iiuii;;i flip' I II '1 11 I »ll) 111 mm •III :!.'. ! ' |i' «»' 3 THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES ^S k"Tilr'2 TMW^?^/i %N y^' yKA ^ ^^4 w PRATTS' DIGEST, COMPKISINO THB Laws Relating to National Banks, With Annotations, References to Decisions OP the Courts, and Table of Cases Cited, AI.SO information in regard to the organization and con- duct OF NATIONAL BANKS, FORMS AND INSTRUCTIONS OF THE OFFICE OF COMPTROLLER OF THE CURRENCY^ AND MISCELLANEOUS REGULATIONS OF THE UNITED STATES TREASURY DEPARTMENT OF IMPORTANCE TO BANKERS. Edition of 1901. Revised, PRBPARSD AND PUBUSHBD BY a. s. pratt & sons, National Bank Agents, WASHINGTON, D. C. Bntered according to Act of Congress, in the year 1898^ by A. S. Pratt & Sons, In the Office of the I. Heard, 38 Atl. Rep., 788 17, 86 Harrington v. First N. Bk. Chittenango, i Thompson & Cook, (N. Y.),36i 16 Hayden v. Bank of Syracuse, 59 Hun., 620 64 " v. Chemical N. Bk., 80 Fed. Rep., 587 139 " V. Thompson, 36 U. S. App., 361 93 Hayes v. Shoemaker, 39 Fed. Rep., 319 25, 50, 57 Hays V. Beardsley, 136 N. Y., 299 138 Hazard v. Nat'l Exchange Bank of Newport, 26 Fed. Rep., 94 ... . 27 Hendee v. Connecticut, etc., R. R. Co., 26 Fed. Rep., 677 .... 160, 189 Henderson N. Bk. v. Alves (Ky.), 15 S. W. Rep., 132 88, 89 " " z/. Alves,9i Ky., 142 87,88,91,161 Hennessy v. City of St. Paul, 54 Minn., 219 18 Hepburn v. School Directors, 23 Wall , 480 109 Hershire z^. First N. Bk., 35 Iowa, 272 113 Hill V. N. Bk. of Barre, 15 Fed. Rep., 432 88 Hills z/. Exchange Bank, 105 U.S., 319 114 Hinds V. Marmelejo, 60 Cal., 229 84 Hintermister v. First N. Bk., 64 N. Y., 212 89, 90 Hirsh z^. Jones, 56 Fed. Rep., 137 138 Hiscock V Lacy, N. Y., 9 Misc., 578 93 Hobert, Receiver, etc. v, Gould, 8 Fed. Rep., 57 59 Hobbs V. Western N. Bk., U. S. Ct. Ct., 2 N. Bk. Cas., 187 24 Hodgson V. McKinstry, 3 Kans. App., 412 119 Holmes v. Boyd, 90 Ind., 322 21 Hoover v. Weiss Malting and Elevator Co., 56 Fed. Rep., 356 162 Home V. Greene, 52 Miss., 452 113 Hot Springs Indpnt. School District, etc v. First N. Bk. H. Spr., 61 Fed. Rep., 417 13I' 189 Howard N. Bk. v. Loomis, 51 Vt., 349 21 Howe V. Barney, 45 Fed. Rep., 688 137 Huggin V. Citizens' N. Bk. ,6 Tex. Cir. App., 33 86 Hughitt V. Hayes, 136 N. Y., 163 141 XIU Hunt, Appellant, etc., 141 Mass., 515 76 Hutchinson f. Crutcher, 98 Tenn., 421 128 Indiana Board of Commissioners v. Elston, 32 Ind., 37 113 In re Armstrong, 41 Fed. Rep., 381 139 " Beard's Est., 50 Pacific Rep., 226 60 " Braden's Est., 165 Pa. St., 184 24 " Certain Stockholders of the California N. Bk. San Diego, 53 Fed. Rep., 38 129 " Eno, 54Fed. Rep., 669 152, 161 " Herman, 50 Fed. Rep., 517 132 " Manufacturers' N. Bk., 5 Bissell, 499 128 " N. Bk. of St. Albans, 49 Fed. Rep. 120 49 " Third N. Bk., 9 Bissell, 535 ; 4 Fed. Rep., 775 129 " Van Campen, 2 Benedict, 419 148,149 " Wild, II Blatchford, 243 84 Interstate N. Bk. z/. Ferguson, 48 Kans., 732 7 Irons z/. Manufacturers' N. Bk., 6 Biss., 301 119,127 " z/. Manufacturers' N. Bk. et al., 17 Fed. Rep., 308 56 Jackson v. United States, 20 Ct. Cls., 298 135 Johnson z/. " " 3 Hughes, 657 . . . . , 12 V. Laflin, 5 Dill., 65 26 V. " 103U. S, 800 25,26 " V. N. Bk. Gloversville, 74 N. Y., 329 84 Johnston v. United States, 17 Ct. Cls. Rep 176 Jones y. Rushville N. Bk., 138 Ind., 87 114 K Kelsey f. N. Bk. of Crawford, 69 Pa. St., 426 64 Kennedy v. California Savings Bank, loi Cal., 495 19 " V. Gibson, 8 Wall., 498, 505 i, 58, 127, 129, 130, 132, 133 Kerser v. Hitz, 133 U. S., 138 2 King V. Armstrong, 50 Ohio St., 222 59» '42 La Dow V. First N. Bk. of New London, Sup. Ct. Ohio, 1894 85 Lang V. Burley, loi 111., 591 51 Lake Erie, etc., R. R. Co. v. Indianapolis N. Bk., 65 Fed. Rep., 690 . 140 Lanham v. First N. Bk. of Crete, 46 Neb., 663 91 Latimer f. Bard, 76 Fed. Rep., 536 32,52 Lazear v. Nat'l Union Bank of Baltimore, 52 Md., 73, 78 89, 90 Leach v. Hale, 31 Iowa, 69 8, 10 XIV Leather Manufacturers' N. Bk. v. Cooper, 120 U. S., 778 188 Lewis V. Leirtz, 74 Fed. Rep., 381 51, 61 Libby t/. Union N. Bk., 99 111,622 21 Lilly r. Board of Commissioners, 69 N. C, 300 1x3 Linn County N. Bk. v. Crawford, 69 Fed. Rep., 532 131, 189 Lionberger v. Rouse, 9 Wall., 486 iii, 112 Lockwood z/. The American N. Bk., 9 R. L, 308 65 Logan County N. Bk. v. Townsend, 139 U. S., 67, 73 7, 18, 189 Luberg z^. Commonwealth, 94 Pa. St., 85 152 Lucas V. Coe, 86 Fed. Rep., 972 60 " V. Government N. Bk., 78 Pa. St., 228 87 Lynch z/. Bank, 22 West Va., 534 89 M Magruder v. Colston, 44 Md., 349 53 Marion N. Bk. v. Thompson (Ky.), 40 S. W. Rep., 903 . • 86 Massey v. Fisher, 62 Fed. Rep., 958 140 Mathews z/. Columbia N. Bk., 79 Fed. Rep., 558 34.38-39 Mayor z'. First N. Bk., 59 Ga., 648 . ... 113 McCann z/. First N. Bk. of Jeffersonville, 112 Ind., 354 36 McConville v. Gilmore, 36 Fed. Rep., 277 160 McCormick v. Market N. Bk. of Chicago, 162 111., 100; 165 U. S., 538 S. C 520 McFarlin v. First N. Bk. of Kansas City, 68 Fed. Rep., 868 33, 52 McGhee v. First N. Bk. Tobias, 40 Neb., 92 88 McMahon v. Macy, 51 N. Y., 155 61 Mercantile N. Bk. z/. N. Y., 121 U. S., 138 108, 109 " •' z/. Shields, 59 Fed. Rep., 952 no Mercer v. Dyer, 15 Mont., 317 141 Merchants' Bank v. State Bank, 10 Wall., 604 77 '* N. Bk. V. Glendon, 120 Mass., 97 164 " " V. Hanson, 33 Minn., 40 12 " " V. Sevier, 14 Fed. Rep., 662 87 " " z/. State N. Bk., 10 Wall., 604 76,77,79 " " z/. United States, loi U. S., I 145 Merrill f. Florida Land and Imp. Co., 60 Fed. Rep., 17 57 Mervill v. N. Bk. of Jacksonville, 41 U. S. App., 529 . . . 130, 133, 134, 135 Metropolitan N. Bk., v. Clagett, 141 U. S., 520 63, 64, 189 Meyers v. Valley N. Bk. 13 Nat'l Bankruptcy Register, 34 97 Michigan Ins. Bank v. Eldred, 143 U. S., 293 63 Miller z/. First N. Bk. of Cincinnati, 46 Ohio St., 424 106 " V. Howard, 95 Tenn., 407 . . . . • 43 Missouri River Telg. Co. v. First N. Bk. of Sioux City, 74 111., 217 ... 91 Mix z/. N. Bk. of Bloomington, 91 111., 20 164 Moore v. Jones, 3 Woods, 53 5-^ Movius V. Lee, 30 Fed. Rep., 298 42, 43 Multnomah County v, Oregon N. Bk., 61 Fed. Rep., 912 140 XV N PACB Nat'l Bank v. Bruhn, 64 Tex., S7i 84 " z/. Carpenter, 52 N. J. Law, 16S 89 " V. Case, 99 U. S., 628 53. 55, 97 •• V. Cove, 96 U. S., 628, 57 ** V. Commonwealth, 9 Wall., 353 113 •* V. Drake, 35 Kans., 564 41 ** V. Graham, 100 U. S., 699 7' 8 " V. Insurance Co., 104U. S., 54 119 " z/. Johnson, 104 U. S., 271 84 " V. Kennedy, 17 Wall., 19 130 " V. Matthews, 98 U. S., 621 12, 18, 22 ♦' V. Whitney, 103 U. S., 99 12 Nat'l Exchange Bank, Baltimore, v. Peters, 44 Fed. Rep., 13 138 " " " Hartford, v. Guy, 57 Conn., 224 178 Nat'l Bank, Auburn, t/. Lewis, 81 N. Y., 15 86 " Chattanooga, z/. Mayor, 8 Heiskell (Tenn.), 814 113 " Commerce v. Atkinson, 55 Fed. Rep., 465 12, 47 " Commonwealth z/. Mechanics' N. Bk., 94 U. S., 437 . . 133, 1 34 ** Jefferson v. Fare, 25 Fed. Rep., 200 188 " Guthrie v. Earl, 2 Okl., 617 • • 16 " Rahway v. Carpenter, 52 N. J. Law, 165 89 ** Virginia v. City of Richmond, 42 Fed. Rep., 877 106 " Winterset v. Eyre, 52 Iowa, 114 91 " Xenia v. Stewart, 107 U. S., 676 96 Nat'l Park Bank of City of N. Y. v. Harmon, 25 C. C. A., 214 ; 79 Fed. Rep., 891 55 Nat'l State Bank v. Brainard, 61 Hun., 339 87 «' " Camden v. Pierce, 18 Albany Law Jrnl., 16; 2 N. Bk. Cas., 177 "3 Nat'l State Bank of Oskaloosa z/. Young, 25 Iowa, 311 105 " " V. Young, 25 Iowa, 311 109 Nat'l Security Bank z^. Butler, 129 U. S, 223 138 «' " V. Price, 22 Fed. Rep., 697 139 Nelson f. Burrows, 9 Abb. N. C, 280 137 Nevada Bank of San Francisco v Portland N. Bk., 59 Rep., 338 ... . 15 Newall V. Somerset First N. Bk. (Ky.), 13 Ky. L. Rep., 275 90 " V. N. Bk. of Somerset, 12 Bush., 57 85 New Orleans N. Bk. v. Raymond, 29 La. Ann., 355 21 Newton N. Bk. v. Newbegun, 74 Fed. Rep., 135 57 Niagara County Bank z'. Baker, 15 Ohio St., 85 11 Norfolk N. Bk. v. Schwenk, 46 Neb., 381 86 V. " Neb., 1895 90 North Ward N. Bk. z/. City of Newark, 39 N.J. Law, 380 108 XVI O PAOB Gates V. First N. Bk., loo U. S., 239 go Ocean N. Bk. v. Carll, 7 Hun., 237 161 O'Connor z/. Witterly, III Cal., 523, 58 O'Hare v. Second N. Bk. of Titusville, 77 Pa. St., 96 95 Ordway v. Central N. Bk., 47 Md., 217 91, 119, 161 Omn V. Merchants' N. Bk., 16 Kans., 34 21 Osborne v. First N. Bk., 175 Pa. St., 494 88 " z/. First N. Bk. of Athens, 175 Pa. St., 474 89 P Pacific N. Bk. v. Eaton, 141 U. S. , 227 a6, 34 " " V. Mixter, 114 U. S., 462; 124 U. S., 721, . . . 131, 161, 162 Palmer v. McMahon, 133 U. S., 660 108 Pape z/. Capital Bank of Topeka, 20 Kans., 440 11 Park N. Bk. of Chicago v. NeblacK, 67 111. App., 583 128 Pattison v. Syracuse N. Bk., 80 N. Y., 82, 92 7, 8 Paul y. McGraw, 3 Wash. St., 296 113 Pauly f. State Loan and Trust Co., 165 U. S., 606 54 Pelton z/. Commercial N. Bk., loi U. S., 143 108, 114 People V. Commissioners, 4 Wall, 241 iii V. Dolan, 36 N. Y., 59 no V. Remington, 121 N. Y.,328 134 V. Weaver, 100 U. S., 539, reversing S. C, 67 N. Y., 516 .... no People's Bank of the City of N. Y. v. Mechanics' N. Bk. of Newark, 62 How. Pr., 422 162 Peterborough N. Bk. v. Childs, 133 N. Y., 248 86 Peters z*. Commercial N. Bk., 142 U. S., 614 188 " V. Foster, 56 Hun., 607 128, 131 " et al V. Bain, 133 U. S., 670 50 Petition of Piatt, 1 Benedict, 534 129 Philler z;. Patterson (Pa.), 168 Pa. St., 468 9 Pickett z/. Merchants' N. Bk. of Memphis, 34 Ark., 346 87 Pittsburgh Locoe. & Car Works v. State N. Bk., U. S. Cir. Ct,, 1875; Thompson N. Bk. Cases, 315 9 Planters' L. and S. Bank v. Berry, Ga., 1893 162 Piatt V. Beach, 2 Benedict, 303 131 " V. Beebe, 57 N. Y., 339 i, 127 Potter V. United States, U. S I54 Prescott V. Haughey, 65 Fed. Rep., 653 138 N. Bk. V. Butler, 157 Mass., 548 12, 18 Price z/. Abbott, 17 Fed. Rep., 506 131 z*. Coleman, 2* Fed. Rep., 694 I39 V. Yates, 19 Alb. Law Journal, 295 ; 2 N. Bk. Cases, 204 ... . 58, 129 II II II XVll R PAGB Raynor y. Pacific N. Bk., 93 N. Y, 371 162 Reynolds J'. Crawfordsville Bank, 112 U. S., 405 . 12, 22 Kichniond v. Irons, 121 U. S., 27 48,50.51, "8, 127 Riddle J'. First N. Hk., 27 Fed. Rep., 503 76 Roberts v. Hill, 23 Fed. Rtp., 31 . . • • • 139 Robertson v. Buffalo Co. N. Bk. (Neb ), 40 Neb., 235 16 Robinson v. Hall, 63 Fed. Rep., 222 43, 44, 132 " V. Hill, 63 i''ed. Rep., 522 17 " V. Tiirrentine, 59 Fed. Rep., 554 49 Rockwell V- Farmers' N. Bk., 4 Colo. App., 562 84, 86 Rosenblatt v. Johnson, T04 U. S., 462 112 RufFin z'. Board of Commissioners, 69 N- C, 498 113 S San Diego County z>- California N. Bk., 52 Fed. Rep., 59 140 Schrader v. Manufacturers' N. Bk., 133 U- S.,67 48 Schroder v. Manufacturers' N. Bk. of Chicago, 133 U. S., 67 118 Schuyler N. Bk. z/. BuUong, 28 Neb., 684 88,91,161 " " V. Bullong, 24 Neb., 321 88 Scott z/. Armstrong, 146 U. S., 499 141 Second N. Bk. of Oswego v. Burt, 93 N. Y., 233 93 Seeber v. Commercial N. Bk. of Ogden, 77 Fed. Rep., 957 19 Seeley v. N. Y. Nat'l. Exc. Bank, 8 Daly, 400 ; affirmed 78 N. Y-, 608 . 36 Seligman v. Charlottesville N. Bk., 3 Hughes, 647 12 Shafer v. First N. Bk., 53 Kans., 614 87 Slioemaker v. Nat'l. Mechs'. Bank, 2 Abb. U. S., 416; N. Bk. v. Case, 96 U. S. 628 9 Shunk V. First N Bk. of Gallon, 22 Ohio St., 508 87 Simons v. Fisher, 55 Fed. Rep., 905 47 Slaughter v. First N. Bk. of Montgomery, 109 Ala., 157 . . .90, 92, 117, 153 Smith V. Exchange N. Bk. of Pittsburg, 26 Ohio St., 141 n, 90 " V. First N Bk., 45 Neb., 444 95 " V. First N. Bk., 42 Neb., 687 89 Smithson v. Hubbell, 8x Fed. Rep., 593 189 Snohomish Co. v. Puget Sound N. Bk., Everett, 81 Fed. Rep., 518 . . 188 Snyder z'. Mount Sterling N. Bk., 94 Ky., 231 88 Sowles z". Witters et al., 39 Fed. Rep., 403 59 Spofford V. First N. Bk. of Tama City, 37 Iowa, 181 9 Spokane County v. Clark, 6r Fed. Rep., 538 140 StaflFord N. Bk. v. Davis, 59 N. H., 38 108 Stanton v. Wilkison, 8 Benedict, 357 48, 131 State V. Bardwell, 72 Miss., 535 152 " z'. Fields (Iowa), 62 N. W. Rep., 653 152 t/. Menke, 52 Bankers' Magazine, 33 ; 153 (I XVIU PAOB State r. Tuller, 34 Conn., 280 152 Stephens z/, Bernay, 41 Fed. Rep., 401 131 •' V. FoUett, 43 Fed. Rep., 842 52 " V. Monongahela Bank, iii U.S., 197 90 " V. Overstolz, 43 Fed. Rep., 465 137 " V. Overstolz, 43 Fed. Rep., 771 138 Stewart v. The Nat'l Union Bank of Maryland, 2 Abb. U. S., 424 ... 95 St. Louis N. Bk. v. Pafin, 3 Cent. L. J., 669 ; i Nat'l Bank Cas., 326 . . 108 Strong V. Southwortli, 8 Ben., 331 58 Stuart z>. Hayden, 169 U. S. i 55, 56 Supervisors i>. Stanley, 105 U. S , 305 110 Sykes v. Canton First N. Bk., 2 S. D. 242 7 T Talbott f. Silver Bow Co., 139 U. S, 441, 438 108,112 Talmage v. Third N. Bk., 27 Hun., 61 160 Tapley v. Martin, 116 Mass., 275 18, i6.v Taylor v. Hutton, 43 Bach., 195 46 Teague v. First N. Bk., Salina, 48 Pac, 603 90 Thatcher v. West River N. Bk., 19 Mich., 196 164 Thayer v. Butler, 141 U. S., 234 26, 52 Third N. Bk. v. Blake, 73 N. Y.. 260 9, 22 " V. Hughes, 76 Fed. Rep. 385 114 " of Philadelphia z/. Miller, 90 Pa. St., 241 87 Thomas v. City N. Bk. of Hastings, 40 Neb., 501 13 " z/. Farmers' Bank of Maryland, 46 Md., 43 65 Thompson f. German Insurance Co. , 76 Fed. Rep. 892 58,131 " J'. St. Nicholas N. Bk. 146U. S., 240; S. C, 113; Is. Y., 325 . 12, loi Tiffany z/. N. Bk., 18 Wallace, 409 83 Tillinghast v. Bailey, 86 Fed. Rep., 46 52 Timberlake r. First N. Bk., 43 Fed. Rep., 231 85,88,89,91 Tootle z/. First N. Bk. of Port Angeles, 6 Wash., 181 18 Town Council of Lexington v. Union N. Bk., 22 S. Rep., 291 18 Town of Farmington za Downing, Supreme Ct. of N. H., 3oAtl. Rep. 345 . no Tracey v Talmage, 18 Barb. 456 11 Traders' N. Bk. v. Chipman, 164 U. S., 347 142 Trenholm, Compt. of Cy. v. Commercial N. Bk. of Dubuque, 38 Fed. Rep., 323 ■ 136 Trustees First Presbn. Church v. Nat'l State Bk., 57 N. J. Laws, 27 . . 19 Turner v. First N. Bk., 2 Iowa, 562 134 u United States v. Allen, 47 Fed. Rep., 696 149 " " V. Britton, 108 U. S., 193, 199 148 " " I'. Britton, 107 U. S.. 655 147, 148 " " V. Cadwallader, 59 Fed. Rep., 677 154 xtx FAAB United Slates v. Curtis, 107 U- S., 671 40, 15 j V. Crecelius, 34 Fed. Rep., 30 148 V. Ege, 49 Fed. Rep., 852 150 " V. Eno, 56 Fed. Rep., 218 153 " V. Fisii, 24 Fed. Rep., 585 148 " V. French, 57 Fed. Rep., 382 154 " V. Graves, 53 Fed. Rep., 634, 700 12, 149, 150, 151 e-. Harper, 33 Fed. Rep., 471 147,148,149 " V. Hiighitt, 45 Fed Rep , 47 149 " V. Jevvett, 85 Fed. Rep., 142 154, 155 " V. Knox, 102 U. S., 422 48 " z/. Means et al, 42 Fed. Rep, 599 . . 149 " V. Northway, 129 U. S., 327 153 V. Potter, 56 Fed. Rep., 83 154 " V. Taintor, 11 Blatchford, 374 148 " V. Warner, 26 Fed. Rep., 616 153 " ex rel. Cond v. Barry, 36 Fed. Rep., 246 39 " ex rel. White v. Knox, 102 U- S i " z/. N. Bk. of Asheville, 73 Fed. Rep., 379 62 " t/. First N. Bk. of Little Rock, 79 Fed. Rep,, 296 . . . 13,47 U. S. Supreme Ct. in Van Allen v. Assessors, 3 Wall., 573 29 Upton i/. N. Bk. of South Reading, 1 20 Mass., 153 21 Van Allen v. The Assessors, 3 Wall., 573 105, 109, jii Van Lenven v. First N. Bk. , 54 N. Y., 671 .... 10 Van Slyke v. State, 26 Wis., 655 iii Veazie Bank v. Fenno, 8 Wall., 533 145 Venango N. Bk. v. Taylor, 56 Pa. St., 14 141 W Waite z^. Dowl, 94 U. S, 527 113 Walden N. Bk. v. Birch, 130 N. Y,, 221 97 Walker t'. Windsor N. Bk., 56 Fed. Rep., 76 188 Washington N. Bk. of Tacoma v. Eckels. 57 Fed. Rep., 870 .... 119, 127 " " V. King's County, 9 Wash,, 607 109, 114 Watkins v. N. Bk. of Lawrence, 51 Kan., 254 118, 119 Weber v. Spokane N. Bk., 64 Fed Rep., 208 98 Weckler v First N. Bk. of Hagerstown, 42 Md., 581 9 Welles V. Graves, 41 Fed. Rep., 459 137, 138 " V. Larrabee et al., 36 Fed. Rep., 866 55, 61 V. Stout, 38 Fed. Rep., 807 57 Western N. Bk. v. Armstrong, 152 U. S., 346 14 Westervelt v. Mohrenstecher, 40 U. S. App. 227 17 Wheeler v. Union N. Bk., 96 U. S., 785 91. 9a Wheelock r. Kost, 77 111., 296 53. 57. 127 XX t PAGE Whitbeck v. -Mercantile Bank, 127 U. S., 193 108 White V. Knox, iii U. S., 784 i^^i^ 134 Whitney v. Butler, 118 U. S., 655 50 " N. Bk. V. Parker, 41 Fed. Rep., 402 106 Wickham v. Hull, 60 Fed. Rep., 326 48, 189 Wichita N. Bk. v. Smith, 36 U. S. App., 530 188 Wiley V. Starbuck, 44 Ind., 298 85, 90 " V. First N. Bk. of Brattleboro, 47 Vt.. 546 8 Williams v. American N. Bk., Arkansas City, 85 Fed. Rep , 376 .... 34 Winter z/. Baldwin, 89 Ala., 483 24 Witters :;. Foster, 28 Fed. Rep., 737 160, 188 " V. Sowles, 35 Fed. Rep., 640 49 " V. Sowles, 38 Fed. Rep., 700 49 Wolverton v. Exchange N. Bk., 11 Wash. 94 87 Woodward f. Ellsworth, 4 Colo., 5S0 112 Wright z/. First N. Bk., 8 Bliss, 243 89 " V. Merchants' N. Bk., i Flippin, 561 127 Wylie i^. Northampton Bk., 119 U. S., 361 8 Wyman v. Citizens' N. Bk., Fairibault, 29 Fed. Rep., 734 95 Y Yakima N. Bk. v. Kinne, 6 Wash., 348 85, 164 Yardley v. Clothier, 49 Fed. Rep., 337 ; 51 Fed. Rep., 506 141 " V. Wilgus, 56 Fed. Rep. 965 52 Yerkes t'. N. Bk. of Port Jervis, 69 N. ¥., 383 10,11 Young V. McKay, 50 Fed. Rep., 397, 594 25, 51 '' z/. Wenipke, 46 Fed. Rep., 354 12S SUPPLEMENTARY CASES CITED. [See Supplement, page 303.] Aldrich v. Campbell, 97 F'ed. R.ep., 663 308 Aldrich v. Chemical N. Bk,, 176 U. S., 618 305, 311 Aldrich v. Yates, 95 Fed. Rep., 78 309 Auten V. Manistee N. Bk., 54 vS. W. Rep., 337 313 Auten V. Manistee N. Bk., 54 S. W. Rep., 337 310 Bailey v. Tilliughast, 99 Fed. Rep., Soi 30S, 309, 314 Bank z'. Williams, 58 N. J. Law, 45 3'5. 316 Binghampton Trust Company v. Auten, 57 vS. W. Rep., 1105 306 Bletz V. Bk. of Kentucky (Ky.), 55 S. W. Rep., 697 304 Board of Com'rs of Morgan Couuty v. isl N. Bk., 57 N. E. Rep., 728 . . 315 Bowen v. Needles N. Bk., 94 Fed. Rep., 935 303 Brown v. Ellis, 103 Fed. Rep., 834 309, 314 Buffalo German Ins. Company v. 3d N. Bk. of Buffalo, 162 N. Y., 163 . . 306 XXI PAOK Central N. Bk. v. Haseltiiie, 55 S. W. Rep., 1015 306 City and County of Saii Francisco v. Crocker Woolworth N. Bk., 93 Fed. Rpp . 273 315 Daggs V. PhcEuix N. Bk., 177 U. S., 549 305 Dennis v. ist N. Bk. of Seattle, 59 Pac. Rep., 777 313 Earle f. Penna., 178 U. S., 449 313 Earle as Receiver of the Chestnut St. N. Bk. v. Conway, 178 U. S., 456 . 313 First N. Bk. of Concord v. Hawkins, 174 U. S., 364 303 First N. Bk. of Grand Forks z^. Anderson, 172 U. S., 573 305 First N. Bk. v. Riggins, 32 S. E. Rep., 801 309 First N. Bk. of Wellington v. Chapman, 173 U. S., 205 314, 315 Farmers' N. Bk. of Owatonna z/. Backus, 77 N. W. Rep., 14a 307 Frater v. Old N. Bk., loi Fed. Rep., 391 308 Gad.«;en v. Thrush, 76 N. W. Rep., 1060 305 George v. Somerville (Mo.), Bankers' Magazine, Vol. LX, p. 391 . . . 305 Gilbert v. McNulta, Bankers' Magazine, Vol. LIX, p. 752 312 Groos V. Brewster (Tex.), 55 S. W. Rep., 590 303 Guarantee Company of N. D. v. Hanway, 104 Fed. Rep., 369 313 Haseltine v. Central N. Bk., Bankers' Magazine, Vol. LX, p. 48 ... 306 Hayden v. Williams, 96 Fed. Rep., 279 312 Hazen v. Lyndonville N. Bk., 41 Atl. Rep., 1046 305 Hulitt V. Bell, 85 Fed. Rep., 98 307 In re Rarle, 92 Fed. Rep., 22 311 In re Earle, 96 Fed. Rep., 678 312 /« ;r Hulitt, 6th Ct., 96 Fed. Rep., 785 311 Jenkins v. NeflF, 163 N. Y., 320 315 Lealos v. Union N. Bk., Bankers' Magazine, Vol. LIX, p. 24 306 Lealos v. Union N. Bk., Bankers' Magazine, Vol. LX, p. 240 306 Lull z/. Anamosa N. Bk., 81 N. W. Rep., 784 316 McDonald V. Chemical N. Bk., 174 U. S., 610 310 McDonald z*. Williams, 174 U. S., 397 311 Mechanics N. Bk. v. Baker, 46 Atl. Rep., 586 315, 316 Merrill v. N. Bk. of Jacksonville, 173 U. S., 131 311 People's Stale Bk. of Lakota f. Francis, 79 N. W. Rep., 853 312 Richardson v. Turner, 52 La. Ann., 1613 312 Robinson v. Southern N. Bk., 94 Fed. Rep., 964 307 Schaberg's Estate v. McDonald, 83 N. W. Rep., 737 309, 312 Schofield 'i>. State N. Bk., 97 Fed. Rep., 282 ... . 15 vScott V. Latimer, 89 Fed Rep., 843 307, 308 Stout V. Lusk, 59 Pac. Rep., 603 307 Stuart z'. Staplehurst (Neb.), 78 N. W. Rep., 298 309 Studebaker v. Perry, 102 Fed. Rep., 947 308 Tourtelot v. Stoltenben, 10 1 Fed Rep., 362 308 Watt V. 1st N. Bk., Lake Beutou, Minn., 79 N. W. Rep., 509 306 zziii INDEX TO SECTIONS OF REVISED STATUTES. Section. 324, 32.V... 82e to 32!l. 830 tu 333. 880 663 029 711 736 884, 885.... 3410 to 3412 8413 to 3416 8417 8686 to 36»U 8820 3701 8811 8847 4046 6133, 6134... 6136, 6136... 6137 8138 6189 6140 , Page. 1 2 3 10.3 159 169 160 163 163 143 144 146 194 237 145 4 238 288 6 6 IS 23 24 27 Section. 5141 5142 5143 :i44 6145 to 6147 6118,6149... 6150 6151 6152 6153 6154 6156, 5156... 5157 to 5159. 5160 to 5162. 5163,6164..., 6165 to 6167. I 6168 ' 6169 , 6170 5171 5172 6173 to 5176. , 6176 to 6178. Page. 28 31 34 87 39 45 46 47 60 61 62 65 66 67 68 69 29 30 i\\ 70 71 72 73 Section. Page. 5179,6180... 6181,5182... 6183,6184... 518.1, 6186... 6187 6188,6189.... 6190 6191 6192 to 5196 6196,6197... 6198 6199 5200 6201 6202 5203, 5204..., 6205 5206 6207 6208 5209 5210,6211..., 6212 to 5214. 74 76 76 77 146 78 79 80 81 83 86, ICO 92 03 96 97 98 99 100 146 101 146 102 103 Section. g». 5215 to 6218 5219 5220 5221 6222,6223..., 6224 6225,6226.... 5227 to 5229, 5230 to 6232, 5233,6234..., 5235,5236..., 52.37 6238,6239..., 5240 6^41 , 5242 5243 5413,6416.... 5430 .Hal 6433 to 6434. 5437 6497 104 106 118 120 121 128 12S 124 126 126 133 135 136 115 116 138, 161 ll'i 155 155 l,'i6 157 1.57 158 ADDITIONAL ACTS. Aot of June 10, 1874.. Extract from Act of June 23, 1874. Act of JanUHrv 14, 1875 Act of Jttiiusri 19, 1876 Extract from Act of February 8, 1876 16, 19, 20 ■( It 11 i« « Extracts from Act of February 18, 1876 Act of June 30, 1876 Bxtreet from Act March 1, 1879. Act of February 14, 1880 Act of February 26, 1881 Act of July 12, 1882 Bxtract from Act of March 8, 1883.. Act of Marcl) 2J, 1886 Act of May 1, lft86.. Extract from Act of July 30, 18S6.. Aot of March .3, 18rf7 Extract from Act of August 13, 1888 Extract from Act of Jliiy '2, 1890 Extract from Act of July 14, 1890 Extract from Act of May 12, 1892 Actof Julv 28, 1892 Act .Of August 13, 1894 Act of .Miuuh 2, 1897 Legal Tender and Lawful Money, definition of terms Extract from Act of March 14, 1900 10 to 13 Act approvec" April 12, 1902 Act approved March 3, 1903 8«ctlon. Pag*. 1 toS 165 4 167 6to7 168 8,9 169 170 1 170 2,3 171 172 6, 19, 20 172 21 173 173 1.2 173 3 174 4 to 6 175 17« 176 178 1 to 3 177 4,6 178 6 179 7,8 180 9 toll 181 12, 13 182 183 1 183 2.3 184 1 184 2 186 3,4 186 6 l»o 1 186 2,3 187 4 187 17 100 6 180 191 191 1 101 8 192 197 0tol3 311 319 S20 PRATTS' DIGEST. PART FIRST. TKE LAWS RELATING TO NATIONAL BANKS, WITH ANNOTATIONS. CHAPTER I. THE COMPTROLLER OF THE CURRENCY. I. Bureau of Comptroller of the Currency. Section 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 currency secured by United States bonds ; the chief officer of which Bureau shall be called the Comptroller of the Cur- rency, and shall perform his duties under the general direction of the Secre- tary of the Treasury. See Kennedy v. Gibson, 8 WalL, 498; Piatt v. Beebe, 57 N. Y., 339; Charleston <'. People's National Bank, 5 S. C, 103; Case v. Terrill, 11 Wall., 199; United States ex rel. White v. Knox, 102 U. S. 2. ComptrotJer of the Currency. Section 325. — The Comptroller of the Currency shall be appointed by the President, on the recommendation of the Secretary of the Treasury, by and with the advice and consent of the Senate, and shall hold his office for the term of five years unless sooner removed by the President, upon rea- sons to be communicated by him to the Senate ; and he shall be entitled to a salary of five thousand dollars a year. The Comptroller of the Cnrrencj'^ is also ex officio Commissioner of the Freedmen's Savings Bank, and for this receives an additional $1,000 per annum. I I 3. Oath and Bond of Comptroller. Section 326. — The Comptroller of the Currency shall, within fifteen days from the time of notice of his appointment, take and subscribe the oath of office; and he shall give to the United States a bond in the penalty of one hundred thousand dollars, with not leas than two responsible suredes, to be approved by the Secretary of the Treasury, conditioned for the faithful dis- charge of the duties of his office, 4. Deputy Comptroller: Duties, etc. Section 327. — There shall be in the Bureau of the Comptroller of the Cur- rency a Deputy Comptroller of the Currency, to be appointed by the Secre- tary, 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 Comptroller shall also take the oath of office prescribed by the Constitution and laws of the United States, and shall give a like bond in the penalty of fifty thousand dollars. The court will take judicial notice of the fact that a certain per- son was on a certain day the Deputy Comptroller of the Currency ; and where he has signed a certificate as "Acting Comptroller," the court will assume that at the date of such certificate he was authorized to exercise the powers and discharge the duties of Comptroller. (Keyser v. Hitz, 133 U. S., 438.) 5 . Clerks. Section 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. While this section retains the appointing power in the hands of the Secretary of the Treasury, it appears to indicate that the Comptroller is to be the judge of the force necessary to perform the work of his office. 6. Interest in National Banks Prohibited. Section 329. — It shall not be lawful for the Comptroller or the Deputy Comptroller of the Currency, either directly or indirectly, to be interested in any association issuing National currency under the laws of the United States. This section is not to be taken in its strict literal sense, but is to be construed so as to carry out the obvious intention of Con- gress, which was to forbid the Comptroller and the Deputy Comp- troller from having any interest in the banks over vv^hich they are to exercise a supervision. 7. SeaJ of Office. Section 330. — The seal devised 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 Comptroller, 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. As amended by act of February 18, 1875, correcting Revised Statutes. 8. Offices, Vaults, etc., for Bureau. Section 331. — There shall be assigned from time to time, to the Comp- troller of the Currency, by the Secretary of the Treasury, suitable rooms in the Treasury building for conducting the business of the Currency Bureau, containing safe and secure fire-proof vaults, in which the Comptroller shall deposit and safely keep all the plates not necessarily in the possession of engravers or printers, and other valuable things belonging to his Depart- ment ; and the Comptroller shall from time to time furnish the necessary furniture, stationery, fuel, lights, and other proper conveniences for the trans- action of the business of his office. 9. Examination of Banks in District of Columbia. Section 332. — The Comptroller of the Currency, 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 bank in the District of Columbia organized under act of Congress. The Comptroller, at his discretion, may report to Congress the results of such examination. The expense necessarily incurred in any such examination shall be paid out of any appropriation made by Congress for special bank examinations. 10. Annual Report of Comptroller. Section 333. — 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 association 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 judgment, may be useful. Second. A statement of the associations whose business has been closed during the year, with the amount of their circulation redeemed and the amount outstanding. Third. Any amendment to the laws relative to banking by which the sys- tern may be improved and the security of the holders of its notes and other creditors may be increased. Fourth. A statement exhibiting under appropriate heads the resources and habilities and condition of the banks, banking companies, and savings banks organized under the laws of the several States and Territories ; such informa- tion to be obtained by the Comptroller from the reports made by such banks, banking companies, and savings banks to the legislatures or officers of the different States and Territories, and, where such reports can not be obtained, the deficiency to be supplied from such other authentic sources as may be available. Fifth. The names and compensation of the clerks employed by him, and the whole amount of the expenses of the banking department during the year. As amended by act of February i8, 1875, correcting Revised Statutes. The reports of heads of Departments are, as a rule, made to the President of the United States ; the only exception is that of the Secretary of the Treasury, which is made direct to Congress. The reports of heads of bureaus in any Department are usually made to the head of that Department, but the Comptroller of the Cur- rency, as seen above, reports direct to Congress, and not through the President or the Secretary of the Treasury. The first report of the Comptroller of the Currency was made for the year 1863 by the Hon. Hugh McCulloch, the first Comp- troller. The earlier reports are out of print, and those of some of the later years also, but copies of such as are on hand and can be spared may be obtained on application to the Comptroller of the Currency by bankers and others who are interested in banking matters. To meet the demand for information relative to the National banking system and banking in general, the supply of reports of the Comptroller for several years being exhausted, the Comptroller has issued a pamphlet giving a compilation of all the reports made since the establishment of the system. II. When Report to be Printed. Section 381 i. — When the annual report of the Comptroller of the Cur- rency upon the National banks and banks under State and Territorial laws is completed, or while it is in process of completion, if thereby the business may be sooner dispatched, the work of printing shall be commenced, under the superintendence of the Secretary, and the whole shall be printed and ready for delivery on or before the ist day of December next after the close of the year to which the report relates. As amended by act of February 18, 1875, correcting revised statutes. CPI AFTER II. ORGANIZATION AND POWERS OF NATIONAL BANKS. 12. Formation of National Banlcing Associations. Sectiok 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 lor which the association is formed, and may contain any other provisions, not inconsistent with law, which the asso- ciation 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 office. For full details how to proceed in the organization of a National Bank, with form of articles of association, etc., see page 195. 13. Organization Certificate. Sectiok 5r34. — The persons uniting to form such an association shall, under their hands, make an organization certificate, which shall specifically state : First. The name assumed by such association ; which name shall be sub- ject to the approval of the Comptroller of the Currency. Second. The place where its operations of discount and deposits 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 shareholders 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. The provision of law requiring that the place where the busi- ness is to be carried on shall be stated in the organization certifi- cate refers to the town or city, and not to the particular building or street number. (McCormick v. Market Nat. Bank of Chicago, 162 111., 100.) As to branch banks see note to Section 5155, page 65. For form of organization certificate, see page 202. 5 6 I4> Acknowledgment of Organization Certificate. Section 5135. — The organization certificate shall be acknowledged before a judge of some court of record, or notary pubHc; 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 carefully preserve the same in his office. For form instructions, see page 202. 15. Corporate Powers of Associations. Section 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 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 organi- zation, 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 [or] equity, as fully as natural persons. Fifth. To elect or appoint directors, and by its board of directors to appoint a president, vice-president, cashier, and other officers, define their duties, require bonds of them and fix the penalty thereof, dismiss such offi- cers or any of them at pleasure, and appoint others to fill their 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 exer- cised and enjoyed. Seventh. To exercise by its board of directors, or duly authorized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of banking ; by discounting and negotiating promis- sory notes, drafts, bills of exchange, and other evidences of debt ; by receiv- ing deposits; by buying and selling exchange, coin, and bulhon ; 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. Banking Powers. — The banking powers here conferred are such as banks and bankers have custotnarily exercised. The enu- meration of powers in the seventh subdivision is the usual formula descriptive of the banking business contained in bank charters, and is almost identical, except in the order of arrangement, with that contained in the New York banking act of 1838, which is the original model upon which most of the banking laws of the coun- try have been framed. The powers here specified are not the incidental, but the principal powers, and to them are to be super- added all incidental powers. While the statute specifies the main things a National bank may do, it does not undertake to specify all, and it does not prohibit all not specified. For instance, the business of making collections, which forms a large branch of the banking business, is not particularly specified, but it has never been doubted that the National banks have the right and power to do this kind of business. In general. National banks may make any contracts which legitimately appertain to the business of banking, as defined by the statute. (Pattison v. Syracuse National Bank, 80 N. Y., 82.) But such banks can exercise only the powers expressly enumerated in the statute, and those powers which are properly incidental to the enumerated powers. (Logan County National Bank v. Townsend, 139 U. S., 67, 73; Casey v. La So- ciety de Credit Mobilier de Paris, 2 Woods, 77.) Deposits. — The authority given National banks to receive deposits also includes power to contract as to the parties to whom deposits shall be repaid. (Sykes v. Canton First National Bank, 2 S. D., 242.) A National bank may be a depositary for the pub- lic money of a city ; and may agree to pay interest on such depos- its, and give bond for their security. (Interstate National Bank V. Ferguson, 48 Kans., 732.) Safe Deposit Boxes. [See Supplement.] Special Deposit. — It is also well settled that National banks may not only receive deposits made in the usual way, which are known as general deposits, but they may likewise receive special deposits. They may receive deposits of bonds and securities for safe-keeping, either for a compensation or gratuitously. (National Bank v. Graham, 100 U. S., 699; Pattison v. Syracuse National Bank, 80 N. Y., 82 ; First National Bank v. Strang, 138 111., 347.) This power has been sustained upon two grounds — first, that it is incidental to the business of banking; and, secondly, that it is implied in the provisions of section 5228, Revised Statutes, which authorizes an insolvent association to deliver special deposits. But the cashier or other executive ofl5cer has no authority to 8 bind the bank by the receipt of a special deposit for safe-keeping, without an express or implied authority from the directors, (First National Bank of Lynn v. Ocean National Bank, 60 N. Y. , 278. See also Wiley v. First National Bank of Brattleboro, 47 Vt., 546.) However, where the bank habitually receives special deposits through its cashier, it will be bound by his acts in receiving the same. (Pattison v. Syracuse National Bank, 80 N. Y., 82, 92; Chattahoochee National Bank v. Schley, 58 Ga., 360.) And where a special deposit is lost through the negligence of the officers or employees of the bank, the bank will be liable to the owner of the deposit. (National Bank v. Graham, 100 U. S., 699.) Where a special deposit made with a bank, afterwards reorganized as a National bank, is converted, the measure of the damage is the value of the deposit at the date of the conversion. (Coffey v. National Bank of Missouri, 46 Mo., 140.) Where a National bank receives United States bonds of one class for the purpose of having them converted into bonds of another class, it is not a mere mandatary, but is responsible for the failure to deliver the bonds on demand. (lycach v. Hale, 31 Iowa, 69.) It is competent for a National bank to take steps for the recover}^ of its property stolen by burglars, and to agree to take like steps for the recovery of the property of others deposited with it for safe-keeping and stolen at the same time, and want of proper diligence, skill and care in performing such an undertaking is ground of liability to respond in damages for failure. (Wylie v. Northampton Bank, 119 U.S., 361.) Bank as a Stakeholder. — A National bank may receive the deposit of a fund in controversy to abide the event of a litigation or award, or to be payable upon a contingency to some person other than the depositor. So long as the bank undertakes nothing more than to pay over the money deposited with it to the person who may, according to the conditions upon which the deposit was made, become entitled to receive it, the bank does not transcend its powers. Nor does it make any difference that the portion of the sum deposited which may become payable to a third person, is, at the time of the deposit, uncertain and subject to litigation. (Bushnell v. Chautauqua County National Bank, 74 N. Y., 290.) Security for Loans. — The words "loans on personal security" in the statute are used in contradistinction to real estate security, and the National banks are not confined, in the taking of security for discounts and loans, to the security afibrded by the names of indorsers or personal sureties, but may take a pledge of bonds, choses in action, bills of lading, or other personal chattels. It has accordingly been held that they may take for this purpose a pledge of the stock of a corporation (Shoemaker v. National Mechanics' Bank, 2 Abb., U. S., 416; see also National bank v. Case, 96 U. S., 628); or a warehouse receipt for merchandise (Cleveland, Brown & Co. v. Shoeman, 40 Ohio St., 176); or a locomotive (Pittsburgh Locomotive and Car Works v. State National Bank, U. S. Circuit Court, 1875 ; Thompson's National Bank Cases, 315); or a chattel mortgage upon a stock of goods (Spofford v. First National Bank of Tama City, 37 Iowa, 181). An indorse- ment of a promissory note by a married woman by its terms charging her separate estate with the payment of the note, is not a mortgage in any sense ; it is simpl}' a personal security within the meaning of the National Bank Act, and is therefore a security which a National bank may take. (Third National Bank v. Blake, 73 N. Y., 260.) The question of loans upon real estate security is discussed under the next section. Clearing-House. — There is nothing in the National banking law which forbids a National bank to become a member of a clearing-house association organized merely for the purpose of facilitating settlements between the members thereof. (Philler et al. V. Patterson, 168 Pa. St. 468.) Dealing in Stocks and Bonds. — A National bank has no power to deal in stocks and bonds, or buy and sell them upon commission. Such operations are not incidental to the business of banking as defined in the statute. (Weckler v. First National Bank of Hagers- town, 42 Md., 581 ; First National Bank of Allentown v. Hock, 89 Pa. St., 324; First National Bank v. National Exchange Bank, 92 U. S., 122.) And the prohibition is implied from the failure to grant the power. (California National Bank v. Kennedy, 167 U- S., 362.) But there seems to be good reason for saying that a different rule applies in respect to Government Bonds. It has always been the custom of the National banks to deal more or less in these securities, and such operations have been generally en- couraged by the fiscal officers of the Government. It is clear that, as financial agents of the Government, they maj-- be employed by lO the Government to perform any duties in respect to its bonds ; and so, perhaps, they may be employed in this way by others. It has long been the practice of bankers, both in this country and in England, to buy and sell and exchange Government securities for their customers, and as it was the policy of the Government to encourage the purchase and sale of its bonds, and facilitate trans- actions in them, it is not probable that Congress intended to pro- hibit National banks, the most numerous class of financial agents in the country, from dealing in these bonds in a manner usual among bankers and banking institutions. It has been decided by State courts of high authority that the National banks have power to receive United States bonds of one class for the purpose of hav- ing them converted into bonds of another class, and that the exchanging of Government securities is a legitimate part of their business. (Yerkes v. National Bank of Port Jervis, 69 N. Y., 383 ; Van Lenven v. First National Bank, 54 N. Y., 671; Leach v. Hale, 31 Iowa, 69.) In the case first cited it was said : "We may take judicial notice of the fact that Government bonds are usually bought and sold through banks, and that all the transactions in reference to them with the Government are usually conducted through banks and persons doing banking business. ' ' [See also Supplement.] May Take Stocks as Security For or in Payment of Debts. — But while the National banks are impliedly prohibited from dealing in stocks, they may yet accept stock when it is transferred to them, bona fide, in satisfaction or payment, or by way of com- promise of debts due to or from the bank, and when it is taken with a view to its subsequent sale or conversion into money so as to make good or reduce an anticipated loss. This right grows out of the implied power to adopt reasonable and appropriate measures to secure the bank's own obligations, or collect or secure debts due to it ; and in this behalf the bank may do whatever natural per- sons would do under similar circumstances. (First National Bank of Charleston v. National Exchange Bank, 92 U. S., 122.) And, in such a case, if the stock is worth more than the amount of the claim, the bank may pay the difference. (/<^-) Purchasing Commercial Paper. — It has been held by the highest courts of Maryland (Lazear v. National Union Bank of Baltimore, 53 Md.. 78) and Minnesota (First National Bank of Rochester v. Pierson, 24 Minn., 140) that a National bank has no II power io purchase commercial paper, or acquire any title to such paper by a purchase, made admittedl}' not in the way of discount, or by lending money on the credit of it. In the Maryland case it was said: " We are of opinion that this transaction was an out- and-out purchase by the bank, and that such purchase was with- out authority, and that the bank acquired no title to the note, and can not recover thereon in this suit. While we do not mean to say that a National bank may not invest its surplus capital in notes, we are of opinion that it has no authority to use such surplus funds, as may remain on hand from day to day, for the purpose or buying notes." The contrary has been held by the Supreme Court of Ohio (Smith v. Exchange National Bank of Pittsburgh, 26 Ohio St., 141), though it was said by that court that, as " in the business of banking, the purchasing and discounting of paper is only ' a mode of loaning money,' " the purchase could not be at a greater rate of discount than allowed by the usury laws. This view seems to be much preferable to that taken in the Maryland and Minnesota cases, in which the construction placed upon the law appears to be very narrow. We have seen that a National bank has, in general, such powers as are incident to the banking business, and the purchase and sale of commerial paper is such an incident. (Yerkes v. National Bank of Port Jervis, 69 N. Y., 3S2.) And it may be .said, upon good authority, that the word ''discount,'" when properly interpreted, includes a pjirchase as well as a loan. In Atlantic vState Bank v. Savery (82 N. Y., 291), the" Court of Appeals of New York, in considering the question whether a bank organized under the New York banking law of 183S could purchase a note, cite, with ap- proval from Mclvcod on Banking, that "it is usual to estimate the value of money by the discount or profit it yields, and to buy or purchase a debt is always in commerce termed to discount it ;" and from the case of Tracey v. Talmage (18 Barb., 456) that "to di.s- count includes to buy, for discounting, at most, is but another term for buying at a discount. ' ' And the same meaning has been ascribed to the term by other courts. (Niagara County Bank v. Baker, 15 Ohio St., 85 ; Pape v. Capital Bank of Topeka, 20 Kau--^., 440.) In the Maryland case cited it was held that the bank could not maintain an action on paper which it had acquired by purcha.se ; but, in later cases in other States, it has been held that notwith- standing the bank, in purchasing the paper, was acting in excess of its power, still its want of power in that respect could not be set 12 Up by any of the parties to the paper when sued thereon, and that it is only for the Government to complain that the bank had ex- ceeded its authority. (Prescott National Bank v. Butler, 157 Mass., 548; Merchants' National Bank v. Hanson, 33 Minn,, 40; First National Bank of Pierre v. Smith, 8 S. Dakota, 7.) The latter is, no doubt, the correct view, and is supported by the decisions of the United States Supreme Court in analogous cases. (National Bank v. Matthews, 98 U. S., 621 ; National Bank v. Whitney, 103 U. S., 99 ; Reynolds v. Crawfordsville Bank, 112 U. S., 405; Thompson v. St. Nicholas National Bank, 146 U. S., 240.) And even if a National bank does not get the legal title to a promissory note bought in the market, it may maintain a suit as the holder thereof (Prescott National Bank of Lowell v. Butler, supra.') In the Kentucky case above cited it was held that the purchase of a note from the payee with the latter's endorsement, is a purchase by discounting in the usual course of business, and is not a purchase by barter and sale, as would be the case if the note were taken without endorsement, or by endorsement without recourse. So, in a late case in Missouri it was decided that the receiving of notes and carrying them through the bank books as discounted paper, and placing the face value as the proceeds thereof te the ci'edit as cash of the party from whom they were received, constituted a discounting or negotiating of notes within the law, although the interest was not taken in advance and no money was actually paid on them at the time. * (EHerbee v. National Ex- change Bank, 107 Mo., 445.) Dealing in Checks. — Dealing in checks is a part of the usual business of banking, and would be within the general powers of a bank without special mention. And there is no difference in this respect between checks payable to bearer and those paj^able to order. (First National Bank of Rochester v. Harris, loS Mass., 514-) Lending Credit— Accommodation Paper. —A National bank has no authority to lend its credit, and its accommodation paper or indorsement or guaranty will be void in the hands of any person taking the same with knowledge of the facts. (National Bank of Commerce v. Atkinson, 55 Fed. Rep., 465; Seligman v- Char- lottesville National Bank, 3 Hughes, 647 ; Johnson v. the same, 3 13 Hughes, 657.) This, it may be remarked, is true of all corpora- tions, and the principle is well established in corporation law. Accommodation Guaranty. [See Supplement,] But while a National bank may not lend its credit for the accom- modation of others, still it may guaranty the payment of commer- cial paper as incidental to the exercise of its power to buy and sell the same. (Thomas v. City National Bank of Hastings, 40 Neb. , 50I-) A, being indebted ''^ a National bank, and being the holder of certain negotiable notes, indorsed them generally, and delivered them to the president of the bank, who negotiated them for value to C, at the same time executing in the name of the bank a written guaranty of payment. From the proceeds of the sale, A's debt to the bank was cancelled. Held, first, that the guaranteeing of the notes under such circumstances was within the powers of the bank ; second, that the authority of the president to execute the guaranty would be conclusively presumed in favor of the pur- chaser acting without notice to the contrary ; third, that the reten- tion and enjoyment by the bank of the proceeds of such transaction constituted a ratification of the president's act. (/<^.) Thus the cashier has no authority to bind the bank by a guaranty of a mortgage bond. (Farmers' and Merchants' National Bank v. Smith, 40 U. S. App., 690.) The ofl&cers and directors of a National bank have no authority to bind the bank by a guaranty of the debts of a third person con- tracted for his own benefit. (Commercial National Bank v. Pirie, 27 C. C. A,, 171 ; 82 Fed. Rep., 799.) Rediscounts. — A rediscount by a National Bank of its bills receivable, though it endorses the same, and becomes contingently liable for their payment, is not a borrowing of money by the bank, but has some of the characteristics of a sale.* (United States, National Bank v. First National Bank of Little Rock, 79 Fed. Rep. , 296.) And such a transaction is not so far outside the scope of ordinary banking transactions as to impo.se upon tiie bank buy- ing such paper the duty of ascertaining that the act has been specially authorized by the board of directors. (/<^.) And when a bank has long been in the habit of rediscounting its bills receiv- able in large amounts, all other banks in the same locality pursu- ing the same practice, and the president and cashier of such bank proposes to its regular correspondent a rediscount of such bills, • But the Comptroller requires that they be included uuder the head of money borrowed in the reports of condition ; and the principles of sound banking seem to demand thnt they be thus considered. 14 and there are no circumstances attending such proposition to arouse suspicion, the bank to which it is made may safely act upon it, without further inquiry, on the assumption that the act has either been specially authorized, or that the officers are acting within the purview of their powers. (^Id.) The rule announced in Western National Bank v. Armstrong (152 U. S., 346; that the vice-president or cashier of a National Bank has no power to bor- row money on its behalf unless specially authorized by the direc- tors, is not applicable in a case where a general and long-established usage is shown between correspondent banks, prevailing in both cities where the lending and borrowing banks were respectively situated, that loaning and borrowing money through the executive officers of the bank, no further authority be furnished or demanded ; the presumption being that such usage was condoned and acqui- esced in by the directors of the borrowing bank, in the absence of notice to the contrary to its correspondent. (Armstrong v. Chemi- cal National Bank, 83 Fed. Rep., 556.) Assigning Judgment. — When a judgment belonging to a Na- tional bank is transferred without collecting it, the presumption is that the transfer is unauthorized. (Cox v. Robinson, 70 Fed. Rep., 760.) Engaging in Manufacturing Business. — [See Supplement.] Borrowing of Money. — The power to borrow monej'' or to give notes is not expressly conferred by the act ; but in proper cases a bank may become a temporary borrower of money. (Western National Bank z'. Armstrong, 152 U. S., 346; Chemical National Bank v. Armstrong, 65 Fed. Rep., 573.) But such transactions are so much outside of the general scope of the bank's business, that the officer acting for the bank therein must have special authority. {Id.) The vice-president, even though he is the principal executive officer of the bank, has no implied authority to borrow large sums on time. {Id.') And where an officer without authoritj' borrows money for the bank, the mere fact that tlie money was placed to the credit of the bank involves no ratification of his act, unless the money was so placed with the bank's consent; and the withdrawal of the money by drafts drawn by such officer in the name of the bank will not con- stitute a receipt of such money by the bank, unless it was, in point of fact, received and used by the bank, or for its benefit. {Id.) 15 Assuming Obligations of Other Bank. — A National bank has power to make a contract whereby, in consideration of the transfer to it of the ofl5ce furniture, lease and cash assets of another National bank, it will assume and pay the liabilities of such other bank. (Schofield v. State National Bank, 97 Fed. Rep.^ 282.) Contract to Pay for the Procuring of Customer. — In the late case of Dresser v. Traders' National Bank (165 Mass. 120), it was held by the Supreme Court of Massachusetts that a National bank is not authorized to make a contract to furnish fire insurance to a person in consideration of his procuring a customer for the bank ; and it was doubted whether the bank can agree to pay money for such a purpose. The court said : ' ' Two questions are then presented : First, whether a bank can agree to pay money to a third person for the purpose of securing a customer ; and, second, if it can do so, whether it can agree to furnish to such third per- son for such a purpose fire insurance to a specific amount. We should be slow in answering the first question in the afiirmative. Such a mode of doing business is so inconsistent with sound prin- ciples of banking that it would seem that the directors would not be justified in thus spending the money of the stockholders. But it is unnecessary to decide this question, as we are of opinion that the second question must be answered in the negative. As we understand the declaration, the ofiicers of the bank, acting in its behalf, were to go about, either personally or by an agent, seeking for persons who wished to insure their property, and when they had found them, put the matter in the hands of the plaintiff who would cause insurance to be made, and thus earn a commission. We are of opinion that this would be so far outside the legitimate purposes for which National banks are organized that the contract declared on must be deemed to be ulira vires of the defendant corporation." False Representations. — A National bank may be held liable for damages for a false representation made by its cashier as to credit of a customer seeking credit at another bank. (Nevada Bank of San Francisco v. Portland National Bank, 59 Fed. Rep. 338.) Donation of Funds. --Where the president of a National bank signed its name to a subscription paper obligating the bank to donate $200 to certain parties on condition that they would erect i6 a paper-mill in the city of K: — Held, (i) that the making of dona- tions of its funds to aid in the building of a paper-mill was no part of the business for which the bank was incorporated ; (2; that the act of the president was not within the scope of his au- thority, and that the bank, in the absence of an authorization or ratification by it of the president's act, was not bound by the agreement made. (Robertson zk Buffalo County National Bank, 40 Neb. 235.) Employment of Attorneys. — Under the fourth subdivision of section 5136 a National bank has full power to employ attorneys to bring or defend suits in any court of law or equity ; and such employment, including the agreement for compensation, may be made by the president of such bank. Such employment by the president is a sufficient authorization and employment, and the bank will be bound thereby. The power to complain and defend is not limited to suits in which the bank may be successful ; nor is the right of the attorney to recover limited by the character of the questions which may arise in the case. (National Bank of Guthrie v. Earl, 2 Okl. 617 ; see also Citizens' National Bank of Kingman v. Berry, 53 Kans. 696.) Promise to Pay Draft. — An officer 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, w4ien it expects to have a deposit from him sufficient to cover it, and no action lies against the bank for its refusal to pay such a draft. (Flannagan ef al. v. California National Bank et al., 56 Fed. Rep., 959.) Loans to Officers. — A National bank may make loans to its officers and directors as freely as to other persons. (Blair v. First National Bank of Mansfield, 10 Chicago Legal News, 84 ; 2 Nat. Bank Cor., 173.) But the loans must be honest, and the borrow- ers must not participate in making the loans to themselves. {Id.') Officers — Tenure of Office. — The officers of a National Bank must be regarded as having taken and accepted their positions under the terms of the act, and to hold them by the tenure speci- fied, to wit, the pleasure of the board of directors. (Harrington 7>. First National Bank of Chittenango, i Thompson & Cook (N. Y.), 361.) It was intimated in the case cited that the officers 17 could not be hired for a specified time ; and it lias since been held that the cashier of a National bank can not be chosen for any stated term, but holds his office at the pleasure of the board of directors. (Westervelt v. Mohrenstecher, 40 U- S. App., 221.) And a bj'-law which provides that he shall hold his office for a stated term, as for instance, for one year, is void. (Id.) Lending for Customers. — A National bank is not authorized to engage in the business of lending money for its customers ; and it can not be held liable for the acts of its officers in so doing. (Grow 7'. Cockrill, 63 Ark., 418.) Liens, — There is nothing in the National Banking Law which forbids a National bank selling seed grain on credit, to acquire the lien afforded by the State statute. (First National Bank of Parker V Peavey Elevator Company (S. D.) 72 U- W. Rep., 402.) But even were such a transaction forbidden, only the Government could be heard to complain, (/d.) Selling Mortgages. — A National bank has no power to act as a broker in selling farm mortgages for a commission. (Farmers and Merchants' National Bank v. Smith, 40 U. S. App., 690.) Collections. — The cashier of a National bank has authority on behalf of the bank to make a collection from a Savings bank. (Hanson v. Heard, 38 Atl. Rep., 788.) The fact that receipts appear upon their face to be the personal receipts of the cashier does not preclude the depositor from showing that they were intended and understood to be receipts in his capacity as cashier of the bank. (Id.) Bonds of Officers. — The directors are vested with a sound discretion as to whether or not bonds shall be given by the officers of the bank. (Robinson 2'. Hill, 63 Fed. Rep., 522.) But special circumstances may exist which will require them to do so. (-^d.) It is not necessar)^ that the acceptance of the bond should be sig- nified by memoranda entered upon the journal or minutes of the directors. The acceptance is to be presumed from the retention of the bond, and from the fact that the officer is permitted to enter upon or continue in the discharge of his duties. (Graves z'. The Lebanon National Bank, 10 Bush., 23.) 2 i8 A surety on the bond of a cashier of a National bank is not dis- charged by the fact that, before the bond was given, the cashier had committed frauds upon the bank, if such frauds were unknown to the officers of the bank, although they were guilty of gross negli- gence in not discovering them. (Tapley v. Martin, ii6 Mass., 275.) Ultra Vires. — It is a well-established principle that after a con- tract entered into by a corporation has been performed by either of the contracting parties, the fact that the making of the contract involved an unauthorized exercise of corporate power on the part of the company will not constitute a defense to an action brought by the party having performed the contract, to recover compensation for a breach of the contract by the other party. This principle has been applied to the contracts of National banks in numerous cases. Thus, where bonds were sold to a National bank under a contract b)^ which it agreed to replace tbe bonds to a seller at the same price, or less, it was held that, admitting the contract to be one the bank could not legally make, yet it could not hold the bonds under or bj' virtue of the contract, and at the same time refuse to comply with the terms of purchase. (I^ogan County Bank v. Townsend, 139 U.S., 67.) So, even if a National bank has not authority to picrchase com- mercial paper, this can not be set up as a defence by the person liable on the paper when sued by the bank thereon. (Prescott National Bank v. Butler, 157 Mass. , 548-) So, where a National bank has made a loan upon a real estate mortgage, its want of power to take such a security is not a defense to the mortgagee in a suit by the bank to foreclose the* mortgage. (National Bank v. Matthews, 98 U S., 621.) So, in an action to determine an adverse claim to real estate, which had been sold under a judgment, and bid in by the judg- ment creditor, and the certificate of sale assigned to a National bank, it was held that the defendants could not raise the question that the bank had no authority to purchase the certificate. (Hen- nessey 7'. City of St. Paul, 54 Minn., 219.) And so, in an action by a National bank on railroad aid bonds, the obligor cannot set up as a defense that the purchase of the bonds by the bank was ultra "oires. (Town Council of Lexington v. Union National Bank, 22 Sou. Rep., 291.) Conversely, where a National bank has received and retained the benefit of a contract made by its officers, it can not plead that the contract was unauthorized by the directors, or be- yond the power of the bank or its officers to make. (Tootle v- First National Bank of Port x\ngeles, 6 Wash., 181.) Thus, it can not 19 intei pose the defeuse of ultra vires to a contract made by it to secure the free entrance of light and air into its banking house, where it has enjoyed the benefits of the contract. (Trustees of First Pres- byterian Church V. National State Bank, 57 N. J. lyaws, 27.) And ah agreement to indemnify a surety upon an attachment bond is enforcible against a National bank, where the surety has paid the bond, though the bond was not given for the benefit of the bank. (Seeber z;. Commercial National Bank of Ogden, 77 Fed. Rep., 957.) The fact that the act of a N^ional bank in assuming to repre- sent another as agent is ultra vires will not exempt it from the rules of law which regulate the duties of an agent to his principal. It cannot plead its own violation of law to justify a breach of trust. Accordingly, when a National bank which had assumed to sell for another certain notes owned by him, but had, instead of so selling them to a third person, without his knowledge, sold thetn to itself, it was held that the bank had violated its duty to the owner, the same as if it had full power under the law to act as such agent ; and was, therefore, guilt}'^ of a conversion of such notes. (Anderson v. F'irst National Bank of Grand Forks, 67 N. W. Rep., 821.) [See also Supplement.] Where a National bank has purchased stock in another corpo- ra-tion, out of the ordinary course of its banking business, and not as security for a debt previously contracted, it may plead that such act was ultra vires, as a defense in an action against it as a stock- holder of such corporation. (The California National Bank v. Kennedy, 167 U. S. 362, overruling Kennedy v. California Savings Bank, loi Cal., 495.) 16. Limitations as to Real Estate and Mortgages. Section 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 accommodation in the transaction of its business. Second. Such as shall be mortgaged to it in good faith byway 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. 20 Purchases and Conveyances. — In purchasing or conveying real estate a National bank should act through its president or cashier, duly authorized by regular resolution of its board of directors. Banking-House. — Ma}^, perhaps, include portions of building built chiefly for its own use, which the bank rents to others ; but it is a question how far a National bank can purchase or improve real estate under color of erecting a banking-house, A National bank which has not been authorized by the certifi- cate of the Comptroller of the Currency to commence the business of banking, has no power to execute a lease of a banking house for a term of years. (McCormick v. Market National Bank of Chicago, 165 U. S., 538; S. C, 162 111., 100.) When Real Estate Security May Be Taken. — The authority conferred by the second, third and fourth subdivisions of this sec- tion is necessary to enable the bank to collect the debts due to it, and is such authority as is conferred in nearly all grants of cor- porate power. But, in order that the bank may acquire any inter- est in real estate, or any mortgage or lien thereon, under these subdivisions, it is essential that there should have been a debt previously contracted in good faith. There is no authority granted to deal in real estate, or to take real estate or any mortgage or lien thereon, as security for contemporaneous loans. Thus, if a bank has discounted a note upon the faith of the paper itself, and the paper is not paid at maturit)^, or if before it matures, the maker, or the person who negotiated it, becomes embarrassed, then the bank, acting bona fide, would have the right to take a mortgage or con- veyance of real estate as security for, or in satisfaction of, the debt; but it would have no right to take a mortgage to secure a note dis- counted at the same time, or to secure paper to be discounted thereafter, or to enter into an agreement at the time of making the discount that it will take a conveyance of real estate in payment or satisfaction of the note. These principles are now settled be- yond controvers^^ (Bank v. Matthews, 98 U. S., 621 ; Fowler v. Scully, 72 Pa. St., 451 ; Crocker v. Whitney, 71 N. Y., 161 ; Frid- ley V. Bowen, 87 111., 151.) As Security for Debts Previously Contracted. — The National banks ma^^ take mortgages on real estate to secure the payment of debts previou.sly contracted. (First N. B. of Skowhegan v. Max- 21 field, 83 Me., 576.) And the power of the National banks to sec«ire or satisfy tlieir debts out of real estate is ample for the purpose, aud, in the bo7ia fide exercise of their power iu this respect, they may do whatever an individual would do under similar circum- stances. If the real object of the purchase i^ to secure or satisfy debts, the authority of the bank to purchase is not limited to the exact amount of the debts, but it is entitled to purchase such real estate as may be necessary for the purpose. (Upton v. National Bank of South Reading, 120 Mass., 153.) Accordingly, it has been held that, when the inducement to the transaction is the se- ourity of an antecedent indebtedness, the bank may make an addi- tional advance, and take a mortgage on real property to secure both the advance and the prior indebtedness. { /c/.) So it may take a conveyance of real estate worth more than the debt, and pay the difference between the debt and the value of the property. (lyibby V. Union National Bank, 99 111., 622.) And similarly, when there is a prior lien upon the property, the bank may discharge this lien and take a mortgage to cover the whole amount (Ornn v. Mer- chants' National Bank, 16 Kans., 34), or it may purchase the prior lien and enforce it in its own behalf (Holmes v. Boyd, 90 Ind., 322) And, iu taking a mortgage to secure the debt upon notes already due, it is not a violation of the law for the bank to agree to renew the notes and hold the mortgage as security for the re- newals. (Howard National Bank z-. Loomis, 51 Vt., 349.) Where a bank sells real estate of which it is the owner, it may take a mortgage on the same to secure payment therefor. ( New Orleans National Bank v. Raymond, 29 La. Ann., 355.) Debentures — Stock of Real Estate Companies — Wife's Separate Estate. — Very difficult questions frequently arise as to whether a contemplated transacticna is within the inhibition against loans on real estate. One question of frequent occurrence, especially in the West, is whether the debentures of mortgage lean companies can be taken as collateral. This point has never been judicially determined, but the Comptrollers of the Cur- rency have generally expressed the opinion that they are not proper securities for a National bank to receive. But it has been held by the Supreme Court of Minnesota that a National bank may make loans upon the securitj- of the stock of a corporation who.se property consists .solely of real estate. (Baldwin v. State National Bank, 26 Minn., 43.) Where a married woman indorsed a note: 22 " I hereby charge my separate and personal estate for the payment of the within note " it was held by the Court of Appeals of New York (Third National Bank v. Blake, 73 N. Y., 260 j that the in- dorsement was to be treated as personal security, within the mean- ing of the National banking law, and not as a mortgage. Mortgage Given to Indorser to Enure to Bank.— It has been held that a National bank may make an agreement that, in case a note discounted by it shall not be paid, a mortgage given by the maker to his indorser shall enure to the benefit of the bank (Haire v. First National Bank, 36 Iowa) ; but this decision seems to be very questionable. Promissory Notes Secured by Mortgage — ^Judgment Notes. — The Solicitor of the Treasury, in an opinion given to the Comp- troller of the Currency, has held that it is not unlawful for a National bank to lend upon a promissory note, which is secured by bonds and notes which are in turn secured by real estate, nor to lend on judgment notes, which when recorded become liens on real estate; provided such loans are made solely on personal security given. * Violation of Law Can Not Be Set Up by Borrower.— But while a National bank is forbidden to make loans upon real estate security, this point can not be raised against the bank when it seeks to foreclose a mortgage or othervidse satisfy the debt out of the property. No one but the Government can be heard to complain that the bank has exceeded its powers, and the only penalty which it incurs is a liability to a forfeiture of its franchises. (National Bank v. Matthews, 98 U. S., 621.) And where the bank acquires real estate, which it had no authority to take, the conveyance to it is not void, but only voidable, at the option of the Government ; and its title to such property is good until assailed in a direct pro- ceeding brought by the Government. (Reynolds v. Crawfords- ville Bank, 112 U. S., 405.) [See also Supplement.] Policy of the La^v. — The prohibition against loans on real estate is a feature of the law which has been much criticized in some quarters ; and as evidence that this restriction upon the powers of the National banks is unreasonable and unnecessary, it is urged that real estate is the best kind of security ; that savings banks, trust companies, and insurance companies are authorized * The Comptroller of the Currency's oflfice formerly accepted this opinion, but now holds that such loans are not lawful. 23 to make such loans ; and why, therefore, should not the National banks be permitted to do the same? But, by the great majority of bankers, the restriction is deemed wise and salutary. The objec- tion to real estate security is not to its sufficiency, but to the kind. As the obligations of the banks are largely payable on demand, it is necessary that the securities it holds should be readily converti- ble into money ; and while a mortgage upon real estate may be good security, it can not be made immediately available, in case of an emergency. Personal securities of the kind usually taken by banks can be quickly assigned, and promptly realized upon; but the transfer of any interest in real estate is always attended with more or less delay. It has not infrequently been the case that banks have been compelled to suspend when their assests were more than sufficient to pay their debts, simply because a large por- tion of the assets were real estate securities, upon which it was impossible to realize at the proper time. In the case of insurance companies, trust companies, savings banks, and similar corpora- tions there is not the same necessity for having the assets in a convertible form, but it is rather desirable that a large portion of the investments shall be of a more or less permanent character ; and. therefore, real estate loans are well adapted to their purpose. 17. Minimum Capital Required. Section 5138.— No association shall be organized under this Title 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 approTal of the Secretary of the Treasury, be organized in any place the population of which does not exceed six thousand inhabitants. No association shall be organized in a city the population of which exceeds fifty thousand persons with a less capital than two hundred thousand dollars. This section Is amended by Act of March 14th, 1900, which pro- vides for the organization of associations with $25,000 capital in towns of 3,000 population or less. (See the Act, page 311.) The Comptroller relies principally on reports of commercial agencies iu determining the population of a place, but his findings in regard to this are not necessarily final. Any error of his in this respect can be ^jcorrected in appropriate legal proceedings. It some- times happens that we find banks in some towns and cities that appear to have less than the minimum capital re- quired by law. The explanation is that they were either 24 organized when the places were smaller, or were organized in villages afterward absorbed by cities lying near. When application is made to the Comptroller for a bank with $50,000 capital, he certifies the application, with statement as to population, etc., to the Secretary of the Treasury, who thereupon takes action and approves or not as he deems best. Generally there is no objection, but the Secretary might not give his approval if he thought a bank unnecessary, or if there was a bank already in the place giving sufiBcient banking facilities. 18. Stockholders' Rights and Liabilities. Section 5139. — The capital stock of each association shall be di'>ided ir:to shares of one hundred dollars each, and be deemed personal property, ar.d transferable on the books of the association in such manner as may be pre scribed in the by-laws or articles of association. Every person becoming a shareholder by such transfer shall, in proportion to his shares, succeed to alj 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. Par Value. — The exception to the division into shares of $100 each is in case of State banks converted. (See section 5154, par. 36.) If a converted bank desires to change the denomination of its shares, the new denomination must be $100. State Statutes. — It is not competent for State legislation to limit or interfere with the transferable quality of National bank stock, as the same is left by the statutes of the United States. (Doty V. First National Bank of Lariraore, 3 N. D., 9.) But it has been held that a State statute prescribing the mode of transfer of stock by executors and administrators will apply to the stock of a National bank located in such State. (Hobbs v. Western National Bank (U. S. Ct. Ct.), 2 Nat. Bk. Cas., 187.) And it is held that a State statute which provides that the stock- holders of all private corporations shall have the right of access to and inspection and examination of the books, records and papers of the corporation at all reasonable and proper times, applies to National banks located within the State. (Winter v. Baldwin, 89 Ala., 483.) And National bank stock is subject to seizure and sale on exe- cution under authority of State laws. {^In ;r Braden's Estate, 165 Pa. St., 1 84.) 25 Transfer of Stock — Entry of Transfer on Books. — The transfer of stock in National banks is not governed by diflercnt rules from those which are ordinaril}' applied to the transfer of stock in other corporations. (Johnson v. Lafiin, 103 U. S-, Soo.) The entry of the transaction in tiie books of the bank is required, not for the purpose of passing the title from seller to buyer, but for the protection of the parties, and others dealing with the bank, and to enable the bank to know who are its .stockholders, (/a^.) Accordingly, it has been held by the Supreme Court of the United States that where the shareholder delivers his certificates of stock to the purchaser, with a Ijlank power of attorney to make the transfer on the books of the bank, and receives the purchase- money, the sale is complete and the title passes from seller to buyer, itd.') And so it has been decided that where a share- holder who has sold his stock delivers the certificates with a pro- per power of attorney to the cashier with a request that the transfer be made upon the books, and the cashier promises so to do, the transferror has done all that is legally required of him to divest himself of the liability of a stockholder, and should the cashier fail to make the transfer on the books, the transferror can not be held as a stockholder in case the bank should afterwards become insolvent. (Hayes v. Shoemaker, 39 Fed. Rep., 319 ; Young v. McKay, 50 Fed. Rep., 397.) And it is further held that it is wholly unimportant in such case whether the notice of sale and request to transfer are in writing or oral. (Hayes v. Shoemaker, 39 Fed. Rep., 319) When a certificate of stock is left with the of- ficers of the bank to be transferred on the books, the transfer takes place at the time when it is so left, and not at the time of actual entry in the books, provided the party leaving it has authenticated to the ofi&cers of the bank his intention to make such transfer in the manner prescribed by the by-laws of the bank. (Young v. McKay, 50 Fed. Rep., 394) The rights of a transferee of National bank stock, under an unrecorded transfer, good at common law, are superior to the rights of a subsequent attaching creditor of the transferror without notice. (Doty v. First National Bank of Lari- more, 3 N. D., 9. But while the noting of the transfer on the books is not neces- sary for the purpose of passing the title to the stock, it is essential for other purposes. It is important to the transferee that the trans- fer should be properly registered, for, until this is done, the corpo- ration is not bound to recognize him as a stockholder, and he is 26 not entitled to vote upon the stock, or to receive the dividends thereon, or in fact, to have any of the privileges of a stockholder; and the transferror has an interest in having the transfer registered, because he will not be discharged from his liability as a stock- holder until this is done. (Bowdell v. Farmers' and Merchants' National Bank, Brown's National Bank Cases, 147.) The record made of the transfer upon the books of the bank is suf&cient, as between the transferee and the bank, to work a change of ownership, and new certificates are not necessary to his becoming the owner of the stock so transferred. (Keyser v. Hitz^ 133 U.S., 438.) Subscription to stock and payment in full and entry of his name on the books as a stockholder makes the subscriber a shareholder without taking out a certificate. (Pacific National Bank v. Eaton, 141 U. S., 227 ; Thayer v. Butler, lb., 234 ; Butler v. Eaton, lb. 240.) Right of Stockholders to Transfer.— A shareholder in a Na- tional bank, while it is a going concern, has the absolute right, in the absence of fraud, to make a bona fide and actual sale and trans- fer of his shares at any time, to any person capable in law of pur- chasing and holding the same, and of assuming the transferror's liabilities in respect thereto, and this right is not subject, in such cases, to the control of the directors or other stockholders. (John- son V. lyaflin, 5 Dill, 65.) The directors are authorized to prescribe regulations under which the transfer of stock shall be made ; but these regulations must be reasonable, and under the pretence of prescribing the manner thereof, the directors can not clog the transfer with useless restrictions. (Johnson zk Laflin, 103 U. S., 800.) The transfer does not require to be approved by the direc- tors, nor can they decline to make it in a proper case, (5 Dill., 65.) But where the transfer is sought to be made to a person incapable in law of assuming the liabilities of a stockholder — as where it is made to an infant, or to a person of unsound mind— then the directors might refuse to permit the transfer to be registered, for such a transfer is a fraud upon the corporation, the stockholders and creditors. And so they might refuse where the transfer is evi- dently made merely for the purpose of escaping liability, as where a shareholder in an insolvent bank seeks to transfer his stock to a pauper, or man of straw, or to an insolvent or irresponsible per- son. Where the person intrusted by the directors with the duty of entering the transfers on the books of the bank, refuses for insuf- 27 ficient reason, to note a transfer, the bank will be liable for the damages resulting tlierefroni. (Case v. Citizens' Bank, loo U. S-, 446 ) On December 30, 1875, A sold certain shares of bank stock to B, and assigned them by a transfer written on the back of the cer- tificate. By the by-laws of the bank, stock was transferable only on the books of the company. On December 14, 1S78, the shares were attached by a judgment creditor of A and sold and trans- ferred to C. Neither the bank nor the creditor had knowledge of the transfer to B. In January, 1880, B presented his certificate and transfer to the ofiicers of the bank and demanded a transfer of the stock, which was refused, whereupon he brought suit against the bank for such refusal : Held, That the bank was liable in dam- ages for the refusal to transfer the sliares. (Hazard v. National Exchange Bank of Newport, 26 Fed. Rep., 94.) Specific Performance. — A court of equity will not enforce specific performance of an agreement to sell shares in a National bank to enable the purchaser to obtain control of the bank, for the reason that, (i) equity will not generally enforce specific execution of a contract relating to personal chattels, and (2 ) because a decree enforcing the agreement in question would be against public pol- icy. (Foil's Appeal, 21 Alb., I^ J.; 2 N. B. C, 411.) 