649 320 Tishimingo Sav. Inst. v. Buchanan . 60 Miss. 496 575 Titus T. Mechanics' Nat. Bank 35 N. J. Law 588 541, 545 Toner v. Fulkerson 125 Ind. 224, 25 N. E. 218 74 Town Co. V. Swigart 43 Kan. 292, 23 Pac. Rep. 617. 152 Townsend v. Williams (N. C.) 23 S. E. 461 275 Tremont Bank v. Paine 28 Vt. 24 137 Trenholm v. Commercial Nat. Bank. 38 Fed. Rep. 323 596 Tripp V. Curtenius 36 Mich. 494, 24 Am. Rep. 610. . 371 True V. Thomas 16 Me. 36 368 Truman v. Lombard 42 N. Y. S. 262 71 Tuttle V. Nat. Bank 48 111. App. 481 414 Tyson v. State Bank 6 Blackf. (Ind.) 225 541 IT. Underhill v. Santa Barbara 93 Cal. 300 10 Union Bank v. Knapp 15 Am. Dec. 182 209 V. Laird 2 Wheat. 390 581 V. Maekall 24 Fed. Cases No. 14359 209 Union Nat. Bank v. Hunt 7 Mo. App. 42 388, 584 V. Lyons 220 Mo. 538 189 T. Oceana Co. Bank 80 111. 212 339 V. Rowan 23 S. C. 339 432 Union Pacific R. v. Chicago, etc. R. 163 U. S. 564 421 Union Sav. Assn. v. Seigelman 92 Mo. 635, 15 S. W. 630. ; . 75, 82 United German Bank v. Katz 57 Md. 128 575 United States v. Amer. Exch. Nat. Bank 70 Fed. Rep. 232 515 V. Barry 36 Fed. Rep. 246 73 V. Britton 107 U. S. 655 159, 216, 686 V. City Bank 21 How. 356 156 V. Cricelius 34 Fed. Rep. 30 686 V. First Nat. Bank 82 Fed. Rep. 410 334 United States Bank V. Georgia Bank 10 Wheat. (U. S.) 333, 6 L. Ed. 334 349 United States v. Heinze 161 Fed. Rep. 425 (C. C.) 425. . 12 363 V. Hughitt 45 Fed. Rep. 47 687 V.Knox 102 U. S. 422 84 V. Mann 95 U. S. 580 14 Table of Oases. Iv [References are to pages.] United States v. Means 42 Fed. Rep. 599 687 V. Morgan H How. 154 622 V. Nat. Bank 73 Fed. Rep. 379 302, 439 V. Nat. Bxch. Bank 45 Fed. Rep. 163 351 V. New York Nat. Park Bank . 6 Fed. Rep. 852 349 V. Norton 188 Fed. Rep. 256 368 V. Sanford 161 U. S. 412 77 ^ V. Stearns 15 Wend. 314 51 United States Nat. Bank v. First Nat. Bank 79 Fed. Rep. 296 137, 140, 141, 151, 426 United States Ranger v. Champion Cotton Press Co 51 Fed. Rep. 61, 140 Cal. 103, 117 N. W. 893 74 Upton V. National Bank 120 Mass. 153 446 V. Tribilcock 91 U. S. 45 258 Vail V. Newark Sav. Inst 32 N. J. Eq. 631 620 Van Leuven v. First Nat. Bank. . . . 54 N. Y. 671 137, 421, 422 Van Reed v. People's Nat. Bank. . . 198 U. S. 554, 124 U. S. 721. . . 32 Vance v. Motley , . . . 92 Tenn. 310, 21 S. W. 593 193 Vansauds v. Middlesex County Bank 26 Conn. 144 57 Varley v. Sims 100 Minn. 331 336 Veeder v. Mudgett 95 N. Y. 295 258 Ventura & Ojai Valley R. Co. v. Hartman 116 Cal. 260 66 Vereontere v. Golden State L. Co. . . 116 Cal. 410 123 Vilas Nat. Bank v. Strait 58 Vt. 448 137 Vincent v. Park Huron Sav. Bank. , 147 Micli. 437, 111 N. W. 90. . 560 Vogeli V. First State Bank 19 L. R. A. (N. S.) 402 301 w. Wagner v. Crook 167 Pa. 259 521 Walker V. State Trust Co 53 N. Y. Supp. 525, 40 App. Div. 55 673 Wall V. Prov. Sav. Inst 6 Allen (Mass.) 320 562 Wallace v. Estill Co. Dep. Bank (Ky.) 116 S. W. 351 621 V. Exchange Bank 126 lud. 265 191 Walnut Hill Bank v. Nat. Reserve Bank 121 N. Y. Supp. 892 333 Walsh & Co. v. First Nat. Bank. . . 238 111. 446 386 Walter v. Merced Academy Assn. . . 126 Cal. 582 66 Ward V. Allen 2 Met. 53 325 V. Farwell 97 111. S 93 11 V. Johnson 5 111. App. 30 574 V. Smith 7 Wall. 447 486 Warhus v. Bowery Sav. Bank 21 N. H. 78 572 Warner v. Mower 11 Vt. 385, 396 72 V. Penoyer 82 Fed. Rep. 181 122 Warren v. Shook 91 U. S. 704 24, 27 Warren Bank v. Suffolk 10 Cush. (Mass.) 582 542 Washburn v. Huntington 78 Cal. 573 612 Washington Bank v. Lewis 22 Pick. (N. Y.) 24 113 Ivi Table of Cases. [References are to pages.] Washington First Nat. Bank v. Whitman 94 U. S. 343. 24 Jj. Ed. 229. ... 351 Washington Nat. Bank v. Eckels ... 57 Fed. Rep. 870 617 V. Pierce 6 Wash. 491, 33 Pac. 972 143 Wasson v. Hawkins 59 Fed. 233 613 V. Lamb 120 Ind. 514, L. R. A 191 Waterloo Mining Co. v. Kuenser. . . 158 111. 259, 41 N. E. 906 542 Watkins v. Nat. Bank 51 Kan. 254 625 Watson V. Fagner 208 111. 136 436 V. Phoenix Bank 8 Met. (Mass.) 217 332 Watts V. Christie 11 Beav. 551 300 Way V. Butterworth 106 Mass. 75, 32 L. R. A. (N. S.) 477 4 Weber v. Spokane Nat. Bank 50 Fed. Rep. 735, 64 Fed. Rep. 208 414 Weed V. Bergh 141 Wis. 569, 124 N. W. 664, 25 L. R. A. (N. S.) 1217.. 4, 9 Weeks v. International Trust Co. . . 125 Fed. Rep. 370 19, 469 Wegner v. Second Ward Sav. Bank. 76 Wis. 242, 44 N. W. 1096 572 Welch V. German American Bank. . 73 N. Y. 424, 29 Am. Rep. 175. . 353 V. Goodwin 123 Mass. 71, 25 Am. St. Rep. 24 348 Welles V. Graves 41 Fed. Rep. 459 121, 596 Wellfley v. Shenandoah, etc. Co. . . . 83 Va. 768 '. 269 Wells V. Black 117 Cal. 157, 161 56, 77 V. Telegraph Co 144 Iowa 605 341 Wells, Fargo & Co. v. Enright 127 Cal. 669 152, 373 Werk V. Madriner Valley Bank 8 Ohio St. 302 313 West V. St. Paul Nat. Bank 54 Minn. 466, 56 N. W. 54 614 West Branch Bank v. Armstrong. . 40 Pa. St. 278 60 Western Bank v. Coldewey 120 Ky. 776 122 Western German Bank v. Novell 134 Fed. Rep. 724 618 Western Maryland R. Co. v. Frank- lin Bank 60 Md. 36 192 Western Nat. Bank V. Armstrong. . . 152 U. S. 346 179, 188, 189, 397, 407, 427 Western Wheeled Scraper Co. v. Sadilek 61 Am. St. Rep. 550 521 V. 69 N. W. 765, 50 Neb. 105, 202.. 521 Wharton v. Walker 4 B. & C. 163 281 Wheat V. Bank 5 S. W. 305 150 Wheatley v. Glover (Ga.) 54 S. E. 626 78 Wheaton v. Daily Telegraph Co. . . 124 Fed. Rep. 61 621 Wheeler v. Aiken Co. Loan & Sav. Bank 75 Fed. Rep. 781, 131 Fed. Rep. 223, 19 Utah 289 119 Wheelock v. Kost 77 111. 296 81, 617 Wheless V. Second Nat. Bank 1 Baxt. (Tenn.) 469, 25 Am. Rep. 783 192 Whetstone v. Ottowa University. . . 13 Kan. 320 52 White V. Elgin Creamery Co 108 Iowa 522 152 V. Franklin Bank 22 Pick. (Mass.) 181 287 V. National Bank 102 U. S. 658-661 172, 493, 494 V. Wood 129 N. Y. 527 261 Whitney v. Butler 118 U. S. 655 86 V. First Nat. Bank 55 Vt. 154 285 ■\Arhitney Arms Co. v. Barlow et al. . 63 N. Y. 62 18 Whitte V. Vincenot 43 Cal. 325 276 Wickersham v. Crittenden 93 Cal. 17 105, 135 Table of Oases. Ivii [References are to pages.] Wiekham v. Hull 60 Fed. Eep. 326 84, 87 Wiggin V. Free Will Baptist Churelj 49 Mass. 301 72 Wild V. Bank 3 Mason 305, Fed. Cas. No. 17,646 171, 427 Wiley V. First Nat. Bank 47 Vt. 546 - 202, 279 Williams v. Drexel 14 Md. 566 350 V. McKay . . .' 46 N. J. Eq. 25, 18 Atl. 824. ... 140 V. Union Bank 21 Tenn. 339 50 Willoughby v. Weinberger 15 Okla. 743 621 Wilson V. Bank 77 Kan. 589 38 V. M. E. K. Co 120 N. Y. 145, 24 N. E. 384, 17 Am. St. Rep. 625 305 \. Tolson 79 Ga. 137 491 Winchester Milling Co. v. Bank 18 L. E. A. (N. S.) 441 520 Winfield v. Ott 54 Pac. Rep. 714 (Okla. 1898) . 614 Wingate v. Mechanics' Bank 10 Penn. St. 104, 107 485, 542 Wingert v. First Nat. Bank 175 Fed. Rep. 739 442 Winalow v. Harriman Iron Co 42 S. W. 698 195 Winter v. Baldwin 89 Ala. 483 13 V. Muscogee R. R 11 Ga. 438 251 Winton v. Little 94 Pa. St. 64 137 Witters v. Sowles 31 Fed. Rep. 1 123 V. 38 Fed. Rep. 700 61, 84 Wood V. Pierce 2 Disn. 411 74 Wood & Co. V. Merchants' Sav., L. & T. Co 41 111. 267 470, 548 Wood River Bank v. First Nat. Bank 36 Neb. 744 523,524 Woodruff V. Plant 41 Conn. 344 313 Woolworth Nat. Bank v. Nevada Bank 73 Pac. 456, 139 Cal. 564, 63 L. R. A. 245, 96 Am. St. Rep. 169 637 Wright V. Hughes 119 Ind. 324, 12 Am. St. Rep. 412 417 V. OrFille Mining Co 40 Cal. 20 106 Wylie V. Northampton Bank 119 U. S. 361 279 Wyman v. Citizens' Nat. Bank 29 Fed. Rep. 734 381 T. Yakima Nat. Bank v. Knipe 6 Wash. 348 50, 51 Yardly v. Philler 58 Fed. Rep. 746 658 Yates V. Jones Nat. Bank 206 U. S. 158, 74 Neb. 734 120 122, 686 Yellow Jacket Silv. Min. Co. v. Stevenson 5 Nev. 224 150 Yerkes v. National Bank 69 N. Y. 382 421, 422 Young V. Adams 6 Mass. 182 348 V. Grote 4 Bing. 253 356 r V. Hudson 99 Mo. 1025 189 V. Vough 23 N. J. Eq. 325 57 Youngblood v. Birmingham Trust Co 95 Ala. 521, 20 L. E. A. 58, 36 Am. St. Eep. 245 9 Zacharine, Succession of 119 La. 150 336 Zinn V. Baxter 65 Ohio St. 341 121, 602 THE LAW OF BANKS AND BANKING. CHAPTER I. BANKING FBIYILE6ES TTNTSEB NATIONAL AND STATE AUTHORITY. § 1. Bight of banking controlled by legislation. The privilege of banking is a right which may be exercised only as authorized and directed by the supreme power of the State. Ifational banks are authorized and created by the Congress of the United States, and the business can only be exercised as expressly authorized and directed by the statutes creating them. State banks are creatures of the State. Their authority to exist and power to do business is derived from the Constitution and legislative enactments of the State in which they are located. The distinction between a national and State bank in their powers and authority emanates from the laws creating them. A national bank being created by. Congress is under national law, while a State bank, being authorized by the State, is under State law. A national bank possesses only such rights and powers as Congress may confer upon it and a State bank is limited in authority and controlled by the Constitution and legis- lative enactments of the State. Neither one can usurp or exer- cise the privileges or authority of the other, although both may possess in some particulars the same right. Congress, having the power to create a national bank, is endowed with the authority to prohibit the carrying on of the [1] 2 Baitking — IsTational and State Authoeity. [ch. i. business unless the persons conducting the same shall conform to its laws of regulation and control. A State is endowed with the same authority of authorizing, regulating and controlling banking within its borders. The privilege of banking originally was a common-law right and was without restriction or restraint of law. It was a privi- lege open to all ; but the flagrant abuses of the business, in the absence of laws of control and regulation, by persons conducting the same have brought about the enactment of laws by the Nation and the States of strict supervision and regulation, and the common-law privilege of private banking has been set aside by the enactment of national and State laws authorizing and empowering banks to exist only through incorporation. The privilege of private banking, it is held by leading author- ities, is one which the Constitution or statutes of a State may forbid. Some of the courts, however, question this doctrine, and hold that the Legislature may make the issuing of notes a franchise; biit as to the other branches of banking they deny the right of a legislature to interfere. The reasoning is based upon the constitutional ground that " no State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States, nor shall any State deprive any person of life, liberty or property without due process of law, nor deny to any person within its jurisdiction the equal pro- tection of law." This question, as early as 1818, was presented to the Supreme Court of Judicature of the State of New York in the case of the People V. Utica Insurance Co., 15 Johns. (N. Y.) 358. The action was an information in the nature of a quo warranto by the Attorney-General against the defendant for exercising bank- ing privileges without authority from the Legislature, and was based upon an act of the ■ Legislature commonly called the " Restraining Laws," which provided that " no person unau- thorized by law shall subscribe to or become a member of any association or proprietor of any bank or fund for the purpose of issuing notes, receiving deposits, making discounts or transact- ing any other business which incorporated banks do or may transact by virtue of their respective acts of incorporation." The court, in defining the right of private banking under this statute, says : " The right of banking, since the Restraining Act, is a privilege or immunity subsisting in the hands of citizens by CH. I.] Banking. 3 grant of the Iiegislature. The exercise of the right of banking, then, with us, is the assertion of a grant from the Legislature to exercise that privilege, and consequently it is the usurpation of a franchise, unless it can be shown that the privilege had been granted by the Legislature." The Legislature, by the above Act, did not confine the restric- tion to the issuing of notes, but included the receiving of deposits and the making of discounts unlawful and prohibitive, unless the person conducting this branch of banking had the privilege or authority from the Legislature. In the case of Nance v. Hemphill, 1 Ala. 551, the court, in substance, says : " Where the Constitution or Legislature does not prohibit private banking, it is a common-law privilege; and is a right that any individual may exercise until forbidden by the Legislature." ^1 The Supreme Court of the State of North Dakota, in the ease of the State of North Dakota ex rel. Marshall T. Goodsill V. Thomas Woodmansee, 1 N. Dak. 246, held that a legislative act which prohibits all persons from doing a banking business within the State, except corporations which are organized under the law, is constitutional. The court says: "As a matter of . fact, we have been unable to find an authority, and we have searched diligently, which has ever questioned the right of the Legislature in the exercise of police power to regulate, restrain and govern the business of banking." It is interesting to note the fact that the question is again brought before the Supreme Court of the State of South Dakota in the case of State v. Scougal, 3 S. Dak. 55. In this case the court holds that the Banking Act of the State, in so far as it prohibits an individual from carrying on the business of bank- ing other than the issuing of notes, and circulating the same as money, is in conflict with the Constitution of the State, which reads as follows : "No law shall be passed, granting to any citizen, class of citizens, or corporation, privileges or immunities which upon the same terms shall not equally belong to aU citizens or cor- porations." In the absence of a constitutiomal provision or inhibition, the Constitution being silent on the subject, it remains a question whether the legislative body of the State has the right to deprive a citizen under the Fourteenth Amendment of the Constitution 4 Banking — National and State Authoeitt. [ch. i. of the United States of the rights and privileges guaranteed to Mm by the constitutional provision/ The business of banking in its very nature creates a con- fidential and trust relationship, which exists between the bank and its patrons; and the diflSculties that depositors and those dealing with the bank necessarily encounter in detecting irregu- lar practices, and in ascertaining the real financial conditions of the same, seem to be sufiicient to justify inspection and control.^ The question whether the Legislature can prohibit private banking has never been directly presented to the Supreme Court of the United States, but the Supreme Court of the United States (in the case of Assaria State Bank v. Dalley, 219 U. S. 121), though not having this question directly imder considera- tion, declared that the Legislature might impose " incorporation as a police regulation and as a provision of safety." The States, therefore, are left in control of the privilege; and the right or privilege of private banking being a privilege or franchase which may be granted, governed, controlled or prohibited if not con- ducted as authorized by law, either by constitutional or legisla- tive provisions of a State, the power is vested in the State, and is denominated a police power; which may be exercised and imposed upon the theory that aU private interests are made sub- servient to the general interests of the community, and in the interest of public safety. The law seems to be settled that a State may, by constitu- tional enactment and legislative provisions, prohibit private banking within its domain, upon the principle " that the power of the States over police regulations is supreme." That this power is not restrained by the Constitution of the United States to the States, is the doctrine as enunciated and established by the Supreme Court of the United States in Slaughter-House Cases, 16 Wall. 36, and Bartemeyer v. Iowa, 18 Wall. 129. The right of banking, therefore, in a State, being a privilege or business under the control of the State it cannot be conducted 1 Attorney-General v. Utica Ins. 105 Cal. 376; Way v. Butterworth, Co., 15 Johns. (N. Y.) 357; Bank of 106 Mass. 75, 32 L. E. A. (N S ) Augusta V. Earls, 13 Pet. 519; 477. Nance v. Hemphill, 1 Ala. 551; 2 People v. Brewster, 4 Wend. State V. Scougal, 3 S. Dak. 55; Du 498; Blaker v. Hood, 53 Kan. 499; Quoin V. Kelley, 176 111. 218, 52 N. Weed v. Burg, 141 Wis. 577, 124 N. E. 919; Bank v. Henne, 0. & L. Co., W. 667. CH. I. J Bankihtg. 6 only as directed by the law of the State. It might provide that no banking business should be done except by corporations.^ The United States, under the Constitution and the laws of Congress, is supreme in its authority to form a bank and con- duct the same. It is supreme in its authority, " to coin money, regulate the value thereof and of foreign coin."' It is also within the privilege of Congress to make gold and silver, or anything else it may designate as money, a legal tender. The States are prohibited from this power, but they may form a bank and conduct the same and issue notes and circulate the same as money and manage the bank wholly in the interest of the State; but the States are prohibited from forming, through constitutional conventions and indorsement thereof by the people. Constitutions empowering them to make notes or anything but gold and silver coined by the government of the United States a " legal tender." The reasons for these prohibitive provisions, which were enacted and became a part of the Constitution of the United States, are historically and judicially stated in the case of Edwards v. Kearzy, 96 U. S. 595. The Supreme Court, in explaining the reasons for the adop- tion of the constitutional provisions, says : " The history of the National Constitution throws a strong light upon this subject. Between the close of the War of the Eebellion, and the adoption of that instrument, unprecedented pecuniary distress existed throughout the country. " The discontents and uneasiness, arising in a great measure from the embarrassment in which a great number of individuals are involved, continued to become more extensive. At length, two great parties were formed in every State, which were dis- tinctly marked, and which pursued distinct objects with syste- matic arrangement 5 Marshall L. of Wash. 75. One party sought to maintain the inviolability of contracts, the other to impair or destroy them. " The emission of paper money, the delay of legal proceedings, and the suspension of the collection of taxes, were the fruits of the rule of the latter, wherever they were completely domi- nant 5 Marshall L. of Wash. 86. " The system called justice was, in some of the States, iniquity 3 Assaria State Bank v. Dalley, 219 U. S. 127. 6 Bankiitg — National and State Authoeity. [ch. i. reduced to elementary principles. * * * In some of the States creditors were treated as outlaws. Bankrupts were armed with legal authority to be persecutors, and by the shock of lall confidence, society was shaken to its foundations. Fisher Ames' Works (ed. of 1859), 120. " Evidences of acknowledged claims on the public would not command in the market more than one-fifth of their nominal value. The bonds of solvent men, payable at no distinct day, could not be negotiated but at a discount of 30, 40, or 50 per cent, per annum. Landed property would rarely command any price; and sales of the most common articles for ready money could be made only at enormous and ruinous depreciation. " State Legislatures, in too many instances, yielded to the necessities of their constituents, and passed laws by which creditors were compelled to wait for the payment of their just demands on the tender of security, or to take property at a valuation, or paper money falsely purporting to be the repre- sentative of specie. Ramsey Hist. IT. S. 77. " The effects of these laws interfering between debtors and creditors were extensive. They destroyed public credit and confidence between man and man, injured the morals of the people, and in many instances insured and aggravated the ruin of the unfortunate debtors for whose temporary relief they were brought forward. 2 Ramsey Hist. S. C. 429. " Besides the large issues of Continental money, nearly all the States issued their own bills of credit. In many instances the amount was very large. 2 Phillips' Hist. Sketches of Am. Paper Currency, 29. " The depreciation of both became enormous. Only one per cent, of the Continental money was assumed by the new government. ]!^othing more was ever paid upon it Act of Aug. 4, 1790, § 4, 1 Stat, at L. 140 ; 2 Phillips' Hist Amer. Paper Currency, 194. It is needless to trace the history of the emissions by the State. " The Treaty of Peace by Great Britain declared that the creditors on either side shall meet vdth no lawful impediment to the recovery of the full amount in sterling money of all bona fide debts heretofore contracted. The British Minister complained earnestly to the American Secret-ary of State of violation of this guaranty. Twenty-two instances of laws in CH. I.J Banking. 7 conflict with it in different States were specifically named. 1 Am. St. Papers, 195, 196, 199, and 237. In South Carolina, laws were passed in which property of every kind was made legal tender in payment of debts, although payable according to contract in gold and silver. Other laws installed the debt, so that of sums already due only a third and afterward only a fifth, were securable in law. 2 Kamsey Hist. S. C. 429. Many other States passed laws of similar character. The obligation of the contract was as often invaded after judgment as before. The attacks were quite as common and effective in one way as in the other. To meet the evils in their various phases, the National Constitution declared that ' No State should emit hills of credit, make wnything hut gold and silver coin a legal tender in payment of dehts, or pass any law, * * * impair- ing the ohligations of contracts.' All these provisions grew out of previous abuses. 2 Curt. Hist, of Const. 366. See also the ' Federalist,' E^os. 7 and 44. In the number last mentioned, Mr. Madison said that such laws were not only forbidden by the Constitution, but were contrary to the first principles of the social compact and to every principle of sound legislation. " The treatment of the malady was severe, but the cure was complete. No sooner did the new government begin its auspi- cious course than order seemed to arise out of confusion. Com- merce and industry awoke and were cheerful at their labors, for credit and confidence awoke with them. Everywhere was the appearance of prosperity, and the only fear was that its progress was too rapid to consist with the purity and simplicity of ancient manners. Fisher Ames' Works, supra, 122. " Public credit was reanimated. The owners of property and holders of money freely parted with both, well knowing that no future law could impair the obligation of the contract. 2 Eamsey Hist., supra, 433." We find, then, the supreme right of banking, the coining of money and regulating the value thereof, to be vested in the Constitution of the United States; but the Constitution does not prohibit the States which form the Union and nation from creating or authorizing banks, but only prohibits them from making bank notes, or anything but gold and silver coined by the government of the United States, a legal tender. 8 Banking — National and State Atjthoeitt. [ch. i. The right of banking, then, exclusive of coining money, and regulating its value in a State can be governed by the State. It then becomes a privilege or franchise whereby a person or individuals may be authorized by law under such regulations as is reasonable, to conduct the business of banking. When banks are duly authorized and incorporated according to the provisions of law, they become private corporations. A national bank, organized under the National Banking Act, is a private corporation. The right of banking vsdthin the State being derived from the Constitution and legislative power of the State, and the privilege being conceded to be a franchise granted by the law, or by special enactment of the Legislature, and one which may be controlled and regulated under the police powers of the States, private banking may be therefore prohibited by constitutional and statutory enactments. Banking institutions must therefore, where such legislative requirements as to operation and regulation exist, comply with all such laws as are enacted, in the operation, conduct and management of their business. To be sure, all such laws, gov- erning the business as enacted by the Legislature, must be reasonable and just ; and the Legislature can not constitutionally enact laws which operate as a prohibition of the rights of any individual in the conduct of a lawful business, and which is guaranteed by the Constitution of the State. But the Legis- lature is invested with the power of enacting reasonable laws regulating business which has for its object the welfare and protection of the people. It may impose any reasonable requirement as a condition precedent to the operation of a business. It may require that the business of banking being one which invites the general public to enter into relationship with it by depositing money therein for safe keeping, that it shall be required to comply with a law requiring incorporation and obtain authority to act, which is only a form of just regu- lation. Such a condition precedent is only a reasonable one enacted as a rule of control and psotection. The courts do not fully agree upon this question, but the weight of authority supports the right of the Legislature in prescribing such conditions as incorporation, through which provision the business of banking may be conducted. OH. I.] Banking. The cases here cited give a view of the subject, both sup- porting and denying the doctrine announced.' " But if the State might require incorporation, it may give advantages to incorporated companies. It might provide that no banking business should be done, except by corporations, and that corporations should not continue with less than a surplus of ten per cent., both provisions being for the purpose of insur- ing safety." ° The Court, in Schaake v. Dalley, 85 Kan. 598, a late case, in the discussion of the common-law right of individuals to conduct the business of banking, where the statute of that State, in Sec. 2 of Chapter 125, Laws of 1911, making pro- vision for granting or refusing application to conduct a bank, very clearly demonstrates that it is within the power of the Legislature to not only regulate but possibly to create a monopoly of the business of banking. ♦ Augusta V. Earle, 13 Pet. 519, 596, 10 L. Ed. 274, 311; Bank of California v. San Francisco, 142 Cal. 276, 64 L. R. A. (N. S.) 918, 100 Am. St. Rep. 130, 75 Pac. Rep. 832; State ex rel. Goodsill v. Wood- mansee, 1 N. D. 246, 11 L. R. A. 420, 46 N. W. 970:; State v. Scougal, 3 S. D. 55, 15 L. R. A. 477, 44 Am. St. Rep. 756, 51 N. W. 855; People ex rel. Attorney-General v. Utica Ins. Co., 15 Johns. 358, 8 Am. Dec. 243; Blaker v. Hood, 53 Kan. 499, 24 L. R. A. (N. S.) 854, 36 Pac. Rep. 1115; Youngblood v. Birming- ham Trust Co., 95 Ala. 521, 20 L. R. A. 58, 36 Am. St. Rep. 245; Weed V. Bergh, 141 Wis. 569, 124 N. W. 664, 25 L. R. A. (N. S.) 1217; Marymout v. Nevada State Banking Board, 33 Nev. 333, 111 Pac. Rep. 295, 32 L. R. A. (N. S.) 477; State of Ind. v. Richereed, 167 Ind. 217, 77 N. E. 1085, 5 L. R. A. (N. S.) 874. 5 Assaria State Bank v. Dalley, 219 U. S; 121. CHAPTER II. STATE EEGTILATION OF BANKING AFTEE ORGANIZATION. § 2. State has power to regulate the business. The State has the power to regulate the business of banking conducted by all banks organized within the State, and of foreign banking corporations doing business within the State, but a State has no power to define the authority or regulate the business of a national bank. This power is vested in and exercised by Congress alone. But it is held in the case of Hoke V. People, 122 111. 511, that a State court has jurisdic- tion over a national bank clerk for forgery, notwithstanding he was punishable for the same act under the Revised Statutes of the United States, section 5209. A State may prescribe restrictions upon State banks which are incorporated under a general or special law, but cannot take away any power or privilege granted to them by a general law. The State may place a limitation upon the amount of indebt- edness which a bank may incur, providing that it shall not create an indebtedness in an amount to exceed its capital stock subscribed or paid up.^ The fact that debts so created does not render void notes and mortgages securing them.^ It may also prohibit the taking of or loaning money upon certain securities such as mining stocks, and may prescribe reasonable regulations as to the investment of its deposits.* It may also provide that a certain per cent, of its net earn- ings, after all expenses and losses are deducted for the current year, shall be placed as a reserve fund. And the law may provide how this fund may be turned into capital stock of the bank, thereby increasing and enlarging the capital. iC. C. California, 309. 2 Underhill v. Santa Barbara, 93 Cal. 300. 3 9 Cash. (Mass.) 604. [10] CH. II.J Banking. ll It may also limit the amount of indebtedness of any one person, firm, or corporation to the bank. And may also prohibit certain persons, its officers or direc- tors, from becoming indebted to the bank in any sum where they act in the capacity as trustees. It may also prohibit the depositing of public funds in a bank, and make such an act a penal offense against a bank for taking the same. It may also require that reports sh'all be published showing all deposits which are uncalled for and have been held for a certain period, and a failure to comply with such requirements may be made an offense punishable by fine and imprisonment.* The State may also provide that a public commissioner or a board of bank commissioners shall be appointed, whose duties shall be to examine into the affairs of banks. They may be given full power and "authority to take possession of banks, where found insolvent. National banks are regulated, as stated, by the law author- izing them, and Congress alone can place restrictions or limi- tations upon their business. It has been held that where Congress has made lan act a crime and punishable, a State does not lose its right to punish the offending party also. (13 IST. E. 823.) The State may impose and levy a license tax upon incor- porated State banks and prohibit a bank from doing business unless such tax is paid. But such a license tax to be consti- tutional must apply to all banking corporations. It may require that the directors shall hold meetings to investigate the condition of the bank. Also that they must, before entering upon their duties, take an oath that they will diligently and honestly administer the affairs of the bank, and that no person shall become a director who does not own in his own right a fixed number of shares of the bank's capital. The State has the power to prohibit an officer or employee from borrowing any of the funds of the banL It may also prohibit any officer, director, agent, teller, clerk or employee of the bank from overdrawing his account therein, * Eagle Ins. Co. v. Ohio, 153 U. Co., 82 N. Y. 172 ; Chicago Life Ins. S. 446; Chicago Life Ins. Co. v. Co. v. Auditor, 101 111. 82; Ward v. Needles, 113 U. S. 574; Attorney- Farwell, 97 111. 593. General v. North America Life Ins. 12 State Regulation of Banking. [ch. ii. and, if any such person knowingly overdraws his account with such bank, such act may be declared a felony. It may also prescribe the manner in which depository banks shall be designated and selected, and prohibit a bank from depositing any of its funds in any other bank unless such other bank has been so designated. It may also prohibit a commercial bank from advertising that they are savings banks, but the Legislature cannot pro- hibit any such bank advertising its business generally, soliciting deposits and agreeing to pay interest thereon. The State may enact a law making it a felony for any officer to certify a cheek of a person, unless such person has on deposit with the bank at the time of such certification an amount equal to the check so certified. It must be shown, however, where such a provision of law exists that the act was wilfully done by the officer.' The bank will be liable for the certification, though it is made in violation of such a law." The State may also prohibit a bank from either directly or indirectly trading or dealing in real estate, and may deter- mine and prescribe how and for what specific purpose a bank may borrow money. It may also enact a law prohibiting the bank from using its capital stock in the purchasing of its own shares (Fitzgerald v. McGregor, 133 Ga. 332), and where the statute forbids, and such acts are done by the bank's officers, it may be made a felony.'' The power of the State in regulating the business of all cor- porations is supreme, and it may place such restrictions and limitations upon each class as may be in the interest of the State and the public generally who may deal with the corpora- tion, but all such inhibitions and restrictions must be within the scope of legislative power. ^ A State may prescribe the terms and conditions upon which a foreign bank or corporation can do business in the State by prescribing that it shall perform certain things before beginning B Patton V. United States, 155 U. ' Ford v. Eoney, 126 Ga 763 55 S. 438. S. E. 499. 6 Thompson v. St. Nicholas Nat. s Engel v. O'Malley 219 U S Bank, 146 U. S. 240; s. c, 113 N. 128; State, ex inf., v. Lincoln Trust Y. 325. See United States v. Heinze, Co., 144 Mo. 562. 161 Fed. Eep. 425. CH. II.] Banking. 13 business, and shall not be allowed to conduct business on any more favorable terms than a corporation incorporated in the State. When the Constitution or the statute of a State requires that a corporation shall have and maintain an office or place in the State for the transaction of its business, where transfers of stock shall be made, and in which shall be kept, for inspec- tion by every person having an interest therein, books in which shall be recorded the amount of capital stock subscribed and by whom, together with the names of the owners of stock, and the amount owned by them respectively, the amount of stock paid in, and by whom, the transfer of stock, the amount of its assets and liabilities, and the names and places of residence of its officers, mandamus proceedings will lie against the officer having custody of the books to enforce the right." The officers of a national bank cannot be compelled to exhibit the books of the bank to State officers for the purpose of fur- nishing a basis for a State taxation of the deposits, as against the depositors. But it is held that a State court has power to issue compulsory process against a national bank, compelling it to disclose the names of its depositors, and the amount of their deposits, in order to ascertain whether any money deposited therein, subject to taxation within the county, has not been returned for that purpose by the owners.^" The proceedings in such a case cannot, where instituted by a State court, be stayed by a writ of injunction issued by a Fed- eral court.^^ Section 3177 of the Eevised Statutes of the United States gives authority to any collector, deputy, or inspector of internal revenue, to enter in the daytime any building or place within his district where any articles or objects subject to such taxa- tion are made, produced, or kept, so far as it may be necessary for the purpose of examining such objects or articles ; and any owner who refuses to admit such officer or suffer him to examine such article or object shall, for every such refusal, forfeit the sum of $500. Held: That under this provision paid bank checks, which 9 Winter v. Baldwin, 89 Ala. 483. n First Nat. Bank of Youngs- i» First Nat. Bank of Youngs- town v. Hughes et al., 6 Fed. Rep. town V, Hughes et al., 6 Fed. Kep. 737. 737. 14 State Kegulation of Banking. [ch. ii. were duly stamped at the time they were made, are not such articles or objects subject to taxation, and that the bank may lawfully refuse the collector to examine the checks." The statute may define who have the right to examine, or inspect certain books of the corporation, and where language is used that " every person having an interest therein," etc., shall have such a privilege, it may be construed to be a deposi- tor or creditor. The privilege is held to be denied to such, however, unless the statute expressly provides that they may do so. 'No book, journal, or document can be made the subject of examination by a depositor or creditor, unless the authority is expressly provided for in the statute or authorized by order of a court of competent jurisdiction. A creditor is one who has a lawful claim against the bank. The claim may be one which the bank disputes and refuses to recognize ; and when disputed and invalid, the bank may refuse access to its books for the purpose of examination; and where there is no penalty or measure of damages fixed by the law against the bank, for a refusal to allow depositors and creditors the right to inspect any such books of the corporation, the bank can be held for only the actual damage arising from such refusal. A violation of any national or State law can be inquired into only through an action brought by the Comptroller of the da- reney or the Attorney-General of the State. 12 United States, Plaintiff in Error, v. Mann, 95 U. S. 580. CHAPTER III. BANKING WITHOUT AXTTHOEITT. § 3. TTnanthorized banking. The business of banking, or the privilege, being one which is withheld or granted by the legislative power of a State, all persons being prohibited unless the privilege is first obtained, the act of banking when conducted without obtaining this right is termed unauthorized banking. A private banker, being one who conducts the business of banking without first securing such a right, where the law requires that such a privilege must be obtained from the power authorized to grant the same, is conducting an unlawful busi- ness; and is subject to punishment as in such oases made and provided. Advertising that deposits will be received and checks paid implies the business or act of banking. A corporation, organized to conduct a business of constructs ing and operating railroads, buying and selling real estate, dry goods, and the like, if it conducts the business of receiving money on deposit for others, and repaying the same upon orders or checks, is conducting the business of banking unlaw- fully. The law of a State may permit the formation of a partner- ship, and authorize the partnership to conduct the business of buying and selling property, both personal and real, and (dis- count notes and other securities which is a part of the author- ized business of banks) such a business may not be unauthorized banking as construed by the law of said State. Where the partnership is formed, the receiving of money and holding the same for others and paying checks is an act of banking. Again, a building and loan association which, in its general working and in its nature, is very similar to banking, may con- duct the business of trusts, holding money placed in trust with it, either by individuals, corporations, or courts ; but it has no authority to conduct the business of banking where the act or [15] 16 Banking Without Authoeitt. [ch. m. law authorizing its creation does not grant it the power to do any business other than that for which it is specifically incor- porated; and if it conducts the business of banking, receiving money on deposit, discounting notes, and securities, and loan- ing money to its customers on commercial paper, it is conduct- ing an unlawful banking business. § 4. A de facto corporation. A de facto corporation is one acting as a corporation in good faith." A corporation de facto exists where a number of persons have organized and are acting in good faith as a corporation.^ A bank may act as a de facto corporation, and while acting as such in good faith without authority of law, its acts are lawful and cannot be inquired into excepting through the proper authorities of the State. All acts or business done by such corporation are not illegal, and its right to exercise corporate powers while performed in good faith, the bank claiming that it has the right to act, will be enforced as against all parties dealing with it. It is also held that one who borrows money from such a cor- poration cannot defeat a recovery by alleging that the company is not a corporation.^ One who has contracted with such a corporation, and received the benefits of its performance, cannot defeat an action brought by the corporation by alleging its lack of power to contract or its want of legal existence.* A hank that acts as a corporation, and is not such, with the knowledge of the fact, but induces another by fraud to deal with it, that other is not estopped from denying the existence of the corporation. § 5. Ultra vires acts. An ultra vires act is the doing of a thing by the corporation which it has no power to do. It is also the doing of a thing which the charter or law says the corporation shall not do. A banking corporation may, in the first instance, believe that 1 Lakeside Ditch Co. v. Crane, 80 3 Grangers Business Asso. v. Clark, Cal. 181. 67 Cal. 634. 2 Martin v. Deitz, 102 Cal. 55, 41 4 Myer v. Bishop, 129 Cal. 204. Am. St. Rep. 151. CH. Ill] Banking. . 17 it has the power ; and in the second, do a thing forbidden it by its charter or the law, knowing that it did not have the power. The latter act is forbidden by statute, and is illegal. An illegal act cannot be enforced. It is doing, or attempt- ing to do, something the law says cannot be done. This act should not be called an ultra vires act. It is a violation of an expressed law. The court in Central Trans. Co. v. Pullman Palace Car Co., 139 U. S. 24, says : " The view which the court has taken of the question pre- sented by this branch of the case, and the only view which appears to us consistent with legal practice, is as follows: A contract of a corporation which is ultra vires, in the proper sense, that is to say, outside the object of its creation as defined in the law of its organization, and therefore beyond the powers conferred upon it by the Legislature, is not voidable only, but wholly void, and of no legal effect. The objection to the eon- tract is, not merely that the corporation ought not to have made it, but that it could not make it. The contract cannot be rati- fied by either party, because it could not have been authorized by either. No performance on either side can give the unlaw- ful contract any validity, or be the foundation of any right or action upon it. " When a corporation is acting within the general scope of the powers conferred upon it by the Legislature, the corpora- tion, as well as persons contracting with it, may be estopped to deny that it has complied with the legal formalities which are- prerequisites to its existence, or to its action, because such requisites might in fact have been complied with. But when the contract is beyond the powers conferred upon it by existing laws, neither the corporation, nor the other party to the contract can be estopped, by assenting, to it, or by acting upon it to show that it was prohibited by those laws. " The doctrine of the common law by which a tenant of real estate is estopped to deny his landlord's title has never been considered by this court as applicable to leases by realty cor- porations for their roads and franchises. It certainly has no bearing upon the question, whether this defendant may set up that the lease sued on, which is not of real estate, but of per- sonal property, and which includes, as inseparable from the 2 18 Banking Without Authoeity. [ch. hi. other proper transfer, the inalienable franchise of the plaintiff, is unlawful and void for want of legal capacity in the plaintiff to make it. " A contract ultra vires being unlawful and void, not because it is in itself immoral, but because the corporation, by the law of its creation, is incapable of making it, the courts, while refus- ing to maintain any action upon the unlawful contract, have always striven to do justice between the parties so far as could be done consistently with adherence to law, by permitting prop- erty or money, parted with on the faith of the unlawful con- tract, to be recovered back, or compensation to be made for it. In such case, however, the action is not maintained upon the unlawful contract, nor according to its terms ; but on the implied contract of the defendant to return, or, failing to do that, to make compensation for, property or money which it has no right to retain. To maintain such an action is not to affirm, but to disaffirm, the unlavfful contract." The courts hold, that where a contract is not purely ultra vires, it may be enforced. For example, where, by a failure to enforce it, a legal wrong might be perpetrated. In the case of Whitney Arms Co. v. Barlow et al., 63 N. Y. 62, the court says : " The doctrine of ultra vires, whether invoked for or against a corporation, is not favorable in the law. It should never be applied where it will defeat the ends of justice." The court further says : " It is now very well settled that a corporation cannot avail itself of the defense of ultra vires when the contract has been in good faith fully performed by the other party, and the cor- poration has had the full benefit of the performance of the contract. If an action cannot be brought directly upon the agreement, either equity will grant relief or an action in some ' other form will prevail. The same rule holds e converso. If the other party has had the benefit of a contract fully per- formed by the corporation, he will not be heard to object that the contract and performance were not within the legitimate powers of the corporation." In the case of McCormick v. Market National Bank, 165 U. S. 538-549, the court says : " The doctrine of ultra vires by which a contract made by a CH. Ill] Banking. 19 corporation beyond the scope of its corporate powers is unlaw- ful and void and will not support an action, rests, as this court has often recognized and affirmed, upon three distinct grounds : the obligation of any one contracting with a corporation to take notice of the legal limits of its powers ; the interest of the stock- holders not to be subjected to risks which they have never undertaken; and above all, the interests of the public that the corporation shall not transcend the powers conferred upl>n it by law." ° This question isr further discussed in the case of California Bank v. Kennedy, 167 U. S. 362 ; the direct question at issue in this case being whether a national bank could take and hold the stock of another corporation. Th^ court in discussing the question says : " In view of the fact that the defendant was a national bank deriving its powers from the statutes of the United States, the averment of a particular transaction of the one in question if entered into was without authority of law and cannot in reason be construed only to relate to the law controlling and governing the conduct of the corporation, that is, the law of the United States." In this case it was admitted at the trial that the stock of the saving bank was not taken as security, or anything of the kind, and it is not disputed in the argument at bar, that the transac- tion by which this stock wa^ placed in the name of the bank, was one not in the course of the business of banking for which the bank was organized. The court says: " Whenever divergence of opinion might arise on this ques- tion from conflicting adjudications in some of the State courts, in this court it is settled in favor of the right of the corporation to plead its want of power. That is to say, to assert the annulity of an act which is an ultra vires act." It is held that a national banking corporation may enter into a lease for ninety-nine years, which is vendible, and that it is not an act ultra vires to enter into such a contract." Nor 5 Concord First Nat. Bank v. « Week v. International Trust Co., Hawkins, 157 Mass. 548 ; Prescott 125 Fed. Eep. 370. Nat. Bank v. Butler, 98 U. S. 621; Hennessy v. City of St. Paul, 54 Minn. 219. w 20 Banking Without Authoeity. [ch, hi. ultra vires for a savings bank to expend money repairing hotel so that it may sell v^ell.'' The rule is well established that vehere a contract is made by a corporation beyond the scope of its corporate powers, it is unlawful and void. Unlawful banking, then, is the conducting of the business of banking by a person, or combination of persons, who have not obtained authority where the law requires that such authority must first be obtained. Unlawful banking may also be the conducting of the busi- ness of by a pretended corporation; one which, at the time of entering into transactions and contracts, well knew that it had no power or authority to act Unlawful banking may also be acts performed by duly incor- porated corporations, which acts are either specifically denied the corporation by the charter, or forbidden by the law. All acts attempted to be done, which if done by a banking corporation which are not authorized by the charter and the law authorizing its existence, either expressed or implied, are acts ultra vires, " and so when it assumes to do that which it has not been empowered by the State to do * * * the act is a nulity." * Every act of a corporation not authorized by its charter and the law under which it is incorporated is an ultra vires act, and therefore is wholly void. In the case of Central Transportation Company v. Pullman Car Co., 139 U. S. 24, Mr. Justice Gray, delivering the opinion of the court, says : " A contract of a corporation which is ultra vires in the proper sense, that is to cay, outside of the objecte of creation, and therefore beyond the powers conferred upon it by this Legislature, is not voidable only, but wholly void and of no legal effect. The objection to the contract is, not merely that the corporation ought not to have made it, but that it could not make it. No performance on either side can give the unlawful contract any validity or be the found- ation of any right of action upon it." " 7 B. & S. Co. V. Savings Bank, 108 15 ; Head v. Providence Ins. Co., 2 Me. 89. But see Interstate Trust Cranch 127. and Banking Co. v. Reynolds, 127 » People v. Chicago Gas Trust Co., La. 193. 130 111. 286 ; Pittsburg, etc., Ey. Co. 8 Chicago, E. I. & P. E. Co. v. v. Keokuk Bridge Co., 131 U. S. 371, Union Pacific Ey. Co., 47 Fed. Eep. 389. CH. Ill] Banking. 21 A banking corporation comes severely within the rule that all acts not authorized by its charter and the law under which it is incorporated are ultra vires. The very nature of its busi- ness requires a strict enforcement of the law, that its stock- holders may not become liable and that the earnings and sav- ings of its depositors may be safely preserved. That the law should be strictly enforced in its application to a banking corporation arises from the reason that it is created by virtue of public acts of the Legislature, and its powers and duties are clearly defined by public law, and parties dealing with it must take notice of the powers and limitations upon it at their peril.^" In this case, even though the purchase and carrying on of a mercantile company by a national bank was illegal, the persons dealing with the company were entitled to receive the money paid into the bank for their account.^^ Where a national bank assisted in the reorganization of a corporation authorized by a State which statute provided for a double liability of all stockholders, it is held that, first, a national bank has no expressed power; second, not having such power, it has no implied power to aid in the organization of a corporation for manufacturing purposes by taking stock therein, and in a suit brought against the bank may plead its lack of power. '^ That a bank's purchase of stock in another bank was ultra vires does not prevent it from getting title to the stock.'' The promise of a bank to honor a draft on presentation is not necessarily ultra vires.'* An act by a bank entering into a guarantee unless of sub- stantial benefit is beyond its power.'" Speculative purchase of national bank stock by another national bank is ultra vires." It is ultra vires for a bank to execute a note as a subscrip- tion to aid in the building of a railroad." loPearee v. Mad. and Ind. Rail- "Farmers' and Merchants' Nat. road, 21 How. 441; Andrews v. Ins. Bank v. Illinois Nat. Bank, 146 111 Co., 37 Me. 256; Franklin Co. in App. 136. Equity V. Lewiston Savings Bank, isLarabee v. Dalley, 175 Fed 68 Me. 43. Eep. 365. u Rankin v. Emich, 218 U. S. 27. i« Metropolitan Trust Co. v. Me- 12 First Nat. Bank v. Converse, Kinnon, 172 Fed. Rep. 846. 200 U. S. 425. 17 A. K. & W. Ey. Co. v. Bank, 21 13 172 Fed. Eep. 846. Okla. 322. 22 Banking Without Authoeity. [ch. hi. It is ultra vireg for a bank to contract to furnish clerks for public sale, to keep the accounls of the sale and to take notes with good security and to be responsible for the exercise of care ou the part of such clerks, and hence it is not liable where its agents at such sale take a note with a forged endorsement.^* BescissioTi. A national bank cannot avoid rescission of an illegal or fraudulent contract on the ground that under the National Banking Law it had authority to enter into such a contract.^* 18 Millet V. F. & M. Bank, 107 pleton, 216 U. 8. 196. See First Iowa 69. Nat. Bank v. Monroe, 135 Ga. 687. i» Citizens' National Bank v. Ap- CHAPTER IV. BANZS CLASSIFIED AITD DEFINED. § 6. Commercial and savings banks. Banks are classified into two divisions, namely, Commercial and Savings Banks. Commercial banks may be divided into three classes, for example, a bank may be incorporated solely for the purpose of receiving money on deposit, retaining the deposit for the depositor and repaying the same back to him upon demand. The business of this kind of a bank is com- mercial in character, and is called a bank of deposit. Again, a bank may be incorporated to receive money on deposit, and repay the same to the depositor upon demand, and also to discount notes, securities and the like for its customers and others. The business of this bank is also commercial in its nature, and may be called a bank of deposit and discount. Again, a bank may be incorporated to receive money on deposit, and repay the same to the depositor upon demand, and to issue notes and circulate the same as money, and to loan money, discount notes, securities and the like. The business of this kind of a bank is also eonxmercial, and is called a bank of circulation, deposit and discount. A commercial bank may therefore have any one or all of these elements and powers; and when endowed with any one of them it is termed a commercial bank. Banks are again divided into savings banks. Coming under this head there are only two classes; one is called Mutual Savings, which is an institution incorporated without capital stock, and is purely mutual in its nature and its powers, con- ducting business only for its members, and wholly in their interest. While the other is a savings bank incorporated with a capital stock, and is authorized to receive deposits and repay the same to depositors, loan money, and, by special power granted by statute in some of the States, is authorized to dis- count notes and issue certificates of deposit. This kind of a [23] 24 Banks Classified and Defined. [ch. iv. bant, although denominated as a savings bank, is stripped of all the elements of such institutions. National banks are commercial in charaoter. They are insti- tutions authorized directly by the Government of the United States, and are empowered to conduct a banking business and to issue, under direction of the Grovemment, their notes, and circulate the same as money. Their powers are strictly com- mercial. § 7. General definition of banking. A banker, as defined by a leading authority, " is one who conducts the business of banking, keeps an estaHishment for the d^osit of money, bills of exchange, etc." This definition, may be enlarged upon, but cannot well be improved. A definition which defines a banker to be one who conducts the business of banking is general in its application. The legitimate business of banking demands that a banker shall have a place of business; while a broker, one who buys and sells, securities, etc., may not have a place of business, but may, and frequently does, conduct the business of a banker without having a place of business. § 8. When a broker becomes a banker. A broker becomes a banker subject to taxation, under the Eevenue Law of the United States, when he, as an agent, receives from another for sale or discount bonds, bullion, stocks, bills of exchange, or promissory notes, where he employs capital of his own, with that of another, provided he has a place of business where credits are opened for that purpose.^ The court, in the case of Warren v. Shook, says: " Having a place of business where deposits are received and paid out on chedjs, and where money is loaned upon security, is the substance of banking." The court also gives the follow- ing illustration : " Thus, if A. B. has $10,000, which he desires to invest, and purchases U. S. stocks, or State stocks, or any other security, he does not thereby become a broker. It is only when making sales and purchases in his business, his trade, his profession, his means of getting a living, or of making his 1 Warren v. Shook, 91 U. S. 704; Selden v. Equitable Trust Co., 94 U. S. 419. CH. IV. J Banking. 25 fortune, that he becomes a broker, within the meaning of the statute." The court, in the case of Selden v. Equitable Trust Co., " The statute describes three classes of artificial and of natural persons, distinguished by the nature of the business transacted by them, and declares that individuals embraced in either of the classes shall be considered bankers. The first class is composed of those who have a place of business where credits are opened by the deposit or collection of money, or currency, subject to be paid or remitted upon draft, check or order. It is not claimed that the company engaged in that branch of business or that they are included in this first class. The agreed state of facts expressily repels any such claim. " The second class are those who have a place of business where money is advanced or loaned on stocks, bonds, bullion, bills of exchange or promissory notes. It is contended on behalf of the plaintiff in error that the company is included in this class because it advances or loans money on bonds. The case, however, states that all the loans the company, makes are invest- ments of its own* capital in mortgage securities on real estate. It is true the bonds of the borrowers are taken with the mort-- gages, but the bonds are mere evidence of the debt. The money is advanced or loaned on the security of the real estate mortgage, and not on the security of the bond. We think Congress, in the case of the Act we are now considering, intended reference to transactions entirely different from loans or advances made on the personal promise or undertaking of the borrower. The words used are not technical. They are, therefore, to be understood in their common and popular sense. Dwarris, Stat. 573. And that in common understanding, an advance or loan of money on stocks, bonds, bullion, bills of exchange, or promissory notes, is an advance or loan where those species of property are pledged as collaterals, or are hypothecated to secure the return of the advance, or the pay- ment of the sum lent, is unquestionably true. It can be nothing else where the money is advanced or lent on stocks or bullion; and, by the statute, bonds, bills of exchange and promissory notes are placed in the same catalogue with stocks and bullion. All of them are like the subject on which the advance or loan 26 Banks Classified and Defined. [ch. iv. is made. It is a fair presumption, therefore, that Congress regarded an advance or loan on bonds as similar in its char- acter to an advance or loan on stocks, involving in each case an hypothecation of the subject on which the advance is made. If not so, if it was intended to embrace loans generally, there was no necessity for introducing the qualifying words, ' on bonds, bills of exchange, or promissory notes.' " It was, however, not the lending, but the method or mode of operation, which was in view. If it was m^ere lending Congress had in contemplation, it is difficult to conceive of a reason why mortgages of real estate were not included with stocks, bonds, bullion, etc. But it is a well-known common usage for banks to m'ake advances or loans on the hypotheca- tion or pledge of such property, though not upon the hypotheca- tion or mortgage of real estate. There was a reason, therefore, for omitting real estate from the catalogue of things upon which the advances or loans contemplated might be made. Advances on them are not within the ordinary business of a banker. To us, therefore, it appears plain that it is the business 'of advanc- ing or lending in the mode usual with bankers, that is, on collaterals, or on the pledge of personal property, that, by the statute, is defined to be banking within the intention of Con- gress, and that lending upon mortgages of real estate is not intended. " The third class described by the statute comprises those who have a place of business where stocks, bonds, bullion, bills of exchange or promissory notes are received for discount or for sale. The language is not ' where stocks, bonds, etc., are sold ' or ' are for sale.' " Surely, Congress did not intend that corporations or persons who have a place of business where they sell their stocks, bonds, bullion, bills or notes should be regarded as bankers. If they did, a vast proportion of the corporations and of the merchants and manufacturers of the country would be included. But the language of the statute is : ' Where ' such property is ' received for discount or for sale.' The use of the word ' received ' is significant. In no proper sense can it be under- stood that one receives his own stocks and bonds, or bills or notes for discount or for sale. He receives the bonds, bills, or notes belonging to him as evidences of debt, though he may CH. IV.] Banking. 27 sell them afterwards. N"obody would understand that to be banking business. But when a corporation or natural person receives from another person, for discount, bills of exchange or promissory notes belonging to that other, he is acting as a banker; and when a customer brings bonds, bullion, or stocks for sale, and they are received for the purpose for which they are brought, that is, to be sold, the case is presented which we think was contemplated by the statute. In common under- standing, he who receives goods for sale is one who receives them as an agent for the principal and is the owner. .He is not one who buys and sells on his own account." Again, the Supreme Court, in the case of Richmond, Plaintiff in Error, v. Blake, Collector of Internal Eevenue, 132 U. S. 592, lays down the law to be that: " Where a broker employs his own capital with the capital of others for the purpose of purchasing and selling stocks, bonds, bills of exchange, or promissory notes, he is a banker under the Revenue Law. But where he negotiates the sale of such securities for others, receiving therefor only a commission, he does not become a banker within the meaning or construc- tion of sections 3407 and 3408 of the Revised Statutes of the United States." § 9. Broker and banker distinguished. The business of a broker is distinguished from that of a banker in this: A broker buys and sells stock and securities for others on commission, while a banker buys and sells securi- ties by investing his own means and the capital of others for a profit to the bank. It is not generally considered a part of the business of a bank to conduct a brokerage business for others on commission. The l^ational Banking Law expressly prohibits this power to national banks, and declare it to be unlawful for a national bank to take money, or the capital of others, and invest the sanie for them, either on a commis- sion or otherwise. It is the business of a National bank to make investments of its own funds, but not to invest for others. The Supreme Court of the United States, in the case of Warren v. Shook, 91 U. S. 704, very clearly distinguishes the business of a banker and broker. 28 Banks Classified and Defined. [ch. iv. § 10. Banker further defined. The definition of a banker, as given by Gilbert, is " a dealer in capital, or, more properly, a dealer in money. He is an intermediate party between the borrower and the lender."' This definition applies more directly to a broker who acts in the intermediate capacity between the parties. He may, and usually does, act for both parties. A banker who receives money on deposit for the purpose of re-loaning the same is not an agent for the depositor. He is the agent of the bank. He acts only for the bank, and never consults the depositor as to the character of security or class of loans that the bank may invest in or hold. The law may define the kind of investments or securities which the bank may take, but the depositor has nothing to say. § 11. Private banker defined. A private banker is one who conducts the business of bank- ing without incorporation, and without any special privilege or authority of law.^ A private banker may, when not prohibited by law, conduct the business of banking, and may make such lawful contracts with his dealers in relation thereto, as to receiving and the repayment of money, as may be mutually agreed upon between the parties. A private banker, then, is one who conducts the business of banking without incorporation, or a fixed capital stock invested, which is, by law, required of all duly incorporated banks, excepting mutual savings banks which, under the law as enacted by some of the States, may become incorporations for the purpose of doing a savings bank business without capital stock. § 12. Trust companies defined. A trust company may conduct the business of banking when not prohibited by law without the use of the word " bank " incorporated in its charter. The name of a corporation, which may indicate its business, does not always express its powers or authority. A trust company formed and duly incorporated under an act of the Legislature providing for the incorporation 2 Perkins v. Smith, 116 N. Y. 441; People v. Doty, 80 N. Y. 225. CH. IV. j Banking. 29 and administration of trusts and of trust funds only, and which defines its powers to be the receiving and administering of trust funds, is not a bank, and its manager cannot be termed a banker. This subject is enlarged upon and further discussed under a subsequent chapter treating upon trust companies. (See sec- tion 357.) § 13. Clearing house defined. A clearing house is a voluntary association of banks for the purpose of making exchanges of notes, checks, bills and moneys and settlements between the banks, all of whom must belong to the association. In the case of O'Brien v. Grant, 146 IST. Y. 163, 166, the business of the clearing house is defined to be " the effecting, at one place, of the daily exchanges between the several asso- ciated banks, and the payment at the same place of balances resulting from such exchanges." A clearing house is not a bank used for the purpose of receiv- ing moneys or other securities on deposit. Neither does it do a discount business. Therefore, it is not a bank. It may be an incorporated body composed of banks where such banks may become stockholders, but is usually an association of bankers for the purpose of making exchanges. A clearing house is not subject to taxation under the revenue laws. N'either is it sub- ject to examination by National or State examiners. The powers and limitations of a clearing house are treated at length in a subsequent chapter on clearing houses. (See section 342.) § 14. Commercial bank further defined. The definition of a banker conducting a commercial bank- ing business is properly defined to be, " one who conducts the business of banking, who has a place or keeps a place or room for receiving money on deposit, and repaying the same out again to his depositors." He may buy and sell (when not prohibited by special acts of law) stocks, bonds, bills, promis- sory notes, checks, evidences of indebtedness, bullion, and bills of exchange for the accommodation of his customers and for profit to the bank. He may invest his own, and the money of 30 Banks Classified and Defined. [ch. iv. his customers, in any way not prohibited by law. He has, however, no authority to issue notes of the bank to be used, circulated, or passed as money, unless the law, by constitutional and legislative enactment, expressly authorizes the privilege. He may act as an agent for his customers and depositors in the transaction of any and all classes of business, when not specific- ally prohibited by law from so doing. It will be seen, there- fore, that the business of a commercial banker, or, in other words, the definition of a banker of this class, may be extended to any length. § 15. Mutual savings bank defined. A mutual savings bank, as its name implies, is mutual in character and principle. It is an institution authorized by law, either by special enactment of the Legislature (where permitted by the Constitution) or under the general laws of the State. It is not endowed with any of the commercial powers of a bank; and while called a bank, its business comes more strictly within the duties and powers of a trust or trustee. It receives the money of its members, and loans the same only for their benefit. The general definition of a bank does not apply to a mutual savings corporation. A mutual savings bank, if it may be called a bank, is a place where money is received, invested for, and paid out to, its members. The ofiieers of such an insti- tution act strictly in the capacity of trustees. It certainly does not come within the definition which defines a banker to be " a money changer " or " one who traffics in money, bills of exchange, etc." § 16. Capitalized savings banks defined. There is considerable difference between a capitalized sav- ings bank and a mutual savings bank. The one is incorporated with a capital stock, while the other has no capital stock. In the one, the principal object is to engage the capital for profit 10 the stockholder. In a capitalized savings bank, the deposi- tor has no mutual interest with the stockholder. This kind of an institution has but few, if any, of the elements of a mutual savings bank. A corporation formed with a capital stock to conduct a banking business may designate itself as a savings bank; and CH, IV. J Banking. 31 it may be declared to be such by the law and the courts. But the fact that it has a capital stock, and that its business is prin- cipally, if not wholly, to earn dividends for its stockholders and the owners of said capital stock, its business and all of its acts demonstrate that it is commercial in its nature, lacking all the elements of a mutual savings bank. § 17. National banks further defined. A national bank, as has been,stated, is an incorporated insti- tution, organized under the law enacted by the Congress of the United States, authorizing certain persons to carry on the busi- ness of banking. The general definition that a banker is " one who conducts the business of banking," applies to a national bank; but the powers granted in the conduct of a national bank, by reason of certain limitations placed upon it and specifically enacted in the law which prohibits certain privileges allowed to State banks, confine the business of banking under the national sys- tem strictly to the law enacted for their government and man- agement. The powers and limitations governing a national bank are very clearly defined by the l^ational Bank Act ; and the agents and managers of a national hank are held closely to the enforce- ment of the law governing them. While a national bank is clearly commercial in its char- acter, business and powers, it is yet, nevertlieless, estopped from conducting certain kinds of commercial transactions which are deemed dangerous for such institutions. For example, the statute fixing the powers of national banks specifically prohibits a national bank from holding real estate as security for a debt, unless such debt ha.s been previously contracted in good faith. A national bank cannot invest its surplus in the stock of another national bank.* A national bank ia also prohibited from negotiating loans for its own customers, and, by implied limitation, cannot buy and sell stocks or realty bonds on commission. All of these privileges are commercial transactions, which may be carried on by commercial State banks without restriction, and unless a special statute intervens. 3 Concord First Nat. Bank v. Hawkins, 174 U. S. 364. 32 Ban-ks Classified and Defined. [ch. iv. It will be seen thereforcs, that a national bank, which is endowed with commercial powers, is restrained by law from doing certain things which are purely commercial in their nature, and which may be done by commercial State banks. A national bank is controlled by laws enacrted by Congress, and cannot be interfered with by State judicial action." § 18. Enlarged and specific definition under State authority. A bank, when incorporated under the general laws of the State, is, as stated, a private corporation ; organized and to be operated for profit to its stockholders. It is subjiect, in its privileges and powers as to issuing and circulating its notes as money, to the laws of the United States, as enaoted by Con- gress, and the laws of the State in which it conducts its business. A bank may be one of deposit where persons may simply deposit their money for safe-keeping, and one where the funds may be kept separate, or all be intermingled, and paid out upon demand by the depositor. A bank may be one of discount, where persons may place their nofes for sale and discount, the profit going to the banker. The Supreme Court of the United States has decided that " the discounting of notes by a person, or corporation, for profit, where the customer's funds are used, is conducting the business of banking," Commercial havJcs more clearly defined. A bank, in a commercial sense, has authority, under State law, to receive deposits, make discounts and circulate its own money, where no inhibition is enacted by the Constitution or law of the State. Such institutions are clothed with power to transact a commercial banking business. The issuing of notes and circulating the same as money is not, however, a necessary element in the full and complete exercise of com- mercial banking. A bank incorporated under State authority to conduct a commercial banking business, has power to carry into execution and exercise all commercial transactions neces- sary in the conduct of its business. It has power to receive money on deposit from persons, municipalities and corporations (where not especially prohibited by State legislation), and repay the same to its depositors upon such terms and at such times as may be lawfully agreed upon. It has the right to receive gen- 4 Van Reed v. People's Nat. Bank, 198 U. S, 554, 124 U. S. 721. CH, iv.J Banking. 33 eral and special deposits. It has the right to discount notes; to make loans on personal and real estate security, under regu- lation of law ; to discount foreign and domestic bills of exchange, and to transact any and all other business coming under the commercial class and authorized by law. Its business is called commercial, as it is the medium through which the exchange of merchandise is transacted. It acts as the beneficiary for the commerce of the world. It holds intercourse with all busi- ness transactions, either directly or indirectly, and becomes, and is, indispensable in the transactions of business. It holds a confidential relationship with all customers dealing with it; and the bank has the right to protect this relationship against all persons, and cannot be compelled to disclose this right, except by order of a court of competent jurisdiction. Commercial banks are the active agents of all parties who may do business with them, and as such their interests are mutual, and in the conduct of the business they are governed by law, and are therefore possessed with all lawful, expressed, implied, and incidental powers necessary to carry into execu- tion their business and purposes. § 19. Mutual and capitalized savings banks more clearly dis- tingnished. A savings bank may be mutual, or an institution organ- ized with capital stock. Mutual savings banks originally were organized as eleemosynary institutions in character, while mutual in principle; their purpose being to stimulate and fix the habit of saving with the poor. They were fiduciary agents, acting for those with limited means, which could not be easily invested; but when an accumulation of a sufficient fund was obtained, loans could be made and all depositors became inter- ested in the profits. They are mutual in principle, as all the loans are made in the interest of the members or depositors, from whom the money is obtained. In case of loss, the bank having no capital stock which may be assessed to cover the same, or other prop- erty out of which it may be paid, the loss can be apportioned pro rata among the members. It having no capital stock, its management must .be con- ducted wholly in the interest of the members. It is merely an incorporated institution, organized for the purpose of receiv- 3 34 Banks Classified and Defined. [ch. iv. ing money of its customers or members on deposit, and invest- ing the same for them, and repaying the same upon such terms and agreements as may be lawfully entered into between them- selves. No profits can be made upon the funds except they inure to the benefit of the members. After the necessary expenses are paid for its management, as stated, ail the profits, at fixed periods, belong to the members, and must be ratably divided between them. The distinction between a mutual savings bank, namely, one without capital stock, and a savings bank incorporated with capital stock, is, that in the one the members receive all the profits, less the actual expense required in managing the same, and aire liable for all the losses pro rata among the members; while in the other, the depositors receive a stipulated divi- dend (that the directors may agree with the depositors as to interests or dividends, is fully conceded), and are relieved from any liability which the stockholder may be required to pay; the stockholder's liability being fixed by the law of the State wherein the bank is located. Savings banks, with or without capital stock, are organized institutions for the purpose of receiving money on deposit from their members, on such terms as ma/y be mutiudly agreed upon. In a savings bank purely mutual, and without capital stock, the conditions upon which money may be received and repaid to its members are entirely in their personal control. In a ■ savings bank organized with capital stock, the mutual principle is entirely eliminated, and money can be received and repaid to the depositor upon such terms as may be agreed upon between each customer and the corporation, acting through its directors. Savings banks, organized with capital stock, are institutions having a fixed liability against the stock in case of loss, or insolvency of the bank. In some respects, they are incidentally possessed with commercial qualities and power ; but are usually limited by law to a class of investments, which are allowed or prohibited by legislative enactments of the State where they are located. The Legislature, or statutory laws directing what securities may be taken (and in some cases fixing the sum or limit that can be loaned upon lands and other securities), operates as a guardian of the depositor, throwing around such institution such protection and safeguards as are deemed to be wise, the laws becoming a financial shield to those transact- ing business with the bank. CHAPTER V, THE ORGANIZATION OF BANKS AND PROOF OF CORPORATE EXISTENCE. § 20. Preliminary steps — organization of national banks. Section 5133, Revised Statutes of the United States, provides as follows: " Associations for carrying on the business of banking under this title may be formed by any number of natural persons, not less in any case than five. They shall enter into articles of association, which shall specify in general terms the object for which the association is formed, and may contain any other provisions, not inconsistent with law, which the association, may see fit to adopt for the regulation of its business and the conduct of its affairs. 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 ofiice." The foregoing section provides for the formation and organi- zation of a national bank. The language of the statute is, that a national bank can be formed " by any number of natural persons, not less in any case than five." § 21. Who are natural persons. Human beings, without distinction as to race or color, male or female, are natural persons. Corporations, joint-stock com- panies, firms, or associations are prohibited from the very nature of their creation and powers in forming or becoming a principal in the formation or organization of national banks. While the stock of a bank can, after its formation, be legally held or acquired by a corporation, it cannot acquire the same as a subscriber in the primary proceedings of organization. § 22. Who can form a bank. Any person who can legally enter into a binding and lawful contract, which cannot subsequently be repudiated by him, can [35] 36 The Osganization of Banks, Etc. [ch. v. be an incorporator of a bank. Infants, persons under age, may enter into contracts; but, having the power to repudiate the same upon arriving at the age of maturity, should not be per- mitted to become incorporators of a bank. § 23. Married women as incorporators. There is nothing in the statute prohibiting, in direct lan- guage, a married woman from becoming an incorporator of a national bank. The law of the State in which she resides, and where the bank is to be put in operation, may place some inhibi- tion upon her rights, and operate as an estoppel; but if the law of the State in which she resides authorizes her to make contracts, and places her in a position to bind herself to all liabilities and obligations of a stockholder, she is clothed with full power to become an incorporator; but inasmuch as the laws of the several States differ as to the rights of a married woman in regard to her separate estate and property, and as to the effect of covenants and agreements made by her as well as to the form of acknowledgment of instruments executed by her, all. organization papers, required in the formation of a bank, bearing her signature, must be accompanied by a copy of the law of the State, which certifies that she has the power to be a party to the organization. It has never been contended that women are not " natural persons," but it is interesting to know that the question has frequently been before the courts. The Supreme Court of the State of Massachusetts, in the opinion of the justices of the Governor and Council, where the statute authorized the Government to appoint nine persons, etc., as a board of health, had occasion to express its opinion that the word " persons," in its natural and usual signification, included women as well as men.^ Where also the word " person " was used in a legislative act, " natural persons " will be intended.^ The articles of association, organization certificate, and cer- tificate of officers and directors must be executed in duplicate, one copy of each being filed in the office of the Comptroller of the Currency, and the other retained by the bank. The 1 Mass. Rep. 136, p. 58. 2 Blair v. Worley, 2 111. 177. CH. v,J Backing. 37 organization certificate must be acknowledged before a judge of a court of record, or before' a notary public iaving a seal. After the execution of the organization certificate, where the directors are not designated in the articles of association, the shareholders should proceed to elect directors as provided in section 5145, Eevised Statutes of United States. After elec- tion, each director is required to take the oath of office, which form of oath will be furnished on application to the Comp- troller of the Currency. (For form, see Appendix.) A per- son, to be eligible as a director, must be a citizen of the United States, and own in his own right at least ten shares of the capital stock of the bank, such stock not to be hypothecated, or in any way pledged as security for a loan or debt. 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. All the preliminary steps having been taken by the board of directors, and the officers of the association having been chosen, and by-laws duly adopted according to law, and the certificate of authority issued by the Comptroller of the Cur- rency, authorizing the bank to begin business, the certificate having been published according to the requirements of law, and forwarded to the Comptroller, the organization becomes a banking corporation from the date of the issuing of said cer- tificate. Organization of State banks. The Constitutions of the various States, and the statutory laws enacted therein, control the right of banking within the State. A State banking corporation, unless special provisions are made providing how it shall be incorporated, can be incor- porated only under the general incorporation laws of the State authorizing the formation of corporations. Articles of incorporation are prepared setting out the name of the corporation, the purpose for which it is formed, the place where its principal business is to be transacted, the term for which it is to exist, the number of directors which the cor- poration shall have, the amount of the capital stock, and the amount actually subscribed, and by whom. These provisions may vary in the different States. 38 The Oeganization of Banks, Etc. [ch. v. The bank must have a namej and if the name selected infringes upon the right of a bank previously incorporated, the Secretary of State should refuse to grant or issue the articles. It is well settled that where a corporation attempts to obtain or use a name which has been granted to another, and under which a large business has been built up, the courts are fre- quently called upon to prevent one corporation from using the name of another, and in some of the States the statute especially forbids a corporation from using the name or a similar name of a friendly corporation. Where the statute of a State permits a corporation to have more than one place in the State where it may conduct busi- ness, a state bank may establish branches therein. It is held by the Supreme Court of the State of Michigan that a bank located in one county, and having its principal place of business fixed by its charter, violates the same by establishing an agency in another county, where it receives deposits, sells exchange and conducts a general banking business. § 24. Term of existence. The law provides that the articles of incorporation shall fix the term or life of the corporation. The time must be fixed, and a charter cannot be obtained for a longer term than that fixed by the law. It must also, when incorporated, and where required by the statute, show the amount of capital stock actually paid in. The statute regulating national banks provides when and how the capital shall be paid in. (Section 5140, E. S. U. S.) Where a bank before the expiration of its charter went into voluntary liquidation, paid its depositors and ceased to do any business except to collect debts, it continued to be a bank.^ § 25. Purpose of corporation. The articles must also set out the purpose of the corporation. This is obvious, especially where the Constitution of the State prohibits a corporation from performing any business other than that for which it is incorporated. For example, a bank incorporated to conduct a general commercial banking business 3 Wilson V. Bank, 77 Kan. 589. CH. v.] Banking 39 should not be permitted under a oommercial charter to conduct a savings bank business, a dry goods business, or a real estate business. This question is more fully discussed under a sub- sequent chapter upon the powers of banks. § 26. Location. It must also have a place where its principal business is to be transacted. The National Banking Act, section 5190, Kevised Statutes, United States, provides that the usual busi- ness of the bank shall be transacted at an office or banking house located in the place specified in its organization certificate. The question as to whether a national bank can have a branch office in the same town is discussed (see organization of branch banks).* § 27. Capital required. The statute of each State must be complied with as to the amount of the capital required to be paid up, and whether it shall be paid in money or otherwise. In Pacific Trust Co. v. Dorsey, 72 Cal. 55, the court holds that a promissory note given cannot be received as cash or as capital paid up. The court says: " The defendant's note was actually received by the corpora- tion, and was a thing in action or evidence of debt. The first section of the act concerning corporations, and persons engaged in the business of banking ' required every corporation, and all persons doing a banking business in this State, in January and July of every year, to publish and file for record a sworn state- ment of the amount of capital actually paid into such corpora- tion, or into said banking business ; provided that nothing shall be deemed capital actually paid in, except money bona fide paid into the treasury of such bank; and under no circum- stance shall the promissory note, check or other obligation of any director or stockholder, or of the proprietors or proprietor of any such bank, be treated, computed, or in any manner con- sidered any part of such actually paid-in capital.' " Under this statute defendant's note could not be advertised to the world, or treated as a part of the paid-up capital of the bank." ♦Merchants' Nat. Bank v. State strong v. Second Nat. Bank of Nat. Bank, 10 Wall. 604 ; Burton v. Springfield, 38 Fed. Eep. 883. Burley, 9 Bias. U. S. 253; Arm- 40 The Oeganeation of Banks, Etc. [ch. v. § 28. Beqnirements of law essential. The process of creating a corporation being an artificial one, all the requirements contained in the general law are held to be essential.' In the case of Martin v. Deetz, 102 Cal. 55, the court says : "As to the necessity of filing the articles with the praper county clerk, the law as deduced from the authorities cited is thus stated in Morawetz on Corporation, section 27: 'A sub- stantial compliance with all the terms of a general corporation law is a prerequisite of the right of forming a corporation under it. Thus, where it is provided that a certificate or articles of association, setting forth the purposes of the cor- poration about to be formed, the amount of its capital and other details, shall he filed with some public officer, and per- formance of this requirement is essential; and until it has been performed the association will have no right whatever to assume corporate franchises.' And again, the same author says : ' In order to prove the existence of a corporation de jure, i. e., a corporation having a legal right to exist, it is necessary to prove not only the existence of a corporation de facto, but also the legislative authorization of its existence. A public law authorizing the formation of a corporation will be judicially recognized without proof; but proof would be necessary to establish that the corporation was formed pur- suant to the law, and that any conditions precedent to the legal right of forming the corporation have been fulfilled.' " It is held in the ease of Mokelumne Hill Min. Co. v. Wood- bury, 73 Am. Dec. 658, that the filing of a certified copy of articles of incorporation with the Secretary of State is not necessary in order to acquire a col-porate existence for certain purposes. When the articles are filed with the County Clerk, as far as individuals are concerned, the corporation acquires a valid legal existence. The filing of a certified copy with the Secretary of State is exclusively a matter between the corpora- tion and the State, for which the latter alone has a remedy by direct proceeding. § 29. Organization, when complete. The organization of a bank becomes complete when the laws have been complied with ; and when the certificate of authority 5 Doyle V. Mizner, 42 Mieh. 332. OH. V.J Banking. 41 has been issued by the proper authority, it is held by the Su- preme Court of the United States, in the case of Casey v. Galli, 94 U. S. 673, that the plea of nul tiel corporation cannot be interposed as against said certificate. The court says : " The plea of nul tiel corporation cannot be interposed as against a certificate of the Comptroller of the Currency which has been issued to the bank by him. The Comptroller was clothed with jurisdiction to decide as to the completeness of the organization, and his certificate is conclusive upon the sub- ject for all purposes of this litigation. " It has the same effect, and for the same reason, as his de- termination and order with respect to the amount to be col- lected from each stockholder in the event of the failure of the association. No question can be raised in this collateral way as to either. " In Thatcher v. Bank, 19 Mich. 196, it was held that whether there was any defect in the process of organization was a ques- tion for the Comptroller to decide, and that ' His certificate of compliance with the Act of Congress removes any objection which might otherwise have been made to the evidence upon which he acted.' In this we concur." " Corporate Existence : A grant or charter may be pre- sumed from long-continued exercise of corporate powers; but to give rights to this presumption, the acts done must bear the impress of corporate acts; must be such as corporations are competent, and individuals incompetent, to perform (Green v. Dennis, 16 Am. Dec. 58) ; and a charter vdll be presumed to exist from long exercise of corporate rights, or from other circumstances. (Selma & T. E. E. Co. v. Tipton, 39 Ind. 344.) Where a corporation has gone into operation and rights have been acquired under it, every presumption should be made in favor of the legality of its existence. (Hagerstown T. E. Co. v. Creeger, 9 Id. 551.) But it is sufficiently organized to bind subscription to the capital stock when the parties mentioned in the charter have, in pursuance of its terms, by vn-itten articles of association organized themselves, and opened books of sub- scription. " The principal case is cited in Harris v. McGregor, 29 Cal. 125, to the point that there must be a substantial compliance with all the requirements of the statute by persons seeking to become a body corporate, but the corporation can be considered 42 The Oeganizatiotst of Banks, Etc. [ch. v. in esse. Consequently, a certificate of incorporation which does not set forth the name of the city or town or county in which the principal place of business of the corporation is to be located does not establish the existence of a corporation. It is also cited in Spring Valley W. W. v. S. F., 22 Cal. 434, to the point that the failure to file a duplicate of the articles of association with the Secretary of State is not a fatal defect." ® The process of organization being complete and the by-laws for the corporation adopted as required by law, the bank becomes a lawful institution denominated a private corporation, and can begin business. In the beginning of business its very first act may be contested, and the question of its due incorporation and power to act be brought to issue, and in such event proof of corporate existence is required. § 30. Organization of branch banks. Under national authority, a national banking institution has no authority to establish a branch banking institution, except by special provision or authority from Congress. This authority was granted at Chicago, Illinois, during the World's Columbian Exposition to any national bank located in the city of Chicago, which might be designated by the World's Columbian Exposi- tion. The branch bank was restricted by the act to have only such rights as the bank to which it belonged, and limited to conduct such business for a period of two years. The question of privilege in the establishment of a branch bank seems to be settled that a national bank has no right to establish branch banks without special legislative authority. The ruling is upon the principle, no doubt, that the bank must have a location or place where all its business is to be trans- acted, and branches, especially if established outside of the city or town, and at a place other than the location of the mother bank, would lead to conflict as to where notes should be protested, and payments to be made. But where State banks, which at the time of the conversion into a national bank have branches established, under section 5155 Revised Statutes, United States, may maintain such branches. But where such branches are maintained " the amount of the circulation redeem- 6 Mokelumne Hill Mining Co. v. Woodbury, 73 Am. Dec. 658. CH. V.J Baktking. 43 able at the mother bank and each branch (is) to be regulated by the amount of the capital assigned to and used by each." In the case of Merchants' National Bank v. State IsTational Bank, 10 Wall. 604, it is held that the provisions requiring " the usual business " of the association to be transacted " at an office or banking house in the place specified in its organiza- tion certificate " must be construed reasonably, and a part of the legitimate husiness of the association which cannot he transacted at the banking house, may he done elsewhere.'' The Comptroller of the Currency in his report of 1902, upon the question or right of a national bank to maintain a branch or agencies principally for the reception of deposits elsewhere than at its banking house in the same or adjacent locality, says: " The only provision of lavif relating to branch banks is the National Bank Act, found in section 5155, United States Eevised Statutes, and reads as follows: It shall be lawful for any bank or banking association, organ- ized 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 granting of this special privilege to State banks and the absence of any similar provision in the law with respect to banks of primary organization have always been construed by the Comptroller to imply that banks of the latter class were not permitted to have branches. The section cited absolutely restricts branch banks of converted associations to such as have a definite proportion of the capital of the parent bank assigned to them, and it is not to be assumed that the law contemplated that associations of primary organization should be permitted to assign any portion of their capital to and operate branches. This fact is further to be inferred from section 5138, United States Eevised Statutes, which prohibits the formation of asso- ciations with less capital than $200,000 in cities of population exceeding 50,000, and contains similar provision with respect to banks organized in places with less population than 50,000. 7 Burton v. Burley, 9 Bias. (U. S.) of Springfield, 38 Fed. 883; Bowman 253 ; Armstrong v. Second Nat. Bank v. Cecil Bank, 3 Grant Cas. 33. 44 ^ The Oeganization of Banks, Etc. [ch. v. To permit the establishment of branch banks would not only render possible an evasion of the provisions of section 5138, but tend to discourage the organization of banking associations which, in the absence of such branches, might be formed. Section 5134 provides in part that the organization certificate of a national bank shall show " the place where its operations of discount and deposit are to be carried on," and section 5190 that " the usual business of each national banking association shall be transacted at an oflSce or banking house (not at offices or banking houses) located in the place (not places) specified in its organization certificate." The words " place " and " at an office or banking house " have always been construed by the Comptroller to mean the legal domicile of the corporation, of which it can have but one ; and this construction is sustained by the Solicitor of the Treas- ury in an opinion rendered August 10, 1899, on the question of the right of a national bank to establish and maintain an auxiliary cash room at some • point distant from its banking house, for the purpose of receiving deposits and paying checks. The Solicitor says : This section (5190, U. S. Kev. Stat.) contemplates that the usual business of a national banking association shall be trans- acted at one office and banking house, and as receiving deposits and paying checks belonging to the " usual business " of a bank, I am of the opinion that the statute does not authorize the establishment of an auxiliary cash rodm in a different part of the city for the purpose proposed. Besides, it may be observed that if a national banking association can lawfully establish and maintain a separate office for receiving deposits and pay- ing checks, it could as well establish as many of such auxiliary cash rooms in the city of its corporate residence as its business might require ; and, indeed, the entire business of the bank may be parceled out and conducted in the same way all over the city. The Supreme Court of the United States, in the case of Armstrong v. Second ITational Bank, 38 Fed. Kep. 886, involv- ing, among other things, the question of the right of a national bank to cash a check elsewhere than at its banking house, held that: Under this section (5190) it certainly would not be com- petent for a national bank to provide for the cashing of checks upon \t at any other place than at its office or banking house. CH. V.J Banking. 45 If, therefore, it is unlawful for a national bank to cash a check elsewhere than at its banking house, it is likewise unlaw- ful for it to discount notes or to receive deposits elsewhere, for one is as much a part of the " usual business " of a bank as the other. While it is obviously impossible for a bank to transact ita entire business within the four walls of any single building, it is not held that the law contemplates that the " entire business," as distinguished from its " usual business," shall be transacted in its banking house. ^ In the case of The Merchants' National Bank v. The State National Bank, 10 Wall. 604, it was held in this ooimection that: The provision requiring the " usual business " of the asso- ciation to be transacted " at an office or banking house specified in its organization certificate " must be construed reasonably, and a part of the legitimate business of the association which cannot be transacted at the banking house may be done else- where. The question involved in this case was the right of the bank's officers to purchase gold elsewhere than at its banking house, and the court held that: The gold must necessarily have been bought, if at all, at the buying or selling bank, or at some third locality. The power to pay was vital to the power to buy, and inseparable from it. The " legitimate business " of a bank, therefore, which a reasonable construction of the law would permit to be done elsewhere than at its banking house would seem to be restricted to transactions similar in character to that involved in the decision quoted, and not the ordinary and usual business of receiving deposits and cashing checks. The argument has been advanced that clearance house asso- ciations are equivalent to branch banks, and the recognition by the National Bank Act of the one affords warrant for the estab- lishment of the other ; but such argument has no apparent force, as the two institutions are entirely dissimilar in character and purpose. The principal object of the former is to facilitate exchange and to adjust balances between banks, while that of the latter is to transact the usual business of a bank with its customers. While the National Bank Act does not in express terms pro- 46 The Oeganizatiow of Banks, Etc. [ch. v. Mbit the establishment and maintenance of branch banks or agencies by associations of primary organizations, the implica- tion to that effect is clear, and the courts have held that what is implied is as effective as that which is expressed. That the act does not contemplate the operation of branch banks by national banks of primary organization is evidenced by the fact that in 1892 a special act was approved authorizing the operation of a branch by a Chicago national bank on the World's Fair Grounds. In 1901 similar legislation was enacted by Congress in connection with the Louisiana Purchase Exposi- tion, to be held in 1904. " The only provision in the National Bank Act relating to branch banks is found in section 5155, United States Revised Statutes, and reads as follows : ' It shall be lawful for any bank or banking association, 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 granting of this special privilege to State banks and the absence of any similar provision in the law with resjiect to banks of primary organization have always been construed by the Comptroller to imply that banks of the latter class were not per- mitted to have branches. The section cited absolutely restricts branch banks of converted associations to such as have a definite proportion of the capital of the parent bank assigned to them, and it is not to be assumed that the law contemplated that as- sociations of primary organizations should be permitted to assign any portion of their capital to and operate branches. This fact is further to be inferred from section 5138, United States Revised Statutes, which prohibits the formation of as- sociations with less capital than $200,000 in cities of popula- tion exceeding 50,000 and with less than a specified capital in places with population less than 50,000. To permit the establishment of branch banks would not only render possible an evasion of the provisions of section 5138, but tend to discourage the organization of banking associations which, in the absence of such branches, might be formed. Section 5134 provides in part that the organization certificate of a national bank shall show " the place where its operations of CH, V.J Banking. 47 discount and deposit are to be carried on," and section 5190 that " the usual business of each national banking association shall be transacted at an office or banking house (not offices or banking houses) located in the place (not places) specified in its organization certificate." The word " place " and " at an office or banking house " have always been construed by the Comptroller to mean the legal domicile of the corporation, of which it can have but one, and this construction is sustained by the Solicitor of the Treasury in an opinion rendered August 10, 1899, on the question of the right of a national bank to establish and maintain an auxiliary cash room, at some point distant from its banking house, for the purpose of receiving deposits and paying checks. The Solicitor says: " This section (5190, U. S. Rev. Stat.) contemplates that the usual business of a national banking association shall be transacted at one office and banking house, and as receiving deposits and paying checks belong to the " usual business " of a bank, I am of the opinion that the statute does not authorize the establishment of an auxiliary cash room in a different part of the city for the purpose proposed. Besides, it may be observed that if a national banking association can lawfully establish and maintain a separate office for receiving deposits and pay- ing checks, it could as well establish as many of such auxiliary cash rooms in the city of its corporate residence as its business might require ; and, indeed, the entire business of the bank may be parceled out and conducted in the same way all over the city." The Supreme Court of the United States, in the case of Arm- strong V. Second National Bank of Springfield (38 Fed. Eep. 886), involving, among other things, the question of the right of a national bank to cash a check elsewhere than at its banking house, held that " Under this section (5190) it certainly would not be competent for a national bank to provide for the cashing of checks upon it at any other place than at its office or banking house." If, therefore, it is unlawful for a national bank to cash a check elsewhere than at its banking house, it is likewise unlaw- ful for it to discount notes or to receive deposits elsewhere, for one is as much a part of the " usual business " of a bank as the other. As it is obviously impossible for a bank to transact its entire business within the four walls of any single building, it 48 The Oeganization of Bahks, Etc. [ch. v. is not held that the law contemplates that the " entire business," as distinguished from its " usual business," shall be transacted in its banking house. In the case of The Merchants' National Bank of Boston v. The State National Bank (10 Wall. 604), it was held in this connection that " The provision requiring the ' usual business ' of the association to be transacted" ' at an office or banking house specified in its organization certificate ' must be construed rea- sonably, and a part of the legitimate business of the association which cannot be transacted at the banking house may be done elsewhere." The question involved in this case was the right of the bank's officers to purchase gold elsewhere than at its banking house, and the court held that " The gold must necessarily have been bought, if at all, at the buying or selling bank or at' some third locality. The power to pay was vital to the power to buy, and inseparable from it." The " legitiriiate business " of a bank, therefore, which a rea- sonable construction of the law would permit to be done else- where than at its banking house, would seem to be restricted to transactions similar in character to that involved in the decision quoted and not the ordinary and usual business of receiving deposits and cashing checks. Limited powers of branch hariks. Where the statute of a State prohibits a banking corporation the privilege of establishing branches an agency cannot be created. But where the statute is silent upon the question, and the charter permits the establishment of branches, any number of branches may be established by the parent bank, and they may conduct business as agencies of the parent bank. But if the charter fails to provide for branches, the parent bank cannot esta]jlish branches. But where the statute of a State authorizes corporations which are formed under the general laws of a State the privilege of establishing agencies or branches in the State, a banking corporation organized and incorporated under such a general law may establish branches. A corporation has only such powers as are granted to it by law, and it cannot establish branches in the State where this power or privilege is prohibited. OH. v.] Banking, 49 It is held in the case of People v. Oakland County Bank, 1 Doug. (Mich.) 282, "where by its charter a bank is located in one county, and it establishes an agency in another county where it receives deposits and buys and sells exchange, it thereby violates its charter." The court further says, in determining this case : " The last and most important question remains to be considered; and that is, whether the establishment of an agency in the city of Detroit was a violation of the charter of the defendants. By the act of the incorporation the stockholders were authorized to locate |;he bank in the county of Oakland. It follows, therefore, that if the corporation has undertaken to exercise any of its franchise without that county, it has usurped an authority in violation of law, and must suffer the penalty which that law inflicts. The case admits that the bank redeemed its bills, kept deposits, and as incident to such redemption, bought and sold exchange at the agency. Did these acts, or either of them separately considered, violate the law which gave a legal exist- ence to the defendant ? To determine this question, it is only necessary to define what business this bank was authorized by the law of its careation to do and perform. Such an examina- tion will lead to the conclusion that it is a bank not simply of discount, but also of deposit. It is quite manifest that the defendants could not establish in this city an office of discount. If so, may it not equally be intended that they cannot establish an office of deposit ? To my mind, the conclusion is irresistible. It requires no profound knowledge of the mysteries of banking to know that the amount of discounts, in institutions which profess to be guided by safe rules, is regulated chiefly by two considerations: First, the amount of actual capital paid in; and secondly, the amount of deposits. If banks did not dis- count upon the strength of their deposits their proflts would be greatly diminished, and the discounts predicated upon such deposits, in a well-regulated bank having its regular customers, are always deemed an entirely safe operation. But it is un- necessary to push our inquiries any further upon this point, as we are all clearly of opinion that, in this respect, there was the assumption of an authority not warranted by law." The subject is further discussed in the case of The South- western ITational Bank v. The Commonwealth, and it is there 4 50 The Oeganizatiow of Bauks, Etc. [ch. t. held that depositing money with another bank, for the redemp- tion of notes, is not the establishing of an agency. Therefore, where branches are authorized by law they are subject only to such powers and authority as may be granted to them by the mother bank. They cannot exercise original au- thority which is not delegated to them. And the mother bank has authority to collect and enforce the payment of any and all debts due the branch bank.' Under the statutes of Kentucky which do not authorize the establishment of branch banks, it has nevertheless been held by the court in the case of Bruner, Secretary of State, v. Citizens' Bank of Shelbyville, 134 Ky. 283, that it may have agents to receive and forward money to the bank or transact other neces- sary business. To what extent this class of business may be permitted, the court fails to say. Where branch banks are authorized to be established in the State, it is not necessary to incorporate them. The mother bank can establish the branch, using the name obtained by the mother bank from the State. But in doing so the branch bank must be designated by all of its signs as such, so the general public may have the full knowledge that they are dealing with the agency. § 31. Proof of corporate existence. When the corporate existence of a bank comes directly in question, which may arise when the State brings suit through its Attorney-General, in the name of the people of the State, to forfeit its charter, proof of performance of every act required, whether by general law or special charter, must be made. In collateral proceedings, being those where the corporate existence is denied or affirmed, in a suit between the bank and any party other than the State, the rule is held to be different. The fact is proved by putting in evidence the certificate of incorporation. The corporate minutes proving an organization and use of the corporate name of the bank in business.® 8 Smith V. Lawson, 18 W. Va. 589; Tapley v. Martin, 116 Mass. 212 ; Bank of Augusta v. Earl, 13 275 ; Yakima Nat. Bank v. Knipe, 6 Pet. 519. Wash. 348; Aspinwall v. Butler, 133 9 Casey, Receiver, v. Galli, 94 U. S. U. S. 595 ; Bank of Manchester v. 673; Albert v. SUte, 65 Ind. 413; Allen, 11 Vt. 302; Williams v. Union Nicollet Nat. Bank v. City Bank, 38 Bank, 21 Tenn. 339; McCormiek v. Minn. 85; Bullard v. Bank, 18 Wall. Market Nat. Bank, 165 U. S. 538; CH. v.j BANxmo, 51 The corporate existence of a plaintiff in ejectment may be established by evidence that it was a corporation de facto. ^° One who has dealt with a corporation as such is estopped to deny its existence by demurrer.^^ The de facto incorporation can be shown by oral evidence, that is, the carrying on of a general banking business, as a bank under a certain name.'^ The fact of incorporation is proved by putting in evidence the certificate of incorporation. The corporate minutes proving an organization and use of the corporate name of the bank in business, etc.^^ The fact that the certificate of incorporation of a national bank is signed by a deputy comptroller, a deputy appointed by the Comptroller of the United States, cannot be raised as an objection to its introduction in evidence; nor, that at the date of such certificate he was not clothed with authority to execute the power." ' i Where the laws of a State require a foreign corporation to file within a certain number of days after commencing business within the State, a copy of their articles of incorporation witk the Secretary of State: Held, that individuals who hold them- selves out as a corporation, by complying with the requirements of such a law, will not be permitted to deny their corporate existence when sued by persons who have acted in good faith upon said representations. The Comptroller's certificate, together with proof that the bank has been acting as a bank for a long time, is sufficient evidence to establish prima facie the existence of the corpora- tion of a national bank.^° § 32. When the life of bank corporation commences. A national bank becomes a corporation from the date of its organization certificate.^* Fresno Canal & Irri. Co. v. Warner, 12 Yakima Nat. Bank v. Knipe, 6 72 Cal. 379; MeCallion v. Hibernia Wash. 348. Sav. Loan Soc, 70 Cal. 163 ; McVicer is United States Bank v. Stearns V. Cone, Or. 28, p. 76. 15 Wend. 314. 10 Oakland Gas Light Co. v. Dam- " Keyser v. Hitz, 133 U. S. 138; eron, 37 Cal. 663. Aspinwall v. Butler, 133 U. S. 595. 11 Bank of Shasta v. Boyd, 99 Cal. 15 Mix v. Nat. Bank of Bloomin?- 604; Cowell v. Springs Co., 100 U. S. ton, 91 111. 20; Merchants' Nat. 61 ; Close v. Glenwood Cem., 107 Bank v. Glenden, 120 Mass. 97. U. S. 466. 16 U. S. Rev. Stat., §§ 5168, 5169, 52 The Oegakization of Baitks, Etc. [ch, v. The certificate upon receipt thereof must be published ac- cording to requirements of section 5170, Eevised Statutes of the United States. The proof of publication of said certificate should be promptly sent to the Comptroller of the Currency. The life of a corporation does not date from the time it begins to do business, but from the date of its organization.^' " Where the statute points out the manner in which the cor- poration shall be organized, and the direction of the statute is followed, this brings the corporation into existence so that it may enter upon the objects of its creation.^* 17 Whetstone v. Ottawa University, is 1 Thomp. on Corp., § 217, and 13 Kan. 320; Hanna v. Interna- author cited, tional Petroleum Co., 23 Ohio St. 622. CHAPTER VI. BY-LAWS. § 33. Power to make inherent in corporations. The power of a corporation to make by-laws is inherent in it. One of the important features of a corporation is the power to make by-laws.'' § 34. By-law defined. "A by-law is a permanent rule of action in accordance with which the corporate affairs are to be conducted." A by-law is also said to be a rule or regulation established by a corporation for the government of its officers and mem- bers in the management of the affairs of the corporation as among themselves.^ § 35. Power delegated by statute. The power to make by-laws, as stated, exists at common law as an inherent right of a corporation. The power may also be given by a statute or by the charter of the corporation.' § 36. Who has power to make by-laws. The statute fixes and vests the authority usually in the stock- holders. The directors have no power to make by-laws unless the statute expressly authorizes it.* The stockholders, however, may delegate their power to the board of directors.® Where the charter confers the power, the directors are author- ized to make by-laws.® 1 Cook on Corporations, Vol. 1 * North Milwaukee, etc., Co. v. (5th ed.), § 4a. Bishop, 103 Wis. 492; Morton, etc., 2 1 Thomp. on Corp., § 935; Flint Co. v. Wysong, 51 Ind. 4. T. Pierce, 99 Mass. 68. 6 Heintzelman v. Druids Relief As- 3 People V. Crossley, 69 111. 195; soeiation, 38 Minn. 138. Kearney v. Andrews, 10 N. J. Eq. « Samuel v. Holladay, Woolw. 400 70; Juker v. Commonwealth, 20 (1869); s. c, 21 Fed. Cas. 306. Penn. St. 484. [53] 54 By-iaws. [oh. VI. Where the power is delegated by fhe charter to the directors, a by-law made by the stockholders, it is held, is binding as to past acts on participating stockholders/ Where a charter confers the power upon the board of directors to make by-laws, the stockholders are bound by their action.* § 37. Where statute provides purpose. Where the statute provides for what purpose by-laws may be passed, none others can be passed." Where the by-laws are in conflict with the charter, the latter will prevail.^" § 38. By-laws must be reasonable. The general rule is that a by-law must be reasonable. It must not interfere with any vested right of the stockholders. It must not be contrary to public policy. It must not be con- trary to the established law of the land. It has been held, in Burden v. Burden, 159 N. Y. 287, that where a bank by its by-laws places the management exclusively into the hands of a person " who may have the exclusive charge and management of the business of the company," that the by-law is not void as a whole, and until the general manager illegally exercises power, the courts will not interfere until such illegal acts are performed. But such a by-law does not divest the directors of a duty imposed upon them by law to perform. § 39. When a by-law becomes a law. A by-law, when enacted in accordance with the charter and statute of the State, is binding upon the individual members from the date of passage ; and when required to be entered in a book of by-laws, it becomes a law when so entered. It has also been held that a by-law authorized by the charter or the statute and not in violation of any constitutional pro- vision or law of the State, is equally binding upon third persons T People V. Sterling Mfg. Co., 82 » Ireland v. Globe, etc., Co., 19 111. 457. E. I. 180. 8 Cahill V. Kalamazoo Mutual Ins. if Republican Mountain Silver Co., 2 Doug. (Mich.) 124. Mines, Ltd., et al. v. Brown et al., 58 Fed. Rep. 644. CH. vi.j Bah'king. 55 dealing with the corporation; providing they are made ac- quainted with the same and the business of the corporation." The contrary doctrine is found in the case of The State v. Overton, 24 N. J, Law, 435, where the coiirt says, "All regu- lations of the company affecting its business, which do not operate upon third persons nor in any way affect their rights, are properly denominated ' by-laws of the company,' and may come within the operation of the principal." The court f urtber says : " The validity of the by-laws of a corporation is purely a question of law. Whether the by-law be in conflict with the law or with the charter of the company, or be in a legal sense unreasonable, is a question for the court and not for the jury." The rule may be correctly laid down as follows: Third persons are hound iy the hy-laws of a corporation only where they have knowledge of them and are brought into privity with them, and where they operate as a contract between the cor- poration and such persons. § 40. By-law must be proved. By-laws and ordinances of a corporation are not judicially noticed, but must be proved as facts. The courts will not take judicial notice of a code of by-laws.^^ A by-law must be pleaded. The pleader may set it out in full or it may be stated in substance according to its legal effect. When the latter course is pursued, the by-law itself may be introduced as evidence under the pleading. § 41. Actions upon by-laws. In the ease of Schrick v. St. Louis Mutual House Bldg. Co., 34 Mo. 423, it is held that an action cannot be maintained if the by-law had been repealed by substitution during the membership of plaintiff and before the bringing of his action. § 42, By-law void which waives liability of stockholder. " The assets of a corporation being a trust fund for its cred- itors, and the indebtedness of shareholders to the corporation 11 Cummings v. Webster, 43 Me. 463 ; Haven v. New Hampshire In- 192-197. sane Asylum, 13 N. H. 532, 38 Am. 12 Lucas V. San Francisco, 7 Cal. Dec. 512. 56 By-laws. [ch. vi, for their shares being a part of this trust fund, a by-law which attempts to release shareholders from the obligation incurred by their contract of subscription or by their knowing acquisition of shares which have not been fully paid up, by allowing them to pay a percentage of what is due in respect of their shares and to forfeit their shares and be discharged from the obliga- tion of paying the remainder, is void as to creditors of the corporation." ^' In the case of Slee v. Bloom, 10 Am. Dec. 273, it is held that a resolution discharging from future assessments any stockholder paying 50 per cent, on his shares is valid as to consenting creditors, and will protect such stockholders as have eomplieiwith its terms before the dissolution of the corporation. In the case of Wells v. Black, 117 Cal. 157, where the ques- tion of liability of stockholders to depositors in a savings bank is discussed, and where a by-law adopted was not consistent with the constitution and laws of the State, and by virtue of its terms attempted to release from liability the stockholders of the corporation: held to be void and of no binding force upon the depositors. The court in this case, in defining a by-law, says that " By- laws are the body of rules laid down by the government of a corporation, its officers and stockholders, in the conduct of its affairs." It is well settled that a by-law cannot be enacted by a bank- ing corporation having capital stock, which would waive the liability of the stockholder to the depositor. However, the depositor can enter into an agreement with the shareholders, waiving the constitutional and statutory provisions of liability; but such an agreement when entered into between the parties must be thoroughly understood. Where a depositor enters into such an agreement, it would be binding upon the parties." § 43. Lien created upon shares of stock. A lien may be created upon the stock of the corporation for dues owing by the stockholder to the corporation, if provided 13 Cyclopedia of Law and Proce- 518; Wells v. Black, 117 Cal. 161; dure, vol. 10, p. 361. Sedgwick on Statutory and Consti- 1* French v. Teschemacher, 24 Cal. tutional Law, 111. CH. VI,] Banking. 57 for by the statute or by the charter of the corporation. Cook on Corporations says : " The weight of authority holds that it may be created by a by-law." The following States hold that a lien may be created by a by-law: Alabama/^ Calif ornia,"° Connecticut," Iowa/' Maine," Mississippi,^" Missouri,^^ New Hampshire,^^ ISTew Jersey," Ehode Island,^* United States.^' The power to prescribe by-laws of a national bank is vested in its board of directors; but a national bank cannot, even by provisions framed with the direct view to that effect, in its articles of association, or by a direct by-law, acquire a lien on its own shares of stock held by persons who are its debtors.^" § 44. Failure to make by-laws. Where the statute by expressed terms confers the power upon the corporation to adopt by-laws, it is held that the failure to exercise the power will not render void any of the acts of the corporation which lyould otherwise be valid. ^' § 45. Reasonable by-law. A by-law is held to be reasonable which requires a depositor in a savings bank to present his book for entry of the amount, which may be withdrawn; but in case of loss of such book, and proof thereof duly furnished the bank of such loss, the bank cannot refuse to pay. The possession of a pass-book is not always proof of owner- ship ; and a by-law, which states that a deposit will not be paid unless the pass-book is presented, is subject to criticism. 15 Planters', etc., Ins. Co. V. Selma Co., 69 N. H. 405, 43 Atl. 640; Sav. Bank, 63 Ala. 585. by-law reserving lien on shares for 16 Jennings v. Bank of California, shareholder's indebtedness to the cor- 79 Cal. 323, 21 Pac. 852, 12 Am. St. poration not within the prohibition Eep. 145, 5 L. E. A. 233; People v. of a statute forbidding restraints Crockett, 9 Cal. 113. upon the free sale of shares. Hill v. 1' Vansands v. Middlesex County Pine River Bank, 45 N. H. 300. Bank, 26 Conn. 144. 23 Young v. Vough, 23 N. J. Eq. IS Farmers', etc., Bank v. Wasson, 325. 48 Iowa 336, 30 Am. Eep. 398. 2* Lockwood v. Mechanics' Nat. 19 Bath Sav. Inst. v. Sagadahoc Bank, 9 E. I. 308, 11 Am. Eep. 253. Nat. Bank, 89 Me. 500, 36 Atl. 966. 2s Knight v. Old Nat. Bank, 14 20 Holly Springs Bank v. Pinson, Fed. Cas. No. 7885, 3 Cliff, 429; 58 Miss. 421, 38 Am. Rep. 330. Pendergast v. Stockton Bank, 19 21 Spurloek v. Pacific E. Co., 61 Fed. Cas. No. 10918, 2 Sawy. 108. Mo. 319; Mechanics' Bank v. Mer- 26 Bullard v. Bank, 18 Wall. 589. chants' Bank, 45 Mo. 513, 100 fim. 27 Steger v. Davis, 8 Tex. Civ. Dec. 388. App. 23, 27 S. W. 1068. 22 Costella V. Portsmouth Brewing 58 Bt-laws. [ch. VI. , A by-law printed in the pass-book, if reasonable, and signed by tbe party who accepts the same, will bind him and likewise the bank ; and the bank cannot revoke nor amend such a by-law so as to affect the rights of such depositor. It is held that such a by-law becomes a part of the contract of deposit.^* § 46. Defining duties of officers. The officers of a banking corporation have, by law, certain implied power; and in the absence of a by-law specifically defining their powers, they have the implied power to manage and conduct the business of the corporation, and perform all the necessary acts other than those which are imposed by the statute to be performed by the board of directors. The by-laws may prescribe in detail the business and acts to be performed by the various officers and agents of the bank. When the duties and acts to be performed are defined by the by-laws, and they contain a restrictive provision, in effect stat- ing that all acts other than those mentioned are prohibited, an officer or agent of the bank has no additional power or authority by implication. Where the statute of a State prescribes the mode of employ- ment or election of an officer or agent of a corporation, it must be strictly complied with. For example: Where the statute says that the officer must be elected by the board of directors, and it prescribes that such election must be by ballot, an officer of the corporation cannot be appointed by a viva voce vote, or by a resolution. Also where the statute prescribes that at the time of his election he must be a bona fide director of the corporation, the directors cannot legalize the position or office, unless he was at the time a director. § 47. Amending by-laws. The power to amend a by-law is vested in the persons who are empowered to make a by-law. Where the statute of a State prescribes how a by-law may be amended or repealed, it must be strictly followed. 28 Heath v. Portsmouth Sav. Bank, McNulta v. Corn Belt Bank, 164 111. 46 N. H. 78; Levy v. Franklin Sav. 427, 45 N. E. 954, 56 Am. St. Rep. Bank, 117 Mass. 448; Kummel v. 203. Germania Sav. Bank, 127 N. Y. 488; CH. VI.] Banking. 59 Where a provision of the charter is made a part of the by-law, such a provision cannot be amended by amending the by-law. A provision inserted in a charter cannot be amended with- out amending the articles of incorporation. Directors of a corporation frequently attempt to amend the by-laws or the provisions which are a part of the articles of association ; but, as stated, this cannot be done only by amending the articles. § 48. Provisions and form of by-laws. Banking corporations incorporated under the laws of a State, in adopting and preparing a form of by-laws, should be very careful in the preparation of the same; as a by-law cannot be adopted, or enacted, which is in violation of a law of the State ; and all of its provisions must be reasonable. For form of by-laws for a national bank, as recommended by the Comptroller of the Currency, see Appendix. § 49. Statute prescribing time in which by-laws are to be adopted. The certificate from the Secretary of State, which is a certifi- cation implying the due incorporation of a bank, in itself does not put the corporation into action or life. Where a bank or other corporation is required by the statute to enact a code of by-laws within a certain number of days after filing the articles of incorporation with the proper officer of the county, where required to be filed, such a statute is not man- datory but directory.^" The failure to adopt a code of by-laws within such period of time, though a statutory provision, will not prevent the cor- poration, after the adoption of by-laws, from thereafter doing business within the State. But if the act of adopting a code of by-laws, as provided by the statute, is made a part of the organization of the corpora- tion, the organization cannot be complete until all the require- ments of the law are complied with ; and contracts made during organization are held to be invalid. An agreement made by a cashier of a national bank, prior to its organization, does not bind the bank unless such agreement 29 Davies v. Smith, 58 N. H. 16, and cases cited. €0 By-laws. [ch. vi. is ratified after the organization is perfected under the National Banking Act.^" In the absence of a statute which may authorize the enact- ment of a by-law creating a lien upon the stock of a bank, there is a conflict of the authorities, and it appears that the weight of authority is opposed to such a by-law, which view is in accord with public policy. . Notice of Lien. But when a lien is authorized by the bank's charter and the law, all persons purchasing stock are affected by the statute and must take notice.*^ Every person is bound to take notice of the corporation's lien when it is authorized by the statute, even though the certificate is silent and gives no intimation of such lien.^^ Mr. Justice Brewer, in Hammond v. Hastings, 134 U. S. 401, lays down the law which is conclusive in the following language: " The rule is clear and unquestioned that where, by general law, a lien is given to a corporation upon its stock for the indebtedness of the stockholders, it is valid and enforce- able against all the world." •oMcDonough v. First Nat. Bank Bank, Wright (Ohio) 477 (1833); of Houston, 34 Tex. 309. West Branch Bank v. Armstrong, 31 Bishop V. Globe Co., 135 Mass. 40 Pa. St. 278; Mechanics' Bank v. 132; Citizens' Bank v. Kalamazoo Merchants' Bank, 45 Mo. 513 Bank, 111 Mich. 313; Birmingham (1870). Trust Co. V. East Lake Land Co., S2 Crawford, etc., v. Bank, 110 101 Ala. 304; Donner v. Zanesville Fed. Rep. 830 (1901). CHAPTER VII. STOCEHOLDEBS' BIGHTS AND LIABILnTES. § SO. Who may be a subscriber. Any person, male or female, other than a minor (whose con- tracts may be revoked) may be a subscriber for shares of stock in a corporation; provided, however, that the laws of the State in which the party resides and the contract is made, and to be executed, do not interfere. A married woman may become a stockholder under the law of the State where the contract is made, if not prohibited, and she will be subject to all the liabilities as such.^ A married woman in the District of Columbia may become a holder of stock in a national banking association, and assume all the liabilities of such a shareholder, although the considera- tion may have proceeded wholly from the husband. The coverture of a married woman who is a shareholder in a bank will not prevent the receiver of an insolvent bank from recovering judgment against her for the amount of an assess- ment levied upon the shareholders equally and ratably under the statute.^ In the case of Witters v. Sowles, 38 Fed. Eep. 700, the court, in discussing the contractual character of the relation and the liability, says: " Doubtless it would be competent for the Legislature to declare that any married woman who might acquire shares in a corporation should be regarded as a stockholder, and should be liable as such, notwithstanding her shares might be the absolute property of the husband at his option; but in the absence of language to that effect, a statute which makes share- holders liable for the debts of the corporation must be pre- sumed to include only persons belonging to the class who can contract that relation toward the corporation and its creditors. 1 Bundy v. Cocke, 128 U. S. 185. 2 Keyser v. Hitz, 133 U. S. 138, 134 Fed. Eep. 842. [61] 62 Stockholdees' Eights and Liabilities, [ch. vh. " The relation is a contractual one and the liability is founded on the presumed assent of the shareholder to be bound by the terms of the organic law of the corporation." This is well stated by Allen, J., in Lowry v. Inman, 46 N. Y. 125: "A personal liability of stockholders for the debts of a cor- poration, in virtue of the charter, is not in the nature of a penalty or forfeiture, and does not exist solely as a liability imposed by statute. It is not enforced simply as a statutory obligation, but is regarded as voluntarily assumed by the act of becoming a stockholder. By such act he assents to be bound, or that his property shall be charged, with the debts of the corporation, to the extent and in the manner prescribed by the act of incorporation." The Code of l^orth Carolina, § 1826, enacted in 1871, pro- vides that no woman during coverture shall be capable of mak- ing any contract to affect her real and personal estate without the written consent of her husband. The court, in Robinson v. Turrentine et al., 59 Fed. Kep. 554, in discussing this provision of the Code, and the question of liability and the rights of a married woman purchasing stock in a corporation, without the written consent of her husband, says: " M. B. Turrentine is a married woman. After her mar- riage and after the passage of the Act of 1871 of North Caro- lina (Code, § 1826), the stock in question was transferred to and acquired by her, to use the language of her answer. Her husband, the other defendant, never gave his written consent to the purchase. Mrs. Turrentine is not a ' free trader " under Code, |§ 1828, 1831, 1832." The court then proceeds to discuss the question of liability of a stockholder as created by section 5151, Eevised Statutes, United States, imposing individual responsibility to the amount of the par value of the shares upon stockholders in national banks, which law, he says, makes no exceptions in favor of married women. The court further says that : " To hold that a State law, were there such a law, could except certain shares from the liability, would enable States to defeat the policy of the Federal Government in establishing the national banking system. That the Congress has power to CH. VII.] Banking. 63 establish and legislate for such banks has not, since 1819, been an open question. (McCuUoch v. Maryland, 4 Wheat. 316.) If a purchase of stock in a national bank by a married woman without the written consent of her husband gives her the owner- ship of such stock, judgment must be given against the femme defendant. If she owned the stock at the failure of the bank, she is liable to the assessment ; if she did not, she is not liable. While the Federal Government exclusively controls the ques- tion of the liabilities of stockholders in national banks, it is not doubted but that a State has power to say that, for reasons seeming good to its Legislature, and not in conflict with organic law, a particular class of persons shall not be permitted to own particular classes of property. It may lawfully be provided that a guardian or other trustee may not invest in securities other than those specified by statute. Probably it might be held that a statute might constitutionally provide that pur- chases by guardians of, say, railroad stock, in the name of their trust, should be absolutely void. In such case it might be held that an attempted transfer of such stock so purchased passed no title; that the stock still remained, although duly assigned and transferred on the corporation books, the property of the vendor; and that the guardian could recover the money paid from the vendor. It would, I think, require strong and plain words to induce courts to give such a construction to an act of the Legislature." The court holds that the Legislature of a State cannot enact a law in conflict with a statute of the United States. § 51. Enforcement of subscription. A subscription to the capital stock of a proposed corporation, for the purpose of forming it, made by several signers, is valid. The corresponding promise of the other signers, and the com- mon object sought to be accomplished, constitute a sufficient consideration for the promise of each signer, and upon the formation of the corporation and its acceptance, each subscriber becomes liable. An action against the subscriber to stock upon his subscrip- tion according to its terms, is not an action under the statute to recover assessments upon the subscribed capital stock.' 3 The Marysville Electric Light & Power Co., Appellant, v. F. W. John- son, Respondent, 93 Cal. 538. 64 Stockholdees' Eights and Liabilities, [ch. vii. A contract in writing, by which the subscribers agree to associate themselves into a corporation for a specific purpose, and to pay to the treasurer of said corporation the amount set against their respective names, is a valid subscription; and an action may be maintained in the name of the corporation, after it is organized, against a subscriber/ The court, in discussing this question, says : " In agreements of this nature, entered into before the organi- zation is formed, or the agent constituted to receive the amounts subscribed, the difficulty is to ascertain the promisee, in whose name alone suit can be brought. The promise of each subscriber, ' to and with each other,' is not a contract capable of being enforced, or intended to operate as a contract to be enforced between each subscriber and each other who may have signed previously, or who should sign afterward, nor between each sub- scriber and all the others collectively as individuals. The undertaking is inchoate and incomplete as a contract until the contemplated organization is effected, or the mutual agent con- stituted to represent the association of individual rights in accepting and acting upon the propositions offered by the several subscriptions. When thus accepted, the promise may be con- strued to have legal effect according to its purpose and intent, and the practical necessity of the case ; to wit, as a contract with the common representative of the several associations." The question of liability of a subscriber is again presented in the case of The International Fair & Exposition Association of Detroit v. Hiram Walker, 83 Mich. 386 ; and a subscriber who signed a subscription paper (but not the articles of associa- tion), which subscription paper was in the following form: " For the purpose of purchasing suitable grounds, erecting suitable buildings thereon of a permanent character for fair and exposition purposes, to be upon a plan similar to the Buffalo Exposition, and believing that a corporation, with a capital stock of at least $250,000, should be organized for such purpose, the undersigned agree to subscribe for and take stock in such a corporation for such purposes to the amounts set opposite our respective names : Provided, that at least the sum of $100,000 shall be subscribed within sixty days from the date hereof, in order to render our agreement hereto binding. " Dated Detroit, January 9, 1889." *Athol Music Hall Co. v. Carey, 116 Mass. 471. CH. VII.] Banking. 65 Was held liable. The court says : " The agreement sets out fully the purposes and objects for which the moneys were to be raised. It was to purchase grounds, erect suitable permanent buildings thereon for fair and exposition purposes, and to be on a plan similar to the Buffalo Exposition. Two hundred and fifty thousand dollars, at least, was to be the amount of the capital stock ; and the only limitation or condition under which the amount subscribed by each should not be paid was that $100,000 should be subscribed within sixty days. This amount was subscribed within the time. The other parties who subscribed went forward in good faith to carry out the plan named in the agreement, and in reliance that the defendant would pay in the amount of his subscription. He stood by and saw the moneys being expended, the ground purchased, and buildings erected. He attended a meeting, and voted, not only the stock of his two sons, but voted his own, upon the question of the site. This subscription was accepted by the plaintiff, and it has the power to give the stock subscribed for, and has offered to do so. I think this case falls so squarely within the case of Peninsular Ky. Co. v. Duncan, supra, that the first proposition of defendant's counsel needs no discussion. It is true that the statute under which the plaintiff in that case organized did require preliminary subscriptions, while the statute in the present ease does not; but here, as in that case, the promises' to pay the amount subscribed are mutual, and the agreement by the defendant to pay the $5,000 was relied upon by the other subscribers, and between them it was a valid contract, upon which, after organization, the corporation could maintain an action." Where the purposes of the corporation are defined in the preliminary subscription paper, which paper sets out the pur- poses of the corporation, and after being signed the articles of incorporation are changed, by additional or new business, the subscriber will be released. The corporation cannot recover against him.^ A subscriber to the stock of a corporation may, by the terms of his subscription, vary his liability to calls or assessments ^Marysville Electric Light & Power Co. v. Johnson, 109 Cal. 192. 5 66 Stockholdees' Eights and Liabilities, [ch. vii. from that imposed by the statute. The liability of a subscriber, in such a case, is measured by the terms of his agreement.* A subscription cannot be avoided where the subscriber has partially paid for his stock, upon the ground that the purposes of the corporation have been changed, and differ from those stated in the subscription agreement.'' The question whether an action can be brought to enforce a subscription to stock in a corporation, before the corporation is organized, is not presented by the cases; but if an agent is named in the subscription paper to receive the amount from each subscriber, for the benefit of the corporation, the assump- tion is, that a suit may be instituted before the organization of the corporation in the name of the agent.* § 52. What constitutes a stockholder. The issuing of ihe stock, coupled with delivery and accept- ance, and entry of the name of the ov?ner on the stock books of the corporation, is proof conclusive of ownership. A subscription to stock of a national bank, and payment in full on the subscription and the entry of the subscriber's name on the books as a stockholder, constitutes the subscriber a stock- holder; though the certificate is not issued or taken out. The Supreme Court, in the case of The Pacific National Bank v. Eaton, 141 U. S. 227, holds, that where a party who agrees to take the new shares of stock, being his proportional share, to the doubling of the capital stock of the banking cor- poration, and paying for it in cash, and receiving a receipt for the same, are acts which are fully equivalent to a subscription to the stock in writing. He would then become a stockholder, and be properly entered as such on the stock book of the company, and his certificate of stock being made out ready for him when he should call for it, would hold. It is his certificate. A stockholder is one who is (in fact) the real ovsmer of the shares and is liable as such, though, when he purchased the stock, he had it transferred upon the stock books to another. A purchaser of stock in a national bank cannot escape indi- 8 Ventura and Ojai Valley Ey. Co., sociation, 126 Cal. 582. Respondent, v. Hartman, Appellant, a Athol Music Hall Co. v. Carey, 116 Cal. 260. 116 Mass. 471. I' Walter v. Merced Academy As- CH. VII.] Banking. 6^ vidual responsibility by having his stock transferred to a person pecuniarily irresponsible.' Where stock is transferred and placed upon the stock books in the name of a person who has no knowledge of such trans- action, which has been done without his authority or consent, this does not constitute him an owner or establish liability ; but where a person is elected a director, and vice-president, of a banking corporation, assuming the active management of the bank, being bound by a statute to own a certain number of shares, and presumed to know the condition of the books of the bank, not only as to whether the required number of shares are held by him, but whether there are the required number of stockholders, and who they are, and does not return a dividend paid him by the bank, at a time when it was insolvent, upon stock transferred to him without his knowledge prior to his election as director and vice-president, and does not repudiate the transfer except by a return of the dividend to the supposed owner of the shares, he must be held the owner of the stock thus transferred to him on the books. ^^ The general rule is, that, unless the statute otherwise pro- vides in expressed terms, " It is not essential that a certificate should have issued in order to create the relation of shareholder, provided a contract to take stock had been duly made, or pro- vided the rights, privileges, and emoluments of a shareholder had been enjoyed with the consent of the corporation." The authorities supporting this rule are sufficiently numerous to establish it as the law." ^' It is held in Chaffin v. Cummings, 37 Me. 76, that, in order to constitute a stockholder, it is not necessary that such fact be shown by the corporation records. It is provable by parol. The court says, " To constitute ownership, it is not necessary that the stock should be paid for. The corporation may give credit for its stock. It is not necessary that certificates should be issued. They only constitute proof of property which may exist without them." When a corporation agrees that a person shall be entitled to 259. s Davis V. Stevens, 17 Blatchford, over, 114 Ind. 381, 16 N. E. 642; Chase v. Merrimae Bank, 19 Pick. i»Brovm v. Finn, 34 Fed. Rep. (Mass.) 264, 31 Am. Dec. 163; Chaf- 124. fin V. Cummings, 37 Me. 76; Farrar " Butler's University v. Scoon- v. Walker, 8 Fed. Gas. No. 4679. 68 Stockholdees' Eights and Liabilities, [ch, vii. share in its capital, to be paid for in a manner agreed upon, which person has agreed to take and pay for them accordingly, the latter becomes the owner by valid contract made upon a valuable consideration. The court further says: " It is insisted that parol evidence cannot be received to prove that a person has become the owner of shares; that the records or books of the corporation are the only legal evidence of that fact; and the case of Stanley v. Stanley, 26 Me. 191, is relied upon as having so decided. That case decided that the transfer of stock from one person to another is by statute required to be entered upon the books of the corporation, before it can be effectual to discharge or incur certain liabilities, and that the transfer can be proved only by the books; not that a title to stock originally acquired from the corporation should be so proved. " The decision upon the facts, as well as the law, being sub- mitted, the court cannot but conclude that the testimony is suffi- cient to prove that the defendant was an owner of ten shares of the stock when the debts on which the judgment was founded were contracted by the corporation. Defenses to subscriptions. The subscriber may withdraw from his subscription if he gives sufficient notice at any time prior to the incorporation of the bank." In Auburn Bolt Works v. Shultz, 143 Pa. St. 256, where the defendant had subscribed for stock in a corporation, its purpose being to erect a manufactory in a certain borough, and failing to do so but having erected it in another township : Held, that the subscription was not enforceable. If the subscriber dies before the corporation is formed his estate cannot be held.^' isHudaon Real Estate Co. v. (Tex. 1893) ; Auburn, etc., Works v. Tower, 161 Mass. 10 (1894); Bry- Shultz, 143 Pa. St. 256 (1891). ants, etc., Co. v. Felt, 87 Me. 234 la Sedalia, etc., Ry. Co. v. Wilker- (1895); Providence, etc.; v. Kent, son, 83 Mo. 235 ; Phipps v. Jones, 20 etc., Co., 19 R. I. 561 (1896) ; Lewis Pa. St. 260, 59 Am. Dee. 708. V. Hillsboro, etc., Co., 23 S. W. 338 CH. vn.J Banking. 69 The general rule is that corporate directors have no power to enter into an agreement with a subscriber that his subscription shall be cancelled. The rule is different, liowever, where such power is incor- porated within the charter, statute or by-laws of the corpora- Liability under hy-law. During the solvency of a corporation it is held that the stockholders' subscription liability can be enforced only by as- sessment in conformity with the by-laws of the corporation.^^ § 53. Purchase and transfer of stock. Stock in a corporation may be acquired by subscription, by purchase, by gift or under a judicial sale by decree of the court. A stockholder acquiring stock has an unqualified and imme- diate right to have the stock transferred to him, upon the books of the corporation. The entry of the transfer on the books constitutes the dct, and from the date of such entry the bank is estopped from setting up any claim or lien against the stock. The bank may refuse to enter the transfer, if it has a lawful claim or lien upon the stock, or if it has been enjoined by a court of competent jurisdiction. The indorsement in blank by the owner of the certificate entitles the holder to fill in the blank, and presentation of the same to the bank demanding that an entry of the transfer be made upon the record, and a new certificate issued, establishes his right as a stockholder from the time of such demand, though the bank does not at the time make the transfer or issue to him a new certificate. A notice given to the bank coupled with a request and tender of a certificate properly indorsed, demanding a transfer of the stock, operates as a release of the stockholder from further liability. 1* Lafayette, etc., Corp. v. Eyland, is Covell v. Fowler, 144 Fed. Rep. 80 Misa. 29 (1891); Rider v. Mor- 535. risen, 54 Mo. 429. TO Stockholdees' Eights akd Liabilities, [ch. viz. If the bank refuses to enter the transfer on demand, without sufficient cause, it will be liable for damages to the party injured. ^° Where a certificate of stock, by the conditions set out on the face of the instrument, is made transferable only on the books of the corporation, the title as between the parties (the seller and the purchaser, passes on delivery of the certificate; and the transfer on the book of the corporation is not an essential act to pass the title ; but it is very important to the parties that the transfer should be made at the time of sale and delivery, in order that the exact legal liability of the parties may be fixed. Where the certificate provides that a transfer shall take place only by a cancellation of the certificate, and entry on the books of the corporation, until such entry is made or notice given to the bank, the stock may be attached in the name of the party appearing as the owner upon the books of the corporation. It has been held that in a suit against the bank to compel it to transfer certain stock to the plaintiff on the books of the corporation that the cashier of the bank need not be made a party." In Com V. Skillern, 87 S. W. 142, " where a stockholder in a bank corporation in due course of trade sold his stock to the cashier of the bank without having any reason to believe that the bank was insolvent, or that the cashier was using any money of the bank in purchasing his stock, the sale was valid and the money paid therefor became the property of the seller." The transfer of stock by the owner in an insolvent bank is liable in a suit brought in the bank's name to recover the amount remaining unpaid upon the subscription to its capital stock, for the payment of the depositors and creditors of the bank, notwithstanding the transfer was made prior to the call, where it appeared that the transfer was fraudulent and made to an insolvent person knowing him to be insolvent.'* Although the transfer of the stock was not made in com- pliance with the by-laws of the bank, the acceptance by the bank of an old certificate, the cancellation thereof on the books and the issue of a new certificate to the purchaser to whom the bank 18 See Bank v. Price, 79 Kan.. 289. is People's Home Savings Bank v. "Johnson v. Hume, 36 So. Eep. Rickard, 139 Cal. 285. 421, 138 Ala. 564. CH. vii.] Banking. 71 paid dividends, held the bank waived compliance with its by- laws which required that they should be signed by the pur- chaser." The rule seems to be strongly supported that where the trans- ferror had no knowledge of the insolvent condition of the bank at the time of transfer, and it is free from fraud, neither the bank nor its creditors have a cause of action against the seller. (19 N. W. 696.) The transfer of stock may, as between the parties, the seller and the purchaser, take place without the knowledge of the bank. The actual transfer on the books is the only notice which affects and binds the bank, and all parties dealing with it as well as the parties to the transaction ; and if, at the time of the actual transfer upon the books, the bank oiScers had knowledge of the bank's insolvency, the purchaser being entirely ignorant of the insolvent condition of the bank, the transaction becomes one of fraud to which the persons contributing should be held responsible. The transfer should be refused, but the fact that the shares are transferable on the books of the bank does not limit the right of transfer when demanded by the seller. Question : Is it the duty of the bank, through its officers, to refuse to make the transfer, knowing at the time that the bank is insolvent ? The withholding by the officer of the actual con- dition of the bank, if known by him to be insolvent, is a fraud perpetrated upon an innocent person, and by the withholding of such knowledge the officer becomes personally liable. He can- not excuse himself in withholding actual knowledge of the insol- vent condition of the bank by saying that no inquiry was made by the purchaser of the stock at the time of the purchase and transfer, therefore it was no part of his business to inform^ the purchaser. The purchaser may not be relieved from liability where the bank has passed into the hands of a receiver, but the damages caused to the purchaser in withholding facts known to exist by the officers of the bank remain.^" Tor a rescission of a contract to avoid liability on national 19 People's Home Savings Bank v. Truman v. Lombard, 42 N. Y. Eickard, 139 Cal. 285. 262. 20 Poster V. Row, 120 Mich. 1; 72 Stockholdees' Eights and Liabilities, [ch. vix. bank stock purchased on fraudulent representations made by officers of the bank relief may be obtained by a suit in equity.^^ § 54. Right of stockholder. Entitled to notice of meetings. Where the time and place of corporate meetings are fixed by the charter or the by-laws, this is held to be sufficient notice to the stockholders and no further notice is necessary unless the charter or by-laws require it.^^ Where no sufficient notice is given by charter, or by statute, or by a by-law, of stockholders' meetings, they are entitled to an express notice of every such corporate meeting.^^ § 55. Notice may be waived. A stockholder may waive his right to have a notice of a cor- porate meeting served upon him. When all the stockholders are present or subsequently approve of and ratify an action of the corporation, the notice is waived and the action becomes valid.^* A stockholder admitting the validity of a claim against the corporation, which claim is held to be valid, though the meet- ing was not called in accordance with the statute, it not appear- ing that any stockholder has ever objected, the meeting is held to be valid.^'' All who appear at a meeting, wherever held, or however defectively the members are notified, will be bound by the pro- ceedings of those who appear and participate in it without dissent.^® § 56. The right to vote. The general rule is that shareholders who are registered as such on the books of the corporation have the right to vote.^^ aiLantry v. Wallace, 182 U. S. 25 Clark v. Warwick, etc., 174 536, 97 Fed. Eep. 865. Mass. 434. 22 Warner v. Mower, 11 Vt. 385, 26 Handley v. Stutz, 139 U. S. 396; State v. Bonnell, 35 Ohio St. 417; Benbon v. Cook, 115 N. C. 324; 10-15; Morril v. Little Falls Mfg. People v. Peck, 11 Wend. 604. Co., 53 Minn. 371. 27 People v. Robinson, 64 Cal. 373, 23Wiggin V. Free Will Baptist 1 Pac. Eep. 156; Morrill v. Little Church, 49 Mass. 301. Palls Mfg. Co., 53 Minn. 371, 55 N. 24 Stutz V. Handley, 41 Fed. Rep. W. 547 ; Matter of Glen Salt Co., 531; Handley v. Stutz, 139 U. S. 153 N. Y. 688, 48 N. E. 1104; Peo- 417. pie V. Devin, 17 111. 84. CH. VII.J Banking. 73 Corporation cannot vote its own stock. A corporation holding or acquiring its own stock cannot vote the same at a corporate election. The statute may regulate the privilege.^* Pledgee cannot vote stocTe. Where stock has been pledged to the corporation or some one in trust for the corporation, neither the bank nor the trustee can vote the stock.^° Voting Trust void under National Bank Act.'" In the absence of a statute a shareholder, who is delinquent upon an assessment against his stock, does not lose his right to vote.^^ § 57. Right to vote by proxy. The right to vote by proxy is generally a right authorized and fixed by statute.'^ Where the statute fails to provide the mode of voting by proxy or the time, place and manner of conducting meetings, the corporation may enact by-laws to govern and control the corporation.^^ In a meeting not lawfully called proxy cannot bind principal. (79 Fed. Eep. 558.) § 58. Right of stockholder to inspect records of corporation. The right to examine, at a proper time and for proper pur- poses, the records, books and papers of a corporation, is an incident and privilege which goes with the ownership of stock in a corporation.^* 28 McNeely v. Woodruff, 13 N. J. Ry. Co. v. Hellman, 109 Cal. 571, 42 L. 352; Am. Ey. Co. v. Haven, 101 Pac. Rep. 225. Mass. 398, 3 Am. Eep. 377. as C. C. Cal., § 303 ; Market Street 29 Monsseaux v. Urquhart, 19 La. Ey. Co. v. Hellman, 109 Cal. 571. Ann. 482. 34 Matthews v. McClaughry, 83 aoBerdgers v. First Nat. Bank of 111. App. 224; Ellsworth v. Dorwart, Tarboro, Sup. Ct. N. C, Feb., 1910. 95 Iowa 108, 63 N. W. 588, 58 Am. 31 Kinman v. Sullivan Co. Club, St. Rep. 427, under Iowa Code, § 26 N. Y. App. 213; Price v. Hoi- 1279; Legendre v. New Orleans comb, 89 Iowa 123, 56 N. W. 407; Brewing Assn., 45 La. Ann. 669, 12 U. S. V. Barry, 36 Fed. Rep. 246. So. Eep. 837, 40 Am. St. Eep. 243 ; 32 C. C. Cal., § 303 ; Market St. Cockbum v. Union Bank, 13 La. 74 Stockholdees' Eights and Liabilities, [ch. vii. Where the statute grants the privilege to the stockholder to inspect the records, the motive cannot be inquired into. The shareholder need not give any reason to the officers for demand- ing the privilege.*^ The right to make an examination of the books is not con- fined to a personal inspection by the stockholder himself, but may be made by his agent, attorney or expert.^" Contrary, see Clark v. Eastern Bldg., etc., Assn., 89 Fed. Eep. Y79, which holds' that a corporation will not be required to permit an examination of its books at the request of stock- holder who alleges misconduct. A shareholder who is not registered on the books of the cor- poration has no right to make an examination of the records.*"* § 59. Liability of stockholder to creditors of corporation. General rule. The general rule at common law is that shareholders in a joint stock corporation are not liable for debts, except to make good the amount due to the corporation for their shares.*'' § 60. Liability cannot be enlarged by a by-law. By unanimous consent the liability of the stockholder may be enlarged beyond the liability created by law, but such a Ann. 289 ; In re Steinway, 159 N. Y. Atl. Rep. 407 ; Cincinnati Volksblatt 250, 53 N. E. 1103, 45 L. R. A. 461, Co. v. HoflFmeister, 62 Ohio St. 189, affirming 31 N. Y. App. Div. 70, 52 56 N. E. 1033, 78 Am. St. Rep. 707; N. Y. Supp. 343 ; Commonwealth v. Lyon v. Am. Screw Co., 16 R. I. 472. Phoenix Iron Co., 106 Pa. St. Ill, 51 se Foster v. White, 86 Ala. 467; Am. Rep. 184, citing State v. Bien- Ballin v. First, 55 Ga. 546; Ells- ville Oil Works, 28 La. Ann. 204; worth v. Dorwart, 95 la. 108, 63 N. Angell & A. Corp., § 681; Grant W. 599, 58 Am. St. Rep. 427; State Corp. 311; 2 Phillips Ev. 313; Red- v. Sportsman Park Assn., 29 Mo. field Ry. 227; Lyon v. American App. 326; People v. Nassau Ferry Screw Co., 16 R. I. 472, 17 Atl. Rep. Co., 86 Hun 128, 33 N. Y. Supp. 61 ; State v. Pac. Brewing, etc., Co., 244, 66 N. Y. St. Rep. 801. 21 Wash. 451, 58 Pac. Rep. 584, 47 ssa Matter of Reiss, 30 Misc. (N. L. R. A. 208; U. S. Ranger v. Y.) 234, 62 N. Y. Supp. 145. Champion Cotton Press Co., 51 Fed. st Toner v. Fulkerson, 125 Ind. Rep. 61, 140 Cal. 103, 117 N. W. 224, 25 N. E. 218; Spense v. Iowa, 893; Harkness v. Guthrie, 27 Utah etc., Constr. Co., 36 Iowa 407; 248. Wood V. Pierce, 2 Disn. 411; Jack- 35 Foster v. White, 86 Ala. 467; son v. Meek, 87 Tenn. 69, 9 S. W. State V. St. Louis, etc., Ry. Co., 29 225, 10 Am. St. Rep. 620; Bank of Mo. App. 301; Mitchell v. Rubber N. A. v. Rindge, 57 Fed. Rep. 279; Reclaiming Co. (C. H., 1892), 24 Smith v. Londoner, 5 Colo. 365. OH. VII.] Banking. 75 liability must be unanimous. A by-law or resolution of the corporation cannot create a liability beyond that fixed by the statute.'^ § 61. When stockholder liable to corporation, liable also to creditors. Oenercd rule. The general rule is that a stockholder, if not liable to the corporation, is not liable to a creditor, except wherte the Con- stitution or statute of the State otherwise provided.^' In the case of Potts v. Wallace, 32 Fed. Kep. 272, it is held that where a subscriber to stock tendered the amount of his subscription to the corporation while it was solvent, and demanded a certificate which was refused him, he was not liable to the assignee in insolvency of the corporation. § 62. liability beyond subscription. A sitockholder has no liability beyond the par value of the stock owned by him, unless such a liability is created by the Constitution, the statute, charter, or by contract. In the State of Washington, under the Constitution, the superadded liability of stockholders to the creditors attaches immediately upon the declared insolvency of the bank.*" The liability of a stockholder in a national bank for assess- ments made by the Comptroller of the Currency on insolvency of the bank, is not dependent upon the contract of subscription between the stockholder and the corporation, but is created by statute for the benefit of the bank's creditors, and can be neither modified nor relteased by any act of the corporation. In the case of Scott v. Latimer, 89 Fed. Rep. 843, the court, in discussing this question, .says : " The liability sought to be enforced in this case is not one created by a contract existing between the corporation and the ssReid v. Eatonton Mfg. Co., 40 St. Rep. 510; Union Sav. Assn. v. Ga. 98, 2 Am. Eep. 563; Flint v. Seigelman, 92 Mo. 635, 15 S. W. Pierce, 99 Mass. 68, 96 Am. Dec. 630; Burgess v. Seligman, 107 U. S. 691. 20, 63 S. W. 62, 124 Cal. 90, 36 ssDeadwood First Nat. Bank v. Colo. 65. Custin Minerva Con. Min. Co., 42 *<> Bennet v. Thorne, 36 Wash. 258. Minn. 327, 44 N. W. 198, 18 Am. 76 Stockholdees' Rights and Liabilities, [ch. vii. stockholders, but is one created by statute in favor of creditors, and not in favor of the corporation. It is a liability which cannot be affected, discharged or released by any action taken by the corporation, or by the combined action or agreement of the corporation and its stockholders. Thus, in Delano v. Butler, 118 U, S. 634, 7 Sup. Ct. Eep. 39, it appeared that the stockholders, in order to meet the liabilities of the bank, had made an assessment of 100 per cent, upon the capital stock which was paid in, but the bank was ultimately compelled to go into liquidation, and the Comptroller made an assessment upon the stockholders under the provisions of section 5151 of the Revised Statutes. The Supreme Court held that the pay- ment of the assessment made by the stockholders did not relieve them from liability for the assessment made by the Comp- troller, it being said that: " ' Under section 5151 the individual liability does not arise, except in case of liquidation and for the purpose of winding up the affairs of the bank. The assessment under that section is made by the authority of the Comptroller of the Currency, is not voluntary, and can be applied only to the satisfaction of the creditors, equally and ratably.' " It is thus made clear that the liability sought to be enforced in this case is not dependent upon the terms, or, in fact, upon the existence, of a contract of subscription to the capital stock of the bank, but it is a liability imposed by statute in favor of creditors, and it is a liability, as already said, which cannot be modified or released by any action on part of the corporation or of the corporation and its stockholders. It is created for the benefit of the creditors, and no action on part of the bank can estop the creditors from enforcing their rights in this par- ticular. Upon whom does the statute impose the liability ? In Bank v. Case, 99 U. S. 628, and Bowden v. Johnson, 107 U. S. 251, 2 Sup. Ct. 246, it was ruled that the actual or beneficial owner of the stock would be liable, and that this liability could not be evaded by the device of transferring the title to a third person, who might be financially irresponsible." In Pauly v. Trust Co., 165 U. S. 606, 17 Sup. Ct. 465, it is said: " It is true that one who does not, in fact, invest his money OH. VII.] Banking. 77 in such, shares, but who, although receiving them simply as col- lateral security for debts or obligations, holds himself out on the books of the association as true owner, may be treated as the owner, and therefore liable to assessment, when the associa- tion becomes insolvent, and goes into the hands of a receiver. But this is on the ground that, by allowing his name to appear upon the stock list as owner, he represents that he is such owner, and he will not be permitted, after the bank fails, and when an assessment is made, to assume any other position as against creditors. If, as between creditors and the person assessed, the latter is not bound by that representation, the list of share- holders required to be kept for the inspection of creditors and others would lose most of its value. * * * As already indicated, those may be treated as shareholders, within the meaning of section 5151, who are the real owners of the stock, or who hold themselves out, or allow themselves to be held out, as owners, in such way and under such circumstances as, upon principles of fair dealing, will estop them, as against creditors, from claiming that they were not in fact owners." The contrary doctrine to that just enunciated is: That a stockholder may, by express contract, entered into with a cor- porate creditor, waive his liability upon a debt which at the time is incurred.*' In the case of Brown v. Eastern Slate Co., 134 Mass. 590, where a bill in equity was instituted against the stockholder of the corporation to enforce payment of the judgment under the statute of the State, the court held that an oral agreement might be shown as a part of the contract to exempt the stock- holders from a statutory liability. The additional liability of the shareholders of a banking corporation depends on the terms of the charter, and, as such a provision in the charter is in derogation of the common law, it must not be extended beyond the words used. In a suit against a stockholder brought by a creditor to enforce individual liability under the charter, a judgment against the corporation establishes, prima facie, the amount and validity of the debt. When the stockholder was not a party to the suit against the corporation, and had no oppor- *i Robinson v. Bidwell, 22 Cal. Bush v. Eobinson, 95 Ky. 492; 379 ; French v. Teschemaker, 24 Cal. U. S. v. Sanford, 161 U. S. 412. 518; Wells v. Black, 117 Cal. 137; 78 Stockholdees' Eights and Liabilities, [ch. vii. tunity to defend in that suit, he may, by way of defense in the suit against him, set up any fact which would absolve him and any fact which would establish that the corporation was not liable upon the debt.*^ § 63. Fixing date of liability. If a liability does not exist by statutory provision at the time of subscribing for stock, a new remedy against stockhold- ers cannot affect those who took shares in the corporation before its passage. The proposition may be again stated as foUows: Where a liability does not exist at the time of subscribing for stock, in a corporation organized under the general laws of a State, a statute cannot afterwards be enacted imposing a liability. In the case of Grand Rapids Savings Bank v. Warren, 52 Mich. 557, in discussing this question, the court says: " The liability for which this proceeding is instituted arose previous to the passage of this statute, and the claimant, at the date of this statute, had a right to recover its demands of the stockholders of the Exchange Bank of Big Rapids on the failure of the bank to pay them. If the Act of 1877 is to be applied to these demands, it takes away the right as to all the stock- holders who are non-residents^ unless they voluntarily come to the State so that process may be served upon them. It also enables any resident stockholder to escape liability by absent- ing himself from the State so that process may not be served. And, apparently, it takes it away as to all estates of deceased stockholders. But an act which could have this effect would be clearly inoperative, at least as to the cases in which its enforcement would release parties before liable, because it would, to that extent, impair the obligation of contracts. It would be inoperative, therefore, as to this estate. And this, we think, not only in so far as it undertook or assumed to give a new remedy, but also in so far as to take away those which existed before. " We agree, therefore, with the circuit judge, that the claim- ant was entitled to prove its claim as was done against the estate. We also think that the liability of the shareholders is 42Wheatley v. Glover (Georgia), 54 S. E. 626. CH. vii.J Banking. 79 commensurate with that of the corporation itself, and extends to costs and interest on the judgments." When an involuntary suspension of a banking corporation is caused by the commissioner of banks, and it is in the hands of such commissioner, or when it is placed in the hands of a receiver, the receiver need not wait until the assets are exhausted before enforcing the liability of the stockholders.*^ Where the statute of a State provides that no action shall be brought against a stockholder for any debt of the corporation until judgment therefor has been recovered against the corpora- tion and execution thereon returned unsatisfied, it is held in Barnes et al. v. Arnold et al., 51 N. Y. S. 1109, that the insolv- ency of a bank, the appointment of a receiver, judgment of dissolution and forfeiture, and the issuance of an injunction restraining its creditors from bringing any action against it, dispenses with the statutory condition precedent to bringing suit against the stockholder. The statute does not operate to estop the creditors in bring- ing an action in equity against the stockholder where it can be shown that a deficit will remain after all the assets are applied to the payment of debts.** Where the statute provides that the stockholders shall be individually responsible " ratably " and " not one for another " for the debts of the corporation to the extent of their stock therein, an accounting in equity must be had to determine the aggregate of the deficit before an action will lie against the stockholders.*' § 64. Extent of stockholder's statutory liability. The extent of liability against the stockholder in a State bank is fixed and determined by the statute of the State. In most of the States the liability is a double liability. In the State of California each stockholder of a corporation is individually and personally liable for such proportion of all hastate v. Union Stock YarJa lett, 90 N. W. 537, 64 Neb. 592; State Bank, 70 N. W. 752, 105 Iowa Barnes v. Arnold, 51 n! Y. Supp 549, 72 N. W. 1076; Crocker v. Ball, 1109, 23 Misc. 197. 59 P. 691, 10 Kans. App. 364; « Barnes v. Arnold, 51 N. Y. Supp. Stevens v. Scott, 52 N. E. 535, 172 1109; also see Booth v. Dear 71 N Mass. 356; Francis v. Hazlett, 78 W. 816, 96 Wis. 516. N. E. 405, 192 Mass. 137, 116 Am. *5 McLaughlin v. O'Neill, 51 P St. Eep. 230; Brinkworth v. Haz- 243, 7 Wyo. 187. 80 Stockholdees' Eights aistd Liabilities, [ch. vii. of its debts and liabilities contracted, or incurred, during the time he was a stockholder as the amount of stock or shares owned by him bears to the whole of the subscribed capital stock or shares of the corporation. Any creditor of the cor- poration may institute joint or several actions against any of its stockholders for the proportion of his claim, payable by each, and in such action the court must ascertain the propor- tion of the claim or debt for which each defendant is liable, and a several judgment must be rendered against each in con- formity therewith. The liability of each stockholder is deter- mined by the amount of stock or shares owned by him, at the time the debt or liability was incurred; and such liability is not released by any subsequent transfer of stock. A bank charter declaring that " the stockholders of said bank shall be personally and individually liable for all losses, de- ficiencies and failures of the capital stock of said bank," has been held to make the shareholder personally liable to the creditors of the bank for its indebtedness in proportion to their respective shares in the stock of the same, and not merely bound to keep the capital good by assessments. An important case discussing this question is the case of Queenan et al. v. Palmer et al., 117 111. 619. In this case it is held, that where the char- ter of a banking corporation makes its stockholders individually liable to the amount of the stock held by them respectively to depositors, and other creditors of the bank, for any losses they may sustain, such liability is a common fund for the security of creditors, and a court of equity aside from the ground of discovery, will have jurisdiction of a bill by a creditor for him- self and others to enforce such liability, and control the fund thus obtained for their benefit, and distribute the same ratably among them. An action at law in such case is declared by the court as being inadequate without the bringing of a multiplicity of suits. Where, a bank charter provides that the stockholder shall " be responsible in his individual property in an amount equal to the amount of stock held by him, to make good losses to de- positors : " Held by the court that the individual liability was not in the nature of a penalty, and, therefore, enforceable only in a court at law ; but was primary and subject to the demand of depositors and other creditors equally with the assets of the bank. CH. VII.J Banking. 81 In construing the statute making stockholders liable, the court holds that where a charter or statute makes the stock- holders of a corporation individually responsible in an amount equal to their stock, " to make good losses to depositors or others," will be construed to make the stockholders liable to all creditors who may suffer from the default or failure of the corporation to pay its indebtedness. § 65. liability of pledgee or trustee. The Supreme Court of the United States in the case of Eankin v. Fidelity Ins. Co., 189 U. S. 242, in discussing the question as to who are stockholders, pledgees, or trustees holding stock in a national bank, says: " 1. That liability may be established by allowing one's name to appear upon the books of the corporation as owner, though in fact he be only a pledgee. Pullman v. Upton, 96 U. S. 328. 'Nor can the real owner exonerate himself from responsibility by making a colorable transfer of the stock, with the under- standing that at his request it shall be retransferred. National Bank v. Case, 99 U. S. 628 ; Bowden v. Johnson, 107 U. S. 251 ; Stuart V. Hayden, 169 U. S. 1. " 2. Stockholders of record are liable for unpaid install- ments, though in fact they may have parted with their stock or held it for others. Hawkins v. Glenn, 131 U. S. 319. " 3. A mere pledgee, however, who receives from his debtor a transfer of shares, surrenders the certificate to the bank and takes out new ones in his own name, in which he is described as ' pledgee,' and holds them afterward in good faith, and as collateral security for the payment of his debt, is not subject to personal liability as a shareholder. Pauly v. State Loan and Trust Co., 165 U. S. 606. But it is otherwise, if he allows his name to appear on the book as owner, or being the owner, makes a colorable transfer of the stock National Bank v. Case, 99 U. S. 628." Where the shares of stock in a banking corporation have been hypothecated, and placed in the hands of a transferee, he will be subject to all the liability of ordinary owners ; for the reason the property is in his name and the legal ownership appears to be in him.*® *6 Wheelock v. Koat et al., 77 111. 296. 82 Stockholders' Eights and Liabilities, [ch. vil Where the transfer appears to be absolute on the books of the bank, the transferee is liable for the debts of the corpora- tion, notwithstanding he may hold such stock by transfer or assignment as collateral security for a loan to the shareholder from whom he receives the transfer.*^ In the case of Union Savings Association v. Seligman, 92 Mo. 635, the court in discussing this question and where it was shown that the certificate of stock was held under agreement in writing, which agreement set out that the stock was held as collateral security, says: " The simple act of accepting that certificate of stock under an agreement in writing, which as also the entry of the stock in the stock book and other records of the company relating to the transaction showed that it was held by them only as col- lateral security, does not make them liable as stockholders, either to the corporation or its creditors. As long as they held the stock under that agreement, doing no other act, their lia- bility to creditors depended upon their legal relation to the company. If stockholders as between themselves and the cor- poration, they would be liable as such to creditors of the cor- poration, otherwise not."** § 66. An assignment absolute in form may be shdwn to be intended as security only. It is always competent to show that an assignment or con- veyance absolute in form is intended as a security only; and in an action by creditor of a banking corporation against a stock- holder to enforoe statutory liability, it is held: evidence is proper upon the part of defendant to show that an assignment of stock, absolute upon its face, was in fact given to him as collateral security, and was held by him for that purpose only.*® The general rule as laid dawn, however, may he stated as follows: A private agreement between the transferrer and the transferee that the former shall not he liable will not relieve him from, liability J'° 47 Hale V. Walker, 31 Iowa 344. N. Y. 3»; MeMahon v. Macy, 51 48 Burgess v. Seligman, 107 U. S. N. Y. 155 (§ 44, 180 U. S. 295). 20. • eo Bell's Appeal, 115 Pa. St. 88, 49 Deapard v. Walbridge, 15 N. Y. 2 Am. St. Rep. 532. 374; Sturtevant v. Sturtevant, 20 CH. VII.] Bankim^g. 83 § 67. Statute protecting pledgee. Where the statute protects the pledgee from liability, the stock if transferred on the stock books of the corporation must show that it is held as pledged property, otherwise the liability will rest upon the party shown to be the owner by the books of the corporation." § 68. Individual liability of shareholders of national banks. The individual liability of shareholders in a national bank arises under section 5151, Revised Statutes of the United States, which reads as follows : " The shareholders of every national banking association shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts and engagements 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 five millions of dollars of capital actually paid in and a surplus of twenty per centum on hand, both to be determined by the Comptroller of the Currency, shall be liable only to the amount invested in their shares; and such surplus of twenty per cen- tum shall be kept undiminished, and be in addition to the sur- plus provided for in this title; and if at any time there is a deficiency in such surplus of twenty per centum such association shall not pay any dividends to its shareholders until the de- ficiency is made good ; and in case of such deficiency the Comp- troller 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." A stockholder's liability arises and exists by force of the statute and is not contractual.'*^ A stockholder's liability is restricted to contracts and debts of the bank which have been contracted in the ordinary course of business.^^ " 190 tJ. S. 386, 140 Cal. 103, 36 Bank of Concord v. Hawkins 33 Colo. 65. U. S. App. 747. 52 First Nat. Bank of Concord v. 53 Richmond v. Irons, 121 U. S. Hawkins, 79 Fed. Rep. 51; Keyser 27; Schrader v. Mfg's. Nat Bank V. Hitz, 133 U. S. 138; First Nat. 133 U. S. 67. ' 84 Stockholdebs' Rights and Liabilities, [ch. vii. Where a bank has been placed into voluntary liquidation a stockholder cannot be held for the claims of new creditors."* § 69. Extent of liability. A stockholder in a national bank is liable in proportion to the whole amount of the deficit that his own stock bears to the whole amount of the capital stock at its par value.°^ A solvent shareholder cannot be required under the law to contribute more than his proportion in order to make good the deficiency of an insofvent shareholder."* § 70. Liable for interest. The law holds a shareholder liable for the interest on debts of the bank as well as for the principal."'' § 71. Representatives of deceased shareholder liable. The representatives of a deceased shareholder cannot defeat a liability, though he dies before the insolvency of the bank."' The fact that the title to the stock of a deceased stockholder is vested in an administrator will not relieve the estate from an assessment."* § 72. lUarried woman stockholder. In Vermont (and many other States) a married woman is competent to become a stockholder in a corporation, and to con- tract to charge her separate property with the payment of any liability which is implied from entering into that relation."" In North Carolina a Code, section 1826, provides that no woman during coverture shall be capable of making any con- tract to affect her real and personal estate without the written consent of her husband. But the court holds that a purchase of stock by a married woman is not a " contract " within the terms of the statute, and that the wife is liable upon an assess- BiSchrader v. Mfg's. Nat. Bank, os Wickham'v. Hull, 60 Fed. Eep. 133 U. S. 67. 326; Richmond v. Irons, 121 U. S. 55 United States v. Knox, 102 27. U. S. 422. B9 Davis v. Weed, 44 Conn. 569. 56 Schrader v. Mfg's. Nat. Bank, so Witters v. Sowles, 38 Fed. Eep. 133 U. S. 67. 700. 57 Casey v. Galli, 94 U. S. 673; Richmond v. Irons, 121 U. S. 27. CH. VII.] Banking. 85 ment, though purchased without the written consent of her husband. In discussing this question, the court says: " To hold that a State law, were there such a law, could except certain shares from the liability, would enable States to defeat the policy of the Federal government in establishing the national banking system. ' That the Congress has power to establish and legislate for such banks has not, since 1819, been an open question. McCuUoch v. Maryland, 4 Wheat. 316. If a purchase of stocks in a national bank. by a married woman without the written consent of her husband gives her the owner- ship of such stock, judgment must be given against the femme defendant. If she owned the stock at the failure of the bank, she is liable to the assessment ; if she did not, she is not liable. While the Federal government exclusively controls the ques- tion of the liabilities of stockholders in national banks, it is not doubted but that a State has power to say that for reasons seem- ing good to its Legislature, and not in conflict with organic law^ a particular class of persons shall not be permitted to own par- ticular classes of property. It may lawfully be provided that a guardian or other trustee may not invest in securities other than those specified by statute. Probably it might be held that a statute might constitutionally provide that purchases by guardians of, say, railroad stock, in the name of their trust, should bfe absolutely void. In such case it might be held that an attempted transfer of such stock so purchased passed no title; that the stock still remained, although duly assigned and transferred, on the corporation books, the property of the vendor; and that the guardian could recover the money paid from the vendor. It would, I think, require strong and plain words to induce courts to give such a construction to an act of the L^islature." *^ The law as previously stated is: A married woman may become a stockholder in a State bank where the law of the State in which the contract is made permits it and she will be subject to all the liabilities as such."^ A married woman in the District of Columbia may become a holder of stock in a national banking association, and assume «i Robinson v. Turrentine, 59 Fed. 82 Bundy v. Cook, 128 U. S. 185, Eep. 554; Keyser v. Hitz, 133 U. S. 438. 86 Stockholdees' Eights and Liabilities, [ch. vii. all the liabilities of such a shareholder, although the considera- tion may have proceeded wholly from the husband. The coverture of a married woman who is a shareholder in a national bank does not prevent the receiver of the bank from recovering judgment against her for the amount of an assess- ment levied upon the shareholders equally and ratably under the statutes."^ Where one knowingly permits his name to be entered upon the stock books of a bank as the owner, he cannot be permitted as against creditors or a receiver of the bank to show that he was not the owner of the stock, and it is held that he is liable for assessments thereon though he held the stock in fact as trustee for the bank itself."* This is in direct contravention of the law as laid down in the case of McMahon v. Macy, 51 N. Y. 155. Where a stockholder sold stock several months before the insolvency of the bank, but the transfer was not made on the books until the date of the bank's failure, held, that the stock- holder incurred the statutory liability."^ But where the stockholder has delivered his certificate of stock with a power of attorney to an officer of the bank, which power of attorney directed him to immediately make the trans- fer on the books, the owner of the stock will not be held respon- sible for the failure of such officer to actually make the transfer."" Where stock has been placed upon the stock book in the name of a person with the knowledge of such fact, and he fails to repudiate the transfer to himself, or deny the ownership, he- is held liable as the owner of such stock." Where the by-laws of a bank require that the transfer of the stock shall be registered, where a certificate is issued to a sub- sequent purchaser in lieu of a certificate of a prior owner, such person will be held liable as a stockholder."" osKeyser v. Hitz, 133 U. S. 138; 68 Whitney v. Butler, 118 U. S. Bundy v. Gocke, 128 U. S. 185. 655; Cox. v. Elmendorf, 97 Tenn. 64 Lewis V. Switz, 74 Fed. Rep. 518; Hayes v. Shoemacker, 39 Fed. 381. Kep. 319. 65 Richmond v. Irons, 121 U. S. st Finn v. Brown, 142 U. S. 56. 27. 68 Laing v. Burley, 101 111. 591. CH. VII.] Banking. 87 § 73. Executors, administrators, guardians, or trustees not per- sonally liable. Section 5152, Eevised Statutes of the United States, provides: That " persons holding stock as executors, administrators, guardians, or trustees, shall not be personally subject to any liabilities as stockholders; but the estates and funds in their hands shall be liable in like manner and to the same extent as the testator, intestate, ward or person interested in such trust funds would be, if living and competent to act and hold the stock in his own name." Where the widow of a deceased stockholder of an insolvent national bank, by authority of the will, undertook to settle the estate as executrix without judicial proceedings, but failed to transfer such stock to herself or other person, she cannot, on the ground that the estate is settled, escape liability as executrix for assessments on such stock to the extent of assets of the estate under her control.*' In the case of Lucas v. Coe, 86 Fed. Eep. 972, it is held that "a trustee, though not appointed by will or an order of the court, or judge, is not personally liable for assessment against stock of an insolvent national bank owned by the cestui que trust, but standing in his name, where he has been guilty of no fraud, concealment or negligence. " In fixing the liability for assessment against stock of an insolvent national bank, the effort of the court should be to ascertain who is the actual owner and to hold him, releasing the apparent owner if he has done nothing to deceive or mislead." Another question not determined by the court, but very strongly leading in that direction, is that proof may be pre- sented to show who is the real owner of the stock.'" Deceased stockholder's liability survives against the repre- sentatives.'^ § 74. Individual liability of a stockholder in national bank, how enforced. When the individual liability of the stockholder is to be enforced, the receiver, before beginning suit, must have au- 89 Baker v. Beach, 85 Fed. Eep. 27; Davis v. Mecca, 44 Conn. 569; 836. Wickham v. Hull, 60 Fed. Eep. 326; 70 Lucas V. Coe, 86 Fed. Eep. 972. Mortimer v. Potter, 213 111. 178. fiEichmond v. Irons, 121 U. S.. 88 Stockholdees' Rights and Liabilities, [ch, vii. thority from the Comptroller of the Currency. It is held that a letter from the Comptroller of the Currency directing the receiver to institute suit is sufficient evidence, if not objected to, that the Comptroller has decided to enforce the individual liability of the stockholder.'^ § 75. Creditor may sue stockholder of State bank corporations. A judgment creditor who has exhausted his legal remedies against a corporation in California may maintain an action against its stockholders to recover for the benefit of all the creditors who may desire to come in and be made party, and collect the amount due upon unpaid subscriptions for stock when the corporation neglects or refuses to collect the same.'* In Indiana the assignee of an insolvent bank cannot main- tain an action to enforce the double liability of shareholders provided by section 2933, Burns Revised Statutes, 1894 (§ 2684 Revised Statutes, 1881), such action being enforceable only by the creditors.'* § 76. Enforcement of Individnal liability of shareholders Tinder the National Banking Act. By an Act approved June 30, 1876, § 2, it is provided: " 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 individual 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 shareholders 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." § 77. When right of action accrues against stockholder in national bank. A right of action does not accrue against the stockholder holding stock in a national bank until the Comptroller of the TsBowden v. Johnson, 107 U. S. 'lEunner, Assignee, v. Dwiggina, 251. 147 Ind. 238; Richmond v. Irons, 'sBaines v. Bahcock, 95 Cal. 581. 121 U. S. 21, 20 Blatchf. 525. See CH. VII.] Banking. 89 Currency has determined that it is necessary to enforce the individual liahility. And the liability of the stockholder can be enforced only in favor of all creditors.'" The Statute of Limitations of a State cannot be pleaded as a bar to an action brought by a receiver of a failed national bank against a stockholder. Shareholders of national banks who have complied so far as steps required to be done on their part are concerned with the ' provision of the Act of July 12, 1882, 22 Stat. 162, p. 90, in regard to withdrawing from a national banking association, two-thirds of the shareholders whereof have asked for a renewal of the charter, cease to be members of the association even if, through no fault of their own, the final action is not taken, and such shareholders are not liable for assessments subsequently made by the Comptroller of the Currency under section 5151, Eev. Stat. U. S.'' Individual liability of shareholder in State banJc. The liability of a shareholder in a bank created and organized under a State law is fixed entirely by the statute laws of the State and the stockholder as previously stated, who is the actual owner of shares, is liable only for such debts as the constitution and the statute expressly enumerate, and this liability may exist even after a transfer by a shareholder of his stock." But it has been held in Meakley v. McClarty, (Ky.) 125 S. W. 265, that where a transfer has been made by the owner and the stock is delivered to oflScers of the bank to be entered upon the trans- fer journal, and such officer fails to make such entry or transfer, the act nevertheless will act as a transfer and extinguish the liability as stockholder or transferror. A devisee of a stockholder cannot be held liable beyond the value of the stock devised." After administration upon the stock and a decree passing title to devisee and a transfer of same on books of bank, the Farmers' Bank of Wickliffe v. Scott, tt Northwestern Trust Co. v. Brad- 144 Ky. 575. bury, (Minn.) 127 N. W. 386. 'B Gatch V. Fitch, 34 Fed. Rep. ts Richards v. Gill, 138 App. Div 566. 75, 122 N. Y. Supp. 620. WApsey V. Kimball, 221 U. S. 514 90 Stockholdees' Eights and Liabilities, [ch. vii. rule attaches. As previously stated the statute fixes the lia- hility. In a few States the suit may be against the stockholder only (Kipp v. Miller, (Colo.) 108 P. 164), and the statute may extend power to a receiver to bring suit.'° " Nichols V. Tauntin Safe Deposit & Trust Co., 203 Mass., 551. CHAPTER VIII. BANE OPFICEBS AND AGENTS. § 78. Directors — general discussion of duties and responsibili- ties. The corporate powers, business and property of all corpora- tions formed must be exercised, conducted and controlled by a board of directors. The office of director is one of the most important connected with a banking corporation. Directors have the general control and government of all its affairs. They are the lawful repre- sentatives holding by law the management and direction of all acts affecting the welfare and prosperity of the corpora- tion. The life of the corporation and its business cannot exist or be conducted without a board of directors. They are delegated with certain powers and duties by law which cannot be transferred or conferred upon agents. A director cannot delegate a responsibility which the statute imposes upon him to specially and personally perform.' But for the purpose of carrying into execution the usefulness and management of its details in business many of the powers conferred upon the corporation bank may be delegated to agents created by the board of directors. And while this is true, and although they may not be required to perform all the transactions which daily occur, they are bound to know all that is done beyond the merest matter of daily routine. They are the officers delegated by law with the power to restrain, rule, govern, direct, check, curb, overpower and counteract any and all things affecting the corporation. They cannot pass by-laws, or resolutions, relieving themselves of responsibility, or liability, which the law imposes upon them. Being in control of the powers, business and property, all acts, however performed, by agents of their creation may become their acts. Agents may exceed their authority or violate the 1 64 Miac. 303, 118 N. Y. 758, 128 S. W. 503. [91] 92 Bank Officees and Agents. [ch. viii. same in such a manner that the directors and the corporation may be excused; but the general principle of law is, that the acts of the agents are the acts of the principal. The office of a director is one of the most important con- nected with a banking corporation; but the duties, as a rule, are looked upon as unimportant, and in many cases the neglect of the directors in the performance of their duties brings dis- aster to the bank. The failure of directors to perform their duty in the super- vision and management of banks has been the direct cause for the arrest, trial and imprisonment of officers for offenses com- mitted in their official capacity, which could have been obviated had the directors asserted their power and fiilly performed such duty. The duty of a director begins with his election and con- tinues for one year, or until his successor is duly elected and qualified. The faithful execution and performance of all the obligations and requirements of law are so frequently neg- lected, that to occupy the position of director is one which the occupant himself regards as merely figurative. But such is not the case. The officers of a bank cannot divest the directors of any power imposed upon them by law. They cannot sell any of the prop- erty or real estate of the bank unless duly authorized to do so by resolution of the board of directors. And the instrument of conveyance is not sufficient to pass the title to the property, unless it sets out the fact that it was ordered to be executed by resolution, duly passed by the board of directors. It has been held that directors have no authority, directly or indirectly, to use any of the funds, or property of the bank, for purposes other than those properly belonging to the legiti- mate business of banking. They can make no gifts of the corporate property, unless duly authorized by all the stock- holders. No appropriation in any manner of the funds or property of the bank can be made by them, unless it is clearly beneficial and for the material well-being of the bank. They are the guardians of the stockholder, and in reference to the property of the bank are the trustees. If they accept the trust, it is implied that they will use their best efforts to advance and protect the interest of the stockholders. The position being CH. VIII.] Banking, 93 a trust, they are enjoined by law not to use the same in any manner to the injury and detriment of the stockholders or the bank. They cannot, by resolution, order the sale of real estate or other property at a consideration below its value and buy the same. A director, acting in the position of trustee, cannot make a profit off of the stockholder, who is the cestui que trust. They are also liable for losses arising from the direction and mismanagement of the affairs of the bank. Where, however, losses occur which arise from unforeseen results or mistakes arising from strictly errors of discretion, they cannot be held responsible. Upon the question of notice it has been held that when a director is engaged in the business of banking (and being a director signifies an engagement), notice to him is notice to the bank. It is a well-established principle of law that if a director takes a part in, or acts for the bank in discounting a note which at the time is known to him to be tainted with fraud or illegality, the bank is affected with this information; and it is not necessary that he should represent the bank. If he is present at the time and is cognizant of such facts, it is held to be notice to the bank. A director, being a trustee of the property of a corporation, is held while acting as such, especially in savings banks, to a strict account. It becomes his duty to take part in all pro- ceedings held or acts done; while he is present at directors' meetings, he cannot close his eyes and remain passive while his co-directors are wasting by improvident investments the property and moneys of the bank. It is his duty not only actively to oppose measures passed by his associates which are unlawful, but also to invoke the law to restrain its continu- ance, and through the aid of the law seek to set aside such actions, and recover property and money which has been un- lawfully disposed of in such cases. The law imposes certain duties which are obligatory and from which a director cannot be excused. A failure to per- form duties which the laws impose makes the director who wilfully neglects such Autj, after being duly qualified in office, liable in civil damages to the person, or persons, injured by such gross neglect. A director cannot excuse himself from statutory duties, and 94 Bank Officers and Agents. [ch. vin. grossly ignore the law, which defines the obligation resting upon him. The directors are liable in failing to perform duties required and imposed by the statute, but it must be inferred that their acts were unintentional.^ Where the position is accepted and capital is entrusted to the care, management or investment under the direction of a board of directors, whose duties are defined, and they wholly, wilfully and negligently fail in the performance of their duties to such an extent as, through such negligence, results in loss, they become civilly liable. A director may not be held liable from the first day of his election if he has not been a director before.^ They may become criminally liable by a failure to observe and comply with mandatory laws enacted by the Legislature. A failure to make a report when required by the statute to be made within a certain time and at a fixed period, where, by such failure, the purpose in noncompliance is to defraud or with- hold information which is required to be made public, becomes a criminal act. It is also a misdemeanor for a director to make false entries in any book, report or statement of the bank, with the intent to deceive the officers of the law.* Where the directors have taken any portion of the assets of a bank, and in violation of law distributed the same as a divi- dend which the bank has not earned, and where they receive a portion in such distribution, they become civilly liable and their acts may be a misdemeanor. No part of the capital of a cor- poration can be withdrawn in such a manner. They cannot in any manner appropriate any portion of the property of the corporation for any purpoee other than that duly authorized by law. The responsibility resting upon a board of directors govern- ing a bank is more onerous than upon a board of directors that may preside over corporations which do not hold, in trust, money belonging to the general public ; consequently there is a greater degree of responsibility which the law imposes. This degree of 2 Bailey v. O'Neal, 72 Ark. 327. * See 61 Kan. 102, 115 Mich. s Rankin v. Cooper, 149 Fed. Rep. 305, 105 N. W. 742. 1010, 183 Mo. S52; Coddington t. Canady, 157 Ind. 243. OH. vin.] Banking. 95 responsibility is created in the very nature of the business of the corporation over which they preside. Their duties extend beyond the mere fulfilment of the manda- tory provisions of the law. They serve more in the capacity of a trustee, and are bound by the principals of law governing that office. They are an advisory board, and are clothed with power of direction as to all the affairs and workings of the bank. They are also guardians of the stockholders and the depositors. It becomes their duty to make examinations into the manage- ment of the banc's affairs. They are bound to maintain a supervision of the bank's business (Gibbon v. Anderson, 80 Fed. Eep. 345, 19 Utah 289) ; also to employ such agents as are qualified to conduct a business of such peculiar responsi- bilities. They have the selection of the president of the bank, the cashier and other clerks who perform the clerical work, and when selected they become in law the agents of the board of directors ; and their acts, if performed within the scope of their instructions, authority and duties, are the acts of the board which have been simply delegated. The question of liability of the principal for the acts of his agent is one largely resting upon the facts, but the general principle of law, as is well known and defined, is that the prin- cipal is liable for the acts of his agent. A violation of authority by an agent, especially where the party dealing with the agent has knowledge, or has reason to believe, that the agent is acting beyond his authority, will relieve the principal of liability ; but if an agent of a banking corporation has been permitted, with the knowledge of the board of directors, to perform certain acts not delegated to him or authorized, which are unlawful, and they have been sanctioned by the directors as between the bank and the party dealing with it, with knowledge, the agent is excused; and the bank is held responsible. The directors are, in such cases, personally responsible. The loss does not fall on the bank." It will be seen that the position of a director in a banking corporation is one of great importance and responsibility. The board should also understand the liability of the bank to 6 McKinnon v. Morse, 177 Fed. Rep. 576. 96 Bank Officbes and Agents. [ch. vm. its depositors and creditors as well as the character of depositors and borrowers. The reputation of a bank is made up not only by the character and standing of the officers in charge, but as well from the char- acter of its customers. The directors should know that the class of business to be encouraged by the bank is of a character that will establish confidence. It is also a part of their duty to become familiar with the habits of its employees; and? if they discover that they are speculating, living beyond their means, or have such habits as, if known to the general public, would bring discredit and possibly ruin upon the bank with the public, it is their duty to dispense with such services at once. It is frequently said as an excuse for retaining an officer whose habits, if publicly known, would bring disgrace upon the bank, that " his ability was unequaled, the bank could not afford to dispense with him. No one in the community could be found to take his place." Such excuses should never prevent a director from doing his duty at once by offering a resolution to vacate the position, and fill it by a person whose character for honesty, truth and morality has at least never been questioned. Such are some of the unwritten duties or implied laws imposed upon directors of a banking corporation. The directors of a bank, being its trustees and acting in the relationship of a guardian of its depositors, must never be swerved from doing their whole duty. If they are in posses- sion of facts that an agent or employee engaged by them to conduct the affairs of the bank is an incompetent person, and being incompetent makes losses which they might expect by reason of this incompetency, they have not fully performed their duty. They have been guilty of negligence, which may be of such a degree as to be defined as gross negligence. The responsibility of conducting a banking corporation is too frequently given over to the manager, president or cashier of the bank. It does not always abide with the president to make the bank a success or prevent its ruin and collapse. If the directors do their duty, success may be easily attained or failure prevented. Directors should have compensation for their services and may vote themselves reasonable pay for services performed, if CH. VIII.] Banking. 97 authorized by the stockholders, and charge the same to expense ; and should be held responsible for the failure of the bank, where it is shown that by reasonable diligence and attention to their duties it could have been by their actions prevented. § 79. Directors of national banks. The sections of the Revised Statutes of the United States relating to the election, qualification and other duties, powers and limitations of directors in a national bank are as follows: Election of directors. Section 5145. " The affairs of each association shall be man- aged by not less than five directors, who shall be elected by the shareholders at a meeting to be held at any time before the association 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." Qualifications of directors. Section 5146. " Every director must, during his whole term of service, be a citizen of the United States, and at least three- fourths of the directors must have resided in the State, territory or district in which the association is located for at least one year immediately preceding their election, and must be resi- dents therein during their continuance in office. Every director must own in his own right at least ten shares of the capital stock of the association of which he is a director, unless the capital of the bank shall not exceed twenty-five thousand dollars, in which case he must own in his own right at least five shares of such capital stock. Any director who ceases to be the owner of the required' number of shares of the stock, or who becomes in any other manner disqualified, shall thereby vacate his place." Oath required from directors. Section 5147. " Each director, when appointed or elected, shall take oath that he will, so far as the duty devolves on him, 7 98 Bank Officees and Agents. [ch, viii. diligently and honestly administer the affairs of such associa- tion, and -will not knowingly violate nor 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, nor in any way pledged, as security for any loan or debt. Such oath subscribed to by the director making it, and certified by the oflBcer before whom it is taken, shall be immediately transmitted to the Comptroller of the Currency, and shall be filed and preserved in his office." Vacancies, how filled. Section 5148. "Any vacancy in the board shall be filled by appointment by the remaining directors, and any director so appointed shall hold his place until the next election." Proceedings where no election is held. If, from any cause, an election of directors is not made at the time appointed, the association shall not for that cause be dis- 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 news- paper 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, shareholders representing two-thirds of the shares may do so. The president of the hoard must he a director. Section 5150. " One of the directors, to be chosen by the board, shall be the president of the board." A married woman, where the laws of the State permit her to assume the obligations of a stockholder, may also be a director. All the directors may be women. The Comptroller of the Currency requires that a director must qualify by taking the oath prescribed by the department, which oath when taken must be filed with the Comptroller. OH. vm.] Banking. 99 § 80. Sirectors of State bank. The statute of the State wherein the bank is incorporated provides for the qualifications and number of directors re- quired, setting forth the mode of their election, and fixing the term of office; and also prescribes their duties, powers and limitations; and for what causes they may be removed from office. A statute defining the duties, powers and limitations of the directors is construed as a mandatory statute and not directory. The directors derive all their powers from the statute and the charter of the corporation; and have no powers other than the expressed provision of law, and the charter, together with such implied and incidental powers as are necessary to carry out the purposes of the corporation. " The best settled conclusion of judicial opinion in this country is that they are general agents " of the corporation.' § 81. Directors' meetings. After the directors have qualified, where the laws require such qualification, they are then authorized to carry into effect their duties and powers and the purposes of the corporation. Their meetings, if the time and place are provided for in the charter, must be held at such time and place. If the charter does not provide for the time and place of meeting, the statute of the State generally designates the manner of calling meetings. In the absence of a statute, charter or by-law providing the time and place of holding directors' meetings, they may be held without the limits of such State if desired.' § 82. Place of meeting and notice. When by-laws have been adopted by the bank providing how, when and where meetings shall be held, a meeting held by the directors, at a time and place in contravention of the by-laws, is illegal. 6 61 Pa. St. 202, 48 Vt. 266, 86 21 S. W. 488; Bassett v. Mining Co., 111. 220; 24 Conn. 591. 15 Nev. 283; Hanna v. Co., 23 Ohio 'Thompson v. Co., 58 Miss. 423; St. 622, 27 C. C. A. 274. Lead Co. v. Eeinhard, 114 Mo. 218, 100 Bank Officees anb Agents. [ch. viii. Notice. In the absence of a by-law a personal notice of the meeting should be given to each member of the board. Personal notice may be waived.* Where the statute or by-laws prescribe the mode or manner of notice, a failure to give such notice renders the meeting illegal. It has been held, however, in the case of American Ex. ITat. Bank v. First ISTat. Bank, 82 Fed. Kep. 961, that if the directors of the bank have long pursued an established custom of holding meetings and transacting business at the bank, during business hours, whenever a sufficient number were present, the custom would carry with it a standing notice to each director; and enable those present to proceed in the absence of a controlling by-law or statute. The notice is not waived except in the absence of a controlling by-law or the statute. § 83. Number necessary to constitute a quorum. A majority of the board of directors in all the States, possibly with the exception of the State of Oregon, is necessary to con- stitute a quorum for the transaction of business. The general rule is, that a majority of the quorum has the power to bind the corporation.* Where the statute fixes the number necessary to transact business, any action taken by a less number will be illegal. § 84. Directors of national banks must act as a unit. The court in the case of National Bank v. Drake, 35 Kans. 564, in the discussion of the question as to the power conferred upon the directors acting for a national bank, says : " The only powers conferred by statute upon the directors of a national bank are vested in them as a board, and when acting as a unit, and therefore the majority of the individual members of the board acting separately and singly is not the assent of the bank, and is not binding upon it." 8 Bank v. McCarthy, 55 Ark. 473, » Ten Eyck v. Pontiac, etc., Co., 18 S. W. 759; B. B. R. Co. v. Buck, 74 Mich. 226, 41 N. W. 905; Hoyt 68 Me. 81; Library v. Association, v. Thompaon, Executor, 19 N. Y. 173 Pa. St. 30. 207, 18 Ind. 327. CH. viiij Banking. § 85. Board electing officers of bank. The board of directors is generally empowered by law, and it becomes its duty to elect the officers of the corporation, and employ clerks and agents of the corporation, fixing their salaries or compensation. If the statute or charter does not authorize the board of directors to choose or elect the officers, the power lies and is vested in the stockholders.^" § 86. Vacancies in the board. Where the statute does not expressly provide otherwise, the law implies that a director may hold his office after the term for which he was elected, and until the election and qualification of his successor. Where vacancies occur in the board, they must be filled as provided for by the statute. In the absence of a charter or statutory provision or a by-law, especially giving the power to the board to fill a vacancy, it can be filled only by the stock- holders. A director may resign at any time.