19. When Capital Stock Must be Paid In. Section 5140. — At least fifty per centum of the capital stock of every asso- ciation 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 instaUments 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 Comptroller, under oath, by the president or cashier of ihe association. Payment of Subscriptions. — Probably the theory of the law is, that each subscriber .'^hall pay half of his subscription down, and the remainder in five equal monthly installments; this is really what a subscriber to National bank stock, who is expected to know the law, agrees to do, but the Comptroller does not usu- ally require a certificate in detail, but only that capital amounting to 50 per cent., or 10 per cent., as the case may be, has in the ag- gregate been paid in. It is sometimes convenient for some sub- 28 aTibers to pay more at once, and this enables the officers to certify the payments necessary to comply with the letter of the law, with- out waiting for the slower subscribers. When this plan is adopted in order to hold the other subscribers, a contract should be entered into with them. (See note on next section.) Certifying Payments. — The officers certify 50 per cent. paid. This is the certificate of officers required by section 5168, par. 21, post, and is called the first instalbnent. Upon the receipt of this the Comptroller ma}^ if bonds have been deposited, authorize the bank to commence business. The date of the Comptroller's certi- ficate of authority to commence business fixes the date of the pay- ment of the succeeding installments. The Comptroller's office furnishes blanks upon which to certify payment of capital. (For form, see Appendix.) 30. Failure to Pay Installments on Stock, etc. Section 5 141. — 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 directors 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 news- paper is published in said city or county, then in an newspaper published nearest thereto, to any person who will pay the highest price therefor, to be not less than the amount then due thereon, with the expenses of adver- tisement and sale; and the excess, if any, shall be paid to the delinquent shareholder. If no bidder can be found who will pay for such stock the amount due thereon to the association, and the cost of advertisement and sale, the amount previously paid shall be forfeited to the association, and such stock shall be sold as the directors may order, within six months from the time of such forfeiture, and if not sold it shall be canceled and deducted from the capital stock of the association. If any such cancellation and reduction shall reduce the capital of the association below the minimum of capital required by law, the capital stock shall, within thirty days from the date of such cancellation, be increased to the required amount; in default of which a receiver may be appointed, according to the provisions of section fifty-two hundred and thirty-four, to close up the business of the association. Subscriber's Liability. — This section is entirely for the direc- tion of bank managers, and points out the proper course to be taken in bringing in the capital of the bank. It must be remem- bered that from the time of his subscription a person becomes a 29 shareholder, and that all the shareholders have entered into a contract among themselves, and are mutually responsible to each other. If only five persons stSrt the bank, and subscribe for all the stock, with the purpose of afterward distributing the same among a number of parties, it is well for each of the five asso- ciates to have his distributees selected and to bind them by a formal contract with himself to each take the stock he destines for them. Legal Status of Stock.— The stock doubtless has a legal standing before a single payment is made, and the association may be legally organized and become a body corporate before a single dollar of the capital is paid in by anyone. Thus sales or transfers of stock may take place before any capital is paid in. This is in line with the decision of the United States Supreme Court in Van Allen v. Assessors, 3 Wall., 573, which holds a share of stock to be an entity distinct from capital. The actual holder or subscriber, in whose name the stock stands on the books of the bank at the time the directors call for the payment of the first installment of 50 per cent., must pay it, and payment can doubt- less be compelled by legal proceedings. The section under con- sideration does not refer to this first installment, but to the subse- quent installments, the dates of payment of which were fixed by the preceding section. The whole tenor of section 5141 implies a previous payment of 50 per cent., which is in the nature of a for- feit, if the stock has to be sold on account of failure to meet the subsequent installments. Limit for Paying in Capital. — A new association would, strictly, under this section, have the following time to make good its capital before a receiver could be appointed ; First, the time until the installment became due ; then three weeks for notice by publication ; then six months from forfeiture to cancellation ; and, finally, thirty days longer in which to bring up capital to required amount. How capital is to be made good in such case is not dis- tinctly stated, but probably by assessment on remaining stock- holders. (See section 5205, par. 83, post.') 21. Comptroller to Determine if Association is Entitled to Com- mence Business. Section 5168. — Whenever a certificate is transmitted to the Comptroller of the Currency, as provided in this Title, and the association transmitting 30 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 complied with all the provisions of this Title recjuired to fee complied with before an association shall be authorized to commence the business of bankmg, 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 associa- tion 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 necessary to enable the Comp- troller to determine whether the association is lawfully entitled to commence the business of banking. Certificate of Officers and Directors. — The certificate de- scribed in this section is that known in the Coiuptroller's oflSce as " Certificate of 0£&cers and Directors." The certificate contains the notification and statements mentioned in the section. (For form see pages 208, 209. Preliminary Examination. — The Comptroller has under this and the subsequent section the right to send an examiner before granting his certificate of authority to commence business. When the Association is formed by reorganization of a private or State bank, it is customary for the Comptroller to have an examination made to ascertain fully the character of the bank's assets — but if the bank is organized de novo, the examination may not be or- dered until after the bank has begun business. 22. Certificates of Authority to Commence Business. Section 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 him for the purpose of inquiring into the condition of such association, or otherwise, it appears that such association is lawfully entitled to commence the business of bank- ing, the Comptroller shall give to such association a certificate, under his hand and official seal, that such association has complied with all the provi- sions required to be complied with before commencing the business of bank- ing, and that such association is authorized to commence such business. But the Comptroller may withhold from an association his certificate authorizing the commencement of business, whenever he has reason to suppose that the shareholders have formed the same for any other than the legitimate objects contemplated by this Title. See note to preceding section. 31 23' Publication of Certificate. Section 5170. — The association 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 pubhshed in such city or county, then in the newspaper published nearest thereto. This refers to the certificate of authority to begin business. An insertion in a weekly newspaper, or in a weeklj'- edition of a daily, during the sixty days is sufficient. The Comptroller requires the publisher's oath of publication and a copy of the paper containing the notice, as evidence of publication for the time required. 24. Increase of Capital Stock. Section 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 maxi- mum of ^uch increase to be provided in the articles of association shall be determined by the Comptroller of the Currency; and no increase of capital shall be valid until the whole amount of- such increase is paid in, and 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. Obsolete Provisions. — Several of the provisions of this section have been rendered obsolete by the act of May i , 1 886. (See posi par. 199.) It is no longer necessary to insert in the articles of association any provisions for an increase of the capital stock ; for now, by the act referred to, shareholders owning two-thirds of the shares may increase the capital stock at any time and to any amount, subject only to the approval of the Comptroller of the Currency, and this notwithstanding that the articles of association contain a provision fixing a maximum limit. The increase must now be made by the shareholders, and not by the directors, and all provisions in the articles of association of banks organized prior to May I, 1886, authorizing directors to increase the stock, have become wholly nugatory. But the provisions that the whole amount of the increase must be paid in, and notice thereof trans- mitted to the Comptroller of the Currency, and his approval obtained, before the increase can take effect, still remain in force. Procedure. — When it is desired to increase the capital stock, the first step is to call a meeting of shareholders and secure the adoption of a suitable resolution authorizing the increase. This 32 resolution must receive the votes of shareholders representing at least two-thirds of the existing stock, and it is not sufficient that the resolution is passed by a vote of shareholders owning two- thirds of the shares represented at the meeting. The next step is to open subscriptions for the new stock. When all the new stock shall have been subscribed and paid for, the proceedings should be certified to the Comptroller of the Currency, and his approval requested. The Comptroller then, if satisfied that the bank's con- dition admits of an increase and that it is made in good faith, gives his approval. (Forms to be used in making the increase will be found on pages 271, 272.) Waiver of Formalities. — The National Bank Act confers upon the National banks the abstract power to increase their capital stock, and such power exists independently of the separate steps required to be taken b}^ the stockholders in the exercise of the power ; and hence any irregularities or informalities in the exercise of that power may be waived by the subscriber. (L,atimer v. Bard, 76 Fed. Rep., 536.) Right of Shareholders to Subscribe for New^ Shares. — The articles of association generally contain a provision that, in case of the increase of the capital stock, each shareholder shall have the privilege of subscribing for such portion of the new stock as he may be entitled to, according to the number of shares in the exist- ing stock held by him at the time. But this provision is merely declarative of a right incident to the ownership of stock, and which would exist though there were no such provision in the articles ; for it is a general rule of law that where the capital stock of a cor- poration is increased, each shareholder has a right of pre-emption to the new stock in proportion to his shares in the original stock. But shareholders may, of course, waive their right to take the new stock, and this is frequently done. And the waiver need not be expressed ; it may be given tacitly. It may be implied from the failure of the shareholder to avail himself of his right within a rea- sonable time. But the safer course, and the one which the direct- ors and officers should generally adopt, is to have the waiver given in writing. In this matter each shareholder is bound only by his own action ; he can not be deprived of his right of pre emption by any vote or assent of the other shareholders, notwithstanding they may own two-thirds, or more, of the stock. 33 Comptroller's Approval — Recovery of Money Paid Where Increase Not Made. — The stock of a National bank can not be lawfully increased before the entire amount of the new capital has been paid in and the Comptroller of the Currency has certified to the increase and to the fact of payment in the mode prescribed by Section 5142, Rev. Stat. U. S. (Cornell's Executors v. First National Bank of Kansas City, 32 U. S. App., 426. McFarlin v. National Bank of Kansas City, 68 Fed. Rep., 868 ; Charleston v. People's National Bank, 5 S. C, 103.) But perhaps a case may arise where a subscriber would be estopped from asserting, as against a creditor, that he was not a stockholder, even though the provisions of the statute had not been strictly followed. (McFarlin V. First National Bank of Kansas City, supra.) Where money paid in on subscriptions to an increase of capital is received by a bank as a trust fund to be applied to that purpose, and before the increase is approved by the Comptroller and his certificate issued, the bank fails, the money so paid may be recovered by the sub- scribers. {Id.') Where Whole Amount of Increase is Not Taken. — In a former edition of this Digest it was stated on the authority of Eaton V. Pacific Bank (144 Mass., 260), that it is a condition pre- cedent to the increase of capital stock, that the entire amount thereof should be subscribed and paid for. But this view has since been overruled by the Supreme Court of the United States. That court holds that where an increase of the capital stock is authorized in a certain sum there is no implied condition that the subscription shall be void if the whole amount so authorized is not subscribed, (Aspinwall v. Butler, 133 U. S., 595.) The provision of the statute that "no increase of capital shall be valid until the whole amount of such increase is paid in and notice thereof has been transmitted to the Comptroller of the Currency, and his certificate obtained .specifying the amount," etc., was intended to secure the actual payment of the stock subscribed, so as to prevent "watering" the stock ; and it is not violated by the issue of less new stock than the full amount authorized, if the amount so issued is the exact amount paid in. (Aspinwall v. Butler, 133 U. S., 595; see also Delano v. Butler, 118 U. S., 634.) Therefore, where a shareholder subscribes his additional and proportional share towards doubling its capital and actually pays his subscriptions, the fact that the stockholders, with the assent of the Comptroller of the Currency, 3 34 reduce the amount of the stock they had proposed to issue, does not permit him to repudiate his subscription and recover the money- paid on it. (Pacific National Bank v. Eaton, 141 U. S., 227.) [See also Supplement.] But if there were a large and material defi- ciency in the amount of capital contemplated, equity might inter- fere to protect subscribers. (Aspinwall v. Butler, 133 U. S., 595.) In 1892 the stockholders of the C. National Bank voted to increase the capital stock $300,000; and M. subscribed for twenty- three shares of such increase and paid in the amount of his sub- scription. The full amount of such increase not having been taken, the President and Cashier called a meeting of stockholders in 1895, at which meeting an increase of capital stock in the sum of $150,000 was authorized, which was approved by the Comptrol- ler of the Currency. M. was not present at such meeting, though one B. , who held a proxy authorizing him to attend meetings of shareholders and represent M.'s stock, was present. Held, that the subsequent action of the stockholders was not binding upon M., and that he could recover the amount paid in by him. (Matthews V. Columbia National Bank, 79 Fed. Rep., 558.) In an action to recover money deposited with a National bank the plaintifi" may show that stock issued by the bank in his name was issued to him merely as collateral security for such deposit. (Williams v. American National Bank of Arkansas City, 85 Fed. Rep., 376.) In such an action it is no defense to the bank that the stock was issued without authority of law. (.Id.) 25. Reduction of Capital Stock. Section 5143. — 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. Procedure. — Where a reduction of the capital stock is con- templated, it is always best, as the first step, for the proper oflficers of the bank to write to the Comptroller of the Currency and advise him of what is intended, and ask him to furnish forms and instructions, for it may be that the Comptroller, for some cause, 35 will not approve of the reduction, or there may be some reason why it can not be legally made. If the Comptroller makes no objection to the proposed reduction — and usually he does not, where the bank is solvent and there is no legal obstacle — the next step is to call a meeting of stockholders, which should be done in the manner pointed out in the note to the next section. The shareholders should then adopt a suitable resolution, authorizing a reduction of the stock. The votes in favor of the resolution must represent two-thirds or more of all the stock of the bank, and it is not sufl&cient that two-thirds of a quorum vote in favor of it. The resolution should state the intention of the stock- holders clearly, but it is not required to be in any special form. If it is desired that the redu ction shall take effect from a certain date, a provision to that effect should be inserted in the resolution ; otherwise, the reduction will take effect from the date on which the Comptroller gives his formal approval. But in no case is the reduction effectual until the approval of the Comptroller is given. Forms upon which to certify to the Comptroller that the necessary steps have been taken by the shareholders are furnished by that officer. (For forms, see pages 272, 273.) Usually the course is for each stockholder to relinquish and sur- render up to be canceled a pro rata portion of his stock, but this is not the only course that may be pursued. If some of the stock- holders are v/illing to surrender enough of their stock to make up the whole amount of the reduction, there is no necessity that the holdings of the other stockholders should be reduced at all. The issue of fractional shares is sometimes unavoidable, and is per- mitted. When Capital Can Not be Reduced. — There can, of course, be no reduction of the capital stock below the minimum amount of capital required by Section 5138, Revised Statues, (par. 17,) nor can any existing bank reduce its capital below the amount required for a new institution established in the same place, although the population of such place at the time such bank was organized would have permitted of an organization with a smaller capital. As to whether a National bank which did not obtain the approval of the Secretary of the Treasury to organize with a capital stock of less than ^100,000, but organized with that amount or more, can reduce its capital below $100,000, there is a difference of opin- ion, and different Comptrollers have held variously on the subject. 36 But, considering that it is a fundamental rule of law, that there can be no change whatever made in the capital stock of a corpora- tion, unless there is a clear authority found in the statute to make such a change, we would say that it would be unsafe for any bank to make such a reduction. It is to be remembered by those hav- ing the management of National banks that the important question is not whether the Comptroller will approve of the reduction, but what are the liabilities of the stockholders and directors in such a case ; for, if the statute does not authorize such a change in the capital stock, the approval of the Comptroller can afford them no protection, and the risks they incur are very serious. Capital Set Free Can Not be Retained by Bank. — When the capital stock is reduced the amount so set free belongs to the stock- holders, in proportion to the number of shares held by each, and it must be returned to them ; it can not be retained by the bank for a surplus fund, or for any other purpose. In this matter the directors have no discretion. (Seeley v. New York National Exchange Bank, 8 Dah^ 400; affirmed, 78 N. Y., 608.) And as such released capital ceases to be the property of the corporation, and becomes the property of the individual stockholders. Its reten- tion by the bank can not be authorized by a majority of the stock- holders, no matter how large ; but each stockholder is entitled to claim his portion, and can not be deprived of this right against his own consent. But frequently the shareholders waive their right to withdraw the released capital, and agree to leave it with the bank to be used for a surplus fund or otherwise ; and, sometimes, where it seems that a reduction of capital might injuriously affect credi- tors, the Comptroller requires such an agreement on the part of the stockholders as a condition precedent to his approval of the reduction. Reduction of Capital to Meet Impairment. — Where the capital stock of a National bank has been reduced in order to meet an impairment thereof there can be no withdrawal of assets ; for, prima fade, any further withdrawal of assets would result in still further impairment of the capital. (McCann v. First National Bank of Jeffersonville, 112 Ind., 354.) In the case cited the capital of a National bank having become impaired by the non- payment of the interest on some paper among its assets, to the amount of $71,000, in order to avoid an assessment by the Comp- 37 troller, the stockholders reduced its capital stock, and carried the bills and notes to the account of suspended or " bad debts," which were not thereafter included as assets, although retained in its custody. Some years afterwards the bank realized $75,000 from collaterals pledged for the security of that paper, and a stock- holder brought an action to recover his share of the amount realized, proportioned to the amount of stock surrendered : Held^ That he could not recover. 26. Rights of Shareholders at Elections. Section 5144. — In all elections of directors, and in deciding all questions at meetings of shareliolders, each shareholder shall be entitled to one vote on each share of stock held by him. Shareholders may vote by proxies duly authorized in writing; but no officer, clerk, teller, or book- keeper of such association shall act as proxy ; and no shareholder whose lia- bility is past due and unpaid shall be allowed to vote. Shareholders' Meetings. — The articles of association and by- laws of banks usually provide that meetings of shareholders shall be called by publishing notice thereof for thirty days in a news- paper, or by notifying the shareholders individually in writing. The latter is probably the method most commonly used. In the absence of any regulation on the subject, the better course would seem to be to send each shareholder written or printed notice such a reasonable time in advance of the meeting as to enable him to be present if he desires. In every case due notice must be given, and for want of due notice to the shareholders the proceedings, unless acquiesced in or ratified by all, may be set aside as invalid. When any act to be done by the association requires the assent of the shareholders, their assent, unless unanimous, must be given at a duly convened meeting of shareholders. The assent in writ- ing of shareholders owning the requisite amount of stock is not sufficient, and will not be binding upon any non-assenting share- holder. The action of a majority, no matter how large, can not be binding upon a minority, no matter how. small, when not taken at a meeting of shareholders at which every shareholder has an opportunity to be represented, either in person or by prox3^ The only exception to this rule is in the case of the amendment of the articles of association extending the period of corporate existence, the consent of the shareholders to which the law expressly author- izes to be given in writing. The mistake is frequently made of supposing that business 38 requiring the action of the stockholders can be transacted at a meeting of the board of directors when the directors own a majority of the stock, or the amount of stock necessary to deter- mine the actions of the shareholders, in respect to such business at a shareholders' meeting. But the rule of law is that every stockholder has a right to be present at the meeting, and to express his assent or dissent ; and this he has, of course, no opportunity of doing when the business is considered at a meeting of the directors. "Where the articles of association of a National bank provide that meetings of the stockholders may be called by the board of direc- tors or by any three stockholders, a meeting called by the Presi- dent and Cashier is not lawfully convened. (Matthews v. Columbia National Bank, 79 Fed. Rep., 558. ) Proxies. — There is some doubt whether the word ^'officer'' in the provision forbidding any '^officer, clerk, teller, or book-keeper" to act as proxy, means only an executive officer, such as the presi- dent, vice-president, or cashier, or whether it applies as well to a director. There does not appear to have ever been any judicial decision on the point, which seems rather extraordinary, for the question must frequently have arisen at meetings of shareholders. The view formerly taken in the office of the Comptroller of the Currency was that a director is not an officer within the intend- ment of this provision. But the contrary view is now held in that office. The closing paragraph of Section 5240 would seem to sustain this ruling, and this appears to better conform to the spirit of the law. The obvious intention of the law is that no person shall act as proxy who is likely to have an interest in the action of the stockholders which may not be consonant with the interests of the corporation. A director therefore would seem to be, more than anyone else, within the spirit of the provision. The evil which the law aims to prevent is greatest in his case. The bank is under the control of the directors, who have the entire management of its affairs, and they have, in many cases, a great personal interest in the action of the meeting, and especially where the meeting is held for the election of directors, and the)^ are candidates for re- election. In all cases it is better, in order to avoid any question, that the proxy shall be a person not identified in any way Vvith the management of the bank. (For form of proxy, see page 274.) A proxy cannot bind his principal by attending at, and partici- 39 pating in, a meeting of stockholders not lawfully called. (Matthews V. Columbia National Bank, 79 Fed. Rep., 558) What Liability Disqualifies Shareholder to Vote. — The provision of this section which disqualifies shareholders "whose liability is past due and unpaid" applies only where the liability is for unpaid subscriptions for stock, and was not intended to dis- qualif}' shareholders otherwise indebted to the bank. (United States ex rel. Cond v. Barry, 36 Fed. Rep., 246.) 27. Election of Directors. Section 5145. — The affairs of each association shall be managed by not less than five directors, who shall be elected by the shareholders at a meet- ing to be held at any time before the association is authorized by tlie Comp- troller of tlie 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. See note to Section 5147. 28. Qi!alifications 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 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 associa- tion of which he is a director. Any director who ceases to be the owner of ten shares of the stock, or who becomes in any other manner disqualified, shall thereby vacate his place. See note to Section 5147. Par Value of Shares. — The par value of shares not being stated, ten shares of a converted bank, though of lower par value, meet the requirement. 29. Oath Required from Directors. Section 5147. — Each director, when appointed or elected, shall take an oath that he will, so far as the duty devolves on him, diligently and honestly adrninister 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 40 the books of the association, and that the same is not hypothecated, or in any way pledged, as security for any loan or debt. Such oath, subscribed by the director making it, and certified by the officer before whom it is taken, shall be immediately transmitted to the Comptroller of the Currency, and shall be filed and preserved in his office. Qualifications of Directors. — From the foregoing two sections it will be seen that several things are required to qualify a person foi the position of director. He must be a citizen of the United States, must own in his own right not less than ten shares of the stock of the bank, and must hold that stock free from pledge ; and also, at least three-fourths of the directors must have resided in the State, Territory or district where the bank is located, for one year immediately preceding their election, and must be residents therein, during their continuance in office. It is therefore necessary that in a Board of five, four must be residents. In a Board of seven, six, etc. As the stock must be held in the director's own right, no person who holds stock in a merely representative capa- city — as an executor, administrator, guardian, or trustee — can be a director. An unmarried woman, whether a widow or spinster, can be a director as well as a man ; and so may a married woman in those States where the laws permit her to assume all the obli- gations of a stockholder. A director who owns more than ten shares of stock may sell or pledge all of his stock except ten shares, without becoming disqualified. Oath of Directors,— The law as regards directors' oaths is fatally defective in that it fails to provide before what ofiicer it may be taken. In order that an oath can have any efiicacy as such, and especially in order that an indictment for perjury may be sustained thereon, it is requisite that the oath shall have been prescribed by law, and that it shall have been taken before an ofiicer duly aitthorized to administer it. The act of February 26, 1 88 1 (^post, par. 185), which authorizes an oath to be taken before a notary public, applies only to the oath prescribed by Section 521 1, Revised Statutes — the oath to the report of condition. As regards the other oaths prescribed by the National banking law, there does not appear to be any ofiicer competent to administer them. (United States z^ Curtis, 107 U. S., 671.) The Comptroller requires them to be taken, but they have no legal force. Directors Can Act Only as a Board. — The election of a per- son as a director does not constitute him an agent of the corpora- 41 tion with authority to act separately and indepeudeutly of his fel- low members. It is the board, duly convened and acting as a unit, that is made the representative of the bank. The assent or determination of the members of the board acting separately and individually is not the assent of the corporation. The law pro- ceeds upon the theory that the directors shall meet and counsel with each other, and that any determination affecting the associa- tion shall be arrived at and expressed only after a consultation at a meeting of the board attended by a quorum. (^National Bayik V. Drake, 35 Kan., 564.) Frequently, it is true, a director does have authority to bind the bank when acting separately and apart from the others ; but in such case he does not derive his authority from his position as director, but from the circumstance that he has been authorized by the board, either expressly or impliedly, to act as the agent of the bank. "What Constitutes a Board. — A quorum generally consists of a majority of the whole board. A provision to this effect is usuall}^ contained in the articles of association (see form of articles on page 198), though this would be the rule in the absence of any provision whatever on the subject. In the previous editions of this Digest the opinion was expressed that it would be competent for the stockholders to provide that a less number than a majority shall constitute a quorum, and we still believe this to be correct, though the Comptroller of the Currency takes a different view. The point has not been judicially determined. Where a majority is required to constitute a quorum, this means a majority of a full board, and not merely a majority of those who may be members at the time. Thus, should there be a vacancy in a board consisting of ten members, six would still be necessary to make a quorum, though five would be a majority of the present members. Sometimes the articles of association do not provide for any specific number of directors, but provide that the board shall consist of not less, or not more, than a certain number, or both, as for instance, " The board of directors shall consist'of not less, than five and not more than ten stockholders." This leaves it to the stockholders to determine at each annual election the number which shall constitute a full board for the ensuing year. If. in such a case, the stockholders do not manifest their intention by expressl}^ setting it forth in a resolution, it is to be gathered from their action in electing a certain number of directors, and it is to 42 be supposed that the number so elected was intended to constitute the board for the year ; and the effect is the same as if they had expressly provided for that number in the articles of association or otherwise. Vacancies occurring through the year should, therefore, be filled as in other cases. Disqualification and Resignation. — It would seem to be the proper construction of the law that where a director becomes dis- qualified, this ipso facto vacates his place in the board, and no re- moval by the other directors is necessary. The provision that the directors are to hold office for one year, does not require a director to serve for the whole term for which he was elected, and prohibit him from resigning during such term, but he may resign at any time during the year. (Briggs v. Spalding, 141 U. S., 132.) The apparent purpose of the provision, in regard to the term of office, is to make it conform to the time of the new election, and not to ab- solutely require every director to serve the full term. (Movius v. Lee, 30 Fed. Rep., 298.) The resignation of a director should be tendered to the board, and not to the shareholders. As the presi- dent is the head of the board, it may be tendered to him. (Movius V. Lee, 30 Fed. Rep., 298.) It is the more orderly and proper way to put the resignation in writing, but an oral resignation tendered to the president is sufficient. (Briggs v. Spalding, 141 U. S., 132.) Where the president is granted a leave of absence on account of ill health, it is not incumbent upon him to tender his resignation as a director, at the peril of otherwise being held liable for losses that may occur during his absence through the mis- management of the bank. {Id.') Liability of Directors. — Directors who violate any of the provisions of the law can be held personally liable for the loss resulting to the bank therefrom. Thus, where they make a loan in excess of one-tenth of the capital stock of the bank, in violation of Section 520Q, Revised Statutes, they will be liable to the bank for all damages sustained by it in conseqvience of such loan. (See on this subject note to Section 5239, par. 118, post.) The degree of care required of the directors is that which men of ordinary prudence would exercise under similar circumstances, and in determining this the restrictions of the banking law and the usages of business should be taken into account. The ques- tion is ultimately one of fact, to be determined under all the 43 circumstances, (Briggs v. Spalding, 141 U. S., 132; Movius v. lyce, 30 Fed. Rep., 298.) They are entitled under the law to commit the banking business, as defined, to their duly authorized officers, but this does not absolve them from the duty of reason- able supervision, and they will not be permitted to be shielded from liability because of ignorance or wrong-doing, if such ignor- ance is the result of gross inattention. (/^.) The directors of a National bank are vested with a sound dis- cretion in the matter of requiring or not the officers of their bank to give bond. But special circumstances may exist which will render them personally liable if they fail to require such bonds. (Robinson v. Hall, 6^ Fed. Rep., 222.) In the case cited, the directors left the management of the bank for more than three years almost wholly to its cashier, who had but little property, and of whom they required no bond ; and they knowinglj' permitted loans to be made to individuals and firms largely in excess of the amounts allowed by law. They also failed to record mortgages given to secure large debts due the bank, even after thej' were aware of its insolvency, and erroneously advised an examiner who had taken charge of the bank that it was not necessar}- to record them : Held, That they were personally liable for the losses caused by such neglect and mismanagement, and the frauds and defalca- tions of the cashier. Directors are not liable for concealing from creditors the fact of the bank's embarrassment, unless that embar- rassment is such as to imperatively demand the bank's suspension. (/<:/.) But perhaps they might be liable for withdrawing their own deposits when they have knowledge of the bank's embarrassment. (/^.) A National bank having suspended payment the directors issued a circular stating that the bank was entirely solvent, and invited its customers to make deposits with it, to be held as special deposits. Afterwards a receiver was appointed by the Comptroller of the Currency, and the special deposits made in pursuance of such invitation were turned over to him : Held, That the directors were individually liable for the amount of such deposits. (Miller V. Howard, 95 Tenn., 407.) [See also Supplement.] If directors who are depositors and know some time before sus- pension that that event is inevitable, and that the bank can pay only a percentage of its deposits, and yet check for the whole of their own balances, thereby diminishing the percentage to which the other creditors would be entitled, they defraud to this extent the creditors whose interests they were relied upon to protect, 44 and will be held to strict accountability. (Robinson v. Hall, 63 Fed. Rep., 222.) (/(2^.) A National bank was organized with a capital of ^60,000. The promoter of the bank took 380 shares of stock in his own name and procured the defendants to be directors as well as a person to be elected cashier by them. The directors were not acquainted with the banking business. The proposed cashier was known to the directors, at least by reputation, and was supposed by them to be competent and trustworthy and of considerable experience in the business, and they had full confi- dence in his integrity and ability to take charge of the bank. The cashier acted as manager of the loan and discount business of the bank, and the directors merely as advisers, when applied to. The promoter of the bank knew, and the other stockholders were pre- sumed to know, that the directors were wholly unused to the banking business : Held, That the directors were not liable for the acts of the cashier in violation of the banking law done without their participation or knovdedge. (Clews v. Barden, 36 Fed. Rep., 617.) The cashier made loans, in excess of 10 per cent, of the capital, to a manufacturing corporation supposed by him and by the "public to be entirely solvent. None of the directors knew of the loans when made, but after a loan of $3,000 in excess of the lawful limit had been made the cashier informed one of them of such a loan, and was by him advised to call it in when due ; and thereafter such director's advice was asked as to a further discount to the same corporation, and he disapproved of it, and it was not made. Afterwards further loans or discounts were made to the same corporation without the knowledge or consent of any of the directors. About eight months after the bank commenced busi- ness one or more of the debtors of the bank failed, and the directors thereupon took the active management into their own hands: Held, That none of the directors had knowingly violated, or knov/ingly permitted to be violated, any of the provisions of the banking law and were not liable for such violation by the cashier. {Id.) It is within the power of the board to give a director a leave of absence on account of ill health, and if frauds are committed dur- ing his absence and without his knowledge, he will not be liable for them. (Briggs v. Spauhling, 141 U. S,, 132.) There have been comparatively few decisions touching the duties and liabilities of directors of National banks ; but their duties and liabilities are, in general, not different from those of directors of other corporations. 45 Annual Meetings. — For election of directors the number of shares represented is not material to legality of a meeting properly called. 30. 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. It would seem to be the proper construction of this section, that the duty of filling any vacancy in the board is obligatory on the remaining directors, and is not merely discretionary with them. The power is conferred upon them for the benefif of the bank and its stockholders, and these have an interest in having the power exercised. 31, Proceedings Where no Election is Held. Section 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 directors fail to fix the day, shareholders repre- senting two-thirds of the shares may do so. Shareholders' Control. — The presence of this section in the law shows the importance attached by the legislators to the exer- cise of control over the management of the bank by stockholders. Precaution is taken that the annual election shall not be neglected by the directors who might perhaps desire to hold over. If the election is from any cause omitted, the directors have the power to cause an election to be held on a subsequent day by giving notice by publication. A failure to name a day in the articles of association may be remedied by the directors in the by-laws, or otherwise. But in the event of the failure of directors to fix a day, either when no day has been fixed in the articles of association or by-laws, or when election has not been held on the day fixed, two- thirds of the stock may fix a day. When No Election Held.— It would seem, therefore, that unless two-thirds of the stock were dissatisfied with an existing 46 board of directors, sucli board, by neglecting to have elections held, might retain office for an indefinite period. The Comp- troller might, perhaps, require them to renew their oaths each year, or he might construe the law to be mandatory as to annual elections ; in which case the bank would have to be guided by the Comptroller's construction, unless it wished to contest the matter in the courts or have the question decided by some law officer of the Government. In the event of any difference of opinion upon a legal point between a bank and the Comptroller, the bank can request that it be referred to the Secretary of the Treasury or the Attornej^-General of the United States for an opinion. 33. The President Must be a Director. Section 5150. — One of the directors, to be chosen by the board, shall be the president of the board, Ex-Officio Powers. — The president of the board of directors is the presiding officer of the board, but otherwise his ex-officio powers are not greater than those of any other director, except that, as the head of the board, he may bring suits in behalf of the bank, and in proceedings against the bank legal process may be. served upon him when it might not be proper to serve it upon any other director. But usually he is also the chief executive officer of the bank, and has large powers delegated to him by the board. Vested Powers. — It is important to remember, however, that his authority as chief managing agent of the bank is not inherent in his office, but is vested in him by the board of directors, either expressly or by implication, and that in his case, as well as in that of any other officer or agent, it is necessary to show that the requisite authority has been conferred by the board. The powers of the president will accordingly vary in different cases, and the powers of some presidents will be much greater than those of others. The directors have the right to remove the president at any time. (Taylor v. Hutton, 43. Barb., 195.) And they have this power though the bank has never legally adopted any by-laws. (/(/.) The president has the power to employ counsel and manage the litigation of a bank, in the absence of any order of the board of directors depriving him of such power. (Citizens' National Bank of Kingman v. Berry, 53 Kan., 696.) And he has, by virtue of his office, authority to assign a judgment owned by the bank; (Guernsey v. Black Diamond Coal and Mining Company, 99 Iowa, 47 471.) or to compromise or release a debt due to the bank. (Far- mers' National Bank v. Templeton, 40 S. W. Rep., 412.) He lias no power inherent in his office to bind the bank on the execu- tion 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. (National Bank of Commerce v. Atkinson, 55 Fed. Rep., 465.) But it is within the scope of the implied power of the president to indorse negotiable paper in the ordinary transaction of the bank's business, and a special authority for this purpose need not be con- ferred by the board of directors. (United States National Bank V. First National Bank of Little Rock, 79 Fed. Rep., 296.) Where the president exercises the functions of cashier and is the sole managing officer of the bank, the bank will be bound by such acts :)f his as belong vh^tute officii to the office of cashier. (Simons v. Fisher, 55 Fed. Rep., 905.) Where the president requests the cashier to make advances to a minor, verbally promising that he will see them repaid, he is liable to the bank for any loss sustained by reason of such loans, as having been guilty of a breach of trust. (Brown v. Farmers' and Merchants' National Bank, 88 Tex. 265.) ZZ' Individual Liability of Shareholders. Section 5 i 5 i . — 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 addi- tion to the amount invested 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 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 divi- dends to its shareholders until the deficiency is made good ; and in case of such deficiency, the Comptroller of the Currency may compel the association Jo close its business and wind up its affairs under the provisions of chapter four of this Title. For What Liabilities of the Bank Shareholders are Re- sponsible.— The liabiUty is not contractional, but exists by force 48 of the statute. (First National Bank of Concord v. Hawkins, 35 U. S. App., 747.) It is not limited in anywise by the provision in Section 5234 that the receiver may, if necessary to pay the ^'debts^^ of the bank, enforce the individual liability of the stockholders ; but the word " debts'" in the latter section, includes all the liabili- ties of the bank specified in this section. (Stanton v. Wilkeson, 8 Benedict, 357 ) But it is restricted to such contracts, debts, and engagements of the bank as have been dul}^ contracted in the ordinary course of business. (Richmond 27. Irons, 121 U. S., 27; Schrader v. Manufacturers' National Bank, 133 U. S., 67.) The liability of the stockholders, therefore, cannot be enforced to pay the claims of creditors on new contracts made after the bank has been placed in voluntary liquidation. (Z^^) Thus, where a bank had gone into liquidation and certain creditors took in payment of their claims some of the paper of the bank, and the individual notes of the president indorsed or guaranteed in the name of the bank, it was held by the Supreme Court of the United States that the stockholders could not be subjected to an individual liability for the payment of such claims. (/'^^'•) Extent of the Liability. — The amount which each shareholder is liable to contribute bears the same 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. (United States v. Knox, 102 U. S., 422.) If there are insolvent shareholders, the solvent share- holders can not be required to contribute more than their propor- tion, in order to make good the deficiency. (Z^/-) The liability of the shareholder is for interest on the debts of the bank as well as for the principal thereof. (Richmond v. Irons, 121 U. S., 27.) The assessment itself bears interest from the date of the order. (Casey v. Galli, 94 U. S., 673.) [See also Supplement.] Deceased Stockholder. — This liability survives against the representatives of a deceased shareholder, and adheres to his es- tate after his death, though he dies before the insolvency of the bank occurs. (Richmond v. Irons, 121 U. S., 27; Davis v. Weed, 44 Conn., 569; Wickham v. Hull, 60 Fed. Rep., 326.) And the fact that the title to the stock of a deceased shareholder vests in his administrator does not relieve the estate from the burden of an assessment. (Davis v. Weed, 44 Conn., supra.') Nor will the fact that the administration is complete, and all the assets have 49 been distributed, defeat an action brought to recover the assess- ment. {Id.) Married Women. — When the law of the State where the con- tract is made permits married women to become owners of stock, they will be subject to all the liabilities of stockholders. (Bundy V. Cocke, 128 U. S., 185; Keyser v. Hitz, 133 U. S-, 438; Jji Re National Bank of St. Albans, 49 Fed. Rep., 120; Anderson v. Line, 14 Fed. Rep., 405.) And it has been held tliat where a married woman is by the State law capable of holding stock in a National bank in her own right, she is liable thereon under this section, though the law of the State does not authorize married women to bind themselves by contracts for the payment of money ; for the law annexes her liability of its own force, and no capacity to act on her part is required. (Witters v. Sowles, 35 Fed. Rep., 640.) The purchase of National bank stock by a married woman is not a ' ' contract ' ' within the terms of a statute providing that during coverture no woman shall be capable of making an}^ contract to affect her real and personal estate without the consent of her hus- band ; and she will be liable for an assessment, although the stock was purchased without the written consent of her husband. (Rob- inson V. Turrentine, 59 Fed. Rep., 554.) In Vermont a married woman is competent to become a stockliolder in a National bank, and to contract to charge her separate property with the payment of any liability which is implied from entering into that relation. (Witters v. Sowles, 38 Fed. Rep., 700.) And in the District of Columbia, a married woman may become a holder of stock in a National bank and assume all the liabilities of such a shareholder, although the consideration maj^ have proceeded wholly from the husband. (Keyser v. Hitz, 133 U. S., 438.) Assignment for Creditors. — Defrauding Creditors. — In a suit to enforce the individual liability of a stockholder, it is not material that the person who transferred the stock to such stock- holder did so for the purpose of concealing his propert}- and de- frauding his creditors ; there is no connection between the liability of the stockholder and an alleged fraudulent intent on the part of the person from v»'hom the title to the stock was acquired. (Key- ser V. Hitz, 133 U. S., 433-) And conversely the fact that one is a stockholder and director in an insolvent National bank, and in- dividually liable for the debts of the bank to the amount of his 4 50 stock, will not operate so as to prevent him from making an other- wise lawful disposition of his property for the benefit of his credi- tors. (Peters et al. v. Bain, 133 U. S., 670.) Registered Owner Liable. — Asageneral rule, the Comptroller of the Currency and the receiver, when they come to enforce the individual liability of the stockholders, are not required to look beyond the stock-books, but may hold all persons liable as stock- holders who appear on the books as such. In order to relieve himself from liability every stockholder selling his stock must have the transfer properly registered; for while, as between the parties, the sale is complete and the title passes when the seller delivers to the buj'er the certificates with a proper power of attorney to make the transfer, the corporation and its creditors are not affected by the transaction until it is noted on the books, or until, at least, the seller shall have done all that he reasonably can do to have it so noted. Accordingly, where a stockholder sold certain stock several months before the insolvency of the bank, but the transfer was not made on the books till the date of the bank's failure, it was held that the stockholder incurred the statutory liability, (Richmond v. Irons, 121 U. S., 27.) But the seller, when he has delivered the certificates with a suitable power of attorney to the proper ofiicer of the bank, and requested him to make the trans- fer on the books, will not be responsible for the failure of such officer to actually make the entry if he has had no reason to suppose that this was not done as directed. (Whitney v. Butler, 118 U. S., 655 ; Cox V. Elniendorf, 97 Tenn., 518.) "The position of the seller in such case is analogous to that of a grantor of a deed deposited in the proper office to be recorded. The general rule is, that the deed is considered as recorded from the time of such deposit." Therefore, where a shareholder of a National bank made a bona-fide sale of his stock and went with the purchaser to the bank, indorsed the certificate, and delivered it to the cashier of the bank, with directions to make the transfer on the books, it was held he had done all that is incumbent upon him to discharged his liability, and that he was not liable upon the subsequent suspension of the bank, for an assessment made by the Comptroller of the Currency, though the cashier failed to make the transfer. (Hayes v. Shoemaker, 39 Fed. Rep., 319) So, where a stock- holder, nearly a year before the failure, had sold his stock to a broker for an undisclosed principal, and indorsed the same, and 51 requested the broker to inform the cashier of the transaction, and to have the stock transferred ; and the broker accordingly handed the stock to the cashier, gave him the necessary information and requested him to make the transfer, which the cashier promised to do ; it was held that iu requesting the cashier to make the transfer the broker acted as the seller's agent, and that the latter did all that was required of him as a prudent business man, and could not be held liable as a stockholder, though the transfer was not in fact made. (Young v. McKay, 50 Fed. Rep. , 594.) But where the seller delivers the stock certificate and power of attorney to the buyer rely- ing upon the promise of the latter to have the necessary transfer made, this will not be sufficient to discharge him. And v/here the sale is made to an officer of the bank, and the certificates and power of attorney are delivered to him and not as such officer, but as vendee, the seller will continue liable until the entry is made. (Richmond V. Irons, 121 U. S., 27.) Of course, a person whose name is put upon the stock-books without his knowledge or consent can not be held liable as a stockholder ; but it has been decided that where the person to whom the stock was transferred was a director of the bank, and was concerned in the management of its affairs, he was to be presumed to have knowledge of the fact that the stock stood in his name, and, as he had not repudiated the transfer to himself, he was liable as the holder of such stock. (Brown v. Finn, 142 U. S., 56.) And where one endorses a check payable to his order, which discloses upon its face that it is for dividends on stock standing in his name on the books of the bank, he is estopped to deny that he is the owner of the stock upon w^hich the dividends are declared. (Keyser v. Hitz, 133 U. S., 433) If he denies owning the stock, he should restore the dividend to the bank. (Finn v. Brown, 142 U. S., 56.) And if the dividend turns out to be a fraudulent one, he will not have freed himself from liability for it by giving his check for it on the bank to the alleged true owner. (Z^^.) Where certificates are issued to a subsequent pur- chaser in lieu of the certificates of the prior owner, such purchaser will be liable as a stockholder though the by-laws of the bank requiring the transfer to be registered were not observed. (Laing V. Burley, loi 111., 591.) Where certificates of stock are made out to the holder as the absolute owner thereof, and he so appears on the books of the bank, he will not be permitted to show in an action against him to recover an assessment on the stock that he held the same as trustee. (L^ewis v. I^evitz, 74 Fed. Rep., 381.) 52 In the case of an agreement made with a subscriber to the stock of a National bank to take the stock from him at a certain time, at his option, the person so agreeing to purchase the stock will be liable to the other for the amount of an assessment made b}' the Comptroller of the Currency upon the stock after the tender thereof in pursuance of the contract. (Gay v. Dare, 103 Cal , 454.) While one who voluntarily appears upon the books of a National bank as a stockholder will be precluded from showing that he is not in fact a stockholder, yet, where it is admitted that the stock is owned by another, and judgment obtained against him for the amount of the assessment upon such stock, the person in whose name it stands cannot be held liable thereon. (Yardly v. Wilgus, 56 Fed. Rep. 965.) Subscribers to New Stock. — A stockholder who elects to subscribe for shares of an increase and actually pays for the same, and is registered as holding the additional shares on the books of the bank, thereby becomes a shareholder, and his failure to call for his certificate of stock makes no difference in his liability as such. (Thayer v. Butler, 141 U. S., 234.) But the fact that the subscriber for new shares (which were never issued) received a dividend on old shares transferred to him without his knowledge in place of new shares, does not estop him from denying his lia- bility as a shareholder, where such dividend was received in the belief that it was paid to him by virtue of his subscription to the new stock. (Stephens v. Follett, 43 Fed. Rep., 842.) And one who subscribes and pays for a specific number of shares of a pro- posed increase of stock, which is in fact never issued, and to whom the bank officials transfer old stock instead, without his know- ledge and consent, is not to be deemed a shareholder as to the stock so issued to him. (Stephens v. Follett, 43 Fed. Rep., 842.) But the subscribers may be estopped to dispute the legality of in- crease by accepting certificates for the stock, receiving dividends, and giving proxies to vote upon the stock. (Tillinghast v. Bailey, 86 Fed. Rep., 46 ; Latimer v. Burd, 76 Fed. Rep., 536.) And the certificate of the Comptroller of the Currency authorizing the in- crease of the capital stock of a National bank is conclusive upon the subscribers to such new stock when sued for an assessment laid upon the same. (M) In McFarlin v. First National Bank (68 Fed. Rep., 868), the plaintiffs .subscribed for certain shares in a bank to increa.se the 53 capital, and, after paying installments thereon, consented that the bank be consolidated with a National bank, and that the capital ot" the latter be increased, and that their subscriptions should stand as subscriptions to the increased capital of the National bank and paid installments on their subscriptions. Some preliminar)^ steps were taken by the National bank to increase its stock, but the Comptroller of the Currency refused to consent to the full increase, and before the amount of increase allowed by him was paid in, and a certificate therefor issued by him, the National bank was placed in the hands of a receiver: Held, That plaiutifis never be- came stockholders in the National bank. Liability of Pledgee, — A person who holds stock merely as collateral security is liable as the owner of the stock, if he appears upon the books of the bank as such. (National Bank v. Case, 99 U. S., 628 ; Moore 7A Jones, 3 Woods, 53 ; Hale v. Walker, 31 lovra, 344; Wheelock v. Kost, 77 111., 296; but see Magruder v. Colston, 44 Md., 349.) " For this several reasons are given. One is that he is estopped from denying his liability by voluntarily holding himself out to the public as the owner of the stock, and his denial of ownership is inconsistent with the representations he has made; another is, that by taking the legal title he has released the former owner ; and a third is, that after having taken the apparent owner- ship and thus become entitled to receive dividends, vote at elections, and enjoy all the privileges of ownership, it would be inequitable to allow him to refuse the responsibilities of a stockholder." And so long as the stock continues to stand in his name the pledgee will be liable as a stockholder, though the loan has been repaid, and the stock certificate surrendered, with an executed power of attorney to make the transfer. (Bowdell v. Farmers' and Mer- chants' National Bank, 14 Bankers'' Magazine, 378 ; 2 Nat. Bk, Cases, 146.) But a pledgee, acting in good faith, and without any fraudulent intention, has the perfect right to shun such liability, and may have the control of the stock tor the purposes of security without being made liable as a registered shareholder. (Anderson V. Philadelphia Warehouse Company, iii U. S., 479-) IQ the case cited, the pledgee, the Philadelphia Warehouse Company, with the knowledge and consent of the pledgor and the officers of the bank, had had the stock transferred on the books of the bank to an irresponsible person, one of its employees, from whom it took an irrevocable power of attorney for the sale and transfer of the 54 stock. The dividends were paid regularly to the pledgor, and the pledgee never received any dividends, and never acted as a share- holder. At the time of the transfer the bank was entirely solvent, but afterwards it failed. Upon these facts it was decided that the pledgee was not liable for an assessment made upon the share- holders of the bank. It may be said, therefore, upon the au- thority of this case, that where a National bank is solvent, a per- son taking its shares as collateral security, when acting in good faith, may avoid incurring a liability in respect to such shares by having them transferred on the books of the bank, and certificates therefor issued to some third person, from whom a power of attor- ney to transfer the stock can be taken. But in such case the officers of the bank should be fully advised of the character of the transaction, and the pledgee should receive no dividends on the stock or exercise any of the rights of a shareholder, and should not pretend to be, or permit himself to be held out as, anything more than a mere pledgee. In Beall v. Essex Savings Bank (67 Fed. Rep., 816), it was held by the United States Circuit Court of Appeals, that where the stock is transferred as collateral security, and the fact that it is held only as such security appears upon the transfer book of the bank, the person b}^ whom it so held will not be liable to an assessment upon the stock in case of the failure of the bank. And, in Pauly v. State I^oan and Trust Company, (165 U.S., 606), it was held by the Supreme Court of the United States that one to whom stock of a National bank is transferred upon the books of the bank " as pledgee " is not liable as a stockholder. The Court said : " It is true that one who does not in fact invest his moneys in such shares, but who, although receiving them simply as collateral 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 association becomes insolvent and goes into the hands of a receiver. But this is upon 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 held bound by that representation, the list of shareholders required to be kept for the inspection of creditors and others would lose most of its value. •But this rule can have no just application v,^hen, as in this case. 55 the creflitors were informed by that list that the party to whom certificates were issued was not in fact, and did not assume to be, the owner of the shares represented by them, but was and assumed to be only a pledgee having no general property in the thing pledged, but only a right, upon default, to sell in satisfaction of the pledgor's obligation. Upon inspecting the stock registry, or any list of shareholders or of transfers kept by the bank, creditors will know that they cannot regard a pledgee as the actual owner." And, of course, a pledgee who does not appear by the books of the bank or otherwise to be the owner, is not liable for an assess- ment upon the shares on the insolvency of the bank. (Welles v, Larrabee et al., 36 Fed. Rep., 866.) If a person receives shares of the stock of a National bank as collateral security for a debt due to him from the owner, with a power of attorney authorizing him to transfer the same on the books of the bank, and he in good faith causes the shares to be transferred on such books to another, under an agreement that they are to be held as security for the debt due from the real owner to the creditor, he will not be treated as a shareholder within the meaning of this. (Nat. Park Bank of the City of New York v. Harmon, 25 C. C. A., 214; 79 Fed. Rep., 891.) [See also Supplement.] Transfer for the Purpose of Avoiding Liability. — The right of creditors of a National bank to look to the individual liability of the shareholders, to the extent indicated by the statute, for its contracts, debts and engagements, attaches when the bank becomes insolvent ; and the shareholder may not, b}^ transferring bis stock, compel creditors to surrender this security as to him, and force the receiver and creditors to look to a person to whom his stock has been transferred. (Stuart v. Hayden, 169 U- S., i.) The real owner of the stock cannot escape liability by having it trans- ferred on the books into the name of another person. (Davis v. Stevens, 17 Blatchford, 259; National Bank v. Case, 99 U- S- 628; Stuart V. Hayden, 169 U. S., i.) And where for the purpose of avoiding liability, a shareholder in a bank which is in a failing condition, transfers his stock to a person unable to respond to the assessment, the transfer may be set aside as a fraud upon the creditors, and the transferror held liable as a stockholder. (Bowdeu V. Johnson, 107 U. S., 251.) And after abank has become insolv- ent, and has closed its doors for business, its shareholders' liability to creditors is so fixed that any transfer of their shares must be 56 held fraudulent and inoperative as against the creditors of the bank. (Irons v. Manufacturers' National Bank et al., 17 Fed. Rep., 308.) Moreover, if the stockholder has reason to apprehend that the bank is in a failing condition, he cannot escape liability by transferring the stock to a person financially irresponsible. (Baker v. Reeves, 85 Fed. Rep.^ 837.} And this is so, even when he acts in good faith. (Stuart v. Hayden, 169 U. S. i.) On the other hand, if the bank be solvent at the time of the transfer, that is, able to meet its existing contracts, debts and engagements, the motive with which the transfer is made is immaterial, as a transfer under such circumstances does not impair the security given to the creditors. (/'''.) In order that the transferror may be held liable it is not necessary that he should have had actual knowledge of the insolvency of the bank ; it is sufiicient if he had good ground to apprehend the failure of the bank, and made the transfer to an irresponsible person, with intent to relieve himself from individual liability. (Cox v. Montague, 78 Fed. Rep., 845.) Where stock has been fraudulently transferred for the purpose of avoiding liability both the transferror and the transferee are liable for the assessment, (Baker v. Reeves, 85 Fed. Rep., 837.) But in an action brought by the receiver the transferees of the stock cannot by cross-bill obtain relief against the transferror for having defrauded them in the sale of the stock. (Stuart z' Hayden, 169 U. S. I.) The receiver is the proper party to maintain a suit in behalf of the creditors of the bank to set aside a transfer of stock made by a stockholder for the purpose of escaping liability as such stockholder. (/^^.) Purchase in Name of Infant. — One who buys stock of a Na- tional bank in the name of an infant will be liable for an assess- ment, since the infant is incapable of binding himself as a stock- holder, (Foster v. Chase, 75 Fed. Rep., 797.) And the ratifica- tion by the infant of such purchase after he becomes of age will not affect such liability. (Foster v. Wilson, 75 Fed. Rep., 797.) Liability is for Benefit of all Creditors, — The liability of the stockholders can be enforced only in favor of all the creditors. If, therefore, a stockholder gives any security for his liability, it must be for the benefit of all the creditors alike. Where a stockholder, after the failure of a bank, gave a mortgage for the purpose of se- curing a single depositor, such mortgage was held void as against 57 a judgment obtained in an action against such stockholder to en- force his individual liability. (Catch v. Fitch, 34 Fed. Rep., 566.) Liability of one National Bank as Stockholder in Another. — A National bank may be held liable as a stockholder in another National bank which has failed ; for though the acquisition of such stock should be illegal (which it is not), the bank could not set up its own violation of law to escape the responsibility resulting from its illegal action. (National Bank v. Cove, 96 U. S- , 628 ; First National Bank of Concord v. Hawkins, 33 U- S. App., 747.) Rescinding Purchase — Fraud of Bank. — A stockholder who has been induced b)^ fraudulent representations to subscribe for stock in a National bank will not necessarily be precluded from repudiating such subscription by reason of the insolvency of the bank, if he has exercised due diligence in discovering the fraud, and has acted promptly after such discovery. (Newton National Bank v. Newbegin, 74 Fed. Rep., 135.) An intend- ing purchaser of bank stock is entitled to rely upon a state- ment of its president as to the bank's condition, without inquiring further. (Merrill v. Florida Land & Improvement Co., 60 Fed. Rep., 17.) The receipt by a bank of the proceeds of a fraudulent sale of stock belonging to it, and the subsequent appointment of a receiver, gives its creditors no such right in the proceeds as will prevent the purchasers from rescinding the sale and requiring res- titution. (/^.) Estoppel. — A shareholder against whom suit is brought to re- cover the assessment made upon him by the Comptroller will not be permitted to deny the existence of the association, or that it was legally incorporated. (Casey v. Galli, 94 U. S-, 673; Wheelock V. Kost, 77 111., 296.) Rules Applicable. — While the liability of stockholders in Na- tional banks is to be rigorously enforced, the courts will not treat them with exceptional severity, and apply to their transfers differ- ent rules from those which obtain in other business transactions. (Hayes v. Shoemaker, 39 Fed. Rep., 319-) Procedure. — The creditors of an insolvent National bank must seek their remedy through the Comptroller, in the mode prescribed by the statute ; they can not proceed directly in their own names 58 against stocktiolders. (Kennedy v. Gibson, 8 Wall, 498.) It is the dut)'^ of the Comptroller of the Currency to decide when pro- ceedings are necessary against the stockholders of a National bank to enforce their personal liability, and to what extent such liabil- ity shall be enforced ; and in an action by a receiver to enforce such liability, such prior determination of the Comptroller must be dis- tinctly averred and proved. (Kennedy v. Gibson, 8 Wall, 498.) But it is not essential to aver and prove that the assessment was necessary, for the decision of the Comptroller on this point is con- clusive. (Strong V. Southworth, 8 Ben., 331; Kennedy v. Gibson, 8 Wall., 498 ; Casey v. Galli, 94 U. S., 673.) Nor is it necessary to allege that the Comptroller had determined that the assessment was necessary ; it is sufficient to allege that he made the assess- ment. (O'Connor v. Witherby, 11 1 Cal., 523.) When the full per- sonal liability of shareholders is to be enforced the action must be at law. (Kennedy v. Gibson, 8 Wall., 498; Casey v. Galli, 94 U. S-, 673.) And it may be at law, though the assessment is not for the full value of the shares ; for, since the sum each shareholder must contribute is a certain exact sum, there is no necessitj^ for invoking the aid of a court of equity. (Bailey v. Sawyer, 4 Dill., 463 ; I N. B. C, 356.) But the suit may be in equity. (Kennedy V. Gibson, 8 Wall., 498.) And it is no objection to the bill that other stockholders, not within the jurisdiction of the court, are not co-defendants. {Id.^ [See Amendment in Supplement.] When Right of Action Accrues — Statute of Limitations. — A right of action against a stockholder does not accrue until the Comptroller has determined that it is necessary to enforce the indi- vidual liability ; but where there is great and unexplained delay in making such assessment the action may be barred by the statute of limitations though the action is brought shortlj'- after the mak- ing of the assessment. (Price v. Yates, 19 Alb. I^aw Journal, 295 ; 2 N. B. Cas., 204.) The State statutes of limitations apply to actions to enforce assessments. (Butler v. Poole, 44 Fed. Rep., 586 ; Thompson v. German Insurance Company, 76 Fed. Rep, 892.) The statute begins to run as soon as the assessment becomes due and payable. (Thompson v. German Insurance Company, supra.^ Set-off. — A stockholder of an insolvent National bank, who happens also to be one of its creditors, can not cancel or diminish 59 the assessment to which the provisions of Sec. 515 1, Rev. St., make him Hable by offsetting his individual claim against it. (Hobart, Receiver, etc., v. Gould, 8 Fed. Rep., 57.) In an action by the receiver of an insolvent National bank to recover of a stockholder an assessment on his shares, the defendant alleged as a counter- claim that the Comptroller of the Currency had directed the bank to restore the value of certain securities held by it which had been reported as worthless by an examiner; that certain of the stock- holders, including defendant, had raised a fund which was placed in the hands of trustees to apply so much as might be from time to time required by the Comptroller to retire such securities ; that the fund was deposited with the bank with full notice of the pur- pose to which it was to be applied; that a portion had been used to retire the securities designated, and that when the bank failed the balance of the fund came into the hands of the receiver, and was now claimed by him as a part of the ordinary assets of the bank ; that a certain portion of this balance belonged to defendant, which amount he asked to set off against the plaintiff's demand: Held, That a general demurrer based on the ground that no set-off or counterclaim was available in such an action would be overruled, as the claim could be set off if it was of such a nature that the holder would be entitled to receive the full amount before distribution by the receiver to general creditors. (Welles v. Stout, 38 Fed. Rep., 807.) In another case the defendant, for the pur- pose of helping a bank, of which complainant was a stockholder, in a financial crisis, loaned it certain securities belonging to com- plainant, and when complainant was informed of the fact she did not object. She was assured by the bank's officers that if the bank was saved the securities would be returned, and if it failed the avails would be credited on her assessment as a stockholder. The bank failed, and the securities were not returned: Held, That she was not entitled, as against other creditors, to set off the value of the securities against her assessment, but was, as to such value, on the same footing as any other creditor. (Sowles v. Witters et al., 39 Fed. Rep., 403.) But the indebtedness on the assessment of a stockholder who is insolvent may be set off against a dividend, payable out of the assets of the bank, on a balance due him on his deposit account with the bank, at the time of its failure. (King V. Armstrong, 50 Ohio St., 222.) And an assignment by the stockholder of his claim against the bank, before the direction of the Comptroller to enforce his liability, but after the insolvency 6o of the bank, does not affect the right to set oflFhis liability against the dividend due on his claim, nor does the fact that the Comp- troller, at the time of the assignment, had not determined the amount necessary to be collected from the stockholders for the pay- ment of the creditors. It is sufficient that such direction has been given, and amount so determined, when the set-off is made. (Z^-) Agent May Not Enforce. — An agent chosen by stockholders to take charge of the business of a National bank in liquidation can not enforce the individual liability of the stockholders, after all the debts have been paid, (Church v. Ayer, 80 Fed. Rep., 543.) Claim Not Entitled to Preference. — The individual liability of a stockholder in an insolvent National bank is not a preferred claim against his estate, and is not entitled to priority of payment even though the estate is insolvent. (/// Re Beard's Kstate, 50 Pac. Rep., 226.) 34. Executors, Trustees, etc., Not Personally Liable. Section 5152. — Persons holding stock as executors, administrators, guar- dians, or trustees, shall not be personally subject to any liabilities as stock- holders ; but the estates and funds in their hands shall be liable in like man- ner and to the same extent as the testator, intestate, ward, or person inter- ested in such trust-funds would be, if living and competent to act and hold the stock in his own name. Application of Section. — This section is of general application and is not limited to trustees appointed such by will or by order of some court or judge. (lyucas v. Coe, 86 Fed. Rep., 972.) In the case cited C subscribed for stock in a National bank as trustee for H, an infant, and a certificate was issued to " C as trustee for H ; " afterwards, the capital stock being reduced, this certificate was surrendered and another issued in lieu thereof to C merely ' ' as trustee," without naming the beneficiary. The officers of the bank were advised that C held the stock as trustee precisely as in the surrendered certificate. Held, that C was not liable for an assessment upon the stock. (Z^/-) An executor continues to be liable as such for an assessment upon National bank stock left by his testator until he has trans- ferred the personal property belonging to the estate. (Baker v. Beach, 85 Fed. Rep,, 836.) 6i Evidence of Stock Ownership. — The fact that the stock is held in a representative capacity must be noted on the stock-book of the bank ; if a person appears there as absolute owner of the stock he will not be permitted tb deny that he is such. (Davis v. Essex Baptist Society, U. S. D. C, 44 Conn., 569 ; Lewis v. Switz, 74 Fed. Rep., 1.) In the case first cited the defendants sought to show, by extrinsic evidence, that they held the stock as trustees, although the certificates and the stock-ledger did not disclose such fact. This it was held they could not do. The court said : " Creditors have a right to know who have pledged their individual liability. If the trusteeship does not appear upon the books of the bank, they have a right to infer that the stockholder is personally liable. If a trustee wislies to disclose his trusteeship there is no difiiculty in giving notice upon the books of the bank. If he doeg not disclose his trusteeship he is guilty of laches, for which others should not suffer. The settlement of the afi'airs of an in- solvent bank would be rendered a matter of great labor, expense, and delay if persons who appeared upon the books of the bank as individual stockholders were permitted to relieve themselves by proving that they held the stock as executors, or guardians, or trustees. If A is permitted to prove that he holds his stock as trustee for B, and B is permitted to show that he is trustee for A, litigation would be protracted, individual stockholders would sufier, and the strength of the personal liability section would be seriously impaired." This reasoning appears to be very sound and forcible, but the decision is in conflict with that in McMahon v. Macy (51 N. Y., 155), which arose under an analogous provision in New York Railroad Act. One to whom the shares are assigned in trust as security for a debt due a third person, and following whose name on the stock-book of the bank is the word " trustee," is not liable for the assessment under Section 5151, and is also within the pro- vision of Section 5152, exempting from such liability persons holding stock as trustees. (Welles v. Larrabee, 36 Fed. Rep., 866.) 35. Depositaries of Public Moneys. Section 5153. — All National banking associations, designated for that pur- pose by the Secretary of the Treasury, shall be depositaries of public money, except receipts from customs, under such regulations as may be prescribed by the Secretary ; and they may also be employed as financial agents of the Government ; and they shall perform all such reasonable duties, as depositaries 62 of public moneys 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 otherwise, for the safe-keeping and prompt payment of the public money deposited with them, and for the faithful performance of their duties as finan- cial agents of the Government. And every association so designated as re- ceiver or depositary of the public money shall take and receive at par all ot the National currency bills, by whatever association issued, which have been paid into the Government for internal revenue or for loans or stocks. See Sections Rev. Stat. 3620, 3847, 4046, 5488, 5497. All arrangements to become public depositaries must be made with the Secretary of the Treasury. The security required is within the discretion of the Secretary. The requirement at present is United States bonds, or bonds guaranteed by the United States. A deposit is allowed to the extent of the full value of the bonds, or more, according to their value, but is always kept below the value of the security. The Secretary of the Treasury could legally accept other security than United States bonds if he saw fit. A National bank, though not designated as a United States depositary, which receives a deposit of United States moneys from a postmaster, thereby assumes a fiduciary relation to the Govern- ment, and is liable to the United States as a bailee of such funds. (United States v. National Bank of Asheville, 73 Fed. Rep., 379.) For regulations in regard to Government Depositaries, see page 236. 36. Conversion of State into National Banks. Section 5154. — Any bank incorporated by special law, or any banking institution organized under a general law of any State, may become a Na- tional 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 a certi- ficate, and to change and convert the bank or banking institution into a Na- tional 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 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 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 63 authority of State laws, may continue to hold its stock, although either bank, or both, may be organized under and have accepted the provisions of this Title. When the Comptroller of the Currency has given to such association a certificate, under his hand and official seal, that the provisions of the 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. Authority Required. — This section was enacted in order to in- duce State banks to enter the National system. The authority of two-thirds of the stock is required to empower the directors to act. It has been said by the Supreme Court of the United States that no authority from a State is necessary to convert a State bank into a National bank (Casey v. Galli, 94 U. S., 673), but many States have passed enabling acts, both to enable State banks to become National banks and to enable National banks to become State banks. State banks intending to convert into National banks should be guided by the State statute as to the closing of the affairs under the State charter. From the special privilege granted to converted State banks to continue to hold the stock in other banks they held when State banks, it may perhaps be inferred that the power of holding stock in other banks was not intended to be granted to all National associations. Corporate Relation to Old Bank. — The conversion of a State bank into a National bank does not destroy its identity or its cor- porate existence; it is not a closing of business, but simply a con- tinuation of the same body, with the same officers and stock- holders, the same property, assets and business of banking under a changed jurisdiction. (Metropolitan National Bank z'. Clagett, 141 U. S., 520) The conversion and change of name do not affect its right to sue on liabilities incurred to it under its former name. (Michigan Insurance Bank v. Eldred, 143 U. S-, 293.) Thus, where a State bank at the time of its change to a National bank, ^ held a continuing guaranty of loans made by it to one W-, upon the strength of which it had made loans and after the change fur- ther advances were made, it was held that an action was maintain- able by the National bank upon the guaranty, and that the guar- antor was liable for the loans made both before and after the 64 change. (City National Bank v. Phelps, 97 N. Y., 44.) And conversely the National bank is liable after the conversion for all the obligations of the old institution. (Coffee v. National Bank of Missouri, 46 Mo., 140; Kelsey v. National Bank of Crawford, 69 Pa. St., 426.) For example, it will be liable to holders of its out- standing circulating notes, issued in accordance with State laws. (Metropolitan National Bank v. Clagett, 141 U. S., 520.) In the case last cited it was held that the provisions of the statute of New York (Laws 1859, c. 236) as to the redemption of circulating notes issued by the banks of such State, and the release of the bank if the notes should not be presented within six years, do not apply to a bank converted into a National bank. And it has been held that a State statute which continues the bank as a body corporate for certain purposes, for a term after the conversion, does not re- lieve the National bank from liability for the debts of the bank as a State institution. (Atlantic National Bank v. Harris, 118 Mass., 147.) A National bank, organized as the successor of a State bank, may take and hold the assets of the bank whose place it takes, though there was not in form a conversion from a State to a National corporation, but the organization of a new corporation. (Bank v. Mclntyre, 40 Ohio St., 528.) And such bank will be liable to the depositors of the former bank. (Kans v. Exchange Bank, 79 Mo., 182.) Assets of Converting Bank. — The Comptroller of the Cur- rency has ruled that a bank entering the National system by con- version will be allowed to carry over to and include in its assets as a National bank only such assets as are allowed by the National Bank Act, excluding any assets prohibited by Sections 5137 and 5200. Charter of State Bank. — When a State bank has been converted into a National bank, it thereby surrenders its charter as a State bank, and when the period during which it may do business as a National bank has expired, its corporate existence, both as a State bank and also as a National bank, is at an end. (Hayden v. Bank of Syracuse, 59 Hun., 620.) Directors, Name, etc. — All of the directors of the State bank at the time of conversion will continue to be directors of the National bank until others are appointed or elected, though some of them may not have joined in the execution of the articles of 65 association and organization certificate. (IvOckwood v. The Amer- ican National Bank, 9 R. I. , 308. ) A State law authorizing National banks which have been converted from State banks to use the name of the original corporation for the purpose of prosecuting and defending suits is not in conflict with the National banking law, and therefore proceedings based upon a judgment obtained before the conversion may be instituted by such association in its former corporate name. (Thomas v. Farmers' Bank of Maryland, 46 Md., 43.) Where a bank has been converted, new certificates of stock are not necessary. (Keyser v. Hitz, 133 U. S., 138.) Savings banks organized in the District of Columbia under an act of Congress and having a capital stock paid up in whole or in part, may be converted into National banks. (Keyser z/. Hitz, 133 U. S., 138.) For forms and instructions, see page 211. 37. State Banks Having Branches. Section 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 propor- tions, 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 capi- tal assigned to and used by each. The authority' expressly conferred by this section appears to exclude by implication the right to establish branches in any other case ; and this has been the view uniformly held by the Comp- trollers of the Currency. 38. Rights of Associations Organized under Act of 1863. Section 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, notwithstand- ing all the steps prescribed by this Title for the organization of associations were not pursued, if such associations were duly organized under that act. The banks organized under the original National Banking Act of February 25, 1863, have all these vested rights under the earlier act secured to them by this section. 5 CHAPTER III OBTAINING AND ISSUING CIRCULATING NOTES. 39. Applies to all National Banks. Section 5157. — The provisions of Chapters two, three, and four* of this Title, which are expressed without restrictive words, as applying to "National banking associations," or to " associations," apply to all associations organized to carry on the business of banking under any Act of Congress. This section gives the same rights to all National banking asso- ciations at whatever date organized. 40. United States Bonds Defined. Section 5158. — The term "United States bond," as used throughout this chapter, shall be construed to mean registered bonds of the United States. 41. United States Bonds to be Deposited. Section 5159. — Every association, after having complied with the pro- visions of this Title, preliminary to the commencement of the banking busi- ness, 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 an 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. Under the Act of June 20th, 1874, Section 4, par. 159, the maxi- mum amount which any National bank is required to deposit, whatever its capital, is $50,000. By the Act of July 12th, 1882, Section 8, par. 188, any bank having a capital of $150,000 or less may be organized on a deposit of bonds equal to one quarter of such capital. Therefore banks with a capital over $150,000 must deposit $50,000 in bonds ; those with $150,000 or less, one quarter of such capital. * Chapters III, IV. and V of this work. 66 67 42. Increase and Decrease of Capital and Bonds. Section 5160. — The deposits of bonds made by each association shall be increased as its capital may be paid up or increased, so that every association shall at all times have on deposit with the Treasurer registered United States bonds to the amount of at least one-third of its capital stock actually paid in. And any 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 stock, and upon which no circulating notes have been delivered. As stated under the preceding section, later laws have changed the limit of bonds, and the limits prescribed in these later laws must be observed in increasing or reducing capital stock. Banks may still, however, return circulation under this section, and take up excess of bonds above legal limit on which no circulating notes have been delivered. 43. Exchange of Coupon Bonds. Section 5 161. — To facilitate a compliance with the two preceding sections, 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. Coupon bonds, as well as registered bonds properly transferred, are usually sent to the office of the Comptroller of the Currency by registered mail or express, and the bond clerk in that office takes the necessary steps to convert the coupon bonds into regis- tered, and to turn over the bonds in due course to the custody of the Treasurer of the United States. 44. Transfer of Bonds to and by Treasurer. Section 5162. — All transfers of United States bonds made by any associa- tion under the provisions of this Title shall be made to the Treasurer of the United States in trust for the association, with a memorandum written or printed on each bond, and signed by the cashier or some other officer of the association making the deposit. A receipt shall be given to the association by the 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 associa- tion. No assignment or transfer of any such bond by the Treasurer shall be deemed valid unless countersigned by the Comptroller of the Currency. 68 Deposit of Bonds. — The bonds when sent to the Comptroller should bear the memorandum, written or printed, and signed by the cashier, that they are transferred to the Treasurer in trust for the association. A receipt is given by the Comptroller of the Cur- rency, and when the bonds are placed in the custody of the Treas- urer, a receipt is given in duplicate by that officer— one is sent to the bank and the other to the Comptroller of the Currenc}'. Withdrawal of Bonds. — The Comptroller and Treasurer will not permit the withdrawal and transfer of bonds from the Treas- urer except upon authority given by the board of directors to transfer the same to the designated transferee. (See form of resolution, page 274.) When bonds are so to be withdrawn, the Treasurer's duplicate receipt held by the bank must be sent to the Comptroller with the directors' resolution. Care should be taken to file this receipt where it can re?dily be found. When it cannot be found the Treasurer requires an affidavit to that effect, before issuing another duplicate. 45. Registry of Bond Transfers. Section 5163. — The Comptroller of the Currency shall keep in his office a book, in which he shall cause to be entered, immediately upon counter- signing it, every transfer or assignment by the treasurer of any bonds belong- ing to a National banking association presented for his signature. He shall state in such entry the name of the association from whose account the trans- fer is made, the name of the party to whom it is made, and the par value of the bonds transferred. Bonds received in the Comptroller's office are first receipted for to the express company or post office, and are then entered in the books of the office. The subsequent history of each bond can thus be accurately traced. 46. Association to be Advised of Transfers. Section 5164. — The Comptroller of the Currency shall, immediately upon countersigning and entering any transfer or assignment by the Treasurer of any bonds belonging to a National banking association, advise by mail the association from whose accounts the transfer is made of the kind and numeri- cal designation of the bonds and the amount thereof so transferred. Advice to the bank is required as an additional precaution against erroneous or fraudulent transfers from its account in trust 69 47. Comptroller and Treasurer to have Access to Books. Section 5165. — The Comptroller of the Currency shall have at all times, during office hours, access to the books of the Treasurer of the United States for the purpose of ascertaining the correctness of any transfer or assignment of the bonds deposited by an association, presented to the Comptroller to countersign ; and the Treasurer shall have the like access to the book men- tioned in section fifty-one hundred and sixty-three, during office hours, to ascertain the correctness of the entries in the same; and the Comptroller shall also at all times have access to the bonds on deposit with the Treasurer to ascertain their amount and condition. This section prescribes further checks on mistakes or frauds. 48. Annual Examination of Bonds. Section 5166. — Every association having bonds deposited in the office of the Treasury 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 certificate 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 a 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 association duly ap- pointed in writing for that purpose; and his certificate before mentioned shall be of hke 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. This section throws upon the association the direct responsibility of ascertaining the safety and actual presence on deposit of the bonds held in trust for it by the Treasurer. The examination is usually made by the bank's accredited agent. 49. Bonds Held as Security for Circulation, &c. Section 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. The Comptroller of the Cur- rency shall give to any such association powers of attorney to receive and appropriate to its own use the interest on the bonds which it has so trans- ferred to the Treasurer ; but such power 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 circulation issued for the same, the Comptroller 70 may demand and receive the amount of such depreciation in other Unitea States bonds at cash value, or in money, from the association, to be deposited with the Treasurer as long as such depreciation continues. And the Comp- troller, upon the terms prescribed by the Secretary of the Treasury, may per- mit an exchange to be made of any of the bonds deposited with the Treasurer by any associations for other bonds of the United States authorized to be received as security for circulating notes, if he is of opinion that such an ex- change 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 associa- tion offering to surrender circulating notes are equal to the amount required for the circulating notes not surrendered by such association,* and that the amount of bonds in the hands of the Treasurer is not diminished below the amount required to be kept on deposit with him, and that there has been no failure by the association to redeem its circulating notes, nor any other vio- lation by it of the provisions of this Title, f and that the market or cash value of the remaining bonds is not below the amount required for the circulation issued for the same. Interest on Bonds. — For the mode of obtaining the interest on these bonds see page 291. , This interest may be retained in certain cases ; ist, as mentioned in this section, for failure to redeem circu- lating notes ; 2d, for failure to make reports, (see Section 5213, par. 89, and Section 5215, par. 91 ;) 3d, for failure to pay taxes, (see Section 5216, par. 93.) United States Bonds on Deposit. — If worth less in the market than the circulation secured by the same, the bank can be required to make the security equal to the face value of its notes in circulation Exchanges of bonds must be made by going through, or trans- ferring the new bonds to the Treasurer in trust and having the old bonds transferred to the bank, but such exchange is a matter of permission, and cannot be demanded. All the conditions men- tioned in the section must be observed. 50. DeJivery of Circulation to Associations. Section 5 171. — Upon a deposit of bonds as prescribed by sections fifty-one hundred and fifty-nine and fifty-one hundred and sixty, the association mak- ing the same shall be entitled to receive from the Comptroller of the Currency *See Act of June 20th, 1874, Section 4, par 159. ^Sections 5168, 5169, and 5170. Par. 21, 22, 23. 71 circulating notes of different denominations, in blank, registered and counter- signed as hereinafter provided, equal in amount to ninety per centum of the current market value of the United States bonds so transferred and delivered, but not exceeding ninety per centum of the amount of the bonds at the par value thereof, if bearing interest at a rate not less than five per centum per annum : Provided, That the amount of circulating notes to be furnished to each association shall be in proportion to its paid-up capital, as follows, and no more : First. To each association whose capital does not exceed five hundred thousand dollars, ninety per centum of such capital. Second. To each association whose capital exceeds five hundred thousand dollars, but does not exceed one milUon of dollars, eighty per centum of such capital. Third. To each association whose capital exceeds one million of dollars, but does not exceed three million[s] of dollars, seventy-five per centum of such capital. Fotirth. To each association whose capital exceeds three millions of dol- lars, sixty per centum of such capital. This section is obsolete, excepting as providing for circulation on deposit of bonds, having been amended by Act of March 14th, 1900, Section 12. (See Act. page 311.) This act provides that any association may receive circulation to an amount equal to the face value of the United States bonds deposited to secure the same, and also that any association may have a total cir- culation to an amount equal to its capital stock paid in, provided the market price of said bonds is not below par, and further pro- vided that not more than one-third of its circulation shall be in five-dollar notes. 51. Printing of Circulating Notes, Denominations, &c. Section 5172. — 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 alterations, and shall have printed therefrom, and numbered, such quantity of circulating notes, in blank, of the denominations of one dollar, two dollars, three dollars, five dollars, ten dol- lars, twenty dollars, fifty dollars, one hundred dollars, five hundred dollars, one thousand dollars, as may be required to supply the associations entitled to receive the same. Such notes shall express upon their face that they are secured by United States bonds, deposited with the Treasurer of the United States, by the written or engraved signatures of the Treasurer and Register, 72 and by the imprint of the seal of the Treasury ; and shall also express uf>on their face the promise of the association receiving the same to pay on demand, attested by the signatures of the president or vice-president and cashier ; and shall bear such devices and such other statements, and shall be in such form, as the Secretary of the Treasury shall, by regulation, direct. 52. Plates and Dies, and Expenses of Bureau. Section 5173. — The plates and special dies to be procured by the Comp- troller of the Currency for the printing of such circulating notes shall remain under his control and direction, and the expenses necessarily incurred in executing 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 on the circulatioti of National banking associations under this Title. Banks' Double Tax. — It was the intention of the original Banking Act that all expense of preparing plates for printing and for the printing of National bank notes should be paid from the proceeds of taxes or duties assessed on circulation. The tax on circulation still continues to be demanded, but under the provi- sions of Section 3 of the Act of June 20th, 1874, banks are now required to pay the expense of preparing the plates for printing their notes. It is, perhaps, a question whether banks organized prior to the passage of the Act of June 20th, 1874, can be required to do so. The Comptroller of the Currenc}^ on page 41 of his re- port for 1885, makes some reference to this matter of the expense of preparing and printing National bank notes, as well as of the expenses of the Comptroller's o£5ce, and the National bank re- demption agency. 53. Annual Examination of Plates, Dies, etc. Section 5174. — The Comptroller of the Currency shall cause to be exam- ined, each year, the plates, dies, but-pieces, [bed-pieces,] and other material from which the National bank circulation is printed, in whole or in part, and file in his office annually a correct list of the same. Such material as shall have been used in the printing of the notes of associations which are in liquidation, or have closed business, shall be destroyed under such regula- tions 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. 54. Issue of Small Notes Limited. Section 5175. — Not more than one-sixth part of the notes furnished to any association shall be of a less denomination than five dollars. After 73 specie payments are resumed no association shall be furnished with notes of a less denomination than five dollars. 55. Amount of Circulation Limited. Section 5176. — No banking association organized subsequent to the twelfth day of July, eighteen hundred and seventy, shall have a circulation in excess of five hundred thousand dollars.* 56. Aggregate Amount of Circulating Notes. Section 5177. — The aggregate amount of circulating notes issued under the act of February twenty-five, eighteen hundred and sixty-three, and under the act of June three, eighteen hundred and sixty-four, and under section one of the act of July twelve, eighteen hundred and seventy, and under this Title, shall not exceed three hundred and fifty-four milhons of dollars. Superseded by Act of January 14th, 1875, sec 3, par. 168. No limit now on the aggregate circulation which may be issued. National bank circulation is at present kept down by competition of Government paper and by the retention of the war tax on circulation. 57. Apportionment of Circulating Notes. Section 5178. — One hundred and fifty milhons of dollars of the entire amount of circulating notes authorized to be issued shall be apportioned to associations in the States, in the Territories, and in the District of Columbia, according to representative population. One hundred and fifty millions shall be apportioned by the Secretary of the Treasury among associations formed in the several States, in the Territories, and in the District of Columbia, having due regard to the ex'isting banking capital, resources, and business of such States, Territories, and District. The remaining fifty-four millions shall be apportioned among associations in States and Territories having, under the apportionments above prescribed, less than their full proportion of the aggregate amount ot notes authorized, which made due application for circu- lating notes prior to the twelfth day of July, eighteen hundred and seventy- one. Any remainder of such fifty-four millions shall be issued to banking associations applying for circulating notes in other States or Territories having less than their proportion. Obsolete. Superseded by Act of January 14th, 1875, sec. 3, par. 168. * Repealed by Act of July 12th, 1882, sec. 10, par. 194. 74 58. Distribution of Circulating Notes. Section 5179. — In order to secure a more equitable distribution of the National banking currency, there may be issued circulating notes to banking associations organized in States and Territories having less than their pro- portion, and the amount of circulation herein authorized shall, under the direction of the Secretary of the Treasury, as it may be required for this purpose, be withdrawn, as herein provided, from banking associations organ- ized in States having more than their proportion, but the am.ount so with- drawn shall not exceed twenty-five million dollars : Provided, That no circu- lation shall be withdrawn under the provisions of this section until after the fifty-four miUions granted in the first section of the act of July twelfth, eighteen hundred and seventy, sBall have been taken up. Obsolete. Superseded by Act of January 14th, 1875, sec. 2>r par. 168. See Act of June 2otb, 1874, sec. 7, par. 162. 59. Withdrawing Excess of Circulation. Section 5180. — The Comptroller of the Currency shall, under the direc- tion of the Secretary of the Treasury, make a statement showing the amount of circulation in each State and Territory, and the amount necessary to be withdrawn from each association, and shall forthwith make a requisition for such amount upon such associations, commencing with those having a circulation exceeding one million of dollars, in States having an excess of circulation, and withdrawing their circulation in excess of one million of dollars, and then proceeding proportionately with other associations having a circulation exceeding three hundred thousand dollars, in States having the largest excess of circulation, and reducing the circulation of such associations in States having the greatest proportion in excess, leaving undis- turbed the associations in States having a smaller proportion, until those in greater excess have been reduced to the same grade, and connnuing thus to make such reductions until the full amount of twenty-five millions has been withdrawn ; and the circulation so withdrawn shall be distributed among the States and Territories having less than their proportion, so as to equaUze the same. Upon failure of any association to return the amount of circulating notes so required, v/ithin one year, the Comptroller shall sell at public auc- tion, having given twenty days' notice thereof in one daily newspaper printed in Washington and one in New York city, an amount of the bonds deposited by that association as security for its circulation, equal to the circulation required to be withdrawn from the association and not returned in com- pliance with such requisition; and he shall, with the proceeds, redeem so many of the notes of such association, as they come into the Treasury, as will equal the amount required and not returned ; and shall pay the balance;, if any, to the association. Obsolete. See Act of January i4tb, 1875, sec. 3, par. 168. 75 6o. Removal of Associations. Section 5181. — Any association located in any State having more than its proportion of circulation may be removed to any State having less than its proportion of circulation, under such rules and regulations as the Comptroller of the Currency, with the approval of the Secretary of the Treasury, shall pre- scribe: Provided, That the amount of the issue of said banks shall not be deducted from the issue of fifty-four millions mentioned in section five thousand one hundred and seventy-eight. Obsolete. See Act of January 14th, 1875, sec. 3, par. 168. Changes of location can now be made within certain limits on ap- proval of the Comptroller (see Act of May ist, 1886), otherwise only by Act of Congress. 61. Circulating Notes : for What Receivable. SEcnON 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 busi- ness, such association may issue and circulate the same as money. And the same shall be received at par in all parts of the United States in payment of taxes, excises, public lands, and all other dues to the United States, except duties on imports ; and also for all salaries and other debts and demands owing by the United States to individuals, corporations, and associations within the United States, except interest on the pubUc debt, and in redemp- tion of the National currency. Signing Circulating Notes. — Stamped signatures affixed by the oflBcers themselves would be sufficient to make the notes ' ' obligatory promissory notes, ' ' and probably printed or engraved signatures would also suflSce for this purpose.' But Congress, no doubt, had in view the usual manner in which promissory notes are signed ; that is, by the manual signature of the maker, and intended that the notes of the banks should be signed in this way. There appears, however, to be no penalty for having printed signatures rather than written ones, as the Comptroller has in some of his reports recommended a law imposing a penalt5\ It is often a great task to sign these notes in quantities, and perhaps a provision of law authorizing the printing of signatures, under certain conditions, upon the notes of smaller denominations, might have a tendency to cause a larger circulation of National- bank notes. Banks Liable without Signatures. — The Act of July 28th, 76 1892, provides that the bank shall be liable for all notes issued to it though unsigned. (See Act of July 12, 1892, par. 211.) 62. Issue of Other Notes Prohibited. Section 5183. — No National banking association shall issue post-notes or any otlier notes to circulate as money than such as are authorized by the pro- visions of this Title. Applies to Circulating Notes. — In the revision of the United States Statutes the words ''posi-uotes" were omitted, but were afterward put back by the act of February the i8th, 1875. This section applies only where the instruments are issued to "circulate as money," and where this is not the purpose they are not within the prohibition. (Hunt z>. Appellant, etc., 141 Mass., 515; Riddle ?'. First National Bank, 27 Fed. Rep., 503.) Thus, it has been held, that this section does not forbid the issue of certifi- cates of deposit. (See cases cited above.) Nor does it forbid the certification of checks, although the purpose of a certification, by making the check primarily the obligation of the bank, is to give it currency, so that it may pass freely from hand to hand. (See Merchants' National Bank v. State National Bank, 10 Wallace, 604.) The use of the term "post-notes" appears to have been the cause of some misapprehension as to the meaning of this section. Doubtless many obligations issued by National banks for money borrowed do come within the definition of a post-note, but the term is to be taken in connection with the words ' ' to circulate as money," which limit the prohibition to post-notes issued for that purpose. 63. Destroying and Replacing Mutilated Notes. Section 5184. — It shall be the duty of the Comptroller of the Currency to receive worn-out or mutilated circulating notes issued by any banking asso- ciation, 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 memo- randum has been entered in the proper books, in accordance with such regu- lations as may be established by the Comptroller, as well as all circulating notes which shall have been paid or surrendered to be canceled, shall be burned* to ashes in presence of four persons, one to be appointed by the Secretary of the Treasury, one by the Comptroller of the Currency, one by the Treasurer of the United States, and one by the association, under such regulations as the Secretary of the Treasury may prescribe. A certificate of * Modified by Act of June 23, 1874, par. 165. 17 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. Merchants' Bank v. State Bank, lo Wall., 604. This section provides for the security of the destruction of notes of banks at a distance from their principals. The checks provided appear to be adequate. The details of the process are given else- where in this work. (See page 278.) 64. National Gold Banks. Section 5185. — Associations may be organized 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 asso- ciations, it shall be lawful for the Comptroller of the Currency to issue to the association making the depcfeit circulating notes of different denominations, but none of them of less than five dollars, and not exceeding in amount eighty per centum of the par value of the bonds deposited, which shall ex- press the promise of the association to pay them, upon presentation at the office at which they are issued, in gold coin of the United States, and shall be so redeemable. But no such association shall have a circulation of more than one million of doUars.f There are now no gold banks in existence, although it may again become profitable to organize them. The resumption of specie payments placed all National banks on a gold basis and the special gold banks at a disadvantage in the issue of circulation. 65. Reserve Required of Gold Banks. Section 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 of this Title : Provided, That, in applying the same to associations organized for issuing gold notes, the terms " lawful money " and " lawful money of the United States" shall be construed to mean gold or silver coin of the United States ; and the circulation of such association shall not be within the limita- tion of circulation mentioned in this Title. J See previous section and remarks. *See Act of February 14, 1880, par. 184. f See Act of January 19, 1875, par. 169. J Section 5187, par. 135. 78 66. Penalties for Imitating National-Bank Notes, etc. Section 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-hill, or advertise- ment, in the hkeness or similitude of any circulating note or other obligation or security of any banking association organized or acting under the laws of the United States which has been or may be issued under this Title, or any act of Congress, or to write, print, or otherwise impress upon any such note, obligation, or security any business or professional card, notice, or advertise- ment, or any notice or advertisement 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. This section is to prevent the deluding of ignorant and unwary people, and to avoid bringing the National system into discredit even collaterally. 67. Penalty for Mutilating Notes, etc. Section 5189. — Every person who mutilates, cuts, defaces, disfigures, or perforates 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 Na- tional 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 re-issued by said association, shall be liable to a penalty of fifty dollars, recoverable by the association. This is to prevent malicious mischief. CHAPTER IV. REGULATION OF THE BANKING BUSINESS. 68. Place of Business. Section 5190, — The usual business of each National banking association shall be transacted at an office or banking-house located in the place speci- fied in its organization certificate. Place of Business. — This provision must be construed reason- ably ; and where a part of the legitimate business of the bank can not be transacted at the banking-house it- may be done elsewhere. (Merchants' National Bank v. State National Bank, 10 Wallace 604.) In the important case of Merchants' National Bank v. State National Bank, above cited, the cashier of the defendant bank bought a quantity of gold of the plaintiff bank, and gave a certified check therefor. The transaction took place at the ofiice of the plaintiff bank, and the check was certified there. It was objected by the defendant that the certification was not good, because not made by the cashier at the defendant's own banking- house. But it was held that there was no force in this objection. The court said : ' ' 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 correspondents or other agents. In the case before us, the gold must have been bought, if at all, at the buying or the selling bank, or at some third locality." Branch Office. — The question often arises whether a bank may have a branch office for the purpose of receiving deposits, paying checks, etc., in the same or a different place. Perhaps, the bank might have such a branch in the same town or city, but clearly it could not establish a branch office elsewhere, (Armstrong v. Second National Bank, 38 Fed. Rep., 883.) In the case cited a National bank in Cincinnati had made an arrangement with a bank in Springfield, Ohio, by which the latter bank was to cash checks drawn on the Cincinnati bank by customers living in 79 8o Springfield. This arrangement was held by the court to be void,, on several grounds, among others, that it is not competent for a National bank to provide for the cashing of checks upon it at any other place than an office or banking-house located in the place specified in its organization certificate. By the Act of May 12, 1892, Chicago bankers were authorized to establish branches at the World's Columbian Exposition. (See posi, par. 210.) [See also Supplement.] 69. Requirements as to Lawful=Money Reserve.* Section 5191. — Every National banking association in either of the follow- ing cities : Albany, Baltimore, Boston, Cincinnati, Chicago, Cleveland, De- troit, Louisville, Milwaukee, New Orleans, New York, Philadelphia, Pitts- burg, 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 circulation 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. Whenever the lawful money of any association in any of the cities named shall be below the amount of twenty-five per centum of its circulation and deposits, and whenever the lawful money of any other association shall be below fifteen per 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 dividend of its profits until the required proportion, between the aggregate amount of its outstanding notes of circulation and deposits and its lawful money of the United States, has been restored. And the Comp- troller 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 association shall fail for thirty days thereafter so to make good its reserve of lawful money, the Comptroller may, with the concurrence of the Secretary of the Treasury, appoint a receiver to wind up the business of the association, as provided in section fifty-two hundred and thirty-four. Obsolete Provision. — Section 2 of the Act of June 20, 1874, page 165, relieves National banks of the necessity of keeping re- serve upon circulation, but it is still required on deposits. Calculating Reserve, etc. — The method of calculating reserve, and the funds available therefor, are fully treated of elsewhere in this work. (See pages 257-270.) *See Sections 5191, 5192, 5195, Act of June 20, 1874; Sections 2 and 3, Act of July 12, 1882; Section 12, Act of March 3, 1887 ; Act of July 14, 1890. 8i 70. Redemption Cities and Reserve Required.* Section 5192. — Three-fifths of the reserve of fifteen per centum required by the preceding section to be kept, may consist of balances due to an asso- ciation, available for the redemption of its circulating notes, from associations approved by the Comptroller of the Currency, organized under the act oi June three, eighteen hundred and sixty-four, or under this Title, and doing business in the cities of Albany, Baltimore, Boston, Charleston, Chicago, Cincinnati, Cleveland, Detroit, Louisville, Milwaukee, New Orleans, New York, Philadelphia, Pittsburg, Richmond, St. Louis, San Francisco, and Washington. Clearing-house certificates, 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 certificate, within the preceding section. 71. United States Certificates of Deposit as Reserve. Section 5193. — The Secretary of the Treasury may receive United States notes on deposit, without interest, from any National banking associations, in sums of not less than ten thousand dollars, and issue certificates therefor in such form as he may prescribe, in denominations of not less than five thou- stand dollars, and payable on demand in United States notes at the place where the deposits were made. The notes so deposited shall not be counted as part of the lawful-money reserve of the association ; but the certificates issued therefor may be counted as part of its lawful-money reserve, and may be accepted in the settlement of clearing-house balances at the places where the deposits therefor were made. 72. Issue of Certificates of Deposit. Section 5194. — The power conferred on the Secretary of the Treasury, by the preceding section, shall not be exercised so as to create any expansion or contraction of the currency. And United States notes for which certificates are issued under that section, or other United States notes of like amount, shall be held as special deposits in the Treasury, and used only for redemp- tion of such certificates. 73. Redemption of Circulating Notes. Section 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 New York. But the foregoing provision shall not apply to associations organized and located in the city of San Francisco for the purpose of issuing notes payable in gold. * See references under previous sections. t Repealed by Act Mch. 14, 1900. 6 82 Each association not organized within the cities named, shall select, subject to the approval of the Complroller, an association in either of the cities named, at which it will redeem its circulating notes at par. The Comptroller shall give public notice of the names of the associations selected, at which redemptions are to be made by the respective associations, and of any change that may be made of the association at which the notes of any association are redeemed. Whenever any association fails either to make the selection or to redeem its notes as aforesaid, the Comptroller of the Currency may, upon receiving satisfactory evidence thereof, appoint a receiver in the manner pro- vided for in section fifty-two hundred and thirty-four, to wind up its affairs. But this section shall not relieve any association from its liability to redeem its circulating notes at its own counter, at par, in lawful money on demand. Obsolete Provision. — The provisions of this section having re- ference to the redemption of circulating notes and the selection of an association at which it will redeem its circulating notes at par, have been superseded by the provisions of Section 3 of the Act of June 20, 1874. Redemption of Notes. — As the provisions for the redemption of notes in New York or other cities did not relieve a National bank from the necessity of redeeming the circulating notes, in lawful money at its own counter, so it is held that the present system of redeeming circulating notes at the United States Trea- sury does not relieve National banks of the necessity of redeeming their notes at their own counter. Reserve Agents. — This section gives banks in certain cities permission to keep one-half of their lawful-money reserve in cash deposits in New York. It was the custom under this section to select certain associations in New York or other cities as redemp- tion agencies, and obtain the approval of the Comptroller ; and it seems to have been generally acceded to, that these approved re- demption agencies were the only banks in New York or other reserve cities where the reserves of National banks could be kept. When the law requiring these redemption agencies was repealed, the Comptroller's office still continued to require banks in the cities named to select particular banks in New York city at which it was the intention to keep a portion of their reserve. The Act of March 3d, 1887, accorded to associations located in Chicago and St. lyouis the same privileges as those of the New York city banks. 83 74- NationaUBank Notes a Legal Tender. Section 5196. — Every National banking 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 association organized for the purpose of issuing notes payable in gold. This section makes National-bank notes legal tender to any Na- tional bank. National-bank notes are redeemable in lawful money ; that is, in gold, silver dollars, or legal-tender notes ; and it will readily be seen that any depreciation of the' character of lawful money — as, for instance, the substitution of an inferior dollar for our present standard — is of the utmost importance to National banks. As there are no gold banks now in existence, the last clause of this section has, at present, no importance. 75. Rate of Interest Limited. Section 5197. — Any association may take, receive, reserve, and charge on any loan or discount made, or upon any note, bill of exchange, or other evi- dences of debt, interest at the rate allowed by the laws of the State, Terri- tory, 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 organ- ized under State laws, the rate so hmited 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, reserve, or charge a rate not exceeding seven per centum, and such interest may be taken in advance, reckoning the days from 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, discount, 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. State Rate Limit. — This section allows National banks to charge the rate of interest allowed by the State to natural persons generally, and a higher rate if State banks of issue are authorized to charge a higher rate. (Tiflfany v. National Bank, 18 Wallace, 409.) The Supreme Court of the United States has explained the meaning of this section as follows: " It was expected that they [the National banks] would come into competition with State banks, and it was intended to give them at least equal advantages in such competition. In order to accomplish this they were em- powered to reserve interest at the same rates, whatever those rates 84 might be, which were allowed to similar State institutions. This was considered indispensable to protect them against possible unfriendly State legislation. Obviously, if State statutes should allow to their banks of issue a rate of interest greater than the or- dinary rate allowed to natural persons, National banking associa- tions could not compete with them, unless allowed the same. On the other hand, if such associations were restricted to the rates allowed by the statutes of the State to banks which might be authorized by the State laws, unfriendly legislation might make their existence in the State impossible. A rate of interest might be prescribed so low that banking could not be carried on, except at a certain loss." {Id.) General State Rate Governs. — But it is the rate of interest allowed to the banks of the State generally that a National bank may charge ; and the fact that a few of the State banks are speci- ally authorized to take a higher rate does not warrant the National banks in doing the same. (Gruber v. First National Bank, 87 Penn St., 468 ; Duncan v. First National Bank of Mount Pleasant, II Bankers' Magazine, 787. But see First National Bank of Mount Pleasant v. Tinstman, 36 Legal Intelligencer, 228.) Nor is it to be understood that whatever by the laws of the State is lawful for natural persons in acquiring title to negotiable paper is lawful for National banks. (National Bank v. Johnson, 104 U. S., 271.) Thus, though the State law fixes no limit to the rate which natural persons may take for the discount or purchase of business paper, this does not authorize the National banks to discount such paper at a higher than the legal rate. (Johnson v. National Bank of Gloversville, 74 N. Y., 329; afl&rmed in National Bank v. John- son, 104 U. S., 271.) Seven Per Cent. Limit. — And where the State law does not limit the rate of interest which may be charged on loans to cor- porations, a National bank located in that State can not charge more than 7 per cent, on such loans. {In re Wild, 11 Blatchford, 243.) But it has been held that if the statutes of the State ex- pressly authorize parties to contract for any rate of interest. Na- tional banks may do likewise, and are not, in such case, limited to 7 per cent. (Hinds v. Marmelejo, 60 Cal., 229 ; National Bank V. Bruhn, 64 Tex., 571 ; Rockwell v. Farmers' National Bank, 4 Colo., App., 562; Wolverton v. Exchange National Bank, 11 85 Wash., 94; Yakina National Bank v. Kinne, 6 Wash , 348; Guild V. First National Bank of Deadwood, 4 S. D., 566.) Where a State statute fixes a certain rate as the legal rate, but authorizes parties to agree in writing for a higher rate, the National banks are permitted to charge such higher rate. (,Wiley v. Starbuck, 44 Ind , 298; Newell v. National Bank of Somerset, 12 Bush, 57.) A National bank in Mississippi is not allowed to retain interest in advance, but can charge interest only on the sum actually loaned. (Timberlake z'. First National Bank, 43 Fed. Rep., 231.) A Na- tional bank located in Ohio may, since the repeal of the statute of that State, fixing the rate of interest for banks of issue, reserve and charge interest at the rate of eight per cent. (La Dow v. First National Bank of New lyondou, 51 Ohio St., 234.) Agreement With Customer.— The bank and its customer have the right to agree as to the time of entering credits, and if such agreement is made in good faith to equalize the interest on diflferent items, and not for the purpose of receiving illegal inter- est, it is not a violation of the law. (Timberlake v. First National Bank, 43 Fed. Rep., 231.) Therefore, where drafts are from time to time deposited in a bank, some of them being payable on demand and some on time, an agreement between the bank and the depositor that credits shall be given for such drafts on the day after their deposit, the depositors being charged with the full legal rate for any over-drafts, does not constitute usury, when such agreement is made in good faith in order to save involved calculations. (/'^.) Where payments are made generally to a National bank on a promissory note which includes unlawful interest, the}' will be ap- plied on the principal. (Hall v. First National Bank of Fairfield, 30 Neb., 94.) In a case in the United States Circuit Court of Appeals it was held that where a National bank purchases drafts at a rate of dis- count larger than the rate of interest allowed by the law of the State, this will be usurj^. (Danforth v. National State Bank, 48 Fed. Rep., 271.) The inhibition contained in this section is general and forbids the taking of usurious interest from an artificial, as well as from a natural, person. (Albion Bank v. Montgomery, 74 N. W. Rep., 1102.) The promise of the Cashier to pay interest upon a deposit at aa 86 usurious rate will not bind the bank ; but the bank would be bound to return the amount actually received by it. (Hanson v. Heard, 38 Atl. Rep., 788.) 76. Penalty for Taking Usurious Interest. Section 5198. — 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 be paid thereon. In case the greater rate of interest has been paid, the person by whom it has been paid, or his legal representatives, 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 t>vo years from the time the usurious transaction occurred. Intent of the Law. — The Supreme Court of the United States has analyzed this section as follows : ' ' Two categories are thus defined, and the consequences denounced, (i) Where illegal in- terest has been knowingly stipulated for, but not paid, then only the sum lent, without interest, can be recovered. (2) Where such illegal interest has beeti paid, then twice the amount so paid can be recovered in a penal action of debt, or suit in the nature of such action, against the offending bank, brought by the persons pay- ing the same, or their legal representatives." (Barnet i*. Muncie National Bank, 98 U. S., 855.) Remedy "Where Action is by the Bank. — Where the bank sues to recover the loan, it can not, if there has been usury, and the defendant pleads this defense, recover any interest at all, but only the principal of the loan. (Barnet v. Muncie National Bank, 98 U. S., 855.) But in such an action the defendant, if he has paid the usurious interest, can not avail himself of such payment as a set-off or counter-claim against the principal of the loan sued on ; but he must bring a separate action therefor, (Barnet v. Muncie National Bank, 98 U. S., 855; Peterborough National Bank v. Childs, 133 N. Y., 248; National Bank of Auburn v. Lewis, 81 N. Y., 15; Ellis v. First National Bank of Olney, 11 Bradw., 275; Rockwell v. Farmers' National Bank, 4 Colo. App., 562; Huggin V. Citizens' National Bank, 6 Tex. Civ. App., 33; Norfolk National Bank v. Schwenk, 46 Neb., 381 ; Marion Na- tional Bank v. Thompson, (Ky.) 40 S. W. Rep., 903 ; Cox v. Beck, 87 83 Fed. Rep., 269.) And usurious interest paid on renewing a series of notes can not, in an action by the bank on the last of thera, be applied in satisfaction of the debt, (Driesbach v. Na- tional Bank, 104 U. S., 52.; What Interest Forfeited— Interest after Maturity.— Where the instrument carries with it illegal interest, the whole interest is forfeited, and not merely that which the party borrowing may agree to pay. The usury destroys the interest-bearing power of the obligation, and there is no point of time from which it can bear interest. Not only does it forfeit the interest accruing before maturity, but as well that accruing after maturity (lyUcas v. Gov- ernment National Bank, 78 Penn St., 228; Shunk v. First Na- tional Bank of Galion, 22 Ohio St., 508; National State Bank v. Brainard, 6i Hun,, 339; First National Bank v. Grimes (49 Kans. 219,) though the latter rate be lawful (Shafer ?'. First National Bank, 53 Kans,, 614), or the interest which otherwise would accrue by law upon non-payment after maturity. (Flenderson National Bank v. Alves, 91 Ky., 142,) And an amount paid on the paper after the maturity thereof must be credited on the prin- cipal without regard to when the interest thereon accrued. (Na- tional State Bank v. Brainard, 61 Hun., 339.) By charging more than legal interest on over-drafts the bank will lose the right to recover any interest at all. (Third National Bank of Philadelphia V. Miller, 90 Pa, St,, 241.) Where a National Bank has re-discounted notes at a usurious rate of interest, the fact that the bank for which the re-discount was made has charged illegal interest on those notes to its customers will not affect its right to set up the defense of usury in an action by the re-discounting bank. (/'^/.) As to whether a National bank can discount a note containing a provision to pay an attorney's fee if suit shall be brought to enforce payment, see Merchants' National Bank v. Sevier (14 Fed. Rep,, 662). Renewals. — If the note is renewed from time to time, no por- tion of the usurious interest included in the renewal note can be recovered, (First National Bank of Mead Centre v. Grimes, 49 Kans., 219.) And the usury is not purged by settlements and renewal notes without additional usury. (Pickett v. Merchants' National Bank of Memphis, 32 Ark., 346.) In a suit upon the last renewal the bank can recover only the principal sum originally 88 advanced. (Snyder z'. Mount Sterling National Bank, 94 Ky., 231.) And any payments made upon any of such notes will be applied to the principal. {Id.) And even though the interest upon the renewal notes has been reduced to the legal rate, no part of the same can be recovered. (Farmers' and Mechanics' Bank v. Hoag^ land, 7 Fed. Rep., 159) A note given for already accrued interest, in part usurious, is without consideration ; and suspension of the right of collection, between its date and maturity, in no way operates to supply the essential element otherwise lacking. (McGhee v. First National Bank of Tobias, 40 Neb., 92.) But in order to render the bank liable to the penalty of double the amount of in- terest paid prescribed by this section, the illegal interest must have been actually paid ; and it is not sufficient that it was carried into renewal notes. (Brown v. Marion National Bank, 169 U. S. 416; Osborn v. First National Bank, 175 Pa. St., 494.) Penalty for Taking Usury— Knowledge of Bank — Allega- tions of Complaint. — To subject the bank to the penalty for taking usurious interest there must have been paid not only a larger rate of interest than that allowed by law, but that larger rate must have been knowingly received. (Timberlake v. First National Bank, 43 Fed. Rep., 231.) And the petition or complaint must allege that it was knowingly received. (Henderson v. Alves, 15 S. W. Rep., 132; Schuyler National Bank v. Bullong, 24 Neb., 321.) As to when allegations of complaint are sufficient to sus- tain a judgment in an action against a National bank for exacting usurious interest, see First National Bank v. Morgan (132 U. S., 141), Guild V. First National Bank of Deadwood, (4 S. D., 566.) Amount of Penalty. — The penalty is twice the amount of interest paid, and is not limited to twice the excess above the legal rate. (Henderson National Bank r. Alves, 91 Ky., 142; Schuyler National Bank v. Bullong, 28 Neb., 684; Hill v. National Bank of Barre, 15 Fed. Rep., 432.) [See also Supple- ment.] Payment of Interest — Statute of Limitations. — In order that the borrower may maintain an action against the bank to recover the penalty provided 1)y the statute for taking usurious interest, such usurious interest must have been actually paid, and it is not sufficient that such interest is merely charged to his account. (Hall v. First National Bank of Fairfield, 30 Neb., 99.) 89 Nor is it sufficient that the interest was reserved from the original loan by way of discount. (Smith v. First National Bank, 42 Neb., 687), but where commercial paper is transferred to and dis- counted by the bank at a rate of interest exceeding the legal rate, and the net proceeds after deducting the interest charged, are cred- ited to the transferee, this is a payment of the interest within the meaning of the statute. (National Bank of Rahway v. Carpenter, 52 N. J. Law, 165.) Each payment of illegal interest is regarded as " a transaction " within the intent of the statute, and when such payment is actually made, or accrues, the two years' limitation com- mences to run. (First National Bank of Dorchester v. Smith, 39 Neb., 90; Lynch v. Bank, 22 West Va., 534; National Bank v. Carpenter, 52 N. J. Law, 165 ; Bobs v. People's National Bank, 21 Fed. Rep., 888.) In the case first cited the sum of $88, illegal interest, was paid upon a loan more than two years prior to the inception of the action, but the loan upon which such usurious interest was received by the bank was not fully paid until within two years before the bringing of the suit. It was held that the limitation began to run from the time the interest was so paid. It is not sufficient to set the statute in operation that the interest was reserved by way of discount. (Smith v. First National Bank, supra). But the payment of the loan is not a condition precedent to the right of the borrower to maintain an action to recover the penalty for the usurious interest paid. The penalty for all illegal interest paid within two years may be recovered in one action, whether the amount was in one payment or in several. (Hiuter- mister v. First National Bank, 64 N. Y., 212.) Who May Bring Action for Penalty. — Only the party paying the illegal interest, or his representatives, can recover the penalty therefor. (Timberlake v. First National Bank, 43 Fed. Rep., 231.) The action can not be brought by a guarantor or surety. (Lazcar V. National Union Bank, 52 Md., 73.) And one of the joint makers of a note can not recover the penalty where the illegal interest was paid by the other maker. (Timberlake v. First National Bank, 43 Fed. Rep., 231 ; First National Bank of Concordia ?'. Rowley, 52 Kans., 394.) But where a bankrupt has paid illegal interest, his assignee may bring such action. (Wright v. First National Bank, 8 Biss, 243; Crocker z'. First National Bank, Thompson's National Bank Cases, 317; Henderson National Bank v. Alves 91 Kentucky, 142. But see Osborn v. First National Bank 90 of Athens, 175 Pa. St., 474.) The right is conferred upon an artificial, as well as upon a natural, person. (Albion National Bank v. Montgomery, 74 N. W. Rep. 1102.) But several of the joint makers of a note on which legal interest is paid by such parties individually can not unite in one action to recover such penalty. (Teague v. First National Bank of Salina, 48 Pac, 603.) The statute confers upon the parties separate rights. That they have paid equal amounts can not change the rule. The cause of action accrues to the one paying the unlawful interest, and to each one making such paj'meuts. There is no cause of action to the makers of the note on which usurious interest is paid. The cause of action arises when the unlawful payment is made, and to each of the ones making such payments. (/. Seibern, 16 Ohio St., 614; Van Slyke v. State, 26 Wis., 655; BoynoU v. State, 25 Wis., 112.) But Congress meant no more than to require of the States, as a condition to the exercise 112 of the power to tax the shares iu National banks, that they should, as far as they had the capacity, tax in like manner the shares of banks of their own creation. (L,ionberger v. Rouse, 9 Wall., 46S.) Therefore, where a State has previously contracted with the banks which it has chartered that they should not be taxed above a cer- tain rate, a tax upon National bank shares at a greater rate is not invalid, if this rate is not greater than that assessed upon all the moneyed capital within the State, except that of the State banks. {Id.; City of Richmond v. Scott, 48 Ind., 568.) State Constitution. — The taxation upon National bank shares by States must be characterized by such equality and uniformity as is required by the State constitution for the protection of indi- vidual citizens having moneyed capital. (First National Bank v. I^indsay, 45 Fed. Rep., 619.) National and State banks in Ken- tucky are subject to county and municipal taxation. (Deposit Bank of Owensboro v. Daviess County, 39 S. W. Rep., 1030.) And the acceptance by the banks of the act known as the ' ' Hewitt Law" does not preclude the State from subjecting them to other modes of taxation. (/. Barney, 45 Fed. Rep., 668.) But where the receiver refuses to bring an action against negligent directors to recover the amount which the shareholders have been compelled to contribute to pay the debts of the association, an action against such directors maj^ be brought by a shareholder on behalf of him- self and the other shareholders. (Nelson v. Burrows, 9 Abb. N. C, 280.) And where the receiver is a director, and one of the parties charged with misconduct and against whom a remedy is sought, the action may be brought by a shareholder on behalf of himself and the other shareholders. (Brinkerhoff z^. Bostwick, 88 N Y., 52.) Such an action may be brought in a State court. {Id.) An action against a director under this section is not an action to recover a penalty, and is therefore not within Section 1047, Rev. Stat. U. S., limiting suits for any penalty or forfeiture accruing under the laws of the United States to five years. (Welles v. Graves, 41 Fed. Rep., 459.) Statute Remedial— Estate Liable.— The statute is remedial and not penal, and the liability of the director does not expire with his death, but survives against his estate. (Stephens v. Over- stolz, 43 Fed. Rep., 465.) Action in Equity or at Law.— As to whether the suit against the directors should be brought in equity or at law, the authorities 138 are not agreed. (See Stephens z: Overstolz, 43 Fed. Rep., 771; National Exchange Bank of Baltimore v. Peters, 44 Fed. Rep., 13; Welles r. Graves, 41 Fed. Rep., 459; Hirsh v. Jones, 56 Fed, Rep., 137.) The liabilities imposed by this section do not pre- clude a common law action of deceit against the directors for false and fraudulent representations made by them. (Prescott v, Haughey, 65 Fed. Rep., 653.) 119. Insolvent Banks, Transfers, Assignments, etc., void. Section 5242.* — All transfers of the notes, bonds, bills of exchange, or other evidence of debt owing to any National banking association, or of de- posits to its credit, all assignments 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 shareholders or creditors, and all payments of money to either, made after the commission of an act of insolvency, or in contemplation thereof, made with a view to prevent the ap- plication of its assets in the manner prescribed by this chapter, or with at view to the preference of one creditor to another, except in payment of its cir- culating notes, shall be utterly null and void.* Meaning of " Insolvency." — The term " insolvency " as used in this section has the same meaning as it has in the National bank- rupt law ; that is, it does not mean an absolute inability to pay at some future time, upon a settlement and winding up of the bank's affairs, but a present inability to pay in the ordinary course of business. (Case v. Citizens' Bank of Louisiana, 2 Woods, 23.) « ^A^hat Constitutes Preference. — To bring a transfer of assets within the operation of this section, it is not necessary that the person to whom they are transferred should know of the insol- vency, but it is sufficient if the insolvency is in the contemplation of the bank only. (/rf'. / National Security Bank v. Butler, 129' U. S., 223.) But it should appear that the money was paid in contemplation of insolvency, for the purpose of giving a prefer- ence, and with a view to preventing the application of the assets to the claims of creditors generally. (Hays v. Beardsley, 136 N. Y., 299.) And the fact that the bank was known to be insol- vent at the time by the officer making payment does not make the payment illegal, where the person receiving payment was treated like any other creditor, and the object was not to give a preference * For part of Section 5242, see "Suits and Jurisdiction." 139 over others. (/'^O If the person receiving payment was entirely ignorant of the insolvency of the bank, and acted in good faith, the fact that he was at the time a director does not make the pay- ment illegal. (/^/.) It will be presumed that any transfer of assets, made after the closing of the bank has been determined upon, whereby any creditor obtains a preference over other credi- tors, was made with the intent to prefer. (National Security Bauk V. Price, 22 Fed. Rep., 697.) But it is not a preference unless given to an existing creditor to secure a pre-existing debt. (Casey v. Societe de Credit Mobilier, 2 Woods, 77.) And if the transaction be free from fraud in fact, and is intended merely to adequately protect a loan made at the time, the creditor can retain property transferred to secure such loan until the debt be paid, though the bank is insolvent and the person making the loan has reason at the time to believe that to be the fact. (Armstrong v. Chemical National Bank, 41 Fed. Rep., 234.) So, where the officers of a bank, which was in danger of failing, in the hope of avoiding a failure, pledged certain assets to a depositor in order to induce him to allow his deposit to remain with the bank, it was held that this was not a preference. (Roberts v. Hill, 23 Fed. Rep., 31. See also Bell v. Hanover National Bank, 57 Fed. Rep., 821 ) vSo where certain property of the bank had been attached, it was held that a transfer of assets to secure the sureties on a bond given to release the attachment was not a preference. (Price V. Coleman, 22 Fed. Rep., 694.) And where a bank had in good faith accepted the draft of a National bank the day before the latter' s insolvency, and afterwards paid the same, it was held that such bank might apply the proceeds of collections made b}'' it on paper in its possession belonging to the insolvent bank, to the payment of the debt, since its lien on such collections ran from the date of the acceptance. {In 7-e Armstrong, 41 Fed. Rep., 381.) Remittances made in usual course of business to a correspondent before an act of insolvency committed are not preferences, though the bank is actually insolvent at the time, and is closed by the Comptroller of the Currency before the remittances are received by the correspondent. (Hajden v. Chemical National Bank, 80 Fed. Rep., 587.) Notes given in renewal of other notes held by a National bank, the original notes not being returned to the maker, are not "evidences of debt" or "assets" within the meaning of this section. (First National Bank of Decatur v. Johnston, 97 Ala., 655.) [See also Supplement.] I40 Deposits Made "When Bank Insolvent — Recovery of. — Upon the general ground that one who has been induced to part with his property by the fraud of another, under the guise of a contract, may, upon discovery of the fraud, rescind the contract and reclaim the property, it has been held that a depositor in a National bank may recover funds deposited after the bank has become hopelessly insolvent, it being considered a gross fraud on the part of the bank to receive them under such circumstances, and that it is not a preference for him to so reclaim his deposit, because in such case he does not claim under a transfer from the bank, but under his original title, and he does not seek to enforce any right as creditor of the bank, but merely to reclaim his own property obtained by fraud. (Cragie v. Hadley, 99 N. Y., 131.) And the fact that the money deposited was not marked, and, by a mingling with the other funds of the bank, lost its identitj^, does not affect the right of the depositor to recover in full, if it can be traced into the vault of the bank, and it appears that a sum equiva- lent thereto remained continuously on hand in the bank until removed by the receiver. (Massey v. Fisher, 62 Fed. Rep., 958.) But the moneys or paper deposited or the proceeds thereof must be traced into the hands of the receiver. (Multnomah County v. Oregon National Bank, 61 Fed. Rep. ,912; Spokane County v. Clark, 61 Fed. Rep., 538; Ivake Erie, Etc., R. R Co. v. Indian- apolis National Bank, 65 Fed. Rep., 690. Compare San Diego County V. California National Bank, 52 Fed. Rep., 59.) Hence, where a bank which had received a note for collection and remit- tance, and had not remitted, failed with cash on hand less than the amount of the collection, it was held that the lien for trust funds converted was limited to the amount on hand, and did not extend to the other assets of the bank, where there was no proof that they were obtained with the money converted. (Boone County National Bank v. I^atimer, 67 Fed. Rep., 27.) A creditor of an insolvent National bank, whose demand grows out of a fraudulent transaction perpetrated by the officers of the bank in contempla- tion of the immediate wrecking of their corporation, does not thereby become entitled to a preference over the general creditors of the bank. (Citizens' National Bank v. Dowd, 35 Fed. Rep., 340.) [See Amendment in Supplement.] Action of Replevin. — A person claiming title to property in the possession of a receiver which has come into his possession with 141 the property belonging to the bank, may maintain an action of replevin therefor. (Corn Exchange Bank z: Blye, loi N. Y., 303.) Hence, where money was deposittd with the receiving teller of a bank a few minutes before the bank closed its doors, to be credited to his account, and the teller not being aware of the impending failure, after crediting the amount in the depositor's pass book, put tlie money and deposit ticket to one side, and before the entry was made in the books of the bank, it closed its doors, and the money was by order of the directors placed apart, and in that con- dition delivered to the receiver, it was held that the depositor could replevy tlie money so deposited. (Faber v. Stephens, 35 Fed. Rep., 17.) Set Off. — This section does not prohibit the allowance of any valid set-off, legal or equitable, which a debtor of a bank may have against any obligation owing by him to it at the time of its insol- vency. (Armstrong, Receiver, v. Warner, 49 Ohio St., 376; Scott 7'. Armstrong, 146 U. S., 499.) A depositor may therefore set-off the amount of his deposit against his liability as maker or endorser of a note held by the receiver, though such note had not matured when the bank was closed, and the receiver appointed. (Scott v. Armstrong, 146 U. S., 499; Yardley v. Clothier, 49 Fed. Rep., 337 ; 51 Fed. Rep., 506; Adams ?'. Spokane Drug Co., 57 Fed. Rep., 888; Mercer 7>. Dyer, 15 Mont., 317 ; Hughitt v. Ha)-es, 136 N. Y., 163.) But the debtor of the bank will not be permitted to set-off against his liability a claim against the bank assigned to him after the bank had closed its doors. (Venango National Bank ?•. Ta)'- lor, 56 Pa. St., 14), though the assignment was made before the appointment of a receiver (Davis v. Kuipp, 92 Hun., 297; Beck- ham 7>. Shackelford, 8 Tex. Cir. App., 660). The court will not be astute to divide the day into fractions to defeat a right of set-off claimed by a creditor of an insolvent National bank. (Faber v. Hanover National Bank, 64 Fed. Rep., 832.) Against the proceeds of the bonds deposited to secure circula- tion the United States can set-off no claim, except for money ad- vanced to redeem notes. (Cook County National Bank v. United States, 107. U. S., 544) The indebtedness of the stockholders on their individual lia- bility, together with the other assets of the insolvent bank, con- stitute a trust fund for the benefit of its creditors ; and in equity such indebtedness of a stockholder who is insolvent may be set-off 142 against a dividend payable out of the trust fund, on a balance due him on his deposit account with the bank at the time of its failure. (King V. Armstrong, 50 Ohio St., 222.) An assignment by the stockholder of his claim against the bank, before the direction of the Comptroller to enforce his liability, but after the insolvency of the bank, does not affect the right to set-off his liability against the dividend due on his claim, nor does the fact that the Comptroller, at the time of the assignment, had not determined the amount necessary to be collected from the stock- holders for the payment of the creditors. It is sufficient that such direction has been given, and amount so determined when the set-off is made- (/'/.) State Statute— Debt Due Savings Bank.— A State statute directing that deposits made by savings banks shall be first paid out of the assets of an insolvent bank can have no application to an insolvent National bauk, since such statute is in conflict with the provisions of the National-bank Act. (Davis 7). The Elmira Savings Bank, 161 U. S., 275, reversing S. C, 142 N. Y., 590.) A State statute forbidding conveyances by insolvent debtors for the purpose of giving a preference applies to such conveyance made to a National bank. (Traders' National Bank v. Chipman, 164 U. vS., 347.) Such a statute is not in conflict with any provi- .sions of the National Bank Act. (/^/.) Federal Question. — The question whether a Savings bank which was a depositor with a National bank which has become insolvent shall be paid in full pursuant to State statute is a ques- tion arising under the laws of the United States, and entitles the receiver of the bank when sued for such deposit to remove the case into the United States Circuit Court. (Auburn Savings Bank v. Hayes, 61 Fed. Rep., 911.) CHAPTER VI. TAX ON UNAUTHORIZED CIRCULATION. lao. Capital of State Bank Converted into National Bank. Section 3410. — The capital of any State Bank or banking association ■which has ceased or shall cease to exist, or which has been or shall be con- verted into a National bank, shall be assumed to be the capital as it existed immediately before such bank ceased to exist or was converted as aforesaid. The act of March 3, 1863, repealed laws taxing capital of both State and National banks. 121. Circulation : When Exempted from Tax. Section 3411. — Whenever the outstanding circulation of any bank, asso- ciation, corporation, company, or person is reduced to an amount not ex- ceeding five per centum of the chartered or declared capital existing at the time the same was issued, said circulation shall be free from taxation ; and whenever any bank which has ceased to issue notes for circulation, deposits in the Treasury of the United States, in lawful money, the amount of its out- standing 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. See act of July 12, 1882, Sections 6 and 8. This section refers to State as well as National banks. State bank circulation has now been mostly retired, and National banks ceasing to issue circulation generally deposit lawful money. 122. Tax on Notes of State Banks, etc., used for Circulation. Section 3412.— Every National banking association. State bank, or State banking association shall pay a tax often per centum on the amount of notes of any person, or of any State bank, or State banking association, used for cir- culation and paid out by them. See act of February 8, 1875, Sections 19 and 20. This prevents the circulation of notes issued by persons or State banks. 143 144 123- Tax on Notes off Cities, etc , used for Circulation. Section 3413. — Every National banking association, State bank, or banker, or association, shall pay a tax of ten per centum on the amount of notes of any town, city, or municipal corporation, paid out by them. See act of February 8, 1875, Sections ig and 20, par. 170. This section is intended to prevent the issue of notes by cities, towns, or municipal corporations. 