^^ § 87. Duties which cannot be delegated. A duty imposed upon the board of directors by the statute to be personally performed cannot be delegated to a committee or agent of the bank." They may delegate certain powers by the enactment of a by-law or a resolution, and confer thereby executive authority to a committee or an agent ;' but where the statute or charter of the corporation specifically defines an act or duty to be per- formed by the directors, they have no power to set aside the lawj and appoint agents to do the very things which the law requires them personally to perform. The general and well-established rule is, that all corporate contracts are to be made by the directors. The directors of a corporation are its chosen representatives, and as such they constitute the corporation to all purposes of 10 Beardsley v. Johnson, 121 N. Y. " See 141 U. S. 132. 224, 24 N. E. 380; Ee A. A. G. Iron 12 Lyons v. Jerome, 26 Wend. (N. Co., 63 N. J. Law 168-357, 41 Atl. Y.) 484. 931. 102 Bank Officees and Agents. [ch. viii. dealing with others. What they do within the scope of the objects and purposes of the corporation, the corporation does.^* § 88. Cannot delegate authority to make discounta. They cannot delegate to an oflBcer of the bank the authority to make discounts generally ; that is, give unlimited power to an officer to loan the funds of the bank to any person or persons who might make application therefor. It may be stated that this inalienable duty, which is vested in the board of directors, and which neither by a by-law nor resolu- tion can be generally delegated to another, is a duty which is more frequently neglected by the board of directors than any other duty imposed by law upon them personally to perform. The board of directors themselves are frequently ignorant of the law, and their duty in this respect ; and just as frequently, the manager or cashier of a bank assumes that the right to make loans and discounts for the bank is an implied authority, and the power vests in him as a matter of custom or right. Following the general rule, that all corporation contracts are to be made by the board of directors, every borrower of the bank's funds who enters into e written promise to pay the bank a sum of money loaned by it to him, has a contract which must be authorized or ratified by the board of directors. Upon examination of the principle, and reasons for the rule, it is found to be a safe and sensible law. The directors are held by a majority of the courts, at the present time, to be the trustees of the funds and property of the banking corporation; and such funds cannot be loaned nor invested without authority emanating from the board of trus- tees, who are held responsible for them. The loans and discounts may be authorized, and the execu- tive part of the business performed by the cashier, president, or other agent of the bank; but the officer has no inherent au- thority, in the absence of a resolution or direction coming from the board of directors, to make loans to any person or persons. In New York in the case of Bank Commissioner v. Bank of Buffalo, 6 Paige Chancery (N. Y.) 497, it is held, that where the board of directors authorized their cashier or president, or any other officer of the bank, to make loans and discounts IS Maynard v. Fireman's Fund & Ins. Co., 34 Cal. 48. CH. VIII.J Banking, 103 in his discretion, without having the same passed upon form- ally at a meeting of the board, the corporation is liable for a violation of its charter. The directors may, by a single resolution, authorize the cashier to make loans to a certain person, firm or corporation, up to a certain amount, and in this manner delegate their au- thority ; but beyond this it has been held, that a general resolu- tion passed by the board of directors, authorizing the cashier to discount notes and make loans generally, to those making ap- plication, and desiring to borrow, is not within their power or authority. If loans have been made by an officer of the bank without authority obtained from the board of directors, they may after- ward be ratified by the board, and such ratification legalizes the act. Discounting notes is the principal business of a bank; its resources almost entirely consists of its bills receivable. The deposits of the bank are placed with the bank by the depositors upon an implied theory, that when invested or loaned, they are to be loaned and invested by the trustees or directors with rea- sonable care and diligence. And the making of the investments for the bank is a duty and an inalienable function belonging to the board of directors. § 89. Cannot delegate statutory duties. The directors cannot delegate any statutory duties imposed upon them by the law to perform. Where they are required to make a report to an officer of the State at periods named by the statutes, as to the' condition of the affairs of the bank, and are required to prepare a statement of its condition, they cannot delegate the authority and substitute a statement made by the officers of the bank; and where such a statement is re- quired of them, they must make an examination into the affairs and conditions of the bank, and upon the examination base their statement and report. Where they are required by law to make a report of the condition and affairs of the bank to an officer of the State, or for publication, and they fail to inform themselves of the con- dition of the bank, and make a report which is false, they are held personally liable to the stockholders and creditors of the bank. 104 Bank Officees and Agents, [ch. viii. § 90. Powers and limitations. Power to sell property of hank. The power to sell the property, both real and personal, of the corporation, when not expressly vested in the stockholders by the statute, is one which the directors alone can carry into effect. This is done by a resolution duly passed at a meeting called for that purpose, or at a regular meeting when a sale of the property of the corporation may be authorized. The resolution of authority shall describe the property to be sold, and the consideration to be received by the bank. It should also direct that the president and secretary of the corpora- tion, in the name of the corporation, be authorized to execute the conveyance. The conveyance should show when executed, that the sale was duly authorized by the board of directors, and that the instrument of conveyance was directed to be made, by the officers, for the corporation. The power to sell and convey property of the bank corporation is vested in the board of directors only.^* » § 91. Limitation of power. No power. They have no power to increase or diminish the capital stock of the bank in any way except as expressly authorized by the law. The shareholders alone have the power to order an increase of the capital stock. ^° § 92. Assessment of shares — National banks. The directors cannot order an assessment upon the shares of stock in a national banking corporation, for impairment of capital. The assessment must be made by the stockholders.^^* § 93. Directors cannot give away property of bank. The directors have no power to give away any portion of the bank's property, but the stockholders by a unanimous action may do so.^® i*Gashwiler v. Willis, 33 Cal. 11. le Frankfort Bank v. Johnson, 24 IB Eidmand v. Boman, 58 111. 444. Me. 490. 15a Rev. St. U. S., § 5205; Hulitt V. Bell, 85 Fed. Rep. 98. CH. VIII.J Banking. 105 § 94. Cannot settle with cashier for his deficits. They have no power or authority to make a settlement with the cashier whose accounts exhibit a deficit in the funds; but the fraudulent conduct of the director of the bank would not annul nor make it void unless the cashier was also guilty of fraud." § 95. Assuming debts of others. They have no power to assume the debt of a third person, except in case of urgent necessity. In the discussion of this question the court in the case of Stark Bank v. U. S. Pottery Co., 34 Ver. 144, says : " The directors had no such power unless under the circum- stances there was an urgent necessity of doing it in order to save the credit of the company, and enable them to go along with their business. If there was such necessity making it for the interest of the company to enter into such arrange- ment, it was within the scope of their powers as directors, other- wise not.^* § 96. Cannot take advantage of position for profit. The directors are precluded, by the acceptance of the trust, from making any use of their power, or of the corporate prop- erty for their own advantage.^' The stockholders confer the trust power upon the board of directors, and' this power must not be used with a purpose to injure or destroy that interest.^" Courts of equity will not permit directors, in the exercise of their duty as such, to make a profit for themselves to the ex- clusion of the other stockholders.^^ It is a well-settled principle of law that where a director of a bank loaned the money of the bank, and took from the borrower a note running to the bank for the principal sum loaned, at a rate of interest therein stipulated, but at the same time, and as a part of the same transaction, made an agree- 1' Frankfort Bank v. Johnson, 24 20 Wright v. Oriville Mining Co., Me. 490. 40 Cal. 20. 18 Seeberger v. McCormiek, 178 21 Oakland Bank of Savings v 111. 404. Wilcox, 60 Oal. 126, 93 Cal. 29. 19 Wickersham v. Crittenden, 93 Cal. 17. 106 Bank Officees and Agents. [ch, viii. ment with the borrower to permit him to participate in the profits of a purchase and sale of certain lands, it is held that the director will not be permitted to retain for himself the profits thus contracted for, but that such profits must be sur- rendered to the bank, to be participated in by all the stock- holders. No stockholder has the right to use, in any manner, any portion of the funds of the bank to the advantage of him- self and as against the rights of the other stockholders. The directors of a corporation are its chosen representatives, and constitute the corporation for all purposes of dealing with others. All acts done within the scope, purpose and object of the corporation, by the directors, the corporation does, and are binding. The corporation is bound by the acts of directors in whatever they may do, if done in good faith and without fraud, upon their rights. The directors of a bank are prohibited from making an illegal loan, or becoming an accommodation endorser for the bank. But where such transactions appear to be regular, and within the authority of the bank, third parties acting with the bank, without notice of a wilful or wrongful purpose, the bank cannot avoid its liability. But where they borrow money, supposedly for the use of the bank but with the intention to use it for a different pur- pose, the lender being aware of their intent and purpose, the bank will be relieved from such indebtedness. § 97. Discretionary power. It is held that the directors of a national bank have dis- cretionary power, and it is left within their sound judgment and discretion in the matter of requiring an officer of the bank to give bond. The same opinion holds that certain special circumstances may arise making them personally liable if they fail to require bonds.^^ § 98. Safe mle. The only safe rule is to require bonds from all the officers and clerks (at least those entrusted with the moneys) of a bank, 22 Robinson v. Hall, 63 Fed. Rep. 222. CH. VIII. J Banking. 107 holding responsible positions. It would seem to be a part of the duty imposed upon the directors, and not a discretionary power to be used at their election. It has been too frequently discovered after a banl^ has suffered through negligent or crim- inal acts of its officers, that the opinion or discretion of the directors was worthless. § 99. Releasing debt. The board of directors may release a debt owing to the bank, if by doing so it can be shown that it is clearly an advantage to the corporation. Touching the same question, it has been held, that where an officer or an employee is in default to the bank, the directors may settle with him upon such terms as will best subserve the interests of the bank.^* § 100. Beleasing subscriber to capital stock. The board of directors have no power to release a subscriber to the capital stock of the corpqration; but if they can make any arrangement with him in settlement without loss to the bank or its creditors, it would seem that they would have the power to do so. The Supreme Court of the State of Illinois, in the case of MclSTulta V. Corn Belt Bank, 164 111. 427, in discussing this question, says : " The effect of the resolution and what was done under it was to release the original subscribers to the capital stock from the obligation to pay their subscription. * * * It has been settled by very numerous decisions that the directors of a com- pany are incompetent to release an original subscriber to its capital stock, or to make any arrangement with him by which the company, its creditors, or the State, shall lose any of the benefits of his subscription. Every such arrangement is re- garded in equity, not merely as ultra vires, but as unjust to the other stockholders, and to the creditors of the company." =3 Jones V. Johnson, 86 Ky. 530; Frankfort Bank v. Johnson, 24 Me. 490. 108 Bah^k Officees and Agents. £ch. viii. § 101. Securing preferred creditor. Where a creditor of a bank has established his debt as a preferred claim, the board of directors may dispose of property to satisfy or secure such a creditor.^* § 102. Removing employees. The board of directors have the power to remove an officer or employee of the bank, for sufficient cause, at any time. But if such employee is removed from any State bank upon a con- tract of employment for a fixed period of time, without a good and sufficient cause, such employee may hold the corporation liable. In the case of Gabriel v. Bank of Suisun, 145 Cal. 266, the Supreme Court says : " Where, after the expiration of an agreement respecting wages and term of service, the parties continue the relation of master and servant, they are presumed to have renewed the agreement for the same wages and term. The Bank of Suisun employed a bookkeeper, for the year 1898, at an annual salary of $1,200, payable monthly, and he continued in that employ- ment during the first two months of 1899. He was then dis- charged and he sued the bank for $1,000, the balance of his salary for the year. There was a judgment of the Superior Court for the amount against the bank, and the Supreme Court has finally decided the case against the bank, saying : ' The pre- sumption arises that the employment was renewed for the same wages and term as for the previous term.' " Under the provisions of the National Banking Act, the board of directors may remove the officers named in said act, without cause, at any time. A provision of said act reads as follows: Fifth. " To elect or appoint directors, and by its board of directors to -appoint a president, vice-president, cashier and other 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." The court, in the case of Taylor v. Hutton, 43 Barb. 195, in discussing this provision of the law, says : " I think this construction of the act, as having reference to 24 Stevens v. Hill, 29 Me. 133; Parker v. Carolina Savings Bank, 53 S. C. 583. CH. vin.J Banking. 109 the directors to do these things, and not to the stockholders, is quite plain. " It does not seem to be at all necessary that any by-laws should be adopted, before a president may be chosen or re- moved and another appointed in his place. This power is expressly given to the board, irrespective of any by-laws, both by the articles of association and by the Act of Congress. Be- sides, 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." The board of directors derive this discretionary power to remove an oflBcer elected by them only when such power is con- ferred upon them by law. § 103. Courts declare that directors are trustees. The leading authorities in discussing the nature of the office of director in a banking corporation hold that their position is in the nature of a trust, and they are held to a strict account. The nature of the business over which they preside clearly establishes this relationship. They owe a duty to the public, to the depositors, and to the stockholders, and they are not permitted by law to acquire any interest adverse to the stock- holders of the bank. As previously stated, they cannot make a profit out of the business and withhold a division from the other stockholders. The rule of law relating to the duties of a trustee is well established that he cannot in any. manner make a profit from property held by him in trust. The law will not permit a trustee to prove " an honest intent." The Supreme Court of the State of California, in the case of the Farmers and Merchants' National Bank of Los Angeles V. John Gr. Downey, 53 Cal. 466, where it was shown that one of the directors of a bank loaned the moneys of the bank, and took from the borrowers a note running to the bank for the principal sum loaned, but at the same time and as a part of the same transaction, made an agreement with the borrowers, that they should permit him to participate with them in the profits of a purchase and sale of certain lands, held that the director could not be permitted to retain for himself the profits 110 Bank Officers and Agents. [ch. viii. thus contracted for, but must surrender them to the bank to be participated in by all the stockholders. The court, in discussing their relationship to the bank, says : " He was its trustee." The court again says : " The directors are the trustees and are managing partners, and the stockholders are the cestuis que trust, and have a joint interest in all the property and effects of the corporation, and no injury that the stockholders may sustain by a fraudulent breach of trust can, upon the general principles of a court of equity, be suffered to pass -without a remedy." § 104. Misappropriating bank funds. A director of a bank cannot use or appropriate any of the funds of the bank, to retain or pay an attorney to defend him in a suit brought by a stockholder against him.^^ § 105. Bights of directors. May iorrow money from bank. The law does not, unless by special provision, refuse to a director the privilege of borrowing money from the bank over which he presides. The statutes of many States have, however, enacted inhibitive provisions upon this subject in so far as sav- ings banks are concerned, and will not permit a director, either directly or indirectly, to borrow from his own bank. The Na- tional Banking Law permits a director to borrow as any other customer, but specifically provides that no person shall be per- mitted to borrow to exceed one-tenth of its capital actually paid in. Where there is no prohibition to borrow, his application must be treated as the application of a stranger, and he is excluded from using his influence to secure the loan with the other mem- bers of the board; and from voting upon the application. It is not necessary that he should withdraw his presence from the room, but he must take no part or action relating thereto. When the law prohibits a loan to a director, and one is made in violation of the charter or statute, the bank may collect the same. In the case of Britain v. Oakland Bank of Savings, 134 Gal. 282, the court, in discussing this question, says : 25 Percy v. Millandon, 3 La. 568. CH. VIII.] Banking. Ill "At the time of the transaction between Bowman and the bank he was a director in the bank. The Civil Code declares that no director or officer of any savings and loan corporation must directly or indirectly, for himself or as the partner or agent of others, borrow any of the deposits or other funds of such corporation. And declares that the office of any director or officer, who acts in contravention of this provision of the law, shall immediately thereupon become vacant. * * * The obvious purpose of this section of the code invoked and relied upon was to protect savings banks and their depositors. To hold, therefore, that if the deposits or funds of such a bank should be borrowed by any of its officers, directly or indirectly, no action could be maintained by the bank to recover the money, would often work a great injustice and wrong. The bank, there- fore, could have sued Bowman to recover back the money loaned." If a loan or discount is knowingly made for the benefit of a director of a bank or of a firm with which he is connected in interest or as a copartner, it is held to be a loan or discount to such director within the intent and meaning of the statute limiting the amount of loans and discounts to directors of banks.^" Some of the States have enacted laws limiting the amount which may be loaned by a bank to any one person, firm or cor- poration ; and many of the States have enacted laws prohibiting officers and directors of savings banks from directly or indirectly borrowing any of the funds of such bank. The statute of California is silent upon the rights of directors to borrow from commercial banks over which they preside. A director has the right to examine the books of the corpora- tion at any time, and cannot be excluded by a by-law which may deny this right to him. The right is a personal right, belonging to his office; and a by-law which may attempt to fix a time for the examination of the books of the corporation in so far as it affects the rights of a director is unconstitutional and invalid. If the right is denied him by the other directors, or officers of the bank, to examine the books, he may apply to the court for a writ of mandamus.^^ 28 Bank Commissioners v. Bank of 2t People v. Throop, 12 Wend. Buffalo, 6 Paige, Chy. (N. Y.) 497. (N. Y.) 183. 112 Bank Officers and Agents. [ch. viii, § 106. Notice to the board. The general rule as to what constitutes notice to the board may be stated as follows : The board as such is charged with notice of a matter when assembled at a meeting, and a member or other person discloses or mentions a matter. The fact that they, as a board, do not at such meeting discuss the matter presented to them, makes no difference. The matter has been sufficiently presented when mentioned at a meeting and they are bound by such a notice. If they have received notice of a matter which should be immediately acted upon, and they fail to act, and a loss occurs to the bank through such failure, they are liable. The rule above stated is fully supported by the court in the case of Bank of Pittsburgh v. Whitehead, Sproul & Co., 10 Watts (Pa.) 397, where the court, in discussing the question, says: " Publication of dissolution in a newspaper, taken by the officers, and paid for by the bank, may not be constructive notice to a bank which had, as in this instance, previously dealt with the firm ; but when the fact of dissolution, gleaned from that, or any other source, is stated before the board by a member of it, and made a subject of conversation during the very transaction, it is impossible to doubt that the bank is to be affected, because knowledge of the fact material to be known is a part of the res gestae. There cannot be a question, therefore, that knowledge imparted to the board, as was done here, by a director at a regular meeting, is notice to the bank." § 107. When the law imputes knowledge. It is held by the Court of Appeals of the State of Missouri, that where directors have had, for many years, complete man- agement of a bank, they are imputed by law to know of its con- dition and are therefore charged with knowledge of its insolvency. The Supreme Court of the United States, in the case of Martin v. Webb, 110 TJ. S. 7, says : " Directors cannot, in justice to those who deal with the bank, shut their eyes to what is going on around them. It is their duty to use ordinary diligence in ascertaining the condition of CH. viiLJ Banking. 113 its business and to exercise reasonable control and supervision of its officers. They have something more to do than, from time to time, to elect the officers of the bank, and to make declarations of dividends. That which they ought, by proper diligence, to have known as to general course of business in the bank, they may be presumed to have known in any contest between the cor- poration and those who are justified by the circumstances in dealing with its officers upon the basis of that course of busi- ness." See 100 Eed. Rep. 705. Bank put on inquiry, see 86 Fed. Eep. 541. § 108. Notice to a director. The general rule is that the bank has notice if the director receives or acquires the notice in his official capacity, or if act- ing as agent or attorney in charge of a matter for the bank. His knowledge is, then, knowledge to the bank. The Supreme Court of the State of Massachusetts holds that if a director of a bank, who acts for a bank, in discounting a note, has knowledge that the note was procured by fraud, the bank is affected with his knowledge. The courts says : " But if the director who has such knowledge acts for the bank in discounting the note, his act is the act of the bank and the bank is affected with his knowledge. A bank, or other cor- poration, can act only through its officers, or other agents. As in other cases of agency, notice to the agent, in the course of a transaction in which he is acting for his principal, of facts affect- ing the nature and character of the transaction, is constructive notice to the principal." "' Where, however, a note is discounted by a bank, the mere fact that one of the directors knew the fraud, or illegality, will not estop the bank from recovering.^' It is held in the case of National Bank v. !N"orton, 1 Hill (N. Y.) 572, that notice of dissolution, published in a news- paper, and thus accidentally reaching a bank director, is not equivalent to actual notice to the bank, especially where, by the provisions of the charter, a director has not power to act for the 28 Suit V. Woodhall, 113 Mass. ham, 24 Pick. (N. Y.) 270; Waah- 391; Bank of U. S. v. Davis, 2 Hill ington Bank v. Lewis, 22 Pick. 451. (N. Y.) 24. 2» Commercial Bank v. Cunning- 8 114 Bank Officees and Agents. [ch. viii. institution, save in conjunction with others. In discussing the question of notice, the court says : " He happened to know the fact of dissolution, as a director or other corporator may do, without perhaps being aware that the bank could be prejudiced by it. Not having any intima- tion that it was material, it is too much, even if the point were in the case, to insist on a presumption that he ever communi- cated the fact to the board. Not having acquired his knowl- edge as director, there is no room for presumption either on the ground of duty or interest. In The Fulton Bank v. Bene- dict, 1 Hall (N. Y.) 480, 497, 557, the judge told the jury that notice to a director who appeared to have had charge of the business to which it related was not notice to the bank, unless communicated to the board, or to the officers of the bank. Oakley, J., said the charge was too narrow for the case ; adding, ' I think that under some circumstances, notice to a director ought to charge the corporation, as where the director acts in any par- ticular business as the special agent of the bank, as in the case of Rathbone. He was one of a committee to inquire as to this very notice,' etc. The Washington Bank v. Lewis, 22 Pick. 24, 31, takes the same view of a director's agency. In the Hart- ford Bank v. Hart, 3 Day 491, 5, the court said, ' The directors have certain powers resulting from their act of incorporation, and are, for certain purposes, agents, and their acts, when in strict relation to their agency, are binding on the corporation.' See also Stewart v. Huntington Bank, 11 Serg. & Eawle 267, 269, and Hayward v. The Pilgrim Society, 21 Pick. 270. These cases show, what is indeed quite plain, that the acts of a director or other officer of a corporation, unless official, or in respect to his agency, are no more operative as against the institution than the acts of any ordinary corporator; and these no more so than the acts of a stranger. " In the case at bar, the learned judge held that proof of publishing the notice, and actual knowlejige in the director whose duty, as one of the board, it was to pass on the discount and renewal of notes, and who was therefore to be regarded as the agent of the plaintiffs, was sufficient proof of their knowledge. In this we think he erred. The board were the agents for the purposes mentioned, and they should acquire this sort of knowl- CH. VIII. J Banking. 115 edge as such, or at least the firm should show notice brought home to some other agent specially authorized by the bank, or by the course of their business, to receive it." In the case of Fairfield Savings Bank v. Chase, 72 Me. 226, it is held that a notice to a bank director, or trustee, or knowl- edge obtained by him, while not engaged either officially, or as an agent or attorney in the business of the bank, is inoperative as a notice to the bank. The rule, as laid down in this case, is stated as follows : "A single trustee or director has no power to act for the insti- tution that creates his office, except in conjunction with others. It is the board of directors only that can act. If the board of directors or trustees makes a director or any person its officer or agent, to act for it, then such officer or agent has the same power to act, within the authority delegated to him, that the board itself has. His authority is, in such case, the authority of the board. Notice to such officer or agent, or attorney, who is at the time acting for the corporation in the matter in ques- tion, and within the range of his authority or supervision, is notice to the corporation." In California, in the case of Balfour v. Fresno Canal Co., 123 Cal. 395, the rule is laid down as follows : "A corporation must be presumed to have full notice of all the facts which are known to its president affecting its interest. It is his duty, as the head of the corporation, to report the same to the trustees, and it is usually conclusively presumed that he has done so." The court says : " The president of a corporation is the proper person to whom notice which is to affect a corporation is to be given. The corporation has no ears, eyes, nor understand- ing, save through its agents. The president is considered the head of the corporation, and it is his duty to report to the trus- tees information affecting the interest of the corporation. And the presumption is that he does so. Usually this is a conclusive presumption." The question is again discussed by the court in California, in the case of McDonald v. Eandall, 139 Cal. 246. The case was tried on an appeal from the Superior Court of Humboldt county. The lower court found the following facts : 116 Bank Officbbs and Agents. [ch. viii. " That the said Eandall Banking Company purchased said note and mortgage in good faith and in the ordinary course of business, and for value before its maturity and in ignorance of the fact that as to Margaret H. McDonald it was given without consideration, or for a debt, which was barred by the Statute of Limitation." The Supreme Court in its opinion says : " This finding, if sustained by the evidence, is determinative of the case against the appellants. It is contended, however, that this finding must be held to be unwarranted, because it appears, and the court found, that Eandall was the president of the bank and knew of the consideration of the note. But when he procured the bank to take the note as part payment of his indebtedness, he was acting individually and at arm's length to the bank, and his knowledge was not the knowledge of the bank. The same may be said of the former secretary, Murray, who was absent when the bank acted in the matter of accepting the note and mortgage, and who obtained his knowl- edge while acting for Eandall individually ; and also of Eoberts, who was elected secretary on the day the bank acted, and who presented the note and mortgage to the bank for and as agent of Eandall. The note and mortgage were accepted at a meet- ing of the board of directors of the bank, at which were present Hill, the vice-president, and four of the other directors, Ean- dall not being present. Neither Hill nor any other of the directors knew that the consideration of the note was an out- lawed indebtedness. The fact that some of them knew, or should be held to have known, that shortly before the making of the note and mortgage the property covered by the mortgage had been conveyed to the plaintiff by her husband — it formerly having been community property — and that the conveyance had been recorded, is of no significance. The validity of the transaction here involved was in no way dependent upon the time at which she acquired title to the mortgaged premises. That a corporation is not chargeable with the knowledge of one of its officers or agents who is acting on his own behalf, and not for the corporation, is beyond question the law. Sufficient authorities are cited to the point in Bank v. Burgwyn, 110 IT. C. 267. It is there said, among other things : ' In such trans- CH. VIII.] Banking. 117 actions the attitude of the agent is one of hostility to the princi- pal. He is dealing at arm's length, and it would be absurd to suppose that he would communicate to the principal any facts ■within his private knowledge affecting the subject of his deal- ing, unless it would be his duty to do so, if he were wholly unconnected with the principal. As was said by the court in Wickersham v. Chicago Zinc Co., 18 Kan. 481, ' Neither the acts nor knowledge of an officer of a corporation will bind it in a matter in which the officer acts for himself and deals with the corporation as if he had no official relations with it ; ' or, as was said in Barnes v. Trenton Gas Light Co., 27 'N. J. Eq. 33, ' His interest is opposed to that of the corporation, and the presump- tion is, not that he will communicate his knowledge of any secret infirmity of the title to the corporation, but that he will conceal it' " We are of the opinion that the finding above discussed can- not here be disturbed; and therefore it is unnecessary to con- sider any other point argued by respondents." In Illinois, in the case of First iN'at. Bank of Monmouth v. Dunbar, 118 111. 625, it is held that where a cashier purchases bonds for a customer of the bank, and receives the bond on special deposit, he acts as agent of the bank. And if, to hide an embezzlement, he takes such bonds from the special deposit, and places them among the assets of the bank, his knowledge is the knowledge of the bank, and the bank cannot acquire a legal title to the bonds without the knowledge or consent of the true owner.*" The rule is again stated, as follows: " itfotiee to an agent of a bank, or other corporation, entrusted to the management of its business, or of a particular branch of its business, is notice to the corporation, in transactions con- ducted by such agent acting for the corporation within the scope of his authority, whether the knowledge of such agent was acquired in the course of the particular dealing or on some prior occasion." '^ '0 See Home Savings Bank v. Smith v. Board et al. Co., 38 Conn. Peoria Trotting Society, 206 111. 9. 208. SI Cragie v. Hadley, 99 N. Y. 131 ; 118 Bank Officers and Agents. [ch. viii. In Mississippi, notice to a bank clerk of matters not under his charge is not notice to the bank.*'' In Massachusetts it is held that the cashier's knowledge of fraud in a note is notice to the bank.^' It is held in the case of Seneca Co. Bank v. Neass, 5 Denio 329, that knowledge obtained by the cashier outside of his duties is not notice to the bank. In the case of National Security Bank v. Cushman, 121 Mass. 490, the court holds that when a director of a bank, who acts for the bank in discounting a note, has knowledge that the note was procured by fraud, the bank is affected with the knowledge. A bank is bound to take notice of a power of attorney given by a third person to its president.** § 109. Director must have actual knowle^e. In the case of Mann v. Sec. E^at. Bank of Springfield, 34 Kan. 746, it is held that: "A corporation should be held to have constructive notice of only such facts as have been brought to the actual notice or attention of some one of its officers or agents, or of such facts only as have been constructively brought to the notice or atten- tion of some one of its officers or agents by the actual notice of such other facts as would naturally put the officer or agent upon inquiry ; and therefore, held, where none of the officers or agents of a bank had any actual notice of any infirmity of a note pur- chased by the bank, but one of the directors, who was also a member of the discount committee of the bank, was the president and general manager of another corporation, one of whose agents, not' the president and general manager, had actual notice of an infirmity of the note, such as would require the agent's own corporation to take constructive notice of such infirmity, the bank may nevertheless be considered as an innocent pur- chaser of the note without notice of any infirmity affecting it, notwithstanding the fact that the other corporation had con- structive notice through its agent of such infirmity." A bank is not chargeable with the knowledge which a director 32 Goodloe V. Godley, 21 Miss. 233. s* Mechanics' Bank v. Schaumberg, 33 Fall, etc., Bank v. Sturtevant, 38 Mo. 228. 66 Mass. 372. CH. vni.] Banking. 119 has acquired, in his individual capacity, as to paper offered for discount, and which he does not disclose, and where, as a director, he does hot discount the paper himself, as an officer or agent of the bank.°° § 110. When director is chargeable with knowledge as against himself. " Knowledge of the corporate officer or agent will not be imputed to the corporation where the fact is one which the officer or agent is interested in concealing from it, except in cases where a contrary rule is necessary to save the rights of innocent third persons." *° § 111. Birectors' liability. The well known and established rule of law is, that the directors must manage the business of the bank, as directed by the law and the bank's charter. And if they fail to perform their duty in good faith, they will be held liable for the losses to the stockholders and creditors.*' They are liable where they fail to use ordinary care in the inspection of the books of the bank.*^ The directors may commit the ministerial work of the bank to officers duly authorized to perform the same, but this does not absolve them from the duty of reasonable supervision or shield them from liability for the wrongdoing of such official, if through gross inattention the wrongdoing has escaped their notice.'* Persons who permit the use of their names as trustees of voluntary savings banks are held to a strict rule of responsibility and where they fail to use proper care and caution, they are liable to depositors in case of loss.*" They are not excused from liability because of want of knowl- edge of wrongdoing, if that ignorance is the result of gross negligence. 85 178 Fed. Rep. 53, 49 Mich. 384. »8 Forbes v. Mohr, 69 Kan. 342. 86 Cyclopedia of Law & Procedure, ss Wheeler v. Aiken Co. Loan & vol. 10, p. 1064. Sav. Bank, 75 Fed. Rep. 781, 131 37 Solomon v. Bates, 118 N. C. Fed. Kep. 223, 19 Utah 289; Lown- 311, 24 N. E. 478; Bank of St. des v. City Nat. Bank, 22 L. E. A. Mary's v. St. John's, 25 Ala. 566, (N. S.) 408. 122 N. C. 365, 157 Ind. 243, 62 N. 4o Holmes v. McDonald, 226 111. Y. Equity 396. 169. 120 Bank Opficees and Agents. [ch. vin. Personal liability. Personal liability arises and can be enforced against directors by a receiver of gross negligence resulting in waste and loss of the bank's capital, although there are no debts and the share- holders are the persons only to whom the damages recovered could be distributed.*^ Using the language of the court in the case of Coddington V. Canady : " It is not denied that the directors may be liable in action by a receiver where there are debts owing by the bank, and the assets in the hands of the receiver are insufficient to pay them. But it is also clear that an action may be maintained against the directors for gross negligence resulting in the waste and loss of the capital where there are no debts, and where the shareholders are the only persons to whom the damages recovered could be distributed." Offenses against banking laws. Under a statute which provides that " any officer, agent or director of a bank or banking association of this State (Ga.) who shall violate the provisions of sections 1934, 1948 and 1949 of the Civil Code or either of them, shall be punished by im- prisonment in the penitentiary for not less than one year nor more than twenty years." The statute providing that no officer should lend to himself funds of the bank in excess of 25 per cent, of the capital stock thereof, etc., held, there was no viola- tion where the officers did borrow in excess of this sum, first because the laws as construed under which the bank was incor- porated authorized the bank as one of issue, and the present- ment in the indictment failed to allege such bank to be a bank of issue, and a demurrer pointing out such defect, was sustained.*^ Liable for false reports. A director signing a report which is false, knowing it to be so at the time, is liable to any person deceived thereby.*^ *i Coddington v. Canaday, 157 Jan. 7, 1909; 63 S. E. 301. But see Ind. 255, 257. 162 Fed. Rep. 844. *2See Thornton v. State (No. 43 Yates v. Jones Nat. Bank, 206 1386), Court of Appeals of Georgia, U. S. 158; Taylor v. Thompson, 124 CH. viii.J Banking. 121 In Smalley v. McGraw, 148 Mich. 395, the court lays down the recognized rule in that State to be : " That one who pur- chases property in the belief of, and reliance upon, false state- ments regarding it, may sue for and recover the damages occa- sioned thereby whether the representations are made in good or bad faith," and further discussing the question in the case at issue the court says : " Directors of a bank are bound to exer- cise that degree of care in the business affairs of the bank tiiat ordinarily prudent and careful men would exercise in affairs of like importance," citing Briggs v. Spaulding, 141 U. S. 132; Commercial Bank of Bay City v. Chatfield, 121 Mich. 641, 80 Fed. Eep. 385, and the court then concludes with the following principle : " The liability of the directors in a case like this is independent of the National Banking Act, and is derived from the principles of the common law." ** The Michigan rule requires the directors to exert reasonable diligence and makes it their duty to inspect and examine into the affairs and condition of the bank and, failing to do so, they make themselves liable. The obedience of such a law is a duty imposed upon the director and is not an unreasonable obligation. Their duty extends to the protection of every person dealing with the bank and is not limited to representing the stockholders of the bank and protecting them alone. Actions against directors. Any violation of the National Banking Act may be redressed by an action brought by the Comptroller of the Currency.*' A receiver of a national bank may bring an action.** If the receiver refuses to bring the action, the creditor or shareholder may.*' App. Div. (N. Y.) 63; Stuart v. 694. But see Wells t. Graves, 41 Bank of Staplehurst, 57 Neb. 569. Fed. Rep. 459. ** Prescott V. Haughey, 65 Fed. *« Boyd v. Schneider, 124 Fed. E«p. 653; BrinkerhofF v. Bostwick, Eep. 239, 45 Fed. Rep. 13. 88 N. Y. 52, 105 N. W. 285. *' Zinin v. Baxter, 65 Ohio St. 341, «6 Allen T. Luke, 141 Fed. Eep. 88 N. Y. 52. 122 Bank Officees and Agents. [ch. viii. . The depositors may, under the statute of several of the States, also bring an action against the directors to recover for losses caused by the negligent performance of their duties.*' Whether the suit brought by the depositors is one in law or equity, there seems to be a conflict of authorities.*' Criminally liable, when? The directors of a bank who keep open for the receipt of deposits one of its branches, knowing that the bank is insolvent, may be convicted under a statute providing for the punishment of an agent of a bank who receives deposits, knowing the same to be insolvent, although he is not present in the town where the branch is located and has no part in the manual receipt of the deposit. ^^ They must use ordinary care, and ordinary care is something more than officiating as " figure-heads." (Briggs v. Spaulding, 141 U. S. 132 ; Thomas v. Taylor, 224 TT. S. 73.) See 82 Fed. Kep. 181, where it is held director not liable where bank seems to be in flourishing condition and altogether in the hands of cashier. (41 Mich. 169, 120 Ky. 776.) § 112. Degree of care. The degree of care required of a director, the Supreme Court of the United States says : " Depends upon the subject to which it is to be applied. Each case is to be determined in view of all the circumstances." Where the statute expressly provides that a dividend shall only be declared from the profits or surplus funds of the bank, and the directors, in ignorance of the law, declared a dividend which impaired the capital stock, they are liable to the stock- holders. Ignorance of an express provision of law does not excuse a director. But where a dividend is declared, from the assets which prove to be only bad judgment, and not bad faith, they are not liable. "Boyd V. Schneider, 131 Fed. 149 Fed. Rep. 1010; Yates v. Jones, Eep. 223. 206 TJ. S. 158. *9 See Stephens v. Overatolz, 43 oo state v. Mitchell, 95 Miss. 130, Fed. Eep. 771, 44 Fed. Eep. 13, 41 26 L. R. A.(N. S.) 1072. Fed. Eep. 459; Rankin v. Cooper, OH. VIII.J • Banking. 123 In the ease of Witters, receiver, etc. v. Sowles, 31 Fed. Kep. 1, the court says : " Bank directors cannot be held personally liable for money paid out for dividends to a greater amount than net profits, after deducting losses and bad debts (Eev. St. U. S. 5204), because these were debts, bad in fact but supposed to be good when the dividends were declared and paid. " Bad judgment on the part of directors as to the condition of the assets, without bad faith, does not make them individually liable." § 113. Acting in good faith. They will not be held liable when acting in good faith and under a mistake of law. If they act in ignorance, and where their acts are directed and authorized by counsel employed by them, good faith may excuse."^ It is their duty to know the express provisions of the statute which define their power, and for a violation of all such acts however committed by them, they will be held liable. § 114. Directors declaring a dividend. The general rule as to the liability of the directors in declar- ing a dividend is laid down by Cooke on Corporations. He says : "Where the directors declare a dividend in good faith and without negligence, they are not to be held liable, merely because the dividend turns out to have impaired the capital stock." But where the directors place fictitious values on the assets in order to declare a dividend, such directors- are liable.^^ A director cannot be held liable for a dividend declared at a meeting when absent or of which he had no notice, and he may be relieved from liability if present, by declaring and voting against the declaration of such illegal dividend. An illegal dividend declared out of the capital stock, in viola- tion of law, and paid by the directors, is a misdemeanor.^* The statutory liability of directors in an Oregon corporation "lO'Leary v. Ablia, 68 Ark. 259. BsVereontere V. Golden State L. 52Cockrill V. Abelea, 86 Fed. Eep. Co., 116 Cal. 410. 505. 124 Bank Officees and Agents. [ch. viii. for declaring dividends, out of the capital stock, is a penal lia- bility." § 115. Excuses of directors. Ill health is held to be no excuse for a failure to perform a duty, especially when at the time of election as a director, he as such director accepted the office; but where a director of a national bank is seriously ill, it is within the power of the other directors to give him leave of absence for a term of one year instead of requiring him to resign. And if frauds are com- mitted during his absence and without his knowledge, whereby the bank suffers loss, he is not responsible for them.°° The fact that a director is a nonresident of the State does not excuse him for false statements sent out by the bank. This question, with others, is discussed at length in the case of Houston V. Thornton et al., 29 S. E. 82Y, and in view of the importance of this subject we cite from the opinion of the court the foUovdng portion : " The issues tendered by the defendants presented the ques- tion whether there had been fraud and misrepresentation on the part of the defendants. Those settled by the court at the close of the plaintiff's evidence presented the inquiry whether there had been negligence and wrongful acts by which the plaintiff had been damaged. The latter were proper upon the pleadings. The plaintiff complained that the board of directors of the People's National Bank, among whom were the defend- ants, in February, 1890, and at sundry other times before and after, caused to be published reports of the status of the bank, which showed it to be amply solvent, whereby the plaintiff was induced, in April, 1890, to purchase eleven shares of the capital stock of said bank, whereas at the times aforesaid the bank was hopelessly insolvent, and had been so for at least five years ; that the said directors either knew this to be the true condition of the bank, or with proper care could have known it. The complaint is full, and contains a detailed statement of the acts of negli- gence alleged against the defendant. The bank was declared 54 Patterson v. Wade, 15 Fed. 132; German Sav. Bank v. Wulfe- Eep. 770. kuhler, 19 Kan. 60. 05 Briggs V. Spalding, 142 U. S. CH. VIII.] Banking. 125 insolvent on the 31st of December, 1890, and the receiver took charge in February, 1891. The plaintiff not only lost the whole sum ($1,100) invested in the purchase of said eleven shares of the stock of the bank, but under the liability clause of the Na- tional Banking Act has been assessed 50 per cent, on her stock, and a judgment has been obtained against her by the receiver for $550 on that account in the Federal court. The published statement of the bank, January 2, 1890, showed that the capital stock was $125,000, the deposits $87,300, the surplus $32,000, and undivided profits $6,795. The former cashier of the bank testified, without contradiction, that this statement was made by the order of the directors ; that it was untrue ; that there was no surplus, no undivided profits, and that the bank did not even have its capital stock'; that, if the directors had examined the papers, they would have known the insolvency of the bank ; that at that time the president (Moore) owed the bank between $100,- 000 and $120,000; that one of the directors (Thornton) owed the bank about $40,000, another director (McNiell) owed it $20,000, and Starr, another director, owed it between $6,000 and $7,000 — thus between $166,000 and $187,000 being due the bank from these officials, of whom MclSTeill was then known to be insolvent and failed in November, 1890, and Thornton in the spring of 1891 ; that the bank never had a finance committee ; that in November, 1889, Moore owed the bank on his unsecured paper $100,000, of which $30,000 had been due three to ten years. It is needless to go through the evidence, which shows the most culpable negligence on the part of the board of directors, for this is sufficiently shown by the above-recited facts if noth- ing further had been proved. At the meeting of the directors on January 14, 1890, a dividend of 4 per cent, out of the profits was declared, all the directors being present, and the defendants voting for the declaration of the same; though this dividend, like all the other semi-annual dividends for the five years pre- vious, was in fact paid out of the deposits, and not out of the earnings." The defendants asked the court to charge : 1. " That upon the facts in evidence the plaintiff cannot recover, because of any negligence of the defendants, they being directors of a national bank in the hands of a receiver, it becomes 126 Bank Officees and Agents. [ch. viii. an asset of the bank, for whicL the receiver alone caa sue, and the jury will therefore answer the second issue ' 'No.' " This prayer was properly refused. The wrong complained of is not one toward the company, not any negligence in the duty to guard its interests and to comply with the requirements of the National Banking Act, but a wrong to the plaintiff in permitting a false and fraudulent statement of the condition of the bank to be published, whereby the plaintiff, trusting in the truth thereof, and the high character of the defendants, was misled into parting with $1,100 for the purchase of eleven shares of the capital stock of the company, which at that time was worse than worthless. This is not a cause of action that, under any circumstances, could have passed to the receiver. 3 Thomp. Corp., §§ 4132, 4144, 4304. If this action had been brought by a depositor " the settled doctrine of the law is that if, in the pretended performance of duties imposed upon them by law, the directors of a bank used their official station to make false repre- sentations which are believed and acted upon by third parties, they are liable to respond for the injury done to the one de- frauded thereby, and that the liability provided for in the National Banking Act cannot be deemed to preclude the right to maintain a common-law action for deceit for such false and fraudulent representation." Prescott v. Haughey, 65 Fed. Kep. 653, 659, which distinguishes Bailey v. Mosher, 11 C. C. A. 304, 63 Fed. Eep. 488 ; Delano v. Case, 121 111. 247, 12 IST. E. Eep. 676, 3 Thomp. Corp., § 4304. The allegations and proof as to declaring dividends out of deposits, and allowing an official to borrow more than one-tenth of the capital stock, are not the basis of this action. If they were, then the receiver should have brought the action; but they are merely evidential to show the negligence whereby the plaintiff, not the bank, was injured, and to support her action for the injury to herself. 2. " That the plaintiff cannot recover unless the jury shall believe from the evidence that the defendants participated in the fraudulent statement made by other officers of the bank; and unless the plaintiff has shown such participation, the jury will answer the second issue, ' No.' " Kefused, and the defend- ants excepted. There was no error in refusing this prayer. The ground of recovery is not the participation of the defendants in CH, VIII.] Banxinq. 127 fraud, but that, by their gross negligence, they permitted the statements to be put forth upon their authority showing the bank to be amply solvent, with large surplus, and the declaration of 4 per cent, semi-annual dividends out of profits, when there had been no profits, as to all of which the defendants should have been informed. It was in evidence, and not denied, that all the directors were present when the dividend of January, 1890, was declared, and Starr alone voted " No," as to whom a nonsuit was entered. As was said in Solomon v. Bates, 118 N. C. 311, 24 S. E, 478, and reaffirmed in same case, 118 IST. C. 321, 24 S. E. 746, and Caldwell v. Bates, 118 N. C. 323, 24 S. E. 481: " If false and fraudulent statements of the condition of the cor- poration are put forth under the authority of the directors, it is not necessary that they should know them to be such. It is their duty to know them to be tru^e, and they are liable for dam- ages sustained by any one dealing with the corporation, relying upon the truth of such reports." 1 Morse, Banks, §§ 132, 137 ; Kinkier v. Junica, 84 Tex. 116, 19 S. W. 359. So salutary and just a rule is supported by ample authority elsewhere ; and, if it were not, it is correct in itself, and a just protection, to which the public are entitled. It is not necessary, as the defendants asked the court to instruct the jury, that these defendants " par- ticipated in the fraudulent statements; " but, if the statements were given to the public by the authority of the board of direct- ors (which is not controverted), and were in fact false and fraudulent, and the plaintiff relying thereon (as she had a right to do), was induced to buy stock, or had made deposits whereby she suffered injury, all the directors are liable whether they " participated " in the fraud or not. (Amison v. Smith, 41 Ch. Div. 348; 3 Thomp. Corp., § 4108.) § 116. Compensation of directors. The general rule is that directors of banks are acting as trustees and as such are supposed to serve without compensa- tion. A governing statute may allow them to regulate their own compensation; but in the absence of a statute or by-law their services are supposed to be gratuitous. 128 Bank Officees and Agents. [ch. viii. They cannot recover compensation for doing what they should have done as directors/* They cannot vote themselves salaries. Such a resolution is void, as being a promise without a consideration."^ They cannot vote themselves a compensation for services already performed."' They may recover for services, however, which are rendered outside of their duty."' It is claimed they may recover for services rendered prior to organization.*" Such services may be recovered for if authorized by a majority tff the shareholders.'^ 58 Brown v. Valley View Mining 69 Bassett v. Fairchild, 132 Cal. Co., 127 Cal. 630, 66 Pac. Eep. 637; Fitzgerald, etc.. Coast Co. v. 424; Brown v. Republican Moun- Fitzgerald, 137 IT. S. 98. tain Silver Mines, 17 Colo. 421, 30 oo Mobile Branch Bank v. CoUina, Pae. Eep. 66; Brown v. Beck, 83 7 Ala. 95; Allerton First Nat. Bank Ga. 471, 10 S. E. 121. v. Hoch, 89 Pa. St. 324. BT Gardner v. Butler, 36 N. J. Eq. «i Tift v. Quaker City Nat. Bank, 702. 141 Pa. St. 550, 79 N. W. 605, 77 58 Blue V. Canfield Nat. Bank, 145 Minn. 119. Ind. 518, 43 N. E. 655. CHAPTER IX. THE PRESIDENT. § 117. General c^ualifications. The executive business of a bank is conducted by its presi- dent, vice-president, cashier and secretary. They having been duly elected or appointed by the board of directors, as the law may require, assume the management and conduct its affairs. The president of a bank should be educated. He must have obtained at least a liberal education. He should be able to speak and write the English language fluently and correctly. It may not be considered necessary in the successful man- agement of a bank, that the president or managing officer should have graduated from a university, but it cannot be said of a president of a bank who has matriculated that his attainments and distinction as a scholar are a detriment to him in his pro- fession as a banker. The deeper his education and training are laid in youth, the broader his comprehension and ability to pre- side in his profession. He should be able to speak well that he may be correctly understood, and write well, so that the meaning of his words cannot be misconstrued. To be concise and accurate in his speech and correspondence forms a very important part in the management of a large bank. There are numerous in- stances where the correspondence has been loosely prepared, possibly having a double meaning, which has brought litigation and loss to the bank. It must be borne in mind that the state- ments either verbally made or reduced to writing by an officer of the bank, while in charge of its business, are binding upon it ; and the stockholders may be held liable. An officer being in charge of the affairs of a bank, and directing its business, is sufficient presumption of authority to bind the bank; and the representations of the president of a bank made in transacting P [129] 130 The Pbesident. [ch. ix. its business are admissible in evidence against the bank, but statements made by him away from the bank, and in which the bank has no interest, are not admissible in evidence against the bank. The duties of a president, as his office indicates, are executive. He should preside at all meetings of the board of directors ; and upon such occasions it frequently becomes necessary to formulate an important document, to draft a preamble or resolution. These meetings are usually, if not always, secret sessions ; and the business is therefore secret and the president of a bank should at least have such an education as would qualify him for this work. It is an erroneous opinion which is held by some that a preparation or education for the profession in the management of a bank is unnecessary. To say that a banker " should have some preparation for his work " is not sufficient qualification, or the standard, which is required in the race for prominence and success. " Some preparation " does not qualify the mechanic in the construction and building of the perfect engine, which hauls the great passenger trains that are filled with precious lives. A banker is like the educated and trained )pilot and, when a financial storm sweeps over the country, he should be at the helm; his training and preparation for his work will then prove a storehouse of wealth, and his bank, otherwise properly guarded, cannot be foundered. To be the trustee of the stockholder and the guardian of the people's money is a responsible position, and ignorance should not be crovimed as manager to execute such trusts. He is bound to exercise such care and prudence in his office as men of com- mon prudence ordinarily show in their own affairs. Davenport V. Prentiee, 110 N. Y. S. 1056. It is no uncommon thing to learn after a bank has failed that it was caused by the officers using and speculating with the bank's funds, or permitting the use of the same by others in violation of law. I believe the records will justify the statement that 50 per OH. IX.] Banking. 131 cent, of all bank failures are brought about in this way. A bank officer should not be a speculator, or become directly or indirectly a partner in speculations in connection with his depositors. If he is engaged in outside interests there is serious danger that he will neglect the interests of the bank. A banker who is a speculator, without any previous thought of wrong or injury to the bank, becomes himself a heavy borrower of the bank's funds. There being no restriction or limitation as to the amount he may borrow, he finds it a very easy matter to give his note and take the money. He has all confidence in his ability to replace the accommodation at any moment; but he seldom calls upon himself to pay back money so easily bor- rowed, and reverses set in. His judgment proved bad, and finally a general depression sweeps over the country and the bank fails. What is the cause ? The practice is dangerous. It should be stopped. There is precedent after precedent where bank officers have granted to themselves unlimited credit in their- own bank, or to others with whom they were interested in business, which caused ruin to depositors and stockholders alike. It is said that no law is a barrier to those who intend to disobey it, but there is no criminal who does not contemplate the force and effect of the law, and if a strict limitation pro- hibiting such accommodations were upon the statute books, it would be the means of saving many banks from ruin and future insolvency. It is argued by some that such strict limi- tations should not be enforced against the bank officers by legislative action, but should be placed in the hands of the directors. That they are better qualified to determine the ability of the borrower to repay, than the law which would fix by arbitrary legislation a limit upon his credit. Upon this question there are various and interesting opinions, from our best financiers ; but many leading bankers who have given this subject unprejudiced consideration are almost unanimously in favor of restricting, or limiting, the amount an officer or other parties can borrow from his own bank. Several States have put themselves on record and have enacted such a law. The 132 The Peesident. [ch. ix. National Banking Law has never been construed upon this question to operate as a barrier to business. Neither has it had the effect to deter honest and intelligent men from serving as directors. The president of a bank should be qualified to preside over the bank, and he should not delegate his responsibility or au- thority to the cashier and reply, if disaster comes (as it may if he fails in the performance of his trust), " I could not pre- vent the crisis. The cashier failed to give me notice of the dangerous condition of matters until it was too late." It is his duty to know the condition of the bank, and when the storm is on he should be at the helm. To be the trustee of the people's money is a responsible position, but if accepted it should be faithfully executed, and criminal negligence, omis- sion of duties, and carelessness should not be excused. A successful bank will have at its head a man who is always at his post; one who will as faithfully guard the treasure of those confiding in him as he would his own. The management of banks is too frequently left in the hands of their cashiers, the president having been selected for his wealth or social standing. Every officer and employee engaged should be laborers, acquainted with all the details of their business, and interested in all matters pertaining to the pros- perity of the bank. A bank president should know his customers, the strength and weakness of those to whom money is loaned, or who are likely to ask for loans. The bank's prosperity depends largely on the sagacious lending of its resources, A successful bank president should make a practice of fre- quently examining into the condition of the bank's affairs, making a searching and thorough examination, taking off a balance, counting the cash, and generally making a careful in- spection of all the books. If this practice is maintained, employees will seldom, if they are so inclined, attempt mal- feasance. A bank that has for its president one that will faith- fully follow this practice, if otherwise judiciously managed, should never be compelled to go into involuntary liquidation. OH. IX.] Banking. 133 § 118. Qualifications necessary to hold office. The national banking laws specify the qualifications required of direct 3rs serving as such for said association, and section 5150 of said act requires that " one of the directors to be chosen by the board shall be the president of the board." In all of the States statutes are enacted designating certain oflScers that corporations must have, and providing that such officers shall be elected by the board of directors. In the absence of such statutes placing the povrer in the directors to elect officers, the current of authority is that the pov^er then lies in the stockholders. The statute of the State providing that an officer shall be selected from the stockholders is mandatory. § 119. The president's powers. The president having been duly elected to preside over the bank, derives his povs^ers from the law governing corporations and the bank's charter, the by-laws, and the authority vested in him by the board of directors. When chosen he becomes the presiding officer of the board and ex officio is president of the bank. His position, however, does not give him extraordi- nary powers or authority greater than any other director. As president of the board of directors it becomes his duty to preside at all meetings held by them, and as such presiding officer he is authorized to call the meeting to order, puts all motions presented for adoption; and is entitled to vote upon every question presented; and have his vote recorded in like manner as other directors. His position and election as presi- dent of the board does not make him the chief managing agent of the bank. This power may be conferred upon him, but is not established by his selection as president of the board of directors. The office of president of the board does not carry with it inherent power as the chief executive or managing agent of the bank. The charter may prescribe that the president of the board of directors shall be the chief executive and managing agent of the bank. In the absence of such power in the charter, the 134 The President. [ch. ix. by-laws of the bank when duly adopted may confer upon him enlarged powers, particularly designating and defining his duties and powers, and practically thereby making him the chief executive agent of the bank. In the absence of such a by-law the board of directors may, by proper resolution, enlarge his powers beyond those enumer- ated either in the charter or the by-laws ; but the board cannot delegate to the president a power vested by law in them which the law imposes upon them to execute and perform. His executive powers inherently are limited, but in the hold- ing of the office he is regarded as having charge of the affairs of the bank ; and the public generally concedes to him authority which, in fact, he does not possess. Independent of his inherent or ex officio powers, his acts must be authorized, acquiesced in, or subsequently ratified by the board of directors in order to bind the bank.^ Usage and custom may confer upon him certain power and authority, and he may bind the bank ; but where his acts are clearly beyond those authorized by usage and custom, and are such as to lead a customer of the bank to question them, the bank will not be held responsible. His powers, therefore, in the management of the bank should be delegated to him. He is an agent of the board of directors, and must perform the duties within the scope and authority of his agency. As previously stated, his inherent power is limited. In the absence of any order of the board of directors, the president of a banking corporation has the inherent power to employ counsel and manage the litigation of a bank.^ He has the power by virtue of his position to take charge of all the litigation in which the bank may be involved. He may engage and retain counsel, and enter into an agreement as to compensation. He may, without previously submitting the 1 Taylor v. Vossburg Mineral 2 Citizens' National Bank v. Berby, Springs Co., 128 La. 363; Com- 37 Pac. Rep. 131. Diercial Nat. B^nk v. First Nat. Bank, 97 Tex. 563. OH. IX.J Banking. 135 question to the board of directors, bring suits in the name of the bank; and also appear, answer and defend the bank when sued. An exception to this right may arise where the bank through an action of the board of directors have engaged an attorney to attend to all the litigation in which the bank may .become involved. In the case of the Pacific Bank v. Stone, 121 Cal. 202, the court says : " The president or acting president of an insol- vent bank has no authority by virtue of his office merely to retain special counsel in addition to the attorneys of the bank regularly employed to assist in litigation for the bank without the sanction or ratification of the board of directors. * * * " We can perceive no reason why a bank president should be clothed with ex officio powers greater than those of presi- dents of any other corporation. As director he derives his authority from the same source as president of other corpora- tions organized under the statutes, and as the presiding officer, his functions and powers in the management of the corporate business are no greater than any other director." (Wickersham v. Crittenden, 93 Cal. 17.) The general rule is that the presi- dent cannot act or contract for the corporation any more than any other director.^ Eeasoning from the case reported in 121 Cal. 202, the in- herent power vested in the office of president of the board of directors and ex officio president of the bank is co-ordinate only with that of any other director, and the single power, namely, that of employing counsel and representing the bank in all of its litigation, may be taken away from him by a resolu- tion of the board of directors, but in the absence of this act on the part of the board, or a provision in the by-laws of the bank, divesting him of his power as president of the bank, he has the authority to employ counsel and conduct the litigation of the bank; and it is immaterial whether the power of refer- ence is lodged in the president and directors, or in the stock- 3 175 U. S. 40, 152 U. S. 346, 146 U. S. 689, 6 Pet. 51, 156 Fed. Eep. 373, 55 Fed. Rep. 465. 136 The Peesidewt. [ch. ix. holders assembled in general meeting; for the entire corpora- tion is represented in court by its counsel, whose acts in con- ducting the suit are presumed to be authorized by the party.* The president of a national bank has power, by virtue of his office, to compromise or release a debt due the bank. As- sociate Justice Stevens, of the Court of Civil Appeals, in dis- cussing the inherent power of the president of a bank to com- promise a debt due the bank, says, that in the absence of usage or authority otherwise derived from the board of direct- ors, the powers of a bank president go little beyond those of any other individual director, and the doctrine laid down in Farmers' National Bank v. Templeton, 40 S. W. 412, is in substance that the president of a bank has power, by virtue of his office, to release or compromise a debt due the hank when usage and previous course of business has sanctioned such a power. It is also held in the case of Guernsey v. Black Diamond Coal Co., 99 Iowa 471, that the president of a bank has au- thority by virtue of his office to assign a judgment which has been obtained and owned by the bank. Where a clerk employed in a bank has absconded and taken funds of the bank, the president is authorized to offer a reward for information which may lead to the arrest or conviction.^ As is shown, his powers inherent in his office are limited; but, as stated, he may exercise power and bind the bank by usage, where the board of directors has full knowledge of such acts, and from time to time acquiesce and make no objection, his acts will be considered as authorized. It has been held that where the president has borrowed money and executed a note in the name of the bank, without authority from the board of directors, or resolution, to that *The Alexandria Canal Company 131; American Insurance Company V. Swann, 5 Howard 83; Citizens' v. Oakley, 9 Paige (N. Y.) 496. National Bank of Kingman v. b Bank v. Griffin, 168 111. 341, 48 Berry, 53 Kan. 696, 37 Pac. Eep. N. E. 154. OH. IX.J Bawkiitg. 137 effect, and they have the knowledge of transactions of this nature, and acquiesce in the same, the bank will be bound/ The president is clothed with implied power to indorse negotiable paper in the ordinary transactions arising in the bank's business/ In the case of Winton v. Little, 94 Pa, St. 64, it is held that where the president without authority released a lien of a judgment belonging to the bank, that the bank had a knowl- edge of the fact and acquiescing therein for a long period of time, was bound by his acts. The president, it would seem, has the authority to enter into an agreement with a person to receive money on, or in pay- ment of, a note at a place other than the place of payment, and to forward the money to the bank where the note is held and where payable.' This rule seems to be in conflict with the rule holding a cashier responsible for the money received or collected for the bank while absent and away from the bank. The president's acts may be those which appear to have been executed in an individual capacity, but in fact are the acts of the bank. In the case of Van Leuven v. First l^Tational Bank of Kings- ton, 54 N. Y. 671, it is held that where the president received government securities to exchange, and he gave a receipt as an individual, executing the same upon bank paper, his act was held to be the bank's act. The contracts of the president entered into with individuals, who at the time believed that he was acting in his official capacity, and authority as manager and president of the bank, his acts will bind the bank, especially so if the bank receives the benefit of the transaction.' The failure upon the part of the president to designate him- self in the contract as president of the bank, if at the time he 'National Bank of Commerce v. 8 Vilas Nat'l Bank v. Strait, 58 Atkinson, 55 Fed. Eep. 465. Vt. 448. 'U. S. National Bank v. First 9 Tremont Bank v. Paine, 28 Vt. National Bank of Little Eock, 79 24. Fed. Eep. 296. 138 The Peesidem-t. [ch. ix. was in fact acting as such, such facts, if shown, the bank will be bound by his act. The question is one of fact and is one for the jury to determine.^" As we have shown, the inherent power in the president is confined to only a very few acts, but as stated, his powers may be enlarged by direct authority from the board of directors, and they may make him the exclusive manager of the bank's affairs, and authorize him to perform any and all acts other than those which the law compels them personally to perform. He may, as general manager of a bank, perform all the ordinary transactions, but being delegated with the power as general manager, does not give him authority to execute note9 and borrow money for the bank. The above rule is supported by many leading authoriti®. In the State of Arkansas we find the rule laid down in the case of City Electric Street Eailway Company v. First Na- tional Exchange Bank, 62 Ark. 33, as follows : " It may be stated as a general proposition that the president and secretary of a corporation are not empowered to bind it by their signa- ture to commercial paper, unless the authority is expressly conferred by the charter, or given by the board of directors. They have no inherent power to execute negotiable notes in the name of the corporation. Tied, on Com. Paper, § 121; Cook on Stock, etc., § 716 ; McCullough v. Moss, 5 Den. 567 ; 4 Thompson on Corp., § 4619; Life & Eire Ins. Co. v. Me- chanic Fire Ins. Co., 7 Wend. 31 ; Hyde v. Larkin, 35 Mo. App. 365 ; Pierce on Kailroads, §§ 32-34 ; Walworth County Bank V. Farmers' Loan, etc., Co., 14 Wis. 325 ; 1 Morawetz on Corp., § 537; Titus v. Eailroad Co., 37 IST. J. L. 98-102; Wait v. IsTashua Armory Assn., 23 Atl. Pep. 77, and authorities there cited; National Bank v. Atkinson, 55 Fed. Eep. 465." In New York the rule adopted by the Supreme Court of Judicature, in 1831, in the ease of Life & Fire Insurance Com- pany V. The Mechanics' Fire Company of New York, 7 Wend. 31, is laid down by the court as follows: " Such authority ia 10 Northern National Bank v. Lewis, 78 Wis. 475, 47 N. W. 834. OH. IX.] Banking. 139 not implied from his appointment as president; as sucli he is merely the presiding officer of the board of directors, chosen by them from their own body, and has no more authority from the charter to bind the company by any of his acts than any other director has; his powers are such only as the board of directors, either by their by-laws or otherwise, think proper to confer upon him." This rule of law is the rule now in force in the State of New York. It is the general rule and is upheld by the courts of all the States. The rule, as laid down in one of the later cases, and stated by District Judge Einer, in the case of Ifational Bank of Commerce v. Atkinson, 55 Ted. Eep. 465, is substantially the same rule as laid down by the court in 'New York in 1831. The court, in the latter case, states the rule to be that " the president of a national bank has no power inherent in his office to bind the bank by the execution of a note in its name, but power to do so may be conferred on him by the board of directors, either expressly, by resolution to that effect, or by subsequent ratification, or by acquiescence in transactions of a similar nature of which the directors have notice." There is a strong tendency upon the part of the court and authors of text works treating upon this subject at the present time to establish a more liberal rule. One which may be stated as follows : " The extent of the powers of agents of a well defined class, such as presidents, directors or cashiers, is determined largely by general custom, of which the courts will take judicial notice, and parties dealing with such agents are entitled to assume that they possess all the powers which are usually accorded to agents of the class to which they belong." ^^ Mr. Morawetz holds that the authority of officers of banks is fixed by general custom, of which the courts will take judi- cial notice, and that they are not held to the strict rule which applies to officers of other corporations. 11 Morawetz, Priv. Corp., vol. 1 Mo. App. 365, and cases cited in re- (2d ed.), § 509; Hyde v. Larkin, 35 spondent's brief. 140 The Peesident. [ch. ix. Banks are not incorporated for the purpose of borrowing money. It is their business to receive money on deposit and reloan the same together with such portion of the capital, and reserve fund, as the law will permit. There should but few occasions arise presenting the necessity of a banking corpora- tion to borrow money. The general rule which has been con- ceded to be the law for so many years should not be weakened upon the theory that a more liberal one would be of special benefit to the public or banking corporation. At least the borrowing of money by the president of a bank without direct authority should not be sanctioned by the law as justifiable and lawful upon the theory that it is or has been a practice or custom of the bank. The president has the implied power to indorse negotiable paper in the ordinary transaction of the bank's business; and authority for this purpose need not be conferred upon him by the board of directors. ^^ It is laid down in the case of Simons v. Fisher, 55 Fed. Rep. 905, that where the president exercises the function of cashier, and is the managing officer of the bank, the bank will be bound by such acts of his as belong virtute offici to the office of cashier. § 120. President's powers derived from statute. Where a statute of a State confers a power upon an officer of a corporation, there can be no necessity of a by-law or resolu- tion of the board of directors authorizing him to execute the power. In some of the States special statutes have been enacted pro- viding that many matters may be conducted in the president's name. In the case of Delafield v. Kinney, 24 Wend. (N. Y.) 345, in a suit against a banking association formed under the general banking laws of the State, it is held, the action may be brought against it either in the name of the association or in that name with the addition of the name of the president thereof. 12 United States Nat. Bank v. First Nat. Bank of Little Eock, 79 Fed. Rep. 296. OH. IX.] Banking. 141 § 121. Iiiiuited and proMbited power of president. The president of a bank, like the cashier, cannot certify his own check. Such certification appears on its face and is notice of fraud to all.'^ The president has no inherent power to transfer or endorse negotiable paper, but through a custom or habit of performing such acts which are well known to the board of directors, they become lawful acts and cannot be denied by the bank.^* As president of the bank he has no authority by virtue of his office to receive the claims of a bank as against a debtor. That power rests alone with the board of directors; and in order to bind the bank, the consent of the board, either directly or by implication, must be first obtained.^^ Neither has he authority by virtue of his office to use any portion of the assets of the bank to settle with the bank's cred- itors. He may, however, do so, if the power is conferred upon him by the board of directors. If either has he the authority to mortgage the property of the bank, but when authorized to do so, may execute a mortgage upon the bank's property. [tfeither has he inherent power to stay the collection of an execution against the property of a judgment debtor. The board of directors alone are endowed with this power.^* 'Nov has he authority inherent in his ofiice to enter into agreements or contracts on behalf of the corporation, but it is held that this power may be conferred upon him by the board of directors. As an officer of the bank he has no implied authority to give away any portion of the corporate property, or to create a gratuitous corporate obligation binding on the corporation.^'' If as president of the bank he holds out to the public that certain powers have been delegated to him, and it is believed by parties dealing with him that he is acting within the scope of his power, his acts are binding upon the bank.^' 13 Chrystle v. Foster, 61 Fed. Eep. lo Spyker v. Spence, 8 Ala. 333. 551. 1' Eo'bertson v. Buffalo County 14 United States Nat. Bank v. Nat. Bank, 58 N. W. 715. First Nat. Bank, 79 Fed. Rep. 296. is Farmers' Bank v. McKee, 2 Pa. 15 Olney v. Chadaey, 7 E. I. 224. St. 318. 14:3 The President. [ch. ix. A commercial banking corporation doing a banking business and refusing to pay interest on deposits, advertising that it does not pay interest, its president has no power or authority to enter into an agreement with a customer to pay interest, and if such a contract is entered into in violatioji of the rule, and advertisement of the bank, it cannot be held responsible for the interest. An agreement to pay interest on deposits of money deposited in a commercial bank is no part of the ordinary busi- ness of the bank, and the president has no power to bind the bank to pay interest in such cases. (Fulton Bank v. New York & Sharon Canal Co., 4 Paige (N. Y.) 127.) But in Boyd v. First Nat. Bank, 108 S. W. 360, it is held that the bank is liable where the president agreed to pay interest. Where a bank is entitled to and makes it part of its business to take special deposits, the president cannot charge the bank with any extraordinary liability in regard to such deposits. He has no power or authority by virtue of his office to compro- mise a debt. This duty belongs to the board of directors.^' The president of a bank is without authority to release judg- ment which has been entered in a court of record, in favor of the bank, unless duly authorized by the board of directors. He has no implied power to lease the property of, the bank.^° The satisfaction or release should set out that it was ordered by the board of directors, and it should have the seal of the bank attached. Where the president performs acts which are not implied or inherent in his office, but which are afterwards ratified by the board of directors, they become the legal acts of the bank, and where a bank retains the proceeds derived from the sale of the property, and guaranty of notes owned by the bank, the fact that the bank retains the proceeds, operates as a ratification of the president's acts in the selling of the property, whether he was authorized or not,^^ An agreement by the president and cashier of a bank, that 19 Eyan v. Manufacturers' & Mer- 21 Thomas v. City National Bank, chants' Bank, 9 Daly 308. 59 N. W. 943. 20 Bank v. Bennett, 159 Mo. App.. 1. OH. IX.J Banking, 143 an endorser shall not be liable on his endorsement is not bind- ing on the bank. It is not within the scope of their duties, and they cannot bind the principal except in the discharge of their ordinary duties.^^ The president has no power to confess judgment against the bank.=^ § 122. Representations and admissions, effect of. The general rule is that the president of a bank, by admis- sions and representations, may bind the same, if Such admissions or representations relate to matters within the scope of his agency, and, like other agents, he must act within the scope of his authority to bind the principal.^* The president of a national bank has no inherent authority to make such admissions as will release the maker of a note from his liability.^' M^either can the president of a bank by admissions charge the same with a debt.^° In the case of Washington National Bank v. Pierce, 6 Wash. 491 (33 Pac. 972), it is held that where the president of a bank is informed by the maker of a promissory note that the same was procured by fraud, and that he (the maker) would not pay it, the remark not being made to the president in his official capacity, nor at the bank, does not bind the bank. Such knowledge does not estop the bank from subsequently discount- ing the note. § 123. President liable to bank for acts which amount to breach of trust. Where the law forbids overdrafts, and the president or cashier permit the overdrawing of the account of a customer, 22 First National Bank of Stur- Marine Bank, 3 Gill. 96; Crump v. gesa V. Bennett, 33 Mich. 520; U. S. Mining Company, 7 Gratt. Angel & Ames on Corporations, §§ 352. 298, 301, 309 ; Story on Agency, § 23 See 27 111. App. 313, 20 Mo. 96. 115; Parsons, Mere. Law, 140, note 24 Panhandle National Bank v. 1 ; Bank v. Dunn, 6 Pet. 51 ; Bank Emery, 78 Tex. 498, 15 S. W. 23. V. Jones, 8 Pet. 16; Minor v. Bank, 25 Farmers' National Bank v. 1 Pet. 46 ; Hodge v. Bank, 22 Gratt. Templeton, 40 S. W. 412. 51 ; Harrisburg Bank v. Tylor, 3 2« Henry v. Northern Bank of W. & S. 373; Merchants' Bank v. Alabama, 63 Ala. 527, 144 The Peesident. [ch. ix. and through such overdraft a loss occurs to the bank, the president authorizing the same becomes personally liable.^^ In a review of the opinion in the case of the Oakland Bank of Savings v. Wilcox, it was found that the president was sub- ject to the by-laws and direction of the board of directors. There is no provision found in these by-laws permitting a customer to overdraw his account. It was the duty of the auditing committee to supervise and direct the mode in which the business was to be conducted. It was their duty to count the cash and examine, or cause to be examined, the books, vouchers, documents, papers and other assets of the corporation. The duties as they here appear, devolved upon various per- sons; but this was held not to discharge the president in the failure to perform his duty. The lower court in the trial of the cause, in giving his instructions, granted the following instruction to the jury: " It has been said to you, gentlemen, during the argument of the case, that it was a usage at the bank to allow customers to overdraw, and have checks and notes charged up without present funds in the bank. I believe there is evidence before you showing the existence of such a usage to a certain extent. The fact, however it may be, is for you to find. But I say to you, as a matter of law, that if such a usage did exist, it would not justify an officer of the bank in case of loss. The usage is still nothing more than usage and practice to mis- apply the funds of the bank, and to connive at the with- drawing of the same without any security. Such a usage and practice is a manifest departure from the duty both of the directors and president of the bank as cannot receive any coun- tenance in a court of justice. It cannot be done by the sanction or approval of any officer of the bank, and when done it is at his own peril and responsibility, especially if done in his own interest." The foregoing instruction may be criticized by the courts as 2T Oakland Bank of Savings v. Wilcox, 60 Cal. 126, 121 N. C. 365. OH. IX.J Banking. 145 too broad, but it is wholesome advice to officers having charge of funds deposited in the bank. The instruction as given, the court justly says, may be too broad, but declares it to be applicable and justifiable in this case. Where the president takes a note which is burdened with a guaranty, and which is liable to cause loss to the bank, it is held in the case of Stearns v. Laurence, 83 Fed. Eep. 738, to be such negligence in case of loss, as will render him liable to the bank, and where the president sells property of the bank without first obtaining the authority from the board of directors to do so, and loss occurs, he is liable to the bank/* Where the president of a bank, by false statements in rela- tion to its affairs, when such statements are officially made, and loss occurs to one who has relied upon such statements, the president is personally liable.^' The National Banking Act, by provision of section 5209, makes a false statement of the affairs of a national bank a misdemeanor. A false entry or statement is one which is intended to deceive and represent that which is false as true. The Supreme Court of the United States says, " that where a president of a bank placed on its books to his own credit at their face value bonds known to him to be worthless or of small value, without the authority of the board of directors or stockholders, the fact that he gave a guaranty of payment of the bonds on demand, does not relieve him from liability; or of an intent to defraud the bank by misapplying its money, although at the time he was solvent and intended to pay his guarantee on demand." § 124. President borrowing from bank. The president of a bank, unless expressly prohibited by stat- ute, may borrow money from the bank, as any other person 28 First Nat. Bank of Central City 2» Prewitt, Trustee, v. Trimble, 92 V. Lucas, 21 Neb. 281. Ky. 176. 10 146 The Peesident. [ch. ix. may, and execute a valid note for the same that will bind him as well as the bank receiving it. Such a note is not void, nor in the absence of fraud it cannot be repudiated or avoided by the bank/" The president of a bank should not be permitted to borrow its funds, without the consent of the finance committee; and in the absence of such a committee, the loan should be passed upon by the board of directors. The statutes of some of the States limit the amount which may be borrowed from State banks by any one person. The by-laws may control this privilege where the statute is silent upon the subject. The National Banking Act places a restriction or limitation against making loans to any association, person, company, cor- poration or firm in excess of one-tenth part 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. This provision of the statute does not prohibit an oflScer or director from borrowing money, but limits the amount which may be borrowed at any one time. This is a wise provision of law and should be strictly enforced. The various States which have not now a statute similar to that enacted by the United States, should be urged to place such a law upon the statute books of the State. Officers and directors of savings banks are by statutes passed in most of the States, prohibited from borrowing any of the funds from the banks over which they act and preside. The penalty prescribed by the National Bank Law for a vio- lation of its provisions, prohibiting any one person from bor- rowing to exceed 10 per cent, of its capital actually paid in, only subjects the bank to a forfeiture of its charter. so Blair v. Bank of Mansfield, 10 Lg. N. S. 94. OH. IX.] Banking. 147 The loan may be collected, although made in excess of the amount prescribed. The bank can recover the full amount.'^ Section 578, Civil Code, California, provides that : " No director or officer of any savings and loan corporation must, directly or indirectly, for himself or as the partner or agent of others, borrow any of the deposits or other funds of such' corporation, nor must he become an indorser or surety for loan to others, nor in any manner be an obligor for moneys borrowed of or loaned by such corporation. The office of any director or officer who acts in contravention of the provisions of this section immediately thereupon becomes vacant." This section operates as a prohibition to the bank in making or accepting a loan made to it by an officer or director; and is a violation of its charter. The making of such a loan may be sufficient grounds for an action against it to declare the same forfeited; but such an action when brought must be in- stituted by the Attorney-General of the State, in a suit brought by him in the name of the people. Where a statute by its provisions declares that if a person holding an office in a private corporation violates the expressed provisions of the same, and that the office thereupon imme- diately becomes vacant, the vacancy may be filled as the law or the charter may provide. But where there is no provision in the charter or by-law authorizing such vacancies to be filled, the office remains vacant until the next general election, when it may be filled as provided for by the statute governing such provisions. The office of a bank director or president is a private office, and the general laws of the State affecting vacancies in public offices does not apply. The power to declare the office vaieant in a banking corporation is vested in the board of directors. A statute which declares that the office of a director in a private corporation shall become vacant upon the happening of a certain event, to wit: the violation of a law, which fails to provide the mode of filling the same, such vacancy can 81 Gold Mining Company v. National Bank, 96 U. S. 640; Corcoran V. Batchelder, 147 Mass. 541. 148 The Peesident. [ch. ix. only be filled under the provisions of the law governing such corporations. The fact that an officer of a banking corporation borrows money of the bank in violation of the statute, which declares that he must not do so, does not prevent the bank from enforc- ing the collection of the debt.'^ § 125. President's compensation. The president of a bank is entitled to compensation for services rendered to the corporation; but there is no implied promise to pay him because he has been elected by the board of directors as its president; and he is not entitled because of his position to compensation, any more than any other director who may perform services for the corporation. The president, however, when he has been delegated and selected as the general manager of the bank; and devotes his energy and time to the bank's afFairs, his salary is usually fixed by the board of directors; but if no action is taken by the board in fixing the amount to be paid him, he can recover for his services only such a sum as may be deemed reasonable for the labor performed. It is held that the president of a bank who superintended the repairs upon a building situated upon real estate owned by the bank, could not recover for such services. This would be the case where he had previously been engaged upon a fixed salary; but if no salary was fixed and the services were per- formed with the knowledge and consent of the board of directors, he could recover the value of his services. The board of directors having the authority to employ the president, it may discharge him. The National Banking Act provides that it is within the power of the board of directors to " appoint a president " * * * and " dismiss such officers or any of them at pleasure and appoint others to fill their places." The directors may remove the president at any time for »2 Savings Bank v. Burns, 104 Cal. 473. OH. IX.] Banking. 149 cause; and the bank cannot be held liable to him for the un- expired term. Under the National Banking Act they may remove him at their pleasure and the bank cannot be held liable for the unexpired term.°* In the State of Illinois it is held that where the bank has employed a president at a fixed salary that the directors have no authority or power to pay him any sum as a bonus in addi- tion to the salary fixed. He cannot recover for services or acts performed for the bank, though performed or coming out- side of his duties. If the bank's charter provides that the president shall not be permitted to draw a salary, the board of directors have no authority to engage to pay a regular salary; but they may engage to pay him for services rendered ; and if no stipulation or agreement is entered into as to the value of such services, he may recover for labor performed the value of his service. Where the president is actively engaged in the interests of a State bank, and the board of directors have engaged his ser- vices for a fixed period of time, he can be discharged only for cause, and may recover for the unexpired term if discharged without cause. The only exceptions to this rule are the provisions of the National Banking Act which as stated provide that it is within the power of the board of directors to dismiss him at their pleasure and appoint another to fill his place. Note. — See Elliott v. Peet, 192 Fed. Rep. 69fl, where the court holds that the bank did not break its contract, that it was closed By law and, therefore, he had no claim against the bank for the unexpired term on the contract. President's powers and limitations hy states. Alabama. — The president has no authority to sell corporate property. 45 So. Rep. 157, 121 Ala. 505. Arlccmsas. — President and secretary have no inherent power to execute notes in the name of the bank. 62 Ark. 7. 33 Taylor v. Button, 43 Barb. 195. 150 The President. [ch. ix. Calif (ymia. — The president has no inherent power to exe- cute a mortgage. 78 Cal. 629. Qeorgia. — He has no power to release the maker of a note or agree that he need not pay it. 60 S. E. 13. Idaho. — President and secretary have no power to sell or to authorize anybody else to sell the property of the corporation. 4 Idaho 758. Indiana. — The president has no implied power to mortgage property of the bank. 141 Ind. 352. Iowa. — Where defense is that the bank through its president had no power to execute it, the power must be shown. 117 Iowa 157. Kansas. — Held in this State that the president and secre- tary cannot even conjointly sell the safe of the bank. 31 Kan. 286. Kentucky. — The president has no power to compromise a' debt from an insolvent firm. 5 S. W. 305. Maine. — Has no implied power to sell treasury stock. 101 Me. 78. Massachusetts. — The president is not empowered to sell and assign a note held by the bank. 14 Mass. 178, except for a valuable consideration. Michigan. — Cannot release securities on a note given to the bank. 33 Mich. 520. Minnesota. — The president is prohibited from increasing the price of construction work. 66 Minn. 349. Mississippi. — Held the president cannot execute a note for the company. 31 Miss. 116. Montana. — Has no power to employ an architect. 19 Mont. 359. Nebraska. — President makes himself liable in selling notes of bank if loss occurs. 21 Neb. 280. Nevada. — Has no power to give note, nor lease lands of cor- poration. 5 JSTev. 224, 21 'Nev. 469. New Jersey. — Where one person holds the office of presi- dent, treasurer and general manager, he has no power to confess CH. X.] Banking. 151 judgment for the corporation, even though he owns all but two shares of the stock. 46 IST. J. L. 237. North Carolina. — Bank may recover money paid out by officer on overdrafts allowed. 105 N. C. 467. Oregon,. — Cannot execute a note for the corporation, nor mortgage its property. 6 Oreg. 125. Pennsylvania. — The president cannot bind the bank by his purchase of bonds or stocks for it. 89 Pa. St. 324. Bhode Island. — A bank president has no power to release a claim owing to the bank. 7 R. I. 224. Texas. — The president of a national bank has authority to accept property in payment of a debt and bind the bank to pay off a lien on it. 78 Tex. 498. Virginia. — Held the president has no authority to transfer the bank's paper. 18 W. Va. 212, 228, 22 Gratt. (Va.) 352. Wiscormn. — It is presumed that the president of trust com- pany has authority to sign its name on back of a note running to it. 112 K W. 1083. Custom and usage. Where the president has been given the implied power to transact all the business of the bank, his acts are not void if lawful; especially is this so when done with the knowledge of the directors.'* The fact that he is made president of the bank and is by virtue of his oflBce the officer to sign the corporate contracts which have been authorized by the board of directors, has led to the belief that almost any act or contract which he may make is binding upon the bank. Hence the rule in New York that a contract which apparently is a corporation contract, being duly signed by the president, is presumed in fact to be a corporate contract until the want of authority is shown. The rule in New York is stated as follows: "Where a contract made in the name of a corporation by its president is one the corporation has power to authorize its president to make, or to «■• 134 N. Y. 598, 168 Mass. 118, 79 Fed. Rep. 296, 146 Ind. 411, 87 N. Y. 628, 131 111. 273. 152 The Peesidewt. [ch. ix. ratif J, after it has been made, the burden is upon the cor- poration of showing that it was not authorized or ratified.'"' The rule in Illinois has been broadened by the courts of that State. They hold that the president by virtue of his office has power to bind the corporation and transact business for it. " The decisions of this court are not numerous where banks and banking principals and laws are involved. In the very nature of the banking business when conducted through a cor- poration its officers are strictly speaking trustees. They are and should be forbidden to execute contract3 except those au- thorized by the board of directors. The reason for this restric- tion of the rule is that the business of banking is one where the officers are acting for the depositors as trustees and for the stockholders as agents, and employees, and the business of the bank is such, that no immediate or emergency contracts need be made and executed by the president without first obtaining the sanction or authority of the board of directors." The rule is again laid down as follows : " In the absence of a statute or by-laws limiting the president's authority, he is presumed to be authorized to bind the corporation by his acts in its name." ^° In the State of Iowa the rule prevailing in that State is stated as follows : " In the absence of any showing to the con- trary the president will be presumed to have authority to act in all matters arising in the ordinary course of business; the natural inference being that he as its president had been en- dowed with the power to direct its operation and manage the transactions for which it was authorized." *^ 35 Patterson v. Bobinson, 116 N. E. 372); Steel Works v. Bresnahan, Y. 193; Chemical National Bamk v. 60 Mich. 322 (27 N. W. 524); Nat. Kohner, 85 N. Y. 189; Columbia State Bank of Terre Haute v. Vago Bank v. Gospel Tabernacle, 127 N. Co. Nat. Bank, 141 Ind. Sup. 352 y. 361. (40 N. E. 800) ; Town Co. -v. Swi- ss Dexter Savings Bank v. Friend, ' gart, 43 Kan. 292 ( 23 Pac. Eep. 90 Fed. Rep. 703. 617); Bleu v. Milling Co., 81 Am. 37 White V. Elgin Creamery Co., Dec. 132; Feeder v. Lumber Co., 86 108 Iowa 522. Supporting this rule Mich. 541 (49 N. W. 575). See 127 are the following cases; Patterson Cal. 669. V. Eobinson, 116 N. Y. 193 (22 N. CHAPTER X. THE CASHIEE. § 126. Cashier, general duties and qnalifications. The cashier of a bank is elected by the board of directors, the term of office being usually fixed at the time. He should be required to give a bond for the faithful performance of his duties. The cashier, unless there be a vice-president, ranks next in authority to the president, and has certain specified duties to perform. He is selected for his business qualifica- tions, and adaptability to the business which he is required to transact. His specific duties are to attend to the corre- spondence. He receives all letters and communications ad- drfesed to the bank, and should make it his business to open and attend to the contents of the same. All applications for loans, discounts, proposals for new customers, orders for the sale or purchase of stock, bonds, letters asking for advice concerning the standing of persons, etc., should be retained by him and when answered copies should always be kept. Letters received containing statements of enclosures and collections are usually passed over to clerks having charge of those depart- ments and by them in due time answered. His position in a large bank is one of great responsibility. He must on entering the bank each morning see that all the clerks are on hand. If a vacant place is observed, it is his duty to supply the work necessary to be performed during the day. Some one may be found to take the place or perform the labor ; if not, and it becomes necessary, the cashier should be sufficiently qualified to supply the place, and perform the labor himself. His business is executive and supervisory. He is supposed to be the thermometer of the bank, and should be able to [153] 154: The Cashiee. [ch. x> denote the condition and financial temperature of the same at any time. It should be his imperative duty to examine daily the balance books, and as frequently as possible inspect the work of clerks, and keep himself informed concerning the business of the bank. His position necessarily brings him continually in contact with the patrons of the bank, and through these means he can in every proper way increase the business of the bank. The profits in the business in most banks are made on the deposits. To increase these, therefore, the cashier has the greatest oppor- tunity. iN'ew accounts, if desirable, are eagerly sought. While this is true, no well conducted bank will blindly open an account with a person without due investigation. A depositor, if not known, should be properly identified and introduced, and be- fore an account is opened or accepted, his character ascertained] and this investigation usually is the business of the cashier. The duties of a cashier may depend in a degree upon the conditions surrounding the bank. The location and volume of business which the bank has may enlarge or lessen the detail of labor and his responsibility; but it is his duty, however, under all circumstances, to see that all papers, valuables and other property of the bank are in its possession. He should see that, at the dose of business, the cash is properly and safely placed in the vaults and the doors securely fastened. It is claimed that, though other officers may have access to the money and other property of the bank which is confided to the cashier, his responsibility therefor is not released. In an important case upon this subject. Chief Justice Mitchell said : " We cannot know judicially what officers and employees are required for the conduct of the business of the bank, nor can we define in detail their several functions and duties., These vary — vary according to the location and business of the bank. It is, however, a matter of such common observatio^Q that courts cannot be ignorant of the fact thatnn the administra- tion of the daily affairs of a bank some one besides a cashier must have access to its funds. It by no means follows that the cashier is not so far in possession as to be rightfully held respon- CH. X.J Banking. 155 sible to account for the funds of the bank to the extent, perhaps, of exhibiting each day, or whenever properly called upon, at least the exact condition of its affairs." ^ This seems to be generally conceded, but it certainly cannot be held that for the carelessness and negligence of other em- ployees having access to the funds and other property of the bank that the cashier should be liable v^hen loss in such cases occur, unless by the negligence and carelessness of the cashier, he having knowledge of the fact that the funds or valuables were being handled by the employees when it was his duty alone to handle and safely care for the same. See 46 Am. Dec. 278; 78 Ky. 475. The duties and responsibilities of the cashier are many. His position is one of great importance, and he should be a man of irreproachable character, a good judge of human nature, alert and circumspect. He should have a good education, and be satisfied to make a quiet and genteel living by means of study, work, and close application to business, willing to forego chances for the accumulation of large fortunes, or of fame. He should be content with steady employment which, if his adaptability and habits justify, will insure him success. He should, in con- clusion, carefully avoid everything which might in the public eye compromise himself, and through him the bank which em- ploys him, and unless in the beginning he can master himself for these duties and responsibilities, he should avoid banking. § 127. Cashier executive officer of the bank. The Supreme Court of the United States in the case of The Merchants' Bank v. State Bank, 10 Wall. 604, in defining and discussing the powers and duties of the cashier of a bank, says : ' The cashier is the executive oflBcer, through whom the whole financial operations of the bank are conducted. He receives and pays out its moneys, collects and pays its debts and receives and transfers its commercial securities. Tellers and other sub- ordinate officers may be appointed, but they are under his direc- 1 Bank of the State v. Wheeler, 21 Ind. 90. 156 The Oashieb. [ch. x. tion, and are, as it were, the arms by which designated portions of his various functions are discharged. A teller may be clothed with the power to certify checks, but this, in itself would not affect the right of the cashier to do the same thing. The directors may limit his authority as they deem proper, but this would not affect those to whom the limitation was unknown." " The office of the cashier is strictly executive. In the absence of expressed authority from the board of directors, he can only perform the daily routine business of the bank. To state his position correctly he is the executive agent of the board of directors. The leading authorities hold that beyond the ordinary business of the bank his acts must be authorized and directed by the board of directors, but his duties may be defined by the by-laws. In the case of the United States v. City Bank of Columbus, 21 How. 356, the Supreme Court of the United States held that where the cashier of a bank wrote to the secretary of the treasury saying, " that the bearer of the letter was authorized to contract for the transfer of money from New York to New Orleans, such a transaction was not within the scope of the powers of the cashier nor authorized by the directors, therefore the bank was not bound to reimburse the money which the secretary of the treasury advanced." In this case it was shown that the directors nor president of the bank had any knowledge of the transaction. All of the directors of the bank at the time of the transaction testified that the cashier had not been authorized by the board or by any of themselves to constitute Miner, who was the bearer of the letter, as such agent of the bank. The directors also testified that they had no knowledge of the cashier's letter, and that they never sanctioned the same. The court, in giving an instruction to the jury in this case, gave the following instruction : " That if they should find that 2 Commercial Bank of Lake Erie & Mechanics' Bank v. Butchers' and V. Norton et al., 1 Hill (N. Y.) 501; Drovers' Bank, 14 N. Y. 624; North Bank of Vergennes v. Warren, 7 River Bank v. Aymar, 3 Hill 262, Hill 91; Beers v. The Phoenix Glass 268; Barnes v. Ontario Bank, 19 N. Company, 14 Barbour 358 ; Farmers' Y. 152. CH. X.] Banking. 157 the letter written by Moody (the cashier) was his own act, and had been given without the knowledge or authority of the board of directors, or any of them individually, except Miner, and that the agency of Miner was not constituted by or known to the board of directors, or any of them except Miner, but was the act of the cashier alone; and if they should find that Moody had no power as cashier, except such as belonged to the office of cashier generally, or such as was given by the charter or by the by-law or other law or usage of the said bank, that the defendant was not concluded by that letter, and is not bound by the contract made by Miner, without some subsequent ratification of the same, though the secretary had, in contracting with Miner, relied upon it as the act of the bank." The court, in discussing this instruction to the jury, saya: " It is also in coincidence with the theories generally entertained of the powers and duties of the cashiers of banks, by those most familiar with the management and business of banks and per- fectly so with such as has been expressed by this court in previous reported cases." In the absence of expressed powers granted by the charter of the bank, or authority given by the by-laws of the corporation, or resolution duly passed by the board of directors, the cashier has no power to perform any act other than those which are termed inherent powers which belong to his office. § 128. Cashier's inherent powers. The cashier or office of cashier, by long usage and custom with banks, has acquired certain inherent powers which the courts have judicially declared to be powers inherent in the office, and which have become settled as recognized law. They are such powers as the cashier may exercise without any special direction, vote, or authority from the board of directors. They are such as go with the office, inherent in the office. Cashier can only bind the bank within the scene of his actual or apparent authority.* s Houston V. Kirkman, 156 Mo. App. 309. 168 The Cashiee, [ch. x. As previously stated, his powers may be enlarged by the language of the charter of by-laws duly adopted by the corpora- tion, or by resolution of the board of directors. In the absence of such special authority, the powers denominated inherent powers are those which belong to him by virtue of his appoint- ment to the office. But he has no inherent power to accept special deposits and agree to return the same to the depositor. This power must emanate either by custom or by authority ex- pressed or implied and come from the board of directors. When the bank, however, habitually receives special deposits it can- not avoid liability in case of loss by pleading lack of authority in the cashier who received the same.* Directors are estopped to any authority where they had known of the course of dealing for a number of years without making objections."* § 129. Cashier has inherent power to certify checks. The power to certify checks has by universal usage become recognized as an inherent power, belonging to the office of cashier. To perform this act the cashier is not required to obtain special directions or authority from the board of directors. He may certify checks when requested to do so by a customer of the bank, if the bank has sufficient funds of the drawer against which the check is to be charged ; and it may be said that it is a part of his duty to do so ; but he has no authority to certify a check drawn upon the bank, unless the drawer has the full amount of funds deposited in the bank to pay the same at the time the check is drawn. The ISTational Banking Act, § 5208, Eev. Stat. U. S., pro- vides that : " It shall be unlawful for any officer, clerk or agent of any national banking association to certify any check drawn upon the association unless the person or company draw- ing the check has on deposit with the association, at the time such check is certified, an amount of money equal to the amount specified in such check. Any check so certified' by duly au- * National Bank v. Graham, 100 s First Nat. Bank of Pullman t. U. S. 699. Gaddis, 31 Wash. 596. CH. X.] Banking. 159 thorized oiEcers shall be a good and valid obligation against the association; but the act of any oflBcer, clerk or agent of any association, in violation of this section, shall subject the bank to the liabilities and proceedings on the part of the Comptroller as provided for in section fifty-two hundred and thirty-four." The Supreme Court of the United States, in the case of Thompson v. St. Nicholas National Bank, 146 U. S. 240, in discussing this section, while holding that it is a violation of the law for an officer of a national bank to certify a cheek unless the drawer of the same has an equivalent amount of money on deposit at the time, holds, that it does not preclude the bank from enforcing its claim out of collaterals pledged to secure the obligations of the drawer of the check. The only penalty incurred by the bank through the acts of its officer for a violation of the provisions of this section, may be a forfeiture of the bank's charter; but where the law pro- hibits certain acts by banks or their officers, their validity can be questioned only by the United States, and not by private persons. The penalty for false certification of checks by any officer, clerk, or agent of any national banking association, is provided for and fixed by section 13 of the Act of July 12, 1882, which provides : " That any officer, clerk or agent of any national banking association who shall wilfully violate the provisions of section fifty-two hundred and eight 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 provisions 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 five thousand dollars, or shall be imprisoned not more than five years, or both, in the discretion of the court." To constitute a criminal certification of a check by the cashier, it must be a wilful act. The Supreme Court of the United States in the ease of United States v, Britton, 107 U. S. 160 The Cashiee. , [oh. x. 655, says : " That the wilful misapplication of the moneys and funds of the banking association * * * means something different from the acts of oflBcial maladministration referred to in section 5239 (Kev. Stat., TJ, S.), and it must be a wilful misapplication for the use of the party charged or of some person or company, other than the association, with the intent to injure and defraud the association or some other body corporate or some natural person." (See 146 U. S. 240.) To certify a, check, the cashier writes the words " certified good," or the word " good," across the face of the check, usually dating the time of the transaction, and signs his name officially to the certification. A stamp may be used, and in such a case the date and signature only are to be written. After the cheek is certified and delivered to the owner, the drawer's account is immediately charged, and the bank charges itself with the amount of the check by placing it to the fund called the " Cer- tified Check Account." The holder of the certified check may at any time present his check to the bank for payment, and the bank being a debtor to the holder of said check for the amount named therein, must pay the same on demand. While the bank's position is one of debtor, it may elect to notify the holder of the check, if known, to present the same for payment at any time. The holder of the cheek is not a depositor of the bank, but is in the position or the relationship of a creditor, holding the obligation or certified check designating a certain sum of money due, and payable on presentation of the same. The holder of the certified check cannot issue a check on the bank and draw against his credit, as he has no account with the bank, but simply holds a negotiable instrument with the bank's certified statement that on presentation by the legal holder of the same, it will pay it upon demand. A certified check is in the nature of a certificate of deposit, which represents the fact that the bank holds for the legal owner of the same, the amount represented by the check; and like a certificate of deposit, it must be presented when payment is demanded; and, like a certificate of deposit, the bank can CH. X.J Banking, 161 refuse to pay any portion of it. But must pay in full on de- mand. The bank' should not make a partial payment of the check and enter a credit upon the same; but if presented and a portion of the check is paid, the bank should cancel the original check and give credit to the owner for the difference, or issue in lieu of said credit a certificate of deposit, for the amount remain- ing due and unpaid. It has been held that a check may be certified verbally; that is to say, where a check is presented by the drawer thereof or by the payee to the bank, and an officer of the same, duly authorized to certify checks, is handed the check and asked the question: " Is this check good ? " and he replies in answer thereto, after examination of the same, that " it is good " or, " it is all right," then such language is equivalent to the certification of the check. It is held, however, in the case of Espy v. Bank of Cincinnati, 18 Wall. 604, that where a party to whom such a check is offered sends it to the bank on which it is drawn, for information, the law presumes that the bank has knowledge of the drawer's signature, and of the state of his account, and it is responsible for what may be replied on these points. That unless there is something in the terms In which informa- tion is asked that points the attention of the bank officer beyond these two matters, his response that the check is good will be limited to them, and will not extend to the genuineness of the filling in of the check as to the payee or amount. The court further holds that a verbal reply that a check is " good " given for the information of the party about to receive it, extends only to matters of which the bank had knowledge, or is presumed to have by the law, unless he is told that more extended information is expected or asked for as to the validity of the check. In so far as the cashier's power is concerned, it is conceded that by universal custom and usage among banks, he has the inherent power to certify checks. This privilege or power, how- ever, is not exclusive to the office. The president of the bank and vice-president also, are inherently clothed with the power; and may do so without having special authority granted to them 11 162 The CashiSe. [ch. x. by the board of directors. It is also claimed that the assistant cashier and the paying teller, by usage and custom, have the inherent power and may certify checks; but the soundness of this law has been questioned. It is held that the assistant cashier, or teller, cannot without authority first obtained from the board of directors, perform this function, but if authorized to do so, they may make such certificates. The courts of. the various States have discussed this question of inherent power in officers of banks, to perform certain func- tions, and have attempted to give logical reasons why a certain officer is clothed with incidental or inherent powers, and some of them have declared the law to be that the cashier is alone delegated inherently to certify checks. One court undertakes to show that the power is only inherent in the teller. Many of these decisions are written without any knowledge of the business of banking, or the division of duties which necessarily and naturally belong to the various departments and officers. To hold that the cashier alone is clothed with the power to certify checks, is establishing a law which, by usage and custom, is accepted everywhere. While it may be conceded that such a custom and usage is inherently established, as a part of the duty of the cashier, it does not necessarily follow that no other officer of the bank is without this inherent power. One court holds that the teller cannot certify a check because he is not authorized to " pledge the bank's credit." This state- ment and language is sufficient to demonstrate the fact, that the learned jurist is not a banker. The bank's credit is not in any way affected by the certification of the check. The money to meet the check's payment before certification must be placed in the bank, and all the bank does, or binds itself to do, through its officer, is to pay the check when it is presented. It enters into no extraordinary transaction. In the simplicity of the act it is accepting a certain sum of money from a cus- tomer, and certifying that the amount for which the check is drawn is in the bank, and that it will be paid to the bona fide holder of the same when it is presented. Again, it is the depositing of a certain simi of money with CH. X.J Banking. 163 the bank (which a teller ordinarily has the right to receive), and when so received the bank by agreement, namely, the cer- tification of a check drawn against the amount by the depositor, agrees that it will, on presentatioi^ of the check, pay the same. There is no " pledging of the bank's credit " in such a trans- action, and, it may be argued, that if the teller has the inherent right to receive the money of customers for deposit, inherently he should have the power to certify the depositor's check, which is in effect the payment of the check in advance, the drawer's account having been charged with the amount at the time. We find the New York courts sustaining the position that the authority to certify checks is inherent in the cashier, and that such authority is derived by usage. If a bank establishes a custom with its dealers and those doing business with it, which is reasonable, and the act performed under such a custom does not work an injustice to the parties dealing with it, and where such custom is universal with the banks in that particular lo- cality, the courts will sanction the custom and make it the law. Therefore, if it is the custom of the teller to certify checks of the bank, it is reasonable to assume that the power is inherent in his office. The nature of the business, particularly delegated and performed by him, of receiving money and paying checks, comes within that class of duty or authority, which the teller assumes and transacts daily and hourly, and the certifying of checks is nothing more than the receiving of money and paying the same out again upon a written order or check. In the case of Merchants' Bank v. State Bank, 10 Wall. 604, which is cited as a leading and important case upon the question of inherent power in the cashier to certify checks, the court there holds that if the cashier has power to receive the moneys, the authority to receive implies the power to give certificates of deposit and other proper vouchers. Upon the same reason- ing, and upon the same ground, the teller who receives deposits has implied authority to perform the act of certifying a check, as it simply amounts to the payment of a deposit. The by-laws of the bank may deprive the cashier or the teller of this particular power, and place the same exclusively in 164 The Cashibe. [ch. x. some other officer of the bank, but in the absence of such a delegation of power or restriction of power in the by-laws, the cashier and paying teller, by the very nature of their duties, should have the inherent power to certify checks. In the absence of a limitation, or prohibition, of a power which by the very nature of the business is required to be per- formed by an officer of the bank, it becomes his duty to per- form the same, and the act, when performed, may be said to be an inherent power in the office. The law is settled that where the directors in a bank allow an officer to certify checks, the hanJc cannot repudiate his acts] and where no knowledge of restrictions or limitations are known to the general public, the act is valid between the barJe and the party dealing with it. The cashier or other officer of a bank who, without authority, certifies a cheek " good," when the drawer has not unincum- bered funds deposited in the bank to meet the check, is a wrongs ful act, and a person having knowledge of such a fact is .pre- sumed to know that such an act was unauthorized, and there- fore void; and such knowledge of the wrongful act will not permit the party to hold the bank liable; but if the check is negotiable, and passes into the hands of an innocent holder without notice, the bank cannot repudiate the check. In the case of Morse v. Massachusetts National Bank, 1 Holmes, 209, the court says : " The certificate of a cashier of a bank that a check is " good " is a representation of a present existing fact within his knowledge as cashier, and if that cer- tificate be made by him in the course of his ordinary business as cashier, it will bind the bank in favor of innocent third per- sons, upon the principle o£ estoppel in pais, even if the certifi- cate is not true, and the drawer of the check has no funds on deposit in the bank." § 130. Cashier cannot certify Ms own check. The certification of his own check is utterly void, though he has money to his credit in the bank covering the amount of the check. The fact that he has deposited, or has on deposit, the CH. X.] Banking. 165 amount of the check does not authorize or give him the power to certify his own check. Where an officer of a bank is authorized to certify checks, and certifies his own check, which passes into the bands of a bona fide holder for value, the bank, though not liable, should be held for it. It has been held that where the president of a bank had drawn his check, and certified the same, that this fact alone was not sufficient to charge the bolder with notice, and there being no proof of notice that the drawer was the person who certified the check, the bank was held liable ; but it is also held that if the names are identical that fact alone is sufficient to put the holder at least upon inquiry, and the bank is not liable. The fact that the names are identical might occur, and a more reasonable holding would be, that proof should be fur- nished showing that the bona fide holder for value had notice that the drawer and the officer certifying the same were one and the same person. In the case of The Clark !N"ational Bank v. The Bank of Albion, impleaded, etc., 52 Barb. 592, it is held that a holder of a check certified to by the cashier cannot recover from the bank unless it appears that he became the owner and holder of the check in good faith for a full and fair consideration and without notice of the cashier's want of power to make the certification. Where the public and those dealing with the bank have notice that a cashier, by the very nature of his office and busi- ness, is authorized to certify cheeks, the want or lack of power to certify his own check is requiring of those dealing with him extraordinary (or legal) knowledge of all his expressed and implied power. It is requiring of the public and persons dealing with the cashier a degree of information as to Ms powers, which the law does not impose upon persons generally who deal with general agents. There are but few persons who deal with banks that have notice that the cashier cannot certify his own checks ; and if they are not possessed with such notice, the holder of a bona fide check should be in a position to hold the bank. 166 The Cashibe. [ch. x. The law, as laid down by the courts, however, and the rule adopted, is stated as follows: " Where the face uf the check shows the officer's attempt to use his official character for his private benefit, every one to whom it comes is put upon inquiry; and when the certificate is false, no one can recover against the bank as a bona fide holder." Payees are put upon notice when.* § 131. Power to draw checks. The cashier has the inherent power to draw drafts or checks, when the business of the bank requires it, upon the funds of the bank when deposited elsewhere. It is not necessary for the board of directors to confer such a power upon him; it is inherent in the'oflSce. In the execution of such checks he should designate himself as cashier of the bank which he represents. This is very important where a cashier by a check or draft directs that the funds of his bank be transferred or paid to a certain person, the check or instrument should be so drawn, showing on its face all the necessary elements of perfectness; and have all the marks of official authority upon it. A failure to perform his duty in this particular may cause loss to a cus- tomer of the bank; which negligence upon his part may also make him liable personally. If the instrument is imperfect, for example, if the cashier fails to sign it as cashier, designating the bank which he repre- sents, it may be refused payment. The bank or cashier upon whom it is drawn should refuse to honor it if presented and signed in an individual capacity. The payee bank may honor it, and be safe in doing 'so, but if it is shown that the cashier was not acting in his official capacity when the check was drawn, the bank paying it would have to sustain the loss. Parole evidence is admissible to show the fact, namely, that the cashier was acting in his official capacity ; and that it was an omission upon his part to sign his name as cashier. In the case of Mechanics' Bank v. Bank of Columbia, 5 Wheat. 326, the question presented to the court in this case sSee 94 Fed. Bep. 30. OH. X.J Banking. 167 arose upon an instrumebt or check issued by the cashier of the Mechanics' Bank of Alexandria, which check was signed by the cashier in his individual capacity. The form of the check is given in the reported case as follows : No. 18. "Meehanica' Bank of Alexandria. June 25th, 1817. Cashier of the Bank of Columhia, Pay to the order of P. H. Minor, Esq., Ten thpusand Dollars. " Wm. Paton, Jr." $10,000 This is one of the early cases. It presented the following question : Was the act of the cashier official, his name appear- ing and being signed in an individual capacity. The court declared in delivering the opinion that parole evi- dence was admissible when the instrument upon its face raises a doubt as to the capacity in which the officer was acting. The justice, in delivering his opinion of the court, says : " The question is whether a certain act done by the cashier of a bank was done in his official or individual capacity. Had the draft, signed by Paton, borne no marks of an official char- acter on the face of it, the case would have presented more diffi- culties. But if marks of an official character, not only exist on the face, but predominate, the case is really a very familiar one. Evidence to fix its true character becomes indispensable. * * * The only ground on which it can be contended that this check was a private check is, that it had not below the name the letters Cas. or Ca. But the fallacy of the proposition will at once appear from the consideration that the consequence would be that all Baton's checks must have been adjudged private. For no definite meaning could be attached to the addition of those letters without the aid of parole testimony. But the fact that this appeared on its face to be a private check 168 The Cashier. [ch. x. is by no means to be conceded. On the contrary the appear- ance of the corporate name of the institution on the face of the paper at once leads to the belief that it is a corporate and not an individual transaction : to which must be added the circum- stances that the cashier is the drawer and the teller the payee ; and the form of ordinary checks deviated from by the substi- tution of to order, for to bearer. The evidence, therefore, on the face of the bill predominates in favor of its being a bank transaction." The cashier acts for the bank in the capacity of a general agent, and if it is shown that his acts are done in the exercise and within the limit of the power delegated, such facts are inquirable into by a court and jury. Any form of check may be used by the cashier for the pur- pose of transferring the funds of the bank, and the drawee may honor it, but if it fails to show any marks or words, to indicate the corporate name of the institution, under the holding of the court in the case above referred to, parole evidence would be inadmissible to show its status, therefore, it should be signed by the cashier, not in his individual capacity, but in his official capacity. While the form may not, as stated, be essential, when prop- erly drawn it removes all suspicion and must be honored imme- diately on presentation. A cashiei* may, by letter, addressed to a corresponding bank, direct that the bank's account be charged with a certain sum, or payment be made to a certain person, or that a remittance be made by the bank to a certain person or bank; such written instructions are frequently used and operate as a check upon the bank's account; but a cashier's check, which is drawn and delivered to a person and which becomes transferable, should bear on its face all the essential elements- marking it as an intrument free from suspicion and doubt as to its genuine- ness. The form, therefore, and the essential requisites may be important to the holder of the check, but if lacking any of these essentials and it can be shown that the cashier was acting OH. X.] Banking. 169 in his oflScial capacity, the bank will be held responsible for the same. The cashier's check, when drawn upon his own bank, is an acknowledgment of the fixed indebtedness due by the bank; and, unlike other checks, in this particular, the holder is not required to present the same for payment within any specified time. It being an acknowledged indebtedness of the bank, it may be presented for payment at any time before being barred by the Statute of Limitation. § 132. Power to receive offers for the purchase of bank securities. As a general agent of the bank the cashier has the authority to receive offers of purchase for the property or securities belonging to the bank; but he is not authorized to dispose of, or sell such securities without an order from the board of directors. The Supreme Court of the United States, in the case of First National Bank of Xenia, Ohio, Plaintiff in Error, v. Daniel M. Stewart and Martha A. McMillan, Admrs. of the Estate of Daniel McMillan, Deceased, 114 U. S. 224, holds that it is within the scope of the general authority of a cashier to receive offers for the securities of the bank, and to state whether or not the bank owns securities which a customer wanted to buy. His statement to a person who was in treaty to purchase that the bank was not the owner of a certain security in his manual possession as cashier, was clearly within the line of his duty and was binding on the bank. § 133. Cashier has inherent power to deal in bills of exchange. A bill of exchange is "A written order from one person to another, directing the person to whom it is addressed to pay to a third person a certain sum of money therein named." ^ "A foreign bill of exchange is one which the drawer and drawee are residents of countries foreign to each other." TWood, Byles on Bills, 1. 170 The Cashiee. [oh. x. In this respect the States of the United States are held foreign to each other.* An inland bill of exchange is one of which the drawer and drawee are residents of the same State or country." A cashier has the inherent power to buy and sell foreign or inland bills of exchange. The National Banking Act, by provisions of section 5197, Eevised Statutes of the United States, authorizes national banks to purchase, discount or sell a bona fide bill of exchange. It is not a violation of the National Banking Act for a cashier to discount bills of exchange drawn in good faith against actually existing values, though the amount exceeds the amount, which by the law may be loaned to any one per- son. It is not construed as money borrowed. Dealing in bills of exchange is a part of the business of banking and it becomes the duty of the cashier in the purchase and sale of the same to endorse them over to the buyer. ^'' If the bank's charter, being a savings bank, forbids this branch of the business, the cashier has no authority to buy and sell bills of exchange, but should he do so, in violation of the charter, or the direction of the board of directors, the pre- sumption of his authority, without notice to the contrary to a customer, will bind the bank. The cashier of a national bank, being authorized to buy aijd sell bills of exchange, a national bank may charge the rate of interest allowed by the State, or a rate that may be allowed to State banks of issue. § 134. Cashier has charge of personal property. The cashier, by the very nature of his office, has charge of all the personal property of every nature belonging to the bank; and is held to a strict account for the same. He has full charge of the cash. Chief Justice Mitchell 8 Dickens v. Beal, 10 Peters 572 ; a Ragsdale v. Franklin, 25 Miss. Phcenix Bk. v. Hussey, 12 Pick. 143. 483 ; Green v. Jackson, 15 Me. 136 ; lo Fleckner v. United States Bank, Armstrong v. American Ex. Bk., 133 8 Wheat. 338; Bank of New Haven U. S. 433. V. Perkins, 29 N. Y. 554. CH. X.] Banking. 171 holds that he should be able to give an account of the same at any time when called upon to do so. If he is charged with the responsibility of giving an account of the cash of the bank at any time, inherently he is endowed with the power of paying all the lawful demands when due and presented against the bank. He may open an account with a customer or refuse the same. Being held accountable for the cash, he may open an account, and select a correspond- ent bank and deposit with such bank such portion of the funds or cash as in his judgment is prudent and for the best inter- ests of the bank. Having authority to select a correspondent, and establish such a depositary for the bank, he has authority to withdraw the same at any time. He is also charged with the care and safe keeping of all the notes, bonds, bills and other securities and valuable papers belonging to the bank; and may, when the necessity arises, during the ordinary course of business, sell, transfer and dis- pose of the same, and, it will be presumed, until the contrary is shown, that he sold the, same on behalf of the bank and was authorized to do so by the directors, or that they ratified his act.'" The inherent powers of his position, holding him responsible for and placing in his charge all the personal property of the bank, and the auxiliary power, when the necessity arises to surrender and transfer notes, fixes a very great responsibility upon him and the office. Having charge of the personal property of the bank, a per- son dealing with him in his capacity as cashier may assume that he has authority to dispose of the property, and in the ordinary transactions and dealings with him, such person is not required to inquire into the limitations or restrictions placed upon him or his authority. If, however, the transactions of the cashier in the disposi- tion of property belonging to the bank, raises a doubt as to his "Hawkins v. Fourth National Story on Agency, § 114; Jones v. Bank, 49 N. E. 957; Wild v. Bank Hawkins, 17 Ind. 550, 559; Ryan of Pasa Maquoddy, 3 Mason 505; v. Dunlap, 17 111. 40. 172 The Oashiee. [ch. x. authority to do and perform the act, it would be the duty of the person dealing with him to investigate and inquire into his authority. In the case of Franklin Bank v. Stewart, 37 Me. 519, the court in discussing the powers and duties of agents and refer- ring to the power of a cashier, says that : " When a bank presents its cashier as habitually performing certain acts or duties, these may be regarded as official acts or duties, and for the performance of them he may be considered as its general agent." " § 135. Power to endorse negotiable paper. The power of the cashier to endorse negotiable paper of the bank is inherent in the office; and it becomes his duty, when so required, to make the endorsement and transfer such paper. The power to transfer paper for collection is one which authorizes the cashier to endorse the same. The various forms (or language) employed in the endorse- ment of negotiable paper is important. There are several variations of the simple endorsement " for collection," evidencing the same intent to retain title in the endorser. For example, an endorsement in the following form " For collection for account " of a certain person named does not pass the title to the paper. ^* Nor does the endorsement which reads as follows, " Pay to B or order, for account of C," pass the title of the paper.^* ITeither do the endorsements, " For collection on account," or, " For collection and credit," pass the title of the paper.^° It is held, however, jn the case of Fawsett v. National Life Insurance Company, 5 111. App. 272, that an endorsement made by the payee in the following form, " Pay to the Second 12 Franklin Bank v. Stewart, 37 i* White v. National Bank, 162 Me. 519. U. S. 658. 13 First National Bank of Crown is Armstrong v. National Bank of Point V. First National Bank of Boyertown, 90 Ky. 431. Bichmond, 76 Ind. 561. OH. X.J Bah^king. 173 National Bank of M. for collection of account of H., executor of A., deceased," passes the title to the paper. If the endorsement is made by the cashier in his individual capacity, it may become a question whether the transaction is one which will bind the bank. As previously stated in the discussion of the question as to the individual or official signing of the signature of the cashier, an endorsement signed by him in a personal capacity may raise the question of fact. Is the signing a personal or an official act ? If it can be shown that it was a bank transaction, the bank is bound by the language of the endorsement. § 136. Endorsement for accommodation. The cashier of a bank has no inherent authority to endorse paper of another in behalf of the bank, for accommodation. Neither can this power be conferred upon a cashier by the board of directors. The bank has no authority to enter into such transiactions. There are certain limitations placed upon him as cashier in the endorsement of paper belonging to the bank, but he has the right inherently in his office to endorse for collection and discount, but has no authority to transfer judgments standing in favor of the bank. His authority in this respect only extends to negotiable instruments. The president and directors are the only persons who can legally make a transfer of a judg- ment; and where the cashier acts as their agent, it should appear in evidence.^* It has been held in the case of Crockett & Harper v. Young at al., 1 S. M. & M. (Miss.) 214, that the cashier has the authority under the direction of the board of directors to endorse negotiable paper in payment of the bank's debts. This power, under direction of the board of directors, authorizes the cashier to settle with all legitimate creditors of the bank while the same remains solvent, by assigning to them the negotiable promissory notes of the bank. 16 Holt et al. V. Bacon et al., 25 Miss. 567. 174 The Cashier. [ch. x. The question, plainly stated, is, can a hank transfer its secu- rities to depositors in settlement of their deposits? The cashier has no inherent power or implied authority to make transfers or assignments of the bank's negotiable instru- ments for this purpose, but under authority by the board of directors^ he may assign and deliver negotiable notes to any depositor of the bank in payment and settlement therefor. In the case of Schneitman v. Noble, 75 Iowa 120 (39 IST. W. 224), the court holds that in the absence of a more special authority, the cashier would be restricted in his power to bind his principal to the doing of such acts as are usually performed by persons who occupy the position he held. The court holds in this case that in the absence of proof of special authority which the cashier did not have, he was devoid of the power inherently in his office to settle with depositors, by transferring to them promissory notes or other securities of the bank. The opinion denies the inherent power upon the following grounds, that the agent cannot bind his principal " only by acts done in the usual and ordinary course of business." We find then that the law estahlishes the rule to be that the cashier of a bank may, without special authority from the board of directors, transfer and endorse the negotiable paper of the bank in its ordinary course of business; but that he is precluded from making such endorsements with the intent and purpose of settling with a creditor or depositor of the bank, and that before such settlements are made, direct or special authority must be obtained, or his acts afterwards ratified by the board of directors. The rule, as laid down and universally adopted and sus- tained by the courts, cannot be questioned, and possibly should not be in any way criticised, but it is certainly open to dis- cussion ; as stated, the rule gives the cashier the inherent power to assign and endorse all negotiable paper belonging to the bank in the ordinary transactions which may daily occur. The cashier of the bank is inherently endowed with the power to receive or reject a deposit. He may also at any time OH. X.J Baitking. 175 upon demand, and when requested so to do, repay such deposits. He has the inherent power to repay a deposit before a demand is made for the same and settle the account with the depositor. As cashier of the bank he may under direction make dis- counts, and perform all other acts necessary, and relating to the notes and personal property belonging to the bank. His power in all these respects is not limited by restrictions or directed by special authority from the board of directors. They are powers, as stated, inherent in the office. It becomes his duty to pay deposits upon demand and to pay the same in current funds. While this is the rule, and one which, in nearly all cases, the depositor would insist upon being fulfilled, we can conceive of no reason or law prohibiting the cashier through the inherent power in his office, from transferring a negotiable instrument of the bank if at the time of the trans- action the bank is solvent, to the depositor in payment of his deposit. The cashier cannot settle with a depositor in this manner without his consent, as all deposits, when repaid as previously stated, must be paid in current funds. The transaction, there- fore, is one which, if the depositor accepts, agreeing to take in lieu of current funds the assignment of a note belonging to the bank, no one should be heard to complain. § 137. Cashier's powers and duty when " run on bank." When a run occurs upon a bank the powers of the cashier, in relation to the property of the bank, are not changed or in any way affected. All the rights inherent in his office, or special powers conferred upon him by the board of directors, or granted to him by the charter and by-laws of the corporation, are such as must, during such dangerous periods, all be put in use. A run may occur at any time. It is frequently induced or occasioned by a false report put into circulation by some enemy of the bank or suspicious person. When the bank is being run by its depositors, and they are 176 The Cashieb. [ch. x. demanding the immediate payment of their deposits, the cashier being usually in charge and the executive officer of the bank, and having under his control and direction all the funds of the bank, he has the inherent power to put into exercise every usage, custom, privilege, and law, in order to protect the interests of the bank; and see that no depositor or creditor obtains a preferred position or right over another creditor equally entitled. In such an emergency the cashier may personally take charge of all the affairs of the bank to the extent of examining into each transaction as it may occur. He has the power to refuse payment upon the presentation of a check, until sufficient and reasonable time is given to ascertain that the account upon which the check is drawn is in sufficient funds to pay the same ; and not until such examination of the drawer's account, can the holder of the check insist upon payment. In a previous chapter the case of Marzetta v. Williams was cited to show that the cashier was entitled to a reasonable time in which to make examination and payment of a check when so presented. The cashier, as stated, being held responsible for all the funds of the bank, is entitled to know personally that the drawer of a check is in funds and is entitled to payment. To obtain this information requires time for the purpose of examining the account of the drawer. In the settlement with the drawer of the check and payment of the same, the person to whom the funds are to be paid is entitled to receive payment in " current funds." The cashier has no right to purposely delay the payment of a check when properly drawn and presented for payment, if the drawer has the funds deposited in the bank to his credit at the time of presentation sufficient to pay the same. But he may take sufficient time to satisfy himself as to the con- dition of the drawer's account, and being satisfied as to his right, it then becomes the duty of the cashier personally, or through the paying teller of the bank, to pay the same. It then becomes the duty of the cashier, under such extraor- dinary conditions affecting the bank, to act with great care CH. X.J Banking. 177 and deliberation. More than ordinary care and supervision is demanded of him in such an emergency. His duties are at all times burdened with responsibility, but when the bank's credit and life is in jeopardy, his duties become very strenuous, and his powers under such emergencies affecting the bank are enlarged, and he may, in order to preserve the bank's credit and safety, make discounts, assign notes, bills of exchange, and pledge of securities of the bank and when authorized borrow money to meet the immediate demands of the bank.^^ If his function or right to borrow money by executing a note in the name of the bank is divested and the right alone is in the board of directors, then during such an emergency, he cannot borrow money for the bank. § 138. Cashier borrowing money — Inherent power. This is a power that many cashiers assume and exercise, but the authorities do not agree that it is inherent in the office. The principles of law do not sanction it as an inherent power in the office. Some of the leading authorities, however, lay down the rule without qualification or restriction and say that the cashier may borrow money on behalf of the bank, and that this power is inherent in the office; most of the authorities justify and sanction this extraordinary authority by simply stating that custom and usage in the banking business author- ize it. It is necessary in the presentation of this important question, to ascertain the true position and rights of the cashier in this particular. He is the executive officer of the bank. He is in charge of, and is held responsible for, the cash and all the per- sonal property of the bank. He can accept or refuse accounts. He can loan money by the order of the board of directors and take notes. He can buy and sell notes, foreign and inland, bills of exchange. He can certify checks for others, but not his own check. He can issue letters of credit, certificates of "City National Bank v. Chemi- Y. 152; Sturges v. Bank of Circle- cal National Bank, 80 Fed. Rep. ville, 11 Ohio St. 153. 869; Barnes v. Ontario Bank, 19 N. 12 178 The Cashiee. [ch. x. deposit, attend to the transfer of stock, endorse notes for col- lection, employ an attorney to make collections, all of which powers inherently belong to the office of cashier ; but the right to borrow money for the bank certainly is not an inherent power belonging to the office. In the discussion of this important question, and in order to determine his rights, it becomes necessary to examine the leading authorities upon the subject. It should be understood that there is no contention upon the question as to the power of the bank, when acting through its board of directors, to borrow money for the corporation, pro- viding it acts within its corporate authority and the law. He may bind the bank to those who are acting without notice or lack of authority. But the question here discussed is, has the cashier the inher- ent power to borrow money for the bank where the parties are charged with lack of notice ? ^* In presenting the question it also becomes necessary to deter- mine to what extent are the rights and powers of corporations in this particular. The borrowing of money by a corporation is the creation of a debt; therefore, the question reduces itself to one stated as follows: When and how may the corporation (bank) borrow money? Does a custom or usage authorize a corporation, through one of its executive officers, without authority from its board of directors, to create a debt ? Banking corporations are institutions, organized and author- ized by law. A national bank derives all its powers from the laws enacted by Congress, and their powers are limited to the express provisions of law and such incidental powers as are necessary in the conduct of their business. The statute governing national banks is silent upon the ques- tion of power of a national bank to borrow money; but it has been held that it has incidentally the power and that this power may be used. This question has been discussed in 18 Bank of Pike v. People's National Bank, 118 N. Y. Supp. 641. CH. X.] Banking. 179 another chapter under the title " Banks borrowing money." The discussion there relates to the power of banks to borrow, while here the question is the " power of the cashier to borrow." In the case of Western National Bank v. Armstrong, 152 U. S. 346, the court, in discussing the power of an executive officer of the bank to contract an indebtedness, where it has been shown that the vice-president of the bank, without author- ity from the board of directors, had borrowed the sum of $200,000, says : " It cannot be pretended as such that he, the vice-president, had power without authority from the board to bind the bank by borrowing $200,000 at four months' time." And upon the question as to the authority of the bank, though acting through its board of directors, to borrow, the court says : " It might even be questioned whether such a transaction would be within the power of the board of directors." We find the Supreme Court of the United States authoritatively declaring the law to be that an executive officer of the bank has no author- ity to bind it or borrow money for its use, without the authority of the board of directors. The inherent authority of the cashier to borrow money for a national bank, is denied by the Supreme Court of the United States. The court, in its opinion, further states : " Nor do we doubt that a bank in certain circumstances may become a temporary borrower of money, yet such transactions would be so much out of the course of ordinary and ligitimate banking as to require those making the loan to see to it that the officer or agent, acting for the bamik, had special authority to borrow the money." The law of the Supreme Court of the United States, as it stands at the present time, upon the inherent power of an executive officer of a national bank to borrow money, is, that he has no inherent power ; that such power can only be used by him by authority and under direction obtained from the board of directors. State banks (so-called) are organized under special banking laws, or under the general incorporation laws enacted by the 180 The Cashiee. [ch. x. Legislature of the various States. Where a banking corpora- tion is incorporated under such general or special laws, and the law restricts such corporation in, or provides how, debts may be created, no debt of any such corporation is valid or binding upon it unless all the necessary steps in conformity to law are taken; and a cashier of any such banking corporation has no inherent power to bind it by borrowing money, which act is creating a debt, unless such power is conferred upon him by the directors. In view of the fact that the Supreme Court of the United States has declared the law to be, that under the National Banking Law the cashier or executive officer has no power inherent in his office to borrow money for the bank, it is deemed advisable to review some of the leading cases of the State courts which have held that the cashier has power as a general agent of the bank inherently in his office to borrow money for the bank. In a leading case determined by the Supreme Court of the State of Illinois, Mr. Justice Sheldon, delivering the opinion of the court, sustains the Appellate Court, which holds that where the cashier of a bank is also the general manager of the same, and that it was one of the usual customs or operations of the bank, in the vicinity or town in which the bank was located, to borrow money on time and execute a note therefor, that such person while acting as cashier and manager for the bank, who borrowed in its name a certain sum of money and executed and delivered a note, held : that the bank was liable.^* It must be noted that in this case the cashier was also shown to be the general manager of the bank, and was proven to be the general agent of the bank, and at the time of the execution of the note by the cashier it was shown that the bank was a private banking institution, not incorporated under any law of the State and therefore not under the same limitations and restrictions as to the creation of debts imposed upon incorpo- rated banking companies. IS Crain et al. v. National Bank, 114 Dl. 516. CH. X.] Banking. 181 An early and leading case frequently cited as giving inherent power to the cashier of a bank to borrow money is the case of Barnes v. Ontario Bank, 19 N. T. 152. In this case it appears, that the cashier and chief financial officer of the bank issued certificates of deposit of the bank and delivered the same to one Hollister who had no funds in the bank, but who was directed by the cashier to negotiate the certificates. The agent, Hollister, endorsed the certificate and procured a third person to sell it. The questions presented in this case are: 1. Did the bank have power to borrow the money ? 2. Was the cashier the proper agent to execute that power without any special delegation of authority thus to act. The court says : " That the power to borrow existed was determined by this court upon the fullest examination in the case of Ourtis v. Leavitt, 15 W. Y. 9. That the cashier, in virtue of his general employment, could exercise the power, was not denied upon the argument and the proposition does not admit of a reasonable doubt." " In the next place, if the baiik could borrow money, it could execute and deliver an assurance or undertaking for the pay- ment of the sum alone in any form not forbidden by the terms or just interpretation of some statute of this State. This was also settled in the case above mentioned. There is no pretense that these certificaties of deposits, payable, as they were, on demand, fall within any of the restraints imposed by law upon the banking institutions of the State. They were, therefore, valid instruments, so far as any question of corporate power to issue them is concerned." The law of the State as it existed at this time authorized the cashier to draw and sign certificates of deposit, and it appearing that this particular certificate of deposit, being authorized by law and having passed into the hands of an innocent purchaser, without notice of the fact that Hollister, to whom the same had been issued, had made no deposit in the bank representing the same, the bank was rightfully held responsible. The court, in further discussing the question, says : " The cashier, therefore,, in issuing such instruments, acted under his 182 The Cashiee. [ch. x. authority, and in so doing he wielded the power of the cor- poration itself. The corporation, therefore, cannot be per- mitted to repudiate the obligation on the mere ground that it was not duly executed." It must be noted that the law authorized the cashier to draw certificates of deposit, but the assumption is always that they are drawn upon a deposit which has previously been made by the owner of the certificate. It cannot be contended that it is a transaction in the nature of creating a debt as debts are usually created, namely, by executing a promissory note, and therefore this case, when cited in support of the inherent power of the cashier to borrow money, is not in point. In the case of Ballston Spa Bank v. The Marine Bank and others, 16 Wis. 125, the court, in discussing the inherent power of the cashier to borrow money, disposes of the question as follows : The court says : " It was competent for the cashier, as agent for the hoard of directors, to execute the promissory notes in question and bind the bank; for such execution. Whether, then, the cashier has prima facie authority by virtue of his office, or whether absolute, or whether, still, the parties seeking to charge the bank through his act must give evidence that he was expressly authorized by the board of directors, we need not now inquire. A subsequent ratification is equivalent to a previous expressed authority." The court very carefully and purposely refrains from declar- ing that the cashier has inherent power to execute promissory notes and borrow money for the bank, but very correctly states and emphasizes the law to be that if such notes are issued, a suhsequent ratification is equivalent to a previous express authority. A recent and very important case discussing this question is the case of City National Bank v. Chemical National Bank, 80 Fed. Eep. 859. The importance of this case demands that the opinion of the court should be given in full. Opimon: In this suit by the Chemical National Bank of St. Louis, Mo., against the City National Bank of Quanah, Tex., the OH. X.J Banking. 183 plaintiff by its petition sought to recover against defendant on certain promissory notes executed by the defendant bank through its cashier, William F. Brice. There was also an account in the petition for money loaned, covering the same transaction as that embodied in the notes. The City National Bank defended on the ground that the action of Brice was not its action, and that it never made the loans or executed the notes, and that the transaction by Brice was for his personal benefit, and did not inure to the benefit of the bank in any way. The record dis- closes the fact, which is undisputed, that Brice was the cashier of the City National Bank, and that in 1894 he applied to the cashier of the Chemical Bank for accommodations, proposing to keep a balance in the Chemical Bank, and to send it the collec- tions in St. Louis of the City National Bank. Brice also sent to the Chemical National Bank, to be used for comparison, what he represented to be, and what purported to be, the signatures of the officers of the City Bank ; also what purported to be a reso- lution of the directors of the City Bank, authorizing him as cashier to borrow from time to time, and to rediscount with the Chemical Bank, the whole or any part of $10,000, and to deposit as collateral paper made by the customers of the City National Bank. The correspondence resulted in an agreement between the cashiers of the two banks, and on August 27, 1894, a note for $5,000 was sent by Brice to the Chemical Bank. This note was signed " City National Bank, by William F. Brice, Cashier," with the seal of the bank affixed. Certain col- lateral, amounting to $7,640, consisting of what purported to be notes payable to the City Bank, was forwarded with this note. Subsequently a note similarly signed was made on September 27, 1894, for a like amount, with which collateral, or what pur- ported to be collateral, amounting to over $8,000, was placed. The proceeds of these notes, when discounted by the Chemical Bank, were placed to the credit of the City Bank, but unques- tionably a large proportion of the amount was used by Brice for his individual benefit. Soon after these transactions 3,000 silver dollars were sent by the Chemical Bank, on a telegram requesting the same, signed " City National Bank," and thig 184 The Cashiek. {ch. x. silver, according to the evidence, went into the vaults of the City Bank. There was considerable evidence in the case, but it need not be set out in detail, as the above statement embraces the material facts necessary to an understanding of the issues involved. The court directed a verdict, under all the evidence in the case, for the plaintiff, and the question presented is, was this action of the court right ? 'Not only did Brice, the cashier of the City Bank, have the usual powers of a cashier — of general management of the bank's business, as to loans, rediscounts, etc. — but the testi- mony of the president shows that the actual management of the City Bank was left almost entirely to Brice after April 2, 1894. Brice seems to have been left by the president and directors of the bank, in connection with his son, as assistant cashier, in full control of the bank's business. The letters written by Brice in reference to loans from the Chemical Bank, and all the correspondence, were on the regular letter paper, and what was purported to be a copy of a resolution of the directors authorizing the loan. There was printed on all the paper so used this heading: The City National Bank. Capital $100,000. G. S. White, President. J. W. Golston, Vice President. Wm. P. Price, Cashier. E. H. Brice, Asst. Cashier. While it appears to be true that the signature of the presi- dent, though a good imitation of his genuine signature, was a forgery, and while what purported to be a resolution of the board of directors was also a forgery, there was nothing what* ever to excite the suspicions of the officials of the Chemical Bank as to their genuineness. The action of Brice was within the general scope of his duties as cashier of the bank, and there was nothing whatever in it calculated even to arouse inquiry as to Brice's honesty, and as to the transaction being made in good faith on behalf of the City Bank. Any authority that may be found to the effect that redis- counting the bank's paper does not come within the scope of CH. X.J Banking. 185 the powers of the cashier of a bank would not be applicable to the facts here. There is evidence in this case to show that it was customary for similar banks in Texas, during certain sea- sons, to borrow money this way. Considering the amount and character of these loans, and the whole nature of the trans- action with the Chemical Bank, there was nothing done, as it appeared to the Chemical Bank, that Brice could not legally and properly do. The cases of Western Nat. Bank v. Armstrong, 152 TJ. S. 346, 14 Sup. Ct. 572, and Chemical Wat. Bank v. Armstrong, 13 0. C. A. 47, 65 Fed. 573, are not applicable, on their facts, to this case. The character and amount of the loans, and the manner in which they were made in both of these cases, were such, as might well have raised suspicion as to the regularity and bona fide character of the transaction. In this case the negotiations and all the correspondence were such as might well lead the officers of the Chemical Bank to believe that Brice was acting on full authority, with perfect good faith and honest intention. The transaction with the Chemical Bank being, as we have stated, within the general scope of the duties of a bank cashier, and Brice having been placed by the authori- ties of the City Bank in a position and afforded facilities to enable him to make these loans as its representative, we do not see how the court could have done otherwise than direct a ver- dict, as it did, in favor of the plaintiff on these notes. A sen- tence or two from leading authorities will indicate without multiplying citations, the law we think applicable to this case : " The cashier is the executive officer through whom the whole financial operations of the bank are conducted." Merchants' Bank v. State Bank. 10 Wall. 604. " The cashier has inherent power to borrow money in the regular course of the business of the bank, and may secure the loan by note or pledge of the bank's property." Morse, Banks, § 160. See also Mor. Priv. Corp., §§ 539, 597. The first specification of error is that the court erred in admitting in evidence the notes executed by Briee as cashier of the City Bank to the Chemical Bank, without proof of execu- tion, notwithstanding the plea of non est factum. They were 186 The Cashiee. [ch. x. admitted on an admission by defendant that Brice, who signed them, was the cashier of the defendant bank, that the same were in his handwriting, and that the seal aflSxed was the genu- ine seal of the bank. There was no error in this. The second specification of error is that the court erred in admitting in evidence what purported to be a copy of the reso- lution of the board of directors authorizing Brice to make these loans. There seems to have been no question but that Brice placed this paper, containing what purported to be the action of the board of directors, with the Chemical Bank, in connec- tion with the loan transaction; and we think the paper was properly admitted, its weight and value as evidence to be after- ward determined. The third specification of error is that the court erred in refusing to instruct the jury to return a verdict for the defend- ant. In this the court was clearly right. The , fourth assignment of error is that the court erred in instructing the jury to return a verdict for the plaintiff. We think, on the whole case before the court, for the reasons we have heretofore given, that this instruction to return a verdict for the plaintiff was right. The court having correctly directed a verdict for the plaintiff, the judgment based thereon should be affirmed; and it is so ordered." The facts in this case show that the Chemical IsTational Bank believed that Brice was acting under full authority, with per- fect good faith and honest intention. Belying upon such author^ ity and resolutions and believing them to be genuine, author- izing Brice to borrow the money, the court held that the City National Bank could not defeat the debt for lack of authority, while at the same time accepting the benefits resulting from the loan. The court, also, in passing upon the facts, justifies his views under the rule that custom regulates and controls ; that if it is customary for bank officers within a banking district or within a State to borrow money for the bank independent of any expressed or authorized power, this custom should bind the CH. X.] Bankiitg. 187 bant. Such a custom is then a particular custom and is con- fined to a particular district, and to establish such a custom in order that it may be accepted as a law of that district, it is necessary to show its existence for so long a period of time that " the memory of man runneth not to the contrary." It is also established that a usage or a custom is never admissible to oppose or alter a mandatory law or to make the legal rights of parties other than they are by law. It is clear that a cashier of a bank has no legal right or inherent authority to execute a note in the name of the bank unless first duly authorized. A corporation can create lawful debts only by a full compliance with the law, and when a custom is relied upon to legitimize an act which is extraordinary and outside of the expressed or authorized power of a bank officer, i. e., the power of borrow- ing money, it should be clearly shown in every case that the transaction is one coming fully within the rule of necessity and a usual transaction, in order that the business of the bank may not in any way be. impaired. It should be clearly understood that there is a distinction between borrowing money for the bank by direct acts as the making of notes in the name of the bank, and discounting paper or notes owned and held in the usual course of business by the bank. The latter are often discounted by the cashier when emergencies arise and in order to save the bank from distress and also in the usual course of business in the settlement of accounts between banks, such transactions are not uncommon and come fully within the implied or inherent power of a cashier. No rule or custom of the country or district need be shown to sustain such transac- tions, for they are, or should be, well known to all banks and bankers. But for the cashier of a bank to execute a note in the name of the bank, and rediscount the same, and obtain the money thereon through the discount, and thereby make the bank liable for the same without any expressed power whatever from the board of directors is very dangerous power to be upheld, upon the principle of a custom, but it appears that the holding of the courts are almost universally based upon this rule that the cashier was known to be the cashier and in charge 188 The Oashiee. [ch. x. of the bank at the time, and as such he redisconnted paper pur- ported to be executed by himself for the bank ; that such redis- counts, although not authorized by the board of directors, the bank is held liable for. The law of custom binds the bank receiving the benefit of the same. Many cases are cited in support of this holding and many of the courts are leaning to- the more liberal and broader rule of liability of the bank and hold " that although the endorsement was not authorized by the board of directors, and the proceeds of the loan were not in fact received by the bank, but were misapplied by the officers who procured it, the bank was liable/" This latei doctrine is in conflict with the case in Western Ifational Bank v. Armstrong, 152 U. S. 346. The rule as well known and unquestioned is that the direct- ors wield all the powers of the corporation for the purpose of conducting its business. In the case of a ministerial officer of the corporation, such as the cashier of a bank, the power to borrow money must emanate from the board of directors and ought to be proven. The power, however, need not be proved by the production of" the official records, but may be proved by circumstances. The Supreme Court of the United States, in the case of Min- ing Co. V. Anglo-California Bank, 104 TJ. S. 194, in discussing this question in connection with the provisions of the Civil Code of California, §§ 305, 354, says: " It is equally clear that the board had, as incident to the general powers conferred by law upon the company, power to borrow money for the purposes of the corporation, and to invest certain officers with authority to negotiate loans, to exe- cute notes, and to sign checks drawn against its bank account. And it is settled law that the existence of such authority in subordinate officers may, in the , absence of express statutory prohibition, be shown otherwise than by the official record of the proceeding of the board. 20 First National Bank v. Arnold, of Pike v. People's National Bank, 156 Ind. 487; City National Bank 118 N. Y. S. 641; Cherry v. City of Quanah v. Chemical National National Bank, 144 Fed. Bep. 587.. Bank, 80 Fed. Bep. 859; State Bank <3H. X.] Banking. 189 " It may be established by proof of the course of business between the parties themselves; by the usages and practice which the company may have permitted to grow up in its busi- ness ; and by tihe knowledge which the board charged with the duty of controlling and conducting the transactions and prop- erty of the corporation, had, or must be presumed to have had, of the acts and doings of its subordinate in and about the affairs ■of the corporation," That the cashier may be delegated with the power to borrow money for the bank, or his acts afterward ratified, is not ques- tioned; but we are unable to find a sound opinion of a court -which goes to the extent of giving unlimited inherent power to the cashier to borrow money. We think the views of the court as expressed in Western National Bank v. Armstrong, 152 TJ. S. 346, express the law upon the subject. See 220 Mo. 538. § 139. Inherent power to collect debts. The cashier has inherent authority to collect debts due the bank, and to accomplish this purpose he may engage an attorney and agree to pay him a reasonafble compensation for his services. His power in this particular is co-ordinate with that inherently given to the president of the bank.^^ He may, of course, receive payment obtained from collections, but is not permitted to accept in payment anything but money.^^ He has also authority to release a mortgage debt by a release duly executed in the name of the bank, or by a release entered upon the record in the recorder's office, where such a release is authorized by statute.^' He has power to transmit notes for collection, but it has been held that he has no power to enter into a compromise with a creditor of the bank; and settle a claim in favor of the bank for a sum less than the actual amount of such claim. When collateral security is held by the bank to secure a debt 21 Hoot V. Olcott, 42 Hun (N. Y.) N. C. 561, 32 S. E. 889; Bank of 536; Young v. Hudson, 99 Mo. 1025. Commerce v. Hart, 37 Neb. 197. 22 Piedmont Bank v. Wilson, 124 23 Ryan v. Dunlap, 17 HI. 40. 190 The Cashiee. [ch. x. due the bank, when the debt is paid he has power to surrender and assign the collateral security to the owner.^* It has been held in the case of Bridenbecker v. Lowell, 32 Barb. (N. Y,) 9, that the cashier in the securing of a collection and debt of the bank may make a compromise of the claim, but this power strictly and properly belongs to the board of directors. § 140. Liability of cashier. Lord Loughborough, in 1 H. Bl. 151, lays down the follow- ing rule : " If the man be in a situation or profession to imply skill, an omission of that skill is imputable to him as gross negligence." ^° Where a cashier fails to notify the maker of a note, which is held by the bank, and the bank suffers a loss and an indorser through such negligence escapes liability, the cashier is liable to the bank, to the extent of the loss sustained.^® The cashier contracts to act in good faith and with entire honesty in transacting all the business of the bank, and to exercise as high a degree and skill as is generally exercised by business men in the management of such business; but he is not libale for honest errors in judgment, nor for the failure to take the utmost precaution possible in making investments for the bank.^^ The cashier is liable in damages for an injury arising from his wrongful or unofficial act, or for a violation of the direc- tions imposed upon him by the board of directors to perform. " Thus it has been held that where losses occur to a savings bank through investments by the president in securities not within the restrictions of the charter, by means of checks signed and left in blank by the treasurer, the president and treasurer are personally liable, the president first and the treasurer next.^° 2* Mathews v. Massachusetts Na- 26 Bidwell v. Madison, 10 Minn. 1. tional Bank, 1 Holmes 3&6. 27 Exchange Bank v. Gardner, 73 2B Story, Partnership, §§ 169, 170, N. W. 591. 171, 173; Story, Agency, §§ 182, 28 Williams v. McKay, 46 N. J. 184; 1 Parsons, Cont., 73, 74 and Eq. 25, 18 Atl. 824. note; 20 Pick. 167. CH. X.J Banking. 191 An honest error of judgment while in the exercise of ordinary care does not make the president liable to the corporation."' It has been held that, although he shoxdd have consulted the board of directors before authorizing certain expenditures, yet if he acted in good faith and did no more than what they probably would have authorized, he was not liable to the corpo- ration for damages.'" It has also been held that a president of a national bank is guilty of no want of ordinary care in accepting a leave of absence granted to him of one year on account of ill health and is not to be held for neglect of duty because he did not resign.*^ It has been held, that the president of a corporation is liable for allowing a debt of a corporation with which he is closely connected to accumulate until the debtor corporation becomes insolvent, when it could have been saved by prompt action.^" But he cannot be held responsible for not defending a suit where there is no good defense.^^ The cashier may be liable on his bond for making improper loans, although the by-laws of the bank provide for the appoint- ment of a committee to control the making of loans.^* Agency: Where cashier is agent of another and not for the bank, see Hillard v. Lyons, 180 Fed. Eep. 685. Liability of hank for acts of cashier. The rule is that a bank is liable for the acts of its servants to the same extent that individuals would be. Alabama. — Central R., etc., Co. v. Smith, 76 Ala. 572, 52 Am. Eep. 353. California. — Maynard v. Fireman's Fund Insurance Co., 34 Cal. 48, 91 Am. Dec. 672. Colorado. — American National Bank v. Hammond, 25 Colo. 367, 65 Pac. 1090. 29 Gubbins v. Bank of Commerce, 32 Doe v. Northwestern Coal Co., 79 111. App. 150. 78 Fed. Eep. 62. 30 Davis V. Memphis City E. Co., 33 Boston Tailoring Honse v. 22 Fed. Eep. 883. , Fisher, 59 111. App. 400. 31 Briggs V. Spaulding, 141 U. S. s* Wallace v. Exchange Bank, 126 132, 11 S. Ct. 924, 35 L. Ed. 662. Ind. 265. See also Movius v. Lee, 30 Fed. Eep. 298. 192 The Cashieb. [ch. x. Connecticut. — Goodshead v. Eastbadam Bank, 22 Coim. 530, 58 Am. Deo. 439. Georgia. — Home Machine Co. v. Sender, 58 Ga. 64. Maine. — Frankfort Bank v. Johnson, 24 Me. 490. Maryland. — Western Maryland R Co. v. Franklin Bank, 60 Md. 36. Massachusetts. — Eeed v. Home Savings Bank, 130 Mass. 443. Missouri. — Iron Moimtain Bank v. Mercantile Bank, 4 Mo. App. 505. New York. — Fishkill Savings Inst. v. Fishkill ITational Bank, 80 N. Y. 162, 37 Am. Kep. 595. Ohio. — Citizens' Savings Bank v. Blakely, 42 Ohio St. 645. Tennessee. — Wheless v. Second l^ational Bank, 1 Baxt. (Tenn.) 469, 25 Am. Eep. 783. Washington. — Pronger v. Old National Bank, 20 Wash. 618, 56 Pac. 391. United States. — Carlisle First National Bank v. Graham, 100 U. S. 699 ; Nevada Bank v, Portland National Bank, 59 Fed. Eep. 338, § 141. Cashier responsible for subordinates, when. It is the duty of the board of directors to employ all the subordinates and clerks of the bank, but in the very nature of the office of cashier, the tellers and bookkeepers are his sub- ordinates and subagemts and only through improper or negligent performance of his duty as manager and superintendent of the bank can he be held for the default or errors of his subordinates. He is only held as cashier to exercise such care and supervision as a man of ordinary prudence would do in the conduct and management of his own affairs.'^ But where the cashier, without authority from the board of directors or necessity, employs an assistant on his own account, and the assistant fraudulently embezzles the funds of the bank, the cashier having fraudulently concealed the fact of such em- ssBatchelor v. Planters' National Bank, 10 Bep. 16 {Ky. 1880). CH. X.] Baskisq. 193 bezzlement after it came to his knowledge, he is personally liable to the bank.'" § 142. Cashier — Penalty — liable, when. The cashier of a national bank is prohibited by section 5187, Eevised Statutes of the United States, from countersigning or delivering to any association or to any company or person any circulating notes contemplated by this section, except in accordance with the true intent and meaning of its provisions. It may be stated that this only applies to officers of the government. Section 5207, Eevised Statutes of the United States, pro- vides that no association shall hereafter offer or receive United States notes or national bank notes, as security, or as collateral security for any loan of money or for a consideration agree to withhold the same from use or offer or receive the custody or promise of custody of such note as security, or as collateral security, or consideration for any loan of money. The law further provides that any officer or officers of any such national banking 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 viola- tion of this section shall be recoverable for the benefit of the party bringing such suit. The object of the provision of this law is designed by the government to prevent the locking up of money. Section 5209, Eevised Statutes of the United States, pro- vides a penalty for the embezzlement, abstraction or wilful misappliance of any of the funds, moneys or credits of the association, and declares that every person who makes any false entry in any book, report or statement of the association, with intent to injure or defraud the association, or any other company, body politic, or corporate, or any individual per- son, or to deceive any officer of the association, or any agent appointed by the Comptroller to examine the affairs of any such association with intent to defraud the same, shall be se Vance v. Motley, 92 Tenn. 310, 21 S. W. 593. 13 194 The Cashieb. [ch, x. deemed guilty of a misdemeanor and shall be imprisoned not less than five years nor more than ten. Section 5437, Kevised Statutes of the United States, pro- vides a penalty for officers, meaning thereby any director, president, casihier, officer or other agent of the corporation, in using notes, etc., of closed banks, and declares that if any per- son knowingly aids in such act he shall be punished by a fine of not more than $10,000, or by imprisonment not less than one year nor more than five years, or by both such fine and imprisonment. Section 5497, Kevised Statutes of the United States, pro- vides a penalty against every banker, broker or other person not an authorized depositary of public moneys, who knowingly receives from any disbursing officer or collector of internal revenue, or other agent of the United States, any public money on deposit, or by way of loan or accommodation with or without interest, or otherwise than in payment of a debt against the United States, or who uses, transfers, converts, appropriates or applies any portion of the public money for any purpose not prescribed by law, and every president, cashier, teller, director or other officer of any bank, or any banking association, who violates the provisions of this section, are declared to be guilty of an act of embezzlement of the public money so deposited, loaned, transferred, used, converted, appropriated or applied, and shall be punished as prescribed in section 5488. A violation of this section constitutes embezzlement and all banking institutions not public depositaries are subject to the provisions of this section. The fact that the cashier commits an act which is a violation of law, or an express statute, will not relieve him from liability, unless done under duress. Where the cashier obeys an order of the board of directors which he knows to be illegal, and given by them for the purpose of defrauding the bank, he is held to be equally guilty, though, he does not participate in the illicit gain obtained from the bank. OH. X.] Banking, 195 § 143. Notice to cashier of bank — When notice to bank. The general rule is that notice to the cashier, while acting as such for the bank, is notice to the bank. The rule, as stated by the court in the case of First National Bank of Mason v. Ledbetter, 34 S. W. 1042, is as follows : " The cashier of a national bank is the executive officer of the bank and his acts done in the ordinary course of business bind the bank, and notice to him is notice to the bank." Where the cashier of a bank conspires with a third person to sell worthless property to defendant at par, in order that the proceeds may be applied to the payment of a debt due the bank, the bank is chargeable with the knowledge that the cashier had of such conspiracy.^' Whether notice is sufficient is altogether one of fact. See 145 U. S. 435. ^Notice to the cashier of an incorporated bank, that a note discounted with the bank was procured by fraud, is notice to the bank, so that the defense is available against it.^* It is also held that knowledge by one of the officers of a bank, who joined in the acceptance for the bank of a negotiable note before due, of a fact which would put a prudent person upon inquiry as to the power of the maker to execute the paper, is sufficient to charge the bank with notice of a disability, if such existed.^' The knowledge of a cashier and two directors that he, the cashier, has, withbut authority, pledged the bank's responsibility upon the note of the corporation, in which such officers have an interest adversely to the bank, is held not notice to the bank.*" In the case of Winslow v. Harriman Iron Co., 42 S. W. 698, where a holder of bank stock placed it in the hands of the bank's cashier for negotiation, . and the cashier obtained a loan on the stock, and was told by the owner to remit the proceeds to him, the owner was at the time indebted to the bank, and the cashier, without authority, deposited the proceeds in the bank, by which 3' Merchants' National Bank v. 39 Hager v. National German Traey, 29 N. Y. S. 77, 113 N. W. American Bank, 31 S. E. 141. 775, »3 Mo. 227, 74 Ohio St. 337. «> Fort Dearborn National Bank 38 Citizens' Savings Bank v. Wall- v. Seymour, 73 N. W. 724. den, S2 S. W. 953. 196 The Cashiee. [oh. x. it was appropriated in payment of the indebtedness, held by the court that the bank was charged with notice of the cashier's fraud and could not make the appropriation. The cashier having been given full authority to make dis- counts, it cannot be contended in behalf of the bank that notice to the cashier is not notice to the bank in the discounting of notes.*^ Where the articles of incorporation of a bank provided that " it is to act as an agent in the investment of funds," and " to transact any business that may properly be done by a financial agent ; " and the cashier of such bank made a loan for a customer who had money deposited therein, and took the acknowledgment to the mortgage securing the loan, and had possession of the unrecorded mortgage, and received two install- ments of interest, which he placed to such customer's credit on his pass book; held, that the knowledge of its cashier was the knowledge of the bank, affecting it with notice of such un- recorded mortgage.*^ In the case of Loring v. Brodie, 134 Mass. 453, the court holds that if a cashier of a bank receives securities on a loan from the bank to a trustee, with knowledge that the securities belong to a trust, the bank is affected with the knowledge of its cashier, and is put upon inquiry as to whether the trustee has authority to pledge the securities. The court, in its opinion, says : " If he received the securities with a knowledge that they were ■wrongfully transferred and were the property of others, his knowledge must affect the bank. His attitude and relation were such that it was his duty to communicate this information to the bank ; and it cannot be deemed that he was a mere channel of transmission, and that his knowledge is to be treated as affecting only himself. Although he was the attorney of Brodie, in taking care of and managing the trust property, he was the cashier also and there was a confidence reposed in him as such which makes his knowledge the knowl- edge of the bank." 41 Merchants' & Planters' Bank v. 42 Christie v. Sherwood, 113 CaL Penland, 1 B. C. 25. 526, 45 Pae. Eep. 820. CH. X.] Baitking. 197 This doctrine is supported by the Supreme Court of the TJnited States in the case of Duncan v. Jaudon, 15 Wall. 165, where the court holds that notice to the cashier of a bank that the stock pledged is trust stock, is notice to the bank. The :^ule is again laid down as follows : " The knowledge of an authorized agent acquired in the course of a given transac- tion within the scope of the agent's authority, is the knowledge of the principal." The knowledge of the cashier of a bank of a defense to a promissory note, if acquired in the course of the transaction which results in the discounting of the note, is the knowledge of the bank, and will deprive it of the position of an innocent holder for value.** A bank is not chargeable with notice of the misappropriation of money by its cashier, acting as agent for a third party, in his individual capacity ; nor is it liable to the principal for such money when it receives no benefit therefrom.** Where the cashier of a bank is also the secretary of another corporation, and while working in the interest of the latter, sold stock therein, taking the purchaser's note therefor, which note was afterwards discounted by the bank, held, that the bank is not affected with its cashier's knowledge as to the value of the stock sold, obtained through his connection with the other corporation.*^ It is held in the case of Drovers' National Bank v. Potvin, 74 N. W. 724, which case was appealed from the Supreme Court of the State of Michigan, that where a bank had no committee or agent to make loans, excepting their cashier, evidence that he had no knowledge that a note indorsed to them for value was procured by fraud, is prima facie sufficient to show want of such notice by the bank. In the case of Indian Head National Bank v. Clark, 43 N. E. 43 National Bank of Bedford v. ** 100 Ped. E«p. 705. Stever, Appellant, 169 Penn. St. *5 Benton v. German American 574; Birmingham Trust Co. v. National Banlt, 26 S. _ W. 975. Louisiana National Bank, 99 Ala. Cashier not chargeable with notice, 379; Niblack v. Ctosler, 74 Fed. Eep. see 66 S. B. 713, 125 N. W. 506, 82 1,000. Kan. 638, 66 Misc. 100. 198 The Oashieb. [oh. x. 912, the court, in discussing the general rule of agency, appli- cable both to corporations and to natural persons, which he defines as follows, is that " notice to an agent, while acting for his principal, of facts effecting the character of the transaction, is constructive notice to the principal," the sourt says, " that there is an exception to this rule when the agent is engaged in committing an independent fraudulent act on his own account, and the facts to be imputed relate to this fraudulent act. It is the circumstance that the agent, while acting for his principal, is at the same time committing an independent fraudulent act upon his own account which makes the case an exception to the general rule.** § 144. Cashier's declarations and admissions. The rule is that the declarations or admissions must be made officially and within the scope of the agent's duties to bind the bank." A declaration or admission made beyond the scope of his authority will not bind the bank.*' The cashier of a bank ordinarily has no authority to dis- charge its debtors without payment or to bind the bank by an agreement that a surety should not be called upon to pay a note he has signed, or that he would have no further trouble from it.** Where the cashier attempts to answer as to the genuineness of paper, and the responsibility of the makers or endorsers in which the bank has no interest, and is not in any way affected thereby, the act is beyond his authority. Where a check drawn upon the bank is presented to the cashier and he said " it is good," held that the bank is bound as to the signature and sufficiency of funds, but the bank can- not be held as to the genuineness of the filling in. *8 Atlantic Cotton Mills v. Indian 4t Sturges v. Bank of Cireleville, Orchard Mills, 147 Mass. 268, 278, H Ohio St. 153. 17 N. E. 496. See Laning, Eeceiver, is Goodbar v. National Bank, 78 V. Johnson, 75 N. J. L. 259; Shat- Tex. 461, 14 S. W. 851; Bank of the tuck V. Guardian Trust Co. of N. Metropolis v. Jones, 8 Peters 12. y., 130 N. Y. 8. 658. « Bank v. Haskell, 51 N. H. 116. OH. X.] Banking. 199 The Supreme Court of the United States, in the case of Espy V. Bank of Cincinnati, 18 Wall. 1-604, says: "The answer he gave that the check was ' good ' or was ' all right ' must be supposed to be responsive only to these two points. The genuine- ness of the payee's name and of the sum filled in the body of the check were as well known and as easily ascertainable by the payees themselves as by the bank officer, and unless the inquiry was so framed as to call his attention to these points, he had no reason to suppose, in the nature of the transaction, that he was expected to give information in regard to them. So the response of ' good ' should not on sound principle be held to extend to them. He was under no moral or legal obligation to give an opinion on these points. He had no reason to suppose that he was asked for such an opinion, and because he did give an opinion that the check was good in the only points of which he knew anything, it would be illogical to hold the bank liable on the ground that the response meant good absolutely and for all purposes." The Supreme Court of Nebraska, in the case of Grant v. Cropsey, 8 N'eb. 205, holds that it is a firmly established rule that when one by his words or conduct wilfully causes another to believe in the existence of a certain state of things and induces him to act on that belief, so as to alter his own previous position, the former is concluded from averring against the latter a different state of things as existing at the same time."" Where the cashier admits that the drawer ,of the check has sufficient funds to pay the same, the bank is bound. It is an act within the scope of his authority and is equivalent to the verbal certification of the check. Where a cashier was asked about the solvency of a firm and he reported that the firm " was good, was perfectly solvent," afterward the firm failed and it was shown that at the time of the inquiry the firm was insolvent and the bank, with the bank- rupt, was sued, held that the bank was not responsible for the 60 Pickard v. Sears, 33 Eng. Com. N. H. 65 ; Merchants' Bank v. Ru- Law Eep. 469; Davis v. Handy, 37 dolph et al., 5 Neb. 527. 200 The Cashiee. [oh. x. statements of the cashier; that he was not employed by the bank to give such information. " A cashier of a batik who is also a director of a manufactur- ing company, and as such director assisting in promulgating false statements as to the financial condition of the company, for the purpose of defrauding all of its creditors, including the bank, was not the agent of the bank in such matter so as to affect the validity of its claims against the company." °^ § 145. Cashier's acts away from bank. A cashier may draw checks while away from the bank; and may also endorse paper while away from the bank.^^ He may also pay or certify checks away from the bank.^' If the cashier can bind the bank by representations made while in the bank, he may, while absent, if representing the bank and upon the bank's business, bind it.°* § 146. Limitation of power. Ordinarily the cashier of a bank has no authority to dis- charge its debtors without payment, or to bind the bank by an agreement that a surety should not be called upon to pay a note he had signed or that he would have no further trouble from it.°' He has no authority to make a compromise where authority is not granted by the board of directors, and the lack of au- thority held to be a matter of law.°* Under section 5136 of the National Banking Act the cashier of a national bank has no power to bind it to pay the draft of a third person on one of its customers, to be drawn at a future day, when it expects to have a deposit from him sufficient to Bi Hadden v. Dooley, 92 Fed. Eep. ^* Houghton v. First National 274. Bank of Elkhorn, 26 Wis. 663. 52 Bissell V. First National Bank os Cocheeho National Bank v. of Franklin, 69 Pa. St. 415. Haskell et al., 51 N. H. 116. 63 Bullard v. Eandall, 1 Gray 56 Farmers' and Merchants' Bank (Mass.) 605. v. Clancy, 163 Mich. 586. OH. X.] Banking. 201 cover it, and no action lies against the bank for its refusal to pay such a draft. °' Where a statute creating a banking corporation provides that its affairs shall be managed by a board of directors who shall have power to appoint and remove a cashier and other employees of the bank, the power to discharge a surety on a note cannot be exercised unless expressly delegated to him by the directors.^* The cashier of a national bank has not, in the absence of special authority' from the board of directors or a usage or practice so to do, power to receive on behalf of the bank prop- erty for safe keeping.^" The cashier has no authority by virtue of his office to bind the bank by certification of his own check. The certification is invalid. "'' He cannot bind the bank by agreeing to pay usurious interest. 64 N. H. 1901. In the case of State National Bank v. Newton National Bank, 66 Fed. Kep. 691, it is held that a cashier of a bank has no implied authority to bind the bank by a pledge of its credit to secure a discount of his own notes for the benefit of a cor- poration in which he was a stockholder. A bank may become liable for the cashier's deceit or for loss of special deposit through carelessness. 100 U. S. 699. The cashier of a bank is the proper officer to receive deposits and to give certificates in respect thereto, which may properly include (with the consent of the depositor) a statement of the source from which the deposit arose; and for a false statement in that respect made to subserve the interests of the bank, the latter is liable in tort to one injured thereby, although the cashier was not expressly authorized to make such statement by the board of directors.*^ 6' Plannigan et al. v. California «« Gale v. Chase National Bank, National Bank et al., 56 Fed. Eep. 104 Fed. Eep. 214. 959. 81 Hindman v. First National 68 People's Savings Bank v. Bank of Louisville, 112 Fed. Bep. Hughes, 1 Mo. App. 549. 931. 59 First National Bank of Lyons V. Ocean National Bank, 60 N. Y. 278. See 80 N. Y. 82, 58 Ga. 360. 202 The Oashiee. [ch. x. The cashier has no power to release a security upon a note given to the bank. 60 S. E. 13. He cannot execute or bind the bank by execution of a mort- gage on the real estate of the bank. The bank's property cannot be mortgaged or sold only by resolution directing the same, emanating from the board of directors. 121 Ala. 505. The cashier cannot plead the Statute of Limitations to his own note due the bank, unless the board of directors had knowl- edge of the due date of the note and knew it was unpaid.*^ In the case of First N^ational Bank v. Ocean l^ational Eank, 60 'N. Y. 278, it is held that a cashier of a national bank has not authority as such to receive special deposits, and thus bind the bank for their safe keeping. It is also held that a cashier cannot bind his bank by any contract, express or implied, con- cerning the taking of special deposits taken for the mere accom- modation of the depositor as such act is not within the au- thorized business of the bank.®* A cashier of a bank has no legal authority by virtue of his position to compromise a claim of the bank or to execute a com- position agreement and release therefor. Such a power is dis- cretionary, calling oftentimes for the exercise of considerable reflection and a high degree of judgment. It is strictly a sacrifice at least of nominal property of the bank, and is a function of the board of directors and not of an executive officer.®* Accepting doubtful securities in payment for good debts: officer doing so is charged with resulting loss. 79 Fed. Eep. 878. But see 62 U. S. (Howard) 356, 48 N. W. 847. 62 Harrisburg Bank v. Forster, 8 «* Chemical National Bank v. Watts (Pa. St.) 12. Kohner, 58 How. Pr. 267. 63 Wiley V. First National Bank, 47 Vt. 546; First National Bank v. Graham, 79 Pa. St. 106. CHAPTER XI. FATINO AND BECEIVINO TELLERS. § 147. Functions of the paying teller. The functions of the tellers, receiving and paying, are re- spectively to receive and pay out the moneys of the bank, de- posited or drawn out from it; and as a rule one cannot dis- charge the duties of the other. The paying teller usually receives a higher salary than any other clerk, because the responsibility put on him to scrutinize signatures and to pay money is peculiar and very great. To his care is committed the custody and disbursement of the bank's funds. He must know the signatures of the bank's customers, and be ready to decide upon the payment or refusal of all checks when presented. His position is very responsible. The refusal of payment of a genuine check or the payment of a forged check, in either case may be a serious matter. A great variety of checks are, during a day's business, drawn and presented for payment, and each one requires more or less examination. Many of them are required to be endorsed, and before passing his hands he must see that the proper endorse- ment is made. Frequently checks are post-dated, and may be presented for payment before the time fixed by the drawers. Sometimes the dates are altered, and the teller must satisfy himself whether the alteration is material or not. In the payment of checks, the teller must think of and decide many important things: First, is the signature genuine? Second, is the account of the drawer good ? And third, is the person holding and presenting the check entitled to receive the money ? Fourth, is the check raised or altered ? " A teller," says an eminent jurist, " is an agent acting under [203] 204 PATiiirG ANB Receiving Tellees. [ch. xi. a special or express authority, and not one so appointed by a principal that there can arise any implication of defined power. By the nature of the teller's employment, his duties are defined with an approach to exactness. Such a one is sometimes called a special agent, though the phrase is open to objection. The principal holds out to the public as an agent with limited powers, and with such a one third persons deal peviculo." A teller, known to be such by one doing business with him, cannot bind the bank by an agreement to pay interest to a depositor in excess of the rate which the bank, through its board of directors, has authorized, and especially so where the rate of interest agreed to be paid was entered as a stipulation in the passbook. The teller has no authority to make contracts for the bank, and when he attempts to do so, if the party dealing with him has the knowledge of the fact that his position in the bank is that of a teller, the bank is not bound by the contract where the same is outside of his duty and authority to act. The rule, however, is different where persons dealing with him and in good faith, without notice of any want of authority in such officer, and the act done is in the apparent scope of his authority, whether clothed with such authority or not, the party so dealing with him would be protected. The acts of a teller, if not within his authority, may be ratified like those of other officers. The power of a teller to act in the absence of the cashier is one of considerable im- portance. In Potter v. Merchants' Bank, 28 N. Y. 641, p. 650, Justice MuUin says : " The cashier cannot clothe him with any more of his power than was necessary to enable the latter to carry on the usual and ordinary business of the bank." In that case the teller " in the absence of the cashier had authority undoubtedly to receive payments of notes and surrender them to the person entitled, and, in a word, to do whatever was neces- sary and proper to be done in the ordinary course of business." " I do not doubt," the court continued, " but that the teller had power to transmit notes owned by the bank or held by it for CH. XI.] Banking. 205 collection and payable in other places, or at other banks, to its agent for that purpose, and as, in order to do so it becomes neces- sary to endorse the paper of the bank, he had power to make such endorsement. But he had no power to pledge its securities unless they became pledged by the mere act of transmitting for collection." The paying teller's duties necessarily bring him in contact with the active customers of the bank, and although his book- keeping is simple, no item which requires entry for his settling book can be omitted. The paying teller's duties principally are, as has been stated, the payment of cheeks presented by customers of the bank. These checks are usually on the bank over which he presides as paying teller. These checks, when paid, pass out of his hands to another clerk, to be charged to the account of the dealer. He also cashes checks for the customers of the bank which are drawn upon other banks. These are then sent to another department to be collected. After checks have passed from the hands of the paying teller to other departments to which they belong, any attempt to get them back by the teller paying them is regarded with suspicion. It is also the duty of the paying teller, when authorized, to certify checks, unless such authority is strictly delegated to the cashier. In certifying a check, when it is a part of the teller's duty, he should be provided with a book of blank forms with two stubs, both being numbered, which are used in his reports to be made to the general bookkeeper. The certifica- tion of a check is usually done by using the stamp of the bank, which saves time, the teller signing his name and date of certifi- cation. It is then handed back to the holder. The bank then has obligated itself to pay the check; whether the drawer or holder has the money to his credit in the bank makes no differ- ence. Certified checks should not be issued, however, unless the customer has the amount for which they are drawn to his credit. I^o oflScer of the bank has the authority to certify credit to any one unless authorized by the board of directors. Certified checks covering an amount in excess of the deposit 206 Paying and Receiving Tellees. [ch, xi. on credit in the bank to the drawer of the check is permitting an overdraft, and overdrafts, being granted and allowed with- out securitj, in case of loss the officer allowing the same becomes personally responsible. A paying teller's position in a large bank is a very important and responsible one. The bank may have any number of tellers; the volume of businessi may be so great that many persons are required to perform this duty. The first paying teller is considered in rank for promotion next to the assistant cashier; and receives from him or the cashier instructions which he should, if not inconsistent with special orders or directions from the board of directors, follow and comply with. At the beginning of business in the morn- ing he receives from the cashier a certain amount of cash, which he is charged with and must account for at the end of the day's business; deducting therefrom all checks or other payments made by him. The daily routine and duty of the teller begins a short time before the bank's doors are open for business. He should appear at the bank sufficiently early to arrange for the duties of the day. Having received from the cashier the cash his responsibility of paying checks begins. His duty in this particular department is to pay only such checks as are properly drawn, dated, and signed. If he honors a worthless or forged check, the bank must bear the loss, unless by reasonable care and ordinary precaution it could have been discovered and the loss averted, and in such a case failing to use such care he may make himself personally responsible. A paying teller may safely guard and prevent all liability by adhering to the well-known principles and rules relating to and governing the payment of checks. He is supposed to know all the customers of the bank, at least should be familiar with their signatures ; not having such knowledge and a check is presented for payment it becomes his duty to satisfy himself as to the genuineness of the signa- ture, and if, being in doubt as to the sufficiency of funds to pay the same, he should pass it to the ledger clerk, who will CH. XI.J Banking. 