124. Monthly Returns of Notes of State Banks, Cities, etc.. Used. Section 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, town, city, or municipal corporations. State banks, or State banking associations paid out as aforesaid for the previous six months, shall be made and rendered in duplicate on the first day of December and the first day of June, by each of such banks, associations, cor- porations, 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 Revenue, 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. See act of February 8, 1875, Section 21, par. 173. It is believed that very few notes of the description mentioned are now issued. 135. In Default of Returns, Commissioner to Estimate. Section 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 corporations, State banks, and State banking associations paid out, as aforesaid, shall be estimated by the Commissioner of Internal Reve- nue, upon the best information he can obtain. And for any refusal or neglect to make return and payment, any such bank, association, corpora- tion, company, or person so in default sh?ll pay a penalty of two hundred dollars, besides the additional penalty and forfeitures provided in other cases. 126. Returns for Converted State Bank. Section 3416, — Whenever any State bar^k or banking association has been converted into a National banking association, and such National banking association has assumed the liabilities of such State bank or bank- ing association, including the redemption of its bills, by any agreement or H5 understanding whatever with the representatives of such State bank or bank- ing association, such National banking association 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. Probably there are now no cases under this section, 137. ProvisJons for Tax on Deposits, Capital, and Circulation not to apply to National Banks. Section 3417. — 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 hun- dred 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." The constitutionality of the taxes imposed bj' the preceding sec- tions has been sustained by the Supreme Court of the United States. ( Veazie Bank ?'. Fenno, 8 Wallace, 533 ; Merchants' National Bank v. United States, loi U. S., i.) In Veazie Bank V. Fenno it was said: " Having thus in the exercise of undisputed constitutional powers undertaken to provide a currency for the whole country, it can not be questioned that Congress may, con- stitutionall)', secure the benefit of it to the people by appropriate legislation. To this end Congress has denied the qualit}- of legal tender to foreign coins, and has provided by law against the im- position of counterfeit and base coin on the community. To the same end Congress may restrain, by suitable enactments, the cir- culation as money of any notes not issued under its own authority. Without this power, indeed, its attempts to secure a sound and uniform currency for the country must be futile." These taxes are not direct taxes. (See cases cited above.) 128. United State Securities Exempt from Local Taxation. Section 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.* "See also in this connection section 5413. 10 CHAPTER VII. CRIMES AND MISDEMEANORS. 135. Penalty for Unlawfully Countersigning Notes. ' Section 5187. — No 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 misdemeanor, and shall be fined not more than double the amount so countersigned and delivered, and im- prisoned not less than one year and not more than fifteen years. This applies to oflScers of the Government. No cases have arisen under it since the National banking law went into force. 136. United States or National=Bank Notes as Security ; Penalty. Section 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 consideration 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 loans shall be liable for a further sum equal to one-quarter of the money loaned ; and any fine or penalty incurred by a violation of this section shall be recoverable for the benefit of the party bringing such suit. This was designed to prevent the locking tip of money. It was aimed at a favorite method of accomplishing this at one time put in practice in New York city, and, perhaps, elsewhere. 137. Penalty for Embezzlement. Section 5209. — Every president, director, cashier, teller, clerk, or agent of any association, who embezzles, abstracts, or wilfully misapplies any of the moneys, funds, or credits of the .association ; or who, without authority from the directors, issues or puts in circulation any of the notes of the association; 146 147 or who, without such authority, 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 officer of the association, or any agent appointed to examine the affairs of any such association ; and every person who with like intent aids or abets any officer, clerk, or agent in any violation of this section, shall be deemed guilty of a misdemeanor, and shall be imprisoned not less than five years nor more than ten. , Willful Misapplication and Abstraction, — The words "will- fully misapplies" are new in statutes creating offenses, and they are not used in describing any offense at common law. They have no settled technical meaning like the word " embezzle" as used in the statutes, or the words "steal, take, and carry away " as used at common law. (United States v. Britton, 107 U. S., 655.) To constitute the offense the misapplication must have been for the use or benefit of the party charged, or of some person or company other than the bank, with intent to injure and defraud the bank, or some other body corporate, or some natural person. (Z^-) It is something different from the acts of official maladministration referred to in Section 5239. (/' possible theory consistent with an honest purpose in the disposition of the funds specified. { Evans ?'- United States, 153 U. S., 608.) And an indictment for aiding and abetting an officer in misapplying the funds of the bank and making false entries in its books need not specifically set out the act or acts by which the aiding and abet- ting were consummated. (Coffin v^ United States, 162 U. S., 664.) In an indictment for willful misapplication of the funds of the bank it is not necessary to charge that the funds had been previously intrusted to defendant, since such act may be done by an officer or agent of the bank without his having previously received the funds into his manual possession. (United States v. Northway, 129 U. S., 327.) An indictment for making a false entry in a report to the Comp- troller need not allege that such report was made by the banking association, or that it was actually verified by the oath or affirma- 154 tion of the president or cashier, or attested by the directors, as required by Section 521 1; but it is sufficient to aver that the defendant made such false entry in a certain report of the condition of the bank, . . . made to the Comptroller of the Currency in accordance with the provisions of Section 521 1. (Cochran v. United States, 157 U. S., 286.) And it is sufficient if the indict- ment allege the substance of the reports in question without set- ting them out in full. (United States v. French, 57 Fed. Rep., 382.) It is not necessary to allege specifically that the reports were transmitted to the Comptroller of the Currency, or that they were published. (United States v. Potter, 56 Fed. Rep., 83. j Embezzlement, abstraction, and willful misapplication of the moneys, funds, etc. , of a National bank, as described in this sec- tion, constitute three separate crimes or offenses, which, under Rev. St., Sec. 1024, may be joined in one indictment, but must be stated in separate accounts. (United States v. Cadwallader, 59 Fed. Rep., 677.) But an averment in an indictment against an officer and agent of a National bank that defendant "did steal, abstract, take and carry away" property of the association, does not charge two offences. (United States v. Jewett, 84 Fed, Rep., 142.) And an indictment charging embezzlement and abstraction of the property of a National bank is not demurrable because it charges the receipt of property by the defendant in different capacities, both as an officer and as an agent of the bank. (/''/•) An allegation that defendant, an officer and agent of a National banking association, did secretly, in a manner and by particulars to the jurors luiknown, willfully, unlawfully and fraudulently con- vert to his own use, and misapply, from said association to himself, certain funds, sufficiently charges the offence of "willful mis- application" of property, under this section. (United States v. Jewett, 84 Fed. Rep., 142.) Criminal Certification of Check. — To constitute a criminal certification of a check by an officer of a National bank, it is not necessary that he should himself deliver the check to some person outside of the bank, or that he should take any part in such delivery ; but the offence would be complete, if after he had writ- ten the words of certification, the actual delivery is made by some clerk or other officer of the bank without his knowledge. (Potter V. United States, U. S.) To constitute the offence the certification •55 nmst have been "willful." {Id.) Where there is evidence tend- ing to show a positive agreement on the part of the officers of the bank that the overdraft caused by such certified check should be practically treated as a loan from day to day, secured by ample collateral, and that before such certified check issued there was deposited in advance an ample amount of cash, such evidence must be submitted to the jury, on the question of criminal intent. {Id,) Agent in Liquidation. — This section applies to an agent in liquidation appointed by the stockholders. (United States v. Jewett, 84 Fed. Rep., 142.) S38. Obligations of the United States Defined. Section 5413. — 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, checks or drafts for money, drawn by or upon authorized officers of the United States, stamps and other representatives of value, of whatever denomination, which have been or may [be] issued under any act of Congress. See Act of February 18, 1S75. 139. PenaBty for Counterfeiting National Bank Notes, Section 5415. — Every person who falsely makes, forges, or counterfeits, or causes or procures to be made, forged or counterfeited, or willingly aids or assists in falsely making, forging or counterfeiting, any note in imitation of or purporting to be in imitation of the circulating notes issued by any bank- ing association now or hereafter authorized and acting under the laws of the United States ; or who passes, utters, or publishes, or attempts to pass, utter, or publish, any false, forged, or counterfeited note, purporting to be issued by any such association doing a banking business, knovi'ing the same to be falsely made, forged, or counterfeited, or who falsely alters, or causes or pro- cures to be falsely altered, or willingly aids or assists in falsely altering any such circulating notes, or passes, utters, or publishes, or attempts to pass, utter, or publish as true, any falsely altered or spurious circulating note issued, or puporting to have been issued, by any such banking association, knowing the same to be falsely altered or spurious, shall be imprisoned at hard labor not less than five years nor more than fifteen years, and fined not more than one thousand dollars. 140. Penalty for using Plates, False Plates, Notes, etc. Section 5430. — Every person having control, custody, or possession of any plate, or any part thereof, from which has been printed, or which may 156 be prepared by direction of the Secretary 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 securities 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 obliga- tion 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, with intent to sell or otherwise use the same ; and every person who prints, photographs, or in any other manner makes or executes, or causes to be printed, photographed, made or executed, or aids in printing, photograph- ing, making, or executing any engraving, photograph, 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. 141. PenaJty fcr Passhig, SeJling, etc., Counterfeits. Section 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 pos- session 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 th xn five thousand dollars, and by imprisonment at hard labor not more than fifteen years. '57 ■43. lr>enalty for Taking Impressions of Implements, etc. Section 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 any bed-plate, bed-piece, die, roll, plate, seal, type, or other tool, implement, instrument, or thing used or fitted or intended to be used, in printing, stamping, or impressing, or in making other tools, implements, instruments, or things, to be used, or fitted or intended to be used, in print- ing, stamping, or impressing any kind or description oft obligation or other security of the United States, now authorized or hereafter to be authorized by the United States, or circulating note or evidence of debt of any banking association under the laws thereof, shall be punished by imprisonment at hard labor not more than ten years, or by a fine of not more than five thousand dollars, or both. /;• 143. Penalty for Having Impressiions of Implements, etc. Section 5433. — Every person who, with intent to defraud, has in his pos- session, keeping, custody, or control, without authority from the United States, any imprint, stamp, or impression, taken or made upon any sub- stance or material v>hatsoever, of any tool, implement, instrument, or thing, used or fitted or intended to he 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 impiisonment at hard labor not more than ten years, or by a fine of not more than five thousand dollars. 144. Penalty for Buying or Selling Counterfeits, etc. Section 5434. — Every person who buys, sells, exchanges, transfers, receives, or delivers, any false, forged, counterfeited, or altered obligation or other security of the United States, or circulating note of any banking asso- ciation organized or acting under the laws thereof, which has been or may hereafter l)e issued by virtue of any act of Congress, with the intent that the same be passed, published, or used as true and genuine, shall be imprisoned at hard labor not more than ten years, or fined not more than five thousand dollars, or both. 145. Penalty for Officers Using Notes, etc., of Closed Banks. Section 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, officer, or agent of the corporation, or any trustee thereof, or any agent of such trustee, or any person having in his possession or under his control the property of the corporation for the purpose of paying or redeeming its notes and obligations, knowingly issues, reissues, or utters as money, or in any other way knowingly puts in circulation any bill, note. 158 check, draft, or other security purporting to have been made by any such corporation whose charter has expired, or by any officer thereof, or purport- ing to have been made under authority 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 not 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 receive such bill, note, check, draft, or other security, bona fide and in the ordinary transactions of business, to utter as money or otherwise circulate the same. This section was an act originally passed in 1837 to apply to the second Bank of the United States, the charter of which had then just expired. For some reason or other the compilers em- bodied this old act in the Revised Statutes. 146. Receiving Public Moneys Unless Depositary ; Penalty. Section 5497. — 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 presi- dent, cashier, teller, director, or other officer of any bank or banking asso- ciation, 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, appropriated, or applied, and shall be punished as prescribed in section fifty-four hundred and eighty-eight. See Sections 3639 and 3651 of U. S. Revised Statutes. It will be seen from this section that all banks other than public depositaries are put on notice in regard to dealings with disburs- ing officers, etc., of the United States. If the provisions of this section are violated, such violation constitutes embezzlement. Sections 3639 and 3651 of the Revised Statutes are also of import- ance to bankers. They have reference to public moneys. CHAPTER VIII. suns, JURISDICTION, AND EVIDENCE. 147. Jurisdiction of District Courts. Section 563. — The District Courts shall have jurisdiction as follows: Fifteenth. Of all suits by or against any association estabhshed under any law providing for National banking associations within the district for which the court is held. See note, next section. 148. Jurisdiction of Circuit Courts. Section 629. — The Circuit Courts shall have original jurisdiction as follows : * * * * * * ' ♦ Tenth. Of all suits by or against any banking association established in the district for which the court is held, under any law providing for National banking associations. Eleventh. Of all suits brought by any banking association established in the district for which the court is held, under the provisions of Title "The National Banks," to enjoin the Comptroller of the Currency, or any receiver acting under his direction, as provided by said Title. The jurisdiction of the Federal courts in suits to which National banks are parties is now defined by Section 4 of the act of August 13, 1888 (see page 187), which made very material changes in the law, and which placed National banks in respect to their rights to sue and be sued in the United States courts on the same footing as corporations organized under State laws. But the section referred to was practically only a re-enactment of the proviso to Section 4 of the act of July 12, 1882. (See page 178.) But neither of these enactments affect the jurisdiction of the Federal courts in cases to which the United States or its officers are parties, or in cases for winding up the affairs of insolvent banks. (Witters ?'. Foster, 28 Fed. Rep., 737; Hendee v. Connecticut, etc., R. R. Co.. 26 Fed. Rep., 677 ; Armstrong t/.Ettlesohn, 36 Fed. Rep., 209; Armstrong 159 i6o V. Troutman, 36 Fed. Rep., 275; McConviile v. Gilmour, 36 Fed. Rep., 277 ; Fisher v. Yoder, 53 Fed. Rep., 565,) 149. Exclusive Jurisdiction of United States Courts in Suits for Penalties, etc. Section 711. — The jurisdiction vested in the courts of the United States, in the cases and proceedings hereinafter mentioned, shall be exclusive of the courts of the several States. Second. Of all suits for penalties and forfeitures incurred under the laws of the United States. *****#♦ ISO. In what Courts Suits may be Brought. Section 5198.- * Suits, actions, and proceedings against any association under this title may be had in any circuit, district, or territorial court of the United States held within the district iii which such association may be estab- lished, or in any State, county, or municipal court in the county or city in which said association is located, having jurisdiction in similar cases. The -acts of 1864 and 1875, authorizing certain State courts to take cognizance of suits, actions, and proceedings against Na- tional banks, had the effect, so far as suits for penalties incurred under the laws of the United States were concerned, to modify the provi.sion in prior enactments that expressly excluded suits for such penalties from the cognizance of State courts. (First Na- tional Bank of Charlotte 7'. Morgan, U. S., 141.) The exemption of National banks from suits in State courts, established elsewhere than in the county or city in which the bank was located, was a personal privilege which the bank could waive, and which was waived when the bank appeared and defended without claiming the immunity. (First National Bank of Charlotte v. Morgan, Id.) And the provision requiring the action to be brought in the county or city where the bank is located applies only to transitor>' actions, and not to actions local in their character. (Casey v. Adams, 102 U. S., 96. See Cadle v. Tracy, 11 Blatch., loi ; Talmagez/. Third National Bank, 27 Hun., 61.) For jurisdictional purposes, a Na- tional bank is a citizen of the State in which it is located. (Davis 7'. Cook, 9 Mo., 134.) The State courts have jurisdiction of an action brought by a shareholder on behalf of himself and other .shareholders to recover of the directors of an insolvent National bank damages for inju- i6i ries resulting from their negligence and misconduct. (Brincker- hoff z/. Bostwick, 88 N. Y., 52.) And State courts have jurisdiction of actions against National banks to recover the penalty prescribed by Congress for taking usurious interest, (Schuyler v. BuUong, 28 Neb., 684; Henderson National Bank v- Alves, 91 Ky., 142; Ordway v. Central National Bank, 47 Md., 217; Bletz v. Columbia National Bank, 87 Pa. .St., 87; Hade v. McVey, 31 Ohio St., 231.) But they have no juris- diction in criminal cases arising under the National-Bank Act. (/« re Euo, 54 Fed. Rep., 669; Commonwealth v. Felton, loi Mass., 204; Commonwealth ex rel. v. Ketner, 92 Pa. St., 372.) A State court has no power to make an order directing the re- ceiver of a National bank who has been appointed by the Comp- troller of the Currency to pay a judgment obtained against the bank before the receiver was appointed. (Ocean National Bank V. Carll, 7 Hun., 237.) The State statute of limitations applies to a suit brought by the receiver of a National bank against a shareholder to recover an assessment upon his stock to pay the debts of the bank. (Butler V. Poole, 44 Fed. Rep., 586.) [See also Supplement.] 151. No Attachment before Final Judgment in State Court. Section 5242.* — 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. Attachments. — In the case of Pacific National Bank v. Mixter, (124 U. S., 721) the Supreme Court of the United States said that although this provision forbidding attachments was evidently made to secure equality among the general creditors in the divi- sion of the proceeds of the property of an insolvent bank, its operation is by no means confined to cases of actual or contem- plated insolvency ; but the remedy is taken away altogether, and can not be resorted to under any circumstances. The efiect of this provision is to write into all State attachment laws an exception in favor of National banks, and all such laws must be read as if they contained an exception in favor of National banks. And, as all power of issuing attachments against National banks has been eliminated from State statutes, there can be no laws of the State *For parts of sections 5198 and 5242, see also par. 76, 119. 11 1 62 providing for such a remedy under which the Circuit Courts of the United States can act, and, therefore, these courts, as well as the State courts, have no power to grant an attachment. {Id.) As the attachment is void, a bond given by a National bank to dissolve such attachment, served by summons of garnishment, is also void. (Planters' L. & S. Bank z^. Berr>^ 92 Ga., 264.) Nor is the giving of such bond an appearance in the attachment case so as to make valid a judgment entered on the bond in that case against the bank and the sureties executing the bond. (/^.) Sureties who have received assets of the bank to secure them from loss thereon, the obligation being illegal, will be discharged in equity and be compelled to transfer their collateral to the receiver of the bank. (Pacific National Bank v. Mixter, 124 U. S., 721.) Where service is made on a National bank only by attachment and publication or service out of the State, the attachment being prohibited by this section will be vacated and the service set aside. (Garner v. Second National Bank, 66 Fed. Rep., 369.) And a re- ceiver of a National bank situated in another State, though not a party, may move to vacate an attachment. (People's Bank of the City of New York v. Mechanics' National Bank of Newark, 62 How. Pr. , 422.) The provision of this section prohibiting attach- ments is not repealed by the Act of Congress of July 12, 1882, providing that the jurisdiction for suits thereafter brought against National banks shall be the same as for suits against State banks, and repealing laws inconsistent therewith. (Raynor v. Pacific Na- tional Bank, 93 N. Y., 371.) [See also Supplement.] Injunctions. — This section forbids State courts to grant injunc- tions against National banks before final judgment ; and the pro- hibition is not repealed by Stat. U. S. 1882, C. 290, § 4, or Stat. U. S. 1887, C. 373, § 4, or Stat. U. S. 1888, C. 866, § 4. (Free- man Manufacturing Company v. National Bank of the Republic, 160 Mass., 398.) But this section does not deprive the Federal courts of the power to issue such an injunction. (Hoover v. Weiss Malting and Elevator Co., 55 Fed. Rep., 356.) And where the case is removed into the Federal court after an injunction granted by the State court, the Federal court may continue such injunc- tion, {li.) When a valid judgment has been obtained in a State court against a National bank, and the lien thereof has attached to its property, before the appointment of a Receiver, this section applies to prohibit the issue of an injunction by a Federal court, 1 63 at the suit of the Receiver, to restrain the enforcement of such judgment. (Baker z\ Ault, 78 Fed. Rep., 374.) 152. Proceedings to Enjoin Comptroller, wliere had. Section 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. See Section 5237, par. rt6. 153. United States District Attorney to Conduct Suits. Section 380. — All 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 districts under the direction and supervision of the Solicitor of the Treasury. 154. Instruments Certified by Comptroller May be Evidence. Section 884. — Every certificate, assignment, and 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 impres- sion of such seal directly on the paper shall be as valid as if made on wax or wafer. [See Supplement.] Certified copies of papers are usually furnished by the Comp- troller's office upon affidavit setting forth what they are required for, and that the evidence can be procured in no other way, pro- vided the parties requesting are entitled to receive them, and if the giving of the copies would not be detrimental to the public service. 155' Certified Copies of Organization Certificate Evidence. Section 885. — Copies of the organization certificate of any National bank- ing 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 association, and of every matter which could be proved by the production of the origin;il certificate. Effect of Certificate as Evidence. — This certificate, together with proof that the bank has been acting as a National bank for a long time, is amply sufficient evidence to establish, at least prima 164 facie, the existence of the corporation. (Mix v. National Bank of Bloomington, 91 111., 20.) See also Thatcher v. West River National Bank, 19 Mich., 196; Merchants' National Bank v. Glen- don, 120 Mass., 97.) And such certificate is competent evidence in a State court. (Tapley v. Martin, 116 Mass., 275.) In a suit against the bank or its stockholders this certificate is conclusive evidence of the organization. (Casey v. Galli, 94 U. S., 673.) Certificate of Deputy Comptroller. — Where the certificate is signed by the Deputy Comptroller, the court will assume that at the date of such certificate he was authorized to exercise the power and discharge the duties of Comptroller. (Ke5^ser v. Hitz, 133 U. S., 438.) And it is no objection that it is signed by him as Acting Comptroller. (M) (Aspiuwall v. Butler, 133 U. S., 595.) Proof by Other Evidence — In an action by a National bank it is competent to prove by parol that it was carrying on a general banking business as a National bank authorized by the general laws of the United States under the name by which it had sued. (Yakima National Bank v. Kuipe, 6 Wash., 348.) CHAPTER IX. AMENDMENTS AND ADDITIONAL ACTS. 156. "The National-Bank Act." An Act Approved June 20, 1874. Section i. — That the act entitled " An act to provide a National cur- rency secured by a pledge of United States bonds, and to provide for tha circulation and redemplioa thereof,'" approved June third, eighteen hundred and sixty-four, shall hereafter be known as the " National-Bank Act." 157. Lawful Money Reserve on Circulation Abolished. Section 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 secdon 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. See Section 5 191, par. 69. 158. Redemption Fund ; Redemption of Notes, &c. Section 3. — That every association organized, or to be organized, under the provisions of the said act, and of the several acts amendatory thereof, shall at all times keep and have on deposit in the Treasury of the United States, in lawful money of the United States, a sum equal to five per centum of its circulation, to be held and used for the redemption of such circulation, which sum shall be counted as a part of its lawful reserve, as provided in sec- tion two of this act; and when the circulating notes of any such associations, assorted or unassorted, shall be presented for redemption, in sums of one thousand dollars or any multiple thereof, to the Treasurer of the United States, the same shall be redeemed in United States notes. All notes so redeemed shall be charged by the Treasurer of the United States to the respective associations issuing the same, and he shall notify them severally on the first day of each month, or oftener, at his discretion, of the amount ot such redemptions; and whenever such redemptions for any associ- ation shall amount to the sum of five hundred dollars, such association so notified shall forthwith deposit with the Treasurer of the United State* 165 i66 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 redemption, as provided herein. And when such redemptions have been so reimbursed, the circu- lating 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 associations shall reimburse to the Treasury the charges for transportation and the costs for assorting such notes,* and the associations hereafter organized shall also severally reimburse to the Treasury the cost of engraving such plates as shall be ordered by each asso- ciation 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, f The Five Per Cent. Fund. — This section requires, instead of the reserve on circtilation abolished by the preceding section, a deposit equal to five per cent, of its circulation by each bank, in lawful money, with the United States Treasurer for the redemption of its circtilation. The deposit so made may be counted as a part of the bank's lawful money reserve. Redemption Regulations. — When National bank notes of one or more associations are presented in lots of ^looo, or any multiple thereof, the Treasurer may redeem the same. The Treasurer has no authorit)^ in law for redeeming a lot less than ^looo, or any lot unless it is in even thousands. The object of this was un- doubtedly to avoid a multiplicity of accounts with the outside public. The notes are charged to the respective associations issuing them until the notes so redeemed for and charged to any one association amount to $500, when that association is notified and required to deposit % lawful money equal to the amount re- deemed. Theoretically the five per cent redemption fund is never touched. It remains intact, and this explains why it can con- * See Act of July 12th, 1882, Sec. 8. fSee Sections 5192, 5195, and 5226, J See Decisions of Attorney General. i67 sistently be counled as a part of the lawful money reserve of a bank. When a bank first makes its five per cent, deposit, it receives a credit on the books of the Treasury. The cash goes into the general fund and becomes indistinguishably mingled there- with. The Treasury redeems the notes as they appear from its own funds, and in the contemplation of law no charge is made to the five-per-cent. account of the bank, but when the redemptions made for it reach $500, then it is notified and required to reimburse the Treasury for the sum paid on its behalf. The requirement that National bank notes unfit for circulation shall be sent in by the Assistant Treasurers and designated depositaries of the United States is intended to keep the circulation up to a fair standard of newness and cleanliness. Notes redeemed at the Treasury fit for circulation are sent back to the banks ; unfit notes are destroyed as provided in Section 5184, (which see, as well as remarks under Section 5232.) Payment of Expenses. — The associations are, according to the amount of notes redeemed for each, lo pay all the expenses of this process of redemption, such expense to be charged to the five- per-cent. account. Prior to the pa.ssage of this section the expense of the plates and all expense of preparing the notes of National banks were paid out of the proceeds of the tax on circulation ; but plates ordered after the date of this section are to be paid for by the banks themselves. (See Section 5173, and also Section 8, Act of July 12th, 1882.) Banks are not relieved from redeeming their own notes at their own counters. (See remarks under Section 5227, par. 1 06.) The detailed regulations governing the redemp- tion of National bank notes will be found on page 275. (See Act July 14, 1892, post.^ 159. Retiring Circulation and Withdrawing Bonds. Section 4. — That any association organized under this act, or any of the acts of which this is an amendment, desiring to withdraw its circulating notes, in whole or in part, may, upon the deposit of lawful money with the Treasurer of the United States in sums of not less than nine thousand dollars, take up the bonds which said association has on deposit with the Treasurer for the security of such 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 outstanding notes of said association, to an amount equal to the legal-tender notes deposited, shall be redeemed at the Treasury of the United i68 States, and destroyed as now provided by law : Provided, That the amount of the bonds on deposit for circulation shall not be reduced below fifty thou- sand dollars. See Section 5167, par. 49. See Act of July 12th, 1882, Section 9, par. 189. See Sections 5159, 5160 and 5167, par. 41, 42, 49. Prior to the enactment of this section the only method by which National banks not in liquidation could withdraw any portion of their bonds was by gathering up their own circulation, and sur- rendering the same for cancellation and destruction to the Comp- troller of the Currency. (See Section 5167, page 69.) This section also reduced the minimum of bonds to be kept from an amount equal to one-third of the capital stock, and not less than $30,000 to $50,000 in each case. (See Sections 5159 and 5160, par. 41, 42.) The minimum of bonds required to be kept on deposit by National banks is in certain cases — banks with a capital of $150,000 and less — further reduced by the provisions of Section 8 of the Act of July i2th, 1882, par, 188. 160. The Charter Number of Banks to be on Notes. Section 5. — That the Comptroller of the Currency shall, under such rules and regulitions 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. This is for convenience in assorting notes. 161. Amount of United States Notes Allowed for Circulation. Section 6. — That the amount of United States notes outstanding and to be used as a part of the circulating medium shall not exceed the sum of three hundred and eighty-two million dollars, which said sum shall appear in each monthly statement of the pubhc debt, and no part thereof shall be held or used as a reserve. 162. Relative to Withdrawal of $55,000,000 Circulation. Section 7. — That so much of the act entitled "An Act to provide for the redemption of the three per cent, temporary-loan certificates, and for an increase of National bank notes," as provides that no circulation shall be withdrawn under the provisions of section six of said act, until after the fifty- four millions granted in section one of said act shall have been taken up, is hereby repealed: and it shall be the duty of the Comptroller of the Currency, under the direction of the Secretary of the Treasury, to proceed forthwith, i69 and he is hereby authorized and required, from time to time, as applications shall be duly made therefor, and until the full amount of filty-five million dollars shall be withdrawn, to make requisitions upon each of the Nationai banks described in said section, and in the manner therein provided, organ- ized in States having an excess of circulation, to withdraw and return so much of their circulation as by said act may be apportioned to be withdrawn from them, or, in lieu thereof, to deposit in the Treasury of the United States lawful money sufficient to redeem such circulation; and upon the return of the circulation required, or the deposit of lawful money, as herein provided, a proportionate amount of the bonds held to secure the circulation of such association as shall make such return or deposit shall be surrendered to it. Obsolete. Superseded by Act of January 14th, 1875, Section 3, par. 168. See Section 5179, Revised Statutes. 163. Bonds to be Sold on Failure to Return Circulation. Section 8. — That upon the failure of the National banks upon which requisition for circulation shall be made, or of any of them, to return the amount required, or to deposit in the Treasury lawful money to redeem the circulation required within thirty days, the Comptroller of the Currency shall at once sell, as provided in section forty-nine of the National Currency Act, approved June third, eighteen hundred and sixty-four, bonds held to secure the redemption of the circulation of the association or associations which shall so fail, to an amount sufficient to redeem the circulation required of such association or associations, and with the proceeds, which shall be deposited in the Treasury of the United States, so much of the circulation of such association or associations shall be redeemed as will equal the amount required and not returned ; and if there be an excess of proceeds over the amount required for such redemption, it shall be returned to the association or associations whose bonds shall have been sold. And it shall be the duty of the Treasurer, Assistant Treasurers, designated depositaries, and National bank depositaries of the United States, who shall be kept informed by the Comptroller of the Currency of such associations as shall fail to return circulation as required, to assort and return to the Treasury for redemption the notes of such associations as shall come into their hands until the amount required shall be redeemed, and in like manner to assort and return to the Treasury, for redemption, the notes of such National banks as have failed, or gone into voluntary liquidation for the purpose of winding up their affairs, and of such as shall hereafter so fail or go into liquidation. Obsolete. Superseded by Act of January 14th, 1875, Section 3, par. 168. See Revised Statutes, par. no. 164. issue of New Notes for $55,000,000 Withdrawn, etc. Section 9. — That from and after the passage of this Act it shall be lawful for the Comptroller of the Currency, and he is hereby required, to issue cir- I70 culating notes, without delay, as applications therefor are made, not to exceed the sum of fifty-five million dollars, to associations organized, or to be organized, in those States and Territories having less than their proportion of circulation, under an apportionment made on the basis of population and of wealth, as shown by the returns of the census of eighteen hundred and seventy ; and every association hereafter organized shall be subject to, and be governed by, the rules, restrictions, and limitations, and possess the rights, privileges, and franchises, now or hereafter to be prescribed by law as to National banking associations, with the same power to amend, alter, and repeal provided by the "National Bank Act:'' Provided, That the whole amount of circulation withdrawn and redeemed from banks transacting busi- ness shall not exceed fifty-five million dollars, and that such circulation shall be withdrawn and redeemed as it shall be necessary to supply the circulation previously issued to the banks in those States having less than their appor- tionment: And provided further. That not more than thirty million dollars shall be. withdrawn and redeemed as herein contemplated during the fiscal year ending June thirtieth, eighteen hundred and seventy-five. Obsolete. Superseded by Act of January 14th, 1875, Section 3, par. 168. 165. Notes to be Destroyed by Maceration. Extract from an Act Approved June 23, 1874. For the maceration of National bank notes, United States notes, and other obligations of the United States authorized to be destroyed, ten thousand dollars; and that all such issues hereafter desti ^j uy, ucstroved 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 National Currency Act as requires National bank notes to be burned to ashes is hereby repealed. See Sections 5184 and 5225, pars. 63-104. i66. Silver Coins to Redeem Fractional Currency. An Act Approved January 14, 1S75. That the Secretary of the Treasury is hereby authorized and required, as rapidly as practicable, to cause to be coined, at the mints of the United States, silver coins of the denominations of ten, twenty-five, and fifty cents, of standard value, and to issue them in redemption of an equal number and amount of fractional currency of similar denominations, or, at his discretion, he may issue such silver coins through the mints, the subtreasuries, public depositaries, and post-offices of the United States ; and, upon such issue, he is hereby authorized and required to redeem an equal amount of such frac- tional currency, until the whole amount of such fractional currency out- standing shall be redeemed. 171 167. Charge for Coining Qold Bullion Repealed. Section 2. — That so much of section three thousand five liundred and twenty-lour of the Revised Statutes cf tlie United States us provides for a charge of one-fifth of one per centum for converting standard gold buUion into coin is hereby repealed; and hereafter no charge shall be made for that service. 168. Repeal of Limit of Circulation, &c. ; Redemption of Legal Tenders. Section 3. — That section five thousand one hundred and seventy seven of the Revised Statutes, limiting the aggregate amount of circulating notes of National banking associations, be, and is hereby, repealed; and each exist- ing banking association may increase its circulating notes in accordance with existing law without respect to said aggregate limit; and new banking asso- ciations may be organized in accordance with existing law without respect to said aggregate limit ; and the provisions of law for the withdrawal and redis- tribution of National bank currency among the several States and Territories are hereby repealed. And whenever, and so often, as circulating notes shall be issued to any such banking association, so increasing its capital or circulating notes, or so newly organized as aforesaid, it shall be the duty of the Secretary of the Treasury to redeem the legal-tender United States notes in excess only of three hundred million of dollars, to the amount of eighty per centum of the sum of National bank notes so issued to any such banking asso- ciation as aforesaid, and to continue such redemption as such circulating notes are issued until there shall be outstanding the sum of three hundred million dollars of such legal-tender United States notes, and no more.* And on and after tlie first day of January, anno Domini eighteen hundred and seventy- nine, the Secretary of the Treasury shall redeem, in coin, the United States legal-tender notes then outstanding, on their presentation for redempdon at the office of the Assistant Treasurer of the United States in the city of New York,f in sums of not less than fifty dollars. And to enable the Secretary of the Treasui-y to prepare and provide for the redempdon in this Act authorized or required, he is authorized to use any surplus revenues, from time to time, in the Treasury not otherwise appropriated, and to issue, sell, and dispose of, at not less than par, in coin, either of the descriptions of bonds of the United States described in the Act of Congress approved July fourteenth, eighteen hundred and seventy, entitled "An Act to authorize the refunding cf the National debt," with like qualities, privileges, and exemp- tions, to the extent necessary to carry this Act into full effect, and to use the proceeds thereof for the purposes aforesaid. And all provisions of law incon- sistent with the provisions of this Act are hereby repealed. *The subsequent Act of May 3iFt, 1878, prohiliited further retirement of legal-tender notes and fixed hmit at amount then outstanding, ^346.681,016, •j- Amended by Act March 3, 1887. 1/2 See Revised Statutes, Sectious 5177 to 5181, pars. 56-60, and Act of June 20th, 1874, vSections 7, 8, and 9, pars. 162, 163, 164. 169. Repeal of Limit of National Gold Bank Circulation. An Act approved January 19, 1875. That so much of section five thousand one hundred and eighty-five of the Revised Statutes of the United States as limits the circulation of banking associations, organized for the purpose of issuing notes payable in gold, severally to one miUion dollars, be, and the same is hereby, repealed; and each of such existing banking associations may increase its circulating notes, and new banking associations may be organized, in accordance with existing law, without respect to such hmitation. See Section 5185, Revised Statutes, par. 64. There are at present no gold banks. 170. Tax on Checks; Notes of State Banks, etc. Extract from an Act approved February 8, 1875. Section 15. — That the words "bank check, draft, or order for the pay- ment of any sum of money whatsoever, drawn upon any bank, banker, or trust company, at sight or on demand, two cents," in Schedule B of the Act of June thirtieth, eighteen hundred and sixty-four, be, and the same is hereby, stricken out, and the following paragraph inserted in lieu thereof: "Bank check, draft, order, or voucher for the payment of any sum of money whatsoever, drawn upon any bank, banker, or trust company, two cents." * Section 19. — That every person, firm, association other than National bank associations, and every corporation. State bank, or State banking asso- ciation shall pay a tax of ten per centum on the amount of their own notes used for circulation and paid out by them, f 171. Tax on Notes of State Banks, Cities, etc. Section 20. — That every such person, firm, association, corporation, State bank, or State banking association, and also every National banking asso- ciation, 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 corporation, used for circulation and paid out by them. See Sections 3412 and 3413, Revised Statutes, par. 122 and 123. * Section 1 5 obsolete. f See Revised Statutes, par. 122-123. ^73 I73« Returns to Commissioner of Internal Revenue. Section 21. — That the amount of such circulating notes, and of the tax due thereon, shall be returned, and the tax paid at the same time, and in the same manner, and with 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 provisions of internal revenue law. See Section 3414, Revised Statutes, par. 124. Extracts from Act of February 18, 1875, Relative to the National Banking Act are omitted from this edition — the corrections in the text required having been made. 173. Receiver,— for Violation of Law, Insolvency, etc. An Act approved June 30, 1876. Section i. — That whenever any National banking association shall be dis- solved, and its rights, privileges, and franchises declared forfeited, as pre- scribed in section fifty-two hundred and thirty-nine of the Revised Statutes of the United States, or whenever any creditor of any National banking association shall have obtained a judgment against it in any court of record, and made application, accompanied by a certificate 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 Xhe insolvency of the National banking association, he may, after due exam- ination of its affairs, in either case, appoint a receiver, who shall proceed to close up such association, and enforce the personal liability of the shareholders, as provided in section fifty-two hundred and thirty-four of said statutes. This section is not unconstitutional. (Bushnellz'. Iceland, 164 U.S. 684.) See Sections 5234 and 5239, Revised Statutes, pars. 113-118. 174. Enforcement of Individual Liability of Shareholders. Section 2. — 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 pro- vided 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 dis- trict in which such association may have been located or established. This enables creditors of banks which have gone into voluntary' liquidation to protect themselves and enforce the liability of share- holders through the courts with reference to the Comptroller of the Currency. As to the power of the court to appoint a receiver, see pages 126, 127. 174 I75. Agent to Manage Affairs of Failed Bank; Election, Powers, &c. Section 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 said statutes, and when, as provided in section fifty-two hundred and thirty-six thereof, the Comptroller shall have paid to each and every creditor of such association, not including share- holders who are creditors of such association, whose claim or claims as such creditor shall have been proved, or allowed as therein prescribed, the full amount of such claims and all expenses of the receivership, and the redemp- tion of the circulating notes of such association 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 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 vo'.e ; and when such agent shall have received votes representing at least a majority of the stock in value and number of shares, and when any of the shareholders of the association shall have executed and filed a bond to the satisfaction of the Comptroller of the Currency, conditioned for the payment and discharge in full of any and every claim that may hereafter be proved and allowed against such associa- tion by and before a competent court, and for the faithful performance and discharge of all and singular the duties of such trust, the Comptroller and the receiver shall thereupon transfer and deliver to such agent all the undi- vided or uncollected or other assets and property of such association then remaining in the hands or subject to the order or control of said Comptroller and said receiver, or either of them ; and for this purpose, said Comptroller and said receiver are hereby severally empowered to execute any deed, assignment, transfer, or other instrument in writing that may be necessary and proper ; whereupon the said Comptroller and the said receiver shall, bv virtue of this act, be discharged and released from any and all liabilities to such association, and to each and all of the creditors and shareholders thereof; and such agent is hereby authorized to sell, compromise, or com- pound the debts due to such association upon the order of a competent court of record or of the United States Circuit Court for the district where the business of the association was carried on. Such agent shall hold, con- trol, and dispose of the assets and property of any association which he may receive as hereinbefore provided for the benefit of the shareholders of such association as they, or a majority of them in value or number of shares, may direct, distributing such assets and property among such shareholders in proportion to the shares held by each ; and he may, in his own name, or in the name of such association, sue and be sued, and do all other lawful acts and things necessary to finally settle and distribute the assets and property 175 in his hands. In selecting an a<(ent as hereinbefore provided, administra- tors or executors of deceased shareholders may act and sign as a decedent might have done if living, and guardians may so act and sign for their ward or wards. [Amended by Act of March 2d, 1S97, par. 213.] 176. Sale of Stock of Shareholder riot Paying Assessment. Section 4. — That the hist clause of section fifty-two hundred and five of said statutes is hereby amended by adding to the said section the following proviso : " And provided, That if any shareholder 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 shareholder or shareholders to be sold at public auction (after thirty days* notice shall be given by post- ing such notice of sale in the office of the bank, and by publishing such notice in a newspaper of the city or town in which the bank is located, or in a newspaper published nearest thereto), to make good the deficiency ; and the balance, if any, shall be returned to such delinquent shareholder or share- holders. 177. Stamping Counterfeit Notes. Section 5. — That all United States officers charged with the receipt or dis- bursements of public moneys, and all officers of National banks, shall stamp or write in plain letters the word "counterfeit," "altered,'' or " worthless," upon all fraudulent notes issued in the form of, and intended to circulate as money which shall be presented at their places of business ; and if such offi- cers 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. 178. Savings Banks, etc., to make Reports. Section 6. — That all savings banks or savings and trust companies organ- ized under authority of any act of Congress shall be, and are hereby, required to make, to the Comptroller of the Currency, and 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 Revised Statutes, and shall be subject to the same penalties for failure to make or publish such reports as are therein provided ; which penalties may be collected by suit before any court of the United States in the district in which said savings banks or savings and trust companies may be located. And all savings or other banks now organized, or which shall hereafter be organized, in the District of Columbia, under any act of Congress, which shall have capital stock paid up in whole or in part, shall be subject to all the provisions of the Revised Statutes, and of all acts of Congress, applicable to National banking 176 associations, so far as the same may be applicable to such savings or other banks. Provided, That such savings banks now estabhshed shall not be required to have a paid-in capital exceeding one hundred thousand dollars. See Sections 5211-5213, pars. 87-89. 179. Abating Semi- Annual Duty of Insolvent Banks. Extract from an Act approved March i, 1879. 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 depositors; 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 of said tax against insolvent State and savings banks as shall be found to affect the claims of their depositors. Johnston v. United States, 17 Court of Claims Reports. 180. Conversion of National Gold Banks. An Act approved February 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 Revised Statutes of the United States, for the conversion of banks incorporated under the laws of any State, cease to be a gold bank, and become such an association as is authorized by section fifty-one hundred and thirty-three, for carrying on the business of banking, and shall have the same powers and privileges, and shall be subject to the same duties, 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. All the existing gold banks have either gone out of existence or have been converted into ordinary National banking a.ssocia- tions under this Act. 181. Verification of Returns of National Banks. An Act approved February 26, 1881. That the oath or affirmation required by section fifty-two hundred 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 said notary resides and the bank is located, or any other officer having an official seal, 177 authorized in such State to administer oaths, shall be a sufficient verification as contemplated by said section titty-two hundred and eleven : Provided, That the officer administering the oath is not an officer of the bank. 182. To Extend Corporate Existence, etc. An Act approved July 12, 1882, That any National banking association organized under the Acts of Feb- ruary twenty-fifth, eighteen hundred 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 herein- after provided, extend its period of succession by amending its articles of association for a term of not more than twenty years from the expiration of the period of succession named in said articles of association, and shall have succession for such extended period, unless sooner dissolved by the act of shareholders owning two-thirds of its stock, or unless its franchise becomes forfeited by some violation of law, unless hereafter modified or repealed. Section 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 its president or cashier, to the Comptroller of the Cunency, 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 arti- cles of association shall not be valid until the Comptroller shall give to such association a certificate, under his hand and seal, that the association has com- plied 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. For instructions and forms, see pages 229-235. 183. Special Examination of Extended Banks. Section 3. — That upon the receipt of the application and certificate of the association provided for in the preceding section, the Comptrollor of the Currency shall cause a special examination to be made, at the expense of the association, to determine its condition; and if after such examination or otherwise it appears to him that said association is in a satisfactory condition, he shall grant his certificate of approval provided for in the preceding section, or if it appears that the condition of said association is not satisfac- tory, he shall withhold such certificate of approval. 12 178 Upon receipt of the application and papers, they are examined in the Comptroller's oflSce, and if found satisfactory the associa- tion is notified that the papers are placed on file, and that the ex- amination required by this section will be made in due course. The examination is usually made shortly before the date of expira- tion of first period of succession, and as soon as the examirier's report is received, if satisfactory^, the certificate approving the extension is issued a few days before the date of the expiration. This certificate of approval is required to be published by regula- tion of the Comptroller's ofl&ce. 184. Privileges, Liabilities, &c., of Extended Banks; Jurisdiction of Suits.* Section 4. — That any association so extending the period of its succes- sion shall continue to enjoy all the rights and privileges and immunities granted, and shall continue to be subject to all the duties, Habihties, and restrictions imposed by the Revised Statutes of the United States and other Acts having reference to National banking associations, and it shall continue to be in all respects the identical association it was before the extension of its period of succession ; Provided, however, That the jurisdiction for suits here- after brought by or against any association established under any lavir pro- viding for National banking associations, except suits between them and the United States, or its officers and agents, shall be the same as, and not other than, the jurisdiction for suits by or against banks not organized under any law of the United States which do or might do banking business where such National banking associations may be doing business when such suits may be begun. And all laws and parts of laws of the United States inconsistent with this proviso be, and the same are hereby, repealed. A bond given to a National bank by the individual members of a corporation to secure such paper as the bank may discount for the corporation does not expire with the termination of the twenty years for which the bank was originally incorporated, and the obligors are liable for discounts made after the bank has extended the period of its existence. (The National Exchange Bank of Hartford v. Guy, 57 Conn., 224.) 185. Witiidrawal of Shareholders; Preference in Allotment. Section 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 amendment may give notice in writing to the directors, within thirty days * See Act August 13, 1888, par. 206. 1/9 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 bank- ing 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 dircttors, and the third by the first two; and in case the value su fixed shall not be satisfactory to any such shareholder, he may appeal to the Comptroller of the Currency, who shall cause a reappraisal to be made, which shall be final and binding; and if said reappraisal shall exceed the value fixed by said committee, the bank shall pay the expenses of i,aid reappraisal, and otherwise the appellant shall pay said exjjcnses ; 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 expiring association shall be entitled to preference in the allot- ment of the shares of the new association in proportion to the number of shares held by them- respectively in the expiring association. iS6. Extended Banks— 0!d and New Notes; Lawful Money Deposit. Section 6. — That the circulating 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 pro- vided 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 pur- poses," and such notes when redeemed shall be forwarded to the Comp- troller 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 suflicient 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 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 pro- vided herein, new circulating notes shall be issued as provided for 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 hereto- fore issued: Provided^ however, That each banking association which shall obtain the benefit of this Act shall reimburse to the Treasury the cost of pre- paring the plate or plates for such new circulating notes as shall be issued to it. i8o 187. Requirements of Banks not Extending. Section 7. — That National banking associations whose corporate exist- ence 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 and fifty-two hundred and twenty-two of the Revised Statutes in the same manner as if the share- holders 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 fii"ty-two hundred and twenty-five of the Revised Statutes shall also be applicable to such associations, except as modified by this Act ; and the franchise of such association is hereby ex- tended for the sole purpose of hquidating their affairs until such affairs are finally closed. The Comptroller sends blanks to expiring associations to enable them to give the notice to his ofEce required by Section 5222, Re- vised Statutes, par. 10 1. Such expiring associations must, within six months from the date of their expiration, deposit lawful money to retire their circulation. [See also Supplement.] 188. Minimum Bonds of Banks of $150^000 Capital or Less, &c. Section 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 bonds in excess of one-fourth of their capital stock as security for their circulating 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 circu- lating notes shall not exceed in any case 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 lawful money for the retirement in full of their circulation shall, at the time of their deposit, be assessed for the cost of transporting and redeeming their notes then outstand- ing a sum equal to the average cost of the redemption of National bank notes during the preceding year, and shall thereupon pay such assessment ; and all National banks which have heretofore made, or shall hereafter make, deposits of lawful money for the reduction of their circulation, shall be assessed and shall pay an assessment in the manner specified in section three of the Act approved June twentieth, eighteen hundred and seventy-four, for the cost of transporting and redeeming their notes redeemed from such de- posits subsequently to June thirtieth, eighteen hundred and eighty-one. [Amended by Act March 14, 1900, (p. 316) as to circulation on bond deposit.] i8i 189. Retiring Circulation and Reissue. Section 9. — That any National Banking association now organized, or hereafter organized, desiring to withdraw its circulating notes, upon a deposit of lawful money with the Treasurer of the United States, as provided in sec- tion four of the Act of June twentieth, eighteen hundred and seventy-four, entitled "An Act fixing the amount of United States notes, providing for a redistribution of National bank currency, and for other purposes," or as pro- vided in this act, is authorized to deposit lawful money and withdraw a pro- portionate amount of the bonds held as security for its circulating notes in the order of such deposits ; and no National bank which makes any deposit of lawful money in order to withdraw its circulating notes shall be entitled to receive any increase of its circulation for tlie period of six months from the time it made such deposits of lawful money for the purpose aforesaid '* Pro- vided, That not more than three millions of dollars of lawful money shall be deposited during any calendar month for this purpose : And provided fur- ther, That the provisions of this section shall not apply to bonds called for redemption by the Secretary of the Treasury, nor to the withdrawal of circu- lating notes in consequence thereof. [See Amendment, page 319.] 190. Amount of Circulation on United States Bonds. Section 10. — That upon a deposit of bonds as described by sections fifty- (jne hundred and fifty- nine and fifty-one hundred and sixty, except as modi- fied by section four of an Act entitled "An Act fixing the amount of United States notes, providing for a redistribution of the National bank currency, and for other purposes," approved June twentieth, eighteen hundred and seventy-four, and as modified by section eight of this act, the association making the same shall be entitled to receive from the Comptroller of the Currency circulating notes of different denominations, in blank, registered and countersigned as provided by law, equal in amount to ninety per centum of the current market value not exceeding par, of the United States bonds so transferred and delivered, and at no time shall the total amount of such notes issued to any such association exceed ninety per centum of the amount at such time actually paid in of its capital stock ; and the provisions of section fifty-one hundred and seventy-one and fifty-one hundred and seventy-six of the Revised Statutes are hereby repealed. [vSuperseded by Act of March 14, 1900, page 316.] 191. Concerning Three- Per-cent. Bonds. Obsolete. Section ii. — That the Secretary of the Treasury is hereby authorized to receive at the Treasury any bonds of the United States bearing three and a half per centum interest, and to issue in exchange therefor an equal amount of registered bonds of the United States of the denominations of fifty, one hun- dred, five hundred, one thousand, and ten thousand dollars, of such form as he may prescribe, bearing interest at the rate of three per centum per annum, *Tbe six months' restriction repealed by Act of March 14, 1900. l82 payable quarterly at the Treasury of the United States. Such bonds shall be exempt from all taxation by or under State authority, and be payable at the pleasure of the United States : Provided, That the bonds herein authorized shall not be called in and paid so long as any bonds of the United States heretofore issued bearing a higher rate of interest than three per centum, and which shall be redeemable at the pleasure of the United States, shall be out- standing and uncalled. The last of the said bonds originally issued under this act, and their substitutes, shall be first called in, and this order of pay- ment shall be followed until all shall have been paid. 192. Gold and 5iiver Certificates : Clearing-House Restrictions. Section 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 certifi- cates therefor in denominations of not less than twenty dollars each, corres- ponding with the denominations 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 receiva- Vjle for customs, taxes, and all public dues, and when so received may be reissued ; and such certificates, as also silver certificates, when held by any National banking association, shall be counted as part of its lawful reserve; 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 : Provided, That the Secretary of the Treasury shall suspend the issue of such gold certificates whenever the amount of gold coin and gold bullion in the Treasury reserved for the redemption of United States notes falls below one hundred millions of dollars; and the provisions of Section fifty-two hundred and seven of the Revised Statutes shall be applicable to the certificates herein authorized and directed to be issued. 193. Penalty for Illegal Issue of Certified Checks. Section 13. — That any officer, clerk, or agent of any N.ational 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 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. i«3 194. Congress may Amend. Section 14. — That Congress may at any time amend, alter, or repeal this act and the acts of which this is amendatory. 195. Repealing Tax on Capital and Deposits of Banks. Extract from an Act approved 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 deposits of banks, bankers, and National banking associations, except such taxes as are now due and payable ; and on and after the first day of July, eighteen hundred and eighty-three, the stamp tax on bank checks, drafts, orders, and vouchers. See decision Attorney General of the United States, May i8th, 1883. 196. Receivers to Protect Equities in Real Estate, etc. An Act approved March 29, 1886. Section i. — That whenever the receiver of any National bank duly appointed by the Comptroller 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 execution, decree of foreclosure, or proper order of any court of jurisdiction, he may certify the facts in the case, together with 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 with a request for the right and authority to use and employ so much of the money of said trust as may be necessary to purchase such property at such sale. Under Section 5234, par. 113, the receiver is required to pay over all money collected by him to the Treasurer of the United States. It often occurred that real estate of the bank or other assets might be incumbered by mortgages or claims. The law of March 29th, 1886, was passed to provide a way in which these incumbrances might be removed, by paying them off with money derived from the collection of other assets. The first section pro- vides for bringing the necessity of action to the knowledge of the Comptroller, 1 84 197. Receiver's Report must be Approved. Section 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, submitted to the Secretary of the Treasury ; and if the same shall likewise be approved by him, the request shall be by the Comptroller of the Currency allowed, and notice thereof, with copies of the request, certificate of facts, and indorsement of approvals, shall be filed with the Treasurer of the United States. This section requires the Comptroller to make certificate of the facts, the amount of money required, &c., to the Secretary of the Treasury. If the Secretary approves the matter, all the papers are turned over to the Treasurer, so that he has evidence before him of the nature of the draft about to be drawn upon the funds deposited with him by the receiver. 198. Payment for Property to be Made by Comptroller. Section 3. — That whenever any such requests shall be allowed as herein- before provided, the said Comptroller of the Currency shall be, and is, em- powered 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 Comptroller of the Currency direct, with the approval of the Secretary of the Treasury, for such purpose only and in such manner as he may determine and order. 199. Increase of Capital Stock. An Act approved May i, 1886. Section i. — 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 accord- ance with existing laws, to any sum approved by the said Comptroller, not- withstanding the limit fixed in its original articles of association and deter- mined 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 association, shall be made except in the manner herein provided. See Section 5142 (par. 24.), under which it is provided that the maximum limit of increase of capital must be fixed and deter- mined in the original articles of association by the Comptroller. i85 The Attorney-General decided that the maximum limit having once been fixed, could not be changed except by act of Congress. The Act of May ist, 1886, is a general act; gives the power to the Comptroller to change the maximum limit of increase ot capital, and also makes a change in the manner of such increase which could previously be made by the directors without consult- ing the stockholders. aoo. Change of Name and Location. Section 2. — That any National banking association may change its name or the place where its operations of discount and deposits are to be carried on to any other place within the same State, not more than thirty miles dis- tant, with the approval 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. How to Proceed. — Prior to the passage of this law no bank could change its name or location except bj^ special act of Congress. The Comptroller of the Currency does not furnish blank forms to be used in making changes of name or location. All that is required is for the shareholders representing the requisite amount of capital stock to pass a suitable resolution authorizing such change, and for the officers of the bank to forward a certified copy of such resolution to the Comptroller of the Currenc}^ when, if he approves of the change, he will issue his certificate to the effect that the change has been duly authorized and is approved bj'^ him. There seems to be no reason whj^ a change of name may not be made as often as desired. And perhaps there may be more than one removal, but it would seem that the bank could not by several successive removals get to a place more than thirty miles distant from its original location. This act is to be construed with reference to the other provisions of law governing the National banks ; and, therefore, where the removal is to be made to a larger place, the capital stock must first be increased to the amount required for banks in such place. It is important for the stockholders to bear this in mind when determining the question of removal. As in other cases where a two-thirds vote of the stockholders is required, this means a vote representing two-thirds of the whole 1 86 number of shares and not merely two-thirds of those represented at the meeting. It is not necessary to forward to the Comptroller any evidence to show that the place to which the removal is to be made is not more than thirty miles distant ; this fact the Comptroller will himself take notice of, or, if necessary, he will ascertain the fact from the proper sources of information in such cases. There have been several cases of removal under this act, and a number of changes of name. 20I. Liabilities, etc., under Old Name. Section 3. — That all debts, liabilities, rights, provisions, and powers of the association under its old name shall devolve upon and inure to the asso- ciation under its new name. 202. New Name or Location Not To Release from Liabilities, etc. Section 4. — That nothing in this ?ct 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. 203. Requirements To Become Reserve Cities. An Act Approved March 3, 1887. That whenever three-fourths in number of the National banks located in any city of the United States having a population of fifty thousand people shall make application to the Comptroller of the Currency, in writing, asking that the name of the city in which such banks are located shall be added to the cities named in sections fifty-one hundred and ninety-one and fifty-one hundred and ninety-two of the Revised 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 sections fifty-one hundred and ninety-one and fifty-one hundred and ninety-five of the Revised Statutes. Amended by act of March 3, 1903. (See Supplement.) The procedure to be designated a reserve city is, in brief, for each bank which wishes to join in the application, to authorize by resolution of its directors, some officer of the bank, generally the president or cashier, to sign the name of the bank to the petition addressed to the Comptroller of the Currency. Blank forms for the resolution of the directors and blank forms of petition are furnished by the Comptroller of the Currency. (For form of application, see page 273. For list of reserve cities, see Supplement.) 1 87 ao4. i?.equirements To Become a Central Reserve City. Seci'ION 2. — That whenever three-fourths in number of the National banks located in any city of the United States having a population of two hundred thousand people shall make application to the Comptroller of the Currency, in writing, asking that such city may be a central reserve city, like the city of New York, in which one-half of the lawful money reserve of the National banks located in other reserve cities may be deposited, as pro- vided in section fifty-one hundred and ninety-five of the Revised Statutes, the Comptroller shall have authority, with the approval of the Secretary of the Treasury, to grant such request, and every bank located in such city shall at all times thereafter have on hand, in lawful money of the United States, twenty-five per centum of its deposits, as provided »n section fifty-one hundred and ninety-one of the Revised Statutes. Under this act Chicago and St. Louis have been made central reserve cities. The procedure is substantially the same as in the case of the designation of a reserve city. (For forms, see page 273.) 305. Redemption of United States Notes at San Francisco. Section 3. — That section three of the Act of January fourteenth, eighteen hundred and seventy-five, entitled "An Act to provide for the resumption of specie payments," be, and the same is hereby, amended by adding, after the words " Ne\V York," the words "and the city of San Francisco, California." This section permits legal-tender notes presented in sums of not less than fifty dollars at the sub treasury at San Francisco to be redeemed there in coin, which by Section 12 of the Act of June 12, 1882, is interpreted to mean gold coin. 206. Jurisdiction of United States Courts in Suits by and against National Banks. Extract from an Act Approved August 13, 1888. Section 4. — That all National banking associations established under the laws of the United Slates 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 cir- cuit 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 an officer thereof, or cases for winding up the affairs of any such bank. This section is in substance a re-enactment of the proviso to Section 4 of the Act of July 12, 1882, (par. 184.) The effect of 1 88 these enactments is to repeal the tenth subdivision of Sec. 629 Rev. Stat. U. S., which confers upon the Circuit Court of the United States jurisdiction of all suits by or against any National banking association established in the District for which the court is held. (National Bank of Jefferson ^^ Fare, 25 Fed. Rep. 200). The change in the law affects only suits brought after the passage of these enactments. (First National Bank v. Morgan, 132 U. S., 141.) National banks are now on preciseh^ the same footing as individual or other corporations with respect to the right to sue or be sued in the Federal courts. (Peter v. Commercial National Bank, 142 U. S., 614.) And now a cause in which a National bank is a party defendant cannot be removed into a Federal court on the mere ground that the defendant is a National bank. (Leather Manufacturers' National Bank z-. Cooper, 120 U. S., 778 ; Wichita National Bank v. Smith. 