207 inform him of the status of the customer's account. Having satisfied himself fully upon all these points he can safely pay the same; failing to perform this ordinary duty and care, if loss occurs to the bank the teller may be held personally respon- sible, as it is his duty to use reasonable care. The paying teller cannot be held personally responsible for losses occurring when he uses such care as one in his position is expected to use and does use. He cannot be held for pay- ing a raised check which by ordinary care, careful scrutiny, and inspection could not be discovered; but if there are any indications which might be discovered on the face of the check by an ordinary person that it has been raised, or that the check is not genuine, or lacks any of the legal requirements to make it good; for example, if it is not dated, or is a post-dated check, or is not properly endorsed when an endorsement is re- quired, or the amount of the check is not legibly written, or lacks the proper signature to charge the drawer's account, he may be held personally responsible to the bank; but he may pay a counterfeit or forged check or a raised draft and, where he uses reasonable skill and such ordinary care and precaution as may be expected and required of a person occupying the position, he cannot be held liable. It is also the duty of the paying teller, after the exchanges have been made at the clearing house, to examine carefully each check coming through the same before charging the same to the drawer's account. If any are found to be irregular, or forged, it becomes his duty to immediately notify the manager of the clearing house and give notice also to the bank from which they were received; failing to perform this duty in due time the bank may be held responsible for any loss which may occur. As previously, announced, it also becomes his duty, in the absence of the cashier and when authorized so to do, to certify checks when required and presented for that purpose. Before binding the bank by such certification it becomes his duty to examine the account of the drawer and ascertain that he has sufficient funds deposited vnth the bank to pay the same. Hav- 208 Paying and Eeceiviwg Tellers. [ch. xi. ing ascertained this fact, and being clothed with the power, he will not hesitate to place the certificate on the check. This is ordinarily done as explained, by writing or stamping upon the face of the check the words, " certified good " or the word " good." The certification should be dated and then signed by him in his official capacity. Having certified the check, he then by a memorandum check charges the. same to the customer's account ; and the amount is charged against the bank and placed to an account called " certified check account." The bank then becomes a debtor and must pay the same to any lawful holder who may afterward present the same. In certifying a check it is held that he has no inherent or implied authority to do so, and cannot perform this act unless authorized, and unless the drawer has the money to his credit in the bank at the time of certification. If he allows an over- draft by paying or certifying a check, having no special direc- tions or authority to do so, he makes himself personally liable. He has no authority or latitude upon this subject; his duty is plain to pay cheeks only when properly drawn and the drawer has the money in bank to meet the same. Latitude is often taken and responsibility assumed, but unless he has been di- rected or authorized by proper and superior authority, he has no right to grant a credit by paying checks or certification thereof when the maker has no money on deposit to meet them. The overpayment of a check creates an overdraft which, though authorized and permitted in many State banks, is allow- ing credit to persons without an expressed promise to pay, and such overdrafts thereby become doubtful loans; and the bank has no authority to advance money upon a verbal promise to repay the same; and an officer is restricted in his authority to make loans upon a written agreement to repay unless duly authorized by the board of directors. Where a teller certifies a check or gives credit to a customer by permitting him to overdraw his account; and suck latitude has been frequently practiced and sanctioned by the board of directors, this degree of latitude may release him from personal liability. CH. XI.] Banking. 209 He may also be released from liability by the ratification of his acts by the board of directors ; but the rule is that he has no inherent authority to bind the bank by any act outside of his defined duty or authority granted to him, and failing to secure such authority his acts are unlawful. In the payment of endorsed checks care should be used, and before payment the teller should require the holder and en- dorser if not personally known to him to identify himself. This is done by the holder of the check calling into the bank some person personally known to the teller, who is required to iden- tify the endorser as the person entitled to payment. This may be a verbal identification or it may be an endorsement of the check by the person himself. Such an endorsement may be a restrictive one, not a guaranty of payment but one of identifica- tion only. If a check endorsed comes to the bank through the clearing house, the bank receiving payment of the same is held liable upon its endorsement. The teller should also before honoring a check satisfy himself that there is no revocation not to pay, previously entered with the bank by the maker. The bank should always require that the notice of revocation should be in writing, signed by the maker. While a verbal notice may be held good, the authority may be questioned and in such a case it must be proven that notice was duly given. A verbal notice frequently causes liti- gation; and the rule should be that all such notices, to be bind- ing upon the parties, should be reduced to writing and signed by the party revoking the payment of the check. A teller paying a check where notice is on file not to pay the same, will be held personally responsible (if liable at all) to the maker for such negligence; as it is his duty to ascertain whether any such notice of revocation has been filed, but if no notice has been filed with the bank, a verbal notice to some officer of the bank which has not been conveyed to the teller cannot bind him. He is not liable in following the usual cus- tom of the bank for mere mistakes. 15 Am. Dec. 182, 24 Fed. cases No. 14359. 14 210 Paying and Eeceiving Tbllees. [ch. xi. At the close of the day's business it is the duty of the teller to make " proof " of the day's transactions ; his cash on hand, adding all checks paid, must agree with the cash received from the cashier at the beginning of business of that day. Having discussed in a general way the qualifications and office of the paying teller, his duties as defined by law are presented, § 148. Teller's Duties. It may be said that the courts generally have denied that the teller by virtue of his office has any inherent power. They lay down the rule to be that through a course of dealing, and by usage and custom, he may have (without being specially dele- gated to perform certain duties) the implied power to repre- sent, and thereby bind the bank. If it is the usage of the bank to recognize the acts of the teller of the bank it is held liable. The teller by prior course of dealing may have implied power to bind the bank by certifying a check.^ Where the teller is authorized by the bank to certify checks, it is bound by his certification, and his authority may be shown by proof of his custom to do so which has been recognized by the bank." The duties of a teller, however, are usually those which are delegated to him either directly by the board of directors or by the president or cashier of the bank. If his duties are specifically defined by the board of directors, the cashier has no authority to interfere with the instructions. Usually, however, he receives his instructions and authority from the cashier. His office is to aid the cashier and perform such clerical duties as may be required of him. Therefore the 1 Security Bank v. The National 2 Hill v. Trust Company, 57 Am. Bank of the Republic, 23 Am. Kep. Rep. 189, 108 Pa. St. 1; Merchants' 129; Farmers' Bank v. Butcher^ Nat. v. State Bank, 77 Wallace 646. Bank, 69 Am. Dec. 678; Meads v. The Merchants' Bank of Albany, 25 N. Y. 143. CH. XI.J Bajtkiitg. 211 teller is the cashier's subordinate. He is detailed to perform a certain duty. As his office signifies, being designated " Paying Teller," his duty is to pay out money for the bank, and if specially delegated by the board of directors to perform this service and this alone, he has no authority to receive on deposit money for the bank, or certify checks j however, in the absence of such authority if he does so in violation of the order of the board of directors, and those dealing with him have no reason to question his authority, the bank will be held liable ; but it is seldom that the board in the employment of a teller specifically defines and limits his power to that alone of paying out money for the bank. The fact that the paying teller is employed by the board of directors for that purpose, does not estop the cashier from paying. He has the inherent power to perform this function, and is therefore a co-ordinate agent with the teller of the bank. It is possible for the board of directors to take away from the cashier an inherent power. It could withdraw from him the power to pay out the funds of the bank, and delegate the power alone to the paying teller; but such a rule would de- stroy the usefulness of the office of cashier ; and such an order, therefore, would greatly retard and injure the business of the bank. The teller, independent of direct instructions as to his duty, as stated, is under the direction of the cashier, and while acting under such direction his acts become the acts of the cashier. There is a very interesting discussion of the question as to the power of the paying teller > to receive deposits where his duty alone is to pay deposits. It is held that if he attempts to act in the capacity of receiving teller, he becomes the agent of the depositor, to turn over the money to the receiving teller. In the case of Thatcher v. The Bank of the State of New York, 5 Sandf. 121, the court says : " A person may, no doubt, become a dealer, by a deposit made on the day his draft or note falls due, though never before in the bank, but his deposit 212 Paying azst> Eeceiving Tellees. [ch. xi. must be made with the proper officer of the institution and with the requisite assent to his becoming such dealer. " In this instance there is, in the first place, no pretense that the cashier, or any officer of the bank except the paying teller, ever assented in any manner to the plaintiff's maMng a deposit, or becoming a dealer with the bank. The first step toward establishing a duty of the bank toward the plaintiff is therefore wanting. " Let us suppose this difficulty obviated, the next step is to show a deposit properly made, that is, that the money was left with an agent of the bank authorized to receive it. The person who left the money knew that the agent who received it was the paying teller, and not the receiving teller of the bank, and it cannot be said he was ignorant of the fact that there were two such officers. Indeed, there was no such idea advanced at the trial. Now the very names of these two agents indicate to every one the proper and widely different functions of each. The one is to pay out the money of the bank; the other is to receive moneys* for the bank. Dealers always pay their money to the receiving teller. When they draw money from the bank or their notes or bills are presented made payable at the bank, the paying teller pays the amount to them, or to the holders of such notes or bills. " But we are not left to the inference derived from the names of these agentsi. The answer states that the proper receiving officer of the bank is the receiving teller, and that it was not within the duties of the paying teller to receive the money left in this instance, or to assume to pay the plaintiff's bill with it, and that it is not in the usual course of business' to deposit moneys with the paying teller. The reply does not traverse the allegation as to the receiving teller being the proper receiving officer of the bank, but it alleges that the receiving of money by the paying teller, in the bank, during bank hours, is within the ordinary scope of the business of the paying teller and of the bank, and that his receipt and promise in the instance before us were within his duties and bound the bank. CH. XI.] Baijkiitg. 213 " The proof entirely failed to make out these allegations. It was shown that in several instances these same parties had left funds with the paying teller in the same way that these were left, but there was no proof that it was his proper func- tion to receive them, or that it was in the usual course of business for him to receive funds in behalf of the bank. On the contrary, both the cashier and paying teller clearly prove that it is no part of his duty or business to receive moneys for the bank; and the teller testifies that when he does receive money for parties who do not keep an account in the bank,, in order to pay notes they have drawn payable there, it is as a favor to such parties; he sometimes refuses, sometimes when pressed very hard he takes it for them, and he then keeps it separate from the money of the bank. " It is true the cashier appears to have known in a few instances that the paying teller thus received money to pay notes and bills, and did not forbid it ; but we cannot infer from this an assent of the bank that he should, in their behalf, receive money for that purpose. His duties as their agent were clearly defined, and the cashier's knowledge that he occasionally while in the bank acted for others does not show that the bank adopted those acts. " So far from the proof showing that, in this transaction, the paying teller was the agent of the bank, it clearly shows that he was the agent of the party who left the money. The bank had nothing to do with the affair, nor was it intended that it should have." The view of the court in the above case in that the teller's office is a very narrow one; and where his duties are confined to that of paying out money he cannot perform any other service for the bank, such as receiving a deposit. If he does so he becomes the agent of the depositor. This Rule may hold good, where it is clearly shown that the person dealing with him had the knowledge that his duties were limited to the payment of w,oney for the hank, and that only. But the rule which is accepted by the courts is stated as follows: 214 Patiitg AiTD Keceiving Tellees. [ch, XI. Where one deals with an officer or employee of the bank, who at the time represents or holds out to such person that they are invested with the authority to represent the bank in the busi- ness being transacted, and the dealer in good faith and without any notice of want of authority, believes the act is done within the apparent scope of his authority, the party so dealing with such officer inay enforce the contract against the bank and this rule applies to a teller as well as the cashier or to any person or employee in the bank representing himself to the dealer as having authority to represent the bank. The bank should not be permitted to plead want of authority in its employee while he is engaged in its employment, especially where the loss would fall upon an ignorant person or one having no knowledge what- ever of the different rules of law holding and releasing banks upon the principle of notice or want of notice or special or general authority. If a bank places behind its counters an employee who will transcend his authority and insists upon transacting business with the bank's customers entirely outside his specified duties, such parties dealing with him have the right to assume that he has been delegated to perform such busi- ness and the bank should be held for all his acts. But if the dealer is a person familiar with the duties of the various officers of the bank and has reasonable opportunity to know that the officer or clerk is not acting within the scope of his authority or has knowledge of a by-law which prohibits such officer or clerk from performing such business, the bank would be relieved of any liability. The court in its opinion in the case of Thatcher v. The Bank of the State of New York, 5 Sandf. 121, applies the rule that where the paying teller receives the funds of a stranger, agree- ing to apply them in the payment of a biU or note, he becomes the agent of the party and not of the bank, and this holding is more frequently cited as relieving the bank of any liability where the teller goes outside of or exceeds his authority; when in fact the law as laid dovm in the case upon the facts shown was one where the dealer knew he was making the teller his agent to do a certain act, and further he was not a customer or CH. XI. J Bab-kinq. 215 dealer of the bank and therefore the case does not apply to the rule as previously sitated.* In the absence of the cashier the paying teller does not succeed to his powers. It would be necessary, therefore, in the absence of the cashier, for the board of directors to delegate to him such powers as they might wish him to perform. The cashier may direct him, the teller, to perform certain duties, but he cannot absent himself from the bank and its responsibility and delegate his authority to the teller. The cashier may delegate to him authority to make remit- tances for the bank and to pay its lawful debts ; bijt he cannot authorize him to perform acts which are clearly and exclusively those inherent in his office. The cashier of a bank has the power to transmit a promissory note to another bank for discount and collection, and to trans- fer the title thereto to the latter bank ; but a mere clerk, acting as cashier in the absence of that officer, has no authority to transfer any of the notes or securities of the bank, tmless such authority has been given to him by the directors. It is held, however, that the casliier may clothe such a clerk with ordinary power necessary to enable the latter to carry on the usual and ordinary business of the bank.* § 149. Teller's torts. A teller cannot bind the bank by unlawful and unauthorized acts; and in order to charge the bank with a violation of the law subjecting it to the penalty imposed, it must be shown that the teller acted under authority from the board of directors, or that his act was subsequently made knovni to and adopted by the board. ° In a previous chapter the penalty imposed by section 5209, Eevised Statutes of the United States, was discussed as it applied to the officers of a national bank. It was there stated 3 National Bank v. Oil and Cot- * Potter v. Merchants' Bank, 28 ton Co., 124 Tex. Civ. App. 645; N. Y. 641. Bank v. Martin, 70 Tex. 643. b Clark v. Metropolitan Bank, 3 Duer 241. 216 Paying ahd Receiving Tellees. [ch. xi. that in order to hold an officer, namely, the president, director, cashier, teller, clerk, or any other agent, of such an association for the violation of any of the provisions of said section of the law, it must be shown that the act was "willfully" committed/ § 150. Receiving teller. The receiving teller's position is one of peculiar responsi- bility, requiring great skill, accuracy, and caution. He is the bank's agent to receive money (of which there are ten different kinds in circulation in the United States) from those wishing to make deposits in the bank. His position places him in close relationship with all customers and persons who may make deposits with the bank. His office, therefore, and the duties arising therefrom, require that it should be fiUed by a person adapted to the business which necessarily is to be per- formed. The bank imposes great confidence in the receiving teller's judgment and skill to protect it from bogus and spurious checks, bank notes, and coins which may be presented for deposit and credit. If he lacks the judgment and skill required as an expert to detect counterfeit notes, coins, and forged signatures, he is not a suitable person to occupy the position of receiving teller; for through his hands the bank receives its deposits and is held responsible to its customers and depositors to repay to them upon demand lawful money. Therefore, it is his duty when receiving a deposit, before enter- ing the same on the book of the depositor, and giving credit therefor, to make a careful examination of all the money, checks, notes, and bills that are offered for deposit. It is his duty to protect the bank and not receive or give credit to a depositor for money, checks, or drafts which may be counterfeits or spurious. He should make a careful exami- nation of each coin, bank note, check, draft, or other instru- ment offered for deposit, and before acceptance, if in doubt « United States v. Britton, 107 U. S. 655. CH. XI.] . Baitking. 217 as to their genuineness, apply the test known to experts. For example, if coins are presented, which may consist of gold and silver, coined by the mints of the United States, or any other country, he should know their value; and ascertain before accepting the same, that they are genuine, and contain the standard weight fixed by the government coining such money. The test adopted by the United States mint to detect counter- feit gold and silver is as follows : Ifitrate of silver (crystals) 24 grains. Pure nitric acid 15 drops. Distilled water 1 oz. A drop of this liquid on counterfeit gold or silver immedi- ately turns black; while if applied on the genuine coin it will remain clear. If the teller, after applying this test and finding them to be genuine, is in doubt about the coins containing the standard weight, the bank should be equipped with scales suificiently accurate to test their weight. It frequently happens that coins which are genuine are light and do not contain the standard weight fixed by the government. If they are found to be below the standard required, the government will deduct from the value the amount necessary to reinstate the loss. A gold coin in the ordinary use of the same, say a double eagle, will maintain its standard weight for over fifty years. It may be reduced in weight by being put through various processes, that of " rubbing " or what is called " sweating." If the teller finds the coins light (perceptibly so), he should deduct the amount from the value of the coin. If the owner objects to this, the coin should be refused. If the bank accepts the coin which it knows to be below the standard weight at a discount found to be correct by weighing the same, it becomes the duty of the bank to transmit the same at once to the Treas- ury Department at Washington. On receipt of the coin it is tested as to its genuineness and weight, and if found to be below the standard, it is immediately turned into the mint and again recoined. 218 Paying Ain> Eeceiving Tbllees. [ch. xi. If the bank accepts coin which it knows to be below the standard of value, in the acceptance of it, having discounted it, and charging the amount of loss to the owner from its standard value, and again puts the same into circulation, pass- ing it as of correct standard weight, and for its face value, it is subject to punishment. It is the duty of the receiving teller to examine all national bank notes, United States notes, currency certificates, or treas- ury notes that may be offered for deposit, and before accepting the same satisfy himself as to their genuineness. To become an expert for this purpose it requires considerable practice and study, and for the benefit of those who occupy the important position of receiving teller, the following instruc- tions and specific tests are given. The government of the United States has expended a very large sum of money for complicated mechanism embracing geometric lathes, hydraulic presses, ruling, and transfer engines, patent paper, secret inks, electrical test, all of which are used in the manufacture and printing of our money; by the use of which the Government of the United States, by authority of law, gives us the handsomest paper money in the world ; at the same time making it (by the use of such fine and costly complicated mechanism, consisting as stated of such deli- cate and perfect machinery, etc.) impregnable against the skill of the counterfeiter. The tests. The paper used by the government for the body of the note is composed of material known only to the government. This is true also of all its inks and coloring fluids used on the paper. The body of the paper is manufactured from the finest quality of silk and linen. This is rolled in layers crossing and recrossing each other, which give it great strength and durabil- ity. In the body and on the surface of all genuine paper money is the "localized fibre," which is a mixture of jute, a species of sea-weed and clippings of colored silk thread. This OH. XI.] Baitking. 219 fibre may be seen in the paper and can be picked from the surface with a sharp-pointed instrument. The genuine bank-note paper is a clear milky white. The counterfeit imitation of the fibre are printed scratches of ink appearing on the surface of the paper, and by the use of a sharp instrument can be easily detected as such. What is known as the localized tint appears in a blue tinted parallel strip crossing the face or back of the genuine note and has not as yet been successfully imitated. The expert desiring to make himself proficient should take a new bank note and inspect it very carefully. In doing so he win discover that it is manufactured from the most costly quality of silk and linen, which is seldom used in a counterfeit. The Bank of England, it is claimed by experts, manufactures the best bank-note paper in the world. Its strength is so great that a five-pound note twisted into a rope or cord will sustain a weight of 150 pounds. The genuine paper, through the sense of touch and feeling, after some practice becomes so familiar to experts that through this test alone counterfeits are easily detected. The touch test. This test is one which experts and those experienced and who are accustomed to handling bank notes regard as one of , great value. In using this test, take a genuine bank note, hold it firmly in the hand and draw it carefully, but not too swiftly between your thumb and fingers ; do not press it so tightly as to impair the sense of touch, and you will discover that the paper will reveal a rough parchment feel, the interior will be oily, tough, elastic and silky. The sense of touch is one when practiced becomes very accurate. The genuine bank note possesses through its manu- facture and the materials used in its composition a something which you become familiar with. The counterfeit bill, if tested in the same way, reveals to the touch a very different sense of 220 Paying and Keceiving Tellees. [ch. xi. feeling. The counterfeit reveals to the touch a smooth, dry, and glassy surface. The paper seems to be devoid of life,. elasticity, and the silky texture felt in the genuine. The counterfeit, as it is drawn through the fingers, silps easily, lacking that clinging feel presented in the genuine. If the counterfeit appears devoid of the glassy surface, the paper will usually be inferior, flimsy, having a spongy, pulpy, and shoddy feel. The paper lacks the strength of the genuine, being rotten and easily torn. Experts by the use of this touch test have become so pro- ficient that they will, when blindfolded, detect the counterfeit from the genuine bank note. Oeometric lath^worh test. The endless white, curving lath lines in the test dies of all genuine government or national bank notes are very accurate, fine, and more delicate than a hair. They are sharp and smooth on the edges (but do not present sharp angles), and are invariably the same size. These delicate, perfect, and beautiful lines are cut with the point of a diamond. The texture of this work varies quite materially. In some dies the net work is shown being twined together, while in others the work is woven and interwoven until almost as fine and close as cloth; all lines, however, cross each other at regular intervals, the curves are perfectly symmetrical and appear as if struck with the point of a compass. No defects can be seen in the lines, no breaks appear, while in the counterfeit lath work, which is engraved usually by hand or imperfect machinery, the lines are not continuous, breaks are frequently discovered, and by close observation it will be seen that the lines at the edge present sharp angles resembling fine saw teeth. They lack the graceful curves and perfect geometrical symmetry of the genuine. The lines also in the counterfeit are not equidistant, they are also heavier in some places than others, neither are they entirely straight. OH. XI.] Bankiitg. 221 The genuine vignettes. The genuine vignettes appearing on the government notes And bonds are exquisitely finished. The engraving is very expensive.. These pictures are lifelike. They are as perfect as skill and talent can make. In observing the eyes you can perceive tkat they are expressive, clear and sharp, showing the v^hite very distinct. The lips are shown to be slightly pouting and display deli- cacy. The hands and feet being perfectly formed; observing the forehead, the pores of the skin or flesh tints are exposed. The face, limbs and neck and other portions of the body are represented by delicate dashes and dots set in perfect semi- circular rows. On the shaded side will be seen the beautiful fine black lines crossing and recrossing each other at accurate angles presenting a clear, sharp diamond work, producing a symmetrical beauty and relief appearance to the picture. The background of the picture, which has gradually van- ished and which surrounds it, is formed of delicate and per- fect squares. The drapery of the picture is exceedingly grace- ful, flowing, and natural. The hair is artistically arranged, it is devoid of coarseness, it appears soft and natural. The shades and lights are so nearly perfect that the strands of the hair can be distinctly seen. The whole picture shows exceed- ingly great skill, all the work being wrought out and blending together to a perfect degree of harmony and perfection. The counterfeit vignettes present a lifeless appearance. The countenance appears haggard, the eyes are blurred, dull and foggy. There is distinct demarcation of the black and white of the eye. The black of the eye mingles with the white. The features are flat and expressionlesis. The mouth lacks the rounded, pouting lips. The flesh tints, shovdng so perfectly upon the genuine on face, neck and limbs, upon the counterfeit show coarse dots. The diamond and background of the counter- feit work is blurred. The hair fails to show the distinct strands, and appears coarse and altogether unnatural. The inks used in numbering the genuine notes are manufae- 222 Payiitg and Eeceiving Tellees. [ch. xi. tured by secret process, the chemicals used are unknown to coun- terfeiters ; and it is said that in no instance have they been suc- cessfully counterfeited or even imitated. The red ink number may be obscured by soiling, but by touching it with a damp sponge its color will be brought out perfectly, while in the coun- terfeit the red ink used in the number and seal presents a pale red or dark logwood. It lacks the lustre, the edges appear ragged, while the dampening with the ■ sponge more clearly reveals its spuriousness. The genuine green ink used has a very rich grass-green hue. The color of this ink is very strong and will be retained until the note is almost worn out. It will be noticed that the only distinction between the national bank note and the government note is in the shading. The government note appears several shades darker than the national. This ink is also made by a secret chemical process known only to the government. The counterfeit green ink upon close investiga- tion appears in a variety of shades, dark green, pale, or pea green, and lacks the lustrous green of the genuine. It is dull and dead in its appearance. The genuine black ink used is almost a pure carbon and will retain its jet black and glossy appearance a great length of time, even on old and worn notes. It appears remarkably fine. The counterfeit black ink lacks the gloss. It has a brownish, smoky appearance and is devoid of the lustre appearing in the genuine. The chemical bath which the bank and government note paper receives prepares it for receiving the ink impressions and prevents the ink from spreading, which is frequently noticed on the counterfeit. The plate used in making these impressions is a work of art and very accurately cut. It is very difficult for the counter- feiter to produce a plate that even resembles the genuine. To detect altered bank notes it is necessary to become famil- iar with the genuine engraving. Upon close observation a striking contrast will be observed between the genuine portion of the note and that of the counterfeit substituted. OH. XI.] Banking. 223 In the altered bank note the comers are generally extracted and the counterfeit printed into their places. To execute this work it becomes very difficult. The extracted part of the note must leave the paper more or less damaged; and the printing taking the place of the original and generally the miserable execution of the work can be perceived at a glance. In substi- tuting the letters and figures it is almost impossible to retain the natural and genuine colors; and it will be observed that the substitution presents coarse outlines and is otherwise imperfect. Spurious signatures. The signatures upon all government notes are engraved, while those upon national bank notes, under section 5182, E,. S. U. S., are required to be signed. But under the ruling it is held they may be stamped upon the notes. The same rule applies in detecting the engraved signature and determining its genuineness as given to detect other por- tions of a note which is engraved. The counterfeit will lack the symmetry and perfect shading and natural appearance. The signatures appearing on the national bank notes, as stated, should be signed. They are those of the president or vice-president and the cashier of the bank. It is very difficult to determine the genuineness of the writ- ten signature unless you have the standard or genuine before you; and have familiarized yourself with, the characteristics of the writer. Having become thoroughly familiar with the genuine -signature of the writer, it does not become impos- sible to detect a counterfeit; but it is impossible that a banker or teller should have the opportunity to know the signatures of the signing officers to the national bank notes, and therefore it is seldom that a counterfeit national bank note is discovered through this source. There is no known rule to be guided by in the detection of a counterfeit signature. It has been demonstrated beyond question that the most scientific and greatest experts have been deceived at their own trade. Of course the forgery of a signature may be and frequently 224 Paying and Eeceiving Tellers. [ch. xi. is discovered, but this is usually done where the work is rough and un^ilfully performed. No person ever wrote his signature exactly alike the second time. It is a thing impossible to do. Expert knowledge is very useful, especially in discovering forgeries of instruments such as wills. Where the forger undertakes to imitate the handwriting of a person (other than his signature) it becomes very difficult, and the forgery may be comparatively easy to detect; but it is very difficult to detect a forged signature where skilfully executed, therefore the courts hold that the bank can only be held responsible for such reasonable care, prudence, and skill as may be required and is expected of a paying teller. The receiving teller may not have the time to apply all these various tests; but if when receiving a deposit he has any doubt as to the genuineness of a note or coin it is his duty to call the attention of the depositor to the fact, and if upon examination it is discovered that the coin or bill is a counterfeit, it then becomes the duty of the officer or receiving teller to immediately take possession of such counterfeit coin or note, and if a note to stamp in plain letters upon the face of the same the word " counterfeit." Section 5 of the Act of Congress approved June 30, 1876, provides " that all United States officers charged with the receipt or disbursement of public moneys, and all officers of national banks, shall stamp or write in plain letters the word " counterfeit," " altered," or " worthless," upon all fraudu- lent 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." There are no provisions of law enacted by any State direct- ing that officers of State banks shall mark such notes as are found to be counterfeit; but it would clearlv be the duty of such officer to do so. Counterfeit notes or coins when detected should be remitted to the treasury department at Washington. After receipt of OH. XI.] Bawkiitg. 225 same at such office, and upon examination, if they are found to be counterfeits, they are returned to the sender (canceled) for the purpose of enabling him to make reclamation; and after such use they must be finally returned to the Treasury Department and by it transferred to the secret service division thereof. The teller must also satisfy himself that all checks presented by the depositor are regular. As stated in a previous chapter the check must be dated, must be drawn on a bank, it must call for a certain sum of money, payable either to bearer or to order of a person named, and be signed by the maker. Being satisfied that the check is regular he should require the depositor to endorse the same, for by such endorsement the bank is in possession of positive evidence of the source of its receipt; and the last endorser may also be held liable to the bank. If the teller receives certified cheeks, being checks certified by another bank, the indorsement of the depositor becomes necessary to pass the title of the check and establish the fact that he is the bona fide holder. § 151. Limitation of power. The receiving teller has no authority to make discounts, certify checks, or allow a credit to a depositor. His duty is confined to receiving money, and only such documents as pass for cash. He should not open an account with a stranger until he has been instructed or authorized to do so. This authority is left with the president or cashier, who may alone determine who the customers of the bank shall be. § 152. Biile as between depositor and bank correcting errors. The receiving teller in receiving a deposit may fail to give the depositor the proper credit on his pass book. Errors are likely to occur in this way. The depositor failing to list the items of deposit on the deposit slip, which may consist of coin, notes, checks, etc., the teller should return the deposit 15 226 Paying and Eeceiving Tellees. [ch. xi. slip to him and request him to enter each item on the deposit slip. Failing to do this the teller's entry of the amount of the deposit in the absence of the depositor is subject to cor- rection. If the depositor can show that an error has been made, and he has not received a proper credit, the bank will be held liable. But it may be very difficult for him to show this. If he has entrusted the money, checks, and drafts, together with his pass-book, with the teller and leaves the bank before the entry is made, the teller may become both his agent and the agent of the bank for the purpose of making the deposit. The teller may require the depositor to remain and verify the amount to be entered to his credit in his pass-book. But where the depositor says, " I am in a hurry, I cannot remain," and the teller enters the deposit, the bank may be held for an error if any should occur. The teller is not required to take the responsibility of listing the items for the party upon the deposit slip, and may. refuse to give credit to the depositor unless the items have been listed upon the deposit slip by the depositor himself. The bank may make any reasonable rule governing the receiv- ing of deposits, and if known to the depositor, and he fails to comply with it, the bank cannot be called upon to correct an error which was the direct default of the depositor. Where the rule requires the depositor to verify the cor- rectness of the deposit in the presence of the teller, and fail- ing to do so he entrusts the counting of the deposit and the entry thereof in the pass book to the teller, the bank cannot be held liable. The depositor has made the teller his agent to count the money and make the entry. The teller, however, may be held liable to the depositor as an agent in case of loss or false entry. It is well understood that the bank cannot make a by-law, or establish a usage, which would injure or deprive third parties of their rights. A by-law which may operate by construction of the law to relieve the bank of a reasonable duty or responsibility, which is imposed upon it by the very nature of its business to perform, CH. XI.] Banking. 237 is void. But a bank is entitled to protection from suspecting and designing persons, and it may enact a by-law which is reasonable, requiring the depositor to be present and verify the correctness of the amount of the deposit, before it is passed to the credit of the depositor. If a customer of a bank caimot be held to reasonable care and diligence in respect to his own business, he should not ask the bank to be held to correct an error for which he alone is responsible. A depositor caimot walk into a bank and hand to the teller his deposit book with money and checks for deposit, and leave the same with the teller before the amount of the deposit is verified, and the entry is made, and afterward charge that the teller was in error, and upon his testimony alone hold the bank liable. The duties in general of the receiving teller may be defined and prescribed by the board of directors, or by the by-laws of the bank. In the absence of such directions or by-laws he is the subordinate of the cashier and is subject to his direction and orders. If his duties are definitely prescribed by the board of directors, he is held accountable only to them for a failure in the performance of the same. If he is the subordinate of the cashier and follows his orders and directions he cannot be held personally liable for loss or injury to the bank. Where a teller is selected and retained by the bank to per- form the duties of receiving teller, the cashier may also receive moneys for deposit, for his duties are co-ordinate with the teller in this particular, § 153. Beceiving deposits after bank insolvent. A teller is often spoken of as a " minor officer " of the bank, which is simply a term used. It does not in any sense mean that the teller is deposed of all authority or released of all liability. He is in fact a clerk employed by the bank and as such performs the duties specially delegated to him- He is 228 Paying and Keceiving Tellees. [oh. xi. not supposed to know the financial condition of the bank and in fact cannot know it unless informed by the managing officers, or by personal examination of its affairs. Not having knowl- edge of its financial condition even though it is insolvent, and receiving deposits for it while insolvent as its agent or clerk, will not make him responsible. But the rule is different where he has actual knowledge of the bank's insolvency, or if he has been informed by the bank's superior officers that it is insol- vent, " but to continue to accept deposits " it is clearly his duty to refuse to do so, and failure to do so and aiding the officers in embezzlement would bring him within the statute making it a felony for any banker to receive money when at the time of receiving such deposits the bank was in fact insolvent. Where it is held that it is his (the banker's) duty to know, and he is under all ordinary circumstances bound to know that the bank is solvent and it is criminal negligence for him not to know of his own insolvency, the offense does not apply to any minor officer or employee of the bank not charged with such knowledge. Such minor officer cannot be held responsible only where he enters into a conspiracy with the banker, or having knowl- edge of the bank's insolvency personally enters into the act of receiving deposits. CHAPTER XII. THE NOTE TEIIEE. § 154. His duties. The note teller's duties are to receive the money for all promissory notes which are placed in his hands and are liqui- dated at the bank. There are two kinds of notes. The notes which are dis- counted hy the bank are called " bills discounted ; " those left for collection are " collection notes." All the notes falling due are placed in the hands of the teller on the day of their maturity. The discounts are received from the discount clerk; the total amount is usually marked on a slip of paper strapped around the notes. When the collection is made the amount is credited to " bills discounted " in the general ledger. All other notes, falling due and collections assigned to and belonging to the bank on the day of maturity, are placed in the hands of the note teller by the cashier and the amount of each note is either marked in pencil on the note or is shown by a ticket accompanying the note. After the notes are placed in his hands, he is authorized to receive payment. All notes received by him which are payable at other places in the city are sent out by messenger for presentation and collection. When notes are paid, certified cheeks or money should be demanded. The teller should be careful to preserve all memo- randa of his transactions, in the order of their occurrence, until his cash is proved at the close of business for the day. At the close of business he erases from the cash book and discount tickler such notes remaining unpaid, and when not otherwise instructed and when protest is necessary, places them in the hands of a notary public for that purpose. He should demand [229] 230 The Note Tellee, [ch. xn. of the notary a receipt for such notes as are placed in his hands. When a note is forwarded under instructions by the cashier to a foreign place for collection, the items or notes are duly entered in a letter form which shows each item or transaction; from this letter the items and totals can be taken and posted in the note teller's cash book. The letter under this system is the original entry and a copy thereof should be taken and preserved. At the close of each day's business the teller must account for the disposition of all notes received by him. His tag or memorandum charging himself with notes uncollected and which are not in his hands should not be accepted. He should present receipts or acknowledgments for all notes and collections when called upon to do so. Limited cmdhority. The duties of the note teller are such as restrict him to a performance only of such transactions as relate to making col- lections, and his authority may be a specially restricted one, given to him by the cashier at the time. He is not invested with authority to compromise any claim or debt due the bank or placed with the bank for collection. This position does not authorize him to release one of the makers of a note. In Schneider v. Seely, 40 111. 255, the court held that he had no such implied authority and that where he did erase the name of a maker it did not operate as a release. CHAPTER XIII. bahe fowebs defined. § 155. Statutory and expressed powers. The powers given to banks are those derived from their charters and the law creating them, and the statute of the State under which they operate. The statutory powers are called the express powers. The expressed powers of national hanks are the laws enacted by Congress, creating the right of a banking corporation to organize and to conduct the business of banking and prescrib- ing their duties and powers. The express powers are those which directly authorize certain things appeartaining to bank- ing, and which guarantee the right of the bank to put them into use and force. In law, an express or statutory power is one defined and authorized by the legislative body of the State, granting author- ity to do and perform certain things; and when authorized by law to do and perform an act uiider such expressed or statutory provisions, the right to do the same can only be inquired into by the State. A law may be unconstitutional, but the right to put it into force until it is adjudged so by a court of competent juris- diction, cannot be questioned. The expressed powers enumerated in the statute, authoriz- ing a bank, when duly incorporated, to do and perform certain things, are privileges' created by law. The extent and use of these powers may present questions requiring adjudication by the courts, but banking corporations may use all the powers granted to them by the statute, and if their acts, -^en per- formed, are within the law, being lawful, they cannot after- ward be declared unlawful. [231] 232 Bank Powees Defined. [ch. xm. The statute may grant a specific power to a bank, and pro- hibit another privilege, which is not unlawful in itself, but dangerous if allowed to be performed by a bank. This is termed a police power or regulation. A statute may specify the principal things which a bank may do, and prohibit it from doing certain other things which it might lawfully do if they were not not prohibited. But the legislature seldom undertakes to define all the powers expressed, implied, or incidental, belonging to the banking busi- ness, but usually contents itself by specifying the principal privileges or powers which it may exercise. The implied or incidental powers are those not enumerated by the legislature, but are such as pertain to, and are conferred upon banking corporations by accepted and long-continued use and custom. The courts recognize these incidental privileges and inherent powers as necessary incidents in carrying on and conducting the business of banking. While customs and uses do not, in every instance, signify that they are fixed privileges or laws, a well-established custom, if reasonable and just, by decisions of the courts, may pass into a fixed rule of law and become a recognized principle and privilege. The decisions of the courts generally go to the extent in defining incidental or implied powers ; " and say that a hank may make any contract, or establish any reasonable custom affectimg or appertaining to the business of banking, and can exercise the powers expressly enumerated in the statute, and also such powers which are properly incidental to the business of banking in conducting its affairs." In the case of Logan County National Bank v. Townsend, the Supreme Court of the United States fuUy established this principle. The court, in discussing the question, says : " It is undoubt- edly true, as contended by the defendant, that the ITational Banking Act is an enabling act for all associations organized under it, and that a national bank cannot rightfully exercise any powers except those expressly granted by that act, or such CH. xiii.] Banking. 233 incidental powers as are necessary to carry on the business of hanking for which it was established." A banking corporation has all the powers expressed and implied though not enumerated in its charter, which are law- ful and authorized in the formation of such a corporation, whether organized under a general or special law. It has also all incidental, ancillary, or implied power necessary to carry on the business of banking. It has power by reason of the very nature of its purposes and business to do many things not spe- cifically delegated to it by the statute. The statute may provide that it has power to receive deposits general, special, and specific, and to loan money, to buy and sell exchange, coin, and bullion; to purchase notes and bills and deal in checks ; to make discounts of negotiable paper ; to issue and give certificates of deposit, but all of these things by right belong to the business of banking in the absence of and without specific power, delegated and prescribed by the statute, and unless prohibited by law, these powers belong to a bank inci dentally and in the very nature of its purposes and business. The statute may provide that its business shall be restricted and controlled ; for example, if a savings bank, that it shall not invest the money of its depositors in mining stocks, but it has all lawful powers, in the conduct of its affairs necessary to carry on its business which is lawful and permitted to be performed by law; and also all such incidental implied and ancillary powers which such corporations may enjoy in the transaction of their business. The ancillary powers are those giving to the corporation the right to sue and be sued; to have a corporate seal; to appoint agents and elect officers, and to make by-laws for the management and government of the affairs of the corporation. In other words, a bank may, unless restricted by the law, perform any lawful act necessary to accomplish the purposes of its creation that an individual could do. A national bank is confined strictly to such powers as are conferred by the statute, and such implied powers as are neces- sary in the conduct of its business. For example, no power 234 Bank Powees Defined. [ch. xni. is granted to it to act as an agent in the sale of stocks for others, but where the bank purchased notes which it had been authorized to sell to a third party, it was held liable for con- version, even though it was not within its power to sell/ A bank's powers as stated are those authorized by its charter and expressed by the statutes of the State, some things being authorized and other prohibited. The State may expressly prohibit a bank from purchasing stock in another bank or in a mercantile corporation (Bank v. Lainer, 11 Wall. 369), and by a qualified provision of law, the State may authorize a bank to purchase stock to secure a debt due it, being one pre- viously contracted. See First National Bank v. National Exchange Bank, 92 U. S. 192; Canfield v. State National Bank, Fed. Gas. No. 2382, and while the law as expressed forbids a bank from engaging in any business other than that expressed by its articles of incorporation, it will allow the bank to purchase an interest in a business to save a debt due it and to conduct such business especially if by a failure to do so the bank would suf- fer a loss or lose its claim entirely. These privileges are all implied and allowed as a right of protection guaranteed to the bank by law. They frequently find themselves partners in a business, or forced into a business, which must be protected and conducted if they would save themselves from a loss, and their power to do these things, although not expressed, is passed unchallenged. The State is vested with power to make complaint that the bank has violated its charter, but when the purpose of the bank is one solely to save a debt, and its acts are not a pretext for embarking in business, which is a question of fact for the jury to determine (Eeynolds v. Simpson, 74 Ga. 454) the State will not lend its aid to disturb the bank's acts. To what extent a bank may enter into or conduct a business other than its own, would depend largely upon the nature of the business and the amount it had invested and the extent such an investment would involve the capital stock of the bank, and 1 First National Bank of Grand Forks t. Anderson, 172 U. S. 573. CH. XIII.] Banking. 235 indirectly its stockholders and depositors. That a hank may engage in the lumber business to reimburse itseK for a debt arising out of the foreclosure of a mortgage, has been settled and that it may continue in such business until reimbursed is a privilege sanctioned by the courts. That a bank may take the transfer of the leasehold of a mill in satisfaction of a prior .indebtedness, and continue to operate the mill as a going con- cern in order to reimburse itself, is also sanctioned by the courts; and a bank may purchase wheat to seed land which it has been compelled to purchase, and it may sell on credit the grain grown on the land, and a bank may, to secure or save a debt previously contracted, purchase at an execution sale, raw and partly manufactured goods, and carry on the business of manufacturing, and a third person injured or claiming injury thereby has no right to complain. See Lippencott v. Longleat- tom, 6 Pa. Co. Ct. 503. It is held that a bank owning land acquired to save a debt may cultivate the same and may clean it and make repairs, and improve it, in fact do anything that a prudent individual would do in order to make the land salable; and it is again held, that where a bank has by law taken possession of a warehouse, it has incidental power to do every act necessary to the preservation of the property. It is also held that a bank has the right to sell butter which it has taken in settlement of a debt, and another bank has the right to buy it, and that a bank, to preserve and secure a debt previously contracted, may become a partner in a milling busi- ness, and may loan money to the partnership.^ The decisions support the authority and extraordinary power 2 Beynolds v. Simpson, 74 Ga. tional Bank v. Meadowcraft, 4 111. 454; Eoebling Sons Co. v. First Na- App. 630. See 218 U. S. 27; Cooper tional Bank, 30 Fed. Eep. 744. v. First National Bank, 40 Kan. 5, Contra, see 69 Ohio St. 160, 202 U. 18 Pae. Eep. 937; Farmers' and S. 295; Peterborough Hydraulic Merchants' Bank v. Detroit, etc.. Power Co. v. McAllister, 17 Ont. L. Co., 17 Wis. 373; Sacket Harbor Eep. 145; Firth National Bank v. Bank v. Lewis Co. Bank, 11 Barb. Banister, 7 Kan. App. 785, 54 Pac. 218; Eurich v. Earling, 27 L. E. A. Eep. 20; First National Bank v. (N. S.) 243; Cameron v. First Na- Peary Elevator Co., 10 S. D. 167, 72 tional Bank, 4 (Tex. Civ. App.), 34 N. W. 402; Cooper v. Hill, 36 C.C. A. S. W. 178. 402, 94 Fed. Eep. 582; German Na- 236 Baitk Powees Defined. [ch. xiii. of the tank to conduct a business other than banking, upon the principle that the bank may at least enter into and continue such business sufficiently long to save its investment or reim- burse itself of the sum involved. It cannot be contended that because a bank conducts a busi- ness requiring great skill and care, and in the nature of a trust, it shall be prohibited from doing anything in any other line of business when it is absolutely necessary to protect its interest. But there should be a rule defining the extent of power which a bank might exercise, in determining whether its conduct was proper, but each case seems to be one which must be governed and controlled by the facts, and the directors are therefore left in control and authority to do in each case what is best for the bank. The rule as to the powers of national banks to acquire stock in other corporations is laid down in First iNational Bank v. Nail Exchange Bank, 92 TI. S. 122, which, briefly stated, is that in the honest exercise of the power to compromise a doubt- ful debt owing to the bank, it might take stocks with a view to their subsequent sale or conversion into money, so as to make good or reduce an anticipated loss. But see Eirst iN'ational Bank v. Converse, 200 U. S. 425, where it is held that a national bank cannot take stock in a new speculative corpo- ration with the common double liability in satisfaction of a debt. The subject of the powers of a bant are thus generally defined. The bank's powers are more particularly discussed tinder the various subjects and topics following: Bank powers — Transacting husiness in foreign state. The Supreme Court of Kentucky in the case of Fawcett's Assignee v. Mitchell, 133 Ky. 361, has declared that in the absence of any statute limiting the authority of a bank organ- ized under the laws of the State, " it many transact any busi- ness within the scope of its charter in foreign States." That it may make collections and pay debts owing by it or its CH. XIII.] Banking. 237 customers out of the State, is a right guaranteed to it inde- pendent of any provision in its charter, but to extend its busi- ness further than this is an attempt to conduct a business independent of the laws and regulations prescribed by the State. A corporation's charter powers will not give it authority to conduct a business in a foreign State except as provided by law where the laws of the State regulate and control all corpora- tions doing business. within the State. National hank, when not exempt from subjection to State laws. The franchise of a national bank, although derived from the United States, does not exempt it from subjection to State laws as do not impair its efficiency in performing those func- tions by which it was designed to serve the United States.* s National Bank v. Conunonwealth, Easton v. Iowa, id. 220; Cogswell v. 9 Wall. 353, 362; Davis v. Elmira Second Nationa,l Bank, 76 Oonn. 252. Sav. Bank, 161 U. S. 275, 283, 287; CHAPTER XIV. COmrEBTINO STATE INTO NATIONAL BANES. § 156. Steps to be taken — Statutory power. The National Banking Act, section 5154, Eevised Statutes of the United States, provides that " a State bank may be converted into a national bank." This may be done without reorganization, and no authority is required from the State in which the bank is situated. In the case of Casey v. Qalli, 94 U. S. 673, the court in disposing of the second plea filed by the defendant, which alleges " that there was not then, nor when the plaintiff was appointed such supposed receiver of said New Orleans Banking Association, nor before, nor since that time, any such corpora- tion in existence, because the bank of New Orleans had no power by its charter, nor authority otherwise from the State of Louisiana, to change its organization to that of a national banking association under the laws of the United States," says : " The second plea is clearly bad. No authority from the State was necessary to enable the bank to so change its organ- ization. The option to do that was given by the forty-fourth section of the Banking Act of Congress. The power there con- ferred was ample and its validity cannot be doubted. The act 18 silent as to any assent or permission by the State. It was as competent for Congress to authorize the transmutation as to create such institutions originally." In converting a State into a national bank the statute must be strictly complied with. Section 5154, Revised Statutes of the United States, pro- vides as follows: "Any bank incorporated by special law, or any banking institution organized under a general law of any State, may [238] OH. xrv.J Banking. 239 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 niay 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 or 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 required to make its or- ganization perfect and complete as a national association. The shares of any such bank may continue to be for the same amount each as they were before 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 State bank which is a stockholder in any other bank, by authority of said 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 association a certificate under his hand and oflScial seal, that the provisions of this title have been complied with, and that it is authorized 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 prescribed for other associations originally organized as national banking associations, and shall be held and regarded as such an association. But no such association shall have a less capital than the amount prescribed for associations organized under this title." § 157. Incorporated banks can only be converted. The bank to be converted into a national bank must exist as a corporation under State laws; A certificate from the proper authority of the State, certifying that a corporation had authority to act as such in a State would be prima facie 240 CoNVEETniTG State dstto Nationai, Ban^ks. [oh. xiv. evidence of the fact tkat the corporation existed under the State law. It would follow, therefore, that a private bank, although permitted by authority of a State to do a banking business, could not be converted into a national bank. The first step required in the process of conversion from a State into a national bank is to obtain in writing the consent of at least two-thirds of the stock ovnied by the shareholders. When the consent of two-thirds of the stockholders is ob- tained, notice should then be given to the Comptroller of the Currency of the intention to make the conversion, and the title to the bank should be submitted. Upon notice being received by the Comptroller, the proper blanks will be furnished by him, which consist of the organization certificate, which must be certified to by at least two-thirds of the board of directors. This certificate must set forth the fact that the stockholders authorized the conversion of the State bank into a national bank. When so executed it should be certified to before an officer, a clerk of a court of record, or a duly appointed notary public. In the case of a conversion from a State to a national bank, the directors of the State banking corporation hold their posi^ tions as directors in the national banking corporation until the next regular annual election. § 158. Corporate relation to old bank after reorganization. The Supreme Court; in the case of Metropolitan Bank v. Claggertt, 141 U. S. 520, in discussing the relationship between the State bank converted into a national bank, holds that : " * * * the conversion of the State bank in the State of IN'ew York, into a national bank under the act of the Legis- lature of that State of March 9, 1865 (N. Y. Laws of 1865, chap. 97), did not destroy its identity or its corporate existence, nor discharge it, ' the State bank,' as a national bank from its liability to holders of its outstanding circulation issued in accordance with State laws." The court in further discussing this subject, says: " The question we are to consider here is, did the court err OH. XIV.] Banking. 241 in holding that the plaintiff in error was not exonerated from liability either by its becoming a national bank, or by the pro- ceedings for the redemption and retirement of its. circulating bills issued whilst a State bank, which proceedings, it was claimed, were in strict observance of every requirement of the New York statute of 1859 in relation thereto, or by the statute of limitations of the State of New York ? " The court decided that the New York statute providing for a redemption of circulating notes and for releasing the bank, if the notes were not presented in six years, applied alone to banks " closing the business of banking ; " that the change or conversion of the Metropolitan Bank into the Metropolitan National Bank did not " close its business of banking," nor destroy its identity or its corporate existence, but simply re- sulted in a continuation of the same body, with the same officers and stockholders, the same property, assets, and bank business under a changed jurisdiction; that it remained one and the same bank, and went on doing business uninterruptedly; and that, therefore, the statutory proceedings relied upon in the answer could not operate as a bar to the liability of either bank to pay the bills delivered by the Metropolitan Bank in 1861 to plaintiff's intestate. The conversion is not a termination of the corporate exist- ence of the bank, neither is the change one which will destroy the liabiiities of the bank. It is simply a continuation of the same body under a changed jurisdiction. The act of conver- sion does not destroy the corporate existence of the bank ; it is only the business or assets of the bank which are converted into the new jurisdiction, and when its liabilities are all dis- posed of and paid, the bank is left in possession of its charter, and retains all of its corporate rights. If so, it may again go into business as a banking corporation. This position is fully sustained by the Supreme Court in the case of Michigan Insurance Bank v. Eldred, 143 U. S. 293. It is held in this case that " the State bank, after conversion into a national bank, does not affect its identity, and that it can maintain an action under its charter and in its corporate 16 242 CoisrvEETiNG State into National Banks. [ch. xiv. name, and sue upon liabilities incurred to it." In this case " an action was brought by the Michigan Insurance Bank, a corporation created and organized under the laws of the State of Michigan, against a citizen of Wisconsin, upon a judgment recovered by the plaintiff against him on May 13, 1862, in an inferior court of Michigan, for the sum of $4,211.56; in the present action the writ was dated May 11, 1872, and appeared by the marshal's return thereon to have been served on June 3, 1882. The defendant originally pleaded the statute of limi- tations of ten years and on that issue obtained a verdict, the judgment on which was reversed by this court at October term, 1888, because evidence introduced by the plaintiff that within ten years the summons which had been delivered to the marshal for service, had not been properly submitted to the jury. The defendant answering denied, upon information and belief, that at the time of the commencement of the action the said plaintiff was, or is now, a corporation created or organized under the laws of the State of Michigan. In support of the other defense the defendant offered in evidence duly certified copies of the following documents: " First. Articles of association. " Second. The organization certificate executed at the same date as the articles of association. " Third. Instruments signed by the stockholders conferring the authority of the change of the State into a national bank. " Fourth. A certificate of the Comptroller of the Currency that the association had complied with the provisions of law, and was authorized to commence business." The defense in this case, in effect, was that the plaintiff at the time of the commencement of this action was not, or is it now, a corporation. The court, in discussing this question, says: " The evidence offered by the defendant on this point wholly failed to support this defense, and it must only profit that the plaintiff sued by the wrong name. It showed no more than that the plaintiff corporation, having been originally created by the laws of Michigan, had, in accordance with the National CH. XIV.] Baitking. 243 Banking Act, become a national bank, and its name been changed accordingly, without affecting its identity or its right to sue upon obligations or liabilities incurred to it by this former name. " In the absence of a statutory provision limiting or affect- ing the corporation rights of a State banking corporation after conversion into a national bank, the State bank does not lose its charter or right to sue in its original name; but where, at the time of re-organization, the choses in action or property of the State bank have been assigned and transferred to the na- tional bank, the action should properly be brought in the name of the assignee." In the case of Atlantic National Bank v. Nathaniel Harris, 118 Mass. 147, held: That " the new bank could maintain an action in its own name against the president for money had and received under the statute of 1870, chap. 217; the fact of sale by the State bank and purchase of the chose in action by the plaintiff being set forth in the writ." § 159. Liabilities of national bank, after conversion. Upon the question as to liability of a national bank formed by the conversion of the State bank, for the debts of the State bank, the case of Metropolitan Bank v. Claggertt, 141 U. S. 520, is directly in point. It holds that : " * * * where a national bank is organized as the suc- cessor of a State bank and takes over the assets of the bank and holds the same, it is liable to the depositors of the former bank." In the case of The City National Bank of Poughkeepsie, Eespondent, v. William Philips, Appellant, 97 N. T. 44, the court holds that : " * * * a State bank transformed into a national bank is but the continuance of the same body under a changed juris- diction, and between it and those who have contracted with it, it retains its identity and may, as a national bank, enforce contracts made with it -as a State bank." 244 CoNVEETiuG State into National Banks. [ch. xrv. Held also that : " * * * -where a State bank, at the time of its change to a national bank held a continuing guarantee of loans made by it to one W., upon the strength of which it had made loans, and after the change further advances were made, an action was maintained by the national bank upon the guarantee and that the guarantor was liable for the loans made both before and after the change." Where a national bank goes into liquidation, closes its busi- ness, and ceases its organization as such in conformity with the Act of Congress in such cases made and provided, and the bank is subsequently legally organized and incorporated ac- cording to law, it becomes liable as the successor of all of the property and interests of the former bank to depositors in said bank.^ Where a national bank is formed as the successor to a State bank and becomes possessed by assignment of the property of the State bank, owning and holding the assets of parties liable to the State bank before its formation or reorganization into a national bank, the debtors became liable to the national bank, and upon the same theory, if it took the assets of the State bank and can collect and sue upon them, it becomes liable for all the transactions legally entered into by the State bank prior to the assignment or reorganization. And a national bank in taking over the assets of a State bank, either by conversion or otherwise, cannot take by transfer or assignment and hold the stock of the State hank. National banking corporations are prohibited by law from holding- by purchase directly, stock of another corporation. A State bank, as formerly stated, does not lose its corporate existence or its charter by conversion into a national bank; it simply transfers or converts its assets into the new corporation formed under the National Banking Law. A State bank may transfer all of its assets and property of every nature, and its surplus fund, if authorized by all of its lEans, Administrator, Plaintiff in son City, 79 Mo. 182; Bank v. Mo- Error, v. Exchange Bank of Jeffer- Intyre, 40 Ohio St. 528. CH. XIV.] Banking. 245 stockliolders, but it cannot transfer its stock to a national bank. Such an act is an act ultra vires on tbe part of the iN^ational Banking Act, and, as previously stated,- unless a statute exists which provides that the State bank's charter shall be annulled or be declared forfeited to the State within a certain period after conversion, the corporation (State bank) lives for the full period granted to it by the provisions of its charter and the law. In the case of Hayden v. Bank of Syracuse et al., 15 1^. T, Supp. 48, it is held that: « * * * jjj accordance with the provisions of the statute- laws of said State, chapter 97 of the Laws of 1865, the change from a State bank to an association organized under the Bank- ing Laws of Congress, the action on the part of the State bank under said statute operated as a surrender of its charter and its existence as a corporation ceased." But, as stated, if there are no statutory provisions terminat- ing the existence of the charter, its rights exist for the re- mainder of the period granted to it by law from the date of the transfer or reorganization. " The transition of a State into a national bank does not disturb the relation of either the stockholders or officers of the corporation, nor does it enlarge or diminish the assets of the institution. These all remain the same under the national as they were under the State organization. The bank neither loses any of its assets nor escapes any of its liabilities by virtue of the change." It is not a new creation, but as a national organization, in assuming the place and position of the State bank, assumes all of its legal liabilities. It is held that : " Where certain pack- ages of coin were specifically deposited with the State bank prior to the change, that an action in trover would lie against the national bank for conversion." ^ Where an asset has been assigned, the assignee taking title would be the proper party plaintiff in action, and the corpora- 2 Benjamin CofFy, Eespondent, v. National Bank of the State of Mis- souri, Appellant, 46 Mo. 140. 246 CoNVEETiNG State into "National Banks. [oh. xiv. tion bank, after assignment, could not claim title or interest in the property, and therefore, would not be a proper party plain- tiff under the statute. But where the old bank corporation has a continuing guarantee of loans, it is held it retains the right to enforce the guarantee.* Assets which may be transferred by a State bank and con- certed and held by the new national bank, are limited to such ■only as the national bank may hold at any time. All assets prohibited to be held by sections 5137 and 5200 of the Eevised Statutes of the United States must be retained by the old corporation. State hanJc having hranches, relation after conversion. " It shall be lawful for any bank or banking association or- ganized 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." (Section 5155, E. S., U. S.) For forms of authority for conversion see Appendix. « National Bank v. Phelps, 97 N. Y. 44. CHAPTER XV. AMENDING BANE CHABTEBS. § 160. National bank charter, how amended. The National Banking Act provides the steps to be taken in obtaining a charter, and when all such proceedings are com- plied with and the Comptroller of the Currency issues a certifi- cate of due incorporation, the charter becomes a contract and is not subject to amendment, only under such laws and re- strictions as are imposed by the statute. A national bank may amend its charter, providing " no change shall he made in the articles of associaiion hy which the rights, remedies, or security of the existing creditor of the association shall he impaired." The necessity of amending a charter obtained to conduct the business of banking, when obtained under the National Bank- ing Act, could hardly arise. The charter when obtained with power to do a general banking business under said act is com- plete. An amendment does not enlarge its power by setting out the various statutory enactments and provisions in the articles of incorporation. All such powers are implied and need not be set out in hsec verba; but a national bank charter which has been granted, and is defective as to requirements of form and law, may be amended by application to the Comp- troller of the Currency. § 161. Amending State bank charter — Statutory provisions — Control. The laws of the various States by statutory provisions pro- vide for the amendment of the articles of incorporation setting out the mode which must be followed. But the amended articles can, in no instance, extend the life of the corporation beyond the time granted to it by its original articles of incor- [247] 248 Amending Bank Chaetees. [ch. xv. poration, and the articles of incorporation by amendment can- not create a new power or definite purpose from that intended by the original articles. For example, a bank which is incor^ porated as a savings bank under a statute authorizing and pro- viding specifically for the incorporation of such banks, and in conformity with such a specific law, cancnot amend its articles of incorporation to include and give it the power of conducting a commercial banking business. The Constitutions of the various States generally have a pro- vision that no corporation shall engage in any other business other than that expressly authorized in its charter, or the law ujider which it may have been incorporated.^ The National Banking Act expressly limits the exercise of the powers delegated to national banks, and they can only per- form such delegated powers and powers incidental thereto as are necessary in the conduct of their business. The object and purpose in so framing the law was evidently to confine such corporations to a strict legitimate banking business, to make them safe in regard to their circulating notes, and as places of deposit. Public policy, therefore, demands that banking cor- porations be held strictly within the limits of the law prescrib- ing and authorizing their organization, and the same policy holds good as to State banking corporations. The Legislature of a State, after a charter has been once obtained by due process of law, has no power to divest the corporation of its rights, or to amend the same, unless such power has been reserved in the Constitution of the State, or unless it has been found that by the operation of such power granted in the charter, the health, peace or public interests generally are being seriously affected or destroyed by the operation and power of such corporation. It can hardly be assumed that such a condition or such results could arise from the operation of powers granted to a bank corporation. The principle is established that a charter when obtained 1 See Constitution of California, art. 12, § 7 ; Constitution Pennsyl- art. 12, § 9; Constitution Alabama, vania, art. 16, § 6. art. 13, § 5; Constitution Missouri, CH. XV.] Backing, 249 from the Legislature of a State (if not obtained through fraud), or from the general law, becomes one of contract between the parties and cannot be set aside or impaired. The Constitution of the United States provides that " no State shall * * * pass any * * * law impairing the obligation of contracts." The celebrated case of Dartmouth College v. Woodward, decided by the Supreme Court of the United States, established it as the law that when the State granted a charter to a private corporation, it became a contract and could not be set aside imless by the consent of the parties thereto. This subject is treated at length in the case of State Bank of Ohio V. Knapt, 16 Howard 369, and Mr. OoUey in his work on Constitutional Limitations says : " Those charters of in- corporation, however, which are granted not as a part of the machinery of the Government, but for the private benefit or purposes of the corporations, stand upon a different footing and are held to be contracts between the Legislature, the corporators having for their consideration the liabilities and duties which the corporation assume by accepting them, and the grant of the franchise can be no more reserved by the Legislature, or its benefits diminished or impaired without the consent of the grantees, than any other grant of property or valuable thing unless the right to do so is reserved in the charter itself." But the States in recent years in framing or amending their con- stitutions have wisely guarded against it by reserving the right to " alter, amend or repeal all laws that may be passed con- ferring corporate powers," but all grants theretofore made by the State are " beyond their reach." It has been held, however, that the Legislature has the power to modify at its pleasure a summary remedy against defaulting stockholders given to a corporation by its charter.^ The general rule is: That the courts in construing charters, construe them liberally when attacked collaterally and directly as against the State. A charter of a company formed under 2 Ex parte N. E. and S. W. Ala. Co., 37 Ala. 679. 250 Amending Bank Ohaetebs. [ch. xv. the General Corporation Law of a State cannot obtain any privilege in violation of the laws of the State.* Articles of incorporation of State banks may be amended in conformity with the law authorizing such privileges, or power, but the law as stated must be complied with in all its require- ments, as the stockholders' and creditors' rights may be affected, and every step taken must be performed in strict compliance with the statute. A banking corporation incorporated under the general law of a State to conduct a general commercial banking business, cannot amend its articles giving it power to conduct a savings bank business, or a commercial and savings bank business com- bined. The law permitting the corporation to amend its articles will not permit it to change its entire purpose. The amend- ment cannot change the original intention and purpose of the corporation. Its powers may be enlarged and new powers may be added and grafted into the corporation, but such powers must be those appertaining to the original purpose of the cor- poration; therefore, as stated, a commercial bank incorporated as such, with power to conduct a commercial banking business, cannot amend its articles of incorporation authorizing it to conduct a savings bank business. This privilege is not germane to the original purposes of the corporation; it is a new power attempted to be created; a new right, and not an amendment of the original purpose or intentions or object of the corporation. A bank may amend its articles of incorporation, but it can- not, by such an amendment, reduce its capital stock to an amount less than its indebtedness. The law permitting a cor- poration to amend its articles will not, at the same time, permit it to destroy them to the injury of its stockholders or creditors. The purpose of the corporation cannot be wholly changed. For example, a bank which destroys its original name, and incor- porates a new name in place of the old one, and enlarges its capital, enumerating other and different powers from those s New Orleans National Banking Association v. Wiltz, 10 Fed. Rep. 330. CH. XV.] Banking. 251 which it had originally attained by law, is creating a new right and not amending its former rights. The statute of the State of California, approved March 11, 1903, providing for the amending of articles or certificates of incorporation, provides that " the articles may be amended by a majority of votes of its board of directors or trustees, and by vote or written consent of the stockholders representing at least two-thirds of the subscribed capital stock of such cor- poration." A copy of the said articles of association, or cer- tificate of incorporation as thus amended, duly certified to be correct by the president and secretary of the board of directors, or trustees, of such corporation, must then be filed in the office, or offices, where the original articles are required to be filed. At the time of so filing such amended articles, a corporation is deemed to have the same power as if such amendment had been embraced in the original articles of incorporation. A defect in the original articles of incorporation can be cured by the process of amendment. Where amendments to charters are provided for by the various statutes of the States, the provisions for amendment must be strictly followed. Cook on Corporations (5th ed.), section 499, declares that " an amendment may be said to be auxiliary and incidental when it merely grants new powers, or authorizes new methods and new plans for the purpose of carrying out the original plan and effecting the real object of that plan." It is also held that " where an amendment changes the cor- porate plans, the question to be determined is one of law." * * Winter V. Muscogee E. R., 11 Ga. 438; Southern E. E. v. Stevens, 87 Pa. St. 190. CHAPTER XVI. BANZ SEHOVING ITS PLACE OF BUSmESS. § 162. National bank removing place of business. A national bank may, witk the consent of the Comptroller of the Currency, remove from one place to another within the State, not more than thirty miles distant from the original place of business designated in its articles of incorporation. The distance cannot exceed the limit of thirty miles, and it must have, before removing, the consent of the Comptroller of the Currency. The National Banking Act, amended March 14, 1900, pro- vides that " 1^0 association shall be organized with 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 thousand inhabitants, and except that banks with a capital of not less than twenty-five thousand dollars may, with the sanction of the Secretary of the Treasury, be organized in any place the popu- lation of which does not exceed three thousand inhabitants. 'No association shall be organized in a city the population of which exceeds fifty thousand persons with a capital of less than two hundTed thousand dollars." A corporation which is required by law to designate a place of business in its articles of incorporation, by such designation thereby gives notice to the world that the place designated is its legal home ; " its domicile " is there, and it then becomes legally a citizen of the State. § 163. State banks removing place of business. It is held in the case of G«orge Eunyan, Plaintiff in Error, V. The Lessee of John G. Coster and Thomas K. Mercien, 14 [252] CH. XVI.] Banking. 253 Peters 122, that : " * * * a corporation can have no legal existence out of a sovereignty by which it is created, as it exists only in contemplation of law and by force of law. It must dwell in the place of its creation and cannot migrate to another sovereignty. But, where the statute of a State provides that a corporation may change its particular place of business from one point to another in the same State, it has such power." It is also held that a corporation bank may, where no statu- tory law intervenes, establish a business in a foreign State as agent of the mother bank, but the rule is well established that a foreign bank corporation cannot have greater privileges in the conducting of its business in the State than those organized within the State. Such a law is reasonable and just. E'o foreign corporation should be allowed to transfer its franchise into a foreign State without complying with all the laws govern- ing corporations of such State. A banking corporation, however, where the statute of the State so provides, may remove its principal place of business from one place to another in the same county, or from one city or county to another city oi* county within the State ; but where no such provisions are provided for in the law, a corporation has no right to remove its principal place of business, but a banking corporation may conduct business within the State and out of the city through its agents duly authorized. Such busi- ness, however, must be that which is given to the corporation by right, by organic law, and such ordinary business as its organic law gives it power to do. For example, an agency may exist for the redemption of bills; an agent may collect a note payable out of the State; a banking corporation may purchase a note in a foreign State. This is held and construed "not transacting business " in the State. It is also held in the case of The President, Directors and Company of Bank of Utica v. Smeeds & Canfield, 3 Cow. Eep. 662, that: " * * * a bank corporation may make any contract within the scope of its general powers, and may bind itself to do an 254 Bank Removing its Place of Business, [ch. xvi. act at any other place, and whenever the engagement may be broken the bank will be equally liable." In the case of Merchants' National Bank v. State Bank, 10 Wall. (U. S.) 604, the court, in referring to the powers of the national banks, says : "Associations organized under the Act of Congress to carry on the bus.iness of banking are required by the expressed words of the act to transact their usual business at an office or bank- ing house located in the place specified in their organization certificate, and no individual officer or party is allowed to leave his bank to go elsewhere to make large contracts without the instructions of the directors. Unless his power in that behalf is limited to the established place of business, he may go wherever he pleases for that purpose, and if he certifies checks anywhere within the four seas of our continent, the bank is "bound by his contracts. Stockholders and depositors should take warning for such is the law, as the national banks are liable at any moment to be overwhelmed with pecuniary obli- gations and involved in utter ruin." A bank located in one county and having its principal place of business fixed by its charter violates the same by establishing an agency in another county where it receives deposits, sells exchange, and conducts a general banking business unless the statute authorizes the privilege. The court, in the case of The People ex rel. Zephaniah Piatt, Attorney-General, v. The President, Directors, etc., of the Oak- land County Bank, 1 Douglass (Mich.), 282, holds that " where, under the provisions of a charter which fixes the place of business, that the bank violates the law if it establishes an agency in another county ; " and in discussing this question the court says: " The last, and most important, question remains to be con- sidered; and that is, whether the establishment of an agency in the city of Detroit was a violation of the charter of the defendants. By the act of the incorporation, the stockholders were authorized to locate the bank in the county of Oakland. It follows, therefore, that, if the corporation has undertaken cA XVI.] Banking. 255 to exercise any of its franchises without that county, it has usurped an authority in violation of law, and must suffer the penalty which that law inflicts. The case admits that the bank redeemed its biUs, kept deposit, and, as incident to such redemption, bought and sold exchange at the agency. Did these acts, or either of them separately considered, violate the law which gave a legal existence to the defendants ? To deter- mine this question, it is only necessary to define what business this bank was authorized, by the law of its creation, to do and perform. Such an examination will lead to the conclusion that it is a bank, not simply of discount, but also of deposit. It is quite manifest that the defendants could not establish in this city an office of discount. If so, may it not clearly be intended that they can establish an office of deposit? To my mind the conclusion is irresistible." In the case of Kennedy Southern Railway v. Gebhard, 109 TJ. S. Eep. 527, the court says : "A corporation may do busi- ness in all places where its charter allows, and the local laws do not forbid." Where the statute of the State provides that an agency may be established within the State, such an agency may conduct a business for the parent bank. In doing so, however, by all of its signs and advertisements it must indi- cate to the public that it is acting simply as an agency of the parent bank. It has no authority to conduct through the agency a general banking business. It can do no business except in the name of the parent bank. If an agency could be established out of the county by the parent bank to do the general business of the corporation, it would be unnecessary to require the corporation to have a principal place of business named in its articles of incorporation. Where the statute of a State provides that a corporation may remove its place of business, the proceedings of removal must be strictly complied with. § 164. Place of business. In the case of Bank of Augusta v. Earle, 13 Peters, 519, Taney, Chief Justice, says: 256 Bank Eemovestg its Place of Business, [ch. xvi. " It is very true that a corporation can have no legal exist- ence out of the houndaries of the sovereignty by which it is created, but, although it muS't live and have its being in that State only, yet it does not by any means follow that its exist- ence there will not be recognized in other places ; and its resi- dence in one State creates no insuperable objection to its power of contracting in another." It is broadly held by many of the courts that a corporation may be organized in one State and do all of its business in another State.^ It is also held in the case of Oatdale Mfg. Co. v. Garst, 18 E. I. 484, and in the case of The People v. Fidelity, etc. Co., 153 111. 25 (1894), that: "* * * a corporation may be organized in one State and do all of its business in another State, but a foreign corporation organized in a foreign State cannot enter another State and conduct business on more favor- able terms than corporations organized in said State." " The usual business of each national banking association shall be transacted at an office or banking house located in the place specified in its organization certificate." Kev. Stat., F. S., § 5190. In the case of Merchants' Bank v. State Bank, 77 "Wallace, p. 650, the court, in construing this section of the statute says: " It is objected that the checks were not certified by the cashier at his banking house. The provision of the Act of Congress as to the place of business of the banks created under it must be construed reasonably. The business of every bank, away from its office, frequently large and important, is unavoidably done at the proper place by the cashier in person, or by corre- spondents or other agents. In the case before us the gold must necessarily have been bought, if at all, at the buying or the selling bank, or at some third locality. The power to pay was vital to the power to buy and inseparable from it." The word " place " as specified in the organization certificate is construed as the office or banking house where the principal business of the bank is done. 1 Missouri Lead, etc., Co. v. Eeinhard, 114 Mo. 218 (1893). CHAPTER XVII. INCEEASING OE EEDTJCING CAPITAL STOCK. § 165. Law governing national banks. Section 5142, Revised Statutes of the United States, provides for the increase of capital of a national bank in the words and figures following: "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." Section 1 of the Act of May 1, 1886, provides that: " * * * any national banking association may, with the approval of the Comptroller of the Currency and by the vote of shareholders owning two-thirds of the stock of such asso- ciation, increase its capital stock, in accordance with existing laws, to any sum provided by the said Comptroller, notwith- standing the limit fixed in its original articles of association and determined by said Comptroller; and no increase of the capital stock of any national banking association, either within or beyond the limit fixed in its original articles of asso- ciation, shall be made except in the manner therein provided." A national bank desiring to increase the capital stock, the first step necessary upon the part of said association is to call a meeting of shareholders for that purpose, and at said meeting adopt suitable resolutions authorizing the increase. Before the resolution adopted at said meeting becomes lawful it must receive the votes of shareholders representing two-thirds of the existing stock. A resolution passed by a vote of two-thirds of the shares represented at the meeting will not he sufficieni. 17 [257] 258 Inceeasins ob Eeducinq Capitax Stock. [oh. xvn. The succeeding step is to open subscriptions for the new stock; when all of said stock has been subscribed and paid for, such proceedings should be certified to the Comptroller of the Currency. It is held by the Comptroller of the Currency that: « * * * jj^ increasing the capital stock of a bank no moneys in the surplus fund, or to the credit of undivided profit account can be used except by the declaration of a divi- dend by the board of directors in the regular course, where- upon the shareholders, if they so desire, may use the proceeds thereof in payment of their subscription to the additional stock. Such portion only of the surplus funds as exceeds the amount required by law may be capitalized in the manner indicated." The action of the Comptroller of the Currency, in approv- ing of an increase of the. capital of a national bank, and cer- tifying that the amount thereof has been paid in, is conclusive, and the validity of the increase cannot be assailed in a col- lateral proceeding, such as an action to enforce the liability of a stockholder. If the stockholders have received their addi- tional stock, and for several years held themselves out to the public as stockholders, they cannot subsequently, when the bank becomes insolvent, and they are assessed to pay its in- debtedness, deny their liability upon the ground that the in- crease of capital was fraudulent.^ Under the United States statute, national banks have the power to increase their capital to such a limit as may be ap- proved by the Comptroller of the Currency.^ The capital cannot be increased for the entire amount until new capital stock has been paid in, and not until the Comp- troller of the Currency has certified to the increase.* It is held in the case of Aspenwall v. Butler, 133 U. S. 595, that: " * * * . when the previous proceedings looking to an 1 Upton V. Tribilcock, 91 U. S. 45. sMcFarlin v. National Bank of 2 Chubb V. Upton, 95 U. S. 665; Kansas City, 68 Fed. Rep. 868; Veeder v. Mudgett, 95 N. Y. 295; Charleston v. Peoples' National Scovlll V. Thayer, 105 U. S. 143 ; Bank, 5 S. C. 103. Latimer v. Bard, 76 Fed. Kep. 636. CH. XVII.] Banking. 259 increase in the capital stock in the national bank have been regular, and all that are requisite, and a stockholder subscribes to his proportionate part of the increase, and pays his sub- scription, the law does not attach to the subscription a condition that it is to be void if the whole increase authorized be not subscribed, although there may be cases in which equity would interfere to protect him in case of a material deficiency." The same authority holds that : " * * * the provision in the Revised Statute, section 5142, that no increase of capital in a national bank shall be valid until the whole amount of the increase shall be paid in, and the Comptroller of the Currency notified and his consent obtained, was intended to secure the actual cash payment of the subscriptions made, and to prevent watering of stock, but not to invalidate bona fide subscriptions actually made and paid. " The Comptroller of the Currency has power by law to assent to an increase in the capital stock of a national bank less than that originally voted by the directors, but equal to the amount actually subscribed and paid for by the share- holders under that vote." The right of shareholders to subscribe for new shares of stock gives them the right to subscribe in proportion to their shares in the original stock. A shareholder, however, may waive his right to the new subscription. Such a waiver need not necessarily be given in writing, it may be given tacitly. Each shareholder has the right to subscribe to the new stock, and his right holds for a reasonable time, and until subscrip- tions are closed. Where a stockholder has subscribed his proportion to double the capital stock, and pays his subscription, he cannot repudi- ate it because the stockholders, with the consent of the Comp- troller of the Currency, reduced the amount of the stock they originally intended to issue.* The same authority holds that: 4 Pacific National Bank v. Eaton, 141 U. S. 227". 260 Inceeasing oe Eeducing Capital Stock. [ch. xvii. " * * * ^ subscription to stock in a national bank and payment in full on the subscription and entry of the sub- scriber's name on the books as a stockholder constitutes the subscriber a shareholder without taJcing out a certificate." For a form of resolution tq increase the capital stock of a national bank as approved by the Comptroller of the Currency, see Appendix. § 166. Increasing capital stock of State banks. The capital stock of all incorporated companies being gen- erally fixed by the statute and the charter in the original arti- cles of incorporation, it frequently, however, happens that the capital stock is found to be too small and an increase is demanded. Such a change cannot be made lawfully only under certain conditions and limitations. In the absence of express authority from the State, a corporation has no power to increase or reduce the amount of its stock." Where an attempted increase or reduction of the stock of the corporation is not authorized by the charter, and there is no authority given by statute, npt even the unanimous assent and agreement of all of the parties interested would legalize the transaction.' A State banking corporation, duly incorporated according to the laws of the State, may, where the statute so provides, at any time during the life of the corporation, increase its capital. The procedure defined by the statute must be strictly complied with. It is held that: « « * * ^j^ injunction is the proper remedy to prevent an illegal increase or reduction of capital stock of a corpora- tion, but an injunction against the issue of new stock by a foreign corporation will be dissolved where the courts of the State where the corporation was created decide such issue of stock to be legal.'' BScovill V. Thayer, 105 U. S '^ Cook on Corporations (5th ed.), 143, 148. § 281. 6 Cooke V. Marshall, 191 Pa. St 315 (1899). CH. XVII.] Banking. 261 In the case of White v. Wood, 129 JST. Y. 527, it is held that " an increase of the capital stock without ■warrant or authority is called an over-issue of stock." In the State of California the statute provides that: « * * * jjQ corporation shall issue stock or bonds except for money paid, labor done, or property actually received, and all fictitious increase of stock or indebtedness is void. " Every corporation may increase or diminish its capital stock, create or increase its bonded indebtedness subject to the following provisions " (then follows the provisions of the law providing the mode and requirements of the statute upon the subject). It is held in the case of D. Stein, Appellant v. Charles How- ard et al., 65 Cal. 616, that : « * * * under the Code and Constitution of the State of California an increase of the capital stock of the corporation, and the issuing of the additional shares to be sold at a price less than the nominal value of the stock to supply funds actu- ally required by the corporation, is not a fictitious issue of the stock within the meaning of article 12, section 11 of the Constitution." In Jefferson v. Hewett, 103 Cal. 624, the court holds: " * * * that under section 359 of the Civil Code, which provides that no corporation shall issue stock or bonds except for money paid, labor done or property actually received, that certificate of stock issued upon credit is absolutely void." It is also held in California that under the statute which provides that stock shall be void except for money paid, labor done, or property actually received, " that a note given in payment for stock with a valid consideration is a legal issue of stock." Where the statute of a State provides how a corporation may increase or reduce its capital stock, the courts have no power by mandate or decree, or in any other manner the right to affect the increase or decrease of the capital stock. It is held in Smith v. Worth American Mining Co., 1 Nev. 423, that: 262 Inceeasing oe Eedttcing Capital Stock. [oh. xvii. " * * * -vflien a corporation has issued certificates of stock (which are valid and not void) to the full extent of all of the shares which by law and the constitution of the company it may issue, no court can order the issuance of other shares because in that respect the powers of the corporation have been exhausted. Stockholders alone have the right to authorize the increase in the capital stock of the corporation. Where, by legislative act or charter, an increase of capital stock is effected by the act and assent of the board of directors, it is held that it must be ratified and authorized by the stockholders at a corporate meeting." " The statute of the State governs the power, and may direct and authorize the directors of a corporation and vest them with power to increase the capital stock." * § 167. Beduction of capital stock — National banks. The Eevised Statutes of the United States, section 5143, pro- vides that: "Any association formed under this title may, by the vote of shareholders owning two-thirds of its capital stock, reduce its capital to any sum not below the amount required by this title to authorize the formation of associations; but no such reduction shall be allowable which will reduce the capital of the association below the amount required for its outstanding circulation, 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." The Comptroller of the Currency recites that by his con- sent and the vote of shareholders owning two-thirds of the shares, a national bank may reduce its capital stock to any sum not below the minimum amount required by the National Bank Act. A reduction becomes operative upon the issuance of his certificate and approval. An association that contemplates reducing its capital, should always advise the Comptroller before formally submitting the sSoutherland v. Olcott, 95 N. Y.93. OH. XVII.] Bankiitg. 263 matter to the shareholders. Before any final action can be taken in the reduction of the stock of such an association, steps should be taken to call a meeting of stockholders ; the stockhold- ers should then adopt a suitable resolution authorizing the reduction; two-thirds of the stock of the bank is necessary in the reduction ; two-thirds of the quorum voting in favor of the proportion is not sufficient. A reduction of capital stock in no case can occur to reduce the capital below the minimum amount of capital required by section 5143, Revised Statutes of the United States. Capital stock set free by the process of reduction belongs to the stockholders in proportion to the number of shares held by each. The stock cannot be retained by the bank for any pur- pose whatever; the release capital stock, from the date of the reduction certificate issued by the Comptroller of the Currency, becomes the property of the individual stockholders. In the case of McCann v. The First National Bank of Jef- fersonville, 112 Ind. 354, where the capital stock of the bank was shown to be impaired and the reduction was made to avoid assessments, the language of the court is as follows : " In the present case the reduction was not made to affect a distribu- tion of the accumulated surplus or unemployed capital of the bank; the original capital had become impaired by reason of " had debts" and the stockholders were in the situation of being compelled to elect either to submit to an assessment of their stock, or go into liquidation and reduce the capital of the bank so as to put the amount of the capital in correspondence with its value. They chose the latter alternative rather than submit to an assessment of their stock, so as to make good their deficiency; each stockholder surrendered a proportionate share of their stock, and by that means they secured the privilege of continuing the business of the bank with a reduced capitaL The appellant, as appears from his complaint, surrendered his proportion, receiving as a consideration therefor immunity from the impending assessment, and the privilege of holding the residue of his stock in a continuing association. This was 264 Inceeasing oe Eedtjcing Capital Stock. [oh. xvn. I all the consideration he contemplated, and all that was implied in the transaction." " Having received the whole consideration upon which the surrender was made, the stockholders could not afterward recover more, simply because the bank succeeded in realizing upon the suspended bills and notes, the suspension of which occasioned the reduction. (For a form, as prepared by the Comptroller of the Cur- rency, being the resolution to reduce the capital stock, see Appendix.) It is held by the Comptroller of the Currency that "no part of the reduction can be carried to surplus or undivided profits without the unanimous consent of the shareholders. When the reduction is made the shareholders should return their old certificates. New certificates, if the capital is reduced, should then be issued. It is competent to issue certificates for fractional shares." The Comptroller of the Currency also requires that a record of the vote of stockholders should be kept and forwarded with the resolution. § 168. Reducing capital of State banks. The capital stock of a State banking corporation can only be reduced by complying with the law as enacted in each State. The statute providing the steps to be taken and the proceedings to be had must be strictly complied with. In no instance can the capital stock be reduced to an amount less than the indebt- edness of the corporation. In the State of California the statute reads that " no corporation shall diminish its capital stock to an amount less than the indebtedness of the incorpora- tion." After an authorized reduction of the capital stock of a duly incorporated company it is held, that the " amount of corporate assets over and above the amount of the capital stock is reduced, and the debt is equivalent to surplus profits, and may be treated as such by the corporation. It may be » Delano v. Butler, 118 U.S; 634. OH. XVII,] Banking. 265 set aside as surplus, or it may be divided among the stock- holders proportionately, inasmuch as the rights of previous corporate creditors are not injured." " And the same authority holds that " under certain circum- stances the surplus may be used to buy outstanding shares of stock." In Strong v. Brooklyn Cross Town E. E., 93 IST. T. 426, held: " * * * where upon the reduction of the capital stock of a bank, certificates of deposit are issued to the stockholders to the amount of the reduction of the capital stock, such certifi- cates of deposit can be enforced only to the extent that the actual assets of the bank exceeded its liabilities and reduced capital stock." A distribution is only lawful when, upon investigation, it is found that the capital stock was unimpaired at the time of the decrease. The reduction of the capital stock of the corporation does not take place and is not final in the State of California imtil the filing of the proper certificate in the office of the Secretary of State. When the statute of a State makes a certificate conclusive proving that the capital stock has been reduced, the same can- not be questioned in a collateral proceeding, though the reduc- tion was not made in accordance with the statute. ^^ 10 Cook on Corporations, § 289. 300 (1899), affd (1900), 2 Q. B. 11 Ladies, etc.. Association, Lim- 376. ited, V. Pulbrook, 81 L. T. Kep. CHAPTER XVIII. CHANGDTG NAME OF BAHE. § 169. Adopting new name. The name of the corporation is an essential part of the instrument or articles of incorporation. It cannot exist or do business without a name. The law authorizing a bank to amend its articles of incorporation does not apply where the object is to change the name of the corporation. The name of a corporation may, or may not, designate its purpose. Where a new name is to be entirely adopted, this can be done only by complying with the special provisions of the statutes prescrib- ing the mode of procedure. When the name of a corporation is to be abandoned and an entirely new and different name to be substituted, it can hardly be an amendment, or classed as an amendment, to the arti- cles of incorporation. The articles of incorporation usually may be amended without application to a court of record, while in some of the States an application for change of name must be niade to the court, and where a statute prescribes a mode of procedure it is mandatory and must be followed. The N^ational Banking Act provides by the Act of May 1, 1886, section 2, that the name of a national bank may be changed ; said section reads : " That any national banking association may change its name * * * with the approval of the Comptroller of the Currency by the vote of shareholders holding two-thirds of the stock of such association. Duly authenticated notice of the vote and of the new name * * * shall be sent to the oflBce of the Comptroller of the Currency, but no change of name * * * shall be valid until the Comptroller shall have issued his certificate of approval of the same." [266] CH. XVIII.] Banking. 267 The name of a national bank cannot be changed unless by consent of the Comptroller of the Currency. Section 3 of the act approved May 1, 1886, provides that: "All debts, liabilities, rights, provisions and powers of the association under its old name shall devolve upon and inure to the association under its new name." Section 4 of said act provides ; " * * * that nothing in this act contained shall be construed as in any manner to release any national banking association under its old name * * * from any liability, or affect any action or proceeding in law in which said association may be, or become, a party interested. "A national bank desiring to change its name may call a meeting of the shareholders for that purpose, and by their directions direct that the president or cashier of the association submit the resolutions adopted by the shareholders to the Comptroller of the Currency, and if approved by him he will issue a certificate to the effect that the change has been approved by him." When a State bank desires to change its name, after the preliminary steps have been taken by the shareholders of the corporation, and when a procedure is to be had in a court of record, an application may be made to said court, by petition or bill, setting out the necessary facts, and upon hearing, no objector intervening, the court may order a change of name: but where suflBcient objections have been alleged by parties who would be directly injured, and a serious wrong be perpe- trated upon some other friendly corporation having a similar name, the court would probably refuse the application. The statute of the State wherein the bank is located would govern the procedure, rights and power of the corporation to change its name. The statute authorizing a corporation to select its name will protect it in retaining the same, and the courts are inclined to protect the name of a corporation independently of any statute. A corporation has a proprietary right in its name, and gen- erally the State enacting laws prescribing the conditions and 268 CsASQTJsa Name op Bank. [ch. xviii. terms upon which corporations, both domestic and foreign may do business within the State, provide that no corporation shall take the name of an existing corporation, and in the absence of any statute on the subject, a foreign corporation is under the doctrine of comity privileged to do business within the State, but the State may prescribe the conditions, and a for- eign corporation bearing the name of ap existing domestic cor- poration is not entitled to a certificate to do business in the State.^ Such a resemblance between names as would mislead or deceive persons of common intelligence and observation would be an infringement upon a name lawfully acquired and should be enjoined.^* In Holmes v. Holmes, etc., Co., 37 Conn. 278, the court, in discussing this question, holds that " a corporate name, legally acquired, should be protected upon the same principle and to the same extent that individuals are protected in the use of trademarks." " The case of an encroachment is analogous to, if not stronger than, that of a piracy upon an established trade- mark." ^ " In Massachusetts, by statute, a foreign corporation doing a banking, loan, trust, or investment business in the State cannot use the same name as, or a similar name to, a domestic corporation." ^ In Higgins Co. v. Higgins Soap Co., 144 N. Y, 462, New York Court of Appeals states the law as follows : " In respect to corporate names the same rule applies as to the names of firms or individuals, and an injunction lies to restrain the sim- ulation and use by one corporation of the name of a prior corporation which tends to create confusion, and to enable the 1 State V. Nichols, 99 Pac. Eep. s Cook on Corporations, vol. 1 876. (Sth ed.), § 15; International T. laL. Martin Co. v. L. Martin, Co. v. International Loan & Trust Wilckes Co., N. Y. Eq. 71 A. 409. Co., 153 Mass. 271; The Illinois (See 140 111. App. 98.) Watch Case Co. v. Piearson, 140 HI. 2 Newby v. Oregon Central Ey., 423. 18 Fed. Cas. 38; Goodyear's India Rubber Co. v. Goodyear Rubber Co., 128 U. S. 598. OH. xviii.] Banking. 269 latter corporation to obtain by reason of the similarity of names the business of the prior one. The courts interfere in these cases, not on the ground that the State may advise such corporate names as it may elect to the entities it creates, but to prevent fraud, actual or constructive. For the purpose of suits it is held that the original name remains unchanged." * The changing of a name of a corporation cannot affect its real estate contracts." As to the right of a corporation to maintain an action on the contract or note executed, to-wit: In the old name." It has been held that where a corporation selects a name similar to one already in existence without the knowledge of such facts and without intention of deceit, the court may, in the exercise of its discretion, refuse an injunction.' In the absence of statutory provisions providing that a cor- poration may change its name, it has no power to do so.' < Morria v. St. Paul, etc., Ey. Co., ' Hygeia, etc., Co. v. New York, 19 Minn. 459. etc., Co., 140 N. Y. 94. 6 Wellfley v. Shenandoah, etc., s Bellows v. Hallawell, etc.. Bank, Co., 83 Va. 768. 2 Mason 31; Sykes v. People, 132 8 Northwestern College v. Schwag- 111. 32. ler, 37 Iowa 577. CHAPTER XIX. DEPOSITS. § 170. Nature of deposits. A deposit made by a dealer with the bant (unless declared special) and placed to his credit as such, makes it a general deposit. There being no terms or agreement, expressed or fixed, between the bank and the depositor, that it is to be held by the bank as distinct from other deposits which are general, it therefore becomes what is termed a general deposit. The depositor in making a deposit in a commercial bank, does so with the implied promise that (unless some special agreement is entered into) it will repay the same upon demand. The money therefore becomes the property of the bank, and the bank has a right to the use of the same, but must repay it upon demand without grace. A general deposit is therefore one which deprives the depositor of the title to the funds until a demand is made for repayment; and it is at once owned by the bank, and ownership authorizes the bank to use the same until called for by the depositor. During such ownership the bank may loan the money and make profit therefrom. The position between the bank and the depositor in a commercial bank of a general deposit is always one of debtor and creditor (State V. Clement Nat. Bank, 84 Vt. 167), and the bank is bound by law to pay upon demand.^ A depositor in such a case is not required to give notice of a particular time when he will demand payment, but may present his check drawn upon the bank and against his account, with- 1 First National Bank of Cincin- E. A. 191 ; Kobinson & Co. v. Bank nati V. Burkhard, 100 U. S. 686; of Pikeville, 146 Ky. 583, 51 Md. WasBon V. Lamb, 120 Ind. 514; L. 562, 24 Am. Dec. 325. [270] CH. XIX.] Banking. 271 out previous notice, and the amount withdrawn discharges the debt of the bank to the extent of the sum named in the check. When the position between the depositor and the banker is one purely of debtor and creditor, the bank cannot be held to the position of a trustee, but may loan such funds for the profit of the bank. Special deposits are the placing of specific kinds of property, or money, in the possession of the bank, to be held by it in kind and returned to the bailor. The bank, in such a case, in accept- ing the property or money, merely becomes the bailee of the depositor. The distinction between a general and a special deposit is, that if general, the depositor loses the title to the money ; if special, the title of the deposit always remains with the depositor or bailor, and must be returned in specie or kind. The insolvency of the bank does not change the position between the parties ; the property must be returned and the depositor is entitled to the identical property. A special deposit, if made in money and accepted by a bank, should not lose its identity and be mingled with or thrown into the general cash funds of the bank. The reason for this is evident, for it cannot become part of the general resources or liabilities of the bank, but it becomes a special liability and is governed by the law in such cases made and provided. It is a well-conceded principle of law that the banker and depositor may, at the time the deposit is made, make any lawful contract as to the terms upon which it is received, and also terms upon which it may be paid or returned." § 171. Nature of general deposits. The relation of banker and depositor, where a general deposit is made in the bank, either on demand or on time, is one of debtor and creditor. As previously stated, a general deposit when placed in the bank becomes the property of the bank. The bank becomes a debtor to the depositor for the amount 2 Beton V. Union Trust Co., 134 Mich. 1. 272 Deposits. [ch. xrs. thereof deposited, and the debt can only be discharged by pay- ment to the depositor or pursuant to his order,* General deposits in a commercial bank received on account of the depositor, when not complicated with transactions other than those of depositing and withdrawing the money, transfers the ownership of the money to the bank and establishes a rela- tionship between the parties of debtor and creditor.* A deposit made in the usual course of business vests in the bank, and cannot be recovered by the depositor on the ground of fraud, even though the bank was insolvent and failed on the next day. A deposit cannot be recovered by a depositor on the groimd of fraud, even though the deposit is made in reliance and on representation by the cashier of the bank that the bank was solvent, unless the officer of the bank knew of its insolvency at the time of the deposit. A depositor making a deposit in a bank may at the time of making the same, contract with the bank to whom the deposit shall be repaid.^ The terms of the contract of withdrawal govern and the bank complying therewith is not liable; for example, where money is deposited by the father in the name of his daughter, it being understood that he was to sign her name by himself, she cannot recover from the bank. She has made her father her agent.* The public funds of a municipality may be deposited in a bank and the bank may agree to pay interest on such deposit, and can also give a bond to the municipality for security. The statute of the State may provide otherwise. The con- stitution of a State may also make the receiving of such a 3 The ^tna National Bank v. The deposits, see 186 Fed. Eep. 245, 125 Fourth National Bank, 46 N. Y. 82; S. W. 229, 849, 127 S. W. 229. In Bank of Republic v. Millard, 10 re Nichols, 166 Fed. Rep. 603; Auto Wall. (U. S.) 152; Neeley v. Rood, Mfg. Co. v. Merchants Bank, 116 54 Mich. 134, 32 Mich. 132; 17 Md. 179. Wend. (N. Y.) 100; Collins v. State, b Sykes v. First National Bank, 2 15 So. Rep. 214. S. D. 242. * Collins V. State, 15 So. Rep. » Green v. Bank of Camas Prair- 214. Defining general and special tie, 7 Idaho 576. CH. XIX.] Banking. 273 deposit, when received as a general deposit, unlawful. Wkere such a statute or constitutional provision is in force, the deposit cannot be, made and received as a general deposit. A party acting as trustee and making a deposit in a bank, placing the same to his credit or private account, without noti- fying the bank that the same is a trust fund, the bank having no knowledge of the fact that he is a trustee, but believing that the property is his own private property, the bank does not become liable to the cestui que trust.^ Where a bank has knowledge of the fact that money deposited with it to the general credit of one of its depositors is held in trust by such depositor, the bank cannot apply the deposit, or any portion thereof, to cancel a note due from the depositor to the bank.* A deposit made in a bank at a time when the officers knew that it was in a failing condition and insolvent, held, that it cannot be recovered from the assignee, unless it can be identi- fied and traced to his hands.® Where a party mails to a bank money or checks, directing that the bank place the same on deposit to his credit, but the bank refuses to acknowledge receipt thereof, and persistently denies that it has received such money or checks, the relation- ship of depositor and depositee is not established.^" The deposit of public funds where interest is required cannot be claimed as a special deposit if the bank should fail. 89 F. 900. A bank makes itself liable, if in any way it colludes with a trustee where it may hold such funds, if the trustee mis- applies the same, and the cestui que trust may refuse to look to the trustee, and can recover from the bank, holding it responsible for any liability or damage accruing to the cestui que trust. 'School District v. First National Tnsolv.) 2 Ohio N. P. 170, 90 N. E. Bank, 102 Mass. 174. 859. See 178 Fed. Eep. 420, 170 8 57 111. App. 107, reversed; Fed. Rep. 816. Clemer v. Drovers' National Bank, lo Miller v. Western National (111. Sup.) 41 N. E. 728. Bank, (Pa. Sup.) 33 A. 634. 9 In re Commercial Bank, (Ct. 18 274 Deposits. [ch. XIX. Where a person designates himself as a trustee for another, and deposits the funds of his cestui que trust in a bank, it has been held that there is a complete and valid transfer of the title to the funds, the title thereby immediately vests in the donee, and the personal representative of the donor cannot recover them from the bank. Trust funds have caused more or less complication and liability in the withdrawal of the same, but the law seems to be well settled and established, that if a trustee deposits trust funds to his own account, and with his individual money, the bank having no knowledge of the fact, that it may pay all checks when signed and presented by the party making the deposit. Where an agent or trustee deposits money belonging to his principal in a bank, to which he himself is indebted, and the bank, without authority and in ignorance of the true ownership of the fund, applies it on the debt, the owner may recover from the bank if it can be identified.^^ Bank receiving money in trust must comply with all the terms strictly. (Mester v. Q. ISTat. Bank, 163 111. App. 645.) The money must be paid to the real owner and the bank can- not escape liability by paying a certificate to one in whose name it is issued when another claims the deposit and especially if it is charged with any knowledge that the deposit does not in fact belong to the person in whose name the certificate is issued. ^^ When a customer of a bank has overdrawn his account, and afterward makes a deposit, the presumption of law is, in the absence of evidence, that the deposit was general, and that it was made and received toward the payment of the over- draft." Where a bank depositor heard rumors of its insolvency and went to withdraw his deposit, but was informed by an officer iiBurtnett, Admr., v. First Na- is Nichols v. State, (Neb.) 65 N. tional Bank, 38 Mich. 630. W. 774. 12 Paris v. Knickerbocker Trust Co., 122 N. Y. S. 521. CH. XIX.] Banking. 275 of the bank that it was perfectly solvent, the depositor relying on such representation and permitting his deposit to remain, when in fact it was insolvent at the time the representations were made, such officer is personally liable to such depositor." Where a national bank has been designated as a depository of public moneys, such designation does not constitute it as an agent of the government or render the government liable for moneys lost by failure of the same.^° A national bank receiving State funds, subject to check and to withdrawal thereof on seven days' notice, and giving security therefor; also agreeing to pay interest on daily balances, the transaction is held to be one of deposit and not a loan.'' In the case of Quin v. Earle, 95 Fed. Kep. Y28, the court holds that : " To authorize the recovery of a general deposit from the receiver of an insolvent bank on the ground that the bank was insolvent, and known to be so by its officers when the deposit was received, and that the fraud authorized a rescission of the contract by the depositor; the thing deposited or its proceeds must be capable of identification in the hands of the receiver or it must appear that the funds coming into his hands were increased by that amount." The court further says: " To constitute a fraud on the part of a bank, in receiving a deposit when insolvent, which will authorize a rescission by the depositor and a recovery of the deposit from a receiver subsequently appointed for the bank, the officers of the bank must have known or believed that it was insolvent at the time the deposit was received; and such knowledge cannot be pre- sumed, but must be prov^ed. The mere fact that the bank was known by the officers to be in an embarrassed condition is not sufficient to establish fraud." On a charge of taking deposit after insolvency, State must prove insolvency and that officer had knowledge.^' "Townsend v. Williams, (N. C.) le State of Neb. v. First National 23 S. E. 461. Bank of Orleans, 88 Fed. Rep. MT. 15 Branch v. The United States, 1 n State v. Dunning, 130 Iowa 678. N. B. C. 363. See Craigee v. Hadley, 99 N. Y. 276 Deposits. [ch. xix. Where checks are delivered to the bank by a depositor for collection and deposit at the time when the bank was insolvent, and when it was known by its officers to be insolvent, which checks had not been collected when the bank closed its doors, they remain the property of the depositor and cannot be held by the receiver/* A party who has sufficient funds in a bank and draws a check on the same for payment, while the funds are not in any way encumbered by an earlier lien in favor of the bank, on refusal to pay the check, he may sue the bank for damages." Where, after the maturity of a promissory note held by a bank, and protest thereof, the maker of said note makes a general deposit of an amount sufficient to pay the note, held that this does not of itself, as between the bank and endorser, operate as a payment. In the absence of an agreement between the parties, the bank has the option to apply the money in payment; but it is under no legal obligation so to do.^" The writing-up by the bank, of a pass-book, in other words what is called " balancing of a pass-book," and the delivery thereof to the owner, does not preclude the owner of inquiring into its correctness.^^ A pass-book made transferable by the by-laws of a bank may bind the parties thereto, but it would not be so as to third parties.^^ But an assignment and transfer of a pass-book with an order to pay the balance then due, would bind all parties and the bank could not refuse payment on the order or check. It is held in the case of Arnold v. Hart, 176 111. 442, that pass- book when balanced and delivered binds the bank, and operates 131; Massay v. Fisher, 62 Fed. Rep. wMt. Sterling National Bank v. 958; Mullouch Co. v. Ol-egon Na- Green, (Ky.) 35 S. W. 911. tional Bank, 61 Fed. Eep. 912, 538, 20 The National Bank of New- 65 Fed. Rep. 690, 52 Fed. Rep. 59. burgh. Respondent, v. Daniel Smith, Preferred creditor, see Citizens' Na- Appellant, 66 N. Y. 271. tional Bank v. Dowd, 35 Fed. Rep. 21 First National Bank v. Whit- 340. man, 94 U. S. 343; Bullock v. Boyd, 18 Richardson v. Denegre, 93 Fed. 2 Edw. Ch. (N. Y.) 292; Bank v. Rep. 572. Earp, 4 Rawle (Pa.) 384. 22 Whitte V. Vincenot, 43 Cal. 325. CH. XIX.] Banking, 277 in the same maimer as an account stated. This can hardly be the law. An account stated is an agreed balance of accounts. An account which has teen examined and accepted by the par- ties. While the pass-book is a statement of an account, it doea not become binding upon the parties as an account stated until it has been agreed between the parties that a balance fixed which has been examined and accepted by the parties is found to be due. An error may be found by examination of the pass-book, and the bank balancing the same should also have the privilege of correcting any error found therein. An entry in a pass-book cannot be conclusive against either the bank or the customer. The entries therein made may be inquired into. It is a ques- tion of fact and subject to investigation. The law may provide that after a certain period of time both parties may be estopped by a statute from investigating or making any corrections.^^ § 172. Special deposits. Originally, all deposits of money deposited with a banker were special deposits. The custom prevailing at that time required the banker, when called upon, to deliver to the depos- itor the same identical coin, the depositor agreeing to pay the banker a compensation for the care of the property. Special deposits are accepted by bankers at the present time, and such deposits may be taken gratuitously or upon com- pensation. It is a well-settled principle of law, that all banking corpora- tions organized for the purpose of conducting a banking busi- ness, with the right to receive deposits, unless prohibited by statute or the bank's charter, may accept on deposit, special deposits of money, stocks, bonds, or other personal property for safe keeping, either for compensation or gratuitously. Special deposits as stated, are placing specific kinds of prop- erty, or money, into the care or possession of the bank to be held by it and returned at some future time. The bank, in 28 French v. Banking Co., 91 Me. 485. 278 Deposits. [ch. xrx. such a case, becomes the bailee of the depositor, and upon demand by the bailor the property must be returned. Special deposit, when made in money, should never lose its identity or be mingled with or thrown into the general cash lunds of the bank. The reasons for this, as stated, are obvious. The money so deposited cannot become a part of the general resources or liabilities of the bank, but becomes a special lia- bility and is governed by the law of bailment. The distinction between a general and special deposit, as previously stated, is this, when general, the identity of the prop- erty is lost. If special, it should at all times he capable of being identified. A special deposit of money can be made as stated, and be returned and be identified. If, however, it is allowed to be intermingled with the general cash funds of the bank, it must necessarily lose its identity and thereby become a general liability of the bank.^* National, State commercial banks, and savings banks, with- out a special prohibitive provision enacted in their charter, have the right to accept special deposits. A mutual savings bank organized and conducted purely upon the mutual princi- ples, unless such a provision is enacted into its charter, has no authority, incidental or otherwise, to accept special deposits. It is held that a national bank has authority to accept special deposits: 1. Upon the ground that it is a power incidental to the banking business.^° 2. That section 5228 of the Revised Statutes of the United States implies the authority that a national bank may receive deposits of bonds and securities for safe keeping, either for a compensation or gratuitiously.^* But the question as to whether the cashier or other executive officer of a national bank has the authority to take a special deposit for safe keeping without direction from the board of 2* Bank v. Banking, 108 Me. 79. tional Bank v. Strang, 138 111. 347. 25 National Bank v. Graham, 100 28 Pattison v. Syracuse National U. S. 699; Pattison v. Syracuse Na- Bank, 80 N. Y. 82; National Bank tional Bank, 80 N. Y. 82 ; First Na- v. Graham, 100 U. S. 699. CH. XIX.] Banking. 279 directors, is questioned. The authority must be implied by custom or usage and known to be exercised and sanctioned by the board of directors.^^ The question, however, is different even without authority expressed or implied. Where the bank habitually receives special deposits, it will be bound by the acts of the officers receiving the same.^' When a special deposit is received by the bank and is lost through the gross negligence of the officers, managers or employees thereof, the bank will be held lia;ble to the owner for the value of the deposit."" A prima facie case is made when it is shown that the deposit was made and the bank failed to return the same. Negligence need not be shown.*" It is held that where a national bank receives United States bonds of a certain class, with instructions to have them con- verted into bonds of another class, for a failure to deliver the bonds on demand the bank becomes liable.*^ It is the duty of a national bank or other bank where property is deposited with it as a special deposit, and is stolen by burglars, to take active steps for the recovery of the prop- erty, and for failure to exercise proper diligence and care in performing such an undertaking the bank may be held in damages for such failure.'" In an action against a national bank to recover bonds deposited with it for safe keeping without compensation, and which the bank alleged were stolen from its vaults, it was held: 1. That the bank was liable only for gross negligence. 2. That a failure to give prompt notice of the robbery was a question for the jury, as bearing on the question of negligence. 2' Wiley V. First National Bank 20 National Bank v. Graham, 100 of Brattleboro, 47 Vt. 546; National TJ. S. 699. Bank of Lyons v. Ocean National so Sherwood v. Savings Bank, 131 Bank, 60 N. Y. 278. Iowa 528. 28 Chattahoochee National Bank si Leach v. Hale, 31 Iowa 69. V. Schley, 58 Ga. 369; Pattison v. 32 Wylie v. Northampton Bank, Syracuse National Bank, 80 N. Y. 119 U. S. 361. 82. 280 Deposits. [ch. xix. 3. That the voluntary act of the cashier in receiving the property would not subject the bank to liability; yet, if the deposit was known to the directors and its retention acquiesced in, a contract relationship would exist and the bank would be held liable."" Property taken by a national bank for safe keeping, where the same is agreed to be cared for without compensation, is only liable for gross negligence."* Where the statute of a State prohibits a State bank from receiving special deposits from a city, of city funds, a provision in the bank charter authorizing the officers to accept such deposits is a direct violation of law; and a bank that accepts such deposits endangers its charter privileges, and is subject to an action which may be brought by the State to have its charter forfeited. But where .the statute is silent upon the subject, and the charter provides that special deposits of money or property may be taken by the bank, it is not necessary to specially delegate such privilege to the managers and officers of the bank. But where the charter is silent upon the question, and there is no authority granted to the officers through the by-laws of the bank to accept special deposits of money or property, the bank cashier is without authority to accept such deposit. Where a charter of a bank does not specifically authorize the establishment of a safe deposit department, the power to conduct the same for special deposits of property or money is purely incidental to the business of banking, and to what extent this authority may be conducted is of serious conse- quence. The Comptroller of the Currency, while admitting that there is no provision in the National Banking Act author- izing national banks to invest any considerable sum of money in the building of safe deposit vaults (which may be used for the special deposit of money or other property) holds that a reasonable sum may be invested for such purposes, and 33 First National Bank of Carlisle 34 De Haven v. Kensington Na- V. Graham, 79 Pa. St. 106, aff'd 100 tional Bank, 81 Pa. St. 95. U. S. 699. CH. XIX. ] , Banking. ■ 281 that it is a matter largely within the discretion of the directors of the bank. To what extent this discretionary power may be carried is not determined by the Comptroller, and it is impossible for him to have the knowledge of the eixtent to which it may be carried by the bank. It would, therefore, seem to be a privilege purely incidental to that of banking, and where not authorized by the statute or the charter of the bank, the limit or extent to which the power could be carried should be defined by the proper author- ity in a by-law as all incidental powers of this nature should be specified and governed by a by-law. It is a well-established principle, that a national or State bank has the authority and right to refuse either general or special deposits, and may arbitrarily select its customers from among those that apply. Where a bank receives a special deposit in gold coin of the United States and agrees to return the deposit in lawful money of the United States, it may pay in money which is current funds. It is held in the case of Mayer and Lowenstein v. The Chat- tahoochee National Bank, 51 Ga, 325, that where "A" makes a deposit of money with a bank, specifying that the deposit is made for the express and special purpose of paying a certain debt, which he ("A") had already or would draw checks to pay ; that the deposit became a special one and that it continued the property of "A," the debtor, until the bank paid the debt or agreed to pay it.*" The liability of the bank only attaches where it agrees to see to the application of money. A national or State bank may hold the deposit of a fund which is in controversy, which is to be paid upon a contingency. 80 Owen V. Owen, 4 C. & P. 93, 96; See 81 Fed. Rep. 602, where special Surtees v. Hubbard, 4 Esp. 203; deposits of money is defined. Wharton v. Walker, 4 B. & C. 163. 282 Deposits. [oh. xix. to a person otter than the depositor. The fact that the sum deposited is subject to litigation makes no dofference.*' § 173. Deposits of paper. Where checks are received and credited as cash, the rule is, that it becomes a general deposit. Checks are, however, gen- erally credited as cash with the understanding implied, that if payment is refused upon them, then the depositor's account will be charged with the amount. The credit given by the bank upon checks so deposited allows the depositor to draw upon his account at once, and the bank upon refusal of the depositor to repay the amount of such, refused and returned checks; it is claimed the bank would have no right of action. The rule is again stated that where the title passes to the bank, a general deposit arises, and when credit is given on a check deposited and properly endorsed, the title passes to the bank, and an implied understanding or promise to pay all such checks which may be returned, lacks the elements of an agree- ment upon which the bank could sue. § 174. Liabilities of banks for special deposits. The general rule is, that a hank is only responsible for gross negligence where it receives on special deposit, property with- out reward. The court in the case of First National Bank v. Ocean National Bank, 60 N. Y. 278, says: " Gross negligence is incapable of precise definition, and its application and use may lead, in some cases, to results unsatis- factory ; but that comes as directly from the nature and extent of the duty in the particular case, as from the phrase by which a breach of the duty is expressed. What constitutes gross negligence, that is, such want of care as would charge a bailee for loss, must depend very much upon the circumstances to which the term is to be applied. It has been defined to be the want of that ordinary diligence and care which a usually pru- dent man takes of his own property of the like description. 88 Bushnell v. Chautauqua County National Bank, 47 N. Y. 290. OH. XIX. ] Bankiitg. 283 This definition is given by a reference to the degree of care, rather than the degree of negligence, which may be the easier and more intelligible mode of defining the extent of the obliga- tion, and the measure of duty assumed. Ordinary care as well as gross negligence, the one being in contrast with the other, must be graded by the nature and value of the property, and the risks to which it is exposed. A depositor of goods or securi- ties for safe keeping with a gratuitous bailee, can only claim that diligence which a person of common sense, not a specialist or expert in a particular department, should exercise in such department." " The bank, as depository, taking no pay and taking no risks, was (is) not bound to resort to any special or extraordinary measures to protect the property of the depositor, and the negli- gence for which it could be charged, or which was the proper subject of evidence upon the trial, was only that which was connected with, and directly contributed to the loss. Inde- pendent acts of negligence, disconnected with the loss, were not properly admissible in evidence." '^ " The defendant was not chargeable with negligence or want of care for not acting upon facts or circumstances not coming to the knowledge of its directors or officers. Facts not brought home to them, tending to show that the property was exposed to loss from some unusual cause, to some peril growing out of peculiar circumstances, were not admissible in evidence against the defendant. The bailee was only called upon to take such care as became necessary to protect it against risks known to it, or of which it had notice. There was great latitude in the evidence on the part of the plaintiffs, and some of it was quite dramatic in its character. The purpose and end was to show that the place of deposit was peculiarly and extraordinarily exposed to perils from robbers at that time, calling for more than the usual cautions from the bailee. This was competent, so far as facts and circumstances proved to exist were communicated to the officers of the bank, but no farther." 87 Scott V. National Bank of Chester Valley, 72 Pa. St. 471. 284 Deposits. [ch. xix. In the further discussion of the question defining gross negli- gence, the case of Thomas E. Patterson, Respondent, v. The Syracuse National Bank, Appellant, 80 N. Y. 82, very clearly defines the facts which constitute gross negligence. The syllabi in said case is as follows: "In an action to recover damages for a special deposit alleged to have been lost through defendant's gross negligence, it appeared that plaintiff delivered to defendant's teller, at its bank, for safekeeping, a package containing certain bonds. Defendant had been accustomed to receive for that purpose, packages supposed to contain securities and valuables. Some of these were left by its directors. " The cashier of the bank had the control and management of its affairs. It did not appear that the president took any part in its management, or that the directors held any meet- ings. The teller sometimes acted as cashier in his absence. Some time before the deposit, the cashier said something to the teller as to their not taking any more packages for safekeeping. The teller testified that this was not a positive instruction, but merely an opinion, and that he did, after that, receive packages. He also testified that he told plaintiff when the deposit was made, that it would be at his own risk; this was contradicted by plaintiff. The teller also testified that the cashier sometimes told persons depositing packages, that they would be at their own risk, and at other occasions, packages were received with- out such notice. The package so left by plaintiff was kept in defendant's bank for about two years before its loss, being occasionally taken out by him to cut off coupons, and then returned. Held, that the evidence justified the submission to the jury of the question of the authority of the teller, and whether the deposit was with the bank; and, this having been found, that defendant was bound to return the bonds when demanded, or to show some suflScient ground for not doing so. " There was no direct explanation of the manner of the loss, but the evidence tended to show that the bonds were stolen in the daytime, when the bank was opetL They were kept in a safe, so placed as to be accessible to any person enter- CH. XIX. ] Bajstking. 285 ing the bank from the street, while those in the bank were so placed that at times the safe was not in their view, and some- times the door of the safe was left open. Held, that the evi- dence authorized a finding, that the bonds were stolen by some one coming in from the street; and that leaving the property thus exposed was gross negligence." Where there is neither fraud nor gross negligence imputaible to a bank, it is not liable for loss of a special deposit, which has been stolen from the bank. In the case of J. D. Whitney V. The First National Bank of Brattleboro, 55 Vt. 154, it is held by the court, that where a naked deposit is made with a bank, without reward, that it cannot be held liable for the robbery or larceny of bonds deposited with it, unless there was complicity or bad faith; that the law demands good faith and the same care of the plaintiff's property as defendant took of its own of like character. § 175. Negligence in delivery of special deposits. A bank holding property on special deposit, in delivering the same, must use the same degree of care as is required of it in keeping it safely on deposit. A bank is held liable where the teller is guilty of gross negligence in failing to identify the owner, and delivers the property to one not the owner. The bank would also be held liable in delivering the property upon an order which is a forgery. In the case of Ganley y. Troy City ISTational Bank, 98 K Y. 487, the court held, that where "A" left certain securities with a bank for safekeeping, and for which the bank executed a receipt duly signed by it, that said securities would be delivered by it on the surrender of the receipt ; and if the bank delivered to " A's " husband the securities without requiring production of the receipt, it was held that the bank was still liable to "A," the bailor. In the case of Anderson v. Pacific Bank, 112 Cal. 598 (44 Pac. 1063) the court holds that the bailor will be entitled to recover interest on a special deposit from the time the bank 286 Deposits. [ch. xix. wrongfully refused to return it. A special deposit must be used as directed.'* When a bank is charged with notice of the fact that a deposit is held as anr official deposit and it allows the same to be with- drawn and paid on the party's private account, it will be held liable."" § 176. Bank deposits received. At common law, a bank has the authority to receive or reject: a deposit. The statute does not attempt to regulate this priv- ilege. It is one incidental to the rights of the bank which can- not be questioned, or legislated upon. A statute would be unconstitutional, which if enacted declaring that a bank must receive on deposit all deposits offered to it; but a statute enacted prohibiting banks from receiving public funds (taxes collected from the people by municipal authority), and placing such funds in the bank upon general deposit and mingling them with the general deposits, may be prohibited upon the theory that they are trust funds, and as such, must be held and retained by the officer representing the municipality. The relationship existing between the bank and the depositor may at any time, by either party at option, be dissolved. This rule holds unless the bank has accepted a deposit and agreed with the depositor to retain the same for a specific time and pay interest thereon for the use and retention of said deposit; in such a case, the deposit is received in the nature of a special contract, and is binding upon the bank and the depositor. A deposit, when made in a bank, should always be made to an agent of the bank, who at the time represents the bank; but the deposit need not necessarily be made to the receiving teller of the bank, but must be made to some officer or agent of the bank, who, at the time of receiving the deposit, repre- sents the bank. If made to a person claiming to represent the bank, when in fact he does not, the bank will not be held respon- se Eshback v. Byers, 164 111. App. as Indiana Trust Co. v. Inter- 449. national, etc., Assn., 165 Ind. 597. CH. XIX. ] Bankin^g. 287 sible. It is therefore important to the depositor to know who are the agents of the bank. The rule that the bank is not liable where an officer or other agent of the bank, other than a receiving teller who has been delegated to alone receive the deposits, is not the law. Any duly authorized agent of the bank may bind it by receiving deposits. A notice posted in a bank " deposits received " and the words " receiving teller " is not a sufficient notice to the depositor that another officer or agent of the bank (other than the receiving teller), cannot receive a deposit and bind the bank. It has been held by nuinerous authorities (The Merchants' Bank v. State Bank, 10 Wall. 604; L'Herbette v. Pittsfield National Bank, 162 Mass. 137, 38 K E. 368 (1894) ; White V. Eranklin Bank, 22 Pick. (Mass.) 181 ; Atlas Bank v. Nahant Bank, 3 Met. (Mass.) 581 ; Dill v. Wareham, 7 Met. (Mass.) 438; Morville v. American Tract Society, 123 Mass. 129; Davis V. Old Colony Eailroad, 131 Mass. 258; EUerbe v. National Exchange Bank, 109 Mo. 445), that the cashier is the proper officer to receive deposits, also to give certificates of deposits; and likewise the power rests with him to accept or refuse tJie account of one desiring to become a depositor; but the rule is not laid dawn in- any of the cases above cited, that he is the only officer authorized to receive deposits. The president of a bank, by inherent power, has the right to receive a deposit for the bank.*" Where a cashier receives money for deposit away from the bank the customer takes the risk that the cashier will properly deposit the money in the bank.*^ The rule is, that any agent of the bank who receives a deposit from a customer within the bank during banking hours, binds the bank unless the dealer had notice of lack of power. The bank cannot set up a defense that it is not responsible because the deposit was not received or passed through the hands of the receiving teller. A deposit is complete when it passes from the possession of *o Bickley v. Bank, 43 S. C. 528, ^j Damarest v. Holdman, 34 Ind. 21 S. E. 886 (1892). App. 685. 288 Deposits. [ch. xix. the depositor into the hands and into the possession of the agent of the bank, if at the time of the transaction it was performed within the bank and during banking hours. In the case of the East Eiver National Bank, Eespondent, v. Francis N. Gove, Appellant, 57 E". Y. 597, the court very correctly states the law upon this subject. The case is so replete and so conclusively sustains the rule that any agent of the bank while representing the bank and within the bank and act- ing during banking hours, binds it that we here quote from the opinion. " There were in this bank, besides the cashier and book- keepers, a paying teller and a receiving teller ; the general duty of the former being to pay the moneys of the bank, and of the latter to receive money paid to or deposited in the bank. In the absence of the receiving teller, other clerks and officers of the bank acted in his place. The defendant had for some years been a dealer with the bank, and he knew that there were a paying and a receiving teller. There was no proof that the receiving teller was in the bank on the twenty-eighth day of August, when the defendant made the payment. For aught that appears, the paying teller was then the highest officer of the bank present. The defendant had several times been spoken to, to make the mistake good. He received the letter from the paying teller and went to the bank, and, upon his request, paid him the money over the counter. There was no proof that the paying teller was not, in fact, authorized to receive this money. He testified that he was not accustomed to receive money from depositors. But this payment was not a deposit. It was a pay- ment of a debt due the bank ; there was no proof that defendant had any reason to believe that Van Orden was not authorized to receive this money, except the fact that he was the paying teller. Under such circumstances, I hold that the payment to the pay- ing teller was a good payment to the bank. " The defendant went to the bank, he found behind the counter the paying teller who asked him to pay a demand the bank had against him, and he then paid it. It would he a very inconvenient and unreasonable rule to hold that hank was not CH. XIX. ] Banking. 289 hound by such a payment. If this payment was not binding upon the bank, it would not have been if Van Orden had de- clared to the defendant that he was authorized to receive it; and if every clerk then in the bank except the cashier had, upon the inquiry of the defendant, made the same declaration. If he had gone to the bank to pay a note and the paying teller had gone to the vault and got the note, taken the money and surrendered up the note, upon the same principle such a pay- ment would not have bound the bank. Banks must be held responsible for the conduct of their officers within the scope of their apparent authority. When one goes into a bank and finds behind the counter one of its officers employed in its business, and upon his demand pays a debt due the bank in good faith, without any knowledge that the officer's authority is so limited that he has no right to receive it, he must be protected and the bank must be bound by the payment. The rule then is as stated in Cyclopedia of Law and Pro- cedure, volume five, p. 516: "The payment of a deposit to any one serving behind the counter of a bank is valid, and if he retains the money for his own use, the bank is liable." *^ The same authority lays down the rule that " the. same prin- ciple applies to a bank whose officers receive special deposits of bonds and other securities.** The rule would be different if a person dealing with the agent knew at the time that the agent was acting without authority. Deposits may be made and received in a fictitious name. But when the bank receives such a deposit with knowledge that the purpose of the depositor was to defraud an honest creditor the bank is guilty of a fraud.** «2East Eiver Nat. Bank v. Gove, v. Commercial Bank, 39 S. C. 296, 57 N. Y. 597; Sweet v. Barney, 23 17 S. E. 980, 48 S. C. 430, 26 S. E. N. Y. 335; Hotchkiss v. Artisans' 725; Bickley v. Commercial Bank, Bank, 2 Abb. Deo. (N. Y.) 403, 2 39 S. C. 281, 17 S. E. 977, 39 Am. (N. Y.) 564; Ihl v. St. St. Eep. 721. Joseph Bank, 26 Mo. App. 129; Mc- *3 Foster v. Essex Bank, 479, 9 Cann v. State, 4 Neb. 324; Eieh v. Am. Dee. 168. Niagara County Sav. Bank, 5 ** Bank of Lawrenceville v. Rock- Thomp. & C. (N. Y.) 589; Jumper more, 129 Ga. 582. 19 290 Deposits. [ch. xix. § 177. Kinds of deposits received. A special deposit when authorized to be received by a bank,, must, as formerly stated, be safely kept and that identical thing returned to the party making the deposit.*" Where a customer presents *to a bank a certain amount of money, and directs that it be received to be applied at some future date to the payment of a check, specifying it, which may be presented, or to be used in the payment of a claim which maybe presented against him (the depositor), such a deposit is not a general but a special deposit. The deposit, although in money, cannot be placed to the credit of the depositor and become a general liability of the bank. It must be retained for the specific purpose named. It is advisable, where special deposits are received by banks, to have a special deposit book or ledger for the purpose of entries, and in which should be entered the conditions upon which each deposit is received. Where such a record is not kept by the bank, written instructions should accompany the deposit directing the nature of, and disposition of the same. It frequently occurs that a customer will deliver to his bank a check drawn upon some foreign bank, directing that it be used for a specific purpose, for example, " when 'A' presents a deed accompanied by a certificate of title showing the title to be perfect in the grantor mentioned in the deed, the money is then to be applied in payment for the property conveyed." Such transactions are common, and the deposit of the check cannot be presented and cashed until the deed and certificate of title are delivered to the bank. In this case, the bank cannot be held for failure to present the check; but if the bank is instructed to collect the check and hold the money for the pur- pose designated, and it fails to present it for collection within a reasonable time, the bank may be held liable. If such a deposit is made, and the bank accepts the conditions, it will be held as by a contract and must comply with the same. The court holds, in the case of American National Bank v» « Butcher v. Butler, (Mo.) 114 S. W. 564. CH. XIX. ] Banking. 291 Presnall (48 Pac, 556), that where a check was delivered to the cashier of the bank, and for which he gave a writing as follows : " Deposited with American National Bank, Arkansas City, Kansas, by J. K. Presnall, October 18th, 1890, $22,200, to be delivered to Presnall upon clear abstract of property, on deeds left with me. H. M. Lamsen, C." It was shown by the evidence, that the document signed " H. Lamsen, C " was executed by the cashier in his official capacity, and that in fact he only received a check. In con- struing the document the court says, " In effect it is stated that the deposit is made with the hank; that the deposit is money and not a check." As stated in this case, a check was deposited, but the bank through its cashier, acting in his official capacity, gave a " de- posit slip " showing upon its face that money was deposited and the court contended that the bank was held by the docu- ment and must make good the amount in money. A check deposited and placed to the credit of the depositor is equivalent in law to the deposit of money.** Customers' bank may select arbitrarily.*' But a bank can- not close an account with a customer who is a depositor without first giving a reasonable notice.*' In receiving a check, as a special deposit, the bank may elect to collect the same and hold the money in its place, if not other- wise specifically instructed ; but in such a case, the bank cannot open an account in the name of the party depositing the check, but must retain and hold the money to execute the trust and purpose for which it is to be used. Where a clerk of a court of record, under order of the court, deposits money in a bank and the money is mingled with and becomes a part of the common fund, and the bank becomes a debtor therefor, the deposit is general. " If the deposit had been placed in a separate package and so deposited and never mingled with the funds of the bank; *« Dernfield v. Fourteenth St. Sav. *7 Jaselli v. Kigga Nat. Bank, 36 Bank, 37 App. C. Dist. Columbia 11. App. C. Dlst. Columbia 159. "Id., 159. 292 Deposits. [ch. xix. or had it been so kept that its identity could be established, it would no doubt have been different." A special deposit may be changed to a general one or vice versa, for example, "A" may deposit a note with a bank for collection. While the note remains unpaid it assumes the nature of a special deposit, to be returned if not collected ; but after collection, the proceeds may be, in the absence of other instructions, placed to the credit of the owner. It then becomes a general deposit. In California it is held in Howard v. Eoeben, 33 Cal. 399, that where one makes a special deposit of gold coin and after- ward contracts with the bailee to pay interest on the same, the special deposit is turned into a general one. But when the deposit is made as a special deposit, i.e., where the bank merely assumes charge of the money or the specific property and has no authority to use it, the depositor is entitled to have the specific property, or identical money, returned. The reason of this rule is that the title remains in the depositor, and the bank is merely a bailee or trustee. Such a deposit is usually accompanied by a contract and the bank is bound to comply with the contract; failing to do so, the bank is liable for the actual loss incurred. Joint tenancies of deposits. Joint tenancies of deposits may be created and either one may withdraw the deposit and this may be done irrespective of whether the tenants be husband and wife, and in such case the right of survivorship exists.*" 48 In re Eysel, 00 Misc. 432, 121 N. Y. S. 413. CHAPTER XX. DEPOSITS BEFAID. § 178. When and how paid. In receiving a deposit the bank gives to the depositor a pass- book showing an entry therein of the date and amount received. It charges itself and credits the party making the deposit, and the person named as depositor from thence on is the party owning the deposit and the bank must deal directly with the owners in repaying the deposit or a person duly authorized to represent the depositor. Failing to repay the money to the true owner, and having paid the same to another representing (but without authority) the owner, will not relieve the bank of liability. Depositing money in a bank in the name of another can only be withdrawn by the order of the person receiving the credit.^ And to the same effect an agent who has authority to receive money in payment of a note due to his principal has no authority to endorse a check payable to the principal.^ It is also held that where a certificate of deposit was made to husband which was a portion of a payment of the consideration of the wife's land with the knowledge of the bank, who afterwards paid the certificate to him, the bank was liable.* A general deposit of money when made and placed to the credit of the depositor, from that time becomes a debt due from the bank to the depositor, and unless a stipulated time is agreed upon between the depositor and the bank when the deposit is to be repaid, the law implies a liability upon the part of the bank for its repayment to the depositor at any time when demand is made. 1 Second Nat. Bank v. Gibboney, s Eobards v. Hamrick, 39 Ind. 43 Ind. App. 492. App. 134. 2 Robinson v. Bank of Winslow, 42 Ind. App. 350. [293] 294 Deposits Repaid. [oh. xx. It is not necessary that the depositor should have a contract or agreement in writing, executed hy the bank, agreeing to repay the same. The entry of his deposit in a book furnished by the bank showing its liability to the depositor is sufficient. It is a presumption of law, that when money is deposited in a bank and credit is given in the name of the party depositing the same, that it belongs to the party making the deposit, and the bank is justified in honoring the check of the party making such deposit. A third party may make a claim of ownership to the funds, but a simple claim or notice to the bank verbally made by the claimant that such funds when deposited in the name of another are his funds or property, cannot be construed by the law as a sufficient notice to the bank, and as a justification of its right or refusal in the payment of checks signed and pre- sented by the depositor. But if the bank has been enjoined by process of law from paying such funds to the depositor, it may refuse to pay the same until the injunction is dissolved. Where deposits are made in the name of a firm, complica- tions may arise in the payment of checks, especially so if the bank should pay out money upon the individual check of one member of the firm. If this is done, and the firm should claim that the funds withdrawn were withdrawn without authority, the bank can only justify its action by proving that the money drawn by the individual member was applied to the use of the firm. To avoid such danger and complications, it is advisable that the bank, when such an account is opened, and before checks are paid, require the firm to empower some one member thereof to draw and sign checks in the name of the firm, upon the account in the bank. The power of attorney, authorizing this, being filed with the bank, would establish the right of the party to draw checks and relieve the bank from all complica- tions and liability. Where deposit is made by several persons to their joint credit the bank must pay to all.* Held in Coleman v. National Bank, 94 Tex. 608, that under the statute, of that State where * Colombia Finance and Trust Co. v. First National Bank, 116 Ky. 367. CH. XX.] BANKITiTG. 295 the husband has the sole management of the wife's separate funds and has made deposits of the same in a hank he can draw them out and the bank is not required to see to their application. Where certificate of deposit was made in name of husband and wife payable to the order of themselves, where properly endorsed, the wife surviving the husband was the sole owner of the certificate and the moneys it represented." Depositor. Where a depositor opens an account in a bank as attorney for another person named, the bank in the absence of intended misappropriation is bound to pay the attorney's checks on the deposit.® Savings banks have two classes of deposits, ordinary and term. The ordinary deposit is somewhat in the nature of a commercial deposit. It may be one wherein the bank will agree to repay up to a certain sum or fixed amount on demand and without notice. When this rule or agreement is entered into between the parties, interest upon the sums is generally waived. The depositor in a savings bank, however, where his deposit is classed as ordinary, is governed by the same law in relation to his rights and claims against the bank in case of insolvency, or liquidation, and is placed in the same position as the term depositor. But the law is well established that before an action can be maintained by a depositor against the bank, he must first have made a demand upon the bank for repayment. This demand may be in the presentation of a check signed by the depositor against his account held by the bank. Suspension of payment by bank is notice that it will not pay checks on demand, and no demand thereafter is necessary. And after suspension the bank is liable to the depositor for interest.^ Held in Callahan v. Bank, 69 S. C. 374, that a depositor has BMertz V. State Nat. Bank of ' 8 Penn. Title and Trust Co. v. North Tonawanda, 131 N. Y. S. Meyer, 201 Pa. 299. 1045. "^ T Ex parte Stockman, 70 S. C. 31. 296 Deposits Eepaid. [oh. xx. a right of action against bank by refusal to pay check given to third party where the bank failed to give notice that it had appropriated the deposit to a debt of depositor due the bank ■ where he had sufficient sum on hand at the time to pay the check. Held in McAndrews v. State Bank, 25 S. D. 590, that it is not necessary to allege that payment was demanded during banking hours. A depositor's account or deposit in the bank remains a lia- bility against the bank until the statute of limitations bars a right of action. In some of the States the statute will not run against the depositor. The depositor is not entitled to interest upon his deposit made in a commercial bank, unless by special contract entered into by the bank, interest is agreed to be paid ; and it seems to be a well-settled principle of law upon this sub- ject that, unless the by-laws of the bank authorize interest to be paid to depositors, that the officers of the bank who. enter into such contracts with depositors without first having such au- thority from the board of directors, have violated certain prin- ciples of banking, and as between themselves and the bank, are personally liable. It is not claimed, however, that as between the depositor and the bank that the bank would not be held liable. If certificates of deposit have been issued and a specified time agreed upon when the money should be repaid, the depositor cannot demand repayment of the same before the expiration of the time; neither can the bank, upon the other hand, pay the depositor upon such certificate before its maturity for the pur- pose of evading the agreement to pay interest on the same. A term deposit is one wherein it is generally stipulated be- tween the parties by contract, that the same shall be withdrawn from the bank only upon notice duly served. This notice when given, if the by-laws require it, must be in writing, specifying that the depositor demands repayment of his deposit within the time which the bank stipulated to repay the same. Banks may repay vdthout notice, electing to waive the same, but they have a jight where such contracts have been entered to demand notice before repayment. Savings banks through their by-laws. CH. XX.] Banking. 297 when properly enacted, can fix the time required to be given by a depositor before the withdrawal of his money, his right to withdraw the same being a contract between the parties, and before withdrawal he must comply with the terms of the agree- ment and the by-laws. It is unnecessary to state that a bank cannot pay out its funds held for one on deposit upon an oral order. It can do so, but in doing so it is done at its risk. Money paid upon an oral order, the payment may be denied by the heirs after death, and the court would exclude the proof if offered by the bank, of such payment. The usages of the banking business entitle it to written evidence of money paid by it. A general depositor of funds in a bank, having claimed that he deposited certain money, is not entitled in repayment to the particular kind of money deposited, unless in case of a special deposit. A depositor, however, when the deposit made by him is in current funds, at the time of repayment, may insist that he shall receive in return current funds. And this is held to be the case, although the funds deposited have in the meantime depreciated. Where deposits are made in depreciated funds and credit is given to the depositor in current funds, the de- positor is entitled, on withdrawal of the same from the bank, to be paid in funds which are current. The bank at the time of the transaction should note the fact in accepting the funds that they were not current funds, if it desires to protect itself at the time of payment. This subject is further discussed under chapter treating on Duties of Paying Teller. § 179. Bank may refuse payment of deposit, when. A bank may refuse to honor and pay out deposits on a check when defects appear upon the face of the cheek. If the bank questions the genuineness of the signature its duty is to at once give notice to the owner of the deposit that payment is with- held for that reason. A bank may be deceived as to the genuineness of a signature, 298 Deposits Kepaid. [oh. xx. and refuse to pay a check where the signature is genuine, and when refusal is based upon that ground and with a motive to protect the deposit, or against fraudulent checks and signatures, the law would not hold the bank liable in damages. A bank, before payment of a check, is entitled to time in which to examine its books, and ascertain from them whether the amount demanded by the check is then a balance due the depositor. This may require the examination by a clerk of all checks, drafts and other orders which may have been during the day previously presented and charged to his account. The bank may take time to strike a balance from the books of the depositor's account, and, if in case of a run on the bank, a de- positor presents his check which purports to be for the balance then due him, demanding that he be paid his balance in full, the bank is entitled to a sufficient time in which to balance the account of the depositor before payment of the check. This requires time in which to enter the checks and deposits for the day upon the books of the bank and the depositor's pass-book, and, when balanced, if the check as drawn is for the correct amount of the balance, it must then be immediately paid. When a " run " is on against the bank, it is not required to call in or retain extra assistance for the purpose of rapidly facilitat- ing such settlements to accommodate a customer, but it may proceed in its customary and ordinary way of doing business. A bank must pay checks in the order in which they are pre- sented. Where two or more paying tellers are employed, checks may be presented to each paying teller simultaneously, and to prevent confusion or preference in payment, the paying teller is entitled to time to examine the debits and credits of the depositor, and by so doing, the order of payment may be fixed. The question of what is a reasonable time in which accept- ance and payment should be made is one of fact to be deter- mined by the court when brought into issue. A check may be paid when presented, by giving the owner credit therefor upon his account, or it may be paid in money; or it may be paid by substituting a draft drawn upon some other banking institution, for the amount, or it may be turned CH. XX.] Banking. 299 into a certificate of deposit, made payable by the bank at some future date; or as stated, it may be paid by the cancellation or discharge of a debt owing by the depositor to the bank. When a check is surrendered and a substitution takes place, for example, when a draft or certificate of deposit is issued in a subsequent suit, if it should arise, the suit should be brought upon the new instrument. A check in effect is also paid where a certification of it by the bank takes place. The check is immediately charged to the drawer's account and the bank becomes from that date liable to the bona fide holder. The drawer is discharged and the bank at once becomes the debtor to such holder. When a certified check passes by endorsement to a bona fide endorser, the bank cannot set up error, but must pay. It cannot be revoked. When a check is not dated it is sufficient to put the bank upon inquiry. The bank may refuse to pay an undated check and before payment require that the date be inserted, and it is held that the payee may insert the true date. It is also claimed that an undated check is never payable, and a date written in not the true date, of the check is a material alteration of its terms such as would destroy its validity.* Held that "whenever the legal rights and liabilities of a maker of commercial paper are changed, in a material respect, by fraudulent alteration of the obligation, such alteration vitiates the instrument and the question whether it is material or not is one of law for the court." * A payment by the bank of a check where it is changed so that by such change the obligations are altered, makes the bank liable. A banker may pay to a depositor his deposit, upon an oral order as previously stated, but in doing so it takes all the risk of the depositor repudiating the transaction, and death may also complicate the position; the representatives denying the 8 Crawford v. West Side Bank, » Crawford v. West Side Bank, 100 N. y. 50. 100 N. Y. 56, and eases cited. 300 Deposits Repaid. [oh. xx. payment, the burden of proof would then be on the bank to show that payment was made. " It has been said that a depositor can demand his deposit without a written order," (McEwin v. Davis, 39 Ind. 109; Ellis V. Woodsocker First National Bank, 22 E. I. 565, 48 Atl. 936; Watts v. Christie, 11 Beav. 551; Cambridge Eirst National Bank v. Hall, 119 Ala. 64, 24 So. 526; Nejff v. Green Co. National Bank, 89 Mo. 581, 165 Ind. 162) ; but this is not a custom. The bank may and frequently does pay on telegraphic in- structions, and in doing so it is not liable to the sender if the message received does not conform in amount to the original. The sender may hold the company transmitting the message for error, but as between the bank and the owner of the deposit, it is not liable. A person having a deposit in a bank and becoming insane, and during insanity issuing his check, which is paid by the bank after knowledge of insanity, is not payment ; but if it pays in good faith, without the knowledge of such insanity, it will be protected.^" When a breach of trust. The rule is that the bank may pay out money on deposit to the rightful owner, but when it has knowledge that a breach of trust is being perpetrated by the depositor, it is liable to the rightful owner of the deposit.^^ The statute may bar the right of action to recover.^^ The rule is again seated in Emerado Farmers' Elev. Co. v. Farmers' and Merchants' Bank, 29 L. E. A. (New Series) 56Y, as follows : "A banking institution is not authorized to pay out funds intrusted to it on deposit to a person known by it to stand in a trust relation to a depositor, when it has notice that such 10 Eiley v. Albany Savings Bank, A. 89 ; Bundy v. Monticello, 84 Ind. 36 Hun (K Y.) 513. 419. 11 American National Bank v. Fi- 12 American National Bank v. Fi- delity Co., 129 Ga. 126 ; Ducket v. delity & Deposit Co., 129 Ga. 126. National Bank, 86 Md. 403, 39 L. R. CH. XX.] Banking. 301 person intends to misappropriate and divert the funds received to his own uses when paid over, and in case such payment is made the amount so paid may be recovered at the suit of the depositor." The whole question fixing liability is one of knowledge. The bank must have the knowledge that the deposit is a trust deposit and that when it is drawn out by the trustee that he intends to misappropriate it. Unless these facts are clearly established the bank cannot be held. Where the amount of money named in the check is written out in full and which differs from the amount specified by the figures, the writing prevails over the figures. It is not negli- gence for a bank to pay a check written on the blank of another bank." § 180. Payment of trust funds. In the leading case of Hatch v. Johnson Loan & Trust Com- pany, Y9 Fed. Eep. 828, the court says: "A bank cashier or teller may pay out a check of a corporation when it is drawn in the usual course of business ; and there are no circumstances of suspicion to put him in inquiry without instituting a pre- liminary inquiry as to what is to be the destination of the money drawn before the check is honored. The bank was bound to pay the cheek when drawn by the company in the usual course of the company's business." The opinion of the Supreme Court of the State of Illinois in the case of the State iN'ational Bank v. James Eeilly, 124 111. 464, is in direct line with the doctrine laid down by the district judge in the Federal case above cited. The rule is, where a hcmker has Jenowledge of the fad thai a hreach of trust is going to he perpetrated upon the trust fund, and he participates in such fraud, the hank is liahle for such misappropriation and the true owner can recover. Where a public officer, a United States postmaster, deposits money in a bank in his official capacity and executes his checks 13 19 L. R. A. (N. S.) 402, 96 Pac. 490, 37 Tex. Oiv. App. 97, 83 S. W. 36. 302 Deposits Eepaid. [ch. xx. in such capacity and withdraws the funds applying them to his personal purposes, the bank would not be responsible " unless it had actual or constructive knowledge of the unlawful inten- tion and purpose of the postmaster when the checks were drawn or presented and paid." ^* Where a bank has full knowledge of the trust, it must protect it to the extent of refusing the payment of checks where the funds are to be used to the loss and injury of the real owner.^" Money deposited by the husband in his wife's name does not give him the authority to withdraw it. The fact that he de- posited the money as an agent does not make him an agent to withdraw it; and he has no authority to execute checks in his wife's name, signing the same as agent. (Bates v. First Nat. Bank of Brockport, 89 K Y. 286.) See for authority of hus- band over wife's separate funds, 120 Fed. Eep. 526. Deposits in all instances can be withdrawn by the real ovroer. It frequently occurs that deposits have been made by mistake and an " account opened " in the name of a person who is not the real owner of the funds. When the bank is fully satisfied that the account has been opened and credit given to the wrong person, it may of its own action, change the account and place the deposit to the credit and in the name of the real owner ; but where the bank is ignorant of any mistake and a deposit has been made in the name of a party who, in fact, is not the owner or entitled thereto; and pays a check executed by the party shown by the books of the bank as the owner, the bank is not liable. A deposit may be made by a person under age in his own name, and he may execute checks and withdraw the same (un- less a statute to the contrary intervenes), and the bank will be protected. But upon notice given to the bank by the parent or guardian that such funds are claimed, the bank may refuse pay- ment of the minor's checks. A bank may be estopped from the payment of a deposit by process of law; for example, the deposit may be attached or 1* United States v. Nat. Bank, 73 is Goodwin v. American Nat. Fed. Rep. 379. Bank, 48 Conn. 550. CH. XX.] Banking. 303 garnisheed. When tlie court issues a writ and the same is served upon the bank, the bank must respect and obey the .notice and refuse to pay until the proceedings are determined. Prom the time that service is made the deposit to the extent of the amount claimed should be immediately charged by the bank against the depositor's account and held by it until the title to the same and the claimant's rights are settled by the law. Where a person sets up an adverse claim not through the process of law, the bank should immediately notify the de- positor of such claim. It having used all diligence to do so and then failing, it may, in order to protect itself, charge the de- positor's account to the extent of such claim, providing it is in every way such a claim as the bank would ultimately be com- pelled to pay. Where disputes arise over the ownership of de- posits, the bank, to protect itself, may bring an action against all persons claiming an interest in the deposit to settle the question of title and ownership. Where two persons of the same name claim the deposit, the question of ownership may be one which can only be settled by a bill in court. Where a bank pays out a deposit under a garnishment upon a judgment against another person of the same name as the depositor, the courts hold that the bank is liable to the owner of the de£osit.^' Garnishment. Where bank is garnished and pays out money before judg- ment, it does so at its peril." The death of a depositor, when known by the bank, estops the bank from payment of checks though delivered to the payee by the maker thereof prior to death. The rule Is, that the death transfers the deposit to his personal representatives, and a hank, i« O'Neil V. New England Trust it Bessemer Sav. Bank v. Ander- Co., 125 Am. St. Eep. 740 ; Jaselli v. son, 134 Ala. 343. Riggs Nat. Bank, 31 L. R. A. (N. 8.) 763. 304 Deposits Eepaed. [oh. xx. having the knowledge of the death and which afterward pays checks, does so at its peril. The statutes of some States, however, provide that the per- sonal representatives may draw upon the account of the de- ceased in a certain sum hefore letters of administration are granted. The bank is also estopped from making payment after notice of insolvency and assignment by the depositor. The assign- ment transfers the deposit to the assignee for the benefit of all the creditors. If the bank honors the check before notice to it of assign- ment, it is protected. Where the bank has a claim or debt due it from the depositor, it may set off the deposit (if done before the death of the maker) as against such debt, and this operation acts as a with- drawal of the deposit. The deposit must belong to the debtor in his own right. The bank cannot apply trust funds in this way, and even after the application is made, if it is shown that the deposit belonged to someone else, the court will order the bank to return the same to the rightful owner. Where a debt is secured, the bank has no authority to apply the deposit in payment of such a debt. Also after notice of death, a bank has no right to apply the deposit standing in the name of the deceased to the payment of his debt, though the debt be due and acknowledged. Bank may recover deposit, when. Where the cashier is in complete control of the bank, he was indebted to one of its customers and pretended to cancel his debt by giving the depositor credit on her pass book ; held where the bank went into insolvency the receiver could recover the amount from the customer. The holding in this case is based upon the theory that " one who receives from an officer of a corporation securities of such corporation in payment of a personal debt ,of such officer, he does so at his own peril." " Prima facie the act is unlawful and unless actually authorized OH. XK,] Bankinq. 305 the purchaser will be deemed to have taken them with notice of the rights of the corporation." ^* Pass-boohs of commercial hanks. A balance struck in a pass-book is an accoimt stated. (Grreenhalgh Co. v. Farmers' National Bank (Pa.), 75 Atl. 260.) Burden on bank to show fraud. 128 S. W. 19, 147 111. App. 193. See 117 U. S. 96. It is a duty of the depositor to examine his pass-book after balancing within a reasonable length of time, but the failure to do so will not estop him from showing error in the account.'* A depositor failing within a reasonable length of time to notify bank of errors in pass-book shifts the burden of proof on the owner of the book. 147 HI. App. 193. Damages for refusing payment of deposit. The rule has never been questioned that a depositor whose cheeks are dishonored without cause may recover damages. The extent or measure of the damages is largely controlled by the nature of the business of the depositor. The presumption with- out further proof is that if the drawer of the check is a mer- chant or trader substantial damages have been sustained.^" Unauthorized payment — Liability of bank. The rule is that the bank must pay the depositor in con- formity with his order. No payment made otherwise can be charged against his account. Therefore when a check is drawn to the " order of " and these words are erased and are made to read to the " bearer " the depositor cannot be charged. This rule and kindred questions of duty of bank and de- positor are discussed and presented with great care in the case of National Dredging Co. v. President, etc. F. Bank, 16 L. E. A. (K S.) 593. 18 Wilson V. M. E. E. Co., 120 N. Bank, 147 111. App. 193; National Y. 145, 24 N. E. 384, 17 Am. St. Dredging Co. v. President, etc, Eep. 625; Hier v. Miller, 68 Kan. Bank, 16 L. E. A. (N. S.) 593. 258. 20 Third Nat. Bank v. Ober, (C. w Rettig V. Southern Illiiiois Nat. C. A.) 178 Fed. Sep. 678. 20 CHAPTER XXI. CHECKS. § 181. Defined. Bouvier's Law Dictionary defines a check to be : "A written order or request addressed to a bank or persons carrying on the business of banking, by a party having money in their hands, desiring them to pay, on presentment, to a person therein named, or bearer, or to such person, or order, a named sum of money." Norton on Bills and Notes defines a check as follows : "A check is a draft or order on a bank or banker, purport- ing to be drawn on a deposit of funds, for the payment, at all events, of a certain sum of money to a certain person therein named, or to him on his order, or to bearer, and payable instantly on demand." There is no essential diflference in the definition. Bouvier defines it to be a written order or request addressed to a bank or banker by a party having money in their hands, requesting them to pay on presentment, to a person named, or bearer, a fixed sum of money. A form of the written instrument commonly used is in the words and figures as follows: Ko " Pasadena, California, Jan. 1st, 1913. UNION NATIONAL BANK. Pay to the order of Robert J. Burdette. $100,000.00 One Hundred Thousand Dollars." " Wm. H. Magee." The form of the check presents a very accurate definition. It is a written instrument dated, addressed to a bank, directing it to pay to a person named therein or to his order (or bearer), a fixed sum of money, and is signed by the drawer. The requisites of a check are that it shall be, first, dated, [306] CH. XXI,] Banking. 307 second, it must be drawn on a bank j' third, it must be payable to a person named to order (or bearer) ; fourth, it must specify a certain sum of money to be paid; fifth, it must be signed by the drawer. If it is defective in any one of these requisites, it is an imperfect instrument and may be refused when presented to the bank for payment. A check, being an order on a bank to pay a certain sum of money, is a direction to the bank to charge the drawer's account with the sum named therein. § 182. A check must be dated. If a check has no date, it has no definite time for payment. A check is only payable on the day of its date or on a day a future date, or at the time of presentment subsequent to its date. The bank, therefore, if a check is not dated, has no direc- tion when to pay or charge the drawer's account; but a bank may pay a check without risk and without a date when pre- sented by and payable to the drawer himself. A bank may pay to a customer his deposit in full at any time without direction or authority in writing from the depositor, upon the ground that the bank can select its customers, receive deposits and repay them at any time. Therefore, it may close the ac- count with the depositor by payment in lawful funds at any time without being requested to do so ; and a check in such a case is not required as an evidence of authority. But the bank cannot charge the depositor's account with a sum of money, which sum is to be paid to or transferred to the account of another, without direction or authority in writing; and this authority must be dated and signed by the party to be charged. The date is important, as stated, because it fixes accurately the time in which payment may be demanded. It is not due until a date is fixed. If it fails to bear a date, the bank is at once put upon inquiry and may refuse payment upon the special ground that the check not being dated, no time of payment is fixed. 308 Checks. [ch. xn. Checks are either payable on demand or at a date fixed in the future. In the case of Crawford v. Westside Eank, 2 N, E. 881, the court says: " In the present case, the plaintiff, on the twentieth of April, intending to be absent from his place of business for a few days, drew his check on the defendant, dated April 22d, for $700, payable to his clerk, one Morgan, for the purpose of enabling him to obtain funds to pay wages becoming due to the drawer's employees on the 22d. The check was left in the drawer's check book, in his safe, with directions to Morgan, who had a key to the safe, to take the check on the 22d, draw the money, and deliver it to his foreman to pay out to the employees in case the drawer did not return before noon upon that day. The plaintiff did not return until after the time appointed; but on the 21st, Morgan took the check, and, having altered the date to the 21st, drew the money from the bank, and absconded with the funds on the same day. " The check, as drawn, conferred no authority on the bank to pay the amount for which it was drawn out of the plaintiff's funds before its date,^ " Such payment did not, therefore, justify the bank in charg- ing the check to the plaintiff. The bank, undoubtedly, had the same right as any other person to purchase a post-dated check, and enforce payment, however, depended upon the question as to whether the purchaser became a bona fide holder of the paper, and also whether it was then a valid obligation of the maker. A material alteration of its terms, after execution and before payment, would destroy its validity. A change in its date, whereby the time of its payment was accelerated was undoubt- edly such an alteration. " Thus, it was held, in the case of Vance v. Lowther, 1 Exch. Div. 176, where the date of a check had been altered from March 2d to March 26th, and, as thus altered, was attempted to be enforced against the drawer by one who had paid value iGodin V. Bank of the Common- v. Broderick, 10 Wend. 304; s. c, wealth, 6 Duer 76; Mohawk Bank 13 Wend. 133. CH. XXI.] Banking. 309 to an unlawful holder for it, that such alteration vitiated the check, and no recovery could be had thereon." The fact that a check is not dated or that the date is changed as stated, would put the bank on inquiry, and it has been held that an undated check is never payable. § 183. It must be drawn on bank. The Supreme Court of the United States, in distinguishing a check with a bill of exchange, says that a check is always drawn on a hank or banker ; while a bill of exchange is not. It is always necessary that the drawee be designated as a banker, so that the instrument will not be construed as a bill of exchange. The Supreme Court of the United States, in defining the difference, says : " The chief differences are, that a check is always drawn on a bank or a banker. No days of grace are allowed. The drawer is not discharged by the laches of the holder in presentment for payment, unless he can show that he has sustained some injury by the default. It is not due until payment is demanded, and the statute of limitations runs only from that time. It is, by its face, the appropriation of so much money of the drawer in the hands of the drawee to the payment of an admitted liability of the drawer. " It is not necessary that the drawer of the bill should have funds in the hands of the drawee. A check, in such a case, would be a fraud." The court further says that a check is never presented for acceptance, but only for payment. See Rogers v. Durant, 140 U. S. 299, which declares that within the meaning of a State statute, a bank check may be construed as coming under bill of exchange. § 184. Check mast be payable to a person named or to Ms order or to bearer. A check failing to designate a payee, or to designate him with sufficient certainty, it is claimed, wiU render the check void. 310 Chscks. [ch. XXI. A check payable to a person named is a negotiable instru- ment and may be transferred simply by the payee endorsing Jxis name on the back or on the face of the check. It is held, that where a check is drawn payable to a fictitious person or to a name or figure, as for example " 1913," or a Tvord " rent," is in law regarded as payable to bearer and is transferable on delivery. § 185. A check must be for the payment of a certain sum of money. Daniels on N^egotiable Instruments, 3d edition, section 1570, says : " In this respect it does not differ from other negotiable instruments, and though perhaps it still might be termed a check, although not paid in money, by which is meant the legal tender currency of the country, it would certainly not be nego- tiable if expressed to be payable in ' bank biUs,' or ' in currency ' or if it lacked words of negotiability, or were deficient in any of the characteristics in respect to certainty in fact and time of payment and party to whom payment is to be made." In the case of Bank of Mobile v. Brown, 42 Ala. 108, where an action is on a bank check by the endorsee against the drawer, it is held by the court, that a bank check payable in Confederate currency is not an instrument payable in money. § 186. A check must be signed by the drawer. The place of the signature is immaterial, provided it appears to have been intended as a signature. It may be written in pencil. Or it may be printed or stamped. Or it may be the drawer's mark. In which case, however, when executed by the maker by mark, it should be executed in the presence of an officer of the bank, or witnessed by a person who could, if called upon by the bank, verify the authenticity of the check. It is not obligatory upon the maker to use the blank checks prepared by the payee bank. It may be written upon the blank of another bank and the body of the check need not be written by the maker. The all important thing is that the signature signed to the check must be genuine.^ z Bank v. Vogeli, 78 Kan. 264. CH. XXI.] Bankisto. 311 Coupons of bonds may be signed by the printed fac-simile of the maker's autograph adopted by him for that purpose, though not expressly authorized by statute. The State Treasurer of the State of California refused to pay the interest on certain bonds, alleging that the signature of the party entitled to collect the same had been printed upon the coupon and not written with his own hand. The court mandamused the treasurer, and he was compelled to pay.' The place of the signature upon the check is properly at the bottom and below the written order to pay; but the place of the signature is immaterial, provided it appears to have been intended as a signature, and the signature to withdraw the money may be whatever they may agree on.* § 187. Days of grace. The bank, upon presentment of a check, must pay the same upon demand, and cannot claim days of grace. No days of grace are allowed upon checks. A bill of exchange drawn on a bank entitles it to days of grace, and the bank may claim this time and is not liable to an action for non-payment until the expiration of the time; but a check must be paid when presented. This rule cannot well be changed. It would retard the progress of business and exchanges to establish a custom allowing banks a fixed number of days in which payments could be made on checks. The refusal of a bank to pay a cheek when presented gives the drawer a right of action, in case he has funds in the bank to meet the checks." § 188. Checks negotiable, when. A check is a negotiable instrument under the law unless by its written terms, it is made non-negotiable. A check pay- able on a contingency is not negotiable." s Pennington v. Baehr, 48 Cal. 5 Brooks v. Tradesman's Nat. 565, 28 Ind. 18, 6 Hill (N. Y.) 443. Bank, 22 N. Y. St. Eep. 633. *See Polizzots v. People's Bank, « Little v. Bank, 2 Hill (N. Y.) 125 La. 770; Newman v. State Bank, 425. 123 N. Y. S. 926. 312 Checks. [ch. xxi. § 189. Delay in presentment. A delay in presenting a check for payment will not dis- charge the drawer from his obligation on the check unless it is shown that he was prejudiced thereby.' It must be presented within a reasonable time. If the holder fails to present it within a reasonable time and the bank becomes insolvent, the drawer wiU be discharged. § 190. What is a reasonable time. The rule is, that where the payee or holder is in the same town where the bank is located, the check should be presented the next secular day after it is received and during banking hours. In the case of Eussell K. Bickford v. The First National Bank of Chicago, 42 111. 238, it is held that in order to fix the liability of the drawer of a check in case of non-payment, the holder should present the check to the bank on which it is drawn within business hours of the day next succeeding the receipt of the paper and give notice of the dishonor to the drawer. In the case of Smith v. Miller, 43 K T. 171, held, that the check could be operative as payment only by express agree- ment; but that although as between the drawee and payee, the payee was not bound to present the check until the day after its receipt by him; yet, that between the drawer and payee, it was the duty of the payee to present the check at once and he was guilty of laches in not so doing and was chargeable with consequent loss. In the case of Hamilton v. Lumber Company, 95 Mich. 436, the court says : " It was held in Holmes v. Eoe, 62 Mich. 199, that where the person receiving the check, and the banker on whom it is drawn, are in the same place, in the absence of special cir- cumstances it must be presented for payment the same day, or, at latest, the day after, it is received; but if in different T Bull V. Bank, 123 U. S. 106. CH. XXI. J Banking. 313 places, the check must be forwarded for presentment on the day after it is received, at the latest. It is also well settled that where the drawer has been discharged by the laches of the holder, and that fact appears, there must, in order to render the drawer liable, be clear proof that the promise was made with full knowledge of all the facts and circumstances." * § 191. Diligence to bind the indorser. Where a check is drawn on a bank located at a distant place, the rule is, that the check must be mailed to that place for collection during business hours of the next secular day after its receipt, and the person charged with its collection must present it during business hours of the next secular day after its receipt. In case of the Northwestern Coal Company v. Bowman and Company, 69 Iowa 150, the court holds that this rule, how- ever, may be varied by the particular circumstances of th& case. The presentment, however, must be made in every case, with all, the dispatch and diligence consistent with the trans- action of other commercial concerns." § 192. Stale checks. A bank is bound to honor and pay a check when not barred by the statute of limitations. If a check is not presented within a reasonable time, where the drawer, the payee and the bank are all in the same place, the bank will naturally look upon such a failure to present the check with suspicion, and it is suflScient cause to put the bank upon inquiry, and if failing to make a proper inquiry, it pays the check at its peril. In the case of Bull v. Bank of Kasson, 123 U. S. 105, the court holds that a bank check presented by a bona fide endorsee for payment six months after its date, the funds against which 8Edw. Bills & N., 652-654; 2 Morris, 28 Barb. 616; Smith v. Daniel, Neg. Inst., 1149; Wade, No- Janes, 20 Wend. 192; Burkhalter v. tice, 974; Parsons v. Diclcinson, 23 Second Nat. Bank, 42 N. Y. 538; Mfeh. 56; Miller v. Hackley, 5 Griffin v. Kemp, 46 Ind. 172-176; Johns. 375. Woodruff v. Plant, 41 Conn. 344; » Mohawk Bank v. Broderick, 10 Werk v. Madriner Valley Bank, 8. Wend. 304; Middletown Bank v. Ohio St. 302. 314 CSECKS. [CH. XXI. it was drawn remaining in the hands of the drawee, and the drawer having been in no way injured or prejudiced by the delay, is not overdue so as to be subject to equities of the drawer against a previous holder. § 193. Holder of check, rights ai^ainst bank. The weight of authority is, that the payee of a check, before it is accepted by the bank, cannot maintain an action upon it against the latter, as there is no privity of contract between them. The holder's remedy is against the drawer. The bank's liability, if any, is to the drawer. This question is fully and elaborately discussed in the case of First I^ational Bank of Washington v. Whitman, 94 U. S. 343, and is of such importance as to here justify the giving of the opinion of the court in full. The facts are stated in the opinion of the court : " Opinion. This action is brought against the First ITational Bank of Washington to recover the amount of a check drawn upon it by Mr. Spinner, Treasurer of the United States, for $3,414, dated March 9, 1867. The check is in this form, viz. : "Draft No. 9,243 on War Warrant No. 915. "($3,414.) "Teeasuby op the Uiiited States, " Washington, March 9, 1867. "Pay to the order of Mrs. E. S. Kimbro, three thousand three hundred and fourteen dollars. No. 9,243. Registered March 9, 1867. "Issued on requisition No. . $3,414. "S. B. COLBT, "Register of the Treasury. "F. E. Spinneb, " Treasurer of the U. S. "To the First National Bank of Washington, D. C." " It was endorsed in the name of Mrs. Kimbro without authority, and the amount of it was paid by the bank to an CH. XXI.] Banking. 315 unauthorized holder. It appears from the testimony of Mr. Tayler, First Comptroller of the Treasury, that the funds of the government .deposited by the Treasurer in a national bank, are treated by the government, for the purposes of keeping accounts, as in the Treasurer's own charge and custody; that they are charged to him, and that payments made are credited to him, and that he is chargeable precisely as if the funds had been in his own office, and that he had power to make the check in question. " We may, therefore, simplify the case by eliminating from its consideration, all reference to the United States, and con- sider the transaction as between Mr. Spinner, as an individual, and the bank, as his depository, and Mrs. Kimbro, as the payee of his check, " The question is this : Can the payee of a check, whose endorsement has been forged or made without authority, and when payment has been made by the bank on which it was drawn, upon such unauthorized endorsement, maintain a suit against the bank to recover the amount of the check? We think it is clear, both upon principle and authority, that the payee of a check unaccepted cannot maintain an action upon it against the bank on which it is drawn. The careful and weU-reasoned opinion of Mr. Justice Davis in delivering the judgment of this court in Bank of the Republic v. Millard, 10 Wall. 152, leaves little to add upon this subject by way of illustration or authority. In that case a paymaster of the army made his check on the Bank of the Republic to the order of Captain Millard for $859, due to him for arrears of pay as an officer of the army. The bank paid the amount of the check upon a forged endorsement of Millard's name. Recovering the check and exposing the forgery, Millard demanded payment to himself, and, upon refusal, brought his action against the bank. This court held that the action could not be maintained, upon the principle that there was no privity between the bank and Millard. The bank's contract was with the paymaster only, and to him only was its duty. It received no money from Millard. It never promised Mil- 316 Checks. [ch. xxi. lard to pay him any money. It had no money belonging to him. It received money from the paymaster, upon an agree- ment that it would return it to him when called for by him in person, or that it would pay it from his checks. But it made no such agreement, or any agreement, with Millard. Eor a failure of duty in this respect, it was responsible to the paymaster, with whom it made the contract, and to no one else. If the check was not paid, the arrears of pay to Millard were not paid, and his claim upon the government or the pay- master was not impaired by the giving of the check, which, being presented in due time, was not paid. He was still entitled to demand his arrears. " That case is a perfect and complete authority upon the question stated. See also -iEtna ITational Bank v. Bank, 46 N. Y. 82. " Nor is this principle confined to checks or bills. Thus, in Ashley v. Dixon, 48 N. Y. 430, it was held that if ' A.' be under a contract to sell property to ' B.,' and ' C persuade * A.' to sell the property to him, no action lies by * B.' against ' C There is no privity of contract between ' C and ' B.,' but the remedy of the latter is against 'A.' only. " It is not to be doubted, however, that it is within the power of the bank to render itself liable to the holder and payee of the check. This it may do by a formal acceptance written upon the check, in which case, it stands to the holder in the position of a drawer and acceptor of a bill of exchange.^" " It may accomplish the same result by writing upon it the word 'good,' or any similar words which indicate a statement by it that the drawer has- funds in a bank applicable to the payment of the check, and that it will so apply them.^^ "And such certificate, it is said, discharges the drawer. As to him it amounts to a payment.^* " Whether this certificate be obtained by the drawer before "•Merchants' Bank v. State Bank, 12 Bank v. Leach, 52 N. Y. 350; 10 Wall. 604; Epsy v. Bank of Cin- Meada v. Merchants' Bank, 25 id. cinnati, 18 id. 604. 143, 9 Met. 311, 2 Duer 121. "Cook V. State Bank of Boston, 52 N. Y. 96. CH. XXI.] Banking. 317 the check is delivered, and is thus made an inducement to the payee to receive the same, or whether it is made upon the application of the payee for his security, is of no importance. It is a contract recognized by the law, valid in its character, which essentially changes the position of the parties. The privity of contract with the drawee, which before pertained to the drawer alone, is now imparted to the payee, and the duty which before existed only to the drawer now exists to the payee. " It is said that this fact of a contract between the payee and drawee exists in the present case. The testimony of Mr. Arnold is referred to, to the effect that in April, 1867, the bank made its weekly statements to Mr. Spinner of deposits received and payments made, returning the draft of Mrs. » Kimbro as paid on the 22nd of that month, and that in the statement the amount .of the draft was entered to the credit of the bank. " There is no suggestion in the evidence that either the bank or Mr. Spinner knew that the endorsement of the payee was unauthorized. The bank, we assume, would not know- ingly subject itself to the dangers and liabilities resulting from making payment to one not authorized to receive it. We assume, also, as we are bound in justice to it to do, that it would not ask Mr. Spinner to give credit for a payment that it knew to have been illegally made, and that it would not attempt to deceive him into the belief that a pretended endorse- ment was a real one. It comes to this, that, upon a settle- ment of accounts between them, a credit was by mistake allowed to the bank to which it was not entitled. The law is, that neither party is to be benefited or to be injured by the mistake. The bank must refund the amount by handing over the sum, or by crediting the same to Mr. Spinner in his next account. Mistakes in bank accounts are not uncommon. They occur both by unauthorized or pretended payments, as well as by the omission to give credit for sums deposited. When discovered, the mistake must be rectified, and an ordi- nary writing up of a bank book, with a return of vouchers or 318 Checks. [ch. xxi, a statement of accounts, precludes no one from ascertaining the truth and claiming its benefits.^* " We cannot perceive that such a mistaken recognition of the validity of the payment of this check can create an addi- tional or different contract between the bank and the owner of the draft. " It is further contended that such an acceptance of the check as creates a privity between the payee and the bank is established by the payment of the amount of this check in the manner described. This argument is based upon the erroneous assumption that the bank has paid this check. If this were true, it would have discharged all of its duty, and there would be an end of the claim against it. The bank sup- posed that it had paid the check; but this was an error. The money it paid was upon a pretended and not a real endorse- ment of the name of the payee. The real "endorsement of the payee was as necessary to a valid payment as the real signa- ture of the drawer ; and in law the check remains unpaid. Its pretended payment did not diminish the funds of the drawer in the bank, or put money in the pocket of the person entitled to the payment. The state of the account was the same after the pretended payment as it was before. " We camiot recognize the argument that a payment of the amount of a check or sight draft under such circumstances amounts to an acceptance, creating a privity of contract with the real owner. It is difficult to construe a payment as an acceptance under any circumstances. The two things are essentially different. One is a promise to perform an act, the other an actual performance. A banker or an individual may be ready to make actual payment of a check or draft when pre- sented, while unwilling to make a promise to pay at a future time. Many, on the other hand, are more ready to promise to pay than to meet the promise when required. The differ- ence between the transactions is essential and inherent. 18 story, Eq. PI., §§ 799-801; v. Hone, 2 Barb. 586; Bullock v. Story, Eq. Jur., §§ 523, 627 ; Buch- Boyd, 2 Edw. 292. lin V. Chaplin, 1 Lans. 443; Bruen CH. XXI.] Banking. 319 " Without discussing the other questions argued, we are of the opinion, for the reasons given, that the plaintiff below was not entitled to recover." Where a bank certifies a check, it is equivalent to a declara- tion upon the part of the bank that the maker has the funds deposited with the bank and to his credit to pay the same. Immediately upon the certification of a check by the bank the maker's account should be charged with the amount of the check, and the bank at once charges itself with the amount and places the same to the " certified check account." There- upon it becomes an unconditional promise by the bank to pay the check to the payee named therein or to the bona fide owner. The rule, then, is that the legal holder upon failure of the bank to pay, may enforce payment in an action directly against the bank.^* A certificate of deposit issued by a bank is very much like a certified check. It is equivalent to a certification that the bank has received the amount named therein, and it agrees to pay the same to the bona fide owner thereof on presentment, and a failure of the bank to pay, the holder may enforce pay- ment in an action against the bank. § 194. Certified checks. A certified check is in form, the same as an ordinary check drawn upon the bank, and when presented for certification, the officer of the bank having authority to certify checks, stamps or marks across the face of the check the word " good," signing his name thereto and writing the date of certification. The effect of the certification of a check operates to charge the depositor's account with the amount to the extent of the same.^° When certified it is equivalent to acceptance. The drawer 1* Florence Mining Co. v. Brown, is Scheffenacker v. Hoopes, 113 124 U. S. 385. Md. 111. 320 Checks. [ch. xxi. cannot afterwards stop payment. A bona fide holder of such & check, though fraudulently issued, can soUect.*' The bank certifying a check before being signed, it was held to bind the bank and may be signed afterwards. ^^ The effect of a certified check is an obligation of the bank to pay on demand and in effect the same as a certificate of deposit.^* All banking corporations conducting a commercial or sav- ings bank business, and authorized to issue or pay checks upon accounts, may certify any check drawn upon the association, if the drawer of said check has an amount of money equal to the amount specified in such check in the bank. For nature of liability as defined, see Merchants' Bank v. Baird, 160 Fed. Eep. 642. The Eevised Statutes of the United States, section 5208, provides : " It shall be unlawful for any officer, clerk or agent of any national banking association to certify any check drawn upon the association unless the person or company drawing the check has on deposit with the association, at the time such check is certified, an amount of money equal to the amount specified in such check. Any check so certified by duly auth- orized 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 proceedings on the part of the Comptroller as provided for in section fifty-two hundred and thirty-four." In the discussion by the court of the foregoing section of the statute, in the case of Thompson et al. as executors, etc., Appel- lants V. The St. Nicholas iN^ational Bank, Respondent, 113 IN". T. 325, the court says : " It will be seen that the statute affirms the legality of the contract of certification, and expressly prescribes the conse- 18 Blake v. Savings Bank Co., 70 is Times Sq. Auto Co. v. Ruther- O. S. 189. ford Nat. Bank, 77 N. J. L. 649. I'Kelling v. Edwards, 116 Minn. 489. OH. XXI.] Banking. 