36 U. S. App., 530). And a Receiver of the bank who is substituted as a party in place of the bank has no greater rights in this respect than the bank itself. (Wichita National Bank of Wichita v. Smith, supra). The assets of an in- solvent National bank are not brought under the control or protec- tion of the Federal courts by being taken into custody by a Receiver appointed by the Comptroller of the Currency, nor by the transfer of such assets from the Receiver to an agent of the stockholders. (Snohomish County v. Puget Sound National Bank of Everett, 81 Fed. Rep., 518.) Federal Questions — Diverse Citizenship. — But these enact- ments do not place National banks under any disadvantage with reference to raising Federal questions in Federal courts. (Walker V. Windsor National Bank, 56 Fed. Rep., 76 ) Thus, a suit upon the bond of the cashier of a National bank is a suit ' ' arising under the laws of the United States," and is therefore within the juris- diction of the Federal courts regardless of the residence of the parties. {Id.") So, the United States Circuit Court has jurisdic- tion of a suit brought against a director for negligent performance of his duties ; for, as such suits rest upon the requirements of the United States laws and by-laws made pursuant thereto, it is a case arising under the laws of the United States. (Witters v. Foster, 28 Fed. Rep., 737.) And so, a suit against the receiver of a National bank to compel him to pay out of the funds in his hands as receiver moneys claimed by the complainant is a suit arising under the laws of the United States, and can be removed into the 1 89 Federal court. (Hot Springs Independent School District, etc., V. First National Bank of Hot vSprings, 6i Fed. Rep., 417. j When a State bank acting under a statute of the State calls in its circu- lation issued under State laws, and becomes a National bank under the laws of the United States, and a judgment is recovered in a court of a State against the National bank upon such out- standing circulation, the defense of the State statute of limitations having been set up, a Federal question arises which may give the Supreme Court of the United States jurisdiction in error. (Metro- politan National Bank v. Claggett, 141 U. S., 520.) So, that court has jurisdiction to review a judgment in State courts involving the question whether a National bank is exempted from liability to account for bonds purchased by it on condition of selling back on demand. (Logan Bank v. Townsend, 139 U. S., 67.) The Federal courts have jurisdiction of an action between a National bank located in one State and a citizen of another State. (First National Bank v. Forest, 40 Fed. Rep., 705.) A Federal court is not de- prived of jurisdiction otherwise vested in it of a suit against the executors of an estate by the fact that the estate is in the posses- sion of a State probate court for purposes of administration, and the Federal court has jurisdiction to adjudge whether a liability exi.sts, but can not issue execution to enforce the same. (Wickham V. Hull, ef a/., 60 Fed. Rep., 326.) Actions by and against Receivers. — These enactments do not affect the jurisdiction of the Federal courts in cases of action brought for winding up the affairs of insolvent National banks ; and the receiver may bring an action in such courts to collect the assets of the bank without regard to the citizenship of the parties. (Fi.sher v. Yoder, 53 Fed. Rep., 565; Linn County National Bank V. Crawford, 69 Fed. Rep., 532; Hendee v. Connecticut, Etc., R. R. Co., 26 Fed. Rep., 677; Burnham v. First National Bank, 53 Fed. Rep., 163.) But the United States Circuit Court has not jurisdiction of a suit in equity, against a receiver of a National bank appointed by the Comptroller of the Currency, where the amount in controversy is less than $2,000. (Smithson v. Hubbell, 81 Fed. Rep., 593.) And in a suit by a creditor of an insolvent National bank in behalf of himself and all other creditors to enjoin the receiver and the Comptroller from paying dividends on an alleged fraudulent claim which has been allowed by them, the jurisdictional amount is to be determined solely by the amount of 190 complainant's own claim, and not by the aggregate of all the claims of those whom he assumes to represent, or by the amount of the dividends, the payment of which is sought to be enjoined. {Id.) 207. Limitation of Banking under Territorial Law. Extract from an Act approved July 30, 1886. Section 5. — That section eighteen hundred and eighty-nine, title twenty- three of the Revised Statutes of the United States be amended and read as follows : " The legislative assemblies of the several Territories shall not grant private charters or special privileges, but they may, by general incorporation acts, permit persons to associate themselves together as bodies corporate for mining, manufacturing, and other industrial pursuits, and for conducting the business of insurance, banks of discount and deposit (but not of issue), loan, trust and guarantee associations, and for the construction or operation of rail- roads, wagon-roads, irrigating ditches and the colonization and improvements of lands in connection therewith, or for colleges, seminaries, churches, libra- lies, or any other benevolent, charitable, or scientific association." 208. National Banks in Oklahoma. Extract from Act of May 2, 1890. Section 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 : Provided, That persons otherwise qualified to act as directors shall not be required to have resided in said Territory for more frhan three months immediately preceding their election as such. 209. Deposits to Pay Circulating Notes to be Covered into Treasury. Extract from Act of July 14, 1890. Section 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 Treasury the circu- lating 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 regulations as the Secre- tary of the Treasury may prescribe, from an appropriation hereby created, to be known as National bank notes Redemption account, but the provi- sions of this act shall not apply to the deposits received under section three 191 of the Act of June twentieth, eighteen hundrea 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 redemption 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. 2IO. Branch Banks at World's Eair. Extract from Act of May 12, 1892. That any National bank located in the city of Chicago and State of Ilhnois may be designated by the World's Columbian Exposition to conduct a bank- ing office upon the exposition grounds, and upon such designation being approved by the Comptroller of the Currency, said bank is hereby authorized to open and conduct such office as a branch of the bank subject to the same restrictions, and having the same rights as the bank to which it belongs : Provided, That the branch office authorized hereby shall not be operated for a longer period than two years, beginning not earlier than July first, eighteen hundred and ninety-two, and closing not later than July first, eighteen hun- dred and ninety-four, 311. National Banks Liable for Incomplete Currency. Act of July 12, 1892. The Act of July 28, 1892, provides that the provisions of the Revised Statutes of the United States, 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 signa- ture or upon the forged signature of the president or vice-president and cashier.* 313. Taxation of Legal Tender Notes and National Bank Notes. Act approved August 13, 1894. Section i. — 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 intended to circulate as cur- rency, 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 : proz'ided. 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. Section 2. — That the provisions of this act shall not be deemed or held to * In view of this liability it is hazardous to have new currency sent from the Comptroller's office by registered mail instead of by express, unless insured. 192 change existing laws in respect of the taxation of National banking asso- ciations. * 313. Insolvent National Bank Agent to Manage Distribution of Assets. Act of March 2, 1897. That section three of an Act entitled '' An Act authorizing the appointment of receivers of National banks, and for other purposes," approved June thirtieth, eighteen hundred and seventy-six, as amended by an Act approved August third, eighteen hundred and ninety-two, be and hereby is, amended so as to read as follows : " Section 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 provided 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 asso- ciation, whose claim or claims as such creditor shall have been proved or allowed as therein prescribed, the full amount of such claims, and all expenses of the receivership and the redemption of the circulating notes of such 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 Cur- rency shall call a meeting of the shareholders of such association by giving notice thereof for thirty days in a newspaper published in the town, city, or county where the business of such association was carried on, or if no news- paper is there published, in the newspaper published nearest thereto. At such meeting the shareholders shall determine 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 v.ote by ballot, in person or by proxy, each share 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 authority, and be subject to all the duties and lia- bihties 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 * Prior to the passage of this statute there was some doubt as to whether the State could tax the circulating notes of the National banks, and the authori- ties on the point were in conflict. (See note to Sec. 5219, Rev. Stat. U. S., par. 95. 193 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 hereinafter 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 com- petent court, and for the faithful performance of all and singular the duties of such trust, the Comptroller and the receiver shall thereupon transfer and dehyer to such agent all the undivided or uncollected or other assets 'ot 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 execute any deed, assignment, transfer, or other instrument in writing that may be necessary and proper; and upon the execution 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 liabili- ties to such association and to each and all the creditors and shareholders thereof. Upon receiving such deed, assignment, transfer, or other instru- ment the person elected such agent shall hold, control, and dispose of the assets and property of such associadon which he may receive under the terms hereof for the benefit of the shareholders of such association, and he may in his own name, or in the name of such association, sue and be sued and do all other lawful acts and things necessary to finally settle and distri- bute 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 discharge 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 shareholders 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, m per- son 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 maionty 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 busmess of said asso- ciation was carried on, he shall have all the rights, powers, and duties of the 13 194 a.gev.1 first elected as hereinbefore provided. At any meeting held as herein- before provided administrators or executors of deceased shareholders may act and sign as the decedent miglit have done if living, and guardians of minors and trustees of other persons may so act and sign for their ward or wards or cestui que trust. The proceeds of the assets or property of any such association which may be undisturbed at the time of such meeting or may be subsequently received shall be distributed as follows : "/'7ri/. 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. " IViird. 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 proceeds shall be received and as shall be deemed advisable by the said Comptroller or said agent." Approved March 2, 1897. 214. Legal Tender and Lawful Money. The following statement concerning the legal-tender properties of money of the United States is based upon United States Re- vised Statutes, Sections 3585, 3586, 3587, 3588, 3589, and 3590, and the acts amendatory thereof and additional thereto: Gold coin, standard silver dollars, subsidiary silver, minor coins. United States notes, and Treasury notes of 1890 have the legal-tender quality as follows : Gold coin is legal tender for its nominal value when not below the limit of tolerance in weight ; when below that limit it is legal tender in proportion to its weight ; standard silver dollars and Treasury notes of 1890 are legal tender for all debts, pub- lic and private, except where otherwise expressly stipulated in the contract ; subsidiary silver is legal tender to the extent of $10. minor coins to the extent of 25 cents, and United States notes for all debts, public and private, except duties on imports and interest on the pub- lic debt. Gold certificates, silver certificates, and National bank notes are nonlegal-tender money. Both kinds of certificates, how- ever, are receivable for all public dues, and National bank notes are receivable for all public dues except duties on imports, and may be paid out for all public dues, except interest on the public debt. The term " lawful money *' is understood to apply to every form of monej' which is endowed by law with the legal-tender quality. (See Opinions of Attorneys-General, vol. 17, p T23.) PART SECOND. ORGANIZING NATIONAL BANKS.— BY-LA V/S, MANAGEMENT. VOLUNTARY LIQUIDATION, EXTENDING CHARTER.— U. S. DEPOSITARIES, CHAPTER I. ORGANIZING.*— BY-LAWS.— MANAGEMENT. ORGANIZATION DE NOVO. The Subscription Paper. — The law requires no preliminary subscription for the stock of the proposed bank, though such sub- scription is frequently the means of greatl)^ facilitating the organ- ization. By it the persons are brought together in a mutual contract, and are thus enabled to more conveniently determine the matters preliminary to the organization of the bank, as, for instance, what provisions the articles of association shall contain ; who shall be named as the first directors of the bank ; where the banking house shall be located, and many other details of more or less importance. As these are matters about which there may be great difference of opinion, to postpone their determination until the articles of association are presented for signature to the various persons who are to become corporators, often causes confusion and delay. Also, if there are to be many shareholders, it is desirable for many reasons that the exact number of shares which each is to have, should be known at the time that the articles are signed. Again, it frequentl}' happens that persons are willing to become shareholders in the bank only upon prescribed conditions, viz. .• that a certain man shall be president ; that the banking house shall be located on a certain street, etc. ; and where this is the case the chances of misunderstandings and fuf.ure disagreements are very — — — 1 * The Comptroller of the Cvrrency requires that National banks use only the printed forms furnished by his office. Written forms servt by the banks will not be accepted. I9S 196 materially lessened if the conditious are plainly set forth in a subscription paper. But the signing of the subscription paper does not constitute one a member of the corporation which is afterwards formed; and should the other subscribers refuse to admit him to participation in the organization, he would have only an action for damages. But when requested to do so, by those having charge of matters, each subscriber would be bound to execute all the instruments, which it is necessary that the corporators should execute, for the formation of the corporation. And should any subscriber refuse to execute these instruments, and his refusal have the effect of preventing an organization, or greatly delay it, a court of competent jurisdiction might, upon petition of the other sub- scribers, decree specific performance. (See L^indley on Partnership, p. 925, and cases there cited.) ' Form of Subscription Paper. We whose names are hereunto signed, do hereby subscribe, in the propor- tions hereinafter set opposite our respective names, for the stock of a National banking association to be organized under the laws of the United States with a capital stock of thousand dollars, divided into shares, of the par value of one hundred dollars each, the said National banking association to be located in the of , State of , and to be called "The ." Names. Shares. Notice to the Comptroller of the Currency. — When the promoters have fixed upon a name for the bank, the Comptroller should be notified, his approval of title selected being necessary (Sec. 5134 R. S.). The notice should be signed by at least five sub- scribers to the stock , giving places of residence, and reading as follows : Sir : Notice is hereby given that we, the undersigned, being natural persons »nd of lawful age, intend, with others, to organize a National banking associa- tion, under the title of "The ," to be located at , county of , State of , with a capital of $ . In order that we may effect such organization, we request that proper blank forms be sent to , at , and, if the title selected shall be approved, that it be reserved for us for the period of sixty days. Note. — The minimum capital required in places exceeding 50,000 popula- tion is $200,000, in other places, |ioo,ooo, excepting that with the approval of the Secretary of the Treasury, in places of 6.000 population or less, banks with 1150,000 capital may be organized, and where the population does not exceed j,ooo, with las.ooo capital. (See Section 5138 R. S. and Act March 14, 1900.) 197 Good Faith of Parties Must be Vouched For. — On the re- verse side of the form above mentioned is given a blank for a statement as to the business of each of the applicants and their financial strength. Also a blank for a statement by some public official acquainted with the parties, that the information is in his opinion correct, and that the parties are acting in good faith. Practice of Comptroller to Reserve Title. — It is the practice of the Comptroller of the Currency, when such a notice, properly endorsed, is received, to reserve for the parties, for a reasonable time, the title selected. Usually this time is sixty days, but extension is sometimes granted by the Comptroller under certain circum- stances. The Form of Title. — The name of the place in which the b^nk is to be located must constitute a part of the title. For ex- ample, "The Exchange National Bank of Omaha." If the name of the place is .selected as the distinguishing part of the title, it must not also be added. Thus, if the title is to be "The Omaha National Bank," the words "of Omaha" must not be added. They would be entirely superfluous and make the title inelegant. The addition of the name of the State is prohibited, because a title in such form has an awkward appearance upon the circulating notes. It is best to make the title brief, not using a long name or compound word as the distinguishing part, also avoiding the use of all superfluous words. E.g., "The Na- tional Susquehanna-River Bank, of the Q\\.y of Harrisburg " would be too much of a title. The title "The First National Bank " will not be granted in a place where another National Bank has ever been organized, whe- ther still in existence or not. Corporators Must Be Natural Persons. — The corporators must be natural persons (Section 5133, Revised Statutes)— ^hat is, human beings, as distinguished from artificial beings which exist only in contemplation of law, such as corporations and joint- stock companies. The reason for excluding these merely lega enti- ties is obvious. Such powers as they have are limited, and in most cases they are not authorized to become corporators of another artificial being, and their participation in the organization might give rise to questions afiecting its validity. Partnerships, equally with corporations, are excluded under the terms of the statute. igS If a firm desires to take any of the stock, this should be done by one of the partners in his individual capacity, until after the cor- poration is formed, when the stock can be transferred to the firm name. . Married "Women as Corporators. — Whether a married wo- man can be a corporator, will depend upon the law of the State in which she resides and where the bank is to be located. If by the State law she is authorized to make a contract of this kind, and has the capacity to bind herself to all the liabilities and obligations of a shareholder, there is no reason why she should not participate in forming the corporation. But as a general rule, it is better that any of the corporators who are women should be unmarried ; and it is only where the legal capacity of married women, to be parties to the organization, is perfectly clear, that they should ever be made such. Whenever there is any doubt in regard to this, stock intended for a married woman should be taken in the name of some other person fully qualified to be a corporator and afterward assigned to her. Infant Can Not Be Corporator. — An infant — that is, a per- son under legal age — should never be allowed to become a corpo- rator, for his contract would not be binding and he could repudiate it upon becoming of age. Articles of Association. — This is the first instrument to be executed, and it is required (Section 5133, R. S.*) that these articles ' ' 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 regula- tion of its business and conduct of its affairs." The following is the form furnished by the Comptroller : Articles of Association. For the purpose of organizing an association to carry on the business of banking, under the laws of the United States, the undersigned subscribers for the stock of the association hereinafter named do enter into the following articles of association : First. The name and title of this association shall be " The ." f * Sections of the Revised Statutes referred to are given in Part I of this work, t Give title exactly as approved by Comptroller. Do not abbreviate or add name of State. 199 Second. The place where its banking house or office shall be located and Us operations of discount and deposit carried on and its general business con- ducted 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 Tuesdayfof 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 elections shall be held according to such regulations as may be prescribed by the board of directors, and not inconsistent with the provisions of the National banking law and of these articles. Fifth. The capital stock of this association shall be thousand dollars, to be 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 lime by shareholders owning two-thirds of the stock, according to the pro- visions of an act of Congress approved May i, 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-presi- dent, 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; * It is well to have article three read, " the board of directors shall consist of not less than five nor more than [fix limit] shareholders," then the number can be changed within that limit at any annual meeting, without amending the articles. The number elected constitutes the board for the year, but should the bank's interests specially require an increase in directors, the Comptroller may give his consent. Then it will be necessary to amend article three to read: " The board of directors shall consist of [number desired] shareholders," and at next annual meeting a sliding scale can be readopted if desired. t Tuesday is optional. See section 5145 R. S. 200 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, gener- ally, 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 , nineteen hundred and . [Signatures of corporators, and there must be at least five. ] I certify that the articles of association of the are executed in dupli- cate, and that one of the instruments so executed is the foregoing ; and that the other, in all respects like the foregoing, is on file with said bank. , Cashier or President. , , 19—. This form may, of course, be varied to meet the views of the corporators, and any provisions may be inserted which are not inconsistent with the National banking laws, but it is advisable for many reasons to use the form provided by the Comptroller of the Currency. Naming Directors in Articles. — Instead of providing, as in the form given (Article 3), for a meeting of shareholders to elect directors, the incorporators may, if they choose, designate in the articles the persons who shall constitute the first board of directors. In this event the following should be substituted for the third article in the preceding form, and the other stricken out : The board of directors shall consist of stockholders, and the follow. ing persons [here insert names] have been duly elected directors of this asso. ciation, 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. 20I Not Necessary to Provide for Increasing Capital Stock. — It was once necessary to provide in the articles of association for an increase of the capital stock (Section 5142, Revised Statutes), but such a provision is no longer of any use, for the Act of May i . 1886, authorizes shareholders owning two-thirds of the shares, with the approval of the Comptroller, to increase the capital stock at any time and to any amount. Provision for Lien on Stock Invalid. — Formerly it appears to have been not unusual, for the persons forming the association, to incorporate in either the articles of association or the by-laws, a provision to the effect that no shareholder, when indebted, either directly or indirectly, to the bank, should transfer his stock with- out the consent of the directors. This is a very common provision in the articles of association and by-laws of other than National banks and of moneyed corporations generally, and is, no doubt, an excellent one where the policy of the law admits of it. But the Supreme Court of the United States has held that any such regulation adopted by a National bank is void, because the bank would thus acquire an interest in its own stock in violation of Sec- tion 5201, Revised Statutes. (Bank v. Lanier, 11 Wall., 369.) Signing the Articles. — It is unnecessary for more than five of the subscribers to the capital stock, to sign the articles of association. Should Be Executed in Duplicate. — The law requires that a copy of the articles of association shall be filed in the oflSce of the Comptroller of the Currency. It often happens that the original articles, in the possession of the bank are lost or destroyed. For this reason it has become the practice to execute them in duplicate, and to file with the Comptroller one of these instead of a copy. The Organization Certificate, — The next thing to do is to make an organization certificate. The matters to be stated in this certificate are specifically set forth in the statute (Section 5134, Revised Statutes), viz.: First. The name assumed by such association, which name shall be subject to the approval of the Comptroller of die Cur- rency. Second. The place where its operations of discount and deposit 202 are to be carried ou, 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 shareholders and the number of shares held by each of them. Fifth. The fact that the certificate is made to enable such per- sons to avail themselves of the advantages of this title. Every one of these matters must be stated clearly and definitely in the certificate, but no other matter should be included in it. The following is the form for the organization certificate, fur- nished by the Comptroller of the Currency : Organization Certificate. We, the undersigned, whose names are specified in article fourth of this certificate, having associated ourselves for the purpose of organizing an asso- ciation for carrying on the business of banking under the laws of the United Slates, do make and execute the following organization certificate ; First. The name 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 the same shall be divided into shares of one hundred dollars each. Fourth. The name and residence of each of the shareholders of this asso- ciation, with the number of shares held by each, are as follows : Name. Residence. Number of shares. Fifth. This certificate is made in order that we may avail ourselres of the advantages of the aforesaid laws of the United States. In witness whereof we have hereunto set our hands this day of 190- [Signatures of corporators.} State of County of ■ [ ss . On this the day of A. D. 190-, before me, a of personally came , to me well known, who severally acknow- ledged that they executed the foregoing certificate for the purposes therein mentioned. Witness my hand and seal of office the day and year aforesaid. [Seal of notary or court.] 203 Must be Signed and Acknowledged.— The persons sign- ing the articles of association must also sign the organization certificate, (Section 5134, Revised Statutes.) And in addition, each person signing such certificate is required to acknowledge his signature thereto before a notary public or a judge of some court of record. (Section 5135, Revised Statutes.) Before What Officer Acknowledgment Can Be Made.— The acknowledgment must be made before one of the ojQBcers specified, but before no other. The acknowledgment can not be taken by the clerk of a court, but must be taken by the judge himself. Officer Must Affix Seal. — The acknowledgment must be authenticated by the seal of the notary or court. This require- ment is not dispensed with by any State law, that notaries are not required to have seals, and no certificate from a State officer or other evidence, that the attesting officer is a notar>' public and qualified to take acknowledgments, will answer in place of a seal. The seal of the court may, of course, be affixed by the clerk of the court, but it must not be understood because the clerk may affix the seal, that the acknowledgment may be taken by him. By Whom Organization Certificates Executed. — The organization certificate and the articles of association nmst be signed by the same persons and only by subscribers to the stock of the proposed bank, and it is usually best not to have these papers signed until all preliminary matters are arranged ; as it sometimes happens that persons who were to be corporators, for one reason or another, decide not to take part in the proposed organization. It is not necessary that all the subscribers to stock should join in executing these papers. The Comptroller holds that five of the sub- scribers are sufficient, and to save the trouble of obtaining many signatures, often a few subscribers are .selected for this purpose ; but all the names of subscribers to the stock must be given in the organization certificate, though not necessarily in their own hand writing, also their places of residence. (R. S., Sec. 5134.) As the papers may be executed by a few persons, so the full amount of stock may be listed in the names of a few and later be distributed. (See page 205.) The names of those who sign the application for title of bank must all appear in the organization certificate as corporators or at 204 least as shareholders, otherwise waiver of right to participate in the organization of any one or more such applicants, not participating, must be furnished the Comptroller. When an officer joins in the execution of the organization certifi- cate as a director as well as an officer, his name should appear in notary's jurat both as an officer and as a director. Ho'w Corporators Should Sign. — In executing the organiza- tion papers, each person should sign his Christian name and sur- name in full, as is usually done in the execution of deeds and other legal instruments. Corporators May Act by Agent or Attorney. — There seems to be no reason why a corporator may not execute the papers by an agent or attorney. In the case of the organization of a railroad corporation, it was said by the Court of Appeals of New York, that the instrument of incorporation might be executed by a duly authorized agent. (Matter of N. Y., h. E. and W. R. R. Co., 99 N. Y., 12.) And there is nothing in the National banking law to require a different rule in the organization of a National bank. As was said in the case referred to, " the statute does not forbid it ; the ordinary rules of law justify, rather than condemn it." The power of attorney need not, of course, be in any special form, but it should clearly state that the person giving it, authorizes the per- son to whom it is given, to take shares for him in the proposed association, and to execute in his name the articles of association and organization certificate and any other necessary papers- As it should be filed and recorded in the office of the Comptroller of the Currency along with the organization certificate it should be ac- knowledged in the same way that that instrument is acknowledged. The following is a form of power of attorney that may be used : Know all men by these presents that I , of , do hereby appoint , of , my attorney, for me and in my name to subscribe for shares in the original capital stock of a National bank- ing association to be located in the of , county of' , State of ', and to be known as the ; and in my name to sign and exe- cute all papers and instruments that it shall be proper and necessary for the corporators of the said to sign and execute in forming the same ; hereby ratifying and confirming all that my said attorney shall lawfully do by virtue hereof. In witness whereof I have hereunto set my hand this day of — , 19—. [Signature.] 205 StaTR of , County of ss : On this — day of — , 19 — , before me, a notary public in and for the State and county aforesaid, appeared , known to me to be the person who exe- cuted the foregoing instrument, and acknowledged that he executed the same. [Signature of notary.] [Seal of notary.] Entire Stock May be Taken by a Few Persons and After- wards Distributed. — When a considerable number of persons sub.scribe to the stock, it may expedite matters for a few to take the entire stock in their names, and after they have executed and filed the organization papers, distribute the stock by issuing at once temporary certificates, showing interest in stock, to the other subscribers, before any pa3mients on stock are called for, and not waiting until the regular certificates are prepared nor until the bank is authorized to begin business ; but in order that the regular stock book may show the original holdings of the stock, in the names of these corporators, to agree with the organization certi- ficate, the first regular certificates should be issued to them and then assigned to the other subscribers, to replace the temporary certificates. Organization Papers. — When the title selected has been ap- proved by the Comptroller, he forwards to the applicants blank organization papers, with specific instructions for their execution. These papers are as follows: Articles of Association, Organiza- tion Certificate, Oaths of Directors, Certificate of Ofiicers and Directors as to payment on Capital Stock, and Order for Circula- tion ; in the case of conversion of a State bank, there is an addi- tional form for shareholders to authorize conversion. The execu- tion of these papers is a very simple matter, bvit mistakes are very frequently made from carelessness. For example : the Corporate Title is not inserted exactly as approved by the Comptroller, perhaps abbreviated or name of State added ; names of persons are misspelled ; errors made in jurat, etc. Care should be taken in preparing the papers to avoid the delay incident to their return by the Comptroller for correction. Association Becomes Body Corporate. — When the articles of association and organization certificate have been executed and filed with the Comptroller, the association becomes a body corporate from the date on which the organization certificate was executed. (Section 5136, R. S.) It can then enter into contracts as a corpora- tion ; call for payment upon capital stock ; lease or purchase banking-house and other necessary property, in short, transact in its corporate name and capacity any matters preliminary to the banking business. (Section 5136, R. S.) 2o6 When Organization Papers Should be Filed. — It is best to file the articles and orgauization certificate with the Comptroller as soon as executed, for until filed the association cannot act as a body corporate. (Sec. 5136, R. S.) The other papers should also be filed as soon as possible, so that if there are any errors they may be corrected ; then when the fifty per cent of capital has been paid in and certified to the Comptroller and bonds deposited there will be no delay in chartering the bank. Qualification of Directors. — Section 5146, R. S., provides that a director of a National bank must be a citizen of the U. S., and at least three-fourths of the board must have resided in the State or Territory where the bank is located for the year just preceding their election, and must be resident therein while directors ; every director also must own in his own right and free from pledge, at least ten shares of the capital stock of the bank. Election of Directors.— Section 5145, R. S., provides that a National bank shall have at least five directors, who shall be elected at a shareholders' meeting, to be held before the bank is chartered, and afterward at annual meetings in January. The usual date is the second Tuesday of January, but this is not obligatory. Notwith- standing the provision for such election, the Comptroller's Office has always construed Sec. 5147, R. S., as authorizing the first board of directors to be appointed or elected. In either case it is necessary that the directors be appointed or elected at the same time or im- mediately after the execution of the organization papers that they may elect the officers of the bank, to meet the Comptroller's re- quirement that the president or cashier certify to the execution of the articles of association. Number of Directors. — In fixing the number of directors, it is well to make a sliding scale in articles of association, to avoid the necessity of calling a meeting of stockholders to change the articles, in case it is deemed expedient at the annual meeting to increase or decrease the number. The form is given on a preceding page We would suggest having a board of at least seven members — as the Comptroller requires that the reports of condition, made five times during the year, be attested b}' not less than three directors ; so that with a smaller board it will be seen that the liberty of the members to be absent from the place is curtailed. Oath of Directors. — The oaths ofdirectors required by Sec. 5147, R. S. , may be taken singly or jointly as is most convenient ; generally they are taken at the meeting to organize the board. They must not antedate the execution of the articles and organization certificate. The Comptroller requires that the oath be administered by an officer 307 having an official seal to attest the same ; and that the sworn statement be sent at once to the Comptroller. Blank forms for directors' oaths are furnished by the Comp- troller of the Currency and written forms of any kind should not be used. Form for Joint Oath of Directors. State of , County of }.„.. We, the undersigned, directors of the , of , in the State of , being citizens of the United States and residents of the State of -, do, each for himself and not one for the other, solemnly swear 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 organized ; and each for himself does solemnly swear that he is the owner in good faith and in his own right of the number of shares of stock required by said statutes, subsciibed by him or standing in his name on the books of the said associa- tion ; and that the same is not hypothecated, or in any way pledged as security for any loan or debt. Signature. Residence. Subscribed and sworn to this day of , 190 — , before the under- signed, a in and for said county. [SEAi<.] , Notary Public. Note. — Each director when elected must take the oath of office and, under Section 5147, U. S. R. S., it 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. The form for single oath of director is the same as the joint oath, excepting that it is prepared as an individual oath. Certificate of Bank Succeeding a State Bank. — When a National bank is being organized dc ?iovo, to succeed a State bank- ing corporation or private bank, the Comptroller before granting authority to begin business requires a certificate as follows : We, the undersigned directors of the National bank of , do hereby certify and agree that any assets purchased by this bank, from ^he 2o8 Bauk of , will not include real estate (other than the banking premises), stocks of other corporations, loans secured by real estate, or loans in excess of ten per cent, of the paid-in capital stock of the National Bank of . Witness our hands this day of , 19 — . [signatures of directors.] Payment on Stock Required. — Section 5168, R. S., requires that at least 50 per cent, of the capital stock be paid in and certified to the Comptroller before a National bank can be chartered. Delay may be avoided by a few of the subscribers to the stock making payments suflScient to cover this requirement without waiting to receive the pro rata proportion from all the subscribers. Calling for Payment on Stock. — The directors may call for the payment of 50 per cent, of the capital stock at any time they see fit, unless the stock has been taken on some agreement to the contrary, as, that the payment shall not be called for before a certain date or before the happening of a certain event. The authority of the directors to call for further payments on subscrip- tions to stock would appear to be limited by Section 5140, Revised Statutes, which provides that after the first payment of 50 per cent, of the capital, the balance shall be paid in monthly install- ments of at least 10 per cent. It might be held that this section simply prescribes the time within which the capital must be paid in. The point has never been judicially determined. A fair construction of the section referred to would seem to give a subscriber to stock the right to make payment in such monthly installments, unless a special agreement has been entered into by the subscribers, authorizing the board to call for payments of stock at pleasure, or in larger installments than is required by law. The second and subsequent payments of course need not be re- stricted to 10 per cent, each, as the capital stock may be paid if desired in advance of the time required by law. Certificates of payments of installments should not include a fraction of a dollar. Book Entry of Payments on Subscriptions. — Payments on subscriptions to capital stock should not be carried to stock ac- count, nor entered in reports of condition to the Comptroller as capital stock until these payments are certified to the Comptroller. Prior thereto they should be credited to shareholders in a separate account and entered in the reports to the Comptroller under head- ing ' ' Liabilities other than those stated. ' ' Certificate of Payment on Stock. — When fifty per cent, of the capital stock has been paid in it is required by Section 5168, Revised Statutes, that this be certified to the Comptroller by the president or cashier of the bank. (vSection 5168, Revised Statutes.) The form of such certificate is as follows : 209 CKRTiriCATE OF PAYMENT OF FiRST INSTALLMENT OF CAPITAL STOCK. It is hereby certified, as required by Section 5140 of the Revised vStatutes of the United States, that of the authorized capital stock of $ , of The National Bank of , , organized in conformity with the provisions of the banking laws of the United States authorizing the organization of national banking associations, the first installment, amounting to $ , has been paid in cash. , President. or , Cashier. State of , \ ^^ . Cou7ity of , / Subscribed and sworn to before the undersigned, a of the said county, this day of , 190- [SEAL.] (Official title) Circulating Notes. — It is optional with a National bank whether it issues circulating notes or not, but as the law requires a certain bond deposit to be maintained with the U. S. Treasurer, regardless of note issue, the banks, with few exceptions, take out circulation. Signing Circulating Notes. — Section 5172, Revised Statutes, requires that circulating notes of National banks shall be attested by the signatures of the president or vice-president and the cashier, but the Act of July 12, 1892, provides that all such notes "issued to or received by any National bank, though they may have been lost or stolen from the bank and put in circulation without the signatures above referred to, " shall be redeemed by the bank. Such being the case, and no penalty being attached for failure to affix signatures, many of the banks have them lithographed, printed, or even stamped with rubber stamp. Order for Circulation. — A National bank.ng association is entitled to circulating notes to the amount of the face value of the U. S. bonds deposited to secure the same [unless the market value of the bonds is below par], and is entitled to a total amount equal to its capital stock paid in, but not over one-third in five-dollar notes. An order for these notes should be sent to the Comptroller of the Currency, with the organization papers. The Comptroller furnishes a blank for the order as follows : 2IO Original Ordbr. Ser. : You will please have plates prepared, and $ in circulating notes printed therefrom, for this bank as follows : Plate 5, 5, 5, 5 Sheets ($20 per sheetK . $ " 10,10,10,20 " (I50 per sheet) . . .$ " 50, 100 . . . " ($150 per sheet) . . $ Total $ , Cashier. Amount and Kind of Notes, — The Comptroller requires that the original order for circulation be made for about one-fourth more than the amount the bank will be entitled to on its bond de- posit, that he may have a suflScieut balance on hand to reimburse the bank for its mutilated notes when redeemed and destroyed. If a bank desires five-dollar notes it is necessary to order two plates, as only one-third of the circulation can be in that denomina- tion (see Act March 14, 1900), as the fives are not printed front a plate in combination with another denomination, as in the case of tens, twenties, fifties, and one hundreds. Time for Printing Notes. — The Comptroller will not make the order on the Bureau of Engraving and Printing for printing circu- lation until the bank has fully complied with the requirements for charter and the Bank given a charter number. Then about forty days are required to engrave the plate and print the notes. The Deposit of Bonds. — The organization papers and certifi- cate of payment of capital stock having been filed with the Comp- troller, it only remains to make the required deposit of United States bonds. These bonds must be assigned to "the Treasurer of the United States in trust " for the bank to be chartered. This deposit is required by law whether a bank takes out circulation or not. The bonds must be registered, but coupon bonds will be accepted, the Secretary of the Treasury being authorized to receive and issue registered bonds for them, bearing same interest, etc. The mini- mum amount of bonds required to be deposited is : 1. For bank of $150,000 capital or less, an amount equal to one- fourth of the capital stock. 2. For a bank with capital over $150,000, a minimum of $50,000. The Comptroller's Certificate. — When the bank has complied with all these conditions, the Comptroller issues a certificate that it is authorized to begin business under the National Bank Act. This certificate the association is entitled to as a matter of right ; and the Comptroller can only withhold if he has reason to believe that . the bank has been organized for objects other than those contem- plated by the National banking laws. When the Comptroller signs certificate he wires the bank its charter number and that it is authorized to begin business. 21 I Certificate Must be Published. — The bank must publish the Comptroller's ccrtiScate for al least sixty days in a newspaper published in the city or county where the bank is located. (Section 5170, R. S.) An insertion in a weekly newspaper or a weekly edition of a daily is sufficient and the oath of the publisher that the certificate has been published for the time required, with printed copy of certificate attached, cut from the newspaper, must be filed in the Comptroller's office. Cost of the Engraved Plates. — The law requires that banks bear the expense of preparing the plates required. No charge is made for paper, or for printing of circulation. The cost is as fol- lows: Plate 5, 5, 5, 5, $75 : Plate 10, 10, 10, 20, $75; Plate 50, roo, $50. CONVERSION OF STATE BANKS TO NATIONAL. Conversion Without Reorganization. — Section 5154, Revised Statutes, provides that a State bank may be changed to a National bank without reorganization. This plan is sometimes found ad- vantageous, although as a rule it is better to close up the affairs of the old bank and organize under the National system de novo. If a State bank propo.ses to enter the National .system by con- version, the Comptroller insists upon an examination of assets before granting a charter, but in organizing de novo, this delay is avoided, as the Comptroller accepts a certificate that only assets which a National bank can lawfully hold will be purchased from the ■ old bank and the examination is made soon after the charter is granted. Only Incorporated Banks Can be Converted. — A bank pro- posing to convert to a National bank must be an incorporated State institution, either by special charter or under some general statute. A private bank to enter the National system must reor- ganize as an entirely new association, though, of course, the new organization will succeed to the good-will of the old bank and take such of its assets as a National bank is permitted to hold. Assets of Bank.— The National Bank Act prohibits National banks holding real estate other than the banking-house property, loans on real estate or mortgage, or loans in excess of one-tenth of its capital (Sections 5137 and 5200. Revised Statutes), and the Comptroller requires that State or private banking institutions proposing to enter the National system shall liquidate such assets before they are chartered as National banks, although if the bulk of a State bank's assets are found to be such as a National bank 212 can hold, the Comptroller may charter the bank under guarantee that the balance will be liquidated as rapidly as possible. Consent of Shareholders. — The first step in the process of conversion is to get the assent of shareholders owning two-thirds of the capital stock. (Section 5154, Revised Statutes.) Frequently this is done, by merely obtaining the signature, to a form of authorit}' furnished by the Comptroller of the Currencj'-, without calling a meeting of shareholders for the purpose of considering the matter. But unless the signatures of all the shareholders can be so obtained, the action should be taken at a duly convened meeting, thirty days' notice in writing being given, for, as will be seen in a subsequent place, where authority is given, to any number of shareholders less than the whole number, to determine any matter relating to the corporate business, it is not meant that these can act wholly in- dependently of the other shareholders, without giving them any voice in the matter, but every shareholder must be afforded an opportunity to express his assent or dissent ; and, therefore, non- assenting shareholders are not bound by any action of the other shareholders had at a meeting of which each was not duly notified. The assent of the holders of two-thirds of the bank stock having been obtained, notice should be given the Comptroller of the Cur- rency of intention to convert, naming title wanted for bank and requesting that proper blanks be sent. The following is the form furnished by the Comptroller of the Currency for the assent of the shareholders. It is known as the " authority for conversion." We, the undersigned, stockholders of the , located in the of -, county of , State of , having a capital of dollars, do hereby authorize and empower the directors thereof to change and con- vert said bank into a National banking association under the sections of the Revised Statutes which authorize the conversion of State banks into National associations, and of subsequent acts in addition to or amendatory thereof; and we do also authorize the said directors, or a majority thereof, to make and execute the articles of association and organization certificate required to be made or contemplated by said statutes, and also to make and execute all other papers and certificates, and to do all acts necessary to be done to convert said into a National banking association, and to do and per- form all such acts as may be necessary to transfer the assets of every descrip- tion and character of said to the National banking association into which it is to be converted, so that the said conversion may be absolute and 213 complete; and we do hereby assume, and authorize the said directors to assume, as the name of the National banking association into which tlie said is to be converted, " Tlie ; " and we do hereby appoint , who are now the directors of the said , to be the directors of the said , to hold their offices as such directors until the regular annurd election of directors is held, pursuant to the provisions of said Revised Statutes, and until their successors are chosen and qualified; and we d) hereby authorize the said directors of the said to continue in office the officers of the said , or to appoint or elect others, as to them may seem best. In witness whereof we have hereunto set our hands and written against our names the number of shares owned by us, respectively, this day of , A.D. i8— . Names of stockholders. Number of shares owned by each. Should Be Presented for Signature at Shareholders' Meet- ing.— For the reasons above mentioned the instrument should be presented to the shareholders for signature at a special meeting of shareholders called for the purpose of considering the question of conversion. If any regulation or by-law of the bank requires that the action of the stockholders at a corporate meeting shall be by ballot (as is frequently the case), the " authority for conversion " should be put into the form of a resolution and adopted by a vote of the shareholders, and the Comptroller should be advised of the reason therefor. By V^hom Papers Executed. —In the case of a conversion, the articles of association and organization certificate are executed by the directors, and not by the shareholders. (Section 5154, Re- vised Statutes.) And it is not necessary that all of the directors should join in the execution of those instruments ; the statute is complied with if a majority do so. {Id.) Articles of Association. — The wording of the first part of the articles of association should be as follows : Articles of Association. We, the undersigned, directors of the , having been authorized by the owner:? of two thirds of the capital stock of said bank, to change and convert the said bank into a National banking association, under section 5154 of the Revised Statutes of the United States, and of subsequent acts in 214 addition to or 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 name and title of the association into which the said is to be changed and converted shall be " The ." From this point the articles will follow the fortn on page 198. The following is the form for organization certificate furnished by the Comptroller of the Currency in cases of conversion : Organization Certificate. We, the undersigned, directors of the , having been duly authorized by the owners of two-thirds of the capital stock of said bank, to change said bank into a National banking association, and to make the necessary organ- ization certificate, under the sections of the Revised Statutes which authorize the conversion of State banks into National banking associations, and of subsequent acts in addition to or 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 said : First. The name and title of this association shall be "The ." Second. The said association shall be located and continued in the of , county of and State of , where its operations of dis- count and deposit are to be carried on. Third. The capital stock of this association shall be dollars {$ ), and the same shall be divided into shares of dollars each, as it is now divided in the said " The ." Fourth. The name and residence of each of the stockholders of the said which is to 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 ; Name. Residence. Number of shares. Fifth. This certificate is made in order that the said and the stock- holders thereof may avail themselves of the advantages of the aforesaid Revised Statutes, and that the said may be changed and converted into a National banking association under the name and title of the . In witness whereof we have hereunto set our hands this day of . eighteen hundred and . State of ss. County of - ..1 On this the day of , A.D. 19^ — , personally came before me, a — — of said county, , directors of the , to me well 215 known, who severally acknowledged that they executed the foregoing cortlfc cate for the purposes therein mentioned. Witness my hand and seal of office the day and year aforesaid. Certificate of Capital Paid In.— This is a certificate of the president or cashier of the l.-ank to the Comptroller of the Currency, showing that the amount of paid-in and unimpaired capital of the bank converting meets the legal requirement (form similar to that on page 209). Directors Continue To Be Such. — The former board of direc tors, if not less than five, may be continued until the regular annual election (Sec. 5154, R. S.), but must take the directors' oath. Ten shares of the old bank stock, regardless of its par value, is sufl5cient for a director to hold to be eligible. Closing Affairs of Old Bank. — State banks converting to National Ijanks must be guided by State statutes as to closing up the affairs of the bank. Conversion to a National bank does not destroy or change the identity or corporate existence of the State bank, although its charter as a State bank then expires. The bank continues as a corporate body simply under changed juris- diction ; its rights to sue and be sued on obligations of the old bank are not affected. Certificates of Stock. — A State bank converting to a National bank does not require to issue new certificates of stock, although it is preferable to do so. If the old certificates are retained they should be stamped to shovj^ the changed jurisdiction. Capital of Bank. — A State bank converting to a National bank must have a paid-in capital of not less than the amount prescribed by the National Bank Act (see page 196). When it is necessary to increase capital of bank to convert, it depends upon the require- ments of the laws of the State in which the bank is located whether it is better to increase under State laws, and then convert, or to put the State bank into liquidation and organize de novo as a National bank. Sometimes considerable delay is avoided by taking this latter course. When a bank increases its capital before conversion, the Comptroller requires as evidence of such increase, a certificate of the State oflBcer with whom the certificate of increa.se is filed. 3l6 BY-LAWS. Tlie power to adopt by-laws for the bank is generally conferred on the directors in the articles of association ; but where the power is not delegated to the directors it belongs to the stockholders. It is a requisite of every valid by-law that it shall be consistent with the National banking laws and with the articles of association ; a by-law which is inconsistent with either the law or the articles is void. Directors often fall into the error of supposing that because they have power to amend the by-laws they may change them in any respect, but the by-laws often contain provisions which are found in the articles of association, and these provisions can not be changed, for, in effect, this would be to amend the articles, which can be done only by the shareholders. Thus, a by-law pre- scribing the number of directors the bank shall have, and how many shall constitute a quorum, can not be amended by the direc- tors if such amendment conflict with any provision of the articles of association. The form of by-laws given in the following pages it is believed will meet the usual requirements of banks and be sufl5cient in the great majority of cases. GENERAL FORM FOR BY-LAWS. By-laws of the \_here t?isert the title of the bank'] organized under the laws of the United States, and authorized by the Comptroller of the Currency to carry on the business of banking. I. — The regular annual meetings of stockholders of this bank for the elec- tion of directors and for the transaction of other legitimate business, shall be held between the hours of ten o'clock A. M. and four o'clock p. M. on the day specified in the articles of association, and the thirty days' notice of the time and object of such meetings thereby required shall be given by the president, vice-president, or cashier by publication in [insert location of paper in which publication is to be made.'] The board of directors shall, within one month previous to the date fixed for such meetings, appoint three stock- holders to be judges of the election for directors, who shall hold and conduct the same, and who shall, under their hands, notify the person acting as cashier of this bank of the result thereof as soon as ascertained, and of the names of the directors-elect. 2. — The person acting as cashier shall thereupon cause the returns made by the judges of election to be recorded upon the minute-book of the bank, and shall notify the directors chosen of their election, and of the time for 21/ them to meet at the banking-house for the organization of the new board. If at the time fixed for such meetings there should be no quorum m attendance, tiie directors-elect present, may adjourn from time to time, until a quorum shall be obtained. 3. — The directors-elect shall meet for organization, upon the notification given in accordance with law 2, within one week from the time of their elec- tion, but shall not do any business whatever prior to qualifying by taking the oath of office as required by law. 4. — If the annual election for directors should not be held on the day fixed by the articles of association, the directors in office shall order a special elec- tion, of which notice shall be given, judges appointed, and returns made and recorded upon the minute-book ; and the directors chosen thereat shall be certified to the cashier, and notified as provided by laws 1 and 2. 5. — The officers of this bank shall be a president, vice-president, cashier, teller, and book-keeper, and such other officers as may be required from time to time for the prompt and orderly transaction of its business ; and all officers, clerks, and agents shall be elected, appointed, or employed by the board of directors, or with the consent thereof, and their several duties may be prescribed by the board. 6. — The president shall hold his office for the current year for which the board of which he shall be n member was elected, unless he shall resign, become disqualified, or be removed ; and any vacancy occurring in the office of president or in the board of directors shall be filled by the remaining members. 7. — The cashier and the subordinate officers and clerks shall be appointed to hold their offices respectively during the pleasure of the board of directors. 8, — The cashier of this bank shall be responsible for all the moneys, funds, and valuables of the bank, and shall give bond, with security to be approved by the board, in the penal sum of dollars, conditioned for the faithful and honest discharge of his duties as such cashier, and that he will faithfully apply and account for all such moneys, funds, and valuables, and deliver the same to the order of the board of directors of this bank, or to the person or persons authorized to receive them. [The bond usually required is from $5,000 upward, according to capital of bank ] 9. — The president of this bank shall be responsible for all such sums of money and property of every kind as may be intrusted to his care or placed in his hands by the board of directors or by the cashier, or otherwise come into his hands as president, and shall give bond, with security to be approved by the board, in the penal sum of dollars, conditioned for the faithful discharge of his duties as such president, and that he will faithfully and hon- estly apply and account for all sums of money and other property of this bank that may come into his hands as such president, and pay over and dehver the same to the order of the board of directors, or to any other person or persons authorized by the board to receive the same. 2l8 lo. — The teller shall be responible for all such sums of money, property, and funds of every description as may from time to time be placed in his hands by the cashier, or otherwise come into his possession as teller, and shall give bond, with security to be approved by the board of directors, in the penal sum of dollars, conditioned for the honest and faithful dis- charge of his duties, and that he will faithfully apply, account for, and pay over all moneys, property, and funds of every description pertaining to tl:is bank that may come into his hands by virtue of his office as teller, to the order of the board of directors, or to such person or persons as may be authorized by the board to receive the same. . II. — The bonds of the officers shall be placed in the custody of a stock- holder of this bank, to be designated by the board of directors, who shall not be one of the bonded officers, to be surrendered by him only upon the order of the board. 12. — The impression made below is an impression of the seal adopted by the board of directors of this bank. \_Impression of Seal."] 13. — All transfers and conveyances of real estate shall be made by the bank, under the seal thereof, in accordance with the orders of the board of directors, and shall be signed by the president or cashier. 14. — Whenever an increase of stock shall be determined upon in accord- ance with the articles of association of this bank, it shall be the duty of the board of directors to cause all the stockholders to be notified thereof, and a subscription to be opened therefor, specifying the teiTns of payment agreed upon by subscribers. Each stockholder shall be entitled to subscribe for shares of the new stock in proportion to the number of shares he already owns ; but if any stockholder shall fail to subscribe for such new stock as he may be entitled to, or to pay his subscription according to agreement, the board of directors shall determine what disposition shall be made of the privileges of subscribing for the new stock not taken. 15. — This bank shall be open for business from o'clock A. M. to o'clock p. M. each day, except Sundays and days recognized by the laws of this State as holidays. 16. — The board of directors of this bank shall hold regular meetings at the banking-house for the transaction of business on of each week, and should th;it day in any year fall upon a holiday, the regular meeting for that week shall be held on such other day as the directors at the preceding meeting may order. The board may also hold special meetings upon the call of the president, cashier, or any three or more members, and whenever there shall not be a quorum at a regular or special meeting, the members present may adjourn the meeting from day to day until a quorum shall be obtained; and any meeting may be adjourned from time to time by a vote of a majority of a 219 quorum present, but no business except adjournment shall be transacted in the absence of a quorum. 17. — There shall be a committee, to be known as the" exchange commit- tee, consisting of the president, directors, and cashier, who shall have power to discount and purchase bills, notes, and other evidences of debt, and to buy and sell bills of exchange; and who shall, at each regular meeting of the board of directors, make a report of all bills, notes, and other evidences of debt discounted and purchased by them for the bank since their last pre- vious report. 18. — The board of directors may appoint one of its members or an officer of the bank to act as clerk at its meetings. 19. — No officer or clerk of this bank shall pay any check drawn upon it, or pay out money on any order, unless the drawer of such check or order shall, at the time of the presentation thereof, have on deposit in the bank funds sufficient to meet such check or order. 20. — The earnings of this bank shall be disposed of according to orders of the board of directors, made at regular or special meetings, and no dividend shall be paid to stockholders, or other disposition of earnings made, except upon order of the board. 21. — The organization papers of this bank, as executed and filed with the Comptroller of the Currency, the returns of judges of the elections, the jiro- ceedings at all regular and special meetings of the board of directors, the by-laws, and all changes and all amendments thereof, and the report of examining committees of directors, made according to law 28, shall be recorded in the minute-book; and the minutes of each meeting of the board shall be signed by the president and attested by the cashier. 22. — The board of directors shall have power to prescribe and, when ex- pedient, to change the form ot books and accounts to be used in the transac- tion of the business of this bank, and to prescribe the general or particular manner in which its affairs shall be conducted. 23. — The stock of this bank shall be assignable and transferable only on the books of this bank, subject to the restriction and provisions of the bank- ing laws, and a transfer book shall be provided, in which all assignments and transfers of stock shall be made. 24. — Transfers of stock shall not be suspended preparatory to the declara- tion of dividends ; and unless an agreement to tlie contrary shall be expressed in the assignments, dividends shall be paid to the stockholders in whose name the stock shall stand at the date of the declaration of dividends. 25. — Certificates of stock signed by the president and cashier sh:ill be issued to stockholders, and the certificates shall state upon their face that the stock is transferable only on the books of the bank. 26.— All the current expenses of this bank shall be paid by the c;ishier, who shall, every six months, or oftener if required, make to the board of directors a detailed statement thereof. 220 27. — All contracts, checks, drafts, etc., for this bank, and all receipts for circulating notes received from the Comptroller of the Currency, shall be signed by the president or cashier. 28. — There shall be appointed by the board of directors a committee of members thereof, whose duty it shall be to examine every three months the affairs of this bank, to count its cash, and compare its assets and liabili- ties with the accounts of the general ledger, ascertain whether these accounts and all others are correctly kept, whether the condition of the bank cor- responds therewith, and whether the bank is in a sound and solvent condi- tion, and to recommend to the board such changes in the manner of doing business, etc., as shall seem to be desirable, the result of Avhich examination shall be reported to the board at the next regular meeting thereafter. 29. — A majority of the directors, including the president, (or in his absence the vice-president,) shall be a quorum to do business. 30. — A copy of the by-laws of this bank as in force shall be kept in a con- venient place in the bank, to which any stockholder shall have free access during the regular hours of business. 31. — These by-laws may be changed or amended by the vote of two-thirds of the directors. Where there is any conflict between the law and articles of association, or between the by-laws and either of the other two, the law takes precedence, the articles of association stand next, and the by-laws must give way to both. 22) THE MANAGEMENT OF NATIONAL BANKS. Brief Suggestions. Bank Records. — In all corporate bodies the recording, and careful preservation of the record of proceedings of all meetings lield, is of the utmost importance. Have the organization papers executed in duplicate and one set incorporated in the minute-book as part of the record of action taken. Also have the proceedings of stockholders, in the first election of directors fully recorded, so that there may be in per- manent form a complete history of the organization of the bank. The by-laws and all proceedings at meetings of directors and of stockholders should also be recorded in the minute-book. These records should very explicitly set forth, the appointment of the judges of election for directors, and the returns of the judges ; and the fact that the directors qualified by taking the prescribed oath, (the 7-ecording of this fact is too often omitted. The importance of it is evident, as showing that the directors qualified as required, before transacting any business,) the appointment of oflScers should also be recorded, the bonds required of them, and the approval thereof by the directors ; in short, all matters pertaining to the original organization of the bank, and the subsequent proceed- ings of the directors in the supervision and management of its affairs. Appointment and Bonds of Officers. — The officers, other than the president, should be appointed to hold their offices indefi- niteh^ and their bonds should be executed accordingly, so as to obviate the necessity of requiring annual bonds from them, and to prevent the occurrence of a time when they would not be under bond. Presidents being annually appointed, should be required to give annual bonds ; and in the appointment or reappointment of any officer a bond should be required of him. It will be found the best policy to pay all officers and other employes liberal but not extravagant salaries, so as to remove from them the temptation of speculating with or otherwise wrongly using the bank's funds. Qualifications for the Banking Business. — It should be remembered that integrity, force, ability, faithfulness, promptness. 222 carefulness and courtesy tell in banking, as well as in any other business, on the other hand traits and conduct of the opposite character insure failure, but given these qualities in good measure in officers and clerks success is assured. One specially important thing to bear in mind in banking, is that new phases of business are constantly developing, and the most successful and most use- ful bank is the one which most quickly adapts itself to the times. Capital. — The capital of a bank should be a reality, not a fiction, and it should be owned by those who have money to lend and not by borrowers. No bank can have a prosperous career if its stockholders take out in loans, the money they have put in as capital, for such a bank, being rendered unable to accom- modate the business public outside of its owners, deprives itself of one of the principal elements of success. Directors. — The Board of Directors is the representative body of the shareholders of the bank and as such is responsible for the administration of its affairs. The greatest obligation therefore rests upon each director, having accepted the office, to inform himself fully of his duties, and the requirements of the law gov- erning the bank, also to take a personal interest in the officers and their methods of discharging their duties, and in that most import- ant matter of looking after the investments of the bank, not to favor granting a loan he would not make from his own funds. President. — The work of a bank President varies according to circumstances. He may or may not share in the active manage- ment of the bank. As a rule, it may be said, he exercises a general oversight of the affairs of the bank, with special duties in connection with his position as President of the Board of Directors. Cashier. — The bank Cashier is usually the chief executive officer of the bank. Primarily he represents the will of the Board of Directors and his duty is to see that the policy and plans formulated by it are properly carried into execution, yet he is not the mere representative and subordinate of the Board, but has also responsibilities as the chief executive officer and agent of the corporation. He should be thoroughl}' conversant with the laws, customs and practices of the banking business, and especially of those of his office. He should maintain a vigilant oversight 22:5 of all the work of his suburdi nates, being responsible for the good conduct and faithful service of the clerical force of the bank. To the public, the bank is what the Cashier is ; therefore while keeping uppermost in mind tlie trust committed to him, he must recognize the bank's obligations to the public, upon which it is dependent for its profits. He should be known as one always approachable, and ready to consider carefully the wants of the bank's customers and as ready to respond, generously, so far as consistent with his best judgment, and if unable to favor the cus- tomer, to manifest by kindly manner his regret. He should not let political or other prejudices influence his con- duct of the afifairs of the bank, but manage it as a business insti- tution, for the benefit of the cotumunity and the profit of the stockholders. Loans and Discounts. — Require ample and undoubted security for all loans and of a readil)'- convertible character if in the shape of collaterals. Do nothing to foster or encourage speculation, but give facilities only to legitimate business operations. Make loans and discounts on as short time as the needs of customers will permit, and insist upon the payment of all paper at maturity, if possible, whether the bank needs the money or not. Borrowers should not be encouraged to expect extensions and renewals of their paper to suit their own convenience. Such favors are not the attributes of good banking, the proper foundation of which is impartiality of treatment, and the exaction of the performance of contracts. Never renew a note or bill, or allow it to lie unpaid, merely because the money can not for the moment be placed with equally good advantage, for it is only by always requiring prompt settlements that the discount line can be controlled, and made at all times reliable. Distribute the accommodations of the bank as widely as possi- ble, rather than concentrate them in a few hands ; for large loans, though sometimes proper, are generally injudicious, and frequently unsafe, for large borrowers are apt to dictate their own terms as regards payment ; and when this is the relation between a bank and its customer, the former is pretty sure to be the sufferer. Every dollar of depositors' money loaned by a bank is owed for, and its managers are therefore under the strongest obligations to its creditors as well as to stockholders to keep its discounts under their own control. 224 Paying Teller. — The Paying teller occupies a position of great importance, being the disbursing ofi&cer of the bank, and having charge of its funds. He should be a man above reproach, a good judge of character, of quick wit, quick action, and the soul of good nature and forbearance. Receiving Teller. — The Receiving teller holds a position closely related to the paying teller and involving great responsi- bility. He should possess, besides strict integrity, good ability and a courteous manner, a natural tact for handling money and of passing on its genuineness. Bookkeeper. — Very great responsibility rests upon the book- keeper since the paying out of the funds of the bank is governed by his records. He should be therefore an accountant of great accuracy, understanding thoroughly bank book-keeping, and keeping abreast of the times in adopting improved methods. Clerical Force. — The Clerical force should be character- ized by fidelity and efi&cient service, and of this there should be due recognition by the officers of the bank in a kindly word of appreciation from time to time, and, better still, an increase of sal- ary or an extra allowance occasionally when good dividends are declared. Verification of \A^ork. — One of the best rules for a bank to adopt, is, that the work of each employee be examined and veri- fied daily by shifting of clerks, under the direction of the execu- tive officer, and that occasionally full examinations of the bank be made in the same manner. As often as every quarter a committee of directors, appointed for the purpose, should make an examina- tion, and a report thereof should be entered upon the minute-book. Stock Certificates. — The greatest care should be exercised in regard to stock certificates and transfers, and when new certificates are issued to see that tliose in lieu of which they are given are promptly surrendered and cancelled. Collaterals. — The stocks, bonds, &c., held by banks as collat- eral security, should be regarded as special trusts, and hence carefully recorded and placed in the bank's vaults, where only the officer entrusted with their care can have access to them. 225 Legal Attorney. — It is an excellent plan for banks to have a special attorney, possibly retained by the year, so that the execu- tive officer of the bank may be able to comraand counsel and decide with promptness questions constantly arising which require knowledge of the law. Surplus Fund. — It should be the chief aim of bank managers to make their respective institutions strong, and to keep them free from unavailable and undesirable assets. Not only should the capital be kept unimpaired, but a surplus fund should be created from the earnings that will be a protection to the capital and to creditors in the trying times that sooner or later overtake all banking institutions. There are few items, if any, that look better upon a balance sheet of a bank than a large surplus, and none that is so well calculated to secure for it public confidence ; and it is, therefore, on all accounts the best policy to accumulate such a fund as rapidly as possible, even if dividends to stock- holders have to be kept down to a low rate for a time. Reports. — The instructions given by the Comptroller of the Currency in regard to reports to be made to his office, should be very closely followed ; the blanks furnished by the Comptroller state very explicitly what is required, but very frequently reports are found by him to be incomplete, necessitating much correspond- ence. This may be easily avoided by seeing that the reports are correct before forwarding. In Conclusion. — Do a straightforward, legitimate, and upright business, and never be tempted by the prospect of large gains to engage in operations not sanctioned by prudence, or by the pro- visions of the laws governing National banks. '5 CHAPTER II. VOLUNTARY LIQUIDATION. MODE OF PROCEDURE. The law authorizes any National bank to go into liquidation by a vote of its shareholders owning two-thirds of its stock. (Re- vised Statutes, 5220.) Nothing is said in the statute about any consent of the Comptroller of the Currency ; but it will be found to facilitate the proceedings to give him notice in advance, that he may cause an examination of the bank to be made ; for until he is satisfied by such an examination that the bank is solvent, he will not consent to the withdrawal of the bonds of the bank deposited with the U. S. Treasurer. The vote of the stockholders should be taken at a meeting called for the purpose in the manner provided for in the articles of asso- ciation or by-laws. If the articles are in the usual form this may be done by publishing notice of the meeting 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. The notice should expressly state that the purpose of the meeting is to consider, and to vote upon, the question of placing the bank in liquidation. It is necessary that shareholders owning at least two-thirds of the stock vote in favor of the liquidation ; the share- holders may vote by proxj^ at this, as well as at other meetings, but a director or other officer of the bank is prohibited by law from acting as such proxy. It is usually more convenient to fix some day in the future as the day from which liquidation is to commence. The resolution to go into liquidation should read as follows* Resolved, That The National Bank be placed in voluntary liquida- tion under the provisions of sections 5220 and 5221, United States Revised Statutes, to take effect , 18 — . There may be prefixed to the resolution such recital of the reasons for the action of the shareholders as they may deem appropriate. 226 22/ The evidence to be furnished the Comptroller of the Currency of the fact of liquidation is a copy of the resolution of the share- holders ; a certificate of the cashier or president, that share- holders owning two-thirds of the stock have voted to place the bank in liquidation, and a copy of the notice calling the meeting, showing date of mailing or publication, all of which should be under seal of the bank. Notice to note-holders and other creditors to present their claims for payment should be published, as required by Section 5221 of the Revised Statutes, 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 bank is located. Notice in a weekly paper is sufl&cient. The bonds can be withdrawn as soon as the liquidation begins, provided the Comptroller of the Currency is satisfied that the bank is solvent, but the bank must first deposit with the Treasurer of the United States sufficient lawful money to retire all its outstanding circulating notes. This deposit must be made within six months from date of going into liquidation. (Sec. 5222.) If there is any tax due on the circulation, the Treasurer, before he will release the bonds, requires a return to be made of the average amount of such notes in circulation. The amount found due for such tax is usually taken out of the bank's 5 per cent. fund. Until the lawful money deposit is made to retire circulation a bank must maintain its 5 per cent. fund. When the bank has been placed in liquidation it can not transact any new business ; and the power of its officers to bind it by trans- action afterwards is only that which results by implication from the duty to wind up and close its affairs, and there is no authority on the part of the officers of the bank to transact any business in the name of the bank so as to bind its shareholders, except that which is implied in the duty of liquidation. (Richmond v. Irons, 121 U- S. , 27; Schroder v. Manufacturers' National Bank, 133 U. S., 67.) The following are copies of the forms furnished b}' the Comp- troller of the Currency for voluntary liquidation : Resolution for Voluntary Liquidation. The National Bank of , , 189—. At a meeting of the shareholders of the National Bank of , held on , 189 — , thirty days' notice of the proposed business having been given, at which sliareholders were present in person, and by proxy, representing shares of the stock of this association, it was — 228 Resolved, That " The National Bank " be placed in volun- tary liquidation, under the provisions of sections 5220 and 5221, United States Revised Statut0|i, to take effect , 189 — . The above resolution was adopted by the following vote, representing two- thirds of the capital stock of the association : Name. Residence. No. of Shares. Total Number of Shares I hereby certify that the above 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 , 189 — . [seal of bank.] , President or Cashier. Subscribed and sworn to before me, this day of , A. D. i8g — . [seal of notary.] , Notary Public. Notice to Comptroller of Liquidation. To the Comptroller of the Currency, Sir: It is hereby certified, in pursuance of sections 5220 and 5221 of the Revised Statutes of the United States, that at a meeting of the stockholders of the , located at , in the State of , duly notified and held pursuant to law and the articles of association of said bank, at the ofifice of said association at aforesaid, on the day of , 189 — , it was voted by the stockholders of said association owning two-thirds of its stock, that said association go into liquidation and be closed. In testimony whereof I have, by instruction of the board of directors of said association, hereto subscribed my name and affixed the seal of said association at aforesaid, the day and year above written. [seal of the b.^nk.] , President or Cashier. Notice to Creditors and Note Holders. The National Bank , located at , in the State of , is closing up its affairs. All note-holders and others, creditors of said asso- ciation, are therefore hereby notified to present the notes and other claims against the association for payment. Dated , 189 — . President or Cashier. [See section 5221, Revised Statutes. A certificate of the publisher that the required publication has been made, together with a slip containing notice from one issue of each paper, should be sent to the office of the Comptroller of the Currency.] CHAPTER III. EXTENSION OF CORPORATE EXISTENCE. The Act of July i2tli, 1882, provides that any National Banking Association may, at any time within the two years next previous to the date of the expiration of its corporate existence under pre- sent law, and with the approval of the Comptroller of the Cur- rency, extend its period of succession by amending its articles of association for a term of not more than twenty years. The date of expiration of the old charter is determined by the date of execu- tion of the organization certificate, as Section 5136 of the Revised Statutes provides that all associations organized under it shall have succession for twenty years from the date of the execution of their organization certificates. If the paper is lost, or the date in any way uncertain, information can be obtained on application to the Comptroller of the Currency. Under the Act of July 12th, 1882, and the regulations of the Comptroller's office, banks are permitted to file their application for extension with the proper papers at any time within sixty days prior to their expiration, and the necessary blank will be sent from that office a sufficient time in advance to enable them to do so. The following are copies of the forms : Amendment to Articles of Association. 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, we, the undersigned, share- holders of " The ," located at , in the county of and State of , owning the shares of the capital stock of said association set oppo- site our respective names, aggregating not less than two-thirds of the stock of said association, the total number of shares representing the capital stock of said National banking association being shares, do hereby consent and agree that the article of the articles of association of said National banking association be, and is hereby, amended to read as follows : * For Act of April 12, 1902, providing for re-extension of corporate existence, see page 319. 229 230 "This association shall continue until -, 19 — , unless sooner placed in voluntary liquidation by the act of its shareholders owning at least two- thirds of its stock, or otherwise dissolved by authority of law." In witness whereof, we the undersigned, have hereto set our hands. Date of Signing. Name. Address. No. of Shares. Certificate of Amendment of Article. Sir: I do hereby certify, 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, that the amendment of the articles of association to which this certificate is attached of " The ," and the consent to the same in writing, was executed in duplicate by share- holders owning not less than two-thirds of the stock of said bank; and I do further certify that the signatures of the shareholders to said consent and said amendment of the articles of association are the true and correct signa- tures of said shareholders or of their lawfully appointed attorneys ; and that one of the instruments so executed is the foregoing, and that the other, in all respects like the foregoing, is on file in said bank. [seal OF BANK.] , President or Cashier. To the Comptroller of the Currency, Washington, D. C. 18- SlR : I certify that the said amendment to the articles of association of " The " was duly recorded upon the minute-book of said association on the day of , 18 — , and that the above certificate was certified under the seal of the association in accordance with a resolution of its board of directors, duly adopted at a meeting of said directors on the day of , 1 8-. [seal of bank.] , To the Comptroller of the Currency, Washington , D. C. Cashier. Sir : I hereby request the Comptroller of the Currency to approve the enclosed amendment of the articles of association of this bank, extending its corporate existence for twenty years, pursuant to the provisions of the act of Congress entitled "An Act to enable National Banking Associations to 231 extend their corporate existence, and for other purposes,'' approved July 12, 1882. The amendment is accompanied by the certificate required by law. Very respectfully, , President or Cashier. To the Comptroller of the Currency, Washington, D. C. The law does not require that a meeting of the stockholders shall be held ; it is sufficient to secure the consent of those representing two- thirds of the stock, and this may be done by sending in ad- vance to each stockholder a power of attorney to be signed and returned by him, some person other than any officer of the bank being empowered to act as attorney. The following form may be used for this purpose : 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, and I hereby consent that tlie 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." Hereby granting unto my said attorney full power and authority to act in and concerning the premises as fully and efifectually as I might do if person- ally present. In witness whereof I have hereunto set my hand and seal this day of , in the year one thousand eight hundred and eighty-two. Signed and sealed in presence of These powers of attorney, signed by the stockholders, should be sent to the Comptroller with the amendment to the articles of asso- ciation on which their names, signed by their authorized attorneys, appear. If preferred, a stockholders' meeting maj' be called for a con- venient date in order to vote for the extension and to sign the necessary papers. Notice of the meeting should be sent by mail to each stockholder, and may also be announced by publication. At this meeting the stockholders may appear in person or by attorney, the power given 232 to the latter being similar in form to that inserted above. In exe- cuting and forwarding the papers the following instructions must be strictly observed : The certificate of the president or cashier, certifying that stock- holders owning at least two-thirds of the stock have consented, in writing, to the amendment, should be executed, in duplicate, and one copy transmitted to the Comptroller, together with the letter applying for approval of the Comptroller, at least one month previous to the expiration of the corporate existence of the bank, in order that the Comptroller may have sufficient time to cause the special examination to be made, as required by Section 3 of the Act of July 1 2th, 1882. If any shares of the bank stand in the name of administrators, executors, trustees, or guardians, and it becomes necessary to have the vote of these shares to make up the majority required to au- thorize the amendment, duly certified copies of the legal appoint- ment of such administrators, executors, trustees, or guardians should be forwarded to the Comptroller of the Currency. When stock voted for the amendment stands in the name of an assignee there must be evidence showing that the shares of stock have been regularly transferred to him, as such assignee, on the books of the bank. When the amendment is signed by an attor- ney acting for shareholders, properly executed powers of attorney must be furnished. Soon after the papers, properly executed, have been received in his office, the Comptroller will order the special examination re- quired by Section 3. This examination must be paid for by the bank, and if the report is favorable the Comptroller will issue his certificate of extension. After the extension has been granted, the law requires that all circulating notes issued to the bank after the date at which the new period of succession begins shall be of different devices from those issued before ; and this necessitates the procuring of new plates, which will be prepared at the expense of the bank. This expense will be ^50 for each plate of two impres- sions and $75 for each plate of four. (See 'page 211.) A blank to enable banks to order the preparation of plates for the printing of new circulation will be furnished, and the order should be made out and sent with the application for extension. No transfer of bonds is necessary, as the extended association is in all respects identically the same as before extension, and is merely placed in the same position as if the law had allowed it at 233 the outset forty years from the date of its organization, of which twenty have expired. The new circulating notes will be issued as the old come in by the usual course of redemption, until the end of three years from the date of extension, when the law requires the bank to deposit lawful money for the redemption of such por- tion of the old circulation as may then remain outstanding. [The full deposit may be made at once or in instalments, or at end of three years.] As new circulation will be immediately issued in place of that for which lawful money is thus deposited, there need be little inconvenience on this account. All that is necessary is to see that the printing of circulation in blank is ordered in advance, so that it may be ready when wanted. Officers' Bonds. — Although the bank is the same bank after extension as before, it is perhaps best to renew the bonds of the officers, tellers, &c., as there might be a question whether the sureties, as bondsmen signing before the extension, could claim they were not liable in not having contemplated the existence of the bank for a longer term than twenty years. Stockholders Not Desiring to Extend the Association. — Some stockholders may not vote for the extension, and some may wish to withdraw the amount of their stock. Section 5 of the Act of Jul}' 12th, 1882, provides for such cases- Reorganization May be Preferable. — The foregoing instruc- tions apply to the extension of the bank on a condition which legall}^ is in all respects identical to what it was at its first organi- zation. It may, however, be deemed best by those principally interested in National banking associations about to expire not to avail them- selves of the foregoing method. The reasons for this are obvious. In a twenty years' life the personnel of the stockholders of an as- sociation undergoes great changes. The stock which was origin- ally in the hands of active resident business men, who brought custom and business to the bank, by various vicissitudes falls into the possession of widows, heirs, and non-residents, whose only interest in the institution is to draw dividends. The active stock- holders remaining in such a.s.sociations will doubtless prefer in many instances to let the old as.sociation expire, and, with their proportion of the capital, joining v.ith themselves other new capi- talists such as they may think will add strength, form a new asso- 234 elation to occupy the place vacated by that which has expired. A proviso iu Section 5 of the Act of July 12th, 1882, prevents the use of the old name for such a new association unless all the stock- holders in the old bank are assigned shares in the new bank pro- portionately to those they held in the old. It will therefore be necessary to take a new name in such cases. The new associates should make application to the Comptroller, obtain the new name desired, execute articles of association and an organization certificate, and file these papers, with an order for cir- culation, in the office of the Comptroller of the Currency about a month prior to the expiration of the existence of the old bank. Fifty per cent, of the capital should be paid in, so as to be certi- fied to the Comptroller at the same time bonds are deposited^ which should be done a few days before the old bank expires. Everything being ready, the new bank can be authorized to commence business on the day of the expiration of the old asso- ciation. The stockholders of the new bank can put into it such moneys as they derive from the old. The assets of the old bank can be sold in such manner by its directors as will realize the most for its stockholders, and in many instances it is advantageous to sell to the new bank such portion as can be legally taken by it. It can- not take any real estate except banking house. It is likewise for- bidden to take real estate paper or mortgages, or mortgage paper ; and it cannot, of course, take any paper or assets of any kind known to be bad or worthless. No old stockholder can be com- pelled to take stock in the new bank, and no transfer of deposits can be made from the books of the old bank to those of the new without the consent of the depositors, manifested by their deposit of checks on the old bank. A set of new books must be opened by the new association. Liquidation of Old Association. — The Act of July 12th, 1882, provides that the liquidation of the old association may be legally continued after its expiration, and its franchise is extended for this sole purpose imtil all its assets are sold and the proceeds dis- tributed among its creditors or stockholders. The liquidation is to be superintended by its board of directors, and the board should be kept up in the same manner as in a bank doing business, until all moneys have been collected and distributed. Banks permitting their corporate existence to expire without 235 extension are required to furnish notice to the Comptroller's oflBce, and also to publish notice. [See also Supplement.] The following are copies of the forms furnished by the Comp- troller of the Currency : Certificate of Closing on Expiration of Charter. National Bank , , 189-. To the Comptroller of the Currency, Washington, D. C. Sir : It is hereby certified, in pursuance of sections 5220 and 5221 of the Revised Statutes of the United States, that the corporate existence of " The ," located at , in the State of , having expired at close of business on the day of , 189-, 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 affixed the seal of said association at aforesaid, the day and year above written. [seal of the bank.] , President or Cashier. Notice. 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 , 189-. 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 , 189-. Note, — The above 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 section 5221, Revised Statutes. A certificate of the publisher that the required publication has been made, together with a slip containing notice from one issue of each paper, should be sent to the office of the Comptroller of the Currency. CHAPTER IV. NATIONAL BANKS AS U. S. DEPOSITARffiS. The National Bank Act under Section 5153 provides for the designation of National banks as depositaries for Government funds, other than receipts for customs. A National Bank wishing such designation must make applica- tion in writing to the Secretary of the Treasury, as the statute provides that the designation be made by him. Before making application a bank should have good evidence that the Government receipts in the place or section in which the bank is located, justify making such application, the Secretary being governed in designating depositaries by the necessities of the public service. As a rule one depositary is suflScient in a district. As regards the security required of National banks as depositar- ies, the law states : " The Secretary of the Treasury shall require the association thus designated to give satisfactory security by the deposit of United States bonds and otherwise." Therefore, with the exception that a portion of the security at least shall be in Gov- ernment bonds, it is left, as to the amount and kind to the discre- tion of the Secretarj'- of the Treasury. As to the kind of security : the present requirement is that it shall be United States bonds. As to the amount of security : no bank will be designated on less security than $50,000, and a larger amount is required if needed for the protection of deposits. Section 3620 of the Revised Statutes gives certain discretionary power to the Secretary of the Treasury as to the deposit of funds of disbursing officers. Under this section, the Secretary may authorize such deposits to be made in a National Bank designated as a depositary, in any place where there is no sub-Treasury ; but no such bank is authonzed to receive such deposits except- ing as specially designated for the purpose. The bank's designation as a depositary under section 5153 is not sufficient. 236 237 Section 4046 provides for the deposit of funds of Postmasters under the direction of the Postmaster-General in a National Bank depositary. It is sometimes a convenience for the Post Office Department to use a depositary for this purpose, but this is not often the case, as there is a general regulation of the Department for Postmasters to deposit with the central Post Offices in their several sections. For instance the Post Offices in the vicinity of Balti- more transfer their funds to the Post Office of that city. Section 3847 authorizes a Postmaster in any place where there is no Gov- ernment depositary to deposit funds in any National Bank at his own risk in his official capacity. The following are the sections of the Revised Statutes relating to this subject ; also the regulations of the Secretary of the Treas- ury governing National banks as depositaries of Government funds : Section 5153. — Designation of National Banks as United States Deposi- taries. — All national banking associations, designated for that purpose by the Secretary of the Treasury, shall be depositaries of public money, except receipts from customs, under such regulations as may be prescribed by the Secretary; and they may also be employed as financial agents of the Gov- ernment ; and they shall perform all such reasonable duties, as depositaries of public moneys and financial agents of the Government, as may be required of them. The Secretary of the Treasury shall require the associa- tions thus designated to give satisfactory security, by the deposit of 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 agents of the Government. 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. Section 3620. — Concerning Disbursing Officers' Deposits. — It shall be the duty of every disbursing officer having any pubhc 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 pursuance of law ; and draw from 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 Treasurer 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- tions as he may deem most safe and effectual to faciUtate the payments to public creditors. 238 Section 4046. — Postmasters Depositing with Depositaries. — Every post- master, assistant, clerk, or other person employed in or connected with the business or operations of any money-order ofifice 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 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 Secretary of the Treasury for that purpose, to his own credit as post- master, any money-order or other funds in his charge, nor prevent his nego- tiating 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 regula- tions 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.* Section 3847. — Postmasters' Deposits, IVJiere no Depositary. — Any post- master, having pubhc 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 own risk and in his official capacity, in any National bank in the town, city, or county where the said postmaster resides ; but no authority or permission is or shall be given for the demand or receipt by the postmas- ter, or any other person, of interest, directly or indirectly, on any deposit made as herein described; and every postmaster who makes any such deposits 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. Section 5488. — Penalty for Unauthorized Deposit of Public Money.— 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 converts to his own use in any way whatever, or loans with or without * The Post Office Department has had occasion in only three or four instances to use National Bank depositaries for post office deposits, the post offices in central localities receiving the deposits of the smaller offices. 239 interest, or for any purpose not prescribed by law withdraws from the Treas- urer or any assistant treasurer, or any authorized depository, or for any pur- pose 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 embezzle- ment of the money so deposited, converted, loaned, withdrawn, transferred, or apphed ; and shall be punished by 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. Section 5497. — Pe7ialty for Unauthorized Receiptor Use of Public Money . — 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 banking association, who violates any of the provisions of this section, is guilty of an act of embezzlement of the pubhc 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. Regulations for the Deposit of Public- Moneys. Department Circular No. 90, Division of Public Moneys. The following regulations, based upon specific provisions of existing laws, for the violation of which penalties of a severe character are provided, are hereby prescribed, and a strict com- pliance therewith enjoined : Collections. — Collectors and surveyors of customs, collectors of internal revenue, and receivers of public moneys, Uving in the same city or town with the U. S. Treasurer or an ass't t'r, or a national bank depositary, must deposit their receipts at the close of each day. Officers at such a distance from a depositary that daily deposits are impracticable must forward their receipts as often as they amount to $i,ooo, and at the end of each month without regard to the amount then accumulated. • All collections must be deposited to the credit of the Treasurer of the U. S., except moneys received by collectors of internal revenue from sales under section 3460, Revised Statutes, or from offers of compromise when received prior to the acceptance of the offer, which must be deposited to the credit of the Secretary of the Treasury. District attorneys, marshals, and clerks of courts, who receive public moneys accruing to the United States from fines, penalties and forfeitures, 240 fees, costs (including costs in civil and criminal suits for violation of the postai laws), forfeitures of recognizances, debts due the United States, interest on such debts, sales of public property, or from any other sources, except as stated below, will deposit the same in accordance with the foregoing para- graphs. Moneys accruing from customs (including navigation) should be paid to the collector or surveyor of customs of the district in which the case arose, a receipt accepted therefor to be sent to the Solicitor of the Treasury. Moneys accruing from internal revenue cases should be paid to the collector of internal revenue of the district in which the case arose, a receipt accepted therefor to be sent to the Commissioner of Internal Revenue. Moneys accruing from civil post office suits and fines in criminal cases for violation of the postal laws should be deposited to the credit of the Treasurer of the United States for the use of the Post Office Department. The department encourages the practice of a deputy collector depositing directly with a depositary in the name of his principal, believing that greater economy and dispatch will thereby be attained. In such cases the deputy will see that certificates are issued in the name of the collector for whom he is acting, to whom he should forward the portion of the set received by him from the depositary. Disbursing officers or agents must deposit disbursing funds to their official credit and draw upon such funds in their official capacity only. Unless otherwise directed, they must deposit such moneys with the Treasurer or an assistant treasurer of the United States, or a National bank depositary if specially authorized by the Secretary of the Treasury for that purpose under the provisions of section 3620, Revised Statutes of the United States. In case no such special authority has been given to a convenient depositary, applica- tion should be made to the Secretary of the Treasury for such authorization. Reference is hereby made to Department's Circulars of March 12, 1889, relative to the transportation of public moneys by express; August 24, 1876, relative to disbursing funds, November 28, 1879, and June 2, 1882, relative to offers of compromise, and June 11, 1896, concerning the issuance and dis- position of certificates of deposit ; also, to Act of Congress of January 22, 1894, sections 3216, 3218, 3617, 3620, 3621, (as amended by Act of May 28, 1896,) 3625, and 5481 to 5505, inclusive, of the Revised Statutes of the United States. This circular supersedes circular regulations for the deposits of public moneys, dated January 12, 1888. Disposition to be Made of Certificates of Deposit. Department Circular No. 89, Division of Public Moneys. Section 3621, Revised Statutes of the United States, as amended by sec- tion 5 of the Legislative, Executive, and Judicial Appropriation Act, approved May 28, 1896, requires tliat the Treasurer and assistant treasurers of the United States and all National bank depositaries shall transmit forthwith to 241 the Secretary of the Treasury the original of every certificate of deposit issued by them and dehver to the depositor the remainder of the set. Accordingly the instructions on this subject contained in Department Cir- cular No. i8, dated February 2, 1894, are hereby revoked and the following regulations are hereby prescribed, to take effect July i, 1896, The originals of all certificates issued for the deposit of any and all public moneys of every character and description, except as stated in the next suc- ceeding paragraph, must be forwarded immediately upon their issuance to the Secretary of the Treasury by the depositaries, who, before transmitting them, should see that their amounts correspond with the amounts actually deposited with them. Exceptions. — Those issued by an assistant treasurer for the shipment of silver coin, in duplicate, the original to be transmitted by him to the office from which the coin is to be shipped, and the duplicate to the depositor; those issued by a Nat'l B'k depositary for shipment of silver coin, in dupli- cate, the original to be transmitted by the depositary to the Treasurer of the United States and the duplicate to the depositor ; those issued for five per cent, redemption fund and for the transfer of funds from one depositary to another, in duplicate, the original to be transmitted by the depositary to the Treasurer of the United States and the duplicate to the depositor: and those issued for the deposit of moneys pertaining to the Post Ofifice Department, in duplicate, the original to be transmitted by the depositary to the Auditor for the Post Ofifice Department and the duplicate to the depositor. Certificates of deposits should be issued and disposed of as hereinafter provided, and in no case should a second or duplicate set of certificates be issued for any deposit, except upon special authority from the Secretary of the Treasury, viz. : Customs Certificates in name of customs officers where naval officers are located, duties on imports, etc., including repayments of disbursing funds, in triplicate ; those issued in the name of customs officers at other ports, in duplicate ; the originals of the former class to be transmitted by the depositary to the Secretary of the Treasury, the duplicates to the naval officers and the triplicates to the depositors ; and of the latter class, the origi- nals to the Secretary of the Treasury and the duplicates to the depositors. (This section does not concern National Bank Depositaries.) Internal Revenue Certificates in name of collectors of internal revenue for internal-revenue, internal-revenue stamps, or repayments of disbursing funds, in triplicate ; the original to be transmitted by the depositary to the Secretary' of the Treasury and the remainder of the set to the depositor who should forward the duplicate to the Commissioner of Internal Revenue and retain the triplicate. Sales of Public Lands, etc. — Those issued in the name of receivers of public moneys for sales of public lands, etc., including repayments of dis- bursing funds, z« triplicate; the original to the Sec'y of the Treasury and the remainder of the set to the depositor, who should forward the duphcate to the Commissioner of the General Land Office and retain the triphcate. 16 242 Judiciary. — Those issued in the name of judicial officers, district attor- neys, marshals, clerk of court, etc., in duplicate ; the original to the Secretary and the duplicate to the depositor. Army and Navy. — Those issued in the name of military or naval officers, on account of repayments, sales of public property, or otherwise, in duplicate ; the original to the Secretary and the duplicate to the depositor. Surveys of Public Lands. — Those issued on account of surveys of public lands, in triplicate; the original to the Secretary, and the remainder of the set to the depositor, who should forward the duplicate to the Surveyor-Gen- eral and retain the triplicate. Patent Fees. — Those issued on account of patent fees, in triplicate ; the original to the Secretary, and the remainder of the set to the depositor, who should forward the duplicate to the Commissioner of Patents and retain the triplicate. Semi-Annual Duty. — Those issued on account of semi-annual duty, in tri- plicate ; the original to the Secretary, and the remainder of the set to the depositor, who should forward the duplicate to the Treasurer of the U. S. and retain the triplicate. Missing Coupons. — Those issued on account of coupons missing from bonds forwarded for redemption, or otherwise, in duplicate ; both the original and duplicate to be transmitted by the depositary to the Secretary of the Treasury. Miscellaneous Receipts. — Those issued on account of subscriptions to any loan, repayments of interest on public debt, civil repayments, except as hereinbefore otherwise provided for, consular fees, miscellaneous and other receipts, in duplicate ; the original to be transmitted to the Secretary of the Treasury and the duplicate to the depositor. Special Accounts, Secretary of the Treasury. — Those issued for deposits to his credit in special accounts Nos. I and 5, in triplicate ; the originals to be transmitted by the depositary to the Secretary, and the remainder of the set to the depositor ; those issued to the credit of the Secretary of the Treasury, special account No. 3, in duplicate, the original to be transmitted by the depositary to the Secretary and the duplicate to the depositor. The depositor should forward the duplicate pertaining to account No. i to the Commissioner of Internal Revenue and retain the triplicate ; he should forward the duplicate pertaining to account No. 5 to the Solicitor of the Treasury and retain the triplicate ; he should retain the duplicate pertaining to account No. 3. Disbursing Officers' Receipts. — For each deposit made to the official credit of a disbursing officer a single receipt should be issued and delivered to the depositor. GENERAL REMARKS. In no case are certificates of deposit required to be filed with accounts rendered by Government officers to the accounting officer of the Treasury Department, nor does such a disposition of any certificates of deposit secure 243 to the officers transmitting them proper credits in their accounts. Credit for deposits is given officers in the settlement of their accounts only upon war- rants issued by the Secretary of the Treasury, based upon the report of the depositary and verified by the original certificate of deposit. In taking credit in their accounts current, however, for money deposited, officers should state specifically the date of deposit, with whom deposited, and the source from which the money was derived. All original certificates issued for deposits by military, naval, and other officers, the amounts of which are required to be recorded in any of the bureaus of the War, Navy, Interior, or other Executive Departments, will, immediately upon their receipt by the Secretary of the Treasury, be com- pared with the proper depositary account, recorded, and forwarded to the head of the Department to which the deposits pertain for designation of the proper appropriations, etc. PART THIRD. CHAPTER I. REPORTS TO THE COMPTROLLER OF THE CURRENCY. [The Comptroller of the Currency requires that National banks use cnly the printed forms furnished by his office. Written forms sent by the banks will not be accepted.] REPORT OF CONDITION. (For form containing items explained in the text, see pages 249-252.) RESOURCES. Loans and Discounts. — These should embrace paper of all kinds repre- senting money loaned by the bank. A schedule of the various classes of paper composing the total, should be made in the form for same, on the back of the report ; and in making up this schedule especial care should be taken to give a description of properties covered in loans " on mortgages and other real estate security," if any such occur, and to furnish full information as to the following : " Bad debts, as defined in section 5204, R. S." " Other suspended and overdue paper.'' " Liabilities of directors (individual or firm) as payers," Overdrafts. — Enter the total of balances of all depositors' accounts which are overdrawn. These should be carefully classified in the proper schedule on the back of report. While overdrafts are unavoidable under certain local condidons of business, they should, as a rule, not be allowed. When such accommodation to a responsible customer is called for, a demand note should be taken for the loan, the customer credited, and bills receivable charged. If a certain maximum temporary credit is wanted to draw against, let a demand note be given the bank, the amount passed to the customer's credit, and in the settlement the customer charged interest for the amount checked out : United States Bonds to SecJtre Circulation ( par Talue). United States Bonds to Sea/re Deposits {par value). United States Bonds on Hand {par -,'alue). 244 245 Enter these at their par value, taking care to indicate by the interest rate the class in each case. If more than one kind is held for any one of the purposes named, state the amount and class of each kind separately. Premium on Bonds for Circulation — Premium on Other U. S. Bonds. — En- ter the premium on U. S. bonds only at the actual market value of same, taking care to state the premium on bonds held "for circulation '' separately from that on "other U. S. bonds." Premium on bonds of any other kind, on stocks, etc., must not be entered here, but included in item of " stocks, secu- rities, etc.'' Stocks, Securities, Judgments, Claims, etc. — This should embrace secu- rities of all kinds (other than U. S. bonds) which are owned by the bank, vft., bonds, stocks, chattel mortgages, judgments, claims, etc. Securities held as collateral for loans must not be entered here. Any real estate secu- rities owned by the bank must be entered with " other real estate." These securities, etc., should be entered in the report at the values at which they stand on the books of the bank, and the " book " value should always repre- sent the actual " market'' value, as nearly as possible. All the items com- posing the total should be listed in the proper schedule on back of the report. Banking House. — Enter at its market value, as nearly as possible, only such real estate held by the bank under Section 5137, " necessary for its im- mediate accommodation in the transaction of its business," and no other. Furniture and Fixtures. — Enter at their actual value to the bank all fur- niture and fixtures used in the conduct of its business. Other Real Estate and Mortgages Owned. — Give the market value of all real estate (except the banking-house property) owned by the bank and held by virtue of any deed, mortgage, vendor's lien, or other instrument in writ- ing. Any real estate securities not owned by the bank, but held by it as col- lateral for loans, should not be included here, but in "loans and discounts," and scheduled in the proper place on back of the report. All transactions in real estate should be made in strict conformity with the provisions of Section 5137, which clearly defines the purposes for which banks " may purchase, hold, and convey" real estate, the evident intent of the restrictions there imposed was to prevent banks from investing their resources in a form which was not readily convertible. Due from National Banks — Not Approved Agents. — Enter the total of balances <\\x& from such National banks as are not " approved reserve agents." Due from State and Private Banks and Bankers. — Enter the total of bal- ances due from such banks and bankers, as distinguished from National banks. It has always been held by the Comptroller's office that, as these in- stitutions are either corporations, firms, or individuals, any balance held by them in excess of one-tenth of the capital stock of the bank must be regarded as an excessive loan made in violation of Section 5200. All such excessive balances should, therefore, be entered in schedule for " loans exceeding the limit prescribed by Section 5200," etc., on the back of the report. Due from Approved Reserve Agents. — Enter the total of balances due /ro?H such National banks as have been approved as " reserve agents " by 246 the Comptroller and balances due from such banks only. Take care to enter in the proper schedule on the back of report the name of each such " reserve agent," the locatio7i of same, and the balance due from it. If reciprocal ac- counts are kept with " reserve agent " banks, only the net balances due from such banks (if any) should be included under this item. Checks and Other Cash Items. — This should include only such items as are readily convertible into cash, and no others. Items of expenses and taxes paid, dishonored drafts and checks, overdrafts, and similar items should be charged to appropriate accounts. Be careful to schedule items on back of report, properly classified, and see that the statements in schedule of these items on back of report and of all schedules agree with face of the report. Exchanges for Clearing-House. — These are checks or drafts on banks which are members of a clearing-house, and will occur only in the case of a bank located in a place where there is a clearing-house. Bills of Other Banks. — Enter circulating notes issued by other National banks, and these only. If a bank has any notes of its own issue on hand, they must be entered under "Notes received from Comptroller'' in "lia- bilities." Fractional Paper Currency, Nickels and Cents. — Silver fractional currency must 7iot be included here, but under " specie." Specie. — Enter only coin (but not nickels, or cents) and certificates repre- senting coin, taking care to state the amount of each kind in its proper place in schedule. In order that this may be accurately done at any time, every bank should keep a daily record of such items in this form. Legal-Tender Notes. — Enter only U. S. Treasury "legal-tender" notes, taking care not to include any " National-bank '' notes. U. S. Certificates uf Deposit for Legal Tender Notes (Section 5193, R. S). — These are certificates issued by theU. S. Treasury for " legal-tender " notes deposited there, under the provisions of Section 5193, by National banks, and may be in multijiles of $5,000. Redemption Fund with U. S. Treasurer (not more than 5 per cent, on circulation). — Enter the actual amount on deposit with the Treasurer of the U. S. for the redemption of circulation issued by the bank for which it is ^ill liable. Due from U, S. Treasurer (other than 5 per cent, redemption fund). — This is intended to include any amounts due to the bank from the U. S. Treasurer (other than 5 per cent, fund), such as notes of other National banks or other forms of currency or bonds forwarded to him for redemption. LIABILITIES. Capital Stock Paid In. — Enter only "capital stock paid in " for which a certificate has been received from the Comptroller. " Capital stock paid in " for which no certificate has been received by the bank at date of call for report must not be included here, but entered in the line below as stock " not certified to.'' 247 Surplus Fund. — This should show whatever amount has been placed to the credit of this fund in accordance with the requirements of Section 5199. Undivided Profits. — This should represent such profits as have not been applied to the payment of expenses, losses, increase of surplus fund (where still necessary), or of dividends. Profits from all sources should be collected under this head. Current Expenses and Taxes Paid. — This should embrace all items of ex- penses and taxes paid, but not charged off to " undivided profits," and the total deducted from that item to give net undivided profits. Circulating Notes Received from Comptroller. — Enter the total of circula- tion outstandingyi^r which the ba7ik is still liable. A bank is no longer hable for circulating notes for the redemption of which it has deposited lawful money with the U. S. Treasurer. Should it have any of its own notes *' on hand'' or "in Treasury for redemption or in transit," they should be de- ducted here from the total circulation received. State Bank Circulation Outstanding. — This will apply only in the case of State banks converted to National banks, and refers to circulating notes issued by such banks prior to their conversion. Dividends Unpaid. — Enter the total of dividends, if any, to credit of share- holders on books of the bank not yet called for by them. Individual Deposits Subject to Check — Demand Certificates of Deposit — Time Certificates of Deposit — Certified Checks — Cashier's Checks Outstand- ing. — These embrace all classes of deposits (other than those of the U. S. or its disbursing officers). They should be carefully classified, according to char- acter. If certificates of deposit have been issued for " money borrowed " by the bank, they should not be entered here, but in the item of " bills payable."' " Overdrafts," if any, should not be deducted from the total amount at credit of deposits, but should be stated separately under item of "overdrafts." U. S. Deposits. — Enter the total of deposits made by the U. S. Government other than those made by its disbursing officers. Deposits of U. S. Disbursing Officers. — Enter only such deposits of Gov- ernment funds as are subject to check by its disbursing officers. Due to Approved Reserve Agents. Due to Other National Banks. — Enter the total of all balances due to other National banks. Any amount which represents money borrowed for a stated period of time from another bank should be entered below in item of "bills payable." Due to State and Private Banks and Bankers. — This should embrace all balances due to such banks and bankers. Remarks as to " money bor- rowed " made in preceding paragraph are applicable here also. Notes and Bills Rediscounted. — This should include any portion of the " loans and discounts" which has been rediscounted by the bank for which it may be in any way liable, by indorsement or otherwise. While circum- stances render rediscounts necessary at times, the resources of the bank 248 should not be too largely used in this way, ana only for short periods of time, to supply temporary demands of good customers. Bills Payable. — Enter the total amount of " money borrowed " by the bank, which is represented either by its note, certificate of deposit, or other instru- ment issued by it, or by any credit given it by any bank or banker which is intended as a loan to it for any stated period of time. Money borrowed by means of " rediscounts '' or " bills payable " (as defined in this paragraph) if it exceeds the amount of the capital stock, is in violation of section 5202. Other Liabilities (Miscellaneous). — This total is intended to represent small items. If it includes any large items, specify what they are. Average Reserve and Interest. — See that the "average reserve" for the thirty days preceding the date of the call is entered in the proper place on back of the report, as also "the highest rate of interest paid by the bank " on any money deposited with or borrowed by it. Suggestions. — Before the report is signed, see that the footings of "lia- bilities " and "resources" balance; and that the items on each side are in their proper places ; all schedules on back of the report properly filled out ; and that the total of items in each schedule agrees with item in the face of the report. Where there are no items to be entered in any schedule on the back of report, write the word " none," as items are frequently omitted through inadvertence, and correspondence is made necessary thereby. Give number and name of bank on each loose schedule of report. An exact copy of the report should always be retained by the bank. Oath and Attestation. — The report must be sworn to by the president or cashier (not the assistant' cashier ),a«^ no other officer of the bank is qualified to do this. The attestation must be by three directors, and the officer sign- ing the report must not attest to its correctness as a director, and his oath must be acknowledged before an officer having an official seal, and not an officer of the bank. See Sec. 521 1 and act February 26, 1881. Publication of Reports. — Reports must be published in a newspaper of the place, or, if it has none, in one in the nearest place in the same county, and proof furnished of publication to the Comptroller. (See Section 521 1.) The Comptroller furnishes a convenient form for printer's " copy." The report must not be condensed for pubHcation, but conform fully to report sent the Comptroller, excepting the schedules on back. The form of affidavit required for proof is furnished to the banks when reports ;ire called for, and the instructions therewith must be strictly complied with. 249 No. of Bank, Form of Report Required by Dr. Report of the condition of " The -," at , in the State 2. 3- 5- 6. 8. 9- lo. II. 12. 14. 15- 16. 17- 18. 19. Resources. Loans and discounts on which officers and direct- ors are liable (see schedule) $ Loans and discounts on which oflScers and directors are not liable $ Overdrafts, secured, $ .unsecured, | , (see schedule) United States bonds lu secure circulation (par value), percenLs, percents. Dollars CmIs United Slates bonds to secure United States deposits (par value), percents United States bonds on hand (par value), percents . . Premium on bonds for circulation, $ ; premium on other United States bonds, $ Stocks, securities, etc., including premium on same (see Schedule) Banking house $ ; furniture and fixtures $ Other real estate and mortgages owned (see schedule) . Due from National banks (not approved reserve agents) Due from State and private banks and bankers Due from approved reserve agents ( see schedule) . . . Checks and other cash items (see schedule) Exchanges for Clearing-house Bills of other National banks P>actional paper currency, nickels, and cents Lawful money reserve in bank, viz. : Gold coin $ ■ Gold Treasury certificates . . . $ . Gold clearing-house certificates . $ . Silver dollars $ ■ Silver Treasury certificates . . . $ Fractional silver coin $ ■ Specie, viz. Total Specie $ Legal-tender notes $ United States certificates of deposit (see section 5193, Revised statutes) $ Redemption finid with United States Treasurer (not more than 5 per cent, on circulation) Due from United States Treasurer Total I, of " The do solemnly swear that the above state- ment is true, and that the schedules on back of the report fully and correctly represent the true state of the several matters therein contained, to the best of my knowledge and belief. > Cashier. Correct. Attest : , ) _ _ , >■ Directors. [SEAI..] j State of , County of- Sworn to and subscribed before me this day of • 189- 250 the Comptroller of the Currency. of- -, at the close of business on the day of- -. jSg-. Cr. 4- 5- 6. 7. 8. 9. 10. II. 12. 13- 14. 16. 17- 18. 19- Liabilities. 1. Capital stock paid in 2. Surplus fund 3. Undivided profits Less current expenses and taxes paid I % Dollars. Circulating notes received from Comptroller . . . Less amount on hand and in Treasury for re- demption or in transit State bank circulation outstanding Due to National banks (not approved reserve agents) Due to State and private banks and bankers .... Due to approved reserve agents (see schedule) . . Dividends unpaid Individual deposits subject to check % Demand certificates of deposit % . Time certificates of deposit 5 • Certified checks $ . Cashier's checks outstanding % ■ United States deposits Deposits of United States disbursing officers Notes and bills rediscounted Bills payable, including certificates of deposit representing money borrowed Liabilities other than those above stated . . • Total Cents. Note i. — This report is to be made at such times as may be designated by the Comptroller of the Currency; to be sworn to by the president or cashier, not by any other officer; attested by not less than three directors, and for- warded to the Comptroller of the Currency without delay. Each day's delay, after five days, will subject the bank to a penalty of one hundred dollars. See Sections 5211 and 5213, Revised Statutes of the United States. Note 2. — Be careful to make full entries — writing No, after any item, for which there is no amount to enter. 251 SCHEDULES. Fill all schedules, writing in the word "none" wherever no amount is to be entered. Loans and discounts. {Including loans and discounts on which officers and directors are liable.') On demand paper with one or more individual or firm names % . On demand, secured by stocks, bonds and other personal securities I • On time, paper with two or more individual or firm names . $ . On time, single-name paper (one person or firm) without otiier security $ • On time, secured by stocks, bonds, and other personal se- curities I . On time, on mortgages or other real-estate security (see schedule) % • Total Included in the above are — Bad debts, as defined in sec. 5204 R. S., % Other suspended and overdue paper . . | Liab'sofdirec's(indi'landfirm) as payers | Enter amount in each of these three items, or write in word "none " if no amount to enter. Loans exceeding the limit p7'e scribed by section 5200 of the Revised Statutes, including amounts which exceed this limit due frotn State and private banks and bafikers. Name of borrower. Enter (uU amount of loan. Name of borrower. Enter full amount of loan. Overdrafts. or Secured : Standing twelve months over Standing six months or over Standing three months or over Temporally Officers and directors . . . Unsecured : Standing twelve months or over Standing six months or over Standing three months or over Temporary Ofl&cers and directors .... Stocks, Securities, etc. , {Stocks, Bonds, Claims, fudgments, and similar items should be included under this head.) Enter number shares of stock or face v:ilue of bonds. Name of corporation issuing stock, bonds, etc. Amount at which carried on books. Estimated actual market value. State whether taken for ' debts previously contracted " or other- wise. 252 From — Balances due from or to approved reserve agents. To— Enter name and location of bank. Amount. Enter name and location of bank. Amount. Checks and other cash items. Checks and drafts on banks, etc., in this city Checks and drafts on other banks Average reserve and interest. Average reserve for last thirty days (in bank or with reserve agents) was per cent, of deposits and bank balances. The highest rate of interest paid by the bank on deposits is per cent., on bills payable is per cent.. on notes and bills rediscounted is per cent. Other Real Estate and Mortgages Owned. Describe property, state form of con- veyance, and from whom obtained. Amount at which carried on books. Amount of prior lien on prop- erly, if any. Estimated actual value of property. Date when acquired. State whether ta- ken for " debts pre- viously contracted, ' or otherwise. Loans and Discounts, Secured by Mortgages or other Real Estate Security. Describe property, state form of convey- ance, and from whom obtained. Amount at i Amount of which j prior lien carried on on prop- books, erty, if any. Estimated actual value of property. Date when acquired. State whether ta- ken for "debts pre- viously contracted," or otherwise. Certificates of Deposit represe?iting money borrowed. To whom issued Amount. Demand. Time. Rate of Interest. Liabilities of Officers and Directors. Mames of Officers and Directors. Liability (individual or firm) as payors. Liability (individual or firm) as iiidorsers or guarantors. Overdrafts. No. Shares Stock Owned. 253 REPORT OF EARNINGS AND DIVIDENDS. For form see page 256. Blanks for making up this report are furnished from the office of the Comi>- troUer of the Currency. In filling out the heading of the blank report be careful to enter — First. Charter number of bank. Second. Date at which dividend period ends. Third. Date of rf(ff/ara/xi?n of dividend. Fourth. Date at which divi- dend is /ayaiJ/zr. Fifth. Enter exact capital at date period ends. I. Gross Earnings Since Last Report. — This should represent the total of gross profits from all sources earned during the dividend period covered by the report, such as discount, interest, exchange, rents, etc., but no part of undivided profits earned during former periods should be included in this item. a. Losses Recovered Since Last Report (if any). — This item requires no explanation. Any profits realized which the bank desires to show separately can be entered specially after the item. Add these two items together, and from their sum deduct the following : 3. Premiums on Bonds Charged Off Since Last Report. — In case of any decrease in the market value of any United States bonds owned by the bank occurring during the dividend period, such decrease should be charged off on the books of the bank and the amount entered here. 4. Losses Sustained Through Bad Debts, Decrease of Values, etc., Since Last Report. — Any losses sustained on " loans and discounts " during the dividend period, and any decrease in the value of banking house, furniture and fixtures, other real estate, securities of any kind owned by the bank, and the amount of any bad debts, as defined by section 5204, should be included here. 5. Expenses and Taxes Paid Since Last Report. — Enter here the sum of all expenses and taxes paid since last report, whether they have been charged off or not. The sum of items 3, 4, and 5 should be deducted from the sum of items r and 2, and the result will be item 6, which, added to 3, 4, and 5, will of course always equal the total of 1 and 2. 6. Net Earnings and Profits or Loss of Past Six Months (or of dividend period, if less than six months). — This represents the net profits remaining after deducting the sum of all items of "outgo " for the dividend period from the sum of the items of " income " during the same period. If the " outgo " has exceeded the " income," the result will be a "net loss " and the figures representing such loss should be entered in red ink. In this case the printed words " earnings and profits " should be stricken out, leaving the word " loss " against entry and deducted from total of items 3, 4, and 5. 7. Undivided Profits or Loss Brought Forward from Last Report. — Enter here the balance of undivided profits remaining on hand at end of the previous dividend period, namely, the amount entered at item 15 or 21 of the last report. Should this item represent a loss, instead of a profit, the figures should be entered in red ink. This item should always be brought forward in full and no part of it included in the first section of report. 354 Should the bank have been converted from some other organization, the profits on hand at date of conversion should be entered here as well as undet item 17. 8. Amount Withdrawn from Surplus (if any). — Enter amount in case there has been withdrawal from this fund. It should be borne in mind that, so long as surplus is below the required 20 per cent. , no portion of it can be withdrawn, except for the purpose of charging off losses incurred, and no more than will meet the losses, and then only after any " undivided profits " on hand have first been exhausted. When the surplus exceeds the limit of 20 per cent., the excess over this limit may be used for the payment of dividends or other- wise, as the bank may elect. The sum of items 12, 13, and 15 should always balance with items 6 to 11. 9. Reduction of Capital Stock Since Last Report (if any). — Any amount of reduction of capital is either for the purpose of covering a loss as shown in item 6 or to return to the shareholders in the form of a dividend. Should capital be reduced by the cancellation or retirement of stock pro- rated among the shareholders, a special item should be entered to that effect in the second and third sections after items 15 and 19. This special item will be perpetuated in the third section. 10. Paid Assessment on Capital Stock Since Last Report (if any). — Any assessment on capital paid in is for the purpose of covering losses shown in item 6 and should only be entered in this item. Any increase in capital does not enter into this report. 11. Surplus Subscribed and Paid in by Shareholders Since Last Report (if any). — Any money subscribed and paid in by the shareholders either as a surplus fund or as a part of the profit account should be entered as indicated in this item, substituting the word "profits " for surplus in the latter case. 12. Carried to Surplus Fund (not less than one-tenth of item 6, unless sur- plus is already 20 per cent, of capital). — Any amount that has been carried to this fund in accordance with requirements of section 5199. A bank may, ii it desires, carry more than one-tenth of its net earnings for a dividend period to this fund ; but so long as the surplus fund is less than 20 per cent, of its capital, it m,ust carry at least one-tenth of its net profits for any dividend period to this fund before it declares a dividend. 13. Dividend of — per cent, (on capital, $ ). — Enter here the amount distributed to stockholders during the dividend period, taking care to enter the rate and the amount of capital in the proper blanks. 14. Include amount of this item in item 20. 15. Amount of Net Profits Undivided, or Loss to be Carried Forward. — Enter here the balance of undivided profits or loss remaining, after deducting items 12, 13, and 14 from items 6 to 11. 16. Total Profits as National Bank Since Organization (less expenses, premiums, losses, etc.). — The amount to be entered here is obtained by adding item 6 of the current dividend period to item 16 of the last dividend report made. 17. Add Profits of Old Organization at Date of Conversion. — This will ap- ply only in the case of a State bank converted to a National bank which had a balance of profits on hand at time of conversion. This balance, of course, remains unchanged, and must be the same in every report. 255 ig. Total Surplus Fund Proper at Date of this Report. — This is oblained by adding the amount carried to surplus fund during the current dividend period (item 12), if any, to item 19 of the last report made. 20. Total Dividend Since Organization as National Bank is obtained by adding the amount of any dividend declared during the current period (item 13) to item 20 of the last report made. 21. Total Other Profits on Hand (same as item 15 of this report). — This, like item 15, represents thebalanceof " undivided profits " or loss remaining at the close of the current dividend period. The sum of items 19, 20, and 21 should exactly equal and balance the sum of items 16, 17, and 18. There are three classes of money which may come into the bank : ist, (item 16), total profits as a National bank ; and (item 17), profits brought into the bank from a converted association, and 3rd (item 18), money which was not earned, but was paid into the bank for special reasons. The dividend report must be signed either by the president or the cashier of the bank. No other officer of the bank is authorized by law to sign it. The oath of the oflScer signing may be made before any officer qualified to admin- ister an oath and affix a seal. An exact copy of each dividend report made to the Comptroller should always be retained by the bank on the extra blank furnished for this purpose. Each bank is allowed to select its semi-annual dividend periods, and must render a report of its earnings or loss for that period, whether it has declared a dividend or not. The law requires that whenever a dividend is declared by a bank, whether semi-annually or oftener, the report of same must be forwarded to the Comptroller within ten days after declaring the dividend. (Section 5212.) Section 5213 prescribes a penalty for failure to forward the dividend report within the required time. EXPLANATION OF REPORT OF EARNINGS AND DIVIDENDS. Section i deals only with the profits realized and losses sustained during the period being reported, or since last report. No part of the profits earned or losses sustained, which have been previously reported (except as indicated in item 2), are to be included in this section. Please see that each section balances. Section 2 deals only with the net profits (or loss) of current period and the undivided profits of previous periods, or losses, if any (item 11 of last report); and any amounts which may have been withdrawn from surplus fund, or ob- tained from sources other than through the earning capacity of the bank, and the disposition of such amounts. Section 3 deals only with the total money received from all sources and its distribution into surplus fund, dividends declared, and undivided profits on hand. Note. — This report is to be made semi-annually to the Comptroller of the Currency. If no dividend has been declared, the report is still required, showing the earnings of the bank and the disposition of the same. 356 No. 64. No. of Bank No. of Div.. Capital stock at clou of this dividtnd period $ Report of Earnings and Dividends of "The " located at , in tki State of for the period of , months endinff /90 . Declared._ „ ,190 . PayabU ,190 . FIRST 3. Premiums on bonds charged off since last report (if any) 4. Losses sustained through bad debts, decrease of values, etc., since last report . . • • 5. Expenses and taxes paid since last report Total of items 3, 4 and 5 •6. Net earnings and profits or loss of past six months carried down to second sec- Uon Total SECTION. 1. Gross earnings since last re- port 2. Losses recovered since last report (if any) Total 13. Carried to surplus fund (not less than one-tenth of item 6, unless surplus is already 20 per cent, of capital) . . . 13. Dividend of per cent, (on capital, I ) . . . . 14. Dividend of. per cent, re- turned to shareholders on account of reduction of cap- ital stock 15. Amount of net profits undi- vided or lo.ss to be carried forward in full to item 7 of next report ToUl 19. Total surplus fund proper at date of this report »o. Total Dividends since organ- ization as National Bank . . 21. Total other profits on hand (same as item 15 of this re- port) SECOND SECTION. *6 8. THIRD Total Net earnings and profits or loss of past six months brought down from first section Undivided profits or loss brought forward in full from item 15 of last report . . . . Ajnount withdrawn from sur- plus since last report (if any) 9. Reduction of capital stock since last report (if any) . . 10. Paid as.sessmcnt on capital stock since last report (if any) 11. Surplus subscribed and paid in by shareholders since last report (if any) Total SECTION. 16. Total profits as National bank since organization (less ex- penses, premiums, losses, etc.) Add profits of old organization at date of conversion to the National system Combined total of items 9, 10, and II of this report, and item 18 of last report . . . . 17- ti8. Total State of County of— J Sworn to and subscribed before me this • ■ day of - -1 190 — • I, , Cashier of the above-named bank, do solemnly swear that the above statement is true, to the best of my knowledge and belief. Cashier. • In case the loss exceeds the profits for the six mouths, the excess of loss over the profits should be entered in item 6 in red ink and deducted from total amount charged off (items 3, 4, and 5). t This item is not to include any transactions in these accounts which have not be«n previously reported in thla manner. CHAPTER II. LAWFUL MONEY RESERVE OF NATIONAL BANKS. The National Bank Act requires that National Banks shall maintain a reserve to protect deposits. The law bearing on the subject is found in sec- tions 5 19 1, 5192 and 5195 of the Revised Statutes, as modified by section 2, part of section 3 of the Act of June 20, 1874; part of section 12 of July, 12, 1882, the Act of March 3, 1887, and the Act of July 14, 1890, On Deposits Only. — Since the passage of the Act of June 20, 1874, the only reserve required is a certain percentage of the aggregate deposits. Reserve Regulations. — The law divides the banks into three classes, as to reserve required, according to location : 1st. Cent7-al Reserve City Banks: — Section 5195 and Act of March 3, 1887, designate certain cities " Central Reserve Cities," viz. : New York, Chi- cago and St. Louis, each bank in which is required to keep a reserve equal to twenty-five per cent, of its deposits, and this reserve to be in the bank's own vaults. 2nd. Reserve City Banks : — Section 5191 names sixteen cities, including the preceding, which are called " Reserve Cities," in which, each bank is required to keep a reserve equal to twenty-five per cent, of its deposits, and to these, under the Act of March 3, 1887, have been added other cities (see full list, page 263) ; but the banks in reserve cities outside of central reserve cities are allowed to keep one-half of their lawful reserve with National Banks, approved by the Comptroller of the Currency, in central reserve cities. 3rd, Banks not in Reserve Cities: — Section 5 191 further provides that each bank located elsewhere than in a reserve city must keep a reserve equal to fifteen per cent, of its deposits, and section 5192 provides that three fifths of this reserve may consist of balances, due the bank, from banks approved by the Comptroller of the Currency, in any of the reserve cities, the otiier two-fifths to be in bank. Deposits Requiring Reserve : — Reserve is to be computed on the aggregate deposits, /. e., on all deposits which appear on the balanced statement of the bank. For purposes of computing the reserve required, deposits are divided into two classes. General Deposits and Bank Deposits. The first consist of the following : " Individuals deposits," including " deposits subject to check,'' "demand certificates of deposit," "time certificates of deposit," "certified checks," " cashier's checks outstanding'' or other like evidence of deposit; " Dividends unpaid ; '' " United States deposits ; " and " deposits of United States disbursing officers." By " Bank Deposits" is meant the total balance 17 257 2>;8 due National banks and other banks and bankers after deducting amounts dtie from such banks. In making such deductions, net balances with approved agents, are not to be deducted from the amounts due to banks, as a certain portion of such deposits may be counted as part of the reserve, so cannot be used also to offset liability, but any excess with approved agents above the proportion of reserve allowed to be with them can be utilized, when ascer- tained, to reduce balance due to banks. Deductions Allowed: Certain deductions are allowed to be made from the general deposits, viz., exchanges for clearing-house, checks on other banks in same place, and National Bank notes of other banks. General Funds Available for Reserve. — The fands available for reserve in bank are comprised : First. Under the general term lawful money, which has been held to mean gold coin of the United States, silver dollars, fractional silver coin, and legal tender notes and Treasury notes of July 14, 1890. By special statute, clearing-house certificates are also available for reserve, (Section 5192, Revised Statutes.) In the same way are available United States gold and silver certificates (Section 12 of the Act of July 12, 1882) and United States certificates of deposit for legal tender notes (Section 5193, Re- vised Statutes). Five Per Cent. Fund Set-off : Section 3 of the Act of June 20, 1874, requir- ing that each National Bank be required to keep at all times with the Treas- urer of the United States, in lawful money, a sum equal to five per cent, of its circulation, also provides that this five per cent, fund may be counted as reserve on deposits, but no surplus in this fund above five per cent, of circu- lation can be thus counted. COMPUTING THE RESERVE. The computation of the reserve is a simple matter. The Bank Act as amended states, it is to be either twenty-five per cent, or fifteen per cent, (according to a bank's location) of the ''aggregate deposits;" what is com- prised in these is given in detail, in the form furnished by the Comptroller of the Currency ; bank deposits are included, but these need to be ascertained separately : if the reciprocal accounts show a net balance due from banks, it must be omitted from the calculation, but if there is shown a balance due to banks this amount is to be added to the other deposits. [Should the amounts due from, exceed the amounts due to banks, such an excess cannot be con- sidered as decreasing the liability for other deposits, as amounts due from can only be used to offset liability for amounts due to banks.] From the total deposits certain specified items are allowed to be deducted ; then as the five per cent, fund with the U. S. Treasurer is allowed to be counted as reserve, the amount of deposits that the fund will cover, {i.e., 4 or 6% times the fund, according to location) is to be subtracted, thus is ascertained the net amount of deposits requiring reserve, then twenty-five per cent, or fifteen per cent, of this remainder is the reserve required, and \ or fths of this according to loca- tion must be in bank, more or all of it may be, but so much must be ; the 259 balance may be with reserve agents (/. e., one-half or three-fifths of the amount). If it is seen that there is a larger amount with reserve agents than the one-half or three-fifths allowed to count as reserve, this surplus or excess cannot be counted as reserve, but may be treated as due from banks and deducted from the balance due to banks (if there is a balance due to banks to offset), thus the total deposits on which the reserve is required will be de- creased, making the reserve requirement less, which is sometimes an object. A short method of utilizing this surplus is given in our rules, otherwise the operation is quite long, for, after the surplus with reserve agents (found by the first calculation) is applied to reduce the amount due to banks, the total de- posit requiring reserve is also reduced, hence the amount allowed with reserve agents as reserve is made less, so a further surplus with reserve agents is developed ; this, in turn, is applied to reduce amount due to banks, and the reduction lessens again the total deposits requiring reserve, so also lessening again the amount alloued with reserve agents as reserve: thus another sur- plus is developed, which is applied, as the preceding, and this operation repeated until only the exact pioportion of reserve allowed with agents is reached, and thus the entire surplus or excess with reserve agents is utilized, to reduce the aggregate deposits and so, the reserve required ; the short method given in our rules avoids this long operation. It will be seen that the only item requiring special attention is th« surplus with reserve agents above the amount of reserve allowed to be with them, and this needs to be considered only when the home reserve is short, requir- ing the excess to be utilized, to reduce the amount of reserve required, but, as before stated, there must be a balance due to banks, to make it possible to utilize such excess or any portion of it. RULES FOR COMPUTING RESERVE. For Forms see pages 265, 266. The following seven rules probably cover all cases that may arise : I. For banks located in Central Reserve Cities. Ride : — Obtain the total of general deposits,* deduct exchanges for clear- ing-house, checks on other banks in same place and National Bank notes of other banks ; then deduct amount due from banks from amounts due to banks, and the remainder, if a balance due to banks, add to the net general deposits f and deduct from the total, four times the five per cent, redemption fund, X twenty-five per cent, of the remainder is the required reserve which must all be in bank in one of the forms of lawful money or certificates avail- able for reserve, heretofore described. *See items in form, page 265. ■j- If amounts due from banks equal or exceed amounts due to banks, both amounts must be omitted from the computation. \ This being the amount of deposits covered by it. 26o 2. For banks located in Reserve Cities other than Central Reserve Cities, where there is no excess with approved reserve agents in Central Reserve Cities. Rule : — Obtain the total of general deposits,* deduct exchanges for clear- ing-house, checks on other banks in same place and National Bank notes of other banks ; then deduct amount due from banks from amount due to banks, and the remainder, if a balance due to banks, add to the general deposits f and deduct from total, four times the five per cent, redemption fund, \ twenty- five per cent, of the remainder is the required reserve ; one-half at least of this must be in bank ; the remaining half may be with approved reserve agents. There is no Hmit on the amount of the reserve which may be kept in bank, 3. For banks located in Reserve Cities other than Central Reserve Cities, when evidently the home reserve is close and there is an excess over the permitted one-half held with reserve agents, and when the amounts due to banks are so large that it is apparent they will exceed all amounts due from banks, even including all excess with reserve agents. Rule : — Obtain the total of general deposits,* deduct exchanges for the clearing-house, checks on other banks in the same place and National Bank notes of other banks ; then deduct amount due from banks from amounts due to banks, and the remainder, if a balance due to banks, add to the net general deposits t and deduct from the total, four times the five per cent, redemption fund, X from the result take the whole amount due from reserve agents.