321 quences whicli shall follow its violation. It, therefore, appears that, so far from making the contract of certification void and illegal, its validity is expressly affirmed, and the consequences which follow a violation are specially defined, and impliedly limit the penalty incurred to a forfeiture of the bank's charter and the winding up of its affairs. There is a clear implication from this provision that no other consequences are intended to follow a violation of the statute. It would, indeed, defeat the very policy of an act intended to promote the security and strength of the national banking system, if its provisions should be so construed as to inflict a loss upon them, and a con- sequent impairment of their financial responsibility. " The d-ecisions of the Supreme Court of the United States are uniform in giving this construction to the provisions of the National Banking Act." ^° The above case was appealed from the Court of Appeals of the State of New York and heard by the Supreme Court of the United States at its October term, 1892. Mr. Justice Blatch- ford, in delivering the opinion of the court, says : " In addition to that, the statute expressly provides that a check certified by a duly authorized officer of the bank, when the customer has not on deposit an amount of money equal to the amount specified in the check certified, shall nevertheless be a good and valid obligation against the bank; and there is nothing in the statute which, expressly or by implication, pro- hibits the bank from taking security for the protection of its stockholders against the debt thus created. There is no pro- hibition against a contract by the bank for security for a debt which the staute contemplates as likely to come into existence, although the unlawful act of the officer of the bank in certify- ing may aid in creating the debt. In order to adjudge a con- tract unlawful, as prohibited by a statute, the prohibition must be found in the statute. The subjection of the bank to the penalty prescribed by the statute for its violation cannot ope- 19 National Bank of Xenia v. National Bank v. Whitney, 103 id. Stewart, 107 U. S. 676; National 99. Bank v. Matthews, 98 id. 621; 21 322 Checxs. [ch. xxi. rate to destroy the security for the debt created by the for- bidden certification, * * * " This construction of the statute in question is strengthened by the subsequent enactment, on July 12, 1882, of section 13 of the act of that date, chapter 288, 22 Stat. 166, making it a criminal offense in an officer, clerk or agent of a national bank to violate the provisions of the Act of March 3, 1869. This shows that Congress only intended to impose, as penalties for over-certifying checks, a forfeiture of the franchises of the bank and a punishment of the delinquent officer or clerk, and did not intend to invalidate commercial transactions connected with forbidden certifications. * * * " Moreover, it has been held repeatedly by this court that where the provisions of the National Banking Act prohibit cer- tain acts by banks op their officers, without imposing any pen- alty or forfeiture applicable to particular transactions which have been executed, their validity can be questioned only by the United States, and not by private parties." ^° The penalty for illegal issue of certified checks will be found in the act passed by Congress and approved July 12, 1882. Section 13 of said act fixing the penalty is as follows: " That any officer, clerk, or agent of any national banking association who shall wilfully violate the provisions of an act entitled, 'An act in reference to certifying checks by national banks,' approved March third, eighteen hundred and sixty- nine, being section fifty-two hundred and eight 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 provisions 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 associa- tion, 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 five thousand dollars, or shall be 20 National Bank v. Whitney, 103 thews, 98 id. 621 ; National Bank of U. S. 99; National Bank v. Mat- Xenia v. Stewart, 107 id. 676. CH. XXI.] Banking, 323 imprisoned not more than five years, or both, in the discretion of the court." " § 195. Bight of holder to look to both the acceptor and the drawer of a certified check. The Supreme Court of the State of Illinois, in the case of Bickford v. Eirst National Bank of Chicago, 42 111. 238, declares that the holder of a certified check has the right to hold the drawee and acceptor as well as the drawer. That where the acceptor has failed and made an assignment, the holder waives none of his rights against the drawer by giving notice to the assignee of the acceptor not to pay over any money to the drawer out of assets which might come to his hands in that capacity. ■The court says : " Certifying a check to be ' good ' is nothing more than a promise by the bank to pay it when presented, as in the case of the acceptance of a bill of exchange. !Now, in the latter case, what are the rights and duties of the parties ? If the bill is accepted by the drawee and protested for non- payment and the drawer duly notified thereof, the law is well settled that he is bound to pay the bill with damages and costs^ The same is the law in regard to a certified cheek.^^ In Wil- lets V. The Phoenix Bank, 2 Duer 121, it was held that certify- ing a check to be ' good ' meant not only that it was good when certified, but that it shall be good when presented for pay- ment. If this was not so, the act of certifying would be nuga- tory and amount to a fraud." § 196. Drawer of certified check, when released. Where the drawer of a check makes and delivers the same to the holder and he procures a certification by the bank, the drawer is released. By his own act he makes the bank his debtor. In the case of Born v. The First National Bank of 21 See Potter v. United States, 155 22 Barnett v. Smith, 10 Foster (N. U. S. 438; Chadwick v. United H.) 206. States, 141 Fed. Eep. 225. 324 Checks. [ch. xzi. Indianapolis, 123 Ind. Y8, the court says : " We agree with the appellant's counsel that the drawer of a check is released if the holder instead of presenting it for payment himself, pro- cures it to be certified by the bank upon which it is drawn. If the holder elects to procure the certification of the check, it becomes in his hands substantially a certificate of deposit. By his own act he makes the bank his debtor and releases the drawer of the check. The reason for this rule is, that the moment the check is certified, the funds cease to be under the control of the original depositor and pass under the con- trol of the person who procures the certification of the check drawn in his favor. First National Bank v. Leach, 52 ]N^. Y. 350 ; Thomas v. Bank, 82 IST. Y. 1 ; Girard v. Bank of Pennsyl- vania, T. P., 39 Pa. St. 92 ; Freund v. Importers', etc.. Bank, 76 N. Y. 352." And the court in this connection states: " It is true that the bank by which the check is certified becomes bound for its payment, and that it cannot defeat the right of the holder upon the ground that the drawer has no funds on deposit. Espy v. Bank of Cincinnati, 18 Wall. 604." ^' It is held in the case of Riverside Bank v. First National Bank of Shenandoah, 74 Fed. Eep. 276, that the certification by a bank of a cheek made payable by such bank where the drawer keeps an account, is an absolute promise by the bank to pay such check, not as the debt of another but as its own obligation. This entitles the holder of the check to suspend any remedy against the maker and relax steps to charge an endorserj and cannot be rescinded by the bank because made under a misapprehension of fact as to the efficiency of the maker's account to meet the check. Where "A" purchases a certified check payable to order and obtains title without endorsement by the payee, he holds it sub- ject to all equities and defenses existing between the original 23 The Irving Bank v. Wetherald, 36 N. Y. 335; Drovers' Nat. Bank v. Provision Co., 117 111. 100. OH. XXI.] Banxinq. 325 parties, although he may have paid a full consideration without notice.''* § 197. A bill of exchange may be accepted orally. Where the statute of a State does not provide that an accept- ance of a till of exchange or check shall be made in writing, a verbal acceptance, when proven, is good. The court, in the case of Jarvis v. Wilson, 46 Conn. 90, says that the statute of frauds does not apply to such an under- taking, and gives as a reason, that the acceptor is regarded as the primary debtor and his acceptance is an undertaking not merely to pay a debt due from the drawer to the payee, but to pay his own debt to the drawer. The courts say that it is fully settled, both in England and in the United States, that in the absence of a statute, an oral acceptance of a bill of exchange will bind the acceptor (Duno- van V. Minn, 118 Mass. 539; Spaulding v. Andrews, 48 Pa. (S. E.) 411; 1 Parsons on Contracts, 267; Fisher v. Beckwith, 19 Vt. 31 ; Ward v. Allen, 2 Met. 53 ; Exchange Bank v. Rice, 98 Mass. 288), and it is held that a bank will bind itself by an oral agreement to accept checks to be drawn upon it in the future, whether the maker thereof has funds to his credit or not." § 198. Liability of banks — Negligence. In the case of Peter Helwege v. Hibernia National Bank, 28 La. Ann. 520, it is held that where a bank certified a check failing to use proper caution, allowing the check to pass from its hands after certification drawn in such a manner that the amount could be easily raised without suspicion, that in the hands of a bona fide owner for value it had no defense. The court says : " The bank was negligent in certifying the check without drawing a line with a pen across the blank 24 Goshen Nat. Bank, Appellant, 25 Leach v. Hill, 106 Iowa 171. V. Bingham, Respondent, 118 N. Y. 349; Lynch v. First Nat. Bank of Jersey City, 107 id. 179. 326 Checks. [ch. xxi. between the words forty-one and dollars, thereby enabling the drawer to perpetrate the fraud. The evidence is, there was nothing in the appearance of the check to excite the suspicion of the plaintiff or a prudent man in business." § 199. When mistake in certification may be corrected by a bank. Where a bank, through a mistake, has certified a check for an amount greater than the drawer has on deposit, it may, after discovering the mistake and after the delivery of the check to the holder, upon getting temporary possession, cancel and make the certification of no effect as between the holder and the bank, provided no rights of other parties have intervened and the situation or rights of the holder betwe«i the certification of a check and its cancellation has in no way changed. § 200. Who may certify checks. The president and cashier of a bank have the inherent power to certify checks. The assistant cashier, paying and receiving tellers may do so when duly authorized by the board of directors. Where there is no authority for the act, a general or par- ticular usage in a given direction will bind the bank to respond to a third party who deals with it in good faith. The general rule is, that where a subordinate officer or clerk of a banJc performs amy act out of the mere ordinary routine of banking business, that in order to hind the bank, his authority to act must be shown. Where a subordinate officer or clerk has been permitted to pursue a particular practice in certifying checks for customers or otherwise, his acts although wrongful, will bind the bank in favor of a person who fulfills the conditions of a dealer in good faith."' § 201. When bank estopped from denying a forged certification. " Where a forged certification of a check is presented at the bank upon which the check is drawn, to the teller whose certifi- 20 Farmers' & M. Bank v. Butchers' & Drovers' Bank, 16 N. Y. 125. CH. XXI.] Banking. 327 cate it purports to be, and he pronounces it genuine, lie adopts the certification and the bank is bound by it the same as if it was genuine." " § 202. Bank can correct mistake, when. Where a bank certifies a check by mistake, it may correct the same by immediately notifying the holder and before the cheek has passed from his hands to the hands of a bona fide § 203. Memorandum checks. Memorandum checks or cheeks marked as such by the drawer by writing on the face of the check " memo " or " memoran- dum," have no significance relating to the duties of the bank when presented for payment. They are treated as all other checks, and when presented by the payee they must be paid. The words " memo " or " memorandum " written on the face of a check, as between the drawer and the payee, may signify and denote a contract of some nature existing between them; but the words as stated have no significance to the bank. If there is an agreement existing between the drawer and payee, for example, that the check will not be presented at the bank immediately for payment, the only remedy the drawer may have is one direct against the payee. Where a check drawn in favor of one who had lent money to the drawer, on the bank where the drawer was known to have no funds and where such check was marked as a memoranduin check and which was not expected to be presented to the bank : Held: " With respect to the check, considering the circumstances under which it was received, both parties knowing that there were no funds in the bank, and it not being intended to be pre- 2T Continental Nat. Bank v. The 28 The Irving Bank v. Wetherald, ■Nat. Bank of the Commonwealth, 50 36 N. Y. 335 ; Brooklyn Trust Co. v. N. Y. 575; Clews et al. v. Bank of Toler, 65 Hun 187. New York Nat. Banking Assoc, 20 N. W. 852. 328 Checks. [ch. ttt sented there, "we think it may be well considered as evidence of money borrowed and recoverable on one of the money counts." In the case of Jacob Skillman v. Liscomb E. Titus, 3 (Vroom.) N. J. Eep. 96, where an action was brought on an ordinary bank check drawn payable to " A," " B," or bearer and is endorsed by the holder to a third person for a valuable consideration, and it appears that at the time of endorsement the abbreviation " mem " was on the face of the check, and that two years and a half had elapsed since it was drawn, the circumstances indicated that the check was not given in the usual course of business, and were sufficient to put the endorsee upon inquiry; and if, for want of proper inquiry, he suffers loss, he has no ground of complaint against the drawer of the check.^^ § 204. Post-dated checks. A post-dated check is one drawn in the ordinary form, but bears a future date and is payable on or at any time after its date. If a bank pays a post-dated check before the day of its maturity, it does so entirely at its own risk. The evident object of the drawer of such a check is to extend the time of payment to a time when he may provide the money to pay the same, and if a bank pays such a check before its maturity and charges the same to the account of the drawer, and dishonors and refuses to pay another check of the drawer not post-dated but intended by the drawer to be paid out of his ordinary account, the bank becomes liable to the drawer to the extent of any damages caused by such act. The drawer's check is not an order of direction to the bank to pay the same until the day of its maturity. Post-dated checks — Banks certifying. Post-dated check is not due until presented and a bank certi- fying the same practically guarantees a negotiable instrument, z'Dykers v. Leather Manufactuiers' Bank, 11 Paige (N. Y.) 612. CH. XXI.] BANKIJiTG, 329 which the general rule holds it has no authority to do. If the drawer has no funds at the maturity of the cheek, the bank cannot charge the depositor's account and the bank's position is then one of allowing the drawer to overdraw his account. The rule that the drawer's account immediately upon a certification of a check is charged or should be charged with the amount of the check, can be applied if the drawer is in funds, but to certify a check not due, the bank is without authority to charge the drawer's account and the act, therefore, is one which under a statute prohibiting overdrafts is or may be made a felony and under a statute prohibiting a bank from guaranteeing a debt is also unlawful. It follows, therefore, that a bank cannot lawfully certify a post-dated check. See Smith v. Field, 19 Ida. 558, for discussion of bank's liability in connection with the statute of that State. A post-dated check, like all other checks, is not entitled to days of grace. The law defining and governing post-dated checks is so clearly given in the case of Champion v. Gordon, 70 Pa. St. 474, that the opinion of the court is given in full: " The law merchant recognizes clearly a distinction in many respects between checks on banks and ordinary bills of exchange. One difference is, that when the former are payable on demand or at sight, no days of grace are allowed. The same rule holds when they are post-dated. (Byles on Bills, 14, note ; 3 Kent's Com. 104, note; In re Brown, 2 Story's Eep. 502; Daniel v. Kyle, 1 Kelly (Md.) 304; Mohawk Bank v. Broderick, 10 Wend. 304; Salter v. Burt, 20 "Wend. 205 ; Andrew v. Blackly, 11 Ohio (K S.) 89; Westminster Bank v. Wheaton, 4 K. I. 30.) Whether it applies also to checks payable at a future day named, is a question upon which there is a contrariety of opin- ion and decision. Mr. Justice Story says : ' The argument pressed is that checks are always and properly payable on demand, and that when payable at a future time they become, to all intents and purposes, inland bills of exchange. But I am not, by any means, prepared to admit the validity or force of this distinction; and no case has been cited which, in my 330 Checks. [ch. xxi. judgment satisfactorily establishes it. A check is not less a check because it is post-dated and thereby becomes in effect payable at a future and different time from that on which it is drawn or issued. This is sufficiently apparent from the case of Allen V. Keerers, 1 East. 435.' That was the determination of a question arising under the Stamp Acts, and it was there held that a post-dated check was not a draft payable on demand, but at a future day, and therefore liable to the duty." Judge Story adds: "It (a check) is usually also made pay- able on demand, although I am not aware that this is an essen- tial requisite. The distinguishing characteristics of checks, as contradistinguished from bills of exchange, are (as it seems to me) that they are always drawn upon a bank or banker; that they are payable immediately on presentment, without the allowance of any days of grace, and that they are never pre- sentable for mere acceptance, but only for payment." 2 Story's Hep. 512. He quotes Chancellor Kent as concurring in these views. 3 Kent, 104, note. The ordinary commercial form of a bill of exchange, payable at a future day, is at so many days' or months' notice after date or sight. An order so drawn, whether upon a banker or any other person, ought to be regarded as a bill with all the privileges and liabilities which by the law merchant are inci- dent to a bill. The drawer, by adopting this usual form, must be held so to intend. So, if an order be dravra on a merchant or other person not a banker, with whom the drawer keeps money on deposit subject to draft, payable at a future day named, there exists no reason why the same rule should not apply. But there is a good reason why there should be a differ- ence between an order so drawn upon a banker, which certainly must be presumed to be by a person who keeps money on deposit with such bankers, subject to draft, and an order on a merchant or other person. If such an order drawn upon a bank, payable at a future day named in it, must be considered as an inland bill of exchange, and not a check, then the payee or holder has the right to present it at once for acceptance, protest it at once for non-acceptance, and sue the drawer imme- OH. XXI.] Banking. 331 diately. Should it be accepted, however, the funds of the drawer in the bank would necessarily be thereby tied up until the day of payment. All the objects of directing payment at a future day would thus be frustrated. What the drawer under- takes is, that on a day named he will have the amount of the check to his credit in the bank. In the meantime he wants the full and free use of his entire deposit. It is not denied that a post-dated check cannot be presented for acceptance, ^hat is by implication payable on a future day. Why then is a check expressly so made payable to stand on different ground ? " In the case before us an ordinary printed form of a bank check was evidently used, and the day of presentment written in one of the blanks. This is the most convenient form, for it calls the attention of the cashier or paying teller to the fact which he would be likely to overlook if it were expressed only by the date. Nothing, I am told, is more common than such mistakes in the payment of post-dated checks, and depositors often thus find their account overdrawn, very much to their embarrassment. If we determine that an order like that before us is not presentable for acceptance before maturity, we settle the question. It is a check and not a bill of exchange. More than twenty years ago the banks of Philadelphia, under the advice of their counsel, adopted this rule, and it has been their uniform practice ever since. The usage of the banks in the commercial metropolis of the State ought to have great weight in determining a question of this character. It is perhaps quite as important that usage should not be disturbed, as that the point should be decided abstractly or theoretically right. It was so held in 1866 in the District Court of Philadelphia, in Lawson V. Richards, 6 Pa. Rep. 179, a case in which the most eminent counsel at the bar were concerned for the defendant, and that determination was acquiesced in." § 205. Bank bound to honor checks, when. A bank is under obligation to honor checks and drafts when presented against all general deposits, where a balance is due from the bank to the depositor covering the amount named and 332 Checks. [ch, xxi. called for by the cheek. If the check is drawn for a sum greater than such balance, the bank may refuse to pay the check and may demand that the check be drawn for an amount not to exceed the balance due the depositor. A bank is held liable and bound to pay in accordance with the depositor's orders in writing, when there is a balance to his credit sufficient for that purpose.^" It is the duty of the bank, in making payment of a check of a depositor to an endorsee of the payee from funds of the depositor in its possession to see that the signature of the payee of the check is genuine, and this duty is not affected by the bank's adapting the convenience of a clearing house system and making payments on the guar- antee by another bank of the endorsements of the payee's name.^^ The rule is well established that at the time of making the deposit it is made to be withdrawn upon the depositor's order, and when the depositor directs by the issuance of a check that it shall be paid to the order of a person named therein, that the bank is bound to see to it that the order is complied with, and if the payee named in the check endorses the same to another person the bank is bound to see that the signature of the payee is genuine.^^ The rule as laid down only applies where checks are drawn to order and are made payable to a person named therein. The naming of a fictitious person, such as " T. R.," may desig- nate and mean something to the drawer of the check, but the letters " T. R." do not signify any person to the bank and there is no definite order to pay to a particular person. Such a check may circulate as money, and when such a check is put into circu- lation the only obligation resting upon the drawee bank is to see to it that the drawer's signature is genuine. But see Louier V. State Savings Bank, 149 Mich. 483. 30 Watson v. Phoenix Bank, 8 Met. Sav. Bank v. Stowell, 123 Mass. 196; (Mass.) 217; First Nat. Bank v. Dedham Nat. Bank v. Everett Nat. Pease, 68 III. App. 562. Bank, 177 Mass. 392; Chritten v. 31 Jordan Marsh Co. v. National Chemical Nat. Bank, 171 N. Y. 219; Shawmut Bank, 201 Mass. 397. Hardy v. Cheaspeake Bank, 51 Md. S2 Murphy v. Metropolitan Nat. 562 ; Harmon v. Old Detroit Nat. Bank, 191 Mass. 159; Greenfield Bank, 153 Mich. 73. CH. XXI.] Banking. 333 Where the drawer of a check through his negligence in deliv- ering check to the payee named and intended and it fell into the hands of another with the same name and he presented it to the bank and it was paid, the drawer cannot recover.^' But this holding does not set aside the rule that the bank must make payment to the person entitled to the money, where there is no negligence upon the part of the drawer of the check. It haS become a settled rule in New York " that if a check, which is drawn upon the bank to which it is presented for deposit by one of its customers, is accepted and retained by the drawee bank without notice to the depositor that it is not good. Such accept- ance and retention amount to a payment of the check." ^* Bank paying on unauthorized endorsement in the name of payee is liable in an action brought by the payee.^^ Presentment and payment by bank of a portion of the check, the remainder, if placed to credit of owner of check, creates a deposit within the meaning of banking.^" Where a depositor and regular customer of a bank deposits a check and the bank accepts it as cash and gives full credit to the depositor with authority to draw against it, the transfer is not conditional but complete.^^ " Payment by a bank of a check drawn upon it does not con- stitute such a bank a holder within the meaning of the negotia- ble instrument law providing that the instrument is negotiated when it is transferred so as to constitute the transferee a holder thereof." ^« As between the bank and depositor, the burden of money payment is upon the bank.'' The Illinois court says that where " the depositor has directed a payment to be in a certain manner, a payment made other- s' Meiaenberger Co. v. Savings ss National Bank of Commerce v. Bank, 84 0. S. 21. Farmers' and Merchants' Nat. Bank, 34 Walnut Hill Bank v. National 87 Neb. 841 ; Aurora State Bank v. Reserve Bank, 121 N. Y. S. 892. HayeB-Eames Elevator Co., 88 Neb. ssMcFadden v. Foulrath, 114 187. Minn. 85. 39 Harmon v. Old Detroit Nat. 36 State V. Salmon, 216 Mo. 466. Bank, 153 Mich. 73. 37 Hebi V. Bank of Evansville, 124 Wis. 73. 334 Checks. [ch. xxi. wise than according to his directions is no discharge of the bank's obligations towards him." The order, however, must be one that the bank can, in the course of its business, comply with. An unreasonable order which might require the bank to deliver the money to some one not present at the bank's counter would be unusual and not of a nature demanding a compliance. A deposit, as stated, made in current funds must be paid in current funds. A deposit made in silver, and entered as such by the bank at the time, may be paid in silver. The bank may pay in " kind " and nothing more can be required of it. The conditions have been complied with when the depositor receives in " kind " the money he deposited. A bank knowing that a check is void and pays the same, does so at its peril. For example: Where, by the statute, the prop- erty of a deceased person can only be taken possession of by an administrator appointed by the court, and, before such transfer is made, a check drawn by the deceased before death is presented to the bank for payment, and the bank being in possession of such facts, pays the check, it does so at its peril. So, in the case where the government issued its pension check to a deceased person whose name was forged and the check paid, held that it devolved upon the bank to know that the party endorsing the check was the legal holder. The government could recover from the back, whose duty it was to detect the forgery.*" So, again, where a bank receives and accepts checks, drafts or other instruments as cash, and gives the depositor full credit therefor, and authorizes him to draw against the deposit, it is bound to honor his checks when presented by innocent holders, even if the bank learns afterwards that the checks and drafts deposited were forged instruments and could not be collected.*^ There is nothing unusual in the rule. It is reasonable and when understood between the parties the bank should not attempt to evade it. The bank always has the opportunity at the time the deposits are received to receive them conditionally or to *o United States v. First Nat. .*i Robinson v. Bank of Pikeville, Bank of Coffey ville, 82 Fed. Rep. 37 L. R. A. 1186. 410. OK. XXI.] Banking. 335 reject them, not placing any conditions against paying them^ but accepting them as so much cash, the bank from that moment becomes a debtor and cannot refuse to pay any demand made upon it by an innocent holder of an order to pay. § 206. Nature and effect of check. It is held, in the cease of Cowing v. Altman, 71 N. Y. 435,, that a check has no validity until delivery. In some jurisdic- tions, after delivery, it is regarded as an assignment of the deposit pro tanto, but generally it does not have this effect until it has been accepted by the drawee. A check is a written con- tract, and an oral declaration cannot be admitted to contradict or vary it; but between the original parties, evidence may be introduced to solve ambiguities for example — to show what person or bank was intended, or to show in what capacity the drawer signed.*^ § 207. Check as payment. A check which has been given upon a bank in the ordinary course of business for a debt is not payment until it is paid.*' If the payment of a check be refused without the holder's, fault or negligence upon his part, he may resort to the original indebtedness.** The holder therefore becomes merely the agent of the drawer in getting the money to pay his debt.*" Gift-deposit check. In order that a deposit in a bank shall pass as a gift, the title- of the money must leave the depositor entirely.*" A gift inter vivos requires no consideration, as where a de- *2 Jackson v. Sill, 11 Johns. (N. 4* Bradford v. Fox, 38 N. Y. 289. Y.) 201; McCullough v. Wainright, 4s Cromwell v. Lovett, 1 Hall (N^ 14 Pa. St., 171; Sweet v. Stevens, 7 Y.) 56. E. I. 375 ; Cork v. Bacon, 45 Wis. *« Bart Savings Institution v.. 192. Fogg, 101 Me. 188. 43 Kenneyer v. Newby, 14 Kan. 164. 336 Checks. [ch. xxi. livery of the money is made by depositing it in a bank in the name of the donee.*'' The delivery of the pass-book in a savings bank to the donee is a suflScient consummation to constitute a valid gift inter vivos.** Held in Succession of Zacharine, 119 La. 150, that where decedent caused money to be deposited in a savings bank to the credit of his sister, the delivery to the bank was a delivery to her.*' A deposit made in the name of a minor child by the mother, through another who took a certificate of deposit payable to the order of the minor or its guardian. Held, the deposit could not be drawn by the, person who was not, but represented himBelf to be the child's guardian.°° Where a by-law exists requiring depositors to present their books with the order to pay, the bank may disregard the rule and pay, and where a depositor intending to make a gift by an assignment of the pass-book, but could not present the pass-book, and the bank accepts the order to transfer the deposit, there may be a valid gift of a deposit in such a bank, although the donor retains possession of the book.^^ In a suit brought by the executrix of a deceased wife against the husband to recover the amount of a certificate of deposit, which, though payable to the wife, had always been kept by the husband, when it appeared that the husband had made deposits from time to time in the name of the wife, the husband was entitled to testify as to what he said at the time he made the last deposit. If the husband at the time of making the deposit intended by the act of depositing the money to make a gift, it then be- comes complete."^ 4TGinterman v. Contant, 111 N. soMcMahon v. German- American Y. S. 18. Nat. Bank, 111 Minn. 551; Varley 48 Goodrich, Exr., v. Rutland Sav- v. Sims, 100 Minn. 331. ings Bank, 81 Vt. 147. "i Gander v. Connecticut Savings 49 Succession of Meteye, 113 La. Bank, 81 Conn. 372. 1012. 52McMalion v. Crdnin, 128 N. Y. S. 423. CH. XXI.] Baitking. 337 A check given without consideration and as a gift to a ser- vant, is not enforceable either against the bank on which it is drawn or against the drawer or his estate. ^^ When gift is held to pass title of deposit, see Goelz v. People's Savings Bank, 31 Ind. App. 67 ; Jacobs v. JoUey, 29 Ind. App. 25. § 208. Bevocation of checks. A revocation of a check is a direction given orally or in writ- ing directly to a bank upon which a check has been previously drawn, that when it is presented, to refuse payment. It is the recall of a power of authority conferred. After a check has been delivered, it may be revoked and the payee must look to the drawer. If the check has been presented to the bank and accepted the bank cannot refuse payment. The deposit is held by the bank subject to the order of the owner and an order to the bank to refuse payment upon a check is a sufficient justification not to pay. The bank, as to the direction of the deposit and to whom it must be paid, is, for this purpose, an agent of the depositor. TJie rule is settled thai the drawer may countermand pay- ment of his check either hy giving notice orally or hy a written notice delivered to the hank. This rule has been enforced from time immemorial. In the case of Dykers v. The Leather Manufacturers' Bank, 11 Paige (N. Y.) 612, " where a customer of a bank had given checks to different individuals for a much larger amount than his funds in the bank, and finding that he could not make them all good during banking hours, went to the bank and directed the officers not to pay any of his checks until further orders from him, and finally drew out the whole of his funds for the purpose of making a ratable distribution thereof among the holders of all the checks. Held, that the owner of one of the cheeks who had demanded payment thereof from the bank after the direction of the drawer not to pay it and before the fund 63 Eimey v. Dunbary, 39 Ind. App. 108. 338 Checks. [ch. xxi. was drawn out, was not entitled to claim the amount thereof against the bank * * *. And where different cheeks are presented to the bank at the same time, for sums which, in the aggregate, exceed the amount of the funds of the drawer, the officers of the bank are not bound to settle the conflicting claims of the holders of the different checks to priority of payment." The Supreme Court of the State of Illinois denies the rule as presented and alleges that, where a depositor draws his check on his banker who has funds to pay the same, it operates as a transfer of the sum named to the payee, and that the payee may sue for and recover the amount from the bank. The court also holds that after a check has passed into the hands of a bona fide holder, it is not in the power of the drawer to countermand the order of payment. Mr. Chief Justice Scott, in delivering the opinion of the court, says: " This action is upon a check drawn by James H. Ledlie, on the Union National Bank of Chicago, in favor of Under- hill and Gray, and by them endorsed and delivered to the Oceana County Bank, located at Pentwater, in Michigan. The declaration contains a special count upon the check, and also the common money counts. On the trial, plaintiff re- covered a judgment for the amount of the check, with interest, and defendant brings the cause to this court on appeal. " The evidence shows there was no unreasonable delay in presenting the check to defendant for payment, and, notwith- standing it is shown the bank had funds in its possession on deposit subject to check, at the time, belonging to the drawer, in excess of the amount of the check, payment was refused, for the reason the drawer had previously ordered the bank not to pay it. " The facts proven in this case bring it clearly within the rule declared in Munn et al. v. Burch et al., 25 111. 35. The doctrine of that case has been so frequently affirmed in other cases in this court, it is not necessary now to discuss it as a new question. The principle of all the cases in this court on this subject is^ that, when a depositor draws his check on his CH. XXI.] Banking. 339 banker, who has funds to an equal or greater sum than his check, it operates to transfer the sum named to the payee, who may sue for and recover the amount from the bank, and that a transfer of the check carries with it the title to the amount named in the check to each successive holder. After the check has passed to the hands of a bona fide holder it is not in the power of the drawer to countermand the order of payment. The case at bar is controlled by this principle, and we content ourselves by simply making reference to our former decisions, where it is declared. The Chicago Marine & Fire Ins. Co. v. Stanford, 28 111. l68; Bickford v. First Nat. Bank, 42 id. 238; Brown v. Leckie et al., 43 id. 497. "Adhering, as we do, to the doctrine of the cases cited, we are of the opinion the evidence offered to prove facts establish- ing a defense as between the drawer and the drawees of the check was properly rejected." "* The States holding that the drawer can revoke his order at any time before the bank's acceptance of the check, and that the bank is bound by such revocation, are: Massachusetts, Charles River Wat. Bank v. Davis, 100 Mass. 413. Missouri, Albers v. Commercial Bank, 85 Mo. 173, 55 Am. Eep. 355 ; Famous Shoe Co. v. Crosswhite, 51 Mo. App. 55. New York, Lunt V. Bank of North America, 49 Barb. (N. Y.) 221; Schneider v. Irving Bank, 1 Daly (N. Y.) 500, 30 How. Pr. (N. Y.) 190. Ohio, Kahn v. Walton, 46 Ohio St. 195, 20 N. E. Rep. 203. Pennsylvania, German Nat. Bank v. Farm- ers' Deposit Nat. Bank, 118 Pa. St. 294; Saylor v. Bushong, 100 Pa. St. 23, 45 Am.Rep. 353. The Supreme Court, in the case of The German Nat. Bank V. The Farmers' Deposit Nat. Bank, 118 Pa. St. 294, in dis- cussing the question as to the right of the drawer of a check to countermand payment of the same, says: "As I understand the case there are but two principles in- volved, viz: (a) Had the Germania Savings Bank the right to stop payment on the check, and (b) if so, was the right 0* The Union Nat. Bank v. Oceana Co. Bank, 80 111. 212. 340 Checks. [ch. xxi. exercised in time, that is to say, before actual payment? All other material questions in the case are but subdivisions of these. " I presume no one at this day questions the right of the drawer of a check to stop the payment thereof. This is usually done by notice to the bank upon which the check is drawn. If the bank pays after such notice it does so at its peril. The holder of a check has no remedy against a bank upon which a check is drawn for its refusal to pay it. He must look to the drawer. The right to stop payment ceases of course with actual payment." While the rule in Illinois is directly contrary to that laid down by the New York courts, the preponderance of authority sustains the rule that the drawer may at any time before ac- ceptance countermand the payment of his check, and that the bank cannot be held responsible in a suit brought by the payee. The bank can then refuse payment and is not compelled to ascertain the fact that the holder of the check has notice of its withdrawal. A claim by the payee made to the bank that he has had no notice from the drawer of the check that payment has been countermanded, can make no difference. The bank may, after such notice is given by the holder of the check, pay another check drawn by the owner of the deposit. The bank is not a party subject to be brought into the differences which may exist or be the cause of the revocation. The payee, the courts hold, must look to the drawer. The payee of a check, where there has been no revocation, and upon refusal of the bank to pay, must look to the drawer, and where notice has been given that payment has been counter- manded, the rule is strengthened that the payee cannot sue the bank. Where the check has been certified by the bank but before payment has been made, a notice is given to the bank that the check has been revoked, the notice comes too late. The bank, upon certification by the act of certification, charges the account of the drawer with the check, and from that date the bank CH. XXI.] Banking. 341 enters into a new relation with the payee and agrees to pay him the amount so certified. An attachment or garnishment of the funds deposited by the drawer revokes payment or stops payment of all checks until the question is judicially determined. Death revokes payment where the bank has notice before the cheek is presented. This rule works a great hardship in many instances, but the weight of authority sustains it evidently upon the sensible reasoning that the execution and delivery of a cheek is not a payment or a transfer of the funds. It is an order which may be revoked at any time by the drawer of the check, and no reason for the revocation need be given to the bank. A bank cannot safely pay cheeks presented after death. If it did so, it would become involved in lawsuits without number. Therefore, the sensible rule that governs and controls all the property of the deceased at the time of his death is, that all property passes by the law into the hands of deceased's legal representatives, and all unpaid checks are revoked. Checks, acceptance. Where the drawer of a check left the money with a bank to pay the same and it was accepted and retained for that pur- pose, the bank was held liable to pay, without reference to a statutory provision which requires an acceptance of a check to be in writing.^° A bank upon inquiry from maker whether to accept check upon receiving notice by telegram to do so ; and it is done cannot be revoked.^* § 209. Presentment for payment. This subject is treated only, -first, as to the duties of the payee receiving a check in presenting the same for payment; and second, as to the duties of the bank to pay or refuse pay- ment. 55 Gruenther v. Bank of Monroe, 56 Wells v. Telegraph Co., 144 Iowa 90 Neb. 280. 606. 342 Checks. [ch. xxi. This eliminates all persons other than the payee to whom the check is made payable, the drawer (the party who makes the check) and the drawee (the bank that is requested to pay the same). The general rule is that the payee is not bound to present the check for payment on the day of its date or receipt, but may hold the same and present it to the bank for payment at any time prior to the running of the statute of limitations. When presented, if not paid by the bank, it is an evidence of an unsatisfied debt. It has been held that a failure to present a check within a reasonable time (and a reasonable time is one which depends upon the circumstances of each case) or use due diligence (which is a question for the jury) will discharge the endorsers, but not the drawers of the check. The failure by the payee to present the check for payment within a reasonable time does not discharge the debt, but the drawer of the check (it is held) if laches or negligence is shown in presenting the check, may be absolved, at least to the extent of his injury. This introduces the question: What is the drawer's injury? There can be no injury to the drawer if the check, when pre- sented, is paid by the bank. The presumption of law is, that the check when drawn and delivered to the payee, represents a debt which the drawer in- tends to cancel. It is also a presumption of law, that at the time of the execution of the cheek, the drawer has made pro- vision for the payment of the same by placing the money in the bank. And upon what theory of reasoning can it be claimed that by a failure of the payee to present the check within a reasonable time, the drawer is injured ? The drawer has given the check and by depositing the money in the bank has provided for its payment. The money is sup- posed to be set aside for that purpose, and if the payee fails to present his check and draw it, there can be no injury to the drawer. The injury, if any, is one which the payee has brought upon himself by his own negligence, and he is the party who CH. XXI.] Banking. 343 must suffer tke financial loss, if any, which is brought about by his own negligence. While the payee's right of action is against the drawer of the check, if the bank refuses or fails to pay the same, a com- plete defense by the drawer would be to show that the payee failed to use due diligence in presenting the check. The drawer of the check cannot recover damages upon the ground that the payee failed to do a thing, which failure operated as a detriment to him (the payee), because he (the drawer) has suffered no injury. When "A." draws a check to " B." for funds then stand- ing to his credit on the books of the bank, as between " A." and " B.," the funds are supposed to be transferred at once to " B." Thereafter " A." should not draw checks against the money which he has transferred by check to " B." Between the drawer of the check and the bank, there can be no change of relationship as to the funds deposited until the payee presents his check for acceptance or payment. If the payee fails to use due diligence in presentiiig his check and the bank suspends payment and closes its doors, he releases the drawer and must look to the bank for payment. He has " slept upon his rights." °' It is advisable, therefore, in view of the fact that the bank may become insolvent or that the drawer of the check may withdraw the funds from the bank before payment, to present the same at the earliest time possible, which, if done, is a reason- able time and is due diligence. The rule of " due diligence," as stated in a previous chapter, may again be stated here, and is as follows : " Where the payee's check is on a hank which is located in the town or city in which the payee lives, the check should he presented for payment within hanking hours on the day follow- ing the day of its receipt. If the hank upon which the check is drawn is located and doing husiness in a town or city other than the residence or place of husiness of the payee, the check must 6» First Nat. Bank of Charlotte V.Alexander, 84 N. C. 30. 344 Checks. [ch. xxi. he, on the day of its receipt hy the payee or within banking hours on the day following, sent by mail to the drawee or depos- ited for collection with a banker." The payee, having at the earliest time possible, presented the check, cannot suffer injury or loss by his own negligence or lack of diligence. This brings us to the second question as to the duty of the bank to pay or refuse payment of a check. It may be stated that the general rule is, it is the duty of a bank to pay a check which is properly drawn and presented to the bank within banking hours. If the check lacks any of the essential elements and discloses upon its face a suspicion as to its genuineness, and the bank becomes satisfied that its defects are material, it is the duty of the bank to refuse payment and immediately notify the drawer. If the check on presentation is properly drawn and fulfills all the essential requisites, and the drawer has on deposit suffi- cient funds to meet the same, it is the duty of the bank to pay the check, and if it refuses, it will be liable in a suit by the drawer for damage sustained. § 210. Mistake of bank in payment of check. The general rule is, that if a bank honors and pays a check under a mistake of fact, it may sue for recovery of the money, but if it pay a check under a mistake of law, the money cannot be recovered. (See Bank v. Eefund and Brookradge Co., 132 Iowa 248.) In the case of Eedington v. Woods, 45 Cal. 406, the courts hold that where the drawee pays to an innocent holder a check which has been fraudulently altered in amount after it left the hands of the drawer, he will be entitled to recover back from the person to whom it was paid, the excess over the true amount of the check, unless the alteration is made in suck a manner that on the face of the paper there appears enough evidence to excite suspicion of fraud, or the drawee has information whick would lead a prudent person to suspect that the check had been altered. CH. XXI.] Banking. 345 The court, in discussing this question, says : " When, therefore, the holder presents a check or bill for payment, the title to which he derives through prior endorse- ments, he undertakes with the drawee that the endorsements are genuine, and that he has a valid title, and consequently, a right to receive the money. If it afterward transpires that one or more of the endorsements are forged, the drawee will be entitled to recover back the money from the person to whom he paid it, on the ground that the latter had no title to the bill or check, and the payment was, therefore, made without consideration, under an innocent mistake. But the endorsement of the holder receiving payment can have, at most, no greater legal significance than this. It implies, at best, only an undertaking that he has a valid title to the bill or check, and consequently a right to receive payment — an implication which the law raises without the endorsement. But the endorsement, proprio vigore, imposes upon him no other or greater liability to refund money paid upon an altered check than would attach to him without the endorsement. " In other words, the endorsement does not, of itself, import an undertaking that the check has not been altered, and in proceedings to recover back the amount paid on an altered check, the endorsement could not be made the foundation of the action, as importing a promise to refund the money, in case it should afterward appear that the amount in the body of the check had been fraudulently altered. In such cases the right of recovery does not rest, in whole or in part, upon the endorsement, as importing such a promise, but upon the fact that the money was paid by the drawee without considera- tion, under an innocent mistake. The authorities in support of this view of the question are numerous and uniform,' and we have been referred to none to the contrary." " Where a bank pays money by mistake to the payee of the check which the bank has been instructed by the drawer not to pay, and there is no suggestion that the check was given to the payee as a gratuity or merely for his accommodation, the bank must first tender the check to the payee before bring- 346 Checks. [ch. xxi. ing an action to recover the money so paid." (See Merchants' Bank v. Superior Candy and Cracker Co., 41 Wash. 653.) The Supreme Court of the State of Massachusetts, in the case of the iNorthamption ITational Bank v. Charles H. Smith, 169 Mass. 281, in discussing this subject, says: "This action is brought to recover money paid by mistake by the plaintiff to the defendant, upon a check which the plaintiff had been instructed by the drawer not to pay. The statement of facts is imperfect, but it is said in the plaintiff's brief that the check was drawn upon the plaintiff by one Herbert in favor of the defendant, and given by him to the defendant. There is no suggestion that it was so given as a gratuity or merely for the defendant's accommodation, and we assume that it was not so given. Payment had once been demanded and refused, but on a second presentation of the check several weeks later it was paid through inadvertence. The plaintiff demanded a return of the money without tendering the check to the defendant, and there was no such tender until the day of the trial. The only question which has been presented to us is, whether it was necessary to tender the check before bringing the action, and we think it was. " It has often been held, that, when one wishes to rescind a contract and recover what he has paid under it, he must first restore whatever of value he has received. (Snow v. Alley, 144 Mass. 546, 551; Bartlett v. Drake, 100 Mass. 174, 176.) The reasons for this rule are fully applicable to the present case. The check, if impaid, belonged to the defendant and would be useful and valuable to him to be used in connection with his own testimony in establishing a claim against Herbert. It has been held that anything absolutely worthless, like a coun- terfeit bill, need not be returned. (Brewster v. Burnett, 125 Mass. 68; Kent v. Bornstein, 12 Allen (Mass.) 342; Snow v. Alley, 144 Mass. 546, 551; Reed v. Boston Machine Co., 141 Mass. 454.) But the check in the present case was not of that character. If upon its presentation payment had been refused, the plaintiff would have had no right to retain possession of it, and such retention against the defendant's will would have OH. XXI.] Banking. 347 been a conversion. And if after a payment had been made through inadvertence or mistake, the plaintiff sought to enforce a return of the money, it was its duty first to tender the check to the defendant. It would be of use to him and he was entitled to have it before returning the money. " The case of Evans v. Gale, 21 IST. H. 240, is much in point, and the doctrine of this decision was affirmed in Cook v. Gil- man, 34 N. H. 556. The same doctrine" is implied in Ooolidge V. Brigham, 1 Met. 547, 550 ; Merchants' National Bank v. National Eagle Bank, 101 Mass. 281, 285 ; Estabrook v. Swett, 116 Mass. 303, and Bassett v. Brown, 105 Mass. 551, 558. See also Otisfield v. Mayberry, 63 Me. 197 ; Park v. McDaniels, 37 Vt. 594." " In an action by one bank against another to recover back the amount of a check paid through the clearing-house under a mistake of fact caused by the fraud of the drawer, the measure of damages is, the difference between the amount of the check and the amount for which he was entitled to draw, and the fact that, where there is not enough money on deposit to pay a check in full, the ordinary custom is to return the check, is immaterial." °* Where a bank pays a check under a mistake of law, i. e., in ignorance of the law, but with a full knowledge of the facts, it cannot be recovered back. The Supreme Court of the State of Missouri, in the case of The Mutual Savings Institution v. Enslin, 46 Mo. 200, says : " Now, if the plaintiffs paid over to the defendant the pro- ceeds of that note " (check) " under a mistake of law merely, and not under a mistake of fact, they are not entitled to recover back the money so paid. In assuming to judge of the legal rights of the rival claimants, without referring the matter to the courts and paying according to their view of those legal rights, they acted at their peril and must submit to the conse- quences. It is a well-settled principle that money paid under mistake or ignorance of the law, but with a knowleHge of the BB Merchants' Bank v. Bank of the Commonwealth, 139 Mass. 513. 348 Checks. [ch. xxi. facts or the means of such knowledge, cannot be recovered back from the party to whom it was paid. 2 Greenl. Ev., § 123; Chit. Cont. (7th ed.), 626, 627. And see the authori- ties cited in note 1, p. 628 ; Tyler v. Smith, 18 B. Mon. 793 ; City of Marietta v. Slocomb, 6 Ohio St. 471." " When payment is made to the holder of paper who ha6^ come into possession of it without any fault on his part, and his situation would be rendered worse if compelled to refund than it was before receiving payment, the money cannot be recovered from him." °° " To justify the payee in holding and retaining the money the bank alone must have been negligent." The above rule is sustained by the States in the following order : Illinois, Quincy First Ifational Bank v. Eicker, 71 111. 439, 22 Am. St. Eep. 104; Kentucky, Georgetown Deposit Bank V. Fayette National Bank, 90 Ky. 10, 11 Ky. L. Kep. 803, 13 S. W. 339, 7 L. E. A. 849; Louisiana, Levy v. Bank of America, 24 La. Ann. 220, 13 Am, Eep. 124; De Feriet v. Bank of America, 23 La. Ann. 310, 8 Am. Eep. 597 ; McKleroy V. Southern Bank, 14 La. Ann. 458, 74 Am. Dec. 438; Smith V. Mechanics', Etc., Bank, 6 La. Ann. 610; Maine, Neal v. Coburn, 92 Me. 139, 42 Atl. 348, 69 Am. St. Eep. 495 ; Belknap V. Davis, 19 Me. 455; Maryland, Commercial, Etc., ITational Bank v. Baltimore First JSTational Bank, 30 Md. 11, 96 Am. Dec. 554; Massachusetts, Dedham National Bank v. Everett- National Bank, 177 Mass. 392, 59 N. E. 62, 83 Am. St. Eep. 286 ; Danvers First National Bank v. Salem First National Bank, 151 Mass. 280, 24 N. E. 44, 21 Am. St. Eep. 450; Welch V. Goodwin, 123 Mass. 71, 25 Am. St. Eep. 24 ; National Bank of North America v. Banks, 106 Mass. 441, 8 Am. Eep. 349; Gloucester Bank v. Salem Bank, 17 Mass. 33; Young^ V. Adams, 6 Mass. 182; Belknap v. National Bank of North America, 100 Mass. 376, 97 Am. Dec. 105; Minnesota, G«r- B» Cyclopedia of Law and Pro- Trust Co. v. Huff, 63 Wash. 225- cedure, vol. 5, p. 546, and author- See 46 Wash. 657 ; 27 Okla. 824. ities there cited; Spokane & Eastern CH. XXI.] Banking. 349 mania Bank v. Boutell, 60 Minn. 189, 62 N. W. 327, 51 Am, St. Eep. 519, 27 L. K. A. 635. But where the bank pays to a bona fide holder by mistake, a forged check, it cannot recover from the- innocent holder. Pennington Co. Bank v. Moorehead, 110 Minn. 263; New Hampshire, Star F. Ins. Co. v. New Hampshire National Bank, 60 N. H. 442 ; New York, National Park Bank v. New York Ninth National Bank, 46 N. Y. 77, 7 Am. Eep. 310 ; Goddard v. Merchants' Bank, 4 N. Y. 147 ; Bank of Commerce v. Union Bank, 3 Id. 230 ; Canal Bank v. Albany Bank, 1 Hill (N. Y.) 287; Ohio, Ellis v. Ohio Lifo Ins. Co., 4 Ohio St. 628, 64 Am. Dec. 610; Pennsylvania, Xevy V. United States Bank, 4 Dallas (U. S.) 234, 1 L. Ed. 814, 1 Binn. (Pa.) 27; McNealy Co. v. Bank of America, 221 Pa. 399 ; Cunningham v. First National Bank of Indiana, 219 Pa. 310; Texas, Eounant v. San Antonio National Bank, 63 Tex. 610 ; Vermont, St. Albans Bank v. Farmers', etc.. Bank, 110 Vt. 141, 33 Am. Dec. 188; United States, United States Bank v. Georgia Bank, 10 Wheat. (U. S.) 333, 6 L. Ed. 334; United States v. New York National Park Bank, 6 Fed. Eep. 852. The rule is that, if " neither party has been negligent or both have been, then the bank cannot recover the money." "' Right of hank to recover amount paid on check under mistaken belief that there were funds to meet it — General rule. In the asbsence of fraud the payment of a check or a note by a bank upon which it is drawn or at which it is payable, under a mistaken belief that the drawer of the check or maker of the note has sufiicient funds to his credit to pay it, can/not ie recovered hack. This general rule is upheld upon another rule which is estab- lished that a bank is required for its own safety and protection to know at ail times the balance to the credit of each depositor, and if they accept and pay checks without first examining the eo Leavenworth First Nat. Bank v. Tappan, 6 Kan. 456, 7 Am. Eep. 568. 350 Checks. [ch. xxi. depositor's account to detennine his balance, they do so at their own risk. The b^nk in all such cases must look to the customer for rectification and not to the party receiving the money on the check." Also in Boylston National Bank v. Kichardson, 101 Mass. 287, where the teller was not misled, and had no reason to believe that the drawer's account " was other than what it was " and paid the check without examining the drawer's account. Held, there was nothing in the transaction to establish a mis- take of facts, " but only that of laches." "^ § 211. Forged checks, bank paying. The rule is settled that a bank which pays a check on a forged endorsement has no rights against the drawer. The discovery by the bank of its error makes no difference. The banker is bound to know the handwriting of its customer. If he pays a check which has been forged, the mistake is his. The rule is so well established, it seems almost unnecessary to cite cases in support of it. The question is one of import- ance, however, and has so frequently been discussed by the courts of the various States it is deemed advisable to here give the citation of cases treating upon this subject as presented by the Cyclopedia of Law and Procedure, vol. 5, page 548 : California,"* Connecticut," District of Columbia^*" Georgia," Illinois,'^ Iowa,** Kentucky,** Maryland,''" Massachusetts," 61 First Nat. Bank v. Devinish, 15 etc., Co., 88 Ga. 252, 14 S. E. 577; Colo. 229, 22 Am. St. Rep. 394, 25 Atlanta Nat. Bank v. Burke, 81 Ga. Pac. Rep. 177; Riverside Bank v. 597, 7 S. E. 738, 2 L. R. A. 96. First Nat. Bank, 20 C. C. A. 181, 38 «' Chicago First Nat. Bank v. U. S. App. 674, 74 Fed. Rep. 276. Northwestern Nat. Bank, 152 111. 62 Chambers v. Miller, 13 C. B. 296, 38 N. E. 739, 43 Am. St. Rep. N. S. 125; Penacook Savings Bank 247, 26 L. R. A. 289. V. Hubbard, 58 N. H. 167 ; Citizens' os German Sav. Bank v. Citizens' Bank v. Schwarzschild et al., 23 L. Nat. Bank, 101 Iowa 530, 70 N. W. R. A. (N. S.) 1092. 769, 63 Am. St. Rep. 399. esHatton v. Holmes, 97 Cal. 208, «» Henderson Trust Co. v. Ragan, 31 Pac. Rep. 1131. 21 Ky. L. Rep. 601, 52 S. W. 848; e< Bristol Knife Co. v. Hartford Rice v. Citizens' Nat. Bank, 21 Ky. First Nat. Bank, 41 Conn. 421, 19 L. Rep. 346, 51 S. W. 454. Am. Rep. 517. 'o Williams v. Drexel, 14 Md. 566. 6B Millard v. National Bank of ^i Belknap v. National Bank of Republic, 3 MacArthur D. C. 54. North America, 100 Mass. 376, 97 66 Freeman v. Savannah Bank, Am. Bee. 105. CH. XXI.] Banking, 351 Missouri," New York," Tennessee/* Utah," United States,'* England." Where a bank pays a check upon an endorsement made not by the true owner but by a person having the same name as the true owner, it must, when called upon, make good the amount to (the drawer) or the true owner. In the ease of Graves v. The American Exch. Bank, 17 N. Y. 203, in discussing this question, the court holds that the bank is bound to ascertain that the person to whom it makes payment is the genuine payee or is authorized by him to receive it. The opinion of the court, which was written by Comstock, J., though confirmed by the judges, is dissented to by Justice Eoosevelt. The dissenting opinion is of sufficient importance bearing upon this question to justify a full citation : " There were two persons of the name of Charles E. Graves. The drawer of the bill in question directed the American Exchange Bank to pay $240 to the order of Charles F. Graves. ' Fredonia, N. Y.,' was the designated residence of the drawer, and ' New York ' that of the drawees. The payee had no designation but his name; none at all events was given by the drawer. The bank in good faith paid the draft to a per- son presenting it with the endorsement of Charles F. Graves, a genuine endorsement, but not the endorsement, it is said, of the genuine Graves. Which of the two, under these cir- '2 J. M. Houston Grocery Co. v. 36 Am. St. Eep. 81, 18 L. R. A. Farmers' Bank, 71 Mo.. App. 132. 663; Pickle v. Muse, 88 Tenn. 380, '3 Shipman v. State Bank, 126 N. 12 S. W. 919, 17 Am. St. Eep. 900, Y. 318, 27 N. E. 371, 22 Am. St. Rep. 7 L. R. A. 93, 115 Tenn. 64. 821, 12 L. R. A. 791; Citizens' Nat. 's Brixen v. Deseret Nat. Bank, 5 Bank v. Importers', etc.. Bank, 119 Utah 504, 18 Pac. Eep. 43. N. Y. 195, 23 N. E. 540 ; Corn Ex- 76 Washington First Nat. Bank v. change Bank v. Nassau Bank, 91 N. Whitman, 94 U. S. 343, 24 L. Ed. Y. 74, 43 Am. Rep. 655; Thompson 229; United States v. National Ex- V. Bank of British North America, change Bank, 45 Fed. Eep. 163. 82 N. Y. 1 ; iEtna Nat. Bank v. New rr Roberts v. Tucker, 16 Q. B. 560, York City Fourth Nat. Bank, 46 N. 15 Jur. 987, 20 L. J. Q. B. 270, 71 Y. 82, 7 Am. Rep. 314; Morgan v. E. C. L. 560; Beeman v. Duck, 12 State Bank, 11 N. Y. 404. L. J. Exch. 198, 11 M. & W. 251 -, ■ '* Jackson v. McMinnville Nat. Mead v. Young, 4 T. E. 28, 2 Eev. Bank, 92 Tenn. 154, 20 S. W. 802, Eep. 314. 352 Checks. [ch, xxi. cumstances, should bear the loss — the drawer who carelessly omitted all designation, or the drawees who innocently paid the wrong person in consequence of such omission ? As between these parties, the loss, it seems to me, should fall on the former. 'Not do I perceive that the payee, the quasi-assignee of the drawer, occupies any better position than his assignor. Hurd was his debtor, and bought the draft to remit in payment of the debt. Hurd directed the form. He did nothing to sup- ply the drawer's omission, but aggravated the error by another of his own; he mailed the draft to Charles F. Graves, La Salle, Hlinois, intending it, he says, for Charles F. Graves, Mendota, Illinois, the two places being only fifteen miles apart. He candidly admits he ' made a mistake in directing the let- ter, and that he should have directed it to Mendota instead of La Salle.' He thus by his own act put the draft into the hands of the La Salle Graves, and held out the La Salle Graves as the real payee. Can he complain, then, that the Exchange Bank recognized his endorsement? Must they pay twice because he, after ' full warning,' as he admits, chose to be careless of his own interests ? Or would it not be more just that he himself should pay the Mendota Graves, to whom he confessedly was indebted, and whose debt confessedly was not discharged by this remittance to the wrong person, and who swears that ' he never had possession of the draft, and never authorized any one to endorse his name upon it, and never authorized any one to take possession of it.' How, too, I would ask, with such a statement sworn to by him on the trial, can he maintain an action of trover, resting his complaint on the averment that he had been ' in possession ' as the legal owner? " The judgment should be reversed." Where a bank pays a check the burden of proof is on it to show that the payment was to the person named in the check, or that the depositor was guilty of negligence precluding him from recovery for payment to the wrong person, and the ordinary rule as established is, " that a banker on whom a check is drawn must ascertain at his peril the identity of the person named in it as payee< CH. XXI.] Banking. 353 It is only when he is misled by some negligence or other fault of the drawer that he can set up his own mistake in this par- ticular against the drawer." '* The drawer of a check is not required to identify the payee to the bank, but in the execution of a check to a particular per- son named therein where there are two persons in the same city , or town having the same name and the drawer of the cheek having knowledge of the fact, it would clearly be the duty of the drawer to designate to the bank in some way upon the face of the check which one of the persons was named in the check as being entitled to its possession. This degree of diligence, care, and protection of his own money due to him by the bank, considering the relation of the parties, and the established usages of business, would certainly require him to give to the bank such protection as he would exercise in his own behalf; and being in a position to do so and failing to do so, and the bank thereby paying without warning to its prejudice, his acts should be charged as negligence relieving the bank of liability. The Supreme Court of the State of California, in the case of People V. Bendit, 111 Cal. 274, defines the crime of forgery, and says : " When the crime is charged to be the false making of a writing, there must be the making of a writing which falsely purports to be the writing of another. The falsity must be in the writing itself — in the manuscript. A false statement of fact in the body of the instrument, or a false assertion of authority to write another's name or to sign his name as agent, by which a person is deceived and defrauded, is not forgery. " There must be a design to pass as the genuine writing of another person that which is not the writing of such other per- 78 National Bank of North America v. Everett .Bank, 177 Mass. 392, 3&5; V. Bangs, 106 Mass. 441, 8 Am. Rep. 59 N. E. 62, 83 Am. St. Eep. 286; 349; Danvers Bank v. Salem Bank, Welch v. German American Bank, 151 Mags. 280, 24 N. E. 44, 21 Am. 73 N. Y. 424, 29 Am. Eep. 175; Ship- St. Rep. 450; Greenfield Savings man v. Bank of State of N. Y., 126 Bank v. Stowell, 123 Mass. 196, 25 N. Y. 318, 27 N. B. 371. Am. St. Rep. 67 ; Dedham Nat. Bank 23 354 Checks. [ch, xxi. son. The instrument must fraudulently purport to be what it is not." '« § 212. Bight of bank against presenter and owner of forged paper. " If the presenter owned the paper at the time of its payment, the money must be refunded on discovery of the forgery, pro- vided his condition has not in the meantime changed so as to render a payment unjust." *° In the case of the Star Fire Ins. Co. v. New Hampshire Nat. Bank, 60 N. H. 442, the court says that " the drawee, who, with- out notice of any forgery, has paid a draft to the holder to whom it was negotiated, by the forged endorsement of the payee's name, may recover of the holder the money paid upon the draft." In the case of Birmingham National Bank v. Bradley, lOS Ala. 109, in an action to recover money paid on a forged cheek, in the syllabus of said case, the reporter says : " The payee of a check who endorses it, and receives the money thereon, guarantees the genuineness of said check to the endorsee, and as to the payee endorser the endorsee is under no obligation to discover its forgery ; and if the check is forged, the endorsee may recover from such endorser the money paid him in an action of assumpsit. * * * " Where a forged check has been forwarded by an endorsee bank to the drawee bank for collection and the latter bank credits the forwarding bank with the amount of such check, without actually remitting the money, on discovering the for- gery, the drawee bank can charge said amount back to the for- warding bank." The rule formerly prevailing that the banker must know the drawer's signature, and if it pays a forged check, must bear the loss as between it and the holder, is modified by the courts, and the rule which is now accepted is very clearly stated in the case of Danvers Bank v. Salem Bank, 151 Mass. 280. 79 People V. Cole, 130 Cal. 13, 109 so Cyclopedia of Law and Pro- Minn. 440, 124 N. W. 286. cedure, vol. 5, p. 549. CH. XXI.] Banking. 355 The court, in defining the rule in this case, says : " In the case at bar, the plaintiff seeks to recover from the defendant the amount of a forged check in the name of one of the plaintiff's customers, for which it had given the defend- ant credit as money. " In the usual course of business, if a cheek purporting to be signed by one of its depositors is paid by a bank to one who, finding it in circulation or receiving it from the payee by endorsement, took it in good faith for value, the money cannot be recovered back on the discovery that the check is a forgery. It is presumed that the bank knows the signatures of its own customers, and therefore is not entitled to the benefit of the rule which in cases of forgery permits a party to recover back money paid under a mistake of fact as to the character of the instrument by which the fraud has been effected. This pre- sumption is conclusive only when the party receiving the money has in no way contributed to the success of the fraud, or the mistake of fact under which the payment has been made. In the absence of actual fault on the part of the drawee, his constructive fault in not knowing the signature of the drawer and detecting the forgery will not preclude his recovery from one who took the check under circumstances of suspicion with- out proper precaution or whose conduct has been such as to mislead the drawee or induce him to pay the check without the usual security against fraud. National Bank of iN'orth Amer- ica V. Bangs, 106 Mass. 451, 445. Where a loss which must be borne by one of two parties alike innocent of the forgery can be traced to the neglect or fault of either, it is reasonable that it should be borne by him, even if innocent of any inten- tional fraud, through whose means it has succeeded. Glouces- ter Bank v. Salem Bank, 1*1 Mass. 33. To entitle the holder to retain money obtained by a forgery, he should be able to maintain that the whole responsibility of determining the validity of the signature was placed upon the drawee, and that the vigilance of the drawee was not lessened and that he was not lulled into a false security by any disregard of duty on his own part, or by the failure of any precautions which from 356 Checks. [ch. Tnrr his implied assertion in presenting the cheek as a sufficient voucher the drawee had a right to believe he had taken. Ellis V. Ohio Ins. & Trust Co., 4 Ohio St. 628; Eouvant v. San Antonio Nat. Bank, 63 Tex. 610; First Nat. Bank of Quincy V. Eicker, 71 111. 439." § 213. Alteration after signing and uttering. Where the drawer of the check, in the writing of the same, so carelessly writes the amount intended to be withdrawn, leav- ing a blank space preceding the writing which may be used to raise the sum from that written, and utters and circulates the same in this form, and it is, after passi'ng from the maker's hands, altered and presented to the bank for payment, the bank cannot be held responsible unless it was possible to discover the alteration.'^ The rule, as laid down in the case of National Bank v. Nolt- ing, 26 S. E. 826, is stated as follows: " The depositor is only charged with ordinary care." The court, in determining the character of negligence that would impose the loss upon the maker, illustrates it by the case of Young v. Grote, 4 Bing. 253. The facts are stated as follows : " Where the depositor, going away from home, left with his wife several checks which he had signed in blank, and which she was to fill up according to her needs, she filled up one for ' fifty-two pounds, two shillings,' but she began the word ' fifty ' with a small letter, and in the middle of a blank line. In writing the marginal figures, likewise, she left a considerable space between the ' pound mark ' and the fig- ures ' 52.' She gave the check in this form to her husband's clerk, to get the money upon it." The court, in commenting upon the drawing of the check, says, " Here the check had been so carelessly written that the forgery was made the simplest matter in the world, and the court held that the loss must rest with the drawer." siMahaiwe Bank v. Douglas, 31 Conn. 170; Belknap v. Bank of North America, 100 Mass. 376. CH. XXI.] Banking. 357 The rule as between the bank and the depositor or maker of the check may be stated as follows : If the check is so carelessly drawn by the maker as to admit of alterations, which cannot be detected by the bank's paying teller, whose duty it is to scrutinize all checks, the drawer of the check must suffer the loss. On the other hand, if the check is carefully drawn, and the usual requirements of the law are complied with, as to the essentials of form, etc., and the bank pays such a check which shows erasures, interlineations or alterations, which evidently changes the original in any material matter, and which could be observed by a careful examination of the instrument, and a loss occurs to the maker by such alteration and through payment thereof by the bank, it must stand the loss. The alteration of the written or printed portion of the check is material, while the change of the figures designating the sum of the check to be withdrawn may not be. The amount of the check or sum to be withdrawn, when written in a legi- ble hand, if altered and changed, should be refused payment until explained. The written amount controls the action and decision of the paying teller and not the amount denoted by the figures. The case of the City Nat. Bank of Fort Worth v. Stout, 61 Tex. 567, is a clear illustration of the rule that the writing of the amount controls and determines the action of the bank paying the check. The facts in this case are stated as follows : " That on the 21st day of September, 1881, plaintiff went into defendant's banking house and requested defendant to sell him certain exchange on the city of New York to the amount of $500, and to make its draft or biU of exchange on some bank in New York for the $500, payable to one Frank Crandall, who was plaintiff's son-in-law; that the bank then, through its cashier, S. W. Lomax, drew its draft as follows: 358 Checks. [ch. xxi. " $500. •' THE CITY NATIONAL BANK OF FOET WORTH, "(Original.) Fort Worth, Texas, Sept. 21, 1881. " Pay to the order of Frank Crandall five thousand dollars. "S. W. Lomax, Cashier. | "To Donnell, Lawson & Simpson, New York. "No. 875." and delivered the same to plaintiff ; that the figures on the margin of the draft were correct ($500) at the time the draft was made, but had afterward been changed by the addition thereto of another figure 0, by someone unknown to defendant, and that the bankers, Donnell, Lawson & Simpson, upon whom said draft was drawn, had in good faith cashed the same, believ- ing it to be a bona fide draft for the sum of $5,000 ; that defend- ant did not discover the mistake until October 22, 1881, long after the draft had been paid to plaintiff and his assignees for the full amount of $5,000, and upon settlement with said Donnell, Lawson & Simpson. That defendant immediately upon discovering the error, and upon ascertaining that Donnell, Lawson & Simpson had cashed the draft for the sum of $5,000, demanded of plaintiff an explanation thereof, and that plaintiff repay to defendant the sum of $4,500, which it alleged defendant by mistake paid and caused to be paid to him and to Crandall, but that neither plaintiff nor Crandall would explain to defendant their fraudu- lent action, and they both refused to repay to defendant the sum of $4,500 or any part thereof; but insisted upon their right to take advantage of the mistake." It will be observed that the draft was drawn showing the amount of the same as written in the body of the check to be " five thousand dollars." The writing was not changed, but the figures which were inserted, and correctly, for $500, were raised by the addition thereto of another figure 0. The bank set up as a defense to the suit " that plaintiff <3H. XXI.] Banking. 359 purchased the $5,000 draft; that plainti£E and his payees received the benefit of the same, and that plaintiff thereby became liable and promised to pay in the sum of $4,500 balance." In disposing of the defense and the case the court says : " The mistake in the amount for which the draft was drawn was made by the cashier of the bank, and it does not appear that the appellee had any notice whatever of the mistake when he handed back the draft to the cashier with request that he would inclose it in an envelope, direct it to Crandall, and deposit it in the post-office with the bank's mail. The appellee received no benefit from the mistake, and however fradulent may have been the conduct of Crandall in receiving $5,000 on the draft, which he most probably knew was intended to enable him to receive $500 only, yet the mere fact that he was the son-in-law of Stout, to whom Stout intended to make a present of $500, could not render Stout liable to the appellant for an injury which resulted from its own want of due care and the fraud of another." If it were shown that Stout knew of the mistake before he caused the draft to be mailed to Crandall, a different question would arise. It is not shown by this case that the bank paying the draft observed the raising of the figures from $500 to that of $5,000, though if this fact had been shown it would not evidently have changed the court's holding; but if the writing, which is the material part of the instrument, is changed, the drawee bank paying the same, when such change or alteration is discernible, must stand the loss. § 214. Bight of possession to paid checks. The question of the right to possession of paid checks may become one of importance, arising when paid by the bank, and when its possession becomes necessary as an item or document to be used in evidence. In matters arising between the bank and the drawer tke 360 Checks. [ch. xxi. bank is entitled to possession after payment. Proceeding upon the fact that a check is an order, and that it is always drawn upon a bank, and is in the nature of a request or direction for the payment of a named sum of money, which is a d^bt owing by the bank to the drawer, the bank, upon payment of the check, is entitled to retain perpetual possession of the same. The right of possession by the bank to a paid check is based upon the principles of law which are recognized by the law merchant, which consists of certain principles of equity and usages of trade which general convenience and common sense of right has established. The common-sense view is that the bank, being a debtor, when it pays out its funds upon an order, which may be in the form of a letter or telegram, or an adopted form of instrument prepared by the bank, and called a check, it is entitled to retain possession of the instrument as its evidence that a specified sum of money owing by it to the drawer was paid. The universal rule of law is that when a debtor pays a debt, upon an order addressed to him directing payment, he is enti- tled to retain perpetual possession of the instrument as an evi- dence of payment. Mr. Wigmore, on evidence, says : " The payee of money naturally leaves behind him in the hands of the payor some document by way of receipt or evidence of payment.*^ § 215. Present rule. By custom the rule is established that upon demand by the drawer made upon the bank it must deliver over to him all his paid checks. This rule has been established upon the hypothesis that the bank is the agent of the depositor, holding his funds for him as a trustee. Upon this theory the drawer may become entitled to possession of the checks. But upon the theory now so well established by the courts, that the bank holding commercial deposits is a debtor to the depositor, it 82 Wigmore on Evidence, vol. 1, § 156. OH. XXI.] Banking. 361 cannot be compelled to surrender its best evidence (in pos- session) of the fact that it has paid its debt. The element or purpose for which the check is given, as between the drawer and payee, cannot in any way arise as affecting the right of the bank to the possession of the check. The check is the instrument placed in the hands of the payee to be used by him for the purpose of withdrawing from the bank the money intended to be transferred to him, or the lawful holder, and after payment his right of possession to the check passes to the bank. § 216. Eqiiitable and safe rule. When a deposit of money is made in a commercial bank, the relationship existing and established by law between the parties is one of debtor and creditor. A pass-book in the possession of a depositor, showing a bal- ance in his favor, is prima facie evidence of the debt of the bank to the owner of the book. At stated periods the bank noti- fies the depositor to bring in or deliver to the bank his book for the purpose of balancing the same, called " balancisg the pass-book." The drawer's checks which have been paid are charged to his account and a balance is struck. The transaction then becomes, if all the items are settled between the parties, an account stated. At the time of balancing the pass-book, and settlement, the drawer of the checks should be required, within a reasonable time, to make an examination of all checks charged up against him, and if any are forged or altered the declaration or fact should, within such reasonable time, and in the presence of the bank's agent, be pointed out to the bank, otherwise the drawer thereafter should be estopped from alleging a forgery. After such examination of the checks they should be sealed and placed on file in the vaults of the bank as canceled vouchers of the drawer, for the purpose of evidence, should they be required, in matters arising between the maker and the payee. The establishment of this rule, which the bank may enforce by a by-law, would forever settle the question as to when or 362 Checks. [ch. xxi. within what period of time a forged or altered check could be declared a forgery and sued upon. The present rule fixing the time when a suit may he brought is that if the drawer, upon discovery, give prompt notice, not heing himself in fault, no length of time will bar the action to recover.*' As to T^hat is a reasonable time in which notice must be given, the Supreme Court, in the case of Third National Bank of St. Louis V. Allen et al., says : " The accepted rule is that the payor must be allowed a reasonable time to detect the for- gery and demand restitution; what will be a reasonable time will greatly depend on the circumstances of each particular the • same rule holds when the written endorsement appears unrestricted. As a matter of fact it may be reasonably inferred from the course of dealing between the parties that the instrument is taken by the bank not as a purchase, but for collection simply. Where the bank gives the depositor credit for the amount of a negotiable instrument endorsed to it, the giving of credit is not conclusive evidence that the bank' had purchased the paper and was not a mere bailee thereof. The authorities hold that where a depositor is given credit upon checks, drafts, and negotiable instruments, endorsed to the bank for collection and he is allowed to draw checks against the same, but where such collections as are not paid and are deducted from the next deposit, such a course of dealing stamps the transaction with reference to the title to instruments so endorsed, as being unmistakably a bailment for collection simply and no greater title is vested in the bank.^* If, by the nature of the transaction, the bank becomes respon- sible to the depositor for the amount of the collection, the title of the paper vests in the bank. In the case of Gibson v. City of Erie, 196 Pa. St. 7, the ovmer of municipal bonds who made a special deposit of them with the bank, which bank was the agent of the municipality, it is held, he does not lose his title thereto by reason of the bank collecting and paying over to him the proceeds of the interest coupons, and where the bank failed after using the 13 Armour Packing Co. v Davis, Butchers & Drovers' Bank v. Hub- Receiver, 118 N. C. 548; National bell, 117 N. Y. 384. CH. XXXVIII.J Banking. 493 money deposited with it by the city for the payment of the principal, held, that the owner is not estopped from recovery against the municipality. § 266. Form of indorsement controls title to collections. If the owner of paper desires to retain the title to the col- lection, he should place a restrictive endorsement upon it. Such an endorsement would read " endorsed for collection." This kind of an endorsement destroys the negotiability of the paper. The Supreme Court of the United States, in the case of The Commercial Bank of Pennsylvania v. Armstrong, 148 U. S. 50, says: " The words ' for collection ' evidently had a meaning. That meaning was intended to limit the effect which would have been given to the endorsement without them and warned the party that contrary to the purpose of a general or blank endorse- meiit, this was not intended to transfer the ownership of the note or its proceeds." And in White v. ISTational Bank, 102 U. S. 658-661, where the endorsement was " for account," the same justice, speaking of the endorsement, said : " It does not purport to transfer the title of the paper or the ownership of the money when received. The plaintiff then, as principal, could have control of the paper at any time before its payment and this control, extended to such time as the money was received by its agent." The court here cites: 117 N". Y. 384; 148 Mass. 553; 151 Mass. 413 ; 14 S. W. 411 ; 76 Ind. 561. Where the paper is controlled by such a restrictive endorse- ment the courts emphatically hold that it does not transfer the title of the paper or the ownership of the money when received. In the absence of a special agreement the bank is not a holder for value.^* Sustaining the doctrine that a collection made by a bank upon paper endorsed to it by restrictive endorsement cannot 1* Phoenix v. Bonsor, 38 Pa. Sup. Ct. 275. 494 Collections by Banks. [ch. xxxviii> place the money so collected in the general funds of the bank, but must retain the same as previously stated as a special deposit or collection for the benefit of the owner." Where a negotiable instrument, then, is endorsed to a ianh for collection and a restrictive endorsement is placed upon the paper, the hank does not become the owner of the paper, hut receives the same for the purpose of collection only. Where an instrument is in the following language: " Pay S. V. White or order, for account Miner's IfationaL Bank, Georgetown, Colorado. " J. L. BEOWNELL, President." WhicJi directs that the proceeds when collected shall be paid to a certain person, does not pass the title. The Supreme Court of the United States, in the case of White V. National Bank, 102 U. S. 658, says : " The language of the endorsement is without ambiguity and. needs no explanation either by parole proof or by resort to usage. The plain meaning of it is, that the acceptor of the draft is to pay to the endorsee for the use of the endorser. Th& endorsee is to receive it on account of the endorser. It does not purport to transfer the title of the paper or the ownership- of the money when received." The Appellate Court of the State of Illinois, in the case of Fawsett v. National Life Ins. Co. of United States, 5 111. App. 272, where an instrument endorsed : " Pay to the Second National Bank of Monmouth, for collection, for account of George F. Harding, executor of Abner C. Harding, deceased. "A. F. FAWSETT." Held, that where a note is endorsed in a form showing an intention to pass all interest in the note, such endorsement imports a consideration, and wherever that is the case the property in the instrument will be deemed to have passed abso- lutely to the assignee. IS Evansville Bank v. German American Bank, 155 U. S. 556. CH. xxxviii.J Banking. 495 And where a check is presented by a customer of a bank and. is endorsed and he receives full credit for the amount of the check and is allowed by the bank to immediately check against the deposit to the full credit given, it is intended as a purchase of the check." . Where a check, drawn by a third person, is deposited in a bank by a customer in the ordinary course of business and is accepted and deposited as money the title passes to the bank.^^ A national bank may take an absolute assignment of a claim for collection and agree to pay the proceeds to another. The transfer in such case passes the legal title to the bank and it may collect.^' But neither the deposit of the check nor the entry of the deposit on the books of the depositor, or the failure to collect, make the check the property of the bank unless it was so intended.^' § 267. Blank indorsement. It may be stated that the general rule is that a blank endorse- ment by the payee or holder of a negotiable instrument carries the title to the bank. The rule in New York and most of the States is, that where- a customer doing business with a bank and having a general account therein, deposits a check, endorsing the same in blank and receives credit on his pass-book, the title to the check so- endorsed passes to the bank. However, where the customer understands and has notice of the fact that the paper was- endorsed and delivered to the hank for collection only, the title will remain in the depositor.'" And the proceeds after collection are subject to gamish-r ment.^^ 16 Bank v Refrigerating Co., 236 is Jefferson Co. Savings Bank v Mo. 407; iHobart JSTat. Bank v. Hendricks, 147 Ala. 670. Powers, 24 Okla. 145. 2» Metropolitan Nat. Bank v. 1' Lyons v. Union Exchange Nat. Loyd, 90 N. Y. 530; Brooks v. Bank of New York, 135 N. Y. S. Bigelow, 142 Mass. 6; Bank of Re- 121; National Bank of Webb City public v. Millard, 10 Wall. (U. S.) V. Everett, 136 Ga. 372. 152. 18 King V Miller, 53 Ore. 53, 97 21 Hobart Nat. Bank v Fordtram,. Pae. Rep. 542. 122 S. W. 413. 496 Collections by Banks, [oh, xxxvm. § 268. Power to collect may be revoked. The owner of the paper at any time before the bank takes action, may revoke the authority of the bank from proceeding in the collection. This is upon the analogy that the bank is acting as an agent. If the bank persists in the collection, it may be restrained by an order of the court. The power to revoke the collection cannot be enforced, however, if the bank has acquired a lien upon it. The lien gives the bank an interest in the property, and if the collection has matured it is the duty of the bank to collect. If the bank becomes insolvent its power to collect is revoked. Nor in the absence of special agreement is the bank a holder for value. See 38 Pa. Super. Ct. 275. The bank has lien on checks to the extent of credit given. But where a bank has brought suit and has entered upon the process of collecting, its authority cannot be revoked unless it is shown that it obtained authority unlawfully. It is claimed that the authority of the bank may be revoked after it has entered on the process of collection if it fails to take the steps necessary to recover the collection. ^^ § 269. Bank lien upon collections. The Supreme Court of the State of Michigan, in the case of Gibbins v. Hecox, reported in 63 N. W. 519, lays down the general rule to be that a bank has a lien on all money, notes and funds of a customer in its possession for any indebted- ness of a customer to the bank which is due and unpaid. The court says: " The reason given for allowing the lien is, that any credit which a bank gives by discounting notes or allowing an over- draft to be made, is given on the faith that money or securi- ties will come into the possession of the bank in the due course of future transactions." 22 Bank of Mobile v_ Huggins, 3 Ala. 206. OH. XXXVIII.] Banking. 497 The court, in its opinion, cites the case In re 'Farnsworth, 5 Biss. 223, Fed. Cas. No. 4673, stating: " Judge Blodgett of the United States Circuit Court of Illinois held that, a bank holding a customer's demand note has a lien upon the proceeds of drafts delivered to it, for col- lection after the giving of the note, though collected after the filing of petition in bankruptcy and can apply such proceeds upon the note." The court then cites from the case of Muench v. Bank, 11 Ho. App. 144, which court says : " The general lien of bankers is part of the law merchant. That bankers have a lien on all money and funds of a depositor in their possession for the balance of the general account is undisputed. A banker's lien does not arise on securities de- posited with him for a special purpose, otherwise we have no doubt that when a discount has been made by the bank, and the note has matured, so as to create an indebtedness from the depositor of the bank, all funds of the depositor which the bank has at the date of the maturity of the discounted note, or which it afterward acquires in the course of business with him, may be applied to the discharge of his indebtedness to the bank; and this is true not only of the general deposit of the customer, but the rule applies to any commercial paper belonging to the depositor in his own right and placed by him with the bank for collection. The bank has a lien on the collection to the extent of the credit given thereon. ^^ The banks have a general lien unless it is shown that the collection is not the property of the bank.^* A corresponding bank receiving a collection with the state- ment that the collection belongs to "A." and not to the bank remitting the same, the correspondent bank cannot acquire a 28 National Bank of Phoenixville 2* Garrison v. Union Trust Co V. Bouser, 38 Pa. Super. Ct. 275. 139 Mich. 392. " 32 498 Collections by Banks. [ch. xxxvin. lien against the collection for a debt which the forwarding bank may owe to it.^' But if the correspondent bank has no notice, but receives the collection as the property of the remitting bank, the cor- respondent bank has a lien for a debt that may exist between them; the rule may then be safely stated that a bank holding a collection as between the owner and itself, cannot acquire a lien upon the collection or proceeds unless the debt existing from the owner of the security to the bank was, at the time the collection was made, a matured debt. And as between the correspondent bank and its agent, the agent cannot acquire a lien where the collection is sent and endorsed " for collection." A letter accompanying a collection (which collection bears a general endorsement) which explains a blank endorsement; would also be held as notice to the collecting bank. The rule may be again stated that a bank cannot acquire a lien against a collection in any instance where the title of the paper remains in the owner. § 270. Authority of bank to make collections. When a collection is received by a bank it not only has the implied authority to collect which is granted to it in the general power to do a general banking business, but it may be said that it becomes a duty. The principle that the power is implied requires no discussion. The character of the business of a commercial bank suggests and requires it to perform the business of making collections. The National Banking Law does not specifically designate the business of making collections a provision of the statute, but the business itself forms a large branch of the banking business and its power is not denied. Held, in case of First Nat. Bank of Fort Worth, Texas, v. Payne, 42 S. W. 736, that plaintiff bank cannot recover upon a note assigned to it merely for the purpose of collection. But see First ISTat. Bank v. Hughes (Cal.), 46 Pac. Eep. 272. 25 Bank of Metropolis v. New England Bank, 1 How. 234. CH. XXXVIII.] Ban^king. 499 The rule as laid down by the Supreme Court of the United States as to the liability and duty of the collecting bank where it receives drafts and other collections from its customers and for defaults of its agents, the court after discussing the decisions of the various States presents the rule to be as follows : " The question involves a rule of law of general application. Whatever be the proper rule it is one of commercial law. It concerns trade between different and distant places, and, in the absence of statutory regulations or special contract or usage having the force of law, it is not to be determined according to the views or interests of any particular individuals, classes, or localities, but according to those principles which will best promote the general welfare of the commercial community. Especially is this so when the question is presented to this tribunal, whose decisions are controlling in all cases in the Federal courts. " The agreement of the defendant in this case was to collect the drafts, not merely to transmit them to the Ifewark bank for collection. This distinction is manifest; and the question presented is, whether the Newark bank, first receiving these drafts for collection, is responsible for the loss or damage re- sulting from the default of its Newark agent. There is no statute or usage or special contract in this case, to qualify or vary the obligation resulting from the deposit of the drafts with the New York bank for collection. On its receipt of the drafts, under these circumstances, an implied undertaking by it arose, to take all necessary measures to make the demands of. acceptance necessary to protect the rights of the holder against previous parties to the paper. From the facts found, it is to be inferred that the New York bank took the drafts from the plaintiff, as a customer, in the usual course of busi- ness. There are eleven drafts in the case, running through a period of over three months, and the defendant had pre- viously received from the plaintiff two other drafts, accept- ances of which it had procured from Conger, at Newark, through the Newark bank. The taking by a bank, from a customer, in the usual course of business, of paper for eollee- 500 Collections by Banks. [ch. xxxviii, tion, is suflScient evidence of a valuable consideratioii for the service. The general profits of the receiving bank from the business betvp'een the parties, and the aceommod'ation to the customer, must all be considered together, and form a con- sideration, in the absence of any controlling facts to the con- trary, so that the collection of the paper cannot be regarded as a gratuitous favor. Bank of Utica v. Smeads, 20 Johns. 372, and 3 Cowen 662 ; McKinster v. Bank of Utica, 9 Wend. 46 ; affirmed in Bank of Utica v. McKinster, 11 Wend. 473. " The contract, then, becomes one to perform certain duties necessary for the collection of the paper and the protection of the holder. The bank is not merely appointed an attorney, authorized to select other agents to collect the paper. Its under- taking is to do the thing, and not merely to procure it to be done. In such case, the bank is held to agree to answer for any default in the performance of its contract; and, whether the paper is to be collected in the place where the bank is situated, or at a distance, the contract is to use the proper means to collect the paper, and the bank, by employing sub-agents to perform a part of what it has contracted to do, becomes respon- sible to its customer. This general principle applies to all who contract to perform a service. It is illustrated by the decision of the Court of King's Bench, in Ellis v. Turner, 8 T. E. 531, where the owners of a vessel carried goods to be delivered at a certain place, but the vessel passed it by without delivering the goods, and the vessel was sunk and the goods were lost. In a suit against the owners for the value of the goods, based on the contract, it was contended for the defendants that they were not liable for the misconduct of the master of the vessel in carry- ing the goods beyond the place. But the plaintiff had judg- ment, Lord Kenyon saying that the defendants were answer- able on their contract, although the misconduct was that of their servant, and adding : ' The defendants are responsible for the acts of their servant in those things that respect his duty under them, though they are not answerable for his misconduct in' those things that do not respect his duty to them.' " The distinction between the liability of one who contracts CH. XXXVIII.J Banking. 501 to do a thing and that of one who merely receives a delegation of authority to act for another is a fundamental one, appli- cable to the present case. If the agency is an undertaking to do the business, the original principal may look to the im- mediate contractor with himself, and is not obliged to look to inferior or distant under-contractors or sub-agents, when de- faults occur injurious to his interest. " Whether a draft is payable in the place where the bank receiving it for collection is situated, or in another place, the holder is aware that the collection must be made by a com- petent agent. In either case, there is an implied contract of the bank that the proper measures shall be used to collect the draft, and a right, on the part of its owner, to presume that proper agents will be employed, he having no knowledge of the agents. There is, therefore, no reason for liability or exemption from liability in the one case which does not apply to the other. And, while the rule of law is thus general, the liability of the bank may be varied hy consent, or the bank may refuse to undertake the collection. It may agree to re- ceive the paper only for transmission to its correspondent, and thus make a different contract, and become responsible only for the good faith and due discretion in the choice of an agent. If this is not done, or there is no implied understanding to that effect, the same responsibility is assumed in the under- taking to collect foreign paper and in that to collect paper payable at home. On any other rule, no principal contractor would be liable for the default of his own agent, where from the nature of the business, it was evident he must employ sub- agents. The distinction recurs between the rule of merely personal representative agency and the responsibility imposed by the law of commercial contracts. This solves the diflaculty and reconciles the apparent conflict of decision in many cases. The nature of the contract is the test. If the contract he only for the immediate services of the agent, and for his faithful corir duct as representing his principal, the responsibility ceases with the limits of the personal services undertaken. But where the contract looks mainly to the thing to he done, and the under- 503 OOLI-ECTIONS BY BaNKS. [cH, XXXVIII. taking is for the due use of all proper means to performance, the responsibility extends to all necessary and proper means to accomplish the object, by whomsoever used. " We regard as the proper rule of law applicable to this case, that declared in. Van Wart v. WooUey, 3 B, & C, 439, where the defendants, at Birmingham, received from the plaintiff a till on London, to procure its acceptance. They forwarded it to their London banker, and acceptance was refused, but he did not protest it for non-acceptance or give notice of the re- fusal to accept. Chief Justice Abbott said : ' Upon this state of facts it is evident that the defendants (who cannot be dis- tinguished from, but are answerable for, their London cor- respondent) have been guilty of a neglect of the duty which they owed to the plaintiff, their employer, and from whom they received a pecuniary reward for their services. The plaintiff is, therefore, entitled to maintain his action against them, to the extent of any damage he may have sustained by their neglect.' In that case there was a special pecuniary reward for the service. But, upon the principles we have stated, we are of opinion that, by the receipt by the defendant of the drafts in the present case for collection, it became, upon gen- eral principles of law, and independently of any evidence of usage, or of any express agreement to that effect, liable for a neglect of duty occurring in that collection, from the default of its correspondent in Newark. " What was the duty of the defendant, and what neglect of duty was there? An agent receiving for collection, before maturity, a draft payable on a particular day after date, is held to due diligence in making presentment for acceptance, and, if chargeable with negligence therein, is liable to the owner for all damages he has sustained by such negligence. Allen v. Suydam, 20 Wend. 321; Walker v. Bank of the State of 'Sew York, 5 Seld. 582. The drawer or endorser of such a draft is, indeed, not discharged by the neglect of the holder to present it for acceptance before it becomes due. Bank of Washington V. Triplett, 1 Pet. 25, 35 ; Townsley v. Sumrall, 2 Pet. 170, 178. But if the draft is presented for acceptance and dis- CH. XXXVIII.] Banking. 503 honored before it becomes due, notice of such dishonor must he given to the drawer or endorser, or he will he discharged. 3 Keiii;'s Com. 82 ; Bank of Washington v. Triplett, 1 Pet. 25, 35 ; Allen v. Suydam, 20 Wend. 321 ; Walker v. Bank of the State of New York, 5 Seld. 582 ; Goodall v. Dolley, 1 T. K. 712; Bayley on Bills (2d Am. ed.), 213. " Moreover, the owner of a draft payable on a day certain, though not bound to present it for acceptance in order to hold the drawer and endorser, has an interest in having it presented for acceptance without delay, for it is only by accepting it that the drawee becomes bound to pay it, and on the dishonor of the draft by non-acceptance, and due protest and notice, the owner has a right of action at once against the drawer and endorser, without waiting for. the maturity of the draft ; and his agent to collect the draft is bound to do what a prudent principal would do. 3 Kent's Com. 94; Eobinson v. Ames, 20 Johns. 146; Lenox v. Cook, 8 Mass. 460; Ballingalls v. Gloster, 3 East 481 ; Whitehead v. Walker, 9 M. & W. 506 ; Walker v. Bank of the State of New York, 5 Seld. 582. " In view of these considerations, it is well settled that there is a distinction between the owner of a draft and his agent, in that, though the owner is not bound to present a draft pay- able at a day certain for acceptance, before that day the agent employed to collect the draft must act with due diligence to have the draft accepted as well as paid, and has not the dis- cretion and latitude of time given to the owner, and, for any unreasonable delay, is responsible for all damages sustained by the owner. 3 Kent's Com. 82; Chitty on Bills (13th Am. ed.), 272, 273." Where a bank receives a collection with instructions, it must discharge its duties, follow the instructions, if reasonable, and exercise reasonable diligence and care. As to what is reason- able diligence, is a question of fact to be determined by the jury.^° Where the draft is lost through negligence, the measure of damages prima facie is the amoimt of the bill.^'' 26 National Bank v City Bank, 2' Allen v. Suydam, 20 Wend. 103 U. S. 368. ■ 319, 103 U. S. 668. 504 Collections by Banks. [oh. xxxviii. § 271. Bank suing in its own name. Rule. The statute of the State where suit is hrought con- trols. The general rule is, that if the endorsement upon the instrument is in blank, the hank can sue in its own name. The blank endorsement implies title to the instrument. The rule is carried further in many of the States and it is. held that the bank as an " endorsee for collection " may sue in its own name. The States of California, Rhode Island, Oregon, Georgia,, Nebraska, Missouri, Illinois, Tennessee, Florida, Michigan and New York, hold that a transfer of a note to a bank for collection, gives it such an ownership thereof that it can sue the maker in its own name. The States that have adopted the new negotiable instrument laws enlarge the rule and confer upon the bank receiving col- lections the right to sue in its own name upon a restrictive endorsement. Where a statute provides that an action shall be prosecuted in the name of the real party in interest, an agent cannot be, for the purpose of collection, the real party in interest. In the State of California, the code provides that every action must be prosecuted in the name of the real party in interest, except that an executor or administrator or trustee of an express trust or person expressly authorized by statute, may sue without joining with him, the persons for whose benefit the action is prosecuted. A real party in interest is defined by the court, in the case of Giselman v. Starr, 106 Cal. 651, as follows : The court says : " But where the plaintifF shows such a title as that a judgment upon it, satisfied by defendant, will protect him from future annoyance or loss; and where, as against the party suing, defendant can urge any defenses he could make against the real owner, then there is an end of the defendant's concern, and with it of his right to object ; for, so far as he is interested, the action is being prosecuted in the name of the real party in interest." In the case of Lanier v. Nash, 121 U. S. 404, it is held that CH. XXXVIII.] Banking. 505 a bank holding a note and mortgage as trustee for collection for another may sue to foreclose in its own name. For a leading case discussing the right of a bank to sue in its own name, and its liability for failure to collect, see First National Bank of Evansville v. Fourth National Bank of Louisville, 56 Fed. Eep. 967. The court says, in discussing the question, that the authorities, are decidedly in favor of the law as given, but under special circumstances, as where delay to bring suit (the collecting bank being the endorsee) would operate to discharge a surety, and there was not time to wait for advises from the owner of the paper, it would be the duty of the collecting bank to bring suit. § 272. When bank may renounce its authority to collect. A bank is not permitted to renounce its authority or refuse to make a collection after the collection has been received and accepted by it from the owner. The bank must take all the steps necessary and imposed upon it by law to enforce the collection. A draft, however, which has been by the collecting bank presented for acceptance after dishonor, may be returned to the owner within a reasonable time, and the act will be con- sidered and construed as a renunciation of authority and the bank will be relieved of liability. But the return of the instru- ment must be done promptly. The retention of a dishonored draft for any length of time, which, during the time, if in the hands of the owner, collection could have been made, would make the bank liable for the loss sustained. In the case of Paint Company v. National Bank, 4 Utah 353, where : " The defendant bank received from the plaintiff, for col- lection, a sight draft on B. & S., the draft was accepted and the plaintiff notified thereof; the defendant, without further notification or taking any steps to collect the draft, held it for forty-seven days and then returned it as uncollectible. During all this time B. & S. were known by defendant to be insolvent^ 506 Collections by Banks. [ch. xxxviii. but had property worth more than the amount of the draft which was covered by an invalid deed of trust. " Two days after the return of the draft, B. & S. made an assignment for the benefit of creditors to L. The vice-presi- dent and a director of the defendant, preferring a debt due defendant; held, that defendant was guilty of such neglect of duty in respect to the draft as to render it liable for the amount thereof." The rule fixing the liability, attaches to the bank when it receives and accepts the collection; after receipt of the same and before any loss may occur to the owner, it may renounce its authority by an immediate return of the collection. If, however, the bank receives the collection, and undertakes with its depositor to collect for him, and, upon endorsement of the instrument by the owner, the bank gives him credit for the amount upon his pass-book, it cannot then arbitrarily re- turn the draft, but must use reasonable diligence to collect the same. The credit and entry in the pass-book operates as a closing of the transaction and implies a contract upon the part of the bank to make the collection.^' § 273. Duty of collecting bank, care, diligence. The general rule is again stated that the bank in receiving a collection must use ordinary care and diligence toward its collection. The diligence and care required depends largely upon the circumstances arising in each case. A bank may contract against liability for negligence of its agents or correspondents, especially so if the agent or corre- spondent is known to and accepted by the owner of the collection. But this rule is not good where the bank selects a correspondent without the knowledge or consent of the owner that proves to be irresponsible and incompetent. asKirkham v. Bank of America, 165 N. Y. 132. CH. xxxviii.J Banking. 507 When the collecting bank assumes the responsibility, its duty is to employ responsible correspondents.^^ The Supreme Court of the State of Illinois, in the case of Fay V. Strawn, 32 111. 295, has held that a bank has the right to stipulate against ordinary liabilities of collecting paper. The opinion of the court is very interesting and instructive upon this question. Opinion of the court. " It is insisted that the finding of the jury is clearly against the weight of the evidence, and that the court below erred in not granting a new trial. The witness, Fay, testified that appellants, when first applied to, positively refused to under- take the collection of the draft. That when they were applied to a second time for the same purpose, they only agreed to send the draft forward, upon the condition that they were to incur no liability. That it was agreed it should be sent to Burch & Co., for presentation, and when paid to be sent to appellants by express. That the draft was thus sent with these instruc- tions. This evidence stands uncontradicted by any other testi- mony in the record. It was, however, attempted to destroy its force by proving the usual course of business of this and other banks of Ottawa. And much stress was placed upon the fact that when collected, Burch & Co. placed the money to the credit of appellants. " If a special agreement was entered into at the time, the usage of this or other banking houses could not in the least aifeet the liability of appellants. Proof of usage can only he received to show the intention or understanding of the parties in the absence of a special agreement. The parties have the right to stipulate against the ordinary liabilities of the busi- ness, and appellants did clearly provide by express agreement against any supposed liability growing out of their undertaking. When the draft was sent forward by appellants to Burch & Co., in accordance with the agreement, they became the agents of 29 Fay V. strawn, 32 111. 295. 508 Collections by Banks. [ch. xxxviii. appellee for the collection of the money. We are unable to see anything in the evidence that overcomes Fay's testimony. " It appears from appellant's letter remitting the draft to Burch & Co., that they gave directions to collect and at once to send the money by express, as it had been agreed between appellants and appellee. " The clerk of Burch & Co. testified that vs^hen the money was collected it was by mistake passed to the credit of appel- lants and against their instructions. Nothing can be inferred against appellants from this act, done without their sanction or consent. And it will be remembered it was not by their agents, but those of the appellee. " It is also urged that appellants were guilty of negligence in sending the draft to an irresponsible banking house for collection. The evidence shows that in Chicago, where Burch & Co. did business, their character for solvency was good. It, however, appears that Warner had suspicions of their solvency and communicated them to appellants, but he states no facts, except that he had heard persons predict that Corning would break Burch in their litigation. It also appears that some depositors withdrew their funds previous to that time from Burch & Co.'s banking house. But it does not appear that appellants were aware of the fact, nor that the withdrawal was. occasioned by want of confidence in' the solvency of Burch & Co. The appellants transacted their business through this banking house and seem to have had confidence in its solvency. This evidence is not sufficient to establish the liability of the appellants. " It was lastly urged that appellants were guilty of negli- gence in taking no steps to correct the mistake in passing the money to their credit. It does not appear that they had any notice of the mistake until they heard of the failure. But it is insisted that when the money failed to come by express, they should have written to have learned the reason, and that had they done so the money might have been saved. The draft was received by Burch & Co. on the 30th of May, and it was paid on the next day. On the 3d of June, three days afterward,. CH. xxxviii.] Bakking. 509 Burch & Co. failed and made an assignment. There were, then, hut two days between the collection and the failure, within which to receive the money. Suppose appellants had become apprehensive that something was wrong, by failing to receive the money by express on the 1st of June and had written on the second, does any one suppose the money could have been thus obtained, or information that would have led to its re- ceipt? It will hardly be contended that because the money was not received on the 1st of June, appellants should have gone in person or sent a messenger the next day; and even if they had, it is not probable anything could have been obtained. " We think the verdict is clearly against the evidence and ■that the court below erred in refusing to set it aside. The judgment is, therefore, reversed, and the cause remanded. " Judgment reversed." § 274. Duty to present — Collection. When the bank receives a collection, when presentment is necessary, it becomes the duty of the bank at the proper time in order to charge the drawer and endorsers to present the same for acceptance or payment as the case may be. The absence of special instructions (which instructions if contrary to law) will not relieve it of liability.^" The act of presentment is performed by exhibiting the paper and requesting its acceptance or payment ; and when presented, the person presenting the same must be in possession of the instrument. The reason for and requirement of an exhibit of the instru- ment is that the maker may judge of the genuineness of the same, and if paid, he may receive immediate possession of the bill. If the drawee refuses to accept the bill when presented or refuses to pay, the bill is dishonored. Where a note is payable at a particular bank and at a speci- fied time, it is dishonored if, at the time it became due and pay- so Hendrix v. Jefferson County Savings Bank, 14 L. K. A. (N. S.) 686. 510 Collections by Banks. [ch, xxxviii. able, the instrument was not in the possession of the bank for collection. In such a case the bank is not liable for not making a formal presentment of the instrument. § 275. Presentment of checks. The rule as stated in a previous chapter, in discussing the law of checks relating to presentment or payment is, that when a check comes into the possession of a bank for collection it should be presented for payment with all dispatch and diligence. It must be presented within a reasonable time after its re- ceipt for collection. And as to what constitutes a reasonable time, depends upon the circumstances of each case.*^ Duty of bank receiving note for collection, 109 C. C. A. 55 ; McBride v. 111. National Bank, 121 N. Y. S. 1041; Hobart National Bank v. McMurrough (Okla.), 103 Pac. Eep. 601. The court in the case of Montelius v. Charles, 76 111. 303, " The general doctrine in each case must depend on its own peculiar facts and be judged accordingly." Presentment should be made during usual and reasonable hours, with banks, and presentment at a bank should be during banking hours. The Supreme Court of the State of Vervant says that when a note is payable at a bank where its business is trans- acted during certain specified hours of the day, the note may be presented during any of those hours, and it is the duty of the maker to provide for its payment whenever the present- ment is made. If the note is not paid when presented, the holder is at liberty to treat it as dishonored, and it is sufficient to charge the endorser. In New York where a promissory note was made payable at a bank, it appeared that, upon the day the note fell due, the endorser being ready to pay it, sent the maker to the bank 31 lioyd V. Osborn, 92 Wis. 93. CH. XXXVIII.] Banking. 511 during banting hours to see if the note was there and to ascer- tain the amount. In this case the note was not presented for payment until an hour after the close of the customary banking hours, then the holder was admitted into the bank and found the cashier and demanded payment. Payment was refused on the ground that no funds had been left with the bank to pay. The court held that the demand was sufficient to charge the endorser. Mere delay to present check for payment will be excused unless such delay causes a loss.^^ § 276. Protest, bank's duty. The collecting bank is bound to protest paper when protest is necessary to preserve the owner's recourse against the parties liable to him. The statute of a State provides how, where, and when protest must be made. Protest may be waived upon a foreign bill of exchange by language or words on the face of the instrument, waiving protest. § 277. Bank accepting payment for collection. A bank is authorized to receive money only. If it receives checks, drafts, or other evidences of debt, by doing so it takes them at its own risk and will be held responsible in money to the owner of the collection.^' This rule that the bank is authorized to receive money only is denied by the Supreme Court of the State of Kentucky, in the case of the Citizens' Bank of Paris, Ky., v. Houston, 98 Ky. 139. Judge Lewis delivered the opinion of the court: " Joseph Houston, about September 22, 1891, delivered to, and Citizens' Bank of Paris, Kentucky, received for collection 32 State Bank of Gothenburg v. Nos. 4532, 5359; Bank and Trust CavioU, 81 Neb. 484. Co. v. Thornton, (C. C. A.) 174 Fed. 33 Essex Co. Nat. Bank v. Bank Eep. 752. of Montreal, 7 Biss. 193, Fed. Cas. S12 Collections by Banks, [ch. xxxviil an order or check for $129, which one Griffith had drawn on "the Cynthiana National Bank at Cynthiana, payable September 30, 1891, to his order. In proper time it was sent to the latter bank, but returned, duly protested for non-payment, of which fact written notice was immediately mailed to both appellee and Griffith. " October 6, 1891, Griffith drew an order on the Bourbon Bank of Paris, for $131.66, being the amount of the original one and protest fees added, and payable to order of Brent, cashier of Citizens' Bank of Paris, which, upon representation that he had there deposited money to meet it, was accepted by the bank instead of the original, then canceled and given up. But payment of that check was likewise refused, although pre- sented for that purpose to the Bourbon Bank of Paris, on the day it was given and other days. " October 22, 1891, Griffith made a deed of assignment for the benefit of creditors generally, and March, 1893, Houston brought this action, to recover of Citizens' Bank of Paris, amount of original check and interest, for which, under peremp- tory instruction of the court, the jury returned a verdict, fol- lowed by judgment now appealed from. " The alleged cause of action is that defendant, without con- sent or knowledge of plaintiff, canceled and gave up that check and accepted in lieu of it a check from Griffith, the debtor, on another bank, made payable to the order of its own cashier. " Up to that time defendant had performed its undertaking w^ith due diligence and in good faith, and the original check was plainly worthless, for Griffith was, as seems to be conceded, insolvent. But, where strictly required to do or attempt to do more in an effort to collect the debt, it is plain defendant ac- .cepted the new and gave up the old check in good faith, and as the only then practicable or possible way of subserving the interest of plaintiff. And that it intended and could possibly profit by assuming ownership of the debt and becoming liable to Houston, therefor, is wholly unreasonable. We know of no rule of right that would, under such circumstances, make an CH. XXXVIII. J Bahkihg. 513 agent liable to his principal, for such was the relation of the parties throughout the transaction. " It may be that when an agent acts without or beyond the line of his authority, and the principal incurs thereby an injury, he may be held liable ; but here no injury was done to plaintiff by cancellation of one and acceptance in its place of another check, nor, according to the evidence, was the transaction either without implied authority of plaintiff or such as he would or could have reasonably objected to if present. " The testimony of Griffith introduced by plaintiff, shows that after the check on National Bank of Cynthiana had been protested for non-payment, he, by letter, informed and prom- ised plaintiff he would go to Paris and ' fix it up,' and that plaintiff after being notified of the protest and return of the cheek to the Citizens' Bank of Paris, remained away four or five days, making no effort to collect it himself, is convincing that he expected and intended defendant, as his agent, to attend to the matter of having Griffith fix it up. " The fact of the new check being made payable to the cashier of defendant is no evidence of its intention to assume ownership of the cheek or become liable to plaintiff therefor, because, he being absent, it had to be drawn in that way in order to procure proper presentation and payment. " It seems to us, as this record stands, defendant incurred no liability to plaintiff, and the jury ought to have been so instructed." It is held that a collecting bank is not authorized to receive in payment for collection a claim against itself; and in the case of Francis v. Evans, 69 Wis. 115, the court holds that a bank is not authorized to receive in payment for a collection, its own certificate of deposit, but certificates of deposit by universal custom between banks are treated as cash ; and where a custom becomes universal, it is recognized by the courts as a law and the courts will take judicial notice of a universal custom. In the State of Iowa (at least) the court has taken judicial 33 514 Collections by Banks. [ch. xxxvm. notice of a custom prevailing where the banks have treated certificates of deposit as cash. § 278. Duty of bank to collect interest, when. A bank cannot accept payment of a note not due and re- lease the maker for interest for the unexpired time. It is bound by the terms set out in the collection, and a failure upon the part of the collecting bank to enforce the provisions of the note or other instrument left for collection, makes the bank liable. Where a certificate of deposit is left with the bank for col- lection, which certificate is payable on demand but would have borne interest if the deposit had remained in the bank up to a certain time and no instructions were given to the bank as to the time of collection, the bank having accepted payment of the principal, it is held that it was not guilty of negligence nor any violation of agreement or instructions and that it was not liable for the interest.** § 279. Collecting bank's liability as indorser. A bank receiving paper for collection which requires it, the initial bank, to transmit the collection to another or the collect- ing bank, should not make itself a general endorser. A general endorser is one who warrants to all subsequent holders in due course, that the instrument is genuine, and that he has title to the paper, and that all prior parties had power to contract. It is held, in the casae of Ferguson v. Staples, 82 Me. 159, that the endorsement of a transfer of an over-due town order by the payee for value, raises a contract on his part that the order is genuine and is the legal promise of the town that it purports to be ; and even after it has been adjudged void, may elect to sue the endorser upon his contract and recover on the order according to its tenor. The meaning of an endorsement, as defined by the court o£ 8* He, Ex'rx, v. The Bremer Co. Bank, 73 Iowa 58. CH. xxxviii.] Banking. 515 Minnesota, is, that an endorser of a promissory note engages unconditionally that it is in every respect genuine; that it is the valid instrument it purports to be, and that the ostensible parties were competent.'^ The bank should qualify its endorsement, using such lan- guage as would negative a general endorsement. It is also the duty of the bank receiving a collection, if it has specific instructions from the owner of the paper directing the initial bank in its course and duty, to transmit such in- structions to its agent, the collecting bank. In the case of Borup v. Mininger, 5 Minn. 417, the court held that it was the duty of the initial bank to convey the instructions received by it from the owner to its correspondent ; and no custom could absolve the bank from this duty, as the fixing of the liability of the endorser was the very essence of the undertaking. It is also held that the initial bank should notify its corre- sponding bank in a foreign State, of the laws governing protest.^" The above authority also holds that a failure to furnish the corresponding bank the law governing such protests in the place or State where the contract is made, and by reason thereof the corresponding or collecting bank fails to comply vdth such law, that the initial bank is liable. In the States where the new negotiable instrument laws are in force, a bank receiving paper which has been endorsed restrictively for collection, it is held that it is liable as a general endorser if it subsequently endorses the paper without qualifi- cation. This rule is in contravention to the rule adopted by the Federal court. The law as laid down by this court is given in the ease of United States v. American Exchange National Bank, YO Fed. Eep. 232. " This was an action by the United States against 35 Crosby v. Wright, 70 Minn. 251. se Allen v. Merchants' Bank, 22 Wend. (N. Y.) 215. 516 Collections by Banks. [ch. xxxvin. the American Exchange National Bank to recover the amount of a pension draft which defendant had collected, as collecting agent of another bank ; it appearing that the name of the payee had been forged upon the draft after her death." Opinion of the court. " The pension draft in this case was paid to the de- fendant bank by the Sub-treasury, upon the forged en- dorsement of the payee's name after her death. The Bel- laire Bank of Ohio had previously cashed the draft upon the forged endorsement, and thereupon endorsed it * for col- lection ' to the defendant bank at New York. The latter was the collecting correspondent of the Bellaire Bank as regards its funds in New York. The collection was made in good faith by the defendant bank and the proceeds remitted to the Bellaire Bank some months before the discovery of the forgery. The endorsement of the forged draft by the Bellaire Bank showed upon its face that the defendant was to act as collecting agent only. The defendant never had any property in the draft or its proceeds. The later authorities sustain the proposition that in any case where the collecting agent pays over the funds before any notice of irregularity or fraud, the remedy is against the principal alone. (Bank v. Armstrong, 148 U. S. 50 ; White V. Bank, 102 U. S. 658; Sweeny v. Easter, 1 Wall. 166; Wells, Eargo & Co. v. United States, 45 Fed. 337; National Park Bank v. Seaboard Bank, 114 N. Y. 28, 20 N. E. 632.) " In such cases the endorsement by the collecting agent, who has no proprietary interest, does not import any guaranty of the genuineness of all prior endorsements, but only of the agent's relation to the principal, as stated upon the face of the draft; and as this relation is evident upon the draft itself, the payor cannot claim to have been misled by the endorse- ment of the agent, or any right to rely upon that endorsement as a guaranty of the genuineness of the payee's endorsement. " In the case of Onondaga Co. Savings Bank, 12 C. C. A. 407, 64 Eed. 703, as I find upon examination of the record on appeal, no question like the present arose. The Onondaga Bank CH. xxxviii.} Banking. 517 was in the same situation as the Bellaire Bank in the present case. It had cashed the forged draft and was collecting the money for its own benefit as owner of the draft. Its endorse- ment imported a guaranty of the prior signatures; and the defendant's remedy here is against the Bellaire Bank. " The direction of a verdict for the defendant upon the un- disputed facts was, I think, correct, and the motion for a new trial should be denied." § 280. When bank liable for fraud or mistakes. Where a party places in the hands of a bank a draft for collection with instructions to hand the collection to an attor- ney, the bank failing to do so, and in the meantime the drawee became insolvent, the bank is liable for the loss.'' The measure of damages for such negligence is prima facie the amount of the paper with interest.'* A bank is liable for a careless mistake, for example: where a note is plainly dated and it mistakes the date and fails to give notice, protest and the like. The Supreme Court of the State of Pennsylvania says : "Certainly, when the bank accepts this note for collection, it became its duty to use reasonable care and skill in attending to it; yet herein it is chargeable with a remarkable blunder in treating the date 15th December as if it were the 5th. There can be no doubt that the 15th is there, for anybody can see it who looks, and the court could commit no error in saying that much. But the first figure was not so strongly marked as the other, and therefore the bank's officers interpreted it out rather than overlooked it, and thus made a mistake and had the note presented for payment ten days too soon, and not at the proper time, and thus discharged the endorser. This was clear care- lessness; for, if there was any doubt about the date, the bank ought to have refused the collection of it, or to have got the holder to state what was the true date, or to have presented it 37 Finch V. Karste, 56 N. W. 123. 38 Commereial Bank v. Red River Valley Nat. Bank, 79 N. W. 85». 518 Collections by Banks. [ch, xxxvin. on both days. To guess a meaning contrary to the expression, is not careful." Where a bank holding a note for collection receives the amount necessary to pay the same from an agent of the maker, and by mistake gave up to him a similar note of another person and returned the first note to its owner, to whom the maker paid it on demand and immediately, though four days after the payment to the bank, upon examining the note in the agent's hands, discovering the mistake, returned it to the bank and demanded back his money: Held, that he was entitled to it, although the bank had in the meanwhile paid the amount to the owner of the other note, the maker of which was insolvent and discharged for want of demand.*® The question of mistake or more properly negligence is one of fact. In the case of Baltimore & Ohio Railroad Co. v. Worthington, 21 Md. 275, the court says : "An absence or want of such care as the law requires in the performance of any given undertaking * * * is a fact the finding of which is for the jury." The rule is that if there is no dispute as to the fact, the ques- tion of negligence is one of law. (Selz v. Collins, 55 Mo. App. 55.) A bank taking a forged check for collection without any precaution and having itself unrestrictedly endorsed the check, held liable to the drawee for money paid; unless the latter was also at fault.*" § 281. Liability of initial bank for default of its agents. As previously stated, a bank must use reasonable care in selecting and employing its correspondents, notaries and other agents to assist in or make collections for it. Where a collection is received by a bank and it agrees to undertake the obligation, it frequently becomes necessary to 89 Andrews v Suffolk Bank, 12 4o First Nat. Bank v. Lother Gray (Mass.) 461. Kaufman Oil & Coal Co., 66 W. Va. 505. CH. XXXVIII.] Banking. 519 employ another bank, notaries and agents to perform this duty and make the collection. When the paper is payable at a distance, this duty arises. The bank then transmits the collection to its regular, corre- spondent, if it has one, at the place where the paper is pay- able; if not, it selects a bank and sends the collection with instructions, if special, how to proceed and what to do. The selection having been made, and the paper forwarded, the initial bank, according to the weight of authority, makes itself liable to the owner of the paper for any failure of its corre- spondent in the performance of its duty. If the initial bank has no regular correspondent at the place where the collection is to be made, before employing an agent, its duty is to ascertain what bank or person at that place is responsible. !N"egligence of the initial bank in this particular makes the bank liable. If a bank is employed which is insolvent, where at the time of the employment it was within the means of the initial bank to ascertain this fact, and it failed to do so, the collection being made by the insolvent bank and the proceeds afterwards lost, the initial bank is held liable. The initial bank is also liable where it selects an unsuitable and particularly incompetent person to give notice to endorsers. § 282. Who are suitable agents. The debtor cannot, under any condition or circumstance, be regarded as a suitable agent to be entrusted with the collection of an obligation owing by himself. Common sense teaches that such a person cannot and should not be employed; but very frequently this common-sense rule is set aside and disregarded and banks send a collection direct to the bank owing the debt, requesting that it remit the amount. If the debtor bank failed to do so and a loss occurs this is gross negligence and the initial bank is liable. In the case of German National Bank of Denver v. Burns, 12 Colo. 539, the court very pertinently asks this question: 520 Collections by Banks. [ch. xxxyiil " How can the debtor be the proper agent of the creditor in the matter of collections of debt ? " The court continuing, says : " If the debtor is embarrassed there is the temptation to delay, and, if wanting in integrity, there is the opportunity to destroy and deny the evidence of indebtedness." The Supreme Court of Illinois presents the unreasonableness and negligence of such a practice in the following questions and language : " Can it be said to be reasonable care in selecting an agent, to select one known to be interested against the principal ? To place the principal entirely in the hands of his adversary ? " The court further says : " Surely it could not be reasonable care and diligence in an agent holding for collection, a promissory note given by one individual to another individual to send the promissory note to the maker, trusting him to make payment, delay it or destroy the evidence of indebtedness and repudiate the transaction as his conscience might permit." It is a very common custom and a rule generally followed by banks to remit drafts and checks directly to the bank owing them, and request that the remitting bank be credited with the collection, and that notice of such credit be immediately given. This custom or rule is not uncommon, and as stated is most always practiced, especially between corresponding banks; but this custom, although daily practiced, does not excuse or relieve the initial bank from liability in case of loss. It is not reasonable care in selecting an agent to collect a debt, to select the debtor himself.*^ It is negligence to send collection to the drawee bank, although it is the only bank in the place.*^ The court holds in the case of Davis v. First National Bank *i The Drovers' National Bank v. *2 Winchester Milling Co. v. Bank The Anglo- American Packing Co., of Winchester, 18 L. R. A. (N. S.) 117 111. 100; Merchants' National 441; First National Bank v. Bank Bank of Philadelphia v. Goodman of Whittier, 221 111. 319; Milling et al., 109 Penn. St. 422, 78 N. W. Co. v. Bank, 120 Tenn. 22£. CH. XXXVIII. J Banking. 521 of Fresno, 118 Cal. 600, tliat a bank, where negligence is charged, should be permitted to show the usage of banks in regard to the collection of paper presented by persons ; and, if in making the collection it follows the course usually taken by banks under similar circumstances, it cannot be held to have been negligent; and in an action against the initial bank to recover the value of the collection on account of its negligence in so sending it, evidence is admissible that the conduct of the bank was in accordance with the usage of banks when making collections of paper presented by persons who were unknown to them. But a usage which is in contravention of law cannot be shown or pleaded to excuse a party in the per- formance of a reasonable duty, and a custom will not generally relieve a bank of gross negligence. The American decisions are almost a unit in holding that it is not proper to send a check by mail directly to the drawee for payment.*^ Custom will not excuse a bank in sending direct to drawee bank where there are no other banks in the place.** The New York rule is that a custom controls and releases the bank of negligence.*' § 283. Banks employing notaries — Conflict of authority as to liability. A bank has the authority to employ notaries to make pro- tests, give notice, and generally to receive collections for it; 43 Bank of Eocky Mountain v. Bank, 71 Mo. App. 451 ; 76 Minn, floyd, 142 N. C. 187, 55 S. E. 95; 136, 44 L. E. A. 504, 77 St. Eep. Giner v. Bank of Alexandria 609, 78 N. W. 980. But see Con- (Tenn.) 47 L. E. A. 270, 52 S. W. tra, Kershaw v. Ladd, 34 Ore. 375, 923; First National Bank v. City 44 L. E. A. 236, 56 Pac. 402, 91 National Bank, 12 Tex. Civ. App. Ky. 465, 31 S. W. 38. 318, 34 S. W. 458; 50 Neb. 105, 61 45 Indig v. National City Bank, Am. St. Rep. 550, 69 N. W. 765, 53 80 N. Y. 100, 89 N. Y. 182, 42 Am. Kan. 542, 36 Pac. 1057, 167 Pa. Eep. 285, 78 N. Y. 269, 172 N. Y. 259, 145 Ala. 321, 124 111. App. 102, 64 N. E. 799, 128 N. Y. 26, 102, 221 111. 319, 77 N. E. 563, 123 27 N. E. 849. Also see 76 Wis. 341, Mich. 336, 82 N. W. 66. 44 N. W. 1105. Pinkney v. Kana- ** American Exchange National wba Valley Bank, 68 W. Va. 255. Bank v. Metropolitan National 522 CoLLECTIOlfS BY BaNKS. [cH. XXXVIII. and if employed by the cashier, the employment is construed to be an employment by the bank. The important question affecting the bank is the one of laches and defaults by the notary. Does the bank become liable to the owner of the collection for such defaults? This question has received considerable attention and has been discussed by the courts of many States at considerable length. The Supreme Court of the United States, in the case of Britton v. iN'iccoUs, 104 U. S. 757, in discussing the question as to the duty and liability of banks as collecting agents, and their reponsibility for the acts of the notary to whom the notes sent to them for collection are delivered for presentment, demand and protest, states the law to be as follows : " It is enough here that the notary was not, in this matter, the agent of the bankers. He was a public officer whose duties were prescribed by law; and when the notes were placed in his hands in order that such steps should be taken by him as would bind the endorsers if the notes were not paid, he became the agent of the holder of the notes. Eor any failure on his part to perform his whole duty, he alone was liable ; the bankers were no more liable than they would have been for the unskil- fulness of a lawyer of reputed ability and learning to whom they might have handed the notes for collection in the conduct of a suit brought upon them." The rule is undoubtedly established by a great majority of the courts of the various States and the federal courts, to be that if the collecting bank uses reasonable care in the selection of a notary, it cannot be held liable for his acts or defaults.*" § 284. Officer of bank acting as notary. Another important question to the banker upon this subject is: Can the president of a bank or other officer, who is also a *8 First Nat. Bank of Manning v. Britton v. Niccolls, 104 U. S. 766; German Bank of Carroll Co., 107 Bank v. Butler, 41 Ohio St. 519; Iowa 543; Bellemire v. Bank of Isham v. Post, 141 N. Y. 100. United States, 4 Whart. (Pa.) 105; CH. XXXVIII.] Banking. 523 notary public, act for the bank; and if so, does his laches or defaults as notary relieve the bank of liability ? In the case of wood Eiver Bank v. First National Bank of Omaha, 36 ITeb. 744, the court holds that where a note is received by the bank with instructions to protest if not paid, and the president of the bank, who is a notary, receives the note, it having been delivered to him for protest, he, failing to give the notice, which failure thereby operates as a discharge of the endorser, the bank is liable. The contrary doctrine is presented in the case of May v. Jones, 88 Ga. 308, 311. The court in its opinion says: " The plaintiff's theory is that, as Jones, the notary public, was also an employee and agent of the bank, ' the action of defendant Jones in the matter, he acting under the authority of the defendant bank, is the action of said. bank.' This is all the allegation touching the bank's liability. Although there is conflict in the cases the prevailing and better holding seems to be that a bank is not liable for the negligence or misconduct of a notary employed by it to protest negotiable paper. The reason is that the notary is not a mere agent or servant of the bank, but is a public officer, sworn to discharge his duties prop- erly. He is under a higher control than that of a private prin- cipal. He owes duties to the public, which must be the supreme law of his conduct. Consequently, when he acts in his official capacity, the bank no longer has control over him, and cannot direct how his duties shall be done. * * * That the notary is also an employee and agent of the baidc does not alter the case. There is still a sharp dividing line between his duties as agent and his duties as a public officer. When his public service eomes into play, his private service is for the time suspended." The theory of this opinion is, that he is not a mere agent of "the bank, but is a public officer, and while acting in this capicity he lays aside his private status, and that it is merged in his public office, he is not and cannot be performing the duties of his private office. This logic and reasoning seems to be sound, but it is defective 524 Collections by Banks. [ch. xxxviii. in this particular. The duties of his private office are not laid aside, they are not merged into those of the public office at any time. His position as the president of the bank and his office as notary public are positions which he may hold at the same time. If the bank of which he is president receives a note for collection and he, as a notary, assumes the authority or is directed to protest the note, if he acts and proceeds to protest the note (being president of the bank) he acts for the bank as its agent, and at the same time performs the acts required and defined of notaries by the law governing and pre- scribing their duties. If he neglects to serve the notice of protest within the time required, and the endorser is released, the bank could not deny that while acting as notary his position as president of the bank or agent, which is one and the same thing, had been suspended to allow him to act as notary. He is holding the dual position as agent and officer of the bank and the office of notary public, and acts in both capacities or positions at the same time. And the dual position and responsibility, if assumed, should not excuse the bank for a failure by its agent in the perform- ance of his duty while acting for it as notary public. Where a bank selects or appoints a notary to act for it for a specified time, and for it required a bond for the faithful discharge of his duties, and failing to give notice to an endorser of a note by which the endorser was discharged, the notary is not, in such a case, an independent officer, but is the agent of the bank.*' The rule then may be laid down as follows : Tliat where a hank delivers a note to a notary for protest, etc., it will not he liable for the default of the latter; hut where an officer of a hank is a notary 'public and fails to discharge Ms duty as such notary, he is held to he the agent of the hanJc and the bank will he liable for his negligence. *i Cferhardt v. Boatman's Sav. v. National Bank of Omaha, 36 Neb. Inst., 38 Mo. 60; Wood River BaJik 744. CH, xxxviii.J Banking. 525 § 285. Initial bank's liability for default of its correspondent — Conflict of authorities. The Supreme Cotirt of the United States, in the case of The Exchange National Bank v. Third National Bank, 112 TJ. S. 276, with great care reviews the various cases of the States and iinally lays down the general rule of law to be, thai the initial bank is liable for such damages as it had sustained by the negli- gence of its agent or collecting bank. The facts in the case and opinion of the court are given in full. Statement of facts. " The facts found were these, in substance : The drafts were drawn by Rogers & Burchfield, at Pittsburgh, to the order of J. D. Baldwin, and by him indorsed, on ' Walter M. Conger, Sec'y Newark Tea Tray Co., Newark, N. J.,' and were dis- counted before acceptance, by the plaintiff, from June 8, 1875, to September 20, 1875, and were in all other respects similar except as to the sums payable, and in the following form: ' $1,042. 75. Pittsburgh, June 8, 1875. Four months after date, pay to the order of J. D. Baldwin ten hundred and forty-two 75/100 dollars for account rendered, value | received, and charge to account of Rogers & Burchfield. To Walter M. Conger, See'y Newark Tea Tray Co., Newark, N. J.' " They were transmitted for collection at different times before maturity, by the plaintiff to the defendant, in letters describing them by their numbers and amounts, and by words ' Newark Tea Tray Co.' They were sent by the defendant to its correspondent, the First National Bank of Newark, enclosed in letters describing them generally in the same way, except that, in two of the letters they were described as drawn on ' W. M. Conger, Sec'y.' The drafts were received by the defendant, in New York, within a day or two of the time of 526 Collections by Banks. [ch. xxxviii. discounting them. They were presented by the First National Bank of Newark, to Conger, for acceptance, who, except in one instance, accepted them by writing on the face these words: 'Accepted, payable at the Newark National Banking Co., Walter M. Conger.' " When the acceptances were taken, the time of payment was so far distant, that there was sufficient time to communicate to the plaintiff the form of the acceptance, and for the plaintiff thereafter to give further instructions as to the form of accept- ance. The Newark bank held the drafts for payment, but the plaintiff was not advised of the form of acceptance until, on the 13th and 19th of October, two of them were returned to it by the defendant. At that time the drawers and endorser were insolvent, but the drawers were in good credit when the drafts were discounted by the plaintiff. The drafts were duly pro- tested for non-payment, but none of them were paid. The Newark Tea Tray Company is a New Jersey corporation, doing business in that State, and Walter M. Conger is its secretary. " The drafts were presented to the plaintiff by Burchfield, one of the drawers, who offered them for discount, to be ' the paper of the Newark Tea Tray Company,' drawn against ship- ments of iron by Rogers & Burchfield to that company, and were discounted as such by the plaintiff. He also represented that Walter M. Conger was the person who examined the ship- ments of iron and ' accepted the drafts,' and that they were drawn in this form for the convenience and accommodation of the company. On drafts of Rogers & Burchfield on the ' New- " ark Tea Tray Co.,' dated May 4, 1874, May 20, 1874, and June 30, 1874, discounted by the plaintiff, and transmitted for acceptance to the defendant, and by it sent to the same Newark bank, that bank took acceptances from Walter M. Conger indi- vidually, without notice to the plaintiff ; and Conger, during the time drafts sent by the plaintiff to the defendant, addressed to the ' Newark Tea Tray Coi' and to ' Walter M. Conger, Sec'y Newark Tea Tray Co., Newark, N. J.,' informed the cashier of the Newark bank that he would not accept these drafts in his official capacity as secretary. CH. xxxviii.J Banking. 527 " The judgment was in favor of the l^ew York bank. The Pittsburgh bank sued out this writ of error to reverse it." Opinion of the court. Mr. Justice Blatchford delivered the opinion of the court. He stated the facts in the foregoing language, and continued: " The negligence alleged consisted in not obtaining accept- ance of the drafts by the Tea Tray Company, or having them protested for non-acceptance by that company, or giving notice to the plaintiff of such non-acceptance, and in failing to give notice to the plaintiff that the company would not accept the drafts or that Conger would not accept them in his official capacity. " The decision of the Circuit Court proceeded on the ground that, at most, the defendant erred in judgment as to the import of the address on the drafts; that it had no information to qualify or explain such import ; that for it to regard the drafts as addressed to Conger in his individual capacity was not a culpable error, because it followed decisions to that effect made by courts of the highest standing in ITew Jersey and New York and elsewhere; that it exercised intelligent and cautious judg- ment on the information it had ; and that the plaintiff knew who was the intended drawee, as understood between it and the drawers, and ought to have advised the defendant, but failed to do so. (4 Fed. Eep. 20.) " The only question presented by the record is that of the sufficiency of the facts found to support the judgment. " It is contended by the defendant, that its liability, in tak- ing at N^ew York for collection, these drafts on a drawee at Ifewark, extended merely to the exercise of due care in the selection of a competent agent at Newark, and to the transmis- sion of the drafts to such agent, with proper instructions; and that the Newark bank was not its agent, but the agent of the plaintiff, so that the defendant is not liable for the default of the Newark bank, due care having been used in selecting that bank. Such would be the result of the rule established in Mas- 528 Collections by Banks. [tin. xxxviii. sachusetts,** in Maryland,*" in Connecticut, °"' in Missouri," in Illinois,"^ in Tennessee,^' in lowa,^* in Wisconsin. °° " The authorities which support this rule rest on the propo- sition that, since what is to be done by a bank employed to collect a draft payable at another place cannot be done by any of its ordinary officers or servants, but must be entrusted to a sub-agent, the risk of the neglect of the sub-agent is upon the party employing the bank, on the view that he has impliedly authorized the employment of the sub-agent ; and that the inci- dental benefit which the bank may receive from collecting the draft, in the absence of an express or implied agreement for compensation, is not a sufficient consideration from which to legally infer a contract to warrant against loss from negligence of the sub-agent. " The contrary doctrine that a bank receiving a draft or bill of exchange in one State for collection in another State from a drawee residing there, is liable for neglect of duty occurring in its collection, whether arising from the default of its own officers or from that of its correspondent in the other State, or an agent employed by such correspondent, in the absence of any express or implied contract varying such liability, is estab- lished by decisions in ITew York, Allen v. Merchants' Bank, 22 Wend. 215; Bank of Orleans v. Smith, 3 Hill, 560; Mont- gomery County Bank v. Albany City Bank, 3 Selden, 459 ; Commercial Bank v. Union Bank, 1 Keman (11 ISF. Y.) ,203, 212 ; Ayrault v. Pacific Bank, 47 K Y. 570 ; in ISTew Jersey, Titus V. Mechanics' National Bank, 6 Vroom. (35 N. J. L.) 588 ; in Pennsylvania, Wingate v. Mechanics' Bank, 10 Pa. St. <8 Fabens v. Mercantile Bank, 23 62 Mtna. Ins. Co. v. Alton City Pick. 330; Dorchester Bank v. New Bank, 25 111. 221. England Bank, 1 Cush. 177. ss Bank of Louisville v. First Nat. *9 Jackson v. Union Bank, 6 Har. Bank, 8 Baxt. 101. & Johns. 146. 5* Gruelich v. National State Bank, 50 Lawrence v. Stonington Bank, 56 Iowa 434. 6 Conn. 521 ; East Haddam Bank v. ss Stacy v. Dane Co. Bank, 12 Scovill, 12 Conn. 303. Wis. 629. Bi Daly V. Butchers' & Drovers' Bank, 56 Mo. 94. CH. XXXVIII,} _ Battking. 529 104; in Ohio, Eeeves v. State Bank, 8 Ohio St. 465; and in Indiana, Tyson v. State Bank, ■ 6 Blackford, 225. " It has been so held in the second circuit, in Kent v. Dawson Bank, 13 Blatchford, 237; and the same view is supported by Taber v. Perrot, 2 Gall. (TJ. S.) 565, and by the English cases of Van Wart v. Woolley, 3 B. & C. 439 ; s. c, 5 D. & K. 374, and Mackersy v. Eamsays, 9 CI. & Ein. 818. In the latter case, bankers in Edinburgh were employed to obtain payment of a bill drawn on Calcutta. They transmitted it to their cor- respondent in London, who forwarded it to a house in Calcutta, to whom it was paid, but, that house having failed, the bankers in Edinburgh, being sued, were, by the House of Lords, held liable for the money, on the ground that they, being agents to obtain payment of the bill, and payment having been made, their principal could not be called on to suffer any loss occa- sioned by the conduct of their sub-agents, between whom and himself no privity existed. " The question under consideration was not presented in Bank of Washington v. Triplett, 1 Pet. 25 ; for although the defendant bank in that case was held to have contracted directly with the holder of the bill to collect it, the negligence alleged was the negligence of its own officers in the place where the bank was situated. " In Hoover v. Wise, 91 U. S. 308, a claim against a debtor in Ifebraska was placed by the creditor in the hands of a collect- ing agency in INew York, with instructions to collect the debt, and with no other instructions. The agency transmitted the claim to an attorney-at-law in l^Tebraska. The attorney received the amount of the debt from the debtor in Nebraska in fraud of the bankrupt law, and paid it over to the agency, but the money did not reach the hands of the creditor. The assignee in bankruptcy having sued the creditor to recover the money, this court (three justices dissenting) held that the attorney in iN'ebraska was not the agent of the creditor, in such a sense that his knowledge that a fraud on the bankrupt law was being com- mitted was chargeable to the creditor on the ground that the 34 530 Collections by Banks. [ch. xxxvin. collecting agency having undertaken the collection of the debt, and employed an attorney to do so, the attorney employed by it, and not by the creditor, was its agent and not the agent of the creditor; and the creditor was held not to be liable to the assignee in bankruptcy for the money. In the opinion of the court, it is said, that the case falls within the decisions in the above-mentioned cases of Eeeves v. State Bank, 8 Ohio St. 465 ; Mackersy v. Kamsays, 9 CI. & Fin. 818; Montgomery County Bank v. Albany City Bank, 3 Selden 459 ; Commercial Bank v. Union Bank, 1 Kernan 203, and Allen v. Merchants' Bank, 22 Wend. 215 ; and it is said that those cases, the first three of which are stated at length, show ' that where a bank, as a collec- tion agency, receives a note for the purposes of collection, its position is that of an independent contractor, and the instru- ments employed by such bank in the business contemplated are its agent and not the sub-agents of the owner of the note.' The court proceeds to say, that those authorities go far towards establishing the position, that the collecting agency was an inde- pendent contractor, and that the attorney it employed was its agent only, and not in such wise the agent of the defendant as to make the defendant responsible for the knowledge of the attorney in Nebraska. " The court then cites, as a case in point, Bradstreet v. Ever- son, 72 Pa. St. 124, as holding that where a commercial agency at Pittsburgh received drafts to be collected at Memphis, and sent them to its agent at Memphis, who collected the money and failed to remit it, the agency at Pittsburgh was to be regarded as undertaking to collect, and not merely receiving the drafts for transmission to another for collection, and as being liable for the negligence of its agent at Memphis. It also cites, as to the same purport, Lewis v. Peck, 10 Ala. 142, and Cobb v. Becke, 6 Ad. & El. 930. It then says that these authorities fix the rule, before stated, on which the decision is rested. So far from there being anything in that case which goes to exon- erate the defendant in the case at bar, its reasoning tends strongly to aflSrm the principle on which the defendant must b& held liable. Indeed, its language supports the view that the- CH. XXXVIII.] Banking. 531 N^ewark baak, in this case, would not be liable directly to the plaintiff. " If that be so, and the defendant is not liable, the plaintiff is without remedy. " The case of Britton v. NiccoUs, 104 U. S. 757, is cited to show that the defendant is not liable. In that case, the defend- ants, bankers in Natchez, Mississippi, received from the plain- tiff, a resident of Illinois, for collection, two promissory notes, dated at !N"atchez, but not stating any place of payment. They were sent to the defendants through a banking house in Bloom- ington, Illinois, with instructions to collect them, if paid, and, if not, to protest them and give notice to the endorsers. The defendants placed the notes in the hands of a reputable notary in ITatchez to make demand of payment and give notice to the endorsers. It was held that the defendants were not liable foE negligence on the part of the notary, whereby the liability of a responsible endorser was released. The negligence consisted in not presenting the notes to the maker at maturity and de- manding payment. The maker resided twelve or fifteen miles from Ifatchez and had no domicile or place of business in Natchez. No information as to his residence was given to the defendants with the notes, and the plaintiff was ignorant of it. All the instructions which the defendants gave to the notary were given on the several days the notes matured, when they handed the notes to the notary with instructions to demand pay- ment, and, if they were not paid, to protest them and send notice of non-payment to the endorsers. The notary knew where the maker resided and that he had no place of business in Natchez; but he inquired for him at three public places in Natchez, and not finding him, protested the notes for non- payment, and gave notice to the endorsers. The defendants had inquired at Natchez as to the residence of the maker, but had not learned it and had sent notices to him through the post- office there, of the amount and date of maturity of the notes, a reasonable length of time in advance. " On these facts it is apparent that the only question raised, was as to the liability of bankers in Natchez, in respect to a 532 Collections by Banks. [ch. xxxviii. note sent to them for collection, dated at Natchez and not pay- able at any specified place there or elsewhere, for the negligence of a public notary there. The suit was not against the banking house in Bloomington, which was only the agent to transmit the notes to the defendants for collection. The opinion of the court states the question to be as to ' the liability of the collect- ing bankers, for the manner in which the notary to whom the notes are delivered for presentment and protest discharges his duty.' " The court says : " ' The notes being dated at ITatchez, the presumption of law, in the absence of other evidence on the subject, is, that that was the place of residence of the maker, and that he contem- plated making payment there. The duty of the bankers, as collecting agents, was, therefore, to make inquiry for his resi- dence or place of business in that city, and, if he had either, to make there the presentment of the notes, but if he had neither, to use reasonable diligence to find him for that purpose.' " The court then refers to the case of Allen v. Merchants' Bank, 22 Wend. 215, in the Court of Errors of 'New York, as declaring the doctrine that a bank receiving paper for collec- tion is responsible ' for all subsequent agents employed in the collection of the paper,' and states that, though that decision has been followed in New York, and its doctrine has been adopted in Ohio, it has been generally rejected in the courts of other States. " The case of Dorchester Bank v. New England Bank, 1 Cush. 177, is then cited, as holding that if a bank acts in good faith in selecting a suitable sub-agent at the place where the bill is payable, it is not liable for his neglect; and the opinion states that this doctrine has been followed in the Supreme Courts of Connecticut, Maryland, Illinois, Wisconsin and Mis- sissippi. The court, however, does not adopt either of these views, or rest the decision of the case before it on the latter I view. For it proceeds to say: " ' In the New York case, in the Court of Errors, it was conceded that the general liability of the collecting bank might CH. XXXVIII. j Banking. 533 be varied and limited by express agreement of the parties, or by implication arising from general usage ; and, in some of the cases in other States, proof of such general usage of bankers in the employment of notaries was permitted, and a release thereby asserted from liability of the bank for any neglect by them.' " The court then states that there was in the case no proof of any general usage of bankers at Natchez, as to the employ- ment of notaries public in the presentment and protest of notes left with them for collection. But, as there was a statute of Mississippi, passed in 1833, authorizing notaries to protest promissory notes and requiring them to keep a record of their notarial acts in such cases, and making the record admissible in evidence in the courts, as if the notary were a witness, and, as the courts of that State had held (Tiernan v. Commercial Bank, 7 How. (Miss.) 648; Agricultural Bank v. Commercial Bank, 7 Smedes & Marshall, 592 ; Bowling v. Arthur, 34 Mis- sissippi 41), under that statute, that it was a part of the duty of the notary, when protesting paper, to give all notices of dishonor required to charge the parties to it, and that a bank receiving commercial paper as an agent for collection, properly discharged its duty, in case of non-payment, by placing the paper in the hands of such notary, to be proceeded within such manner as to charge the parties to it, and that the bank was not liable in such case, for the failure of the notary to perform his duty, the court says, that, ' judged by the law of Mississippi,' the defendants ' discharged their duty to the plaintiff when they delivered the notes received by them for collection to the notary public,' and adds : ' What more could they have done, as intelligent and honest collecting agents, desirous of per- forming all that was required of them by the law, ignorant as they were of the residence or place of business of the maker of the notes, and having unsuccessfully made diligent inquiry for them ? ' " It further says : ' The notary was not, in this matter, the agent of the bankers. He was a public officer whose duties were prescribed by law ; and when the notes were placed in his 534 Collections by Banks. [ch. xxxviii. hands in order that such steps should be taken by him as would bind the endorsers if the notes were not paid, he became the agent of the holder of the notes. For any failure on his part to perform his whole duty, he alone was liable.' " On these grounds the court held that the defendants were not guilty of negligence and were not liable for the negligence of the notary. The decision was not placed on any general rule of commercial law, but rested on the fact that the notary was a public officer with duties prescribed by statute, and has no application to the case at bar. No reference was made to the case of Hoover v. Wise, nor any suggestion that the views stated in the opinion in that case were doubted or dissented from. There is, in the case at bar, no negligence of a notary, or of a public officer, or of any person whose duties or func- tions are prescribed by statute ; and the question of the liability of the defendant is to be determined on principles not involved in the actual decision in Britton v. NiccoUs. " The question involves a rule of law of general application. Whatever be the proper rule, it is one of commercial law. It concerns trade between different and distant places, and, in the absence of statutory regulations or special contract or usage having the force of law, it is not to be determined according to the views or interests of any particular individuals, classes or localities, but according to those principles which will best promote the general welfare of the commercial community. Especially is this so when the question is presented to this tribunal, whose decisions are controlling in all cases in the Federal courts. " The agreement of the defendant in this case was to collect the drafts, not merely to transmit them to the Newark bank for collection. This distinction is manifest; and the question presented is, whether the Newark bank, first receiving these drafts for collection, is responsible for the loss or damage re- sulting from the default of its Newark agent. There is no statute or usage or special contract in this case to qualify or vary the obligation resulting from the deposit of the drafts with the New York bank for collection. On its receipt of the cH. xxxvin.] Banking. 535 drafts, under these circumstances, an implied undertaking by it arose to take all necessary measures to make the demands of acceptance necessary to protect the rights of the holder against previous parties to the paper. From the facts found, it is to be inferred that the New York bank took the drafts from the plaintiff as a customer in the usual course of busi- ness. There are eleven drafts in the case, running through a period of over three months, and the defendant had pre- viously received from the plaintiff two other drafts, accept- ances of which it had procured from Conger at Newark, through the Newark bank. The taking by a bank, from a customer, in the usual course of business, of paper for collection, is sufficient evidence of a valuable consideration for the service. The gen- eral profits of the receiving bank from the business between the parties, and the accommodation to the customer, must all be considered together and form a consideration, in the absence of any controlling facts to the contrary, so that the collection of the paper cannot be regarded as a gratuitous favor. Smedes V. Bank of Utica, 20 Johns. 372, and 3 Cowen 662; McKinster V. Bank of Utica, 9 Wend. 46; affirmed in Bank of Utica v. McKinster, 11 Wend. 473. The contract, then, becomes one to perform certain duties necessary for the collection of the paper and the protection of the holder. The bank is not merely appointed an attorney authorized to select other agents to collect the paper. Its undertaking is to do the thing, and not merely to procure it to be done. In such case, the bank is held to agree to answer for any default in the performance of its contract ; and, whether the paper is to be collected in the place where the bank is situated, or at a distance, the contract is to use the proper means to collect the paper, and the bank, by employing sub-agents to perform a part of what it has con- tracted to do, becomes responsible to its customer. This general principle applies to all who contract to perform a service. It is illustrated by the decision of the Court of King's Bench, in Ellis V. Turner, 8 T. R. 531, where the owners of a vessel carried goods to be delivered at a certain place, but the vessel passed it by without delivering the goods, and the vessel was 536 Collections by Banks. [ch. xxxtiii. sunk and the goods were lost. In a suit against the owners for the value of the goods, based on the contract it was con- tended for the defendants that they were not liable for the misconduct of the master of the vessel in carrying the goods beyond the place. But the plaintiff had judgment, Lord Kenyon saying that the defendants were answerable on their contract, although the misconduct was that of their servant, and adding : ' The defendants are responsible for the acts of their servant in those things that respect his duty under them, though they are not answerable for his misconduct in those things that do not respect his duty to them.' " The distinction between the liability of one who contracts to do a thing and that of one who merely receives a delegation of authority to act for another is a fundamental one, appli- cable to the present case. If the agency is an undertaking to do the business, the original principal may look to the im- mediate contractor with himself, and is not obliged to look to inferior or distant under-contractors or sub-agents, when de- faults occur injurious to his interest. " Whether a draft is payable in the place where the bank receiving it for collection is situated, or in another place, the holder is aware that the collection must be made by a com- petent agent. In either case, there is an implied contract of the bank that the proper measures shall be used to collect the draft, and a right, on the part of its owner, to presume that proper agents will be employed, he having no knowledge of the agents. There is, therefore, no reason for liability or exemption from liability in the one case which does not apply to the other. And, while the rule of law is thus general, the liability of the bank may be varied by consent, or the bank may refuse to undertake the collection. It may agree to re- ceive the paper only for transmission to its correspondent, and thus make a different contract, and become responsible only for good faith and due discretion in the choice of an agent. If this is not done, or there is no implied understanding to that effect, the same responsibility is assumed in the under- taking to collect foreign paper and in that to collect paper CH. XXXVIII. J Banking. 537 payable at home. On any other rule, no principal contractor would be liable for the default of his own agent, where from the nature of the business, it was evident he must employ sub-agents. The distinction recurs between -the rule of merely personal representative agency and the responsibility imposed by the law of commercial contracts. This solves the difficulty and reconciles the apparent conflict of decision in many cases. The nature of the contract is the test. If the contract be only for the immediate services of the agent, and for his faithful conduct as representing his principal, the responsibility ceases with the limits of the personal services undertaken. But where the contract looks mainly to the thing to be done and the under- taking is for the due use of all proper means to performance, the responsibility extends to all necessary and proper means to accomplish the object, by whomsoever used. " We regard as the proper rule of law applicable to this case, that declared in Van Wart v. WooUey, 3 B. & C. 439, where the defendants, at Birmingham, received from the plain- tiff a bill on London, to procure its acceptance. They for- warded it to their London banker and acceptance was refused, but he did not protest it for non-acceptance or give notice of the refusal to accept. Chief Justice Abbott said : " ' Upon this state of facts it is evident that the defendants (who cannot be distinguished from, but are answerable for, their London correspondent) have been guilty of a neglect of the duty which they owed to the plaintiff, their employer, and from whom they received a pecuniary reward for their ser- vices. The plaintiff is, therefore, entitled to maintain his action against them, to the extent of any damage he may have sustained by their neglect.' " In that case there was a special pecuniary reward for the service. But, upon the principles we have stated, we are of opinion that, by the receipt by the defendant of the drafts in the present case for collection, it became, upon general prin- ciples of law, and independently of any evidence of usage, or of any express agreement to that effect, liable for a neglect 538 COLLECTIOITS BY BaHKS. [CH. XXXVIII. of duty occurring in that collection from the default of its correspondent in ^Newark. " What was the duty of the defendant, and what neglect of duty was there? An agent receiving for collection, before maturity, a draft payable on a particular day after date, is held to due diligence in making presentment for acceptance, and, if chargeable with negligence therein, is liable to the owner for all damages he has sustained by such negligence. Allen V. Suydam, 20 Wend. 321 ; Walker v. Bank of the State of New York, 5 Selden 582. The drawer or endorser of such a draft is, indeed, not discharged by the neglect of the holder to present it for acceptance before it becomes due. Bank of Washington v. Triplett, 1 Pet. 25, 35 ; Townsley v. Sumrall, 2 Pet. lYO, 178. But, if the draft is presented for acceptance and dishonored before it becomes due, notice of such dishonor must be given to the drawer or endorser, or he will be dis- charged. 3 Kent's Comm. 82 ; Bank of Washington v. Triplett, 1 Pet. 25, 35; Allen v. Suydam, 20 Wend. 321; Walker v. Bank of the State of New York, 5 Selden 582; Goodall v. DoUey, 1 T. K. 712 ; Bayley on Bills, 2d Am. ed. 213. More- over, the owner of a draft payable on a day certain, though not bound to present it for acceptance in order to hold the drawer and endorser, has an interest in having it presented for acceptance without delay, for it is only by accepting it that the drawee becomes bound to pay it, and, on the dishonor of the draft by non-acceptance, and due protest and notice, the owner has a right of action at once against the drawer and endorser, without waiting for the maturity of the draft; and his agent to collect the draft is bound to do what a prudent principal would do. 3 Kent's Comm. 94; Robinson v. Ames, 20 Johns. 146; Lenox v. Cook, 8 Mass. 460; Ballingalls v. Gloster, 3 East 481; Whitehead v. Walker, 9 M. & W. 506; Walker v. Bank of the State of JSTew York, 5 Selden 582. " In view of these considerations, it is well settled that there is a distinction between the owner of a draft and his agent, in that though the owner is not bound to present a draft payable at a day certain, for acceptance, before that day, the agent CH. xxxviii.] Backing. 539 employed to collect the draft must act with due diligence to have the draft accepted as well as paid, and has not the dis- cretion and latitude of time given to the owner, and, for any unreasonable delay, is responsible for all damages sustained by the owner. 3 Kent's Comm. 82 ; Chitty on Bills, 13th Am. ed. 272, 273. " The defendant being thus under an obligation to present the drafts for acceptance, and having, in fact, presented them, through the I^ewark bank to Conger, the secretary of the company, was found not to take the acceptances it did, but to treat the drafts as dishonored. The plaintiff was, at least, entitled to an acceptance in the terms of the address on the drafts. Walker v. Bank of the State of 'New York, 5 Selden 582. The defendant had notice from the description of the drafts by the words ' Newark Tea Tray Co.,' in the letters sending them for collection, that the plaintiff regarded the drafts as drawn on the company ; and the defendant recognized its knowledge of the fact that the drafts were drawn on the company, by describing them by the words ' Newark Tea Tray Co.,' in its letters to the Newark bank, in every instance but two. If, on the face of the drafts, the address was ambiguous, it was not for the defendant to determine the question, as against the plaintiff, by taking an acceptance which purported to be the acceptance of Conger individually, especially in view of the information it had by the words ' Newark Tea Tray Co.,' in the letters sending the drafts to it for collection. " It appears that the drafts were discounted by the plaintiff as drafts on the company, and, if it could have had an accept- ance in the terms of the address, it would, in a suit against the company, have been in a condition to show who was the real acceptor. But, with the information given to the Newark bank by Conger, while that bank had in its hands for accept- ance drafts drawn in the same form as those here in question, that he would not accept such drafts in his official capacity as secretary, the Newark bank chose to take acceptances individual in form. This was negligence, for which the defendant is liable to the plaintiff in damages, no notice of dishonor having been 640 Collections by Banks. [ch. xxxviii. given. The defendant was bound to give such notice to the plaintiff. Walker v. Bank of the State of New York, 5 Selden 582. " The question as to whether the company would have been liable on the drafts, if they had been accepted in the terms of the address, is not one on the determination of which this suit depends ; nor do we find it necessary to discuss the question as to whether, on the face of the drafts, the company or Conger individually is the drawee. The very existence of the am- biguity in the address, and of the question as to whether the company would be liable on an acceptance in the terms of the address, is a cogent reason why the defendant should not be allowed, without further communication with the holder, to do acts which may vary the rights of the holder, without responding in damages therefor. The risk is on the defendant and not on the plaintiff. " It is, therefore, plain that the judgment must be reversed. But judgment cannot be now rendered for the plaintiff for damages. There must be a new trial. Although there is a special finding of facts, it does not cover the issue as to dam- ages. No damages are found. The action is one for negli- gence, sounding in damages. Although the complaint alleges that the drawers and the endorser are discharged for want of notice of non-acceptance, and though it is found that the drawers were in good credit when the drafts were discounted, and that the drawers and endorser had become insolvent by the 13th and 19th of October, 1875, there is nothing in the find- ing of facts on which to base a judgment for any specific amount of damages. On the new trial, that question will be open, and we do not intend to intimate any opinion on the subject." The States that sustain the rule that the initial bank is liable to the owner of the paper are given in the order hereinafter set forth, with citations of cases rendered by the courts of the various States. New York. — National Eevere Bank v. National Bank of Kepublic, 172 N. Y. 102 ; Kirkham v. Bank of America, 165 CH. XXXVIII.J Banking. 541 N. Y. 132, 58 ]Sr. E, T53j Castle v. Corn Exchange Bank, 148 N. Y. 122, 42 ]Sr. E. 518; St, Mcholas Bank v. State National Bank, 128 JST. Y. 26, 27 N. E. 849 ; ISTaser v. Eirst JSTational Bank, 116 'E. Y. 492; Commercial Bank of Penn. v. Union Bank of N, Y., 11 N. Y. 203; Allen v. Merchants' Bank, 22 Wend. (N. Y.) 215. See McBride v. 111. National Bank, 121 N. Y. S. 1041. New Jersey. — Titus v. Mechanics' National Bank, 35 N. J. Law 588. Ohio.— Beeves v. State Bank, 8 Ohio St. 466. Georgia. — Bailie v. Augusta Savings Bank, 95 Ga. 277, 21 S. E. 717. Michigan. — Simpson v. Waldby, 63 Mich. 439, 30 N. W. 199. Minnesota. — Streissguth v. National German- American Bank, 43 Minn. 50. Montana. — Power v. Eirst National Bank of Ft. Benton, 6 Mont. 251. LouisiarbO. — See Martin v. Hibernian Bank and Trust Co., 127 La. 301. North Dakota. — The statute fixes the liability in this State, but in the absence of such a statute, the court evidently sustains the rule. Commercial Bank v. Bed Eiver Valley National Bank, 8 N. Dak. 382, 79 N. W. 759. Colorado. — German National Bank of Denver v. Burns, 12 Colo. 539. Texas. — Schumacher v. Trent, 18 Tex. Civ. App. 17, 44 S. W. 460 ; State National Bank of Et. Worth v. Thomas Mfg. Co., 17 Tex. Civ. App. 214, 42 S. W. 716. Indiana. — Tyson v. State Bank of Indiana, 6 Blaekf. (Ind.) 225; American Express Co. v. Haire, 21 Ind. 4. The general rule that the initial bank is liable for all de- faults of its agents in many of the States is modified and is stated as follows : The initial hanle, if it selects as its agent one who is competent and worthy of trust, and transmits the paper to him, its duty is done, and the owner of the collection must looh to the sub-agent for any default of which he is guilty. 542 Collections by Banks. [ch. xxxviii. The States sustaining this rule are: California. — The rule in California is not stated with the same precision and accuracy of language, but in effect it is as follows: That the initial bank is bound to exercise reasonable care and diligence in the employment of its sub-agents; and, if in the employment and in making the collection the course usually taken by -banks is followed, the initial bank is not negligent. The holding of the court substantially supports the rule as stated. Davis, Respondent, v. First Nat. Bank of Fresno, 118 Cal. 600 ; Smith v. National Bank, 191 Fed. 226 ; 190 Fed. 318; 132 Fed, 187. Connecticut. — Bank v. Scovell, 12 Conn. 303; Lawrence v. Stonington Bank, 6 Conn. 521. Illinois. — Fay v. Strain, 32 111. 295 ; Waterloo Mining Co. V. Kuenster, 158 111. 259, 41 N, E. 906; Drovers' National Bank v. Anglo-American P. & P. Co., IIY 111. 100 ; Anderson V. Alton National Bank, 59 El. App. 587 ; Carlinville National Bank v. Wilson, 78 111. App. 339, 58 N. E. 250. Iowa. — Guelich v. National State Bank, 56 la. 434, 9 N. W. 328. Kansas. — Linsbourg Bank v. Ober, 31 Kan. 599, 3 Pac, 324. Maryland. — Citizens' Bank v. Howell, 8 Md. 530. Massachusetts. — Warren Bank v. Suffock, 10 Cush. (Mass.) 582; Fabins v. Mercantile Bank, 23 Pick. (Mass.) 330. Mississippi. — Louisville Third National Bank v. Vicksburg Bank, 61 Miss. 112. Missouri. — Daly v. Butchers' Bank, 56 Mo. 94. Nebraska. — Omaha First National Bank v. Moline First National Bank, 55 Neb. 303 ; First National Bank of Pawnee City V. Sprague, 34 Neb. 318, 51 N. W. 846. Pennsylvania. — Hazlet't v. Commercial National Bank, 132 Penn. St. 118; Wingate v. Mechanics' Bank, 10 Penn. St. 104; Bradstreet v. Emerson, 72 Penn. St. 124, 13 Am. Eep. 665. Tennessee. — Second National Bank v. Cummings, 89 Tenn. 609, 35 Am. Eep. 691 ; Givan v. Bank of Alexandria (Tenn. Ch. 1898), 52 S. W. 923. CH. XXXVIII.J Eanking, 543 Wisconsin. — Stacy v. Dane County Bank, 12 Wis. 629. North Carolina. — Planters' & iFarmers' National Bank of Baltimore v. First ll^ational Bank of Wilmington, 75 N. C. 534; Bank v. Floyd, 142 K 0. 187. Kentucky. — Farmers' Bank & Trust Co. v. Newland, 97 Ky. 464 ; Falls City Woolen Mills v. Louisville ITational Bank- ing Co., 145 Ky. 64. The rule in South Dakota is that where a regular customer having an understanding with the bank that outside checks not paid should be charged back will not be liable for the loss of the proceeds, for loss by its agent in the absence of fraud or negligence on the part of the bank as the depositor by implica- tion authorized the collection through sub-agents. (Faucet v. Bank, 24 So. Dak. 248.) § 286. Review of decisions. In a review of the decisions we find that the rule which is established in the State of Masachusetts is, that when an initial bank transmits a collection with proper instructions to a repu- table and proper agent where the collection is to be made, it has performed its duty, and is not responsible for the laches, defaults or negligence of the correspondent. The owner of the collection may sue the last collecting bank. (Lord v. Hingham National Bank, 186 Mass. 161.) This rule, as we have seen, is (with some unimportant variations in language) sustained and held to be the law in the States of California, Connecticut, Illinois, Iowa, Kansas, Maryland, Mississippi, Missouri, Nebraska, Pennsylvania, Tennessee, Wisconsin, Kentucky and North Carolina. The general rule, which may be said to be the New York rule, is as previously stated, that the initial bank is responsible for the negligence, laches and defaults of its correspondents. This rule is confirmed as the law by the Supreme Court of the United States and by the following States: New York, New Jersey, Ohio, Georgia, Michigan, Minnesota, Montana, South Dakota, Colorado, Texas, Indiana and the Federal courts discussing the question. 644 Collections by Banks. [ch. xxxviii. The . Supreme Court of New York presents its reasons in support of the rule upon the ground " that a contract to do the business covers all the means employed." The Supreme Court of the United States embodies its posi- tion in support of the principle and the rule in the following language. It says, " That the distinction between the liabilities of one who contracts to do a thing and that of one who merely receives a delegation of authority to act for another is a funda- mental one. * * * If the agency is an undertaking to do the hvMness, the original principal may looTe to the immediate contractor with himself, and is not obliged to looTc to inferior or distant under-contractors or sub-agents when defaults occur injurious to his interest. * * * The nature of the contract is the test." With this reasoning in view, a bank that receives a note for collection without entering into a special contract particularly, specifying that it will not be held responsible for the laches and defaults of its agents who may subsequently be engaged to act, is held responsible to the owner of the collection. Therefore, a bank desiring to limit its liability, located in a State where the courts uphold this rule, should, before undertaking to collect for the owner of the collection (if it desires to avoid liability as an agent), enter into a contract with the owner of the paper limiting its liability to place for collection, the paper into the hands of reputable and reliable sub-agents. A special agreement entered into will control the rights and liabilities of the parties.'^^ Where there is a general understanding or custom it will control." The Supreme Court of the State of Michigan in the case of Simpson v. Waldby, 63 Mich., p. 451, says: If I leave an endorsed note against persons in my own town 06 Exchange National Bank of (C. C. A.) Ill, 128; McBride v. Pittsburgh v. Third National Bank Illinois National Bank, 121 N. Y. S. of New York, 112 U. S. 276; Call- 1041. fornia National Bank of Saera- s' Morris Miller Co. v. Von Pres- mento v. Utah National Bank sentin, 63 Wash. 74. cH. xxxviii.J Banking. 545 for collection, and consequent demand and protest, I know that some agent or employee of the bank will do the work or some part of it and I do not inquire who will do it. I contract, how- ever, with the bank that suitable agents will be employed and hold it responsible for their acts. * * * jy^ f}iey wish to avoid such responsibility, it is very easy for them to accept such business only upon a special agreement as to their duties and ■ liabilities. Failing to do this, I think they must, in taking such bills and drafts, be responsible as other business men are, for the misconduct of their selected agents at home or abroad." § 287. When correspondent bank liable to initial bank. Conceding the rule holding the collecting or initial bank liable to the holder of the collection for defaults of its agents, to be the law, the correspondent bank must be held liable to the initial bank for its default or negligence. The authorities supporting the general rule of the initial bank's liability apply here.°* The correspondent bank is liable to the initial bank for the negligence of the agents employed by it, and it is held in the case of IJ^ational Pahquioque Bank v. First itfational Bank of Bethel, 36 Conn. 325, that where the cashier of the defendant bank received notes, drafts and checks for collection from the initial bank, that he had ostensibly power and that it was his duty to collect the same, or to protest and return them. Fail- ing to do either, he made the bank liable to the initial bank for their amount.^® § 288. Where paper total loss. Where a draft or note is endorsed to a bank for collection by blank or general endorsement, and it undertakes to collect 68 Exchange Nat. Bank of Pitla- 35 N. J. Law 588; McBride v. burgh V. Third Nat. Bank of New Illinois Nat. Bank, 121 N. Y. S. York, 112 U. S. 276; Simpson v. 1041; Citizens' Bank and Trust Co. Waldby, 63 Mise. 439, 30 N. W. v. Thornton, (C. C. A.) 174 Fed. 199; Ayrault v. Pacific Bank, 47 Eep. 752. N. Y. 570; Streissguth v. National oq Merchants' Bank of Baltimore Grerman-American Bank, 43 Minn. v. Bank of Commerce, Use of Hofl- 50; Titus v. Mechanics' Nat. Bank, man, 24 Md. 12, 52. 35 546 Collections by Banks. [ch. xxxviii. the same and employs an agent, if the instrument is lost through negligence, by the agent of the initial hank, the owner may look to the initial bank; and the initial bank may look to its correspondent. The measure of recovery, when there is a total loss, is the face value of the paper. Where it appears that a note entrusted to an express com- pany was lost through negligence, the injury is the same as' if it had been converted.*" § 289. Sight of creditors to proceeds of collection. The rights of a creditor of the owner of the collection to garnishee the proceeds, while yet remaining in the initial or collecting bank, depends upon the law or the statute of the State. The general rule is, that when the collection is in the hands of the initial bank as the property of the owner of the col- lection, and such facts can be established, it is subject to gar- nishment or attachment. In the State of Georgia, the rule is laid down as follows: " Where the payee of a bill of exchange by endorsing it ' for deposit to the credit of ' himself, he retains ownership not only of the bill but of its proceeds until they are so disposed." The collection of proceeds which under, the rule as stated may be liable to garnishment or attachment; but, if the initial bank has allowed the owner to draw against the same while the collection is in the hands of a correspondent bank for col- lection, neither the bank itself nor the proceeds would be liable to garnishment in the hands of the correspondent, for the reason that the initial bank has acquired a title thereto by allowing the endorser to draw against the same. § 290. Insolvency of initial or corresponding bank affecting pro- ceeds of collection. If the initial bank becomes insolvent while holding the pro- ceeds of a collection, the owner of the collection is either a «o American Express Co. v. Par- Nat. Bank v. Kiper (Neb.), 82 sons, U III. 312; Omaha (Neb.) K. W. 102. OH. xxxviii.] Ban-king. 647 general or special depositor. If the funds have been passed to his credit after collection by his instructions, he becomes a general creditor of the bank. If the proceeds of the collection are not passed to his credit under instruction, and the bank becomes insolvent while hold- ing such funds, they become a special deposit or trust funds and the bank or its assignee or receiver must pay the claim in fuU. If the collecting bank becomes insolvent while holding the proceeds of the collection, the owner of the collection in the States which hold the initial bank liable to the owner, is not affected by the insolvency of the corresponding bank. He may look to the initial bank. The rule as laid down by the Supreme Court of the State of Kentucky is as follows : " When a bank receives a draft or note for collection on ac- count or which is the same collection and credit, it does not owe the amount until collected; and though credit be given there- for prior to collection, the bank is not precluded from can- celing such credit which is regarded as only provisional, if the paper is dishonored. On the other hand, the owner of the paper is at liberty to treat the bank as an agent until the pro- ceeds are collected by the bank in money, and an entry of credit by the bank before it has actually received the money, will not bind the owner. Therefore, when the bank has entered the credit and then gone into the hands of a receiver before it has actually received the money from another bank to which it transmitted the paper for collection, the real owner may re- cover from the latter bank the proceeds still in its hands. ]!^either the receiver nor the creditors of the bank which trans- mitted the paper for collection have any right to the money. A mere usage between banks, whereby the collecting bank credits the transmitting bank with the amount collected instead of remitting, is not sufficient to deprive the real owner of his rights." 548 Collections by Banks. [oh. xxxviii. § 291. Collection completed, when. A collection is not completed by the bank until the owner is paid in money. The payment of negotiable paper can only be paid with money. Where an agent is employed to make a collection, he cannot accept anything but money in payment. His principal, how- ever, may authorize him to accept something else. Where a bank holding notes for collection, without authority from the principal, accepted other notes of the maker, payable to the bank for the principal sum, and credited the bank's ac- count of the payee therewith, surrendering the notes, and no credit was given the aocoimt of the payer of the notes as for borrowed money, and no cash passed, and the bankers ab- sconded, and the owner of the surrendered notes brought suit against the maker, it is held that no payment had been made and the ovraer could recover.*^ Where a correspondent bank informs the initial bank that a draft sent to it for collection has been paid by the drawee giving his check therefor, and the initial bank thereupon gives credit to the owner of the draft, it cannot afterward, upon failure of the correspondent bank to collect the check, cancel the credit.*^ The Supreme Court of the State of Illinois, in the case of Eidgely Bank v. Patton and Hamilton, 109 HI. 479, in dis- cussing the question as to the right of a banker to apply money on deposit to the payment of a note payable at the bank, without the order of the depositor, says, " clearly a banker has no right to apply money on deposit to the payment of a note of the depositor payable at the bank, without the order of the depositor." (41 HI. 267.) Payment to the initial bank's correspondent, in the States holding the initial bank liable directly to the holder, is pay- ment to the initial bank to which the holder may look.'* •1 Scott V. Gilkey, 153 111. 168, «« Eeeves, Stephens & Ctt. v. State 39 N. E. 265. Bank of Ohio, 8 Ohio St. 466. 82 Kirkham v. Bank of America, 165 N. Y. 132, 58 N. E. 753. CH. XXXVIII.J Banking. 549 A case reported in 1842 by the Supreme Court of the State of New York, holds that where a bank at Troy received a note for collection, payable at Buffalo, which was sent to a bank of Orleans for collection, whence it was transmitted to a bank in Buffalo, the cashier of the bank of Orleans, acting under the mistaken supposition that the money due on the note had been collected and deposited to the credit of his bank, paid the amount to the bank at Troy, which bank paid it over to the holder; the bank of Orleans having parted with the money under a plain mistake of fact, held, that it might maintain an action for it directly against the holder. What is payment? See Pollock Bros. v. Niall Herrin Co., 137 Ga. 23. § 292. Bank's liability for negligence in failing to make collec- tions. The general rule is, than in an action against a bank for negli- gence in failing to collect an instrument sent to it for collection, the burden of proof rests on the plaintiff to show that the drawee was solvent, and the draft collectible ; and that the loss was due to negligence. Where a bank holds a draft according to its custom or the customary method of business for ten days without notice to the drawer, and during which time the drawee makes an assignment, held, that it does not in itself, constitute such negligence as will make the bank liable to the drawer."* Such a custom would not excuse the bank from liability, where it became necessary to bind an endorser or other party to the instrument ; notice in such case is essential and must be given in a fixed time. ITegligence must result in loss to the owner of the paper.'" Collection — Relation of cestui que trust and trustee. When this relationship exists, by one who deposits drafts for collection, the proceeds can be recovered from a receiver after insolvency, if they can be traced and identified. «* Sahlien et al. v. Bank of Ion- os Finch et al. v. Karste et al., 56 oke, 16 S. W. 373. N. W. 123. 650 CoLLECTioirs by Banks. [oh. xxxviii. A recent and very important case discussing this question is the American Can Co. v. Williams (Circuit Court of Ap- peals, 2nd Circuit, March 7, 1910), 178 Fed. Eep. 420. The court says, in discussing the rule : " While the right to follow the misapplied moneys as trust funds into the hands of a receiver has been extended in the modern decisions, there has never been, in the Federal courts, a departure from the principle that there must be some identification of the property followed with the trust funds." Where a collection is made by a bank, and it retains the proceeds of the collection, it will be deemed to be the agent and trustee of the owner of the check, and the money so wrongfully retained, if the bank is charged with notice, is a trust fund ; which the owner may follow and reclaim. Identification of the collection in such a case may be impossible. If the same is charged with a trust, the cestui que trust will be entitled to have the same taken out of the Assets with which it is mingled. °° The commingling of such a deposit with the usual and ordi- nary deposits does not make it a general deposit.*' The fact that a trustee deposits a check payable to him as such in his personal account is not notice to the bank of trustee acting dishonestly.'' 86 Bank v. Bank, 62 Kan. 788. <>8 Bachelder v. Central National °7 Mitchell r. Bank of Indianola, Bank of Boston, 188 Mass. 25. 98 Miss. 658. CHAPTER XXXIX. SAVINGS BANES. ' § 293. General discussion — Nature. Savings banks were originally mutual in principle, eleemosy- nary in character. They were organized for the purpose of stimulating and fixing the habit of saving with the poor. They acted as fiduciary agents, only for those whose limited means or incompetency in some direction forbade the making of their own investments. Only clerical services were compensated by salaries. The legislative functions and the power of making investments wer6 lodged in a board of trustees. The members often lacking financial knowledge and experience serving without pay, the services rendered being as usual where the public is the recipi- ent, careless and perfunctory with the result, savings institu- tions came frequently to grief, involving considerable partial losses to depositors. In the course of time it was found that the scope of savings banks must be enlarged and that they must cease to be local, that deposits from a distance must be received, that investments must be sought away from home, and that provisions must be made for the receipt and caring for money of estates and of trust funds in considerable amounts. Then it was that the weakness of the old machinery became apparent and it dawned on the public that savings banks must be under the control and active supervision of those experienced in matters of finance, and who had a personal and pecuniary interest in the welfare of the institutions under their charge, beyond the question of mer^ employment and salaries. The result has been capitalized sav- ings banks ; particularly is this the case on the western coast of America. [551] 552 Savijstgs Banks, [ch. xxxix. Savings banks tinder the laws as previously stated are or may be of two classes, namely: Mutual associations or capital stock carporations. The mutual bank is organized without capital stock and for the sole purpose of accumulating, holding, and loaning the funds of their members. They are designated as institutions for the deposit and safe keeping of money, and the profits, if any, arising from the investment of such deposits, are annually or semi-annually paid to the depositors. Where the statute authorizes the incorporation of such sav- ings banks (without capital stock) neither by terms or implica- tion will the law permit the bank to conduct any other than a savings bank business. No corporation can, by law, engage in any business other than that expressly authorized by the law and its charter. The purpose of this provision of the law is obvious. If it is a mutual savings bank it cannot derive power by impli- cation or otherwise to enter into or engage in any business except wholly in the interest of its members. And the statute when it imposes duties to be performed directing the class or kind of securities which it may hold or invest in is mandatory. The limitations and powers when imposed upon the mana- gers or officers of such institutions by the statute must be strictly complied with, and the officers in such cases acting for such associations become trustees. The laws providing that the deposits may be loaned and invested (especially if it direct that they or a certain propor- tion of the same shall be invested in securities of a definite character) makes the managers or officers who direct and auth- orize such investments trustees, and as such they are held to the strictest account. If the statute making these provisions is violated, the officers or trustees become personally responsible, and they should be held to suffer. The statute directs the powers and limitations in the conduct and management of savings banks. The prohibitions and limi- tations fixed against the officers and directors of savings banks, forbidding them from borrowing any of the deposits or other funds of such corporation fully establishes the principle thai; OH. xxxtx.] Bai^king. 653 they are acting as trustees, and it is a well-established principle of law that trustees cannot personally use, in any manner, either directly or indirectly, the funds of their principal, either for profit or otherwise. They cannot make profit from them. Therefore it is the duty of directors and trustees of such corpo- rations to strictly comply with the law while they act in such positions and relationship with their depositors. As stated, when a savings institution is incorporated without capital stock, they are merely places of deposit where money can be left to remain or to be taken out at the pleasure of the owner, and under such terms as may be stipulated in the by-laws and agreed upon between the parties. In such a case the assets consist in loans of money made by them for the benefit of the members or depositors from whom the money was derived. In case of loss, they have no property out of which it can be paid, and the loss is apportioned pro rata among the depositors. A mutual savings bank, having no stock, it receives the money of depositors for investment, and invests it in securities taken for the general benefit of all the depositors. When the bank is incorporated, without capital stock, it becomes merely, an incorporated agency for receiving and loaning money on account of those to whom the money belongs. After the necessary expenses are paid for its management, the interest received upon the investments is to be ratably divided among the depositors. The trustees and officers, in the absence of fraud or peculation of the funds of such bank, have no personal liability. A savings bank, incorporated for the sole purpose of receiving and investing the deposits and all the earnings of the bank other than those which go to the payment of the necessary expenses, belong to the depositors ratably. Such is the nature of a mutual savings association. Savings bank incorporated with capital stock are very differ- ent from the mutual association. In such a bank the stock of the corporation becomes a security to the depositors in case of loss. The trustees or directors in a corporation organised 554 Savings Banks. [oh. xxxix. with capital stock are also held and bound by the same law iu relation to the funds entrusted to them as are the trustees in a mutual association. And if the bank is organized with a single purpose, namely, to conduct a savings hank business, kaving a capital stock does not give it a power to conduct a commercial banking business. Where the statute by special act provides for the incorpora- tion of a capitalized savings bank, defining its duties and powers, it is confined in its operations and powers to the pro- visions of the law creating it. It cannot obtain through its charter greater powers than those authorized by the act or the law authorizing its creation and defining its privileges. There is no special provision of law enacted by Congress authorizing a savings bank to be conducted in connection with or independent of a national bank, but it is contended by those holding liberal views upon the National Banking Laws that under the broad authority of a bank to " receive deposits " and having the authority to contract in what manner they may be received, and to whom paid, that such incidental and implied powers to receive deposits gives a national bank the broader power to have a savings department and agree to pay interest on such deposits. That this privilege can be granted by the Comptroller of the Currency and that such powers are vested in his office there can hardly be any question. National banks being prohibited from investing their deposits in loans upon real estate would estop a savings department of the bank from making such loans, but there seems to be no good reason prohibiting a savings department of a national bank because such loans cannot be made. Commercial loans are con- sidered to be the safest and most desirable securities to a bank, and as such would be solvent security for a savings bank. If such authority is conceded to exist in the Comptroller of the Currency authorizing a national bank to open such departments, their government, management, and control would be under such rules and regulations as might be enacted by him. It has long been contended that there exists against national banks a restriction in loaning money upon real estate which CH. XXXIX.J Banking, 555 should be removed, and if savings departments were duly authorized by law with power to accept directly real estate security, all national banks having savings departments would not in any way, directly or indirectly, attempt to evade the law prohibiting them from accepting real estate loans. But as the law now stands under a strict construction thereof, national banks have no power to establish a savings department. § 294. State regulation of business. Most of the States have enacted special laws authorizing the formation by incorporation of savings banks. Where such laws are enacted, they generally define the duties and powers of the corporation, prescribing how investments are to be made, and the class of securities which the associatipns may loan money on or hold. Where the statute does not especially provide that a savings association shall have capital stock it may be incorporated with- out capital, and when incorporated in this manner, it is defined to be a mutual savings association. Where the statute prescribes that no bank shall be incorpo- rated within a State without capital stock, and fixes the amount of capital which it must have to entitle it to do business in certain cities and towns, composed of a certain number of inhabitants, a mutual savings bank or association without capi- tal stock, under the provisions of such a statute cannot exist or be incorporated. Such a law is one of prohibition, and its constitutionality may be questioned, upon the ground that no State has the right to prohibit (by imposing a capital to be used in business by) a person or any number of persons from forming themselves together for the purpose of conducting a lawful occupation or business, especially where the business to be conducted is mutual and confined to its members and purely for their benefit. Can a mutual savings bank be denied the right to do business ? A lawful calling cannot be prohibited. The general rule as laid down by Mr. Cooley in his work on constitutional limita- tions is, " That any person is at liberty to pursue any lawful 556 Savih^gs Banks. [ch. xxxix. calling and to do so in his own way, not encroaching upon the rights of others." ^ A mutual savings association is not an institution organized for the purpose of profit to stockholders, or for the benefit of a certain number of their members, and is unlike savings banks organized with a capital stock. The purpose of a mutual sav- ings society is to receive the money of its members for safe keeping, and return the same at such a time and in such a manner as all of the members may agree upon. If any profits are made by the investment of such funds they are to be divided among the members ratably. Many of the States, however, have enacted laws which declare that such an institution cannot do business within the State unless it has a capital stock. The effect of the law is to prevent any number of persons from placing into the hands of a board of trustees their prop- erty or money for safe keeping and investment. In bank corporations which are organized purely for profit to their stockholders the deposits are not held strictly as trust funds, but when received the bank becomes a debtor for such funds. The capital stock of such a bank is then held as a secu- rity for the return of such deposits and for the faithfid per- formance of the duties required by such corporations. The legislature is vested with the power to regulate and con- trol and fix the amount of capital required of all corporations of a private nature, especially those organized for profit, where the profits are obtained by the use of moneys of others, and where it is to be distributed to the stockholders. But a mutual savings society as previously stated is eleemosynary in its purpose and character, and is not possessed of power to do any business except for persons who become members. But the right of the legislature to regulate and fix the amount of capital required of banks of all classes is the accepted law. iCooley'a Const. Lim. (7th ed.) page 889. CH. xxxrx.] Banking. 557 § 295. Depositors in mutual savings bank constitute the bank. In a mutual savings bank, that is, one which is entitled to exist, and has no capital stock, the depositors constitute the bank. The Supreme Court of the State of iN'ew Hampshire, in the case of Cogswell v. Bank, 59 'N. H. 43, says: " The assets of savings banks consist of loans of money made by them for the benefit of their depositors, from whom the money was derived, and correspond to the capital stock in banks of discount, and depositors in savings banks stand in the same relation to the assets of the bank as stockholders to banks of discount. Bunnell v. CoUinsville Bank, 38 Conn. 203; Simp- son V. Savings Bank, 56 W. H. 466, 467; Osborne v. Byrne, 43 Conn. 155. They are the owners of the funds of the bank, entitled to share in its profits and liable to bear its losses pro rata, and upon the winding up of the business of the bank each depositor is entitled to his share of the assets or property remaining after the payment of the debts. The depositors are in fact the bank, while the corporation is but an agency for receiving and loaning the money of the depositors. Coite V. Society for Savings, 32 Conn. 173. And the trustees and officers of the bank are the agents of the depositors. The claim of a savings bank depositor to his share of the earnings or deposits cannot be considered as a debt against the bank. Gushing, J"., Simpson v. Bank, supra. If either can such share be set off by a depositor against a debt due from him to the bank. Osborne v. Byrne, supra." Mr. Justice Strong, associate justice of the Supreme Court of the United States, in defining a savings bank without capital stock and in determining the rights and relationship of the depositor to the bank, says : " It is not a commercial partnership nor is it an artificial being, the members of which have property interests in it, nor is it strictly eleemosynary. Its purpose is rather to furnish a safe depository for the money of those members of the com- munity disposed to intrust their property to its keeping. It is 558 Savings Banks. [ch. xxxix. somewhat of the nature of such corporations as church-wardens for the conservation of the goods of a parish, the college of sur- geons, for the promotion of medical science, or the society of antiquaries, for the advancement of the study of antiquity. Its purpose is a public advantage, without any interest in its mem- bers. * * * It is like many other savings institutions incorporated in England, and in this country during the last sixty years. Intended only for provident investment, in which the management and supervision are entirely out of the hands of the parties whose money is at stake, and which are quasi benevolent and most useful, because they hold out no encour- agement to speculative dealing or commercial trading. * * * Among the earliest savings banks are some in Massachusetts, organized under a general law passed in 1834, which provided that the income or profit of all deposits shall be divided among the depositors with just deduction of reasonable expenses. They exist also in 'New York, Pennsylvania, Maine, Connecti- cut and other States. Indeed until recently, the primary idea of savings banks has been that it is an institution in the hands of disinterested persons, the profits of which, after deducting the necessary expenses of conducting the business, inure wholly to the benefit of the depositors in dividends or in a reserve sur- plus for their greater security." § 296. Depositor has no liability in capitalized savings bank. A depositor in a mutual savings society is declared as hold- ing the same relationship as stockholders in a capitalized bank and may be held liable for their proportion of the losses if any exist at the time of winding up the affairs of the bank; while a depositor in a capitalized savings bank has no liability at any time. § 297. Nature of deposit in a capitalized savings bank. A deposit in a savings bank may be general or special. A general deposit in a savings bank is one which loses its identity and is intermingled with other deposits. A special deposit is one which is kept separate and apart from other deposits. OH. XXXIX. J Baitking. 559 A general deposit may be one designated as an ordinary deposit and paid as ordinary deposits to depositors in com- mercial banks without notice. A general deposit may also be a term deposit, where the depositor deposits his money with the bank agreeing not to withdraw the same without first hav- ing given the bank notice, which notice designates the time when the deposit is to be repaid. A special deposit when received and allowed to be received by a savings bank, the bank, in the care, safe-keeping and return thereof, is governed by the same law of responsibility relating to and governing special deposits held by commercial banks. § 298. Trust deposit. A trust deposit although entered on the pass-book as such, is not such unless intended to be. One making a deposit in a savings bank which is declared in the book to be in trust for another, does not thereby create a trust if the depositor had not at the time the intention of doing so,^ § 299. Bules regulating and governing depositors. A savings bank may make such rules and regulations for receiving and for the withdrawal of deposits as are reasonable ; and when understood by the depositor they are in the nature of a contract, and are binding upon both the bank and the depositor. It is a common rule in savings banks that a depositor shall produce his pass-book in order to draw his deposit and when such a rule is entered in the pass-book and has been assented to by the depositor, it is reasonable and binding.® Where the rule of payment requires the depositor to present his pass-book, and if lost to iramediately notify the bank; and knowing the same to be lost and failing to give the notice, the 2 Cleveland v. Hampden Savings s Langdate v. Citizens' Bank of Bank, 182 Mass. 110; Cunningham Savannah, 121 Ga. 105, 48 S. E. V. Davenport, 147 N. Y. 43. 708. 560 Savii^gs Banks. [oh. xxxix. book is presented by another with a forged order to pay, and nothing appearing to warn the bank, and it pays the deposit upon such order and presentation of the pass-book, the bank is not liable unless the order was such a plain case of forgery that it might be detected by any ordinary person. The rule protecting savings deposits requires more than ordinary care and caution upon the part of the bank.* But where the owner of the book failed to use such care and precaution in protecting his deposit, and failing to give notice of the loss of the book, and it appeared that the depositor thereafter had possession of the book and deposits were entered therein without any inquiry by the depositor as to withdrawals, the bank having used reason- able care, was not liable.^ And where the bank pays a deposit after the death of the depositor, upon presentment of the pass- book and an order, which order was a forgery, having no knowl- edge of the death and using reasonable care, it cannot be held to pay again to the heirs.° The bank imposing strict rules as to payment of savings deposits requiring the depositor to comply therewith, the law imposes a greater degree of care by the bank to protect the deposit, and what is termed ordinary care in relation to the duties of the officers of savings banks applies more correctly to a high degree of care, which should be exercised and is by the nature of the business imposed upon those in charge of the bank. The question of negligence is one of fact to be deter- mined by the jury.'' A rule printed in the pass-book issued by the bank, when properly made known to a depositor receiving the same, and in which he has credit of a deposit made in the bank if lawful and reasonable is a part of the 'contract between him and the institution.* * Chase v. Waterbury Sayings ^ Vincent v. Park Huron Savings Bank (Conn.), 59 Atl. Eep. 37. Bank, 147 Mich. 437, 111 N. W. 5 Ferguson v. Harlem Savings 90. Bank, 92 N. Y. S. 261; Kenney v. s Israel v. Bowery Savings Bank, Harlem Savings Bank, 114 N. Y. S. 9 Daly (N. Y.) 507; Eaves v. The 749, 120 N. Y. S. 82. People's Savings Bank, 27 Conn. « Kelley v. Buffalo Savings Bank, 228. 72 N. E. 995. CH. XXXIX.] Baxteing. 561 Savings banks — Paying deposits — Rules — Pass-boohs. Holding in mind the general rule governing all banks that the bank must pay deposits to the rightful owner, the fact that a savings bank has rules requiring the Owner of the deposit to present the book with a signed order to transfer the deposit will not lessen its duty to examine carefully the signature on the check or order authorizing the transfer. In fact, the transfer of a savings account is somewhat unusual, and this places the bank upon notice to be cautious and requires it to make a careful examination of the order and signature of the owner of the deposit authorizing the transfer; there may be nothing connected with the transfer to excite suspicion, but the bank failing to use such precaution as to comparing carefully the signature signed by the owner of the deposit on the register with that of the signature on the order would be negligence on the part of the bank. § 300. Gift — Savings bank deposit in trust. "A gift, whether in the form of a trust, or otherwise, always involves the intention of the donor; and when the trial court has found that there was a gift which took the form of a deposit in a savings bank in trust for the donee, and the Appellate Division has unanimously decided that the findings of fact are supported by the evidence, the finding cannot be questioned in the Court of Appeals." " § 301. Amount of deposit received may be governed by statute. The amount received on deposit, from any one individual or firm may be regulated by statute; but this privilege more properly belongs to the powers vested in the board of trustees or directors, and is made a rule by the adoption of a by-law to that effect." »Farleigh v. Cadman, 159 N. Y. lo Taylor v. Empire State Bank, 169. 66 Hun (N. Y.) 538. 36 562 Savings Banks. [oh. xxxlx. § 302. When special deposit preferred. When the by-laws of a mutual savings bank provide what classes of deposits may be received by the bank, specifying them: 1. As weekly deposits. 2. Special deposits and (3) dime, irregular deposits, one who makes a special deposit and rceives a certificate in the words and figures following: " Office of the Washington Coitntt Savings Ins. "Hageestown, November 20, 1873. " Eeceived from Tyron H. Edwards, one thousand and thirty dollars, on special deposit, to draw interest from July 1, 1873, at the rate of three per cent, semi-annually, if not' drawn out within one year." It is held by the court in the case of Heironimus v. Sweeney, 55 Am. St. Eep. 333, to be a special deposit and as such becomes a debt of the bank, which must be paid before the other depositors. The opinion of the court evidently is upon the theory that it was borrowed money, or special deposit, and as such became an obligation or debt and not a regular and ordinary deposit. Where a depositor is entitled to preference and the bank is a mere trustee, a court of equity has jurisdiction.^* § 303. Notice of vnthdrawal, when not required. There are but few if any, savings banks that do not reserve the right by the enactment of a by-law of requiring depositors to give notice of their intention to withdraw their deposits. This requirement, or rule, may be waived by the bank as it generally is, except in times of a money stringency. If the bank refuses to pay on the ground that the deposit has previously been paid to another, a notice to the bank is not required.*" 11 Commonwealth v. Bank of v. Prov. Savings Institute, 6 Allen Pennsylvania, 3 Watts and Serg. (Mass.) 320; Heath v. Portsmouth 184. Savings Bank, 88 Am. Dec. 194; 12 Eaves v. People's Savings Bank, People's Savings Bank v. Cupps, 91 27 Conn. 228, 71 Am. Dec. 59; Wall Pa. St. 315. CH, xxxLX.] Baitking. 563 § 304. By-laws of savings banks. The Franklin Savings Bank of Massachusetts, by a by-law, which was enacted by the baiik for its protection and entitled " Security Against Fraud " and which was as follows : "As the oflScers of the instituion may be unable to identify every depositor, the corporation will not be rsponsible for loss sustained, when a depositor has not given notice of his book being stolen or lost, if such book be paid in whole or in part on presentment. In all cases a payment upon present- ment of a deposit book shall be a discharge to the corporation for the amount so paid." The court in discussing this by-law and the liability of the bank says: " The plaintiff contends that the sole object of the by-law is to protect the bank against the risk of mistake as to the personal identity of its depositors, and therefore that it does not apply to a case where there has been no mistake as to identity, but the bank has paid upon a forged order purporting to be signed by the depositor. This argument would be very strong, perhaps conclusive, if this by-law had not contained the last clause. It would then have been the same, with only immaterial verbal changes, as the by-law considered in the case of Jochumsen v. Suffolk Savings Bank, 3 Allen 87, cited by the plaintiff. But the added provision, that " in all cases a payment upon presentation of a deposit book shall be a dis- charge to the corporation for the amount so paid," enlarges the by-law, and extends its operation to other cases than those in which there is a mistake as to the identity of the depositor. Unless it has this effect, it is without force and useless. The bank is obliged to deal with a very large number of depositors, most of whom must be strangers to its officers. They are unable to identify the persons of the depositors, and it is equally impossible that they should know their handwriting. The danger of fraud, by payments upon forged orders accom- panied by the book, may be as great as by payments to per- sons who falsely personate the depositor and present the book. 564 Savings Banks. [oh, xxxix. In either case we think the purpose of the by-law was to author- ize the bank to rely upon the presentation of the book as its security against fraud. " In the case at bar, therefore, a majority of the court is of opinion that if the bank, using reasonable care, in good faith, paid a whole or a part of the plaintiff's deposit upon the pre- sentation of his book it is a case provided for by the by-law, and the corporation is discharged to the amount so paid." ^' Another by-law which was enacted by the Bristol County Savings Bank of Massachusetts for the protection of the bank was as follows: "As the officers of the institution will not be rsponsible for any loss sustained when a depositor has not given notice of his book being stolen or lost, if such book be paid in whole or part on presentation." The validity and effect of the foregoing by-law is discussed in the ease of Goldrick v. Bristol County Sav. Bank, 123 Mass. 320. This is an important and valuable case, for the reason that the plaintiff, who was the depositor, could not write his name, and was accustomed to make his mark, in the form of a cross. His book was stolen and a large portion of the deposits were withdrawn from the bank by one impersonating the plaintiff and owner of the deposit. The court, in this case, held that the bank was not liable as it had used reasonable care and the plaintiff and owner of the book failed to give the bank notice that the book had been stolen. The bank-book contained a copy of the by-laws. The facts in this case are interesting and the opinion of the court of sufficient importance to justify the giving of it in full : " One of the by-laws of the defendant bank provides that ' as the officers of the institution may be unable to identify every depositor the institution wiU not be responsible for any loss sustained, when a depositor has not given notice of his book being stolen or lost, if such book be paid in whole or part, on presentation.' When the plaintiff made his deposits, 18 Levy V. Franklin Sav. Bank, 117 Mass. 448. CH. XXXIX.J Banking. 565 he assented to the by-laws, and it thus became a part of the contract between the parties. The plain object of this by-law was to exonerate the bank from loss occasioned by the inabil- ity of its officers to identify the depositor, and to throw upon the depositor the risk of keeping his book safely. " The presiding judge who tried the case at bar without a jury was justified in finding, upon the evidence, that the bank in good faith and without negligence paid the amount which is sued for, upon presentation of the plaintiff's book, to some person who had stolen or otherwise obtained possession of it, and who fraudulently personated the plaintiff, no notice that the book was stolen having been given to the bank. This ia exactly the case which the by-law was intended to provide for, and the plaintiff cannot recover without a violation of the terms of the contract which the bank made with him. Wall V. Provident Inst, for Sav., 3 Allen 96; Levy y. Franklin Sav. Eank, 117 Mass. 448." Another important case tried by the Supreme Court of Massachusetts is the case of Kimins v. Boston Five Cent Sav. Bank, 141 Mass, 33. The facts in this case are stated as follows : The plaintiff was a depositor in the defendant bank and had one of its usual books of deposit. This book showed a deposit on May 24, 1875, one on May 24, 1880 ; two in 1881 and one on April 24, 1882, also various payments, the first being on May 4, 1880, and the last in 1883. All these pay- ments were made on forged orders, purporting to be signed by the plaintiff, by her mark, and witnessed directing the bank to pay the respective amounts to a certain person who was the nephew of the plaintiff. This nephew forged the orders. Pay- ments were made to said nephew on his presenting the orders and the plaintiff's deposit-book, wherein was entered the amount paid in each case, in the usual way and the book was then returned to said nephew. In each case the book was stolen, or fraudulently obtained from the plaintiff by said nephew, he knowing the place where the same was kept, and taken each time to get money on from the bank. The several 666 Savings Banks. [ch. xxxix. deposits as they appear in the book were made by the plain- tiff herself; and after entry thereof she received the book back again. A deposit was made on March 7, 1881. At this time the plaintiff's deposit-book showed three payments on forged orders. The plaintiff could neither read nor write, but it did not appear that the defendant had any knowledge that the plaintiff could not read, except in so far as such knowl- edge is imputable from the fact that the plaintiff instead of signing her name made her mark. Plaintiff had no knowledge that any sum had been drawn on the forged orders until the whole had been drawn, unless such knowledge is imputable to her on the facts herein appearing. The bank had no knowledge that the orders were forged or the book had been stolen, or fraudulently taken from the plaintiff. The bank when it paid the several amounts on the forged orders, paid the same in good faith, and used diligence in the premises. The deposit-book presented to the plaintiff when she made her first deposit contained the by-laws as they existed upon May 24, 1875, the date of the first deposit, and the plaintiff duly subscribed at that time the rules and regulations of the bank (by making her mark, which was witnessed) ia the fol- lowing form: "The subscribers whose signatures appear below, or the agents of such subscribers, agree to be governed and to abide by the regulations of this institution as expressed in the by- laws of the same." Among the by-laws contained in the plaintiff's bank-book was one giving the defendant's trustees power " to alter or amend these by-laws. As the officers of the institution may be unable to identify every depositor transacting business at the bank, the institution will not be responsible for loss sustained where the depositor has not given notice of his book being stolen or lost, if such book be paid in whole or in part on pre- sentment." On September 13, 1875, this by-law was amended as follows: " In all cases a payment upon presentation of a deposit- CH. xxxix.J Banking. 567 book shall be a discharge to the corporation for the amount so paid." This by-law, as amended, has been in force since that time. The amendment was duly made in accordance with the pro- visions in the by-laws for their amendment, but the plaintiff had no actual knowledge of such change in the by-laws, unless such knowledge is imputable to her from the facts herein stated, or she is presumed to have such knowledge. The bank did not give the plaintiff a- new book with the by-law as amended nor did it request the surrender of the old book, and the acceptance of a new book containing the by-laws as amended j and it is not the custom of the bank to give notice to depositors of change in the by-laws, or make any change in deposit-books in such cases; and her signature was not requested to the amended by-laws, and it is not the custom of the bank to make requests for signatures in such cases.. The payments on the forged orders were all made after the by-law was amended. The court, on rendering its opinion, says : " The only defense is, that the defendant bank was author- ized to make the payments to the plaintiff's nephew on the forged orders and the presentation of the deposit-book. The authority, if it existed, must have been given by the plaintiff when she made the contract of deposit, or must have arisen from an estoppel worked by her subsequent conduct; The facts stated do not show «an estoppel, and the ruling of the court that the plaintiff could not recover must have been on the ground that the contract authorized the payments. By the contract, the plaintiff agreed to be governed by the by-laws of the bank, and the by-laws were contained in the deposit-book given to her. " By the by-laws as they existed at the time the contract was signed by the plaintiff, the bank had no authority to make the payments. They authorized a payment to one who falsely personated the depositor in presenting the stolen book (Gold- rick V. Bristol County Sav. Bank, 123 Mass. 320) ; but not to one who falsely claimed to act under authority from the depos- 568 Savings Banks. [oh. xxxix, itor (Jochumsen v. Suffolk Sav. Bank, 3 Allen 87; Levy v. Franklin Sav. Bank, 117 Mass. 448.) " The defendant does not dispute its liability, if the ease is to be determined on the construction of the by-law in force when the contract was made, but it contends that the by-law of 1875 became incorporated into the contract between the parties, and a part of it. If this was so, it would have given the defendant authority to make the payments. Donlan v. Provident Inst, for Sav., 127 Mass. 183. " No notice was given to the plaintiff of this by-law and she had no knowledge of it, and the deposits made after it was passed must be taken to have been made under the original contract. " The defendant contends that the subsequent by-law became part of the contract of deposit, by force of the Gen. Stats., chap. 57, § 147 (Pub. Stats., chap. 116, § .29), which pro- vided that the deposits might be withdrawn at such time and in such manner as the corporation in its by-laws directed, and of the by-law existing when the contract was made, which provided for making changes in the by-laws, with the plain- tiff's agreement to abide by, the regulations of the institution as expressed in its by-laws. " The authority of the defendant to make by-laws regulating the time and manner in which deposits might be withdrawn did not empower it to change, without the consent of the plain- tiff, a contract it had made with her, nor to discharge the debt to her by payment to a stranger; nor was it any part of the plaintiff's contract that the defendant might do this. See Donlan v. Provident Institution for Savings, ubi supra. " The by-law in question is not one which merely concerns the regulations of the institution as to the time and manner of paying deposits to depositors. It materially affects the con- tract of deposit in the interest of the bank, and not of the depos- itor ; and if it applies to contracts made before it was passed, it authorizes the bank to pay the money of depositors to those not authorized by the contract to receive it, and to relieve the bank from its obligation to pay it to the depositors. Authority CH. XXXIX.J Banking. SG^ to make such a material change in the contract, without the: knowledge of the plaintiff, cannot be inferred from her agree- ment to abide by the regulations of the institution." A still later Massachusetts case is Kingsley v. Whitman Sav- ings Bank, 182 Mass. 252. The bank had adopted a by-law, which reads as follows : "As the officers of this institution may be unable to identify every depositor transacting business at the bank, the institution will not be responsible for loss sus- tained where the depositors have not given notice that their books have been stolen or lost, if the sums of money entered in such book shall have been paid in whole or in part on presentation of said book." It was held in this case that the object of the by-law was to avoid loss from inability to identify the depositor, and that it did not prevent a depositor from recovering from the bank a deposit which had been paid by the bank to another person on presentation of the bank-book with a forged order. The court in deciding this case reviews in brief the cases pre- viously before the court, namely, the case of Jochumsen v. Suffolk Savings Bank, 3 Allen 87; also the case of Levy v. Franklyn Savings Bank, 117 Mass. 448 ; also the case of Gold- rick V. Bristol County Savings Bank, 123 Mass. 320 ; also the case of Kimins v. Boston Five Cent Savings Bank, 141 Mass. 33, and the case of McCarthy v. Provident Institution for Saving, 159 Mass. 527. Affirming the law, as previously presented by the courts, and restates by quoting from the case in 117 Mass., the law to be as follows : " By the by-laws as they existed at the time the contract was signed by the plaintiff, the bank had no authority to make the payments. They authorized the payment to one who falsely personated the depositor in presenting the stolen book; * * * but not to one who falsely claimed to act under the authority from the depositor. " We have no doubt that under our decision this is a correct statement of the law, and that on the facts of the case before us the by-law has no application." 570 Savings Banks. [ch. xxxix. The effect of a by-law is discussed by the Supreme Court of the State of Michigan in the case of Ackenhausen v. People's Savings Bank, 110 Mich. 175. In this case the bank had adopted the following by-laws : " 3. On making the first deposit the depositor shall sign his or her name in the signature book of the institution, which contains a copy of these rules and regulations, and to which the depositor will assent before his or her deposit ca^ be received by this institution. " 7. Money deposited in this institution will be entered in a book which will be given to each depositor. This small book will be the depositor's voucher, or evidence of his or her deposit in the institution. When money is withdrawn, this book given to the depositor shall be brought into the bank to have the payments entered therein. Depositors can draw money them- selves, or, in ease of absence or sickness, it will be paid to their order, properly witnessed, and accompanied by the book. " 10. While the officers of this institution will do their utmost to prevent fraud, yet, as they will be unable to identify every depositor, this institution will not be responsible for loss sustained when a book has been mislaid, stolen, or lost, if, before the cashier is notified thereof, such book be paid in whole or in part on beiijg presented. " 11. If a book be .mislaid, stolen or lost, the owner is required to give immediate notice of the fact to the cashier of this institution." There was also in force at the time of the adoption of the foregoing by-laws by the bank, the following statutory laws of the State, which read as follows: "All deposits in said bank shall be repaid to the depositor or his or her lawful representative when required, at such time or times, and with such interest and imder such regulations as the board of directors of the bank from time to time pre- scribes, which regulations shall be printed and conspicuously exposed in some place accessible and visible to all in the busi- ness office of said bank. CH. XXXIX.J Baitkestq. 571 "A pass-book skall be issued to each depositor in the savings department, containing the rules and regulations adopted by the board of directors governing such deposits, in v?hich book shall be entered each deposit made by, and each payment made to such depositors; and no payment or check against any such savings account shall be made unless accompanied by and entered in the pass-book issued therefor, except for good cause, and on assurances satisfactory to the officers of the bank." The court says : " It is insisted that the bank complied with these provisions of the statute, and that plaintiff, because of his contract with the bank, has no cause of action against it " (the court citing the following cases) : Schoenwald v. Bank, 57 N. T. 418; Appleby v. Bank, 62 K Y. 12; Sullivan v. Lewiston Institution, 56 Me. 507; Goldrick v. Bank, 123 Mass. 320. The court then proceeding, says : " The eases just cited undoubtedly hold that under the laws of this State, where the decisions were rendered and the by-laws in force, in those banks there was no liability; and if the sav- ings banks, which were parties to the litigation involved in those cases, were created under like laws, and possessed with the same powers as savings banks possess in this State, the decisions would be conclusive." The court then proceeds to discuss the nature of a mutual savings society and a savings bank capitalized and organized under the general laws of a State, and finally, in determining the law in this case and the effect of the by-law adopted by the bank, says : " We think the requirement of the statute that the deposits shall be paid to the depositor or his legal representatives cannot be changed by a by-law, unless the attention of the depositor is called to the by-law and he assents thereto, actually or im- pliedly." As a conclusion upon this subject, it may be stated that the general rule laid down is as follows : " The general rule is, that a by-law adopted by a savings bank 572 Savings Banks. [oh. xxxix. to regulate its hiisiness, and for the repayment of its deposits, if reasonable and not in violation of any statutory law, if known to the party dealing with the harile, is binding between them and as between the bank and the depositor, the by-law becomes a contract, unless the bank is negligeni." " It is clearly established that a depositor is not bound by. a by-law in the beginning unless he knows of it.^* If the depositor cannot read he should get some one to read the rules to him, and it would seem to be the duty of the bank to aid him in this particular, and to know that the rules have been read to him.^° The rule is well established that if a by-law, however reason- able and in all respects made in compliance with the law, will not relieve the bank of liability, if negligent.^'' Such by-laws, when adopted and are reasonable, become a contract and when they require that payments will be made only on presentation of the pass-book and a written order to withdraw the deposit, if the bank pays upon a forged order having used good faith, and reasonable care, and could not detect forgery in the written order, it is not liable.^* In the absence of rules, it is held in New York that a sav- ings bank is to be governed by the same legal principles which apply to other moneyed institutions.^' § 305. Pass books. The pass-book issued to a depositor and in which entries of deposits are made by the receiving teller of a savings bank, 1* Heath v. Portsmouth Savinga Donlan v. Provident Savings Inst., Bank, 46 N. H. 78, 88 Am. Dec; 127 Mass. 183, 34 Am. Eep. 358; Warhus v. Bowery Savings Bank, Brown v. Merrimac River Saving» 21 N. H. 78; Mitchell v. Home Bank, 67 N. H. 549, 47 Am. Eep. Savings Bank, 38 Hun (N. Y.) 255; 171; Kummel v. Germania Savings Israel v. Bowery Savings Bank, 9 Bank, 127 N. Y. 488, 28 N. E. 398; Daly (N. Y.) 507. Smith v. Brooklyn Sav. Bank, 101 15 Ackenhausen v. People's Sav- N. Y. 58, 54 Am. Eep. 653 ; ' Wegner ings Bank, 110 Mich. 175, 68 N. W. v. Second Ward Savings Bank, 75 118, 64 Am. St. Eep. 338. Wis. 242, 44 N. W. 1096. 18 Burrill v. Dollar Savings Bank, i8 Savings Co. v. Anderson, 78 92 Pa. St. 134, 37 Am. Eep. 669. 0. S. 341. 1' Sullivan v. Lewiaton Savings i» Siegel v. State Bank, 122 Inst.^ 56 Me. 507^ 96 Am. Dec. 500; N. Y. S. 220. ■CH. xxxrx.] BANKiiirG. 573 are original books of entry; and entitled to as muct. credit as ■evidence as the books retained by the bank.^° Where a figure in a pass-book is obscure and a disagreement arises between the bank and the owner of the Hook, as to the sum intended to be represented, the true meaning is a question -of fact for the jury.^^ A pass-book in JSTew York is not negotiable and possession by a party other than the owner does not constitute a proof ■of a right to draw money thereon. ^^ In Massachusetts a pass-book may be assigned. The delivery •of the savings book with the intention of transferring title to the money deposited transfers the equitable title to the deposit.^* Any writing fully intending to assign the pass-book is suf- ficient. Tor example, these words were used : " Ed this is for you, Lida." To carry out the intention of the party is the purpose of the law.^* Balanced pass-hooks. The general rule is that a balanced pass-book when in the hands of the owner, if not examined by him within a reason- able time and all errors therein pointed out to the bank, the balance becomes an account stated between the parties and does not estop him from showing the incorrectness of the balance as given by the bank, but his failure to do so within a reasonable time places the burden upon him to show that the balance as returned is not correct.^^ In Pennsylvania a balance struck in a pass-book is in effect an account stated between a bank and its depositors, which may be impeached for fraud or error, but unless so impeached the bank is estopped from denying its liability as shown by the account so stated by it. These are questions of fact which must be submitted to the jury.^' 2»Knox V. Savings Bank, 93 24 Stacks v. Buten, 141 Wis. 235, Mich. 511. . 124 N. W. 403. 21 Kux V. Savings Bank, 93 Mich. 25 Mitzel v. B. & 0. Southwestern 511. E. E. Co., 147 111. App. 195. 22Kunimel v. G. S. Bank, 127 20 Greenhalgh Co. v. Farmers' N. Y. 488. ' National Bank, 226 Pa. 184; Mellor 23 Pierce v. Boston Five Cent National Bank v. People's Bank, 226 Sav. Bank, 129 Mass. 425. Pa. 261. 574 Savings Banks, [oh. xxxix. The books of the bank are better evidence as to entries therein than the president's oral testimony.^' The entries in a pass-book proved to have been made by the bank's officers make a prima facie case in favor of the owner of the bank." Loss of pass-hooTe. Where a person demands his deposit, being fully identified as the owner of the pass-book, but cannot produce the same showing its loss, a rule of the bank requiring him to give bond to the bank before payment cannot be enforced. Such a rule is unreasonable."* A by-law of a savings bank requiring immediate written notice of loss of depositor's pass-book, is not a condition prece- dent to a recovery of deposit.*" § 306. Savings banks borrowing money. The power of a savings bank to borrow money may be determined by the terms of its charter and its mode of dealing. Where the relation between the bank and its depositors becomes one of debtor and creditor, a savings bank has the implied right to borrow money for the bank by negotiating or pledging any of its securities. This proposition can only be sustained upon the theory that the bank becomes a debtor and is not that of trustee holding the deposits in trust for the depositors.®^ In New Jersey where a savings bank was incorporated by a special charter, held that it had the implied power inherent in corporations created for business purposes, of borrowing money and of making negotiable paper or a pledge of its securities as a means of borrowing.*" 2T Boyd, Exr., v. First National so Mierke v. Jefferson Co. Savings Bank, 128 Ky. 468. Bank, 134 N. Y. S. 44. 28 Lucks V. Bank, 148 Mo. App. si Ward v. Johnson, 5 111. App. 30. 376. 82 Fifth Ward Savings Bank v. 29 Bayer v. Commonwealth Trust First National Bank, N. J. Law 513. Co., 129 S. W. 268. CH. XXXIX.] Bahking. 575 § 307. Investments. Savings banks are required, usually by the statute of the State where incorporated, to invest or lend their deposits in a prescribed manner upon the security of land, bonds or stocks, the statute usually designating the kind of bonds or stocks which the bank may loan upon or invest in. In some of the States savings banks are vested by law with the power to dis- count and purchase paper. This is an attribute and a power belonging to commercial banks, but where the law of the State imposes no objection and the charter of the bank grants the authority, it may make discounts and purchase negotiable paper.°^ A savings bank is prohibited from entering into a contract with a broker for the purchase and sale of stock for speculative purpose. Such contracts are ultra vires.^* Where the bank's charter prohibits loaning upon notes, bills of exchange, or other personal property, the loan is not void, only voidable. (Sistare v. Best, 88 IST. Y. 527.) The act does not necessarily render void the purchase of notes.'" § 308. Insolvency of savings banks — Appointment of a receiver. Where a savings bank is declared to be insolvent a receiver may be appointed, unless the law of the State otherwise pro- vides. The application may be made by the attorney-general of the State where the law requires him to act. In California it is the duty of the attorney-general on a report made to him by the superintendent of banks, declaring the insolvency of a bank, to immediately apply to the court for a receiver. S3 Pape V. Capitol Bank, 20 Kaa. Bank v. Kramer, 32 Hun (N. T.) 440, 27 Am. Eep. 183; Duncan v. 270. Contra, Pratt v. Eaton, 79 Maryland Savings Institution, 10 N. Y. 449. Gill & J. (Md.) 299; United Ger- 34jemison et al. v. C. S. Bank, man Bank v. Katz, 57 Md. 128; 122 N. Y. 135. Tishimingo Sav. Inst. v. Buchanan, 35 Citizens' Savings Bank v. Couse, 60 Miss. 496; Aull Savings Bank v. 124 N. Y. S. 79. Lexington, 74 Mo. 104; Eome Sav. ■576 Savest GS Banks. [oh. xxxix. The application where the law does not require the attorney- general to act may be made by a stockholder.** When equity courts are required to protect the interest of ■depositors, the assets of the bank should be reduced to cash as rapidly as possible without sacrifice and distributed among i;he depositors without delay.'^ A receiver may not be appointed where the trustees by agree- ment with the depositors accept a stipulation of settlement and they proceed to act upon such stipulation and distribute the assets of the bank.** § 309. Bights of depositors. When a savings bank becomes insolvent in some of the States it is held that the depositors are general creditors like others.*' In New Jersey and some other States the depositors are not paid until after all the debts for management are discharged.*" § 310. Depositor denied set-off unless demands are mutual. The statute may provide otherwise, but the general rule is that a depositor in a purely mutual savings bank, when insol- vent and in liquidation, is not entitled to set off his debt due the bank against the deposit due him, but must pay his debt to the bank and take his pro rata of the proceeds. The debts must be mutual.*^ The law is otherwise where the deposit is a special deposit or where the demands are purely mutual. A special deposit made to be withdrawn upon call may be set off against the depositor's debt to the bank.*^ A special deposit such as above referred to is in fact treated 8» Gorman v. Guardian Savings 40 Stockton v. Mechanics', etc., Bank, 4 Mo. App. 180. Savings Bank, 32 N. J. Eq. 165. 87 Matter of Dime Savings Inst., *i Sawyer v. Hoag, 17 Wall. 29 N. J. Eq. 109. (U. S.) 610. 88 Lewis V. Lynn Inst, for Sav- 42 Hall v. Paris, 59 N. H. 71. ings, 148 Mass. 235. But see Hanover National Bank v. 89 Reed V. Home Sav. Bank, 130 Suddish, 215 U. S. 110. Mass. 443, 39 Am. Eep. 468; Cogs- well V. Rockingham Ten Cent Sav- ings Bank, 59 N. H. 43, 92 N. Y. 7. CH. XXXLX.J Backing. 577 in the same way as a commercial deposit, and when accepted by a savings bank and allowed to be withdrawn upon call, the depositor does not receive interest br any portion of the divi- dends which may be declared by the bank, but in lieu thereof receives the privilege of drawing against his account without notice. It is again stated that a special deposit of money made by a person in a bank is one which the banker must keep separate and apart, and not mingle it with the other deposits of the bank. Money which is deposited in a bank subject to call is not a special deposit. It is general, and a depositor in a sav- ings bank receiving the privilege of checking against the same at any time without notice, in case of failure, the debts are mutual. If the bank has in fact received a special deposit and holds it in possession as such, it must return it to the depositor ; a debt owing to the bank by a general depositor is entitled to a set off. The correct rule governing the right of depositors in purely mutual savings banks to set off their liabilities to the bank against the debt or deposit due them by the bank, is presented in the case of Stockton y. Mechanics', etc.. Bank, 32 'N. J. Eq. 163. "A savings bank under a special charter was authorized to receive and invest deposits for the benefit of the depositors, the income or profit to be divided among them, after reason- able deductions for necessary expenses, the principal to be repaid to the depositors at such times and with such interest and under such regulations as the board of managers should from time to time prescribe. Under their regulations they not only received deposits, participating in the profits, and not payable except on thirty days' notice, but also another kind of deposits (called by them " special deposits "), which were not to partici- pate in the profits and were to be repaid (not redelivered) to the depositors, without any preliminary notice. Both kind of deposits were intermingled in the funds of the bank, undis- 37 578 Savings Baj^ks. [ch. xxxix. tinguishable. Under insolvent proceedings, a receiver was appointed. Held : "(1) That such an institution is a mere trustee for the bene- fit of the depositors. "(2) That a depositor who borrowed money from the bank, secured by his note or mortgage, cannot offset his debt against the amount of his deposit at the time when the decree of insolvency was made. " (3) That the so-called ' special ' depositors are not entitled to priority in payment over the other class of depositors. " (4) That debts and expenses contracted by the bank in carrying on its ordinary business are to be preferred. " (5) That a claim, under a covenant in the lease, for rent accruing after the surrender of the premises to the lessor by the receiver, cannot be maintained. " (6) That money paid to the bank in exchange for its check, given for the accommodation of the payee, which was dis- honored, presumably went into the funds, and the debt should be preferred. " (7) That checks given to depositors on account of deposits, are not to be preferred." If the depositor has deposited a special fund in the bank and has a contract with bank to the effect that he may at any time set off his debt against his deposit, such a contract is lawful and the set-off, therefore, may be equitable, but the deposit must be retained by the bank as a special deposit, and a special must not be mingled with the general funds of the bank. CHAPTER XL. UENS OF BANES. § 311. General and special liens. "A lien is defined to be a legal claim or charge upon real or personal property for a satisfaction of some debt or duty." Under the Code of California a banker has a general lien dependent on possession upon all property in his hands belong- ing to a customer for the balance due to him from such customer in the course of business. Many of the States have similar statutes. It is a -well-established principle that a bank has a general lien on all of the moneys and funds which have been placed in the bank's possession and it may use and cancel any matured debt owing by the debtor to the bank. Liens are classified into common-law liens, which is the right to retain possession of personal property until some debt due on, or secured by the property shall be paid or satisfied. An equitable lien is one which a court of equity recognizes, being distinct from strictly legal rights. It is not a right of property in the subject-matter of the lien, nor does it depend upon pos- session, but is a right to have the property subjected to the satisfaction of a debt. A statutory lien is one where the statute expressly declares that under certain circumstances, a lien shall exist in favor of certain persons to hold specific property for the payment of a certain claim. Liens are again divided into special and general liens. A special lien is one authorizing the retention of certain property to satisfy a specific debt or claim, while a general lien is one authorizing the retention of property of another to secure a general balance due from the owner of the property. By a general custom of usage, a bank is said to have a general lien dependent on possession on all moneys and property of its 1579] 580 LiEHS OF Banks. [ch. xl. depositor or debtor and may apply the same upon any indebted- ness due the bank by said debtor. This subject of a general lien is clearly defined and discussed by that court in the case of Muench v. Bank, 11 Mo. App. 144. The court says: " The general lien of bankers is part of the law merchant. That bankers have a lien on all money and funds of a depositor in their possession for the balance of the general account, is undisputed. A banker's lien does not arise on securities de- posited with him for a special purpose; otherwise, we have no doubt that when a discount has been made by the bank and the note is matured so as to create an indebtedness from the de- positor of the bank, all funds of the depositor which the bank has at the date of the maturity of the discounted note, or which it afterward acquires in the course of business with him, may be applied to the discharge of his indebtedness to the bank, and this is true not only of the general deposit of the customer, but the rule applies to any commercial paper belonging to the de- positor in his own right and placed by him with the bank for collection." A deposit of collateral security made to secure a particular debt creates a special lien and cannot be held by the bank after such indebtedness is paid and upon demand made by the owner must be returned to him. But a general deposit of collateral security made to secure any and all indebtedness that may be owing by the debtor, is a general lien and can be held until all the debtor's indebtedness is settled, and the lien of the bank can be enforced against said property. "^ But a bank has no lien upon the deposit of a customer for an indebtedness owing to it by him, which has not matured, though he be insolvent.^ This rule has some modifications. Stock certificates — Statutory liens. The Supreme Court of the United States in the case of Ham- mond V. Hastings, 134 U. S. 401, in discussing the law as 1 American Nat'l Bank v. Minor merce (Mo. Sup.), 41 S. W. 790; & Son, 142 Ky. 792. Gibbons v. Hecox, 105 Mich. 509, 2 Homer v. Nat. Bank of Com- 63 N. W. 519. CH. XL.] Bankiitg. 581 enacted by the legislature in the State of Michigan, section 4143, Howells' Annotated Statutes (1st ed.), section 17 of Act 187 (1875), which reads: " The stock of every such cor- poration shall be deemed personal property and be transferred only on the books of such corporation in such form and manner as their by-laws shall prescribe, and such corporation shall at all times have a lien upon all of the stock, the property of its members invested therein for all debts due from them to such corporation," says: " The general act, Howells' (1st ed.) section 4866, provides as to aU. corporations that a transfer of stock shall not be valid except as between the parties, unless entered on the books of the company showing the names of the parties by, and to whom transferred, the number and designation of shares and the date sf the transfer. The bank was ignorant of ' Sweet's ' indebted- ness to the corporation when it lent its money on the security of the stock, and of course Hastings, though notified thereof at the time of the sale, succeeded to all of the rights of the bank. On these facts the circuit judge held that the purchaser took the stock discharged of any lien and submitted to the jury only the question of the value of the stock. This having been found by its verdict, judgment was entered therefor and the corporation now alleges error. The single question is, whetJier the corporation had a lien upon the stock for Sweet's indebted- ness as against the claims of the hank and the purchaser. This question must he answered in the affirmative, for the rule is clear and unquestioned that where hy general law a lien is given to a corporation upon its stock for the indehtedness of the stockholder, it is valid and enforceable against all the world." * s Union Bank v. Laird, 2 Wheat. Bank, 5 Penn. St. 345, 348; Farm- 390; Brent v. Bank of Washington, ers' Bank v. Iglehart, 6 Gill (Md.) 10 Pet. 596; National Bank v. Wat- 50; Eeese v. Bank of Commerce, 14 sontown Bank, 105 U. S. 217, 221; Md. 271; Hartford Bank v. Hart- Rogers V. Huntington Bank, 12 S. & ford Ins. Co., 45 Conn. 22; Bishop R. (Pa.) 77; Sewall v. Lancaster v. Glohe Co., 135 Mass. 132; Bohmer Bank, 17 S. & R. (Pa.) 285; Pres- v. City Bank, 77 Va. 445. byterian Congregation v. Carlisle 582 Liens op Banks. [ch. xl. The law under which this corporation (referring to the case of Hammond v. Hastings) was organized was a general law; so it has been decided by the Supreme Court of Michigan, in JN'ewberry v. Detroit, etc., Co., 17 Mich. 141, 151, where it is said : " The law in question is a public act, and all are ■charged with knowledge of its provisions." This construction l)y the Supreme Court of the State of the law is conclusive in this court, as well as elsewhere, as to its character. The law in terms provides for a lien, and that being a public law, all are charged with knowledge of its provisions. Generally, wherever paper of a nature similar to this is issued under au- thority granted by general statute, whoever deals with that paper is charged with notice of all limitations and burdens attached to it by such statute. And this is true whether the party lives in or out of the State by which the law was enacted. It is unnecessary to enter upon the certificate any statement of the limitations and burdens which the law casts upon all such paper, and the omission to state such limitations upon the face of the paper is not a waiver by the corporation of the benefits thereof. The statute of the United States provides, section 5230, that: " For any deficiency in the proceeds of all of the bonds of an association (bank) to reimburse to the United States the amount expended in paying circulating notes of the association, the United States shall have a permanent lien upon all of its assets, and such deficiency shall he made good out of such assets in preference to any and all other claims whatsoever , except the necessary costs and expenses of administering the same." Liens created hy law. The Supreme Court of the State of California, in the case of the Anglo-Calif ornian Bank (Limited), Appellant, v. Granger's Bank of California, Kespondent, 63 Cal. 359, says: " The lien, if any, must have been created by the by-law above quoted, and it seems to us that no lien could be created in that way which would affect a bona fide purchaser for value without notice to whom the stock was transferred in mode CH. XL.J Banking. 583 prescribed by the Code. We think that the by-law, which it is claimed gives the defendant such a lien, is clearly inconsistent with the provisions of section 324 of the Civil Code which we have quoted. The provision that ' the transfer is not valid ex- cept hetiveen the parties thereto until the same is so entered upon the ioohs of the corporation as to show the names of the parties hy and to whom transferred, the number or designation of the shares, and the date of the transfer,' does not, as we con- sider it, justify the defendant in its refusal to enter upon its books, the transfer from Fowler to the plaintiff any more than it would in the absence of any such by-law as the one upon which the defendant relies for its justification in this case. If there was a valid transfer of the stock from Fowler to the plaintiff, the latter had a right to have it transferred on the books of the defendant. The defendant might make by-laws regulating the transfer of stock, but it could not, under the power to regulate the transfer of stock, create a secret lien upon it, which would adhere to it in the hands of a bona fide purchaser for value and without notice." This question was elaborately, if not exhaustively, discussed" in Bullard v. Bank, 18 Wall. 589, and in Driscoll v. West Bradley & C. M. Co., 59 IS. Y. 96, and the conclusion reached in both cases was that a corporation could not, under the power, to make by-laws for the regulation of the transfer of stock, create or declare a lien upon the stock hy hy-law, nor refuse to permit a transfer until the indebtedness of the stockholder to the company be paid. It is held that the bank's lien is not only effective against the debtor, but that the bank may pursue the property in the hands of his assignee for creditors, and may be enforced as against such assignee. " Thus a bank to which paper was endorsed for collection before the maker thereof assigned for the benefit of creditors may set off the amount of the paper in a suit against it by the assignee to recover the maker's deposit in the bank." * i Seloner on Bank Collections, p. 42 ; Penn. Bank v. Farmers' Deposit Nat. Bank, 130 Pa. St. 209. ♦ 584 Liens of Banks. [ch. xl. A commercial State bank can, by special agreement, unless prohibited by statute, have assigned to it as security its own stock, and it may purchase the same at a sale to protect the bank from loss. It may then sell the stock purchased at such sale and take the purchasers' note with the stock as collateral security.^ A national bank cannot, either by specific provisions or agreement entered into, take its own stock as security for a debt contracted by the stockholders with the bank, but as the law provides no penalty for its violation the proceeding can only be inquired into by the United States. RuHe ietween correspondent and initial hank. The general rule is that, as between the correspondent hank and the initial hank where there have heen for several years mutval and extensive dealings between two banks and an ac- count current kept between them in which they mutually cred- ited each other with the proceeds of all negotiable paper trans- mitted for collection when received and accounts were regularly transmitted from, the one to the other and settled upon these principles, and balances remitted when called for and upon the face of the paper transmitted, it always appeared to he the property of the respective banks, and the collecting hank had no notice that the transmitting hank did not own the paper, and such paper was transmitted by each of the two banks on its own account; held, there is a lien for a general balance of account no matter who may he the real owner of the paper." But the general rule does not hold in the absence of a pre- vious agreement or mutual dealings between the correspondent and the initial bank. The court says, in Millikin v. Shapleigh, 36 Mo. 596: « * * * ^y^i where there is no such mutual arrangement or previous course of dealing between the parties whereby it is B Union Nat. Bank v. Hunt, 7 Mo. 440; The President and Directors of App. 42. the Metropolis, Plaintiff in Error, y. 8 Carroll v. Exchange Bank of The President, Directors, etc., of the- Wheeling, 30 W. Va. 518, 4 S. E. New England Bank, 6 How. 212. CH. XL. J Banking. 585 expressly or impliedly understood that such remittances of paper are to go to the credit of the previous account when re- ceived and no advance is made and no credit is given on the basis of the particular bill or on the faith of such course of dealing or such remittances, or where the special circumstances are inconsistent with the hypothesis of such mutual under- standing, and the one bank merely bases the proceeds of paper remitted for collection to the credit of the other on a subsist- ing indebtedness which it happens at the time to have standing against the other, there is no such lien and no right to retain and apply the money collected in that manner, but the real owner of the funds may maintain an action to recover the amount." In the case of the First National Bank of Clarion v. Gregg & Co., 79 Pa. St. 384, the rule as stated is as follows : "A note was made to plaintiff's order, endorsed by him and sent through the house of Brady, a banker, for collection by him, endorsed to the defendant, a bank, for collection and credit. Held, that Brady by the endorsement did not become the owner of the note and had no right to pledge it, or direct its proceeds to be credited to him in payment of his indebted- ness to the defendant." Mr. Justice Williams, in delivering his opinion, says: " Brady & Co. did not become the owners of the note by the plaintiff's endorsement and delivery of it to them for collection, and they had no right to pledge it or direct its proceeds to be placed to their credit in payment of their indebtedness to the bank. It is true that they were the apparent owners of the note, and in the absence of notice of the plaintiff's title the bank had the right to treat them as the real owners. If it had made advances or given new credits to Brady & Co., on the faith of the note, it would imdoubtedly be entitled to retain the amount out of the proceeds, but just at this point the defense wholly fails. The aflSdavit of the cashier does not show that the bank made any advances or gave any new credits on the faith of the note, nor does it show that it incurred any liability or did anything by which its condition is worse than 586 Liens of Banks. [ch. xl. it could Lave been if it had not received the note for collection and credit, or that it will sujBfer any loss or damage if the credit is not allowed. If so, the bank has clearly no equity which entitles it to withhold the proceeds from the owners of the note." In the case of Lawrence and Another v. The Stonington Bank, 6 Conn. 521, the court holds that: " * * * a custom among banks of transmitting bills and notes from each to the other for collection, and when paid of passing the avails to the credit of the bank so transmitting them, and to the debt of 'the bank so receiving them, cannot affect the claim of a third person to the avails of a bill which he has committed to one of them for collection. The court in the above case, in discussing a banker's lien. " In Jourdaine v. Lefevre et al., 1 Esp. Eep. 66, it was said by Lord Kenyon that a banker had a lien on a note paid into his house, and, of course, a right to retain it for his general balance. The doctrine more clearly appears from the case of Davis and Al. Bowsher, 5 Tenn. Hep. 488: 'A customer lodges bills of exchange in the hands of his banker generally, and when the banker advances money to him he applies it to the discount of such of the bills as happen to be nearest in value to the sum advanced, but without any special agreement to that effect. This does not invalidate the banker's general lien upon all of the other bills in his hands, but he may retain them in order to secure the payment of his general balance.' " A bank does not have a general lien against a specific or special deposit.'' A bank holding securities assigned to it by a partnership cannot in any event apply money belonging to one of them, to the satisfaction of a debt due by the other, without the con- sent of the former.^ T Fitzgerald v. State Bank, 64 110, 125 S. W. 248. See 215 U. S. Minn. 469; Bank v. Ins. Co., 104 110. U. S. 54; Judy v. Farmers' and » Bank of Lagrange v. Calter, 101 Traders' Bank, 81 Mo. 404; Hanover G-a. 134; Dawson et al. v. Real Nat. Bank v. Suddart, 215 U. S. Estate Bank, 5 Pike (Ark.) 283; CH. XL.J Banking. 587 The deposit of funds in the name of a person as trustee cannot be apportioned or applied by the bank to the payment of his individual indebtedness to the bank." In the case of Hodgkins v. Bank, 124 N. C. 540, the rule as to the right of the bank to apply the deposits of a surviving partner to cancel the debts of the former is stated as follows: "A bank has the right to apply the debt due by it for de- posits to any indebtedn by the depositor in the same right to the bank, provided such indebtedness to the bank has matured." Lien and set-off. In a very recent case (1910) the Supreme Court of Minnesota has decided that a bank summoned as garnishee in an action against one of its depositors may set off against the depositor's general account, unmatured notes held by it at the time of the service of the garnishee summons, when it appears that the depositor is insolvent, and it need not be shown that at the time of the service of the summons that the depositor had been adjudged an insolvent. Insolvency in fact is all that is necessary to entitle the garnishee to the remedy. The doctrine is somewhat new and the law as expressed by the court is of more than ordinary importance. The rule is fully established that a bank in which a deposit is made for a special agreement may not apply the deposit to the discharge of the depositor's matured indebtedness.^" Lien application to national hanhs. Section 5201, Revised Statutes, U. S., provides as follows: " No association shall make any loan or discount on the security of the shares of its own capital stock, nor be the pur- chaser or holder of any such shares, unless such security or Ferry v. Home Savings Bank, 114 v. Drovers' National Bank, 157 111. Mich. 321. 206; Preston v. Prather, 137 U. 8. 9 Bundy v. Town of Monticello, 604. 84 Ind. 119; National Bank v. In- lo See Smith v. Sanborn State surance Co., 104 U. S. 54; Clemer Bank, 126 N. W. 779. 588 LrEiTS of Banks. [ch. xl; purchase shall be necessary to prevent loss upon a debt pre- viously contracted in good faith; and stock so purchased or acquired shall, within six months from the time of its pur- chase, be sold or disposed of at public or private sale; or, in default thereof, a receiver may be appointed to close up the business of the association, according to section fifty-two hun- dred and thirty-four." It has been frequently held under this section that national banks cannot acquire a lien on its own stock in the hands of its stockholders.^^ But there is nothing in this section of the statute forbidding national banks from acquiring liens through a loan upon the stock of another national bank.^" It is not within the power of the board of directors by the passage of a by-law to create a lien in the face of this statute in favor of the bank, and any such by-law is wholly void and neither does a provision of this nature when written into the certificate operate as a notice and create a lien." Where a debtor owed a bank and at the same time had money on deposit, the bank is under no obligation to apply the deposit to a debt due it by the depositor unless he has sufficient funds to fully pay the debt, but the bank can sue to collect the debt and recover, in Oregon, a reasonable attorney's fee.^* Where decedent had money in bank at the time of his death and the bank held a note against him for a less amount which matured the day after his death, held it might make the set-off and pay difference to the administrator.^" Special deposit in Maine not subject to set-off.^' A deposit made subject to depositor's order is not subject to the depositor's debt due the bank.^' 11 Bank v. Lanier, 11 Wall. 369; National Bank, 53 Ore. 57&, 98 Third National Bank v. Buffalo Pac. 509, 101 Pac. 390. German Ins. Co., 193 U. S. 581 ; « Little, Admr., v. City National Smith V. First National Bank, 115 Bank of Fulton, 115 Ky. 629. Ga. 608. i« Lyman v. National Bank, 98 12 Metropolitan Trust Co. v. Me. 448. McKinnon, 172 Fed. Rep. 846. it Carter v. Martin, 22 Ind. App. 13 Third National Bank v. Buffalo 445 ; Smith v. Sanborne State Bank, German Ins. Co., 192 V. S. 581. 147 Iowa 640. 14 Booth V. Farmers' and Traders' CHAPTER XLI. STATUTE OF IIMITATIOlirS. § 312. Buns against checks, when. In the absence of a statute of a State declaring that the statute of limitations shall not run against money deposited in the bank, the rule is that the statute begins to run against the liability of the bank from the time a demand for payment is made.^ If the drawer has no funds in the bank, presentation is not necessary and the statute begins to run from the date of the check.^ A delay to call for a deposit for a period of six years from the time the money was placed in the bank is not a bar to a right of action against the banker.^ Where a bank holds funds of a depositor subject to call, the contract is one to pay on demand, and the statute does not begin to run imtil demand.* A certification of a check by the bank does not change the rule. The statute does not begin to run until after demand. It is also claimed that the statute does not begin to run until demand is made by owner of bank stock for dividends. § 313. Buns against certificates of deposits, when. A certificate of deposit is, by the courts, declared to be in legal effect a promissory note; and the statute of limitations, if such is the law, begins to run immediately, and no demand is necessary unless the statute provides as in Iowa the statute begins to run only after demand." 1 Railroad v. Bank, 212 Mo. 505, s Glrard Bank v. Bank of Penn 39 Pa. St. 92. Township, 39 Pa. St. 92. 2 Haynes v. Mealey, 112 Ga. 668. < Starr v. Stiles, 19 Pae. Rep. 225. 5 Elliott V. Bank, 128 Iowa 273. [589] 590 Statute of Limitations. [ch. xli. In the case of Mitchell v. Easton, 37 Minn. 335, the court says, in discussing the question of the statute of limitations in a suit brought upon an instrument designated as a certificate of deposit which is in the words and figures following : " Mower County Bank, Austin, Minn., March 29, 1876. " L. S. Mitchell, Esq., has deposited in this bank seven hun- dred fifty and no-100 dollars, payable to the order of himself, in current bank notes, on the return of this certificate properly endorsed, with interest at the rate of ten per cent, per annum. " SMITH, WILKINS & EASTOK" " The defendants received the money of the plaintiff, and by the instrument sued on, promised and agreed to repay it, with interest, and by placing their obligation in this form they manifest an intention to change the character of the trans- action from that of an ordinary deposit to that of a debt or loan evidenced by an instrument construed to be a promissory note payable on demand. If the parties desired to place any other or further limitation upon the rights or obligations of either, it should have been expressed upon the face of the instrument. " Upon the question under discussion it is admitted that the authorities differ. In New York the cases indicate much conflict of opinion. Some of them hold that such certificates are promissory notes ; others mere receipts or written evidences of a deposit, and as such continuing securities, which, though negotiable, are not dishonored until after an actual demand. See National Bank of Fort Edward v. Washington County Bank, 5 Hun 605. But if they are promissory notes payable on demand, then, under the statute above referred to, they would be dishonored after sixty days. But this could not con- sistently be the case if the paper was not due until an actual demand. But it is manifestly the better rule in practice to hold that such demands become stale and outlawed unless col- lected or sued within six years. Brummagin v. Tallant, 29 Cal. CH. XLI.J Banking. 591 503 (89 Am. Dec. 61); Tripp v. Curtenius, 36 Mich. 494; Curran v. Witter, 68 Wis. 16 (31 IST. W. Eep. 705.) " The general rule is that a certificate of deposit if in fact is a promissory note and this may be proven by parole evidence (State V. Savings Bank, 136 Iowa 79), and payable on de- mand, is due immediately without any actual demand and that the statute begins to run at once.° The statute begins to run when a right of action accrues.'' Where the courts hold that a certificate of deposit is not in legal effect a promissory note, the certificate becomes due (unless a date is fixed) from the date of demand, and the statute does not begin to run until demand is made. The Supreme Court of the State of Massachusetts, in the case of Shute v. Pacific Ifational Bank, 136 Mass. 487, holds that a certificate of deposit issued by a national bank is not a promissory note within the meaning of the general statutes, chapter 53, section 10. It is also held by the same authority that a certificate of deposit is not due until a demand is made and the certificate is returned or tendered.* In the case of Lusk v. Stoughton State Bank, 135 Wis. 311, held that the statute of the State, section 4230 (1898), exempt- ing from the operation of the statute of limitations actions brought upon " any bills, notes or other evidences of debt issued by any bank or issued or put into circulation as money," does not include certificates of deposit reading as follows : " This certifies that L. has deposited in the Stoughton State Bank $263.75 credit of himself, payable in bankable currency upon the return of this certificate properly endorsed, R. D. Cashier." In Pennsylvania a certificate of deposit made payable upon return is not payable until demand is made, and from this time the statute begins to run.* Brmnmagin v. Tallant, 29 Cal. McGough v. Jamison, 107 Pa. St. 503; Cousins v. Partridge, 79 Cal. 336. 228 ; Story on Promissory Notes, s Bellows Falls Bank v. Rutland § 29; Angell on Limitations, § 59; County Bank, 40 Vt. 377; Monger Wood on Limitations, § 124. v. Albany City Bank, 85 N. Y. 580. 7 See Jones v. NichoU, 82 Cal. 32 ; » Gardner's Estate, 228 Pa. 282. 592 Statute of Limitations. [ch. xli. Buns against depositor, when. Where no special contract is entered into between the de- positor and the bank at the time of deposit, an implied contract is established and controls the relationship existing between the parties. This relationship established by usage and custom is that the depositor has placed the deposit with the bank to be retained by it until demand is made. There is no default until payment is demanded and refused and until demand, no cause of action arises. Unless there is a statute to the contrary, the established law, is that the statute does not begin to run against an ordinary deposit until demand.^" The mere drawing of a check is not a demand.^*^ So it has been held that where a note as collateral security to a line of discounts is deposited in bank and is converted into money by the bank, the statute does not begin to run as to the proceeds of the note until .demand. ^^ In an action by a depositor against a bank in California for damages for refusal to pay check, whether the alleged cause of action is good or not, is barred by the statute of limi- tations in two years.^' § 314. Statute runs against stockholder's liability, when. In a suit by a receiver of an insolvent national bank to collect an assessment authorized by the Comptroller of the Currency upon the stock from a stockholder who has made a fraudulent transfer of his shares, the action is based upon the statutory liability of the stockholder, and the statute begins to run from the date the assessment becomes due. 10 Mltchel v. Beckham, 64 Cal. n Bank of Brit. North America 117; Adam v. Orange County Bank, v. Merchants' National Bank of 17 Wend. (Mass.) 514; Girard New York, 91 N. Y. 106. Bank v. Bank of Pennsylvania 12 Humphrey v. National Bank of Township, 39 Pa. St. 92; Farmers' Clearfield, 113 Pa. St. 417. and Merchants' Ba;nk v. Planters' 13 Smith's Cash Store v. First Bank, 10 Md. 422; Green v. Odd National Bank of San Francisco, Fellows S. * C. B., 65 Cal. 71. 149 Cal. 32. CH. XLI.J . Banking. 593 The statute begins to run from the accrual of the liability.^* When a bank fails and its assets are insufficient to pay off all of its liabilities, the stockholders become liable for such deficiency to the extent provided (if a national bank, by the statute of the United States; if a State bank, by the statute of the State), and no limit of time prescribed by the Federal statutes within which an action must be brought to enforce an assessment against a stockholder, such an action is governed, as to limitation, by the statute of the United States. But see Aldrich v. Skinner, 98 Fed. Eep. 345. The court here holds that the statute of the State where the action is brought governs. In a very late case the Supreme Court of the United States has decided that the statute of limitations of a State is no defense to an action brought by the receiver of a failed national bank against its stockholders. Chief Justice McKenna, in rendering the opinion of the court in the case of Rankin, receiver of the Hutchinson Na- tional Bank, v. Edward E. Bartin, a stockholder, says : " We think the Kansas Supreme Court overlooked the official character and power of the Comptroller of the Currency and the decisions of this court declaring them. A national bank is an instrumentality of the United States; its circulating notes are guaranteed by the United States, and if the United States should be compelled to pay them the United States has a para- mount lien on the assets of the bank for reimbursement. The administration of the bank's assets is, therefore, vested in the comptroller as an officer of the United States. He appoints the receiver and directs his acts. Individual liability of a stockholder can only be enforced by his order. "As the power of the comptroller is derived from a statute of the United States it cannot be controlled or limited by State statutes." The statute of limitations affecting the liability of stock- 1* Thompson v. Grerman Ins. Co., 77 Fed. Eep. 258; Godfrey v. Terry, 97 U. S. 171. 38 594 Statute of Limitations. [ch. xli. holders in a nationar tank does not begin to run against the stockholder until the time when the comptroller has declared the liability to be due.^^ And no limit of time having been prescribed by the Federal statutes within which an action must be brought, such an action is governed as to limitation" by the statute of the State where it is brought." The national banking law prescribes that the comptroller 'may fix the time when the liability shall become due, but the statute fixes no definite time when he shall act." § 315. When State statute begins to run. In actions for the recovery of usurious interest, a State statute limiting the time within which an action to recover excessive interest may be brought does not apply. ^* In the State of California it is held in the case of Wells v. Black, that the statute of limitations commences to run against the liability of the stockholders of a savings bank from the time when the debt was created and the liability incurred upon the acceptance of each deposit, and at the expiration of three years thereafter, the right to enforce the stockholder's liability is at an end. The court says: " Since the relation of debtor and creditor existed between the bank and its depositors it follows that the debt was created and the liability incurred at the time of the acceptance of each deposit. At the expiration of three years the right to enforce the stockholder's liability was at an end. (Code Civil Pro- cedure, section 359; Hunt v. Ward, 99 Cal. 612, 37 Am. St. Kep. 87; Bank v. Pacific Coast S. S. Co., 103 Cal. 594.) Whatever divergence of views may be found in the earlier adjudications, the cases above cited contain the last expressions of the court upon the question. It follows, therefore, that iBDeweese v. Smith, 106 Fed. it Aldrick v. Yat«s, 95 Fed. Eep. Rep. 438, 77 Fed. Eep. 258; McDon- 78. aid V. Thompson, 184 U. S. 71. is Lucas v. Government National 16 Aldrick v. Skinner, 98 Fed. Eep. Bank of Pottaville, 1 N. B. C. 872. 375; McCIaine v. Rankin, 197 U. S. 154. CH. XLI.J Banking. 595 plaintiff's cause of action is barred as to all deposits made more than three years before the commencement of the action. " The judgment is ordered modified to conform to these views, appellants to have their costs upon appeal." § 316. Fraudulent act by officer of bank — Statute runs, when. Where an officer of a bank has committed a fraudulent act causing loss or injury to the bank, which act is unknown to the directors of the bank, in an action brought against him (the officer) for money had and received, the statute of limi- tations does not begin to run until the knowledge of the act has been discovered by the directors.^' 19 Atlantic Nat. Bank v. Nathaniel Harris, 118 Mass. 147. CHAPTER XLII. FORFEITUEE OF BAITE'S FRANCHISE. § 317. Acts of banks whieli may forfeit charter. The National Banking Act, section 5239, Revised Statutes of the United States provides : " If the directors of any national banking association shall knowingly violate or knowingly permit any of the officers, agents, or servants of the association to violate any of the pro- visions of this title, all the rights, privileges and franchises of the association shall he thereby forfeited. Such violation shall, however, be determined and adjudged by a proper circuit, dis- trict, 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 personal and individual capacity for all damages which the association, its shareholders, or any other person shall have sustained in consequence of such violation." § 318. Acts constituting liability. A franchise of a national bank is liable to forfeiture when the acts are committed by the directors knowingly, and the information brought must charge that the act was done by the directors, or that they knowingly permitted it to be done.^ If the action is not brought within a period of five years it is barred by the statute of limitations.^ By the provisions of the foregoing statute, the Comptroller iTrenholm, Comptroller of the 2 Welles v. Graves, 41 Fed. Eep. Currency, v. Commercial National 459. Bank of Dubuque, 38 Fed. Rep. 323. [596] CH. xLii.J Banking. 597 of the Currency is given the sole and discretionary power to bring the action. The authority is vested in him. No other person can complain or institute proceedings. Legislatures in some of the State have enacted laws declaring that if a bank shall violate any of the laws of the State or its charter by doing acts in excess of its powers, or failing to comply with express provisions of the law directing it to per- form certain acts, its charter may be forfeited in a suit in- stituted by the Attorney-General of the State. The charter of a State corporation, whether obtained under a special or general law, cannot be forfeited only by an action brought under the direction and authority of the Attorney- General of the State. A complaint may be laid by any indi- vidual before such officer, but the power to bring the action is discretionary and rests with him. But where a public officer, who is empowered by law to perform an act which concerns the public, and affects the public interest, the execution of the power where the officer fails to perform his duty may be en- forced by writ of mandate. In the State of California the writ of mandate is issued only to enforce an act especially enjoined by law as a duty resulting from an office, trust, or station.' Unintentional acts committed by the officers or directors of a bank, though violations of the law and the charter of the bank, but which do not result in serious harm to the stock- holders or depositors, should not be urged and is not sufficient grounds for declaring a forfeiture of the bank's charter. But acts which are knowingly committed by the directors, or with their knowledge are committed by any of the officers or agents of the bank, with a purpose to avoid or violate a law, and which, when done, cause loss or injury to any person dealing with the bank, are acts which, when proven, present sufficient grounds and authority for declaring the charter forfeited. 3 Price V. Riverside L. & I. Co., 56 Cal. 431; Priet v. Eeis, 93 Cal. 85; Code Civ. Proc. (Cal.), § 1085. S98 FoEi-EiTTiEE OF Baitk's Feaitchise. [ch. xlii, § 319. Failure to comply with statutory provisions — Grounds for forfeiture. Where the law requires that a banking corporation shall have a capital stock, a portion of which may be paid up when the charter is granted, the remainder to be paid within a time £xed by the statute, upon a failure to pay in the remainder at such time, works a forfeiture of the charter; and in such cases, it at once becomes the duty of the Attorney-General of the State to institute an action for that purpose. The failure of the corporation in the performance of an act required by law to be performed at a certain time, cannot be extended. § 320. Nonuser of charter. Where the statute provides that a corporation shall organize within a certain period of time, and shall perform certain other acts at times fixed by the law, such as the election of a board of directors, or if after its organization and commencement of its business, it shall lose or dispose of all of its property, and shall fail for a period fixed by the statute to transact in regular order the business of said corporation, its corporate powers shall cease and the corporation may be dissolved at the instance of a creditor at the suit of the State on the information of the Attorney-General. (Civ. Code of Cal., section 358.) It is held in the case of the People of the State of New York V. The President, Directors, etc., of the Bank of Hudson, 6 Cow. (N. Y.) 216, that an information in the nature of a quo warranto against an incorporated company, seeking to deprive it of its franchise, on the ground of forfeiture by non user, may be against the company in its corporate name. The judgment is a judgment of seizure, and the court holds in this case that the corporate rights may be forfeited by a non user or misuser. Suffering an act to be done which destroys the end and object for which a corporation was instituted, the court holds is equivalent to a surrender of its corporate rights, as .where an incorporated bank becomes insolvent, and assigns so CH. XLILJ BAIfKIIfG. 599 much of its property to trustees, for the purpose of paying its debts as to prevent its resumption of banking business. § 321. Wilful violation of law or bank's charter cause for for- feiture. Any wilful violation of law, the creating of a debt in excess of the amount provided by statute, paying dividends out of the capital stock, failing to comply with the mandatory provisions of the law, which requires the bank to make official reports to the proper authority of the State or knowingly making false reports, are such offenses as would justify an action by the proper authority to forfeit the bank's charter. In the case of People v. Oakland County Bank, 1 Doug. (Mich.) 282, where the bank under the provisions of the law and its charter is located in one county, in the absence of a statute authorizing it to establish an agency in another county, and where it establishes such an agency, receives deposits, and buys and sells exchange, held by the court that it thereby violates its charter. But the court, in discussing the facts and the question presented in this case, says: " In view of all the circumstances disclosed in the case made, seeing that the agency in question was probably established without any deliberate intention to violate the law, and that the same has been discontinued, we shall not feel disposed, as at present advised, to declare judgment of forfeiture against the defendants, but in the exercise of that broad discretion with which we are clothed, to adapt the judgment to the circum- stances of the case ; admonishing those interested in the bank to see to it, that in the meantime, and for all time to come, they so conduct the affairs of the institution as not to render them- selves obnoxious to legal proceedings. The public demand of us and of all concerned in the administration of the law, the greatest vigilance in detecting and punishing in the most ex- emplary manner those who can and do wield so much power, when that power *is so exerted as to be productive of evil in- stead of good. And, while the judgment in this case may not 600 FOEFEITUEE OF BaNK's FeaWCHISE. [cH. XLII. deprive the defendants of important privileges, a repetition of the offense will be visited with the severest penalties of the law." The court very discreetly in this case looked into the motive and intention of the directors of the bank, and when it found that there was no wilful violation of the law, it withheld its power of punishment. In a very early case reported in 5 Ohio St., the court held that it was in violation of the act which was passed by the legislature to incorporate the State Bank of Ohio, etc., for one of the independent banks chartered by the original bank, to make loans to a director before the adoption by the stock- holders of by-laws to regulate the liabilities of directors, and that such violation was a cause for forfeiture of the bank's charter.* § 322. Taking: usurious interest held to be a violation of charter. In the case of Fleckner v. United States Bank, 8 Wheat. 338, the court holds, that the statute incorporating the bank of the United States does not avoid securities on which usurious interest may have been taken and the usury cannot be set up as a defense to a note on which it is taken ; it is merely a viola- tion of the charter, for which a remedy may be applied by the Government. Where the rate is not fixed by the State, taking 7 per cent, is not a violation of law.° § 323. Bank may be indicted for taking usurious interest. In the case of State v. First National Bank of Clarke, 51 N". W. 587, it is held that a national bank may be indicted by the State for taking usurious interest, also that the State law which makes the taking of illegal interest a misdemeanor, and in case of a corporation, punishable by the imposing of a fine, is not necessarily an interference with the proper discharge * The state ex rel. the Attorney- " Daggs v. Phoenix National Bank, G^-neral v. Seneca, County Bank, 5 117 U. S. 549. Ohio St. 170. CH. XLii.] Banking. 601 of the bank's duties to the government as will make such requirement invalid. Where the statute of a State prescribes that all the capital stock of a corporation shall be subscribed, a bank has no au- thority to commence doing business until said stock has all been subscribed. And the State may bring an action to forfeit a charter where the corporation commences business before the full capital stock is subscribed.* § 324. Directors embezzling funds of bank -^ Mismanagement. In the case of the Bank Commissioners v. Ehode Island Central Bank, 5 E. I. 12, where the commissioners brought an action to enjoin the bank from further doing business on the ground averred in the application, that the bank " is so manag- ing its concerns that the public or those having funds in its custody are in danger of being defrauded thereby," the court upon the hearing of the case found that there was gross and illegal management and danger of fraud growing out of such mismanagement, and it, therefore, entered a decree appointing a receiver and perpetually enjoined the bank from further exercising the powers and franchises conferred by its charter. § 325. Wrongful act of a single director. The wrongful act of a single director or officer of the bank does not constitute an offense upon which an application will lie upon the part of the State. But where the board of directors sanction and have knowl- edge of acts committed by an officer or a director, which are in violation of law, it is imputed to and becomes the act of the bank. § 326. Bank doing business not authorized. A bank incorporated to conduct a commercial banking busi- ness is restricted by the law to that class of business and cannot conduct a savings bank business, or a mercantile business, or People V. National Savings Bank, 129 111. 618, 11 N. E. 170. 602 FoEFEiTUEE OF Baktk's Feakchise. [oh. xlii. a real estate business. Likewise a savings bank incorporated for the single purpose of conducting a savings bank business, with no other power provided for by its charter, cannot con- duct a commercial banking business or buy and sell commercial paper. It is confined by the law in the conduct of its business to the purpose for which it is incorporated. And a corporation that conducts a business not authorized, its charter may be revoked. '^ Where the statute requires that a certain number of persons must sign and acknowledge the articles of incorporation, and where a corporation attempts to do business, not having com- plied with the law, the State may forfeit its charter.' § 327. Directors liable for losses resulting from violation of law. The directors of a national bank are liable in an action for damages on account of their personal acts, resulting in a viola- tion of a law, and a suit may be brought though the Comptroller of the Currency has not procured a forfeiture of the charter.' But where a receiver has been appointed to take charge of the affairs of the bank it is held that the action should be brought by him.^" Where the receiver neglects or refuses to bring an action against such directors it may be brought by a shareholder.^^ A State court has jurisdiction.^^ 7 The People v. Utica Ins. Co., 15 488, 141 Fed. Eep. 694, 124 Fed. Johns. 357. Eep. 239. 8 People V. Montecito Water Co., n Brinkerhoflf v. Bostwick, 8§ 97 Cal. 276. N. Y. 52. » Stevens v. Overstolz, 43 Fed. " Zinn v. Baxter, 65 Ohio St. 341 ; Rep. 465. Boyd v. Schneider, 131 Fed. Eep. 10 Bailey v. Mosher, 63 Fed. Rep. 223. CHAPTER XLIIL INSOLVENCY. § 328. Insolvency defined. The district judge, In re Gilbert et al., 112 Fed. Eep. 951, says : " Under the old bankruptcy act, inability to pay debts as they matured constituted insolvency. Then the matter of solvency was a simple one. Now a new test is prescribed. Does the respondent's property at a fair valuation equal his liabilities?" Mr. Collier says : " That insolvency turns on what is a fair venation of the property," citing In re Gilbert (D. C. Ore.), 8 A. M. B. E. 101, 102 Fed. Eep. 951. "When the aggregate of a person's property at a fair valuation is sufficient to pay his debts he is insolvent within the definition contained within the bankruptcy act." (Carson v. Chicago Title and Trust Co., 5 A. M. B. K. 814; Pirie v. Chicago Title and Trust Co., 182 U. S. 438.) And a fair valuation, as con- sidered by the court in the case of In re Hines, 144 Fed. Hep. 142, is stated as follows: "As it respects property considered in a commercial sense, I can conceive of no better or surer standard by which to arrive at a fair valuation than the market value, that is what the property will probably bring or is worth in the general market where everybody buys." Again the term " insolvency " is defined as follows : " Insolvency means, simple inability to pay, as debts should become payable, whereby the. debtor's business would be broken up." The deposits in a commercial bank are held to be debts due by the bank and are payable upon demand. Therefore, under the last definition, any commercial banking corporation upon failure to pay a deposit upon demand made upon it, would be declared insolvent. [603] 604 Insolvency. [ch. xliii. The general rule is laid down that a bank is insolvent when, unable to meet its liabilities as they become due in the ordinary course of business, and when it cannot pay its deposits on de- mand in accordance with its promise. The rule here stated requires that a banker shall at all times when called upon be ready to meet and pay every depositor whose debts are due, or demanded, and failing to do so, it is an act of insolvency. If this rule is applied and the solvency of banks depends upon their ability to pay all depositors, immediately upon de- mand, it would work a very great injury and wrong. The violent enforcement of the rule would close the doors of more- than ninety per cent, of all the banks, which under the rule as laid down by Collier, if applied would reasonably allow them to continue in business. But the courts generally are possessed with a broad knowl- edge of the business and conditions confronting a bank and recognize the fact that if they are called upon to immediately pay all demands, that they cannot at once comply. Therefore they have sanctioned and now uphold the more reasonable rule that a, bank is solvent when it possesses sufficient solvent and marketable assets to meet all its obligations and liabilities within a reasonable time. This reasonable construction of the law as applied to banks is now held by the courts in many of the States to be the law determining a bank's solvency. Mr. Moore on Eraudlent Conveyances, vol. 2, page lOiTS, supports Mr. Collier in defining " insolvency " under the present law, and further says, " In all foreign bankruptcy laws, cessation of payments is the essential of insolvency and this was the test in the United States until the passage of the' present law. Thus it was held that the amount of the trader's property was of no consequence if he was unable to pay his debts in lawful money as they matured." The author then says, " under the Law of 1898, the value- of the property is the essential element." In Illinois, the court holds " insolvency," as applied to a person, firm or corporation engaged in trade, in its inability CH. XLiii.] Banking. 605 to pay debts as they fall due in the usual course of business. (Atwater v. American Express Bank, 152 111. 605.) The term " insolvency," as used in Kentucky, section 597 (Eussel's St., section 2186), providing that if any president of a bank shall receive or assent to the receiving of deposits with knowledge that the bank is insolvent, he shall be guilty of a felony, means that all of the bank's property and assets are not sufficient to satisfy its debts, and not that it may not have suffi- cient funds in its vaults to satisfy all its depositors, or any con- siderable number of them on the same day, or in case of a run." ^ In Indiana the court in its construction of a statute, which makes it embezzlement for a banker to receive a deposit when insolvent from any one not indebted to the bank, whereby the deposit so made shall be lost to the depositor, says : " When a deposit of money is made, the banker, in con- templation of law, has money on hand to the full amount of the sum deposited, ready to deliver when called for, and his contract with the depositor is to refund that same amount on demand. When it is not paid back on demand as contemplated by the agreement between the banker and the depositor and this because of the insolvency of the banker, and his consequent inability to refund the amount of the sum deposited, then, within the true intent and meaning of this statute, which is entitled 'An act for the protection of bank depositors,' the deposits so made, or in the words of the statute, the sum fraudulently taken, is lost to the depositor. The crime created by the statute is consummated when the insolvent banker fraudulently receives the deposit, for the statute declares that such banker so receiving such deposit shall be deemed guilty of the embezzlement of the sum so fraudulently taken." In iNTew York, the court in the case of Levingston v. The Bank of N'ew York, 26 Barb. 305, says: " The bank we are told is insolvent, but how is that shown ? The plaintiffs' ' information and belief ' is surely no evidence, especially when in direct contradiction to the regular official 1 Paris V. Commor.wealth, 123 S. W. 329. 606 Insolvency. ' [ch. xliii. reports of the bank, which being made under oath and pub- lished by express direction of law are, it is presumed, entitled to at least as much weight, judicially, as the unknown and unsworn informant of the plaintiff. " We are left then to the mere legal inference of insolvency, resulting from the suspension of specie payments by a bank of issue. " Is such the necessary inference from suspension, no mat- ter what the bank's assets may amount to, in cases where sus- pension is general and nearly universal throughout the State and every other section of the Union ? It seems to me that it is not. The statute of 1849, which being subsequent in time and especially directed to the case of banks of issue and cover- ing precisely the same ground, would seem to supersede on these points the older enactments. This statute provides that, upon proof by the abortive return of an execution or by other satisfactory evidence before it is returned, that an execution for ' any debt or liability exceeding $100 ' cannot be satisfied out of any property of the bank thus sued, the judge ' shall at once make an order declaring the insolvency of such cor- poration or association; ' to be followed, of course, by the appointment of a receiver to wind up its business. Under another section, however, a creditor without waiting the first twenty days or the subsequent sixty days, if his demand exceeds $100, may at any time after ten days from the refusal of payment, apply for an order enjoining the bank and declar- ing it insolvent, and on such application the judge, ' if in his opinion on the facts presented it be expedient, in order to prevent fraud or injustice,' may grant an order for a tem- porary injunction. After which, on hearing of the parties on short notice, he shall determine whether the bank be ' clearly solvent or otherwise.' And even if he determine it be clearly solvent, he is required to continue the temporary injunction, if one has been granted, until full payment of the debts and costs. But if he determine that it is ' not clearly solvent,' he must not only continue the injunction, but appoint a receiver. " Heading these provisions, can any one say that, by a true CH. XLIII.J Banking. 607 interpretation of the law of which they form a part, the mere suspension of specie payments of itself and by itself, settles the question of insolvency? If so, why require under one section the issuing of an execution and proof of inability to satisfy it, , and under another, first a delay of at least ten days, and then a hearing on further notice and an examina- tion of the ' officers' books, papers, accounts, assets, and effects ? ' Banks of igsue in this State are the creatures of the law. The same law assumes that while accommodating the public they will yield an income to the stockholders; and how is such income to be realized unless they are allowed to loan, not only their capital, but a portion at least of their deposits, and that, too, not returnable on demand, but on time? It assumes, therefore, in the very organization of such institutions, that in case of a panic or sudden rush, the banks, although amply able and clearly solvent, may not have specie enough on hand immediately to satisfy all claims. Hence the Act of 1849, instead of authorizing a permanent injunction upon a mere refusal to pay in specie, expressly requires further "' proof satisfactory to a justice of the Supreme Court,' that the demand of the plaintiff ' cannot be satisfied out of any property of the defendant,' or that after a full hearing of the parties, it shall appear, and be so determined, that the institution is ' not clearly solvent.' " In the present case it is now admitted that the bank has property not only sufficient, but in every respect more than sufficient to satisfy all demands. Within the meaning of the statute, therefore, it is ' clearly solvent,' and, of course, not a subject for the extraordinary decree prayed for in the com- plaint. For that reason, as well as for the reason that no * fraud or injustice ' is alleged or pretended, it is, in my ' opin- ion, on the facts presented,' not only ' not expedient,' but on the contrary highly inexpedient, to grant a ' temporary injunc- tion,' or an order to show cause why such an injunction should not be issued." The more liberal rule and one which in justice should be applied to all debtors and particularly to a banking corpora- 608 Insolvency. [ch. xliii. tion, is that a bank is solvent when it possesses sufficient solvent assets to pay all its liabilities within a reasonable time. Upon a construction of the statute and Constitution of the State of Missouri, rendered by the Supreme Court of the United States, in the case of Dodge v. Hasten, the court, in defining the word " solvent " and the phrase " in failing cir- cumstances," says: " I will proceed next to define the meaning of the word ' solvent ' and the phrase ' in failing circumstances,' used in the statutes and Constitution. In the ordinary acceptation the term ' insolvent ' when applied to a bank, means inability to meet liabilities in the usual course of business. But a bank may be solvent and yet, from temporary causes, over which its officers have no control, suspend until these causes can be overcome. But they must be causes for which prudence and foresight cannot provide or over which the bank or its officers had no control or could have none. Such causes when they do occur are usually soon overcome. The bank again takes up its business and proceeds with it in the usual way. The failure of the First National Bank of Kansas City, Missouri, on the 29th of January, 1878, would not have been a good cause for suspension, for that could have been, and as we have seen, was overcome by means, however, which may aid you in deter- mining the solvency of the Mastin Bank at the time of its failure. As much of what I shall say upon the phrase ' in fail- ing circumstances ' applies also to solvency and insolvency of a bank, I pass to this branch of the case with the declaration that a bank is solvent, within the meaning of the Constitution and statutes we are considering, when it possesses sufficient of assets to pay within a reasonable time all its liabilities through its own agencies, and is insolvent when from the uncertainty of being able to realize on its assets, in a reasonable time, a sufficient amount to meet its liabilities, and, therefore, makes an assignment by which the control of its affairs and property passes out of its hands. The phrase ' in failing circumstances,' used in the Constitution and statutes, when applied to a bank, must be taken to mean a state of uncertainty, whether the CH. XLiii.j Banking. 609 bank will be able to sustain itself, depending on favorable or unfavorable contingencies, which in the course of business may occur and over which its officers have no control. Thus, for instance, an individual may be said to be in failing circum- stances when he is put to unusual shifts to meet his liabilities, such as borrowing money at unusual rates of interest, makes sacrifice in the disposition of his property, which he would not do but for his condition. Such a condition of things may exist regarding a bank, and when this is the case, a bank, like an individual, may be sa'id to be in failing condition. The funds of banks are supposed to be ready at hand to meet the wants of commercial, trading, and manufacturing communities in which they are located. Anything interfering with the avail- ability of its funds, such as the carrying of large debts upon which nothing can be realized, except after long delays, invest- ments in real estate which it may take time to turn into cur- rent funds — and all of these things when they occur, may or may not tend to show whether a bank is in failing circum- stances." (See 131 Mo. 464, 152 Mo. 522, 54 S. W. 226, 48 S. W. 72.) In California, the Civil Code provides that " a debtor is insolvent, within the meaning of this title, when he is unable to pay his debts from his own means as they become due." The Supreme Court of the State of California in the case of Sacry v. Lobree, 84 Cal. 41, in discussing the meaning and definition of an insolvent under this statute, says (quoting the testimony of Lobree, the defendant) : " ' I think the account of Murphy, Grant & Co., held by Crawford & Tabor, was $160. I was owing them at the time. Their debt was then due. I could have paid them in a few days. I was not able then to pay it. I can't say whether I owed any other creditors, whom I was unable to pay as their accounts became due, or not. * * * I (ji(j not pay ^y }){\\g ^s they became due, because I did not have the money. I had no bank account. I was attached at 9 :30 o'clock Saturday night, and I made the assignment and conveyance to Lobree about 8 o'clock Monday 39 610 Insolvency. [ch. xliii. morning. The keeper was in charge then of these goods that had been attached. At the time I made the assignment and conveyance I did not know that I was owing more money than I could pay, but I knew that I could not pay all at once what I owed then. There was more money due my creditors then than I could have paid if they had demanded immediate pay- ment. I did not have money enough in my hands to pay my debts as they became due. I had merchandise. Only one side of the store was attached. * * * j had property enough to pay everybody, and I wanted to pay everybody. I did not have money enough at the time to pay them. I had made no proposition to my creditors for a settlement.' " It is claimed that this testimony shows a clear and distinct confession of insolvency, but we do not think that this claim can be maintained. " It has been held, under the United States Bankrupt Act, that a trader is insolvent when he is unable to pay his debts as they become due in the ordinary course of business. (Toof v. Martin, 13 Wall. 40; Wager v. Hall, 16 Wall. 584.) In the case first cited the district judge had ruled that ' if the bank- rupts could not pay their debts in the ordinary course of busi- ness, that is, in money, as they fell due, they were insolvent.' Speaking of this the Supreme Court, by Mr. Justice Field, said : " ' The rule thus laid down may not be strictly correct as applied to all bankrupts. The term insolvency is not always used in the same sense. It is sometimes used to denote the insufficiency of the entire property and assets of an individual to pay his debts. This is its general and popular meaning. But it is also used, in a more restricted sense, to express the inability of a party to pay his debts as they become due in the ordinary course of business. It is in this latter sense that the term is used when traders and merchants are said to be insol- vent; and as applied to them, it is the sense intended by the Act of Congress. It was of the bankrupts as traders that the district judge was speaking when he used the language which is the subject of criticism by counsel. With reference to other persons not engaged in trade or commerce, the term may, per- CH. XLiii.] Banking. 611 haps, have a less restricted meaning. The Bankrupt Act does not define what shall constitute insolvency, or the evidence of insolvency, in every case.' " It was further said : ' In the present case the bankrupts were insolvent in both senses of the term at the time the con- veyances in controversy were made.' "In Bump's Law and Practice of Bankruptcy (5th ed.), page 469, it is said: ' Perhaps no precise rule can be laid dovra which will be applicable to all cases, inasmuch as the determina- tion of each case rests largely upon its own peculiar facts. It is generally held by the bankrupt courts that a trader who is not able to pay all his debts in the usual and ordinary course pf business, as persons carrying on trade usually do, is insol- vent, within the meaning of the Bankrupt Law, and there is no better general rule to govern courts when they are consider- ing the facts of a case. It is neither too broad or too narrow, while it would be quite too narrow and restricted to hold that failure to pay some one debt when due is evidence of insol- vency in all cases under the act. Whether a single instance of non-payment of a debt at maturity would be evidence in a given case of insolvency depends somewhat upon the magnitude of the debt, the locality of the debtor, and what is the ordinary course of business and custom, in that respect, of the locality where the debtor resides, and upon such other facts and cir- cumstances as bear upon the question of insolvency. * * * The question is whether the debtor or trader is able to pay his debts in the ordinary course as persons carrying on trade there usually do. Hence, it may be, and undoubtedly is, true that insolvency in commercial centers is not insolvency in small country tovras. In the former places, if the debtor's paper is dishonored, his credit is gone, and he is prima facie insolvent ; whereas, in the latter localities, it is not so. Insolvency is a fact and not a matter of definition or rule of law; and what is evidence of insolvency in London or Paris or l^ew York is not evidence of insolvency everywhere.' (Citing cases.) " The Insolvent Act of this State provides that a debtor may be put into involuntary insolvency if he, ' being insolvent, has 612 Insolvency. " [ch. xliii, suffered his property to remain under attachment or legal process for four days ' (§ 8), but it nowhere defines what shall constitute insolvency. The Civil Code, however, in the title in regard to assignments for the benefit of creditors (§ 3450), says: 'A debtor is insolvent, within the meaning of this title, when he is unable to pay his debts from his own means as they become due,' and it has been held that this is the correct definition of insolvency under the Insolvent Act of 1880.^ *•' What is meant by the words ' from his own means ? ' The definition of the word ' means ' as given by Webster, is ' resources or income.' But ' resources ' does not necessarily mean money in hand. A debtor may have ample resources to pay all his debts as they become due and yet have no money in his pocket or in bank. Is such a debtor insolvent ? Suppose a wheat buyer should have a thousand tons of wheat in a warehouse worth $25,000 which he is holding for better prices, and is indebted in the sum of a thousand dollars. Is he insol- vent unless he sells the wheat at whatever price he can get, and pays the debt as it becomes due? We do not think he is, under the Insolvent Law of this State. " In Bell V. Ellis, 33 Cal. 620, it was held that a trader is insolvent when he is not in a condition to meet his engagements, or to pay his debts in the usual and ordinary course of business ; but he is not so merely because his assets, at a given date, may not satisfy all the demands against him due and to become due. The court says : ' The test question is not, will his effects realize enough to pay his debts due and to become due? but, are his affairs in such a condition as to enable him in the usual and ordinary course of his business, to make his payments as they fall due? and the question is to be answered by the jury in view of all the circumstances affecting the business of the trader, including the value of his effects, the extent and char- acter of his business, the manner in which it was being con- ducted, whether upon a speculative or legitimate and safe basis, the amount of his profits, the extent of his liabilities, whether 2 Washburn v. Huntington, 78 Cal. 573. GH, xliilJ Banking. 613 kept within a safe limit, and generally his credit, accompanied by the benefit or advantage which he has, outside of the mere value of his property and the debts due him, arising from the good will of the business.' " It is not always a very easy matter to determine just when a bank may become insolvent. The bank's officers in charge may be possessed with the knowledge while a person dealing with the bank must rely upon information from the officers in charge. The keeping of a bank open and conducting business in the usual manner constitutes representation of its solvency, while at the same time it may be irretrievably insolvent. Statements made by the officers at the time of receiving the deposit to the effect that the bank is solvent, when it afterwards appears that such statements did not represent the true condition of the bank, would constitute a fraud and a deposit made under such circumstances, " the bank would become a trustee ex malefficio and would hold the deposit for the use of the depositor and sub- ject to his right of reclamation." ^ § 329. Means may exist in another State. Eeferring to the California statute, it is hot essential that the means from which the debts are to be paid must exist in this State; nor is the debtor to be considered insolvent, merely because he has not means in this State to pay his creditors here.* § 330. Officer taking deposit with knowledge of bank's insolv- ency — Liabile, when. In South Dakota the court holds, construing a statute impos- ing a penalty against a bank officer for taking a deposit, know- ing that the bank was insolvent at the time, that the term insolvent means a present inability to pay depositors as banks 3 Wasson v. Hawkins, 59 Fed. 233. * Cook v. Cockins, 117 Cal. 140. But see ex parte Berger, 81 S. C. 244; Livingston v. Trust Co., 77 S. C. 305. 614 IlfSOLVElirCT. ^ [CH. XLIII. usually do, and meet all liabilities as they become due, in the ordinary course of business. (92 N. W. 420.) The question of insolvency is one of fact to be determined from all the evidence viewed in the light of proper instructions.' Evidence of the general reputation for financial responsibility is held to be relevant on the question of solvency.* Held, that an indictment v?hich alleged the receipt of a deposit of the value of $130 was suflScient to show that the deposit was in money, checks or drafts. The indictment was not defective for a failure tb accurately describe the items.'' Insolvency under the Kentucky statute means that all the bank's property and assets are not sufficient to satisfy its debts and not that it may not have sufficient funds in its vaults to satisfy all of its depositors or a considerable number of them on the same day, or in case of a run.' In prosecution under Mills Ann. Stat., § 222, Colorado, held that part of the statute making a failure of a bank at any time within thirty days after receiving a deposit prima facie evidence of knowledge of insolvency, is constitutional and valid.' Where a bank officer is charged with taking deposits with knowledge of bank's insolvency, the term " insolvency " in Idaho, as construed in connection with a bank, means that a bank is insolvent when its assets are of such a character and value that it is unable to meet the demands against it as they may arise in the usual way.^" Under statute in Indiana, it is not unlawful for an officer to receive a deposit after knowledge of bank's insolvency if the deposit does not exceed his liability to the bank.^^ BNoonan v. State, 55 Wis. 258, 'Parrish v. Commonwealth, 136 12 N. W. 379; State v. Bowman, Ky: 77. 78 N. C. 509. sparriot v. Commonwealth, 136 6 Ellis V. State, 138 Wis. 523; Ky. 77. Hahn v. Penney, 60 Minn. 487, 490, » McClure v. The People, 27 Colo. 62 N. W. 1129; West v. St. Paul 358; Dryer v. Pease, 88 Fed. 978; National Bank, 54 Mmn. 466, 56 Winfield v. Ott, 54 Pae. Eep. 714 N. W. 54; Angel v. Eosenburg, 12 (Okla. 1898). Mich. 241 ; Bank of Middleburg v. lo State v. Cramer, 20 Idaho 639. Rutland, 33 Vt. 414. " State v. Cadwallader, 154 Ind. 607. CH. XLIII.J Banking. 615 What constitutes hnowledge. An officer in charge has good reason to know. He has all the opportunity to investigate, and it is his duty to do so, and to know the condition of the bank.^^ A leading case determined by the Supreme Court of the State of Iowa, holding an officer liable for receiving money when he had knowledge of the insolvency of the bank, is reported in the case of the State of Iowa v. Eifert, 102 la. 188. The facts in this case briefly stated are as follows : A banker's son and employee received a deposit when the insolvency of the bank waa known, and an hour or two before it finally closed. He received this deposit contrary to a telephone message from the banker " to take no more deposits." When the banker reached home, he, having knowledge that the deposit had been received, made no effort to, and failed to, return it, and four days later included the same in a general assignment for the benefit of his creditors. The defendant was indicted and convicted of fraudulent banking and sentenced to be confined in the State penitentiary for two years and six months, and to pay costs. The defendant was tried and convicted under a statute of the State which reads as follows : " If any such bank, banking house, exchange broker or deposit office, firm, company, corporation, or party, shall receive or accept on deposit any such deposits, as aforesaid, when insolvent, any officer, director, cashier, manager, member, party or managing party thereof, knowing of such insolvency, who shall knowingly receive or accept or be accessory to or permit or connive at the receiving or accepting on deposit therein, or thereby, any such deposit as aforesaid, shall be guilty of a fel- ony, and upon conviction shall be punished by imprisonment in the State prison for a term not to exceed ten years, or by imprisonment in the county jail not to exceed one year, or both fine and imprisonment, the fine not to exceed ten thousand dollars." Instate V. Quaekenbush, 99 Minn. 515, 108 N. W. 593; State v. Straie, 99 Minn. 327. 616 Insolvency. [ch. xliii. In the absence of a statute which prescribes no remedy a common-law action may be resorted to.^° § 331. Officer must have actual knowledge of insolvency. Actual knowledge of insolvency must be shown ; and in order to sustain a conviction it must be shown that the defendant had some direct personal connection with the receipt or accept- ance of the deposit ; being in the bank, and in a room other than where the deposit is received by the bank, is not knowledge.^* It is held in the case of Stout v. Lusk, 9 Kan. App. 694, that the provisions of a State statute providing a penalty are not applicable to national banks and their oflScers. The contrary doctrine is that in the State of Iowa the statu- tory provisions as to fraudulent banking applies to national banks as well as to State banks. ^° In the State of Minnesota the law holds the directors of a bank liable for accepting through its teller a deposit, where they have knowledge of the bank's insolvency, and where the depositor is ignorant of such insolvency. The acts of the teller in such cases are held to be the acts of the directors.^* In order to establish guilt on a charge of felony, criminal intent is an essential element of the offense, or where the statute states that " Knowing the bank to be insolvent " the word " knowledge " as used, is construed to mean, personal informa- tion of existing conditions which exist by reason of his relation to the bank as control over or management of the bank.''' The officer in charge does not apply to a teller or an assistant cashier who have no control over the bank unless they have been placed in charge of the bank and have knowledge of the bank's insolvency. As previously stated, before conviction, the bank's insolvency at the time must be alleged and proven. The allegation is one of fact.^^ 13 Cummings v. Winn, 89 Mo. 51. i5 State v. Fields, 62 N. W. 653. See Ellis v. State, 138 Wisi 513, is Baxter v. Coughlin, 70 Minn. 1. 119N. W. 1110, 20L. E. A. (N. S.) "Parish v. Conn. (Ky.) 123 444. S. W. 339. 1* The State v. Warner, 60 Kan. is State v. Mitchell, 26 L. R. A. 94. But see State v. Mitchell, 96 (N. S.) 1072, 123 S. W. 339. Miss. 259. CH. xLin.] Bankdstg. 617 § 332. Insolvenuy — National banks. Section 918, Kevised Statutes of tlie United States (1879), provides that " any bank officer who violates the provisions of section 918, Revised Statutes, by receiving deposits for his bank, or by assenting to the same with knowledge that the bank is insolvent or in failing circumstances, is individually responsible for such deposits so received, and the depositor may maintain an action against such officer for the amount of his deposit." The depositor, and not the assignee of the bank, is the proper party to institute the suit authorized by the foregoing section.^' By the provisions of section 3 of the Act of March 2, 1897, entitled, "An act authorizing the appointment of receivers of national banks, and for other purposes," it is provided that the shareholders may manage the liquidation of the bank. Comptroller's decision of insolvency conclusive. The power vested in the Comptroller of the Currency by Act of June 30, 1876, authorizing him, whenever he becomes satisfied of the insolvency of a national bank, to appoint a receiver is discretionary, and his decision as to such insolvency is conclusive, and not subject to review.^" Proof of insolvency may be established by the return of an execution unsatisfied.^^ The meaning of insolvency under section 5242, Revised Stat- utes of the United States, or the term used in the section has the same meaning as the National Bankrupt Law, that is, a present inability to pay in the ordinary course of business''^^ § 333. Deposits may be recovered, when. The general rule, as laid down in a 'New York case, is that a depositor may recover funds deposited in a bank, if at the 19 Cummings v. Winn, 89 Mo. 51. 21 Wheeloek v. Kost, 77 111. 296. 20 Washington National Bank of 21a Case v. Citizens' Bank ol Tacoma v. Eckels, 57 Fed. Eep. 870. Louisiana, 2 Woods 23. 618 Insolvency. [ch. xliii. time of making the same the officer accepting the same had knowledge of the fact that the bank was hopelessly insolvent. The reason of the rule is, that the deposit is obtained by fraud.^^ Where an endorser paid a note to a bank and took the bank- er's receipt therefor, but the bank failed to make the proper application of the money, and afterward went into insolvency, it is held that the money may be recovered.^^ It is held in the case of Citizens' Nat. Bank v. Dowd, 35 Fed. Eep. 340, that a creditor of an insolvent national bank, where his demand grew out of a fraudulent transaction, perpe- trated by the bank, and in contemplation of wrecking the same, that he does not become a preferred creditor.^* The general rule as laid down by the Illinois courts is that " one who deposits a check in a bank, and receives credit therefor, is not entitled, after the check has been paid by the drawee bank and the proceeds thereof so mingled with other money of the bank in which it was deposited, as to lose their identity as a fund, to be made a preferred creditor for the amount of the check, upon the voluntary assignment of the latter bank, a few days after receiving the cheek, although the officers then knew the bank was insolvent." The court, in the case of Lanterman v. Travous, 174 111. 459, further says : " It has frequently been announced as the law of this State that even in a case where a definite and actual trust fund which possesses all the attributes of a separate and distinct identity has been so mixed and mingled with other funds as to render identification impossible, the cestui que trust in the event of the insolvency of the trustee is remitted to the position and the rights of a general creditor." The rule, as laid down in Nebraska, is that a creditor may follow his money while he can trace and distinguish it or the proceeds thereof, but not after it has passed into the hands 22 Craigie v. Hadley, 99 N. Y. 131 ; v. Indianapolis Nat. Bank, 65 Fed. Western German Bank v. Novell, Eep. 690. 134 Fed. Eep. 724. 24 Citizens' Nat. Bank v. Dowd, 35 23 Massey v. Fisher, 62 Fed. Eep. Fed. Eep. 340. 958; Lake Erie & Western E. E. Co. CH. xliilJ Banking. 619 of the assignee, and is mingled witli the other funds of the bank, and the fact that the bank is insolvent within the knowl- edge of its officers and receives the money of the depositor which amounts to a fraud upon him, is not of itself sufficient to entitle the latter to a preference from the funds of the bank in the hands of an assignee. The court, in the case of Higgins v. Hayden, says : " Where a bank remains open, holding itself out as ready to transact business, this is an implied representation of solvency, and for it to receive a deposit when its insolvency is known to its officers is a fraud upon the depositor. * * * The depositor may, therefore, at his election, rescind the contract of deposit and recover back the money or property, but he must do so before the deposit has become commingled with the general assets of the bank.^° Bank insolvent, paying checks after preference^ A bank colluding with a depositor and paying checks there- after i.nd when the depositor knew of the bank's insolvency, can be recovered back from him. It is a preference of creditors.^' But the rule is otherwise when the depositor is paid in a general way without knowledge of the bank's insolvency. What is knowledge to a depositor of insolvency? A run upon a bank by its depositors may occur at any time, and without cause ; but such -occurrences are usually accompanied by statements that " the bank is insolvent ; " such general statements made in this way do not constitute or establish insolvency, and checks paid during such a run on the bank are paid in the general way, and the money paid out to a depositor during such a time can- not be recovered. The safe and just rule must establish the fact that the knowledge of insolvency obtained by the depositor came from a reliable source, and through some person who is in a position to know of the actual condition of the bank, and the depositor having this kind of knowledge colluding with the 25 Higgins V. Hayden, 53 Neb. 61. 20 McGregor, Eeceiver, v. Battle, 128 Ga. 577. 620 Insolvency. [ch. xliii. bank would constitute actual knowledge of insolvency and would authorize a receiver bringing an action to recover the sum paid. § 334. Special deposits recoverable. The rule is well settled that a special or specific deposit which has actually been kept separate and not intermingled with the general deposits of the hank, and which can he identified, may he reclaimed." § 335. Insolvency demonstrated. The Supreme Court of the United States, in the case of Eoberts v. HiU, 23 Blatehf. 312, says that " insolvency as ordi- narily defined is that condition of affairs in which a merchant or business man is unable to meet his obligations as they mature in the usual course of business. * * * ^^ act of insol- vency takes place when this state of affairs is demonstrated and the merchant has actually failed to meet some of his obli- gations. A bank is in contemplation of insolvency when the fact becomes reasonably apparent to its officers that the con- cern will presently be unable to meet its obligations, and will be obliged to suspend its ordinary operations." § 336. Set-off. The rule is laid down that " the right to set-off must be gov- erned by the state of things existing at the moment of a bank's insolvency." " The Supreme Court of the United States, in the case of Scott V. Armstrong, 146 U. S. 499, defines the rule to be " that where the mutual obligations have grown out of the same transactions, insolvency, on the one hand, justifies the set off of the debt on the other." 27 American Express National 28 Cook County National Bank v. Bank v. The Lorietta Gold and United States, 107 U. S. 445; Ains- Silver Mining Co., 165 111. 103; worth v. Bank of California, 119 Vail V. Newark Sav. Inst., 32 N. J. Cal. 470; Stephens v. Schuchmann, Eq. 631. 32 Mo. App. 333. CH. xLiii.J Banking. 621 Bule as applied. Where at the time of the appointment of a receiver for a corporation it was indebted to a bank in a sum largely exceed- ing the amount of the corporation's deposit, the bank was entitled to set off such deposit against the corporation's indebt- edness to it.^" 'I Where there is nothing in the statute to the contrary a bank may in equity offset as against an immatured debt of an insol- vent debtor any sum which it may be owing to the debtor; unless the account which it owes has been pledged to some spe- cific purpose or is impressed with some trust.^" Under Bankruptcy Act, § 60a, forbidding preferential pay- ments within four months of bankruptcy, where the bankrupt is indebted to a bank, if the bankrupt deposit with the bank a sum of money subject to his cheek in such a way as to make the bank his debtor, set-off immediately takes place pro tanto between that debt and the debtor's debt, and there would not be a preferential transfer. The money must be received by the bank as a deposit and not as a payment.^^ A depositor held to have no preference where he deposited money on the day the bank closed its doors.^^ The bank or its assignee for the benefit of its creditors is entitled to set off a debt due to it against a debtor's deposit, providing the deposit has been received in the course of busi- ness; when such a debt is due, and demand therefor has been made.^' A dividend not due cannot be offset.^* If the debt is in excess of the deposit there is no obligation resting on the bank in the absence of instructions to apply the deposit to its pay- 29Wheaton v. Daily Telegraph posit Bank (Ky.), 116 S. W. 351; Co., 124 Fed. Eep. 61. Mingus v. Bank of Ethel (Mo. 30 Thomas V- Exchange Bank, 99 App.), 117 S. W. 683; Davenport v. Iowa 202. National Bank of Commerce, 127 31 Cox V. First National Bank, 126 App. Div. 391, 112 N. Y. S. 291, 133. La. 87. 34 People v. Public Service Com- as Willoughby v. Weinberger, 15 mission, 127 App. Div. 480, 112 Okla. 743. N. Y. S. 133. «3 Wallace v. Estill County De- 622 Insolvency. [ch. xliii. ment.'° The law is that general deposits received by the bank can be set off by the bank against any debt due and owing to the bank by the depositor. But the bank has no authority to apply special deposits to concel a debt owing to it.^° Where public funds are deposited in a bank by a county offi- cer and they are intermingled with other deposits and no special agreement entered into at the time of making the deposit by the public officer with the bank that they were to be held as a special deposit and the bank afterwards fails, the officer making the deposit is liable. His liability is based upon the rule that public policy requires the imposing of a strict liability upon public officers for public funds, controlled by him.^' The court in the case of Mecklenburg County v. Beals, 36 L. K. A. 285, in holding the strict rule of accountability, says : " The weight of argument upon general principles and in the light of public policy as we think * * * is in favor of the rule of strict liability, which requires a public official to assume all risk of loss, and imposes upon him the duty to account for the public funds which go into his hands, except where the cases where the loss results from the act of God, or the public enemy, or possibly from some other overruling necessity." ^* In Georgia where a bank is used as a State depository of money, the State has a prior lien to other depositors in case of insolvency.'* Equitable set-off. The deposit of a depositor (in an insolvent commercial bank) may be set off against his note, matured or immatured.*" 36 Booth V. Farmers' and Traders' 17-63; Mason v. Erie County, 126 National Bank (Or.), 98 Pac. Rep. Pa. 445, 73 N. C. 255, 67 Mo. 395, 509. 29 Am. Eep. 512, 37 Iowa 550, 30 38 First National Bank v. Barger HI. 99, 32 Mich. 132, 6 Ohio St. 607, (Ky.), 115 S. W. 726. 67 Am. Dee. 363. 22 lud. 125, 52 37 Tillinghast v. Merrill, 151 N. Y. Kan. 451, 39 Am. St. Eep. 354, 34 135, 34 L. R. A. 678, 56 Am. St. Pac. Rep. 1046, 71 Miss. 767, 39 Rep. 612, 45 N. B. 375. Wis. 468. 38 United States v. Morgan, 11 39 Booth v. State of Georgia, 131 How. 154, 4 Wall. (U. S.) 182, 9 Ga. 750. Wall. (TJ. S.) 86, 13 Wall. (U. S.) 40 Armstrong, Receiver, v. Warner CH. xLiii.J Banking. 623 A depositor cannot purchase a debt after insolvency for the purpose of set off against a debt owing by himself. Neither can the maker of a note which is sued upon by the cashier set off certificates of deposit purchased by him for that purpose after the bank became insolvent.*^ Interest. The rule is that the debt of the creditor as against an insol- vent baiik continues to draw interest. Where a shareholder is liable for the debts of the bank, he is liable for interest to the extent to which the bank would have been liable not in excess of the maximum liability fixed by the statute.*" Dividends. The Supreme Court of the United States, in the case of Merrill v. National Bank of Jacksonville, very fully discusses the rights of a secured creditor of an insolvent national bank to prove and receive dividends upon the face of his claim as it stood at the time of the declaration of insolvency. Mr. Chief Justice Fuller, ^ in delivering the opinion of the court, says: " Our conclusion is that the claims of creditors are to be determined as of the date of the declaration of insolvency, irrespective of the question whether particular creditors have security or not. When secured creditors have received pay- ment in full, their right to dividends, and their right to retain their security ceases, but collections therefrom are not otherwise material. Insolvency gives unsecured creditors no greater rights than they had before, though through redemption or sub- rogation or the realization of a surplus they may be benefited." *' et al., 49 Ohio St. 376; Camden Davis v. Knipp, 92 Hun (N. Y.); National Bank v. Green, 45 N. J. Storth v. G«orge, 150 Mo. 1. Eq. 546; Kentucky Flour Co. v. *2 Richardson v. Irons, 121 U. S. Merchants' National Bank, 90 Ky. 27. 225; Mercer v. Dyer, 15 Mont. 317. 43 Merrill v. Jacksonville Nat'l "Dyer v. Sebrell, 135 Cal. 597; Bank, 173 U. S. 131. 624 Insolvency. [ch. xliii. Debts due savings bank. A State statute which provides that deposits made by a sav- ings bank in a national bank, which becomes insolvent, shall be first paid, is in conflict with the National Bank Laws.** Rule — Set-off — Insolvent savings bank. The general rule is that a debtor to the bank for money bor- rowed cannot set off the amount of his deposit against his indebtedness.*" Held in Auten v. United States National Bank of New York, 174 U. S. 125, " That the set-off having been allowed by the New York bank in account the receiver was entitled to no other relief." In a going bank it has the right to set off notes which are due against the debtor's liability to the bank, and may also charge the depositor's account.*" In case of insolvency the equities of creditors are greater than those of stockholders.*^ This rule applies to mutual savings hanks, such as are purely mutual and have no capital stock; but where savings banks are incorporated institutions with a capital stock, in the absence of a special statute, a depositor in such a bank, especially if the relationship created by the deposit becomes one of debtor and creditor, the general rule and right of set-off existing would prevail. 4* Davis V. The Elmira Savings *6 Irish v. Citizens' Trust Co., Bank, 161 U. S. 275; Auburn Sav- N. Y. (D. C.) 880. ings Bank v. Hayes, 61 Fed. Rep. *'Meholen v. Carlson, 17 Idaho 911. 742. *5 Hannon v. Williams, 34 N. J. Eq. 255. CHAPTER XLIV. DISSOLUTION. § 337. Volimtary lignidation. The National Banking Act, § 5220, provides that "Any asso- ciation may go into voluntary liquidation and be closed by the vote of its shareholders owning two-thirds of its stock." A meeting of the stockholders must be held and notice of the date and purpose of the meeting must be given to all stock- holders. It requires two-thirds of all the stock of the bank, voting in the affirmative, to place the bank in liquidation. The rights of the minority stockholders are not considered. Their wishes and interests, although affected adversely, cannot be heard.^ A national bank in process of liquidation cannot be compelled to enter subsequent transfers of stock on its books and issue new certificates therefor.* Dissolution does not bar a bank from collecting claims due it.^ § 338. Authority of officers in c\iaxg6. "Without express authority from the shareholders in a national bank, its officers, after the bank goes into liquidation, can only bind them by acts implied by the duty of liquidation." * The stockholders' rights cannot be affected by the acts of the president done after the bank is placed in liquidation, Schrader v. Manufacturers' Bank, 133 U. S. 67. iWatkins v. National Bank, 51 s Commercial Trust Co. v. Mai- Kan. 254; Green v. Bennett, 110 lers, 242 111. 50. N. W. 108. 4 Richmond v. Irons, 121 U. S. 27. 2Muir V. Citizens' Bank, 39 Wash. 57. 40 [625] 626 DiSSOLUTIOIT. [CH. XLIV. § 339. Liquidation does not dissolve corporation. It continues as a body corporate under the provisions of law governing national banks until its affairs are closed, and may sue and be sued for the purpose of winding up its business."* A State bank, unless the statute expressly provides that its charter shall be dissolved by the act of liquidation, can liquidate all of its affairs, i. e., pay all of its debts, and afterward reor- ganize and again do a banking business. A banking corporation may fail in business and its affairs be liquidated by a receiver appointed by the court, and if its debts are all paid the stockholders remain the owners of the charter and may, after a compliance with the provisions of law as to the repayment into the bank of the capital required before the commencement of business, again conduct a banking business. Liquidation does not dissolve the charter in the absence of a statute to that effect. The charter of a corpora- tion can only be forfeited by a suit instituted by the State, and the act of liquidation is not one which would authorize the forfeiture of a charter. § 340. Liquidation dividends. " Liquidation dividends of a national bank belong to the holder of the shares, whether those shares be recorded upon the books of the bank or not and must be paid to the holder of such shares on demand." * Involuntary liquidation. The act of taking possession of a bank by due process of law and winding up its affairs is involuntary liquidation. The statutes of the various States prescribe the mode of procedure. In some States the bank commissioners or superintendent of banks may at any time upon finding the bank insolvent take immediate possession without process of law. In some other 5 National Bank v. Insurance Co., « Savings Institution v. National 104 U. S. 54. But see Hodgson v. Banlj, 89 Me. 500. McKinistry, 3 Kan. App. 412. CH. XLiv.J Banking, 627 States under the statute liquidation may be had by consent of the stockholders independently of the courts/ In some other States the directors must be mode parties to a proceeding for the appointment of a receiver. The adminis- tration of the receiver is for the benefit of the stockholders as well as for the creditors.* 7 Driefus v. Colonial Bank and » Binst v. Williams, 81 S. C. 495, Trust Co. (L. A.) 485, 64». 62 S. E. 859. CHAPTER XLV. EXTENSION OF COBFORATE EXISTENCE. § 341. National banks. The Act of July 12, 1882, provides that national banks may extend their charter in accordance with said act, which reads as follows: " Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, that any national banking association orgnaized under the Acts of Eebruary 25, 1863, June 3rd, 1864, and February 14th, 1880, or under sections fifty-one hundred and thirty-three, fifty- one hundred and thirty-four, fifty-one hundred and thirty-five, fifty-one hundred and thirty-six and fifty-one hundred and fifty-four of the Revised Statutes of the United States, may,- at any time within two years next previous to the date of the expiration of its corporate existence under the present law, and with the approval of the Comptroller of the Currency, to be granted, as hereinafter provided, extend its period of suc- cession by amending its Articles of Association for a term of not more than twenty years from the expiration of the period of sucession named in said Articles of Association, and shall have succession for such extended period, unless sooner dis- solved by the act of shareholders owning two-thirds of its stock, or unless its franchise becomes forfeited by some viola- tion of law, or unless hereafter modified or repealed." The application to extend the corporate existence is made by the president of the bank and is addressed to the Comptroller of the Currency. For form of application, see Appendix. The powers of attorney, signed by the shareholders, should be sent to the Comptroller, with the amendment to the article of association on which their names, signed by their authorized attorney, appear. [628] CH. XLV.J Banking. 629 If preferred a shareholders' meeting may be called in order to vote for the extension and to sign the necessary papers. Proper notice of the meeting should be given to the share- holders. At this meeting the shareholders may appear in per- son or by attorney. In executing and forwarding the papers the following instructions should be strictly observed: " The certificate of the president or cashier certifying that shareholders owning at least two-thirds of the stock having con- sented, in writing, to the amendment, should be executed in duplicate and one copy transmitted to this office, together with the letter applying for approval of the Comptroller, at least two months prior to the expiration of the corporate existence of the bank, in order that the Comptroller may have sufficient time to cause the special examination to be made, as required by section 3 of said act. " If any shares of the bank stand in the name of administra- tors, executors, trustees, or guardians, and it becomes necessary to have the votes of these shares to make up the majority required to authorize the amendment, duly certified copies of the legal appointment of such administrators, executors, trus- tees, or guardians, should be sent to the Comptroller. In the case of stock held by a corporation, a certified copy of a resolu- tion of the board of directors authorizing the president or other officer to consent to the amendment, is required. " 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 been regularly transferred to him, as such assignee, on the books of the bank. When the amendment is signed by an attorney acting for the shareholders, properly executed powers of attorney must; be furnished." Upon the receipt of the papers in due form, the Comptroller will order the special examination required by section 3, which must be paid for by the bank, and if the report of the examiner is favorable, the Comptroller will, at the date of expiration of charter, issue his certificate of extension. 630 Extension of Ooepoeate Existence, [oh. xlv. State bank's extension of charter. With but few exceptions there is no provision made by the laws of the various States for extending the charters of banks. When the life of the charter expires, if the bank desires to continue in business, it must proceed to reincorporate and com- ply with the law in force at the time of its reincorporation. But with the aid of a statute it may be done.^ 1 State ex rel. Cascade Bank v. Yoder, 39 Mont. 202, C. C. Oal., see. 401. CHAPTER XL VI. CLEARING-HOUSE. § 342. History of the clearing-house. The origin or history of the clearing-house as given by Bouvier is presented as follows : " The origin of the system is said to have been in Edin- burgh ; at least the bankers of that city so claim, but the earliest record of one (and that is not clear as to date) is that of Lon- don, founded in 1775, or possibly earlier. It was started in the alehouse of those times, the general resort of proprietors of new enterprises. The system, however, increased in use- fulness so much as to require rooms, which were procured in Lombard street, and a system was rapidly developed of exchanging checks and other securities to reduce the amount of actual money required for settlements. In this country such associations were established in !N"ew York, in 1853, Boston, in 1856, Philadelphia, Baltimore, and Cleveland, in 1858, Wor- cester, in 1861, Chicago, in 1865, and since that date the num- ber increased rapidly to thirty-one in 1884 (Bellas, Proct. Bkg.), and the system is now extended to most of the cities in which there are several banks. They also exist in Australia, Trance, Germany, Switzerland, Italy, and other continental countries of Europe. Most of these associations are unincor- porated, but in Minnesota there is an act (March 4, 1893), for their incorporation. The Clearing-house Asseciation of New York consists of all the incorporated banks — private bankers not being admitted as in London. Two clerks from each bank attend at the clearing-house every morning, where one takes a position inside of a counter at a desk bearing the number of his bank, the other standing outside the counter and holding in his hand parcels containing the checks on each of the other [631] 632 Cl.EABI]5rG-H0USE. [CH. XLVI. bants received the previous day. At the sound of a bell, the outside men begin to move, and at each desk they deposit the proper parcel, with an account of its contents — until, having walked around, they find themselves at their own desk again. At the end of this process the representative of each bank has handed to the representatives of every other bank the demands against them, and received from each of the other banks their demands on his bank. A comparison of the amounts tells him at once whether he is to pay into or receive from the clearing- house a balance in money. Balances are settled daily. In London the practice of presenting checks at the clearing-house has been held a good presentment to the banker at law. It is not usual to examine the checks until they are taken to the bank, and if any are then found not good they are returned to the bank which presented them, which settles for such returned checks. In this country when a check is returned not good through the clearing-house, it is usually again presented at the bank." § 343. Character and object. The character and object of a clearing-house, as formed by the co-operation of a number of bankers in the city of Phila- delphia some years ago, is very correctly defined by the court in the case of Philler v. Patterson, 47 Am. St. Kep. 896. The court after examining the constitution or articles of association adopted by the banks, then says : " In substance these articles amount to an agreement "with each other by thirty-eight national banks in the city of Phila- delphia to facilitate and simplify the settlement of daily bal- ances between them for their mutual advantage. This agree- ment substitutes a settlement made at a fixed time and place each day, by representatives of all the members of the asso- ciation, in the place of a separate settlement by each bank with every other made over the counter. No other object is con- templated or provided for. The association does not provide for any united action for any business purpose. It does not contemplate the employment of capital or credit in any enter- CH. xLvi.] Bankistg. 633 prise. It proposes and provides for co-operation to expedite and simplify the transaction by each member of the associa- tion of its own proper business in one particular, viz., the set- tlement of daily balances with the other national banks doing business in the city. Incidentally, co-operation in this par- ticular would tend to bring the banks belonging to the associa- tion into closer relations, enable them to become more familiar with the volume of business and the actual condition of each other, and open the way to make them mutually helpful in times of financial stringency, but these results are incidental only. The Clearing-house Association is nothing more nor less than an agreement among thirty-eight national banks to make their daily settlements at a fixed time and place each day." The mode of putting the agreement or articles of associa- tion of the clearing-house into operation is then given by the court in the following language: " To carry this agreement into operation it became neces- sary to determine the place and hour at which the settlement should be made. A suitable room was secured, fitted up with desks and other necessary appliances at the expense of the associated banks, and a manager chosen to preside over it and direct the action of the clerks and runners when in session. This room is the clearing place, or in the language of the con- stitution of the association, the clearing-house. It is the place where the representatives of the several banks meet and where all balances are struck and settled daily between the banks composing the association. "At the close of each meeting the amount due to and from each bank is definitely ascertained. The debtor banks then pay over to the manager the gross balance due from them to settle their accounts with all the members of the association, and he makes distribution of the sum so received among the creditor banks entitled to receive them. The clearing-house is, therefore, not a business organization, a corporation, a part- nership, or an artificial person of any sort, but a place in which the members of the association settle with each other daily. We come now to consider the committee and the position in 634 Oleaehtg-House. [ch. xlvi. the general scheme occupied by it. Among the economies in time and labor contemplated by the banks was a settlement of daily balances without the necessity for handling and counting the cash in every case. To provide for this the banks agreed that they would deposit in the hands of certain persons, to be selected by them and to be called the clearing-house commit- tee, a sum of money or its equivalent in good securities, at a fixed ratio upon their capital stock, to be used for payment of balances against them. For these sums the committee was to issue receipts or certificates in convenient sums, and these receipts or certificates were to be used in lieu of the cash they represented, which remained in the hands of the com- mittee pledged for the payment, when payment became neces- sary, of the certificates. The committee held the funds and securities deposited with them in trust for the special purpose of securing the payment as far as they would reach of the balances due from the bank making the deposit. " On September 24, 1873, the associated banks entered into another agreement with each other by which, ' for the purpose of enabling the banks, members of the Philadelphia Clearing-house Association, to afford proper assistance to the mercantile and manufacturing community and also to facilitate the interbank settlements resulting from the daily exchange.' they authorized the committee to receive from any member of the association additional deposits of bills receivable and other securities and issue certificates therefor 'in such amount and to such percentage thereof as may in their judgment be advisable.' The additional certificates, if issued, they agreed to accept in payment of daily balances at the clearing-house on the condition that the securities deposited therefor should be held by the committee ' in trust as a special deposit pledged for the redemption of the certificates issued thereupon.' The committee were made, both by the original articles of associa- tion and by the additional contract of 1873, trustees or agents for all the members of the association, with authority to accept deposits in money or securities and to issue their own receipts therefor, the money or securities remaining in their hands in CH. xLvi.J Banking. 635 pledge for the redemption of the receipts or certificates so is- sued by them. When a bank to which certificates had been issued under the original plan or the contract of 1873 failed to redeem them when their redemption became necessary, it was the duty of the committee t.o collect the securities in their hands and apply the proceeds to the payment of the holders of the cer- tificates. The deposits were made and the certificates issued under an unconditional pledge of the securities to the committee for the payment of the certificates, and their title could only be divested by the payment of the sums for which the securities were pledged. The entire plan on which the settlements are made is, therefore, a device adopted by the banks to facilitate their legitimate business as banks, and involves no element of speculation, and no business undertaking by or on behalf of the associated banks." ^ The method of putting into operation the business of the clearing-house formed in Philadelphia in 1873, may differ in detail from that followed in other cities, but the character and object of all are the same. The principle and prime purpose of the clearing-house is to settle daily the accounts between members, and at the same ■ time and place make payments of balances resulting from the exchanges.^ § 344. Organization — Not a corporation. A clearing-house association is a voluntary organization which, as we have found, may be created by any number of banks or bankers doing business in the particular city or place where formed. Its affairs are governed by a constitution and rules adopted by agreement between the banks forming such association. It has been said that a clearing-house association may be incorporated. Where corporations are formed, they are 1 Crane Paris Co. v. National Thompson, 129 Mass. 438 ; O'Brien Bank, 173 Pa. St. 566. v. Grant, 146 N. Y. 163. 2 Merchants' National Bank v. 636 CLEABIlirG-HoUSE. [CH, XLVI. governed as to their purpose and power, by the law of the State or the law under which they are created. A clearing-house may be incorporated, but its members or stockholders can only be persons or corporation banks which are authorized by law to subscribe for and hold stock in other corporations. The ISTational Banking Law prohibits a national banking association " from purchasing or subscribing to the stock of another corporation." ' It will be seen, therefore, that the law excluding a national bank from purchasing or subscribing to stock of another cor- poration would prevent it from membership as a stockholder in a clearing-house association, if incorporated with a capital stock; and where the law of a State prohibits a State bank from subscribing or holding stock by purchase in another cor- poration such inhibitions would also prevent a State bank from membership in an incorporated clearing-house association. It will be seen, therefore, that it must be a voluntary asso- ciation in order that national banks may become members. There is no provision of law prohibiting a national bank be- coming a member' of a clearing-house association which is organized purely for facilitating settlements between the members thereof.* A voluntary clearing-house association is not an institution in violation of the statutes of the United States relating to national banks. (See Philler v. Patterson, 47 Am. St. Kep. 896.) But if it became an incorporated association it might be a violation of the statute. The association as it now exists is not in conflict vsdth law. It may organize by adopting a constitution and by-laws or rules for its guidance. § 345. Btiles of association. The rules or by-laws adopted by the association must be such as are reasonable and not in violation of any law. s California Bank v. Kennedy, 167 * Philler et al. v. Patterson, 168 U. S. 362. Pa. St. 468. CH. XLVI.J Bankuitg. 637 The Supreme Court of the State of Massachusetts in the case of Manufacturers' National Bank v. Thompson, 129 Mass. 438, declares that the rules of the clearing-house association are adopted solely for the purpose of facilitating exchanges among the banks; and where banks in a city form themselves into a voluntary association for the purpose of making clear- ings and for their mutual benefit, they are governed and bound by the rules of the association.^ In the case of Preston and Others v. Canadian Bank of Com- merce, 23 Fed. Eep. 179, the court, in discussing the rule of the Chicago Clearing-house, which reads as follows: "All checks received in the morning exchanges, not found good, are to be returned the same day received before one and a half p. m. to the member from whom received, who shall immediately reimburse the holder of the same," holds that it is entirely ■competent for members of a clearing-house association, who are dealing with each other, to make an agreement binding upon the members. The rules and usages of a clearing-house are not binding Tzpon the bank's depositors.® Settlements and transactions through clearing-house — Custom — Rules. See National TTnion Bank v. Earl, 93 Fed. 330 ; Woolworth National Bank v. Nevada Bank, 73 Pac. 456, 139 Cal. 564, €3 L. E. A. 245, 96 Am. St. Eep. 169 ; Atlas National Bank V. National Exchange Bank, 57 N. E. 605, 176 Mass. 300; Dedham National Bank v. Everett National Bank, 59 N. E. '62, 177 Mass. 392, 83 Am. St. Eep. 286; Mt. Morris Bank V. Twenty-third "Ward Bank, 64 N. E. 810, 172 N. Y. 244. In an action by a bank to recover from another bank the amount of checks paid by the former, to the latter, through the clearing-house, on the grounds that the endorsements on 5 O'Brien et al. v. Grant, 146 tional Bank, 1 McGIoin, 181; Mer- N. Y. 163, 173; Exchange Bank v. chants' National Bank v. National Bank of North America, 132 Mass. Bank of Commonwealth, 139 Mass. 147. 513, 2 N. E. 89. 8 Louisiana Ice Co. v. State Na- 638 Cleajbing-House. [ch. xlvi. the checks were fraudulent and made in the name of a firm, a verdict for plaintiff held against the weight of evidence.' It is competent for banks associated in clearing-house to make rules governing as between them the effect of endorse- ments and such rules supplant the law.^ Clearing-house. A bank not a member is not bound by the rules of a clearing- house. Held, also, that a defendant could not avail himself of the rules of the clearing-house to which he was not a party in defense.' § 346. Non-member bank not affected by clearing-house rules. In the case of Overman v. Hoboken City Bank, 2 Vroom. (JS. J. L. Kep.) 563, the court in discussing the question of a bank representing as an agent parties who are not members, " Moreover the entire system on which the business of the clearing-house is transacted is inconsistent with the theory that any of the members, in their transactions with each other, are the agents of parties who are not members. They trust each other as principals, and hence the facility with which that immense business is transacted. If each member were bound, as in ordinary business, to stop to inquire into the fact of agency, and the responsibility of principals, the association could not profitably live a day. Besides, if the several members have the power, in any given transaction in the clearing-house, of acting for a stranger to the institution, and in his behalf and name, such stranger, pro hac vice, would stand in the posi- tion of a member — a circumstance repugnant to the nature of the organization of the association, as it is represented to this court in the evidence." A custom or special usage of trade which may confuse the T National Park Bank v. Ameri- Bank v. Nevada Bank, 73 Pac. Eep. can Exchange National Bank, 88 456, 139 Cal. 564. N. Y. S. 271. 9 Manufacturers' National Bank 8 Crocker Woolworth National v. Thompson, 129 Mass. 438. CH. XLVI.J Banking, 639 operations of the general rules of law, should be construed strictly and should not be extended to persons who are not clearly proved to have acted under them. As between a bank and the drawers and payees of checks which have been drawn thereon, the relation is controlled by the well-settled principles of the law merchant; which rules cannot be altered or modified by a rule or custom passed by a clearing-house. ^° § 347. Settling: daily ezchai^es. The mode of settling daily exchanges through the clearing- house is accomplished by the following method: "At the hour named a runner and a settling clerk represent ing each bank met at the clearing-house. These representa- tives of the respective banks brought with them, in separate sealed packages, the checks which the banks they represented held against other banks. The runner of each bank thereupon delivered to the settling clerk of the others these packages, taking receipts therefor, so that at the common place of meet- ing the clerk of each bank received from every other bank the checks drawn against the bank he represented. The making up of these packages for exchange is thus provided for in the rules: " ' Kule III. Sealed packages, well gummed and sealed with wax and endorsed with ink or indelible pencil, shall be used exclusively in the morning exchange in the runners' exchange, and the amounts stated thereon shall be the basis of settle- ment. These packages, with the seals unbroken, shall be de- livered by the messengers of the several banks fo their respec- tive institutions; otherwise, no responsibility shall attach to the sender.' "After these packages had been received the settling clerk of each bank made up from the endorsements on the packages delivered to him the debts, and stated the credits arising from the sum of the packages delivered by the runner of his bank 10 People v. St. Nicholas Bank, 77 Hun (N. Y.) 160. 640 Oleaeing-House. [ch. xlvi. to the settling clerks of the other banks. The sheets thus made up were then turned over to the manager of the clearing- house, by whom they were verified and consolidated. The manager's balance sheet hence, necessarily, contained a state- ment itemizing the aggregated debts and credits of all the banks concerned in the clearing. Where any fractional sum was due by a bank in consequence of the clearing, this frac- tional sum was paid to the manager by a due bill ; the manager treating this due bill as cash, deposited it in the bank where his account was kept and the sum of this due bill became a credit item in favor of the bank holding it in the clearing of the next morning." § 348. Presentment of collection through clearing-house. The Supreme Court of the State of Massachusetts says that a note sent through a clearing-house to a bank at which it is payable, is not a demand for immediate payment made during business hours, but was equivalent to leaving the note at the bank for collection from the maker on or before the close of baiiking hours; and that the payment of such a note at the clearing-house was a provisional payment only which became complete when the note was paid in the usual and ordinary course of business. ^^ Where there has been due presentment of a check to the drawee and payment demanded and refused, the drawer, if otherwise liable, is not discharged because of failure to present the check at the clearing-house in accordance with a universal usage, though it would have been paid had it been so presented. ^^ § 349. Effect of clearing-honse customs between member banks. In an action by one bank against another, where both were members of a clearing-house, to recover the amount of a note which was included in the account in the clearing-house of the defendant bank against the plaintiff bank at which the note was 11 National Exchange Bank v. 12 Kleekaup v. Myer, 5 Mo. App. Bank of North America, 132 Mass. 444. 147. CH. xLvi.J Bankiijg. 641 payable, and returned by the plaintiff to the defendant after the close of business hours, if there is evidence of a universal cus- tom among the members of the association vyhich choose to clear their notes through the clearing-house in place of presenting them for payment at the bank where they are payable; and where notes included in clearing-house settlement, which turn out to be not good and are not returned to the paying bank before its time of closing, the conditional payment becomes absolute.^* § 360. Settlement between banks' members of clearing-lioTise. A settlement made by two banks through the clearing-house, in which checks are presented and exchanged, and the balance between them is struck, will be 'final and conclusive if either fails to give notice of maturity to meet the balance against it on the general adjustment, before the hour when banks usually pass credit to the checks of their depositors. The mutual credit thus given cannot be recalled by either one to the detriment of the other. ^* If by any mistake of fact a check so paid but not good was retained until after the hour fixed, the payment is held to be treated as payment made under a mistake of fact to the same extent and subject to the same right of reclamation as if it had been made without the intervention of the clearing-house. § 351. Eules in Massachusetts where check was paid under mis- take of fact. Where a check has been paid under a mistake of fact, the rule that the bank paying it can recover the amount from the bank to which it was paid, is good, provided that the latter had not changed its position between the hour named for return and the return of the check.^° 13 Atlas Nat. Bank v. National Ann. 251; Merchants' Nat. Bank v. Exchange Bank, 176 Hass. 300; National Eagle Bank, 101 Mass. 281. O'Brien et al. v. Grant, 146 N. Y. is Merchants' Nat. Bank v. Na- 163. ' tk)nal Bank of Commonwealth, 139 "Blaffer et al. v. Bank, 35 La. Mass. 513. 41 642 Cleaeinq-House. [ch, xlvi. The Federal Court, in the case of Preston v. Canadian Bank of Commerce, 23 Fed. Kep. 182, in discussing the law and rule as laid down by the Massachusetts court, says : " It seems to me that the Boston case has gone to the very verge of the application of the rule that money voluntarily paid under a mistake can be recovered back ; and it is noticeable that the next succeeding case in the volume of Massachusetts Keports in which the case relied upon by the plaintiffs is re- ported, was where a bank sued to recover on the ground they had paid a check by reason of having made a mistake of fact as to the amount to the credit of the drawer, and the court held that no such recovery could be allowed, because it was laches to make such a mistake of fact. " If parties competent to contract within what time they may correct mistakes in their dealings with each other have so con- tracted, it seems to me the courts have no right to override or disregard such an agreement. If a mistake which is discovered within an hour, or within ten minutes, after the expiration of the time limited by the agreement for its correction may be corrected, I can see no reason why it cannot be corrected a week afterward, or whenever it is discovered. The Massachusetts court puts its decision on the ground that you may correct a mistake of this kind at any time after it is discovered, if it places the party to whom the check is returned, in no worse con- dition than it would have been if it had been returned within the stipulated time ; thus, overlooking the rule that parties may agree that they shall not have the right to correct mistakes unless done within a limited time." § 352. Forged checks passing through clearing-house — Bank's liability — Negligence. The facts presented in the case of Commercial and Farmers' National Bank v. First National Bank of Baltimore, reported in 30 Md. 11, are, as the court says, " of considerable interest to the public and of importance to the banking institutions ; " and by reason of the importance of these questions and the dis- OH. XLVI.J Banking. 643 cussion, we feel justified in giving the opinion of the court in full, which opinion states also the facts : " This case presents questions of considerable interest to the public, and of importance to the banking institutions of the State. The material and undisputed facts, which must be stated somewhat in detail, are these : On the 20th of December, 1866, about 2 o'clock p. m. an individual, well dressed and of respectable appearance, but a stranger unknown to any of its officers, came to the counter of the receiving teller of the Com- mercial and Farmers' National Bank, said he wished to open an account, and presented a check on the First National Bank of Baltimore for $4,600 15/100, purporting to be drawn by Horace Abbott, dated the 18th of December, and payable to the order of John S. Hillan. The teller, who knew Mr. Abbott's financial standing to be good, and had seen his checks before, produced the signature book in which the man put the name ' John S. Hillan, No. 504 W. Fayette Street,' and endorsed the check at the counter in that name. The teller then gave him a customer's small bank book, in which the amount of the check was put to his credit as cash; but on the same day the teller was directed by the cashier not to allow the account to be dravm upon until the deposited check was known to be good or was paid. On the morning of the next day, the 21st, this with other checks was sent by the Commercial and Farmers' Bank to the clearing-house, its amount being noted on the lists which were there balanced and settled. From thence it was taken to the First National Bank, where it was passed as genuine by the proper officers of that bank, charged to Mr. Abbott's account, and credited to the Commercial and Farmers' Bank. By the custom and usage of all the banks in the city of Baltimore, proved by all the witnesses, where a check is sent through the clearing-house to the bank on which it is drawn, and is not heard from before eleven o'clock on the day on which it is so sent, the bank sending it has the right to assume it was good or had been paid, and to act accordingly. On the follow- ing day, the 22d, after the check had thu^ been accepted as genuine and paid by the First National Bank, the same person 644 CLEAEIIfG-HbuSE. [CH. XLVI. presented himself at the counter of the paying teller, of the Commercial and Farmers' Bank with his bank book, and said he wanted to draw some money ; a blank check was given him which he filled up for $4,500, payable to self or bearer, and signed the name ' John S. Hillan.' The teller ascertained from the books the amount to his credit, and from the receiving teller his identity with the individual who had previously made the deposit, compared the signature of the check with that on the signature book, asked him how he wanted the money, and Tvhether he was going to use it in Baltimore, with a view of endorsing the check good, if he wished to use it in the city among the merchants; but the man replied he wanted to take the money to Washington, and the teller then paid him the $4,500 in small notes of fives and tens, making quite a large bundle. " Mr. Abbott was a large customer and depositor of the First National Bank, and was absent from Baltimore, from the 14th to the 22d of December. His account charged with this check was overdrawn by him on Monday the 24th, to the amount of $372 48/100, and the overdrawing continued during the week until Saturday the 29th, when his account was overdrawn $2,297, and after bank hours of that day, he was for the first time informed by the bank officers of such overdrawing. This information led to an immediate examination of his account and checks, when he discovered the check in question, pro- nounced it a forgery, and stated he never knew such a man as John S. Hillan, and had never drawn such a cheek. The forgery of his name was very skilfully executed and difficult of detection, and the check itself was in printed form, exactly similar to those used by him from his check book. Ifotice of the forgery was given by the First National Bank to the Com- mercial and Farmers' Bank, on Monday the 31st, and repay- ment of the money demanded, but the latter denied its liability beyond the $100 15/100 still remaining to Hillan's credit. No such person as John S. Hillan could be discovered or traced. " The First National Bank having refunded to Abbott, brought this action against the Commercial and Farmers' Bank CH. XL VI. J Banking. 645 to recover back the money the former had thus paid on this forged check. The declaration contains the common counts for money paid by the plaintiff for the defendant, at its re- quest; for money received by the defendant for the use of the plaintiff; and also special counts for money paid by the plain- tiff to the defendant, at its request, on this forged check. " It is our first duty to determine what principles of law are to govern the decision of the case upon the conceded facts above stated. In arriving at a just conclusion upon this sub- ject, we are without the aid of any express adjudication of our own courts, for no case similar in its circumstances has hereto- fore arisen in this State. The case of the Merchants' Bank v. The Marine Bank, 3 Gill 96, is materially different in that there was there a genuine instrument upon which there was a forged endorsement of the payee's name, where as here the check is a forgery throughout. We think, however, the legal principles which must guide and control our judgment have been settled by decisions elsewhere of the highest authority. " In the early case of Price v. iN^eil, 3 Burr. 1354, where an action of assumpsit was brought to recover back from the en- dorsee and holder, money which had been paid to him by the drawee on two bills of exchange, one of which was paid with- out acceptance, and the other accepted and then paid, and on both of which it was afterward discovered the drawer's name had been forged. Lord Mansfield, after adverting to the form of action as one in which the plaintiff could not recover the money unless it be against conscience in the defendant to retain it, said: 'But it can never be thought unconscientious in the defendant to retain the money when he has once received it upon a bill of exchange endorsed to him for a fair and valuable consideration, which he had bona fide paid without the least privity or suspicion of the forgery.. Here was no fraud, no wrong. It was incumbent on the plaintiff to be satisfied that the bill drawn upon him was the drawer's hand before he accepted or paid it ; but it was not incumbent on the defendant to inquire into it.' The authority of this case, so far as it pro- 646 Cleaeinq-House. [ch. xlvi. ceeds upon the ground that the drawee is bound to know the handwriting of his correspondent, and as applicable to the case of a bill accepted or paid by the drawee, where the drawer's name has been forged, has never been questioned, but has been uniformly and abundantly sustained. It is because the ac- ceptor is bound to this knowledge that in an action against him the handwriting of the drawer need not be proved. The same rule has been extended to bank notes and bank checks and for preciSfely the same reason. A bank which receives money on deposit, and thence derives profit is justly held to the obligation to know the signatures of its depositors to their checks, and if it pays in mistake a forged check, there is no reason why the loss should be shifted to another innocent party upon whom the law casts no such obligation, and who, upon the faitb of such payment, has parted with his own money or been placed in a worse position than he would have been but for such payment. "Another instance of the application of the same principle is found in Smith v. Mercer, 6 Taunton Y6. There the accept- ance was forged, and the bill paid at maturity to a holder for value, by the bankers of the' acceptor where he kept his cash, and where by the forged acceptance it was made payable. The forgery was discovered a week afterward and notice given to the defendant, but it was held that the bankers were not en- titled to recover. The strongest instance perhaps of the enforce- ment of the rule is that of Levy v. Bank of the United States, 1 Binney 27, and 4 Dallas 234, where one Thomas passed to the plaintiff. Levy, a check for $2,600 on the bank, purporting to be drawn by Charles Wharton, in favor of Thomas or bearer. The plaintiff sent his clerk to the bank with the check, and it was received by the teller and entered to Levy's credit in his bank book as cash. A few hours afterward on the same day, it was discovered that Wharton's name had been forged by Thomas, and notice thereof was given to Levy, and yet the loss was thrown upon the bank. " In every stage of the case which underwent three several arguments in different courts, the decisions were in favor of Levy. The entry in his book as cash was treated as payment CH. xLvi.] Banking. 647 of the check by the bank, and upon the authority of Price v. 'Need, it was held to be the duty of the bank to know the hand- writing of its depositor, and having paid the check to a holder for value, who had no suspicion of the forgery, it must bear the loss. " In another case (United States Bank v. Bank of Georgia, 10 Wheat. 333), bank notes issued by the Bank of Georgia, which had been fraudulently altered in course of circulation, found their way into the Bank of the United States, and the latter presented them to the former who received them as genuine and placed them to the general account of the latter as cash by way of general deposit. The forgery was discovered nineteen days thereafter, and it was decided by the Supreme Court of the United States the loss must fall on the Bank of Georgia, whether the transaction be regarded as a payment or an acceptance of the notes. Mr. Justice Story, who delivered the opinion of the court in that case, reviewed all the authorities and held that the receipt by a bank, of forged notes purporting to be its own, must be deemed an adoption of them as it has the means of knowing whether they are genuine or not: 'And in respect to persons equally innocent where one is hound to know and act upon his knowledge, and the other has no means of knowledge, there seems to be no reason for burdening the latter with any loss in exoneration of the former. There is nothing unconscientious in retaining the sum received from the bank in payment of such notes, which its own acts have deliberately assumed to be genuine.' " In a more recent case (Bank of St. Albans v. Farmers' and Merchants' Bank, 10 Vermont 141), the same doctrine has been aflBrmed and enforced by the Supreme Court of Vermont. There, a check upon the Bank of St. Albans in favor of one Wilson, or bearer, was purchased by another bank from the alleged payee, an entire stranger^ who endorsed it in the name of Wilson, and it was paid on presentment by the bank on which it was drawn. It was subsequently discovered that the name of the maker, who was the president and a customer of the bank, was a forgery, and a like result attended the effort 648 Cleaeing-Hoxtse. [ch. xlvi. to recover back the money. We may also refer to the case of Bernheimer v. Marshall, 2 Minn. 78, for a very clear and well reasoned decision upon the same subject and to the same effect. " The facts, as well as the principles of these cases, have been cited with some particularity, because of their close re- semblance in many instances to those of the case at bar. I^ our opinion, the case before us falls within the general doc- trines settled by these authorities, and is distinguishable from that class of cases, where forged securities of third persons have been received in payment, as well as from those which have established the rule, that if a party pays money under a mis- take of the real facts, and no laches are imputable to him, in respect of his omitting to avail himself of the means of knowl- edge within his power, he may recover it back. Nor is the rule of commencial law, that no title can be acquired through a forged endorsement, which was specially relied on by the ap- pellee's counsel in argument, and was the ground upon which the court below proceeded in granting the plaintiff's first prayer applicable here. The rule as stated, is no doubt clearly settled, but its very statement shows it can have no bearing on such a case as the present. It presupposes a genuine negotiable instru- ment, the title to which can be transferred by a valid endorse- ment; but it is a solecism to say any title can be acquired to that which has in fact no existence. The endorsee of a check or note to which the marker's name is forged, of course, acquires no title from an endorsement, and no rights as against any one where the endorsement is made to him directly by the forger or his accomplice, and it matters not in such case what may be the form of the forged instrument, whether payable to order or bearer. It is therefore perfectly immaterial to the rights of the parties to this suit whether the name John S. Hillan, the payee in the check, was a fictitious name inserted by the forger and endorsed thereon by the person who deposited the check with the defendant, or was the genuine name of the criminal thus acting. In neither case could the defendant have derived any title by such endorsement, and in the sense of acquiring title from one capable of transferring the paper, it cannot be pretended the CH. XLVi.J Banking. 649 defendant was a bona fide holder. The appellant's defense does not rest upon this ground. Its legitimate defense is, that in entire innocence and without suspicion of the forgery, it re- ceived in the course of business a forged check on deposit, and sent it through the regular channel of communication, for pay- ment to the plaintiff, on whom it purported to be drawn and upon whom the law cast the duty and obligation of knowing the maker's signature; that the plaintiff adopted it as genuine and actually paid it to the defendant, and after such recognition and payment, and on the faith thereof, the defendant paid over a large part of the money to the same party who had made the deposit. Apart from any other facts or considerations than these, there is in the language of the authorities cited nothing unconscientious in the defendant's retaining the money, and no reason why the loss as between parties thus equally innocent and equally deceived, but where one is bound to know and act upon his knowledge, and the other has no means of knowledge, should be thrown upon the latter in exoneration of the former. The safest rule for the commercial public, as well as that most consistent with justice, is to allow the loss to remain where by the course of business it has been placed. ITor is the argument sound, that the defend- ant was placed in no worse position in consequence of the plaintiff's payment of this check, because by receiving and treating it as a deposit in cash, it assumed to take the risk of its genuineness as between itself and the depositor, or parties whom he might have induced to advance money, or give him credit upon the faith of the statement in the bank book deliv- ered to him, at the time the deposit was made. How far the defendant might have been estopped from denying its responsi- bility, to those who might have dealt with the party calling himself Hillan, on the faith of this representation of a deposit to his credit as cash, it is not necessary to inquire. Such a case might depend on a variety of considerations, and will be seasonably decided when it arises. It is sufficient for our present decision to say, that no such question is presented by this record. The payment here was in fact made to the 650 Cleaeing-House. [ch. xlvi. same party who made the deposit, the forger himself or his confederate, and in our judgment it is very clear the defend-- ant had the right as between itself and this party to instruct its officers, notwithstanding the entry to his credit as cash, not to allow the account to be draw upon, until it was first ascer- tained that the deposited check was good or had been paid. Having done so and having in fact paid to such party, after the check had been paid by the plaintiff, it is impossible to say the defendant has not been placed in a worse position in conse- quence of such payment by the plaintiff. " It follows from these views there was error in granting the plaintiff's first prayer, and for this error the judgment must be reversed. The remaining inquiry is, ought the case to be sent back for a new trial ? Upon this question we have already, in a measure, indicated our opinion. It has been the uniform practice of this court to refuse a procedendo where it is apparent from the record the plaintiff is not entitled to recover, in view of the law of the case pronounced by the appellate tri- bunal. What that law in the present case is upon the undis- puted facts, we have already determined. The two grounds upon which it is supposed the plaintiff is entitled to recover independently of the law thus announced, are stated in its second and third prayers, which were rejected by the court below. The first places the plaintiff's right to recover solely upon the ground that the jury might find, from the evidence, that there was a general and well-established usage of the banks in Baltimore, to the effect that where one bank sends to the clearing-house a check on another bank, payable to order and purporting to be endorsed by the payee, the bank sending it guarantees the endorsement of the check to be the genuine endorsement of such payee. We need not stop to inquire whether there is evidence proper to be submitted to the jury of the existence of such usage, because we have shown it was immaterial to the rights of these parties whether the endorse- ment of Hillan's name was genuine or fictitious, the drawer's name being a forgery. The proposition that the plaintiff could recover in this case upon the basis of such supposed guarantee. OH. XLvi.] Banking. 651 assumes that the obligation of knowing the handwriting of Abbott was thrown as much upon the defendant, who had no means of such knowledge, as upon the plaintiff, who had the means and who was in law presumed to know his signature, and is in direct conflict with the authorities before cited. " The second ground proceeds iipon the theory that there was a general and well-known usage among the banks in the ■city of Baltimore, not to receive on deposit a check drawn upon another bank from the alleged payee, unless he is known to some of its officers or is introduced or identified by some person so known; that the party calling himself Hillan, the forger or lis confederate, was entirely unknown to the officers of the defendant, and they did not take the precaution of requiring any evidence of identity; that the defendant's cashier, on hear- ing the fact that the check had been received from a stranger, directed the teller not to permit the party to draw on the ■deposit until the check had been paid by the plaintiff, and then sent the check through the clearing-house in the ufeual way without notice to the plaintiff of the circumstances under which it was received and held, and it is insisted that if the jury found this usage and these facts in connection with those stated in the first prayer, and that by this negligence of the defendant in so receiving the check and sending it to the clearing-house for payment, the forger was enabled to consummate his intended fraud, the plaintiff is entitled to recover. "IrjyOur opinion, the question of negligence as affecting the Tights and determining the rsponsibility of these two banks in this transaction, must stand on grounds entirely independent ■of the supposed usage not to receive deposits from strangers without identification. The defendant's officers do not admit hnowledge of any such custom, and aver that no such uniform practice has been adopted by their bank. But the whole object and purpose of this practice in each bank where it prevails, is obviously protection and security for itself and not of other banks with which it has dealings. The defendant had a clear legal right to receive this check on deposit as it did, and if it acted negligently in so doing, or had cashed the check at once 652 Cleaeing-House. [ch. xlvi. instead of receiving it on deposit, it certainly would have incurred the risk of loss to itself, but we cannot perceive how this could help the plaintiif's case or excuse its own negligence in law, or enable it to escape the consequences of its failure to detect the forgery of its customer's name, when the check wks presented to it for payment. It certainly would be very unsafe to decide that a bank can be excused for the negligent perform- ance of the duty imposed by law of examining its- customer's signature to a check, because the innocent holder happening to be another bank has merely failed in receiving it, to observe a usage or practice adopted for its own security. Their own interests will prompt banks to adopt proper precautions in receiving deposits as well as in paying out money, but something more is required than the mere non-observance of the usage here attempted to be set up, in order to throw the loss in this case upon the defendant in exoneration of the plaintiff. So that at last the question presented resolves itself into this : Can it be said, as matter of law, that the sending of this check through the clearing house and the failure to communicate to the plain- tiff the fact that it was received from a stranger, amount to such negligence as will throw the loss upon the defendant, or ought a jury to be permitted, from these facts or any circum- stances disclosed in evidence, to infer such negligence and find a verdict for the plaintiff for the full amount claimed. " It was at one time held in cases where bills, notes, or other securities, transferable by delivery, were lost or stolen, that it was a sufficient defense to an action by the holder for value, that he had received them under circumstances which ought to have excited the suspicion of a careful and prudent man, but the English decisions following that of Gill v. Cubitt, 3 Barn. & Cress. 466, adopting this doctrine were subsequently over- ruled, and lord Denman, in Goodman v. Harvey, 4 Adol. & Ellis, 870, has said: ' I. believe that we are all of opinion that gross negligence only would not be a sufficient answer where the party has given a consideration for the bill. Gross negli- gence may be evidence of mala fides, but it is not the same thing. We have shaken off the last remnant of a contrary CH. XL VI. J Banking. 653 doctrine. Where tlie bill has passed to the plaintiff without any proof of had faith, there is no objection to his title.' The weight of American authority is to the same effect. Murray v. Lardner, 2 Wall. 110. " We do not mean to adopt this law as applicable in all its bearings to a case like that now before us, or to decide that a case may not arise in which bank officers and agents may, in receiving a check, act in a manner so grossly negligent, even without mala fides, or by their conduct so mislead and lull into security the bank called upon to pay, as to excuse its failure to immediately detect the forgery, and -where a jury may very properly be allowed to pass upon such conduct and negligence as most essentially facilitating the fraud, and occasi-oning the loss, and find a verdict accordingly. But in view of the long series of decisions settling the law so as to protect innocent holders for value, a much stronger case must be made out than is presented by this record. There is no pretense of bad faith on the part of the defendant. It received the check in the ordinary course of business and sent it through the usual channel for payment. We cannot sanction so loose a doctrine as to hold that the fact that it came .through the clearing house affords any shadow of excuse to the plaintiff. The law attaches no sanctity to this source of communication, and none in fact can be imputed to it. The legal effect of what was done here as in every case of presentment and demand is this : the defendant said to the plaintiff, 'we hold this check on your bank, purporting to be drawn by one of your customers, and demand its payment,' and it can make no difference through what source this demand was made, whether by letter, or by special messenger, or through the clearing-house. " The appearance, acts, and conduct of the party, both when he made the deposit and when he drew out the money, fail to exhibit, so far as the proof discloses, anything affording rational grounds of suspicion of the forgery. The direction of the defendant's cashier to its teller imports nothing more than proper precaution on his part to protect his own bank from loss, consequent in his mind from the risk incurred in receiving the 654 Cleaeing-House. [ch. xlvi. check from a stranger. There was nothing, therefore, to be communicated important for the plaintiff to know, unless it be determined that in every case where a check is received from a stranger it is the legal duty of the holder to communicate this fact to the bank on which it is drawn, before or at the time of its presentment and demand for payment, and that the failure to do this is negligence or evidence of negligence affecting his right to retain the money paid upon the check, in case it should afterward be discovered to be a forgery. We are not prepared to lay down so stringent a rule as this. Indeed, it is difficult to perceive of what service this knowledge would have been to the plaintiff, unless we assume it had the means of knowing, not only Mr. Abbott's signature, but was familiar with his business, and knew all the parties with whom he had dealings and to whom it became necessary for him to give checks; and if it had such knowledge the fact to whom this check was given, was as effectually imparted from the face of the paper itself, as it could have been by any written or verbal communication from the defendant. But if it should be held the non-commu- nication of this fact or any circumstances attending the whole transaction was negligence or evidence of negligence in the defendant, what can be said of the conduct of the plaintiff, not only in paying the check, but in retaining it for a we^k, and in the meantime allowing Abbott's account to' be overdrawn, from ■ day to day, to a large amount without notice to hiiia of that fact, so as to lead to a more speedy detection of the crime, the arrest of the forger and recovery of the money which the defendant had paid to him ? The chance of discovering the criminal and recovering the money was certainly diminished by each day's delay, and if the negligence of either party, apart from the legal obligation resting upon the plaintiff to know Abbott's signa- ture, can be regarded as most essentially facilitating the fraud, and occasioning the loss, and the liability therefor could be thereby determined, we should be forced to say the superior negligence was upon the plaintiff. "After a careful and patient examination, both of the law and the facts of the case, we are satisfied there is no ground CH. xLvi.J Banking. 655 for a procedendo. The ease in short in all its features demon- strates the propriety of the rule established by the authorities we have cited. We are fully aware of the importance . of so settling and applying the law as not to facilitate the success of frauds, and of the difficulty of detecting the skilful forgeries unfortunately so prevalent in recent times. But the law has fastened the obligation of knowing the signatures of its cus- tomers upon the bank which receives their money on deposit, and undertakes to pay it out on their cheeks. Greater safe- guards and precautions must be devised and adopted by banks to ascertain, before payment, the genuineness of checks drawn upon them. The primary obligation and duty are there placed, and in the careful discharge of that duty, and in the just severity of courts in punishing to the extreme limits of the law, the guilty perpetrators of such crimes, the community will find its best security. " The defendant admits its liability to the extent of the $100 15/100, still remaining in its hands, and the judgment must be reversed with costs, and judgment rendered by this court in favor of the appellee for that sum only." § 353. .Bights of drawee bank against payee in endorsing forged check. The facts presented in the case of National Bank of North America v. Edward D. Bangs and another, 106 Mass. 439, are very interesting and of peculiar importance to bankers. It is conceded that they should all be well informed upon ques- tions affecting their responsibility, especially where the ques- tion of liability arises upon their acts or defaults relating to forged instruments which may come into their hands. There- fore having in view the question of responsibility resting upon a banker and the valuable information which may be derived from an important case, we believe it advisable t« recite the facts which were agreed upon in the above case and submitted to the court upon which his opinion was rendered. They are as follows : 656 Cleaeing-House. [ch. xlvi. " The defendants, on September 21, 1869, took of some person (whom they do not remember, and did not remember when they were first notified of the alleged forgery, and could not then tell whether he was a stranger to them or a person known to them) in good faith and for full value, in payment for gold sold by them in the usual course of their business, a check payable to their order, of which the following is a copy : " $1,308,63. K"ational Bank of North America. " Boston, Sept. 21, 1869. " Pay to the order of E. D. & G. W. Bangs & Co. thirteen hundred and eight dollars and sixty-three cents. " 1^0. 932. WILLIAM D. BICKFOED." " On said September 21st, the defendants deposited this check, with others, and with their other moneys, in the Mave- rick iN^ational Bank of Boston, where they kept their deposits; and before depositing it, for the purpose of enabling the Maverick l^Tational Bank to collect the check from the National Bank of North America, and in accordance with the usage of depositors of checks payable to order, they endorsed it in blank by writing on the back of it ' E. D. & G. W. Bangs & Co.' The Maverick National Bank the next day presented the check at the clearing-house, when it was allowed and paid to the Maverick National Bank by the National Bank of North America in the usual manner of settling the daily balances of banks at the clearing-house. " The Maverick National Bank, on the day of deposit, credited the defendants with the amount of the check in its account with them ; and the National Bank of North America on September 22d, debited William D. Biekford, in whose name the check purported to have been drawn, and who was a cus- tomer of and a depositor in the National Bank of North Amer- ica, and had funds on deposit there, with the amount of the check. The check was retained by the National Bank of North America until the 1st or 2d of October, 1869, when it was sent with other checks, by the National Bank of North America, to CH. XLvi.] Backing. 657 William D. Bickford, with the monthly statement of his account, according to the usage of banks. Bickford, after exam- ining the checks, pronounced this a forgery, and on the 4th of October informed the bank of it; and on the same day the • defendants were notified by the Ifational Bank of North Amer- ica that the check was forged, which was the first intimation or suspicion they had that the check was forged. For the pur- poses of the hearing on this statement of facts, it is admitted that the check was a forgery." The court in rendering its opinion upon the above agreed statement of facts, says : " This suit is brought to recover money paid upon a check purporting to be drawn by one Bickford, upon the plaintiff bank, to the order of the defendants, endorsed by them, depos- ited with their banker, and collected through the clearing-house. The signature of the drawer proved to be a forgery. As the discovery of the forgery was not made in time to enable the plaintiff to return the check, as of absolute right, under the rules of the clearing-house, we think the case must stand as if the payment had been made directly at the plaintiff's counter, in the ordinary mode. " The right of return, secured by the rules of the clearing- house, is a special provision, in compensation for payment with- out inspection. Instead thereof, the rules give opportunity for subsequent inspection. When that has been had, the special rules cease to govern; and the rights of the paying bank rest upon the general principles of law." § 304. Clearing-house member representing a bank not a mem- ber. Where a bank, which is a member, of a clearing-house, enters into an agreement with a bank not a member, to clear for it all the checks of the latter, where the latter has knowledge of the 43 658 Cleaeing-House. [ch. xlvi. rules of the clearing-house, the agreement is held to be a tri- partite agreement between the banks and the association." A member of a clearing-house agreeing to clear for a non- member, held entitled to dispose of bills receivable deposited with it by the non-member to reimburse it for paying checks drawn on the non-member. ^^ § 355. How clearing-house may sue and be sued. A clearing-house is not a corporation nor a partnership or an artificial person, but is an association represented by its trustee, and its committee or business managers may sue as trustees to collect upon securities which have been pledged to the clearing-house to secure indebtedness due and owing by member banks, for the certificates issued for their benefit, by the clearing-house committee. The committee holds the securities as trustees. The prop- erty is pledged to them as security.^' When a clearing-house makes an unauthorizd disposition of the surplus, it becomes directly liable therefor to the receiver of the bank, and the receiver in such a case is not required to sue the banks to whom the money was distributed. He may sue the committee who have the entire control of the business.^' Bight of set-off J when may he denied. A clearing-house committee holding notes for value and as security and which have been placed with it, in a suit to recover thereon, the maker is denied the right of set-off. The maker has no right to set off against the note the amount which his bank owed him as a depositor.^" 18 O'Brien et al. v. Grant, 146 is Philler et al. v. Patterson, Ap- N. Y. 163; Farmers' & Merchants' pellant, 168 Pa. St. 468. Bank of East Birmingham v. Third isYardly c. Philler, 58 Fed. Hep. National Bank of Pittshurg, Ap- 746. pellant, 165 Pa. St. 500. 20 Philler et al. v. Jewett & Co., 17 Davenport v. National Bank of Appellants, 166 Pa. St. 456. Commerce (N. Y.), 112 N. Y. S. 291. en. XLVi.j Banking. 659 § 356. General utility of clearing-lioiise and its incidental pow- ers. The purpose of the clearing-house, as previously stated, is not only to make settlements between the banks who are mem- bers of the association, but to give aid to each other in financial stringencies. The clearing-house may be called a financial reg- ulator. In times of financial disturbance and money stringency, the clearing-house associations have demonstrated their useful- ness to the country, by issuing clearing-house certificates which, for the time being, met the emergency of the occasion. During the currency famine of 1893 it was clearly demon- strated that the national banking system was very defective in elastic powers. The failure of this system during such time is so clearly presented by John DeWitt Warner, in an article prepared by him and published by the Sound Currency Com- mittee of the Keform Club, February 15, 1895, that a large portion of his valuable paper entitled " The Currency Famine of 1893 " is here given space, speaking in reference to the clearing-house certificates and their value as a medium of cur- rency (but not to be used as such) but used to meet the defici- ency of the national bank currency, he says : " Our laws provided but one resource — additional issues of national bank notes. The national banks were urgently summoned to perform their most important legitimate func- tion - — that of giving elasticity to a currency admittedly rigid at every other point. The only result was to demonstrate the worthlessness of the national banking system itself. " We had had it for thirty years. Its original aim had really been, not to provide bank note currency — there was a plethora of that when the national banking system was established — but rather to starve the business public into purchasing govern- ment bonds as a condition of being permitted to do business at all. " So far was it from accommodating itself to the wants of developing communities that it took $11 in funds free for investment in any given locality to secure for that locality $9 in currency. So far was it from expanding to meet the growing 660 Cleaeing-House. [oh. xlvi. demands of the country that, while twenty years ago the then outstanding $340,000,000 of national bank notes represented more than 45 per cent, of all our circulation, ten years later the $347,000,000 of similar notes then outstanding repre- sented but 28 per cent, of our currency, and in June, 1893 — the latest date at which conditions were normal — the $172,000,000 of national bank notes then in circulation outside of the treasury were less than 11 per cent, of our currency, of which they had ceased to be a material factor. " So far was it from being elastic, that we had come to expect a period of stringency in each year — in the late summer and early autumn — which invariably arrived ; while a careful survey of the course of our national bank note circulation showed that the general tendency, at first to its increase and afterward to its withdrawal, had absolutely no coflnection with present or prospective, however certain, business demands for currency. ITational banks had long since ceased even pre- tended obedience to the law, and habitually made discounts in times of stringency in the face of depleted reserves. This practice was possible because the initiative was in the hands of the banks, and the government had power only to pimish; a power which it forebore to exercise. " In the other particular, however, that of furnishing cur- rency, the initiative was in the hands of the Comptroller. The banks were thus powerless to break the law, no matter how beneficent might have been such violation. And nothing is more instructive than to contemplate the futile writhing and cortortions of our national bank-note currency system in the strait- jacket with which it had been pinioned, and to see the note merely inadequate, but positively ludicrous, results of its strenuous efforts to respond to the most urgent demands for relief that this generation has heard. " The increase of our currency by additions to national bank circulation during the stringency was only about 1% per cent, and was far less than the amount by which the banks of a single city virtually increased it by clearing-house certificates alone — little more than half the amount by which individual CH. XLVi.] Banking. 661 bankers increased it by actually buying gold in Europe and shipping it hitber — and was in great part accomplished only after the necessity for it was over, millions of dollars of the additional currency taken out being returned to the treasury with the packages unbroken. " It was to such a dead fetich that our stricken business appealed when caught in the panic of August, 1893. Never was there offered a more conclusive proof of the self-reliance of our citizens and the superiority of business expedients over government direction. Not merely by financiers in our great cities, and by great corporations experienced in handling such crises but in every part of the country, with the exception of the far southwest, did the people work out their own salvation. Emergency currency. " The experience of August-September, 1893, was unique. There was no gradually developed plans for mutual assistance. Mutual helpfulness there was in plenty between individuals and localities ; but it was in prompt response to sudden appeals ; and before any general system could be devised, the occasion for it was over. Financial clouds had long been lowering; but it was within a single month that the currency famine became general, its worst effect was felt, and such relief as was extended aided the crisis over, with a tendency toward a glut of circulating medium. " In other cases, nations or communities had simply found themselves thrown upon their own resources. Our people found themselves not merely drained of currency, but for- bidden by most carefully drawn statutes to utilize the expe- dients which would have been most natural and most eilective. No civilized nation has ever experienced such a currency famine. None has ever found itself so fettered by positive law in its efforts to rescue itself. None ever so promptly arose to the emergency. Never was there so prompt a return to normal conditions. " It is this that I have found a peculiarly interesting study. Not that I have been able to estimate or even trace it in any- !662 CLEAEIlirG-IIoUSE. [CH. XLVI. thing like full measure. One of its most striking peculiarities was the extent to which — partly on account of the sudden- ness with which it was called for and the promptness with which the need of it was over — partly, perhaps, because everyone assumed that its use was in defiance of law — the actual practice in each locality was in general, unknown outside of it, and evidence and mention of it hard to secure afterward. " The specimens I quote are, therefore, but a few score of the hundreds of cases that careful inquiry would reveal; and, except in the case of clearing-house certificates proper, give but a faint idea of the extent to which in all parts of the country this emergency currency sprang into being. They are, however, I trust, sufficiently varied to illustrate the methods used and the more characteristic sorts of currency — as distin- guished from more strictly ' credit ' expedients — that were thus called into being. Clearing-house certificates. " First come actual clearing-house certificates — new, not in invention, but rather in the novel extent of their use. Their office was simply to extend indefinitely the brief term of mutual credit involved in all clearing-house settlements. Con- trary to the general impression, they were not used as cur- rency ; but their effect was to add just their face to the volume of currency in circulation, by releasing, for use outside, that which would otherwise have been reserved for clearing-house settlements. So far as the banks using them transgressed law, it was in renewing loans and extending discounts when their reserves were depleted below the legal limit. The use of clear- ing-house certificates simply enabled this to be done with less risk of other than legal consequences. "And to the vn-iter, not the least interesting of the data that he has gathered in this connection has been the proof — in instance after instance — where he has been proudly assured that a particular city had not been forced to extraordinary expedients such as had been seized upon in their desperation by less favored centers — either that the boaster had been CH. xLvi.j Banking. ^^^ saved by aid extended by those whom he so patronizingly pities, or that the self-sufficient town had already adopted such practices that its ordinary way of doing business left nothing in the way of liberal financiering yet to be exploited. It was to the banks that did use clearing-house certificates in the emergency that the country owes its escape from unpar- alleled disaster, " Denominations were as follows : New York, $20,000, $10,000 and $5,000; Philadelphia, $5,000 only; Boston, $10,000 and $5,000; New Orleans, $500 to $10,000; Balti- more, $6,000, $3,000 and $1,000 ; Pittsburgh, $10,000, $5,000 and $1,000; Detroit $5,000 only; Buffalo, $5,000 and $1,000. Their issue, it will be noticed, was mainly in the Northeast, New Orleans being the only Southern and Detroit the most Western example. And in each case it will be observed that use of the certificate is limited strictly to settlement of mutual accounts between members of the clearing-house association in question." We shall not attempt to give in reduced f ac simile, copies or specimens of all the clearing-house certificates referred to by Mr. Warner, but will present a copy as used by the clearing- house association of New York: No. $20,000. OQ LOAN COMMITTEE OF THE NEW YORK CLEAEING-HOUSE ^ ASSOCIATION. \^ New Yobk, , 1893. 2 This Ceetifies, that the has deposited with this Committee, securities in accordance with the proceedings of a Q Meeting of the Association, held June 15th, 1893, upon which this ^ Certificate is issued. This Certificate will be received in payment oa of balances at the Clearing-house for the sum of Twbntt TsotrsAND & Dollars, from any member of the Clearing-house Association. pH On the surrender of this certificate H by the depositing bank above named, the ►h Committee will endorse the amount as a f5 H payment on the obligation of said bank, 2 S held by them, and surrender a propor- I ^ tionate share of the collateral securi- g: H ties held therefor. g" $20,000. •* 664 Cleaeing-House. [ch. xlvi. Other devices in similar character to the clearing-house cer- tificate were used during the currency famine of 1893, such as certified checks, pay checks, due-bills, etc. It is conclusive from the facts presented by Mr. DeWitt Warner, that the national banking system, during a severe money stringency, is not clothed with the power to provide in such emergencies the necessary circulation, its elastic power, such as it possesses, is frequently withdrawn. By the use of conservative language, it may be said that the system at such times is powerless to meet the emergency. Therefore, the clear- ing-house under its implied power, it has been found, may pro- vide for and issue clearing-house certificates. They do not circulate as money, but the eifect is practically the same. They add to the volume of currency, to the sum or amount which, in their absence, would be required in cash to make the settlements between clearing-house banks. Certificates counted as reserve. Clearing-house certificates are declared to be lawful money for reserve purposes, and may be counted as reserve when they represent special or lawful money specially deposited for the purpose of any clearing-house association. (Rev. Stat., TJ. S., § 5192.) While the purpose of the clearing-house, as stated, was not originally organized or intended to be put to such use through its implied or incidental power, in the issuing by it of such certificates, however, by the use of such means, the currency is expanded to aid the circulating medium required by the country in extreme financial depressions. The issuing of such certificates is recognized as clearly within the law. They are intended to be used only as instru- ments for settlement of balances between banks that are mem- bers of the clearing-house. The issue and circulation of the 'instrument is limited between the parties. They are not intended to circulate as money, and therefore, as previously stated, cannot be construed to be in violation of the constitution relating to the issuing Gil. XLVi.J Banking. 665 of instruments as bills of credit and intended to circulate as money. In a review of the usefulness and powers of the clearing- house, it is found to be a great convenience to banks in making settlements between themselves. It may also receive from a member bank, securities; and upon such securities make advancements to aid it during times of depression. As an organization through its committee, it may enforce collection upon such securities where they have passed into the clearing-house for value, and the debtor as against the bank depositing the same, has no right of set-off. It may also issue clearing-house certificates as settlements for balances found to be due between its members, and they may be used between the bank as a payment in the place of cash. Banks as organizations may greatly enlarge their usefulness to each other and the public in general by urging all banking associations, where conveniently located, to become members, and as such, report their condition monthly to the clearing- house committee. CHAPTER XLVII. TETTST COMPANIES. § 357. Distinguished from a bank. The powers of a trust company are tkose which are con- ferred upon it by the statute. The extent of its powers in business and acts are such only as are specifically granted to it and authorized by the law. It may, when authorized, do the things authorized by its charter ; but it has no incidental or implied authority to transact other business.^ It is a trustee and is bound by law to the exercise and per- formance only of such acts as are delegated to it by the expressed and necessarily implied provisions of the law. It differs from a bank in this, that its deposits are loans to it or trust funds held in trust, and are not subject to check. It has no power to issue its notes for circulation. It cannot deal in exchange, make discounts, issue letters of credit, drafts or certificates of deposit. It may receive moneys in trust, and when so received, it must preserve them as trust funds. It may hold the same and accu- mulate the same at an agreed rate of interest ; and may accept and execute all trusts committed to it by persons, corporations, and courts of record ; and receive title to real estate or personal estates in trust, which may be created according to the laws of the State ; and may also act as agent for corporations in holding, issuing, registering and transferring stocks and bonds; but its iNew York Trust and Loan Co. Harrill v. Davis, 168 Fed. Eep. 196; V. Helmer, 12 Hun 35, aflf'd in International Trust Co. v. American (1879) 77 N. Y. 64; In re Jaycox, Loan and Trust Co., 62 Minn. 501, Fed. Cas. 7237 (12 Blatchf. 209); 65 N. W. 78. r666] CH. XLVII.J BAIiTKING. ^^^ functions and powers are not those of a bank, in the strict com- mercial sense of that word.^ § 358. Trust companies may have banking powers. The Constitution and laws of the State govern and control this privilege, and where banking privileges are not expressly granted, the business of banking by a trust company cannot be exercised. Many of the States by special provisions of law have enacted statutes authorizing this privilege, granting to a trust company, in connection with its powers as such, the right to conduct a banking business. But this power must be expressly authorized by the statute, if not, the power does not exist by implication. Where an act of the legislature author- izes the creation of a trust company, and by its provisions de- fines its powers to be those of executing trusts, and does not in the act authorize a banking business, it has no power to perform such business under an implied authority of law. The principle of law governing a trustee who accepts a trust, will not permit the trustee to speculate with the trust property ; or to retain the profits made by the use of the same. A trustee is compelled by law to account for and pay over to the cestui que trust all profits made by the use of any trust property. The doctrine is also settled that a trustee cannot become a purchaser at his own sale without special permission or author- ity given by a court of competent jurisdiction.^ A purchaser by a trustee of property for his own benefit is not absolutely void but voidable ; and may be confirmed by the parties interested, either directly or by long acquiescence.* It will be seen that the business of banking and that of a trust company are governed and controlled upon almost directly opposite principles of law. A banker may make profit out of money received upon an open account, and may also buy prop- erty at his own sale. He may also issue drafts, certificates of 2 Mercantile Bank v. New York, s Allen v. Gillette, 127 U. S. 589. 121 U. S. 138 ; Kavanaugh v. Com- 4 Hammond v. Hopkins, 143 IJ s' monwealth Trust Co., 64 Misc. 303, 224. 118 N. Y. S. 758. 668 Teust Companies. [ch. xlvii. deposit, letters of credit, and discount notes. Where funds are deposited in a commercial bank upon an open account, the bank at once becomes a debtor for the same. While the deposit of funds in a trust company cannot be intermingled with other funds and must be held in trust, neither can they be used for profit, except as may be expressly agreed upon\ between the parties and as authorized by law. Where the statute permits a trust company to do a banking business, a provision of law should always be enacted, requiring that a separate set of books should be kept ; and no interming- ling of the commercial and trust funds should be permitted. The principle of combination or dual authority, allowing a trust company to do banking business, is inconsistent and as pre- viously stated should not be permitted unless expressly author- ized by law. The question of authority under the constitution and statute, of a trust company organized under the laws of the State of Missouri to do a banking business, is ably and profoundly dis- cussed in the case of State ex inf. v. Lincoln Trust Co., 144 Mo. 562. In this case the Lincoln Trust Company was duly incorpo- rated under the acts of the legislature enacted in 1889 and amendments thereto passed in 1891. The company claimed the authority under its charter and incidentally under the laws enacted to conduct a banking busi- ness in connection with its trust business, and at the time of bringing the action by the attorney-general in behalf of the people, it was conducting in addition to a trust business a banking business. The case is a very important one, as it involves the construc- tion of the powers under the act creating and authorizing trust companies ; and also distinguishes the business of banking from that exercised by trust companies. The general rule as announced by the Supreme Court of the United States, in the case of Thomas v. Railroad, 101 U. S. 71, is as follows : " The powers of corporations organized under legislative statutes are such and such only as those statutes con- CH. xLvii.j Banking. 669 fer. Concerning the rule applicable to all statutes, that which is fairly implied is as much as granted, as what is expressed, it remains that the character of a corporation is the measure of its power, and that the enumeration of these powers excludes all others." ^ A trust company cannot become a public depos- itory without the aid of a statute. See 89 K E. 367. It is held in the case of State ex inf. v. Lincoln Trust Com- pany, where the statute permitted trust compaifies to receive money on deposit, and allow interest on the same, that the money might be returned or paid upon check issued; but that the company could go no further ; it must confine its privileges to the language of the statute which permitted such companies to receive money on deposit and pay interest on the same. In the case of Mercantile Bank v. New York, 121 U. S. 138, the court in determining the question of taxation had occasion to say after enumerating the powers conferred upon trust com- panies by the legislature of that State that, " It is evident from this enumeration of powers 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 exchange of commerce." Where powers granted by the statute authorizes trust compa- nies to receive moneys on trust, it is not a banking privilege and does not authorize them to conduct a banking business, or make loans on personal notes, or to discount or purchase negotiable paper.® But where the statute authorizes a trust company to do a banking business, its powers are limited to the provisions of the law, and the special act under which they are incorporated, and to such implied and incidental powers as are necessary to carry out the express purposes of the corporation. " But powers merely convenient or useful are not implied if they are not essential, having in view the nature and object of the corporation." '' Trust companies with banking powers conducting a dual ^ Coolidge V. Williams, 4 Mass. ' People ex rel. Tiffany & Co. v. 140. Campbell, 144 N. Y. 166, 172, 38 'Jenkins v. Neflf, 185 U. S. 230. N. E. 990. 