^ One-seventh of the remainder will be the exact reserve required at home This short method of applying the excess with the reserve agents to reduce the reserve required at home is based on the known ratio of the reserve required at home to deposits — in this case (of 25 per cent, banks) it is one- eighth. What is wanted is to apply the excess with reserve agents to reduce reserve liabihty on deposits, and it is evident in deducting the entire balance with reserve agents from the deposits requiring reserve, there is left seven- eighths of the final net deposits, \i. e., of the final net amount which will require reserve,] since in the deposits ascertained are two quantities, eight - eighths of the final net deposits and eight-eighths of an amount to be offset by the eight-eighths of excess with reserve agents ; and in the reserve agents' balance i§ two quantities, one-eighth of the amount of final net deposits and the eight-eighths of excess, so the total balance with agents being subtracted, there remains seven-eighths of the final net deposits, and one-seventh of this remainder is one-eighth, which is the amount of reserve required at home. * See items in form, page 265. t If amounts due from banks equal or exceed amounts due to banks, both amounts must be omitted from the computation. X This being the amount of deposits covered by it. { If reciprocal accounts are kept, then by the whole amount is meant, the net balance due from the agents. 20I 4. For banks located in Reserve Cities other than Central Reserve Cities where evidently the home reserve is close, and there is an excess over the permitted one-half with the reserve agents, and when the total of amounts due to banks exceeds the total of amounts due from banks, but not so largely as to plainly show that it will exceed the total due from banks plus the excess over amount allowed as reserve with the reserve agents. Rule: — Obtain the total of general deposits,* deduct exchanges for the clearing house, checks on other banks in same place, and National Bank notes of other banks; then deduct amount due from banks from amounts due to banks, and the remainder, if a balance due to banks, add to tlie gene- ral net deposits,! and deduct from the total four times the five per cent, re- demption fund. J Take one-eighth of the remainder, subtract this from the total balance due the reserve agents, and the remainder equals seven-eighths of the total excess with reserve agents, and by adding one seventh of this amount to it we have the full excess available to apply against bank deposits (/'. e., against the net amount due to banks) ; if this excess equals or is less than the balance due to banks, then the whole can be applied, and this is done by taking one-eighth of the excess and deducting it from the deficiency in home reserve (the proportion of the excess available for this purpose), thus reducing or perhaps cancelling it^ If the excess is found to be larger than the net balance due to banks then, instead of one-eighth of the excess, one-eighth of the amount of balance due to banks only can be apphed to reduce the deficiency in home reserve, as the use of the excess is limited by the amount of such balance. This short method of applying the excess is the same principle as in the preceding rule ; we ascertain readily what seven-eighths of the excess with the reserve agents is, that is, one-eighth of the deposits ascertained contains two quantities, viz. : one-eighth of the net deposits, i. e., of the final net amount on which the reserve is required, and one-eighth of an amount which is to be offset by the excess with reserve agents, — on the other hand, the net balance of reserve agents contains two quantities, viz. : one-eighth of final net amount on which reserve is required, and the full eight-eighths of the excess, so by subtracting there is left seven-eighths of the excess, and by adding one-seventh of this amount to it we have the full eight-eighths that can be applied to reduce the reserve required, and ^th of this (or what is the same, one-seventh of the seven-eighths) is the propordon that can be applied on Home reserve. *See items in form, page 265. f If amounts due from banks equal or exceed amounts due to banks, both amounts must be omitted from the computation. I This being the amount of deposits covered by it. g Having ascertained what seven-eighths of the excess is, often it is apparent that the total excess is less than net balance due banks, and so one-seventh of the Yi (which is Y% of total) is at once seen to be the amount to apply 262 5. For banks not in Reserve Cities when there is no excess with approved reserve agents. Rule : — Obtain the total of general deposits,* deduct exchanges for clearing house, checks on other banks in same place, and National Bank notes of other banks ; then deduct amounts due from banks from amounts due to banks, and the remainder, if a balance due to banks, add to the net general deposits,! and deduct from the total six and two-third times the five per cent, redemption fund ; J fifteen per cent of the remainder is the required reserve. Two-fifths at least of this must be in bank, the remaining three-fifths may be with approved reserve agents. There is no limit as to the amount of the reserve which may be kept in bank. 6. For banks not in Reserve Cities when evidently the home reserve is close, and there is an excess over the permitted three-fifths with the reserve agents, and when the amounts due to banks are so large that it is apparent that the excess with reserve agents, added to the amounts due from banks, will not exceed amounts due to banks. Ru/e : — Obtain the total of general deposits, * deduct exchanges for clear- ing house, checks on banks in same place, and National Bank notes of other banks ; then deduct amount due from banks from amounts due to banks, and the remainder, if a balance due to banks, add to the net general deposits.f and deduct from the total six and two-third times the five per cent, redemp- tion fund ; X from the remainder take the whole amount with approved re- serve agents, and six ninety-firsts, or, approximately, one fifteenth of the result is the exact home reserve required. This short method of ascertaining the home reserve is similar to that given in Rule 3 ; in deducting the entire balance with reserve agents from the deposits ascertained, ninety-one one-hundredths of the net deposits remain, since in the deposits are two quantities, viz. : one hundred one-hundredths of the final net deposits requiring reserve, and one hundred one-hundredths of an amount to be offset by the excess with reserve agents ; on the other hand, in the reserve agents' balance are two quantities, viz. : nine one-hundredths (three-fifths of fifteen percent.) of final net deposits, and one hundred one- hundredths of the excess, and by subtracting the latter from the former ninety- one one-hundredths of the final net deposits remain, and six ninety-firsts of this is six per cent., [two-fifths of fifteen per cent.], the reserve required at home. 7. For banks not in Reserve Cities when the home reserve is close, and there is an excess over the permitted three-fifths with the reserve agents and when the total of amounts due to banks exceeds the total of amounts due from banks, but not so largely as to plainly show that it will exceed the total due from banks plus the full surplus with reserve agents. *See items in form, page 266. f If amounts due from banks equal or exceed amounts due to banks, both amounts must be omitted from the computation. J This being the amount of deposits covered by it. 263 Rule: — Obtain the total of general deposits,* deduct exchanges for the clearing house checks on other banks in the same phice and National Bank notes for other banks, then deduct amount due from banks from amounts due to banks ; and the remainder, if a balance due to banks, add to the gen- eral net deposits,! and deduct from the total six and two-thirds times the five percent, redemption fund; % take nine per cent, of this amount (/. e.^ three- fifths of fifteen per cent.) and substract it from the total balance with reserve agents, the remainder will be ninety-one one-hundredths of the excess with reserve agents, available to reduce reserve liability on deposits, and by find- ing and adding nine one-hundredths, or say one-tenth of the ninety-one one- hundredths to this amount, the total excess is obtained ; if this excess is equal to or less than the balance due to banks, then the whole can be utilized and the proportion available to apply on home reserve is found by taking six per cent, of the excess (/. iz Deduct 4 times the five per cent. (5% ) fund (t. e. the amount of deposits covered by this fund as reserve) * N9i Deposits requiring reserve is 25% of this is the total Reserve required, viz. I $ Proportion of Reserve to be in bank is %, viz. | $ Any excess with Reserve Agents above the proportion allowed to be with them can be counted as due from banks, so if the Home Reserve is short and there is a bal- ance due banks, the excess with Agents can be used to lessen Reserve required. The following are short methods for applying it : — Rule A. — If the excess is considerably less than the net balance due banks, subtract from the Net deposits > the entire net balance with Reserve Agents,' viz One seventh of the remainder \ is the exact Reserve required to be in bank, viz Rule B. — If the excess is evidently near the amount of net balance 4 257 228 Net balance — With Reserve Agents Amount with Reserve Agents allowed to Count as Reserve 9% The remainder is ^^^ of Exact Excess . [Add ^fjj or say yi^th of this. For Exact Excess Y^g'^'^] Approximate total Excess 6^ (i. e. f of 15%) of this, is amount that can be applied on Home Reserve Making Home Reserve in Excess of requirements 42 21 000 728 20 2 272 027 22 299 1337 i'i09 + 271 Miscellaneous Forms. Certificate of Payment of Capital Stock. -, 189—. Sir : It is hereby certified that the installment, amounting to dollars ($ ), has been paid in on account of the capital stock of The Bank of , making the total amount paid in on the capital stock of this bank $ . [seal of bank.] , Cashier. To the Comptroller of the Currency. State of , County of '^ ^"^ ' Subscribed and sworn to before the undersigned, of the said county, this day of , 189 — . Resolution to Increase Capital Stock. No. . The National Bank of , 189 — . At a meeting of the shareholders of the National Bank of -, held on , 189 — , thirty days' notice of the proposed business having been given, at which shareholders were present in person, and by proxy, representing shares of the stock of this Association, it was — Rt solved, That, under the provisions of the Act of May i, 1886, the capital stock of this association be increased in the sum of $ , making the total capital % The above resolution was adopted by the following vote, representing more than two-thirds of the capital stock of the association : Name. Residence. No. of Shares. Total Number of Shares I hereby certify that the above is a true and correct report of the. vote and of the resolution adopted at a meeting of the shareholders of this bank held -esidcnt or Cashier. Subscribed and sworn to before me, this day of , A. I). 189 — . [seal of notary.] , Notary Public. 272 Certificate of Pavment of Increase. . 189—, To the Comptroller of the Currency, Washington, D. C. : It is hereby certified that the capital stock of "The • National bank of " has been increased, pursuant to the provisions of the act of May i, 1886, in the sum of dollars, all of which has been paid in, and that the paid up capital stock of said bank now amounts to dollars. [bank seal.] , Cashier. I hereby certify that the foregoing certificate, by me subscribed, is true. , Cashier.. State of , .} County of- *" ^^ I, , cashier of " The National Bank of ," in the State of , do solemnly swear that the foregoing certificate by me subscribed is true. Subscribed and sworn to before me this day of , 189- Resolution to Reduce Capital Stock. No. The National Bank of , , 189 — At a meeting of the shareholders of the National Bank of -, held on , 189 — , thirty days' notice of the proposed business having been given, at which shareholders were present in person, and by proxy, representing shares of the stock of this association, it was — Resolved, That, under the provisions of Section 5143, U. S. Revised Stat- utes, and of the law amendatory thereof, the capital stock of this association be reduced in the sum of $ , leaving the total capital after said reduc- tion $ . The above resolution was adopted by the following vote, representing more than two-thirds of the capital stock of the association : Name. Residence. No. of Shares. Total Number of Shares I hereby certify that the above 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 , 189 — [seal of bank.] President or Cashier, Subscribed and sworn to before me, this day of , A. D. 1 89 — , [seal of notary.] , Notary Public. 273 Certificate ok Reduction of Capital. , 189—. To the Comptroller of the Currency : It is hereby certified that the capital stock of '' The National Bank of " has been reduced by a vote of the shareholders owning two-thirds of the stock of the association, in accordance with the provisions of section 5143 of the Revised Statutes of the United States, in the sum of dol- lars, and that the paid-up capital stock of said bank since said reduction is dollars. [bank seal.] , Cashier. State of County of- \ ss : Ij , cashier of " The National Bank of ," in the State of , do solemnly swear that the foregoing certificate, by me subscribed, is true. Subscribed and sworn to before me this day of , 189 — . , Cashier. Application to have City Designated a Reserve City. To the Comptroller of the Currency. Sir : In accordance with the provisions of the act approved March 3, 1887, the National banks, whose corporate names are hereunto subscribed by their duly authorized officers or agents, do hereby make application that the city of , in the State of , be added to the cities named in sections 5191 and 5192 of the Revised Statutes of the United States, so that balances due from associations, approved by the Comptroller of the Currency located in the city of aforesaid, may, to the extent authorized by law, be in- cluded in the lawful-money reserve required to be kept by all National banks, except banks in the cities named in said sections 5191 and 5192 of the Revised Statutes, and such cities as, in pursuance of the said act of March 3, 1887, have been added thereto. [Applicants to sign as follows.] The National Bank of , by , President or Cashier. Authority of Officer to Sign Application. At a meeting of the board of directors of the bank of , held at their banking house , 189—, the following resolution was adopted : Resolved, That the , of this bank be, and he is hereby, authorized to sign the corporate name of the bank to an application to be made to the Comptroller of the Currency that, in accordance with the provi- sion of the act of March 3, 1887, the city of be added to the cities named in sections 5191 and 5192 of the Revised Statutes of the United States. I hereby certify that the above is a true extract from the minutes of said meetmg. [seal of bank.] Cashier and Sec. of the B' d of Directors. , 189—. ]8 274 Withdrawal of Bonds. At the meeting of the board of directors of the Bank of , held at their banking house , 189 — , the following resolution was adopted : Resolved, That the Comptroller of the Currency be, and he is hereby, authorized to withdraw $ U. S. bonds, deposited with the Treasurer of the United States by this bank to secure circulation, and described as follows : $ of the loan of , and that be, and is hereby authorized to sell, assign, and transfer the same, and to appoint one or more attorneys for that purpose. I hereby certify that the above is a true extract from the minutes of said meeting. — '■ [seal of bank.] Cashier and Sec. of the B'd of Directors. Note. — The Treasurer's receipts for the bonds proposed to be withdrawn must be forwarded (with this form properly filled) to the Comptroller of the Currency. Form of Proxv for Use at Stockholders' Meeting for Election of Directors. I do hereby constitute and appoint , of , in the county of and State of , my lawful proxy, for me and in my name to vote shares of the stock of the National Bank of , owned by me and standing in my name on the books of said bank, at the annual meet- ing of the stockholders thereof to be held for the election of directors on the day of , A. D. 189 — , pursuant to law, and at all future meetings of stockholders which shall be held for a similar purpose until this authority shall be revoked, hereby ratifying and confirming whatsoever the said - may lawfully do by virtue hereof; and I hereby revoke and annul any and all authority heretofore given by me, authorizing any person for me, or in my name, to vote my stock in said bank. In witness whereof I have hereunto set my hand and seal this day of , A. D. 189—. , [L. S.] Requirement of Directors. (Circular letter of Comptroller of the Currency.) To the President Bank. In order to obviate any excuse on the part of the directors of National banks, based upon the ground that they are not and have not been informed of the affairs of the banks with which they are officially connected, and there- fore should not be held responsible for the same, all letters hereafter addressed to the officers of banks bearing upon the report of the Examiner are to be submitted to the directors, and the acknowledgment and answer thereto made over each director's individual signature. By law, the duty of conducting the affairs of a bank devolves upon the directors, and it is desired that such intention shall be made effective. You will acknowledge the receipt of this letter and return it with the signa- tures of the directors attached. CHAPTER III. THE FIVE PER CENT. REDEMPTION FUND AND THE TRANS- PORTATION, REDEMPTION AND REISSUE OF CURRENCY. The Five per cent. Deposit. — Every newly-organized National bank is required, immediately upon the receipt of its circulation, to deposit in the Treasury of the U. S. a sum equal to five per centum thereof, in lawful money of the U. S., " to be held and used for the redemption of such circu- lation," in accordance with section 3, Act of June 20th, 1874, par. 156. A similar deposit is required on any additional circulation issued to Na- tional banks on a further deposit of bonds. In estimating the circulation upon which the deposit is required, the bank must include all notes of its issue in its possession, even unsigned as well as those in actual circulation. Keeping Fund Intact.— Upon receipt of advices of redemption, banks are required to remit forthwith to make good their five per cent, fund, without awaiting the receipt of the notes fit for circulation, or the certificate of destruction of the notes unfit for circulation, as this fund is required to be kept intact for further redemption of notes, and also since it is allowed to be counted as reserve. Banks which have made deposits of lawful money of the U. S. for the re- tirement of a portion of their circulation, and those whose notes have been destroyed without reissue, are required to maintain the five per cent, deposit only on the remainder. The excess over the required amount is surrendered immediately on receipt from the Comptroller of the Currency of advice of the amount retired. Only reductions of circulation which are accompanied by a release of bonds are regarded. Banks which have resolved to go into liquidation must maintain the full five per cent deposit, until lawful money of the United States is deposited for the retirement of their circulation ; but all of their notes redeemed, whether fit or unfit for circulation, are destroyed. When the deposit is made, the ex- cess of the five per cent, fund over the amount required to cover the expenses of redemption and any tax due, is surrendered. Banks may keep with the Treasurer any amount they choose in excess of the required five per cent, but they are not permitted to count such excess as a part of their lawful money reserve. It should be entered on their reports of condition, under item: "Due from U. S. Treasurer (other than five per cent, redemption fund.) " Redemptions. — The redeemed notes of the several National banks are 275 2/6 assorted, prepared for delivery, and charged to their five per cent, accounts, and advices of redemption are forwarded to them, in regular rotation, follow- ing an alphabetical arrangement; and no departure from this practice can be made for the accommodation of any bank. If the amount due does not exceed the five per cent, deposit of the bank, the notes fit for circulation are forwarded to it by express, and the notes unfit for circulation are delivered to the Comptroller of the Currency, on the same day that the advice of redemption is issued. If the bank's five per cent, account is overdrawn by the redemption, a sufficient amount of the notes to cover the overdraft is held until it is made good. The law requires the return of the redeemed notes fit for circulation to the respective associations by which they were issued, and the dehvery of those unfit for circulation to the Comptroller of the Currency for destruction, and no other disposition can be made of them. All of the redeemed notes of banks which have made a deposit of United States notes for the retirement of all or a portion of their circulation are charged to that deposit until it is exhausted. Upon a change in the title of a National bank all of the redeemed notes issued under the former title are destroyed, and the same course is pursued viritli notes of the old issue of banks whose charters have been extended. Remittances. — Remittances for credit of the five per cent, fund may be made in any of the following ways : I. By a check drawn on New York, payable to the order of the Assistant Treasurer U. S. in N. Y., and collectible through the clearing-house, for- warded directly to that officer, with instructions to deposit the amount on ac- count of the five per cent, fund, and to forward the certificate of deposit there- for to the Treasurer U. S. II. By a deposit of lawful money of the U. S. with the Assistant Treasurer U. S. in Baltimore, Boston, Chicago, Cincinnati, New Orleans, New York, Philadelphia, St. Louis or San Francisco, on account of the five per cent, fund. Banks not situated in one of the above-named cities should make the deposit through their correspondents. The certificate of deposit must be for- warded directly to the Treasurer U. S. by the bank making the deposit, as credit cannot be given until it is received. III. By a remittance of lawful money of the United States, addressed to the Treasurer U. S., Washington, D. C, marked with the amount and nature of the contents, and the fact that it is " for credit of the five per cent, fund." The express charges, if not prepaid, will be deducted from the proceeds of the remittance at Government contract rates. National bank depositaries are not authorized to receive deposits for credit of the five per cent. fund. Assistant Treasurers are not authorized to receive remittances by express on account of the five per cent, fund; and only the Assistant Treasurer in New York is authorized to receive checks on that account. It is not necessary to advise the Treasurer of remittances on account of the five per cent, fund, unless they are made directly to him. 277 National banks should make only such deposits on account of the five per cent, fund as they desire to have applied in the redemption of their notes, or in payment of the expenses of redemption. Acknowledgments of remittances made by one bank for credit of the five per cent, account of another are sent only to the bank whose account is credited. Ledger Account. — Banks should charge the original five per cent, deposit, and all subsequent remittances for the five per cent, fund, to an account designated as the " five per cent redemption fund,'' and the account should be credited with remittances from the Treasury of notes of the bank redeemed and returned as fit fur circulation and also with the amount of incomplete currency sent the bank in lieu of notes redeemed and destroyed. Banks are charged with the full amount of their notes unfit for circulation delivered to the Comptroller, whether the exact amount is re-issued by him or not. Sometimes the exact amount is not sent, on account of the rule of the Department to remit only full sheets of notes, i. e., four notes, so if the redemptions are of an odd amount, say, $510, the Department will only send 250 sheets of $5. notes or 100 of plate lo-io-io 20, but the bank may send additional notes for redemption, two fives or four tens, which with the $10 balance will entitle the bank to another sheet, thus making the " five per cent, fund " on the bank's books correspond with the books of the Treasury Re- demption agency. Again, the remittance of new currency may be short on account of the redemption of a half note ; in such case the five per cent, fund on the bank's books will show the difference. If a bank prefers, it can cut a note and forward half for redemption to add to the credit of the former half redeemed in order to get credit for a full note, and carry the other half of note cut, in cash, until another redemption of a half, when the one held in cash can be sent on to remedy the matter again. Assessment for Expenses. — The expenses incurred for "the charges for transportation and the costs for assortin<^'' the redeemed notes of National banks are assessed upon the several banks, including those which have made deposits of lawful money for the reduction of their circulation in proportion to the amount of their circulation redeemed, and are charged to them in their five per cent, accounts. The assessment is made by fiscal years, and is levied as soon after the end of each fiscal year (June 30th) as the accounts can be settled and the computations made. Under Section 8 of the Act of July 12th, 1882, National banks making deposits of lawful money for the retirement in full of their circulation are assessed, at the time of their deposit for the cost of transporting and redeem- ing their notes then outstanding, a sum equal to the average cost of the redemption of National bank notes during the preceding year. Any notes which may have been redeemed for their five per cent, deposits during the year then current are included in the assessment. Remittance should be made for the amount of the assessment, immediately on receipt of the notice thereof, in the same manner as for notes redeemed. 278 unless there is a sufficient excess to the credit of the bank in the five per cent, fund to cover it. Incomplete Currency. — The issue of new circulating notes to National banks is under the control of the Comptroller of the Currency, and all inquiries and requests in regard thereto should be addressed to him. New currency is ordered to be printed only on requisitions from the banks, specifying the amounts and denominations desired. Banks should keep an account of the amount of their incomplete currency in the Comp- troller's office, and should make requisitions on him for the printing of addi- tional supplies, a sufficient time in advance of the exhaustion of those pre- viously ordered, to cover the time required for the printing of the new notes. Disposition of Notes Redeemed. — Packages of National bank notes received for redemption at the Treasury Department are charged to, and receipted for, by the counters, with the seals unbroken; and the counters are required to count, return, and obtain a receipt for, the contents of each pack- age before receiving another. An inventory of the contents according to the amounts marked on the straps, is made immediately on opening the package, and the contents of each strap are separately proved. Discrepan- cies are noted on the proper strap, which is returned to the owner. '"Shorts" are at once reported and verified by the teller in charge. The packages are charged to the counters by the amounts on the wrappers, and any dis- crepancy between these amounts and the contents is reported as an "over'' or a " short " by inventory. The notes are then assorted and examined by experts. The currency fit for circulation is sent to the several banks of issue, and that which is unfit for circulation is cancelled by cutting off the signa- tures of the president and cashier, then done up in sealed packages and delivered daily to the Comptroller of the Currency, who has it examined, counted, and schedules made for the banks, of what is to be destroyed each day. It is then delivered to clerks from the office of the Secretary of the Treasury, occupying a room for the time being in the Comptroller's office, to be examined and counted. After this count the notes are further cancelled by punching, and then delivered as required by section 5184 of the Bank Act, par. 63, to the agent of the bank in the same room, who examines and counts them and verifies the amount. The package is then checked off from the schedules in the presence of four witnesses, representing the Secretary of the Treasury, the U. S. Treasurer, the Comptroller of the Currency and the bank the notes of which are to be destroyed. It is then deposited in a a box and locked, then, accompanied by the witnesses, taken to the macerator and ground into pulp, and new currency is sent the banks for the same. Frequently notes are pronounced unfit for circulation though apparently in good condition, but they are notes so thoroughly worn, that they would bear but little further use, and the expense of new notes is so very small that it is not a consideration. CHAPTER IV. TAX ON QRCULATING NOTES. By section 5215, Revised Statutes, it is made the duty of the Treasurer of the U. S., to prescribe the form for making return by each National bank of the average amount of its notes in circulation for each half year. This return, with each blank filled with the proper amount as indicated and subscribed and sworn to by the president or cashier of the bank before an officer qualified to administer oaths, must be sent to the Treasurer of the U. S. within ten days from the first days of January and July, respectively, in each year, under a penalty of two hundred dollars, and payment must be made within the months of January and July. Payment may be made by deposit of the amount of duty to the credit of the Treasurer of the U. S., with him, or with any Assistant Treasurer or National Bank Depositary. Triplicate certificates should be issued therefor, the " original " of which must be forwarded to the Secretary of the Treasury, the " duplicate " to the Treasurer, and the "triplicate'' held by the bank making the deposit as its voucher therefor. No other receipt will be issued. The certificate must state that the deposit is on account of semi-annual duty. If there is no depositary convenient, payment may be made by draft on New York (collectible through the clearing-house), to the order of the Treas- urer, or by remittance to him in lawful money of the U. S. or notes of Na- tional banks, for which the Treasurer will issue his certificate of deposit, and send the duplicate to the bank. Drafts on other cities than New York will uot l)e accepted. The duty on circulating notes isone-half of one per centum on the average amount outstanding for the six months. Excepting that on circulation secured by Consols of 1930, it is one-fourth of one per centum. Liability begins on the first days of January and July in each year, unless a bank had at that time no circulation outstanding, then it begins with the date of the first issue of notes, and terminates on the 30th day of June or the 31st day of December (as the case may be), date of commencement and termination both included. Banks that have heretofore made returns will report for the full semi-annual term of 181, 182, or 184 days, as the case may be ; all others will report their circulation from and including the date of their first issue. To ascertain the average amount, add together the daily balances of the notes in circulation from the proper date of liability to duty (including for each Sunday and holiday the balance of the first pre- 279 28o ceding business day) to and including the 30th day of June or the 31st day o! December, as the case may be. The aggregate of daily balances for the first six months of any year will be divided by 181 — the number of days from January ist to June 30th, except in leap year, when the sum will be divided by 182. The aggregate of daily balances for the last six months of any year will be divided by 184 — the number of days from July ist to De- cember 31st. Banks not making daily statements and obtaining their averages from weekly statements, should add together the weekly balances, including for each day in any fractional part of a week one-seventh of the weekly balance next preceding such fractional part. The aggregate of balances for the first six months of any year will be divided by the number of weeks from Jan- uary 1st to June 30th (25f or 26, as the case may be). The aggregate of balances for the last six months will be divided by 26f — the number of weeks from July ist to December 31st. Banks having circulation subject to duty for a period less than a half year, which make their estimates from daily balances, will divide the aggregate of the balances of the item for the time for which it is liable to duty by the number of days in the half year ; and banks which make their estimates from weekly balances, by the number of weeks and the fractions thereof in the half year. The quotient thus found will be the average amount subject to duty for each six months, respectively, and should be entered in the Return, and duty computed thereon at the full semi-annual rate. A bank retiring its circulation, or any portion of it, is relieved from duty on the amount retired from the time of making the deposit of lawful money to redeem the same. A bank which has gone into liquidation, in making its final return must estimate duty upon circulation to the time of making the deposit of lawful money with the Treasurer of the U. S. to redeem the same. The item should be average for the full six months, according to the foregoing rule, and the duty calculated at the prescribed rate. The amount thus determined is the correct proportion for the time for which the item is liable. PART FOURTH. CHAPTER I. THE ISSUE, REDEMPTION AND EXCHANGE OF U. S. COIN AND PAPER CURRENCY, TRANSPORTATION CHARGES, ETC The following regulations govern the issue, redemption, and exchange of the paper currency and the gold, silver, and minor coins of the United States and the redemption of national baiik notes by the Treasurer of the U. S. : I. Issue of United States Paper Currency.. — The Treasurer will forward new U. S. notes, Treasury notes of 1890, or silver certificates, by express, at the expense of the consignee, at Government contract rates, or by registered mail, registration free, at the risk of the consignee, in return for such notes or certificates unfit for circulation, national bank notes, fractional silver coin, or minor coin, received for redemption. Silver certificates are issued by the Treasurer or Asst. Treasurers upon a deposit of standard silver dollars. II. Issue of Gold Coin. — Gold coin is issued in redemption of U. S. notes, in sums not less than $50, by the Asst. Treas. in N. Y. and San Francisco, and in redemption of Treasury notes of 1890, in like sums, by the Treasurer and all the Asst. Treas. III. Issue of Standard Silver Dollars and Fractional Silver Coin. — Standard silver dollars are issued by the Treasurer and Asst. Treas. in redemption of silver certificates and Treasury notes of 1890, and are sent by express, at the expense of the Government, in sums or multiples of ;?5oo, for silver certificates or Treasury notes of 1890 deposited with the Treasurer or any Asst. Treas. Upon the deposit of an equivalent sum in U. S. Currency or national bank notes with the Treasurer or any Asst. Treas. or national bank depositary, fractional silver coin will be paid in any amount by the Treasurer or Asst, Treas. in the cities where their several offices are, or will be sent by express, in sums of $200 or more, at the expense of the Government, or by registered mail, at the risk of the consignee, in packages of $50, registration free, as the depositors may request, from the most convenient Treasury office. For 281 282 this purpose drafts may be sent to the Treasurer or Asst. Treas. in N. Y., payable in their respective cities to the order of the officer to whom sent. Drafts on N. Y. City should be sent direct to the Asst. Treas. U. S., New York, and drawn to his order. IV. Issue of Minor Coin. — The act making appropriations for sundry civil expenses of the Government for the fiscal year ending June 30, 1899, ^^^^' tains a provision as follows : The Secretary of the Treasury is authorized and directed to transport from the Treasury or sub-treasuries, free of charge, minor coin when requested to do so : Provided, That an equal amount in coin or currency shall have been deposited in the Treasury or such sub-treasuries by the applicant or applicants. For the purpose of carrying this enactment into effect, the following regu- lations are hereby promulgated : Upon the deposit of an equivalent sum in U. S. currency or national bank notes with the Treasurer or any Asst. Treas. or national bank depositary, i-cent bronze and 5-cent nickel pieces will be paid in any amount by the Treasurer or Asst. Treas. in the cities where their several offices are, or will be sent by express, in sums of $20 or more, at the expense of the Govern- ment, or by registered mail, in like sums, at the risk of the consignee, regis- tration free, as the depositors may request from the most convenient Treas- ury office. For this purpose drafts may be sent to the Treasurer or the Asst. Treas. in N. Y., payable in their respective cities to the order of the officer to whom sent. Drafts on N. Y. City should be drawn to the order of the Asst. Treas. of the U. S., New York, and sent directly to him. The Treasurer and Asst. Treas. will pay out for lawful money any minor coin not needed in the current business of their offices, but in no case should drafts be sent to them or for it, V. Issue of the Treasurer's Transfer Checks. — Subject to the convenience of the Treasury, and provided that the express charges on remittances have been prepaid, the Treasurer will issue transfer checks on the Asst. Treas., payable to the order of the sender or his correspondent, for U. S. notes and Treasury notes of 1890 unfit for circulation or national bank notes sent to the Treasurer for redemption, or for fractional silver coin or minor coin sent in multiples of $20 to the Treasurer or an Asst. Treas. VI. Redemption of Paper Currency. — U. S. notes, fractional currency notes, gold certificates, silver certificates, and Treasury notes of 1890, are redeemable by the Treasurer, and when not mutilated so that less than three-fifths of the original proportions remains, by the several Asst. Treas., at face value. U. S. notes are redeemable in coin, in sums not less than $50. by the Asst. Treas. in N. Y. and San Francisco. Treasury notes of 1890 are redeemable in coin, in sums not less than $50, by the Treasurer and all the Asst. Treas. Silver certificates are redeemable in standard silver dollars only, or exchangeable for other silver certificates. National bank notes are redeemable in lawful money of the U. S. by the Treasurer, but not by the Asst. Treas. 283 U. S. notes, fractional currency notes, gold certificates, silver certificates, Treasury notes of 1890, and N. B. notes, when mutilated so that less than three- fifths, but clearly more than two-fifths, of the original proportions remains, are redeemable by the Treasurer only, at one-half the face value of the whole nole or certificate. Fragments not clearly more than two-fifths are not redeemed, unless accompanied by the evidence required in the following paragraph. Fragments less than three- fifths are redeemed at the face value of the whole note when accompanied by an affidavit of the owner or other persons having knowledge of the facts that the missing portions have been totally destroyed. The affidavit must state the cause and manner of the mutilation, and must be sworn and subscribed to before an officer qualified to administer oaths, who must affix his official seal thereto, and the character of the affiant must be certified to be good by such officer or some other having an official seal. Signatures by mark [ X ] must be witnessed by two persons who can write, and who must give their places of residence. The Treasurer will exercise such discretion under this regulation as may seem to him needful to protect the U. S. from fraud. Fragments not redeemable are rejected and returned. VII. Returns for Paper Currency. — For remittances received under the U. S. Government contract : For remittances from a place where there is no sub-treasury, returns will be made in new U. S. paper currency by express, at the expense of the con- signee, at U. S. contract rates; or in fractional silver coin, at the expense of the U. S. for transportation, in sums or multiples of $200. For remittances from a place where tliere is a sub-treasury, returns will be made in new U, S. paper currency by express, at the expense of the con- signee, at U. S. contract rates; or, subject to the convenience of the Treas- ury, in the Treasurer's transfer checks on the sub-treasury in the place from whence the remittance is received. No exchange for remittances of currency to the Treasurer for redemption under the U. S. contract will be furnished either by transfer checks or ship- ments of currency. VIII. Redemption or Exchange of Silver and Minor Coin. — Fractional silver coin and coins of copper, bronze, or copper-nickel may be presented in sums or m.ultiples of Jg20, assorted by d('no)ninaiio7is iti separate packages, to the Treasurer or an Asst. Treas. for redemption or exchange into lawful money, and standard silver dollars for exchange into silver certificates only. When forwarded by express, the charges should be prepaid. Depositors of fractional silver coin will obtain quicker returns and aid the Department in retiring the old issues from circulation, if tliey will present coins of the old designs and the new in separate packages. No foreign, mutilated, or defaced silver coin or coins to which paper or any other substance has been attached as an advertisement or for any other purpose, will be received. Reductions by natural abrasion is not considered mutilation. 284 Minor coin that is so defaced as not to be readily identified, or that is punched or clipped, will not be redeemed or exchanged. Pieces that are stamped, bent, or tv/isted out of shape, or otherwise imperfect, but showing no material loss of metal, will be redeemed. IX. Transmission to the Treasurer. — U. S. notes, gold certificates, silver certificates. Treasury notes of 1890, and National bank notes should be sent in separate remittances. The notes should be assorted by denominations and inclosed in paper straps, not more than 100 notes to each strap, and the straps should be marked with the amount of their contents. Not more than 8,000 notes should be put in one package. An inventory, giving the amount of each denomination of notes, the total amount in the package, the address of the party sending, and the disposition to be made of the proceeds, should be enclosed with each package, and a letter of advice sent by mail. The package, if it be sent by express, should be sealed up in stout paper and addressed to the '' Treasurer of the United States, Washington, D. C." The wrapper should be plainly marked with the owner's name and address, the amount and kind of currency enclosed, and, if the sender desires the benefit of the Government contract, with the words " under Government con- tract with the United States Express Company from the nearest point of transfer." It is the duty of postmasters to register free of charge all letters on which the postage has been fully prepaid, addressed to the Treasurer, containing currency of the U. S. for redemption. It is recommended that all such let- ters be registered as a protection against loss. Remittances of money by mail should be addressed to the " Treasurer of the United States, Washington, D. C." Such remittances and returns there- for by mail are invariably at the risk of the owners. All communications to the Treasurer in regard to packages lost in the mail are referred for investi- gation to the Chief Post-Office Inspector, Post-Office Department, Washing- ton, D. C, to whom any subsequent inquiry on the subject should be addressed. X. Express Charges. — The Government contract with the United States Express Company for the transportation of moneys and securities extends to all points accessible through established express lines reached by continu- ous railway communication, in all the States and Territories of the U. S., excepting Alaska, Arizona, California, Idaho, Nevada, New Mexico, Oregon, Utah, and Washington, but does not embrace sea, river, or stage transporta- tion of any kind. [See provision for sending by registered mail, page 286.] The contract rates for the transportation of all kinds of paper currency to or from Washington are : Between Washington and points in the territory of the United States Ex- press Company and reached by it, 20 cents per |i,ooo or fractional part thereof over $500; sums of ^500 or fractional part thereof, 10 cents. Between Washington and points in the territory of another express com- pany, excepting points in Texas, Arkansas, Colorado, Kansas, Nebraska, 285 Montana, North Dakota, South Dakota, Wyoming and the Indian and Okla- homa Territories, 60 cents per $1,000 or fractional part thereof over $500; sums of ^500 or fractional part thereof, 40 cents. Between Washington and points in Colorado, Kansas and Nebraska, 75 cents per $1,000 or fractional part thereof over $500; sums of $500 or frac- tional part thereof, 50 cents. Between Washington and points in Texas, Arkansas, Montana. Norih Dakota, South Dakota, Wyoming and the Indian and Oklahoma Territories, $1 per $1,000 or fractional part thereof over $500; sums of $500 or fractional part thereof, 65 cents. Express charges are paid by the Government, at contracted rates, on stand- ard silver dollars sent by the Treasurer or Asst. Treas. in sums or multiples of $500, on fractional silver coin in sums of $200 or more, and on minor coin sent from the mint at Philadelphia in sums or multiples of $20, and on Na- tional bank notes sent to the Treasurer for redemption in sums or multiples of $500. On U. S. notes, gold certificates, silver certificates, Treasury notes of 1890, sent for redemption, on any kind of lawful money sent for credit of the 5 per cent, redemption fund, and on National bank notes sent for redemption in other amounts than multiples of $500, the charges, if not prepaid, are de- ducted from the proceeds at contract rates. On U. S. notes, gold certificates, silver certificates, or Treasury notes of 1890, returned for United States currency or National bank notes redeemed, the charges are deducted at contract rates. On standard silver dollars, fractional silver coin, and minor coin, sent for exchange or redemption the charges must be prepaid by the sender. On transfers of funds from National bank depositaries, under letters of in- struction, the charges must be paid by the depositaries. Express charges cannot be prepaid at Government contract rates. The Treasurer has no control over rates exacted when the charges are prepaid, or for transportation outside of the territorial limits of the contract. No charge is made for the amount of express charges inclosed with a re- mittance when separately noted on the wrapper. Packages should always be marked with the exact amount of the contents. XI. General Information. — Paper currency presented for redemption or exchange or for credit of tlie Treasurer at the offices of the Asst. Treas. must be assorted by kinds and denominations, and inclosed in paper straps, the straps not to contain more than 100 notes each, and to be plainly marked with the amount of the contents. The act of June 30, 1876 (19 Statutes, 64), requires " that all U. S. 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 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 oflScers shall wrongfully stamp any genuine note of the 286 U. S. or of the National banks, they shall, upon presentation, redeem such notes at the face value thereof." Counterfeit notes or coins found in remittances to this office are returned to the sender canceled for the purpose of enabhng him to make reclamation and after such use they must be returned to this office for transfer to the Secret-Service Division of the Treasury Department. In case of the loss or destruction of one of the Treasurer's checks, and upon application for a duplicate, payment of the original check is stopped, and the applicant is furnished with a form of bond of indemnity, upon the return of which, properly executed, a duplicate is issued. Compliance with the foregoing regulations is enjoined on all officers of the Department, and observance of them will be expected of all making remit- tances. Provision for Sending Incomplete Currency from Wash- ington by Registered Mail, Insured. — The Comptroller of the Currency will accept a power of attorney from National banks to deliver their new currency to an agent, thus authorized, to send to the banks by registered mail. We have made arrangements with a reliable insurance company to insure such shipments, and it is found less expensive than by express to many banks oflF the line of the express company which has the Government contract for transportation of moneys. We will furnish estimate of expense and blank power of attorney on application. A, S. Pratt & Sons. CHAPTER 11. MISCELLANEOUS REGULATIONS. Coupons Bonds.— Coupon bonds of the United States are payable to bearer, and pass by delivery, without endorsement. They are convertible into registered bonds of the same loan, but the law does not authorize the conversion of registered into coupon bonds. Coupon bonds forwarded to the Department for exchange into registered bonds should be addressed to the Secretary of the Treasury, Division of Loans and Currency. There is no expense attending the exchange at the Department ; but when bonds are sent by express the charges must be paid by the party transmitting them. Form of Letter for Conversion of Coupon Bonds into Registered Bonds. , , , 18-. Hon. Secretary of the Treasury, Was king ioTi, D. C. Sir: Herewith I send % U. S. coupon bonds of the Act of July 14th, 1870, per cent, loan on ; which please excliange into registered bonds in the name of . Please send the new bonds to the subscribed address. Mail checks for the interest to , . . Very respectfully, Registered Bonds. — Registered bonds of the United States differ from coupon bonds in the following respects, namely: (i) They have inscribed or expressed upon their face the names of the parties who own them, denomi- nated /aj)/owered to assign the bonds. 19 290 It is recommended that resolutions be adopted only at regular meetings. But when passed at a special meeting, the certificate may be as follows : We certify that at a special meeting of the board of directors of , duly held at , on the day of , at — o'clock — M., i8 — , the fore- going resolution was adopted, and is now in full force. And we certify that notice was duly given, personally, to all the members of the said board of directors of the time and place of said meeting, and of the object thereof, for more than days prior thereto, and in time to enable all to attend said meeting ; and that at such meeting so held a quorum of all the members of said board was present and voted for the adoption of said resolution. Form of Authority under By-laws. At the annual meeting of the stockholders of the , of -, held , 18—, was duly elected president, and was duly elected cashier ; and as such they are jointly or severally empowered by the by-laws (a certified copy of which is hereto annexed) to sell and assign any and all United States bonds now standing {or which may hereafter stand) in the name of this bank \_or institution]. . Secretary. [Seal of bank or institution.] Acknowledgments of assignments, when not made at this Department, must be made either before an Assistant Treasurer of the U. S., a U. S. judge or district attorney, clerk of a U. S. court, collector of customs or internal revenue, or president or cashier of a National bank. The witnessing officer should append his official title and affix his seal of office, if he have one ; if he have no seal of office, he should certify such to be the fact. The president or cashier of a National bank must append the title and affix the seal of the bank. The impress of the seal must in every case be made upon the bond. Foreign Acknowledgments may be made before a United States minister, chargd, consul, vice-consul, or commercial agent. A notary public, or other competent officer, in a foreign country may take acknowledgments ; but his official character and jurisdiction must be properly verified. (See under head "Foreign successorship assignments.") The official seal, where there is one, should in all cases be affixed, as per foregoing direction ; and where there is none this fact should be made known and attested. Execution of Powers. — Powers of attorney for the transfer of bonds must be acknowledged in the presence of some one of the officers authorized to take acknowledgments of assignments ; and where such officer has an official seal, it must be affixed ; where he has none he should so state. Powers of Substitution must be executed and acknowledged in the same manner as powers of attorney, and should likewise follow the same general form. Transmission of Bonds. — When registered bonds are properly assigned, they should be transmitted to the Register of tiie Treasury for reissue, and should be accompanied by a letter of explicit instructions, stating tiie amount 291 enclosed, the loan to which the bonds belong, the denominations of the bonds desired in exchange therefor, the name and residence of each assignee, and the post office address to which it is desired the interest checks shall be mailed. When bonds of different loans are forwarded in one remittance, a separate letter of instructions should accompany the bonds of each loan. When coupon and registered bonds are transmitted at the same time, the former should be sent to the Secretary of the Treasury, and the latter to the Register of the Treasury. Form of Letter Transmitting Registered Bonds for Transfer. Register of the Treasury. Sir : Herewith you will receive $ U. S. registered bonds of the per cent, loan of , which please transfer, per as assignment, to of , . Please send the new bonds to the subscribed address. Mail checks for the interest to , . Very respectfully, New Bonds. — Registered bonds received for transfer are cancelled, and new bonds in their stead are issued in the name of the assignee. These bear interest from the first day of the quarter or half year (as their interest term may run) in which the transfer shall have been made. As a rule, returns are made on the same day that the bonds are received, and made invariably by registered mail unless otherwise instructed. When bonds are sent or returned by express the entire expense thus incurred must be borne by the party desiring the transfer. No Fees will be charged by a United States minister, charg^, consul, vice- consul, or commercial agent for witnessing and certifying an assignment of, or power to assign, bonds, or collect interest thereon. No charge is made by the Department for transferring registered bonds. Interest on Registered Bonds. — Interest on registered bonds of the above- described loans is paid by check which is sent by mail ; when address is not known checks will be held by the Treasurer until called for by the payees thereof The checks are payable, when properly indorsed, on presentation at the U. S. Treasury or at the office of any Assistant Treasurer of the U. S. Holders of these bonds should notify the Register of the Treasury of any change in their post-office address at least fifteen days before the interest falls due ; and in case of the appointment of an attorney to indorse the interest checks, notice of this fact should likewise be given to the Register. Such holders should also transmit to the Auditor of the Treasury all powers of attorney authorizing the indorsement of interest checks, and advise him specifically, at which of the offices referred to above it is desired that the interest checks, under such powers, shall be paid. Closing of Transfer Books.— For the purpose of preparing the interest schedules, the transfer books are closed during tlie month immediately pre- ceding the date of payment of the interest. 292 If bonds forwarded for transfer be not received prior to or upon the day fixed for closing the transfer books, the transfer will not be effected until after the reopening of the books ; and consequently the interest for that quarter or half year (as the interest term may be) will be declared in favor of the parties whose names appear upon the face of the old bonds, and to them the assign- ees must look for any interest claimed. Form of Power of Attorney to Collect Interest Checks. Know all men by these presents, that of , do appoint attorney to receive from the proper officer and to indorse checks for interest * in name on the books of the Treasury Depart- ment of the United States ; granting to said attorney power to appoint one or more substitutes for the purpose herein expressed ; hereby ratifying and con- firming all that may lawfully be done by virtue hereof. Witness hand- and seal- this day of , 18—. . [L. S.] . [L.S.] Signed, sealed and acknowledged in the presence of— (To be acknowledged as directed below.) Execution of Powers of Attorney to Indorse Interest Checks. — Powers of attorney must be acknowledged either before the Treasurer or an Asst. Treas. of the U. S., a U. S. judge, U. S. district attorney, clerk of the U. S. court, collector of customs, collector of internal revenue, president or cashier of a National bank, or a notary public. If in a foreign country, powers must be acknowledged either before a U. S. minister, charge, consul, vice-consul, commercial agent, or notary public. If before the latter, his official character and the genuineness of his signature must be properly verified. The acknowledging officer must add his official designation, residence and seal, if he have one; if he have no seal of office, he should certify such to be the fact. Powers of attorney and testamentary evidence designed as authority to col- lect interest checks should be filed with the Auditor of the Treasury. Form of Authority by Resolution for the Indorsement of Inter- est Checks. At a regular meeting of , held at , in the State of , on thg day of , 18 — , a quorum being present, it was, on mption, Resolved, That be, and is hereby, authorized to receipt for and to indorse checks for interest due, or to become due, on all United States bonds registered in the name of on the books of the Treasury Department, with power to appoint one or more substitutes for the purpose * When intended to be special, insert [due on the day of , 18— on all bonds standing in .] When general, insert [now due and which may hereafter accrue on all bonds standing, or which may hereafter stand, in 293 herein expressed, until such authority is officially revoked, and notice of revocation is properly given to the Treasury Department. A true copy of the minutes. (Signed.) , President. [seal,] Attest: , Secretary. Note. — Where the society or institution has no seal, it will be requisite to acknowledge the instrument before a notarj' or some other competent officer having an official seal. If the president, cashier, secretary, or treasurer be authorized to indorse the checks, the instrument must be certified by an officer other than the one empowered to make the indorsement. The Auditor of the Treasury should be advised where interest checks indorsed by attorneys will be presented for payment. Interest to Joint Holders of Registered Bonds. — Interest will be paid to any one of several joint holders, or co-trustees, executors, administrators, or guardians; but in the execution to a third party of a power to collect interest checks all must join. In case of the death of any such joint holders, co-trustees, &c., the survivor or survivors will be recognized as having full authority, upon due proof of such death and survivorship. Payment of Interest on U. S. R. Bonds in Name of Minors. — When Gov- ernment bonds are registered in the names of infants, checks issued in pay- ment of interest thereon will be paid only to the proper guardian of such infants, when the Secretary of the Treasury has been notified of such infancy. Neither the father nor mother of an infant has the right, as a general rule, to indorse or collect such checks. The guardian of an infant, in order to indorse and collect interest checks in favor of his ward, js required to file with the Auditor of the Treasury evidence (i) of guardianship, (2) of his authority being in force, and (3) of the identity of his ward as the payee in the bonds. The Government is not liable to refund to an infant, on his arriving at the age of majority, money paid to him on his indorsement of checks during mi- nority, when the Secretary of the Treasury had not been notified of the fact of infancy. (Department Circular No. 6, dated February 7th, 1881.) Unclaimed Interest. — The interest on registered bonds which has been returned to the Treasury as unclaimed, can be collected only in person or by attorney at the U. S. Treasury. For the convenience of the public, and to save charges, powers to collect specified unclaimed interest may be made in favor of the Chief of the Division of Loans and Currency of the Secretary's office. Translations.— Powers of attorney, and all other legal documents executed in the United States, must be in the English language. If executed abroad in any other language, such powers must be accompanied by an accurate translation into English, and by a sworn certificate of the person who made such translation, properly acknowledged before a notary public or other com- petent officer having a seal, to the effect that the translation is correct and complete. Lost Registered Bonds. — In case of the loss of registered bonds, the Secre- tary of the Treasury should be promptly notified, in order that a caveat 294 may be entered against the transfer of the missing bonds, on the books of the Department. Form of Request for Caveat. Secretary of the Treasury. Sir : The registered bonds described below, standing in my name, were stolen from the undersigned on or about the of last. Please enter a caveat against their transfer : No. , for I , Act of , i8 — , per cent., and No. , for % , Act of , i8 — , per cent. Very respectfully, , Lost Coupon Bonds, Notes and Coupons. — In consequence of the increas- ing trouble, wholly without practical benefit, arising from notices which are constantly received at the Department, respecting the loss of coupon bonds, which are payable to bearer, and of Treasury notes issued and remaining in blank at the time of loss, it becomes necessary to give this public notice, that the Government cannot protect, and will not undertake to protect, the owners of such bonds and notes against the consequences of their own fault or mis- fortune. Hereafter all bonds, notes, and coupons, payable to bearer, and Treasury notes issued and remaining in blank, will be paid to the party presenting them in pursuance of the regulation of the Department, in the course of regu- lar business ; and no attention will be paid to caveats which may be filed for the purpose of preventing such payment. (Department Circular of April 27, 1867.) Duplicates for Destroyed or Defaced Bonds. — Section 3702. — Whenever it appears to the Secretary of the Treasury, by clear and unequivocal proof, that any interest-bearing bond of the U. S. has, without bad faith upon the part of the owner, been destroyed, wholly or in part, or so defaced as to impair its value to the owner, and such bond is identified by number and description, the Secretary shall, under such regulations and with such restrictions as to time and retention for security or otherwise as he may prescribe, issue a duplicate thereof, having the same time to run, bearing like interest as the bond so proved to have been destroyed or defaced, and so marked as to show the original number of the bond destroyed and the date thereof. But when such destroyed or defaced bonds appear to have been of such a class or series as has been or may, before sucii application, be called in for redemption, instead of issuing duplicates thereof, they shall be paid, with such interest only as would have been paid if they had been presented in accordance with such call. Section 3703. — The owner of such destroyed or defaced bond shall sur- render the same, or so much thereof as may remain, and shall file in the Treasury' a bond in a penal sum of double the amount of the destroyed or defaced bond, and the interest which would accrue thereon until the principal becomes due and payable, witli two good and sufficient sureties, residents of the U. S., to be approved by the Secretary, with condition to indemnify and save harmless the U. S. from any <:laim upon such destroyed or defaced bond. 295 Duplicates for Lost Registered Bonds. — Section 3704. — Whenever it is proved to the Secretary of the Treasury, by clear and satisfactory evidence, that any duly registered bond of the U. S., bearing interest, issued for valua- ble consideration in pursuance of law, has been lost or destroyed, so that the same is not held by any person as his own property, the Secretary shall issue a duplicate of such registered bond, of like amount, and bearing like interest and marked in the like manner as the bond so proved to be lost or destroyed. Section 3705. — The owner of such missing bond shall first file in the Treasury a bond in the penal sum equal to the amount of such missing bond, and the interest which would accrue thereon, until the principal thereof becomes due and payable, with two good and sufficient sureties, residents of the U. S., to be approved by the Secretary, with condition to indemnify and save harmless the U. S. from any claim because of the lost or destroyed bond. Parties presenting claims on account of a coupon or registered bond of the U. S. which has been destroyed wholly, or in part, or on account of a regis- tered bond which has been lost, will be required to present evidence showing : 1. The number, denomination, date of authorizing act, and rate of interest of such bond ; whether coupon or registered ; and, if registered, the name of the payee. In the case of a registered bond, it should also be stated whether it had been assigned or not previous to, or since, the alleged loss or destruc- tion, and, if assigned, by whom, and whether assigned in blank or to some person specifically by name ; and if assigned in the latter manner the name of the assignee should be given. 2. The time and place of purchase, of whom purchased, and the considera- tion paid. 3. The place of deposit of the missing bond ; whether or not any person or persons, other than the owner, had access thereto ; and in the event of its having been accessible to other parties, their afl&davits, in addition to that of the owner, should be furnished, showing their knowledge of the existence of the bond, and of the fact of its loss or destruction. 4. The material facts and circumstances connected with the loss or destruc- tion of the bond. 5. It should be shown by the affidavits of credible persons, if practicable by U. S. oiBcers, that the statements of the claimant as set forth in his affidavit are worthy of the confidence of the Department, and that he is the identical person named in the application. In all cases the evidence should be as full and clear as possible, that there may be no doubt of the good faith of the claimant. Proofs may be made by affidavits duly authenticated, and by such other competent evidence as may be in the possession of the claimant. General Form of Affidavit. \ ss : Personally appeared before me, a notary public in and for the city of county of and State of , the subscriber, , who, being duly sworn according to law, deposes and says that is the lawful owner of the following described registered bonds of the United States, viz. : 296 No. , fori , Act of , 18 — , per cent., and No. r for $ , Act of -, 18—, per cent., registered in name on the books of tlie Treasury Department, , 18 — ; that no assignment or transfer of said bonds [or either of them] has been made by or attorney, either in blank or by a specific assignment, or in any manner what- ever ; that said bonds have not, nor has either of them, by hypothecation, pledge, loan, or otherwise, passed from the custody or control of said with [his or her] knowledge or consent ; that the said bonds were stolen from , the said , at , on the , by some person or persons unknown to ; and that due diligence has been exercised in endeavoring to recover the said bonds, without success. [State what has been done.] Sworn to and subscribed before me this the day of , A.D., 18 — . And I certify that said is personally well known to me to be the identical person mentioned in the foregoing affidavit. [notarial SEAL.] . Notary Public. Affidavits and other evidence pertaining to the claim should be transmitted to the Secretary of the Treasury. The applicant will be advised of the decision as soon as it is reached. If it be favorable to such applicant, a blank indemnity bond will be forwarded to him for execution ; and when this indemnity bond shall have been duly executed, returned' to the Department, and approved, the relief desired will be granted. A duplicate in lieu of a lost registered bond will not be issued within six months from the time of the alleged loss. The interest on an uncalled registered bond will be paid to the payee thereof even though the bond has been lost or destroyed. Under a decision of the Attorney-General of the U. S. of January 29th, 1878, the Secretary of the Treasury cannot give relief in cases where coupons previously detached from the bonds have been destroyed. The decision makes a distinction between coupons destroyed when still attached to the bond and those detached and afterwards destroyed. In the former case it would amount to a partial destruction or defacement of the bonds themselves ; in the latter, the coupons form no part of the bonds, but are then the basis for independent claims, possessing all the essential attributes of commercial paper. That is, a claimant for relief for a coupon destroyed while still attached to bond can get it from the Secretary of the Treasury, under the provisions of Section 3702 ; but if destroyed after detachment, the claimant must present his claim in the usual manner, and await action of Congress. Called Bonds. — All U. S. called bonds forwarded for redemption should be addressed to the Secretary of the Treasury, Division of Loans and Currency. When registered bonds are so forwarded they should be assigned to • ' the Secretary of the Treasury for redemption." Assignments must be dated and properly acknowledged, as prescribed in the note printed on the back of each bond. Where checks in payment of registered bonds are desired in favor of any 297 one but the payee, the bonds should be assigned to the " Secretary of the Treasuiy for redemption for account of "- (here insert the name of the person or persons to whose order the check should l)e made payal)le.) Regulations in regard to Coupons Detached from Called Bonds. — When coupons detached from bonds that have been called in for redemption are presented for payment, the Department will pay such portion of the interest specified in such coupons as had accrued at the day fixed in the call for the redemption of the bonds, and no more, unless the party presenting them claims payment of their nominal value, in which case the Department will retain the coupons until the bonds from which they were detached shall have been presented and the conflicting claims adjusted. When a called bond is presented for redemption from which a coupon, maturing after the day fixed in the call for such redemption, shall have been detached, the nominal value of such coupon shall be deducted from the sum due upon the bond, unless the coupon shall have been paid as above; the sum thus deducted to be retained to await the presentation of the coupon and a settlement. All correspondence in relation to bonds that have been called in for redemp- tion, or coupons belonging thereto, should be addressed to the " Loan Division," Secretary's Office. Exemption of United States Bonds from Taxation.— Section 3701 of the Revised Statutes provides as follows: "All stocks, bonds. Treasury notes, and other obligations of the United States shall be exempt from taxation by or under State or municipal or local authority." This section makes the exemption from taxation binding only upon "State or municipal or local authority;" but, according to the express terms of the Act of Congress of July 14th, 1870, the bonds and the interest thereon of the funded loans which are thereby authorized — namely, the loan of 1881, the loan of 1891, and the four-percent, consols of 1907 — " shall be exempt from the payment of all taxes or duties of the United States, as well as from ta.xation in any form by or under State, municipal, or local authority ; and the said bonds shall have set forth and expressed upon their face the above specified conditions." (See also Section 5219, Revised Statutes ) BONDS OF THE UNITED STATES. Interest Bearing. — Funded Loan of 1891, Act July 14, 1S70, and January 20, 1871, continued 2 per cent., payable at pleasure of U. S, Consols of 1907: Act July 14, 1870, and January 20, 1871, 4 percent., pay- able July I, 1907. Loan of 1904 : Act January 14, 1875, 5 P^r cent., payable February i, 1904. Loan of 1925: Act January 14, 1875, 4 per cent., payable February r, 1925. Ten-twenties of 1898: June 13, 1898, |2oo,ooo,ooo, 3 per cent., payable after August 1, 1908. Bonds that have Matured and Ceased to Bear Interest. — Loan of 1858: June 14, 1858, 5 per cent., payable 15 years from January i, 1859. Fives of i860: June 22, i860, 5 per cent., payable 10 years from January i, 1861. Sixes of 1880 : February 8, i86i, 6 per cent., payable December 31, 1880. 298 Oregon War Loan : March 2, 1861, 6 per cent., payable 20 years from July I, 1861. Sixes of 1881 : July 17 and August 5, 1861, 6 per cent., payable June 30, 1881. Five-Twenties of 1862: February 25, 1862, 6 per cent., payable after 5 and within 20 years from May i, 1862. Sixes of 1881 : March 3, 1863, 6 per cent., payable June 30, 1881. Five-twenties of 1864: March 3, 1864, 6 per cent., payable after 5 and within 20 years from November i, 1864 Ten-forties: March 3, 1864, 5 per cent., payable after 10 and within 40 years from March i, 1864. Five-twenties of 1864: June 30, 1864, 6 per cent., payable after 5 and within 20 years from November i, 1864. Five-twenties of 1865 : March 3, 1865,6 per cent. , payable after 5 and within 20 years from November i, 1865. Consols of 1865: March 3, 1865, 6 per cent., payable after 5 and within 20 years from July i, 1865. Consols of 1867: March 3, 1865,6 per cent., payable after 5 and within 20 years from July i, 1867. Consols of 1868 : March 3, 1865, 6 per cent., payable after 5 and within 20 years from July i, 1868. Funded Loan of 1881 : July 14, 1870, and January 20, 1871, 5 per cent., pay- able after May i, 1881. Sixes of 1881 : July 17, and August 5, 1861 (continued April 11, 1881), 3^^ per cent, payable at pleasure of U. S. Sixes of 1881 : March 3, 1863 (continued April 11, 1881), 2^4 per cent., paya- ble at pleasure of U. S. Funded Loan of 1881: July 14, 1870, and January 20, 1871 (continued May 12, 1881), 35^ per cent., payable at pleasure of U. S. Funded Loan of 1882 : July 12, 1882, 3 per cent., payable at pleasure of U. S Funded Loan of 1891 : July 14, 1870, and January 20, 1871, 4)4 per cent., continuc-d at 2 per cent., payable at pleasure of U. S. Currency Sixes Pacific R. R. : July r, 1862, and July 2, 1864 (issued 1865- 1869), 6 per cent., payable in 30 years. INDORSEMENT OF TREASURY DRAFTS. The name of the payee, as indorsed, must correspond in spelling with that on the face of the draft ; no guarantee of an indorsement, imperfect in itself, can be accepted. If the name of a payee, as written on the face of a draft, is spelled incorrectly, the draft should be returned to the Treasurer of U. S. for correction. Indorsements by mark (X) must be witnessed by two persons who can write, giving their places of residence. Indorsements by executors, administrators, guardians, or other fiduciaries must be accompanied by certified copies, under seal, of letters testamentary, letters of administration, of guardianship, or other evidence of fiduciary char- acter, as the case may be. Payees and indorsees must indorse by their own hands ; officials, officially with full title ; firms, the usual firm-signature by a member of the firm, not by a clerk or other person for the firm. 299 Every indorsement must be by the proper written (not printed) signature of the person whose indorsement is required. Powers of attorney for the indorsement of drafts in payment of claims must state the number, date and amount of draft, and number and kind of warrant, and be dated subsequently to the date of the drafts ; must be witnessed by two persons, and must be acknowledged by the constituent before the Treasurer of the U. S. or an Asst. Treas., a judge or clerk of a District Court of the U. S., a collector of customs, a notary public under his seal, or a justice of tlie peace in those States only in which such justice has authority to take acknowl- edgments of deeds, or commissioner of deeds ; if before either of the two latter, the certificate and seal of the county clerk as to the ofiScial character and signature of the justice or commissioner is required. If executed in a foreign country, the acknowledgment must be made before a notary public with his seal attached, or a U. S. Consul or Minister. The officer taking the acknowledgment must certify that the letter of attorney was read and fully explained to the constituents at the time of acknowledg- ment, and that said constituent is personally well known to him to be the identical person named in and who subscribed his name to said power of attorney. (See Revised Statutes, sections 1778 and 3477.) Evidence of authority to indorse for incorporated or unincorporated com- panies must accompany drafts drawn or indorsed to the order of such com- panies or associations. Such evidence should be in the form of an extract from the by-laws or records of the company or association, showing the authority of the officer to indorse and receive and receipt for moneys for the company, and giving his name and the date of his election or appointment, which extract must be verified by a certificate under seal signed by the presi- dent and secretary, or by one of these officers and not less than two of the directors ; which certificate must state that such authority remains unrevoked and unchanged. If the company have no seal, the extract should be certified as correct by a notary public or other competent officer under his seal. When a resolution is adopted at a special meeting of directors, it must be shown that all had notice of the time and place of such meeting, and that a quorum assented to the resolution. In cases where an individual or a copartnership is doing business under a company title, the affidavit of the owner or of the members of the copartner ship will be required, showing the fact of ownership and naming the person who is authorized to indorse and receive and receipt for moneys for the owners. The indorsement of all the joint holders or co-trustees, executors, adminis- trators, guardians or other fiduciaries will be required on drafts, and in the execution of a power to a third party to collect, all must join. In case of death of either, the survivors will be recognized as having full authority upon due proof of such death and survivorship. ■• 30O '■'• WAR REVENUE LAW. (Extracts from Act approved June 13, 1898,) Bankers. — Bankers using or employing a capital not exceeding the sum of twenty-five thousand dollars shall pay fifty dollars ; when using or employing a capital exceeding twenty-five thousand dollars, for every additional thousand dollars in excess of twenty-five thousand dollars, two dollars, and in estimat- ing capital surplus shall be included. The amount of such annual tax shall in all cases be computed on the basis of the capital and surplus for the preced- ing fiscal year. Every person, firm or company, and every incorporated or other bank, having 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, or where money is advanced or loaned on stocks, bonds, bullion, bills of exchange or promissory notes, or where stocks, bonds, bullion, bills of exchange, or promissory notes, arereceived for discount or sale, shall be a banker under this Act : Provided That any savings bank having no capital stock, and whose business is confined to receiving deposits and loaning or investing the same for the benefit of its depositors, and which does no other business of banking, shall not be subject to this tax. ********* Checks, Drafts, Etc. — Bank check, draft or certificate of deposit not draw- ing interest, or order for the payment of any sum of money drawn upon or issued by any bank, trust company or any person or persons, companies or corporations, at sight or on demand, two cents. Domestic Bills of Exchange. — Bill of exchange (inland), draft, certificate of deposit drawing interest, order for the payment of any sum of money, other- wise than at sight and on demand, or any promissory note except bank notes issued for circulation, and for each renewal of the same, for a sum not exceed- ing one hundred dollars, two cents ; and for each additional one hundred dol- lars or fractional part thereof in excess of one hundred dollars, two cents. Foreign Bills of Exchange. — Bills of exchange (foreign) or letter of credit (including orders by telegraph or otherwise for the payment of money issued by express or other companies or any person or persons), drawn in but paya- ble out of the United States, if drawn singly or otherwise than in a set of three or more, according to the custom of merchants and bankers, shall pay for a sum not exceeding one hundred dollars, four cents, and for each one hundred dollars or factional part thereof in excess of one hundred dollars, four cents. If drawn in sets of tv.'o or more: For every bill of each set, where the sum made payable shall not exceed one hundred dollars, or the equiva- lent thereof in any foreign currency in which such bill may be expressed, according to the standard of value fixed by the United States, two cents ; and for each one hundred dollars or fractional part thereof in excess of one hun- dred do^ars, two cents. That the acceptor or acceptors of any bill of exchange or order for the payment of any sum of money drawn, or purporting to be drawn, in any for- eign country', but payable in the United States, shall, before paying or accept- ing the same, place thereupon a stamp, indicating the tax upon the same, as the law requires for inland bills of exchange or promissory notes; and no bill • Law abolished, to take efiFcct July r, 1902, Act of April 12, 1902. 