670 Teust Companies. [ch. xlvii. business by reason of tbe relationship existing between its customers and itself, holding moneys in one relationship as trustees, and in another simply as a debtor, for moneys depos- ited, impresses upon such companies a strict performance of the law. The courts recognize the importance of this question and hold all such companies to a strict compliance with the pro- visions of the statute authorizing them to conduct such busi- ness. Illustrating the views set forth we find the court in the case of Granse v. Commonwealth Trust Co., 24 L. E. A. (N. S.) 967, 196 N. Y. 134, 89 N. E. 476, emphasizing the rule that such companies are strictly held to the provision of the law which creates them. The court says : " The legislature intended, and the public interests demand, that trust companies shall be confined not only within the words, but also within the spirit of the statutory provision which declares that a corporation shall not possess or exercise any corporate powers not given by law or not necessary to the exercise of the powers so given. Such authority does not per- mit a trust company to enter into speculative and uncertain schemes, or, unless under peculiar circumstances not disclosed in this case, became the guarantor of the indebtedness or busi- ness of others. Its authority to buy and sell stocks and bonds does not authorize it to indulge in hazardous promoting schemes, although it may hope from the successful launching of such schemes to make large commissions and receive large bonuses. We have, already referred to the case of Appleton v. Citizens' Central iN'ational Bank, in which this court has illus- trated the effect of different circumstances in determining the legality of particular acts. The guaranty of said notes in this case, as well as the alleged guaranty to the plaintiff, was without any , legitimate or adequate basis. Its president, as stated, assumed that there was no risk in what he did and directed, and he was doubtless influenced by a sentimental reason aris- ing from the extent to which the defendant had been connected with the general scheme of floating the ship building company. It did, however, create a hazard so great as to involve the very life of the defendant, and in our judgment it was wholly with- CH. XLVii.J Banking. 671 out authority. The result of such hazardous and reckless deal- ings, and acts by the officers of trust' companies is well illus- trated in this ease, as it appears that the defendant was organ- ized with a large capital and paid-in surplus in the spring of 1902, and, within a few months thereafter, was shorn of its surplus and compelled to reduce its stock to a small part of the original issue, and it has still upon its hands this serious litiga- tion. If such business methods are authorized by statute and approved by the courts, the purpose of the organization of trust companies would fail and result in a trap to those invited by the legislature to submit to such corporations their fiduciary accounts, " It is claimed by the plaintiff that, under the doctrine estab- lished in this State, the defendant is liable, notwithstanding its acts were beyond its corporate authority, by reason of the fact that it has, by the agreement with the plaintiff, secured to itself a benefit, and the planitiff has performed his part of the agreement. As we have shown, the alleged agreement was not only outside of its corporate powers, iDut it was signed by its vice-president without the authority of its board of directors, and the seal was attached thereto without any statutory or other authority." Under the Constitution of Georiga, it is within the power of the Secretary of State to issue a charter to a trust company with banking privileges.' In the State of Washington, where the legislature passed a special act providing that trust companies might incorporate under such acts with power to do banking business, held that it was not entitled to incorporate under the general laws, " though its articles did not include all the powers named in the act." * Rule determining authority or power. To determine whether trust companies have hanhing powers reference must he had to the charter of the company; if incor- porated under a special act, and if such act does not authorize , 8 Mulherin v. Kennedy, 48 S. E. 9 State v. Nichols, 82 Pac. Rep. 437, 120 Ga. 1080. 741, 4 Wash. 437. €72 Teust Companies. [ch. xlvii. tlie conducting of a hanJcing business, the charter cannot con- fer such a power, though it is set out and grafted therein. The statute is the measure of authority. Where there is no special statute empowering and authoriz- ing the formation of trust companies, such corporations may be formed and organized under the general incorporation laws of the State; and may conduct any lawful business permitted by law; but where there is a special act of the legislature, authorizing the formation of trust companies, the incorporation must be formed under and controlled by its provisions." In the absence of authority in the act authorizing the busi- ness of banking in connection with its business of executing trusts, the law, as previously stated, does not imply such authority. Stochholders' and officers' liability. The charter liabilities of stockholders of a loan and trust company for " all contracts, debts, and engagements " of the company, are not limited to the banking features of the com- pany.^^ As to time when liability may begin, see Murphy v. Wheatley, 63 Atl. 62, 102 Md. 501. Where managing agent may make himself personally liable, see Sweet v. Montpelier Savings Bank and Trust Co., 84 Pac. 542, 73 Kan. 47. Where two officers have knowledge of a false minute of an alleged meeting of the board of directors of a trust company, and one of them in the presence of the other presents the minutes to an examiner as to the financial condition of the company, they are both held to be guilty.^^ The stockholders' liability is one created by statute and can only be enforced as therein provided.^^ 10 state ex rel Gorman et al. v. 12 State v. Twining, 62 Atl. 402, Nichols, 82 Pac. Eep. 741. 73 N. J. Law 683. 11 M. T. and Banking Co. v. So. is Nichols v. Taunton Safe De- Loan and Trust Co., 43 Atl. 24, 92 posit and Trust Co., 203 Mass. 551. Me. 444. CH. xLvii.J Banking. 673 Representations — Knowledge. A trust company axjting as administrator deposited funds of the estate in an insolvent bank. Held, that his knowledge of the bank's condition was his knowledge of the trust company in a controversy between it and the distributees of the estate, though the rule might be otherwise in a controversy between the two corporations.^* Where not chargeable with notice, see Tate v. Security Trust Co., 52 Atl. 313, 63 IST. J. Eq. 559. Powers of trust company with hanking privileges. It may, when it has power to receive money on deposit, issue certificates of deposit.^' Where it has such power it may also pay out money by use of checks; although it is said that a check is, strictly speaking, only drawn on a bank.^° Liability for deposits. A trust company authorized to receive deposits is under the same law to repay to the owner which governs banks gener- ally. If it receives the funds of an infant deposited by a special guardian, and pays the same back to the guardian, held, it was not liable.^'' A trust company receiving a check for collection is held liable to the owner of the check for the pro- ceeds." Forfeiture of franchise. The legislature of a State is invested with authority to enact a statute defining insolvency and authorizing a board of bank "Germania Safe Vault and Trust Co., 144 Mo. 562, 46 S W Trust Co. V. Driskell, 66 S. W. 610, 593. 23 Ky. Law Rep. 2050. n Walker v. State Trust Co., 53 IS Bank of Saginaw v. Title and N. Y. S. 525, 40 App. Dlv. 55. Trust Co. of Western Pa., 105 Fed. is King v. Bowling Green Trust Rep. 491. Co., 129 N. Y. S. 977. 18 State ex rel. Crow v. Lincoln 43 6T4 Tettst Companies. [ch. xlvii. commissioners when such conditions exist to revoke the com- pany's charter. ^° Insolvency receiver — Set-off. Held that the value of collaterals given to claimants to secure payment of certificates of deposit issued by an insolvent trust company should be deducted from amounts due on certificates in proceedings to wind up the affairs of such company.^" In Pennsylvania, unless by legislation a preference exists in favor of depositors over other general creditors of an insolvent trust company, no preference can be made. Prudential Trust Company, Assignment, 223 Pa. 409.^^ In Pennsylvania (Stat. 1898) where a trust company has banking privileges and money is deposited which is mingled with the general funds and cannot be traced the cestui que trust is not entitled to a preference over general creditors in the dis- tribution of the funds in the hands of the assignee of such trust company.^" For preference of claims against assignee, see Bank Com- missioners V. Security Trust Co., 49 Atl. 113, 70 IST. H. 536. Taxation. The Constitution of the State and the legislative provisions govern and control the property tax which may be levied against a State bank or trust companies. In Montana the Supreme Court in the case of Daly Bank, etc., Co. V. Board of Commissioners, 33 Mont. 101, under the Constitution and statutes of that State has laid down the fol- lowing rule: The court says : " The result of our deliberations is that a State bank or trust company may deduct from its solvent credits 19 State V. Northwestern Trust Company, 166 Mass. 337, 44 N. E. Co., 101 N. W. 14, 72 Neb. 497. 340; New York Security and Trust 20 Bank Commissioners v. Se- Co. v. Lombard Investment Co. of curity Trust Co., 49 Atl. 113, 70 Kansas (C. C), 73 Fed. Eep. 537. N. H. 536. 22 In re Cobson's Estate, 3 Pa. 21 See American Loan and Trust (Super. Court) 244, 39 W. N. C. Co. V. Northwestern Guaranty Loan 486. CH. XLVii.] Banking. 675 its just debts, Tvliich debts are defined by the code, provided it makes the proper return to the assessor, .and claims the reduc- tion, and otherwise complies with the law. And finally, the stock is taxable to the owners at its full cash value, less the amount of its taxable property of the bank or trust company representing such stock." CHAPTER XLVIII. INSPECTION AND EXAMINATION OF BANKS. § 359. Checking up a bank. Section 5246, Revised Statutes of the United States, provides, that the Comptroller of the Currency, with the approval of the Secretary of the Treasury, shall appoint suitable persons to make examination of the affairs of all the national banking associations located within the States and Territories. The Act of February 19th, 1875, provides the compensation of the examiners. State banks organized or doing business in a State are "usually placed under the supervision of a commission designated as " Bank Commissioners," who are appointed by the Governor and confirmed by the Senate. A Comptroller of the Currency, in discussing the usefulness of this office, says, " Perhaps no one thing has done more to promote the safety and sound management of national banks than their liability to examination, without previous notice, by an agent appointed for that purpose, and probably no provision of the law was more unpopular among the banks when the law first went into effect; but the good results brought about di- rectly and indirectly by such examinations have fully vindi- cated the wisdom of the provision." The position and office of bank examiner is one of great value and responsibility. Criticisms are frequently heard and expressed that bank examinations are of no value, that the commission is an unnecessary expense placed upon banks and that the good derived from the examination does not justify the cost. It is true that the experience with the adopted system of examination has been unfortunate in many cases. But the [676] CH. XLviii.J Banking. 6Y7 great good performed by the examination is seldom given to the general public. The reason that examinations are regarded as formal and worthless, arises from the fact that where a bank fails the public generally overlook the fact that the failure was brought about by acts which could neither be detected by an expert, or prevented by an officer of the law, or the prohibition of the law itself. The largest and most dangerous failures are those produced by the bank's officers falsifying the books and robbing the " tills." These conditions or acts usually occur during the interim of examinations, and therefore could not be detected. The difficulty is that examinations are made too hurriedly, and the work which the law requires to be done within a given time cannot be performed, and as a result some important mat- ter is overlooked which otherwise could have been detected, and a great failure averted. The value of an examination made by a person that has no knowledge of local conditions cannot be wholly relied upon. An examination being made by a stranger who cannot be familiar with the business paper of the place, does not make discounts and assets good which are worthless. The inspection should be thorough and should amount to an auditing of the entire business of the bank. This would re- quire the appointment of expert accountants. The examina- tions also should be more frequent and could be more success- fully performed if the examiner had full power to call in the board of directors, requiring them to remain in session while the examination was in progress. The directors, if required to be present, could verify the authority for making and dis- counting loans and be called upon to report upon each trans- action, loan, or discount, and its value as a resource of the bank. The National Banking Act gives authority to the examiner to summon the officers and directors to testify as to . the condition of the bank. In Massachusetts the law empowers an examiner to summon and examine under oath any officer or agent of the bank, in relation to its condition, and a statute 6Y8 Inspection, Etc., of Banks. [ch. xlviii. which authorized such power and the party summoned refused to appear and testify, held subject to a fine or imprisonment. Held further " that the statute is not unconstituional as usurp- ing judicial power, by requiring the justice to allow an injunc- tion in the first instance on- the complaint of the bank com- missioners without evidence." ^ To make a thorough and complete examination of the con- dition and all the affairs of the bank, the examiner should enter the bank either immediately after the close of business for the day, or at such hour before commencement of the busi- ness of the day, as would permit him to take possession of the entire assets of the bank. The first thing to be done is to place the ofiicers or officer in charge of and managing the bank under oath, requiring them to truly answer all questions that may be put to them by the commissioner or commissioners, con- cerning the affairs of the bank, the character and value of its assets, and amount of its liabilities, neither misrepresenting nor concealing anything relative to the true condition of the bank. The cash in the hands of the teller or tellers should then be immediately counted, the amount found to be in the hands of each one should be noted as cash in the hands of first, second, and third paying or receiving teller, etc., and at the same time an itemized list of all cash items held by them should be separately taken and carefully examined, as these form a part of and (if solvent) are added to and counted as cash. Cash items, checks, including clearing-house certificates, in the hands of the tellers having been taken, separately listed, and carefully compared with the ledger statement, each item having been found to be regular, these added to the tellers' cash, together with the cash in the hands of the cashier or cash in the vault, which has been counted, make up the total cash on hand and as shown per general ledger. If one examiner is making the examination, the bills receiv- 1 Commonwealth v. Farmers' and Mechanics' Bank, 38 Mass. (21 Pick.) 542, 32 Am. Dee. 290. CH. xiviii.J Banking. 679 able, together with the stocks and bonds, are immediately after counting of cash taken into his possession, and are placed under seal of the commissioner until such a time as he may be able to list every piece of paper and loan held by the bank. The commissioner may then take a skeleton proof from the general ledger of all resources and liabilities and the subsequent examinations can be based upon this statement, taken item by item. The assets may then be examined and proved as they appear upon the skeleton statement. The real estate owned by the bank taken for debt, including that used as bank premises, should be listed. Title abstract should accompany each piece of property, and these will show the cost of the same, and date when taken by the bank, and if carried above its value the excess should be charged off. The stocks, bonds, and warrants, are also listed. This should be done so the examiner may deter- mine whether the bank, if it is a savings bank, has violated the law in owning or holding securities which are prohibited by law. The loans usually are the most important part of the assets of the bank, and a full and complete list should be taken, together with a list of endorsers and collaterals. Each piece of paper should receive the personal examination of the commis- sioner, and during the investigation and listing one or more of the officials of the bank, who have a personal knowledge of the genuineness, and value of the same, should be present that the commissioner may have such facts verified. There are many instances of extensive frauds which have been committed, by means of loans that were never authorized by the board of directors, and during the process of listing the notes, questions directed to the officer as to their genuineness — the unauthorized or forged loans may be brought to light. The examiner cannot detect, forged paper where the same appears to be regular upon its face, but he can do his duty by placing the officer in charge of the same, and who had authority in the first instance to accept or make loans, upon oath as to their value and genuineness. By listing the loans and dis- 680 iH-sPECTioif, Etc., of Banks. [ch. xlviii. counts, the examiner can ascertain the amount borrowed by the officers and directors, and for which they are personally liable. From the list it can also be ascertained whether or not the bank (if a savings bank) has complied with the law in making its investments in securities authorized by law. The stocks, bonds, and warrants when listed, their character, value, and genuineness should be determined. National banks are prohibited by law from purchasing, and holding as an in- vestment, stocks of other corporations; likewise savings banks are prohibited hj law from investing in certain stocks and bonds. Overdrafts as a resource are a dangerous class of loans. The authority for their creation may also be a question, which the examiner should carefully investigate; for example, where a firm or corporation doing business with a bank overdraws its account, the examiner should in every instance ascertain the authority for creating the same. All overdrafts should be listed; the date of the overdrafts and the amounts dravm; and the person creating the same should be called into the bank to verify the correctness of the account, and be required to secure the bank against the sums so drawn, as overdrafts are unlawful, unless granted upon collateral security deposited with the bank. Resources due from banks are assets that may be accurately verified and proved by writing, or wiring, correspondents ; stat- ing the balance shown to be due from them on a certain day, and requesting a verification. When all of the bank's assets have been listed, proven, and verified, with the books, and the sum total of their value is fixed and determined by the examiner, the bank's liabilities are to be checked and proven. The liabilities consist first, of capital stock, which can be proven by listing the stock issued, taking the certificate book and checking from it (the stub) the number of the certificate, name of party to whom issued, together with the number of shares, and the amount paid on each share. The deposits, or the amount due depositors, can only be CH. XL VIII. J Banking. 681 proven accurately by balancing and cbecking up each indi- vidual account, and proving the same with the ledger. This practice is not followed; and the ledger account showing a total of deposits due, is usually* accepted as correct. Quite frequently the examiner will call in a number of pass books, and balance them, verifying the accuracy of the ledger to that extent; but farther than this the examiner seldom extends this branch of the examination. Certificates of deposit can be proven in several ways ; but the one usually followed is to list by number all outstanding certificates, showing the amount due upon each certificate, checking back from the ledger and cer- tificate book all paid certificates previously issued by the bank. Due banks, as a liability, consists of all moneys borrowed and received from all sources. Liabilities of this nature can only be proven correctly by wiring for a verification of the account. Notes and bills rediscounted, are under the national banking rules held to be liabilities. They are, however, not construed by the Federal courts as immediate liabilities of the bant, as they may never ripen into a debt, and rediscounts s^e classed as notes or bills sold. They are, however, listed as a liability, and are required to be reported by the Comptroller of the Cur- rency in all reports made to him. Bills payable represent money boarrowed by the bank. Such liabilities should receive a careful investigation, in order to determine the authority for, and the necessity for, borrovdng money. This authority should emanate from the board of directors ; money borrowed by the president, or cashier, of the bank, unless authorized, is unlawful. Dividends unpaid are a liability of the bank until distributed, unless they have been unlawfully declared. A dividend cannot be declared only from the profits arising out of the business, and after all the expenses and other requirements of the law have been first complied with. A dividend cannot be declared out of the capital stock, and if upon an examination of the bank, it is found that the capital stock is impaired, no dividend can be declared until it has been made whole. Surplus fund. Where the law requires that a certain portion 682 Inspection, Etc., of Banks. [ch. xlviii. of the earnings of the bank shall at stated periods be carried to a surplus fund, a dividend cannot be declared from the earnings until this has been done. Undivided profits are all of the net earnings of the bank, which may be declared as a dividend, and then distributed to the stockholders. When all of the liabilities have been discovered, and listed, in order to determine the condition of the bank, the question of determining its solvency or insolvency is one v^hich is reduced to the sound judgment of the examiner. He must pass upon many important matters. The main question to be deter- mined is seemingly simple in its statement; but more diffietilt and complicated when a report is to be made which must show the bank's actual condition. If the assets are scheduled, and shown by the books of the bank, are solvent, and the balance is found to be equal to all of the liabilities, no doubt can exist ; but frequently the assets are scaled down until it becomes a ques- tion of serious import to the examiner, and when such a close crisis is reached, it becomes a matter of opinion, and experts and persons of extremely sound judgment may then differ. But it is always best, if error is made, to make it rather in favor of the creditors of a bank, and if a bank's solvency hangs in the balance, the judgment of the commissioner, rather than that of the officers of the bank, should prevail. The author, in past experience as bank commissioner, ob- served the necessity of a State law empowering the examiner with the authority to summon the directors of banks and others having knowledge of its affairs to appear and give testimony respecting its assets and the solvency of the bank. Within a very recent period the Comptroller of the Currency has issued an order to all national bank examiners to make diligent inquiry into the concentration of the funds of all national banks invested in companies controlled by the banks' officers and directors, directing that the books of all such con- cerns shall be open to the examiner so that he may determine whether they are money-making ventures. The order should go to the extent that the examiner should call before him at CH. XLVIII.J Banking. 683 the time of examination into the affairs of the concern all the directors who should, as suggested, be required to give evidence as to the solvency of its assets; the necessity of such a law is important in the States where such a power is not already conferred upon the officer delegated to make examinations of banks. The order of the comptroller is sufficient authority to compel directors to be present and in attendance while the examiner is making an examination of a bank. But it is claimed there is no authority in the absence of a statute vested by law in the office of a state examiner authorizing him to issue a summons commanding directors to be present at the time of examining the bank. The laws of the State authorizing the office of state examiner or commissioner, while directing such examinations, unless they provide authority for compelling the attendance of directors, the summons or order may be denied, upon the ground that all such writs are nugatory unless issued under the authority and direction of a court of competent jurisdiction. § 360. Reports required of banks. The law authorizing and governing national banks requiring reports is set out in the Revised Statutes of the United States as provided by section 5211, which requires that, " Every association shall make to the Comptroller of the Currency not less than five reports during each year, according to the form which may be prescribed by him, verified by the oath or affirma- tion of the president or cashier of such association, and attested by the signature of at least three of the directors. Each report shall exhibit, in detail and under appropriate heads, the re- sources and liabilities of the associations at the close of business on any past day by him specified, and shall be transmitted 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 is no newspaper in the place, then in one 684 IjsrsPECTiOM', Etc., of Banks. [ch. xlviii. published nearest thereto in the same county, at the expense of the association; and such proof of publication shall be fur- nished 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." And section 5212 requires that every such association shall within ten days after declaring a dividend, the amount of the same, and the amount of the net earnings in excess of the same, shall be reported to the Comptroller of the Currency. These reports must be attested by the president or cashier of the association. Section 5213 provides that for a failure to make reports as called for by sections 5211 and 5212, such associations shall be liable to a penalty of one hundred dollars for each day after such period. When a call is made by the Comptroller of the Currency for a report, a form printed by the Comp- troller is usually furnished, if not, an application should be immediately made to him for such printed form, as all written forms used will be rejected. "When the report is completed it must be signed and sworn to by the president or cashier, and attested as correct by not less than three of the directors of the bank, and when so com- pleted, it must be forwarded to the Comptroller. The report forwarded, or an exact copy thereof, must be published as required by law, and proof of publication forwarded to the Comptroller. In addition to the reports above mentioned section 5210 of the statute requires 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 residences of all the shareholders in the association, 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 association, and the officers authorized to assess taxes under State authority, during business hours of OH. xLviii.J BANKiiira. 685 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 president or cashier, shall be trans- mitted to the Comptroller of the Currency." There is no uniform law of the States requiring State banks to make and publish reports, but the value of such a law, re- quiring such reports cannot be overestimated. The form and plan adopted by the United States, which is required to be made by national banks, is very complete, and every State in the Union should have enacted a law requiring reports to be made and published. The verification of the report should be made by the board of directors, or a majority of them, and attested by the presi- dent or cashier. By the adoption of this rule the directors would be required to expert the affairs of the bank, and not rely upon the examination and report made by the officers. Such a law would insure the examination of the bank by the board of directors, and would compel them, under penalty, to perform a duty which is impliedly their duty to perform by virtue of their office. The reports should be called by the bank commissioners, or authority in control of the banks, as to the condition of the banks at the close of business on some date prior to the date of the call. There should be not less than six calls during the period of one year. It has been found that through the system of frequent calls, the banks which are required by law to exhibit the full amount of reserve cannot so easily violate this provision. Monthly reports have been recommended by some authori- ties, but the necessity of such frequent reports does not seem to be apparent, except between banks having mutual accounts, or clearing-house banks, which are required by the rules in most cities to make weekly reports which are furnished for the benefit of the members. False reports. A false entry made by an officer in a report of the bank's con- dition where the statute makes it a felony, the intent to defraud 686 Inspection, Etc., of Banks. [ch. xlviii. is an essential element of the offense charged, and makes it necessary to prove such intent.^ In an action by the State charging an officer of making a false report as to the condition of the bank the court, in State V. Jackson, 21 S. D. 499, substantially holds that the report made and signed by the officer should agree with the books of the bank. This holding should not be construed literally. The report should state the actual condition of the bank regardless of what the books upon their face may show; for example, the books may show that the bank is the owner of an issue of bonds, the par value of which are $1,000,000, but are carried on the ledger at $750,000, while in fact the market value is only $500,000. It cannot be claimed that the officer should report such bonds as a solvent asset above the value of $500,000, and in a charge of criminal intent in making a false report, the items as assets set out in the report if they do not agree with the books should be appraised by experts appointed by the court, to determine the truth or falsity of the officer's report. It is not what the books may state which determines the true condition of the bank. Its condition can only be determined by an actual examination and appraisement of all its assets.^ It is no defense to an action against an officer of a bank for damages in making false report for him to show ignorance of the law.'* A person has the right to rely upon a report as published and directors making false reports make themselves personally liable." What are false entries? An entry falsely made with intent to deceive or to defraud the bank is a false entry." The officer is guilty in directing a false entry.' 2 Chicot Lumber Co. v. Dardell, » Agnew v. United States, 165 84 Ark. 136. U. S. 36; United States v. Britton, 3 State V. Wheatley, 65 Wash. 244. 107 U. S. 655; United States v. 3a Yates V. Jones Nat. Bank, 74 Cricelius, 34 Fed. Rep. 30. Neb. 734. "Agnew v. United States, 165 4Penfold V. Charlevoix Savings U. 8. 36, 174 Fed. Rep. 539; Scott Bank, 140 Mich. 126, 148 Mich. 385. v. United States, 130 Fed. Rep. 429. CH. XLViii.j Ba^tkhstg. 687 The simple entry of a false report is not the gist of the offense; it is the intent to deceive.' A false entry made hy an officer of a national bank to the Comptroller constitutes the crime even though the report was not called by the Comptroller/ An assistant cashier of a national bank although he is not one of the officers called upon or authorized by the statute to make a report, if he does so, and makes it falsely, will make himself personally liable." In a national bank directors are officers within the meaning of the law." § 361. Suggestions to examiners. The examinations made of banks fail in many instances to disclose the real conditions existing and avert failures. The best accountants and experts are frequently deceived, as the record of failures which occur fully demonstrate. It is a lamentable fact, that the most serious failures are those caused directly by the officers who preside over, and have the management of the bank's affairs. These failures occur, as a rule, in banks where the board of directors are mere " dummies," and where they have grossly neglected to perform their duties. The most notable bank failures may be traced to one or two' causes; the principal cause is the result of illegitimate use of the bank's funds, taken by some officer of the bank and used in speculation. This is the rock upon which has been wrecked many of the strongest banking institutions, and bank examiners should be able to discern and observe the danger signals. They can be discovered by a careful investigation into the personal habits and business enterprises engaged in by the officers and employees of the bank. It should be an important part of the duties which are im- I United States v. Means, 42 Fed. » Cochran v. United States, 157 Eep. 599, 53 Fed. Rep. 700. U. S. 286. « Harper v. United States, 170 lo United States v. Means, 43 Fed. Eep. 385, 45 Fed. Eep. 47. Fed. Rep. 599. 688 Inspection, Etc., of Banks. [ch. xlviii. posed upon the examiner to quietly and judiciously make in- vestigations along this line. If upon a thorough examination into the life and habits, or business, of an officer in charge of and handling the funds of the bank, the examiner becomes satisfied that the bank is endangered, being in possession of the facts, he should call a meeting of the board of directors and disclose to them his information, together with the possi- bility of danger. When this duty is performed, it then becomes the personal duty of the board of directors to make a full and complete investigation of all the facts presented to them, and if they find that the bank's property or the funds and deposits belonging to others, are being endangered by and through the business acts or personal habits of any of the bank's officers or employees, it becomes their duty (being in possession of such knowledge) to take action at once to protect the bank from the possible occurrence of loss and damage; failing to do this and loss occurring, which by their action could have been prevented, they themselves become personally liable. APPENDIX. The National Bane Act and Acts Amendatory Theejeof AND Supplementaet Theeeto. [Note. — Compiled by Comptroller of Currency.] CHAPTER I. BUEEATJ OF THE COMPTEOLLEE OP THE CUEEENCT. 1. § 324. Bureau of the Comp- troller of the Currency, 2. § 325. Comptroller of the' Cur- rency. 3. § 326. Qualification of Comp- troller of the Currency. Amount of bond. 4. § 327. Deputy Comptroller of the Currency. 5. Act May 22, 1908. Additional Deputy Comptroller of the Currency. 6. § 328. Clerks. 7. § 329. Interest in national banks prohibited. 8. § 830. Seal of Comptroller of the Currency. 9. § 331. Rooms, vaults, and furni- ture for Currency Bureau. 10. § 332. Banks other than na- tional in District of Colum- bia. (See sec. 714, Code District of Columbia.) 11. § 333. Report of Comptroller. 12. Act April 28, 1902. Report of Comptroller to give com- plete list of all employees of the office, information about failed banks, em- ployees under receivers, etc. 13. Act January 12, 1895. Number of copies of report to be printed. 14. Joint resolution March 4, 1907. Three thousand additional copies authorized to be printed. 1. Bueeat: of the Compteollek of the Ctjeeenct. (Sec. 324.) There shall be in the Department of the Treasury a Bureau charged with the execution of all laws passed by Congress relating to the issue and regulation of a national cur- 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. Act June 3, 1864, c. 106, sec. 1; 13 Stat. L. Q9. 44 [689] 690 Appendix. 2. COMPTEOLLEE OF THE CuBEENCY, (SeC. 325.) The Comptroller of the Currency shall be appointed by the Presi- dent, on the recommendation of the Secretary of the Treasury, by and with the advice and consent of the Senate, and shall hold his office for the term of five years, unless sooner removed 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. Act June 3, 1864, c. 106, sec. 1; 13 Stat. L. 99. Act March 3, 1875, c. 130, sec. 2; 18 Stat. L. 398. 3. Qualification of Compteollee of the Cueeency, Amount of Bond. (Sec. 326.) The Comptroller of the Cur- rency 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 Secretary of the Treasury, conditioned for the faithful discharge of the duties of his office. Act June 3, 1864, c. 106, sec. 1; 13 Stat. L. 99. 4. Deputy Compteollee of the Cueeency. (Sec. 327.) There shall be in the Bureau of the Comptroller of the Currency a Deputy Comptroller of the Currency, to be appointed by the Secretary, who shall be entitled to a salary of two thousand five hundred dollars a year and who shall possess the power and perform the duties attached by law to the office of Comptroller during a vacancy in the office or during the absence or inability of the Comptroller. The Deputy ComptroUfer 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. Act June 3, 1864, c. 106, sec. 1; 13 Stat. L. 99. Note. — The salary of the Deputy Comptroller has been fixed at various amounts by different appropriation bills, as follows: Act March 3, 1875 (sundry civil bill), 18 Stat. L. 396, $3,000; Act March 3, 1901, 31 Stat. L. 978, $2,800; Act March 18, 1904, 33 Stat. L. 103, $3,000; Act February 3, 1905, 33 Stat. L. 649, and all subsequent acts, $3,500. Banking. 691 5. Additional Deputy Compteollee of the Cueeenct. Act May 22, 1908. * * * Deputy Comptroller, three thou- sand five hundred dollars; Deputy Comptroller, three thousand dollars. Legislative, Executive, and Judicial Appropriation Act, approved May 22, 1908. Note. — The Attorney-General of the United States, in an opinion ren- dered June 19, 1908, said: "Generally speaking, a deputy has power to do every act which his principal may do and is not restricted to some particulars of his office. (Throop on Public Officers, sec. 583; Mechem's Public Officers, sec. 570; Erwin v. U. S., 37 Fed. Rep. 470.) Doubtless it was on account of this general rule, and with the intention that there should he no restriction, that Congress did not deem it necessary to pre- scribe specifically the duties of the additional Deputy Comptroller. There being no limitation or restriction upon the power of that officer, my opinion is that he would have the same authority as that conferred by statute upon the first deputy. 6. Cleeks. (Sec. 328.) The Comptroller of the Currency shall employ, from time to time, the necessary clerks, to be appointed and classified by the Secretary of the Treasury, to discharge such duties as the Comptroller shall direct. Act June 3, 1864, c. 106, see. 1 ; 13 Stat. L. 100. 7. Inteeest in National Banks Peohibited. (Sec. 329.) It shall not be lawful for the Comptroller or the Deputy Comp- troller of the Currency, either directly or indirectly, to be in- terested in any association issuing national currency under the laws of the United States. Act June 3, 1864, c. 106, see. 1; 13 Stat. L. 99. 8. Seal of Compteollee of the Cueeenct. (Sec. 330) [as amended 1875.] The seal devisel by the Comptroller of the Currency for his office, and approved by the Secretary of the Treasury, shall continue to be the seal of office of the Comp- troller, and may be renewed when necessary. A description of the seal, with an impression thereof, and a certificate of ap- proval by the Secretary of the Treasury, shall be filed in the office of the Secretary of State. Act June 3, 1864, c. 106, see. 2; 13 Stat. L. 100. Act Feb. 18, 1875, c. 80; 18 Stat. L. 317. &92 Appendix. 9. Rooms, Vaults, aitd Fuestituee foe Cueeenct Bueeau. (Sec. 331.) There shall be assigned, from time to time, to the Comptroller of the Currency, by the Secretary of the Treasury, suitable rooms in the Treasury building for conducting the busiiiess of the Currency Bureau, containing safe and secure fireproof 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 department; and the Comptroller shall from time to time furnish the necessary furniture, stationery, fuel, lights, and other proper conveniences for the transaction of the business of his office. Act June 3, 1864, u. 106, sec. 3 ; 13 Stat. L. 100. 10. (Sec. 332.) Refers entirely to banks other than national in the District of Columbia and is incorporated in section 714 of the Code of the District of Columbia and has been repeatedly amended. See said section 714, page 113, post. 11. Eepoet of Compteollee. (Sec. 333) [as amended 1875.] The Comptroller of the Currency shall make an annual report to Congress, at the commencement of its session, exhibiting — First. A summary of the state and condition of every asso- ciation 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 liabilities, the amount of circulating notes outstanding, and the total amount of means and resources, 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 judg- ment may be useful. Second. A statement of the associations whose business has been closed during the year, with the amount of their circula- tion 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 holders of its notes and other creditors may be increased. Banking. 693' Fourth. A statement exhibiting under appropriate heads the resources and liabilities and condition of the banks, banking companies, and savings 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, bank- ing companies, and savings banks to the legislatures or officers of the different States and Territories, and, where such reports cannot 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 department during the year. Act June 3, 1864, see. 61; 13 Stat. L. 117 Act. Feb. 19, 1873, sec. 1; 17 Stat. L. 466. Act Feb. 18, 1875, c. 80; 18 Stat. L. 317. 12. COMPTEOLLEE TO GiVE COMPLETE LiST OP AIL EM- PLOYEES OF THE Office, IsrFOEMATioiir About Failed Banks, Employees, Under Ebceivees, Etc. Act Apeil 28, 1902. Provided^ That for the fiscal year of nineteen hundred and two and thereafter, a full and complete list of all officers, agents, clerks, and other employees of the office of the Comptroller of the Currency, including bank examiners, receivers and attor- neys for receivers, and clerks employed by such examiners and receivers, or any other person connected with the work of said office in Washington or elsewhere, whose salary or compensa- tion is paid from the Treasury of the United States or assessed against or collected from existing or failed banks under their supervision or control, shall be transmitted to the Secretary of the Interior in accordance with the provisions of an Act of Congress approved January twelfth, eighteen hundred and eighty-five, relating to the Official Register: And provided further. That the Comptroller of the Currency is hereby directed to include in his Annual Report to the Speaker of the House of Representatives, expenses incurred during each year, in liquida- tion of each failed national bank separately. Act April 28, 1902, Legislative, Executive, and Judicial Appropriation Act; 32 Stat. L. 138. 694 ApPEIfDIX. 13. NuMBEE OF Copies of Eepoet to be Feinted. Act OF Januaey 12, 1895. (Sec. 73.) * * * There shall be printed of the annual report of the Comptroller of the Currency, ten thousand copies ; one thousand for the Senate, two thousand for the House, and seven thousand for distribution by the Comptroller of the Currency. Act Jan. 12, 1895, sec. 73; 28 Stat. L. 616. 14. Theee Thousand Additional Copies Authoeized to BE Printed. Joint Resolution No. 25, Maech 4, 1907. That section 73 of an act " Providing for the public printing and binding, and the distribution of public documents," ap- proved January 12, 1895, be, and the same is hereby, so amended as to authorize the printing annually hereafter of ten thousand copies of the annual report of the Comptroller of the Currency, for distribution by the Comptroller of the Currency, instead of seven thousand copies as heretofore. H. J. Ees. 219, March 4, 1907 ; 34 Stat. L. 1245. CHAPTER II. OEGANIZATION AND POWEBS. 15. Act June 20, 1874. The na- tional-bank act. 16. § 5133. Formation of national banking associations. 17. § 5134. Requisites of organiza- tion certificate. 18. § 5135. How certificate shall be acknowledged and filed. 19. § 5136. Corporate powers of as- sociation. 20. Act May 1, 1886. Section 1 re- lates to increase of capital stock and is inserted after section 5142. 21. Act May 1, 1886. May change name and location. 22. Act May 1, 1886. Debts not af- fected by change. 23. Act May 1, 1886. No release from liabilities. 24. Act August 13, 1888. National banks deemed citizens of states in which located. 25. Act July 12, 1882. Extension of corporate existence. 26. Act of July 12, 1882. Consent of two-thirds necessary. 27. Act July 12, 1882. Special ex- amination of bank and issue of certificate of approval by Comptroller. 28. Act of July 12, 1882. Status not changed by extension. Jurisdiction of suits by or against national banks. 29. Act July 12, 1882. Dissenting shareholders may withdraw. 30. Act July 12, 1882. Redemption of circulating notes issued prior to extension. Banking. 695 31. Act July 12, 1882. Dissolution of banks not extending period of succession. 32. Act April 12, 1902. Re-exten- sion of corporate existence. 33. § 5137. Power to hold real prop- erty. 34. § 5138. Requisite amount of capital. 35. § 5139. Shares of stock and transfers. 36. § 5140. How payment of capital stock must be made and certified. 37. § 5141. Proceedings if share- holder fails to pay install- ments. 38. § 5142. National banks may in- crease capital stock. 39. Act May 1, 1886. Increase of capital stock. 40. § 5143. Reduction of capital stock. 41. § 5144. Right of shareholders to vote. Proxies authorized. 42. § 5145. Election of directors. 43. § 5146. Requisite qualification of directors. 44. § 5147. Oath required from directors. 45. § 5148, Filling vacancies. 46. § 5149. Proceedings where no election is held on the proper day. 47. § 5150. Election of president of the board. 48. § 5151. Individual liability of shareholders. 49. § 5152. Executors, trustees, etc., not personally liable. 50. § 5153. National banking asso- ciations to be depositaries of public moneys. 51. Act May 30, 1908. Interest on public deposits. 52. § 5154. Conversion of state banks into national banking associations. 53. § 5155. State banks having branches. 54. § 5156. Reservation of rights of associations organi^sed under act of 1863. 15. The JSTational Bank Act. Act June 20, 1874. (Sec. 1.) An act entitled "An act to provide a national cur- rency secured by a pledge of United States bonds, and to pro- vide for the circulation and redemption thereof," approved June 3, 1864, shall hereafter be known as " the national bank act." Act. June 20, 1874, c. 343, sec. 1; 18 Stat. L. 123. 16. FOEMATION OF N"aTIONAL BaNKING ASSOCIATIONS. (Sec. 5133.) Associations for carrying on the business of banking under this title may be formed by any number of natural persons, not less in any case than five. They shall enter into articles of association, which shall specify in general terms the object for which the association is formed, and may con- tain any other provisions, not inconsistent with law, which the association may see fit to adopt for the regulation of its business and the conduct of its affairs. These articles shall be signed by the persons uniting to form the association, and a Appendix. copy of them shall he forwarded to the Comptroller of the Currency, to he filed and preserved in his office. Act June 3, 1864, c. 106, see. 5; 13 Stat. L. 100. 17. Kequisites op Oeganization Cbetificate. (Sec. 5134.) The persons uniting to form such an association shall, under their hands, make an organization certificate, which shall specifically state : First. The name assumed hy such association; which name shall be subject to the approval of the Comptroller of the Currency. Second. The place where its operations of discount and de- posit 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 share- holders and the number of shares held by each of them. Fifth. The fact that the certificate is made to enable such persons to avail themselves of the advantages of this title. Act June 3, 1864, c. 106, sec. 6; 13 Stat. L. 101. Note. — For authority to change names or locations see Act May 1, 1886, following section 5136. 18. How Cbetificate Shall be Acknowledged and Filed. (Sec. 5135.) The organization certificate shall be ac- knowledged before a judge of some court of record, or notary public ; and shall 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 care- fully preserve the same in his office. Act June 3, 1864, c. 106, sec. 6; 13 Stat. L. 101. 19. COEPOEATE POWEES OP ASSOCIATION. (SeC. 5136.) Upon duly making and filing articles of association and an organization certificate, the association shall become, as from the date of the execution of its organization certificate, a body Banking. 697 corporate, and as such, and in the name designated in the organization 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 franchise 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 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 officers, define their duties, require bonds of them and fix the penalty thereof, dismiss such ofiicers or any of them at pleasure, and appoint others to fill tBeir places. Sixth. To prescribe, by its board of directors, by-laws not inconsistent 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 conducted, and the privileges granted to it by law exercised and enjoyed. Seventh. To exercise by its board of directors, or duly au- thorized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of bank- ing; by discounting and negotiating promissory notes, drafts, bills of exchange, 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. Act June 3, 1864, c. 106, see. 8; 13 Stat. L. 101. 6'98 Appendix. Note. — See sees. 5168, 5169 and 517», pages 35, 36, post, relating to issuing and publishing of certificate authorizing association to begin business. 20. Inckease of Capital Stock. Act May 1, 1886. (Sec. 1.) Helates to increase of capital stock and is inserted after section 5142, Bevised Statutes. 21. May Change Name and Location; How. Act May 1, 1886. (Sec. 2.) Any national banking association may change its name or the place where its operations of discount and deposit are to be carried on, to any other place within the same State, not more than thirty miles distant, with the ap- proval of the Comptroller of the Currency, by the vote of shareholders owning two-thirds of the stock of such association. A duly authenticated notice of the vote and of the new name or location selected shall be sent to the office of the Comptroller of the Currency; but no change of name or location shall be valid until the Comptroller shall have issued his certificate of approval of the same. Act May 1, 1886, c. 73, sec. 2; 24 Stat. L. 18. 22. Debts not Affected by Change. Act May 1, 1886. (Sec. 3.) All debts, liabilities, rights, provisions, and powers of the association under its old name shall devolve upon and inure to the association under its new name. Act May 1, 1886, c. 73, see. 3; 24 Stat. L. 19. 23. No Release from Liabilities. Act May 1, 1886. (Sec. 4.) Nothing in this act contained shall be so construed as in any manner to release any national banking association under its old name or at its old location from any liability, or affect any action or proceeding in law in which said association may be or become a party or interested. Act May 1, 1886, c. 73, sec. 4; 24 Stat. L. 19. Banking. 699 24. l^ATioNAL Banks Deemed Citizens of States in Which Located. Act August 13, 1888. (Sec. i.) All na- tional 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 citizens of the States in which they are respectively located; and in such cases the circuit and district courts shall not have jurisdiction other than such as they would have in cases between individual citizens of the same State. The provisions of this section shall not be held to affect the jurisdiction of the courts of the United States in cases commenced by the United States or by direction of any officer thereof, or cases for winding up the affairs of any such bank. Act March 3, 1887, sec. 4; 24 Stat. L. 554. Act Aug. 13, 1888, c. 866, sec. 4; 25 Stat. L. 436. 25. Extension of Cobpoeate Existence. Act July 12, 1882. (Sec. 1.) That any national banking association or- ganized under the acts of February twenty-fifth, eighteen hun- dred and sixty-three, June third, eighteen hundred and sixty- four, and February fourteenth, eighteen hundred and eighty, or under sections fifty-one hundred and thirty-three, fifty-one hundred and thirty-four, fifty-one hundred and thirty-five, fifty-one hundred and thirty-six, and fifty-one hundred and fifty-four 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 suc- cession by amending its articles of association Tor a term of not more than twenty years from the expiration of the period of succession named in said articles of association, and shall have succession for such extended period, unless sooner dis- solved by the act of shareholders owning two-thirds of its stock, or unless its franchise becomes forfeited by some violation of law, or unless hereafter modified or repealed. Act July 12, 1882, c. 290, sec. 1 ; 22 Stat. L. 162. 700 Appendix. Note. — Act of Feb. 14, 1880, relates to the conversion of gold banks into currency banks, and is inserted after Eevised Statutes, section 5186. 26. OoNSEWT OF Two-THiEDs !Necessaey. Act July 12, 1882. (Sec. 2.) That such amendment of said articles of association shall be authorized by the consent in writing of shareholders owning 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 the 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 articles of association shall not be valid until the Comptroller shall give to such associa- tion a certificate under his hand and seal that the association has complied with all the provisions required to be complied with, and is authorized to have succession for the extended period named in the amended articles of association. Act July 12, 1882, c. 290, see. 2; 22 Stat. L. 162. 27. Special Examination op Bank and Issue of Certifi- cate OF Appeoval by Compteollee. Act July 12, 1882. (Sec. 3.) That upon the receipt of the application and cer- tificate of the association provided for in the preceding section, the Comptroller of the Currency shall cause a special exami- nation to be made, at the expense of the association, to deter- mine its condition ; and if after such examination or otherwise, it appears to him that said association is in a satisfactory con- dition, 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. Act July 12, 1882, c. 290, sec. 3; 22 Stat. L. 163. 28. Status not Changed by Extension, Jueisdiction of Suits by oe against IN'ational Banks. Act July 12, 1882. (Sec. 4.) That any association so extending the period of its Bankijs^g. 701 succession shall continue to enjoy all the rights and privileges and 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 res.pects the identical association it was before the exten- sion of its period of succession: Provided, however. That the jurisdiction for suits hereafter brought by or against any asso- ciation established under any law providing for national bank- ing 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 organized under any law of the United States which do or might do banking business where such national banking asso- ciation 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, repealed. Act July 12, 1882, c. 290, see. 4; 22 Stat. L. 163. Note. — See also Act of August 13, 1888, relating to citizenship of na- tional banks and jurisdiction of the circuit and district courts, which follows section '5136, page 16, ante. 29. DissBifTiifG Shaeeholders Mat Withdraw. Act July 12, 1882. (Sec. 5.). That when any national banking association has amended its articles of association as provided in this act, and the Comptroller has granted his certificate of approval, any shareholder not assenting to such amend- ment 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 702 Appendix. 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: Provided, That in the organization of any banking association intended to replace any existing banking association, and retaining the name thereof, the holders of stock in the expir- ing association shall be entitled to preference in the allotment of the shares of the new association in proportion to the num- ber of shares held by them respectively in the expiring associa- tion. Act July 12, 1882, c. 290, sec. 5; 22 Stat. L. 163. 30. Redemption of Cikculating !N^otes Issued Peioe to Extension. Act July 12, 1882. (Sec. 6.) That the cir- culating notes of any association so extending 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 redistribution 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 corporate existence of each bank the association so extended shall deposit lawful money with the Treasurer of the United States sufiicient to redeem the remainder of the circulation which was outstanding 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 Revised Statutes ; and any gain that may arise from the failure Banking. 703 to present such circulating 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 circulating 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 association 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. Aet July 12, 1882, c. 290, see. 6; 22 Stat. L. 163. Note. — Aet of June 20, 1874, section 3, mentioned above, is inserted after Eevised Statutes, seetion 5192. The destruction of bank notes by burning, as provided in sections 5184, 5225, Eevised Statutes, is superseded by Aet of June 23, 1874, which requires bank notes to be macerated. ' 31. DissoLTJTiON OP Banks not Extending Peeiod of Succession. Act July 12, 1882. (Sec. 7.) That national banking associations whose corporate existence has expired or shall' hereafter expire, and which do not avail themselves of the provisions of this act, shall be required to comply with the provisions of sections fifty-two hundred and twenty-one a^id fifty-two hundred and twenty-two of the Eevised Statutes in the same manner as if the shareholders had voted to go into liquidation, as provided in Section fifty-two hundred 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 Eevised Statutes shall also be applicable to such associations, except as modified by this act; and thQ franchise of such associations is hereby extended for the sole purpose of liquidating their affairs until such affairs are finally closed. Act July 12, 1882, u. 290, sec. 7 ; 22 Stat. L. 164. Note. — Other sections of Act of July 12, 1882. Sec. 8. — [Relates to bond deposits and circulating notes.] Follows Eevised Statutes, seetion 5167. Sec. 9. — [Relates to withdrawal of circulating notes.] Follows Revised Statutes, section 5167. 704 Appendix. Sec. 10. — Repealed seotions 5171-5176, Revised Statutes, and was super- seded by Act of March 14, 1900. (See section 5171, Revised Statutes.) Sec. 11. — Authorizes the exchange of three per cent, bonds for outstand- ing three and one-half per cent, bonds. Sec. 12. — Authorizes the issue of gold certificates upon the deposit of gold coin. Inserted after section 5207. Sec. 13. — [Relates to false certification of checks.] Follows Revised Statutes, section 5208. 32. Ee-extensiok of Coepoeate Existence. Act of Apeil 12, 1902. That the Comptroller of the Currency is hereby authorized, in the manner provided by, and under the conditions and limitations of, the Act of July 12, 1882, to extend for a further period of twenty years the charter of any national banking association extended under said act which shall desire to continue its existence after the expiration of its charter. Act April 12, 1902, c. 503; 32 Stat. L. 102. 33. PowEE TO Hold Eeal Peopeett. (Sec. 5137.) A national banking association may purchase, hold, and convey real estate for the following purposes, and for no others: First. Such as shall be necessary for its immediate accom- modation in the transaction of its business. Second. Such as shall be mortgaged to it in good faith by way of security for 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. But no such association shall hold the possession of any real estate under mortgage, or the title and possession of any real estate purchased to secure any debts due to it, for a longer period than five years. Act June 3, 1864, c. 106, sec. 28 ; 13 Stat. L. 107. 34. Eeqtjisite Amount of Capital. (Sec. 5138) [as amended 1900.] 'No association shall be organized with a less capital than one hundred thousand dollars, except that Banking. 705 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, and except that banks with a capital of not less than twenty-five thousand dollars may, with the sanction of the Secretary of the Treasury, be organized in any place the population of which does not exceed three thousand inhabit- ants, ^o association shall be organized in a city the popula- tion of which exceeds fifty thousand persons with a capital of less than two hundred thousand dollars. Act June 3, 1864, e. 106, sec. 7; 13 Stat. L. 101. Act March 14, 1900, c. 41, sec. 10; 31 Stat. L. 48. 35. Shakes of Stock and Teansfbes. (Seo. 5139.) 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 man- ner as may be prescribed in the by-laws or articles of associa- tion. Every person becoming a shareholder by such transfer shall, 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, remedies, or security of the existing creditors of the association shall be impaired. Act June 3, 1864, c. 106, sec. 12; 13 Stat. L. 102. 36. How Payment of the Capital Stock Must be Made AND Certified. (Sec. 5140.) At least fifty per centum of the capital stock of every association shall be paid in before it shall be authorized to commence business; and the remainder of the capital stock of such association shall be paid in install- ments of at least ten per centum each, on the whole amount of the capital, as frequently as one installment at the end of each succeeding month from the time it shall be authorized by the Comptroller of the Currency to commence business; and the payment of each installment shall be certified to the Comp- troller, under oath, by the president or cashier of the association. Act June 3, 1864, c. 106, sec. 14; 13 Stat. L. 103. 45 706 AppEiirDrx;. 37. Pkoceedings if Shaeeholdees Fails to Pat Install- ments. (Sec. 5141.) Whenever any shareholder, or his assignee, fails to pay any installment on the stock when the same is required by the preceding section to be paid, the direct- ors of such association may sell the stock of such delinquent shareholder at public auction, having given three weeks' previous notice thereof in a newspaper published and of general circula- tion in the city or county where the association is located, or if no newspaper is published in said city or county, then in a news- paper 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 advertisement 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 adver- tisement and sale, the amount previously paid shall be for- feited to the association, and such stock shall be sold as the directors may order, within six months from the time of such forfeiture, and if not sold it shall be canceled and deducted from the capital stock of the association. If any such can- cellation and reduction shall reduce the capital of the associa- tion below the minimum of capital required by law, the capital stock shall, within thirty days from the date of such cancella- tion, 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 busi- ness of the association. Act June 3, 1864, o. 106, sec. 15 ; 13 Stat. L. 103. 38. National Banks May Inceease Capital Stock. (Sec. 5142.) 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 limitations 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 Bankiitg. 707 in, and notice thereof has been transmitted to the Comptroller of the Currency, 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 association. Act June 3, 1864, c. 106, sec. 13; 13 Stat. L. 103. 39. Increase of Capital Stock. Act May 1, 1886. (Sec. 1.) That any national banking association may, with the approval of the Comptroller of the Currency, by the vote of shareholders owning two-thirds of the stock of such association, increase its capital stock, in accordance with exist- ing laws, to any sum approved by the said Comptroller, not- withstanding the limit fixed in its original articles of associa- tion and determined by said Comptroller; and no increase of the capital stock of any national banking association either within or beyond the limit fixed in its original articles of asso- ciation shall be made except in the manner herein provided. Act May 1, 1886, c. 73, sec. 1 ; 24 Stat. L. 18. Note. — Other sections of this Act follow Revised Statutes, section 5136. 40. Eeduction of Capital Stock. (Sec. 5143.) Any association formed under this title may, by the vote of share- holders owning two-thirds of its capital stock, reduce its capital to any sum not below the amount required by this title to authorize the formation of associations; but no such reduction shall be allowable which will reduce the capital of the associa- tion below the amount required for its outstanding circulation, 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. Act June 3, 1864, c. 106, sec. 13; 13 Stat. L. 103. 41. Right of Shaeeholdebs to Vote; Peoxies Authoe- iZED. (Sec. 5144.) In all elections of directors, and in decid- ing all questions at meetings of shareholders, each shareholder shall be entitled to one vote on each share of stock held by him. 708 Appendix. Shareholders 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. Act June 3, 1864, c. 106, sec. 11; 13 Stat. L. 102. Note. — The Circuit Court of . the United States, in United States v. Barry, 36 Fed. Rep. 246, held that the words " liability past due and unpaid" referred only to unpaid subscriptions for stock. 42. ELECTiojsr of Dieectoes. (Sec. 5145.) The affairs of each association shall be managed by not less than five direct- ors, who shall be elected by the shareholders at a meeting to be held at any time before the association is authorized by the Comptroller of the Currency to commence the business of bank- ing ; and afterward at meetings to be held on such day in Janu- ary of each year as is specified therefor in the articles of associ- ation. The directors shall hold office for one year, and until their successors are elected and have qualified. Act June 3, 1864, c. 106, sees. 9, 10; 13 Stat. L. 102. 43. Requisite QuALiFioATio]5r of Dieectoes. (Sec. 5146) [as amended 1905.] Every director must, during his whole term of service, be a citizen of the United States, and at least three-fourths of the directors must have resided in the State, Territory, or District in which the association is located for at least one year immediately preceding their election and must be residents therein during their continuance in office. Every director must own in his own right at least ten shares of the capital stock of the association of which he is a director, unless the capital of the bank shall not exceed twenty-five thousand dollars, in which case he must own in his ovsm right at least five shares of such capital stock. Any director who ceases to be the ovsmer of the required number of shares of the stock, or who becomes in any other manner disqualified, shall thereby vacate his place. Act June 3, 1864, c. 106, sees. 9, 10; 13 Stat. L. 102. Act Feb. 28, 1905; 33 Stat. L. 818, c. 1163. Banking. 709 44. Oath Required feom Dieectoes. (Sec. 5147.) Each director, when appointed or elected, shall take an oath that he will, so far as the duty devolves on him, diligently and hon- estly 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 trans- mitted to the Comptroller of the Currency, and shall be filed and preserved in his office. Act June 3, 1864, c. 106, sec. 9; 13 Stat. L. 102. See 107 U. S. 671. 45. FiLXiNG Vacancies. (Sec. 5148.) Any vacancy in the board shall be filled by appointment by the remaining directors, and any director so appointed shall hold his place _ until the next election. Act June 3, 1864, e. 106, see. 10; 13 Stat. L. 102. See 141 U. S. 132. 46. Peoceedings wheee no Election is Held on the Peopee Day. (Sec. 5149.) If, from any cause, an election of directors is not made at the time appointed, the association shall not for that cause be dissolved, 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 710 Appendix. directors fail to fix the day, shareholders Representing two- thirds of the shares may do so. Act June 3, 1864, o. 106, see. 10; 13 Stat. L. 102. 47. Election of Peesident of the Boaed. (Sec. 5150.) One of the directors, to be chosen by the board, shall be the president of the board. Act June 3, 1864, c. 106, 8ee. fr; 13 Stat. L. 102. 4:8. Individttal Liabilitt of Shaebholdees. (Sec. 5151.) The shareholders of every national banking association shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such association, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares; except that shareholders of any bank- ing association now existing under State laws, having not less than five millions of dollars of capital actually paid in, and a surplus of twenty per centum on hand, both to be determined by the Comptroller 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 surplus 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. Act June 3, 1864, c. 106, sec. 12; 13 Stat. L. 102. Note. — See Act of June 30, 1876, following section 5238, Bevised Stat- utes, for enforcement of liability prescribed by this section in cases of voluntary liquidation. See George v. Wallace, 135 Fed. Kep. 286. 49. ExEcuTOEs, Trustees, Etc., not Peesonally Liable. (Sec. 5152.) Persons holding stock as executors, administra- tors, guardians, or trustees shall not be personally subject to 1 Cliapter 5 of this compilation. Banking. Vll any liabilities as stockholders; but the estates and funds in their hands shall be liable in like manner and to the same extent as the testator, intestate, ward, or person interested in such trust-funds would be, if living and competent to act and hold the stock in his own name. Act June 3, 1864, c. 106, sec. 63; 13 Stat. L. 118. See 165 Fed. Rep. 891, 89 Fed; Rep. 843, 133 U. S. 565, 118 U. S. 634, 141 U. S. 227, 133 U. S. 595. 50. National Banking Associations to be Depositaries OF Public Moneys. (Sec. 5153) [as amended 1907.] All national banking associations, designated for that purpose by the Secretary of the Treasury, shall be depositaries of public money, under such regulations as may be prescribed by the Secretary; and they may also be employed as financial agents of the government; and they shall perform all such reasonable duties, as depositaries of public money and financial agents of the government, as may be required of them. The Secretary of the Treasury shall require the associations thus designated to give satisfactory security, by the deposit of United States bonds and crtherwise, for the safe-keeping and prompt payment of the public money deposited with them, and for the faithful performance of their duties as financial agents of the govern- ment: Provided, That the Secretary shall, on or before the first of January of each year, make a public statement of the securities required during that year for such deposits. And every association so designated as receiver or depositary of the public money shall take and receive at par all of the national currency bills, by whatever association issued, which have been paid into the government for internal revenue, or for loans or stocks : Provided, That the Secretary of the Treas- ury shall distribute the deposits herein provided for, as far as practicable, equitably between the different States and sec- tions. Act June 3, 1864, c. 106, sec. 45; 13 Stat. L. 113. Act March 3, 1901, c. 871, sec. 1; 31 Stat. L. 1448. Act March 4, 1907; 34 Stat. L. 1290. Note. — For other provisions relating to duties and liabilities of deposi- taries see following sections of the Revised Statutes of the United States: Vl3 Appendix. Sec. 3640. Transfer of moneys from depositaries to Treasury authorized. See. 3641. Transfer of postal deposits. Sec. 3642. Accounts of postal deposits. Sec. 3643. Entry of each deposit, transfer and payment. Sec. 3644. Public moneys in Treasury and depositories subject to draft of Treasurer. Sec. 3645. Begulations for presentment of drafts. Sec. 3646. Duplicates for lost or stolen checks authorized. Sec. 3647. Duplicate check when oflScer who issued is dead. See. 3648. Advances of public moneys prohibited. Sec. 3649. Examination of depositaries. See also sections 3620, 3847, 4046, 5488 and 5497, page 88, post. 51. Inteeest on Public Deposits. Act May 30, 1908. (Sec. 15.) That all national banking associations designated as regular depositaries of public money shall pay upon all spe- cial and additional deposits made by the Secretary of the Treas- ury in such depositaries, and all such associations designated as temporary depositaries of public money shall pay upon all sums of public money deposited in such associations interest at such rate as the Secretary of the Treasury may prescribe, not less, however, than one per centum per annum upon the average monthly amount of such deposits: Provided, however. That nothing contained in this act shall be construed to change or modify the obligation of any association or any of its officers for the safe-keeping of public money: Provided further. That the rate of interest charged upon such deposits shall be equal and uniform throughout the United States. Act May 30, 1908, sec. 15. 52. Conveesion of State Banks into National Bank- ing Associations. (Sec. 5154.) Any bank incorporated by special law, or any banking institution organized 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 Banking. 713' change or convert the bank or banking institution into a national association. A majority of the directors, after execut- ing the articles of association and organization certificate, shall have power to execute all other papers, and to do whatever may be required to make its organization perfect and complete as a national association. The shares of any such bank may continue to be for the same amount each as they were before the conversion, and the directors may continue to be the direct- ors of the association until others are elected or appointed in accordance with the provisions of this chapter; and any State 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 Cur- rency has given to such association a certificate, under his hand and official seal, that the provisions of this title have been complied with, and that it is authorized to commence the busi- ness of banking, the association shall have the same powers and privileges, and shall be subject to the same duties, responsi- bilities, and rules, in all respects, as are prescribed for other associations originally organized as national banking associa- tions, and shall be held and regarded as such an association. But no such association shall have a less capital than the amount prescribed for associations organized under this title. Act June 3, 1864, e. 196, sec. 44; 13 Stat. L. 112. 53. State Banks Having Beanches. (Sec. 5155.) It shall be lawful for any bank or banking association 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. Act March 3, 1865, c. 78, sec. 7; 13 Stat. L. 484. 714 Appendix. 54. Eeseevation of Eights of Associations Oeganized UNDEE Act of 1863. (Sec. 5156.) Nothing in this title shall affect any appointments made, acts done, or proceedings had or commenced prior to the third day of June, eighteen hundred and sixty-four, in or toward the organization of any national banking association under the act of 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 imposed by this title, notwithstanding all the steps prescribed by this title for the organization of associations were not pursued, if such associa- tions were duly organized under that act. Aet June 3, 1864, c. 106, sec. 62; 13 Stat. L. 118. CHAPTER III. OBTAINING AND ISSUING CIRCULATING NOTES. 55. § 5157. What associations are governed by chapters two, three, and four. 56. § 5158. Registered bonds in- tended by the terms " United States bonds." 57. § 5159. Deposit of bonds re- quired before issue of circu- lating notes. 58. Act December 21. 1905. Panama Canal bonds have all rights and privileges accorded to other two per cent bonds of the United States. 59. § 5160. Increase or reduction of deposit to correspond with capital. 60. § 5161. Exchange of coupon for registered bonds. 61. § 5162. Manner of making trans- fers of bonds. 62. § 5163. Registry of transfers. 63. § ,5164. Notice of transfer to be given to association inter- ested. 64. § 5165. Examination of registry and bonds. 65. § 5166. Annual examination of bonds by association. 66. § 5167. General provisions re- specting bonds. 67. Act June 20, 1874. Withdrawal of circulating notes on de- posit of lawful money and withdrawal of bonds. 68. Act July 12, 1882. Amount of bonds required to be on de- posit. Reduction of amount or retirement in full of circulating notes. 69. Act July 12, 1882, as amended May 30, 1908. Withdrawal of circulating notes on de- posit of lawful money and withdrawal of bonds. Not more than nine millions to be deposited during any calendar month. With- drawal of additional circu- lation on deposit of lawful money or national-bank notes. Banking. 715 70. § 5168. Comptroller to deter- mine if association can com- mence business. 71. § 5169. Certificate of authority to commence banking to be issued. 72. § 5170. Publication of certifi- cate. 73. § 5171. Repealed by act August 12, 1882. 74. Act March 14,-1900. Delivery of circulating notes. 75. § 5172. Printing denominations and form of the circulating notes. 76. Act June 20, 1874. Charter number to be printed on notes. 77. Act March 3, 1875. Distinctive paper for printing notes. 78. § 5173. Plates and dies to be under control of the Comp- troller. 79. § 5174. Examination of plates and dies. 80. § 5175. Limit to issue of notes under five dollars. 81. § 5176. Repealed by act July 12, 1882. 82. § 5177. Repealed by act Janu- ary 14, 1875. 83. Act January 14, 1875. Aggre- gate amount of circulating notes not limited. 84. § 5178. Superseded by act Janu- ary 14. 1875. 85. § 5179. Superseded by act Janu- ary 14, 1875. 86. § 5180. Repealed by act Janu- ary 14, 1875. 87. § 5181. Superseded by act Janu- ary 14, 1875. 88. § 5182. For what demands na- tional bank-notes may be re- ceived. 89. § 5183. Issue of post notes, etc., prohibited. 90. § 5184. Destroying and replac- ing worn-out and mutilated notes. 91. Act June 23, 1874. Maceration of national-bank notes. 92. § 5185. Organization of associa- tions to issue gold notes. 93. § 5186. Reserve requirements for gold banks. 94. Act February 14, 1880. Conver- sion of national gold banks into currency banks. 95. § 5187. Penalty for issuing circulating notes to unau- thorized associations. 96. § 5188. Penalty for imitating bank circulation. Use of same for advertising pur- poses. 97. § 5189. Penalty for mutilating circulation. ACT MAY 30, 1908, AUTHORIZING NATIONAL CURRENCY ASSOCIATIONS, THE ISSUE OF ADDITIONAL NATIONAL BANK CIRCULATION, AND CEEATINQ A NATIONAL MONETARY COMMISSION. 98. § 1. Formation of national currency associations. 99. § 1 (continued). Conditions under which banks belong- ing to national currency as- sociations may take out ad- ditional ciruclation. 100. § 2. Redemption fund below requirement. Duty of Treasurer qf the United States. 101. 102. § 3. What national banks may apply for authority to issue additional circulation on bonds other than United States bonds. What bonds will be accepted for such additional circulation. § 4. Legal title of bonds de- posited to secure additional circulation. Assignment of bonds by Treasurer to be countersigned by the Comp- troller of the Currency. 716 103. § 5. Additional circulation, how treated. Limit to amount of circulation issued to each bank. Limit to total amount outstanding under this act. 104. § 6. Amount of redemption fund. 105. § 7. Equitable distribution of notes. 106. § 8. Secretary of the Treasury to furnish information as to the value and character of securities. 107. § 9. Amends section 5214, Re- vised Statutes. 108. § 10. Amends act July 12, 1882, as amended March 4, 1907. Inserted after sec- tion 5167. 109. § 11. Amends section 5172, Revised Statutes. 110. § 12. Circulating notes to be redeemed in lawful money of the United States. ApPEIiTDIX. 111. § 13. All acts of the Comptrol- ler of the Currency and Treasurer of the United States under this act to be approved by the Secretary of the Treasury. 14. Is amendatory of section 5191, Revised Statutes. In- serted after that section. 15. Relates to deposit of public money and is insert- ed after section 5133, Re- vised Statutes. 16. Expenses of act. 17. Appointment of monetary commission. 18. Powers of commission. Commission to report to Congress. 19. Expenses of commission. 20. When act expires by limitation. 112 113 114, 115. 116. § 117, 118, 55. What Associations abe Governed by Chaptees Two, Theee, and Foue. (Sec. 5157.) The provisions of chapters two, three, and four ^ of this title, which are expressed without restrictive words, as applying to " national banking associa- tions," or to " associations," apply to all associations organized to carry on the business of banking under any act of Congress. 56. Registeeed Bonds Intended by the Teem " United States Bonds." (Sec. 5158.) The term "United States bonds," as used throughout this chapter, shall be construed to mean registered bonds of the United States. Act June 3, 1864, c. 106, sec. 4; 13 Stat. L. 100. 57. Deposit of Bonds Requieed befoee Issue of Ciecu- lating Notes. (Sec. 5159.) Every association, after having complied with the provisions of this title, preliminary to the 1 Chapters three, four and five of this compilation. Banking. 717 commencement of the banking business, and before it shall be authorized to commence banking business under this title, shall transfer and deliver to the Treasurer of the United States any United States registered bonds, bearing interest, [to cm amount not less than thirty thousand dollars 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. Act June 3, 1864, c. 106, sec. 16 ; 13 Stat. L. 104. Note. — The italicized words are held to be modified by the Acts of June 20, 1974, and July 12, 1882. Section 4, Act of June 20, 1874, which follows section 5167, provides in part that the amount of bonds on deposit for circulation shall not be reduced below $50,000'. This determines the amount of bonds required to be deposited by banks organizing with capital stock over $150,000. Banks having a capital of $150,000, or less, are not required to keep on deposit bonds in excess of one-fourth of the capital stoclc as security for their circulating notes, by Act July 12, 1882, chapter 290, section 8. This act follows section 5167, Revised Statutes. 58. Panama Canal Bonds Have all Rights and Peivi- LEGES ACCOEDED TO OtHEE TwO PeE CeNT. BoNDS OF THE United States. Act Decbmbee 21, 1905. That the two per cent, bonds of the United States authorized by section eight of the act entitled "An act to provide for the construction of a canal connecting the waters of the Atlantic and Pacific oceans," approved June twenty-eight, nineteen hundred and two, shall have all the rights and privileges accorded by law to other two per cent, bonds of the United States, and every national banking association having on deposit, as provided by law, such bonds issued under the provisions of said section eight of said act approved June twenty-eight, nineteen hun- dred and two, to secure its circulating notes, shall pay to the Treasurer of the United States, in the months of January and July, a tax of one-fourth of one per cent, each half year upon the average amount of such of its notes in circulation as are based upon the deposit of said two per cent, bonds; and such taxes shall be in lieu of existing taxes on its notes in circulation 718 Appendix. imposed by section fifty-two hundred and fourteen of the Revised Statutes. Act Dec. 21, 1905 ; 34 Stat. L. 5. Note. — Panama Canal tonds issued under Act of August 5, 1909, not receivable as security for circulation. See page 108. 59. Increase oe Reduction of Deposit to Ooeeespond WITH Capital. (Sec. 5160.) The deposit of bonds made by each association shall be increased as its capilal 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 actvMy paid in]. And any association that may desire to reduce its capital, or 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 stocJc], and upon which no circulating notes have been deliv- ered. Act June 3, 1864, c. 106, sec. 16; 13 Stat. L. 104. Note. — In reference to italicized words see notes under section 5159 and Acts of June 20, 1874, and July 12, 1882, set forth in full following Hevised Statutes, section 5167. These acts fix the minimum of bonds as $50,000 for all banks over $150,000 capital and as one-fourth of the capital stock for all banks having a capital of $150,000 or less. 60. Exchange of Coupon foe Reqisteeed Bonds. (Sec. 5161.) To facilitate a compliance with the two preceding sec- tions, the Secretary of the Treasury is authorized to receive from any association, and cancel, any United States coupon bonds, and to issue in lieu thereof registered bonds of like amount, bearing a like rate of interest, and having the same time to run. Act June 3, 1864, e. 106, see. 16; 13 Stat. L. 104. 61. IMannee of Making Teansfees of Bonds. (Sec. 5162.) All transfers of Unted States bonds, made by any association under the provisions of this title, shall be made to Banking. 719 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 Comptroller 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 redemption and payment of any circulating notes that have been or may be delivered to such association. No assignment or transfer of any such bond by the Treasurer shall be deemed valid unless countersigned by the Comptroller of the Currency. Act June 3, 1864, c. 10«, sec. 19 ; 13 Stat. L. 105. 62. Rbgistet of Transfees. (Sec. 5163.) The Comptrol- ler 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 Treasurer, 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. Act June 3, 1864, c. 106, sees. 19, 20; 13 Stat. L. 105. 63. IN'oTicE OF Teansfeh to be Given to Association Inteeested. (Sec. 5164.) The Comptroller of the Currency shall, immediately upon countersigning and entering any trans- fer or assignment by the Treasurer, of any bonds belonging to a national banking association, 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. Act June 3, 1864, e. 106, sec. 19 ; 13 Stat. L. 105. 64. Examination of Registey and Bonds. (Sec. 5165.) The Comptroller of the Currency shall have at all times, during 720 Appendix. 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 association, presented to the Comptroller to countersign ; and the Treasurer shall have the like access to the book mentioned in section fifty-one hundred and sixty-three, during office hours, to ascer- tain 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 June 3, 1864, c. 106, sec. 20; 13 Stat. L. 105. 65. Annual Examination of Bonds by Association. (Sec. 5166.) Every association having bonds deposited in the office of the Treasurer of the United States shall, once or oftener in each fiscal year, examine and 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 correct, to execute to the Treasurer a certifi- cate setting forth the different kinds and the amounts thereof, and that the same are in the possession and custody of the Treasurer at the date of the certificate. 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 officer or agent of such associa- tion, duly appointed in writing for that purpose ; and his certifi- cate 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 retained by the association. Act June 3, 1864, c. 106, sec. 25; 13 Stat. L. 106. 66. General Peovisions Respecting Bonds. (Sec. 5167.) The bonds transferred to and deposited with the Treasurer of the United States, by any association, for the security of its circulating notes, shall be held exclusively for that purpose, until such notes are redeemed, except as provided in this title. Banking. 721 The Comptroller of the Currency shall give to any such asso- ciation powers of attorney to receive and appropriate to its own use the interest on the bonds which it has so transferred to the Treasurer; but such powers shall become inoperative whenever such association fails to redeem its circulating notes. Whenever the market or cash value of any bonds thus deposited with the Treasurer is reduced below the amount of the "circula- tion 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 con- tinues. 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 United States authorized to be received as security for circulating notes, if he is of opin- ion that such an exchange can be made without 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 circulating notes: Provided, That the remaining bonds which shall have been transferred by the association offering to surrender cir- culating notes are equal to the amount required for the circu- lating 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 pro- visions 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 June 3, 1864, c. 106, sec. 26 ; 13 Stat. L. 107. 67. Withdrawal of Cieculating- iffoTEs on Deposit of Lawful Money and Withdrawal of Bonds. Act June 20, 1874. (Sec. 4.) That any association organized under this 46 722 Appeistdix. 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 Avith the Treasurer for the security of such circulating notes ; which bonds shall be assigned to the bank in the manner specified in the nineteenth section of the National Bank Act, and the out- standing notes of said association, to an amount equal to the lengal-tender notes deposited, shall be redeemed at the Treasury of the United States, and destroyed as n&w provided by law: Provided, That the amount of the bonds on deposit for circu- lation shall not be reduced below fifty thousand dollars. Act June 20, 1874, c. 343, sec. 4; 18 Stat. L. 124. Note. — Other sections of this Act referred to under Revised Statutes, section 5192. Section 19 of the National-bank Act is incorporated in Revised Statutes, sections 5162-5164. 68. .Amount of Bonds Required to be on Deposit; Reduction op Amount ob Retieement in Full of Circu- lating Notes. Act July 12, 1882. (Sec. 8.) That national banks now organized or hereafter organized, having a capital of one hundred and fifty thousand dollars, or less, shall not be required to keep on deposit or deposit with the Treasurer of the United States United States bond in excess of one-fourth of their capital stock as security for their circu- lating 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 arvy case exceed ninety per centum of the par value of the bonds deposited as herein provided:] Provided further. That the national banks which shall hereafter make deposits of law- ful money for the retirement in full of their circulation shall at the time of their deposit be assessed for the cost of transport- Banking. 723 ing 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 assess- ment. And all national hanks which have heretofore made or shall hereafter make deposits of lav?ful money for the reduc- tion of their circulation shall be assessed and shall pay an assess- ment in the manner specified in section three of the act approved June 20, 1874, for the cost of transporting and redeeming their notes redeemed from such deposits subsequently to June 30, 1881. Act July 12, 1882, c. 290, sec. 8; 22 Stat. L. 164. Note. — The limitation of the circulation not to exceed ninety per cent, of the bonds deposited is superseded by Act March 14, 190tf, which follows Revised Statutes, section 5171. Act June 20, 1874, sectioii 3, mentioned in this section, follows Revised Statutes, section 5192. 69. Withdrawal of Circulating I^otes on Deposit of Lawful Money, and Withdrawal of Bonds. Not More THAN ITiNE Millions to be Deposited During any Cal- endar Month. Withdrawal of Additional Circulation ON Deposit of Lawful Money or If ational Bank Notes. Act May 30, 1908. (Sec. 10.) That section, nine of the act approved July twelfth, eighteen hundred and eighty-two, as amended by the act approved March fourth, nineteen hundred and seven, be further amended to read as follows: " Sec. 9. That any national banking association desiring to withdraw its circulating notes, secured by deposit of United States bonds in the manner provided in section four of the Act approved June twentieth, eighteen hundred and seventy- four, is hereby authorized for that purpose to deposit lawful money with the Treasurer of the United States and, with the consent of the Comptroller of the Currency and the approval of the Secretary of the Treasury, to withdraw a proportionate amount of bonds held as security for its circulating notes in the order of such deposits : Provided, That not more than nine millions of dollars of lawful money shall be so deposited dur- ing any calendar month for this purpose. "Any national banking association desiring to withdraw any 724 Appendix. of its circulating notes, secured by the deposit of securities other than bonds of the United States, may make such with- drawal at any time in like manner and effect by the deposit of lawful money or national bank notes with the Treasurer of the United States, and upon such deposit a proportionate share of the securities so deposited may be withdrawn : Provided, That the deposits under this section to retire notes secured by the deposit of securities other than bonds of the United States shall not be covered into the Treasury, as required by section six of an act entitled 'An act directing the purchase of silver bullion and the issue of Treasury notes thereon, and for other purposes,' approved July fourteenth, eighteen hundred and ninety, but shall be retained in the Treasury for the purpose of redeeming the notes of the bank making such deposit." Act May 30, 1908, sec. 10. 70. COMPTEOLLEE TO DeTEEMINE IF ASSOCIATION CaN Commence Business. (Sec. 5168.) Whenever a certificate is transmitted to the Comptroller of the Currency, as provided in this title, and the association transmitting the same notifies the Comptroller that at least fifty per centum of its capital stock has been duly paid in, and that such association has com- plied with all the provisions of this title required to be com- plied with before an association shall be authorized to com- mence the business of banking, the Comptroller shall examine into the condition of such association, ascertain especially 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 attested by the oaths of a majority of the directors, and by the president or cashier of the association, a statement of all the facts neces- sary to enable the Comptroller to determine whether the asso- ciation is lawfully entitled to commence the business of banking. Act June 3, 1864, e. 106, see. 17; 13 Stat. L. 104. Banking. 725 71. Ceetificate of Authokity to Commence Banking TO BE Issued. (Sec. 5169.) If, upon a careful examination of the facts so reported, and of any other facts which may come to the knowledge of the Comptroller, whether by means of a special commission appointed by hinf for the purpose of in- quiring into the condition of such association, or otherwise, it appears that such association is lawfully entitled to commence the business of banking, the Comptroller shall give to such association a certificate, under his hand and ofiieial 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 busi- ness. But the Comptroller may withhold from an association his certificate authorizing the commencement of business, when- ever he has reason to suppose that the shareholders have formed the same for any other than the legitimate objects contemplated by this title. Act June 3, 1864, c. 106, sees. 12, 18; 13 Stat. L. 102, 104. 72. Publication of Ceetifioate. (Sec. 5170.) The asso- ciation shall cause the certificate issued under 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 published in such city or county, then in the newspaper pub- lished nearest thereto. ^ Act June 3, 1864, u. 106, see. 18; 13 Stat. L. 104. 73. (Sec. 5171.) This section was repealed by Act of July 12, 1882, and the repealing sec- tion was superseded by Act of March 14, 1900, section 12, which follows. 74. Deliveet of Cieculating Notes. Act of Maech 14, 1900. (Sec. 12.) That upon the deposit with the Treasurer of the United States, by any national banking association, of any bonds of the United States in the manner provided by existing law, such association shall be entitled to receive from 726 Appendix. the Comptroller of the Currency circulating notes in blank, registered and countersigned as provided by law, equal in amount to the par value of the bonds so deposited; and any national banking associations now having bonds on deposit for the security of circulating notes, and upon which an amount of circulating notes has been issued less than the par value of the bonds, shall be entitled, upon due application to the Comptroller of the Currency, to receive additional circulating notes in blank to an amount which will increase the circulating notes held by such association to the par value of the bonds deposited, such additional notes to be held and treated in the same way as circulating notes of national banking associations heretofore issued, and subject to all the provisions of law affecting such notes: Provided, That nothing herein contained shall be con- strued to modify or repeal the provisions of section fifty-one hundred and sixty-seven of the Revised Statutes of the United States, authorizing the Comptroller of the Currency to require additional deposits of bonds or of lawful money in case the market value of the bonds held to secure the circulating notes shall fall below the par value of the circulating notes out- standing for which such bonds may be deposited as security: And provided further, That the circulating notes furnished to national banking associations under the provisions of this act shall be of the denominations prescribed by law, except that no national banking association shall, after the passage of this act, be entitled to receive from the Comptroller of the Cur- rency, or to issue or reissue or place in circulation, more than one-third in amount of its circulating notes of the denomina- tion of five dollars: And provided further. That the total amount of such notes issued to any such association may equal at any time but shall not exceed the amount at such time of its capital stock actually paid in : And provided further. That under regulations to be prescribed by the Secretary of the Treasury any national banking association may substitute the two per centum bonds issued under the provisions of this act for any of the bonds deposited with the Treasurer to secure circulation or to secure deposits of public money ; and so much Banking. '2' of an act entitled "An act to enable national banking associa- tions to extend their corporate existence, and for other pur- poses," approved July twelfth, eighteen hundred and eighty- two, as prohibits any national bank which makes any deposit of lawful money in order to withdraw its circulating notes from receiving 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, is hereby repealed, and all other acts or parts of acts inconsistent with the provisions of this section are hereby repealed. Act March 14, 1900, o. 41, see. 12; 31 Stat. L. 49. 75. Feinting Denominations and Foem of the Ciecu- LATiNG Notes. (Sec. 5172) [as amended May 30, 1908.] In order to furnish suitable notes for circulation, the Comptroller of the Currency shall, under the direction of the Secretary of the Treasury, cause plates and dies to be engraved, in the best manner to guard against counterfeiting and fraudulent altera- tions, and shall have printed therefrom, and numbered, such quantity of circulating notes, in blank, of the denominations of five dollars, ten dollars, twenty dollars, fifty dollars, one hun- dred dollars, five hundred dollars, one thousand dollars, and ten thousand dollars, ^s may be required to supply the asso- ciations entitled to receive the same. Such notes shall state upon their face that they are secured by United States bonds or other securities, certified by the written or engraved signa- tures of the Treasurer and Register and by the imprint of the seal of the Treasury. They shall also express upon their face the promise of the association receiving the same to pay on demand, attested by the signature of the president or vice- president and cashier. The Comptroller of the Currency, act- ing under the direction of the Secretary of the Treasury, shall as soon as practicable cause to be 'prepared circulating notes in blank, registered and countersigned, as provided, by law, to an amount equal to fifty per centum of the capital stock of each national banking association; such notes to be deposited in the treasury or in the subtreasury of the United States nearest the 728 Appendix. place of business of each association, and to be held for such association, subject to the order of the Comptroller of the Cur- rency, for their delivery as provided by lav? : Provided^ That the Comptroller of the Currency may issue national bank notes of the present form until plates can be prepared and circulat- ing notes issued as above provided: Provided, however. That in no event shall bank notes of the present form be issued to any bank as additional circulation provided for by this act." Act June 3, 1864, c. 104, sec. 22; 13 Stat. L. 106. Act May 30, 1908, sec. 11. 76. ChaETEE NtTMBEE TO BE PeINTED ON NoTES. AcT June 20, 1874. (Sec. 5.) That the Comptroller of the Cur- rency shall, under such rules and regulations as the Secretary of the Treasury may prescribe, cause the charter numbers of the association to be printed upon all national bank notes which may be hereafter issued by him. Act June 20, 1874, c. 343, sec. 5; 18 Stat. L. 124. Note. — Other sections of this Act will be found under Revised Statutes, section 5192. 77. Distinctive Papee foe Printing Notes. Act Maech 3, 1875. (Sec. 1.) * * * That the national bank notes shall be printed under the direction of the Secretary of the Treasury, and upon the distinctive or special paper which has been, or many hereafter be, adopted by him for printing United States notes. Act March 3, 1875, c. 130, sec. 1; 18 Stat. L. 372; sundry civil bill. 78. Plates and Dies to be Undee the Conteol op the CoMPTEOLLEE. (Sec. 5173.) The plates and special dies to be procured by the Comptroller of the Currency for the print- ing of such circulating notes shall remain under his control and direction, and the expenses necessarily incurred in execut- ing the laws respecting the procuring of such notes, and all other expenses of the Bureau of the Currency, shall be paid out of the proceeds of the taxes or duties assessed and collected Banking. 729 on the circulation of national banking associations under this title. Act June S, 1864, c. 106, sec. 41; 13 Stat. L. 111. Note. — See Act June 20, 1874, following Revised Statutes, section 5192, and Act July 12, 1882, following Eevisedi Statutes, section 5136, requiring banks to pay cost of their plates. 79. Examination op Plates and Dies. (Sec. 5174) [as amended 1877.] The Comptroller of the Currency shall cause to be examined, each year, the plates, dies, bed pieces, and other material from which the national bant circulation is printed, in whole or in part, and file in his oflSce 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 liquida- tion, 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 examination or destruction shall be paid out of any appropriation made by Congress for the special examination of national banks and bank note plates. Act March 3, 1873, c. 269, sec. 4; 17 Stat. L. 603. Act Feb. 27, 1877, c. 69; 19 Stat. L. 252. 80. Limit to Issue of Notes Undee Five Dollars. (Sec. 5175.) Not more than one-sixth part of the notes furnished to any association shall be of a less denomination than five dollars. After specie payments are resumed no association shall be furnished with notes of a less denomination than five dollars. Act June 3, 1864, c. 106, sec. 22; 13 Stat. L. 105. Note. — Specie payments were resumed January 1, 1879. (See Act of March 14, 1900, section 12, following. Revised Statutes, section 5171, limit- ing the issue of five-dollar notes.) 81. (Sec. 5176.) Repealed by Act July 12, 1882, which in turn was superseded by Act March 14, 1900. (See section 5171.) 82. (Sec. 5177.) Repealed by Act January 14, 1875. 730 Appendix. 83. Agwjregate Amount of Cieculating Notes not Limited. Act Januaey 14, 1875. (Sec. 3.) That section 5177 of the Kevised Statutes of the United States, limiting the aggregate amount of circulating notes of national banking associations, be and is hereby repealed ; and each existing bank- ing association may increase its circulating notes in accordance with existing law without respect to said aggregate limit ; and new banking associations may be organized in accordance with existing 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 Terri- tories are hereby repealed. Act Jan. 14, 1875, sec. 3; 18 Stat. L. 296. 84. (Sec. 5178.) Superseded by Act January 14, 1875. 85. (Sec. 5179.) Superseded by Act January 14, 1875. 86. (Sec. 5180.) Superseded by Act January 14, 1875. 87. (Sec. 5181.) Superseded by Act January 14, 1875. 88. Foe What Demands National Bank Notes Mat be Received. (Sec. 5182.) After any association receiving circulating notes under this title has caused its promise to pay such notes on demand to 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, Banking. I^^l and all other dues to the United States, except duties on im- ports; and also for all salaries and other debts and demands owing by the United States to individuals, corporations, and associations within the United States, except interest on the public debt, and in redemption of the national currency. Act June 3, 1864, c. 106, sec. 23; 13 Stat. L. 106. 89. Issue of Post Notes, Etc., Prohibited. (Sec. 5183) [as amended 1875.] 'Ro 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. Act June 3, 1864, c. 10«, sec. 23; 13 Stat. L. 106. Act Feb. 18, 187S, c. 80; 18 Stat. L. 320. 90. Desteoying and Replacing Woen-ottt and Muti- lated Notes. (Sec. 5184.) It shall be the duty of the Comp- troller of the Currency to receive worn-out or mutilated circu- lating notes issued by any banking association, and also, on due proof of the destruction of any such circulating notes, to deliver in place thereof to the association other blank circulating notes to an equal amount. Such worn-out or mutilated notes, after a memorandum has been entered in the proper books, in accord- ance with such regulations as may be established by the Comp- troller, as well as all circulating notes which shall have been paid or surrendered to be canceled [shall he hurned to ashes] in presence of four persons, one to be appointed by the Secre- tary 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 burning], 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. Act June 3, 1864, c. 106, sec. 24; 13 Stat. L. 106. Note. — Act June 23, 1874, provides for maceration in place of burning. 732 Appendix. 91. MACEEATIOlif OB" ]!^ATI01*rAL BaSTK ISTOTES. AcT JtJWE 23, 1874. * * * For the maceration of national bank notes * * * ; and tliat all 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 JSTational Currency Act as requires national bank notes to be burned to ashes is hereby repealed; that the pulp from such macerated issue shall be disposed of only under the direction of the Secretary of the Treasury. Provision in Sundry Civil Appropriation Act, June 23, 1874; 18 Stat. L. 206. 92. OEGANIZATIOIf OF ASSOCIATIONS TO IsSUE GoLD NoTES. (Sec. 5185) [as amended 1875.] Associations may be organ- ized in the manner prescribed by this title for the purpose of issuing notes payable in gold; and upon the deposit of 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 Currency to issue to the association making the deposit circu- lating 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 promise of the association to pay them, upon pre- sentation at the office at which they are issued, in gold coin of the United States, and shall be so redeemable. Act July 12, 1870, c. 282, sec. 3; 16 Stat. L. 252. Act Jan. 19, 1875, c. 19; 18 Stat. L. 302. 93. Keseeve Eequieemewts foe Gold Banks. (Sec. 5186.) Every association organized under the preceding section shall at all times keep on hand not less than twenty-five per centum of its outstanding circulation, in gold or silver coin of the United States ; and shall receive at par in the payment of debts the gold notes of every other such association which at the time of such payment is redeeming its circulating notes in gold coin of the United States, and shall be subject to all the provisions Bankiitg. 733 of this title: Provided, That, in applying the same to asso- ciations organized for issuing gold notes, the terms " lawful money " and " lawful money of the United States " shall he construed to mean gold or silver coin of the United States; and the circulation of such association shall not be within the limi- tation of circulation mentioned in this title. Act July 12, 1870, i!. 282, sees. 3-5; 16 Stat. L. 252, 253. 94. CoNVEESioiir of National Gold Banks into Cueeenct Banks. Act Febeuaet 14, 1880. 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 pre- scribed by section fifty-one hundred and fifty-four of the Re- vised Statutes of the United States, for the conversidn of banks incorporated under the laws of any State, cease to be a gold bank, and become such an association as is authorized by sec- tion fifty-one hundred and thirty-three, for carrying on the business of banking, and shall have the same powers and privi- leges, and shall be subject to the same duties, responsibilities, 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. Act Feb. 14, 1880, c. 25; 21 Stat. L. 66. 95. Penalty foe Issuing Cieculating K'otes to Unatt- thoeized Associations. (Sec. 518T.) 'Ko officer acting under the provisions of this title shall countersign or deliver to any association, or to any other company or person, any circulating notes contemplated by this title, except in accordance with the true intent and meaning of its provisions. Every officer who violates this section shall be deemed guilty of a high misde- meanor, and shall be fined not more than double the amount so countersigned and delivered^ and imprisoned not less than one year and not more than fifteen years. Act June 3, 1864, c. 106, sec. 27; 13 Stat. L. 107. 734 Appendix. 96. Penalty foe Imitating Bank Circulation. Use of Same foe Abveetising Ptjeposes. (Sec. 5188.) It shall not be lawful to design, engrave, print, or in any manner make or execute, or to utter, issue, distribute, circulate, or use, any business or professional card, notice, placard, circular, hand- bill, or advertisement, in the likeness or similitude of any circulating note or other obligation or security of any banking association organized or acting under the lav^s 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 impress upon any such note, obligation, or security any business or pro- fessional 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. Act Feb. 5, 1867, c. 26, see. 2; 14 Stat. L. 383. 97. Penalty foe Mutilating Cieculation. (Sec. 5189.), Every person who mutilates, cuts, defaces, disfigures, or per- forates with holes, or unites or cements together, or does 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, shall be liable to a penalty of fifty dollars, recoverable by the association. Aet June 3, 1864, c. 106, sec. 58; 13 Stat. L. 117. Act May 30, 1908, Authoeizing National Cueeency As- sociations, THE Issue of Additional National Bank Cie- culation, AND Creating a National Monetaey Commis- sion. 98. Formation of National Currency Associations — - What Banks Eligible — Manner of Foeming — Associa- tion to be Body Coepoeate and Exeecise Powees as Such — But One Association in any City — Members of Asso- Banking. 735 CIATION TO BE TaKEN AS NeAELY AS CONVENIENT FEOM StATE, Pabt of State, oe Contiguous Paets of One oe Moee States — Officees, How Selected — Powees of Offioees AND Executive Committee — By-laws to be Appeoved by THE Sbceetaey OF THE Teeasuey. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled. That national banking asso- ciations, each having an unimpaired capital and a surplus of not less than twenty per centum, not less than ten in number, having an aggregate capital and surplus of at least five millions of dollars, may form voluntary associations to be designated as national currency associations. The banks uniting to form such association shall, by their presidents or vice-presidents, acting under authority from the board of directors, make and file with the Secretary of the Treasury a certificate setting forth the names of the banks composing the association, the principal place of business of the association, and the name of the asso- ciation, which name shall be subject to the approval of the Secretary of the Treasury. Upon the filing of such certificate the associated banks therein named shall become a body cor- porate, and by the name so designated and approved may sue and be sued and exercise the powers of a body corporate for the purposes hereinafter mentioned: Provided, That not more than one such national currency association shall be formed in any city: Provided further. That the several mem- bers of such national currency association shall be taken, as nearly as conveniently may be, from a territory composed of a State or part of a State, or contiguous parts of one or more States: And provided further. That any national bank in such city or territory, having the qualifications herein pre- scribed for membership in such national currency association, shall, upon its application to and upon the approval of the Secretary of the Treasury, be admitted to membership in a national currency association for that city or territory, and upon such admission shall be deemed and held a part of the body corporate, and as such entitled to all the rights and privi- leges and subject to all the liabilities of an original member: 736 Appendix. And 'provided further. That each national currency association shall be composed exclusively of banks not members of any other national currency association. The dissolution, voluntary or otherwise, of any bank in such association shall not affect the corporate existence of the asso- ciation unless there shall then remain less than the minimum number of ten banks: Provided, however. That the reduction of the number of said banks below the minimum of ten shall not affect the existence of the corporation with respect to the assertion of all rights in favor of or against such association. The affairs of the association shall be managed by a board con- sisting of one representative from each bank. By-laws for the government of the association shall be made by the board, sub- ject to the approval of the Secretary of the Treasury. A presi- dent, vice-president, secretary, treasurer, and an executive committee of not less than five members, shall be elected by the board. The powers of such board, except in the election of officers and making of by-laws, may be exercised through its executive committee. Act May 30, 1908, sec. 1. 99. CoNDiTioisrs IIndee Which Banks Belonging to Na- tional Ctjeeenct Associations May Take Out Additional CiECULATioN — Amount Limited to Seventy-five Pee Cent, of the Cash Value of the Sectteities and Commee- ciAL Paper Deposited — Issue of Additional Ciecitlation ON Deposit of State, City, Town, County, oe Municipal Bonds Authoeized to Extent of Ninety Pee Cent, of Theie Maeket Value — The Banks and Assets of all Banks Membees of Said Association Jointly and Sevee- ALLY Liable to the United States foe the Redemption of Such Additional Cieculation — Lien of United States Undee Section 5230, Revised Statutes, Extended to Covee Assets of all Banks Belonging to the Associa- tion — Requieement of Additional Securities — When Association May Sell Secueities Deposited With It. The national currency association herein provided for shall have Banking. 737 and exercise any and all powers necessary to carry out the pur- poses of this section, namely, to render available, under the direction and control of the Secretary of the Treasury, as a basis for additional circulation any securities, including com- mercial paper, held by a national banking association. For the purpose of obtaining such additional circulation, any bank belonging to any national currency association, having circulat- ing notes outstanding secured by the deposit of bonds of the United States to an amount not less than forty per centum of its capital stock, and which has its capital unimpaired and a surplus of not less than twenty per centum, may deposit with and transfer to the association, in trust for the United States, for the purpose hereinafter provided, such of the securities above mentioned as may be satisfactory to the board of the association. The officers of the association may thereupon, in behalf of such bank make application to the Comptroller of the Currency for an issue of additional circulating notes to an amount not exceeding seventy-five per centum of the cash value of the securities or commercial paper so deposited. The Comptroller of the Currency shall immediately transmit such application to the Secretary of the Treasury with such recom- mendation as he thinks proper, and if, in the judgment of the Secretary of the Treasury, business conditions in the locality demand additional circulation, and if he be satisfied with the character and value of the securities proposed and that a lien in favor of the United States on the securities so deposited and on the assets of the banks composing the association will be amply sufficient for the protection of the United States, he may direct an issue of additional circulating notes to the associa- tion, on behalf of such bank, to an amount in his discretion, not, however, exceeding seventy-five per centum of the cash value of the securities so deposited: Provided, That upon the deposit of any of the State, city, town, county, or other muni- cipal bonds, of a character described in section three of this act, circulating notes may be issued to the extent of not exceed- ing ninety per centum of the market value of such bonds so deposited: And provided further. That no national banking 47 738 Appendix. association shall be authorized in any event to issue circulating notes based on commercial paper in excess of thirty per centum of its unimpaired capital and surplus. The term " commercial paper " shall be held to include only notes representing actual commercial transactions, which when accepted by the associa- tion shall bear the names of at least two responsible parties and have not exceeding four months to run. The banks and the assets of all banks belonging to the asso- ciation shall be jointly and severally liable to the United States for the redemption of such additional circulation ; and to secure such liability the lien created by section fifty-two hundred and thirty of the Revised Statutes shall extend to and cover the assets of all banks belonging to the association, and to the securities deposited by the banks with the association pursuant to the provisions of this act; but as between the several banks composing such association each bank shall be liable only in the proportion that its capital and surplus bears to the aggre- gate capital and surplus of all such banks. The association may, at any time, require of any of its constituent banks a deposit of additional securities or commercial paper, or an exchange of the securities already on deposit, to secure such additional circulation ; and in case of the failure of such bank to make such deposit or exchange the association may, after ten days' notice to the bank, sell the securities and paper already in its hands at public sale, and deposit the proceeds with the Treasurer of the United States as a fund for the redemption of such additional circulation. If such fund be insufficient for that purpose the association may recover froip the bank the amount of the deficiency by suit in the circuit court of the United States, and shall have the benefit of the lien hereinbefore provided for in favor of the United States upon the assets of such bank. The association or the Secretary of the Treasury may permit or require the withdrawal of any such securities or comrbercial paper and the substitution of other securities or commercial paper of equal value therefor. Act May 30, 1908, sec. 1. Bankiitg. 739 100. Eedemptiow Fund Below Eeqttibement. Duty of Tbeastjeee ow United States. (Sec. 2.) That whenever any bank belonging to a national currency association shall fail to preserve or make good its redemption fund in the Treasury of the United States, required by section three of the Act of June twentieth, eighteen hundred and seventy-four, chapter three hundred and forty-three, and the provisions of this act, the Treasurer of the United States shall notify such national cur- rency association to make good such redemption fund, and upon the failure of such national currency association to make good such fund, the Treasurer of the United States may, in his discretion, apply so much of the redemption fund belonging to the other banks composing such national currency association as may be necessary for that purpose; and such national cur- rency association may, after five days' notice to such bank, proceed to sell at public sale the securities deposited by such bank with the association pursuant to the provisions of section one of this act, and deposit the proceeds with the Treasurer of the United States as a fund for the redemption of the additional circulation taken out by such bank under this act. Act May 30, 1908, sec. 2. 101. What National Banks May Apply foe Authoeity TO Issue Additional Cieoulation on Bonds Othee Than United States Bonds. What Bonds Will be Accepted foe Such Additional Ciecula'tion. (Sec. 3.) That any national banking association which has circulating notes out- standing, secured by the deposit of United States bonds to an amount of not less than forty per centum of its capital stock, and which has a surplus of not less than twenty per centum, may make application to the Comptroller o'f the Currency for authority to issue additional circulating notes to be secured by the deposit of bonds other than bonds of the United States. The Comptroller of the Currency shall transmit immediately the application, with his recommendation, to the secretary of the Treasury, who shall, if in his judgment business conditions in the locality demand additional circulation, approve the same 740 Appendix. and shall determine the time of issue and fix the amount, within the limitations herein imposed, of the additional circulating notes to be issued. Whenever after receiving notice of such approval any such association shall deposit with the Treasurer or any assistant treasurer of the United States such of the bonds described in this section as shall be approved in character and amount by the Treasurer of the United States and the Secretary of the Treasury, it shall be entitled to receive, upon the order of the Comptroller of the Currency, circulating notes in blank, registered and countersigned as provided by law, not exceeding in amount ninety per centum of the market value, but not in excess of the par value of any bonds so de- posited, such market value to be ascertained and determined under the direction of the Secretary of the Treasury. The Treasurer of the United States, with the approval of the Secretary of the Treasury, shall accept as security for the addi- tional circulating notes provided for in this section, bonds or other interest-bearing obligations of any State of the United States, or any legally authorized bonds issued by any city, tovm, county, or other legally constituted municipality or dis- trict in the United States which has been in existence for a period of ten years, and which for a period of ten years previous to such deposit has not defaulted in the payment of any part of either principal or interest of any funded debt authorized to be contracted by it, and whose net funded indebtedness does not exceed ten per centum of the valuation of its taxable prop- erty, to be ascertained by the last preceding valuation of prop- erty for the assessment of taxes. The Treasurer of the United States, with the approval of the Secretary of the Treasury, shall accept, for the purposes of this section, securities herein enumerated in such proportions as he may from time to time determine, and he may with such approval at any time require the deposit of additional securities, or require any association to change the character of the securities already on deposit. Act May 30, 1908, sec. 3. Banking. 741 102. Legal Title of Bonds Deposited to Secure Addi- tional CiECULATioN. Assignment of Bonds by Teeasubee TO BE COUNTEESIGNED BY THE OoMPTEOLLEE OF THE . CuB- EENCY. (Sec. 4.) That the legal title of all bonds, whether coupon or registered, deposited to secure circulating notes issued in accordance with the terms of section three of this act shall be transferred to the Treasurer of the United States in trust for the association depositing them, under regulations to be prescribed by the Secretary of the Treasury. A receipt shall be given to the association by the Treasurer or any assistant treasurer of the United States, stating that such bond is held in trust for the association on whose behalf the transfer is made, and as security for the redemption and payment of any circulating notes that have been or may be delivered to such association. No assignment or transfer of any such bond by the Treasurer shall be deemed valid unless countersigned by the Comptroller of the Currency. The provisions of sections fifty-one hundred and sixty-three, fifty-one hundred and sixty- four, fifty-one hundred and sixty-five, fifty-one hundred and sixty-six, and fifty-one hundred and sixty-seven and sections fifty-two hundred and twenty-four to fifty-two hundred and thirty-four, inclusive, of the Revised Statutes respecting United States bonds deposited to secure circulating notes shall, except as herein modified, be applicable to all bonds deposited under the terms of section three of this act. Act May 30, 1908, sec. 4. 103. Additional Cieculation, How Teeated. Limit to Amount of Cieculation Issued to Each Bank. Limit to Total Amount Outstanding Undee This Act. (Sec. 5.) That the additional circulating notes issued under this act shall be used, held, and treated in the same way as circulating notes of national banking associations heretofore issued and secured by a deposit of United States bonds, and shall be sub- ject to all the provisions of law affecting such notes except as herein expressly modified: Provided, That the total amount of circulating notes outstanding of any national banking asso- 743 Appendix. ciation, including notes secured by United States bonds as now provided by law, and notes secured otherwise tban by deposit of such bonds, shall not at any time exceed the amount of its unimpaired capital and surplus: And provided further. That there shall not be outstanding at any time circulating notes issued under the provisions of this act to an amount of more than five hundred millions of dollars. Act May 30, 1908, sec. 5. 104. AMOtTifT OP Redemption Fund. (Sec. 6.) That when- ever and so long as any national banking association has out- standing any of the additional circulating notes authorized to be issued by the provisions of this act it shall keep on deposit in the Treasury of the United States, in addition to the redemp- tion fund required by section three of the act of June twentieth, eighteen hundred and seventy-four, an additional sum equal to five per centum of such additional circulation at any time outstanding, such additional five per centum to be treated, held, and used in all respects in the same manner as the original redemption fund provided for by said section three of the Act of June twentieth, eighteen hundred and seventy-four. Act May 30, 1908, sec. 6. 105. Equitable Disteibution of Notes. (Sec. 7.) In order that the distribution of notes to be issued under the pro- visions of this act shall be made as equitable as practicable between the various sections of the country, the Secretary of the Treasury shall not approve applications from associations in any State in excess of the amount to whi<}h such State would be entitled of the additional notes herein authorized on the basis of the proportion which the unimpaired capital and sur- plus of the national banking associations in such State bears to the total amount of unimpaired capital and surplus of the national banking associations of the United States : Provided, however. That in case the applications from associations in any State shall not be equal to the amount which the associations of such State would be entitled to under this method of dis- Banking. 743' tribution, the Secretary of the Treasury may, in his discretion, to meet an emergency, assign the amount not thus applied for to any applying association or associations in States in the same section of the country. Act May 30, 1908, sec. 7. 106. Seceetaey of the Teeasuby to Fuenish Infoema- TION AS TO THE VaLUE AND ChAEACTEE OF SeCTJEITIES. (SeC. 8.) That it shall be the duty of the Secretary of the Treasury to obtain information with reference to the value and character of the securities authorized to be accepted under the provisions of this act, and he shall from time to time furnish information to national banking associations as to such securities as would be acceptable under the provisions of this act. Act May 30, 190«, see. 8. 107. (Sec. 9.) Amends section 5214, Hevised Statutes. 108. (Sec. 10.) Amends section 9 of Act approved July 12, 1882, as amended by Act approved March 4, 1907, inserted after section 5167, page 34, ante. 109. (Sec. 11.) Amends section 5172, Revised Statutes. 110. ClECULATING NoTES TO BE REDEEMED IN LaWFUL Money of the United States. (Sec 12.) That circulating notes of national banking associations, when presented to the Treasury for redemption, as provided in section three of the Act approved June twentieth, eighteen hundred and seventy- four, shall be redeemed in lawful money of the United States. Act May 30, 1908, see. 12. 111. All Acts of the Compteollee of the Cueeenct AND TeeASUEEE OF THE UnITED StATES UnDEE ThIS AcT TO 744 Appendix. BE Approved by the Seceetaey op the Teeastjet. (Sec. 13.) That all acts and orders of the Comptroller of the Cur- rency and the Treasurer of the United States authorized hy this act shall have the approval of the Secretary of the Treasury who shall have power, also, to make any such rules and regu- lations and exercise such control over the organization and management of national currency associations as may he neces- sary to carry out the purposes of this act. Act May 30, 1908, sec. 13. 112. (Sec. 14.) Is amendatory of section 5191, Kevised Statutes, and is inserted on page 53, post. 113. (Sec. 15.) Belates to deposits of public money and interest thereon and is inserted after section 5153, Revised Statutes. 114. Expenses of Act. (Sec. 16.) That a sum sufficient to carry out the purposes of the preceding sections of this act is hereby appropriated out of any money in the Treasury not otherwise appropriated. Act May 30, 1908, sec. 16. 115. Appointment of Monetaey Commission. (Sec. 17.) That a commission is hereby created, to he called the " National Monetary Commission," to be composed of nine members of the Senate, to be appointed by the presiding officer thereof, and nine members of the House of Representatives, to be appointed by the speaker thereof; and any vacancy on the commission shall be filled in the same manner as the original appointment. Act May 30, 1908, sec. 17. 116. PowEEs OF Commission. Commission to Eepoet to Congress. (Sec. 18.) That it shall be the duty of this Com- mission to inquire into and report to Congress at the earliest date practicable, what changes are necessary or desirable in the Banking. 745 monetary system of the United States or in the laws relating to hanking and currency, and for this purpose they are au- thorized to sit during the sessions or recess of Congress, at such times and places as they may deem desirable, to send for per- sons and papers, to administer oaths, to summons and compel the attendance of witnesses, and to employ a disbursing officer and such secretaries, experts, stenographers, messengers, and other assistants as shall be necessary to carry out the purposes for which said commission was created. The commission shall have the power, through subcommittee or otherwise, to examine witnesses and to make such investigations and examinations, in this or other countries, of the subjects committed to their charge as they shall deem necessary. Act May 30, 1908, Bee. 18. 117. Expenses of Commission. (Sec. 19.) That a sum sufficient to carry out the purposes of sections seventeen and eighteen of this act, and to pay the necessary expenses of the commission and its members, is hereby appropriated, out of any money in the Treasury not otherwise appropriated. Said appropriation shall be immediately available and shall be paid out on the audit and order of the chairman or acting chairman of said commission, which audit and order shall be conclusive and binding upon all departments as to the correctness of the accounts of such commission. Act May 30, 1908, sec. 19. 118. When Act Expires BY Limitation. (Sec. 20.) That this act shall expire by limitation on the thirtieth day of June, nineteen hundred and fourteen. Act May 30, 1908, sec. 20. 746 Appendix. CHAPTER IV. EBGUIATION OF THE BANKING BUSINESS. 119. § 5190. Place of business. 120. § 51^1. Reserve cities and re- serve requirements. 121. § 5192. What may be counted as reserve. 122. Act June 30, 1874. Lawful money reserve to be deter- mined by deposits. 123. Act May 30, 1908. No reserve need be held against de- posits of public money. 124. Act June 30, 1874. Provisions for redeeming circulation. Five per cent redemption fund. 125. Act March 3, 1875. Clerical force for redemption of circulating notes. 126. Act March 3, 1887, as amended March 3, 1903. Additional reserve cities. 127. Act July 14, 1890. Disposition of redemption account. 128. Act July 28, 1892. Redemption of lost or stolen notes and of notes not properly signed. 129. § 5193. Repealed by act March 14, 1900. 130. § 5194. Superseded by repeal of section 5193. 131. § 5195. Place for redemption of circulating notes to be designated. 132. Act June 20, 1874. National banks not required or per- mitted to redeem their cir- culating notes elsewhere than at their own counters or at the Treasury of the United States. 133. Act March 3, 1887. Additional central reserve cities. 134. § 5196. National banks to take notes of other national banks at par. 135. § 5197. Limitation upon rate of interest which may be taken. 136. § 5198. Penalty for taking un- lawful interest. Jurisdic- tion of suits by or against national banks. 137. § 5199. Dividends. 138. § 520O. Limitation of liabili- ties which may be incurred by any one person, com- pany, etc. 139. § 5201. Associations must not loan on or purchase their own stock. 140. § 5202. Restriction on bank's indebtedness. 141. § 5203. Restriction upon use of circulating notes. 142. § 5204. Prohibition upon with- drawal of capital. Un- earned dividends prohibited. 143. § 5205. Assessment for failure to pay up capital stock or for impairment of capital. 144. § 5206. Prohibition against un- current notes. 145. § 5207. United States notes not to be held as collateral. 146. Act July 12, 1882. Issue of gold certificates. 147. § 5208. Penalty for falsely certifying checks. 148. Act July 12, 1882. Punish- ment for falsely certifying checks. 149. § 5209. Penalty for embezzle- ment, abstraction, willful misapplication, false en- tries, etc. 150. Act January 26, 1907. Na- tional banks not permitted to make contributions in connection with election to political office. 151. § 5210. List of shareholders. 152. § 5211. Reports to Comptrol- ler of the Currency. 153. Act February 26, 1881. Verifi- cation of reports. 154. § 5212. Report of dividends. 155. § 5213. Penalty for failure to make reports. Banking. 747 156. § 5214. Taxes payable to the United States. § 5215. Half-yearly return of circulation [deposHs and capital stock}. § 5216. Penalty for failure to make return. 157. 158. 159. § 5217. Enforcing tax on cir- culation. 160. § 5218. Refunding excess tax. 161. Act March 1, 1879. No tax to be paid by insolvent banks. 162. § 5219. State taxation. 119. Place of Business. (Sec. 5190.) The usual business of each national banking association shall be transacted at an oflSce or banking house located in the place specified in its organization certificate. Act June 3, 1864, c. 106, sec. 8; 13 Stat. L. 101. Note. — See Act May 1, 1886, following Revised Statutes, section 5136, in reference to change in place of business. 120. Reseeve Cities and Reserve Requirements. (Sec. 5191.) Every national banking association in either of the following cities: Albany, Baltimore, Boston, Cincinnati, Chi- cago, Cleveland, Detroit, Louisville, Milwaukee, New Orleans, New York, Philadelphia, Pittsburg, St. 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 circu- tion and] its 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 notes in circulation and] of its deposits. When- ever 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 centum 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 dividends 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 74:8 Appendix. of the Currency may notify any association, whose lawful money reserve shall be below the amount above required to be kept on hand, to make good such reserve ; and if such associa- tion shall fail for thirty days thereafter so to make good its reserve of lawful money, the Comptroller may, with the con- currence of the Secretary of the Treasury, appoint a receiver to wind up the business of the association, as provided in sec- tion fifty-two hundred and thirty-four. Act June 3, 1864, c. 106, sec. 31; 13 Stat. L. 108. Act March 1, 1872, c. 22; 17 Stat. L. 32. See 163 Fed. Rep. 1018. Note. — This section is amended by the Act of June 20, 1874, section 2, which provides that no reserve need he held against circulation. Said Act follows section 5192. Act of March 3, 1903, amending Act of March 3, 1887, providing for additional reserve cities, follows section 5192. Pro- visions relating to redemption of circulating notes. Acts June 20, 1874, March 3, 1875, and July 14, 1890, follow Revised Statutes, section 5192. Provisions relating to redemption of old notes of banks extending their corporate existence. Act July 12, 1882, follows Revised Statutes, section 5136. Leavenworth, Kansas, was included as a reserve city in the original Act, but was struck out March 1, 1872. Words " lawful money " construed by Attorney-General as including all that is legal tender. Opin. Atty.-Gen. 17:123. 121. What Mat be Counted as Eeseeve. (Sec. 5191.) Three-fifths of the reserve of fifteen per centum required by the preceding section to be kept, may consist of balances due to an association, available for the redemption of its circulating notes, from associations approved by the Comptroller of the Currency, organized under the act of June three, eighteen hun- dred 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 Orleans, New York, Philadelphia, Pittsburg, Richmond, Saint Louis, San Francisco, and Washington. Clearing-house certifi- cates, representing specie or, lawful money specially deposited for the purpose, of any clearing-house association, shall also be deemed to be lawful money in the possession of any association belonging to such clearing-house, holding and owning such cer- tificate, within the preceding section. Banking. 749 Act June 3, 1864, c. 106, sec. 31; 13 Stat. L. 108. Act March. 1, 1872, c. 22; 17 Stat. L. 32. Note. — Leavenworth Kansas, was included as a reserve city in the original Act, but was struck out March 1, 1872. Charleston and Richmond not being included in the list of reserve cities enumerated in section 5191, the banks of which are required to hold a reserve of twenty-five per centum of their net deposits, the Comptroller of the Currency has never approved any banks in said cities as reserve agents. 122. Lawful Money Reserve to be Determined by Deposits. Act June 20, 1874. (Sec. 2.) 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 amount 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 on hand shall be determined by the amount of deposits in all respects, as provided for in the said section. Act June 20, 1874, c. 343, sec. 2 ; 18 Stat. L. 123. Note. — Section 31 of "the National-bank Act" is incorporated in sec- tions 5191, 5192, Revised Statutes. Section 1 of Act June 20, 1874, precedes section 5133, Revised Statutes. 123. ISo Reserve Need be Held against Deposits of Public Money. Act May 30, 1908. (Sec. 14.) That the provisions of section fifty-one hundred and ninety-one of the Revised Statutes, with reference to the reserves of national banking associations, shall not apply to deposits of public moneys by the United States in designated depositaries. Act May 30, 1908, sec. 14. 124. Provisions for Redeeming Circulation. I^ive Per Cent. Redemption Fund. Act June 20, 1874. (Sec. 3.) That every association organized, or to be organized, under the provisions of the said act, and of the several acts amend- atory 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 circula- tion, to be held and used for the redemption of such circu- lation; which sum shall be counted as a part of its lawful 750 Appendix. reserve, as provided in section two of this act; and when the circulating notes of any such associations, assorted or unas- sorted, shall be presented for redemption, in sums of one thou- sand dollars, or any multiple thereof, to the Treasurer of the United States, the same shall he redeemed in [United States notes]. All notes so redeemed shall he charged by the Treas- urer 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 vrhenever such redemptions for any association shall amount to the sum of five hundred dollars, such association so notified shall forthwith deposit with the Treasurer of the United States a sum in United States notes equal to the amount of its circulating notes so redeemed. And all notes of national banks, worn, defaced, mutilated, or other- wise 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 redemp- tion 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 Comptroller of the Currency and destroyed and replaced as now provided by law: Provided, That each of said associa- tions shall reimburse to the Treasury the charges for transporta- tion and the costs for assorting such notes ; and the associations hereafter organized shall also severally reimburse to the Treas- ury the cost of engraving such plates as shall be ordered by each association respectively; 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: And provided further. That so much of section thirty-two of said national-bank act requiring or permitting the redemption of its circulating notes elsewhere than at its own counter, except as provided for in this section, is hereby repealed. BANKI]5rG. 751 Aet June 20, 1874, c. 343, sec. 3; 18 Stat. L. 123. Note. — Section 12 of Act of May 30, 1908, provides that notes of national banking associations shall be redeemed in lawful money of the United States. Section 32 of national-bank act is section 5195, Revised Statutes. Other sections of Act of June 20, 1874. Section 1 precedes Revised Statutes, section 5133. Section 2. See paragraph 122, page 53, ante. Section 4 follows Revised Statutes, section 5167. Section 5 follows Revised Statutes, section 5172. Section 6 relates to United States notes only. Sections 7-9 superseded by Act of January 14, 1875, which follows Revised Statutes, section 5177. 125. Cleeical Force foe Redemption of Cieculating iSToTES. Act Maech 3, 1875. That to carry into effect the provisions of section three of the act entitled "An act fixing the amount of United States notes, providing for a redistribu- tion of the national-bank currency, and for other purposes," approved June twentieth, eighteen hundred and sevetny-four, the Secretary of the Treasury is authorized to appoint the following force, to be employed under his direction, namely: In the OflBee of the Treasurer : * * * In the Office of the Comptroller of the Currency * * * And at the end of each month, the Secretary of the Treasury shall reimburse the Treasury to the full amount paid out under the provisions of this section by transfer of said amount from the deposit of the national banking association with the Treasury of the United States ; and at the end of each fiscal year he shall trans- fer from said deposit to the Treasury of the United States such sum as may have been actually expended under his direction for stationery, rent, fuel, light, and other necessary incidental expenses which have been incurred in carrying into effect the provisions of the said section of the above-named act. Act March 3, 1875 ; 18 Stat. L. 399 ; part of the Sundry Civil Appropria- tion Act. 126. Additional Reseeve Cities. Act of Maech 3, 1903, Amending Act of Maech 3, 1887. (Sec. 1.) That whenever three-fourths in number of the national banks located in any 752 Appendix. city of the United States having a population of twenty-five 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 he added to the cities named in sections fifty-one hundred and ninety-one and fifty-one hun- dred and ninety-two of the Eevised Statutes, the Comptroller shall have authority 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 sec- tions fifty-one hundred and ninety-one and fifty-one hundred and ninety-five of the Revised Statutes. Act March 3, 1887, sec. 1; 24 Stat. L. 559. Act March 3, 1903, sec. 1; 32 Stat. L. 1223. 127. DisposiTioiir of Kedemption Account. Act July 14, 1890. (Sec. 6.) That upon the passage of this act the balances standing with the Treasurer of the United States to the respective credits of national banks for deposits made to redeem the circulating notes of such banks, and all deposits thereafter received for like purpose, shall be covered into the Treasury as a miscellaneous receipt, and the Treasurer of the United States shall redeem from the general cash in the Treas- ury the circulating notes of said banks which may come into his possession subject to redemption; and upon the certificate of the Comptroller of the Currency that such notes have been received by him and that they have been destroyed and that no new notes will be issued in their place, reimbursement of their amount shall be made to the Treasurer, under such regu- lations as the Secretary of the Treasury may prescribe, from an appropriation hereby created, to be known as " national- bank notes; Redemption account," but the provisions of this act shall not apply to the deposits received under section three of the act of June twentieth, eighteen hundred and seventy- four, requiring every national bank to keep in lawful money with the Treasurer of the United States a sum equal to five per centum of its circulation, to be held and used for the redemp- Bankiitg. T53 tion of its circulating notes ; and the balance remaining of the deposits so covered shall, at the close of each month, be reported on the monthly public debt statement as debt of the United States bearing no interest. Act July 14, 1890, c. 708, sec. 6; 26 Stat. L. 289. Note. — The other sections of this Act relate to the purchase of silver bullion and issue of Treasury notes. 128. Redemptioit of Lost oe Stolen N^otes, and of Notes not Peopeely Signed. Act July 28, 1892. That the provisions of the Revised Statutes of the United States, providing for the redemption of national-bank notes, shall apply to all national-bank notes that have been or may be issued to, or received by, any national bank, notwithstanding such notes may have been lost by or stolen from the bank and put in circulation without the signature or upon the forged signature of the president or vice-president and cashier. Act July 28, 1892, c. 217; 27 Stat. L. 322. 129. (Sec. 5193.) Repealed March 14, 1900. Note. — This section as enacted June 8, 1872 (17 Stat. L. 337), authorized the Secretary of the Treasury to receive on deposit from national banking associations United States notes in sums of not less than ten thousand dollars and to issue certificates therefor payable on demand in denomina- tions of not less than five thousand dollars. This was repealed by Act March 14, 1900, section 6, page 97, post, which provides for issue of gold certificates payable to order in denominations of ten thousand dollars. 130. (Sec. 5194.) Dependent on section 5193 and superseded by its repeal. 131. Place foe Redemption of Cieculating JJ^otes to BE Designated. (Sec. 5195.) Each association organized in any of the 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 l^ew York. [But the foregoing provision shall not 48 754 Appendix. apply to associations organized and located in the city of San Francisco 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 Comptroller^ an associa- tion 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 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 receiv- ing satisfactory evidence thereof appoint a receiver, in the man- ner 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 ovra counter, at par, in lawful money on demand. Act June 3, 1864, c. 106, sec. 32; 13 Stat. L. 109. Note. — Italicized words repealed by Act June 20, 1874. 132. National Banks not Requieed oe Peemitted to Redeem Theie Cieculating Notes Elsewheee than at Theie Own Countees. Act June 20, 1874. (Sec. 3.) * * * And provided further. That so much of section thirty-two (section 5195, Revised Statutes) of said national- bank act requiring or permitting the redemption of its circu- lating notes elsewhere than at its own counter, except as pro- vided for in this section, is hereby repealed. Act June 20, 1874, c. 343, sec. 3; 18 Stat. L. 123. Note. — Section 3, Act of June 20, 1874, is set forth in full after Kevised Statutes, section 5192. 133. Additional Centeal Reseeve Cities. Act Maech 3, 1887. (Sec. 2.) That whenever three-fourths in number of the national banks located in any city of the United States hav- ing a population of two hundred thousand people shall make application to the Comptroller of the Currency, in writing, Banking. 755 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 provided in section fifty-one hundred and ninety-five of the Kevised 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 fifty-one hundred and ninety-one of the Eevised Statutes. Act March 3, 1887, e. 378, sec. 2 ; 24 Stat. L. 560. Note. — Other sections of Act March 3, 1887: Section 1, relating to additional reserve cities as amended by Act of March 3, 1903, follows Itevised Statutes, section 5192. Section 3 of this Act relates to redemption of legal-tender notes. 134. National Banks to Take Notes of Othee National Banks at Pae. (Sec. 5196.) Every national bank- ing association formed or existing under this title, shall take and receive at par, for any debt or liability to it, any and all notes or bills issued by any lawfully organized national banking association. But this provision shall not apply to any associa- tion organized for the purpose of issuing notes payable in gold. Act June 3, 1864, c. 106, sec. 32; 13 Stat. L. 109. Act July 12, 1870, e. 282, sec. 5; 16 Stat. L. 253. 135. Limitation upon Bate of Intbeest which Mat be Taken. (Sec. 5197.) Any association may take, receive, reserve, and charge on any loan or discount made, or upon any note, bill of exchange, 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 existing 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. 756 Appendix. 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. Act June 3, 1864, c. 106, sec. 30; 13 Stat. L. 108. 136. Penalty foe Taking Unlawful Interest. Jueis- DicTiON OF Suits by oe against National Banks. (Sec. 5198) [as amended 1875.] The taking, receiving, reserving, or charging a rate of interest greater than is allowed by the preceding section, when knowingly done, shall be deemed a forfeiture of the entire interest which the note, bill, or other evidence of debt carries with it, or which has been agreed to b§ paid thereon. In case the greater rate of interest has been paid, the person by whom it has been paid, or his legal repre- sentative, may recover back, in an action in the nature of an action of debt, twice the amount of the interest thus paid from the association taking or receiving the same; provided such action is commenced within two years from the time the usurious transaction occurred. That suits, actions, and pro- ceedings 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 association may be established, 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. Act June 3, 1864, c. 106, sec. 30; 13 Stat. L. 108. Act Feb. 18, 1875, c. 80; 18 Stat. L. 320. Note. — Additional provisions relating to jurisdiction of actions by and against national banks are contained in Act July 12, 1882, which is inserted after Revised Statutes, section 5136. See sections 62& and 736, Revised Statutes of United States, page 81, post, as to jurisdiction of Circuit Courts to enjoin Comptroller under section 5237, Revised Statutes, United States. See 223 U. S. 493, 196 U. S. 115, 195 U. S. 396, 183 U. S. 118, 191 U. S. 119. Banking. 757 137. Dividends. (Sec. 5199.) The directors of any asso- ciation may, semi-annually, declare a dividend of so much of the net profits of the association 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. Act June 3, 1864, c. 106, sec. 33 ; 13 Stat. L. 109. 138. Limitation of Liabilities which Mat be Incuebed BY Any One Pekson, Company, Etc. (Sec. 6200) [as amended 1906.] The total liabilities to any association, of any person, or of any company, corporation, or firm for money borrowed, including in the liabilities of a company or firm the liabilities of the several members thereof, shall at no time exceed one-tenth part of the amount of the capital stock of such associations, actually paid in and unimpaired, and one-tenth part of its unimpaired surplus fund : Provided, however, That the total of such liabilities shall in no event exceed thirty per centum of the capital stock of the association. But.;^he discount of bills of exchange drawn in good faith against actually exist- ing values, and the discount of commercial or business paper actually owned by the person negotiating the same shall not be considered as money borrowed. Act June 3, 1864, c. 106, see. 29; 13 Stat. L. 108. Act June 22, 1906; 34 Stat. L. 451. 139. Associations Must not Loan on ob Puechase Theib Own Stock. (Sec. 5201.) No association shall make any loan or discount on the security of the shares of its own capital stock, nor be the purchaser or holder of any such shares, unless such security or purchase 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 disposed of at public or private sale ; or, in default thereof, a receiver may be appointed to close 758 Appendix. up the business of the association, according to section fifty- two hundred and thirty-four. Act June 3, 1864, c. 106, sec. 35; 13 Stat. L. 110. 140. Resteiction on Bank's Indebtedness. (Sec. 5202.) No 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 nature following : First. Notes of circulation. Second. Moneys deposited with or collected by the associa- tion. Third. Bills of exchange or drafts drawn against money actually on deposit to the credit of the association, or due thereto. Fourth. Liabilities to the stockholders of the association for dividends and reserve profits. Act June 3, 1864, c. 106, sec. 36; 13 SUt. L. 110. See 214 U. S. 302. 141. Resteiction upon Use of Cieculating Notes. (Sec. 5203.) No association shall, either directly or indirectly, pledge or hypothecate any of its notes or circulation, for the purpose of procuring money to be paid in on its capital stock, or rt) be used in its banking operations, or otherwise ; nor shall any association use its circulating notes, or any part thereof, in any manner or form, to create or increase its capital stock. Act June 3, 1864, o. 106, sec. 37; 13 Stat. L. 110. 142. Peohibition ttpon Withdeawal of Capital. Un- EAENED Dividends Peohibited. (Sec. 5204.) No association, or any member thereof, shall, during the time it shall con- tinue its banking operations, vsdthdraw, or permit to be with- drawn, either in the form of dividends or otherwise, any por- tion of its capital. If losses have at any time been sustained by Banking, 759 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 banking operations, to an amount greater than its net profits then on hand, deducting therefrom its losses and bad debts. All debts due to any association, 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 prevent the reduction of the capital stock of the associa- tion under section fifty-one hundred and forty-three. Act June 3, 1864, c. 106, sec. 38; 13 Stat. L. 110. 143. Assessment foe Failure to Pay up Capital Stock OE FOE Impaiement OF CAPITAL. (Sec. 5205) [as amended 1876.] Every association which shall have failed to pay up its capital stock, as required by law, and every association whose capital stock shall have become impaired by losses or otherwise, shall, within three months after receiving notice thereof from the Comptroller of the Currency, pay the deficiency in the capi- tal 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 Comptroller of the Currency, until otherwise notified by him. If any such association shall fail to pay up its capital stock, and shall refuse to go into liquidation, as provided by law, -for three months after receiving notice from the Comp- troller, a receiver may be appointed 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 share- holder or shareholders of such bank shall neglect or refuse, after three months' notice, to pay the assessment, 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 share- holder or shareholders to be sold at public auction (after thirty days' notice shall be given by posting such notice of sale in 760 Appendix. the oJBSce of the bank, and by publishing such notice, in a news- paper of the city or town in which the bank is located, or in a newspaper published nearest thereto) to make good the deficiency, and the balance, if any, shall be returned to such delinquent shareholder or shareholders. Act March 3, 1873, c. 269, sec. 1 ; 17 Stat. L. 603. Act June 30, 1876, c. 156, sec. 4; 19 Stat. L. 64. See 192 U. S. 243. 144. PnOHIBITlOIir AGAIN^ST TJlirCTrEEENT NoTES. (SeC. 5206.) ISTo association shall at any time pay out on loans or discounts, or in purchasing drafts or bills of exchange, or in payment of deposits, or in any other mode pay or put in circu- lation, 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. Act June 3, 1864, c. 106, sec. 39; 13 Stat. L. 111. 145. UiiriTED States Notes not to be Held as Collat- eral. (Sec. 5207.) No association shall hereafter offer or receive United States notes or national-bank notes as security or as collateral security for any loan of money, or for a considera- tion agree to withhold the same from use, or offer or receive the custody or promise of custody of such notes as security, or as collateral security, or consideration for any loan of money. Any association offending against the provisions 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 Bankiitg. 761 fine or penalty incurred by a violation of this section shall be recoverable for the benefit of the party bringing such suit. Act Feb. 19, 1869, e. 32; 15 Stat. L. 270. 146. Issue of Gold Cbetificates. Act July 12, 1882. (Sec. 12.) That the Secretary of the Treasury is authorized and directed to receive deposits of gold coin * * * and issue certificates therefor * * *. Said certificates * * * when held by any national banking association, shall be counted as part of its lawful reserve; and no national baniing associa- tion shall be a member of any clearing-house in which such certificates shall not be receivable in the settlement of clearing- house balances ; * * * And the provisions of section fifty- two hundred and seven of the Revised Statutes shall be applica- ble to the certificates herein authorized and directed to be issued. Act July 12, 1882, see. 12; 22 Stat. L. 165. Note. — This section given in full, page 87, post. See also Currency Act of Marqh 4, 1900, as amended March 4, 1907, page 97, post, relating to gold certificates, and making ten dollars lowest denomination. Other sections of this act referred to on page 19, ante. 147. Penalty fob, Falsely Ceetifying Checks. (Sec. 5208.) It shall be unlawful for any officer, clerk, or agent of any national banking association to certify any check drawn upon the association unless the person or company drawing the check has on deposit with the association, at the time such check is certified, an amount of money equal to the amount specified in such check. Any cheek so certified by duly author- ized 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 proceedings on the part of the Comptroller as provided for in section fifty-two hundred and thirty-four. Act March 3, 1869, c. 135 ; 15 Stat. L. 335. See 146 U. S. 240. 148. Punishment foe Falsely Ceetifying Checks. Act July 12, 1882. (Sec. 13.) That any officer, clerk, or agent 762 Appendix. of any national banking association who shall wilfully violate the provisions of an act entitled "An act in reference to certify- ing checks by national banks," approved March third, eighteen hundred and sixty-nine, being section fifty-two hundred and eight of the Eevised 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 provisions 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 misde- meanor, and shall, on conviction thereof in any circuit or dis- trict court of the United States, be fined not more than five thousand dollars, or shall be imprisoned not more than five years, or both, in the discretion of the court. Act July 12, 1882, c. 290, sec. 13; 22 Stat. L. 166. 149. PEIfALTY FOK EMBEZZLEMENT, AbSTEACTION, WiLFUL Misapplication, False Entries, Etc. (Sec. 5209.) Every president, director, cashier, teller, clerk, or agent of any asso- ciation, who embezzles, abstracts, or wilfully misapplies any of the moneys, funds, or credits of the association; or who, with- out authority from the directors, issues or puts in circulation any of the notes of the association ; or who, without such author- ity, issues or puts forth any certificate of deposit, draws any order or bill of exchange, makes any acceptance, assigns any note, bond, draft, bill of exchange, mortgage, judgment, or decree; or who makes any false entry in any book, report, or statement of the association, with intent, in either case, to injure or defraud the association or any other company, body politic or corporate, or any individual person, or to deceive any oflBcer 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. Act June 3, 1864, c. 106, sec. 55; 13 Stat. L. 116. Act April 6, 1869, c. 11; 16 Stat. L. 7. Act July 8, 1870, c. 226; 16 Stat. L. 195. Banking. 763' 150. National Banks not Permitted to JVEake Contri- butions IN Connection with Election to Political Office. Act January 26, 1907. That it shall be unlawful for any national bank, or any corporation organized by author- ity of any laws of Congress, to make a money contribution in connection with any election to any political office. It shall also be unlawful for any corporation whatever to make a money contribution in connection with any election at which Presi- dential and Vice-Presidential electors or a Representative in Congress is to be voted for, or any election by any State legisla- ture of a United States Senator. Every corporation which shall make any contribution in violation of the foregoing pro- visions shall be subject to a fine not exceeding five thousand dollars, and every officer or director of any corporation who shall consent to any contribution by the corporation in viola- tion of the foregoing provisions shall upon conviction be pun- ished by a fine of not exceeding one thousand and not less than two hundred and fifty dollars, or by imprisonment for a term of not more than one year, or both such fine and imprisonment in the discretion of the court. Act Jan. 26, 1907; 43 Stat. L. 864. 151. List of Shareholders. (Sec. 5210.) 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 •residences of all the shareholders in the association, 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 association, and the officers authorized to assess taxes under State authority, during busi- ness hours of each day in which business may be legally trans- acted. A copy of such list, on the first Monday of July of each year, verified by the oath of such president or cashier, shall be transmitted to the Comptroller of the Currency. Act June 3, 1864, e. 106, sec. 40; 13 Stat. L. 111. 764 Appendix. 152. Rbpoets to Oompteollee of the Cueeenct. (Seo. 5211) [as amended 1877.] Every association shall make to the Comptroller of the Currency not less than five reports during each year, according to the form vehich may be pre- scribed by him,_ verified by the oath or affirmation of the presi- dent or cashier of such association, and attested by the signature of at least three of the directors. Each such report shall exhibitj in detail and under appropriate heads, the resources and liabili- ties of the association at the close of business on any past day by him specified; and shall be transmitted 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 is 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. Act June 3, 1864, e. 106, sec. 34; 13 Stat. L. 109. Act March 3, 1869, c. 130, sec. 1; 15 Stat. L. 326. Act Feb. 27, 1877, c. 69; 19 Stat. L. 252. See 157 U. S. 286. Note. — See section 713, Code of District of Columbia, page 112, post, requiring publication of reports in District of Columbia to be in two or more daily papers. 153. VtiEiFicATiGiir OF Repoets. Act Febeuaey 26, 1881. That the oath or affirmation required by section fifty-two hun- dred and eleven of the Revised 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 administer oaths, shall be a sufficient verification as contemplated by said section fifty-two hundred Banking. 765 and eleven: Provided, That the oflBcer administering the oath is not an oflScer of the bank. Act Feb. 26, 1881, c. 82; 21 Stat. L. 352. 154. Repoet of Dividends. (Sec. 5212.) In addition to the reports required by the preceding section, each association shall report to the Comptroller 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. Act March 3, 1869, c. 130, sec. 2; 15 Stat. L. 327. 155. Penalty foe Pailtjee to Make Repoets. (Sec. . 5213.) Every association v^hich fails to make and transmit any report required under either of the two preceding sections 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 delays 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 interest, as it may become due to the association, on the bonds deposited with him to secure circulation. All sums of money collected for penalties under this section shall be paid into the Treasury of the United States. Act March 3, 1869, c. 130, sees. 1, 2; 15 Stat. L. 326. 156. Taxes Payable to the United States. (Sec. 5214) [as amended May 30, 1908.] National banking associations having on deposit bonds of the United States, bearing interest at the rate of two per centum per annum, including the bonds issued for the construction of the Panama Canal, under the provisions of section eight of "An act to provide for the con- struction of a canal connecting the waters of the Atlantic and 766 Appendix. Pacific oceans," approved June twenty-eighth, nineteen hundred and two, to secure its circulating notes, shall pay to the Treas- urer of the United States, in the months of January and July, a tax of one-fourth of one per centum each half year upon the average amount of such of its notes in circulation as are hased upon the deposit of such honds; and such associations having on deposit bonds of the United States bearing interest at a rate higher than two per centum per annum shall pay a tax of one-half of one per centum each half year upon the average amount of such of its notes in circulation as are based upon the deposit of such bonds. National banking associations hav- ing circulating notes secured otherwise than by bonds of the United States shall pay for the first month a tax at the rate of five per centum per annum upon the average amount of such of their notes in circulation as are based upon the deposit of such securities, and afterwards an additional tax of one per centum per annum for each month until a tax of ten per centum per annum is reached, and thereafter such tax of ten per centum per annum, upon the average amount of such notes. Every national banking association having outstanding circulating notes secured by a deposit of other securities than United States bonds shall make monthly returns, under oath of its president or cashier, to the Treasurer of the United States, in such form as the Treasurer may prescribe, of the average monthly amount of its notes so secured in circulation ; and it shall be the duty of the Comptroller of the Currency to cause such reports of notes in circulation to be verified by examination of the banks' records. The taxes received on circulating notes secured otherwise than by bonds of the United States shall be paid into the Division of Kedemption of the Treasury and credited and added to the reserve fund held for the redemption of the United States and other notes. Act June 3, 1864, c. 106, sec. 41; 13 Stat. L. 111. Act March 3, 1883, sec. 1; 18 Stat. L. 488. Act March 14, 1900, c. 41, see. 13; 31 Stat. L. 49. Act May 30, 1908, see. 9. 157.~ Half-yeaelt Eetuen oe- Cibculation [deposits and capital stocTe]. (Sec. 5215.) In order to enable the Treasurer Banking. 767 to assess the duties imposed by the preceding section, each asso- ciation shall, within ten days from the first days of January and July of each year, 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 prescribe, of the average amount of its notes in circulation [a/nd of the average amount of its deposits, and of 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 association which fails so to make such return shall be liable to a penalty of two hundred dollars, to be col- lected 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 States. Act June 3, 1864, c. 106, sec. 41; 13 Stat. L. 111. Note. — The taxes on the average amount of deposits and capital stock having been repealed by the Act of March 3, 1883, and the original provision therefor struck out of section 5214 as amended by Act of May 30, 1908, there is no longer any obligation to make the return of those two items. 158. Penalty foe FAiitrEE to Make Retubn. (Sec. 5216.) 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 delivered to such association by the Comptroller of the Cur- rency [and upon the highest amount of its deposits and capital stock, to be ascertained in such manner as the Treasurer may deem best]. Act June 3, 1864, c. 106, sec. 41; 13 Stat. L. 111. Note. — See note under section 5215 stating that tax on deposits and capital stock had been repealed. 159. Enfoecing Tax on Cieculation. (Sec. 5217.) Whenever an association fails to pay the duties imposed by the three preceding sections, the sums due may be collected in the manner provided for the collection of United States taxes from other corporations; or the Treasurer may reserve the 768 Appendix. amount out of the interest, as it may become due, on the bonds deposited with him by such defaulting association. Act June 3, 1864, c. 106, sec. 41; 13 Stat. L. 111. 160. Refundin-g Excess Tax. (Sec. 5218.) In all cases where an association has paid or may pay in excess of what may be or has been found due from it, on account of the duty required to be paid to the Treasurer of the United States, the association may state an account therefor, which, on being certi- fied by the Treasurer of the United States, and found correct by the Pirst Comptroller of the Treasury, shall be refunded in the ordinary manner by warrant on the Treasury. Resolution March 2, 1867, No. 49; 14 Stat. L. 572. 161. No Tax to be Paid by Insolvent Banks. Act March 1, 1879. (Sec. 22.) That whenever and after any bank has ceased to do business by reason of insolvency or bankruptcy, no tax shall be assessed or collected, or paid into the Treasury of the United States, on account of such bank, which shall dimin- ish the assets thereof necessary for the full payment of all its depositors; and such tax shall be abated from such national banks as are found by the Comptroller of the Currency to be insolvent. Internal Eevenue Act, March 1, 1879, sec. 22; 20 Stat. L. 351. 162. State Taxation. (Sec. 5219.) Nothing herein shall prevent all the shares in any association from being included in the valuation of the personal property of the owner or holder of such sha:res, 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 located, and not elsewhere. Noth- Banking. 769 ing 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. Act June 3, 1864, c. 106, sec. 41; 13 Stat. L. HI. Act Feb. 10, 1868, c. 7; 15 Stat. L. 34. Note. — See 14 Idaho 659, 19 U. S. 19, 23 Wall. 480, 113 U. S. 690, 39 Fed. Rep. 389, 48 Ind. 568, 205 U. S. 503, 90 S. W. 949, 102 Ky. 174, 101 U. S. 153, 113 U. S. 143, 76 Fed. Itep. 385, 147 U. S. 87. Can a bank evade a tax by inveBting in government bonds t See In re People's Bank of Vermont, 203 III. 300. Notice to examine books of bank not necessary in Indiana. Washington Nat. Bank v. Daily, 166 Ind. 631. Bank deposits temporarily in the State should not be taxed. 205 U. S. 395, 216 U. S. 206, 198 U. S. 100, 195 U. S. 351, 173 U. S. 664, 160 U. S. 660. CHAPTER V. DISSOLUTION AND BECEIVEESHIP. 163. § 5220. Two-thirds vote re- quired for liquidation. 164. § 5221. Notice of volunta;ry liquidation. 165. § 5222. Deposit of lawful money to redeem circula- tion. 166. § 5223. No deposit required for consolidation. 167. § 5224. Reassignment of bonds and redemption of notes of liquidating banks. 168. Act June 20, 1874. Duty of Treasurer, assistant treas- urer, etc., to return notes of failed or liquidating banks to Treasury for re- demption. 169. § 5225. Destruction of re- deemed notes. 170. § 5226. Protest of bank circu- lation. 171. § 5227. Bonds forfeited if cir- culation is dishonored. Ex- amination by special agent. 172. § 5228. Suspension of business after default. 173. § 5229. Notice to present cir- culation for redemption. Cancellation of bonds. 49 174. 175. 176. 177. § 5230. Sale of bonds at auc- tion. First lien for re- deeming circulation. § 5231. Bonds may be sold at private sale., § 5232. Disposal of redeemed notes. Regulations for re- demption records. § 5233. Redeemed notes to be canceled. 178. § 5234. Appointment and duties of receivers. 179. § 5235. Notice to creditors of insolvent banks to present claims. 180. § 5236. Dividends. Distribu- tion of assets of insolvent banks. 181. § 5237. When bank may enjoin further proceedings. 182. § 5238. Fees and expenses. 183. Act June 30, 1876. When re- ceiver may be appointed. 184. Act June 30, 1876. Creditor's bill against shareholders. 185. Act June 30, 1876. Appoint- ment, qualification, and duties of shareholders' agent. 770 Appendix. 186. Act March 29, 1886. Receiver may purchase property to protect his trust. 187. Act March 29, 1886. Approval of request. 188. Act March 29, 1886. Payment. 189. § 5239. Penalty for violation of this title. Forfeiture of charter. Individual lia- bility of directors. 190. § 5240. Appointment of ex- aminers. Compensation. 191. § 5241. Limitation of visitorial powers. 192. § 5242. Transfers, when void. Illegal preference of cred- itors. 193. § 5243. Use of the title "Na- tional." 163. Two-THiEDS Vote Eequieed foe Liquidation. (Sec. 5220.) Any association may go into liquidation and be closed by the vote of its shareholders owning two-thirds of its stock. Act June 3, 1864, c. 106, sec. 42; 13 Stat. L. 112. Note. — For enforcement of shareholders' liability when bank is in liqui- dation, see Act of June 20, 1876, following Revised Staitutes, section 5238. 164. ISTOTICE OF ■VOLTTNTARY LIQUIDATION. (SeC. 5221.) 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 newspaper published in the city or town in which the association is located, or if no newspaper is there published, then in the newspaper published nearest thereto, that the association is closing up its affairs, and notifying the holders of its notes and other creditors to present the notes and other claims against the association for payment. Act June 3, 1864, c. 106, see. 42; 13 Stat. L. 112. 165. Deposit of Lawful Money to Redeem Oieoulation. (Sec. 5222.) Within six months from the date of the vote to go into liquidation, the association shall deposit with the Treas- urer of the United States, lawful money of the United States sufficient to redeem all its outstanding circulation. The Treas- urer shall execute duplicate receipts for money thus deposited, and deliver one to the association and the other to the Comp- Banking. 771 troller 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. Act June 3, 1864, c. 106, sees. 42, 43; 13 Stat. L. 112. Act July 14, 1870, c. 257, 16 Stat. L. 274. 166. No Deposit Requieed foe Consolidation. (Sec. 5223.) An association vehich is in good faith winding up its business for the purpose of consolidating with another associa- tion shall not be required to deposit lawful money for its out- standing circulation; but its assets and liabilities shall be re- ported by the association with which it is in process of consolidation. Act July 14, 1870, c. 257; 16 Stat. L. 274. 167. Reassignment of Bonds and Redemption of Notes OF Liquidating Banks. (Sec. 5224) [as amended 1875.] Whenever a sufficient deposit of lawful money to redeem the outstanding circulation of an association proposing to close its business has been made, the bonds deposited by the association to secure payment of its notes shall be reassigned to it, 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. And if any such bank shall fail to make the deposit and take up its bonds thirty days after the expiration of the time specified, the Comptroller of the Currency shall have power to sell the bonds pledged for the circulation of said bank, at public auction in New York City, and, after providing for the redemption and cancellation of said circulation, and the necessary expenses of the sale, to pay over any balance remain- ing to the bank or its legal representatives. Act June 3, 1864, c. 106, sec. 42; 13 Stat. L. 112. Act Feb. 18, 1875, c. 80; 18 Stat. L. 320. 773 Appendix. 168. DtTTT OF Teeastjeee, Assistant Teeasueees, Etc., TO Return Notes of Failed oe Liquidating Banks to Teeasuey foe Redemption. Act June 20, 1874. (Sec. 8.) And it shall be the duty of the Treasurer, assistant treasurers, designated depositaries, and national bank depositaries of the United States to assort and return to the Treasury for redemp- tion the notes of such national banks as have failed, or gone into voluntary liquidation for the purpose of winding up their affairs, and of such as shall hereafter so fail or go into liquidation. Act June 20, 1874, o. 343, sec. 8; 18 Stat. L. 125. 169. Desteuction of Redeemed Notes. (Sec. 5225) [as amended 1877.] Whenever the Treasurer has redeemed any of the notes of an association which has commenced to close its affairs, under the five preceding sections, he shall cause the notes- to be mutilated and charged to the redemption account of the association; and all notes so redeemed by the Treasurer shall, every three months, be certified to and [burned] in the manner prescribed in section fifty-one hundred and eighty-four. Act June 3, 1864, c. 106, sec. 43; 13 Stat. L. 112. Act Feb. 27, 1877, c. 69; 19 Stat. L. 252. Note. — See Act of June 23, 1874, following Revised Statutes, section 5184, directing that bank notes be macerated and not burned. 170. Peotest of Bank Cieculation. (Sec. 5226.) When- ever any national banking association fails to redeem in the lawful money of the United States any of its circulating notes, upon demand of payment duly made during the usual hours of business, at the office of such association, or at its designated place of redemption, the holder may cause the same to be pro- tested, in one package, by a notary public, unless the president or cashier of the association whose notes are presented for pay ment [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 admis- Banking. 773' sion in writing, stating tlie 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 forthwith forward such admission or notice of protest to the Comptroller of the Currency, retaining a copy thereof. If, however, satisfactory proof is produced to the notary public that the payment of the notes demanded is re- strained 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. . Act June 3, 1864, c. 106, sec. 46; 13 Stat. L. 113. Note. — Circulation redeemable only at Treasury or over own counter. Designated places of redemption have not existed since Act June 20, 1874. (See said Act following Hevised Statutes, section 5192.) 171. Bonds Foefeitbd if Cibculation is Dishonoeed. Examination by Special Agent. (Sec. 5227.) On receiving notice that any national banking association has failed to re- deem 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 refused to pay its circulating notes and is in default, he shall, within thirty days after he has received notice of such failure, declare the bonds deposited by such asso- ciation forfeited to the United States, and they shall thereupon be so forfeited. Act June 3, 1864, e. 106, sec. 47; 13 Stat. L. 114. 172. Suspension of Business Aftee Default. (Sec. 5228) [as amended 1875.] After a default on the part of an association to pay any of its circulating notes has been ascer- 774 Appendix. tained by the Comptroller, and notice thereof has been given by him to the association, it shall not be lawful for the association suffering the same to pay out any of its notes, discount any notes or biUs, or otherwise prosecute the business of banking, except to receive and safely keep money belonging to it, and to deliver special deposits. Act June 3, 1864, e. 106, sec. 46; 13 Stat. L. 113. Act Feb. 18, 1875, c. 80; 18 Stat. L. 320. 173. Notice to Peesent Cieculatioij^ foe Eedemption. Cancellation of Bonds. (Sec. 5229.) Immediately upon declaring the bonds of an association forfeited for non-payment of its notes, the Comptroller shall give notice, in such manner as the Secretary of the Treasury shall, by general rules or other- wise, direct, to the holders of the circulating notes of such asso- ciation, 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 exceeding par, to the notes paid. Act June 3, 1S64, c. 106, sec. 47; 13 Stat. L. 114. 174. Sale of Bonds at Auction. Fiest Lien foe Kk- deeming Cieculation. (Sec. 5230.) Whenever the Comp- troller has become satisfied, by the protest or the waiver and admission specified in section fifty-two hundred and twenty-six, or by the report provided for in section fifty-two hundred and twenty-seven, that any association has refused to pay its circu- lating 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 JSTew York, after giving thirty days' notice of such sale to the association. 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 association, the United States shall have a paramount lien upon all its Bawkiitg. .Y75 assets; and such deficiency shall be made good out of such assets in preference to any and all other claims whatsoever, except the necessary costs and expenses of administering the same. Act June 3, 1864, c. 106, sees. 47, 48; 13 Stat. L. 114. 175. Bonds May be Sold at Peivate Sale. (Sec. 5231.) The Comptroller may, if he deems it for the interest of the United States, sell at private sale any of the bonds of an asso- ciation shown to have made default in paying its notes, and receive therefor either money or the circulating notes of the association. But no such bonds shall be 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 hundred and sixty-two, fifty-one hundred and sixty- three, and fifty-one, hundred and sixty-four. Act June 3, 1864, c. 106, sec. 49'; 13 Stat. L. 114. 176. Disposal of Redeemed Notes; Regulations foe Redemption Recoeds. (Sec. 5232.) The Secretary of the Treasury may, from time to time, make such regulations respect- ing the disposition to be made of circulating notes after presen- tation at the Treasury of the United States for payment, and respecting the perpetuation of the evidence of the payment thereof, as may seem to him proper. Act June 3, 1864, c. 106, sec. 47; 13 Stat. L. 114. 177. Redeemed Notes to be Canceled. (Sec. 5233.) All notes of national banking associations presented at the Treasury of the United States for payment shall, on being paid, be canceled. Act June 3, 1864, c. 106, sec. 47; 13 Stat. L. 114. 178. Appointment AND Duties OF Receivers. (Sec. 5234.) On becoming satisfied, as specified in sections fifty-two hundred 7Y6 Appendix. and twenty-six and fifty-two Imndred and twenty-seven, that any association has refused to pay its circulating notes as therein mentioned, and is in default, the Comptroller of the Currency may forthwith appoint a receiver, and require of him such hond and security as he deems proper. Such receiver, under the direction of the Comptroller, shall take possession of the hooks, records, and assets of every description of such association, collect all dehts, dues, and claims belonging to it, and, upon the order of a court of record of competent juris- diction, may sell or compound all had or douhtful dehts, 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 dehts 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. Act June 3, 1864, c. 106, sec. 50; 13 Stat. L. 114. Note. — Other provisions authorizing the appointment of receivers of national banks and relating to powers and duties of receivers and agents will he found in the Act of June 30, 1876, as amended August 3, 1892, and March 2, 1897, and the Act of March 29, 1886. Both these acts are set forth following section 5238, Revised Statutes. A receiver may also he appointed, under the provisions of section fifty- two hundred and thirty-four of the Revised Statutes of the United States, for the following violations of law: Where the capital stock of a national hank has not heen^fully paid in and it is thus reduced below the legal minimum and remains so for thirty days. (Sec. 5141, R. S.) For failure to make good the lawful-money reserve within thirty days after notice. (Sec. 5191, R. S.) Where a bank purchases or acquires its own stock, to prevent loss upon a debt previously contracted) in good faith, and the same is not sold or disposed of within six months from the time of its purchase. (Sec. 5201, R. S.) For failure to make good any impairment in its capital stock and refusing to go nto liquidation within three months after receiving notice. (Sec. 5205, R.S.) For false certification of cheeks by any ofiicer, clerk, or agent. (Sec. 5208, R. S.) 179. Notice to Ceeditoes of Insolvent Banks to Pej;- SBNT Claims. (Sec. 5235.) The Comptroller shall, upon appointing a receiver, cause notice to be given, by advertise- Banking. 777 ment in sueli newspapers as he may direct, for three consecutive months, calling on all persons who may have claims against such association to present the same, and to make legal proof thereof. Act June 3, 1864, c. 106, sec. 50; 13 Stat. L. 114. 180. Dividends; Disteibution of Assets of Insolvent Banks. (Sec. 5236.) From time to time, after full provision has heen first made for refunding to the United States any deficiency in redeeming the notes of such association, the Comp- troller shall make a ratable dividend of the money so paid over to him by such receiver oh all such claims as may have been proved to his satisfaction or adjudicated in a court of competent jurisdiction, and, as the proceeds of the assets of such associa- tion 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. Act June 3, 1864, c. 106, see. 50; 13 Stat. L. 114. 181. When Bank Mat Enjoin Eubthee Proceedings. (Sec. 5237.) Whenever an association against which proceed- ings have been instituted, on account of any alleged refusal to redeem its circulating notes as aforesaid, denies having failed to do so, 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 and twenty-seven, apply to the nearest circuit, or district, 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 fur- ther proceedings should not be enjoined, and' after the decision of the court or finding of the jury that such association has not refused to redeem 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 7Y8 Appendix. direction, from all furtker proceedings on account of such alleged refusal. Act June 3, 1864, c. 106, sec. 50; 13 Stat. L. 114. Note. — See also sections 629 and 736, Revised Statutes, page 81, post. 182. Fees and Expenses. (Sec. 5238.) All fees for pro- testing the notes issued by any national banking association shall be paid by the person procuring 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 pay- ment 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. Act June 3, 1864, u. 106, sec. 51; 13 Stat. L. 115. 183. When Eeceivee May be Appointed. Act June 30, 1876. (Sec. 1.) That whenever any national banking asso- ciation shall be dissolved, and its rights, privileges, and fran- chises declared forfeited, as prescribed in section fifty-two hun- dred and thirty-nine of the Revised Statutes of the United States, or whenever any creditor of any national banking asso- ciation shall have obtained a judgment against it in any court of record, and made application, accompanied by a certificate from the clerk of the court stating that such judgment has been rendered and has remained unpaid for the space of thirty days, or whenever the Comptroller shall become satisfied of the in- solvency of the national banking association, he may, after due examination of its affairs, in either case, appoint a receiver who shall proceed to close up such association, and enforce the per- sonal liability of the shareholders, as provided in section fifty- two hundred and thirty-four of said statutes. Act June 30, 1876, c. 156, sec. 1; 19 Stat. L. 63. 184. Ceeditoe's Bilx Against Shaeeholdees. Act June, 30, 1876. (Sec. 2.) That when any national banking associa- Banking. 779 tion 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 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 shareholders thereof, in any court of the United States having original jurisdiction in equity for the district in which such association may have been located or established. Act June 30, 1876, c. 156, sec. 2; 19 Stat. L. 63. 185. Appointment, Qualification, and Duties of Shaee- HOLDBEs' Agent. Act June 30, 1876, as Amended 1892. 1897. (Sec. 3.) That 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 the Revised Statutes of the United States, and when, as pro- vided in section fifty-two hundred and thirty-six thereof, the Comptroller of the Currency 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 receiver- ship, and the redemption of the circulating notes of such asso- ciation shall have been provided for by depositing lawful money of the United States with the Treasurer of the United States, the Comptroller of the Currency 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 association was carried on, or if no newspaper is there published, in the newspaper published nearest thereto. At such meeting the shareholders shall deter- mine whether the receiver shall be continued and shall wind up the affairs of such association, or whether an agent shall be elected for that purpose, and in so determining the said share- holders shall vote by ballot, in person or by proxy, each share 780 Appendix. of stock entitling the holder to one vote, and the majority of the stock in value and number of shares shall be necessary to determine whether the said receiver shall be continued, or whether an agent shall be elected. In case such majority shall determine that the said receiver shall be continued, the said receiver shall thereupon proceed with the execution of his trust, and shall sell, dispose of, or otherwise collect the assets of the said association, and shall possess all the powers and au- thority, and be subject to all the duties and liabilities originally conferred or imposed upon him by his appointment as such receiver, so far as the same remain applicable. In case the said meeting shall, by the vote of a majority of the stock in value and number of shares, determine that an agent shall be elected, the said meeting shall thereupon proceed to elect an agent, voting by ballot, in person or by proxy, each share of stock entitling the holder to one vote, and the person who shall receive votes representing at least a majority of stock in value and number shall be declared the agent for the purposes herein- after provided; and whenever any of the shareholders of the association shall, after the election of such agent, have executed and filed a bond to the satisfaction of the Comptroller of the Currency, conditioned for the payment and discharge in full of each and every claim that may thereafter be proved and allowed by and before a competent court, and for the faithful per- formance of all and singular the duties of such trust, the Comp- troller and the receiver shall thereupon transfer and deliver to such agent all the undivided or uncollected or other assets of such association then remaining in the hands or subject to the order and control of said Comptroller and said receiver, or either of them ; and for this purpose said Comptroller and said receiver are hereby severally empowered and directed to exe- cute any deed, assignment, transfer, or other instrument in writing that may be necessary and proper ; and upon the execu- tion and delivery of such instrument to the said agent the said Comptroller and the said receiver shall by virtue of this act be discharged from any and all liabilities to such association and to each and all the creditors and shareholders thereof. Bajstkiitg. T81 Upon receiving such deed, assignment, transfer, or other in- strument, the person elected such agent shall hold, control, and dispose of the assets and property of such association which he may receive under the terms hereof for the benefit of the share- holders of such association, and he may, in his own name, or in the name of such assoeiation, 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, and may sell, compromise, or compound the debts due to such association, with the consent and approval of the circuit or district court of the United States for the district where the business of such association was carried on, and shall at the conclusion of his trust render to such district or circuit court a full account of all his pro- ceedings, receipts, and expenditures as such agent, which court shall, upon due notice, settle and adjust such accounts and dis- charge said agent and the sureties upon said bond. And in case any such agent so elected shall refuse to serve, or die, resign, or be removed, any shareholder may call a meeting of the share^ holders of such association in the town, city, or village where the business of the said association was carried on, by giving notice thereof for thirty days in a newspaper published in said town, city, or village, or if no newspaper is there published, in the newspaper published nearest thereto, at which meeting the shareholders 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 shall have executed a bond, to the shareholders conditioned for the faithful performance of his duties, in the penalty fixed by the shareholders at said meeting, with two sureties, to be approved by a judge of a court of record, and file said bond in the office of the clerk of a court of record in the county where the business of said association was carried on, he shall have all the rights, powers, and duties of the agent first elected as hereinbefore provided. At any meeting held as hereinbefore provided administrators or executors of deceased shareholders may act and sign as the decedent might have done if living, and 782 Appendix. guardians of minors and trustees of other persons may so act and sign for their ward or wards or cestui que trust. The pro- ceeds of the assets or property of any such association which may be undistributed at the time of such meeting or may be subsequently received shall be distributed as follows: " First. To pay the expenses of the execution of the trust to the date of such payment. " Second. To repay any amount or amounts which have been paid in by any shareholder or shareholders of such association upon and by reason of any and all assessments made upon the stock of such association by the order of the Comptroller of the Currency in accordance with the provisions of the statutes of the United States; and " Third. The balance ratably among such stockholders, in proportion to the number of shares held and owned by each. Such distribution shall be made from time to time as the pro- ceeds shall be received and as shall be deemed advisable by the said Comptroller or said agent." Act June 30, 1876, c. 156, sec. 3; 19 Stat. L. 63, as amended Aug. 3, 1892, 27 Stat. L. 345, and! Mar. 2, 1897, 29 Stat. L. 60O. Note. — Other sections of Act June 30, 1876: Section 4 amends Revised Statutes, section 5205. Section 5 relates to counterfeit notes. Section 6 relates to savings banks and trust companies, organized under Act of Congress. See Code District of Columbia, page 112, post. 186. Keceivee Mat Puechase Peopeety to Protect His Tettst. Act Maech 29, 1886. (Sec. 1.) That whenever the receiver of any national bank duly appointed by the Comp- troller of the Currency, and who shall have duly qualified and entered upon the discharge of his trust, shall find it in his opinion necessary, in order to fully protect and benefit his said trust, to the extent of any and all equities that such trust may have in any property, real or personal, by reason of any bond, mortgage, assignment, or other proper legal claim attaching thereto, and which said property is to be sold under any execu- tion, decree of foreclosure, or proper order of any court of jurisdiction, he may certify the facts in the case, together with Banking. 783' his opinion as to the value of the property to be sold, and the value of the equity his said trust may have in the same, to the Comptroller of the Currency, together vs^ith a request for the right and authority to use and employ so much of the money of said trust as may he necessary to purchase such property at such sale. Act March 29, 1886, c. 28, sec. 1; 24 Stat. L. 8. 187. Approval of Request. Act Maech 29, 1886. (Sec. 2.) That such request, if approved by the Comptroller of the Currency, shall be, together with the certificate of facts in the case, and his recommendation as to the amount of money which, in his judgment, should be so used and employed, sub- mitted to the Secretary of the Treasury, and if the same shall likewise be approved by him, the request shall be by the Comp- troller of the Currency allowed, and notice thereof, witb copies of the request, certificate of facts, and endorsement of approvals, shall be filed with the Treasurer of the United States. Act March 29, 1886, c. 28, sec. 2; 24 Stat. L. 8. 188. Payment. Act Maech 29, 1886. (Sec. 3.) That whenever any such request shall be allowed as hereinbefore pro- vided, the said Comptroller of the Currency shall be, and is, empowered to draw upon and from such funds of any such trust as may be deposited with the Treasurer of the United States for the benefit of the bank in interest, to the amount as may be recommended and allowed and for the purpose for which such allowance was made: Provided, however. That all payments to be made for or on account of the purchase of any such prop- erty and under any such allowance shall be made by the Comp- troller of the Currency direct, with the approval of the Secre- tary of the Treasury, for such purpose only and in such manner as he may determine and order. Act March 29, 1886, c. 28, sec. 3; 24 Stat. L. 8. 189. Penalty eoe Violation of This Title ; Foefeitttee OF Chaetee; Individual Liability of Dieectoes.^ (Sec. 784 AppEifDix. »*- 5239.) If the directors of any national banking association shall knowingly violate, or knowingly permit any of the officers, agents, or servants of the association to violate any of the pro- visions of this title, all the rights, privileges, and franchises of the association shall be thereby forfeited. Such violation shall, however, be determined and adjudged by a proper circuit, dis- trict, 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 viplation every director who participated in or assented to the same shall be held liable in his personal and individual capacity for all damages which the association, its shareholders, or any other person shall have sustained in consequence of such violation. Act June 3, 1864, c. 106, sec. 53; 13 Stat. L. 116. 190. Appointment of Examinees, Compensation. (Sec. 5240) [as amended 1875.] 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 association, 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. That all persons appointed to be examiners of national banks not located in the redemption cities specified in section five thousand one hundred 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 examination 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 three hundred thousand dollars, twenty-five dollars ; those hav- ing a capital of three hundred thousand dollars and less than four hundred thousand dollars, thirty-five dollars ; those having Banking. 785 a capital of four hundred thousand dollars and less than five hundred thousand dollars, forty dollars ; those having a capital of five hundred thousand dollars and less than six hundred thousand dollars, fiftj dollars; those having a capital of six hundred thousand dollars and over, seventy-five dollars; which amounts shall be assessed by the Comptroller of the Currency upon, and paid by, the respective association so examined, and shall be in lieu of the compensation and mileage heretofore allowed for making said examinations, and persons appointed to make examinations of national banks in the cities named in section five thousand one hundred and ninety-two of the Re- vised Statutes of the United States, or in any one of the States of Oregon, California, and Nevada, or in the Territories, shall receive such compensation as may be fi:^ed by the Secretary of the Treasury upon the recommendation of the Comptroller of the Currency; and the same shall be assessed and paid in the manner hereinbefore provided. But no person shall be ap- pointed to examine the affairs of any banking association of which he is a director or other officer. Act June 3, 1864, c. 106, sec. 54; 13 Stat. L. 116. Act Feb. 19, 1875, 0. 89; 18 Stat. L. 329. 191. Limitation of Visitoeial Powees. (Sec. 5241.) 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. Act June 3, 1864, c. 106, sec. 54; 13 Stat. L. 116. 192. Teansfees, When Void; Illegai, Peefeeence of Ceeditoes. (Sec. 5242.) All transfers of the notes, bonds, bills of exchange, or other evidences of debt owing to any na- tional banking association, or of deposits to its credit ; all assign- ments of mortgages, 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 share- holders or creditors ; and all payments of money to either, made after the commission of an act of insolvency, or in contempla- 50 V86 Appendix. tion thereof, made with a view to prevent 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 utterly 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. Act June 3, 1864, c. 106, sec. 52; 13 Stat. L. 115. 193. Use op the Title " ]!^ational." (Sec. 5243.) All banks not organized and transacting business under the national currency laws, or under this title, and all persons or corpora- tions doing the business of bankers, brokers, or savings institu- tions, except savings banks authorized by Congress to use the word " national " as a part of their corporate name, are pro- hibited from using the word " national " as a portion of the name or title of such bank, corporation, firm, or partnership; and any violation of this prohibition committed after the third day of September, eighteen hundred and seventy-three, shall subject the party chargeable therewith to a penalty of fifty dol- lars for each day during which it is permitted or repeated. Act March 3, 1873, c. 269, sec. 3; 17 Stat. L. 603. CHAPTER VI. ACTS OF A GENERAL NATURE AND SECTIONS OF THE REVISED STATUTES, NOT INCLUDED IN THE NATIONAL BANK ACT, AFFECTING NATIONAL BANKS. 194. District attorney to conduct suits when United States is a, party. 195. Jurisdiction of circuit court to enjoin Comptroller. 196. Where such proceedings must he hrought. 197. Sealed certificates of Comp- troller competent evidence. 198. Certified copy of organization certificate as evidence. 199-209. Tax on State hank circula- tion. 210-211. Tax on United States and national hank notes. 212. Bestrictions on notes less than one dollar. 213-223. Legal tender. 224^229. Government depositaries. 230-239. Forgeries, frauds, etc. 240-253. Currency act March 14, 1900. 254^257. Act March 4, 1907. BANKmG. 787 194. All Suits TJndee Banking Law in Which the United States oe Any of its Officers oe Agents Aee Paeties to be Conducted by Disteict Attorneys Undbe the Supeevision of the Solicitoe of the Teeasuey. (Sec. 380.) AH suits and proceedings arising out of the provisions of law governing national banking associations, in which 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. Act Feb. 25, 1863, c. 58, sec. 55; 12 Stat. L. 680. Act June 3, 1864, e. 106, sec. 56; 13 Stat. L. 116. Note. — The United States Supreme Court decided in the case of Gibson V. Peters (150 U. S. 342) that a district attorney could not receive any compensation for services in conducting a suit arising out of the provisions of the national banking laws in which the United States or any of its officers or agents are parties. 195. JUEISDICTION OF ClECUIT CoUETS TO EnJOIN CoMP- TEOLLEE (Sec. 629) [as amended 1875.] The circuit courts shall have original jurisdiction of all suits brought by any banking association established in the district for which the court is held, under the provisions of title " The I^ationai, Banks," to enjoin the Comptroller of the Currency, or any receiver acting under his direction, as provided by said title. Act June 3, 1864, e. 106, sees. 50, 57; 13 Stat. L. 115, 116. Act Feb. 18, 1875, c. 80; 18 Stat. L. 318. Note. — Proceedings to enjoin Comptroller authorized by section 5237. 196. Wheee Such Peoceedings Must be Beought. (Sec. 736.) 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 district where such association is located. Act June 3, 1864, c. 106, sees. 50, 57; 13 Stat; L. 115, 116. 197. Sealed Certificates of Compteollee Competent Evidence. (Sec. 884.) Every certificate, assignment, and 788 Appeitdix. conveyance executed by the Comptroller of the Currency, in pursuance of law, and sealed with his seal of office, shall be received in evidence in all places and courts; and all copies of papers in his office, certified 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 as valid as if made on wax or wafer. Act June 3, 1864, o. 106, sec. 2; 13 Stat. L. 100. 198. Ceetified Copy of Oeganization Ceetificate as Evidence. (Sec. 885.) Copies of the organization certificate of any national banking association, duly certified by the Comptroller of the Currency, and authenticated by his seal of office, shall be -evidence in all courts and places within the jurisdiction of the United States of the existence of the asso- ciation, and of every matter which could be proved by the production of the original certificate. Act June 3, 1864, c. 106, sec. 6; 13 Stat. L. 101. TAX ON STATE BANK CIECULATION. 201. 202. 199. § 3408. Tax on circulation. 200. § 3411. Circulation; when ex- empted from tax. §§ 3412, 3413. Superseded by act February 8, 1975. Act February 8, 1875. Tax on circulation of banks other than national. 203. Act February 8, 1875. Tax on notes of State banks, mu- nicipal corporiations, etc. 204. Act February 8, 1875. Banks' returns, payment of tax, penalties. 205. § 3414. Semi-annual return by banks. 206. 3415. Failure to make return. Commissioner to estimate. 207. § 3416. State banks converted into national banks. Re- turns; how made. 208. § 3417. Tax provisions re- stricted. 209. Act March 1, 1879. Taxes on insolvent banks. 199. Tax on Oiecttlation. (Sec. 3408.) There shall be levied, collected and paid, as hereafter provided. First. * * * Second. * * * Banking. 789 Third. A tax of one-twelfth of one per centum each month upon the average amount of circulation issued by any bank, association, corporation, company or persons, including as cir- culation all certified checks and all notes and other obligations calculated or intended to circulate or to be used as money, but not including that in the vault of the bank, or redeemed and on deposit for said bank ; and an additional tax of one-sixth of one per centum each month upon the average amount of such circulation, issued as aforesaid, beyond the amount of ninety per centum of the capital of any such bank, association, cor- poration, company, or person. In the case of banks with branches, the tax herein provided shall be assessed upon the circulation of each branch severally, and the amount of capital of each branch shall be considered to be the amount allotted to it. Act June 30, 1864, see. 110; 13 Stat. L. 277. Act July 13, 1866, sec. 9; 14 Stat. L. 137, 146. Act June 6, 1872, sec. 37 ; 17 Stat. L. 625. Note. — The first and second clauses in this section related to taxes on deposits and capital stock and were repealed by Act of March 3, 1883. 200. CiEcuLATioN When Exempted feom Tax. (Sec. 3411.) Whenever the outstanding circulation of any bank, association, corporation, company, or person is reduced to an amount not exceeding five per centum of the chartered or de- clared 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. Act March 3, 1865, c. 78, sec. 14; 13 Stat. L. 486. Act July 13, 1866, c. 184, sec. 9; 14 Stat. L. 146. 201. (Secs. 3412, 3413.) Superseded by Act February 8, 1875. 202. Tax on Cieculation of Banks Othee Than Na- tional Ban-ks. Act Febeuaet 8, 1875. (Sec. 19.) That 790 Appendix. every person, firm, association, other than national bank asso- ciations, and every corporation. State bank, or State banking association shall pay a tax of ten per centum on the amount of their ov7n notes used for circulation and paid out by them. Act Feb. 8, 1875, c. 36, sec. 19; 18 Stat. L. 311. 203. Tax on Notes of State Banks, Municipal Coe- POEATIONS, Etc., Used as Cieculation and Paid Out by Banks. Act Febeuaet 8, 1875. (Sec. 20.) That every such person, firm, association, corporation, State bank, or State banking association, and also every national banking associa- tion, shall pay a like tax of ten per centum on the amount of notes of any person, firm, association other than a national banking association, or of any corporation, State bank, or State banking association, or of any town, city, or municipal cor- poration, used for circulation and paid out by them. Act Feb. 8, 1875, u. 36; sec. 20; 18 Stat. L. 311. 204. Banks' Ketuens ; Payment of Tax Penalties. Act Febeuaet 8, 1875. (Sec. 21.) That the amount of such cir- culating notes, and of the tax due thereon, shall be returned, and the tax paid at the same time, and in the same maimer, and V7ith like penalties for failure to return and pay the same, as provided by law for the return and payment of taxes on deposits, capital, and circulation imposed by the existing pro- visions of internal revenue law. Act Feb. 8, 1875, sec. 21; 18 Stat. L. 3U. 205. Semi-annual Ketuen by Banks. (Sec. 3414.) A true and complete return of the monthly amount of circulation [of deposits, and of capital], as aforesaid, and of the monthly amount of notes of persons, tovsTi, city, or municipal corpora- tions. State banks, or State banking associations paid out as aforesaid for the previous six months, shall be made and ren- dered in duplicate on the first day of December and the first day of June, by each of such banks, associations, corporations, Banking. 791 companies, or persons, with a declaration annexed thereto, under the oath of such person, or of the president or cashier of such bank, association, corporation, or company, in such form and manner as may be prescribed by the Commissioner of Internal Eevenue, that the same contains a true and faithful statement of the amounts subject to tax, as aforesaid ; and one copy shall be transmitted to the collector of the district in which any such bank, association, corporation, or company is situated, or in which such person has his place of business, and one copy to the Commissioner of Internal Revenue. Act June 30, 1864, c. 173, sec. 110; 13 Stat. L. 278. Act 'July 13, 1866, c. 184, sec. 9; 14 Stat. L. 147. Act. March 26, 1867, c. 8, sec. 2; 15 Stat. L. 6. Act June 6, 1872, c. 315, sec. 37; 17 Stat. L. 256. Act Dec. 24, 1872, c. 13, see. 5; 17 Stat.. L. 403. Note. — Italicized words repealed by Act March 3, 1883. " That the taxes herein specified imposed by the laws now in force be, and the same are hereby, repealed, as hereinafter provided, namely: On capital and de- posits of banks, bankers, and national banking associations, except such taxes as are now due and payable." 206. Failuee to Make Retukn. Commissioner to Esti- mate. (Sec. 3415.) In default of the returns provided in the preceding section, the amount of circulation [deposit, capital], and notes of persons, town, city, and municipal cor- porations. State banks, and State banking associations paid out, as aforesaid, shall be estimated by the Commissioner of Internal Revenue, upon the best information he can obtain. And for any refusal or neglect to make return and payment any such bank, association, corporation, company, or person so in default shall pay a penalty of two hundred dollars, be- sides the additional penalty and forfeitures provided in other cases. Act June 30, 1864, e. 173, see. 110; 13 Stat. L. 278. Act July 13, 1866, c. 184, sec. 9; 14 Stat. L. 146. Act Dec. 24, 1872, c. 13, sec. 2; 17 Stat. L. 402. Note. — See note under preceding section. 207. State Banks Conveeted into National Banks; Rettjens, How Made. (Sec. 3416.) Whenever any State bank or banking association has been converted into a national 792 Appbitdix. banking association, and such national banking association has assumed the liabilities of such State bank or banking associa- tion, including the redemption of its bills, by any agreement or understanding whatever with the representatives of such State bank or banking association, such national banking asso- ciation shall be held to make the required return and payment on the circulation outstanding, so long as such circulation shall exceed five per centum of the capital before such conversion of such State bank or banking association. Act March 3, 1865, c. 78, sec. 14; 13 Stat. L. 486. Act July 13, 1866, c. 184, sec. 9; 14 Stat. L. 146. 208. Tax Peovisions Eesteigted. (Sec. 3417) [as amended 1875.] The provisions of this chapter relating to the tax on the [deposits, capital and] circulation of banks and to their returns, except as contained in sections thirty-four hundred and ten, thirty-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 relate 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." Act June 30, 1864, c. 173, sec. 110; 13 Stat. L. 278. Act July 13, 1866, e. 184, see. 9; 14 Stat. L. 146. Act Feb. 18, 1875, c. 80; 18 Stat. L. 319. Note. — See note under section 3414 stating that taxes on deposits and capital were repealed by Act March 3, 1883. 209. Taxes on Insolvent Banks. Act Maech 1, 1879. (Sec. 22.) That whenever and after any bank has ceased to do business by reason of insolvency or bankruptcy, no tax shall be assessed or collected, or paid into the Treasury of the United States, on account of such bank, which shall diminish the assets thereof necessary for the full payment of all its de- positors; and such tax shall be abated from such national banks as are found by the Comptroller of the Currency to be insolvent; and the Commissioner of Internal Revenue, when the facts shall so appear to him, is authorized to remit so much Banking. 793 of said tax against insolvent State and savings banks as shall be found to affect the claims of their depositors. Act March 1, 1879, c. 125, sec. 22; 20 Stat. L. 351. Note. — Part of section omitted superseded by Act of March 3, 1883. TAX ON UNITED STATES AND NATIONAL-BANK NOTES. 210. § 3701. Obligations of the United States exempt from taxation. 211. Act August 13, 1894. National bank notes and notes and certificates of the United States circulating as cur- rency subject to State taxa- tion. 210. Obligations of United States Exempt feom Taxa- tion. (Sec. 3701.) 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. Act Feb. 25, 1862, e. 33, sec. 2; 12 Stat. L. 346. Act March 3, 1863, c. 73, sec. 1; 12 Stat. L. 710. Act March 3, 1864, e. 17, see. 1; 13 Stat. L. 13. Act June 30, 1864, c. 172, sec. 1; 13 Stat. L. 218. Act Jan. 28, 1865, c. 22, sec. 1; 13 Stat. L. 425. Act March 3, 1865, c. 77, sec. 2; 13 Stat. L. 469. Act July 14, 1870, c. 256, sec. 1; 16 Stat. L. 272. 211. INationax Bank Notes and Notes and Ceetificates OF THE United States Cikculating as Cubeency Subject to State Taxation. Act August 13, 1894. (Sec. 1.) That circulating notes of national banking associations and United States legal tender notes and other notes and certificates of the United States, payable on demand and circulating or in- tended to circulate as currency, and gold, silver, or other coin shall be subject to taxation as money on hand or on deposit under the laws of any State or Territory : Provided, That any such taxation shall be exercised in the same manner and at the same rate that any such State or Territory shall tax money or currency circulating as money within its jurisdiction. (Sec. 2.) That the provisions of this act shall not be deemed or held to change existing laws in respect of the taxa- tion of national banking associations. Act Aug. 13, 1894, sees. 1 and 2; 28 Stat. L. 278. 794 Appendix. 212. Restrictions on Notes Less Than One Dollae. (Sec. 3583.). No person shall make, issue, circulate, or pay out any note, check, memorandum, token, or other obligation for a less sum than one dollar, intended to circulate as money or to be received or used in lieu of lawful money of the United States; and every person so offending shall be fined not more than five hundred dollars or imprisoned not more than six months, or both, at the discretion of the court. Act July 17, 1862, c. 196, sec. 2; 12 Stat. L. 592. LEGAL TENDEE. 213. § 3584. Foreign coins. 214. § 3585. Gold coin of the United States. 215. § 3586. Superseded by act Feb- ruary 28, 1878, and act June 9, 1879. 216. Act February 28, 1878. Au- thorizing coinage of stand- ard silver dollars and mak- ing them legal tender. 217. Act June 9, 1879. Subsidiary silver coins. 218. § 3587. Minor coins. 219. § 3588. United States notes. 220. § 3589. Demand Treasury notes. 221. § 3590. Interest-bearing notes. 222. § 5182. See section 5182 under national-bank act. 223. Act July 12, 1882. Gold cer- tificates. 213. Foreign Coins. (Sec. 3584.) No foreign gold or silver coins shall be a legal tender in payment of debts. Act Feb. 21, 1857, o. 56, sec. 3; 11 Stat. L. 163. 214. Gold Coin of the United States. (Sec. 3585.) The gold coins of the United States shall be a legal tender in all payments at their nominal value when not below the stan- dard weight and limit of tolerance provided by law for the single piece, and when reduced in weight below such standard and tolerance, shall be a legal tender at valuation in proportion to their actual weight. Act Feb. 12, 1873, c. 131, sec. 14; 17 Stat. L. 426. 215. (Sec. 3586.) Superseded by Act February 28, 1878, and Act June 9, 1879. Banking. 795 216. AuTHOEiziNG Coinage of Standard Silvee Dollaes AND Making Them Legal Tendee. Act of Febeuaey 28, 1878. (Sec. 1.) That there shall be coined at the several mints of the United States, silver dollars of the weight of 412% grains Troy of standard silver * * * j which coins together with all silver dollars heretofore coined by the United States, of like weight and iSneness, shall be a legal tender, at their nominal value, for all debts and dues, public and private, except where otherwise expressly stipulated in the contract. Act. Feb. 28, 1878, c. 20, sec. 1; 20 Stat. L. 25. 217. SuBsiDiAEY Silvee Coins. Act of June 9, 1879. (Sec. 3.) That the present silver coins of the United States of smaller denominations than one dollar shall hereafter be a legal tender in all sums nOt exceeding ten dollars in full pay- ment of all dues public and private. Act June 9, 1879, c. 12, sec. 3; 21 Stat. L. 8. 218. MiNOE Coins. (Sec. 3587.) The minor coins of the United States shall be a legal tender, at their nominal value, for any amount not exceeding twnety-five cents in any one payment. Act Feb. 12, 1873, c. 131, sec. 16; 17 Stat. L. 427. 219. United States ISTotes. (Sec. 3588.) United States notes shall be lawful money, and a legal tender in payment of all debts, public and private, within the United States, except for duties on imports and interest on the public debt. Act Feb. 25, 1862, c. 33, see. 1; 12 Stat. L. 345. Act July 11, 1862, c. 142, sec. 1; 12 Stat. L. 532. Res. Jan. 17, 1863, No. 9, 12 Stat. L. 823. Act March 3, 1863, c. 73, sec. 3; 12 Stat. L. 711. 220. Demand Teeasuey Notes. (Sec. 3589.) Demand Treasury notes authorized by the Act of July 17, 1861, chapter 5, and the Act of February 12, 1862, chapter 20, shall be law- ful money and a legal tender in like manner as United States notes. 796 Appendix. Act July 17, 1861, c. 5, see. 1; 12 Stat. L. 259. Act Feb. 12, 1862, c. 20; 12 Stat. L. 338. Act Feb. 25, 1862, c. 33, sec. 1; 12 Stat. L. 345. Act March 17, 1862, c. 45, sec. 2; 12 Stat. L. 370. 221. iBrTEEEST-BEAEiNG NoTEs. (Sec. 3590.) Treasury notes issued under the authority of the Acts of March 3, 1863, chapter 73, and June 30, 1864, chapter 172, shall he legal tender to the same extent as United States notes, for their face value, excluding interest: Provided, That Treasury notes issued under the act last named shall not be a legal tender in payment or redemption of any notes issued by any bank, bank- ing association, or banker, calculated and intended to circulate as money. Act March 3, 1863, c. 73, sec. 2; 12 Stat. L. 710. Act June 30, 1864, c. 172, sec. 2; 13 Stat. L. 218. 222. Foe What Demands National Bank I^otes May be Eeceived. (Sec. 5182.) Note. — See section 5182, National-Bank Act, 223. Gold Ceetipicates. Act July 12, 1882. (Sec. 12.) 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 of not less than twenty dollars, and to issue certificates therefor in denominations of not less than twenty dollars each, corresponding with the de- nominations of United States notes. The coin deposited for or representing the certificates of deposit shall be retained in the Treasury for the payment of the same on demand. Said certificates shall be receivable for customs, taxes, and all public dues, and when so received may be reissued; and such certifi- cates, as also silver certificates, when held by any national banking association, shall be counted as part of its lawful re- serve; and no national banking association shall be a member of any clearing-house in which such certificates shall not be receivable in the settlement of clearing-house balances: Prp- vided. That the Secretary of the Treasury shall suspend the issue of such gold certificates whenever the amount of gold Banking. 797 coin and gold bullion in the Treasury reserved for the redemp- tion of United States notes falls below one hundred millions of dollars; and the provisions of section fifty-two hundred and seven of the Eevised Statutes shall be applicable to the certifi- cates herein authorized and directed to be issued. Act July 12, 1882, sec. 12; 22 Stat. L. 166. Note. — See section 6 of the Currency Act of March 14, 1900, as amended. March 4, 1907, post, page 97, for additional provisions relating to gold certificates. Gold and silver certificates are not legal tender, but are receivable for all public dues. GOVERNMENT DEPOSITABIES. 224. § 3620. Duty of disbursing officers. 225. § 3847. Provisions for deposits by certain postmasters. 226. § 4046. Penalty for misapplica- tion of money-order funds. 227. § 5153. See section 5153 under national-bank act. 228. § 5488. Penalty for unauthor- ized deposit of public money. 229. 5497. Penalty for unauthorized receipt or use of public money. 224. Duty of Disbtjesing Officers. (Sec. 3620) [as amended 1877.] It shall be the duty of every disbursing ofiicer having any public money intrusted to him for disbursement to deposit the same with the Treasurer or some one of the assistant treasurers of the United States, and to draw for the same only as it may be required for payments to be made by him in pur- suance of law; and draw for the same only in favor of the persons to whom payment is made, and all transfers from the Treasurer of the United States to a disbursing officer shall be by draft or warrant on the Treasury or an assistant treasurer of the United States. In places, however, where there is no Treasurer or assistant treasurer, the Secretary of the Treasury may, when he deems it essential to the public interest, specially authorize in writing the deposit of such public money in any other public depository, or, in writing, authorize the same to be kept in any other manner and under such rules and regula- 798 Appendix. tions as he may deem most safe and effectual to facilitate the payments to public creditors. Act June 14, 1866, c. 122, sec. 1; 14 Stat. L. 64. Act Feb. 27, 1877, c. 69, sec. 1; 19 Stat. L. 249. 225. Peovisions poe Deposits by Ceetain Postmastees. (Sec. 3847.) Any postmaster, having public money belonging to the Government, at an office within a county where there are no designated depositaries, treasurers of mints, or Treasurer or assistant treasurers of the United States may deposit the same, at his ovsm risk and in his official capacity, in any na- tional bank in the town, city, or county where the said post- master resides; but no authority or permission is or shall be given for the demand or receipt by the postmaster, or any other person, of interest, directly or indirectly, on any deposit made as herein described ; and every postmaster who makes any such deposit shall report quarterly to the Postmaster-General the name of the bank where such deposits have been made, and also state the amount which may stand at the time to his credit. Act March 3, 1873, c. 272; 17 Stat. L. 604. 226. Penalty foe Misapplication op Money-oedee Funds. (Sec. 4046.) Every postmaster, assistant, clerk, or other person employed in or connected with the business or operations of any money-order office who converts to his own use, in any way whatever, or loans, or deposits in any bank, except as authorized by this title,* or exchanges for other funds, any portion of the money-order funds, shall be deemed guilty of embezzlement, and any such person, as well as every other person advising or participating therein, shall, for every such offense, be imprisoned for not less than six months nor more than ten years, and be fined in a sum equal to the amount embezzled ; and any failure to pay over or produce any money- order funds intrusted to such person shall be taken to be prima facie evidence of embezzlement; and upon the trial of any a "This Title" The Postal Service. Banking. 799 indictment against any person for such embezzlement it shall be prima facie evidence of a balance against him to produce a transcript from the money-order account books of the Sixth Auditor. But nothing herein contained shall be construed to prohibit any postmaster depositing, under the direction of the Postmaster-General, in a national bank designated by the Secre- tary of the Treasury for that purpose, to his own credit as postmaster, any money-order or other funds in his charge, nor prevent his negotiating drafts or other evidences of debt through such bank, or through United States disbursing officer, or otherwise, when instructed or required to do so by the Postmaster-General for the purpose of remitting surplus money-order funds from one post-office to another; to be used in payment of money-orders. Disbursing officers of the United States shall issue, under regulations to be prescribed by the Secretary of the Treasury, duplicates of lost checks drawn by them in favor of any postmaster on account of money-order or other public funds received by them from some other postmaster. Act June 8, 1872, c. 335, sec. 122 ; 17 Stat. L. 299. Act March 3, 1873, c. 272; 17 Stat. L. 604. 227. !N"ATio]5rAi. Banking Associations to be Deposita- EiBs OF Public Moneys. (Sec. 5153) [as amended 1907.] Note. — See section 5153 under " National-bank act." , 228. Penalty foe Unauthoeized Deposit of Public Money. (Sec. 5488.) Every disbursing officer of the United States who deposits any public money intrusted to him in any place or in any manner, except as authorized by law, or con- verts to his own use in any way whatever, or loans with or without interest, or for any purpose not prescribed by law withdraws from the Treasurer or any assistant treasurer, or any authorized depositary, or for any purpose not prescribed by law transfers or applies any portion of the public money intrusted to him, is, in every such act, deemed guilty of an embezzlemenir of the money so deposited, converted, loaned, withdrawn, transferred, or applied; and shall be punished by 800 Appeitoix. imprisonment with hard labor for a term not less than one year nor more than ten years, or by a fine of not more than the amount embezzled or less than one thousand dollars, or by both such fine and imprisonment. Act June 14, 1866, c. 122, sec. 2; 14 Stat. L. 64. Note. — Sections 5489- to 5496 do not refer to national banks. 229. Penalty foe Unauthoeized Receipt oe Use of Public Money. (Sec. 5497) [as amended 18Y9.] Evpry banker, broker, or other person not an authorized depositary of public moneys, who knowingly receives from any dusbursing officer, or collector of internal revenue, or other agent of the United States, any public money on deposit, or by way of loan or accommodation, with or without interest, or otherwise than in payment of a debt against the United States, or who uses, transfers, converts, appropriates, or applies any portion of the public money for any purpose not prescribed by law, and every president, cashier, teller, director, or other officer of any bank ox banking association, who violates any of the provisions of this section, is guilty of an act of embezzlement of the public money so deposited, loaned, transferred, used, converted, appro- priated, or applied, and shall be punished as prescribed in section fifty-four hundred and eighty-eight. * * * Act June 14, 1866, c. 122, sec. 3; 14 Stat. L. 65. Act Feb. 3, 1879, c. 42; 20 Stat. L. 280. Note. — For duties and liabilities of depositaries see note under section S1S3, page 25, ante. PORGEEIES, nSAtrDS, ETC. 230. § 5413. Obligations of- the United States defined. 231. § 5414. Forging or counterfeit- ing United States secur- ities. 232. § 5415. Counterfeiting national bank notes. 233. § 5430. Using plates to print notes without authority. 234. § 5431. Penalty for passing counterfeit circulation. 235. § 5432. Penalty for taking un- authorized impression of tools. 236. § 5433. Penalty for having such impressions. 237. § 5434. Penalty for dealing in counterfeit circulation. 238. § 5437. Issuing circulation of expired associations ; pen- alty therefor. 239. Act June 30, 1876. Fraudulent notes to be so marked by United States ofiicers and officers of national banks. BANKHiTG. 801 230. Obligations of the UiiriTED States Defined. (Sec. 5413) [as amended 1875, 1877.] The words " obligation or other security of the United States " shall be held to mean all bonds, certificates of indebtedness, national bank currency, coupons. United States notes, Treasury notes, fractional notes, certificates of deposit, bills, cheeks, 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. Act June 30, 1864, e. 172, sec. 13; 13 Stat. L. 222. Act Feb. 18, 1875, c. 80; 18 Stat. L. 320. Act Feb. 27, 1877, c. 69; 19 Stat. L. 253. 231. FOEGING OE COUNTEEFEITING UnITED StaTES SeCU- EiTiES. (Sec. 5414.) Every person who, with intent to de- fraud, falsely makes, forges, counterfeits, or alters any obliga- tion or security of the United States shall be punished by a fine of not more than five thousand dollars and by 'imprison- ment at hard labor not more than fifteen years. Act June 30, 1864, i;. 172, see. 10; 13 Stat. L. 221. 232. COUNTEEFEITING NATIONAL BaNK IfoTES. (SeC. 5415.) Every person who falsely makes, forges, or counter- feits, or causes or procures to be made, forged, or counterfeited, or willingly aids or assists in falsely making, forging, or coun- terfeiting, any note in imitation of, or purporting to be in imitation of, the circulating notes issued by any banking asso- ciation 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 counter- feited 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 issue, or purport- ing to have been issued, by any such banking association, 51 802 Appendix. 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. Act Feb. 25, 1863, c. 58, sec. 57; 12 Stat. L. 680. Act June 3, 1864, c. 106, sec. 59; 13 Stat. L. 117. Note. — Sections 5416 to 5429, inclusive, do not refer to national-bank circulation. 233. Using Plates to Print Notes Without Authoeitt. (Sec. 5430.) Every person having control, custody, or pos- session of any plate, or any part thereof, from vsrhich has been printed, or which may be prepared by direction of the Secre- tary of the Treasury for the purpose of printing, any obligation or other security of the United States, who uses such plate, or knowingly suffers 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 printed for the use of the United States by order of the proper officer thereof ; and every person who engraves, or causes or procures 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 securi- ties 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 security issued under the authority of the United States, vsdth intent to sell or otherwise use the same; and every person who prints, photographs, or in any other Banking. 803' manner makes or executes, or causes to be printed, photo- graphed, made, or executed, or aids in printing, photographing, making, or executing any engraving, pljiotograph, print, or impression in the likeness of any such obligation 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 foreign 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 distinctive 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. Act June 30, 1864, e. 172, sec. 11; 13 Stat. L. 221. 234. Penalty foe Passing Counterfeit Cieculation. (Sec. 5431.) Every person who, with intent to defraud, passes, utters, publishes, or sells, or attempts to pass, utter, publish, or sell, or brings into the United States with intent to pass, publish, utter, or sell, or keeps in possession or conceals, with like intent, any falsely made, forged, counterfeited, or altered obligation, or other security of the United States, shall be punished by a fine of not more than five thousand dollars and by imprisonment at hard labor not more than fifteen years. Act June 30, 1864, c. 172, sec. 10; 13 Stat. L. 221. 235. Penalty foe Taking Unattthoeizeb Impeession of Tools. (Sec. 5432.) Every person who, without authority from the United States, takes, procures, or makes, upon lead, foil, wax, plaster, paper, or any other substance or material, an impression, stamp, or imprint of, from, or by the use of, 804 Appendix. any bedplate, bedpiece, die, roll, plate, seal, type, or other tool, implement, instrument, or thing used or fitted, or intended to be used, in printing, stamping, or impressing, or in making other tools, implements, instruments, or things, to be used, or fitted or intended to be used, in printing, stamping, or im- pressing any kind or description of obligation or other security of the United States, now authorized or hereafter to be au- thorized 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. Act Feb. 5, 1867, c. 26, see. 4; 14 Stat. L. 383. 236. Penalty foe Having Such Impeessions. (Sec. 5433.) Every person who, with intent to defraud, has in his possession, keeping, custody, or control, without authority from the United States, any imprint, stamp, or impression, taken or made upon any substance or material whatsoever, of any tool, implement, instrument, or thing used, or fitted, or in- tended 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 punished by imprisonment at hard labor not more than ten years, or by a fine of not more than five thousand dollars. Act Feb. 5, 1867, c. 26, sec. 5; 14 Stat. L. 384. 237. Penalty foe Dealing in Counteefbit Cieculation. (Sec. 5434.) Every person who buys, sells, exchanges, trans- fers, receives, or delivers any false, forged, counterfeited, or altered obligation or other security of the United States, or circulating note of any banking association organized or acting under the 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. BANKIIfG. 805 shall be imprisoned at hard labor not more than ten years, or fined not more than five thousand dollars, or both. Act Feb. 5, 1867, c. 26, sec. 1; 14 Stat. L. 383. , Note. — Sections 5435 and 5436 do not refer to national-bank circulation. 238. Issuing Cieculatiok of Expieed Associations, Penalty Theebfoe. (Sec. 5437.) In all cases where the charter of any corporation -which has been or may be created by Act of Congress has expired or may hereafter expire, if any director, oflScer, 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 cor- poration for the purpose of paying or redeeming its notes and obligations, knowingly issues, reissues, 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 thousand dollars, or by imprisonment net less than one year nor more than five years, or by both such fine and imprisonment. But nothing herein shall be construed to make it unlawful for any person, not being such 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 hereinbefore set forth, who has received or may hereafter re- ceive such bill, note, check, draft, or other security, bona fide and in the ordinary transactions of business to utter as money and otherwise circulate the same. Act July 7, 1838, c. 185, sec. 1; 5 Stat. L. 297. 239. Featjdtjlent Notes to be so Maeked by United States Offioees and Officees of National Banks. Act June 30, 1876. (Sec. 5.) That all United States officers .charged with the receipt or disbursement of public moneys, and 806 Appendix. 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 circulate as money which shall be presented at their places of business; and if such officer 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. Act June 30, 1876, sec. 5; 19 Stat. L. 64. CTJBRENCT ACT, APPROVED MARCH 14, 1900. 240. § 1. Gold dollar declared to be standard unit of value. 241. § 2. Secretary of Treasury to set apart and maintain a gold reserve of one hundred and fifty million dollars In gold coin and bullion for the re- demption of United States notes and notes issued under the act of July 14, 1890. May sell bonds to replenish reserve. 242. § 3. Silver dollar to remain legal tender. 243. § 4. Divisions of issue and re- demption established. 244. § 5. When silver dollars are coined from bullion pur- chased under act of July 14, 1890, an equal amount of Treasury notes to be canceled and silver certificates issued. 245. § 6. Issue of gold certificates. Issue of gold certificates pay- able to order. 246. § 7. Issue of silver certificates. 247. § 8. Subsidiary silver coinage. 248. § 9. Recoinage of uncurrent subsidiary silver coin. 249. § 10. Amends section 5138, Re- vised Statutes. (See said section under national-bank act.) 250. § 11. Refunding of United States bonds. 251. § 12. This section is inserted in national-bank act follow- ing section 5171, which it supersedes. 252. § 13. See section 214, Revised Statutes, under national-bank act. 253. § 14. International bimetallism. An Act To define and fix the standard of value, to maintain the parity of all forms of money issued or coined by the United States, to refund the public debt, and for other purposes. 240. Gold Dollar Declared to be Standard UinT of Value. Be it enacted hy the Senate and House of Representa- tives of the United States of America in Congress assembled, That the dollar consisting of twenty-five and eight-tenths grains of gold nine-tenths fine, as established by section thirty-five hundred and eleven of the Eevised Statutes of the United Bawkibtg. 807 States, shall be the standard unit of value, and all forms of money issued or coined by the United States shall be main- tained at a parity of value with this standard, and it shall be the duty of the Secretary of the Treasury to maintain such parity. Act March 14, 1900, sec. 1; 31 Stat. L. 45. 241. Sbceetaey of Teeasuey to Set Apaet and Main- tain A Gold Rbseeve of One Hundeed and Fifty Million DoLLAES in Gold Coin and Bullion foe the Redemption OF United States Notes and Notes Issued Undee Act of July 14, 1890. May Sell Bonds to Replenish Reseeve. (Sec. 2.) That United States notes, and Treasury notes is- sued under the Act of July fourteenth, eighteen hundred and ninety, when presented to the Treasury for redemption, shall be redeemed in gold coin of the standard fixed in the first section of this act, and in order to secure the prompt and certain redemption of such notes as herein provided it shall be the duty of the Secretary of the Treasury to set apart in the Treasury a reserve fund of one hundred and fifty million dollars in gold coin and bullion, which fund shall be used for such redemption purposes only, and whenever and as often as any of said notes shall be redeemed from said fund it shall be the duty of the Secretary of the Treasury to use said notes so redeemed to restore and maintain such reserve fund in the manner following, to wit: First, by exchanging the notes so redeemed for any gold coin in the general fund of the Treasury ; second, by accepting deposits of gold coin at the Treasury or at any subtreasury in exchange for the United States notes so redeemed; third, by procuring gold coin by the use of said notes, in accordance with the provisions of section thirty-seven hundred of the Revised Statutes of the United States. If the Secretary of the Treasury is unable to restore and maintain the gold coin in the reserve fund by the foregoing methods, and the amount of such gold coin and bullion in said fund shall at any time fall below one hundred million dollars, then it shall be 808 Appendix. his duty to restore the same to the maximum sum of one hun- dred and fifty million dollars by borrowing money on the credit of the United States, and for the debt thus incurred to issue and sell coupon or registered bonds of the United States, in such form as he may prescribe, in denominations of fifty dollars or any multiple thereof, bearing interest at the rate of not exceeding three per centum per annum, payable quarterly, such bonds to be payable at the pleasure of the United States after one year from the date of their issue, and to be payable, principal and interest, in gold coin of the present standard value, and to be exempt from the payment of all taxes or duties of the United States, as well as from taxation in any form by x)r under State, municipal, or local authority; and the gold coin received from the sale of said bonds shall first be covered into the general fund of the Treasury and- then exchanged, in the manner hereinbefore provided, for an equal amount of the notes redeemed and held for exchange, and the Secretary of the Treasury may, in his discretion, use said notes in exchange for gold, or to purchase or redeem any bonds of the United States, or for any other lawful purpose the public interests may require, except that they shall not be used to meet deficiencies in the current revenues. That United States notes when redeemed in accordance with the provisions of this section shall be reissued, but shall be held in the reserve fund until exchanged for gold, as herein provided; and the gold coin and bullion in the reserve fund, together with the redeemed notes held for use as provided in this section, shall at no time exceed the maximum sum of one hundred and fifty million dollars. Act March 14, 19O0, sec. 2; 31 Stat. L. 45. 242. Silver Dolxae to Remain Legal Tendee. (Sec. 3.) That nothing contained in this act shall be construed to affect the legal tender quality as now provided by law of the silver dollar, or of any other money coined or issued by the United States. Act March 14, 1900, sec. 3; 31 "Stat. L. 46. Banking. 809 243. Divisions of Issue and Redemption Established. (Sec. 4.) That there be established in the Treasury Depart- ment, as a part of the office of the Treasurer of the United States, divisions to be designated and known as the division of issue and the division of redemption, to v^hich shall be assigned, respectively, under such regulations as the Secretary of the Treasury may approve, all records and accounts relating to the issue and redemption of United States notes, gold cer- tificates, silver certificates, and currency certificates. There shall be transferred from the accounts of the general fund of the Treasury of the United States, and taken up on the books of said divisions, respectively, accounts relating to the reserve fund for the redemption of United States notes and Treasury notes, the gold coin held against outstanding gold certificates, the United States notes held against outstanding currency certificates, and the silver dollars held against outstanding silver certificates, and each of the funds represented by these accounts shall be used for the redemption of the notes and certificates for which they are respectively pledged, and shall be used for no other purpose, the same being held as trust funds. Act March 14, 1900, sec. 4; 31 Stat. L. 46. 244. When Silver Dollars abb Coined From Bullion Purchased Under Act of July 14, 1890, an Equal Amount OF Treasury I^otes to be Canceled and Silver Certifi- cates Issued. (Sec. 5.) That it shall be the duty of the Secretary of the Treasury, as fast as standard silver dollars are coined under the provisions of the Acts of July fourteenth, eighteen hundred and ninety, and June thirteenth, eighteen hundred and ninety-eight, from bullion purchased under the Act of July fourteenth, eighteen hundred and ninety, to retire and cancel an equal amount of Treasury notes whenever re- ceived into the Treasury, either by exchange in accordance with the provisions of this act or in the ordinary course of business, and upon the cancellation of Treasury notes silver certificates shall be issued against the silver dollars so coined. Act March 14, 1900, sec. 5; 31 Stat. L. 47. 810 Appendix. 245. Issue of Gold Ceetificates. Issue of Gold Cee- TiFioATES Payable to Oedee. (Sec. 6) [as amended by Acts of March 4, 1907 and March 2, 1911.] That the Secretary of the Treasury is hereby authorized and directed to receive deposits of gold coin with the Treasurer or any assistant treas- urer of the United States in sums of not less than twenty dollars, and to issue gold certificates therefor in denominations of not less than ten dollars, and the coin so deposited shall be retained in the Treasury and held for the payment of such certificates on demand, and used for no other purpose. Such certificates shall be receivable for customs, taxes, and all public dues, and when so received may be reissued, and when held by any national banking association may be counted as a part of its lawful reserve: Provided, That whenever and so long as the gold coin and bullion held in the reserve fund in the Treasury for the redemption of United States notes and Treasury notes shall fall and remain below one hundred million dollars the authority to issue certificates as herein provided shall be suspended: And provided further. That whenever and so long as the aggregate amount of United States notes and silver certificates in the general fund of the Treasury shall exceed sixty million dollars the Secretary of the Treasury may, in his discretion, suspend the issue of the certificates herein provided for: And provided further. That of the amount of such outstanding certificates one-fourth at least shall be in denominations of fifty dollars or less: And pro- vided further. That the Secretary of the Treasury may, in his discretion, issue such certificates in denominations of ten thousand dollars, payable to order: And provided further. That the Secretary of the Treasury may, in his discretion, receive, with the assistant treasurer in New York and the assistant treasurer in San Francisco, deposits of foreign gold coin at their bullion value in amounts of not less than one thousand dollars in value and issue gold certificates therefor of the description herein authorized: And proiMded further, That the Secretary of the Treasury may, in his discretion, receive, with the Treasurer or any assistant treasurer of the Banking. 811 United States, deposits of gold bullion bearing the stamp of the coinage mints of the United States, or the assay office in New York, certifying their weight, fineness, and value, in amounts of not less than one thousand dollars in value, and issue gold certificates therefor of the description herein au- thorized. But the amount of gold bullion and foreign coin so held shall not at any time exceed one-third of the total amount of gold certificates at such time outstanding. And section fifty-one hundred and ninety-three of the Revised Statutes of the United States is hereby repealed. Act March 14, 1900, sec. 6; 31 Stat. L. 47. Act March 4, 1907, sec. 1; 34 Stat. L. 1289. Act March 2, 1911. 246. Issue of Silvee Oeetificatbs. (Sec. 7.) That here- after silver certificates shall be issued only of denominations of ten dollars and under except that not exceeding in the aggre- gate ten per centum of the total volume of said certificates, in the discretion of the Secretary of the Treasury, may be issued in denominations of twenty dollars, fifty dollars, and one hun- dred dollars; and silver certificates of higher denomination than ten dollars, except as herein provided, shall, whenever received at the Treasury or redeemed, be retired and canceled, and certificates of denominations of ten dollars or less shall be substituted therefor, and after such substitution, in whole or in part, a like volume of United States notes of less denomina- tion than ten dollars shall from time to time be retired and canceled, and notes of denominations of ten dollars and up- ward shall be reissued in substitution therefor, with like qualities and restrictions as those retired and canceled. Act March 14, 1900, sec. 7; 31 Stat. L. 47. Note. — The Act of February 28, 1878, authorized the issue of silver certificates in sums of not less than ten dollars. The Act of March 3, 1887, authorized the issue of one, two, and five dollar certificates. This section supersedes these acts as to all new issues. 247. Subsidiary Silvee Coinage. (Sec. 8.) That the Secretary of the Treasury is hereby authorized to use, at his discretion, any silver bullion in the Treasury of the United 812 Appendix. States purchased under the Act of July fourteenth, eighteen hundred and ninety, for coinage into such denominations of subsidiary silver coin as may he necessary to meet the public requirements for such coin: Provided, That the amount of subsidiary silver coin outstanding shall not at any time exceed in the aggregate one hundred millions of dollars. Whenever any silver bullion purchased under the Act of July fourteenth, eighteen hundred and ninety, shall be used in the coinage of subsidiary silver coin, an amount of Treasury notes issued under said act equal to the cost of the bullion contained in such coin shall be canceled and not reissued. Act March 14, 1900, sec. 8; 31 Stat. L. 47. 248. Recoinage of TJjstcueebnt Sitbsidiaey Silvee Coin, (Sec. 9.) That the Secretary of the Treasury is hereby au- thorized and directed to cause all worn and uncurrent sub- sidiary silver coin of the United States now in the Treasury, and hereafter received, to be recoined, and to reimburse the Treasurer of the United States for the difference between the nominal or face value of such coin and the amount the same will produce in new coin from any moneys in the Treasury not otherwise appropriated. Act March 14, 1900, sec. 9; 31 Stat. L. 48. 249. (Sec. 10.) Amends section fifty-one hundred and thirty-eight, Revised Statutes. (See said section under National -bank act.) 250. Eefunding of United States Bonds. (Sec. 11.) That the Secretary of the Treasury is hereby authorized to receive at the Treasury any of the outstanding bonds of the United States bearing interest at five per centum per annum, payable February first, nineteen hundred and four, and any bonds of the United States bearing interest at four per centum per annum, payable July first, nineteen hundred and seven, and any bonds of the United States bearing interest at three per centum per annum, payable August first, nineteen hun- BANKUiTG. 813 dred and eight, and to issue in exchange therefor an equal amount of coupon or registered bonds of the United States in such form as he may prescribe, in denominations of fifty dol- lars or any multiple thereof, bearing interest at the rate of two per centum per annum, payable quarterly, such bonds to be payable at the pleasure of the United States after thirty years from the date of their issue, and said bonds to be pay- able, principal and interest, in gold coin of the present standard value, and to 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 authority : Provided, That such outstanding bonds may be received in exchange at a valuation not greater than their present worth to yield an in- come of two and one-quarter per centum per annum; and in consideration of the reduction of interest effected, the Secre- tary of the Treasury is authorized to pay to the holders of the outstanding bonds surrendered for exchange, out of any money in the Treasury not otherwise appropriated, a sum not greater than the difference between their present worth, computed as aforesaid, and their par value, and the payments to be made hereunder shall be held to be payments on account of the sink- ing fund created by section thirty-six hundred and ninety-four of the Kevised Statutes : And provided further. That the two per centum bonds to be issued under the provisions of this act shall be issued at not less than par, and they shall be numbered consecutively in the order of their issue, and when payment is made the last numbers issued shall be first paid, and this order shall be followed until all the bonds are paid, and whenever any of the outstanding bonds are called for payment interest thereon shall cease three months after such call; and there is hereby appropriated out of any money in the Treasury not otherwise appropriated, to effect the exchanges of bonds pro- vided for in this act, a sum not exceeding one-fifteenth of one per centum of the face value of said bonds, to pay the expense of preparing and issuing the same and other expenses incident thereto. Act March 14, 1900, sec. 11; 31 Stat. L. 48. 814 Appendix. 251. (Sec. 12.) This section is inserted in the national-bank act following section fifty- one hundred and seventy-one, which it supersedes. 252. (Sec. 13.) See section 5214, Revised Statutes. 253. IwTEENATioiirAL BIMETALLISM. (Sec. 14.) That the provisions of this act are not intended to preclude the accom- plishment of international bimetallism whenever conditions shall make it expedient and practicable to secure the same by concurrent action of the leading commercial nations of the world and at a ratio which shall insure permanence of relative value between gold and silver. Act March 14, 1900, sec. 14; 31 Stat. L. 49. ACT MABCH 4, 1907. 254. § 1. Amends section 6 of act of 257. § 4. Amende section 9 of act of March 14, 1900. July 12, 1882. The amended 255. § 2. Issue of Treasury notes. section follows section 5167 256. § 3. Amends section 5153 of of the Revised Statutes. the Revised Statutes. 254. (Sec. 1.) Act March 4, 1907. Amends section 6 of Act of March 14, 1900. 255. Issue of Treasury !N'otes. (Sec. 2.) That when- ever and so long as the outstanding silver certificates of the denominations of one dollar, two dollars, and five dollars, issued under the provisions of section seven of an act entitled "An act to define and fix the standard of value, to maintain the parity of all forms of money issued or coined by the United States, to refund the public debt, and for other purposes," approved March fourteenth, nineteen hundred, shall be, in the opinion of the Secretary of the Treasury insufficient to meet the public demand therefor, he is hereby authorized to issue United States notes of the denominations of one Banking. 815 dollar, two dollars, and five dollars, and upon the issue of United States notes of such denominations an equal amount of United States notes of higher denominations shall be retired and canceled: Provided, however. That the aggregate amount of United States notes at any time outstanding shall remain as at present fixed by law : And provided further. That noth- ing in this act shall be construed as affecting the right of any national bank to issue one-third in amount of its circulating notes of the denomination of five dollars, as now provided by law. Act March 4, 1907, sec. 2; 34 Stat. L. 1289. 256. (Sec. 3.) Amends section 5153, Eevised Statutes. 257. (Sec. 4). Amends section 9 of Act of July 12, 1882, as amended by Act of March 14, 1900. Note. — This section was further amended by section 10 of Act of May 30, 1908, as set forth following Eevised Statutes, 5167. Taeipf Act Approved August 5, 1909. 258. (Sec. 38.) Corporation tax. 259. (Sec. 39.) Panama bonds. Note. — Other sections relate to customs duties and internal revenue. 258. Excise Tax on Coepoeations. (Sec. 38.) That every corporation, joint stock company or association, organ- ized for profit and having a capital stock represented by shares, and every insurance company, now or hereafter organized under the laws of the United States or of any State or Terri- tory of the United States or under the acts of Congress appli- cable to Alaska or the District of Columbia, or now or here- after organized under the laws of any foreign country and engaged in business in any State or Territory of the United 816 Appendix. States or in Alaska or in the District of Columbia, shall be subject to pay annually a special excise tax with respect to the carrying on or doing business by such corporation, joint stock company or association, or insurance company, equiva- lent to one per centum upon the entire net income over and above five thousand dollars received by it from all sources during such year, exclusive of amounts received by it as divi- dends upon stock of other corporations, joint stock companies or associations, or insurance companies, subject to the tax hereby imposed; or if organized under the lavi^s of any foreign country, upon the amount of net income over and above five thousand dollars received by it from business transacted and capital invested within the United States and its Territories, Alaska, and the District of Columbia during such year, exclusive of amounts so received by it as dividends upon stock of other corporations, joint stock companies or associa- tions, or insurance companies, subject to the tax hereby imposed: Provided, however, That nothing in this section contained shall apply to labor, agricultural or horticultural organizations, or to fraternal beneficiary societies, orders, or associations operating under the lodge system, and providing for the payment of life, sick, accident, and other benefits to the members of such societies, orders, or associations, and dependents of such members, nor to domestic building and loan associtions, organized and operated exclusively for the mutual benefit of their members, nor to any corporation or association organized and operated exclusively for religious, charitable, or educational purposes, no part of the net income of which inures to the benefit of any private stockholder or individual. Second. Such net income shall be ascertained by deducting from the gross amount of the income of such corporation, joint stock company or association, or insurance company, received within the year from all sources, (first) all the ordi- nary and necessary expenses actually paid within the year out of income in the maintenance and operation of its business and properties, including all charges such as rentals or franchise Banking. 817 payments, required to be made as a condition to the continued use or possession of property; (second) all losses actually sus- tained within the year and not compensated by insurance or otherwise, including a reasonable allowance for depreciation of property, if any, and in the case of insurance companies the sums other than dividends, paid within the year on policy and annuity contracts and the net addition, if any, required by law to be made within the year to reserve funds; (third) interest actually paid within the year on its bonded or other indebtedness to an amount of such bonded and other indebt- edness not exceeding the paid-up capital stock of such corpo- ration, joint stock company or association, or insurance com- pany, outstanding at the close of the year, and in the case of a bank, banking association, or trust company, all interest actually paid by it within the year on deposits; (fourth) all sums paid by it within the year for taxes imposed under the authority of the United States or of any State or Territory thereof, or imposed by the government of any foreign country as a condition to carrying on business therein; (fifth) all amounts received by it within the year as dividends upon stock of other corporations, joint stock companies or associa- tions, or insurance companies, subject to the tax hereby imposed: Provided , That in the case of a corporation, joint stock company or association, or insurance company, organized under the laws of a foreign country, such net income shall be ascertained by deducting from the gross amount of its income received within the year' from business transacted and capital invested within the United States and any of its Territories, Alaska, and the District of Columbia, (first) all the ordinary and necessary expenses actually paid within the year out of earnings in the maintenance and operation of its business and property within the United States and its Territories, Alaska, and the District of Columbia, including all charges such as rentals or franchise payments required to be made as a con- dition to the continued use or possession of property; (second) all losses actually sustained within the year in business con- 52 818 Appendix. ducted by it within the United States or its Territories, Alaska, or the District of Columbia not compensated by insurance or otherwise, including a reasonable allowance for depreciation of property, if any, and in the case of insurance companies the sums other than dividends, paid within the year on policy and annuity contracts and the net addition, if any, required by law to be made within the year to reserve funds; (third) interest actually paid within the year on its bonded or other indebtedness to an amount of such bonded and other in- debtedness, not exceeding the proportion of its paid-up capi- tal stock outstanding at the close of the year which the gross amount of its income for the year from business transacted and capital invested within the United States and any of its Territories, Alaska, and the District of Columbia bears to the gross amount of its income derived from all sources within and without the United States; (fourth) the smns paid by it within the year for taxes imposed under the authority of the United States or of any State or Territory thereof ; (fifth) all amounts received by it within the year as dividends upon stock of other corportions, joint stock companies or associa- tions, and insurance companies, subject to the tax hereby imposed. In the case of assessment insurance companies the actual deposit of sums with State or Territorial officers, pur- suant to law, as additions to guaranty or reserve funds shall be treated as being payments required by law to reserve funds. Third. There shall be deducted from the amount of the net income of each of such corporations, joint stock companies or associations, or insurance companies, ascertained as pro- vided in the foregoing paragraphs of this section, the sum of five thousand dollars, and said tax shall be computed upon the remainder of said net income of such corporation, joint stock company or association, or insurance company, for the year ending December thirty-first, nineteen hundred and nine, and for each calendar year thereafter; and on or before the first day of March, nineteen hundred and ten, and the first day of March in each year thereafter, a true and accurate return under oath or affirmation of its president, vice-president. Banking. 819 or other principal officer, and its treasurer or assistant treas- urer, shall be made by each, of the corporations, joint stock companies or associations, and insurance companies, subject to the tax imposed by this section, to the collector of internal revenue for the district in which such corporation, joint >stock company or association, or insurance company has its princi- pal place of business, or, in the case of a corporation, joint stock company or association, or insurance company, organized under the laws of a foreign country, in the place where its prin- cipal business is carried on within the United States, in such form as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe, setting forth (first) the total amount of the paid-up capital stock of such corporation, joint stock company or association, or insurance company, outstanding at the close of the year; (second) the total amount of the bonded and other indebtedness of such corporation, joint stock company or association, or insurance company at the close of the year; (third) the gross amount of the income of such corporation, joint stock company or association, or insurance company, received during such year from all sources, and if organized under the laws of a foreign country the gross amount of its income received within the year from business transacted and capital invested within the United States and any of its Territories, Alaska, and the District of Columbia ; also the amount received by such corpo- ration, joint stock company or association, or insurance com- pany, within the year by way of dividends upon stock of other corporations, joint stock companies or associations, or insur- ance companies, subject to the tax imposed by this section; (fourth) the total amount of all the ordinary and necessary expenses actually paid out of earnings in the maintenance and operation of the business and properties of such corpora- tion, joint stock company or association, or insurance company, within the year, stating separately all charges such as rentals or franchise payments required to be made as a condition to the continued use or possession of property, and if organized under the laws of a foreign country the amount so paid in 820 Appendix. the maintenance and operation of its business within the United States and its Territories, Alaska, and the District of Colum- bia; (fifth) the total amount of all losses actually sustained during the year and not compensated by insurance or other- wise, stating separately any amounts allowed for. depreciation of property, and in the case of insurance companies the sums other than dividends, paid within the year on policy and annuity contracts and the net addition, if any, required by law to be made within the year to reserve funds ; and in the case of a corporation, joint stock company or association, or insurance company, organized under the laws of a foreign country, all losses actually sustained by it during the year in business conducted by it within the United States or its Ter- ritories, Alaska, and the District of Columbia, not compen- sated by insurance or otherwise, stating separately any amounts allowed for depreciation of property, and in the case of insur- ance companies the sums other than dividends, paid within the year on policy and annuity contracts and the net addition, if any, required by law to be made within the year to reserve fund ; (sixth) the amount of interest actually paid within the year on its bonded or other indebtedness to an amount of such bonded and other indebtedness not exceeding the paid-up Capital stock of such corporation, joint stock company or association, or insurance company, outstanding at the close of the year, and in the case of a baiik, banking association, or trust company, stating separately all interest paid by it within the year on deposits; or in case of a corporation, joint stock company or association, or insurance company, organized under the laws of a foreign country, interest so paid on its bonded or other indebtedness to an amount of such bonded and other indebtedness not exceeding the proportion of its paid-up capital stock outstanding at the close of the year, which the gross amount of its income for the year from business trans- acted and capital invested within the United States and any of its Territories, Alaska, and the District of Columbia, bears to the gross amount of its income derived from all sources within and without the United States; (seventh) the amount Banking, 821 paid by it within the year for taxes imposed under the author- ity of the United States or any State or Territory thereof, and seperately the amount so paid by it for taxes imposed by the government of any foreign country as a condition to carrying on business therein; (eighth) the net income of such corporation, joint stock company or association, or insurance company, after making the deductions in this section author- ized. All such returns shall as received be transmitted forth- with by the collector to the Commissioner of Internal Revenue. Fourth. Whenever evidence shall be produced before the Commissioner of Internal Eevnue vrhich in the opinion of the commissioner justifies the belief that the return made by any corporation, joint stock company or association, or insur- ance company,' is incorrect, or whenever any collector shall report to the Commissioner of Internal Revenue that any cor- poration, joint stock company or association, or insurance company has failed to make a return as required by law, the Commissioner of Internal Revenue may require from the cor* poration, joint stock company or association, or insurance company making such return, such further information with reference to its capital, income, losses, and expenditures as he may deem expedient; and the Commissioner of Internal Revenue, for the purpose of ascertaining the correctness of such return or for the purpose of making a return where none has been made, is hereby authorized, by any regularly appointed revenue agent specially designated by him for that purpose, to examine any books and papers bearing upon the matters required to be included in the return of such corporation, joint stock company or association, or insurance company, and to require the attendance of any officer or employee of such corporation, joint stock company or association, or insurance company, and to take his testimony with reference to the matter required by law to be included in such return, with power to administer oaths to such person or persons; and the Commissioner of Internal Revenue may also invoke the aid of any court of the United States having jurisdiction to require the attendance of such oflBcers or employees and the production 822 Appeitdix. of such books and papers. Upon the information so acquired the Commissioner of Internal Eevnue may amend any return or make a return where none has been made. All proceedings taken by the Commissioner of Internal Eevenue under the provisions of this section shall be subject to the approval of the Secretary of the Treasury. Fifth. All returns shall be retained by the Commissioner of Internal Revenue, who shall make assessments thereon; and in case of any return made with false or fraudulent intent, he shall add one hundred per centum of such tax, and in case of a refusal or neglect to make a return or to verify the same as aforesaid he shall add fifty per centum of such tax. In case of neglect occasioned by the sickness or absence of an officer of such corporation, joint stock company or association, or insurance company, required to make said return, or for other sufiicient reason, the collector may allow such further time for making and delivering such return as he may deem necessary, not exceeding thirty days. The amount so added to the tax shall be collected at the same time and in the same manner as the tax originally assessed, unless the refusal, neg- lect, or falsity is discovered after the day for payment of said taxes, in which case the amount so added shall be paid by the delinquent corporation, joint stock company or associa- tion, or insurance company, immediately upon notice given by the collector. All assessments shall be made and the sev- eral corporations, joint stock companies or associations, or insurance companies, shall be notified of the amount for which they are respectively liable on or before the first day of June of each successive year, and said assessments shall be paid on or before the thirtieth day of June, except in cases of refusal or neglect to make such return, and in cases of false or fraudulent returns, in which cases the Commissioner of Internal Revenue shall, upon the discovery thereof, at any time within three years after said return is due, make a return upon information obtained as above provided, for, and the assessment made by the Commissioner of Internal Revenue thereon shall be paid by such corporation, joint stock com- Banking. 823 pany or association, or insurance company immediately upon notification of the amount of such assessment; and to any sum or sums due and unpaid after the thirtieth day of June in any year, and for ten days after notice and demand thereof by the collector, there shall be added the sum of five per centum on the amount of tax unpaid and interest at the rate of one per centum per month upon said tax from the time the same becomes due. Sixth. When the assessment shall be made, as provided in this section, the returns, together with any corrections thereof which may have been made by the commissioner, shall be filed in the office of the Commissioner of Internal Revenue and shall constitute public records and be open to inspection as such. Seventh. It shall be unlawful for any collector, deputy collector, agent, clerk, or other officer or employee of the United States to divulge or make known in any manner what- ever not provided by law to any person any information obtained by him in the discharge of his official duty, or to divulge or make known in any manner not provided by law any document received, evidence taken, or report made under this section except upon the special direction of the President; and any offense against the foregoing provision shall be a misdemeanor and be punished by a fine not exceeding one thousand dollars, or by imprisonment not exceeding one year, or both, at the discretion of the court. Eighth. If any of the corporations, joint stock companies or associations, or insurance companies aforesaid, shall refuse or neglect to make a return at the time or times hereinbefore specified in each year, or shall render a false or fraudulent return, such corporation, joint stock company or association, or insurance company, shall be liable to a penalty of not less than one thousand dollars and not exceeding ten thousand dol- lars. Any person authorized by law to make, render, sign, or verify any return who makes any false or fraudulent return. 824 Appendix. or statement, witli intent to defeat or evade the assessment required by this section to be made, shall be guilty of a mis- demeanor, and shall be fined not exceeding one thousand dollars or be imprisoned not exceeding one year, or both, at the dis- cretion of the court, with the costs of prosecution. All laws relating to the collection, remission, and refund of internal-revenue taxes, so far as applicable to and not incon- sistent with the provisions of this section, are hereby extended and made applicable to the tax imposed by this section. Jurisdiction is hereby conferred upon the circuit and dis- trict courts of the United States for the district within which any person summoned under this section to appear to testify or to produce books, as aforesaid, shall reside, to compel such attendance, production of books, and testimony by appropriate process. Act Aug. 5, 1909, sec. 38; 36 Stat. L. 112. 259. Panama Canal Bonds — Additional Issue Atjthoe- izED AT Rate oe Interest not to Exceed Theee Pee Cent. Pee Annum. (Sec. 39.) That the Secretary of the Treasury is hereby authorized to borrow on the credit of the United States from time to time, as the proceeds may be required to defray expenditures on account of the Panama Canal and to reimburse the Treasury for such expenditures already made and not covered by previous issues of bonds, the sum of two hundred and ninety million five hundred and sixty-nine thou- sand dollars (which sum together with the eighty-four million six hundred and thirty-one thousand nine hundred dollars already borrowed upon issues of two per cent, bonds under section eight of the Act of June twenty-eight, nineteen hun- dred and two, equals the estimate of the Isthmian Canal Com- mission to cover the entire cost of the canal from its inception to its completion), and to prepare and issue therefor coupon or registered bonds of the United States in such form as he may prescribe, and in denominations of one hundred dollars, five hundred dollars, and one thousand dollars, payable fifty Banking. 825 years from the date of issue, and bearing interest payable quarterly in gold coin at a rate not exceeding three per centum per annum; and the bonds herein authorized shall be exempt from all taxes or duties of the United States, as well as from taxation in any fotm by or under State, municipal, or local authority: Provided, That said bonds may be disposed of by the Secretary of the Treasury at not less than par, under such regulations as he may prescribe, giving to all citizens of the United States an equal opportunity to subscribe therefor, but no commissions shall be allowed or paid thereon; and a sum not exceeding one-tenth of one per centum of the amount of the bonds. herein authorized is hereby appropriated, out of any money in the Treasury not otherwise appropriated, to pay the expenses of preparing, advertising, and issuing the same; and the authority contained in section eight of the act of June twenty-eight, nineteen hundred and two, for the issue of bonds bearing interest at two per centum per annum, is hereby repealed. Act Aug. 5, 1909, sec. 39; 36 Stat. L. 117. 260. Panama Canal Bonds Issued Under Act of August 5, 1909, NOT Receivable as Security foe the Issue of CiEcuLATiNG IS'oTES TO NATIONAL Banks. Be it enocted hy the Senate and House of Bepresentatives of the United States of America in Congress assembled, That the Secretary of the Treasury be, and he is hereby, authorized to insert in the bonds to be issued by him under section thirty-nine of an act entitled "An act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes," approved August fifth, nineteen hundred and nine, a provision that such bonds shall not be receivable by the Treasurer of the United States as security for the issue of cir- culating notes to national banks ; and the bonds containing such provision shall not be receivable for that purpose. Act March 2, Ifl'll. 826 Appendix. Act March 2, 1911. 261. Ceetified Checks Deaww on JSTational and State Banks Receivable foe Duties on Imports and Inteenax Taxes. Be it enacted by the Senate and House of Representa- tives of the United States of America in Congress assembled. That it shall be lawful for collectors of customs and of internal revenue to receive for duties on imports and internal taxes certified checks drawn on national and State banks, and trust companies during such time and under such regulations as the Secretary of the Treasury may prescribe. No person, however, who may be indebted to the United States on account of duties on imports or internal taxes who shall have tendered a certified check or checks as provisional payment for such duties or taxes, in accordance with the terms, of this act, shall be released from the obligation to make ultimate payment thereof until such certified check so received has been duly paid; and if any such check so received is not duly paid by the bank on which it is drawn and so certifying, the United States shall, in addi- tion to its right to exact payment from the party originally indebted therefor, have a lien for the amount of such check upon all the assets of such bank; and such amount shall be paid out of its assets in 'preference to any or all other claims whatsoever against said -bank, except the necessary costs and expenses of administration and the reimbursement of the United States for the amount expended in the redemption of the circulating notes of such bank. Sec. 2. That this act shall be effective on and after June first, nineteen hundred and eleven. Act March 2, 1911. Banking. 827 CHAPTER VII. SPECIAL ACTS EELATING TO NATIONAL BANKS. 262. Act May 2, 1890. Qualifica- tions of directors in Okla- homa. 263. Act May 2, 1890. National banking laws extended to Indian Territory. 264. Act April 12, 1900. National banking laws applicable to Porto Rico. 265. Act April 30, 1900. National banking laws applicable to Hawaii. 266. Special acts authorizing change of name or location of na- tional banks. 262. Qualifications of Dieectoes in Oklahoma. Act Mat 2, 1890. (Sec. 17.) That the provisions of title sixty- two of the Revised Statutes of the United States relating to national banks, and all amendments thereto, shall have the same force and effect in the Territory of Oklahoma as else- where in the United States: Act May 2, 1890, sec. 17; 26 Stat. L. 89. " Provided, That persons otherwise qualified to act as direct- ors shall not be required to have resided in said Territory for more than three months immediately preceding their elec- tion as such." Act April 12, 1900, sec. ).4; 31 Stat. L. 80. 263. !tfATiONAL Banking Laws Extended to Indian Tee- EiTOBY. Act Mat 2, 1890. (Sec. 31.) * * * That all laws relating to national banking associations shall have the same force and effect in Indian Territory as elsewhere in the United States. Note. — The Act of May 2, 1890, is. "An act to provide a temporary government for the Territory of Oklahoma, to enlarge the jurisdiction of the United States court in the Indian Territory, and for other purposes." Sections 17 and 31 are the only sections which relate to national banks. 264. jS'ational Banking Laws Applicable to Poeto Rico. Act April 12, 1900. (Sec. 14.) That the statutory laws of the United States not locally inapplicable, except as 828 Appendix. hereinbefore or hereinafter otherwise provided, shall have the same force and effect in Porto Rico as in the United States, except the internal-revenue laws, which, in view of the pro- visions of section 3, shall not have force and effect in Porto Rico. Act May 2, 1890, sec. 31; 26 Stat. L. 96. Note. — The Attorney-General of the United States in an opinion ren- dered June 2, 1900, held " There seems to be in the structure of the national banking laws no general provisions which cannot he carried into force and eflFect in Porto Rico equally with all of the various States and Territories to which the laws were originally applied. I can find no reason to hold that the statutes relative to the organization and powers of national banks have not, by section 14 of the Porto Eican act, above referred to, been extended to that island. The language of that section is broad enough, and in my opinion does, authorize the organization and carrying on of national banks in Porto Rico." 265. l^ATiONAL Banking Laws Applicable to Hawaii. Act Apeil 30, 1900. (Sec. 5.) That the Constitution, and except as herein otherwise provided, all the laws of the TJnited States which are not locally inapplicable, shall have the same force and effect within the said Territory as elsewhere in the TJnited States: Provided, That sections eighteen hundred and fifty and eighteen, hundred and ninety of the Revised Statutes of the TJnited States shall not apply to the Territory of Hawaii. Act April 30, 1900, sec. 5; 31 Stat. L. 141. Note. — The Attorney-General of the United States in an opinion rendered June 23, 1900, held "That the Act of April 30, 1900, * * • extended the national banking acts to the Territory of Hawaii, and would authorize the Comptroller to grant permission for the organization of national banks therein. (See my opinion of June 2, 1900, relative to the same question as applied to Porto Rico.) But I do not think that the provisions of section 5154 apply to banks existing in Hawaii prior to the passage of the Act of April 30, 1900. Sections 5154 and 5155 seem, by their especial terms, to refer only to banking institutions organized under special or general laws of a State, and do not seem to apply at all to banks organized under the laws of any Territory. I think the object of these two sections was to enable the banks that were previously strictly State institutions to become national corporations, and the operation of the act in that respect is to be so restricted." 266. Special Acts Authorizing Change of Name oe Location. Act June 7, 18Y2. (Sec. 1.) That The First National Bank of Annapolis, now located in the city of Annap- Banking. 829 olis and State of Maryland, is hereby authorized to change its location to the city of Baltimore, in said State. Whenever the stockholders representing three-fourths of the capital of said bank, at a meeting called for that purpose, determine to make such change, the president and cashier shall execute a certificate, under the corporate seal of the bank, specifying such determination, and shall cause the same to be recorded in the office.of the Comptroller of the Currency, and thereupon such change of location shall be effected, and the operations of discount and deposit of said bank shall be carried on in the city of Baltimore. Act June 7, 1872, sec. 1 ; 17 Stat. L. 281. Sec. 2. That nothing in this act contained shall be so con-) strued as in any manner to release the said bank from any liability or affect any action or proceeding in law in which the said bank may be a party or interested. And when such change shall have been determined upon, as aforesaid, notice thereof, and of such change, shall be published in two weekly papers in the city of Annapolis not less than four weeks. Act June 7, 1872, sec. 2; 17 Stat. L. 282. Sec. 3. That whenever the location of said bank shall have been changed from the city of Annapolis to the city of Balti- more, in accordance with the first section of this act, its name shall be changed to The Traders' ]N"ational Bank of Baltimore, if the board of directors of said bank shall accept the new name by resolution of the board, and cause a copy of such reso- lution, duly authenticated, to be filed with the Comptroller of the Currency. Act June 7, 1872, sec. 3; 17 SUt. L. 282. Sec. 4. That all the debts, demands, liabilities, rights, priv- ileges, and powers of The First E'ational Bank of Annapolis shall devolve upon The Traders' l^ational Bank of Baltimore whenever such change of name is effected. Act June 7, 1872, sec. 4; 17 Stat. L. 282. 830 Appendix. Sec- 5. That this act shall take effect, and be in force from and after its passage. Act June 1, 1872, sec. 5; 17 Stat. L. 282. Note. — Acts of a similar nature to the one preceding have been enacted by Congress for the following purposes: Authorizing The Manufacturers' National Bank of New York to change its location from the city of New York to the city of Brooklyn. (Ap- proved July 27, 1868.) Authorizing The City National Bank of New Orleans, Louisiank, to change its name to The Germania National Bank of New Orleans. (Ap- proved March 1, 1869.) Authorizing The Second National Bank of Plattsburgh, New York, to change its name to The Vilas National Bank of Plattsburgh. (Approved March 1, 1869.) Authorizing The First National Bank of Delhi, New York, to change its location and name to The First National Bank of Port Jervig, New York. (Approved May 5, 1870.) Authorizing The First National Bank of Fort Smith, Arkansas, to change its location and name to the First National Bank of Camden, Arkan- sas. (Approved July 1, 1870.) Authorizing the Jersey Shore National Bank, Pennsylvania, to change its location and name to The Williamsport National Bank, Pennsylvania. (Approved December 22, 1870.) Authorizing the Worcester County National Bank of Blaekstone, Mas- sachusetts, to change its location and name to The Franklin National Bank, Massachusetts. (Approved February 9, 1871.) Authorizing The Farmers' National Bank of Fort Edward, New York, to change its location and name to The North Granville National Bank, New York. (Approved February 18, 1871.) Authorizing The Worthington National Bank of Cooperstown, New York, to change its location and name to The First National Bank of Oneonta, New York. (Approved February 27, 1871.) Authorizing The Warren National Bank of South Danvers, Massachu- setts, to change its name to The Warren National Bank of Peabody, Massa- chusetts. (Approved March 12, 1872.) Authorizing the First National Bank of Seneca, Illinois, to change its location and name to The First National Bank of Morris, Illinois. (Two acts, approved April 5, 1872, and June 18, 1874.) Authorizing The Eailroad National Bank of Lowell, Massachusetts, to change its location and name to The Railroad National Bank of Boston, Massachusetts. (Approved May 31, 1872.) Authorizing The National Bank of Lyons, Michigan, to change its loca- tion and name to The Second National Bank of Ionia, Michigan. (Approved" December 24, 1872.) Authorizing The East Chester National Bank of Mount Vernon, New York, to change its location and name to The German National Bank of Evansville, Indiana. (Approved January 11, 1873.) Authorizing The First National Bank of Newnan, Georgia, to change its location and name to The National Bank of Commerce, Atlanta, Georgia. (Approved January 23, 1873.) Authorizing The First National Bank of Watkins, New York, to change its location and name to The First National Bank of Penn Yan, New York. (Approved February 19, 1873.) Banking. 831 Authorizing The National Bank of Springfield, Missouri, to change its name to The First National Bank of Springfield, Missouri. (Approved March 3, 1873.) Authorizing The Kansas Valley National Bank of Topeka, Kansas, to change its name to The First National Bank of Topeka, Kansas. (Approved March 3, 1873.) Authorizing The First National Bank of Saint Anthony, Minnesota, to change its location and name to The Merchants' National Bank of Minne- apolis, Minnesota. (Approved January 8, 1874.) Authorizing The Second National Bank of Havana, New York, to change its name to The Havana National Bank of Havana, New York. (Approved January 9, 1874.) Authorizing The Passaic County National Bank of Paterson, New Jersey, to change its name to The Second National Bank of Paterson, New Jersey. (Approved April 15, 1874.) Authorizing The Citizens' National Bank of Hagerstown, Maryland, to change its location and name to The Citizens' National Bank of Washing- ton City, District of Columbia. (Approved May 1, 1874.) Authorizing The Irasburg National Bank of Orleans, at Irasburg, Ver- mont, to change its location and name to The Barton National Bank, Ver- mont. (Approved June 3, 1874.) Authorizing The Farmers' National Bank of Greensburg, Pennsylvania, to change its location and name to The Fifth National Bank of Pittsburg, Pennsylvania. (Approved June 23, 1874.) Authorizing The Citizens' National Bank of Sanbornton, New Hamp- shire, to change its name to The Citizens' National Bank of Tilton, New Hampshire. (Approved February 19, 1875.) Authorizing the Second National Bank of Jamestown, New York, to change its name to The City National Bank of Jamestown, New York. (Approved March 3, 1875.) Authorizing The Second National Bank of Watkins, New York, to change its name to The Watkins National Bank, New York. (Approved March 3, 1875.) Authorizing The Slater National Bank of North Providence, Rhode Island, to change its name to The Slater National Bank of Pawtueket, Rhode Island. (Approved March 3, 1875.) Authorizing The Auburn City National Bank of Auburn, New York, to be consolidated with The First National Bank of Auburn, New York. (Approved March 3, 1875.) Authorizing The Miners' National Bank of Braidwood, Illinois, to change its location and name to The Commercial National Bank of Wilmington, Illinois. (Approved January 31, 1878.) Authorizing The Windham National Bank, Windham, Connecticut, to change its location to the village of Willimantic, Connecticut. (Approved February 10, 1879.) Authorizing the National Bank of Commerce of Cincinnati, Ohio, to change its name to The National Lafayette and Bank of Commerce. (Ap- proved April 29, 1879.) Authorizing the City National Bank of Manchester, New Hampshire, to change its name to The Merchants' National Bank of Manchester. (Ap- proved June 11, 1880.) Authorizing The Blue Hill National Bank of Dorchester, Massachusetts, to change its location and name to the Blue Hill National Bank of Milton, Massachusetts. (Approved January 13, 1881.) Authorizing The First National Bank of Meriden, West Meriden, Con- 832 Appendix. necticut, to change its name to The First National Bank of Meriden, Con- necticut. (Approved March 1, 1881.) Authorizing The National Mechanics' Banking Association of New York, New York, to change its name to Wall Street National Bank. (Approved February 14, 1882.) Authorizing The Lancaster National Bank of Lancaster, Massachusetts, to change its location and name to The Lancaster National Bank of Clinton, Massachusetts. (Approved February 25, 1882.) Authorizing the National Bank of Kutztown, Pennsylvania, to change its location and name to The Keystone National Bank of Reading, Penn- sylvania. (Approved June 27, 1882.) Joint resolution authorizing The National Bank of Winterset, Iowa, to change its name to The First National Bank of Winterset, Iowa. (Ap- proved January 18, 1883.) Authorizing The Second National Bank of Xenia, Ohio, to increase its capital stock. (Approved February 17, 1883.) Authorizing The First National Bank of West Greenville, Pennsylvania, to change its name to The First National Bank of Greenville, Pennsylvania. (Approved February 26, 1883.) Authorizing The West Waterville National Bank of Oakland, Maine, to change its title to The Messalonskee National Bank of Oakland, Maine. (Approved April 15, 1884.) Authorizing the Hillsborough National Bank, of Hillsboro, Ohio, to change its name to The First National Bank of Hillsborough, Ohio. (Ap- proved December 18, 1884.) Authorizing The Slater National Bank of North Providence, Rhode Island, to change its name. (Approved January 8, 1885.) Authorizing the First National Bank of Omaha, Nebraska, to increase its capital stock. (Approved January 10, 1885.) Authorizing The National Bank of Bloomington, Illinois, to change its name to the First National Bank of Bloomington, Illinois. (Approved January 27, 1885.) Authorizing The Manufacturers' National Bank of New York to change its name to The Manufacturers' National Bank of Brooklyn, New York. (Approved February 20, 1885.) Authorizing The Commercial National Bank of Chicago, Illinois, to increase its capital stock. (Approved February 28, 1885.) Authorizing The First National Bank of Lamed, Kansas, to increase its capital stock. (Approved March 3, 1885.) Authorizing The First National Bank of Fort Benton, Montana, to change its location and name. (Approved December 18, 1890.) Authorizing the National Safe Deposit Company of Washington to change its title to " The National Safe Deposit Savings and Trust Company of the , District of Columbia." (Approved February 18, 1892.) Authorizing a national bank of Chicago, Illinois, to establish a branch office upon the grounds of the World's Columbian Exposition. (Approved May 12, 1892.) Authorizing The First National Bank of Sprague, Washington, to change its location and name. (Approved March 20, 1896.) Authorizing the Interstate National Bank of Kansas City, Kansas, to change its location. (Approved March 2, 1897.) Authorizing any bank or trust company located in the State of Missouri to conduct a banking office on the Louisiana Exposition grounds at St. Louis, Mo. (Approved March 3, 1901.) Banking. 833 Authorizing The American National Bank of Graham, Virginia, to change its location and name. (Approved February 15, 1906.) Authorizing the National Safe Deposit Savings and Trust Company of the District of Columbia to change its title to " National Savings and Trust Company." (Approved January 31, 1907.) CHAPTER VIII. OPINIONS OP THE ATTOBNET-GBNERAL. 267. Opinion of Attorney-General of United States on Oklahoma deposit guarantee law. 268. Opinion of Attorney-Gteneral of United States on Kansas de- posit guarantee law. 269. Opinion of Attorney-General of the United States on power of a national bank to enter into a contract with an in- surance company guarantee- ing the solvency of the bank. 267. The Okiahoma Deposit Guarantee Law. The Attomey-General of the United States, in an opinion ren- dered July 28, 1908, said: The business of insuring deposits is a wholly separate business from that of banking * * *. A national bank has no power to guarantee the obligations of a third party, unless in connection with the sale or transfer of its own property and as an incident to the business of the bank * * *. But a contract guaranteeing the payment by another corporation or individual of obligations in nowise connected with the business of the bank Is entirely ultra vires. I hold * » * that it is illegal for the officers of a national bank to enter into any such agreement as that contemplated by section 4 of the Oklahoma statutes, and any willful action to this effect on the part of any national bank is sufficient cause for the forfeiture of charter. 268. The Kansas Deposit Guaeantee Law. The Attor- ney-General of the United States, in an opinion rendered April 6, 1909, said: The question of the power of a national bank to avail of the invitation extended to it by this act involves primarily a consideration of the nature of the agreement contemplated by it. Attorney-General Bonaparte, in an opinion rendered to the Secretary of the Treasury, under date of July 28, 1908, considering an act of the Legislature of the State of Oklahoma (27 Op. A. G., p. 38 ) , determined that a national bank could not lawfully enter into the plan or scheme contemplated by that act, because it involved es- sentially a guaranty to the depositors of all State banks in Oklahoma, and other national banks in that State which might accept the terms of the law, that their respective depositors should be paid in full; a, contract which he deemed to be clearly ultra vires. The act now under consideration attempts to avoid this objection by limiting the amount for which any bank may become liable, but within such limitation the same principle is involved, for to the extent of the 53 834 Appendix. contribution and liability required by the statute each bank becomes liable to creditors of the other banks which are parties to the plan. But even if a proper construction of the act would, as contended, make it a guaranty by each bank of payments to its own depositors, and not a general guaranty within the limits of contribution prescribed by the act, of all deposits in all the banks which are parties to the scheme, nevertheless I am strongly of the opinion that a national bank is without corporate power to expend its moneys for the purpose of providing insurance that its depositors shall be paid in full. It may, of course, insure its own property against loss or destruction; it may insure itself against loss of property through theft or other dishonesty, but the application of its funds for the purpose of secur- ing a collateral guaranty by third parties that it will pay in full its debts to its depositors is, it appears to me, beyond its corporate power. Such contract would fall within the principles asserted in Commercial National Bank v. Pirie, 82 Fed. 799, Bower v. Needles National Bank, 94 Fed. 925, for if, as is well established, a national bank has no power to guarantee the obligation of another, it certainly has no power to employ another to guarantee its own obligation to a third person. 269. Power of Natioital Bank to Enter into a Con- tract WITH AN Insurance Compant Guaranteeing the Solvency of the Bank. The Attorney-Greneral of the United States in an opinion rendered May 7, 1909, said: Replying to yours of the 29th ultimo, in which, at the request of the Comptroller of the Currency, you ask for an opinion as to the power of a national bank to enter into a contract With an insurance company guaran- teeing the solvency of the bank, and transmitting to me a form of policy which is proposed to be issued by an insurance company proposed to be organized, I beg to say that, as a general principle, I have no doubt that it is entirely within the powers of a national bank to contract for the insurance of its assets against loss. The form of the proposed policy sub- mitted in your letter is somewhat peculiar. It purports to insure to the bank the payment of " a sum of money sufficient to indemnify the bank for any and all losses suilered by it by reason of theft, embezzlement, losses in realizing upon loans and investments, shrinkage in value of assets or otherwise, in an amount equal to but not exceeding the net excess of its obligations, other than by reason of the stock of the bank, over the total aggregate value of the assets of the bank thus reduced by such losses; pro- vided that there shall be included in the assets of the bank all net sums which have been realized by reason of the additional liability of the stock- holders of the bank." Such contract is, in effect, an agreement to pay to the bank any de- ficiency in its assets upon ultimate realization necessary to enable it to pay all of its liabilities of every kind. The policy is to run for a period of three months, but to be renewable thereafter for periods of three months each with the consent of the insurance company, and at such premiums as the insurance company may fix at least one month before the expiration of the then current term of the insurance, the premium in every case to be a percentage of the average indebtedness of the bank during the period covered by such renewal, with the provision that, if such rate shall be in excess of one-sixteenth of 1 per cent upon such average indebtedness, then and in such event the insurance company shall be liable to account to the bank Banking. 835 ioT the application of such premium paid by the bank in excess of one- sixteenth of 1 per cent, " which excess shall be applicable only to the pay- ment of actual losses incurred by the company by reason of claims under this and similar policies, and any excess over such extra claims shall be divided pro rata among the banks paying such extra rate of premium as a participation in the profits during which period such extra rate of premium has been paid." It is somewhat uncertain precisely what this paragraph means and what its effect may be. It seems to me to be objectionable as committing the bank to a profit-sharing feature, which might be contended to entail a corresponding liability for losses; and, as the attorney for the promoters of the proposed insurance company informs me that this is not regarded as an essential part of the plan, I should advise that it had better be eliminated from the policy. Another provision contained in the policy subjects the bank to a, period- ical examination by the examiners of the insurance company without notice and at such times as the company may elect, one of such examinations to be within each period of six months covered by the policy and all renewals thereof. This period is probably inadvertently p}aced at six months, as the policy is proposed to be written for periods of three months only. Aside from that, I very much question the legality of this clause, or at least its enforceability. Section 5241 of the Revised Statutes provides that, "No association shall be subject to any visitorial powers other than such as are authorized by this article, or are vested in the courts of justice." While this statute does not prohibit the bank from permitting an ex- amination of its books, in my opinion it does operate to prohibit it from obligating itself to permit such examination; and if the covenant to insure can be considered as in any respect dependent upon this agreement to permit examinations, it might be vitiated by the unlawful provision. I should advise that the clause be reframed so as to make it clear that the agree- ment to insure is not dependent upon the failure to permit the examina- tion, although it might be stipulated that in case, at any time, the ex- aminer of the company should not be allowed access to the books of the bank for the purpose of making an examination the company should have the option, upon reasonable notice, to terminate the contract. In my opinion, therefore, it is a matter for the discretion of the directors and officers of a bank to determine whether or not they will enter into any such contract in any given instance, this discretion to be exercised in view of the solvency and general financial condition of the company making the insurance and the reasonableness of the rate of premium; and the form of the policy being modified to conform to the foregoing suggestions, I see no legal reason why a bank may not enter into it. 836 Appendix. OODE or THE DISTRICT OF COLUMBIA. CHAPTER XVIII. COBPOEATIONS. Sub-chapter lY. — Manufacturing, Agricultural, Mining, Mechanical, Insurance, Mercantile, Transportation, Marleet, and Savings Bank Corporations. Sec. 605. Certificate. Sec. 606. Certificate. Sec. 607. Signers incorporated. Sec. 608. Trustees. Sec. 609. Elections. Sec. 610. Elections. Sec. 611. Officers. Sec. 612. By-laws. Sec. 613. Calls. Sec. 614. Stock. Sec. 615. Liability of stockholders. Sec. 616. Payments on capital stock. Sec. 617. Annual reports. Sec. 618. Penalty for failure. Sec. 619. False report. Sec. 620. Stock of other companies not to be bought. Sec. 621. Loans to stockholders. Sec. 622. Dividends. See. 623. Dividend?. Sec. 624. Executors, and so forth, not personally liable. Sec. 625. Executors, and so forth, may vote. Sec. 626. Pledges of stock. Sec. 627. Stock book. Sec. 628. Stock book. Sec. 629. Transfers. Sec. 630. Transfers. Sec. 631. Inspection of books. Sec. 632. Inspection of books. Sec. 633. Increase or diminution of stock. Sec. 634. Increase or diminution of stock. Sec. 635. Increase or diminution of stock. Sec. 636. Increase or diminution of stock. Sec. 637. Increase or diminution of stock. Sec. 638. Increase or diminution of stock. Sec. 639. Increase or diminution of stock. Sec. 640. Copy of certificate to be evidence. Sec. 605. Certificate. Any three or more persons who desire to form a company for the purpose of carrying on any enterprise or business which may be lawfully conducted by an individual, excepting banks of circulation or discount, rail- roads, and such other enterprise or business as may be other- wise specially provided for in this code, may make, sign, and acknowledge, before some officer competent to take the acknowl- edgment of deeds, and file in the office of the recorder of deeds, a certificate in writing: Provided, That nothing herein con- BANKIIfG. 837 tained shall be held to authorize the organization of corpora- tions to buy, sell, or deal in real estate, except corporations to transact the business ordinarily carried on by real estate agents or brokers. Act June 17, 1870, sec. 2; 16 Stat. L. 153; sec. 553, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 605; 31 Stat. L. 1284. Act June 30, 1902, sec. 605; 32 Stat. L. 533. Sec. 606. In Such Cbetificate Shall be Stated — First. The corporate name of the company and the object for which it is formed. Second. The term of its existence, which may be perpetual. Third. The amount of the capital stock of the company and the number of shares of which said stock shall consist. Fourth. The number of trustees who shall manage the con- cerns of the company for the first year and their names. Fifth. The name of the place in the District in which the operations of the company are to be carried on. Act June 17, 1870, sec. 2; 16 Stat. L. 153; sec. 553, Kev. Stat, of District of. Columbia. Act March 3, 1901, see. 606; 31 Stat. L. 1285. Sec. 607. Signers Inoobpoeated. "When the certificate shall have been filed, in accordance with the provisions of the preceding section, the persons who shall have signed and acknowledged the same and their successors shall be a body politic and corporate in fact and in name, by the name stated in such certificate, and by that' name have succession and be capable of suing and being sued in any court of law or equity in the District; and they and their successors may have a common seal and make and alter the same at pleasure, and they shall by their corporate name be capable in law of purchasing, holding, and conveying any real or personal estate whatever which may be necessary to enable the company to carry on its operations named in such certificate, but shall not mortgage such estate or give any lien thereon, except in pursuance of a vote of the stockholders of the company. Act May 5, 1870, sec. 4; 16 Stat. L. 102; sec. 554, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 607; 31 Stat. L. 1285. 838 Appendix. Sec. 608. Teustees. The stock, property, and concerns of such company shall be managed by not less than three nor more than fifteen trustees, who shall, respectively, be stock- holders, and a majority citizens of the District, and shall, except for the first year, be annually elected by the stockholders, at such time and place as shall be determined by the by-laws of the company. Act May 5, 1870, sec. 4; 16 Stat. L. 102; sec. 555, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 608; 31 Stat. L. 1285. Sec. 609. Elections. Public notice of the time and place of holding such election shall be published not less than thirty days previous thereto in some newspaper printed and published in the District, and the election shall be made by such of the stockholders as shall attend for that purpose, either in person or by proxy. All the elections shall be by ballot, and each stockholder shall be entitled to as many votes as he owns shares of stock in the company, and the persons receiving the greatest number of votes shall be trustees; and when any vacancy shall happen among the trustees it shall be filled for the remainder of the year in such manner as may be provided by. the by-laws of the company. Act May 5, 1870, sec. 4; 16 Stat. L. 103; sec. 556, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 609; 31 Stat. L. 1285. Sec. 610. In case it shall happen at any time that an elec- tion of trustees shall not be made on the day designated by the by-laws of said company when it ought to have been made, the company shall not for that reason be dissolved, but it shall be lawful on any other day to hold an election for trustees, in such manner as shall be provided by the by-laws, and all acts of trustees shall be valid and binding as against said company until their successors shall be elected. Act May 5, 1870, sec. 557, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 610; 31 Stat. L. 1285. Sec. 611. Offcees. There shall be a president of the com- pany, who shall be designated from the trustees; and also Banking. 839 such subordinate officers as may be elected or appointed, and who may be required to give security for the faithful perform- ance of the duties of their office, as the company by its by-laws may require. Act May 5, 1870, sec. 558, Rev. Stat. District of Columbia. Act March 3, 1901, see. 611; 31 Stat. L. 1285. Sec. 612. By-laws. The trustees shall have power to make such prudential by-laws as they deem proper for the management and disposal of the stock and business affairs of such company, not inconsistent with the laws of the District and the Constitution of the United States, and prescribing the duties of officers, artificers, ■ and servants that may be employed, for the appointment of all officers, and for carrying on all kinds of business' within the objects and purposes of such company. Act May 5, 1870, sec. 559, Kev. Stat. District of Columbia. Act March 3, 1901, sec. 612; 31 Stat. L. 1285. Sec. 613. Calls. No company incorporated under this sub-chapter shall be authorized to transact any business until ten per centum of the capital stock shall have been actually paid in, either in money or in property at its actual value ; and it shall be lawful for the trustees to call in and demand from the stockholders the residue of their subscriptions in money or property at such times and in such installments as the trus- tees shall deem proper, under the penalty of forfeiting the. shares of stock subscribed for and all previous payments made thereon, if payment shall not be made by the stockholder within sixty days after a personal demand or a notice requiring such payment shall have been published for six successive weeks in a newspaper in the District. Act May 5, 1870, sec. 560, Eev. Stat. District of Columbia. Act March 3, 1901, sec. 613; 31 Stat. L. 1286. Sec. 614. Stock. The stock of such company shall be deemed personal estate and shall be transferable in such man- ner as shall be prescribed by the by-laws of the company; but 840 Appendix. no shares shall be transferable until all previous calls thereon shall have been fully paid in or the shares shall have been declared forfeited for non-payment. Act May 5, 1870,- sec. 561, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 614; 31 Stat. L. 1286. Sec. 615. Liability of Stockholdee. All the stock- holders of every company incorporated under this sub- chapter shall be severally individually liable to the creditors of the company in vyhich they are stockholders for the unpaid amount due upon the shares of stock held by them, respectively, for all debts and contracts made by such company, until the vphole amount of capital stock, fixed and limited by such com- pany, shall have been paid in, and a certificate thereof shall have been made and recorded, as prescribed in the following section. Act May 5, 1870, sec. 562, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 615; 31 Stat. L. 1286. Sec. 616. Payments on Capital Stock. The president and a majority of the trustees, withm thirty days after the payment of the last installment of the capital stock so fixed and limited, shall make a certificate stating the amount of the capital so fixed and paid in, which certificate shall be signed and sworn to by the president and a majority of the trustees; and they shall within the said thirty days record the same in 'the office of the recorder of deeds of the District. Act May 5, 1870, sec. 563, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 616; 31 Stat. L. 1286. Sec. 617. Annual Reports. Every such company shall annually, except insurance companies, within twenty days from the first of January, make a report, which shall be published in a newspaper in the District, which shall state the amount of capital and of the proportion actually paid and the amount of existing debts, which report shall be signed by the president and a majority of the trustees, and shall be verified by the Banking. 841 oath of the president or secretary of the company, and filed in the office of the recorder of deeds of the District. Act May 5, 1870, sec. 566, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 617; 31 Stat. L. 1256. Sec. 618. Penalty fob Failuee. If any company fails to comply with the provisions of the preceding section, any creditor of the corporation or other person interested may by petition for mandamus against the corporation and its proper officers compel such publication to be made, and in such case the court shall require the corporation or the officers at fault to pay all the expenses of the proceeding, including counsel fees. Act May 5, 1870, sec. 567, Re'v. Stat. District of Columbia. Act March 3, 1901, sec. 618; 31 Stat. L. 1286. Act June 30, 1902, sec. 618; 32 Stat. L. 533. Sec. 619. False Eepoet. If any certificate or report made or public notice given by the officers of any company in the pursuance of the provisions of this sub-chapter shall be false in any material representation, all the officers who have signed the same, knowing it to be false, shall be jointly and severally liable for all debts of the company contracted while they are stockholders or officers thereof. Act May 5, 1870, sec. 568,, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 619; 31 Stat. L. 1286. Sec. 620. Stock of Othee Companies not to be Bought. It shall not be lawful for any company to use any of their funds in the purchase of any stock in any other corpo- ration. Act May 5, 1870, sec. 569, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 620; 31 Stat. L. 1286; Sec. 621. Loans to Stockholdees. No loan of money shall be made by any company upon the security, in whole or in part, of its own stock; and if any such loan shall be made, the trustee or officer authorizing the same shall be responsible to the corporation therefor: Provided, That noth- 842 Appendix. ing herein contained shall be held to release the borrower in such a case from liability to the corporation. Act May 5, 1870, sec. 570, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 621; 31 Stat. L. 1286. Act June 30, 1902, sec. 621; 32 Stat. L. 533. Sec. 622. Dividends. If the trustees of any company shall declare and pay any dividend the payment of which would render it insolvent, or which would diminish the amount of its capital stock, they shall be jointly and severally liable for all the debts of the company then existing and for all that shall be thereafter contracted while they shall respectively remain in office. Act May 5, 1870, sec. 571, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 622; 31 Stat. L. 1287. Sec. 623. If any of the trustees shall object to declaring such dividend or the payment of the same, and shall, at any time before the time fixed for the payment thereof, file a cer- tificate of their objection in writing with the secretary of the company and with the recorder of deeds of the District, they shall be exempt from the liability prescribed in the preceding section. Act May 5, 1870, sec. 572, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 623; 31 Stat. L. 1287. Sec. 624. Executoes, and so Fobth, not Peesonallt Liable. No person holding stock in such company as execu- tor, administrator, guardian, or trustee shall be personally subject to any liability as stockholder of such company, but the estate and funds in the hands of such executor, aininia- trator, guardian, or trustee shall be liable in like manner and to the same extent as the testator or intestate or the ward or person interested in such trust fund would have been if he had been living and competent to act and hold the stock in his own name. Act May 5, 1870, sec. 576, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 624; 31 Stat. L. 1287. Banking. 843 Sec. 625. Executoes, and so Foeth, Mat Vote. Every suck executor, administrator, guardian, or trustee shall repre- sent the stock in his hands at all meetings of the company, and may vote accordingly as a stockholder. Act May 5, 1870-, sec. 577, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 625 ; 31 Stat. L. 1287. Sec. 626. Pledges of Stock. No person holding stock in such compajiy as collateral security shall be personally sub- ject to any liability as stockholder of such company, but the person pledging such stock shall be considered as holding the same, and shall be liable as a stockholder accordingly; and every person who shall pledge his stock as collateral security may, nevertheless, represent the same at all meetings and vote as a stockholder. Act May 5, 1870, sec. 578, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 626; 31 Stat. L. 1287. Sec. 627. Stock Book. It shall be the duty of the trus- tees of every corporation formed under this chapter to cause a book to be kept by the treasurer or secretary thereof, con- taining the names of all persons, alphabetically arranged, v^ho are or shall v^ithin six years have been stockholders of such company, and showing their place of residence, the number of shares of stock held by them respectively, the time when they became owners of such shares, and the amount of stock actually paid in. Act May 5, 1870, sec. 579, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 627 ; 31 Stat. L. 1287. Sec. 628. Such book shall, during the usual business hours of the day, on every business day, be open for inspection of stockholders and creditors of the company and their per- sonal representatives, at the office or principal place of busi- ness of such company in the district where its business opera- tions shall be located, and any stockholder, creditor, or repre- sentative shall have a right to make extracts from such books. Act May 5, 1870, sec. 580, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 628; 31 Stat. L. 1287. 844 Appendix. Sec. 629. Teansfees. A person in whose name shares of stock stand on the books of a company shall be deemed the owner thereof as'regards the company, but if any such person shall in good faith sell, pledge, or otherwise dispose of any of his shares of stock to another and deliver to him the certificate for such shares, with written authority for the transfer of the same on the books, the title of the former shall vest in the latter so far as may be necessary to effect the purpose of the sale, pledge, or other disposition, not only as between the parties themgelves, but also as against the creditors of and subsequent purchasers from the former, subject to the pro- visions of section six hundred and fourteen. Act May 5, 1870, sec. 581, Eev. Stat. District of Columbia. Act March 3, 1901, sec. 629; 31 Stat. L. 1287. Sec. 630. Such book shall be presumptive evidence of the facts therein stated in favor of the plaintiff in any suit or proceeding against such company or against any one or more stockholders. Act May 5, 1870, sec. 582, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 630; 31 Stat. L. 1287. Sec. 631. Inspection of Books. Every officer or agent of any company who shall neglect to make any proper entry in such book, or shall refuse or neglect to exhibit the same, or allow the same to be inspected and extracts to be taken there- from, as herein provided, shall be deemed guilty of a misde- meanor, and the company shall pay to the party injured a penalty of fifty dollars for any such neglect or refusal, and all damages resulting therefrom. Act May 5, 1870, sec. 583, Rev. Stat. District of Columbia. Act March 3, 1901, see. 631; 31 Stat. L. 1288. Sec. 632. Every company that shall neglect to keep such book open for inspection, as provided in section six hundred and twenty-eight, shall forfeit to the United States the sum Banking. 845 of fifty dollars for every day it shall so neglect, to be sued for and recovered in the Supreme Court of the District. Act May 5, 1870, sec. 584, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 632; 31 Stat. L. 1288. Sec. 633. Increase ok Diminution of Stock. Any com- pany which may be formed under this sub-chapter may in- crease or diminish its capital stock, by complying with the provisions of this sub-chapter, to any amount which may be deemed sufficient and proper for the purposes of the corpora- tion, and may also extend its business to any other business authorized hereby, subject to the provisions and liabilities of this sub-chapter. Act May 5, 1870, sec. 585, Eev. Stat. District of Columbia. Act March 3, 1901, sec. 633; 31 Stat. L. 1288. Sec. 634. Before any corporation shall be entitled to diminish the amount of its capital stock, if the amount of its debts and liabilities shall exceed the amount of capital to which it is proposed to be reduced, such amount of debts and liabilities shall be satisfied and reduced so as not to exceed such diminished amount of capital. Act May 5, 1870, sec. 586, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 634; 31 Stat. L. 1288. Sec. 635. Whenever any company shall desire to call a meeting of the stockholders for the purpose of increasing or diminishing the amount of its capital stock, or for extending or changing its business, it shall be the duty of the trustees or directors to publish a notice, signed by a majority of them, in a newspaper in the District, at least three successive weeks, and to deposit a notice thereof in the post-office addressed to each stockholder at his usual place of residence, at least three weeks previous to the day fixed upon for holding such meeting, specifying the object of the meeting and the time and place when and where such meeting shall be held. Act May 5, 1870, sec. 588, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 635; 31 Stat. L. 1288. 846 Appendix. Sec. 636. If, at any time and place specified in the notice provided for in the preceding section, stockholders shall appear by proxy or in person representing not less than two-thirds of all the shares of stock of the corporation, they shall organize and proceed to a vote of those present or by proxy. Act May 5, 1870, sec. 589, Eev. Stat. District of Columbia. Act March 3, 1901, sec. 636; 31 Stat. L. 1288. Sec. 637. If, on canvassing the votes, it shall appear that a sufficient number of votes are in favor of increasing or diminishing the amount of capital, or extending or changing the business of the company, a certificate of the proceedings, showing a compliance with the provisions of this sub-chapter, the amount of capital actually paid in, the business to which it is extended or changed, the whole amount of debts and liabilities of the company, and the amount to which the capital shall be increased or diminished, shall be made out, signed, and verified by the affidavit of the chairman, and be counter- signed by the secretary. Act May 5, 1870, sec. 590, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 637; 31 Stat. L. 1288. Sec. 638. Such certificate shall be acknowledged by the chairman, and filed as required by section six hundred and six, and when so filed the capital stock of such corporation shall be increased or diminished to the amount specified in the certificate, and the business extended or changed accord- ingly; and the company shall be entitled to the privileges and provisions and be subject to the liabilities of this sub-chapter. Act May 5, 1870, sec. 591, Eev. Stat. District of Columbia. Act March 3, 1901, sec. 638; 31 Stat. L. 1288. Sec. 639. A vote of at least two-thirds of all the shares of the stock of a company shall be necessary to an increase or diminution of the amount of its capital stock or the extension or change of its business. Act May 5, 1870, sec. 592, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 639; 31 Stat. L. 1288. Banking. 847 Sec. 640. Copy of Ceetificate to be Evidence. A copy of any certificate of incorporation filed in pursuance of this sub-chapter, certified by the recorder of deeds to be a true copy and the whole of such certificate, shall be received in all courts and places as presumptive legal evidence of the facts therein stated. Act May 5, 1870, sec. 593, Rev. Stat. District of Columbia. Act March 3, 1901, sec. 640; 31 Stat. L. 1288. Sec. 641. Eefers to title and fire insurance companies. Secs. 642, 643, and 644. Eefer to sale of unclaimed freight. SUB-CHAPTER VII. BBILDINS ASSOCIATIONS. Sec. 691. Objects. The object of such corporation shall be the accumulation of a capital in money to be derived from the savings and accumulations by the members thereof, to be paid into said corporation in such sums and at such times as may be designated by the by-laws of said corporation, from which the members thereof may obtain advances upon their shares of stock: Provided, That the Comptroller of the Cur- rency, in addition to the powers conferred upon him by law for the examination of national banks, is further authorized, whenever he may deem it useful, to cause examination to be made into the condition of any building association incorporated under the provisions of this chapter, as well as any other build- ing or loan association located or doing business in the District of Columbia. The expenses necessarily incurred in making any such examination shall not exceed the sum of twenty-five dollars for the first five hundred thousand dollars or fractional part thereof of assets and the sum of ten dollars for each addi- 848 Appendix. tional two hundred and fifty thousand dollars or fractional part thereof of assetsi, and be paid by such association to the Comptroller of the Currency at the time of the making of such examination: And provided further, -That every building or loan association located and doing business in the District of Columbia shall make to the Comptroller of the Currency at least one report during each year, according to the form which may be prescribed by him, verified by the oath or affirmation of the president or secretary of such association and attested by the signature of at least three of the directors. The said Comptroller shall also have power to take possession of any company or association whenever in his judgment it is in- solvent or is knowingly violating the laws under which such company is incorporated, and to liquidate the same in the manner provided in the laws of the United States in respect to national banks: Provided further. That from and after the first day of July, anno Domini nineteen hundred and nine, no person, company, association, copartnership, or corporation shall conduct or carry on in the District of Columbia the kind of business named in this act, without strict compliance in all particulars with the provisions of this act : Provided, That building associations heretofore organized and in actual opera- tion before the passage of this act need not be incorporated. Any person, officer, or agent of any company, firm, or cor- poration who shall wilfully violate any of the provisions of this section shall be deemed guilty of a misdemeanor, and shall on conviction thereof be punished by a fine of not more than one thousand dollars or by imprisonment not longer than two years, or by both said punishments, in the discretion of the court. That any wilful false swearing in regard to any certificate, or report, or public notice required by the pro- visions of this act shall be perjury, and shall be punished as such according to the laws of the District of Columbia. And any misappropriation of any of the money of any corporation or company, formed under or availing itself of the privileges of this act, or of any building or loan association located or doing business in the District of Columbia, or any money, Banking. 849 funds, or property intrusted to any such corporation, com- pany, or association, shall be held to be larceny and shall be punished as such under the laws of said district. Act March 3, 1901, sec. 691; 31 Stat. L. 1299. Act March 4, 1909; 35 Stat. L. 1058. Sec. 691a. That any building association incorporated or unincorporated, organized and existing under the laws of any State or Territory, except the District of Columbia, to do or now doing, in the District of Columbia, a building association business or otherwise operating as a building association, shall be subject to all the provisions of the foregoing section of this act in respect of the powers of the Comptroller of the Currency hereunder, and, any such association or corporation shall at all times keep on deposit with the Comptroller of the Currency in money or stocks, bonds or mortgages or other securities to be approved by said officer not less than ten per centum of its capital and surplus as security for its depositors and creditors, and as a, guarantee for the faithful performance of its contracts, and may also make such further deposit of its assets as above described with the Comptroller for such pur- pose as it may from time to time desire so to do. Act March 4, 1969; 35 Stat. L. 1058. SUB-CHAPTER X. SAVINGS BANKS. Sec. 713. Report to be made to Comptroller. Sec. 714. Comptroller authorized to make examinations. Sec. 713 (as amended 1906). Eequieed to Make Same Eepoets as IvTational Banks. Compteollee Authoeized. TO Appoint Eeceivees. All savings banks, or savings com- 54 850 Appendix. panies, or trust companies, or other banking institutions, or- ganized under authority of any Act of Congress to do business in the District of Columbia, or organized by virtue of the laws of any of the States of this Union, and having an office or banking house located within the District of Columbia where deposits or savings are received, shall be, and are hereby, re- quired to make to the Comptroller of the Currency and to publish all the reports which national banking associations are required 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 of the United States, and shall be subject to the same penalties for failure to make such reports as are therein provided, which penalties may be collected by suit before the Supreme Court of the District of Columbia. And the Comptroller shall have power, when in his opinion it is necessary, to take possession of any such bank or company, for the 'reasons and in the manner and to the same extent as are provided in the laws of the United States with respect to national banks : Provided, how- ever. That banking institutions having offices or banking houses in foreign countries as well as in the District of Colum- bia shall only be required to make and publish the reports provided for in this section semi-annually: And provided further, That all publications authorized or required by said section fifty-two hundred and eleven of the Eevised Statutes, and all other publications authorized or required by existing law to be made in the District of Columbia, shall be printed in two or more daily newspapers of general circulation, pub- lished in the city of Washington, one of which shall be a morning newspaper. Act June 30, 1876, sec. 6; 19 Stat. L. 64. Act March 3, 1901, sec. 713; 31 Stat. L. 1302. Act June 30, 1902, see. 713; 32 Stat. L. 534. Act June 25, 1906, sec. 713; 24 Stat. L. 458. Sec. 714. Examination of Savings Banks. The Comp- troller of the Currency, in addition to the powers now con- ferred upon him by law for the examination of national banks, Banking. 851 is hereby further authorized, whenever he may deem it useful, to cause examination to be made into the condition of any bank mentioned in the preceding section. The expense of such examination shall be paid in the manner provided by section fifty-two hundred and forty of the Revised Statutes of the United States relating to the examination of national banks. Act June 20, 1873; 17 Stat. L. 412. Act March 3, 1901, sec. 714; 31 Stat. L. 1302. Act June 30, 1902, sec. 714; 32 Stat. L. 534. Act June 25, 1906, sec. 714; 34 Stat. L. 459. Note. — Orig. sec. 332, Rev. Statutes. SUB-CHAPTER XI. TBUST, LOAN, M0BTGA6B, AND CERTAIN OTHER CORPORATIONS. Sec. 715. For what purposes to be formed. Sec. 716. Organization certificate. Sec. 717. Powers of Commissioners of the District. Sec. 718. Notice of application to Commissioners. Sec. 719. Recording charter, and so forth. Sec. 720. Reports to Comptroller. Sec. 721. Special powers. Sec. 722. May be appointed trustee, executor, and so forth. Sec. 723. Oath. Sec. 724. Stock to be security. Sec. 725. Existing companies. Sec. 726. Real estate. Sec. 727. Duration of charter. Sec. 728. Capital stock. Sec. 729. Shares. Sec. 730. Annual reports to Comp- troller. Sec. 731. Liability of trustees. Sec. 732. False swearing. Sec. 733. Stock personal estate. Sec. 734. Liability of stockholders. Sec. 735. Stock to be paid up in money only. Sec. 736. Number of trustees. Sec. 737. Officers. See. 738. By-laws. Sec. 739. Dividends. Sec. 740. Dividends. Sec. 741. Liabilities exceeding as- sets. Sec. 742. Executors, and so forth, holding stock. Increase of capital stock. Copy of certificate to be evidence. Sec. 745. No bond to be required when company appointed executor, and so forth, except, and so forth. Bond may be required. Corporations organized un der State laws. Sec. 748. Right to amend or repeal reserved to Congress. Sec. 743. Sec. 744. Sec. 746, Sec. 747 Sec. 715. Foe What Pueposes to be Foemed. Corpora- tions may be formed within the District of Columbia for the purposes hereinafter mentioned in the following manner: At any time hereafter any number of natural persons, citizens of the United States, not less than twenty-five, may associate 852 Appendix. themselves together to form a company for the purpose of carrying on in the District of Columbia any one of the three classes of business herein specified, to-wit: First. A safe deposit, trust, loan, and mortgage business. Second. A title insurance, loan, and mortgage business. Third. A security, guaranty, indemnity, loan, and mort- gage business: Provided, That the capital stock of any of said companies shall not be less than one million dollars : That any of said companies may also do a storage business when their capital stock amounts to the sum of not less than one million two hundred thousand dollars. Act Oct. 1, 1890, sec. 1; 26 Stat. L. 625. Act March 3, 1901, sec. 715; 31 .Stat. L. 1303. Sec. T16. Oeganization Ceetificate. Such persons shall, under their hands and seals, execute, before some officer in said District competent to take the acknowledgment of deeds, an organization certificate, which shall specifically state: First. The name of the corporation. Second. The purposes for which it is formed. Third. The term for which it is to exist, which shall not exceed the term of fifty years, and be subject to alteration, amendment, or repeal by Congress at any time. Fourth. The number of its directors, and the names and residences of the officers who for the first year are to manage the affairs of the company. Fifth. The amount of the capital stock and its subdivision into shares. Act Oct. 1, 1890, sec. 2; 26 Stat. L. 626. Act March 3, 1901, sec. 716; 31 Stat. L. 1303. Sec. 717. Powees op Commissioitees op the Disteict. That this certificate shall be presented to the Commissioners of the District, who shall have power and discretion to grant or refuse to said persons a charter of incorporation upon the terms set forth in the said certificate and the provisions of this sub-chapter. Banking. 853 Act Oct. 1, 1890, sec. 3; 26 Stat. L. 626. Act March 3, 1901, sec. 717; 31 Stat. L. 1303. Sec. 718. I^otice 01- Application to Commissionees. Previous to the presentation of the said certificate to the said Commissioners, notice of the intention to apply for such charter shall he inserted in two newspapers of general circulation, printed in the District of Columbia, at least four times a week for three weeks, setting forth briefly the name of the proposed company, its character and object, the names of the proposed corporators, and the intention to make application for a charter on a specified day, and the proof of such publica- tion shall be presented with said certificate when presentation thereof is made to said Commissioners. Act Oct. 1, 1890, sec. 4; 26 Stat. L. 626. Act March 3, 1901, sec. 718; 31 Stat. L. 1303. Sec. 719. Eecoeding Chaetee, and so Foeth. If the charter be granted as aforesaid, it, together with the certificate of the Commissioners granting the same endorsed thereon, shall be filed for record in the office of the recorder of deeds for the District of Columbia, and shall be recorded by him. On the filing of the said certificate with the said recorder of deeds as herein provided, approved as aforesaid by the said Commissioners, the persons named therein and their successors shall thereupon and thereby be and become a body corporate and politic, and as such shall be vested with all the powers and charged with all the liabilities conferred upon and im- posed by this sub-chapter upon companies organized under the provisions hereof: Provided^ however. That no corpora- tion created and organized under the provisions hereof, or availing itself of the provisions hereof as contained in section seven hundred and twenty-five shall be authorized to transact the business of a trust company, or any business of a fiduciary character, until it shall have filed with the Comptroller of the Currency a copy of its certificate of organization and charter, and shall have obtained from him and filed the same for record with the said recorder of deeds, a certificate that the said 854 Appendix. capital stock of said company has been paid in and the deposit of securities made with said Comptroller in the manner and to the extent required by this sub-chapter. Act Oct. 1, 1890, sec. 5; 26 Stat. L. 626. Act March 3, 1901, sec. 719; 31 Stat. L. 1304. Sec. 720. Reports to Compteollee. All companies or- ganized hereunder, or which shall, under the provisions hereof, become entitled to transact the business of a trust company, shall report to the Comptroller of the Currency in the manner prescribed by sections fifty-two hundred and eleven, fifty-two hundred and twelve, and fifty-two hundred and thirteen of the Revised Statutes of the United States, in the case of national banks, and all acts amendatory thereof or supplementary thereto, and with similar provisions for compensating ex- aminers, and shall be subject to like penalties for failure to do so. The Comptroller shall have and exercise the same visitorial powers over the affairs of the said corporation as is conferred upon him by section fifty-two hundred and forty of the Revised Statutes of the United States in the case of national banks. He shall also have power, when in his opinion it is necessary, to take possession of any such company for the reasons and in the manner and to the same extent as are pro- vided in the laws of the United States with respect to national banks. Act Oct. 1 1890, sec. 6; 26 Stat. L. 626. Act March 3, 1901, sec. 720; 31 Stat. L. 1304. Sec. 721. Special Poweks. All companies organized under this act are hereby declared to be corporations possessed of the powers and functions of corporations generally, and shall have power: First. To make contracts. Second. To sue and be sued, implead and be impleaded, in any court as fully as natural persons. Third. To make and use a common seal and alter the same at pleasure. Fourth. To loan money. Banking. 855 Fifth. When organized under subdivision one of section seven hundred and fifteen of this sub-chapter to accept and execute trusts of any and every description which may be com- mitted or transferred to them, and to accept the office and per- form the duties of a receiver, assignee, executor, administrator, collector of estate or property of any decedent, guardian of the estate of minors, with the consent of the guardian of the person of such minor, and committee of the estates of lunatics and idiots whenever any trusteeship or any such ofiice or appoint- ment is committed or transferred to them, with their consent, by any person, body politic or corporate, or by any court in the District of Columbia; and all such companies organized under the first subdivision of section seven hundred and fifteen of this sub-chapter are further authorized to accept deposits of money for the purposes designated herein, upon such terms as may be agreed upon from time to time with depositors, and to act as agent for the pur|)Ose of issuing or countersigning the bonds or obligations of any corporation, association, munici- pality, or State, or other public authority, and to receive and manage any sinking fund on any such terms as may be agreed upon, and stall have power to issue its debenture bonds upon deeds of trust or mortgages of real estate to a sum not exceed- ing the face value of said deeds of trust or mortgages, and which shall not exceed fifty percentum of the fair cash value of the real estate covered by said deeds or mortgages, to be ascertained by the Comptroller of the Currency; but no de- benture bonds shall be issued until the securities on which the same are based have been placed in the actual possession of the trustee named in the debenture bonds, who shall hold said securities until all of said bonds are paid ; and when organized under the second subdivision of section seven hundred and. fifteen of this sub-chapter said company is authorized to insure titles to real estate and to transact generally the business men- tioned in said subdivision ; and when organized under the third subdivision of section seven hundred and fifteen of this sub- chapter said company is hereby authorized, in addition to the loan and mortgage business therein mentioned to secure, 856 Appendix. guarantee, and insure individuals, bodies politic, associations, and corporations against loss hj or through trustees, agents, servants, or employees, and to guarantee the faithful perform- ance of contracts and obligations of whatever kind entered into by or on the part of any person or persons, association, corporation or corporations, and against loss of every kind: Provided, That any corporations formed under the provisions of this sub-chapter when acting as trustee shall be liable to account for the amounts actually earned by the moneys held by it in trust in addition to the principal so held; but such cor-^ poration may be allowed a reasonable compensation for ser- vices performed in the care of the trust estate. Act Oct. 1, 1890, sec. 7; 26 Stat. L. 627. Act March 3, 1901, sec. 721: 31 Stat. L. 1304. Sec. 722. May be Appointed Teustee, Executoe, and so FoETH. In all cases in which application shall be made to any court in the District of Columbia, or wherever it be- comes necessary or proper for said court to appoint a trustee, receiver, administrator, collector, guardian of the estate of a minor, or committee of the estate of a lunatic, it shall and may be lawful for said court (but without prejudice to any pre- ference in the order of any such appointments required by existing law) to appoint any such company organized under the first subdivision of section seven hundred and fifteen of this sub-chapter, with its assent, such trustee, receiver, ad- ministrator, committee, or guardian, vrath the consent of the guardian of the person of such minor: Provided, however. That no court or judge who is an owner of or in any manner financially interested in the stock or business of such corpora- tion shall commit by order or decree to any such corporation any trust or fiduciary duty. Act Oct. 1, 1890, sec. 8; 26 Stat. L. 627. Act March 3, 1901, sec. 722: 3,1 Stat. L. 1305. Sec. 723. Oath. "Whenever any corporation operating un- der this code shall be appointed such trustee, executor, ad- Banking. 857 ministrator, collector, receiver, assignee, guardian, or commit- tee as aforesaid, the president, vice-president, secretary, or treasurer of said company shall take the oath or affirmation now required by law to be made by any trustee, execu- tor, administrator, collector, receiver, assignee, guardian, or committee. Act Oct. 1, 1890, sec. 9; 26 Stat. L. 628. Act March 3, 1901, sec. 723; 31 Stat. L. 1305. Sec. 724. Stock to be Secueity. When any court shall appoint the said company a trustee, receiver, administrator, collector, or such guardian or committee, or shall order the deposit of money or other valuables with said company, or where any individual or corporation shall appoint any of said companies a trustee, executor, assignee, or such guardian, the capital stock of said company subscribed for or taken, and all property owned by said company, together with the liability of the stockholders and officers as herein provided, shall be taken and considered as the securty required by law for the faithful performance of its duties, and . shall be absolutely liable in case of any default whatever. Act Oct. 1, 1890, sec. 10; 26 Stat. L. 628. Act March 3, 1901, sec. 724; 31 Stat. L. 1305. Sec. 725. Existing Companies. Any safe deposit com- pany, trust company, surety or guaranty company, or title insurance company now incorporated and operating under the laws of the United States in the District of Columbia, or of any of the States, and now doing business in said District, may avail itself of the provisions of this sub-chapter on filing in the office of the recorder of deeds of the District of Columbia, or with the Comptroller of the Currency, a certificate of its intention to do so, which certificate shall specify which one of the three classes of business set out in section seven hundred and fifteen it will carry on, and shall be verified by the oath of its president to the effect that it has in every respect com- plied with the requirements of existing law, especially with 858 Appendix. the provisions of this sub-chapter; that its capital stock is paid in as provided, in section seven hundred and thirty-five of this sub-chapter and is not impaired, and thereafter such company may exercise all povi^ers and perform all duties au- thorized by any one of the subdivisions of section seven hun- dred and fifteen of this sub-chapter in addition to the powers now lawfully exercised by such company. Act Oct. 1, 1890, sec. 11; 26 Stat. L. 628. Act March 3, 1901, sec. 725; 31 Stat. L. 1306. Sec. 726. Keal Estate. Any company operating under this sub-chapter may lease, purchase, hold, and convey real estate, not exceeding in value five hundred thousand dollars, and such in addition as it may acquire in satisfaction of debts due the corporation, under sales, decrees, judgments, and mort- gages. But no such association shall hold the possession of any real estate under foreclosure of mortgage, or the title and possession of any real estate purchased to secure any debts due to it, for a longer period than five years. Act Oct. 1, 1890, see. 12; 26 Stat. L. 628. Act March 3, 1901, sec. 726; 31 Stat. L. 1306. Sec. 727. Dueation of Chaetee. The charters for in- corporations named in this sub-chapter may be made perpetual, or may be limited in time by their provisions, subject to the approval of Congress. Act Oct. 1, 1890, sec. 13; 26 Stat. L. 628. Act March 3, 1901, sec. 727; 31 Stat. L. 1306. Sec. 728. Capital Stock. The capital stock of every such company shall be at least one million dollars, and at least fifty per centum thereof must have been paid in, in cash or by the transfer of assets as hereinafter provided in section seven hun- dred and thirty-five of this sub-chapter, before any such com- pany shall be entitled to transact business as a corporation, except with its own members, and before any company or- ganized hereunder shall be entitled to transact the business of Banking. 859 a trust company, or to become and act as an administrator, executor, guardian of the estate of a minor, or undertake any other kindred fiduciary duty, it shall deposit, either in money or in bonds, mortgages, deed of trust, or other securities equal in actual value to one-fourth of the capital stock paid in, with the Comptroller of the Currency, to be kept by him upon the trust and for the purposes hereinafter provided; and the said Comptroller may from time to time require an additional deposit from any such company, to be held upon and for the same trust and purposes, not exceeding, however, in value one- half the paid-in capital stock; and the said Comptroller shall not issue to any corporation the certificate heretofore provided for until said deposit with him of securities required by this section. Within one year after the organization of any cor- poration under the provisions of this sub-chapter, or after any, corporation heretofore existing shall have availed itself of the powers and rights given by this sub-chapter in the manner herein provided for, its entire capital stock shall have been paid in. Act Oct. 1, 1890, sec. 14; 26 Stat. L. 628. Act March 3, 1901, sec. 728; 31 Stat. L. 1306. Sec. 729. Shaises. The capital stock of every such com- pany shall be divided into shares of one hundred dollars each. It shall be lawful for such company to call for and demand from the stockholders, respectively, all. sums of money by them subscribed, at such time and in such proportions as its board of directors shall deem proper, within the time specified in section seven hundred and twenty-eight, and it may enforce payment by all remedies provided by law; and if any stock- holder shall refuse or neglect to pay any installment as re- quired by a resolution of the board of directors, after thirty days' notice of the same, the said board of directors may sell at public auction to the highest bidder so many shares of said stock as shall pay said installment, under such general regula- tions as may be adopted in the by-laws of said company, and 860 Appendix. the Mghest bidder shall be taken to be the person who offers to purchase the least number of shares for the assessment due. Act Oct. 1, 1890, sec. 1-5; 26 Stat. L. 629. Act March 3, 1901, sec. 729; 31 Stat. L. 1306. Sec. 730. Annxjal Kepobts to Compteollee. Every such company shall annually, within twenty days after the first of January of each year, make a report to the Comptroller of the Currency, which shall be published in a newspaper in the District, which shall state the amoimt of capital and of the proportion actually paid, the amount of debts, and the gross earnings for the year ending December thirty-first then next previous, together with their expenses, which report shall be signed by the president and a majority of the ^rectors or trus- tees, and shall be verified by the oath of the president, secretary, and at least three of the directors or trustees; and said com- pany shall pay to the District of Columbia, in lieu of personal taxes for each next ensuing year, one and one-half per centum of its gross earnings for the preceding year, shown by said verified statement, which amount shall be payable to the col- lector of taxes at the times and in the manner that other taxes are payable. Act Oct, 1, 1890, sec. 16; 26 Stat. L. 629. Act March 3, 1901, sec. 730; 31 Stat. L. 1307. Sec. 731. Liability of Tetjstees. If any company fails to comply with the provisions of the preceding section, all the directors or trustees of such company shall be jointly and severally liable for the debts of the company then existing, and for all that shall be contracted before such report shall be made: Provided, That in case of failure of the company in any year to comply vdth the provisions of section seven hun- dred and thirty of this sub-chapter, and any of the directors shall, on or before January fifteenth of such year, file his written request for such compliance with the secretary of the company, the Comptroller of the Currency, and the recorder Bahkinq. 861 of deeds of the District of Columbia, such director shall be exempt from the liability prescribed in this section. Act Oct. 1, 1890, sec. 17; 26 Stat. L. 629. Act March 3, 1901, sec. 731; 31 Stat. L. 1307. Sec. 732. False Sweaeiwg. Any wilful false swearing in regard to any certificate or report or public notice required by. the provisions of this sub-chapter shall be perjury, and shall be punished as such according to the laws of the District of Columbia. Any misappropriation of any of the money of any corporation or company formed under this act, or of any money, funds, or property intrusted to it, shall be held to be larceny, and shall be punished as such under the laws of said District. Act Oct. 1, 1890, sec. 18; 26 Stat. L. 629. Act March 3, 1901, sec. 731; 31 Stat. L. 1307. Sec. 733. Stock Peesonal Estate. The stock of such company shall be deemed personal estate, land shall be trans- ferable only on the books of such company in such manner as shall be prescribed by the by-laws of the company; but no shares shall be transferable until all previous calls thereon shall have been fully paid, and the said stock shall not be taxable in the hands of individual ovtmers, the tax on the gross earnings of the company hereinbefore provided being in lieu of other personal tax. All certificates of the stock of any company organized under this sub-chapter shall show upon their face the par value of each share and the amount paid thereon. Act Oct. 1, 1890, sec. 19; 26 Stat. L. 629. Act March 3, 1901, sec. 733; 31 Stat. L. 1307. Sec. 734. Liability of Stockholders. All stockholders of every company incorporated under this sub-chapter, or availing itself of its provisions under section seven hundred and twenty-five, shall be severally and individually liable to the creditors of such company to an amount equal to and in 862 Appendix. addition to the amount of stock held by them respectively for all debts and contracts made by such company. Act Oct. 1, 1890, sec. 20; 26 Stat. L. 630. Act March 3, 1901, sec. 734; 31 Stat. L. 1307. Sec. 735. Stock to be Paid up in Money Only. Noth- ing but money shall be considered as payment of any part of the capital stock, except that in the case of any company now doing business in the District of Columbia in any of the classes herein provided for, or under any Act of Congress or by virtue of the laws of any of the States, and which company has actu- ally received full payment in money of at least fifty per centum of the capital stock required by this act and which company desires to obtain a charter under this act, all the assets or prop- erty may be received and considered as money, at a value to be appraised and fixed by the Comptroller of the Currency: Provided, That all such assets and property are also trans- ferred to and are thereafter owned by the company organized under this act. Act Oct. 1, 1890, sec. 21; 26 Stat. L. 630. Act March 3, 1901, sec. 735; 31 Stat. L. 1308. Sec. 736. Ntjmber of Trustees. The stock, property, and concerns of such company shall be managed by not less than nine nor more than thirty directors or trustees, who shall, respectively, be stockholders and at least one-half residents and citizens of the District of Columbia, and shall, except the first year, be annually elected by the stockholders at such time and place and after such published notice as shall be deter- mined by the by-laws of the company, and said directors or trustees shall hold until their successors are elected and qualified. Act Oct. 1, 1890, sec. 22; 26 Stat. L. 630. Act March 3, 1901, see. 736; 31 Stat. L. 1308. Sec. 737. Officers. There shall be a president of the company, who shall be a director, also a secretary and a treas- urer, all of whom shall be chosen by the directors or trustees: Banking. 863 Provided, That only one of the above-named offices shall be held by the same person at the same time. Subordinate officers may be appointed by the directors or trustees, and all such officers may be required to give such security for the faithful performance of the duties of their office as the directors or trustees may require. Act Oct. 1, 1890, sec. 23; 26 Stat. L. 630. Act March 3, 1901, sec. 737; 31 Stat. L. 1308. Sec. 738. Bt-laws. The directors or trustees shall have power to make such by-laws as they deem proper for the management or disposal of the stock and business affairs of such company, not inconsistent with the provisions of this sub- chapter, and prescribing the duties of officers and servants that may be employed, for the appointment of all officers, and for carrying on all kinds of business within the objects and pur- poses of such company. Act Oct. 1, 1890, sec. 24; 26 Stat. L. 630. Act March 3, 1901, sec. 738; 31 Stat. L. 1308. Sec. 739. Dividends. If the directors or trustees of any company shall declare or pay any dividend the payment of which would render it insolvent, or which would create a debt against such company, they shall be jointly and severally liable as guarantors for all of the debts of the company then existing, and for all that shall be thereafter contracted, while they shall, respectively, remain in office. Act Oct. 1, 1890, see. 25; 26 Stat. L. 630. Act March 3, 1901, sec. 739; 31 Stat. L. 1308. Sec. 740. If any of the directors or trustees shall object to declaring of such dividend or the payment of the same, and shall at any time before the time fixed for the payment thereof file a certificate of their objection in writing with the secretary of the company and with the recorder of deeds of the District they shall be exempt from liability prescribed in the preceding section. Act Oct. 1, 1890, sec. 26; 26 Stat. L. 630. Act March 3, 1901, sec. 740; 31 Stat. L. 1308. 864 Appendix. Sec. 741. Liabilities Exceeding Assets. If the liabili- ties of any company shall at any time exceed the amount of the fair cash value of the assets, the directors or trustees of such company assenting thereto shall be personally and indi- vidually liable for such excess to the creditors of the company after the additional liability of the stockholders has been enforced. Act Oct. 1, 1890, sec. 27; 26 Stat. L. 630. Act March 3, 1901, sec. 741; 31 Stat. L. 1308. Sec. 742. Executoes, and so Foeth, Holding Stock. No person holding stock in such company as executor, ad- ministrator, guardian, or trustee shall be personally subject to any liability as stockholder of such company, but the estate and funds in the hands of such executor, administrator, guardian, or trustee shall be liable in like maimer and to the same extent as the testator or intestate or the vs^ard or the person interested in such trust fund would have been if he had been living and competent to act and hold the stock in his own name. Act Oct. 1, 1890, sec. 28; 26 Stat. L. 631. Act March 3, 1901, sec. 742; 31 Stat. L. 1308. Sec. 743. Increase of Capital Stock. Any corporation which may be formed under this sub-chapter may increase its capital stock by complying with the provisions of this sub- chapter to any amount which may be deemed sufficient and proper for the purposes of the corporation. Act Oct. 1, 1890, sec. 29; 26 Stat. L. 631. Act March 3, 1901, sec. 743; 31 Stat. L. 1309. Sec. 744. Copy of Certificate to be Evidence. A copy of any certificate of incorporation filed in pursuance of this sub-chapter, certified by the recorder of deeds to be a true copy and the whole of such certificate, shall be received in all courts and places as presumptive legal evidence of the f&cts therein stated. Banking. 865 Act Oct. 1, 1890, sec. 30; 26 Stat. L. 631. Act March 3, 1901, sec. 744; 31 Stat. L. 1309. Sec. 745. No Bond to be Required When Company Appointed Executoe, and so Foeth, Except, and so Fobth. No bond or other collateral security, except as hereinafter stated, shall be required from any trust company incorporated under this sub-chapter for and in respect to any trust, nor when appointed trustee, guardian, receiver, executor, or ad- ministrator with or without the will annexed, collector, com- mittee of the estate of a lunatic or idiot, or other fiduciary appointment ; but the capital stock subscribed for or taken, and all property owned by said company and the amount for whidi said stockholders shall be liable in excess of their stock, shall be taken and considered as the security required by law for the faithful performance of its duties, and shall be absolutely liable in case of any default whatever; and in case of the insolvency or dissolution of said company, the debts due from the said company as trustee, guardian, receiver, executor, ad- ministrator, collector, or committee of the estate of lunatics, idiots, or any other fiduciary appointment shall have a preference. Act Oct. 1, 1890, sec. 31; 26 Stat. L. 631. Act March 3, 1901, sec. 745; 31 Stat. L. 1309. Sec. 746. Bond May be Reqtjieed. The Supreme Court of the District of Columbia, or any justice thereof, shall have power to make orders respecting such company whenever it shall have been appointed trustee, guardian, receiver, executor, administrator with or without the will annexed, collector, com- mittee of the estate of a lunatic, idiot, or any other fiduciary, and require the said company to render all accounts which might lawfully be made or required by any court or any justice thereof if such trustee, guardian, receiver, executor, adminis- trator with or without the will annexed, collector, committee of the estate of a lunatic or idiot, or fiduciary were a natural person. And said court, or any justice thereof, at any time, 55 866 Appendix. on application of any person interested, may appoint some suitable person to examine into the affairs and standing of such companies, who shall make a full report thereof to the court, and said court, or any justice thereof, may at any time, in its discretion, require of said company a bond with sureties or other security for the faithful performance of its obligations, and such sureties or other security shall be liable to the same extent and in the same manner as if given or pledged by a natural person. Act Oct. 1, 1890, sec. 32; 26 Stat. L. 631. Act March 3, 1901, sec. 746; 31 Stat. L. 1309. Sec. 14:7. Coepoeations Oeganized TJndee State Laws. No corporation or company organized by virtue of the laws of any of the States of this Union and having its principal place of business within, the District of Columbia shall carry on in the District of Columbia any of the kinds of business named in this sub-chapter vsrithout strict compliance in all particulars with the provisions of this sub-chapter for the government of such corporations formed under it, and each one of the officers of the corporation or company so offending shall be punished by fine not exceeding one thousand dollars or imprisonment not exceeding one year, or by both fine and imprisonment, in the discretion of the court. Act Oct. 1, 1890, sec. 33; 26 Stat. L. 631. Act March 3, 1901, sec. 747; 31 Stat. L. 1309. Sec. 748. Eight to Amend oe Repeal Reseeved to Con- GEESS. Congress may at any time alter, amend, or repeal this sub-chapter, but any such amendment or repeal shall not, nor shall the dissolution of any company formed under this sub- chapter, take away or impair any remedy given against such corporation, its stockholders or officers, for any liability or penalty which shall have been previously incurred. Act Oct. 1, 1890, sec. 34; 26 Stat. L. 632. Act March 3, 1901, sec. 748; 31 Stat. L. 1309. Banking. 867 INSTEUCTIONS EELATIVE TO THE OKGANIZATION OF NATIONAL BANKS. (All sections cited refer to the United States Revised Statutes.) [Note. — Prepared By Comptroller of Currency.] OEGANIZATION. The preliminary proceeding in connection with the organiza- tion of a national bank is to write to the Comptroller of the Currency requesting the reservation of the desired title and stating the location and the proposed capital. If the nationalization of a State bank is contemplated the request should indicate whether the bank is to be converted into a national bank, or placed in liquidation and a national bank organized to succeed it. If the State bank is to continue in existence and a separate national bank is to be organized that fact should be stated. The application must be signed by at least five persons who are prospective shareholders of the association, and preferably by individuals who are also to be officers or directors. It should be endorsed by three prominent public officials, pref- erably the mayor and the postmaster of the place where the bank is to be located, and a judge of court. The exclusion of any professional promoters from the or- ganization will be required, as an application to receive favor- able consideration must represent a local demand for banking accommodations. The following formal application for reservation of title and authority to organize a national bank will be furnished on request : Application to Organize a National Bank. , 191 — To the Compteolleb op the Cueeenct, Washington. SiE: We, the undersigned, prospective shareholders, heing natural persons and of lawful age, intend, with others, to organize a national banking asso- ciation, under the title of " The ," to be located at , county of , State of , with a capital of $ , to succeed the bank of . Population, . We request that the title be reserved for a period of sixty days and organization blanks and instructions be sent to , who is an actual resident of the place where the proposed bank is to be located. 868 Appendix. Signatures of applicants. Residences. Business. Financial strength, in figures. Shares subscribed for. ' The signers of this application are known by me to be reputable citizens; the information in reference to their business and financial standing is in my opinion correct, the statement as to population authentic, and I am of the belief that the conditions locally are such as to insure success if the bank is organized and properly managed. , Judge of Court. , Poatmaater. BEAD THESE INSTEUCTIONS CABEFUXLY. The name of the place should form a part of the title, thus, "The First National Bank of A- ," but the name of the State should not be included. Consideration will not be given to an application for a title including the word " First " if a national bank exists or has existed at the given locality; nor to an application for a title identical with that of a national bank heretofore in existence, nor to one materially similar to that of a national. State, or other bank existing in the place. The application must be signed by at least five prospective shareholders, and should be indorsed by three prominent persons, judge of court, post- master, and mayor, or other public officials. The correspondent must be an actual resident of the place where the bank is to be located and should be a prospective shareholder, and, if possible, a prospective officer or director of the proposed institution. The following shows the national. State, or private banking institution with which the applicants are, or have been, connected. Applicant. (Date) (Signed) *Oorreapondent. * N. B. — The correspondent is requested to furnish, as early as possible, a list of the prospective ofBcera and directors of the proposed organization and a statement showing their previous connection, if any, with other banking institutions. Particular care should be taken to give in detail the required Information, which must be furnished before the organization papers are submitted. No preliminary examination will be ordered until the information herewith requested is received. Banking. 869 Care must be exercised in giving the information called for on the hack of the application. The capacity in which the applicants were connected with other banks should be stated, although the blank does not provide a special space for such information. The list of officers and directors should be promptly furnished as soon as the organization has progressed sufficiently to permit of their determination. When forwarding the application the local correspondent should state definitely by letter whether an agreement providing for a payment of any kind for services in soliciting stock sub- scriptions or promoting in any manner the organization of the bank will be entered into. If an agreement of any kind exists, a copy of the agreement should be forwarded to the Comp- troller's office to be retained permanently in its files. If there is only a verbal understanding the conditions should be de- finitely stated. Information is also desired as to whether any of the appli- cants or other persons interested in any manner in the pro- posed organization have at any time been connected with, or interested in, the organization or attempted organization of any bank, either State or national; if so, the name of the bank or banks and the conditions under which they were organized should be stated. If the organization is effected, the president and a majority of the directors must be residents of the place where the bank is located. To avoid delay and unnecessary letter writing all corre- spondence relating to official matters should be conducted by the local correspondent directly with the Comptroller's office. Printed headings on the stationery of the organizing bank should indicate clearly that the bank is " organizing " or bear the heading " Organizing committee." As the charter number should appear on the bank's perma- nent letterhead, stationery should not be ordered until the bank is chartered and the charter number obtained. Special num- bers cannot be reserved and the number cannot be determined until the charter is issued. 870 Appendix. The law contemplates that the net financial worth of any shareholder shall be at least double the amount of his stock subscription. The double liability of a stockholder is an asset of the bank for the protection of the depositors and creditors and the original shareholders at least are presumed to be able to respond to an assessment on the stock which they hold. When the application has been received at this ofiice in proper form, an investigation will be made and within the following 30 days the applicants will be advised of the approval or disapproval of their application. If the application receives the approval of the Comptroller, he will furnish all necessary blanks for use in effecting the organization, with instructions for their proper execution, and the title applied for will be reserved for a period of 60 days, during which time it is expected that the organization of the bank will be completed. CAPITAL EEQUIEED. National banks with a minimum capital of $25,000 may be organized in places the population of which does not exceed 3,000 ; with minimum capital of $50,000 in places the popula- tion of which does not exceed 6,000 ; with minimum capital of $100,000 in places the population of which does not exceed 50,000 ; and with minimum capital of $200,000 in places with population of over 50,000. STOCK SUBSCRIPTION LIST. When the proposed incorporators have received advice of the approval of their application to organize, there may be formulated a subscription contract to be signed by the pros- pective shareholders, which, in addition to their signatures, should give each subscriber's occupation, address, net financial worth, and the number of shares subscribed for. (Blanks for this purpose are not furnished by this office.) The law requires that 50 per cent, of the capital stock of a national bank should be paid in cash and permits the payment of the additional 50 per cent, in five equal monthly instal- Banking. 871 ments, but there would appear to be no objection to the in- corporation in the subscription contract of a provision that the entire amount due on each share shall be paid at the call of the directors. The advisability of incorporating in the subscription con- tract a provision for the sale of the stock at a premium for the purpose of establishing a surplus fund which shall be available for use in payment for furniture and fixtures, sta- tionery, books, and for the purchase of a suitable banking building should be considered. In this connection emphasis is laid upon the desirability of restricting the investment in a banking building to economical and prudent limits and proportionate to the capital of the bank. Where a surplus is not established by the payment of a premium on the stock, it is recommended that dividends be not paid until a substantial surplus has been created from the earnings of the bank. Where the stock is sold at a premium of 20 per cent., a bank is enabled at the first dividend period to distribute the net earnings without the carrying of any portion thereof to the surplus fund as provided by section 5199. In case subscriptions to stock are paid in instalments, tem- porary certificates may be issued and the amount of each pay- ment credited thereon. When all instalments have been paid the temporary certificates should be surrendered and canceled and permanent certificates of stock issued in lieu thereof. The following is a form of temporary certificate in general use: No. . Tempobart Certificate. shares. This is to certify that is entitled to shares of the capital stock of the National Bank of , capital $ , and that upon payment of all installments, amounting to $ , and surrender of this temporary certificate, » certificate of stock will be issued. Witness the seal and the signatures of the president and cashier of the bank. Dated , 191— The National Bank of By , , Cashier. President. 8Y2 Appehdix. Payments on Account or Capitai* First inBtallment, per cent, amounting to $ , paid , 191- Second Third Fourth Fifth Sixth IM— . 191— 191— 191— , 191 Assignment. For value received I hereby transfer, and assign to this temporary certificate and hereby appoint and constitute my true and lawful attorney to transfer said certificate, with full power of substitution in the premises. Sated at , this day of , 191 — . Witness: . Five persons at least are required to sign the articles of association, and those who sign the articles must sign and acknowledge the organization certificate. If a majority of the applicants are not interested in the bank as organizers or shareholders, a new application will be required. The or- ganization certificate should be executed at the same time as the articles of association or subsequent thereto. The articles of association and organization certificate, forms of which follow, must be executed in duplicate, one copy of each to be filed in the office of the Comptroller of the Cur- rency and the other retained by the bank. The persons uniting to organize a national bank must be natural persons — that is, individuals who can legally hold and control property in their individual right — and not corpora- tions, firms, or associations of any character. The proportion of capital required for organization — that is, one-half — must be paid in money, and each subsequent instalment must be so paid until all the capital is paid in. Promissory notes or other evidences of debt cannot be taken in payment for subscriptions to capital stock. Instead of providing, in section 3 of the articles of associa- tion, for the election of the first board of directors, the names of the directors may be given therein if the stockholders are agreed as to the persons who are to constitute the board. In this event the third article should read as follows: Backing. 873 The board of directors shall consist of shareholders, and the fol- lowing persons (here insert their names) are hereby appointed directors of this association, to hold their offices as such until the regular annual elec- tion takes place, pursuant to the fourth article of these articles of associa- tion, and until their successors are chosen and have qualified. The third section, if desired, may be made to provide for what is termed a sliding scale instead of a fixed number of directors; in other words, a minimum and maximum number of directors, in which event the section should read as follows: The board of directors shall consist of not less than (insert minimum number) nor more than (insert maximum number) shareholders; and the following 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 have qualified. The number of directors elected at each a,nnual meeting shall constitute the board for the year, all vacancies to be filled as in the other case in accord- ance with the provisions of section 5148. It will he seen that the only advantage of a sliding scale is that the shareholders are enabled to elect annually any number of directors within the limits thereof, there being no authority for the election of additional directors during the year ; further- more, if a vacancy occurs it must be filled the same as though the articles called for a fixed number of directors. ARTICLES OF ASSOCIATION. (Executed in duplicate.) 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 title of this association shall be " The ." Second. The place where its banking house or office shall be located, and its operations of discount and deposit carried on, and its general business conducted, shall be . Third. 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. Fourth. 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 5149 of the Revised Statutes of the United States, and all 874 Appendix. elections shall be held according to such regulations as may be prescribed by the board of directors not inconsistent with the provisions of the national-banking law and of these articles. Fifth. The capital stock of this association shall be dollars, divided into shares of one hundred dollars each; but the capital may, with the approval of the Comptroller of the Currency, be increased at any time by shareholders owning two-thirds of the stock, according to the provisions of an Act of Congress approved May 1, 1886; 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 its members president of this association, 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. The directors shall have power to elect a vice- president, who shall also be a 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 office of president, except 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 required 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. The directors shall have power to define the duties of the officers and clerks of the association, to require bonds from them, and to fix the penalty thereof; to regulate the manner in which elections of directors shall be held, and to appoint judges of the elections; to make all by-laws that it may be proper for them to make, not inconsistent with law, for the general regulation of the business of the association and the management of its affairs, and generally to do and perform all acts that it may be legal for a board, of directors to do and perform under the Revised Statutes aforesaid. 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 shareholders owning at least two-thirds of its stock, or otherwise dissolved by authority of law. Eighth. These articles of association may be changed or amended at any time by shareholders owning a majority of the stock of the associatioii, in any manner not inconsistent with law; and the board of directors or any three shareholders may call a meeting of the sharehouders for this or for 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 mailing to each shareholder notice in writing thirty days before the time fixed for the meeting. In witness whereof we have hereunto set our hands this day of . (To be signed by at least five natural persons, preferably the applicants.) Banking. 875 0B6ANIZATI0N CEBTIFICATE. (Executed in duplicate.) We, the undersigned, whose names are specified in article ftmrth of this certificate 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 title 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 deposit are to be carried on. Third. The capital stock of this association shall be dollars ($ ), and shall be divided into shares of one hundred dollars each. Fourth. The name and the residence of each shareholder of this associa- tion, with the number of shares held, are as follows: No. of sharea. Note. — The names, etc., of all the shareholders must be given. 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 . (To be signed and acknowledged by those who have signed the articles ef association.) (Acknowledgment must be made before judge of court or notary public.) State op Covmty of Before the undersigned, a of personally appeared 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 this day of ■ [OmCIAL SEAL OP OFFICEE.] The association will have succession for a period of twenty years from the date of the execution of the organization cer- 876 Appehdix. tificate, and not from the date of the certificate of the Comp- troller of the Currency authorizing the bank to commence busi- ness. (See Sec. 5136.) The name, etc., of each stock subscriber, but not necessarily his signature, is required in the fourth subdivision. Each person who signs the articles of the association is also required to sign the organization certificate and make acknowledgment before a judge of court of record or a notary public having a seal. Inasmuch as the laws of the several States differ as to the rights of married women in regard to their separate estates and property, and as to the effects of covenants and agreements made by them, and also as to the forms of acknowledgment of instruments executed by them, any organization papers bearing the signatures of women must be accompanied by evidence that under the laws of the State they have the power to be parties to the organization. The authority of a guardian or trustee to subscribe for stock must be shovsm in every case, giving, if necessary, the order of court directing such subscriptions. In cases where a guardian subscribes for a ward, the name of the ward should be given, and in the case of a trustee subscribing for stock the name of the beneficiary of the trust should be given. Stock subscrip- tions should not be taken in the name of an estate. If the heirs of an estate subscribe for stock it should be taken in their in- dividual names. If it was subscribed for by the executor his authority to make such subscription should be shown. An administrator has no authority to subscribe for stock, as his duty is merely to close up the estate and to distribute the prop- erty among the heirs, and he has no authority to make invest- ments. No subscriptions to stock should be received in the name of any State, county, township, or municipality. Where stock is subscribed for in the name of an order or association, it will be necessary to furnish evidence that said order or society is authorized by its articles or charter to sub- scribe for the stock, and also that it is legally and financially Banking. 877 responsible for assessment thereon in case one becomes neces- sary under the national bank act. When the organization of a bank is effected and stock sub- scriptions paid, certificates should be issued in the names of the shareholders and for the numbers of shares of stock listed in the organization certificate, transfers to be made in the regular manner in the case of any stock which changes ownership. DIEECTOES. After the execution of the organization certificate, if the directors are not designated in the articles of association, the shareholders should proceed to elect directors as provided in section 5145. Each director must, after his election or appoint- ment (but not prior to the date of acknowledgment of the organization certificate), take an oath of the following form: oath of dieectoe. State of , County of , ss: I, the undersigned, director of The -, located at , being a citizen of the United States, and resident of the State of , do solemnly swear (affirm) that I will, so far as the duty devolves on me, diligently and honestly administer the affairs of said association; that I will not knowingly violate, or willingly permit to be violated, any of the provisions of the statutes of the United States under which this association has been organized; and that I am the owner in good faith and in my own right, of the number of shares of stock required by said statutes, subscribed by me or standing in my name on the books of the said association; and that the same is not hypothecated or in any way pledged as security for any loan or debt. Subscribed and sworn (affirmed) to before the undersigned this day of , 19 — . [official seal of officee.] "Notary Public. Note. — Each director when elected must take oath of office, and, under section 5147, U. S. E. S., the oath should be transmitted to the Comptroller of the Currency immediately a,fter the election. If the officer adminis- tering the oath has no seal, a certificate of the proper State, county, or court official, to the effect that such officer is authorized to take acknowledg- ments, must be attached. In case two or more directors qualify jointly the following form should be used : 878 Appendix. oath of dibeotobs. State of , Cov/nty of , ss : We, the undersigned, directors of The , located at , being citizens of the United States, and all residents of the State of , do, each for himself, and not one for the other, solemnly swear (aflSrm) that we will severally, so far as the duty devolves on us, diligently and honestly administer the affairs of said association; and that we will not knowingly violate, or willingly permit to be violated, any of the provisions of the statutes of the United States under which said association has been organ- ized; and, each for himself, does solemnly swear (affirm) that he is the owner in good faith, and in his own right, of the number of shares of stock required by said statutes, subscribed by him or standing in his name on the books of the said association; and that the same is not hypothecated, or in any way pledged as security for any loan or debt. Signature. Signature. Subscribed and sworn (affirmed) to before the undersigned this day of , 19 — . [OFFICIAL SEAL OF OFFICER.] Notary Public. Note. — Each director when elected must take the oath of office and, under section 5147, U. S. R. S., the oath should be transmitted to the Comptroller of the Currency immediately after the election. If the officer administering the oath has no seal, a certificate of the proper State, county, or court official to the effect that such officer is authorized to take acknowledgments must be attached. Every director must own in his own right at least 10 shares of the capital stock of the association of which he is a director, unless the capital of the hank shall not exceed $25,000, in which case he must own in his own right at least 5 shares of such capital stock. Any director who ceases to he the owner of the required numher of shares of the stock, or who becomes in any other manner disqualified, thereby vacates his place under section 5146 as amended February 28, 1905, and the vacancy should be at once filled by the remaining directors under section 5148. The old director may be reappointed if his disqualification has been removed. Banking, 879 At least tkree-foTirths 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 meetings of shareholders, each shareholder shall be entitled to one vote on each share of stock held by him. Under section 5144, shareholders may vote by proxies duly authorized in writing, but no officer, clerk, teller, or bookkeeper of the asso- ciation can act as proxy, and no shareholder whose liability is past due and unpaid shall be allowed to vote. The comptroller, supported by certain decisions of the courts, holds that a director is an officer within the meaning of said section, and, furthermore, that the prohibition with regard to the voting of stock by a shareholder who is liable to the bank merely applies to subscriptions to capital stock. Cumulative voting at meetings of national banking associa- tions is not permissible. For instance, if a shareholder is the owner of 10 shares of stock and 7 directors are to be elected, he cannot cast 70 votes in favor of any one person as a director, but is at liberty only to cast 10 votes for each of the 7 candidates. FORM OF PROXT. Know all men by these presents that I, , do hereby con- stitute 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 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 this day of , one thousand nine hundred and . Signed in presence of — The directors having been elected, made payment of at least 50 per cent, on the requisite number of shares, and taken the required oath should, as soon as practicable, elect a president and vice-president of the association, a cashier, and such other officers as may be desired, a report of the election, with signa- tures, of officers being required, in the following form: 880 Appendix. OFFICIAL SIQNATUBES OF OFFICEBS OF THE ■ -, LOCATED AT ■ IN THE STATE OF Original signatures. Names of predecessors. [seal of bank.] IMPOBTANT. The following instiructions should be observed to avoid return of paper for correction: (1) Insert title and place of location of bank. (2) Give the signatures of ofScers, with date of election or appointment. (3) In case of a vacancy, the word " None " should appear in the space for the signature of the officer. (4) AfBx seal of bank in the space designated. (5) The signatures of all of the officers, with date of election or appoint- ment of each, and name of predecessor, in ease of a change, are required. When at least 50 per cent, of the capital stock of the asso- ciation is paid in cash, not in assets of another corporation, notes, or other like evidences of debt, each shareholder or his assignee having paid not less than one-half of each share sub- scribed (certifications need not be confined originally to 50 per cent., and subsequently to 10 per cent, of capital stock, larger payments and in advance of the prescribed time being permissible), and all other legal requirements complied with, a certificate, in substantially the following form, should be executed and sworn to by the president, or cashier, and a majority of the directors and forwarded to the Comptroller. The certificate should cover all amounts paid in on capital, but must not include any amount paid in as surplus. CEETIFICATE OF OFFICEBS AND DIBECTOES BBa.ATIVB TO PAYMENT OF CAPITAL STOCK AND COMPLIANCE WITH OTHEB LEGAL BEQUHtEMENTS. The undersigned, officers and directors of - -, located at - organized under the provisions of the Revised Statutes of the United States authorizing the organization of national banking associations, do hereby Banking. 881 certify that of the authorized capital stock of $- into aaid bank, in cash, as permanent capital $- - there has been paid ■, and that no part of this sum is represented by promissory nptes or other evidences of debt; also that the name and place of residence of each director, and the amount of stock individually owned in good faith, are as follows: Name of director, a Place of residence. (Town or city and State.) Number of aharee of stock. 4a It is further certified that the association has in good faith complied with all of the provisions that are required to be complied with before receiving, authority to commence the business of banking. Directors. President, or Cashier. State op Gownty of ■ Before the undersigned, a of personally appeared the above-named directors and other officers of the aforesaid national bank, and made oath that the foregoing certificate and the matters and things therein set forth are true, to the best of their knowledge and belief. Witness my hand and seal of office this day of , 19 — . [official seal of officeb.] The foregoing instructions apply solely to new organizations. The method of procedure and forms necessary in conversion of a State bank, under the provisions of section 5154, will be found elsewhere. a The names, etc., of all the directors of the association must appear on this page. A majority of the directors, exclusive of the president or cashier, must sign on the following page and make acknowledgment. 56 882 Appendix. DEPOSIT OF BONDS. Banks with capital of $150,000 or less are required to de- posit bonds equal to oue-fourth of their capital, and a deposit of at least $50,000 in bonds must be made by banks with capital in excess of $150,000. The issue of circulating notes is optional with the directors of a bank, but deposit of bonds is niandatory. United States registered interest-bearing bonds should be sent to the Comptroller of the Currency for transfer to and deposit with the Treasurer of the United States in trust for the association to the account of which they are to be credited. In assigning bonds care should be exercised to enter the exact corporate title of the association. Coupon bonds can be exchanged for registered bonds by sending them to the Comptroller of the Currency with a re- quest for their exchange and that the registered bonds be issued to and deposited with the Treasurer of the United States in trust for the association interested. 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 interesit, by check, to the order of the bank, payable at the office of any United States assistant treasurer or at any United States depository. Bonds to be deposited as security for circulation cannot be procured from the Treasury Department, but must be pur- chased at prevailing prices from dealers in securities of that character. Circulation secured by United States registered 2 per cent, bonds, " Consols " of 1930, and Panama Canal bonds bearing interest at the rate of 2 per cent., authorized by the Act of June 28, 1902, is subject to a semi-annual tax of one- fourth of 1 per cent. Circulation otherwise secured is subject to a semi-annual tax of one-half of 1 per cent., as provided by section 5214. The Act. of March 2, 1911, provides that the Panama Canal bonds issued under the Act of August 5, 1909, shall not be receivable as security for circulation. Bankhitg. 883 WITHDRAWAL OF BONDS. The law permits national banking associations to withdraw bonds in excess of the legal requirement, held by the Treasurer of the United States in trust, upon deposit of a like amount of lawful money with the Treasurer or an assistant treasurer of the United States, to provide for the redemption of the currency secured by such bonds. Authority to withdraw the bonds must be conferred upon the Comptroller of the Currency by the board of directors, and upon some one other than a government official to sell and assign them. If an official of the bank is authorized to dispose of the bonds, the resolution should be certified by some officer of the association other than the one empowered to assign them. It is recommended that resolutions be adopted only at regular meetings, but when passed at a special meeting the certificate must be signed Jby two officers, a form (Wo. 662) for which purpose will be furnished upon application to the Comptroller of the Currency. CIECULATING NOTES. National banking associations are entitled to receive and issue circulating notes equal to the par value of the bonds de- posited, not exceeding the amount of the paid-in capital stock, but only one-third of the amount issued to an association can consist of $5 notes. (See section 5171 as amended March 14, 1900.) Eor information as to taxation of circulating notes see " Deposit of bonds." OBIGINAL ORDER FOR PLATES AND CIBCDIATION. Charter No. . National Bank of ■ -, 19-. To the Comptroller of the Currency. SiK: You are requested to have plates engraved for this bank, the cost to be paid upon demand, and circulating notes printed therefrom, as follows : 884 Appendix. Coat of plates. No. of sheets ordered. DenominationB on sheets. Value per sheet. Amount of order. $75 75 76 75 $6. $5. $5. $5 $20 BO 40 260 ? $10, $10, $10, $20 $10, $10, $10, $10 $50, $50, $60, $100.... Total Respectfully, Cashier. Note. — The Act of May 30, 1908, requires the Comptroller of the Cur renoy to keep on hand incomplete currency to the amount of 50 per cent of the capital stock of each bank, which circulating notes should be ordered in addition to notes equal to the par value of the bonds deposited as security for circulation. The Act of March 14, 1900, provides that no national bank shall be entitled to receive from the Comptroller, or to issue more than one-third in amount of its circulating notes of the denomination of $5. Banks desiring the full amount of circulation to which thfey are entitled, including notes of the denomination of $5, must order at least two plates. It will require about forty days to engrave a plate and to print circulat- ing notes. The order can not be acted upon until all legal requirements are satisfied, including the deposit of bonds with the Treasurer of the United States, as the charter number of the association, which can not be previously determined, must appear upon the plate from which the notes are printed. SUPPLEMENTABT OEDEE. Charter No. 19—. SiB: You are requested to have printed under the national-bank act, for this bank, circulating notes in blank, to the amount of (see footnote) dollars, and of the following denominations, viz: Sheets, $6, $5, $5, $6 ($20 per sheet).. Sheets, $l0, $10, $10, $2$ ($50 per sheet) . . Sheets, $10, $10, $10, $10 ($40 per sheet).. Sheets, $50, $50, $50, $100 ($250 per sheet).. Total Respectfully, -, Cashier. Banking. 885 To the COMPTBOLUEB OF THE CUEEENOT. Note. — Bank officers should oheerve the multiples of the different sheets of notes, and put in amounts that can be made from such multiples. This will save returning many orders for correction. Under the Act of March 14, 19O0, five-dollar notes are limited to one-third of a bank's circulation. In ordering currency bank officers should observe this limit, taking into consideration, in estimating the amount needed, both the amount of fives outstanding and the amount already printed and on hand in the Treasury Department. CEETIFICATE OF ATJTHOEITY TO COMMENCE BUSINESS. All of the organization papers having been received by the Comptroller of the Currency, and the necessary amount of bonds deposited with the treasurer, the Comptroller, if satisfied from the examiner's report that the association has complied with the requirements of the law, and that the shareholders have, in good faith, organized for the legitimate objects con- templated by the bant act, will give to the association a certifi- cate authorizing it to commence the business of banking (Sees. 5168, 5169). This certificate, upon its receipt, must be pub- lished in a local or county newspaper, as required by section 5170, and proof of publication forwarded to the Comptroller at the proper time. This and. other certificates referred to elsewhere may be pub- lished for the period of time required by law, either in a weekly newspaper, a weekly editioii of a daily newspaper, or in every issue of a daily having no weekly edition. The certificate of authority to commence business or, as is generally understood, the charter issued to a national banking association, reads as follows: No. . TBEAStTBT DePABTMENT, Office of Comptkollee of the Ctjeebnct, W No. of shares owned by each. The shareholders of a State bank having authorized its con- version into a national banking association, the directors should execute the articles of association and organization certificate ' The signatures of the owners of at least two-thirds of the stock. Banking. 899 as per the following forms, the signatures of a majority of the directors being required: ABTIC!U;S OF ASSOCIATION. (Executed in duplicate.) We, the undersigned, directors of the , having heen author- ized by the owners of two-thirds of the capital stock of said bank to filiange and convert the said bank into a national banking association, under the prOTlsions of section 5154 of the Revised Statutes of the United States, or of acts amendatory thereof, and to execute articles of association, do hereby, in our own behalf, and in behalf of the stockholders whom we represent, make and execute the following articles of association: First. The title of the association into which the said State bank is to be changed and converted shall be " The ." Second. The place where its banking house or ofSee shall be located, and its operations of discount and deposit carried on, and its general business conducted shall be the , county of , State of . Third. The board of directors shall consist of shareholders. Fourth. 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 514& of the Revised Statutes of the United States, and all elections shall be held according to such regulations as may be prescribed by the board of directors not inconsistent with the provision of the national bank- ing law and of these articles. Fifth, The capital stock of this association shall be dollars, divided into shares of one hundred dollars each; but the capital may, with the approval of the Comptroller of the Currency, be increased at any time by shareholders owning two-thirds of the stock, according to the pTovisions of an Act of Congress approved May 1, 1886; 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 its members president of this association, who . shall hold his office (unless he shall be disqualified or be sooner removed by a two-thirds vote of all of the members of the board) for the term for which he was elected a director. The directors shall have power to elect a vice-president, who shall also be a 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 office of presi- dent, except 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 required 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. The directors shall have power to define the duties of the officers and clerks of the association; to require bonds from them and to fix the penalty thereof; to regulate the manner in which elections of directors shall be held, and to appoint judges of the elections; to make all by-laws that it 900 Appendix. may be proper for them to make, not inconsistent with law, for the general regulation of the business of the association and the management of its affairs, and generally to do and perform all acts that It may be legal for a board of directors to do and perform under the Revised Statutes aforesaid. 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 shareholders owning at least two-thirds of its stock, or otherwise dissolved by authority of law. 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 mailing to each shareholder notice in writing thirty days before the time fixed for the meeting. In witness whereof, we have hereunto set our hands this day of OEGANIZATION CBBTIFICATE. We, the undersigned directors of the -, having been duly authorized by the owners of two-thirds of its capital stock to change and convert said bank into a national banking association, and to make the necessary organization certificate, under the provisions of section 5154 of the Eevised Statutes of the United States, or of acts amendatory thereof do sign and execute the following organization certificate, which we hereby declare we are authorized to make by. the owners of two-thirds of the capital stock of the said State bank. First. The title of this association shall be " The ." Second. The said association shall he located and continued in the of , county of , and State of , where its operations of discount and deposit are to be carried on. Third. The capital stock of this association shall be — '■ dollars ($ ), divided into shares of dollars each, as it is now divided in the said State bank. Fourth. The name and residence of each of the stockholders of the said State bank, which is to become 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: Banking. 901 Fifth. This certificate is made in order that the said State bank and the stockholders thereof may avail themselves of the advantages of the afore- said Revised Statutes, and that the said State bank may be changed and converted into a national banking association under the foregoing title. In witness whereof, we have hereunto set our hands this day of The signatures of a majority of directors required. States op , County of , ss: Before the undersigned, a, of , personally appeared directors of the aforesaid State bank, to me well known, who severally acknowledged that they executed the foregoing certificate for the purposes therein mentioned. Witness my hand and seal of ofiice this day of . [OFFICIAL SEAL OF OFFICER.] , CEBTIFICATE RELATIVE TO PAYMENT OF CAPITAL STOCK OP STATE BANK CONVERTING INTO NATIONAL BANK. It is hereby certified that the Bank of which is to be converted into "The National Bank of ," in conformity with the provisions of section 5154 of the Revised Statutes of the United States, authorizing the conversion of " any bank incorporated by special law or any banking institution organized under a, general law of any State," has a paid in and unimpaired capital of $ . President or Cashier. State op , County of , ss : Subscribed and sworn to before the undersigned, a of the said county, this day of , 191 — . [OFFICIAL SEAL OF OFFICER.] [Official Title.] Duly qualified directors of a State bank being converted into a national bank may continue as directors, regardless of the number of shares owned, until the first annual election is held when, to be eligible for re-election, they must own the number of shares required by the national-bank act. The oaths should be taken as directors of the national bank. Unless officers are reappointed by the directors of the national bank subsequent to their qualification, the form requiring the sig- 902 Appendix. natures of the officers of the national bank (a copy of which follows) should show date of appointment by the directors of the State bank: OFFICIAL SIGNATUBES OF OFFICERS OF THE , LOCATED AT • IN THE STATE OF . Original signatures. ment. Names of predecesora. [SEAL OF BANK.] IMPOETANT. The following matructions should be observed to avoid return of paper for correction : ( 1 ) Insert title and place of location of bank. ( 2 ) Give the signatures of officers, with date of election or appointment. (3) In case of a vacancy, the word " None " should appear in the space for the signature of the officer. (4) Affix seal of bank in the space designated. (5) The signatures of all of the officers with date of election or appoint- ment of each and name of predecessor, in case of a change, are required. EXTENSION OF CORPOEATE EXISTENCE. The Act of Congress approved July 12, 1882, empowers the extension of the corporate existence of national banking associations whose periods of succession are about to expire. Section 5136 provides that all associations organized under it shall have succession for twenty years from the date of the execution of their organization certificates. The officers of a national bank can therefore ascertain the date of the expiration of the corporate existence of the asso- ciation from the date of the last acknowledgment in the or- ganization certificate. If the certificate has been lost or the date is uncertain, information can be obtained upon applica- tion to the Comptroller. Under the Act of July 12, 1882, and the regulations of the comptroller's office, shareholders owning at least two-thirds of capital stock are authorized to give their Bankiito. 903 written consent to extension of corporate existence at any time within two years prior to the expiration of existing charter, and the necessary blanks and instructions will be sent a suffi- cient time in advance to enable them to do so. While no meet- ing of shareholders is necessary, the law only requiring the written consent of the owners of two-thirds of the capital stock, there is no legal objection to the holding of a meeting of share- holders for the purpose of considering the propriety of extend- ing charter. The formal amendment, certificate relative thereto, and request for approval to be executed and filed with the Comptroller are as follows: AMENDMENT OP ABTICMIS Or ASSOCIATION OF NATIONAL BANK. In accordance with and in pursuance of the provisions of "An act to enable national banking associations to extend their corporate exisfffttce, and for other purposes," approved July 12, 1882, we, the undersigned, shareholders of " The ," located at , in the county of and State of , owning the number of shares of the capital stock of said association set opposite our respective names, aggregating not less than two-thirds of the stock of said association, do hereby consent and agree that the article of the articles of association of said national banking association be, and is hereby, amended to read as follows: 'This association shall continue until close of business on 19 — , unless sooner placed in voluntary liquidation by the act of its share- holders 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 signing. Signature of shareholder. Address. Signature of proxy. No. of shares. CERTIFICATE. To the COMPTBOLLEB OP THE CUEKENCT, Washington, D. C. SiB: In pursuance of the provisions of "An act to enable national bank- ing associations to extend their corporate existence, and for other purposes," 904 Appendix. approved July 12, 1882, I hereby certify that shareholders owning not less than two-thirds of the capital stock of " The " have con- sented in writing to the extension of the charter of said association; that the signatures to the attached amendment of the articles of association, executed in duplicate, are the true and correct signatures of said share- holders, or of their lawfully appointed attorneys, and that one of the instru- ments, in all respects' like the other, is on file in the bank. The foregoing certificate is made under seal of the association in accord- ance with a resolution of the board of directors adopted at a meeting held on the day of , 19 — , in which the president or cashier was also authorized to make an application for the approval of the amended articles of association, a copy of which resolution has been recorded on the minute book of the bank. [SEAL OF BANK.] , ^ President or Cashier. (The above certificate should not be made prior to date on which the amendment is last signed.) BEQUEST FOB APPBOVAL. The Comptroller of the Currency is hereby requested to approve the fore- going amendment of the articles of association of said bank, extending its corporate existence for twenty years, pursuant to the Act of Congress entitled "An act to enable national banking associations to extend their corporate existence, and for other purposes," approved July 12, 1882. President or Cashier. PEOXT FOE USE IN EXTENDING COBPOEATE EXISTENCE OF NATIONAL BANK. Know all men by these presents, that I, , of , hereby constitute 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, or any amend- ment of said act, and I hereby consent that the article of the articles of association of the , be so amended as to read as follows : " This association shall continue until close of business on , 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." I further grant unto my said attorney full power and authority to act in and concerning the premises as fully and effectually as I might do if per- sonally present. In witness whereof I have hereunto set my hand this day of , in the year one thousand nine hundred and . Signed in presence of two witnesses: Banking. 905 AUTHORITY OF EEPEBSENTATIVE OF OTHER CORPORATION CONSENTING TO EXTENSION OP CORPORATE EXISTENCE OF NATIONAL BANK. At a meeting of the of the ■ of , it was voted that of ■ , held on the ■ day be, and he is hereby, appointed irrevocably as its attorney, ■with power of substitution, to consent to and sign, in its behalf, the amendment of the article of the articles of association of The National Bank , said amendment reading as follows: " This association shall continue until close of business on , , 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." A true copy from the records. Attest: . [AfBbc seal.] EXTENSION OF CHARTER. Order for plates and circulation. (Charter No. ■ -.) [Series of 1902.] National ■ Bank of ■ 19—. To the Comptroller of the CcRRENcy. Sir: As the corporate existence of this bank is to be legally extended for twenty years, you are requested to have new plates engraved, the cost to be paid upon demand, and circulating notes printed therefrom as follows : Cost of plates. No. of sheets ordered. Denominations on sheets. Value per sheet. Amount of circulation. $75 76 / 75 75 $5, 5S, $5, KS $10, $10, $10, $20... $10, $10, $10, $10... $60, $60, $50, $100.. Total $20 50 40 250 $ Respectfully, Cashier. Note. — The Act of July 12, 1882, requires that circulating notes issued to banks subsequent to extension of corporate existence shall bear such devices as shall make them readily distinguishable from prior issues. Lawful money must be deposited within three years from date of extension, to redeem old issues outstanding. The Act of May 30, 1908, requires the Comptroller of the Currency to keep on hand incomplete currency to the amount of 50 per cent, of the capital stock of each bank, which circulating notes should be ordered in addition to notes equal to the par value of the 906 Appendix. bonda deposited as security for circulation. The Act of Mlarch 14, 1900, limits the issue of circulating notes of the denomination of $5 to one-third of the total issues of each bank. If, therefore, notes of that denomination are desired, it will be necessary to order at least two plates. This order should accompany the amendment providing for the extension of the corporate existence of the association. The following instructions should be strictly observed: The date on which each shareholder or his attorney signs the amend- ment should be entered in the column for that purpose. An attorney representing several shareholders need sign but once on a page, if the names of shareholders are bracketed. Resi- dence and number of shares of each shareholder consenting to the extension must be given. When the owners of at least two-thirds of the stock have signed the amendment, in person or by proxy, a meeting of directors should be held and a resolution adopted directing the president or cashier to make the necessary certification to the Comptroller of the Currency and request the approval of the amendment as provided by law. The amendment, with ap- pended certificate, and request for approval should be trans- mitted to the Comptroller at least two months prior to the expiration of the corporate existence of the bank in order to allow sufficient time to cause the special examination to be made as required by law. If any shares of stock standing in the names of administrators, executors, trustees, or guardians are represented, certified copies of the legal appointment of such administrators, executors, trustees, or guardians should be furnished to the bank unless the directors are satisfied of the existence of authority of such administrators, etc., to sign the amendment. In order that stock held by an assignee may be represented, the shares must have been formally transferred to him on the books of the bank. If the amendment is signed by attorneys acting for shareholders or by an officer of another corporation, properly executed powers of attorney or other authority should be required and retained for the files of the bank. Subsequent to the receipt of extension papers in due form, the Comptroller will order the special examination required Banking. 907 by law, the expense of which must be paid by the bank. If the report of the examiner is favorable, the Comptroller will, at the date of expiration of existing charter, issue the certificate of extension. The law requires that circulating notes issued to the bank after the date at which the period of succession begins shall be of different devices from those issued before. This necessitates the procuring of new plates, which are prepared at the expense of the bank. A blank to enable a bank to order the engraving of plates and the printing of new circulation will be furnished. The order should be transmitted with the amendment. No transfer of bonds is necessary, as the extended associa- tion is, in all respects, the same as before extension. The new circulating notes will be issued as the old issues are received for redemption, until the end of three years from the date of extension, when lawful money must be deposited for the re- demption of such portion of the old circulation as may then remain outstanding. Redemption of the old issues may be provided for by depositing lawful money in full, or in instal- ments, at any time prior to the expiration of the three-year period. OFFICEES' BONDS. When the corporate existence of a national bank is extended, the renewal of bonds of officers and employees should have consideration. SHABEHOLDEES NOT DESIRING TO EXTEND THE COEPOBATE EXISTENCE OF THE ASSOCIATION. Some shareholders may not assent to the extension, and may wish to withdraw from the association. Section 5 of the Act of July 12, 1882, provides what may 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 hag granted his 908 Appendix. oertifleate 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 re- appraisal shall exceed the value fixed by said committee, the bank shall pay the expenses of said reappraisal, and otherwise the appellant shall pa'y 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. EE-EXTENSION OF COEPOEATE EXISTENCE. The Act of Congress approved April 12, 1902, provides that the Comptroller of the Currency may, in the manner provided by and under the conditions and limitations of the Act of July 12, 1882, extend for a further period of 20 years the charter of any national banking association extended under said act which shall desire to continue its existence after the expiration of its charter. The form of amendment and certificate follows : EE-EXTENSION OF CHARTER — AMENDMENT OF ARTICI.ES OF ASSOCIATION OF NATIONAL BANK. In accordance with and in pursuance of the provisions of "An act to enable national banking associations to extend their corporate existence, and for other purposes," approved July 12, 1882, and the amendment ap- proved April 12, 1902, we, the undersigned, shareholders of "The 1 — ," located at , in the county of and State of , owning the number of shares of the capital stock of said association set opposite our respective names, aggregating not less than two-thirds of the stock of said association, do hereby consent and agree that the article of the articles of association of said national banking association be, and is hereby, amended to read as follows: " This association shall continue until close of business on , 19 — , unlessBOoner placed in voluntary liquidation by the act of its share- holders 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. Banking. &09 Date of aigning. Signature of shareholder. Address. Signature of proxy. No. of shares. -, 19—. To the COMPTEOLLEB OF THE CUBBENCT, Washington, D. G. Sts: In pursuance of the provisions of "An act to enable national bank- ing associations to extend their corporate existence, and for other pur- poses," approved July 12, 1882, and the amendment approved April 12, 1902, I hereby certify that shareholders owning not less than two-thirds of the capital stock of " The ," have consented in writing ,to the re-extenaion of the charter of said association; that the signatures to the attached amendment of the articles of association, executed in duplicate, are the true and correct signatures of said shareholders, or of their law- fully appointed attorneys, and that one of the instruments, in all respects like the other, is on file in the bank. The foregoing certificate is made under seal of the association in accord- ance with a resolution of the board of directors adopted at a meeting held on the day of , 19 — , in which the president, or cashier, was also authorized to make an application for the approval of the amended articles of association, a copy of which resolution has been recorded on the minute book of the bank. [SEAL OP BANK.] , President or Cashier. (The above certificate should not be made prior to date on which the amendment is last signed.) The Comptroller of the Currency is hereby requested to approve the fore- going amendment of the articles of association of said bank, re-extending its corporate existence for twenty years, pursuant to the Act of Congress entitled "An act to provide for the extension of the charters of national banks," approved April 12, 1902. [SEAL OP BANK.] , President or Cashier. The other forms are similar to those used in connection with the original or first extension of charter. AMENDMENTS. Section 5139 of the Revised Statutes provides that no change shall he made in the articles of association of a national bank 910 Appendix. by which the rights, remedies, or security »f the existing creditors of the association shall be impaired; which, by im- plication, authorizes amendments not contravening the rights of creditors. As a matter of fact, the national banking law specifically provides for amendments of the articles of asso- ciation changing corporate title, location of bank, increasing and reducing capital stock, and extension of corporate existence. Amendment of the last-named character requires the written consent of shareholders owning two-thirds of the stock of an association, but the other changes require authorization by two-thirds of the stock of the bank at a meeting of shareholders called for the purpose. Ordinarily a provision is written into the articles of asso- ciation of national banks authorizing amendment, in any respect not conflicting with law, by a majority stock vote. Where this provision exists, the right is recognized to amend the articles by such a vote, relating to the number of directors, the time of holding annual elections (in the month of January), the num- ber of directors required to constitute a quorum, etc. In the interest of banks concerned, and in accordance with the rulings of the office, a proposition to amend the articles of association of a bank in any particular should be submitted to the Comptroller of the Currency, for approval and specific instructions, in advance of action by stockholders. In this connection attention is called to " Notice for shareholders' meeting," appearing on page 42. CHANGE OF NAME OB OF NAME AND LOCATION. .A national banking association may, with the consent of the Comptroller of the Currency and by the vote of the share- holders owning at least two-thirds of the stock of the association, change its name or place where its operations are carried on to any other locality in the same State not more than 30 miles distant. When an association desires to change its title or location, Banking. 911 the proposition should be submitted to the Comptroller of the Currency for consideration, and when approved a meeting of shareholders called that the required vote may be obtained. Due notice of the meeting must be given and a certified copy of the resolution, under seal of the bank, sent to the Comp- troller of the Currency, accompanied by a copy of the resolu- tion of the board of directors authorizing the Treasurer of the United States to assign to the bank under its new title the bonds held by him as security for circulation, together with an order for plate or plates and circulation to conform to change of title, etc. Ifo circulating notes of a bank under its original title will be issued from this office subsequent to date of ap- proval of change of corporate name. No change of name or location is valid until the Comptroller's certificate of approval is issued. (See Act of Congress approved May 1, 1886, to be found in the national bank act.) The removal of a bank to a different street location but within the limits of the place where it was organized does not require any action by the shareholders or the approval of the Comptroller, it being entirely within the control of the board of directors unless the specific location is fixed by the articles of association, in which event action by the shareholders is necessary. When the " place " in which a bank was organized has been annexed to another municipality the removal of the bank beyond the limits of the place in which it was organized into the municipality to which the former place had been annexed requires the vote of shareholders ovsraing at least two- thirds of the stock of the association and the approval of the Comptroller. This approval will not be given when the capital of a bank is less than that required by law for the organization of an association in the municipality into which it is proposed to move. LIQUIDATION. A national banking association may, under section 5220, be placed in voluntary liquidation by a vote of the owners of two- thirdsi of the stock. Before calling a meeting of shareholders. 912 Appendix. however, for the purpose of voting upon the proposition, appli- cation should be made to the Comptroller for his approval and the necessary blanks: and instructions. Notice of the meeting, as herein elsewhere provided, should be given to the shareholders at which it is proposed to take the vote required. (See notice for shareholders' meeting.) When a meeting has been held and a resolution adopted by the required vote, it is the duty of the board of directors to cause notice of the fact to be certified, under seal of the asso- ciation, to the Comptroller of the Currency by the president, or cashier, and publication thereof to be made for a period of two months in a newspaper published in the city of 'Sew York and also in the place in which the association is located; or if no newspaper is published in such place, then in a newspaper published nearest thereto, that the association is closing up its affairs, and notifying note holders and other creditors to present the notes and other claims against the association for payment. (See Sec. 5221.) When an association, with the approval of the Comptroller, goes into liquidation, its affairs pass into the hands of its share- holders for such legal disposition as may be deemed proper; and, unless a liquidating agent is elected by the shareholders (Solicitor's op., March 6, 1906), the settlement of the affairs of the bank would appear to devolve upon the directors, who will be at liberty to continue one or more of the officers or, in lieu thereof, to appoint an agent for the purpose of conducting liquidating proceedings. After a bank has gone into voluntary liquidation the Comp- troller has no further supervision of its affairs, with the ex- ception that he is authorized under the Act of June 30, 1876, to appoint a receiver if subsequently satisfied of the insolvency of the association, or whenever a creditor has obtained a judg- ment against it in any court of record and made application accompanied by a certificate from the clerk of the court, stating that such judgment has been rendered and has remained un- paid for the space of 30 days. BAKKIIirG. 913 BESOLTITION FOE VOLUNTAEY LIQUIDATION. No. . At a meeting of the shareholders of The of , located at , held on National Bank thirty days' notice of the proposed business having been given, it was Resolved, That be placed in voluntary liquidation, under the provisions of sections 5220 and 5221, U. S. Revised Statutes, to take effect . The foregoing resolution was adopted by the following vote, representing at least two-thirds of the capital stock of the association, no director, other officer, or employee having acted as proxy. Name of shareholder. Residence. Name of proxy. No. of shares. Stock voted against resolution. Name of shareholder. Residence. Name of proxy. No. of shares. Stock not represented at meeting. Name of shareholder. No of shares. Total number of shares voted in favor of the resolution. Total number of shares voted against the resolution, Total number of shares represented at the meeting, Total number of shares not represented at the meeting, - Total number of shares of capital stock, — . 58 914 Appbotjix. I hereby certify, under authority of the board of directors, that the fore- going is a true and correct report of the vote and of the resolution adopted at a meeting of the shareholders of this bank held on . [SEAL OP BANK.] , President or Cashier. Subscribed and sworn to before me this day of , A. D. . [SEAL OF NOTAKY.] , Notary Puhlie. ITOTICE. Form of notice to be published two months, from date on which resolution to liquidate takes effect, in a newspaper in the city of New York and in one published in the place in which the bjink is located. When publication has been made as required by section 5221 affidavits of the publishers should be sent to the Comptroller of the Currency. The National Bank , located at , in the State of , is closing its aflfairs. All note holders and other creditors of the association are therefore hereby notified to present the notes and other claims for payment. President or Cashier. Dated, , 19—. LIQUIDATION FOK CONSOLIDATION. If it is desired to consolidate two national banks by placing one of them in liquidation, its business to be taken over by the other, the proper method of disposing of the circulation account is to have the absorbing bank deposit lawful money to redeem the notes of the liquidated bank and to have the bonds of the liquidated bank transferred to the Treasurer of the United States in trust for the absorbing bank. The Comptroller will issue new notes to the absorbing bank immediately upon the transfer of the bonds. In case the absoi^bing bank has not a sufficient stock of in- complete currency in the vaults of this office, an order for the printing of the necessary supply will have prompt attention. As an association placed in voluntary liquidation has six months within which to deposit lawful money to redeem its outstanding Bankiitg. 915 circulation, deposits may be made in instalments if desi:*ed, which will enable the transfer of a like amount of bonds and the issue thereon of a corresponding amount of circulating notes to the absorbing association. Consolidation can only be effected by pursuing one of the following methods : First. Without an increase of capital the directors of the absorbing bank may enter into a contract with the directors or agents of the liquidating association to purchase its assets, assume liabilities to depositors and other creditors, and to pay the value of assets purchased in excesis of liabilities to de- positors and other creditors, less any expenses incident to liquidation. Second. By increasing the capital stock of the absorbing bank to an amount equal to that of the liquidated bank, the additional shares may be sold to stockholders of the latter, con- sent thereto having been previously obtained from shareholders of the absorbing association. The pre-emptive right of shareholders to participate pro rata in an increase of capital is well recognized, and it is generally incorporated in the articles of association. In order to avoid possible litigation, the course usually pursued is to secure waivers of right to participate from shareholders of record. Provision having thus been made for shareholders of the closed bank, the directors of the continuing bank are at liberty to contract for the purchase of assets and the assumption of lia- bilities to depositors and other creditors of the liquidated bank. A§ the law is construed as requiring the payment of capital, original or on account of increase, in money, and not in " notes or like evidences of debt," the right to accept stock or assets representing stock of the closed bank, and to issue therefor Certiiicates in the continuing bank is not recognized. In every such case shareholders of the closed association are paid the value of their stock either in' cash or cashier's cheeks, the pro- ceeds being available in payment of shares to which they may be entitled in the absorbing corporation. Third. The remaining method is to place the interested 916 Appendix. banks in voluntary liquidation, under section 5220 of the United States Kevised Statutes, organize anew under a different corporate title, and acquire, in the manner hereinbefore out- lined, the business of the liquidating associations. This method enables the incorporators to place the stock as they may determine. In any case an examination of the assets to be taken over will be made by a national bank examiner at the expense of the bank acquiring the assets. LIQUIDATION AT EXPIRATION OF CHAETEK. Section 7 of the Act of July 12, 1882, provides that national banking associations whose corporate existence has expired or shall hereafter expire, and which do not avail themselves of the provisions of this act, shall be required to comply with the provisions of sections 5221 and 5222 in the same manner as if the shareholders had voted to go into liquidation, as pro- vided in section 5220 ; and the provisions of sections 5224 and 5225 shall also be applicable to such associations, except as modified by this act; and the franchise of such associations is extended for the sole purpose of liquidating their affairs until such affairs are finally closed. While, under the above-mentioned act, no meeting of share- holders is necessary for the purpose of voting on the question of expiration of charter (the corporate existence expiring by limitation, if not extended as provided by law) , it would seem advisable to call the shareholders together before date of ex- piration of charter, for exchange of views and the taking of such action as may be deemed necessary with regard to closing the affairs of the bank after the charter has expired. After the charter of a bank is permitted to expire, the presi- dent or cashier should execute and forward to the Comptroller of the Currency certificate to that effect, in the following form : Banxing. 917 certificate of expibation of cobpoeate existence. National Bank , To the COMPTEOLLEB OF THE CuEEENCT, Washingtcm. SiB: It is hereby certified that the corporate existence of , located at , in the State of , having expired at close of business on the — ; — day of , , the bank is now closing its affairs under the provisions of section 7 of the Act of July 12, 1882. In testimony whereof I have, by instruction of the board of directors of said association, hereto subscribed my name and afSxed the seal of said association at , aforesaid, the day and year above written. [seal of bank.] President or Cashier, The National Bank , located at , in the State of , is closing up its affairs, its corporate existence having expired at close of business on the day of , . All note holders and others, creditors of said association, are therefore hereby notified to present the notes and other claims against the association for payment. President or Cashier. Dated , . Note. — The foregoing notice to be published for a period of two months in a newspaper in the city of New York, and also in a newspaper published in the place in which the bank is located. (See sec. 5221, Rev. Stat.) Certificates of the publishers that the required publication has been made, together with a slip containing notice from one issue of each paper, should be sent to the Comptroller of the Currency. The settlement of the affairs of a bank, at expiration of charter, should be effected in the same manner as in the case of liquidation by resolution of shareholders. MEETING. Unless the by-laws provide to the contrary, no notice of an annual meeting is required when the time and place are pro- vided for in the articles of association, if at said meeting the election of directors only is to take place. For an annual meeting, at which business of an unusual or extraordinary character, such as the amendment of articles of association, is to be considered, and for all special meetings of shareholders, notice should be given as required by the articles 918 Appendix. of association of the bank. Unless provision is made therein, 30 days' notice of meeting and business to be transacted is required. If for any cause the election of directors is not made at the time appointed and the annual meeting is not regularly adjourned, an election must be held on a subsequent day designated by the directors, 30 days' notice of meeting to be given in a newspaper published in the city, town, or county in which the association is located, or the nearest newspaper thereto. BRANCH BANKS. The only provision in the national bank act relating to branch banks is found in section 5155, United States Revised Statutes, and reads as follows : It shall be lawful for any bank or banking association, 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 be- come 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 granting of this special privilege to State banks and the absence of any similar provision in the law with respeet to banks of primary organization have always been construed by the Comptroller to imply that banks of the latter class were not permitted to have branches. The section cited absolutely restricts branch banks of converted associations to such as have a definite proportion of the capital of the parent bank assigned to them, and it is not to be assumed that the law contemplated that associations of primary organizations should be permitted to assign any portion of their capital to and operate branches. This fact is further to be inferred from section 5138, United States Revised Statutes, which prohibits the formation of asso- ciations with less capital than $200,000 in cities of population exceeding 50,000, and with less than a specified capital in places with population less than 50,000. To permit the establishment of branch banks would not only render possible an evasion of the provisions of section 5138, Banking, 919 but tend to discourage the organization of banking associations which, in the absence of such branches, might be formed. Section 5134 provides in part that the organization certificate of a national bank shall show " the place where its operations of discount and deposit are to be carried on," and section 5190 that " the usual business of each national banking association shall be transacted at an office or banking house (not offices or banking houses) located in the place (not places) specified in its organization certificate." The word " place " and " at an office or banking house " have always been construed by the Comptroller to mean the legal domicile of the corporation, of which it can have but one, and this construction is sustained by the Solicitor of the Treasury in an opinion rendered August 10, 1899, on the question of ' the right of a national bank to establish and maintain an auxiliary cash room at some point distant from its banking house, for the purpose of receiving deposits and paying checks. The solicitor says: This section (5190, U. S. Rev. Stat.) contemplates that the usual busi- ness of a national banking association shall be transacted at one office and banking house, and as receiving deposits and paying checks belong to the " usual business " of a bank, I am of the opinion that the statute does not authorize the establishment of an auxiliary cash room in a, different part of the city for the purpose proposed. Besides, it may be observed that if a national banking association can lawfully establish and maintain a separate office for receiving deposits and paying checks, it could as well establish as many of such auxiliary cash rooms in the city of its corporate residence as its business might require; and, indeed, the entire business of the bank may be parceled out and conducted in the same way all over the city. The Supreme Court of the United States, in the case of Armstrong v. Second National Bank of Springfield (38 Fed. Rep. 886), involving among other things the question of the right of a national bank to cash a check elsewhere than at its banking house, held that — Under this section (5190) it certainly would not be competent for a national bank to provide for the cashing of checks upon it at any other place than at its office or banking house. If, therefore, it is unlawful for a national bank to cash a check elsewhere than at its banking house, it is likewise un- 920 Appendix. lawful for it to discount notes or to receive deposits elsewhere, for one is as much a part of the " usual business " of a bank as the other. As it is obviously impossible for a bank to transact its entire business within the four walls of any single building, it is not held that the law contemplates that the " entire busi- ness," as distinguished from its " usual business," shall be transacted in its banking house. In the case of The Merchants National Bank of Boston v. The State ISTational Bank (10 Wall. 604), it was held in this connection that — The provision requiring the " usual business " of the association to be transacted " at an office or banking house specified in its organization certificate " must be construed reasonably, and a part of the legitimate business of the association which can not be transacted at the banking house may be done elsewhere. The question involved in this case was the right of the bank's officers to purchase gold elsewhere than at its banking house, and the court held that — The gold must necessarily have been bought, if at all, at the buying or selling bank or at some third locality. The power to pay was vital to the power to buy, and inseparable from it. The " legitimate business " of a bank, therefore, which a reasonable construction of the law would permit to be done elsewhere than at its banking house would seem to be restricted to transactions similar in character to that involved in the decision quoted, and not the ordinary and usual business of receiving deposits and cashing checks. While the national bank act does not in express terms pro- hibit the establishment and maintenance of branch banks or agencies by associations of primary organization, the implica- tion to that effect is clear, and the courts have held that what is implied is as effective as that which is expressed. That the act does not contemplate the operation of branch banks by national banks of primary organization is evidenced by the fact that in 1892 a special act was approved authorizing the operation of a branch by a Chicago national bank on the World's Fair grounds. In 1901, similar legislation was enacted r Bankikg. 921 by Congress in connection with the Louisiana Purchase Exposi- tion, held in 1904. SAVINGS DEPARTMENT. ■• There is nothing in the national bank act authorizing the operation of a savings department, and as the capital, deposits, and all other funds of a national bank may be loaned or other- wise invested only in conformity with the provisions of the act, it follows that the sole business of a savings bank, which can be legally transacted by a national bank, is the paying of in- terest on deposits. The right to pay interest on deposits, by a commercial bank, has been established by practice and is recognized by the courts. The right of a national bank to pay interest on deposits necessarily carries with it the right to advertise that policy, but where, as in some States, the laws prohibit the use of the word " Savings," and the soliciting or receiving of deposits as a savings bank by banking institutions not authorized by State law to do a savings bank business, it is probable that the courts would hold the prohibition against the use of the word " Savings " applicable to national banks, but not the prohibition against soliciting and receiving interest- bearing deposits. INFORMATION. Respecting United States Paper Currency^ Coin and Pro- duction of Precious Metals, Etc. [Note. — The information here obtained is taken from the United States .Treasury Department, Circular No. 52, authorized and directed to be issued by A. Piatt Andrew, Acting Secretary.] 922 Appendix. HISTORY OF COIN'S AND CURRENCY. MONETARY SYSTEM OF THE UNITED STATES. In 1786 the CongreSB of the Confederation chose as the monetary unit of the United States the dollar of 375.64 grains of pure silver. This unit had its origin in the Spanish piaster or milled dollar, which constituted the basis of the metallic circulation of the English colonies in America. It was never coined, there being at that time no mint in the United States. The Act of April 2, 1792, established the first monetary system of the United States. The bases of the system were: The gold dollar or unit, containing 24.75 grains of pure gold, and stamped in pieces of $10, $5, and $21^) denominated, respectively, eagles, half eagles, and quarter eagles; the silver dollar or unit, containing 371.25 grains of pure silver. A mint was established. The coinage was unlimited, and there was no mint charge. The ratio of gold to silver in coinage was 1 to 15. Both gold and silver were legal tender. The standard was double. The Act of 1792 undervalued gold, which was therefore ex- ported. The Act of June 28, 1834, was passed to remedy this, by changing the mint ratio between the metals to 1 to 16.002. This latter act fixed the weight of the gold dollar at 25.8 grains, but lowered the fineness from 0.916 2/3 to 0.899225. The fine weight of the gold dollar was thus reduced to 23.2 grains. The Act of 1834 undervalued silver, as that of 1792 had under- valued gold, and silver was attracted to Europe by the more favorable ratio of 1 to 15%. The Act of January 18, 1837, was passed to make the fineness of the gold and silver coins uniform. The legal weight of the gold dollar was fixed at 25.8 grains and its fine weight at 23.22 grains. The fineness was therefore changed by this act to 0.900 and the ratio to 1 to 15.988+. Silver continued to be exported. The Act of February 21, 1853, reduced the weight of the silver coins of a denomination less than $1, which the acts of 1792 and 1837 had made exactly Banking. 923 proportional to the weight of the silver dollar, and provided that they should be legal tender to the amount of only $5. Under the Acts of 1792 and 1837 they had been full legal tender. By the Act of 1853 the legal weight of the half dollar was reduced to 192 grains and that of the other fractions of a dollar in proportion. The coinage of the fractional parts of the dollar was reserved to the Government. The Act of February 12, 1873, provided that the unit of value of the United States should be the gold dollar of the standard weight of 25.8 grains, and that there should be coined, besides, the following gold coins: A quarter eagle, or 214- doUar piece; a 3-dollar piece; a half eagle, or 5-dollar piece; an eagle, or 10-doUar piece, and a double eagle, or 20-dollar piece, all of a standard weight proportional to that of the dollar piece. These coins were made legal tender in all payments at their nominal value when not below the standard weight and limit of tolerance provided in the act for the single piece, and when reduced in weight they should be legal tender at a valua- tion in proportion to their actual weight. The silver coins provided for by the act were a trad© dollar; a half dollar, or 50-cent piece ; a quarter dollar, and a 10-cent piece ; the weight of the trade dollar to be 420 grains troy ; the half dollar, 12^2 grams; the quarter doUar and the dime, respectively, one-half and one-fifth of the weight of the half dollar. These silver coins were made legal tender at their nominal value for any amount not exceeding $5 in any one payment. The charge for converting standard gold bullion into coin was fixed at one- fifth of 1 per cent. Owners of silver bullion were allowed to deposit it at any mint of the United States, to be formed into bars or into trade dollars, and no deposit of silver for other coinage was to be received. Section 2 of the joint resolution of July 22, 1876, recited that the trade dollar should not thereafter be legal tender, and that the Secretary of the Treasury should be authorized to limit the coinage of the same to an amount sufficient to meet the export demand for it. The Act of February 19, 1887, retired the trade doUar and prohibited its coinage; that of September 924 Appendix. 26, 1890, discontinued the coinage of the l-doUar and 3-dollar gold pieces. The Act of February 28, 1878, directed the coinage of silver dollars of the weight of 412% grains troy, of standard silver, as provided in the Act of January 18, 1837, and that such coins, with all standard silver dollars theretofore coined, should be legal tender at their nominal value for all debts and dues, public and private, except where otherwise expressly stipulated in the contract. The Secretary of the Treasury was authorized and directed by the first section of the act to purchase from time to time silver bullion at the market price thereof, not less than $2,000,000 worth nor more than $4,000,000 worth per month, and to cause the same to be coined monthly, as fast as pur- chased, into such dollars. A subsequent act, that of July 14, 1890, enacted that the Secretary of the Treasury should pur- chase silver bullion to the aggregate amount of 4,500,000 ounces, or so much thereof as might be offered, each month, at the market price thereof, not exceeding $1 for 371.25 grains of pure silver, and to issue in payment thereof Treasury notes of the United States, such' notes to be redeemable by the Govern- ment, on demand, in coin, and to be legal tender in payment of all debts, public and private, except where otherwise ex- pressly stipulated in the contract. The act directed the Secre- tary of the Treasury to coin each month 2,000,000 ounces of the silver bullion purchased under the provisions of the act into standard silver dollars until the 1st day of July, 1891, and thereafter as much as might be necessary to provide for the redemption of the treasury notes issued under the act. The purchasing clause of the Act of July 14, 1890, was repealed by the Act of November 1, 1893. The Act of June 9, 1879, made the subsidiary silver coins of the United States legal tender to the amount of $10. The minor coins are legal tender to the amount of 25 cents. The Act of March 14, 1900, declares that the dollar consist- ing of 25.8 grains of gold .900 fine " shall be the standard unit of value," and makes it the duty of the Secretary of the Treasury Banking. 925 to maintain at a parity of value with this standard all forms of money issued or coined by the United States. Denominations, Fine Metal, Auxjy, and Weight op the Coins of the United States. GOLD. Denomination. One doUar ($1) Quarter eagle ($2.50) Three dollara ($3)... Half eagle ($6) Eagle ($10) Double eagle ($20) Fine gold contained. Grains. 23.22 58.05 69.66 116.10 232.20 464.40 Alloy con- tained.^ Grains. 2.58 6.45 7.74 12.90 25.30 51.60 Weight. Grains. 25.80 64.60 77.40 129.00 258.00 516.00 ^ The alloy neither adds to nor detracts from the value of the coin. Denomination. Standard dollar Half dollar ... Quarter dollar Dime Fine silver Alloy con- contained. tained. Weight. Grains. Grains. Gi ains. 412.60 371.25 41.26 192.90 173.61 19.29 86.805 9.645 38.58 34.722 3.858 Prior to the act of February 21, 1853, all ailver coins were legal tender in all payments whatsoever. The act of February 21, 1853, reduced the weight of all silver coins of leas denomination than the silver dollar about 7 per cent., to be coined on government accoimt only, and made them legal tender in payment of debts for all sums not exceeding $5; the act of June 9, 1879, increased their legal tender quality to $10. MINOR. Denomination. Fine copper contained. Grains. 57.87 45.60 Alloy con- tained. Grains. 19.29 2.40 Weight. Grains. 77.16 48 * Seventy-five per cent, copper, 25 per cent, nickel. 2 Ninety-five per cent, copper, 5 per cent, tin and zinc. 926 Appendix. Troy weights are used, and while metric weights are by law assigned to the half and quarter dollar and dime, troy weights still continue to be employed, 15.432 grains being considered as the equivalent of a gram, agreeably to the Act of July 28, 1866. Standard bullion contains 900 parts of pure gold or pure silver and 100 parts of copper alloy. The coining value of an ounce of pure gold is $20.67183 and the coining value of an ounce of standard gold is $18.60465. The coining value in standiard silver dollars of an ounce of pure silver is $1.2929 and the coining value of an ounce of standard silver is $1.1636. The weight of $1,000 in United States gold coin is 53.75 troy ounces, equivalent to 3.68 pounds avoirdupois. The weight of $1,000 in standard silver dollars is 859.375 troy ounces, equivalent to 58.92 pounds avoirdupois, and the weight of $1,000 in subsidiary silver is 803.75 troy ounces, equivalent to 55.11 pounds avoirdupois. LEGAL TENDEE QUALITIES OF UNITED STATES MONET. There are ten different kinds of money in circulation in the United States, namely, gold coins, standard silver dollars, sub- sidiary silver, gold certificates, silver certificates, treasury notes issued under the Act of July 14, 1890, United States notes (also called greenbacks and legal tenders), national bank notes, and nickel and bronze coins. These forms of money are all available as circulation. While they do not all possess the full legal tender quality, each kind has such attributes as to give it currency. The status of each kind is as follows: Gold coin is legal tender at its nominal or face value for all debts, public and private, when not below the standard weight and limit of tolerance prescribed by law ; and when below such standard and limit of tolerance it is legal tender in proportion to its weight. Standard silver dollars are legal tender at their nominal or face value in payment of all debts, public and private, without Banking. 927 regard to the amount, except where otherwise expressly stipu- lated in the contract. Subsidiary silver is legal tender for amounts not exceeding $10 in any one payment. Treasury notes of the Act of July H-, 1890, are legal tender for all debts, public and private, except where otherwise ex- pressly stipulated in the contract. United States notes are legal tender for all debts, public and private, except duties on imports and interest on the public debt.a Gold certificates, silver certificates, and national hank notes are not legal tender, but both classes of certificates are receivable for all public dues, while national bank notes are receivable for all public dues except duties on imports, and may be paid out by the Government for all salaries and other debts and demands owing by the United States to individuals, corporations, and associations within the United States, except interest on the public debt and in redemption of the national currency. All national banks are required by law to receive the notes of other national banks at par. The minor coins of nickel and copper are legal tender to the extent of 25 cents. Foreign coins are not legal tender. — Section 3584 of the Revised Statutes of the United States provides that no foreign coins shall be a legal tender in the United States. GOLD COINS. While the gold dollar is the unit and standard of value, the actual coinage of the $1 piece was discontinued under authority of the Act of September 26, 1890. Gold is now coined in denominations of $2.50, $5, $10, and $20, called, respectively, quarter eagles, half eagles, eagles, and double eagles. « United States notes, upon resumption of specie payments, January 1, 1879, became acceptable in payment of duties on imports and have been freely received on that account since the above date, but the law has not been changed. 928 Appendix. The total coinage of gold by the mints of the United States from 1792 to June 30, 1910, is $3,149,207,670.50, of which it is estimated that $1,531,074,997 is now in existence as coin in the United States, while the remainder, $1,618,132,673.50, represents the excess of exports over imports and the amount consumed in the arts. The gold bullion now in the United States is about $105,000,000. The basis for the estimate of the amount of gold coin in the United States was established in 1873, when the amount in the vaults of the national banks and in the Treasury was ascer- tained from reports to be $71,188,548. To this was added $20,000,000 as an estimate of the amount of gold in use on the Pacific coast, $10,000,000 as the amount held by all other banks and by the people, and $3,818,086 in national banks. The amount thus ascertained was $105,006,634, to which have been added from year to year the new coinage reported by the Director of the Mint and the imports as shown by the custom house reports, and from which have been deducted the exports and the amounts consumed in the arts. It will be seen that more than one-half of the gold coins struck at the mints of the United States have disappeared from circulation. In 1907 the Director of the Mint revised the estimates of the amount of gold in the United States, and as a result of the revision the amount was reduced by $135,000,000. A detailed statement may be obtained upon application to the Director of the Mint. SILVBE COINS. The standard silver dollar was first authorized by the Act of April 2, 1792. Its weight was 416 grains .8924 fine. It contained the same quantity of fine silver as the present dollar, whose weight and fineness were established by the Act of January 18, 1837. The coinage of the standard silver dollar was discontinued by the Act of February 12, 1873, and it was restored by the Act of February 28, 1878. The total amount coined from 1792 to 1873 was $8,031,238, and the amount Banking. 929 coined from 1878 to December 31, 1904, when the coinage was discontinued, was $570,272,610. The coinage ratio be- tween gold and silver under the Act of 1792 was 15 to 1, but by the Acts of 1834 and 1837 it was changed first to 16.002 -to 1 and finally to 15.988 to 1 (commonly called 16 to 1). This is the present ratio. The total expenditure by the United States for silver bullion, exclusive of subsidiary silver coinage, has been — Under Act of February 28, 1878 $308,279,260.71 Under Act of July 14, 1890 155,931,002.00 Total $464,210,262.71 There have been coined from the bullion thus purchased standard silver dollars of the face value of $570,272,610 and subsidiary silver coin of the face value of $33,118,575.05, con- suming the entire amount of bullion purchased under the Act of July 14, 1890. The present bullion value (July 1, 1910) of the standard silver dollars coined is $237,723,617.44. The space required for the storage of 1,000,000 standard silver dollars is 250 cubic feet. The standard silver dollars in the vaults of the Treasury and the several subtreasuries June 30, 1910, amounting to about 496,000,000, require 124,000 cubic feet of space. Of the 570,272,610 standard silver dollars coined since February, 1878, 2,495,000 are reported to have been shipped to Cuba, Porto Rico, and the Philippines, of which 643,680 have been returned; there were held in the Treasury June 30, 1910, 495,844,994 ; 143,782 which were mutilated,, were pur- chased by the Government as bullion and melted; the amount outside the Treasury in the United States was $72,432,514. Of the amount held in the Treasury $489,117,000 were held for the redemption of an equal amount of silver certificates out- standing; $3,672,000 were held on account of Treasury notes of 1890, and $3,055,994 were held in the general cash as assets of the Government. The commercial value of an ounce of fine 59 930 Appendix. silver June 30, 1910, was $0.54038, and the commercial value of the silver in the silver dollar on that date vs^as 41.795 cents. TRADE DOLLAES. The trade dollar of 420 grains troy was authorized by the Act of February 12, 1873. It was intended for circulation in oriental countries as a substitute for the Mexican dollar, which it slightly exceeded in weight ; but by the terms of the authoriz- ing act it was made legal tender in the United States in sums not exceeding $5. This legal tender quality was withdrawn by the joint resolu- tion approved July 22, 1876, and the coinage was limited to such amount as the Secretary of the Treasury should consider sufficient to meet the export demand. The Act of February 19, 1887, provided for the retirement of trade dollars and their recoinage into standard silver dollars or subsidiary silver. For six months after the passage of the act they could be exchanged at the Treasury or any subtreasury, dollar for dollar, for stand- ard silver dollars or subsidiary coin. The total number of trade dollars coined was 35,965,924. The number redeemed under the Act of 1887 was 7,689,036, and from the bullion resulting from the melting of these dol- lars there were coined in subsidiary silver $2,668,674.30 and into standard silver dollars $5,078,472. Since the expiration of the period of redemption above mentioned, trade dollars have been purchased as bullion when presented at the mints. SUBSIDIAEY SILVER. The silver coins of smaller denominations than one dollar, authorized by the Act of April 2, 1792, were half dollars, quarter dollars, dimes, and half dimes. They were the equiva- lent in value of the fractional parts of a dollar which they represented — that is, two half dollars were equal in weight to one silver dollar, and so on. These coins were full legal tender when of standard weight, and those of less than full Banking. 931 ■weight were legal tender at values proportional to their respective weights. By the Act of February 21, 1853, the weight of the fractional silver coins was reduced so that the half dollar weighed only 192 grains, and all the smaller denominations were reduced in proportion. Their legal tender quality was at the same time limited to $5, and they thus became subsidiary coins. The present subsidiary coins are half dollars, quarter dollars, and dimes. Their weight is slightly different from that prescribed by the Act of 1853; but the limit of their legal tender quality has been raised to $10, and $213,303,955.25 have been coined since February 12, 1873. The amount of full-weight fractional silver coined prior to February 21, 1853, was $76,734,964.50, and the amount of subsidiary silver coined since that year is $272,351,351.45. There was a period, from 1862 to 1876, when there was no fractional silver coin in circulation in the United States except on the Pacific coast. During this period the small change of the country consisted of fractional paper currency, which will be described in its place. PAPBE MONEY. The first paper money ever issued by the Government of the United States was authorized by the Acts of July 17 and August 5, 1861. The notes issued were called " demand notes," because they were payable on demand at certain designated subtreasuries. They were receivable for all public dues, and the Secretary was authorized to reissue them when received, but the time within which such reissues might be made was limited to December 31, 1862. The amount authorized by these acts was $50,000,000. An additional issue of $10,000,000 was authorized by the Act of February 12, 1862, and there were reissues amounting to $30,000. The demand notes were paid in gold when presented for redemption, and they were re- ceived for all public dues, and these two qualities prevented their depreciation. All. other United States notes were de- 932 Appendix. preciated in value from 1862 until the resumption of specie payments. The Act of February 25, 1862, provided for the substitution of United States notes in place of the demand notes, and the latter were therefore canceled when received. By July 1, 1863, all except about $3,350,000 had been retired, and nearly three millions of this small remainder were canceled during the next fiscal year. These notes were not legal tender when first issued, but they were afterwards made so by the act of March 17, 1862. UNITED STATES NOTES. The principal issue of United States paper money was oflScially called United States notes. These were the well- known " greenbacks " or " legal tenders." The Act of Feb- ruary 25, 1862, authorized the issue of $150,000,000, of which $50,000,000 were in lieu of an equal amount of demand notes, and could be issued only as the demand notes were canceled. A second issue of $150,000,000 was authorized by the Act of July 11, 1862, *of which, however, $50,000,000 was to be a temporary issue for the redemption of a debt known as the temporary loan. A third issue of $150,000,000 was authorized by the Act of March 3, 1863. The total amount authorized, including the temporary issue, was $450,000,000, and the highest amount outstanding at any time was $449,338,902 on January 30, 1864. There are still outstanding $346,681,016. The reduction from the original permanent issue of $400,- 000,000 to $346,681,016 was caused as follows: The Act of April 12, 1866, provided that United States notes might be retired to the extent of $10,000,000 during the ensuing six months, and that thereafter they might be retired at the rate of not more than $4,000,000 per month. This authority re- mained in force until it was suspended by the Act of February 4, 1868. The authorized amount of reduction during this period was about $70,000,000, but the actual reduction was only about $44,000,000. No change was made in the volume of United States notes outstanding until after the panic of Banking. 933 1873, when, in response to popular demand, the Government reissued $26,000,000 of the canceled notes. This brought the amount outstanding to $382,000,000, and it so remained until the resumption Act of January 14, 1875, provided for its reduction to $300,000,000. The process was, however, again stopped by the Act of May 31, 1878, which required the notes to be reissued when redeemed. At that time the amount outstanding was $346,681,016, which is the present amount. The amount of United States notes redeemed from the fund raised for resumption purposes since January 1, 1879, to June 30, 1910, was $712,260,694; but the volume out- standing is undiminished because of the provisions of the Act of May 31, 1878, which require the notes so redeemed to be paid out again and kept in circulation. The Act of March 14, 1900, also directed the reissue of United States notes when redeemed, but they must first be ex- changed for gold as provided in the said act. The act also provides that when silver certificates of large denominations are canceled, and small denominations issued ^in their place, a like volume of small United States notes shall from time to time be canceled and notes of $10 and upward issued in sub- stitution therefor.a The Act of March 4, 1907, provides for the issue, under certain conditions, of United States notes in denominations of $1, $2, and $5, and upon such issue an equal amount of United States notes of higher denominations shall be retired and canceled. GOLD CERTIFICATES. The Act of March 3, 1863, authorized the Secretary of the Treasury to receive deposits of gold coin and bullion in sums not less than $20, and to issue certificates therefor in denomina- tions not less than $20, said certificates to be receivable for duties on imports. Under this act deposits of gold were re- ceived and certificates issued until January 1, 1879, when the a The Act of March 14, 1900, may be found on pages 79-82. 934 Appendix. practice was discontinued by order of the Secretary of the Treasury. The purpose of the order was to prevent the holders of United States notes from presenting them for redemption in gold, and redepositing the gold in exchange for gold certifi- cates. No certificates were issued after January 1, 1879, until the passage of the Bank Act of July 12, 1882, which authorized and directed the Secretary of the Treasury to receive gold coin and issue certificates. This act, however, provided that " the Secretary of the Treasury shall suspend the issue of gold certificates whenever the amount of gold coin and gold bullion in the Treasury, re- served for the redemption of United States notes, falls below one hundred millions of dollars." The Act of March 14, 1900, re-enacted this provision, and further provided that the Secre- tary may, in his discretion, suspend such issue whenever and so long as the aggregate amount of United States notes and silver certificates in the general fund of the Treasury shall exceed $60,000,000. It provided further that of the amount of such certificates outstanding one-fourth, at least, shall be in denominations of $50 or less. The amount of gold certificates now outside the Treasury is $802,754,199. The Act of July 12, 1882, made them receivable for customs, taxes, and all public dues. The Act of March 4, 1907, provides for the receipt of de- posits of gold coin in sums of not less than $20 and the issue of gold certificates therefor in denominations of not less than $10. SILVEE CEETIFICATES. The Act of February 28, 1878, authorizing the issue of the standard silver dollars, provided that any holder of such dollars might deposit them in sums not less than $10 with the Treasurer or any assistant treasurer of the United States and receive certificates therefor, in denominations not less than $10, said certificates to be receivable for customs, taxes, and all public dues. The Act of August 4, 1886, authorized the issue of the smaller denominations of $1, $2, and $5. Silver certificates have Banking. 935 practically taken the place in circulation of the standard silver dollars -which they represent. The amount outside of the Treasury July 1, 1910, was $478,597,238, while the amount of standard silver dollars outside the Treasury was only $72,432,- 514. The Act of March 14, 1900, provided that thereafter the issue of silver certificates should be limited to the denominations of $10 and under, except that 10 per cent, of the total volume of such certificates, in the discretion of the Secretary of the Treasury, may be issued in denominations of $20, $50, and $100. Neither silver certificates nor silver dollars are redeem- able in gold. TREASURY NOTES, ACT OF JULY 14, 1890. These notes were authorized by the Act of July 14, 1890, commonly called the " Sherman Act." The Secretary of the Treasury was directed to purchase each month 4,500,000 ounces of fine silver at the market price, and to pay for the same with Treasury notes redeemable on demand in coin and legal tender for all debts, public and private, except where otherwise expressly stipulated in the contract. It was provided in the act that when the notes should be redeemed or received for dues they might be reissued, but that no greater or less amount of such notes should be " outstanding at any time than the cost of the silver bullion and the standard silver dollars coined thefefrom, then held in the Treasury purchased by such notes." The authority for the purchase of silver bullion under this act was repealed by the Act of November 1, 1893, up to which date the Government had purchased 168,674,682.53 fine ounces, at a cost of $155,931,002, for which Treasury notes were issued. The amount of Treasury notes redeemed in gold up to the close of the fiscal year 1910 was $110,582,179 and the amount redeemed in standard silver dollars was $84,556,867. Treasury notes redeemed in standard silver dollars are canceled and retired in accordance with the requirements of the Act of 1890. Sections 5 and 8 of the Act of March 14, 1900, also 936 Appendix. provide for the cancellation and retirement of Treasury notes to an amount equal to the coinage of standard silver dollars and subsidiary silver from the bullion purchased with such notes. The cancellation of notes on account of coinage since March 14, 1900, is $67,702,135, so that there remained out- standing June 30, 1910, but $3,672,000. Copies of the Treasury regulations governing the issue and redemption of currency may be procured by application to the Treasurer of the United States. FEACTIONAL CTJEBBNCT. When specie payments were suspended, about January 1, 1862, both gold and silver coins disappeared from circulation. The place of the subsidiary silver coins was for a time supplied by the use of tickets, due bills, and other forms of private obliga- tions, which were issued by merchants, manufacturers, and others whose business required them to " make change." Con- gress soon interfered, and authorized, first, the use of postage stamps for change; second, a modified form of postage stamp called postal currency, and finally, fractional paper currency in denominations corresponding to the subsidiary silver coins. The highest amount authorized was $50,000,000. The highest amount outstanding at any time was $49,102,660.27, and the amount still outstanding, though not in use as money, is $15,- 234,756.28, of which $8,375,934 is officially estimated to have been destroyed. •- EEDEMPTIOlir. Gold coins and standard silver dollars, being standard coins of the United States, are not " redeemable." Subsidiary coins and minor coins may be presented, in sums or multiples of $20, to the Treasurer of the United States or to an assistant treasurer for redemption or exchange into lawful money. United States notes are redeemable in United States gold Banking. 937 coin in any amount by the Treasurer and all the assistant treasurers of the United States. Treasury notes of 1890 are redeemable in United States gold coin in any amount' by the Treasurer and all the assistant treas- urers of the United States. National ianJc notes are redeemable in lawful money of the United States by the Treasurer, but not by the assistant treas- urers. They are also redeemable at the bank of issue. In order to provide for the redemption of its notes when presented, every national bank is required by law to keep on deposit with the Treasurer a sum equal to 5 per cent, of its circulation. Gold certificates, being receipts for gold coin, are redeemable in such coin by the Treasurer and all assistant treasurers of the United States. Silver certificates are receipts for standard silver dollars deposited, and are redeemable in such dollars only. " Coin " ohligations of the government are reedeemed in gold coin when gold is demanded and in silver when silver is demanded. STJMMAEY OF MONETARY EVENTS OF THE WOBLD SINCE 1786. 1186. — Establishment of the double standard in the United States with a ratio of 1 to 15.25 ; that is, on the basis of 123.134 grains of fine gold for the half eagle, or $5 piece, and 375.64 grains of fine silver for the dollar, without any actual coinage. 1192. — Adoption of the ratio of 1 to 15 and establishment of a mint with free and gratuitous coinage in the United States; the silver dollar equal to 371^ grains fine, the eagle to 247% grains fine. 180S. — Establishment of the double standard in France on the basis of the ratio of 1 to 15%, notwithstanding the fact that the market ratio was then about 1 to 15. 1810. — Introduction of the silver standard in Russia on the basis of the ruble of 17.99 grams of fine silver, followed in 1871 by the coinage of imperials, or gold pieces of 5 rubles, of 5.998 grams; therefore, with a ratio of 1 to 15. This ratio 938 Appendix. was changed by the increase of the imperial to 5 rubles 13 copecks, and later to 1 to 15.4:5, 1815. — Great depreciation of paper money in England, reaching 261/2 per cent, in May. Course of gold, £5 6s., and of silver, TlVsi^. per ounce standard. In December the loss was only 6 per cent. ; gold at this period was quoted at £4 3s., and silver at 64d. 1816. — Abolition of the double standard in England, which had had as its basis the ratio of 1 to 15.21, and adoption of the gold standard on the basis of the pound sterling at 7.322 grams fine in weight. Coinage of divisional money at the rate of 66d. per ounce. Extreme prices, £4 2s. for gold and 64d. for silver; in Janu- ary, £3 18s. 6d., and 59i/4d. in December. Substitution for the ratio of 1 to 15.5 in Holland, established by a rather confused coinage, of the ratio of 1 to 15%. 1819. — Abolition of forced currency in England. Price of gold, £3 17s. 10% and of silver, 62d." per ounce in October, against £4 Is. 6d. and 67d. in February. 18S2. — Introduction of the monetary system of France in Belgium, with a decree providing for the coinage of pieces of 30 and 40 francs, which, however, were not stamped. Sil- ver, 59%d. 183Jt. — Substitution of the ratio of 1 to 16 for that of 1 to 15 in the United States by reducing the weight of the eagle, ten- dollar gold piece, from 270 grains to 258 grains. In 1837 the fineness of the United States gold coins was raised from .899,225 to .900, and the silver coins from .892,4 to .900, giving a ratio of 1 to 15.988, and fixing the standard weight of the silver dollar at 412% grains. Silver, 59 15/16d. 1835. — Introduction of the company rupee, a piece of silver weighing 165 grains fine, in India in place of the sicca rupee. Creation of a trade coin — the mohur, or piece of 15 rupees — containing 165 grains of fine gold. Silver, 59 ll/16d. a The price of silver given hereafter represents the average rate per ounce standard — that is, the mean between the ,highest price and the lowest price quoted during the year. Banking. 939 ISJfJf. — Introduction o£ the double standard in Turkey, with the ratio of 1 to 15.10. Silver, 59y2d. 18Jf7. — Abolition of the double standard in Holland by the introduction of the silver standard on the basis of a 1-florin piece 0.945 grams fine, the coinage of which had already been decreed in 1839. Silver, 59 ll/16d. ISJi-l. — Discovery of the gold mines of California. 18^.8. — Coinage in Belgium of pieces of 10 and 25 francs in gold, a shade too light. These pieces were demonetized and withdrawn from circulation in 1884. Silver, 59%d. 1848. — Replacing the ratio of 1 to 16 in Spain, which had been in force since 1786, by that of 1 to 15.77. 1850. — Introduction of the French monetary system in Switzerland without any actual coinage of gold pieces. Sil- ver, 60 l/16d. i 551 .— Discovery of the gold mines of Australia. 185S. — Lowering of the weight of silver pieces of less value than $1 to the extent of 7 per cent, in the United States, and limitation of their legal-tender power to $5. Silver, Qiy2d. 1853. — Maximum of the production of gold reached in Cali- fornia, when it amounted to $65,000,000. 1854- — Introduction of the gold standard in Portugal on the basis of the crown of 16.257 grams fine. Before this period the country had the silver standard, with a rather large circu- lation of gold coins stamped, on the basis of 1 to 15^ in 1835 and 1 to I6I/2 in 1847. Silver, eil^d. 185 J/.. — Modification of the ratio of 1 to 15.77 in Spain by raising it to 1 to 15.48, and by lowering the piaster from 23.49 grams to 23.36 grams fine. 1864. — Introduction of the silver standard, as it existed in the mother country, in Java, in place of the ideal Javanese money, and coinage of colonial silver pieces. 1857. — Conclusion of a TQonetary treaty between Austria and the German States, in accordance with which 1 pound of fine silver (one-half a kilogram) was stamped into 30 thalers, or 521/2 florins of south Germany, or 45 Austrian florins, result- 940 Appendix. ing in 1 thaler equaling 1% German florins or 1% Austrian florins. Silver, 61%d. 1861. — Law decreeing the coinage of gold pieces of 10 and 20 francs exactly equal to French coins of the same denomina- tion in Belgium. Silver, 61%d. 186^. — Adoption of the French monetary system by Italy. Silver, 61 7/16d. 1865. — Formation of the Latin Union between France, Bel- gium, Switzerland, and Italy on the basis of a ratio of 1 to 15%. Silver, 61 l/16d. 1868. — Adoption of the French monetary system by Rou- mania. with the exclusion of the 5-franc silver piece, which was, however, stamped in 1881 and 1883. Silver, eO^d. 1868. — Admission of Greece into the Latin Union. The definite and universal introduction of the French monetary system into the country was effected only in 1883. 1868. — Adoption of the French monetary system, with the peseta or franc as the unit, by Spain. The coinage of gold alphonses d'or of 25 pesetas was made only in 1876. 1871. — Replacing of the silver standard in Germany by the gold standard. Coinage in 1873 of gold pieces of 5, 10, and 20 mark pieces, the latter weighing 7.168 grams fine. Sil- ver, 60y2d. 1871. — Establishment of the double standard in Japan with the ratio of 1 to 16.17 by the coinage of the gold yen of 1.667 grams and of the silver yen of 26.956 grams, both with a fine- ness of .900. 1873. — Increase of the intrinsic value of the subsidiary coins of' the United States. Replacing of the double standard by the gold standard. Reduction of the cost of coinage of gold to one-fifth per cent., the total aboltion of which charge was decreed in 1875. Creation of a trade dollar of 420 grains with a fineness of .900. Silver, 59^d. 1873. — Suspension of the coinage of 5-franc pieces in Bel- gium. 1873. — Limitation of the coinage of 5-francs on individual account in France. Banking. 941 18TS. — Suspension of the coinage of silver in Holland. 187 S. — Formation of the Scandinavian Monetary Union. Eeplacing of the silver standard in Denmark, Sweden, and Norway by that of gold on the basis of the krone. Coinage of pieces of 10 and 20 kroner, the latter weighing 8.961 grams, with a fineness of .900. 187 Jf. — Introduction of the system of contingents for the coinage of 5-franc silver pieces in the Latin Union. Silver, 58 5/16d. 1875. — Suspension of the coinage of silver on individual account in Italy. Silver, b&'^/^d.. * 1875. — Suspension of the coinage of silver on account of the Dutch colonies. 1S75. — Introduction of the double standard in Holland on the basis of the ratio of 1 to 15.62 by the creation of a gold piece of 10 florins, weighing 5.048 grams fine, with the main- tenance of the suspension of the coinage of silver. 1876. — Great fluctuations in the price of silver, which declined to 46%d., representing the ratio of 1 to 20.172, in July. Recovery, in Deceinber, to 58%d. Average price, 5234d. 1877. — Coinage of 5-franc silver pieces by Spain continued later, notwithstanding the decline of silver in the market. Silver, 54%d. 1877. — Replacing of the double standard in Finland by that of gold on the basis of the mark or franc. 1878. — Act of United States Congress providing for the purchase, from time to time, of silver bullion, at the market price thereof, of not less than $2,000,000 worth per month as a minimum, nor more than $4,000,000 worth per month as a maximum, and its coinage as fast as purchased into silver dol- lars of 412% grains. The coinage of silver on private account prohibited. Silver, 52 9/16d. 1'878. — -Meeting of the first international monetary confer- ence in Paris. Prolongation of the Latin Union to January 1, 1886. 942 Appendix. 1879. — Suspension of the sales of silver by Germany. Sil- ver, 51i/4d. 1881. — Second international monetary conference in Paris. Silver, 51 ll/16d. 1885. — Introduction of the double standard in Egypt. Sil- ver, 48%d. 1S85. — Prolongation of the Latin Union to January 1, 1891. 1886. — Great decline in the price of silver, vsrhich fell in August to 42d., representing a ratio of 1 to 22.5, and recovery in December to 46d. Modification of the coinage of gold and silver pieces in Russia. Silver, 45%d. 1887. — Retirement of the trade dollars by the government of the United States in February. Demonetization of the Spanish piasters, known as Ferdinand Carolus, whose reim- bursement at the rate of 5 pesetas ended on March 11. New decline of silver in March to 44d., representing the ratio of 1 to 21.43. Silver, 44%d. 1890. — United States — Repeal of the act of February 28, 1878, commonly known as Bland-Allison law, and substitution of authority for purchase of 4,500,000 fine ounces of silver each month, to be paid for by issue of Treasury notes payable in coin. (Act of July 14, 1890.) Demonetization of 25,000,000 lei in pieces of 5 lei in Roumania in consequence of the intro- duction of the gold standard by the law of October 27. Sil- ver, 47 ll/16d. 1891. — Introduction of the French monetary system in Tunis on the basis of the gold standard. Coinage of national gold coins and billon. Silver, 45 l/16d. 1892. — Replacing of the silver standard in Austria-Hungary by that of gold by the law of August 2. Coinage of pieces of 20 crowns, containing 6,098 grams fine. The crown equals one- half florin. Meeting of the third international monetary con- ference at Brussels. Production of gold reaches its maximum, varying between 675,000,000 and 734,000,000 francs. Silver, 39 13/16d. 189S. — Suspension of the coinage of silver in British India and of French trade dollars on individual account. Panic in Banking. 943 tte silver market in July in London, when the price fell to 30^2^-? representing the ratio of 1 to 30.92. Kepeal of the purchasing clause of the act of July 14, 1890, by the Congress of the United States. 1895. — Adoption of the gold standard by Chile. 1895. — Russia decides to coin 100,000,000 gold rubles in 1896. 1896. — Costa Eica adopts the gold standard. 1896. — Russia decides to resume specie payments. 1897. — Adoption of the gold standard by Russia and Japan. 1897. — Peru suspends the coinage of silver and prohibits its importation. 1898. — Ecuador limited the tender of silver coins to the amount of 10 sucres. 1899. — India adopted the gold standard at the rate of 15 rupees to 1 pound sterling (British standard). 1900. — United States formally adopted the gold standard. 1900. — Ecuador adopted the gold standard. 1901. — San Domingo adopted United States gold as standard. 1902. — Siam adopted the gold standard. 190S. — Colombia adopted gold standard. 1903. — Philippines adopted the gold standard. 1904^. — Panama adopted gold standard. 1905. — Mexico adopted the gold standard. THE NATIONAL-BANK CURRENCY. AUTHORIZING ACTS. The issue of circulating notes by national banking associa- tions was first authorized by an act entitled "An act to provide a national currency secured by a pledge of United States stocks, and to pirovide for the circulation and redemption thereof," approved February 25, 1863, which act was repealed by an 944 Appendix. act entitled "An act to provide a national currency secured by a pledge of United States bonds, and to provide for the circu- lation and redemption thereof," approved June 3, 1864. The act approved June 3, 1864, with subsequent amendments thereof, was embodied in the Revised Statutes of the United States in 1873. The law as embodied in the Kevised Statutes has been amended from time to time, and is now contained in what is known as the national-bank act, with amendments thereof.- AMEUDATOET ACTS. Material amendments have been made to the national-bank act during the past few years. The first, dated March 14, 1900, authorized the formation of national banks with minimum capi- tal of $25,000; the issue of. circulation to the par value of bonds deposited, and reduced the tax on circulation secured by 2 per cent, bonds to one-fourth of 1 per cent, semi-annually. The act of June 22, 1906, authorizes national banks to loan to one interest an amount not in excess of 10 per cent, of the paid-in capital stock and surplus, the aggregate, however, not to exceed 30 per cent, of the capital, the original limitation being 10 per cent, of the capital stock. On January 26, 1907, an act was approved prohibiting national banks or other corporations organized by authority of any act of Congress from making money contributions in connection with political elections. By the act of May 30, 1908, the banking law was further amended, authorizing the organization of national currency associations and the issue to bank members of such associations of additional circulation on securities including commercial • paper held by the national banking associations. The act further authorized deposits with the Treasurer of the United States, in trust, of State, municipal, etc., bonds, as security for circulation, but provided that additional circulation can only be issued to banks having an unimpaired capital, and surplus ' equal to 20 per cent, of the capital, and whose circulation Banking. 945 secured by the United States bonds amounts to at least 40 per cent, of their capital stock. Additional circulation, however, can only be issued at such times and under such conditions as, in the judgment of the Secretary of the Treasury, an increase in national-bank circulation is warranted. Elsewhere in this publication the act appears in full, with the rulings of the Secretary of the Treasury in regard to certain sections and phrases, published September 16, 1910. SECUEITY FOE CIKCULATION. Under the provisions of existing law a national bank is required to deposit interest-bearing bonds of the United States Treasurer as security for its circulating notes in the following minimum amounts : 1. Banks with a capital not exceeding $150,000 must deposit bonds, par value, to an amount not less than one-fourth of their capital stock. 2. Banks with a capital exceeding $150,000 must deposit bonds to the amount of at least $50,000, par value. Circulating notes are issued against United States bonds deposited as security therefor to the par value of the bonds or of the market value, if the bonds are below par, the maxi- mum amount issuable on bonds being measured by the paid-in capital stock except as provided by the act of May 30, 1908. 60 946 Appekdix, STATISTICS OF COINAGE AND PRODUCTION OF THE PRECIOUS METALS. Acts Authobizing and Discontinuing Coinage, Changes in Weight and Fineness, and Amount Coined, fob Each Coin. DeDominatioD. ChangeB in weight and fineneBB. Act authorizing and dia- continuing coinage. Weight (grains). Finene b Fiecee. Total amount coined to June 30. 1910. GOLD COINS. Double eagle (S20). . . Eagle (JIO).. Half eagle (S5).. I Quarter eagle ($2.50').... -j [ Three-dollar piece One dollar.. One dollar, Louisiana Pur- chase Exposition. Dollar, Lewie and Clarl.Ex- position. Total gold. . SILVER COINS. Dollar Trade dollar 6 Lafayette dollar Mar. 3, 1849 Apr. 2, 1792 June 28, 1834 Jan. 18, 1837 Apr. 2. 1792 June 28, 1834 Jan. 18. 1837 .Apr. 2. 1792 June 28, 1834 Jan. 18, 1837 Feb. 21, 1853. Act die- continuing coinage, Sept. 26, 1890. Mar. 3, 1849. Act dis- continuing coinage, Sept. 26, 1«90. June 28, 1902 516 270 258 .900 .916? 112,807,169 48,177,301 135 129 Apr. 13, 1904. Apr. 2, 1792 Jan. 18. 1837. Act dis- continuing coinage Feb. 12, 1873. Feb. 28, 1878 July 14, 1890 Feb. 12, 1873. Act die- continuing coinage Feb. 19, 1887. Mar. 3, 1899 67.5 64.5 .900 .899225 .900 [ 70, 986,684 77.4 25.8 25.8 416 412i 420 412} .900 .900 .900 .900 ,900 .900 .900 .900 ). 13,971,659 539,792 19,499,337 250,000 60,000 $266,291,942 ■ 578,303,848 35,965,924 $2,256,143,380.00 481,773,010.00 354,933,420.00 34,929,147.60 1,619,376.00 19,499,337.00 250,000.00 60,000.00 $3,149,207,670.50 0578,303,848.00 35,965,924.00 50,000 .50,000.00 a Amount coined to February 12, 1873, $8,031,238t Silver-dollar coinage under acts of — April2,1792 February 28, 1878 July 14, 1890 March a, 1891 , .$378,166,793 . 187,027.346 5,078,472 $8,031,238 570,272,610 Total $578,303,848 b Coinaee 1 imited to export demand, joint rpsolutios Julv 22, 1876. Babtking. 947 ■ Acts Authoeizing and DiscowTiNuiiifG Coinage, Changes in Weight and Fineness and Amount Coined foe Each Coin — Continued. Changes in weight and fineness. Pieces. Total amount continuing coinage. -■.-ip;t :•!-■. ■?"'■«— '-tr;."' ■ '■ ■'■'' Weight (grains). Fineness 30, 1910. siivzR coiHS— cont'd. Halfdollar Anr 2 1792 208 206} 192 ul92.9 192.9 104 103} 96 C96.45 96.45 llars or any multiple thereof, bearing interest at the rate of two per centum per annum, payable quarterly, such bonds to be payable at the pleasure of the United States after thirty years from the date of their issue, and said bonds to be payable, principal, and interest, in gold coin of the present standard value, and to 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 authority: Provided, That such out- standing bonds may be received in exchange at a valuation not greater than their present worth to yield an income of two and one-quarter per centum per annum; and in consideration of the reduction of interest effected, the Secretary of the Treasury is authorized to pay to the holders of the out- standing bonds surrendered for exchange, out of any money in the Treasury not otherwise appropriated, a sum not greater than the difference between their present worth, computed as aforesaid, and their par value, and the payments to be made hereunder shall be held to be payments on account of the sinking fiind created by section thirty-six hundred and ninety-four of the Revised Statutes: And provided further, That the two per centum bonds to be issued under the provisions of this act shall be issued at not less than par, and they shall be numbered consecutively in the order of their issue, and when payment is made the last numbers issued shall be first paid, and this order shall be followed until all the bonds are paid, and whenever any of the outstanding bonds are called for payment, interest thereon shall cease three months after such call ; and there is hereby appro- priated out of any money in the Treasury not otherwise appropriated, to 954 Appendix. effect the exchanges of bonds provided for in this act, a sum not exceeding one-fifteenth of one per centum of the face value of said bonds, to pay the expense of preparing and issuing the same and other expenses incident thereto. Sec. 12. That upon the deposit with the Treasurer of the United States, by any national banking association, of any bonds of the United States in the manner provided by existing law, such association shall be entitled to receive from the Comptroller of the Currency circulating notes in blank, registered and countersigned as provided by law, equal in amount to the par value of the bonds so deposited; and any national banking association now having bonds on deposit for the security of circulating notes, and upon which an amount of circulating notes has been issued less than the par value of the bonds, shall be entitled, upon due application to the Comp- troller of the Currency, to receive additional circulating notes in blank to an amount which will increase the circulating notes held by such associa- tion to the par value of the bonds deposited, such additional notes to be held and treated in the same way as circulating notes of national banking associations heretofore issued, and subject to all the provisions of law affecting such notes: Provided, That nothing herein contained shall be construed to modify or repeal the provisions of section fifty-one hundred and sixty-seven of the Revised Statutes of the United States, authorizing the Comptroller of the Currency to require additional deposits of bonds or of lawful money in case the market value of the bonds held to secure the circulating notes shall fall below the par value of the circulating notes outstandiing for which such bonds may be deposited as security: And provided further. That the circulating notes furnished to national banking associations under the provisions of this act shall be of the denominations prescribed by law, except that no national banking association shall, after the passage of this act, be entitled to receive from the Comptroller of the Currency, or to issue or reissue or place in circulation, more than one- third in amount of its circulating notes of the denomination of five dollars : And provided further. That the total amount of such notes issued to any such association may equal at any time but shall not exceed the amount at such time of its capital stock actually paid in: And provided further. That under regulations to be prescribed by the Secretary of the Treasury any national banking association may substitute the two per centum bonds issued under the provisions of this act for any of the bonds deposited with the Treasurer to secure circulation or to secure deposits pt public money; and so much of an act entitled "An act to enable national banking associa- tions to extend their corporate existence, and for other purposes," approved July twelfth, eighteen hundred and eighty-two, as prohibits any national bank which makes any deposit of lawful money in order to withdraw its circulating notes from receiving 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, is hereby repealed, and all other acts or parts of acts inconsistent with the provisions of this section are hereby repealed. Sec. 13. That every national banking association having on deposit, as provided by law, bonds of the United States bearing interest at the rate of two per centum per annum, issued under the provisions of this act, to secure its circulating notes, shall pay to the Treasurer of the United States, in the months of January and July, a tax of one-fourth of one per centum each half year upon the average amount of such of its notes in circulation as are based upon the deposit of said two per centum bonds ; and such taxes shall be in lieu of existing taxes on its notes in circulation imposed by section fifty-two hundred and fourteen of the Revised Statutes. Banking. 955 Sec. 14. That the provisions of this act are not intended to preclude the accomplishment of international bimetallism whenever conditions shall make it expedient and practicable to secure the same by concurrent action of the leading commercial nations of the world and at a ratio which shall insure permanence of relative value between gold and silver. Approved, March 14, 1900. ACT OF MARCH 4, 1907. AN ACT To amend the national banking act, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section six of an act to define and fix the standard of value, to maintain the parity of all forms of money Issued or coined by the United States, to refund the public debt, and for other purposes, approved March fourteenth, nineteen hundred, be, and the same is hereby, amended to read as follows: " Sec. 6. That the Secretary of the Treasury is hereby authorized and directed to receive deposits of gold coin with the Treasurer, or any assistant treasurer of the United States in sums of not leas than twenty dollars, and to issue gold certificates therefor in denominations of not less than ten dollars, and the coin so deposited shall be retained in the Treasury and held for the J)ayment of such certificates on demand, and used for no other purpose. Such certificates shall be receivable for customs, taxes, and all public dues, and when so received may be reissued, and when held by any national banking association may be counted as a part of its lawful reserve: Provided, That whenever and so long as the gold coin and bullion held in the reserve fund in the Treasury for 'the redemption of United States notes and Treasury notes shall fall and remain below one hundred million dollars the authority to issue certificates as herein provided shall be suspended: And provided further, That whenever and so long as the aggregate amount of United States notes and silver certifi- cates in the general fund of the Treasury shall exceed sixty million dollars the Secretary of the Treasury may, in his discretion, suspend the issue of the certifioates herein provided for: And provided further, That of the amount of such outstanding certificates one-fourth at least shall be in denominations of fifty dollars or less: And provided further, That the Secretary of the Treasury may, in his discretion, issue such certificates in denominations of ten thousand dollars, payable to order. And section fifty-one hundred and ninety-three of the Revised Statutes of the United States is hereby repealed." Sec. 2. That whenever and so long as the outstanding silver certificates of the denominations of one dollar, two dollars, and five dollars, issued under the provisions of section seven of an act entitled "An act to define and fix the standard of value, to maintain the parity of all forms of money issued or coined by the United' States, to refund the public debt, and for other purposes," approved March fourteenth, nineteen hundred, shall be, in the opinion of the Secretary of the Treasury, insuificient to meet the public demand therefor, he is hereby authorized to issue United States notes of the denominations of one dollar, two dollars, and five dollars, and upon the issue of United States notes of such denominations an equal amount of United States notes of higher denominations shall be retired and canceled: Provided, however. That the aggregate amount of United States notes at any time outstanding shall remain as at present fixed by law: And provided further. That nothing in this act shall be construed as affecting the right of any national bank to issue one-third in amount of 956 Appendix. its circulating notes of the denomination of five dollars, as now provided by law. Sec. 3. That section fifty-one hundred and fifty-three of the Revised Statutes be amended to read as follows: " Sec. 5153. All national banking associations, designated for that pur- pose by the Secretary of the Treasury, shall be depositaries of public money, under such regulations as may be prescribed by the Secretary; and they may also be employed as financial agents of the Government; and they shall perform all such reasonable duties, as depositaries of public money and financial agents of the Government, as may be required of them. The Secretary of the Treasury shall require the associations thus desig- nated to give satisfactory security, by the deposit of United States bonds and otherwise, for the safe-keeping and prompt payment of the public money deposited with them, and for the faithful performance of their duties as financial agenis of the Government: Provided, That the Secre- tary shall, on or before the first of January of each year, make a public statement of the securities required during that year for such deposits. And every association so designated as receiver or depositary of the public money shall take and receive at par all of the national currency bills, by whatever association issued, which have been paid into the Government for internal reveonue, or for loans or stocks: Provided, That the Secretary of the Treasury shall distribute the deposits herein provided for, as far as practicable, equitably between the different States and sections." Sec. 4. That section nine of the act of July twelfth, eighteen hundred and eighty-two, as amended by the act of March fourteenth, nineteen hun- dred, be further amended to read as follows: " Sec. 9. That any national banking association now organized, or here- after organized, desiring 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, eighteen hundred and seventy- four, or as provided in this act, is authorized to deposit lawful money and, with the consent of the Comptroller of the Currency and the approval of the Secretary of the Treasury, withdraw a proportionate amount of the bonds held as security for its circulating notes in the order of such deposits: Provided, That not more than nine millions of dollars of lawful money shall be deposited during any calendar month for this purpose: And provided further. That the provisions of this section shall not apply to bonds called for redemption by the Secretary of the Treasury, nor to withdrawal of circulating notes in consequence thereof." Approved, March 4, 1907. ACT OF MAY 30, 1908. AN ACT To amend the national banking laws. Be it enacted iy the Senate and House of Representatives of the United States of America in Congress assembled. That national banking associa- tions, each having an unimpaired capital and a surplus of not less than twenty per centum, not less than ten in number, having an aggregate capital and surplus of at least five millions of dollars, may form voluntary associations to be designated as national currency associations. The banks uniting to form such association shall, by their presidents or vice-presidents, acting under authority from the board of directors, make and file with the Secretary of the Treasury a certificate setting forth the names of the banks composing the association, the principal place of business. of the associa- Banking. 95Y tion, and the name of the association, which name shall be subject to the approval of the Secretary of the Treasury. Upon the filing of such certifi- cate the associated banks therein named shall become a body corporate, and by the name so designated and approved may sue and be sued and exercise the powers of a body corporate for the purposes hereinafter men- tioned: Provided, That not more than one such national currency associa- tion shall be formed in any city: Provided further. That the several mem- bers of such national currency association shall be taken, as nearly as conveniently may be, from a territory composed of a State or part of a State, or contiguous parts of one or more States: And provided further. That any national bank in such city or territory, having the qualifications herein prescribed for membership in such national currency association, shall, upon its application to and upon the approval of the Secretary of the Treasury, be admitted to membership in a national currency association for that city or territory, and upon such admission shall be deemed and held a part of the body corporate, and as such entitled to all the rights and privileges and subject to all the liabilities of an original member: And provided further, That each national currency association shall be composed exclusively of banks iiot members of any other national currency association. The dissolution, voluntary or otherwise, of any bank in such association shall not affect the corporate existence of the association unless there shall then remain less than the minimum number of ten banks: Provided, however. That the reduction of the number of said banks below the mini- mum of ten shall not affect the existence of the corporation with respect to the assertion of all rights in favor of or against such association. The affairs of the association shall be managed by a board consisting of one representative from each bank. By-laws for the government of the associa- tion shall be madfe by the board, subject to the approval of the Secretary of the Treasury. A president, vice-president, secretary, treasurer, and an executive committee of not less than five members, shall be elected by the board. The powers of such board, except in the election of officers and making of by-laws, may be exercised through its executive committee. The national currency association herein provided for shall have and exercise any and all powers necessary to carry out the purposes of this section, namely, to render available, under the direction and control of the Secretary of the Treasury, as a basis for additional circulation any securi- ties, Including commercial paper, held by a national banking association. For the purpose of obtaining such additional circulation any bank belong- ing to any national currency association, having circulating notes outstand- ing secured by the deposit of bonds of the United States to an amount not less than forty per centum of its capital stock, and which has its capital unimpaired and a surplus of not less than twenty per centum, may deposit with and transfer to the association, in trust for the United States, for the purpose hereinafter provided, suQh of the securities above mentioned as may be satisfactory to the board of the association. The officers of the association may thereupon, in behalf of such bank, make application to the Comptroller of the Currency for an issue of additional circulating notes to an amovmt not exceeding seventy-five per centum of the cash value of the securities or commercial paper so deposited. The Comptroller of the Currency shall immediately transmit such application to the Secretary of the Treasury with such recommendation as he thinks proper, and if, in the judgment of the Secretary of the Treasury, business conditions in the locality demand additional circulation, and if he be satisfied with the character and value of the securities proposed and that a lien in favor of 958 Appendix. the United States on the securities so deposited and on the assets of the banks composing the association will be amply sufficient for the protection of the United States, he may direct an issue of additional circulating notes to the association, on behalf of such bank, to an amount in his dis- cretion, not, however, exceeding seventy-five per centum of the cash value of the securities so deposited: Provided, That upon the deposit of any of the state, city, town, county, or other municipal bonds, of a character described in section three of this act, circulating notes may be issued to the extent of not exceeding ninety per centum of the market value of such bonds so deposited: And provided, further. That no national banking asso- ciation shall be authorized in any event to issue circulating notes based on commercial paper in excess of thirty per centum of its unimpaired capital and surplus. The term " commercial paper " shall be held to include only notes representing actual commercial transactions, which when accepted by the association shall bear the names of at least two responsible parties and have not exceeding four months to run. The banks and the assets of all banks belonging to the association shall be jointly and severally liable to the United States for the redemption of such additional circulation; and to secure such liability the lien created by section fifty-two hundred and thirty of the Revised Statutes shall extend to and cover the assets of all banks belonging to the association, and to the securities deposited by the banks with the association pursuant to the pro- visions of this act; but as between the several banks composing such asso- ciation each bank shall be liable only in the proportion that its capital and surplus bears to the aggregate capital and surplus of all such banks. The association may, at any time, require of any of its constituent banks a deposit of additional securities or commercial paper, or an exchange of the securities already on deposit, to secure such additional circulation; and in case of the failure of such bank to make such deposit or exchange the association may, after ten days' notice to the bank, sell the securities and paper Already in its hands at public sale, and deposit the proceeds with the Treasurer of the United States as a fund for the redemption of such additional circulation. If such fund be insufficient for that purpose the association may recover from the bank the amount of the deficiency by suit in the circuit court of the United States, and shall have the benefit of the lien hereinbefore provided for in favor of the United States upon the assets of such bank. The association or the Secretary of the Treasury may permit or require the withdrawal of any such securities or commercial paper and the substitution of other securities or commercial paper of equal value therefor. Sec. 2. That whenever any bank belonging to a national currency asso- ciation shall fail to preserve or make good its redemption fund in the Treasury of the United States, required by section three of the act of June twentieth, eighteen hundred and seventy-four, chapter three hundred and forty-three, and the provisions of this act, the Treasurer of the United States shall notify such national currency association to make good such redemption fund, and upon the failure of such national currency associa- tion to make good such fund, the Treasurer of the United States may, in his discretion, apply so much of the redemption fund belonging to the other banks composing such national currency association as may be necessary for that purpose; and such national currency association may, after five days' notice to such bank, proceed to sell at public sale the securities de- posited by such bank with the association pursuant to the provisions of section one of this act, and deposit the proceeds with the Treasurer of the Bankino. 959 United States as a fund for the redemption of the additional circulation taken out by such bank under this act. Sec. 3. That any national banking association which has circulating notes outstanding, secured by the deposit of United States bonds to an amount of not less than forty per centum of its capital stock, and which has a surplus of not less than twenty per centum, may make application to the Comptroller of the Currency for authority to issue additional circulating notes to be secured by the deposit of bonds other than bonds of the United States. The Comptroller of the Currency shall transmit immediately the application, with his recommendation, to the Secretary of the Treasury, who shall, if in his judgment business conditions in the locality demand additional circulation, approve the same, and shall deter- mine the time of issue and fix the amount, within the limitations herein imposed, of the additional circulating notes to be issued. Whenever after receiving notice of such approval any such association shall deposit with the Treasurer or any assistant treasurer of the United States such of the bonds described in this section as shall be approved in character and amount by the Treasurer of the United States and the Secretary of the Trgasury, it shall be entitledl to receive, upon the order of the Comptroller of the Currency, circulating notes in blank, registered and countersigned as pro- vided by law, not exceeding in amount ninety per centum of the market value, but not in excess of the par value of any bonds so deposited, such market value to be ascertained and determined under the direction of the Secretary of the Treasury. The Treasurer of the United States, with the approval of the Secretary of the Treasury, shall accept as security for the additional circulating notes provided for in this section, bonds or other interest-bearina; obligations of any State of the United States, or any legally authorized bonds issued by any city, town, county, or other legally constituted municipality or dis- trict in the United States which has been in existence for a period of ten years, and which for a period of ten years previous to such deposit has not defaulted in the payment of any part of either principal or interest of any fundted debt authorized to be contracted by it, and whose net funded indebtedness does not exceed ten per centum of the valuation of its taxable property, to be ascertained by the last preceding valuation of property for the assessment of taxes. The Treasurer of the United States, with the approval of the Secretary of the Treasury, shall accept, for the purposes of this section, securities herein enumerated in such proportions as he may from time to time determine, and he may with such approval at any time require the deposit of additional securities, or require any association to change the character of the securities already on deposit. Sec. 4. That the legal title of all bonds, whether coupon or registered, deposited to secure circulating notes issued in accordance with the terms of section three of this act shall be transferred to the Treasurer of the United States in trust for the association depositing them, under regula- tions to be prescribed by the Secretary of the Treasury. A receipt shall be given to the association by the Treasurer or any assistant treasurer of the United States, stating that such bond is held in trust for the associa- tion on whose behalf the transfer is made, and as security for the redemp- tion and payment of any circulating notes that have been or may be delivered to such association. No assignment or transfer of any such bond by the Treasurer shall be deemed valid unless countersigned by the Comptroller of the Currency. The provisions of sections fifty-one hundred and sixty-three, fifty-one hundred and sixty-four, iifty-orie hundred and sixty-five, fifty-one hundred and sixty-six, and fifty-one hundred and sixty- 960 Appendix. seven and sections fifty-two hundred and twenty-four to fifty-two hundred and thirty-four, inclusive, of the Kevised Statutes respecting United States bonds deposited to secure circulating notes shall, except as herein modified, be applicable to all bonds deposited under the terms of section three of this act. Sec. 5. That the additional circulating notes issued under this act shall be used, held, and treated in the same way as circulating notes of national banking associations heretofore issued and secured by a deposit of United States bonds, and shall be subject to all the provisions of law affecting such notes except as herein expressly modified: Provided, That the total amount of circulating notes outstanding of any national banking association, includ- ing notes secured by .United States bonds as now provided by law, and notes secured otherwise than by deposit of such bonds, shall not at any time exceed the amount of its unimpaired capital and surplus: And provided further. That there shall not be outstanding at any time circulating notes issued under the provisions of this act to an amount of more than five hundred millions of dollars. Sec, 6. That whenever and so long as any national banking association has outstanding any of the additional circulating notes authorized to be issued by the provisions of this act it shall keep on deposit in the Treasury of the United States, in addition to the redemption fund required by sec- tion three of the act of June twentieth, eighteen hundred and seventy-four, an additional sum equal to five per centum of such additional circulation at any time outstanding, such additional five per centum to be treated, held, and used in all respects in the same manner as the original redemption fund provided for by said section three of the act of June twentieth, eighteen hundred and seventy-four. Sec. 7. In order that the distribution of notes to be issued under the provisions of this act shall be made as equitable as practicable between the various sections of the country, the Secretary of the Treasury shall not approve applications from associations in any State in excess of the amount to which such State would be entitled of the additional notes herein authorized on the basis of the proportion which the unimpaired capital and surplus of the national banking associations in such State bears to the total amount of unimpaired capital and surplus of the national banking associations of the United State^: Provided, however, That in case the applications from associations in any State shall not be equal to the amount which the associations of such State would be entitled to under this method of distribution, the Secretary of the Treasury may, in his discretion, to meet an emergency, assign the amount not thus applied for to any applying association or associations in States in the same section of the country. Sec. 8. That it shall be the duty of the Secretary of the Treasury to obtain information with reference to the value and character of the securi- ties authorized to be accepted under the provisions of this act, and he shall from time to time furnish information to national banking associations as to such securities as would be acceptable under the provisions of this act. Sec. 9. That section fifty-two hundred and fourteen of the Revised Stat- utes, as amended, be further amended to read as follows: " Sec. 5214. National banking associations having on deposit bonds of the United States, bearing interest at the rate of two per centum per annum, including the bonds issued for the construction of the Panama Canal, under the provisions of section eight of 'An act to provide for the construction of a canal connecting the waters of the Atlantic and Pacific oceans,' approved June twenty-eighth, nineteen hundred and two, to secure its circulating notes, shall pay to the Treasurer of the United States, in Banking. 961 the months of January and July, a, tax of one-fourth of one per centum each half year upon the average amount of auch of its notes in circulation as are based upon the deposit of such bonds; and such associations having on deposit bonds of the United States bearing interest at a rate higher than two per centum per annum shall pay a tax of one-half of one per centum each half year upon the average amount of such of its notes in circulation as are based upon the deposit of such bonds. National banking associations having circulating notes secured otherwise than by bonds of the United States shall pay for the first month a tax at the rate of five per centum per anuum upon the average amount of such of their notes in circulation as are based upon the deposit of such securities, and afterwards an additional tax of one per centum per annum for each month until a tax of ten per centum per annum is reached, and thereafter such tax of ten per centum per annum, upon the average amount of such notes. Every national banking association having outstanding circulating notes secured by a deposit of other securities than United States bonds shall make monthly returns, under oath of its president or cashier, to the Treasurer of the United States, in such form as the Treasurer may prescribe, of the average monthly amount of its notes so secured in circulation; and it shall be the duty of the Comptroller of the Currency to cause such reports of notes in circulation to be verified by examination of the banks' records. The taxes received on circulating notes secured otherwise than by bonds of the United States shall be paid into the Division of Redemption of the Treasury and credited and added to the reserve fund held for the redemption of United States and other notes." Sec. 10. That section nine of the act approved July twelfth, eighteen hundred and eighty-two, as amended by the act approved March fourth, nineteen hundred and seven, be further amended to read as follows: " Sec. 9. That any national banking association desiring to withdraw its circulating notes, secured by deposit of United States bonds in the manner provided in section four of the act approved June twentieth, eighteen hun- dred and seventy-four, is hereby authorized for that purpose to deposit lawful money with the Treasurer of the United States and, with the con- sent of the Comptroller of the Currency and the approval of the Secretary of the Treasury, to withdraw a proportionate amount of bonds held as security for its circulating notes in the order of such deposits: Provided, That not more than nine millions of dollars of lawful money shall be so deposited during any calendar month for this purpose. "Any national banking association desiring to withdraw any of its circulating notes, secured by the deposit of securities other than bonds of the United States, may make such withdrawal at any time in like manner and eflfect by the deposit of lawful money or national bank notes with the Treasurer of the United States, and upon such deposit a proportionate share of the securities so deposited may be withdrawn: Provided, That the deposits under this section to retire notes secured by ■ the deposit of securities other than bonds of the United States shall not be covered into the Treasury, as required by section six of an act entitled 'An act directing the purchase of silver bullion and the issue of Treasury notes thereon, and for other purposes,' approved July fourteenth, eighteen hundred and ninety, but shall be retained in the Treasury for the purpose of redeeming the notes of the bank making such deposit." Sec. 11. That section fifty-one hundred and seventy-two of the Eevised Statutes be, and the same is hereby, amended to read as follows: 61 962 Appendix. " Sec. 5172. In order to furnish suitable notes for circulation, the Comp- troller of the Currency shall, under the- direction of the Secretary 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 five dollars, ten dollars, twenty dollars, fifty dollars, one hundred dollars, five hundred dollars, one thousand dollars, and ten thousand dollars, as may be required to supply the associations entitled to receive the same. Such notes shall state upon their face that they are secured by United States bonds or other securities, certified by the written or engraved signatures of the Treasurer and Register and by the imprint of the seal of the Treasury. They shall also express upon their face the promise of the association receiving the same to pay on demand, attested by the signature of the president or vice-president and cashier. The Comp- troller of the Currency, acting under the direction of the Secretary of the Treasury, shall as soon as practicable cause to be prepared cireu:lating notes in blank, registered and countersigned, as provided by law, to an amount equal to fifty per centum of the capital stock of each national banking association; such notes to be deposited in the Treasury or in the subtreasury of the United States nearest the place of business of each association, and to be held for such association, subject to the order of the Comptroller of the Currency, for their delivery as provided by law: Provided, That the Comptroller of the Currency may issue national bank notes of the present form until plates can be prepared and circulating notes issued as above provided: Provided, however, That in no event shall bank notes of the present form be issued to any bank as additional circula- tion provided for by this act." Sec. 12. That circulating notes of national banking associations, when presented to the Treasury for redemption, as provided in section three of the act approved June twentieth, eighteen hundred and seventy-four, shall be redeemed in lawful money of the United States. Sec. 13. That all acts and orders of the Comptroller of the Currency and the Treasurer of the United States authorized by this act shall have the approval of the Secretary of the Treasury, who shall have power, also, to make any such rules and regulations and exercise such control over th? organization and management of national currency associations as may be necessary to carry out the purposes of this act. Sec. 14. That the provisions of section fifty-one hundred and ninety-one of the Revised Statutes, with reference to the reserves of national banking associations, shall not apply to deposits of public moneys by the United States in designated depositaries. Sec. 15. That all national banking associations designated as regular depositaries of public money shall pay upon all special and additional deposits made by the Secretary of the Treasury in such depositaries, and all such associations designated as temporary depositaries of public money shall pay upon all sums of public money deposited in such associations interest at such rate as the Secretary of the Treasury may prescribe, not leas, however, than one per centum per annum upon the average monthly amount of such deposits: Provided, however, That nothing contained in this act shall be construed to change or modify the obligation of any association or any of its officers for the safe-keeping of public money: Provided, further. That the rate of interest charged upon such deposits shall be equal and uniform throughout the United States. Sec. 16. That a sum sufficient to carry out the purposes of the preceding BANKiiirG. 963 sections of this act is hereby appropriated out of any money in the Treasury not otherwise appropriated. Sec. 17. That a commission is hereby created, to be called the " National Monetary Commission," to be composed of nine members of the Senate, to be appointed by the Presiding Officer thereof, and nine members of the House of Representatives, to he appointed by the Speaker thereof; and any vacancy on the commission shall be filled in the same manner as the original appointment. Sec. 18. That it shall be the duty of this commission to inquire into and report to Congress at the earliest date practicable what changes are neces- sary or desirable in the monetary system of the United States or in the laws relating to banking and currency, and for this purpose they are authorized to sit during the sessions or recess of Congress, at such times and places as they may deem desirable, to send for persons and papers, to administer oaths, to summons and compel the attendance of witnesses, and to employ a disbursing officer and such secretaries, experts, stenog- raphers, messengers, and other assistants as shall be necessary to carry out the purposes for which said commission was created. The commission shall have the power, through subcommittee or otherwise, to examine witnesses and to make such investigations and examinations, in this or other countries, of the subjects committed to their charge as they shall deem necessary. Sec. 19. That a sum sufficient to carry out the purposes of sections seventeen and eighteen of this act, and to pay the necessary expenses of the commission and its members, is hereby appropriated out of any money in the Treasury not otherwise appropriated. Said appropriation shall be immediately available and shall be paid out on the audit and order of the chairman or acting chairman of said commission, which audit and order shall be conclusive and binding upon all departments as to the correctness of the accounts of such commission. Sec. 20. That this act shall expire by limitation on the thirtieth day of June, nineteen hundred and fourteen. Approved, May 30, 1908. RULINGS OF THE TREASURY DEPARTMENT IN REGARD TO CERTAIN SECTIONS AND PHRASES CONCERNING THE ISSUE OF ADDITIONAL CIRCULATION IN THE ACT APPROVED MAY 30, 1908. [1910. Department Circular No. 53. Division of Loans and Currency.] Tbeasuet Dbpaetment, Office of the Seceetaey, Washington, Septemher 16, 1910. I. WITHDEAWAL OP A BANK FEOM A CTJEEBNOY ASSOCIATIOlSr. Any member of an association may withdraw therefrom providing — 1. That at the time of such withdrawal there shall be no unredeemed additional circulating notes issued to the association; 2. That the unanimous consent of the executive committee of the board of managers of the association shall be obtained, and 3. That the Secretary of the Treasury of the United States shall approve. II. EEDEMPTION fund foe ADDITIONAL CIECULATION. Section 3 of the act of June 20, 1874, provides that a. national bank must keep on deposit in the Treasury of the United States a sum equal to 5 per centum of such circulation as is provided for in that act. Section 6 964 Appendix. of the act of May 30, 1908, provides that the banks shall keep on deposit in the Treasury of the United States an additional sum equal to 5 per centum of such additional circulation at any time outstanding. The department is of the opinion that the redemption fund to be deposited in the Treas- ury on account of additional circula4;ion authorized by the act is not required to exceed 5 per centum of such additional circulation, and that Congress intended only to extend to the additional currency the original provisions for » 5 per cent redemption fund hitherto provided for the ordinary bond-secured circulation. III. EXTENT OF TEEBITOBY TO BE COMPEEHENDBD BY A CUEBENCY ASSOCIATION. In regard to the extent of territory to be comprehended by a currency association, attention is called to the following provisions of the act of May 30, 1908: 1. That there shall not be more than one such association formed in any city. 2. That the member banks " shall be taken, as nearly as conveniently may be, from a territory composed of a State or part of a State, or con- tiguous parts of one or more States." 3. " That any national bank in such city or territory, » » * shall, upon its application to and upon the approval of the Secretary of the Treasury, be admitted to membership in a national currency association for that city or territory," ♦ ♦ * These provisions are construed to mean ( 1 ) that the territory to be included in the currency association of a particular city must be at least coextensive with the limits of the city, and, (2) that if the territory to be covered by an association has been fixed in the approved by-laws, all banks within that territory must, if properly qualified, be admitted to membership. In other words, if the by-laws stated that the membership in an association shall be composed of banks doing a business within a State, no national bank within the State would be excluded from member- ship, provided that it was otherwise qualified. On the other hand, if the by-laws limited membership to banks doing a business within a county, then only the national banks in that county would expect to attain membership. IV. SECURITY FOE ADDITIONAL CIBCXILATION. Section 1 provides that the national currency associations may use as a basis for additional circulation " any securities, including commercial paper, held by a national banking association." The term " commercial paper " is thereafter defined to include, " only notes representing actual commercial transactions, which, when accepted by the association, shall bear the names of at least two responsible parties and have not exceeding four months to run." These requirements will be satisfactorily met by single-name paper arising from actual commercial transactions if indorsed by the bank desiring additional currency. Section 3 permits the issue of additional notes on the security of bonds of a municipality or district in the United States "whose net funded indebtedness does not exceed 10 per centum of the valuation of its taxable property, to be ascertained by the last preceding valuation of property for the assessment of taxes." (1) The phrase "net funded indebtedness" is held to mean the entire bonded debt of a municipality, less any bonds not yet sold, or any bonds repurchased and not canceled, as for sinking-fund account. (2) The phrase "valuation of its taxable property" is construed to mean the valuation of taxable property as estimated by the assessor. Where the law prescribes that the assessors shall estimate ithe value of all property subject to taxation at its actual value, and that the taxes shall be Banking. 965 assessed at a fraction of such value, the valuation of taxable property is understood to mean the actual valuation as estimated by the assessors. Where, however, the law makes no distinctions between actual and taxable value of property, the " valuation of taxable property " is construed to mean the taxable value upon which the actual taxes are levied. A. Piatt Andrew, Acting Secretary. ACT OF JUNE 25, 1910. AN ACT To establish postal savings depositories for depositing savings at interest with the security of the Government for repayment thereof, and for other purposes. *****♦» Sec. 10. That any depositor in a postal savings depository may sur- render his deposit or any part thereof, in sums of twenty dollars, forty dollars, sixty dollars, eighty dollars, one hundred dollars, and multiples of one hundred dollars and five hundred dollars, and receive in lieu of such currendered deposits, under such regulations as may be established by the board of trustees, the amount of the surrendered deposits in United States coupon or registered bonds of the denominations of twenty dollars, forty dollars, sixty dollars, eighty dollars, one hundred dollars, and five hundred dollars, which bonds shall bear interest at the rate of two anu one- half per centum per annum, payable semiannually, and be redeemable at the pleasure of the United States after one year from the date of their issue and payable twenty years from such date, and both principal and interest shall be payable in United States gold coin of the present standard of value: Provided, That the bonds herein authorized shall be issued only (first) when there are outstanding bonds of the United States subject to call, in which case the proceeds of the bonds shall be applied to the redemp- tion at par of outstanding bonds of the United States subject to call, and (second) at times when under authority of law other than that contained in this act the Government desires to issue bonds for the purpose of replenishing the Treasury, in which case the issue of bonds under authority of this act shall be in lieu of the issue of a like amount of bonds issuable under authority of law other than that contained in this act: Provided further. That the bonds authorized by this act shall be issued by the Secretary of the Treasury under such regulations as he may prescribe: And provided further, That the authority contained in section nine of this act for the investment of postal savings funds in United States bonds shall include the authority to invest in the bonds herein authorized whenever such bonds may be lawfully issued: And provided further, That the bonds herein authorized shall be exempt from all taxes or duties of the United States as well as from taxation in any form by or under state, municipal, or local authority: And provided further. That no bonds authorized by this act shall be receivable by the Treasurer of the United States as security for the issue of circulating notes by national banking associations. Sec. 11. That whenever the trustees of the postal savings fund have in their possession funds available for investment in United States bonds they may notify the Secretary of the Treasury of the amount of such funds in their hands which they desire to invest in bonds of the United States subject to call, whereupon, if there are United States bonds subject to call, the Secretary of the Treasury shall call for redemption an amount of such bonds equal to the amount of the funds in the hands of the trustees which 966 Appendix. the trustees desire to thus invest, and the bonds so called shall be redeemed at par with accrued interest at the Treasury of the United States on and after three months from the date of such call, and interest on the said bonds shall thereupon cease : Provided, That the said bonds when redeemed shall be reissued at par to the trustees without change in their terms as to rate of interest and date of maturity: And provided further, That the bonds so reissued may, in the discretion of the Secretary of the Treasury, be called for redemption from the trustees in like manner as they were originally called for redemption from their former owners whenever there are funds in the Treasury of the United States available for such redemp- tion. Approved, Jime 25, 1910. INDEX. [References are to pages.] A. ACCEPTANCES. ( See Checks, Bills of Exchange. ) ACCOMMODATION ENDORSEMENT. (See Endoksement. ) ACKNOWLEDGMENT: page. Organization certificate . . 875 (See Oath.) ACTING COMPTROLLER OF THE CURRENCY: During vacancy, absence or inability of Comptroller 690 ACTIONS: Against directors 121 By and against clearing house 658 By bank in its own name in making collections 504 For violation of national or State law must be brought by Comp- troller of Currency or Attorney-General of State 14 (See Suits.) ACTS: March 14, 1900, text of 950-955 March 4, 1907, text of 955-956 May 30, 1908, text of 956-963 June 25, 1910, text of (sees. 10 and, 11) 965 Special, authorizing change of name or location of national bank . . 828 What may work forfeiture of bank charter 596 What constitutes liability 596 ADDITIONAL CIRCULATION: Act authorizing 956-963 Application for 957 To be appi'oved by the Comptroller and Secretary 737, 739 Character of security required for issue of 957, 958, 964 Commercial paper, meaning of 964 Comptroller to order the preparation of 727 Conditions under which issuable 739 Disposition of deposits to retire 723 Disposition of taxes paid on 765 Distribution of, how determined 742, 960 [967] 968 Index. ADDITIONAL CIRCULATION — Ccwiiraued; page. How obtained 957, 958 Interest, rate of 962 Liability for redemption of, by members of national currency asso- ciation 736 Limit of, including United States bond-secured, issuable by any bank 741 Limit of, issued by all national banks 741 Monthly returns of, for taxation 765, 961 Net funded indebtedness, meaning of 964 Per cent of, issuable on securities, including commercial paper, through national currency association 736 Per cent of, issuable on State bonds, etc 736, 739 Plates for printing of - 727 Redemption fund of other banks available, when 739 Redemption fund required on 742, 958, 963 ■ Redenjption of, in lawful money at Treasury 743 Reduction of, provision for 723 Sale of securities to redeem 736 Stock of, to be deposited in the Treasury or sub-treasuries 727 Subject to applicable provisions of law, relating to United States bond-secured circulation 741 Tax rate on 765, 961 Valuation of taxable property, meaning of 964 When to be issued 957, 958 Withdi'awal of, on deposit of lawful money or national-bank notes, 723 ADMINISTRATOR. (See Teustee.) ADMISSIONS : Of cashier, when binding on bank 198, 200 ADVERTISEMENTS : Imitation of circulation in, penalty for 734 Commercial bank, prohibition against advertising as savings bank. . 12 (See also Notice; Pubucation. ) AGENCY, NATIONAL BANK REDEMPTION: Provisions for 731, 732, 749 AGENT: Association as financial, of (Jovernment 711 Bonds, examination by 720 Central reserve, city 753 Central reserve, city, additional 754 Circulation, to witness destruction 731 Liquidating bank , 779 Resei've 747 Reserve, city, additional provisions for 751 Reserve, city, additional central, provisions for 754 Shareholders, appointment and qualification of 779 Shareholders, duties of 779 Special, to examine bank failing to redeem^ notes 773 Witnessing destruction of circulation by 731 Index. 969 aiding: page. Misdemeanor^ of officers 762 ALLOTMENT. (See Shakes.) ALLOY: In United States coins 925 , AMENDMENTS: Proposed, to national-bank act to be made in Comptroller's report, 692 Requirements relative to 909 Restriction of, to articles of association 705 APPLICATION TO ORGANIZE BANK: Form of 867 APPOINTMENT: Agent to examine bonds 720 Agent to witness destruction of circulation , 731 Committee to examine plates, etc 729 Committee to witness destruction of circulation 731 Comptroller 690 Directors 877 Examiners of associations 784 Officers of association 879 Liquidating agent 912 Receivei's of associations 775, 778 Special commission for preliminary examination of assftciations . . . 725 APPRAISAL. (See Shakes.) ARTICLES OF ASSOCIATION: Amendment of, for extension of corporate existence 699, 903 For re-sxtension of corporate existence 700, 90S Restricted ' 705 Converted State bank, execution of, by 712 Form of 896 Execution of, in duplicate 872 Form of 873 Increass of capital stock by amendment of 707 Proceedings in regard to, and form of 695 Provisions for elections when not provided for in 709 Reduction of capital stock 707 Specification of object of association in 696 Title and location, change of 698 ASSESSMENTS : Examinations 784 Examiner, compensation of 784 Impairment of capital 759 Plates, engraving of . . . : 703, 750 Redemption of circulation 721, 722, 723 Repayment of tax 768 Reports of circulation, failure to make 766 Semi-annual duty 766 970 Index. ASSESSMENTS — Gontinued : page. Shareholder's personal liability 710 Stock in national bank for impairment of capital 104 Tax on unauthorized circulation 789, 790 Transportation of notes 750 ASSESSORS: Shareholders' lists accessible to 763 ASSETS: Additional circulation banks' assets liable for redemption 738 Comptroller's report to contain statement of 692 Expenses of receiver paid from 778 Failed bank, may be turned over to agent 779 Insolvent banks, distribution of 777 Of consolidated banks 771 Receiver to collect, etc 776 Receiver to sell on order of court 776 Reports of condition to contain statement of 764 Shareholders' agent to distribute 779 United States has paramount lien on 774 ASSIGNMENT: Form of, of temporary certificate of stock 872 Liability of assignee of stock 82 Of assets after insolvency, void 786 Register of bonds , 719 United States bonds as security for circulation 718 (See also Bonds, United States.) ASSISTANT TREASURER, UNITED STATES: Circulation, unfit, to be sent to Treasurer for redemption 750 Fraudulent notes to be marked by 805 Public moneys to be deposited with 797, 798 Unauthorized withdrawal of public money from 799 ASSOCIATIONS : Defined 716 ATTACHMENT: Not to issue, prior to final judgment of court 786 Of deposits 303 ATTORNEY. (See Counsel.) ATTORNEY-GENERAL OF UNITED STATES: ' Opinions of 833-835 AUCTION: Bonds of expiring associations 703 Liquidating associations 703 Bonds, sale of, when association has failed to pay its circulating notes 774 Enforcement of assessment, impaired capital 759 Index. 971 AUCTION — Continued : page. Purchase of property by receiver 782 Sale of delinquent national bank stock 7S9 Sale of dissenting shareholder's stock 702 AUTHORITY. (See Cebtificate.) B. BAD DEBTS : Defined 759 BAILMENT: Defined 480 When bank becomes bailee of paper deposited for collection. . 477, 480 BALLOT. ( See Elections ; Shabbholdees.) BANK: Capital stock, use of, to purchase its own shares 12 Inspection and control 4 Laws, must comply with 8 Liability of, for acts of cashier 191 Money, authority to borrow 12 Private corporation, when incorporated under State laws 32 Real estate, authority to deal in 12 Right of United States to form and conduct 5 BANK CIRCULATION. (See Ciectoation. ) BANKER: When a broker becomes 24^-27 Defined 24, 28 Broker, distinguished from 27 BANKING.- Defined 15 Right of State to govern 8 Privilege of statutory 1, 2 BANKING HOURS: Term refers to time in which ordinary business of bank is to be done 465 When binding upon the public 463 BANKING HOUSE: Association may own 704 BANKING POWERS : Corporate 696 Express and statutory 231 Implied or incidental 232, 696, 697 Limitation of powers of national bank 233 Transacting business in foreign State 236 When national bank not exempt from subjection to State laws .... 237 972 IwDEs. BANK OF CIRCULATION, DEPOSIT AND DISCOUNT: page. Defined 23 BANK OF DEPOSIT: Defined 23, 32 BANK OF DEPOSIT AlsTD DISCOUNT: Defined 23 BANK LOANS. (See Loans.) BANKRUPTCY. (See Insolvency.) BANKS BORROWING: By national banks: Extent of power 389-412 Only incidental power to be exercised in extreme emergencies . . 389 For purpose of loaning again inay be illegal 389, 390 Restrictions upon indebtedness 413 By State banks : Only permitted in case of emergencies unless authorized by statute 414 Cashier, when authorized by directors, may borrow if run threatens bank 417 Officers cannot borrow where statute prohibits 417 BILLS OF EXCHANGE. Defined 169 Discount of 756 By cashier 170 Illegal transfer of, void 785 Interest on 755 Oral. acceptance valid in absence of statute 325 Penalty for official malfeasance, relative to 762 Purchase by national banks 170 Restriction on loans, not applicable to 757 Restriction on association's liability, not applicable to 758 Transfer of, to create a preference, void 785 BIMETALLISM 814 BOARD OF DIRECTORS : Election of 697 Election postponed . .' 709 National Monetary Commission 734, 736, 736 Number constituting 708 President 710 Three-fourths to be residents of State 708 Vacancy, filling 700 ( See also Dikectoes. ) BONDS, OFFICIAL: Comptroller of the Currency 690 Deputy Comptroller 690 Officers and clerks of bank may be required to give 106 ISTDES. 973 BONDS, OVFlGIAh — Gontimied: page. Officers of associations 697 Public depositaries 711 Receiver 775 Renewal of 907 Shareholders' agent 779 Shareholders', on election of agents 779 BONDS, UNITED STATES : Annual examination of, provided for 720 Assigned to treasurer in trust 882 Assignment or transfer of, to be countersigned by Comptroller 718 Association to be notified of transfer or assignment 719 Cancellation of, forfeited, for circulation redeemed 774 Circulation issuable on 725 Circulation obtainable on 725 Comptroller, access to records of and deposit with Treasurer 719 Coupon, to be exchanged for registered 718, 882 Depositaries required to deposit 711 Deficiency in proceeds from sale of, what first lieu 774 Defined 716 Deposit of, required to begin business 716, 882 Depreciation in value of, how made good 720, 721 Exchange of, permitted 720, 721, 882 Extension of charter, need not be transferred 907 Forfeiture of, for failure to redeem circulation 773 General provisions respecting 720, 721 Gold banks to deposit. 732 Increase of deposit of 718 Interest on, how paid 882 Liable for penalty for failure to make returns and pay tax. . . . 767 Liable for penalty for failure to make reports to Comptroller. . 765 Withheld on impaired capital 759 Lawful money, deposit of, to retire circulation and withdraw . . 721, 722 Minimum amount to be deposited 716, 882 Maximum circulation issuable on 725, 726 Need not exceed one-fourth of capital, when .• 882 Obligations of United States, including, defined 230 Panama Canal, available as security for circulation 717 Additional issue of, authorized 824 Authorized by Act of August 5, 1909, not receivable as security for circulation 825 Penalty for illegal dealing in counterfeit 804 For illegal possession or use of material for printing 802 For passing counterfeit 803 For taking or possessing unauthorized impressions of tools, etc., used in printing 803, 804 Postal Savings 965 Reassignment of, to liquidating bank 771 Record of transfer or assignment of, to be kept by Comptroller. . . . 719 Refunding of ; 812 Registered, to be deposited witli Treasurer United States 716 Relation of, on deposit to capital 718 Return of, to association 720, 721 974 Index. BONDS, UNITED STAT'ES — Contimied: page. Sale of, at auction, for failure to redeem circulation 774 Privately, at not lees than par, for failure to redeem circula- tion 775 Taxation, exempt from 793 Tax on circulation secured by Panama Canal bonds 717 Transfer of, how effected 718 Treasurer United States to have access to records of Comptroller relative to 719 To hold, in trust for association 719 Withdrawal of 718, 883 And of circulation 721 BOOKKEEPER. (See Officers.) BOOKS : Inspection of 13, 14 When national bank need not exhibit books to State officers 13 Liability of bank for refusal to allow inspection 14 (See CoMPTEOixEE; Tbeasueee United States.) BORROWED MONEY. (See Banks Bobbowing; Loans; Opficees.) Power of cashier to borrow on behalf of bank 177-189 BORROWING FROM BANK: Offloers or employees may be prohibited from, by State 11 BRANCH BANKS: Law relative to '. 918 Chicago World's Fair 832 Louisiana Exposition 832 State banks entering system by conversion may retain 713 BROKER: Banker distinguished from 27 National bank has no authority to act as, in purchase of stocks and bonds 418 When a banker 24-27 BULLION. (See Gold Buluon; .Silvbe BmxioN; Standard Bitl- uon.) BUSINESS: Authorization of association to begin, when 705 Place of 747 Suspension of, after default to pay circulation 773 BUSINESS PAPER. (See Commeecial Papee.) BY-LAWS: Action upon 55 Amending 58 Defined 53 Failure to make, effect 57 Index. 975 BY-LAWS — Continued : page. Form and provisions 59, 891 Governing certification of checks 163 Law, when becomes 54 Lien under 56 On stock of bank 60 Of national bank, power to prescribe 57 Of savings banlcs 563-572 Pleading of 55 Power to make 53 Delegated by statute 53 Prescribed by directors of national banks 697 Prescribing duties of officers 58 I Proof of 55 Purpose, where statute provides 54 Reasonable, must be 54, 57 Reasonable hours of business may be prescribed 463 When void 55 Time of adoption, statute providing 59 Who bound by 54, 55 Who has power to make 53 0. CANCELLATION. ( See Bonds, United States ; Circulation. ) CAPITALIZED SAVINGS BANK: Defined . . 30 Distinguished from, mutual savings bank 33, 34 CAPITAL STOCK: Additional circulation, relation of, to 736-738 Agent of shareholders to distribute assets ratably 779 Amount of, and number of shares stated in organization oertifi- eate 696 Amount to be paid before association begins business 705 Appointment and qualification of shareholders' agent 779 Branches of converted State banks 713 Certificates, issue of, to whom and when 877 Certificate of officers and directors required relative to pajrment of 705, 724 Circulation not to be used to create or increase 758 Outstanding not exceeding 5 per cent, of, free from taxation . . . 789 Proportion to 718 Compensation of examiners based on, except in certain cases 784 Converted State banlcs 712 Creditor's bill against shareholders 778 Deposit of United States bonds based on 716, 717 Directors, individual liability of 783 Disposition of delinquent shareholders 706 Dividends declared on, and net earnings in excess of dividends to be reported 765 Dividends on, and creation of surplus 757 When prohibited 758 976 Index. CAPITAL STOCK.-— Continued: page. Division of, into shares, and value of each 705 Enforcement of assessment, to make good impairment of 759 Enforcing individual liability of shareholders of, by receiver 778 Enforcing payment of 706, 887 Extension of charter, settlement with dissenting shareholders 907 First installment of 880 Form of certificate of increase 888 Certificate of payment of first installment, etc 880 Certificate of payment, converted State bank 901 Kesolution increasing 888 Resolution reducing 890 Impairment of, assessment for 759 Receiver may be appointed for failure to make good 778 Increase or reduction of, when valid 887, 889 Increase of, provisions for 104, 257, 260, 706, 707, 887 Limit of 887 When below minimum required 706 Individual liability of shareholders 710 Liabilities of an association not to exceed, except on account of cer- tain demands 758 Liquidation, shareholders owning two-thirds of, may vote to go into 770 List of shareholders of, to be transmitted to the Comptroller 763 Loans on security of shares or purchase of, prohibited 757 Loans restricted to 10 per cent, of, including surplus, etc 757 Minimum amount required of national banks 704, 870 Minimum of bonds to 717 National currency association, requirements relative to 734-736 Payment of, provisions for 705 After first installment 886 Penalty for failure to make good impairme^t of 759 Personal liability of shareholders 710 Preference of holders of stock in expiring association in allotment of shares of new association 702 Receiver may b© appointed when — impaired 759 When not fully paid in 70C Reduction of, provisions for 262, 264, 707, 889 Limit of 889 Relation of bond deposit to 718 Required for organization, how paid 870, 880, 886 Shareholders of, list to be kept and subject to inspection 763 Shareholders owning two-thirds of, may place an association in liquidation 770 Shares of, acquired for debt to be disposed of when 757 State taxation of shares of 768 Subscription list 870 Subscriptions to, when payable 705 Surplus fund to be created to the amount of 20 per cent, of 757 Temporary certificate of 871 United States registered bonds to be deposited as security for cir- culation to be based on 716 Vote, one on each share 707 Withdrawal of bonds on reduction of, or closing of business 718 Withdrawal of bonds limited. . 720, 721 Index. 977 CASHIER: PAGE. -Accommodation endorsement by 173 Admissions and declarations of, when binding on bank 198 Acts wlien away from bank 200 Appointment or election of 697 Bank examiner may examine on oath 784 Bond assignments by 718 Certificate of oflScers and directors 724 Certification of cheeks 158, 164, 326 Of payment of stock 70S Of expiration of corporate existence 7ft3 Of extension of corporate existence 700 Circulating notes, to sign 727 Compromise claim for less than amount due, no authority for 189, 20O, 202 Counsel, authority to employ . . . , 454 Criminal certification of cheek by 159 Delegation of powers to paying teller 215 Directors cannot settle with, for deficits 105 Duties and qualifications, in general 153 Effect of signature of check in individual capacity 167 Embezzlement by 762 Executive oflBcer of bank 155 Examiner of own bank, cannot be 784 False certification of checks 761 Incomplete circulation, provisions relative to 753 Individual debt, payment of, by giving depositor credit on pass book 304 Inherent powers 157 Inherent power to borrow money on behalf of bank 177-189 To collect debts 189 To draw drafts and checks 166 To deal in bills of exchange 169 To' certify checks 161 To endorse negotiable paper of the bank 172 To pay depositors 175 To receive or reject deposits 174 Liability to bank for acts 190 Liability of bank for acts of 191 Liability under U. S. Rev. St 193 Limitation of powers 200 Liquidating bank, duty in ^ 770 Notice to, when notice to bank , 195 Paying teller, in absence of, does not succeed to powers of 215 Penalty for countersigning or delivering circulation improperly. . . 733 False certification of checks 761 Issuing circulation of expired associations 805 Ofiicial malfeasance 762 Pledging, etc., circulation 766 Unauthorized receipt of public money 800 Personal property belonging to bank, has charge of HO Power to receive ofi'ers for the purchase of bank securities 169 Powers and duties, when " run on bank " 175 Protest of circulation, waiving notice of , 772 G2 978 Index. CASHIER — Contimued : page. Proxy, not to act as 708 Receiving teller may perform duties of 227 Release of mortgage debt by 189 Reports of condition verified by 764 Earnings and dividends verified by 765 Settlement with depositors by transfer of securities 173, 174 Shareholders, lists of, by 763 Signature of, forged or wanting, not to invalidate circulation 753 Special deposits, authority to accept, without instructions . . . 278, 280 Subordinates, when responsible for 192 Taxable circulation, returns by 766 Unauthorized circulation, returns by 790 Voluntary liquidation, certified by 770 (See also Peesident; Officees.) CENTRAL RESERVE AGENTS. (See Agents; Reseeve; Rjeseevb Agents. ) CERTIFICATE: Authority of, to commence business 885 Certified copy of organization, evidence 788 Comptroller's, of authority 725 Converted State banks 712 Destruction of notes 731 Expiration 917 Execution of organization 696 Extension of corporate existence 700 Increase of stock 707 Form of 888 Installments of capital stock paid in, etc 880, 886 May be withheld, when 725 National currency association, to be filed with and approved by the Secretary of the Treasury 734—736 Officers' and directors', before commencing business 880 Officers and directors to attest 724 Organization to specify 696 Payment of capital, etc., form of 880, 886 Payment of installments of stock to be certified 705 Publication of, authorizing bank to commence business 885 Publication of Comptroller's, of authority 725 Reduction of stock, valid, when 707 Sealed, of Comptroller, evidence 787 Stock, to whom issued 877 Voluntary liquidation 770 CERTIFICATES, GOLD AND SILVER: Of indebtedness 933, 934 (See Gold Ceetificates ; Silveb Ceetificates.) CERTIFICATES OF DEPOSIT: Authority of banks to issue 376 Defined to be promissory notes 369 Index. 979 CEETIFICATES OF DEPOSIT — Gontirmed : page. State courts holding that they are 371 That they are not 372 Interest on 375 Payment of 377 Statute of limitations against 589 When certified check may become 378 CERTIFICATE OF INCORPORATION OF NATIONAL CURRENCY ASSOCIATION: Approval of, by Secretary of Treasury 734-736 Body corporate upon execution of 734-736 Execution of 734-736 CERTIFICATION. (See Checks; Cashiee; Peesidbnt; Vice- Pebsident. ) CERTIFIED COPIES. (See Etidbnce.) CHANGE OF NAME OR OF NAME AND LOCATION: Provisions relative to 910 CHARITY. (See Donations.) CHARTER: Certificate of Comptroller authorizing the bank to begin business known as 725 Forfeiture of 783 Issue of, to national banks 725 Of State bank, amendment 247-251 Of national bank, how amended 247 (See Certificate; Coepoeate Existence; Extension of Coepobate Existence; and Liquidation.) CHARTER NUMBER: To be printed on circulation 728 CHECKS: Acceptance orally valid in absence of statute 325 Alteration after signing and uttering 356 Bank bound to honor, when 331 When not barred by statute of limitations 313 Blank forms prepared by payee bank need not be used 310 Cashier's check on his own bank need not be presented within speci- fied time 169 Certificate of deposit, when certified check may become 378 Certification of 12 When forbidden, and penalty for 761, 762 Statutory authority for 320 Who may certify 320, 326 When certification may be made 320 Certification by cashier 158 Criminal certification by cashier 159 Certification by teller 205, 207, 208, 210 Effect of certification 319, 320 980 Index. CHECKS — Continued : page. Certification is equivalent to acceptance 319 When mistake in, may be corrected by bank 326, 327 False certification of, unlawful 761 Falsely certified, an obligation of association 761 Certified, receivable for duties on imports and internal taxes . . 826 Date essential 307 Days of grace, payee cannot claim 311 Defined 306 Deposit of 282 Drawee bank, right of, against payee in endorsing forged checks. . . 655 Drawer of certified, when released , 323 Drawn on bank, must be 309 Forged check, right of bank against presenter and owner of 354 Liability of bank upon forged check passing through clearing house 64-2-655 When bank estopped from denying forged certification 326 Form and requisites 306, 307 Holder of, rights against bank 314 Remedy against drawer 314 Certified check may hold drawee and acceptor as well as the drawer 323 Liability of bank for dishonoring, without cause 305 For payment of altered 299 For paying forged cheeks 350 For allowing certified check to pass from its hands in such a manner that the amount could be easily raised 325 For unauthorized certification by agent 320, 321 For unauthorized payment 306 Memorandum checks 327 Payment of 327 Nature and effect of 335 Negotiable, when 311 Notice of revocation 209 Officers cannot certify their own 164, 165 Payable in order presented 298 To person named or to his order or bearer, must be 309 To bearer, when drawn payable to fictitious person or to name or figure 310 Payment, when operate as 335 Through clearing bouse under mistake of fact 641 Under mistake, when bank may recover 344-349 Payments, recovery, under mistaken belief that there were funds to meet the check 349 Preference, payment by insolvent bank constitutes 619 Penalty for false certification of 158, 761 For illegal issue of certified checks 322 Presentment for payment, duties of payee to present within rea- sonable time 341 Duties of bank 341 By bank making collections 510 Where drawn on bank at distant place 313 Delay in presentment, effect of 312 Diligence to bind endorser 313 Index. 981 CHECKS — Continued : page. Reasonable time for presentment, what constitutes 312, 313 Post-dated 328 Liability of bank for payment of, before maturity 328 Certification of 328, 329 Not entitled to days of grace 329 Revocation of 337 May be made orally 337 When cannot be made 337 Rights of holder of certified check 160 Payment of certain sum of money, must be for 310 Right to possession after payment '. 359 Present rule 360 Equitable and safe rule 361 Signature must be by drawer 310 Place of signature immaterial 310 May be printed, stamped or in pencil 310 Statute of limitations against 689 Undated, retusal of payment 299 Verbal certification 161 CIRCULATION: (See also Additionai, CiECtrLATioN. ) Amount of, obtainable 725-727 Obtainable by gold banks 732 Circulating notes not limited 730 Association may issue 697 To receive interest on bonds as long as, honored 718 Associations consolidating, deposit of lawful money to retire, un- necessary 771 To redeem, in lawful money on demand 753 Bonds in excess of amount required may be withdrawn 718 Forfeited when, dishonored 773 United States, to secure 716 Certificates of destruction, by whom executed 731 Charter number on 728 Collection of tax on 767 Consolidating banks 771 Cost of plates to be paid by association 750 Counterfeiting, etc 733, 734, 801-805 Countersigning unlawfully 733 Denominations, minimum 729 Deposit of United States bonds to secure 716 Of bonds to be increased when capital is increased 718 Destroyed, to be replaced by an equal amount of new notes . . . 749, 750 Disposition of redemption account balances 752 Examination of bank upon protest of, by agent of Comptroller 773 Expense of plates for new notes of extended banks 703 Expenses of redemption, how paid 749 Extended bank, shall differ from prior issues 702 For what, is receivable 730 Fraudulent notes to be so stamped 805 Gain from, lost and destroyed 702 Gold bank, to be redeemed in gold coin 732 982 IwDEx. CIRCULATION — (7onti»Mie(i; page. • Government depositories to receive, at par 711 Inscription on 727, 732 Increasing capital stock, use of, prohibited 758 Limit on aggregate amount of 726 Liquidating bank to deposit lawful money to redeem 771 Minimum denominations 729 Jjeposit of bonds required 716, 717 Notice of redemption of, to be forwarded to bank 749 Other, prohibited for national bank 731 Penalty for failure to make return of taxable 767 Pledging as security prohibited 758 Profit on unredeemed, inures to the United States 702, 703 Proceedings when return is not made 791 Prohibition against circulating uncurrent notes 760 Proportion to bonds deposited 726 To capital 716, 717 Protest of 772 Receivable at par by all national banks 755 Redeemed, to be canceled 775 Redemption fund 742, 749 Redemption of, in United States notes 749 Extended banks 702 Liquidating banks 772 Closed banks 772 Incomplete 753 Refunding excess tax 768 Restriction on notes less than $1 794 On notes less than $5 729 On notes of $5 726 Of tax provisions 792 Semi-annual return of, subject to tax 766, 790 Signing 727 Statement concerning, of closed banks to appear in Comptroller's report . 692 Tax on 765 Converted bank 791, 792 Insolvent banks remitted 768, 792 State bank issue 788-791 Subject to State law 793 Treasurers and public depositaries to return all, of closed banks. . 772 When exempt from tax 789 When issuable 730 Withdrawal of, by depositing lawful money, limitation of 721 Worn out or mutilated, destroyed 731, 732 CIRCULATING NOTES : Denominations and amounts issuable 883 Design for extended charters 905 Cost of plates for 884, 905 Supplementary order for 884 Tax on . .'. 883 CITIZENS: National banking associations are, when 699 Index. 983 CLAIMS. (See Insolvency; Recetvee.) CLEARING HOUSE: ■ page. Certificates, issuance of 662-664 Counted as reserve 664, 748 In settlement between members may be used as cash 665 Character and object of 632 - Check paid under mistake of fact, recovery, rule 641 Defined 29 Effect of customs between banks 640 Emergency currency 661 Forged checks, passing through 642-655 Bank's liability for negligence '. 642-655 History of 631 Incidental powers, general utility of 659-665 Member of, representing bank not a member 657 Organization of, not a corporation . 635 Presentment for collection through 640 Receipt in settlement of balances of gold and silver certificates by. . 761 Rights of drawee bank against payee in endorsing forged checks . . . 655 Rules of 636 Not binding upon depositors 637 Non-member bank not affected by 638 Governing effect of endorsements 638 Settlements and transactions through 637 Settlement between banks 641 Settling daily exchanges 639 Suits by and against, how brought 658 Set-off, right of 658 CLEARING HOUSE CERTIFICATES. (See Cleabing House; Re- serve. ) CLERKS: Appointment and classification of by Secretary of the Treasury. . , 69il Clerical force for redemption of circulating notes 751 Duties of, fixed by the Comptroller 691 Employment of by the Comptroller 691 Names and compensation of, in annual report 693 Proxy, of banks, cannot act as 708 CLOSED ASSOCIATIONS. (See Insolvent Banks.) CODE OF DISTRICT OF COLUMBIA: Banking institutions in District of Columbia: Subject to supervision of Comptroller of the Currency, when 849, 850 Building associations in District of Columbia: Objects 847 Under supervision of Comptroller of the Currency 847, 849 Certificate of incorporation: Piling of, with recorder 836 Charters : Commissioners' power to grant 852 Filing of, with recorder 853 984 IwBEx. CODE OF DISTRICT OF COLUMBIA— Continued: page. Commissioners, District of Columbia : Authority to grant charters to loan, etc., companies 852 Comptroller of the Currency : Examinations of savings banks by 850 Savings banks, etc., to report to 849, 850 Supervision by, of banking institutions in District of Columbia 849, 850 Corporations, formation of, imder code 836 Body corporate, when 837 Books, inspection of 844 Business in which may engage 836 Business, kinds of, prohibited 836 By-laws, made by trustees 839 Capital stock, changes of 845 Certificate of incorporation, what to state 837 Dividends 842 Loans on own stock prohibited 841 Officers, election of 838 Reports, annual, etc 840, 841 Stock of other companies not to be bought 841 Stock, payment of installments 839, 840 Stockholders, liability of 840, 843 Trustees, election of, etc 838 Vote necessary to change capital or business 846 Executors, etc. : Loan, trust, etc., companies, as 856 Foreign banking institutions : Reports and examinations of 849, 850 Loan, trust, mortgage, etc., companies: Annual reports 860 Bonds, requirement 865 By-laws 863 Capital stock 858, 862, 864 Certified copy of certificate of incorporation of, evidence 864 Commissioners of the District, powers of 852 Conversion of existing companies 857 Dividends 863 Duration of charter 858 Executors, etc 856, 864 Increase of capital 864 Notice of application to commissioners 853 Oath required of trustee, etc 856 Officers . . .' 862 Organization 851, 852 Penalty for false swearing, misappropriations, etc 861 Purposes for which formed 851 Real estate investments '. 858 Recording charter with recorder of deeds 853 Reports to be made to Comptroller 854 Shares of capital stock 859 Security to be given by, when 865 Special powers 854 State corporations doing business in District to comply with conditions of 857, 866 , Index. 985 CODE OF DISTRICT OF COLUMBIA— Continued: page. Stockholders' liability 861 Trustee, executor, etc 856 Trustees' liability 860 Organization: General corporations in District of Columbia 836 Loan, trust, etc., companies 851 Powers : Commissioners of the District of Columbia 852 Loan, trust, etc., companies 854 Recorder of deeds: Certificates of incorporation to be filed with 836, 853 Savings banks: Banking institutions, including, to make reports and submit to examinations 849, 850 Expenses of examinations 850, 851 Insolvent, Comptroller to take possession of 849, 850 Organized under code, subject to supervision of Comptroller of the Currency 849, 850 Publication of reports from 849, 850 COINAGE: Acts authorizing and discontinuing ( table ) 946-948 Amount coined, for each coin to June 30, 1910 (table) 946-948 Changes in weight and fineness (table) 946-948 Of gold coins, history 928 Of silver coins, history 928 Of subsidiary silver, history 930 Of trade dollars 930 COINS: History of 922-931 (See also Gold, Silver and Minob Coins.) COLLECTIONS: Action by bank in its own name 504 Agents, who are suitable 519 Authority of bank to collect 498 Revocation of 496 When bank may renounce 505 Blank indorsement passes title 495 Care and diligence required of bank in making 506 Completed, when 548 Correspondent liable to initial bank, when 545 Creditors, right of to proceeds of collections 546 Duty of bank 477 Duty of bank to scrutinize instruments deposited for collection .... 478 Fraud and mistake, liability of collecting bank for 517 Indorsement, form of 478 Indorsement for collection 493 Indorsement, form of controls title to collections 493 When relationship becomes fixed by indorsement of instrument. . . . 479 Indorser, liability of collecting bank as 514 986 Index. COLLECTIONS — Continued: page. Initial bank, liability for default of its agents 518, 525 Liability of, where paper total loss 545 States sustaining liability of to owner of paper 540 Modification of rule holding liable for all defaults of its agents, 541 States sustaining modified rule 542 Review of decisions as to liability of initial bank 543 Insolvency of initial or corresponding bank, effect upon proceeds of collections 546 Interest, duty of bank to collect 514 Law of place governs relation 487 Lien of bank upon 496 Negligence, liability of bank for in failing to make collections .... 549 Notaries, employment of 521 Officer of bank acting as 522 Payment, acceptance of by bank, what may be received, 511 Presentment of checks 510 Presentment, duty of bank to make when necessary 509 Presentment for through clearing house 640 Protest, duty of bank to make 511 Recovery of proceeds from receiver of bank after insolvency 549 Relationship between bank and parties depositing paper for collec- tion 477 Title of paper deposited for collection remains with depositor 491 Usage and custom 487 When Jjaper payable at specific bank 486 COMMENCEMENT OF BUSINESS : Requisites for 885 COMMERCIAL BANK: Authority and power of 32 Classified . 23 Defined 23, 29, 32 COMMERCIAL PAPER: (See also Coujections.) Additional circulation on 736 Authority of national bank to deal in 429-435 Available under act May 30, 1908 957 Characterized, when available as security for additional circula- tion 736 Discount of 755, 758 Distinction between " discounting " and " purchasing " 428 Meaning of 964 State banks have incidental power to deal in 435 COMMISSIONERS OF BANKS : Appointment 11 Duties 11 COMMITTEE OF APPRAISAL. (See Dissenting Shabeholdebs. ) Index. 987 COMPTROLLER OF THE CURRENCY: page. Action as to agent of shareholders 779 Acts of, subject to approval of Secretary 743, 744 Additional circulation to be issued by, when 736 Agent, special, to be appointed for association failing to redeem circulation 773 Application for additional circulation to be made to 736 Appointment, term and salary of 690 Approve receiver's purchase of property 783 Approve reserve agent 748, 753 Bond to be given by 690 Bonds and records of, with Treasurer, access to 719, 720 Bonds, sale of, privately or at public auction by 747, 775 Capital stock, increase or reduction of, to be approved by. . . . 706, 707 Certificate to begin business 725 Certified copy of organization certificate, evidence 788 Charter number of bank, to have it put on circulating notes 728 Cited in injunction of receiver 777 Circulation, worn, mutilated, destruction of 731, 732 Creditors of failed banks, to pay dividends to 770 Decision of insolvency of bank conclusive 617 Distribution of reports of 694 Duties of 689 Enforce stockholders' liability 710 Engraving of plates for printing of additional circulation to be ordered by 727 Enjoined by bank, how 777 Examiners, appointment of 784 Extension of corporate existence, approval ol by 699 Evidence sealed certificates 787 Forfeit, cancel, or sell bonds or notes not redeemed 775 Forfeiture of charter, suit to be brought by 783, 784 Instruction^ of ^ 867-921 Interest in national banks, issuing currency, prohibited 691 Jurisdiction of Circuit Courts to enjoin 787 Liquidation of associations to be notified of 770 Notice to banks short in reserve 748 Notice to creditors of insolvent banks 776 Oath to be taken 690 Payment for property purchased by receiver to protect his trust. . . 783 Plates and dies, examination of 729 Qualification of ; 690 Receivers, appointed by 748, 775 Recommendation relative to issue of additional circulation, to be referred to and approved by the Secretary 736-738 Report of 692, 693, 694 Reports to be made to 764-765 Reserve cities, designation of , by 752, 754, 755 Seal of office 691 Secretary of Treasury to approve certain acts of 743, 744 State banks converted, approved by 713 Title and location of national banks, change of, to be approved by. . 696 Title of national banks subject to approval of 696 Transfer and assignment of bonds to be countersigned by 741 Verification by, of banks' monthly returns of additional circulation for taxation 766 988 IliTDEX. COMPOUNDING DEBTS: page. Of insolvent national banks 776 CONGRESS: Authority over banks 1, 2 Comptroller's report to be made to 692 CONSOLIDATION OF NATIONAL BANKS: Provisions regarding liquidations and bonds 771, 914 (See also Liquidation.) CONVERSION OF STATE BANKS: Authority of shareholders for 895 Corporate papers, forms of .• 896-903 Incorporated banks only can be converted 239 Provisions for 895 Statutory power 238 Steps to be taken 238 Trust companies 895 CONTRIBUTIONS. (See Political Contributions.) CORPORATE EXISTENCE: Extension of 699, 700, 902 Re-extension of 704, 908 Certificate of expiration of 917 Liquidation upon expiration of 703, 916 CORPORATE POWERS. (See Powers.) CORPORATION: Excise tax on 815 National baijk becomes, when 696 National currency association becomes, when 734-736 COST. (See Expenses.) COUNSEL: Authority to employ ; 454 COUNTERFEITS: Making or using notes, plates, tools, etc 801-804 Tests by teller in detecting 218-225 COUPON BONDS. (See Bonds, United States.) COURTS. (See Crimes, Jurisdiction, Etc.) CREDIT: When lending by bank prohibited 466-468 CREDITORS: Bill in equity by, against shareholders 778 Checks falsely certified a valid obligation of associations 761 Creditors' rights not to be impaired 785 In-dex. 989 CREDITORS — Oontimied : page. Directors' liability 783 Expiration of existence, notice to 703 Insolvency, notice of, to 776 Nonpayment of circulation, notice of, to 774 Payment of assets of failed banks 777 Preference of illegal 785 Shareholders, list of, subject to inspection by 763 Personal liability of, to 710 Voluntary liquidation, notice of, to 770 CREDITORS' BILLS: Against shareholders 778 CRIMES, JURISDICTION, ETC.: Abstraction of money, funds, etc 762 Aiders and abettors 762 Counterfeiting circulation 801 Dealing in counterfeit circulation 804 Embezzlement . 762 Evidence, certified copy of organization certificate 788 Sealed certificate of Comptroller competent 787 False certification of checks 761 False entries 762 Having or taking unauthorized impressions of tools, etc 803-804 Illegal possession or use of material for circulation 802 Imitating circulation for advertising purposes 734 Improper countersigning or delivering circulation 733 Issuing circulation without authority 762 Of expired associations 805 Jurisdiction, general, of national bank cases 699, 700 ~ To enjoin Comptroller or receiver 787 Misapplication, willful 762 Mutilating circulation 734 Obligations of the United States defined 801 Official malfeasance 762 Passing counterfeit circulation 803 Pledging United States notes or bank circulation 760 Political contributions 763 Taking unauthorized impressions of tools, etc 803 CUMULATIVE VOTING: Not permissible 879 CURRENCY: National bank, history of 92 (See CiECULATiON ; Gouj; Gold Ceetificates ; Silvee; Silver Cbji- TiFicATES; Lawful Monet; United States Notes.) CURRENCY BUREAU: Designation of office of Comptroller of the Currency 689 Expenses of, in liquidating failed bank 693 Offices, vaults, etc., for 692 Submission of list of employees 693 990 Index. CUSTOM: PAGE. Usage and oustom as to collections 487 CUSTOMERS : Contract with person to secure ultra vires 457 D. DAYS OF GRACE! Payee of cheek not entitled to 311 Drawee of bill of exchange may claim 311 DEALING IN COMMERCIAL PAPER. (See Commbecial Papee.) DEALING IN REAL ESTATE. ( See Reai Estate. ) DEALING IN STOCKS AND BONDS. (See Shaees.) DEBTS: Collection, by cashier 189 Of national bank not affected hy change of location and name 698 DEBTS, COMPOUNDING OF: Real estate held for 704 DE FACTO CORPORATION: Acts of banks as 16 Defense of one dealing with 16 Defined 16 DEFINITIONS: Bad debts 759 Banker 24, 28 Banking 15 Bank of circulation, deposit and discount 23 Deposit 23, 32 Deposit and discount 23 Bill of exchange 169 By-Laws 53 Capitalized savings bank 30 Cheek 306 Clearing house 29 Commercial bank 23, 29, 32 De facto corporation 16 Discounts 425 Foreign bill of exchange 169 General deposits 270 Indorsement, different kinds 478 In failing circumstances 608 Inland bill of exchange 170 Insolvency 603, 614, 617, 620 Liens, general and special 579 " Means " to pay debts defined 612 Memorandum check 327 Index. 991 DEFINITIONS — Continued : page. Mutual savings bank 23, 30 National bank 31 Ordinary deposit 295 Overdraft 363 Post-dated check 328 Private banker 28 Public money 438 Solvent 608 Special deposits 271 Term deposit 296 Trust company 28 Ultra vires 16 Unauthorized banking 15 United States banks 716 DEMAND NOTES: History of 931 DENOMINATIONS: Circulation of gold banks 732 Of national banks 727 Converted State bank shares 713 Gold certificates 761, 810 Shares of national bank stook 705, 713 DEPOSIT OF UNITED STATES BONDS. (See Bonds, United States.) DEPOSITARIES. (See Government Depositaries.) DEPOSITARY BANKS: Designation of 12 DEPOSITS: Acceptance of 286 Special 277, 278 Agent of bank, duly authorized, may rec&ive 287 Should always be made to 286 Application of, lo payment of note of depositor 476 Assignment and insolvency of depositor, notice of, estops bank from payment of checks 304 Attachment or garnishment of 302, 303 Cashier, power of, to receive or reject 174 Certified, are equivalent to certified check 319 Checks 282 Delivered to insolvent bank for collection, when do not become, 276 Deposit of, equivalent to money 291 Payable in order 298 Payment by giving owner credit 298 By certification 299 Clerk of court, deposits by 291 Complete, when 287 Contract for withdrawal , 272 992 Index. DEPOSITS — Continued : page. Contract with person to secure ultra vires 457 Current funds, deposits in, must be paid in 334 Death of depositor estopps bank from payment of checks, although delivered to payee 303 Defined 296 Demand for repayment 295 Not necessary where bank has suspended payment 295 Depositor, where checks are dishonored without cause, may recover damages 306 Dissolution of relationship between bank a,nd depositor 286 Fictitious name, deposit in 289 Funds in controversy 281 General, defined 270 General and special, distinguished 278 Gift, when operates as 335 Husband and wife, deposits in name of 295 Insolvency, recovery of, after 617 Interest upon 296 Investment, regulations 10 Joint tenancies of 292 Liability for payment of check issued by insane depositor 300 Unauthorized payment 305 Minor, deposits by 302 Money to pay note, deposit of, is not payment 475 Municipal funds 272 Nature of . 270, 271 Ordinary deposit defined 295 Pass-book, duty of depositor to examine 305 Payment in current funds 281 By cashier of his individual debt by giving depositor credit on her pass book 304 Upon oral order at risk of bank 297, 299 Of trust funds 300, 301 Of deposits by husband in wife's name 302 Of checks after insolvency constitutes preference 619 By set-off by bank of debts due it from depositor 304 Upon telegraphic instructions 300 May be refused: When check defective 297 When check not dated 299 Public moneys 11, 438-t40, 771, 797 Recovery of, from bank upon ground of fraud 272 General deposit from receiver of national bank upon ground of insolvency 275 Refusal of, right of bank to 281, 286 Relation of banker and depositor where general deposit made is debtor and creditor 271 Repayment of 293 By cashier 175 To joint depositors 294 Reports of, publication 11 Reserve to be kept on 732, 747-749 Safe deposit department, establishment of 280, 281 Index. .993 DEPOSITS — Continued : page. Special deposits 290 Defined 271 Acceptance by national bank 278 Authority of cashier to accept without instructions 278, 280 When made in money should not be mingled with general funds, 278 When recoverable after insolvency 620 May be changed to general, and vice versa 292 When accepted to pay note 475 Liability of bank for loss of 282 Negligence in return or delivery of 285 Statute of limitations runs against depositor, when 373, 592 Trust company, liability for 673 Trust funds 273, 274 DEPKECIATION. ( See Bonds ; CiEcnLATiON. ) DEPUTY COMPTROLLER 690 Appointment 690 Bond 690 Clerks of Comptroller's office 691 Directors of associations 697 Dissenting shareholders, committee of appraisal 701 Directors of national banks 708 Duties 690 Interest in bank issuing national currency prohibited 691 Oath to be taken 690 Officers of associations 697 DEPUTY COMPTROLLER, ADDITIONAL: Powers of 691 Salary of 690, 691 Vacancies in board of directors 709 DESTRUCTION OF MUTILATED NOTES. ( See REDBMPmoir. ) DIES. (See Plates and Dies.) DIRECTORS: Accountable as trustees 109 Actions against 121 Appointment or election of 697 Assessment of stock in national bank for' impairment of capital, cannot order 104 Assessment, provisions for enforcement of 759 Attestation of reports to Comptroller by 764 Bank funds, cannot use, to pay attorney for defense of action by stockholder 110 Board of, may be named in articles of association 872 When law imputes knowledge to 112 Bond, may require officers and clerks to give 106 Books, may examine, at any time Ill Borrow funds from bank, may 110 Capital impaired, d'uties 706 Capital stock, may be authorized by statute to increase or diminish, 104 63 994 Index. DIRECTORS — Continued: pack. Care required, degree of 122 Certificate of officers and ^ 724 Certification of, to extension 700 Compensation 127 Conversion of State banks, action by 713 Criminal liability 122 Debt due bank, power to release 107 Debts of third person, assumption of 105 Dividends, declaration of, by 757 Duties and responsibilities of 11, 91 Which cannot be delegated 101 Delegation of authority to make discounts 102 Cannot delegate statutory duties 103 Election of 37, 97, 877 Election, proceedings where none held 98 Embezzlement, penalty 762 May be cause for forfeiture of bank charter 601 Employees in State bank, removal of, for cause 108 National bank, removal of, without cause 108 Enforcing payment of capital 706 Exception in Oklahoma 827 Excuses for failure to perform duty 124 Failure to hold annual election 709 Forfeiture of charte^r for violation, etc., by 783, 784 Good faith of 123 Illegal claims, no authority to pay 456 Liability of 119, 783, 784 For false reports 120 In declaring dividends 123 For losses resulting from violation of law 602 Liquidating agent, appointment of, by 912 Loans, may authorize officer to make 103 Loans and discounts, board vested with power to make 451 Meetings of 99 Must act as a. unit ^ 100 Names and residences of, to be ascertained by Comptroller 724 Not to be appointed by Comptroller to examine own bank 784 Notice of meeting 100 Notice to, in oflicial capacity 113 Must have actual 118 When chargeable with knowledge as against themselves 119 Notice to board 112 Number and election of 708 Number of, specified, or minimum and maximum, must appear in articles 873 Oath required 97, 98, 709, 877 Forms of 877 Offenses against banking laws 120 Ofiicers, election of, by 101 Oklahoma, qualification of national bank in 827 Penalty for issuing circulation of expired association 805 Official malfeasance 762 Unauthorized receipt of public money 800 IwDEx. 995 DIRECTORS — Continued : page. Place of meeting 99 Powers of 697 President of board to be a 98, 71 Profit, cannot take advantage of position for 106 Property, may sell, to satisfy or secure preferred creditor 108 Cannot give away 104 Power to sell 104 Proxy, cannot act as 708 Qualifications of 11, 37, 97, 98, 708, 878 In Oklaboma 827 Quorum, number necessary to constitute 100 Release of subscriber to capital stock 107 Settlement with cashier for his deficits unauthorized 105 Settlement with subscriber . 107 Shareholders dissenting to extension, to give notice to, etc 701 State bank 99 State banks, powers and duties of, on conversion 895 Vacancies in board of 98, 101, 709, 878 Votes of shareholders in election of 879 (See Board of Diebctoes.) DISBURSING FUNDS OP UNITED STATES OFFICERS: Depositing with national bank depositaries 797 DISCOUNTS: Bills receivable, danger of discounting 427 Defined 425 Delegation of authority to make 425 Directors cannot delegate authority to make 102 Directors have exclusive power to make 425 " Discounting " and " purchasing " distinguished 428 Discounting not purchasing 428 Rediscount of paper 426 (See Loans; Liability; Interest.) DISSENTING SHAREHOLDERS: Withdrawal of, on extension 701 DISSOLUTION: Authority of officers in charge 625 Involuntary 626 Voluntary liquidation 625 (See ExpiEA'tioN of Chaetee; Forfeiture of Charter; Insolvestct ; Liquidation.) DISTINCTIVE PAPER: National bank circulation, etc., to be printed on 728 Unauthorized possession or use of 802 DISTRICT ATTORNEY; * Compensation for conducting suit against national bank 455 DISTRICT OF COLUMBIA. (See Code of District of Columbia.) 996 IiTBEX. DIVIDENDS: PAGE. Comptroller to make ratable, of assets of insolveint banks 777 Directors may declare, when 757 Earnings and, to be reported 765 Liability of directors in declaring 123 Penalty for failure to report earnings and: 765 Restriction on association's liability 758 Rules governing, after insolvency 623 Unearned, prohibited 758 (See also Surplus and Dividends.) DONATIONS : Political contributions prohibited 457 Power vested in stockholders 456 DRAFTS: Obligations of United States including 801 Official malfeasance 762 . Liability of association relative to 758 Pe^nalty for mutilating 734 (See OVEEDBAFTS.) DUES. (See Taxation; Duties.) DUTIES: Associations organized under Act of February 25, 1863 714 Circulation, converted State banks 791 Enforcing payment of, on 767 Exempt from 789 Not receivable for customs 730 Refunding excess on 768 Restrictions on 792 Semi-annual on 766 Unauthorized 788-790 Comptroller's 689 Directors' 708, 709 Examiners' 784 Gold certificates receivable for 810 Public depositaries, designation and 711 Receiver, appointment and 775 Shareholders' agent 779 E. EARNINGS. (SeeDiviDBNDS.) ELECTIONS : Change of title or location 698 Corporate powers 197 Directors by shareholders • 877 Directors and officers of National Currency Association 734, 735 Extension of corporate existence 699 Failure to hold annual 700 Index. 997 ELECTIONS — Continued : page. Increase of stock 707 Number of directors 708 Oaths of directors 709 Qualifications of directors 708 Qualifications of shareholders 707 Reduction of stock 707 Shareholders' agent 779 Voluntary liquidation 770 EMBEZZLEMENT, MISAPPLICATION OF FUNDS, ETC. : Penalty for 193, 194, 762 EMPLOYEES: Removal by directors 108 EMPLOYEES AND EXPENSES. (See Cueeks; Expenses.) EMPLOYING COUNSEL. (See Counsel.) ENDORSEMENT: Difl'erent kinds defined 478 Blank Indorsement passes title 495 By cashier of bank's paper 172 For accommodation by cashier 173 For collection 493 Forms of 172 ENFORCING PAYMENT OF CAPITAL STOCK: Provision for 706 ENGRAVING. ( See Ciectjlation ; Plates and Dies. ) EQUITY. (See Ckeditor's Bill Against Shareholdbks.) EVIDENCE 787, 788 EXAMINATIONS : Annual, of bonds 720 Ascertainment of value of stock of dissenting shareholders 701 Bonds and records, provisions for 719 Checking of banks 676-683 Compensation of examiners 784 Examiners to make 784 Extension of corporate existence 906 Limitation of visitorial powers 785 List of shareholders subject to 763 Plates and dies annually 729 Preliminary, to beginning business 724 Qualification of examiners 784 Special, of extended associations 700 Suggestions to examiners 687 EXAMINERS: Appointment of 784 Compensation of 784 Qualifications of 784 Special commission 725 998 Index. EXECUTION. (See Suits.) EXECUTOR. (SeeTEUSTBES.) EXECUTORS AND ADMINISTRATORS: page. Liability as stockholders 87 EXISTENCE : Extension of 699 National currency association, corporate existence of 734, 735 Re-extension of 704 Term of corporate, of national banks 697 EXPENSES : Bureau, to be stated in Comptroller's report 692, 693 Circulation, redemption of 749, 750 Transportation and redemption of 722, 723 Duties of shareholders' agent, relative to 779 Examinations 784 Dissenting shareholders 701 Spcial 700, 906, 907 Examiners, fees of 784 Liquidation of failed national banks 693 National Currency 'Commission 745 Plates, cost of 703, 750, 884, 907 Plates and dies, examination of 729 Provisions for, Act May 30, 1908 744 Receiverships, how paid 778 Paid prior to election of shareholders' agent 779 Sale of bonds 774 Sale of delinquent stock 706 EXPIRATION OF CHARTER: Liquidation as a result of 916 Certificate of 917 Publication of notice of 917 EXTENSION OF CORPORATE EXISTENCE: Administrators, executors, trustees, guardians, or corporations , voting for 906 Amendment for 903 Circulating notes, issue of, in case of 905 Examination before 906 National banks 628, 699, 700 Power of attorney for, form of 905 Re-extension authorized 908 Shareholders may authorize by power of attorney 906 Owning at least two-thirds of stock must consent to 903 Not assenting to, shall be paid for their stock.- 907 State banks 630 ■ Transfer of bonds not necessary in case of 907 F. FAILED NATIONAL BANKS: Report of expenses 693 IwDEX. 999 FAILURE. (See Insolvency.) FALSE ENTRY: page. Penalty for, official malfeasance 762 FALSELY CERTIFYING CHECKS 761 Penalty for 761 FEES. (See Examinees; Receivees.) FINANCIAL BILLS: Act March 14, 1900, text of 950^-955 Act March 4, 1907, text of 955-956 Act May 30, 1908, text of 956-963 FINE. (Sse Penalty.) FINENESS. (See Weight and Fineness of Coins.) FIRM. (See Liability.) FISCAL AGENT. (See Agent; Government Depositaries.) FORFEITURE OF CHARTER: Acta which may work forfeiture 596 Doing unauthorized business 601 Failure to comply with statutory provisions 598 Mismanagement, embezzlement by directors 601 Wrongful act of single director 601 Non-user of charter 598 Suit to be brought for, by Comptroller of the Currency 783 Taking usurious interest 600 Indictment of bank for 600 Trust company, franchise of 673 Wilful violation of law or charter 599 FORGERY: Liability of bank paying forged checks 350 Right of bank against presenter and owner of forged paper 354 (See Crimes; Penalty.) FOREIGN BANK: Regulation of business of 12 FOREIGN BILL OF EXCHANGE: Defined 169 FRACTIONAL CURRENCY: Amount authorized and outstanding 936 FRANCHISE : ' Forfeiture of 783 (See also Foefeituee of Chaetee.) FRAUD AND MISTAKE: Liability of collecting bank for 517 1000 Index. FRAUDULENT NOTES: PAGE. United States and national bank officers to mark 805 G. GARNISHMENT: Bank summoned as garnishee in an action against an insolvent de- positor may set off notes 587 Of deposits , 303 Of proceeds of collections 546 GIFTS: By deposit in bank 335 By deposit in trust 561 (See Donations.) GOLD: Certificates not to be issued when reserve of gold coin and bullion is depleted 810 When part of national bank reserve 761 Circulation of gold, banks redeemable in 732 Deposit of, for certificates ....'. 761, 845 Dollar, standard unit of value 806 Gold banks not required to take circulation of other banks at par. . 755 Issue of certificates of deposit of 761, 810 Organization of gold banks 732 Reserve gold of one hundred and fifty millions 807 Reserve gold banks to be silver and 732 Taxation of, gold certificates by State, etc 793 GOLD BANKS: Circulation of, issuable 732 Conversion of 733 Deposit of bonds by 732 Exempted from provisions relative to other bank circulation 755 Organization of 732 Reserve required for 732, 753 Tax on circulation 765 GOLD BANK NOTES.' (See Gold Banks; Cibculation. ) GOLD BULLION: Amount now m United States 928 Production of, in the United States since 1792 (table) 949 GOLD CERTIFICATES: Deposit of gold for 810 Deposit of foreign gold for 810 History of 927 Issue of, prohibited, when 761, 845 Minimum denomination 845 Redemption of 937 Not legal tender • 927 Payable to order •. . . . 845 Receivable for what 761, 845, 927 IWDEX. 1001 GOLD COINS : PAGE. Acts authorizing and discontinuing coinage of (table) 946 Amount coined, each coin, to June 30, 1910 (table) 946 Basis for estimate of 928 Changes in weight and fineness of (table) 946 Denominations, fine metal, alloy and weight 925 History of 927 Legal tender quality of 926 Not redeemable 936 Total coinage of 928 Unit of value ; 923, 925, 927 Weight of $1,000 of 926 GOLD RESERVE IN TREASURY: Gold certificates not be issued when, depleted 819 Limit of, Act March 14, 190O 950 GOVERNMENT DEPOSITARIES: Application by national bank for designation 438 Deposit and withdrawal of public moneys 797 Deposits by certain postmasters 798 Designation and duties of 711 Interest to be paid by 712 National banks as , . . . 711 Bank circulation to be received by 711 Banks as financial agents ctf Government. . ; 711 Penalty for misapplication of money-order funds 798 Unauthorized deposit of public moneys 799 Unauthorized receipt or use of public moneys 80O Secretary of Treasury to designate 711 Securities to be deposited by 711 GUARANTY: Where bank may make 467, 468 GUARDIAN: Liability as stockholder 87 (See Tetjstke.) H. HAWAII: National banking laws applicable to 828 HOURS. (See Banking HouBS.) HOUSE OF REPRESENTATIVES: Members of, on National Monetary Commission 744 Speaker of, appointment by, of members of National Monetary Commission 744 HYPOTHECATION. ( See Pletcing. ) 1002 Index. I. IMPORTS, INTEREST ON PUBLIC DEBT: page. Circulation of national banks not receivable for duties and interest, 730 IMPROPER USE OF CIRCULATION: Pledging, hypothecating, etc 758 Uncurrent circulation 760 INCOMPLETE CIRCULATION: Redemption of 753 (See also Cibculation. ) INCORPORATION: Right of State to require 8, 9 (See National Banks; Oesanization and Powers op National Banks; State Banks.) INCREASE OF CAPITAL: Resolution for 888 Certificate of 889 Valid, when 887 INDEBTEDNESS: Limitation of amount of, to bank 11 Prohibition against certain pe^rsons becoming indebted to bank. ... 11 INDEBTEDNESS OF BANKS: Limitation upon 10 Validity of notes and mortgages securing 10 INDIAN TERRITORY: National Bank Act in effect in 827 INDORSER: Liability of collecting bank as 514 INJUNCTION: Not issued to stay proceedings by State court against national bank to discover taxable deposits 13 (See CoMPTROLLBE; Suits.) INLAND BILL OF EXCHANGE : Defined 170 INSOLVENCY: Assets, distribution of, by receiver 777 Comptroller's decision of conclusive 617 Debts due savings banks 624 Defined 603, 614, 617, 620 Rule applicable in determining 611 When debtor insolvent 611 Deposits, recovery of 617 Dividends, rule governing , 623 Index. 1003 INSOLVENCY — Continued : page. Evidence of 614 Expenses incident to, report of 693 Impairment of capital 759 Initial or corresponding bank, effect upon proceeds of collections . . 546 Interest continues to run 623 Jurisdiction of courts to enjoin Comptroller 787 Of national bank cases 699, 700 Knowledge of, what constitutes 615 Officer must have actual knowledge 616 Liability of receiving teller for taking deposits after insolvency of bank 227 Means to pay debts, defined 612 May exist in another State 613 National banks 617 Notice to creditors of associations in 776 Payment of checks after insolvency is a preference 619 Penalty for issuing circulation of associations in 805 Preference of creditors 785 Proof of, return of execution unsatisfied 617 Receiver, appointment of 775 Duties of 775 When may be appointed 775, 778 Recovery of general deposits from national bank upon ground of. . 275 Redemption of circulation of association in 772 Savings banks, appointment of receiver 575, 576 Shareholders' agent 779 " Solvent " and " in failing circumstances " defined 608 Special deposits, when recoverable after insolvency 620 Taking deposits when insolvent, liability 613, 617 Taxes on bank in, remitted 768, 792 Trust companies 674 (See SBT-orF.) INSTRUCTIONS: Of Comptroller of the Currency 867-921 INSURANCE COMPANY: Insurance of solvency of bank by 834 INTEREST: Bonds deposited, how paid 882 Continues to run after insolvency of bank 623 Duty of bank making collections 514 Public deposits to be paid on 962 Rate of, chargeable by national banks 755 United States deposits 712 (See also Usttet.) INTEREST IN NATIONAL BANKS PROHIBITED: By Comptroller 691 By Deputy Comptroller 691 1004 Index. INTERNAL EEVENUB: page. Entry of buildings to discover taxable property 13 Refusal of bank to allow collector to examine paid checks 13, 14 INTERNAL REVENUE, COMMISSIONER OF: Penalty for failure to make returns to, of taxable circulation 791 Remission of tax against insolvent State banks 768, 792 Semi-annual return to, of taxable circulation other than national . . 790 INTERNATIONAL BIMETALLISM: Act March 14, 1900, relative to 814 ISSUE AND REDEMPTION DIVISION ESTABLISHED 809 J. JUDGMENT: Appointment of receiver when judgment obtained against bank. . . 778 Illegal preference of creditors 785 (See also Suits.) JURISDICTION. (See Ckimes, Jubisdiction, Etc.) K. KANSAS: Deposits guarantee ,la\v 833 L. LARCENY. (See Cbimbs, Jubisdiction, Etc.) LAWFUL MONEY: Defined 747 Defined for gold banks 732 Deposit of, to retire United States bond-secured circulation.. 721, 722 Exemption of circulation from taxation when, deposited 789 Expiring associations to deposit 703 Extended banks to deposit 702, 907 Five per cent fund 749, 752 Forfeiture of bonds, for failure to redeem circulation in 773 Limit of amount to be deposited monthly 723 Liquidating associations to deposit 770, 914 Consolidating, not to deposit 771 National bank circulation, including, to be deposited to retire addi- tional circulation 723 To be redeemed in, at Treasury 743 Payment of protested circulation in 774 Protest of circulation, for failure to redeem in 772 Receiver to be appointed for failure to maintain reserve of 747 Redemption account, disposition of 752 Reserve to be 747 Withdrawing circulation, deposit of 721, 722 Index. 1005 LAWFUL MONEY RESERVE. (See Reserve.) LEASE ; PAGE. Lease of property by bank beyond life of its ciiarter 469 LEGAL TENDER: Foreign coins are not 927 " Legal tenders " (see United States Notes) 7, 926 Qualities of different kinds of money 926, 927 Gold coins 794 Minor coins 795 Silver dollars 795-80i8 Subsidiary silver coins 795 United States notes 795 LEGISLATURE: Banks, control over 8, 9, 10 LIABILITIES: Associations organized under Act of February 25, 1863 714 Change of title or location not to affect 698 Comptroller's report to contain statement of national banks 692 Converted State banks 791 Deficiency in reserve, not to increase liabilities 747 Deposit of lawful money relieves from, on circulation. . 771 Duties of receiver 775 Exceptions to limitation 758 Extended associations 701 Liquidating associations, on consolidation 771 Loans, restrictions on 757 Reports of condition to show 764 Restriction on 758 LIABILITY: Association's, for pledging, etc., United States noises, etc 760 Banks and assets, additional circulation 736 Converted State bank for old notes 791 Creditor's bill against shareholders 778 Estates owning stock subject to 710 False certification of checks 761 Individual of directors 783 Limited to amount of capital except 758 Personal of shareholders 710 Shareholders, debars from voting 708 Of certain banks exempt from 710 Trustees, exempt from, when 710 LICENSE TAX. (See Tax.) LIENS: Bank cannot acquire against specific or special deposit 586 Application of rule 586 Collections, lien upon 496 1006 IWDEX. LIENS — Gontimued : page. Deposit of collateral security creates 580 General and special defined 579 National bank, cannot acquire lien on its own stock in hands of stockholders 587, 588 May acquire through loan upon stock of another bank 588 National currency association to have benefit of, when 736 Notice of, by bank upon its stock 60 On stock ( stock certificates ) 580-584 Rule between correspondent and initial bank 584 Set-off of unmatured notes of insolvent depositor against his gen- eral account 587 Under by-law on stock of bank 60 United States has paramount, on assets of association 774 LIMITATIONS : Associations, corporate existence 697 Bonds, withdrawal of 720-722 Circulating notes, amount not limited 730 Capital, converted State banks 712, 713 Capital stock, increase of 706, 707 Payment of 706 Reduction of 707 Requisite amount of 704 Circulation, denominations 727 Deposit of lawful money on withdrawing 721 Exempt from tax 789 Obtainable 725 Obtainable by gold banks 732 To be taken at par 755 Tax on 765, 792 Unauthorized, tax on , 789, 790 Corporate existence of converted gold banks 733 Creditors of insolvent banks, notice to 776 Illegal preference 785 Directors, number of 708 Dividends 757, 758 Expiration of corporate existence 703 Extension of corporate existence 699, 704 Gold certificates, denominations of 761 Impairment of capital 759 Interest rate 755 Jurisdiction, general, of national bank cases 699, 700 Lawful money deposited to retire circulation 722 Liability of national banks 758 Location of associations, change of 698 Loans 757 " National " in title of bank 786 Plac" of business 747 Public depositaries 711 Real estate holdings 704 Reserve, gold banks 732 Receiver, appointment of 778 Purchase of property to protect trust 782 Index. 1007 LIMITATIONS — Continued : page. Reports of condition, transmitted 764 Of earnings and dividends, transmitted 765 Reserve requirements 747 With central reserve agents 753 With reserve agents 748 Shareholders, personal liability of 710 Personal liability of certain converted banks 710 Shares of stock, directors to own 708 Par value 705 State taxation of money 793 Of National banks 768 Stock purchased or acquired 757 Suits, conduct of 787 United States bonds deposited 716 Visitorial powers 785 Voluntary liquidation, vote 770 Deposit of lawful money 770 "Voters at elections 707 LIQUIDATION: Agency 911, 912 Authority of officers in charge 625 Bonds withdrawn 771 Creditor's bill against shareholders 778 Consolidation 771 Dividends 626 Does not dissolve corporation 626 Expiration of corporate existence 916 Expiring associations to comply with provisions for 703 Involuntary 626 Lawful money to be deposited : 770 Notice of, to be published 770^ 914, 917 Penalty for issuing circulation of associations in 805 Redemption of circulation of associations in 772 Resolution for 913 Sale of bonds, when 771 Voluntary 625 Instructions relative to 911, 912 For consolidation 914 Vote required 770 LIQUIDATION AND RECEIVERSHIP: Bonds, deficiency in, first lien on assets for redemption of circu- lation 774 Forfeiture of 773 Sale of, at auction 774 Privately 775 Withdrawal of 771 Charter, forfeiture of 783 Circulation, protest of 772 Consolidation, provisions for 771 Creditor's bill against shareholders 778 Deposit of lawful money on liquidating 770 1008 Index. LIQUIDATION AND RECEIVERSHIP — OowtwMei; page. Distribution of assents of insolvent associations.. 777 Enjoining proceedings 777 Where brought 787 Expiring associations 703 Illegal preference of creditors 785 Jurisdiction, general, of national bank cases 61)9 Of Circuit Courts 787 Notice of vote to liquidate 770 To creditors of insolvent associations 776 To present circulation for redemption 774 Penalty for issuing circulation of expired associations 805 Receiver, appointment of .... 775 When may be appointed 778 Purchase of property to protect trust 782 Receivership, expenses of 778 Shareholders' agent, appointment of 779 Duties of 779 Suits, conduct of 787 Suspension of business for nonpayment of circulation 773 Taxes on insolvent associations remitted 768, 792 Vote required for liquidation 770 (See also Liquidation; Rbcbivbk.) LOANS: Action to recover loan in excess of one-tenth part of capital stock. 385 Associations' liability restricted 758 Authority of banks to make 380, 385, 388 Circulation as collateral for, prohibited 758 Directors may authorize officer to make 103 Limitation as to amount 452 Nature of 379 Officers of bank prohibited from loaning money of bank to them- selves 451 Personal 379 Prohibited upon certain securities 10 On security of own stock 757 Real estate, prohibited 704 Secured by mortgage 379 Restrictions on 380-384, 757 Security for 385-388 Unauthorized loan to officer of bank may be collected 452 LOCATION: Change of 698, 910 Organization certificate to state 696 LOSSES: Bad debts and, exceeding profits 758 LOST OR STOLEN NATIONAL BANK NOTES: Redemption of 753 Inbex. 1009 M. MANDAMUS: page. To compel inspection of books 13 MACERATION: Redeemed circulation to be disposed of by 732 MINIMUM. (See Bonds; Capital Stock; Cibculation; Limita- tions. ) MARRIED WOMEN: Liability as stockholders 84 MEETINGS: Directors 99, 100 Shareholders 917 Notice of 72, 917 METRIC WEIGHTS: Assigned to certain coins 926 Troy weights are used 926 MAXIMUM. (See Bonds; Capital Stock; Circulation; Limita- tions. ) Capital stock, amount of 870 Deposit of bonds 882 MINOR COINS: Acts authorizing and discontinuing ( table ) 946 Amount coined, each coin, to June 30, 1910i (table) 946 Coinage of (tables) 946 Denominations, fine metal, alloy, weight 925 Legal tender, quality of 926 Redemption of ' ; 936 MISDEMEANOR. (See Crimes; Penalty; Official Malfeasance.) MONETARY EVENTS OF THE WORLD : Summary of, since 1786 937-943 MONETARY SYSTEM: National Monetary Commission to investigate and report on 744 Of the United States 922-925 MONEY IN THE TREASURY: Appropriation of, to carry out provisions of Act of May 30, 1908 . . 744 Expenses of National Monetary Commission, to be paid from 745 MONEYS: Legal tender qualities of 926, 927 Paper 931 64 1010 Index. MONEYS — Gontimied: page. Ten kinds in circulation 926 Right of coining vested in United States Constitution 7 Right of Congress to make S (See Lawful Money; Liegai, Tendeb; Cieculatign; Pubuc Moneys.) MORTGAGES : Assignment of, when illegal .■ 785 Assignment, when oflScial malfeasance 762 Real estate, possession, etc., of, by association 704 MUTILATED OR WORN CIRCULATION: Redemption of 731 MUTUAL SAVINGS BANK: Defined 23, 30 Distinguished from capitalized savings bank 33, 34 N. NAME: Change of by national bank 266, 698, 910 NATIONAL: Use of the word, in titles of associations other than national, pro- hibited 786 NATIONAL BANK ACT: Provides for a national currency, etc 695 Status of national banks organized under Act of February 25, 1863, 714 NATIONAL BANK NOTES: Additional circulation of 944, 956-963 Authority for 944 Not legal tender 927 Redemption of 937 Security for circulation 945 NATIONAL BANKS: Acknowledgment of organization certificate 696, 875 Agent in purchase of stocks and bonds, no authority to act as 418 Amendatory acts 944 Authorizing acts 944 Articles of association 695 Amendment of articles of association restricted 705 Authority of 1 Branches, organization of 42-48 May be retained by converted State banks 713 By-laws, power to prescribe 57 Cancellation of redeemed circulation 775 Ittdex. 1011 NATIONAL BANKS — Continued: pagk. Capital required 704 Capital stock, when and how paid in 38 Certificate of organization, form of 875 Execution of, in duplicate 872 Acknowledgment of 875 Association to have succession for 20 years from date of 875 Converted State bank 90fl Certificate of officers and directors 724 Change of name and location 698 Charter forfeiture 783 Charter number to be printed on circulation of 728 Circulation obtainable by 725 Of, tax on 765-768 Of, to bei redeemed in United States notes 749 Of, for what receivable 730 To be taken at par 755 Unsigned or with forged signatures to be redeemed 753 Closed bank circulation 772 Collections, may take evidences of debt for 421 Commercial paper, authority to deal in 429-435 Congress alone may limit business of 11 Conversion of State banks to 712 Corporate and incidental powers of 696 Defined 31 Deposit of bonds by 716 Depositaries of public funds, designation as 437 Application for designation as 438 Directors individually liable when 783 Number and election of 37, 708 Oath of ■.■.'.'.■. 709 Qualifications of 37, 708 Distinguished from State bank 1 Election, holding " annual 708, 709 Enjoining proceedings 777 Examination of, prior to being authorized to begin business . . . 724, 725 Exchange of bonds 718 Execution, filing and acknowledgment of certificate 36, 37, 867 Expiration of corporate existence, provisions on 703 Extended bank circulation 702 Extension of corporate existence 699, 700 Filing of organization certificate 696 Formation of national currency associations by 734 General provisions respecting bonds 720 Gold bank circulation, provisions for issuing 732 Gold banks may be organized 732 Conversion of 733 Government securities, may deal in and exchange 421 Incorporators, who may become 35, 872, 876 Natural persons, who are 35 Infants 36 Married women . 36 Increase of capital stock by 706, 707 Interference with by judicial action of State 32 1012 Index. NATIONAL BANKS — Oontinuea: page. Liability upon stock held as security 423 of, as members of National Currency Association 736 Liquidating banlc circulation 772 Liquidation, provisions for 770-771 Lost or stolen notes of, to be redeemed 753 Municipal bonds, dealing in 422 National Bank Act relative to, in force in the Indian Territory. . . 827 Oklahoma, quaiihoation of directors in 827 Officers, election of 877, 878, 879 Certificate of directors and before bank authorized to com- mence business 880 Certificate of, form of 880 Proxy, cannot act as 879 Bonds of, renewal of, in case of extension of charter 907 Organization, certificate, requisites of 696 Instructions, relative to 867 Forms for 867-878 Married women, parties to 876 Parties to, must be natural persons 872 When complete 40-42 When life commences 51-S2 Payment of stock prior to beginning business 705 Place of business 39 Post notes, issue of, prohibited 731 Powers strictly commercial 24 Preparation of bank circulation 727 President of, to be chosen by board 710 Proof of corporate existence 50, 51 Publication of certificate of authority 725 Real estate, authority to deal in 441-447 Receiver for, when may be appointed 706, 778 Redemption and destruction of circulation of 731, 732, 749 Account, disposition of 752 Reduction of capital stock 707 Regulation of business of 746-768 Relation of bond deposit to capital of 718 Security for circulation , 716, 717 Shares of stock 705 Shareholders' agent 779 Shareholders of, qualifications of, at elections 707 Personally liable 710 When not personally liable 710 State laws, when not exempt from 2'37 Status of, organized under Act of February 25, 1863 714 Subscribed stock not paid for forfeited to 706 Suspension of business after default to pay circulation 773 Taxation of circulation of, by States, etc 793 Tax provisions restricted 792 Taxes on insolvent, remitted 768, 792 United States bonds, non-registered, may exchange for registered. . 421 Where proceedings to enjoin may be brought 787 Withdrawing circulation 721-724 (See also Obganization and Powers of National Banks.) I]S-BEX. 1013 NATIONAL CURRENCY ASSOCIATIONS: page. Act authorizing. May 30, 1908, text of 956-963 Additional circulation issued by State, etc., bonds, other securities, and commercial paper 736-738 Board of 734, 735 Body corporate, when 734, 735 By-laws of, to be approved by Secretary of Treasury 734, 735 Certificate of incorporation to be filed with Secretary of Treas- ury 734, 735 Circulation, additional, securities for and amount issuable . . . 736-738 Circuit Court, United States, suit in, against defaulting bank, when 736-738 Commercial paper characterized and amount circulation issuable thereon 736-738 Composition of 734, 735 - Membership : 734, 735 Comptroller to receive and recommend to the Secretary disposition of applications to issue additional circulation 736-738 Conditions of membership in 734, 735 Creation of, authorized : 734, 735 Duties of 736-738 Effect of reduction, below 10, in membership 734, 735 Liability of members. . 736-738 Lien of United States, benefit of, for 736-738 Lien on assets of defaulting member enforceable by 736-738 Limit of act creating 745 Limit of circulation to be issued to members of 741 Membership in, how obtained , 734, 735 National bank, member in but one 734, 735 National banks to organize 734, 735 Number of, to be formed in any city 734, 735 OflScers and eixecutive committee, election and powers of 734, 735 Organization authorized 734, 735 Powers of 734-738 Powers of board 734, 735 Redemption fund, how made good 739 Rulings of Treasury Department concerning 963-964 Sale of securities authorized when 739 Secretary of the Treasury to approve 743, 744 To determine character and value of securities tendered and approve or otherwise the issue of additional circulation 739 Securities deposited with, to be held in trust for the United States 741, 743 Exchange of, and additional 736-738 Including commercial paper, basis for additional circula- tion 736-738 Treasurer United States may use redemption fund of other banks when 739 NATIONAL MONETARY COMMISSION: Appointment of members of 744 Composition of 744 Creation of, authorized 744 Duties of 744 1014: IlTDEX. NATIONAL MONETARY C0UM.IS81ON — Continued : page. Expenses of, provided 745 Limit of act creating 745 Report to Congress provided 744 NET EARNINGS: Reserve fund from 10 NET FUNDED INDEBTEDNESS: Meaning of, as used in Act of May 30, 190i8 964 NET PROFITS. ( See Dividends. ) NEW YORK CITY: Associations in, reserve agents 747, 748, 753 Bonds, sale of forfeited, in 774 Notice of voluntary liquidation in paper in 770 NON-RESIDENTS : Directors 708, 827 State, etc., taxation of stock of 768 NOTARY PUBLIC: Acknovriedgment of organization certificates before 696, 875 Of rfeports 764, 765 Employment of by banks 521 NOTES: Circulation 5 Indorsement, different kinds defined 478 Issuance 5 Maker's right of set-off 475 Money deposited with bank to pay note is not payment 475 Special deposit, when accepted to pay note 475 Transfer to other banks for discount and collection 215 When bank estopped from setting off payment of note against de- posit of accommodation endorser 471, 472 When note payable at bank, duty of bank 470 When bank may apply deposit to payment of note. .471, 472, 473, 476 (See ADDiTiONAi Cieculating; Commkecial Papee; Demand; Na- tional Bank; Tebasuey; United States.) NOTE TELLER: Duties and authority 229 NOTICE. Board of directors charged with when assembled at meeting 112 When law imputes knowledge to board of directors 112 Directors must have actual notice 118 To directors in official capacity ,113 To agent or officer of bank 115 Of officer's attempt to use his official character for private benefit. . 166 IlTOBI. 1015 NOTICE — Continued.: page. Waiver by stockholder 72 Of reyocation of check 337 Liquidation 914, 917 Meetings, general 917 When notice to cashier Hotice to bank 195 (See Publication; Pbinting.) 0. OATH: Certificate of officers and directors 724 Directors 709 Examiners may take statements under 784 Execution of organization certificate 696 Official, by Comptroller of the Currency 690 By Deputy Comptroller 690 Payment of instalments 705 Reports of condition, and earnings and dividends 764, 765 Semi-annual return of circulation 766-768 Shareholders, list of 763 OBLIGATIONS OF THE UNITED STATES: Defined ... 801 Penalty for dealing in counterfeit. . .^ 804 For illegal possession or use of material for 802 For passing counterfeit 803 For pledging 760 For taking or having unauthorized impressions of tools, etc 803, 804 OFFICERS: Authority of, after bank goes into liquidation 625 Bond may be required of 106 Bonds assigned to be signed by cashier or other 718, 719 Certificate of directors and 724 Ce.rtificate of payment of increase of stock 70:6 Certification of payment of stock by president or cashier 705 Circulation properly signed, issuable 730 Deposits, liability for taking with knowledge of bank's insolv- ency 613, 617 Disqualified to examine national banking associations in which interested as 784 Donations cannot be made by 'without consent of all, the stock- holders 456 Election or appointment of by directors 697 Examination of, under oath 784 False certification of checks forbidden 761 False reports by 685, 686 Forfeiture of charter, provisions for 783 Forged signatures of, to circulation not to invalidate 753 Fraudulent acts by, statute, of limitations against 595 Notes to be marked by 805 1016 Index. OFFICERS — Gontimied : page. Insolvency, knowledge of 615, 616 Loans to officers of savings banks prohibited' 453 Loaning funds of bank to themselves, prohibited 451-453 National currency association, election of 734, 735 Oath, administration of, to reports 764 Official malfeasance, penalty for 762 Penalty for false certification of checks 761 For improper oovmtersigned, etc., circulation 733 For issuing circulation of expired associations 805 For official malfeasance 762 For pledging, etc., circulation 760 For unauthorized receipt of public money. 800 Preference of creditors 785 President of board a director 710 President or cashier, certification of extension 700 Certification of liquidation 770 Waiving notice of protest 772 President or vice-president and cashier to sign circulation 727 Proxy not to act as 707 Receiver, appointment of, for violation of National Bank Act by . . . 778 Redemption of unsigned circulation 753 Reports of condition, verification of, by president or cashier 763 Of earnings and dividends, attestation of, by president or cashier 765 Shareholders' list, verified by president or cashier 763 Taxation, circulation subject to, returns by president or cash- ier 766, 767 Unauthorized circulation, returns by president or cashier .... 790 Trust company, liability of 672 (See also President; Cashier.) OFFICERS AND EMPLOYEES: Borrowing from bank prohibited 11 Overdrawing account prohibited 11 OFFICERS, VAULTS, ETC. : Assignment of to the Comptroller by the Secretary 692 OFFICERS, UNITED STATES : Deposit and withdrawal of public money 797 Penalty for improper countersigning or delivering circulation .... 733 For unauthorized deposit of public money 799 Receiving or disbursing public money to mark fraudulent 805 OKLAMOHA: Deposit guarantee law 833 Qualification of directors of association in 827 ORGANIZATION AND POWERS OF NATIONAL BANKS: Amendment of articles of association 705 Articles of association 695 Branches of converted State banks 713 Index. 1017 ORGANIZATION AND POWERS OF NATIONAL BANKS— Cont'd: page. Capital stock 696 Capital stock requirements 704 Certificate of authority to begin business 725 Of officers and directors 724 Change in title and location 698 Conversion of gold banks 733 Conversion of State banks 712 Corporate powers 696 Deposit of bonds 716 Directors, election of 709 Number and election 70S Oath of 709 Qualifications of 708 In Oklahoma 827 To choose president 710 Vacancy, how filled 709 Enforcing payment of stock 706 Examination preliminary to beginning business 724 Execution of organization certificate 696 Extension of corporate existence 699 Failure to hold election 709 Gold banks, conversion of 733 Organization of , 732 Incidental powers 697 Increase of capital stock, provisions for 706, 707 When valid 70i6 Liquidation 770 Location 696 And title, change of 698 Organization certificate 696 Payment of stock 705 President, election of by board 710 Qualification of 710 Publication of certificate of authority to begin business 725 Reduction of capital stock, provisions for 707 Restoration of capital stock : 706 Shareholders 696 Personal liability of 710 Qualification of, at election 707 When personally liable 710 Shares of stock 70S State banks, conversion of 712 Converted, may retain branches 713 Status of associations organized under Act of February 25, 1863 . . 714 Title 696 And location, change of ' 698 Vacancies in board, how filled 709 ORGANIZATION CERTIFICATE: Certified copy of, evidence 788 Comptroller to grant or withhold 725 Conversion of gold banks 733 Of State banks 712 1018 IliTDEX. ORGANIZATION CERTIFICATE — CtwiimMed; page. Execution of 696 Sealed certificate of Comptroller, eyidence 787 Specifications in i 696 OVERDRAFTS: Allowance of by officer, when crimiiial act 368 Defined 363 Liability of drawer to bank for 368 Overdrawing may be legalized 367 When unlawful ^ 363 Usage or custom, no authority 363 P. PANAMA CANAL BONDS: Available as security for eirculation 717 Tax on circulation secured by 717 PAPER MONEY: History of 931 PASS-BOOKS: , Assignment and transfer of 276 Balancing and delivering to owner does not preclude inquiry as to correctness 276 Duty of depositor to examine within reasonable time 305 By-law requiring presentation of before payment 57 (See Sayings Banks.) PAYMENT: By check 335 PAYMENT OP CAPITAL STOCK: Provisions relative to 706 PENALTY: Appointment of receiver for violations of act 775, 778 Bond of Comptroller 690 Of Deputy Comptroller 690 Counterfeiting circulation 801 Dealing in counterfeit circulation 804 False certification of cheeks 761 Failure to pay installment on stock 706 To redeem circulation 773 Forfeiture of charter 783 Illegal possession or use of material for circulation 802 Imitating bank circulation for advertising purposes 734 Improper countersigning or delivering circulation 733 Interest, unlawful 756 Issuing circulation of expired associations 805 Jurisdiction of United States courts 699, 700 IlfDEX. 1019 PENALTY — Continued : page. Mutilating circulation 734 Misapplication of money order funds 798 " National," unlawful use of the word 786 Official malfeasance 762 Passing counterfeit circulation 803 Pledging United States notes or bank circulation 760 Reports to Comptroller, failure to make 765 Eeserve, maintenance of 747 Semi-annual return of circulation 765-768, 789, 790 Taking or having unauthorized impressions of tools, etc 803, 804 Unauthorized deposit of public money 799 Receipt or use of public money 800 PERSONAL LIABILITY. (See Shabbholdebs ; Tbtjstbe; Liabiutt.) PLACE OP BUSINESS: Where located ' 266, 256 Removal, by national bank 252 By State bank 252-255 PLATES: Act of May 30, 1908 727 Control of 726 Cost of engraving 703, 750, 884, 907 Custody of 692 Engraving of 727 Examination annually 729 Expense of examination and destruction of 729 Extended bank, re-extended bank 708, 907 Liquidating bank, to be destroyed 729 Penalty for counterfeiting, or having possession of counter- feit 802, 803 Taking unauthorized impressions of tools, etc 803 Having false impressions of tools, etc 804 PLEDGE : Liability of pledgee or trustee upon stock 81, 87 Right of pledgee to vote stock 73 Statute protecting pledgee from liability 83 PLEDGING OR HYPOTHECATING CIRCULATION: Prohibited 758 POPULATION: Relation of capital stock to 704, 705 PORTO RICO: National banking laws applicable to 827 POSTAL SAVINGS BONDS (2%, PER CENT.) : Authority for. Act of June 25, 1910, sections 10 and 11 965 1020 Index. POLITICAL CONTRIBUTIONS: PAQBi Prohibited 457, 763 POSTMASTER-GENERAL : Deposit of funds by, authority of 798 POSTMASTERS: Deposit of public funds by 798 Misapplication of money-order funds by 798 POST-NOTES: National banking associations prohibited from issuing 731 POWERS : Granted to national banks 696 Incidental, of national banks 696 National currency association 734-738 (See also Comptboumb.) PREFERENCES: Preference of creditors illegal 785 PREPARATION OF CIRCULATION: Provisions for 727 PRESENTATION FOR PAYMENT. (See Checks.) PRESIDENT: Allowance of overdrafts- 143 Usage no excuse for 144 Authority to employ counsel 454 Borrow from bank unless prohibited 145 Certificate of officers and directors 724 Checks, power to certify 161, 326 Compensation 148 Countersigning or delivering circulation improperly 733 Director to be 710 Donations cannot be made by without consent of stockholders 456 Election or appointment of, by directors 697 False certification of checks and penalty for 761 Liability to bank for acts which amount to breach of trust 143 Official malfeasance, penalty for 762 Powers and duties 133-140 And limitations by States 149-151 Of, implied 151 Statutory 140 Limited and prohibited 141 Proxy, not to act as 708 Public money, unauthorized receipt of, by 800 Qualifications, general 129 Removal of, by directors 148 Itepresentations and admissions, effect of 143 Index. 1021 PRESIDENT — Continued : page. Signature of, forged, not to invalidate circulation 753 On circulation 727-730 Statutory qualifications 133 Violations of act by, penalty for 778, 783 (See also Officebs.) PRESIDENT OF UNITED STATES: Appointment of Comptroller by 690 PRINTING: Additional circulation 727 Annual report of Comptroller, number, distribution 692-694 Certificate of authority to begin business 725 Charter numbers on circulation 728 Circulation of associations 727 Extended blanks 702 Creditors of insolvent associations, notice to 776 Notice of sale of delinquent stock 706, 759 Notice of sale of bonds at public auction 774 Liquidation 770 Special annual election 700 Penalty for counterfeiting circulation 801 Illegal possession or use of material for circulation 802 Imitating circulation 734 Taking or having unauthorized impressions of tools, etc., for 803, 804 Reports of condition 764 Shareholders' agent, notice of election of 779 Voluntary liquidation, notice of 770 (See also Publication.) PRIVATE BANKER: Defined 28 PRIVATE BANKING: Privilege of 2, 3 May be prohibited j 4, 8 PRIVATE CORPORATION: Banks constitute 8 PROTEST OF CIRCULATION: Bonds forfeited, -when 773 Bonds, sale of, v^hen 774, 775 Failure to redeem circulation 772 PROXY: Right to vote by 73 Shareholders may vote by 879 Form of 879 Director, officer, clerk, teller, and bookkeeper not competent to act as 879 1032 IWDEX. PUBLICATION: page. Annual election, notice of holding special 709 Certificate of authority to begin business 725, 885 Creditors of insolvent associations, notice to 776 Nonpayment of circulation, notice to presemt 774 Reports of condition of national banks 764 Sale of bonds, notice of 774 Of delinquent stock, notice of 706, 759 Shareholders' agent, notice of election of 779 Voluntary liquidation, notice of 770, 914, 917 (See also Printing.) PUBLIC DEBT. (See Impobts and Inteeest on Pubuc Debt.) PUBLIC DEPOSITS: Banks to give security for 711 Interest on 712, 962 PUBLIC MONEYS: Defined 438 Designation of national banks as depositaries of 437 State banks may accept deposit of, unless prohibited by statute . . . 439 Q. QUALIFICATIONS: Comptroller of the Currency 690 Directors of association 878, 879 National banks in Oklahoma 827 Examiners of associations 784 Shareholders' agent i 779 R. RATE. (See Interest; Tax; Ustjrt.) RATIO: Additional national bank circulation, to capital and surplus 736 (See also Bonds; Capital Stock; Ciectjlation. ) REAL ESTATE: Bank, authority to deal in 12 Authority of State bank to deal in 447 National bank cannot hold for longer period than five years 447 Has no power to buy and sell for profit 446, 447 Provision of statute 441 May hold as security 442—447 Investments and holdings restricted 704 Subject to State, etc., taxation 768 RECEIVER: Appointment and duties of 775 Index. 1023 RECEIVER — Continued : page. Appointment of, for failure to dispose of own stock 775 For failure to restore diminished capital 775 For false certification of checks 775 For nonpayment of circulation 775 For impairment of capital 775 For insolvency 778 For non-maintenance of reserve 775 Courts may enjoin 777 Expenses of, how paid 778 General jurisdiction of national bank cases 699, 700 Jurisdiction of circuit courts to enjoin Comptroller 787 Purchase of property by, to protect trust 782 Payment for , 783 Savings banks, appointment 575, 576 RECEIVERSHIPS. (See Liquidation and RECEavKESHiPS ; Re- ceiver. ) RESCISSION: Of illegal or fraudulent contract made by national bank 22 REDEMPTION: Additional circulation, Act May 30, 1908 739, 742, 957, 963, 964 Cancellation of circulation sent for 775 Coin obligations 937 Deposit of lawful money for, of associations in liquidation 770 Disposition of, account 752 Enjoining Comptroller 777 Extended bank circulation 702 First lien on assets 774 Five per cent, fund for, to be maintained 749 Part of lawful reserve 749 Forfeiture of bonds 773 Forged signatures not to prevent 753 General provisions respecting 749 Incomplete circulation 753 Issue and redemption division established 809 Lawful money, of circulation 743 Liquidating bank circulation 772 Money, several kinds 936-937 Notice to present circulation for 774 Place of redemption of circulating notes 754 Proceeds from sale of bonds for, of circulation 771 Profit on circulation not presented for 702 Protest of circulation, for failure to redeem 772 Records of 775 Sale of bonds 774, 775 United States notes, of circulation in 749 Unsigned circulation to be redeemed 753 Withdrawn circulation 721, 722 Worn or mutilated circulation 731, 7S2 1024 IWDEX. REDEMPTION ACCOUNT: page. Disposition of 752 REDEMPTION OF UNITED STATES NOTES: Gold coin and bullion to be set apart as reserve- for 807 REDISCOUNT: Of paper by bank 426 REDUCTION OF CAPITAL: Resolution for 890 Valid, when 889, 890 Disposition of 890 RE-EXTENSION OP CHARTER: Law and instructions relative to 908 REGISTER OF THE TREASURY: Signature on circulation 727 REGISTERED BONDS. (See Bonds, United States.) REGULATION OF BANKING BUSINESS : Assessment, enforcement of 759 Cireulaiion, improper use of 758 Dividends 757 Prohibited, when 758 Examiners, appointment of 784 Compensation of 784 Impairment of capital 758 Interest, limited 755 Unlawful, penalty for 756 Laws governing certain associations 716 Liability of association restricted 758 Loans, restrictions on 757 Net profits 757 Place of business 747 Real estate, purchasing, eto 704 ! Reports of condition 764 Failure to make 765 Verification of 764, 765 Of dividends and earnings 765 Reserve cities 747, 751 Balances with agents '. : 748 Central 753, 754 Requirements 747 Reserve requirements, gold banks 732 Shareholders, list of 763 State taxation of associations 768 Stock, holding, etc 757 Surplus and dividends 757 Uncurrent notes, use of, prohibited 760 Uearned dividends prohibited 758 Visitorial powers, limitation of 785 Ikdex. 1025 REIMBURSEMENT. (See Cieculaiton; Expenses; Plates and REMOVING PLACE OP BUSINESS. (See Place of Business.) REPORTS: PAGE. Circulation, semi-annual return of 766, 767 Comptroller of the Currency ■.;.;... 692, 693 694 May call for special 684 Distribution of Comptroller's .....' 694 Dividends and earnings _\ ygg False entries in by officers 685 686 What are ' ggg List of shareholders nag ■ No uniform law of States requiring. 685 Not less than five required during each year 683 Number of copies of Comptroller's 694 PajTnent of capital stock 705 Should be more frequently called for 685 Statement of condition of national banks '. 764 Verification of, relative to additional oireulation, by the Comp- troller ygg Verification and attestation of 685 Must be verified by president or cashier and attested by three directors g83 RESERVE: Clearing house certificates 748 Five per cent fund 749 Gold and silver, held by gold banks 732 Gold certificates : 761 Lawful money 747 Maintenance of , .' 747 Penalty for failure to maintain '. 747 Proportion of, with agents 748, 753 Requirements 747 Requirements for gold banks 732 Silver certificates 796 United States deposits, not required on United States note certifi- cates ■ 749 RESERVE AGENTS: 'Balance with 748 (See also Agent.) RESERVE CITIES: Additional, provisions for 751 Central, deposits in 753 Provisions for 754 Named 747 Requirements, not applicable to gold banks in San Francisco 753 Requirements of associations in 747 65 1026 IiTOBX. RESERVE FUND: page. Provision for 10 Changing to capital stock 10 RESIDENCE: List of shareholders and, reported annually 763 In organization certificate 696 National banks 6&9 Qualification of directors of associations 708, 827 RESOURCES. (See Assets.) RESTORATION OF CAPITAX STOCK: Provisions for 706, 759 RETURNS. (See Cibcttlatign ; Rjeipobts; Taxation.) RULINGS OF TREASURY DEPARTMENT ON ACT MAY 30, 1908: Extent of territory, National Currency Association 964 Redemption fund for additional circulation 963 Security for additional circulation 964 Withdrawal of a bank from a currency association 963 " RUN ON BANK:" Powers and duties of cashier 175 S. SALE: Assets of insolvent associations by receiver 775, 776 By shareholders' agent 779 Bonds for failure to redeem circulation 771, 773, 775 Power of directors to sell property of bank 104 Securities deposited for additional circulation 739 Stock for delinquent payment of installment 706 On impairment of capital 759 Taken for debt 757 SAFE DEPOSIT DEPARTMENT: Conducting safe deposit and receiving special deposits distin- guished 459 Establishment of by national bank 280, 281 Liability of bank conducting safe deposit 459-462 Receiving special deposits 459-462 Power of bank to conduct , 459 SAVINGS BANKS: Authority to deal in commercial paper 435 Borrowing of money, power to 574 Business, regulation by States , 555 By-laws, discussion of [ 563-572 General rule defining held binding between the parties . . . 571, 572 Index 1027 SAVINGS BANKS — Gontinuea: page. Defined 23 Depositors, rules regulatiiig and governing 559-561 Relationship of in mutual bank 557 Liability in capitalized bank 558 Deposits, nature of in capitalized bank 558 Amount of may be regulated by statute 561 In trust 559 Discount and purchase of negotiable paper 575 Gift — deposit in trust 561 Insolvency, right of depositors to set-off 576-578 Appointment of receiver 575, 576 Eights of depositors 576 Investments 575 Loans upon personal property 575 To officers of, prohibited 453 Nature and general discussion of 551-555 Operation of 921 Pass-books, original books of entry 572, 573 Assignment of 573 When not negotiable, possession of does not constitute proof of right to draw money 573 When balance in becomes an account stated 573 Entries in, if questioned, are facts for the jury 573 Loss of, recovery of deposit 574 Proof of ownership 57 Presentation of 57 Payment of deposits, rules governing 561 Preference in payment by insolvent national bank 624 Receiver, appointment of 575, 576 Set-off by mutual savings banks 624 Special deposits, when preferred 562 Stock, contract for purchase and sale of, for speculative purpose, ultra vires 575 Withdrawal, notice of, when not required 562 SEAL OF OFFICE OF COMPTROLLER: Certified copy of organization certificate under, evidence 788 Certificates under, competent evidence 787 Description, impression and approval to be filed with Secretary of State 691 Devised by Comptroller and approved by Secretary of the Treasury. 691 SECRETARY OF THE INTERIOR: Report to, of bureau employees 693 SECRETARY OF STATE : Description, impression and certificate of seal of Comptroller to be filed with 691 SECRETARY OF THE TREASURY: Acts of Comptroller and Treasurer to be approved by 743, 744 Agent, special, to be appointed for associations failing to redeem circulation 773 1028 IXDEX. SECRETARY OF THE TREASURY — Gontimied : page. Appointment af Comptroller on recommendation of 690 Appointment and classifioation of clerks by 691 Of Deputy Comptroller by 690 Assignment of rooms, etc., for Comptroller by 692 Authorization of, for issue of additional circulation 736-738 Authorized to exchange registered for coupon bonds 718 Circulation, worn or mutilated, destruction of, by 731, 732 Determines character and value of securities for additional cir- culation 736-738 Duties of Comptroller under general direction of 689 Exchange of bonds, terms of, prescribed by 720 Information relative to available securities for additional circula- tion to be obtained by, and tendered to banks 743 Organization of national banks with capital less than $100,000 to be approved by 704, 705 Plates and dies, examination of, by 729 Recommendation of appointment of Comptroller by 690 Recommendation of Comptroller to be approved, or otherwise, by 736-738 Receivers, appointment of, by Comptroller, concurrence in by. In certain eases 747 Reserve cities, designation of, by Comptroller, to be approved by. . 754 Rules to be established by, relative to Act of May 30, 1908 744 Seal of oflfice of Comptroller to be approved by 691 Supervision of formation of national currency associations 734 SECURITIES, other than United States bonds, for additional circula- tion : Character, etc., acceptable by Treasurer of the United States and Secretary of the Treasury 739 Character, etc., acceptable through national currency associa- tion 736-738 Exchange of 736-738, 739 Information relative to available, to be obtained by Secretary and tendered to banks 743 Receipt for, to be given by Treasurer or Assistant Treasurer 741 Sale of, when 739 Treasurer or Assistant Treasurer to accept 741 Transfer and assignment of, to be countersigned by Comptroller of Currency 741 Withdrawal of, to retire circulation 723 SECURITY FOR CIRCULATION: Commercial paper as 736-738 Municipal, etc., bonds as 739 United States bonds as 716, 717 (See Bonds, United States; Additional Cibcui.ation.) SECURITY FOR LOANS: Personal 897 Index. 1029 senate: pagk. Comptroller's reports to be sent to 694 Members of, on National Monetary CommiBsion 744 Presiding officer of, appointment by, of members of National Mone- tary Commission 744 SET-OFF: Bank summoned as garnishee in an action against an insolvent depositor may set off notes 587 Clearing house, right of 658 Debtor for money borrowed cannot set off deposit 624 Depositor cannot purchase debt after insolvency of bank for pur- pose of set-off 623 Equitable set-off 622 Eight of depositor in insolvent bank governed by condition at mo- ment of insolvency 620 Rule applied 621 Eight of depositor in savings bank 576-578 Special deposits in national bank 588 In savings bank 576, 577 SHAREHOLDEES: Action, when right of accrues against stockholder in national bank. 88 Additional stock, right to subscribe for 259 Agent of, to return to, assets of insolvent association 779 Appointment and qualification of agent of 779 Assessment for impairment of capital 759 Assets of insolvent association to be returned to, ratably after debts are paid 777 Capital stock, authority to increase 104 Consent of necessary to extension of corporate existence 700 Conversion of State banks requirements 712 Creditor's bill against 778 Creditor may sue stockholder of State bank 88 Directors, election or appointment of by 697, 708 Disqualified from voting, when 879 Dissenting to extension may withdraw 70il, 908 Donations, power to make vested in 456 Duties of agent of 779 Enforcement of assessment for impairment of capital stock 759 Enforcing payment by, of installments 706 Estates and funds with trustee liable for assessment 710 Executors, administrators, guardians and trustees not personally liable 87 Extension of corporate existence 699, 700, 902 Impairment of capital, assessment of stock for 104 Increase of capital stock by 706, 707 Liability of, fixing date of 78, 86 Extent of liability 79, 84, 89 Cannot be enlarged by by-law 74 Individual liability of 83 Enforcement of individual liability of 87, 88 For interest of debts of bank 84 Stock held as security 423 1030 IWDEX. SHAREHOLDERS — Continued : page. To creditors of corporation 74 Beyond subscription 75-77 When liable to cbrporation liable also to creditors 75 Of Stockholders, trust company 672 List of, to be kept and copy sent to Comptroller 763 Subject to inspection 763 Location, change of by 698 Married women 876 Liability as stockholders 84 Meetings of 917 Notice to of meetings 72 Personal liability of 710 Personal liability of, in certain converted State banks 710 Pledgee cannot vote stock 73 Provisions for election by, when 709 Proxies, voting by 73, 707, 879 Qualifications of directors 708 Records of corporation, right to inspect 73 Reduction of capital stock by 70T Re-extension of corporate existence by 908 Representatives of deceased stockholder liable 84 Rights and liabilities of on transfer of shares 705 Rights of, to increased capital 915 Shares of dissenting, to be paid for 908 Statute of limitations runs against liability of, when 592 Stock, corporation cannot vote its own 73 Stock, purchase and transfer of 69-72 Subscription, enforcement of 63 Defenses to 68 Liability under by-laws for 69 Title, change of by 698 Vote of, necessary to place association in liquidation 770 Votes of in elections and meetings 879 Vote, right to 72 Voters, qualifications of 707 What constitutes 66-68 Waiver of notice 72 Who may be 61 SHAREHOLDERS' AGENT. (See Agent.) SHARES : Assessment for impairment of capital 104 Association not to own or hold its own, except 757 Consent of owners of two-thirds, necessary to extension 700 Converted State bank to be the same as prior to conversion 712 Commercial and savings banks have incidental power to deal in . . . 423 Dealing in, national bank no authority to, as agent 418 Disposition of, taken for debt 757 Fifty per cent of aggregate value of, to be paid in prior to be- ginning business 706 Holding of, in other banks, by converted banks authorized 712 Installments, payment and certification of 705 Index. 1031 SHARES — Gontimied : page. List of owners of, to be kept and copy sent to Comptroller 763 Loan on security of, prohibited 757 Oath of director relative to 709 Organization certificate to state number of 696 Owners of two- thirds may place association in liquidation 770 Personal property 705 Preference in allotment of, in succeeding association 701 Purchase and transfer of 69 Qualifications of directors 708 Receiver may be appointed for failure to dispose of, taken 778 Sale or forfeiture of, for failure to pay installments due 706 Sale of, when necessary 701, 757, 759 State taxation of 768 Transfer of 69, 705 Value, par, of each 705, 712 Value of, of shareholders dissenting to extension, how ascertained. 701 Voting 707 SIGNATURE ON CIRCULATION: President or vice-presilent and cashier 727 Treasurer and Register, United States 727 SILVER: Construed to be lawful money, when 732 Reserve of gold banks to be gold and 732 SILVER BULLION: Authority to purchase 924 Production of in United States since 1792 (table) 949 SILVER CERTIFICATES : Amount outstanding June 30, 1910 ' 935 For what receivable 927, 937 History of 934 Not legal tender 927 Redemption of 937 Clearing house balances payable in 796 Issue of, in place of Treasury notes, when 809 Issue of, when 809, 811 Reserve of national banks may be 796 Silver certificates, denomination of 811 SILVER COINAGE: Dollars 808, 809 Subsidiary 811, 812 SILVER COINS: Acts authorizing and discontinuing (table) 946 Amount coined, each coin, to June 30, 19101 (table) 946 Changes in weight and fineness of (table) 946 Denominations, fine metal, alloy and weight 925 tender quality of 926 1032 Inbex. silver dollars: . To remain legal tender 808 (See Standard Silveb Doixabs.) SOLICITOR OF THE TREASURY: Conduct of suits under direction and supervision of 787 SPEAKER OP THE HOUSE OF REPRESENTATIVES: Appointment by, of Members of House of Representatives on National Monetary Commission 744 SPECIAL AGENT. ( See Agent. ) SPECIAL REPORTS. ( See Reports. ) STANDARD BULLION: Proportions of pure gold or silver and alloy 925 STANDARD OF VALUE: Act to define and fix, text of 950i-9S5 History of 922-925 STANDARD SILVER DOLLARS: Acts authorizing and discontinuing coinage of (table) 946 Amount coined 829, 946 Changes in weight and fineness (table) 946 Coining value in 926 Fineness and weight 924 History of 928, 929 Legal tender quality of 926 Not redeemable 936 Snace for storage of 929 Weight of $1,000 of 926 STATE: Authority over banks 1,2, 5 Money, no power to make 5 Prohibition against private banking 4 Prohibition against taking of or loaning money on certain securi- ties 10 Punishment by, of crime established by Congress 11 Regulation of banking business 10-14 Right to govern banking 8, 10 STATE BANKS: Authority of 1 To levy and sell real estate for profit 447 To deal in real estate 447 To deal in commercial paper 435 Branches, establishment of 38, 48 Limited powers of 48 Of converted 713 Relation of after conversion 246 Index. 1033 STATE BANKS — Continued: page. Capital, amount and payment of 39 Circulation of, when exempt from taxation 789 Commercial and Savings banks have incidental power to deal in stocks, bonds, etc 423 Conversion of 712, 895-903 Corporate relation to old bank after reorganization 240 Corporate existence of State bank not destroyed 241 Distinguished from national bank 1 Incorporation, articles of incorporation, contents 37, 38 Purpose of incorporation, statement of 38 Place of business, statement 39 Statement of amount of capital stock actually paid in 38 Compliance with statute essential 40 Name, selection of 38 When incorporation complete 40-42 Liability of national bank after conversion for debts of State bank. 243 Penalty for failure to make return of tax on circulation 791 For unauthorized receipt of public money 800 Proof of corporate existence 50, 51 Public moneys may be accepted as deposits unless prohibited by statute . 439 Reports of, provided for 692 Eetum of taxable circulation 790 Shareholders' personal liability, exceptions 710 Shares of, copverted 712 Tax on converted 791 On unauthorized circulation 789-790 Term of existence 38 Voluntary liquidation before expiration of charter 38 STATE OR PRIVATE BANK: Reorganization of 895 Purchase of assets from 895, 896 STATE COURTS. (See Compteoijubh ; Suits.) STATE, TERRITORY OR DISTRICT: Change of title or location of association 698 Compensation of national bank examiners 784 Conversion of bank organized under laws of 712 Interest, legal rate in, national banks not to take, etc., in excess of. 755 " National," use of the word in titles 786 Proceedings to enjoin Comptroller or receiver, to be brought in district in which association is located 787 •Qualification of directors 70S Taxation of circulation of State, etc., associations 788-792 Of money by 793 Of National banks by 768 STATUTE OF LIMITATIONS: Certificates of deposits, runs against when 589 Checks, runs against when 589 1034 IliTDEX. STATUTE OF UMITATIONS — Gontimied: page. Fraudulent acts by officers of bank, when statute runs 595 Runs against depositor, when 592 State's statute, when does not apply 594 Commences to run, when 594 Stockholder's liability, runs against when 592-594 STOCK SUBSCRIPTION LIST: Suggestion relative to 870 SUBSIDIARY SILVER: Acts authorizing and discontinuing (table) 946 Amount coined, each coin to June 30l, 1910 (table) 946 Changes in weight and fineness (table) 946 Denominations, fine metal, alloy and weight 925 History of 930 Legal tender quality of 927, 930 Redemption of 936 Weight of 931 Of $1,000 of 926 SUCCESSION: Expired associations 701 Period of, national banks 696, 875 SmTS: Against United States officers or agents 787 Certified copy of organization certificate evidence in 788 Circuit Courts, jurisdiction of, to enjoin Comptroller 787 Circuit and District Courts, jurisdiction of 699, 700 Corporate powers of association 696 Creditor's bill against shareholders 778 Crimes, jurisdiction, etc. (See Ceimes.) Enjoining Comptroller or receiver 777 Forfeiture of charter 783 Proceedings to enjoin Comptroller to be brought, where 787 Sealed certificate of Comptroller, competent evidence 787 Shareholders' agent 779 Liability, to enforce 775-776 Solicitor of the Treasury to direct and supervise certain 787 (See Actions.) SURPLUS: Accumulation of 888 Additional circulation issuable, measured by 736 Converted State bank with capital of $5,000,000 710 Creation of 757 Loans, limit of, measured by capital and 757 Use of, and of other profits, on increase of capital 888 SURPLUS AND DIVIDENDS : Provisions for surplus and payment of dividends 757 Index. 1035 T. TAX: PAGE. Bills of converted State bank 791 Books, inspection for purpose of ascertaining taxable deposits 13 Circulation, enforcing payment of 767 Exempt from 789 Failure to make returns 767 Rate and time of payment 765, 882 Refunding excess 768 Semi-annual return of 766-767 Money of all kinds subject to, by States, etc 793 Notes, State banks, corporation, company, or persons 788, 789-790 Failure to make return 791 Semi-annual return ! 790 Provisions restricted 792 Remission of, on insolvent national banks 768, 792 State taxation of national banks 11, 768 Trust companies 674 TELLER: Certification of checks 162, 163, 205, 207, 208, 210, 326 Duties 210-215 At close of day's business 210 Instructions and authority from cashier 210, 215 Liability for losses 207, 209 Liable only for willful acts 216 Note teller, duties and authority 229 Paying teller does not succeed to powers of absent cashier 215 Functions of 203 No authority to contract for bank 204 Power of, to receive deposits 211-215 Payment of endorsed checks 209 Powers in absence of cashier 204 Ratification of unauthorized acts by 207, 209 Receiving teller, responsibilities 216 Duty to examine money and instruments offered for deposit. . 216 Limitation of powers 225 No authority to make discounts, certify cheeks or allow credit. 225 Should not open account with stranger until so authorized .... 225 Correcting errors in deposits 225 When duties not defined is subordinate of cashier 227 Liability for receiving deposits after insolvency of bank 227 Test adopted by United States mint to detect counterfeit coins. . . . 217 Tests in detecting counterfeit paper 218 Touch test 219 Geometric lath-work test 220 The genuine vignettes 221 Spurious signatures 223 Unlawful and unauthorized acts not binding on bank 215 TEMPORARY CERTIFICATE OF STOCK: Term of 871 1036 Inbex. TITLE AND LOCATION: page. Application for reservation of title 867 Change of, by national banks ". 206, 698, 910 Reservation of title for applicants 867 TRADE DOLLARS: History of 930 TRANSFERS. When void 785 (See Tbeastjreb, United States; Bonds, United States.) TREASURER, UNITED STATES: Acceptance of bonds, etc., on approval of Secretary 739 Acts of, to be approved by Secretary of Treasury 743 Circulation, withdrawal of, provisions for 723 Currency bureau in 689 Deposit of securities with 739 Disposition of redemption account 752 Enforcing tax on circulation 767 Examination of bonds and records, provisions for 719-720 Interest on bonds to be retained by, when 759, 767 Monthly returns of additional circulation to, and verification of re- ports by Comptroller of the Currency 765 Proceedings on default in making return on circulation subject to duty 767 Proceeds of sale of securities to be deposited with, to redeem addi- tional circulation . . . .■ 739 Public moneys to be deposited with Assistant Treasurer, govern- ment depositaries, or 797 Receipt for bonds deposited to be given by, or Assistant Treasurer. 741 Redemption fund of other banks available on default 739 To be kept with 749 Redemption of circulation by 749 In United States notes by 749 Semi-annual return to, of circulation subject to duty 766 Signature of, on circulation 727 Tax, excess, refunding 768 On circulation to be paid to 765-766 Title to bonds deposited with, in trust for United States 741 Transfer of bonds in trust for associations to be made to 718-719 TREASURY NOTES OF 1890: Amount issued 935 Outstanding June 30, 1910 935 Authority for 935 Demand 795 History of 935 Interest bearing 796 Issue of 814 Legal tender quality of 927 Redemption of 937 Index. 1037 treasury, united states : paae. Associations to reimburse, for cost of redemption of circulation and plates 749-750 Notioe to present circulation at 774 Penalty for failure of associations to report to be paid into. . 765, 767 Redemption account, disposition of 752 Fund, 5 per cent, in 749 Of circulation at 722, 749, 772, 775 (See also Tbbasueeb, United States.) TROY WEIGHT: Metric weights assigned to certain coins 926 Number of grains of, equivalent to gram 926 United States coins are measured by 926 TRUST: Purchase of property by receiver to protect 782 TRUST COMPANIES: Banking powers, may nave 667 Rule determining 671 Conversion of 895 Forfeiture of franchise 673 Defined 28 Deposits, liability for 673 Distinguished from a bank 666 Insolvency, set-off 674 Preferences 674 Officers and stockholders, liability 672 Representations, knowledge 673 Powers of 666 With banking privileges 673 Taxation of 674 TRUSTEE: Shareholders' liability, exemptions from 710 Liability as stockholder 81, 87 For assessments upon stock 86 U. UNCURRENT NOTES: Issue of, prohibited 760 ULTRA VIRES ACTS: Defined 16 Validity and enforcement of 17-22 Contract with person to secure deposits is 457 Guaranty by bank may be 468 Contract by savings bank for purchase and sale of stock for specu- lative purposes 575 1038 Index. UNAUTHORIZED BANKING: page. Defined 15 By private banker 16 Corporation 15 Building and loan association 15 Partnership 15 UNITED STATES: Courts of, may enjoin proceedings 777 Forfeiture of charter 783-784 Suits in which United States is party 787 (See also Officers of the United States; Obimes, JusiSDiCTioif, Etc.) UNITED STATES CONSTITUTION: Banking, right of 7 Money, coining and regulating value 7 Reasons for provisions regulating banking and money 5 UNITED STATES DEPOSITS: Interest to be paid on, when 712 Reserve on, in banks, not required 749 UNITED STATES DISBURSING OFFICERS: Fraudulent notes to be marked by 805 Penalty for unauthorized deposit of public money 799 Withdrawal of public money 797 UNITED STATES NOTES: Amount authorized 932 Circulation of banks to be redeemed in 749-750 Fraudulent, to be marked 805 History of 932 Legal tender quality of 927 Obligations of the United States defined 801 Penalty for dealing in counterfeit 804 For illegal use or possession of material for printing 804 For passing counterfeit 803 For pledging, etc 760 For taking or having unauthorized impressions of tools, etc 803, 804 Redemption of 936 Subject to taxation by States, etc 793 USURY: Interest, when not 755 Penalty for 756 Taking of ground for forfeiture of charter 600 V. VACANCIES: Board of directors, filling 709 Index. 1039 value : page. Unit of, history 922, 925 VICE-PRESIDENT: Bonds, United States, may sign transfer of 718-719 Circulation, may sign 727, 730 Election or appointment of 697 Power to certify cheeks 161 Proxy, not to act as 708 (See also Officees.) VIOLATIONS OF PROVISIONS OP NATIONAL BANK ACT: Forfeiture of charter for 783-784 VISITORIAL POWERS: Limitation of national banking associations, subject to 785 VOLUNTARY LIQUIDATION: Consolidation 914 (See LiQinDATiON.) VOTERS: Qualifications of shareholders at elections 707 VOTING: Elections and meetings 877 Qualification and rights of shareholders 878, 879 W. WEIGHT AND FINENESS OF COINS: Changes in (table) 946-948 History of 922-924 Troy weight used for United States coins 926 WITHDRAWAL: Additional circulation 723 Bonds, general provisions respecting 720 Circulation, provisions for 721-722 Deposit and, of public moneys 797, 799 Dissenting shareholders 701 Expired associations, bonds of 703 Illegal preference of creditors 785 Liquidating associations, bonds of 771 Reduction of capital 707 Unearned dividends 758 (See Savings Banks; Deposits.) Whole Ntjmbee op Pages 1094.