301 of exchange shall be paid or negotiated without such stamp ; and if any person shall pay or negotiate, or offer in payment, or receive or take in pay- ment, any sucli draft or order, the person or persons so offending shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be pun- ished by a fine not exceeding one hundred dollars, in the discretion of ilie court. Mortgages and Collaterals. — Mortgage or pledge of lands, estate, or prop- erty, real or personal, heritable, or movable, whatsoever, where the same shall be made as a security for the payment of any definite and certain sum of money, lent at the time or previously due and owing or forborne to be paid, being payable ; also any conveyance of any land, estate, or property whatso- ever, in trust to be sold or otherwise converted into money, which shall be intended only as security, either by express stipulation or otherwise ; on any of the foregoing exceeding one thousand dollars and not exceeding one thou- sand five hundred dollars, twenty-five cents ; and on each five hundred dol- lars or fractional jiart thereof in excess of fifteen hundred dollars, twenty-five cents. Provided, That upon each and every assignment or transfer of a mortgage, lease, or policy of insurance, or the renewal or continuance of any agreement, contract, or charter, by letter or otherwise, a stamp duty shall be required and paid at the same rate as that imposed on the original instrument. Protests. — Upon the protest of every note, bill of exchange, acceptance, check or draft, or any marine protest, whether protested by a notary public or by any other officer who may be authorized by the law of any State or States to make such protest, twenty-five cents. Penalties. — That if any person or persons shall make, sign, or issue, or cause to be made, signed, or issued, or shall accept or pay, or cause to be accepted or paid, with design to evade the payment of any stamp tax, any bill of exchange, draft, or order, or promissory note for the payment of money, liable to any of the taxes imposed by this act, without the same being duly stamped, or having thereupon an adhesive stamp for denoting the tax hereby charged thereon, he, she, or they shall be deemed guilty of a misde- meanor, and upon conviction thereof shall be punished by a fine not exceed- ing two hundred dollars, at the discretion of the court. SYNOPSIS OF DECISIONS OF THE ATTORNEY-GENERAL AND COMMISSIONERS OF INTERNAL REVENUE. Certificates of Deposits— On demand, non-interest bearing, 2 cents. Interest bearing, if money is left on deposit for specified time, 2 cents, when issued, and if paid after time specified, additional stamps must be affixed at the rate of 2 cents per |ioo or fraction thereof, of face value. Checks. — Drawn by the manager of the clearing-house, to settle balance between banks, 2 cents. Used in the nature of a memorandum, and within the bank exclusively, require no stamp. Drawn by any officer of a bank, on his bank, but payable to third person not connected with the bank, 2 cents. Drawn within the U. S. on a domestic or foreign bank, 2 cents. 302 Drawn by officers of State, counties and municipalities in their official capacity against public funds, require no stamp. Banks should not pay unstamped checks presented for payment, but should return all such unstamped checks to parties presenting same. Bank checks drawn abroad, but payable in the United States, a cents. Drafts. — Sight or demand, 2 cents. Time, 2 cents per $100 or fraction thereof. If drawee named in a draft accepts same payable at a bank, an additional 2-cent stamp is required. Drawn in, but payable outside the U. S., if drawn singly, 4 cents per $100 or fraction thereof. Drawn by one bank upon another bank, and duly stamped, no additional stamp required. Drafts drawn abroad, but payable within the United States, if at sight or on demand, 2 cents ; if drawn otherwise than at sight or on demand the tax is at the rate of 2 cents per $100 or fractional part thereof of face value. The party first negotiating a draft or bill of exchange drawn abroad, but payable within the United States, must affix and cancel the required stamp. Receipts, etc. — Tendered personally by depositor upon withdrawal of funds to his credit, not subject to stamp tax. If commercial, negotiable instruments require 2-cent stamp. Debits or charges against a depositor's account, made at his request, in writing, by his bank, 2 cents each. Receipts for insurance premiums, gas, water, telephone, bills, and the like, when paid by banks and charged to depositors' accounts, must have a 2-cent stamp affixed thereto, as orders for the payment of money. Order for the transfer of money, by telegraph or otherwise, within the U. S., 2 cents on each order ; abroad, 4 cents eacli |ioo or fraction thereof. Notes. — The transfer by endorsement of promissory notes does not require a stamp. Judgment notes containing clause authorizing confession of judgment requires 25-cent stamp in addition to stamp required as a promissory note. Promissory notes must be stamped at the rate of 2 cents per $100 or frac- tion thereof, of face value. Promissory notes payable at a bank and charged to the maker's account do not require an additional 2-cent stamp. A written order from the depositor to make such charge must bear a 2-cent stamp. Waiver of protest on a note does not require a 25-cent stamp. . Collateral. — Certain securities or other property pledged for a definite and fixed sum taxed on the amount of loan they secure, over $1,000, at the rate of 25 cents for each $500 over |i,ooo. Held as indemnity or as a basis of credit or a guarantee generally, no par- ticular property being specified as security for the payment of a definite and fixed sum, not taxable. Reports. — The reports of earnings and dividends and of condition made by National Banks to Comptroller of the Currency do not require a stamp. The list of shareholders required by Comptroller of the Currency from National Banks does not require a stamp. Semi-annual returns of National Banks of notes in circulation made to U S. Treasurer do not require a stamp. 303 DIGEST OF DECISIONS RENDERED SINCE THE PUBLICA- TION OF EDITION OF OCTOBER, 1898. Act authorizing National Banks of $25,000 Capital also Circulation to Face Value of Bonds, etc. POWERS AND LIABILITIES OF NATIONAL BANKS. Under Section 5136. Accommodation Guaranty. — A National bank has no power to give an accommodation guaranty, and such a guaranty is not enforceable against the bank. (Bowen v. Needles National Bank, 94 Fed. Rep., 925 ; Groosz;. Brewster (Tex.), 55 S. W. Rep., 590.) In the cases cited a National bank advised plaintiff that it would pay all checks of a third person, although such person had no funds on deposit, as was known to both plaintiff and the hank. In reliance on such promise, plaintiff cashed checks of such per- son, and transmitted them to the bank for payment. The bank issued and sent to plaintiff its drafts on a correspondent for the amount of the checks, which drafts were refused payment. Held, that the contract was one purely of guaranty, and was ultra vires on the part of the bank, and the transaction gave plaintiff no right of action against it on the drafts. Purchase of Stock of Other National Banks. — A National bank can not lawfully acquire and hold the stock of another Na- tional bank as an investment. * (First National Bank of Concord V. Hawkins, 174 U. S., 364.) * The court in this case said : " We think that the reasons which disqual- ify a National bank from investing its money in the stock of another corpor- ation are quite as obvious when that other corporation is a National bank as in the case of other corporations. The investment by National banks of their surplus funds in other National banks, situated perhaps in distant States as in the present case, is plainly against the meaning and policy of the statutes from which they derive their powers, and evil consequences would be certain to ensue if such a course of conduct were countenanced as lawful. Thus it is enacted in Section 5146 that ' every director must, during his whole term of service, be a citizen of the United States, and at least three-fourths of the 3^4 And where such stock has been purchased the bank may plead its want of power as a defense to an assessment upon the stock, notwithstanding it appears as the registered owner thereof, and has received and retained the dividends thereon. {Id.) Cashier — Fraud of. — The subsequent fraud of its Cashier will not relieve a National bank from its liability as indorser on paper transferred by its Cashier within the scope of his authority to an innocent third person. (Auten v. Manistee Nat. Bank, 54 S. W. Rep., 337.) Safe Deposit Boxes. — The Comptroller of the Currency holds that while there is no provision of the statute authorizing National banks to invest considerable sums in the building of safe deposit vaults for the purpose of making that a prominent feature of their business, yet the investment of a moderate amount for such pur- pose in cities where companies can not be properly organized for the sole purpose of conducting this line of business is not open to criticism. The Comptroller holds that the matter is one largely in the discretion of the directors of the bank. Manufacturing Business. — A National bank has no power to engage in a manufacturing busi^ess. (Bletz v. Bank of Ken- tucky (Ky.), 55 S. W. Rep., 697.) "When Bank Cannot Set up its "Want of Power. — Where a National bank has itself purchased notes which the owner had authorized it to sell to a third party, it is liable for their value as directors must have resided in the State, Territory or district in which the as* sociation is located for at least one year immediately preceding their election, and must be residents therein during their continuance in ofl&ce.' " One of the evident purposes of this enactment is to confine the manage- taent of each bank to persons who live in the neighborhood, and who may for that reason be supposed to know the trustworthiness of those who are to be appointed officers of the bank, and the character and financial ability of those who may seek to borrow its money. But if the funds of a bank in New Hampshire, instead of being retained in the custody and management of its directors, are invested in the stock of a bank in Indiana, the policy of this wholesome provision of the statute would be frustrated. The property of the local stockholders, so far as thus invested, would not be managed by directors of their own selection, but by distant and unknown persons. Another evil that might result, if large and wealthy banks were permitted to buy and hold the capital stock of other banks, would be that in that way the banking cap- ital of a community might be concentrated in one concern, and business men be deprived of the advantages that attend competition between banks. Such accumulation of capital would be in disregard of the policy of the National Banking Law, as seen in its numerous provisions regulating the amount of the capital stock, and the methods to be pursued in increasing or reducing it. The smaller banks in such a case would be in fact, though not in form, branches of the larger one." 305 for a conversion, even though it had not the power to act as the owner's agent for the sale thereof (First National Bank of Grand Forks V. Anderson, 172 U. S., 573.) So, where it uses in its busi- ness monej' obtained by one of its oflBcers as a loan to it. it cannot escape liability therefor upon the ground that the loan was not negotiated by it, or by its directors, or that it could not itself have legally borrowed the raonej'. (Aldrich v. Chemical National Bank, 176 U. S., 618.) A National bank took as security for a debt, partly pre-existent and partly created at the time, a real estate mortgage, naming an individual, an officer of the bank, as mortgagee. The transaction was usurious. Held, that, having given the transaction the form of one with an individual, for the purpose of evading the liabilities peculiar to National banks, the bank could not be heard to assert its true nature, for the purpose of evading the liabilities attached to individuals, and of claiming the privileges of National banks. (Gadsden v. Thrush, 76 N. W. Rep., 1060.) Under Section 5137. While a National Bank is forbidden to lend money on real estate security, this does not aflfect the contract, and the security may be enforced ; and though the bank when it discounts a note does not know that the same is secured by a mortgage upon real estate, yet it may, upon discovering the security, enforce the same for its own benefit. (George v. Somerville (Mo.), Bankers' Magazine, Vol. LX, p. 391.) Under Sections 62^ and 5198. Citizenship — Jurisdiction. — For jurisdictional purposes a National bank is to be regarded as a citizen of the State where it is located. (Hazen v. lyyndonville National Bank (Vt.), 41 Atl. Rep., 1046.) Under Section 5198. Usury — Penalty. — Where the laws of a State or Territory ex- pressly authorize parties to contract in writing for any rate of in- terest, such laws apply in favor of the National banks located in such State or Territory, and they are at liberty to contract for any rate of interest. (Daggs v. Phoenix National Bank, 177 U. S., 549.) 3o6 Under the Federal statute the defendant has no right to set off usurious interest paid on the note ; but he must resort to a separ- ate action to recover back such interest. (Central National Bank V. Haseltine, 55 S. W. Rep., 1015.) The action cannot be maintained unless the usurious interest has been actually paid by the borrower. (Haseltine v. Central National Bank, Bankers' Magazine, Vol. L,X, p. 48.) The amount of recovery is twice the amount of the interest paid, and not merely double the excess over the legal rate. (Watt v. First National Bank of Lake Benton (Minn.), 79 N. W. Rep., 509.) The right to recover double the interest paid is personal to the party paying such usurious interest ; and an action to recover the same can be maintained only by such person, or his or her legal representative. (Lealos v. Union National Bank, Bankers' Maga- zine, Vol. I/IX, p. 24.) Where two persons execute their joint note in favor of a National bank, which note is claimed to be wholly for usury, and the same is paid by one of the joint makers, an action can not be maintained, under the .section above referred to, to recover the penalty therein provided, by the other maker. The cause of action accrues to the person making the payment. (L^alos v. Union Nat. Bank, Bank- ers' Magazine, Vol. LX, page 240.) The New York statute pro- viding that corporations may not plead usury applies to National Banks. (Binghampton Trust Company v. Auten, 57 S. W. Rep., 1105.) Under Section 3201. Lien on Stock. — A National bank cannot acquire a lien upon the shares of its own stock for a loan made by it to the owner thereof. The fact that the certificates of stock bear upon their face a notice that the stock is subject to the lien of the bank does not affect the rights of a purchaser, inasmuch as the bank is pro- hibited from acquiring such lien. (Buffalo German Insurance Company v. Third National Bank of Buffalo, 162 N. Y., 163. Under Section 5190. Legal Residence of Bank — Branches. — It is now held by the Comptroller of the Currency that the legal residence of the bank is the particular location, that is, the street and number in the place 307 designated in its organization certificate, or in case of removal its new location, and therefore that it cannot have branches in the same city, and cannot have elsewhere. Under Section S^09- The law of Kansas making oflficers of banking institutions re- sponsible for the reception of deposits or the creation of debts, when such bank is insolvent or in a failing condition, are not applicable to National banks or their officers. (Stout v. Lusk, 59 Pac. Rep., 603.) Under Section 5220. Expiration of Charter. — A National bank, after the expira- tion of the time limit of its charter, continues to exist as a body corporate, capable of suing and being sued, until its affairs are completely settled. (Farmers' National Bank of Owatonna v. Backus (Minn.), 77 N. W. Rep., 142.) STOCK AND STOCKHOLDERS. Under Sectioyi 514.2. Increase of Capital Stock. — The provision of Sec. 5142, Rev. Stat. U. S., to the effect that no increase of capital stock shall be valid until the whole amount thereof is paid in, does not create a condition, express or implied, that shares subscribed and paid for in full are not valid unless the entire amount of the proposed in- crease is subscribed and paid for in full. (Scott v. I^atimer, 89 Fed. Rep., 843.) Under Section 5 131. Stock Held as Collateral Security. — Though the pledgee of National bank stocks buys in the same at the sale thereof, and credits the amount of the purchase price on the indebtedness to which it is collateral, and retains the certificates, yet he will not be liable for an assessment upon the stock in case of the bank's insolvency, unless he has the stock transferred to himself upon the books of the bank. (Robinson v. Southern National Bank, 94 Fed. Rep., 964.) When it is proved or admitted that the person in whose name National bank stock stands is a mere pledgee, then the burden is 3o8 upon the Receiver attempting to enforce an assessment upon such stock against such person to show that he knowingly permitted the stock to stand in his name on the books of the bank. (Tourtelot V. Stoltenben, loi Fed. Rep., 362.) Certain shares of the M. National Bank, owned by B, were pledged by him to the O. National Bank as collateral security for his in- debtedness to the latter bank, and were transferred upon the books of the M. bank to " C, Cashier of O. National Bank." Held, that the O. National Bank was not liable for an assessment upon such stock. (Fraler v. Old National Bank, ici Fed. Rep., 391.) Assessment. — The Comptroller of the Currency has power to order successive assessments against the stocholders of an insolvent National bank ratably on all, where the aggregate does not ex- ceed the par value of the stock. (Aldrich v. Campbell, 97 Fed. Rep., 663; Studebaker v. Perry, 102 Fed. Rep., 947.) Where the assessment upon the stockholders is for less than the full amount of their liability the same may be collected by a suit in equity ; and where questions are involved which are common to a number of stockholders they may be joined as defendants. (Bailey v. Tillinghast, 99 Fed. Rep., 801.) The action of the Comptroller in making the assessment is con- clusive as to the necessity therefor, and can not be questioned col- laterally. (Aldrich v. Campbell, 97 Fed. Rep., 663.) It is incompatible with the policy and purposes for which National banks are created and allowed to do business that mere irregularities, or even fraudulent practices in organization or man- agement, should wholly invalidate the exercise of their vital func- tions, and give ground to a stockholder to repudiate his obliga- tions to the public. (Bailey v. Tillinghast, 99 Fed. Rep., 801.) Where for a long time a person has actually sustained the rela- tion of stockholder to a National bank, he will not be permitted to escape the statutory liability by rescinding his subscription after the appointment of a receiver for the bank, although his subscrip- tion was obtained under such circumstances that he would be entitled to rescind as between him and the bank. (Scott v. Lati- mer, 89 Fed. Rep., 843.) Subscribers to new stock were given old stock instead. The fact that the stock was of the original issue appeared on the cer- 309 tificate, and on the books of the bank, and the stock was retained by the subscribers without dissent for tliree years. Held, that they were estopped to question their liability as stockholders. (Bailey v. Tillinghast, 99 Fed. Rep., 801.) A stockholder in a National bank in process of liquidation can not set off his distributive .share in the assets against his liability on his stock. (First National Bank v. Riggins, 32 S. E. Rep. , 801 .) A right of action by the receiver of an insolvent National bank against a stockholder to recover an assessment does not arise until the necessity for the assessment has been determined and the assessment made by the Comptroller, if it in fact accrues before demand and refusal to pay ; hence limitation runs against such an action only from that time. (Aldrich v. Yates, 95 Fed. Rep., 78.) It is no defense to a stockholder in an insolvent National bank who is sued by the Receiver on his individual liability upon an assessment ordered by the Comptroller of the Currency, to say that the Receiver has unlawfully disposed of such claim, and that the creditors of such bank will not receive of the proceeds thereof as much as they are entitled to. (Schaberg's Estate v. McDonald, 83 N. W. Rep., 737.) The books of a National bank are, among the shareholders, pub- lic records and evidence of what they show, and are admissible against a shareholder in an action brought against him by the Receiver to recover an assessment upon his stock. (Brown v. Ellis, 103 Fed. Rep., 834.) DIRECTORS. Under Section 514.7. False Reports — Liability of Directors for. — Directors of a National bank who, in a simulated performance of the duties pre- scribed by the law applicable to such an institution, relative to the preparation and publication of advertisements, statements and reports, knowingly make and publish false statements and reports of the financial condition of the bank, with intent to deceive, and such matters are believed and acted upon \yy parties, to their damage, are liable for the damages, in an action for the deceit. (Stuart V. Staplehurst (Neb.), 78 N. W. Rep., 298.) 3IO INSOLVENT BANKS. Under Section 524.2. Preferences. — So long as a National bank is a going concern, carrjung on its business as usual, and has committed no act of in- solvency, and it does not appear that a present suspension of busi- ness is contemplated by its officers, though it is actually insolvent, to their knowledge, payments or remittances made or caused to be made to a correspondent bank in the due course of its daily busi- ness can not be said to have been made in contemplation of insolv- ency, or with a view to prefer the correspondent as a creditor, within the meaning of Rev. St., § 5242, making such payments void. (McDonald v. Chemical National Bank, 174 U. S., 610.) The mere fact that a correspondent of a National bank refuses to pay a check drawn on it by such bank at a time when the account of the latter is overdrawn, does not constitute an act of insolvency on the part of the drawing bank, which would render subsequent transfers of property or payments made by it void, as preferences, under Rev. St., § 5242. (/' 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. * 3): ♦ 3|e ♦ ♦ * THE REEXTENSION OF NATIONAL BANK CHARTERS. An Act approved April 12, igo2. 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. Mode of Re-extending Charter. — The regulations of the Comptroller's oflSce for re-extension of charter are the same as for original extension (see pages 229-235). The Comptroller should be notified sixty days before expiration of old charter of intention to extend or to go into voluntary liquidation. 320 PROVISION FOR ADDITIONAL RESERVE CITIES. A71 Ad approved March j, 190J. " That whenever three- fourths in number of the National banks located in any city of the United States having a population of twenty-five thousand people shall make application to the Comp- troller of the Currency, in writing, asking that the name of the city in which such banks are located shall be added to the cities named in sections fifty-one hundred and ninety-one and fifty-one hundred and ninety-two of the Revised 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 percentum of its deposits, as provided in sections fifty-one hundred and ninety-one and fifty-one hundred and ninety-five of the Revised Statutes." For procedure to secure designation, see note to Act March 3, 1887, page 186. The advisability of National banks in a city of only 25,000 population securing the designation of a reserve city is open to question. The matter should be carefully considered before appli- cation is made, especially as a designation by the Comptroller can be revoked only by action of Congress — and some banks located in reserve cities with even larger population regret that their city was designated. The reserve cities July i, 1903, are as follows : Central reserve cities — New York, Chicago, St. L,ouis. Reserve cities — Boston, Albany, Brooklyn, Philadelphia, Pitts- burg, Baltimore, Washington, D. C, Savannah, New Orleans, Louisville, Dallas, Houston, Cincinnati, Cleveland, Columbus, Indianapolis, Detroit, Milwaukee, Cedar Rapids, Des Moines, Dubuque, St. Paul, Minneapolis, Kansas City, Kans., Wichita. Kansas City, Mo., St. Joseph, Lincoln, Omaha, Denver, Salt Lake City, San Francisco, Los Angeles, Portland, Oreg. INDKX. PA&E Accommodation Papbr— Association cannot lend its credit 18 AcKNowLKDGMBNT— (See also Oath). Assignment of bonds 290 " " " Foreign 290 Acting Comptroller of the Currency 2 Action— (See also Suits). Against Association holding own stock 96, 97 Directors, how brought 137 For usury, who may bring gg Of replevin ... 140 Administrator— (See also Trustee). Holding stock as such, not personally liable 60 May act and sig^n for shareholder 190 Advertisement— f See Notice; Ptiblication). Agency— Redemption, in the Treasury 166 Agent— Association as fiscal, of Government 61 Examination of bonds 69 Liquidating bank 146, 155 Reserve 80, 82, 186, 187 Shareholder, appointment and qualification of 192 " Limitation of power 60,190 Special, to examine bank failing to redeem notes 124 To witness destruction of circulation 76 Aiding Misdemeanors of Officers 146, 151 Allotmf.nt— (See Shares). Amendments National Bank Act — Congress may amend 183 Proposed to Act, in Comptroller's rej)ort 3 Restriction of, to articles of association 24 Appointment— Agent to examine bonds 69 Agent to witness destruction of circulation 76 Committee to examine plates, etc 72 Comptroller 1 Deputy Comptroller 2 Directors of associations 39-45 Dissenting shareholders, committee of appraisal for 179 Examiners of associations 115 Clerks of Comptroller's office 2 Officers of associations 6 Receivers of associations 126 Special commission for preliminary examination of associations 30 Vacancies In Board of Directors 46 Appraisal — (See Shares). Articles of Association — Amendment of, for extension of corporate existence . . 177, 229, 235 Amendment of restricted 24 Converted State Bank, execution of, by ()•>, 213 Increaseof capital stock by amendment of 31 Lien on stock, providing for invalid 201 Proceedings in regard to, and form of . 5, 198 Provisions for elections when not provided for in 45 Reduction of capital stock 84 Spccificiition of object of association in, etc 5,37,39 Title and location, change of 185 Assessments— Examinations 115 Examiner, compensation of 115 Impairment of capital 99, 100, 175 Plates, engraving of 166, 211 Redemption of circulation 1C6, 167, 180, 277 Repayment of 176 Reports, failure to make 108 Semi-annual dutv 103 Shareholder's personal liability 47, 126 State tax 105 Tran.sportation of notes 166,167,180, 277 Assessors— Shareholders, lists accessible to 102 3*1 322 PAGB Assets— Comptroller's annual report to contain, of associations 3 Converting State banks, wliat available 211 Exchange of property as sale when not allowed 129 Expenses of Keceiver paid from 136 Failed bank, may be turned over to agent 192 Insolvent banks, distribution of 133, 134 No withdrawal, while capital impaired 36 Of consolidated banks 121, 122 Receiver sells on order of Court 129 Receiver to collect on failure to redeem notes 126 Reportsof condition to contain statement of 102 Shareholders' agent to distribute 192 United States have paramount lien on 125 Assignment— (See also Treasurer United States ; Bonds of U. S.). Executed by Comptroller to be evidence in suit 163 For creditors 49 Of assets after insolvency, void 138 Registered bonds 287, 288 United States bonds as security for circulation 66, G8 Association— (See National Banking Association). Attachment— Not prior to final judgment from State court 160, 161 Attorney- at-Law— Association should have 224 For Receiver 131 Power to employ 16 Auction— Bonds of liquidating associations 122, 125, 180 Enforcement of assessment, impaired capital 175 Purchase of property by Receiver 183 Sale of delinquent National bank stock 28 Sale of dissenting shareholder's stock 179 Authority— (See Certificate). B Bad Debts— Charged off, later, realized on 36, 37 Defined 98 Bank Circulation— (See Circulation). Banking House— Association may own 19 What constitutes • . 20 Bank Note Paper- Penaltv for having unlawfully 156 Bank Officers— (See OflBcera of Association). Bankrupt Law— Not applicable to National banks 128 Banking Powers— (See also Real Estate and National_Bauking Associations). Accommodation paper 12, 13 Bonds U. S., dealing in 9, 10 Borrowing money l-t Charter forfeited for violation of Bank Act 136 Checks, dealing in 12 Clearing house membership 9 Commercial paper, dealing in 10, ll, 12 Commercial paper, guarantee of association 13 Contracts that are legitimate 7 Corporate body, when 29, 205 Deposits 7, 8 Lending credit not lawful 12, 13 Loans 8, 16, 93 May contract to repay deposits ^ J Mortgages, mav foreclose 20, 21 Municipal funds, may receive, pay interest on and give bond 7 Not specified not necessarily prohibited 7 Principal and incidental . 6, 7 Promissory note bankable paper, though mortgage clause 22 Recourse, if property or deposits stolen 8 Real Estate, acquiring excess in covering debt 21 Real Estate, illegal holding, liability 22 Real Estate, mortgage held on property sold 21 Real Estate, mortgage to indorser, enuring to bank ^ Real Estate, policy of law in restrictions on ffl Real Estate, security on notes renewed 21 Re-discounts '^ Stakeholder may act as g Stocks and bonds, not deal in 9 Stocks or bonds mav be taken for debt » Ultra Vires 1° Banking— Limitation of, under territorial law m oa Bills of Exchange— Discount of 'iSI Illegal transfer of, void ;,„ ;f? Penaltv for official malfeasance, relative to 119, I4b Restriction on loans, not applicable to 93 Restriction on association's liability, not applicable to 97 Transfer of, to create a preference, void 1S8 323 PAGL Bills Receivable— Rediscount of 13 Board op Directors— (See also Directors). Action in extension of charter 177 Annual meeting, not calling 4/i, 46 Election pustponed 46 Number constituting, advantage of sliding scale 41, 199 Power to kiemove president 46 President, power of 40 Provision for 89 Quorum, what 41 Three-fourths to be residents of State 89 Vacancy, filling 45 Withdrawal of oonds, authorize 68 Bonds, Official- Agreement to indemnify surety on attachment bond 19 Comptroller 2 Deputy Comptroller t Otlicers of associations 6, 17, 43 Otticers of association extending charter ....-.•..• 233 Public depositaries 62 Receiver 126 Shareholders' agent of failed bank 192 Shareholders, on elec ion of agent of failed bank 192 Bonos, U. S.— Annual examination of provided for 69 Assignment or transfer of • • 67, 68, 287, 288 Associations dealing in • • . • . . . . 9, 10 Association to be notified of transfer or assignment . ... 65 Called for redemp ion 296, 297 Cancellation of, forfeited • . 124 Circulation issuable on . 66, 70, 71, 181 Comptroller, access to records of and deposit with Treasurer 69 Converted State banks to deposit 62 Coupons detached of called bonds 297 Couvion, to be exchanged for registered 67, 287, 289 Deficiency in proceeds from sale of, what first lien 125, 141 Defined ... 66, 155 Deposit of, required to begin business 66, 70, 71, 210 Depreciation in value of, now made good 69 Duplicate for lost 294, 295 Exchange of, permitted 70 Extended bank, no transfer necessary 232 Forfeiture of, for failure to redeem circulation 70, 122, 125 General provisions respecting 69, 287 Government depositaries, deposit of, required 61, 236 Increase of deposit 67 Interest bearing outstanding 297 Interest on, collection of 291 Interest on, withheld for failure to make returns and pay tax 104 Interest on, withheld for failure to make reports to Comptroller 103 Interest on, withheld on impaired capitad 100 Lost coupon 294 Maximum circulation issuable on 181 Maximum amount of deposit to secure circulation 66, 70 Matured 297 Minimum amount to be deposited 66, 168, 180 Penalty for dealing in counterfeit 157 Penalty for illegal possession of imprint, etc 167 Penalty for passing counterfeit 156 Penalty for taking or possessing impressions of tools, etc 157 Reassignment of, to liquidating bank 122, 192 Record of transfer or assignment of, to be kept by Comptroller 68 Registered, deposited with Treasurer U. 8 66 Relation of deposit to capital 67 Return of, to association 70 Sale of, for fkiluie to redeem circulation 122, 124, 125 Taxation, exempt from 145 Transfer ot, how offected 67 Treasurer U. S. access to records of Comptroller relative to 09 Treasurer U. S. to bold, in trust for association 67 Withdrawcl oi, and of circulation 67, 167, 287, 290 Withdrawal, form of 274 Bookkeeper — (See Clerks). BoKRowED Money— (See Liability of Association ; Loans). Branch Banks— Chicago World's Fair • 191 Concerning 79 Converted banks may retain 65 Business— Authorization of association to begin, when 27,210 Place of 79 Suspension of, after default to pay circulation 124 Business Paper— (See Commercial jmper). 324 PAOB By-laws— Effect of 45, 216 Form of 210 Prescribed by directors of national banks 6 What included 6, 37, 216 Cancellation— (See also Bonds, U. S. ; Circulation). Bonds forfeited 125 Circulating notes 126 Shares of Stock 28 Capital Stock— Agent of shareholders, election, distributing assets, etc 192, 194 Associatiou to begin business, amount to be paid 27 Branches of converted State banks (15 Certificate payment of increase, form 272 Certificate of oflQcers and directors as to payment of 27,30 Certificate of payment, form 271 Certificate of reduction, form 273 Character of 222 Circulation not to be used to create 98 Circulation proportion to 70-72, 180, 181 Collateral security for deposit 3-4 Compensation of examiners based on, except in certain cases 115 Consolidating banks 122 Conversion of State banks 62 Creditor's bill against shareholders 173 Deposit of United States bonds based on 66, 168 Directors, individual liability on 136 Directors, qualification of 39 Distinguished from shares of stock 105 Dividends additional, and net earnings to be reported 103 Dividends, and creation of surplus 102 Dividends, when prohibited 98 Disposition of, delinquent shareholders 28, 176 Division of, into shares, number, value and transfer 24, 25 Enforcing individual liability by receiver • . . . 173 Enforcing payment of installments, or receiver 28, 173 Failure to dispose of shares, purchased or acquired 28, 96 Holders of shares, preference in extended banks 177 Holding of shares required by directors 39 Impairment of, assessment for 99, 175 Impairment, appointment of Receiver 100, 136 Increase not made, sul>scribers may recover 33 Increase not required by increase of population 23 Increase of, provisions for 31, 32, 52, 184 Increase, subscribers bound though amount reduced 33 Increase, subscribers equity if net full 34 Individual liability of shareholders 47 Legal status before payment for 29 Ldabilities of an association not to exceed and exceptions 97 Liquidation, two-thirds of stock may vote 118 List of shareholders to be sent the Comptroller 102 Loans on not restricted by circulation 97 Loans on security of shares, prohibited 96 Loans restricted to 10 per cent, of 93 Minimum amount required of national banks 23 Minimum of bonds to • 180 Number of shares and amount in organization certificate 5 Payment of, provisions for and limit in time 27, 28, 29 Eeduction of, provision for 34, 35, 36 Reduction to cover impairment 36 Relation of bond deposit to 67 Resolution to increase, form 271 Resolution to reduce, form 272 Restoration of, when below the minimum required 88 Savings and other banks in District of Columbia subject to this act ... 176 Set free by reduction, shareholders pro rata 36 Set free by reduction used as surplus or Comptroller require as 36 Shares, fractional may be issued 35 Shares, personal property 24 Shares of acquired for debt to be disposed of, when 96 State banks converted the same, as prior to conversion 148 State taxation of shares of 105 Shareholders' rights, duties, liabilities, etc.— (Sec Shareholders). Subscriptions to, when jiayable 28, 29, 208 Surplus fund to be created to 20 per cent, of 92 Surrendered, no claim on collateral of bad debts 86, 87 Tax on repealed 188 325 PACB Capital Stock— When increase of, becomes valid 31 Witlidrawal of bonds on reduciion, or closing business 67 Withdrawal of bonds, limited 70 Cashier— (See also President ; Officers). Appointment of 6 Authority, exceeding 44 Bank examiner may examine on oath 115 Bond assignments by 67 Borrowing money, limited in 14 Certificate of officers and directors 29,80,208 Certificate of stock payment 27, 2S Circulating notes, to sign 71, 7i, 75 Commission, cannot offer, for securing deposits 15 Customers' credit, responsibility for 15 Deposits, special 7, 8 Embezzlement by 146 Examiner of own bank, cannot be • 115 Expiration of corporate existence, certification by 180,235 Extension of corporate existence, certilication by 177, 230, 232 False certification of checks 101, 15J, 182 Guarantee of payment, limit in 15 Incomplete circulation, bank's liability for, without signature 191 Increase of stock, ct^rtification of 31 Liquidating bank, duty in 118, 119, 120, 121, 227 Loans on U. 8. or national bank notes unlawful 146 Organizing, duties in 27 Penalty for countersigning notes, when 146 Penalty for issuing circulation of expired associations 157 Penalty for official malfeasance 146 Penally for pleilging, etc., circulation 146 Penalty for authorized receipt of public money 158 Personal receipt, binding 17 Position of 222 Protest of circulation, waiving notice of 123, 124 Proxy, not to act as 37 Reports of condition, verified by 102,248,256 Reports of earnings and dividends, verified by 103 Shareholders, list of, by 102 Taxable circulation, returns by 104 Unauthorzied circulation, returns by 173 Voluntary liquidation, certified by 120, 227, 228 Central Reserve Agents— (See Reserve agents). Cbrtificatb — Certified copy of organization, evidence 163 Comptroller's authority to begin business 30, 210 Converted State banks 62 Deposit of public money 240 Destruction of notes 76,123,125,126 Execution of organization 6 Extension of corporate existence 177,230,232 Increase of stock 31,52 May be withheld, when 30 Officers and directors 30, 208 Organization 5 Payment of installments of stock 27 Publication of Comptroller's authority 31,211 Reduction of stock 34 Sealed, of Comptroller, evidence 163 Voluntary liquidation 120, 227, 228 Certification of Checks— When criminal 154 When forbidden and penalty for 101, 182 Certified Copies— (See Evidence). Charter Number— Of circulating notes to be printed on 168 Charter— (See Corporate Existence). Chattels— As security for loans 9 Checks- Dealing in 12 False certification of, Receiver appointed 101 Falsely certified, an obligation of association 101 Penalty for false certification of 182 Circulation— Association, Issuing . 6, 66, 209, 278 Association to redeem, in lawful money on demand 81, 122, 165 Bonds U. S. to secure 67-70, 168, 210 Bonds in excess of amount required and interest to secure may be with- drawn 67 Bonds forfeited when, dishonored 69, 124 Certificates of destruction 76, 77 Charter number on 168 Collection of tax on 104 326 PASS CiRCxn-ATiON Consolidating banks 121, 122 Cost of engraved plates to be paid by association 72, 166, 179, 211 Cost of redemption and transportation '. 167,181,^7 Counterfeiting, etc 155, 157 Countersigning unlawfully 146 Destroyed, to be replaced by new notes 76 Examination of bank upon protest of 124 Expense of plates lor notes of extended banks 179 Extended bank, shall differ from prior issue 179 Form, denomination, printing and signing 70, 71, 73, 179 Form of order for 210 For what receivable 75 Fraudulent notes to be stamped 175 Gaiu from lost and destroyed 179 Government depositaries to receive, at par 61 Inscription on 71 Increasing capital stock, by prohibited 98 Liquidating bank to deposit lawful money to redeem 122 No limit on aggregate amount 171 Notice of redemption, to be forwarded to bank 165 Other, prohibited for national banks 76 Penalty for failure to make returns of, for tax 104 Pledging, as security jirohibited 98 Preparation of 71 Profit on unredeemed, inures to the United States 179 Proceedings when return is not made by State banks 144 Prohibition against circulating uncurrent notes 100, 101 Proportion to Donds deposited 180, 181 Proportion to capital 67, 181 Protest of 123 Receivable at par by all national banks 83 Reduced if bonds withdrawn 70 Refunding excess tax 104 Redeemed of closed bank to be canceled 126 Redeemed, disposition of 278 Redemption fund of 5 per cent 165 Redemption of, in United States notes and expenses 166-167, 100, 275 Redemption ot extended bank 179 Redemption of, liquidating banks 123 Redemption of closed banks 122, 125, 126, 190 Redemption of incomplete 191 Re-issue of 76, 166 Restriction of tax provisions 146 Statement, of closed banks in annual report of Comptroller 3 Securities exempt from local taxation 145 Tax on 103-105, 144, 279, 280 Tax on converted bank 143 Tax on insolvent banks remitted 176 Tax on State bank issue 143 Tax.subject to State law 113,191 Treasurers and pTiblic depositaries to return, of closed banks ]67 When exempt from tax 143 When issuable as money 75 When withdrawn, new issued onlv after six months 181 Withdrawal of, by depositing lawful money 70, 121, 122, 168, 181 Worn out or mutilated, destroyed 76, 170 Claims— (See Insolvency ; Receiver >. Clearing House— Certificates issued by, counted as reserve 81 Membership 9, 182 Clerks— Appointment of, Comptroller's 2 Duties of, fixed by the Comptroller 2 Employment of, for the Bureau by the Comptroller 2 Names and compensation of, in annual report 3 Of Association, not act as proxy 37 Of Association, qualifications 224 Closed Associations— (See Insolvent banks). Collaterals— Care of 224 Of insolvent banks , 134 Shares registered, held as 53 Stocks and mortgages 10, 20, 21, 22 Collections— Association authorized to make 7 Cashier on savings bank 17 Commercial Paper- Association indorsing 18 Discotmt of 83, 97 Guaranteeing payment of 13 Purchasing 10 Commission— Paying to get customer 15 327 FAOS CojirxROLLBK OP THB CuRRBNCY— Action as to agent of shareholders IVi Agent special, for association failing to redeem circula- tion 124 Annual report to be made to Congress by 3 Apix)intmenf , term and salary- ol 1, 2 Approve Receiver's jjurcliasu of property 184 Approve reserve agent . . fcO Articles of association and organization certificate to be filed with 5 Authorized to examine banks in the District of Co- lumbia 8 Bonds and records of with Treasurer, access to 60 Bonds, sale of, by 125 Capital stock, increase or reduction of, approved by . 81, 34 Certiticate to begin business 30, 210 Certified copies of organization certificate, etc., evi- dence 163, 164 Charter number of bank to have put on notes 168 Cited in injunction of Receiver 136 Circulation, duties as to 70, 71, 76, 80, 126, 166 Commissioner of Freedmen's Savings Bank 1 Creditors of failed banks pay dividends to 133, 136 Decision of insolvency final 127 Destroy circulating notes by maceration 170 Duties of 1,2 Enforce stockholder's liability 126 Enjoined by bank, how 163 Examiners, appointment of 115 Extension of corporate existence, approved of, by . . . 177 Evidence sealed certificates 163 Forfeit, cancel or sell bonds of notes not redeemed . . . 125 Forfeiture of charter, suit to be brought by 136 Gold banks, organization of 77 Interest in National banks, issuing currency prohibited 2 Jurisdictiouof circuit courts * 159 Liquidation of Association to be approved by ... . 120, 226 Not compound debts of National banks 129 Notice to banks short in reserve 80 Notice to creditors of insolvent banks 133 Oath to be taken and bond to be given by 2 Pay for Receiver's purchase of property 184 Pays residue of assets to shareholders 133, 192 Plates and dies and examination of 3, 72 Printing report of 4 Qualification of 2 Re-appraisal of stock in failed bank 179 Receiver, appointed by 80, 99, 101, 126, 173 Receiver, may remove 127 Reports of savings banks 175 Reports to be made to 102, 103, 244 Reserve cities, designation of, by 186 Retiring circulation 181 State banks converted, approved by 62 Title and location, change of, to be approved by ... . 185 Title of National banks, approved by 5, 1% Transfer of bonds 67, 68 Computation— Of reserve and rules 258,263 Compounding Debts— Of insolvent bank 129 Congress— Comptroller's report to be made to 3 Consolidation of Associations— Provisions for and suggestions 121, 122 Contract— Effect of asury upon 99 Liquidating banks cannot make 118 Rights and liabilities 6, 18, 19 Converted State Banks— (See State Banks Converted). Corporate Existence— Extension of 177, 229 Liq\iidaling, not terminate 119, J80 Corporators op National Banks — May act by attorney 20-1 Minimum number 6 To be natural persons 107 Women as 198 Corporate Powers — (See Banking Powers). Corporation — Association becomes, when 6, 29, 206 Cannot be organizer of National banks 197 Cost— (See Expenses). Counterfeits— Making or using notes, plates, tools, etc 155,157 Stamping • 175, 286 Coupon Bonds— (See Bonds, United States). Courts— (See also crimes, jurisdiction, etc). Federal jurisdiction in insolvent bank suit 180 328 PAon Courts— Jurisdiction of 159, 178, 187 May enjoin Comptroller and Receiver 135, 159 State jurisdiction in insolvent bank suit 130 Credit— Lending by association 13 Creditors— Checks falsely certified valid against associations 101 Defrauding 49 Directors' liability 136 Expiration of existence, notice to 180,234 Insolvency, notice of, to 133 Non-payment of circulation, notice of, to 124 Of failed banks must proceed through Comptroller 133, 136 Payment of assets of failed banks 133,134 Preferred, when and when not 110, 125, 138, 139 Procedure against association 57, 173 Rights not to be impaired 24, 56 Shareholders' agent, settlement with 194 Shareholders' list of, subject to inspection by 102 Shareholders' personal liability of, to 47, 56 Voluntary liquidation, notice of, to 120 Creditors' Bill— Against shareholders 178 Crimes, Jurisdiction, etc.— Counterfeiting circulation 155 Dealing in counterfeit circulation 157 Evidence, certified copy of organization certificate 163 Evidence, sealed certificate of Comptroller competent .... 163 False certification of checks 101 Having or taking unauthorized impression of tools, etc. ... 157 Illegal possession or use of material for circulation 165 Imitating circulation for advertising purposes 78 Improper countersigning or delivering circulation 146 Indian Territory 190 Issuing circulation rf expired associations 157 Jurisdiction, general, of National bank cases 159, 178, 187 Jurisdiction to enjoin Comptroller or Receiver 135, 159 Mutilating circulation 78 Obligations of the United States defined 155 Ofiicial malfeapauce 146 Passing counterfeit circulation • 156 Pledging United States notes or bank circulation 146 Suits against United States officers or agents 163 Criminal Intent — Must be shown against bank officers 146, 154 Currency— (See Circulation, Gold Certificates, Silver Certificates, Lawful Money, United States Notes). GuRRENcv Bureau— Designation of officer of Comptroller of the Currency 1 Offices, vaults, etc., for 3 D Dealing— In commercial paper 10 In real estate In stocks and bonds 9 U. S. bonds 9 Debentures -Of mortgage loan companies 21 Debts— Compounding 129 Real estate held for ... 19 Deceased Shareholders — Estate liable 48 Definitions — Bad debts 98, 99 Banking powers 6, 7 Greater rate 108 Lawful money and legal tenders 194 National banks 66 Obligations of United States 66, 155 Denominations— Circulation of National banks 71 Converted State bank shares 62 Gold certificates 182 Shares of National bank stock 24, 62 United States note certificates 81 Depositaries- (See Government Depositaries.) Depositors— Loaning for 17 Otiiccrs cannot contract to procure 15 Dbposits— After bank insolvent 140, 141 Kind allowed 7, 8 PuVjUc moneys 61, 236 Replevin, set off, etc 58, 140, 141 Reserve to be kept on 80 Shares as collateral for 34 Special, liability for 8 Tax on, repealed 188 329 Dbpdty Comptroller— Appointment, bond, oath, duties, salary 2 Interest in bank issuing National currency prohibited 2 DeiTruction OF Mutilated Notes— By maceration 170 On deixjaitoflawful money 123,167, 181 Dibs— (See Plates and Dies.) Directors— (See also Board of Directors). Association to elect or appoint 6, 39, 40 Assessment, provisions lor enforcement of, by 176 Attestation of reports to Comptroller, by 102 Borrowing mouev, must authorize 14 Capital impaired, duty in 28, 100, 176 Certificate of olhcers and 30, 208 Certification of, to extension 177 Comptroller, special instructions to 274 Conversion of State bank, action by 62 Deposits, personal, withdrawing in crisis 43 Deposits, special liability for 43 Disqualification and resignation 42 Dividends, declaration of, by 92 Election and qualiiicatiou of 39,40 Embarrassment of bank, when may conceal 43 Embezzlement, penalty 146 Estate of, liability 137 Exception in Oklahoma 190 Failed bank, duty in 132 Failure to hold annual election 46 Forfeiture of charter for violation, etc., by 136 In bank action against, for usuriotis loan 92 Individual authority only as delegated 41 Indian Territory, relative to 190 Leave of absence 42, 44 Liabilitv 36, 42, 163 Liability in reports to Comptroller 136, 150 Names and residences of, to be ascertained by Comptroller 30 Naming in articles 200 Not an examiner of own bank 116 Number and election of 39 Oath of 39, 206 Oath, le.gal force of 40 Office of 222 Officers of association 38,115,149 Officers' term, control 16 Oklahoma, qualification of National bank in 190 Penalty for issuing circulation of expired association 157 Penalty for official malfeasance 146 Penalty for unauthorized receipt of public money 158 P*resident of board, to be a 46 Powers of 6, 18, 39-45 Proxv, cannot act as 38 Qualifications of 39 Real estate conveyance 20 Representative holders of stock, not eligible as such S9 Resolution of, assignment of registered bonds 274,289 Should require bonds of officers 43 Shareholders dissenting to extension, notice to, etc 178 Stock, must hold free from pledge 40 Stock registered in name, liable for 60 Suit against, for neglect, etc 1S2 Supervision of aflairs of bank required 42, 43 Vacancies in board of 45 When refuse to declare dividends 93 Women when eligible 39, 40 Discounts — (See also Loans, Liability, Interest.) Bills of exchange, when not usurious 83, 84 Include purchase| , 12 Prohibited, when reserve deficient " 80 Rate of interest that may be charged 83, 84 Suggestions as to making 223 When embezzlement 148 With attorney fee clause 87 With mortgage clause 22 Distinctive Paper— Unauthorized possession or use of _ 155 District Attornets — To conduct suits against associations 163 District OP Columbia— Examination of and requirements of banks in 3,175 Supervision of banks in, by Comptroller 3 Disbursing Funds op U. S, Officbrs— Depositing with National bank depKJSitarles .... 237 Dividends— (See also Surplus). Comptroller to make ratable, of assets of insolvent banks 133 Directors to declare 92, 9 J 330 « PACB DiviDKNDS— Earnings and, to be reported ino Explanations of items in report of 263 Form of report 266 Limitations on ' .' 80 98 99 Of failed associations .'.'.'.".'. 133 igo Penalty for failure to report earnings and ' loa Pledge from shareholders 9g Restriction on association's liability .' ] 07 Donation— Officers cannot bind bank ?« Drafts— Binding banli to pay !.'!'.' 16 Obligations of United States, including .".'.'.'."".* IBs OflQcial malfeasance {ac Liability of association, relative to . ! 07 Penalty for mutilating ' ' 70 U. S. Treasury, indorsement of '. 000 DuTiEs-(See Tax). ^'^ E Earnings, Net— (See also Dividends). Must be reported lOj What constitutes . '...'.'.'.'' (m Elections— Corporate powers .'.'.'.'.''"'' 6 Directors . . . . .'.".'.'.'.'.".'.".'.' 6 39 Extension of corporate existence '...'.'.. 177 Failure to hold annual 45 Increase of stock 3j Proceedingsin ■.■.'.■.■.■.■.■. ■.37,*39, 206 Rightsof shareholders in • ■ 37 Reduction of stock .'.*.'.'.' 34 Shareholders' agent '.'.'.'.'.'.'.'.'.' 192 Voluntary liquidation ,.....'."' ilS 120 EMBBZZLEMENT—(See also ("rimes). • • • • , Indictment what must show and penalty 153 Misapplication of funds, etc., penalty .."..' 146 Must be shown 147 Unauthorized receiving public deposits '..'..'.'.. 158 When action under State laws "... isi 162 Engraving— (See also Circulation Plates and Dies). • • • , Plates, banks to pay for 166 Enjoining Comptroller AND Receiver— (See Injunction of Comptroller). Estoppel— In Receivership 136 On plea of charter, void 57 Evidence— Certified copies of organization certificate '. 163 Copies of papers certified by Comptroller .163 Examinations— Annual, of bonds 69 Bonds and records, provisions for 69 Comptrollerof banks in the District of Columbia 3 Examiners to make, and expense 115 Extending charter 177 Limitation of visitorial powers 116 List of shareholders subject to 102 Ofbankbybank officers 224 Plates and dies annually 72 Preliminary, to beginning business 30 Special, of extended associations 177 Examiners— Appointment, compensation and qualifications 115 Not an officer of bank examined 115 Special commission 30, 124, 177 Exchange of U. S. Bonds 67, 70, 287, 289 Execution— (See Suits). Executor— (See Trustee). Expenses— Bureau of Comptroller, to be stated in annual report 3 Circulation, default on 126 Circulation, tax on 103 Circulation, transportation and redemption of 76,167,181 Duties of shareholders' agent relative to 194 Examiner US Extend charter examination 177 Extending charter, dissenting shareholders' stock 179 Examinations, in District of (^olumbia 3 Plates and dies 166, 167, 179, 211 Plates and dies, examination of 72 Receivership and how paid 126,136 Receivership, paid prior to election of shareholders' agent 194 Reappraisal dissenting stock in charter extension 1'79 Sale of bonds 125 Sale of delinquent stock 28,175 Transportation of notes, etc 166, 167, 277 331 PAoa jiOCPiRiNG Associations— Procedure to close 180, 286 ExPRKSs CHAKGEs-Natioual bank uotes, U. S. coin and currency 284 Express Company— Government contract with 884 E);tknsion op Cokpokatb Existbnch— Amendment of articles and forms 177, 229, 230 Circulation of old and new 179 Continues identical association 178 Procedure in 177, 229 Rights, liabilities and restrlctionfl 177, 229 Shareholders not voting for 233 When better to. reorganize 233 P PAii.tRK—(See Insolvency). Fai-se Entry— Definition • JJ" Indictment, what must show • 15^» Penalty for, ollicial malfeasance 146, 147 When and when not 148, 149 Federal Courts— Enjoining banks IJj'^ Transfer of suit ,Va I'o-; 1^ What cases jurisdiction 160,187, l.sj Federal Questions— Concerning National banks 188, 189 Fees— (See also Examiners ; Receivers). None for witnessing assignment by U. S. minister, etc ^1 Protesting circulation of bank 123 Protest failed bank, responsibility i* Fine— (See Penalty). Firm— (See also Liability of Association). Limit in loans ,• • •• ,?X Five Per Cent. Redemption Fund— Excepted from lawful money deposits 190 Ledger account 277 Redemptions on 165, WS Regulation of '^5 Remittances for 276 Fisc/.L Agent— (See Agent ; Government Depositaries). FoRFEiTURE-(See Interest; Bonds; Charter; Suits). Forgery— (See Crimes ; Penalty). Forms— Articles of Association oct ion Bonds, U. S., letter for conversion of coupon ■»'. •^J Bonds, power of attorney to assign |^JJ Bonds, resolution of directors to assign •^'^•1 By-Laws i^'V Capital stock, certificate of payment -'' Capital stock, resolution of increase f±\ Capital stock, certificate of payment of increa.se -{^^ Capital stock, resolution to reduce f')- Capital stock, certificate of reduction ;^7^ Circulation, order for o,; 55o Corporator, agent signing for '^^''*« ^f^ Directors, naming in articles ^, Directors, oath -* Expiration of charter, closing ^^ Interest on bonds, power of attorney to collect ^ Interest, resolution of directors, attorney to collect ^'^ Organization certificate 202 Organization, notice of intention ijj^ Organization, indorsement of applicalion i^^ Officers and directors, oath of oei ocr Reserve computing *°^' f^'i Subscription paper '^^ Title of association ixi "Voluntary liquidation, resolution for ^^ Voluntary liquidation, notice to creditors ^-8 Fractional Silver Com— Issue of ^'■ Franchise— (See Corporate Powers ; Violation of National Bank Act). Fraudulent Notes— United States and National bank officers to stamp no G GARNisHEK-Liquidatingbank as, of depositor 119 Gold Banks— Laws governing • '' GoldCbrtificatbs— Deposit for, issue limitation and denomination i»^ Reserve for national banks 18^ GoveknmentContract— For transportation of moneys ^\ ^ Government Depositaries- Deposit and withdrawal of public moneys 5V ooS Deposits by postmasters ?,' ^ Designation and duties of ' „?f National banks as 61, 2.50 332 PAGB GovBRNMHNT Dbpositaribs — National bank circulation to be received by 61 National banks as fiimncial agents of the Government ... 61 Penalty for misapplication of money-order funds 238 Penalty for unauthoriiied deposit ot public moneys .... 238 Penalty for unauthorized receipt or use of public moneya . . 238 Secretary of the Treasury to designate 61, 236 Securities to be depositea by 61, 236 Greater Rate— In State taxation, defined 108 Guardian— (See Trustee). GuAKANTKE— Paper by association 13 H Hand Bills— Imitation of national bank notes, penalty for 78 Hypothecation— (See Pledging). Impairment OF Capital— To be made good 99,100,175 Imports. Interest on Public Debt— Circulation of national banks not receivable for . . 75 Incidental Powers — (See also Banking Powers). Of associations 6, 7 Incomplete Currency— (See also Circulation). Associations liable for 191 Issumg 278 Redemption of 191 Unlawful countersigning or delivering 14t> IncreaseofCapitalStock— Procedure, rights of shareholders, etc 81,82,52,184,27-1 Indebtedness— Of association, limit on 97 To association, limitation 93 Indian Territory— National bank act in effect in 190 Individual Liability — (See Liability). Indorsement— Of Treasury drafts 298 Infant — Liability on stock of 56 Injunction— (See also Comptroller ; Suits). Not to issue before final judgment • 161, l?i Of Comptroller . 1„ Insolvbncv— (See also Liquidation and Receivership). Acts and proceedings, contemptatiiig void 138 Agent ot shareholders 192 Assets, distribution of and transfer of 133-135,138 Circulation issued after, penalty for 157, 158 Claims against association 126 Claims not allowed by receiver 135 Claims for tort 134 Collaterals • . . 134 Compounding debts 129 Comptroller's decision final 126 Creditors, notice to 133 Creditors, preference of 138, 139 Creditors' procedure 57 Defined 138 Directors, duty in 132 Impairment of capital 99, 100, 175 Jurisdiction of cases 159, 187 Liability of registered stock 53,55,57 Lien of U. S. on assets, what 134 Proof of by return of execution 127 Receiver, appointment of, etc 99, 126, 173, 189 Redemption of circulation 107 Set off 141, 142 Shareholders may manage liquidation 192 State statutes applying to 112, 142 Suit for and against receiver 130 IMTERBST— (See also U.sury). Checks for, of U.S. Treasurer 293 Claims against failed banks 133 Collection of, on U. S. bonds, form of power of attorney 293 Collection of, on bonds with Treasurer 69, 70, 291 Forfeited, when . 87 How paid to joint holders of U. S. bonds 293 Legal rate, of national banks 83, 84 Of rediscounts, action for usurious 87 On bonds held by minors 293 On bond deposit and when withheld 69, lOO, 104 Penalty for usurious 86 Public debt not payable in national bank notes 75 Eenewal notes, usiirious 87 333 PA08 Intbrkst— State law, relative to 83, 84 llnlavvful paymeuts 85 Internal Revenue— Remission of tax against Insolvent banks 176 Semi-annual return, ol" taxable circulation other than national ... 144 War Revenue Law S'X) Judgment— (See also Suits). Appointment of Receiver for 178 Assigning H Final in State Court before certain proceedings 161, 162 For usury when allegations suflicieut 88 Illegal preference of creditors 138 Purchase of real estate under- 19 Judgment Notes— Discount of 22 Jurisdiction— (See also Crimes, Jurisdiction, etc.). •^ Of courts 159, 187 Lakceny— (Bee Crimes, Jurisdiction, etc.). Lawful Monkv — Defined 194 Deposit to reduce circulation 181 Exemption of circulation from taxation when deposited 143 Expiring associations to deposit 180 Extended bank to deposit 179 Five per cent, fund 165, 166, 276 Forfeiture of bonds, for failure to redeem circulation in . . 124 Liquidating associations to deposit 121, 122, 180 Liquidating association, consolidating 121 National bank notes redeemable in 83 Payment of protested circulation in 124 Protest of circulation, for failure to redeem in 123 Redemption account, disposition of 190 Reserve to be 80, 81 Withdrawing circulation, by deposit of 167 Lawful Monbt Reserve— Balances with agents 81, 82, 180, 187 Clearing-house certificates 81 Computing, examples of short methods 2t"i7-270 Computing, forms for 265, 266 Computing, rules for 259, 264 Gold and silver certificates 182 Five per cent, fund 105,166, 275 Lawful money in bank, what counts as 80, 81 Maintenance of 80 On what required 8o, 105, 257 Receiver for failure to maintain 80, 173 Regulations of 257-264 Reserve agents, proportion with 80 United States note certificates 81 Leave op Absence— Directors '^\ii Liability— Action against Directors 1^7 Association's, for pleerty to protect trust 183 Re-issue of retired circulation on lawful money deposit 181 Report of condition, trausmission 102 Reports of earnings and dividends, transmission 103 Reserve requirements 80 Reserve with central reserve agents 81, 82, 187 Reserve with reserve agents 81, 186 Savings banks in District of Columbia, capital of 173 Shareholders' agent, duties of 192 Shareholders' personal liability 47, 62 Shares of stock, par value 24 Shares of stock, directors to own 39 State taxation of money 145 State taxation of National banks 105 Stock, purchased or acquired 96 Suits, conduct of 57, 132, 163 United States bonds deposited 66 United States note certiflcates, denominations of 81 United States gold certificates, issue of 81 United States Treasurer to redeem circulation presented 166 Usury, right of action for 86-89 Vlsltorial jx)wers 116 Voluntary liquidation, vote .- 118 Voluntary li(juidation, deposit of lawful money I2t Voters at elections 37 335 PAGS Liquidation, Voluntaby— Bonds withdrawn 122 Consolidation 121, 122 Contracts not malie 118 Creditors' bill against stockholders 173 Expiring associations to comply with provisions for 180 Forms, resolutions and notices .... 228 If insolvent not valid, but must be shown 119 Jurisdiction of Conns 159, 187 Lawful money to be deposited . 121 limitation of charter 180 Notice of to bo published 120 Penalty for issuing circulation of associations in 157 ITocedure 118-121, 226 Provisions for, in charter 6 Redemption of circulation of associations in 123, 174 Sale of bonds, when 122, 124 Vote required 118 When date from 120 LiguiDATioN AND Rbceivkrship— (Scc also Insolvency ; Receiver). Funds, forfeiture or 124 Bonds, at auction or private sale 125 Charter, forfeiture of, and Directors' liability 136 Circulation, jirotest of 123 Distribution of assets of insolvent associations 133 Enjoining proceedings, and where 135, 163 Illegal preference of creditors 138 Jurisdiction, general, of National bank cases 187 Jurisdiction of Circuit Courts 159 Lien of U. S. on assets, for what 125 Notice to creditors of insolvent associations 133 Notice to present (irculation for redemption 124 Penalty for issuing circulation of expired associations . . 157 Receiver, appointment of . . . 28,58,80.100,101,126,173 Receiver, purchase of property to protect trust 183 Receivership, expenses of 136 Shareholder's agent, appointment and duties 192 Suits, conduct of 57, 132, 163 Suspension of business for non-payment of circulation . . 124 Taxes on insolvent associations remitted 176 Loans— Borrower liable, though loan illegal 22 By what liabilities, not limited 97 Circulation as collateral for prohibited 98 Entry in report 151, 244 Forbidden when reserve short 80 Illegal Interest 86 In excess when collateral is given 95 Limit of indebtedness 97 Penalty for, in excess 95 Policy in making 223 Prohibited on security on own stock 96 Rate of interest 83, 84 Real Estate prohibited 19 Restrictions on 93 Usurious to Directors 92 When restriction applicable 94 Location— Change of 185 Organization certificate to state 6 Lost or Destroyed Notes— How replaced 76 Profit on, to inure to the Government 179 Lost, Defaced or Destroyed Bonds— Proceedings in regard to 293 Losses— With bad debts— when exceeding profits 98 M Maceration- Destruction ofnotes, by 76,170 Management of Associations — Suggestions as to 221 Married Women— As shareholders or directors 40,49 Indorsement, special 9 May be corporators 198 Purchase of stock by 49 Mbbtings— Annual 37, 45 Elect agent of failed bank 192 Increase of capital 31 Reduction of capital 34 Minors — Bonds Standing in name, interest how paid 293 MisDBMBANOR—(See Crimes ; Penalty; Official Jfal feasance). MoNBys—(See Lawful Money ; Legal Tender; Circulation: Public Moneys). 33^ PAGB Mortgages — Assignment of failed bank, by preference void 138 Foreclosure by association ,'..'!!! 20 Limitation to holding .' ! ! ! 19 23 Mortgagee liable on illegal loans ! ! ! . ' 18 Official malfeasance ' . 146 147 Purchase of, by receiver, when '.'.'.. 183* 184 Real estate, possession, etc , of, by association ' 2 Board may remove *6 Capital stock, payment of 27 Certificate of officers and directors 29 Circulating notes protested 123 Director to be 46 Election or appointment of, by directors 6 Ex officio and vested powers ;,; «*^ Extension of charter *■"• »32 False certification of checks and penalty for 101, 182 Liable for statement of banks' condition 57 List of shareholders to keep 101 Liquidation 120 Loans to minors : : ■ ^ \.- ;r ■ ,■ ■ ■ *l Maybeexaminedunder oath by National bank examiner 115 Not liable on leave of absence 42 Position of ■ ■ *22 Official malfeasance, penalty for 147 Proxy, not to act as. . 37 Public money, unauthorized receipt oi, by io» Report of condition to Comptroller 103 Report on circulation to Comptroller 104 Signature of, forged, not to invalidate circulation 191 Signature of, on circulation '^',15 Violation of bank act, penalty for 136 WTien shareholders delinquent 28 President OF THE United States— Appointment of Comptroller by 1 Printing— Charter numbers on circulation .... in ti Circulation of associations 'lii Circulation of extended banks • * 179 Comptroller's annual report 4 Profits, Net— Disposition of in dividends and surplus 92 Losses deducted before declaring dividends 98 Other than legal surplus 99 Report of, to Comptroller 103 Undivided, deflned 99 Projiissory Notes— Attorney fee clause °l Set off for indorser i*i With mortgage clause 22 Protest of CiRCULATioN—Bonds forfeited, when 124 Bonds, sale of, when i;^2 Failure to redeem 1*3 Proxy— Clerks, cannot act as 38 Not bind principle, in illegal meeting ^» Officers cannot vote as 0700 Shareholders 3(, ao Publication— (See also Notice). _ Annual election, notice of holding special ., J,?, Certificateof authority to begin business '^li Change of title or location, notice of l°5 Comptroller's certificate of extension of charter 178 Creditors of insolvent associations, notice to i^i i-o Expiring associations, notice 176, 1^9 Non-payment of circulation, notice to present '1^ Reports of condition of banks In District of Columbia inA oio Reportsof condition of National banks ' i or Sale of bonds, notice of oq 17? Sale of delinquent stock, notice of ' iqo Shareholders* agent, notice of election of i»;^ Voluntary liquidation, notice of 1*" Public DBBT—(SeealsoImportsandIntereston Public Debt). , ^ , ,„ Amount of U. S. notes outstanding to appear m statement of • • J^s Public Moneys— Regulations in regard to o'' *^^^^ PuRCHASB—Billsofexchange, when not usurious i^'ial Of property, real or personal, by receiver i**^' i^J Shares of own stock of association "^ Q Qualification— (See also Directors and Officers). Comptroller of the Currency ? Deputy Comptroller oa •oi Directors and officers ' ?Si Directors of National banks in Oklahoma iw Examiners of associations n* 34i PAOB Qualification— Receivers of aasociationa 129 Shareholders' ageut IM B Rate— (See Interest, Taxation). Rbal Estate— Assigumeut 18 Banking house, what may cover 20 Conveyance not void, though bank exceed rights 2i Discounting paper having real estate security i:0 Illegal borrowing on, not defense against bank 22 Investments and hokiiugs restricted 19, 2<», 23 May purchase more, than debt to cover 21 Mortgage to indorser inuring to bank 22 Purchase or convey, how 20 Purchase of certificate, of aasignment of 18 Purchase to save equity 18S, 184 Subject to State, etc., taxation 105 Violation of law, not hinder foreclosure 2'i, 21 Wisdom of restrictions on real estate dealings of National banks 22, 23 Rbal Estate Company's Stock — As collateral 21 RK-.\ssiGNMBNT-Of bonds 07,68,70,167 Rbcbivbr— Appointment and duties of .126 " o^ for failure to dispose of stock 96 " of; for failure to restore diminished capital 28 " of, for false certification of checks 101 " of, for non-payment of circulation • • 128 *' of, for impairment of capital 100 " or for violation of law, etc., 57,68,173 " of, for non-maintenance of reserve 80 Attorney for 132 Bank office, may move 128 Compounding debts 129 Corporate existence not terminated by appointment of 128 Courts may appoint 127 Courts may enjoin 135, 163 Directors, suit against 132 Enforcing individual liability 130, 131 Expenses of, how paid 136 General jurisdiction of National bank cases 187 Jurisdiction of courts 129, 159 Limitation of, power of 128, 129 May hold shareholders for illegal dividend 93 Maybe removed by Comptroller of Currency 127 Purchase of property by, to protect trust 18:!, 184 Replevin 140 Responsibility in action 131 Sale, order of court necessary 129 Suits by and against 130, 189 Suit, illegal transfer of stock 66 Transfer suit 142, 188 When recover for stock sold bank 97 RBCBivERSHip~(See also Receiver). Action of executive officers, not ground for 137 Comptroller's decision of insolvency final 126, 127 Expenses of, ^rst lien on assets 136 Fees 136 Receiving Teller— Position of 224 Records of Association— How kept 221 Shareholders access to 24 Record— Transfer rights 26 Redemption- At own counter 72, 166 Cancellation of redeemed notes 126 Deposit of lawful money, associations in liquidation 121 Disposition of, account 190 Enjoining Comptroller as to 135 Extended bank circulation 179 First lien on assets 125 Five per cent, fund fof, to be maintained IGj, 106,275 Forfeiture of bonds • ■ 1"^4 Forged signatures not to prevent 191 Fragments 277, 283 General provisions respecting 82, 83, 165, 167, 275, 281 Liquidating bank circulation 123 Notes of bank failing to pay 125 Notes of closed bank 125 Notice of present circulation for 124 Of notes generally by Treasurer 165,169 34« PAOB Rbdemption— Proceeds ftom sale of bonds for circulation m Profit on circulation not presented for 179 Protest of circulation, for failure to redeem 13* Provisions for, of circulation 76, 166, 278 Provisions for, of United States note certificates 81 Records of 126 Sale of bonds 12i State bank circulation, converted, provisions for 144 United States notes, of circulation in 166 Unsigned circulation to be redeemed 191 Withdrawn circulation 121 Worn or mutilated circulation 76, 181, 277, 283 Rediscount— Authority to malie 13 Illegal interest, right of action 87 Not borrowing money U Refunding— Excessive tax paid on circulation 104, 105 Rbgister of the Treasury— Signattire on circulation 71 Registered Bonds— (See also Bonds, United States). Assignment of 287, 290 Closing of transfer, book of 298 Collection of interest on 291,292 Coupon exchanged for 67 Form of affidavit for lost 294 Information about 287 Transmission of, to Treasury 290 Regulation of Associations— Organization, de novo 5. 195 Organization, conversion of State banks 62, 211 Management of . . . 221 Shareholders' meetings, liability, etc 37, 39, 45, 47 Board of Directors 39 Capital, payment of 27, 208 Capital, increase of 31 Capital, reduction of 34 Circulation, issue, bond requirement, etc 6, 66, 209 Circulation, redemption of 76, 165 Circulation, retiring 167 Deposits 7 Loans 6, 19, 93, 223 Interest 83 Taxes 103, 300 Surplus 92 Dividends 92 Reports to Comptroller . . 102, 244 Reserve requirements 80, 146, 267 Real Estate, restrictions 19, 23 Examiner ... 115 Extension of corporate existence 177, 229 Voluntary liquidation 118, 226 Violations of law 28, 67, 86, 100, 101, 122, 146, 173 Receiver 126 Reimbursement— (See Circtxlation; Bixpenses; Plates and Dies.) Released Capital Stock— Disposition of 36 Repeal— Redemption agents 166 Requirements as to agg^regate circulation 167, 171 Requirement Act of Congress to Increase capital 184 Reserve on circulation . 165 Tax on capital and deposits 183 Replevin— Right of action 140 Reports— Annual, to be made to Congress ,; , 5 Bank Examiner 115, 116 Circulation, semi-annual returns 104 Condition of association 102, 225, 244 Dividends and earnings 103, 253 Explanation of items in reports to Comptroller 244, 253 Forms of, to Comptroller 249, 256 List of shareholders 102 Payment of capital stock 27 Receiver *26 Rbsbrvb— (See also Lawful Money Reserve). Clearing-house certificates, to count as 81 Five per cent, fund, to count as 165 Gold certificates, to count as 182 Penalty for failure to maintain 80 Proportion of, with agents 81 Requirements 80 Silver certificates to count as 182 U. S. note certificates to count as 81 U. a notes not to be used as, by Secrctarj' of Treasury 81, 168 343 Reserve Agents— (See also Agents). Balance with 81 Central 81, 82, 187 Cities ill which may be located 81, 82, 186 Reserve Cities— Application to beccjiue, form 273 Central 81, 187 Other tliaii central 81, 82, 186 Requirements of assuciatiou in 80 Resolution of Board, form 27ll Reserve op Lawful Money— (See Lawful Money Re.serve). Residence— List of shareholders reported uuuually 102 List of shareholders in organization certificate 6 National banks 79 Qualification of Directors of association 80 Resignation— Directors 24 Returns— (See Circulation ; Reports ; Taxation). Revised Statutes, United States- Index of Sections of Bank Act and additional Acts . . 331 s Bale- Appraised stock of extended association 179 As-^ets of insolvent associations, by Receiver 126 Assets of insolvent associations by shareholders' agent 193 Bonds for failure to redeem circulation 122,1*24, 125 Of stock binding without registra'ion 50 Stock for delinquent payment of instalment 28 Stock on impairment of capital 175 Stock taken for debt 96 San Francisco— Redemption of United States notes at 187 Savings Banks— Limit of capital of existing, in the District of Columbia 175 Reports of, provided for in annual report 3 Trust Companies and, in the District of Columbia 175 Schedules— In reports to Comptroller 251, 262 Seal— Certified copy of organization certificate under, evidence 163 Certificates under, competent evidence 163 Devised by the Comptroller, and approved by Secretary 8 Evidence of Comptroller filed with Secretary of State 3 Of association 6 Secretary of State— Description, impression, etc., of seal of Comptroller, filed with ... 3 Secretary OF Treasury— Appointment of Comptroller on recommendation of 1 Appointment and classification of clerks by 2 Appi )intment of Deputy Comptroller by 2 Assignment of rooms, etc.. for the Comptroller by 3 Certificates, issue of for II. S. notes 81 Certifying destruction of, worn or mutilated, by 76 Charter number on notes, printing, regulations by 168 Circulation, printing, regulations by ,. 71 Currency, expansion or contraction, by certificates, prohibited . 81 Designates National banks as U. S. Depositaries 61 Dutiesof Comptroller, under general direction of 1 Examiner, approval of appointment 115, 124 Exchange of bonds, by 67, 69, 70 Issue coin for fractional currency 170 Organization with capital less than $100,000 to be approved by . 23 Plates and dies, examination of, by 72 Receiving deposit of U. 8. notes 81 Receiver, appointment of, for reserve deficit, concurrence in . . 80 Receiver, to approve certain action of 183, 184 Reserve cities, designation of, to be approved by 187 Seal of olScc of Comptroller, to be approved by 3 Sbcuhitibs of United States — (See also Bonds). Defined 165 Security for Circulation— (See Bonds, V. S.). Security for Loans — Personal 6, 8 Shares of own bank not to be taken 96 Should be readily convertible 23 Stock of Real Estate Companies, Cdllateral 21 Set Off— Against insolvent bank 141, 142 Illegal interest, not 86 Shareholders' 68 Shareholders' Agent — ApjKjintinont and dutle:^, for insolvent bank 192 Shares -Appraisal of stock for holders not extending 179 Association liable, on offlcors' .statement of value 67 Association not to own or hold its own, except 96 Certificates, care of 224 Consent of owners of two-thirds, necessary to extension 177 Converted State hank, par value 62 Delinquent, forfeiture and sale 28, 17& 344 PAoa Sharbs— Directors', minimum holding Z9 Disposition of, taken for debt 98 Execution under Slate laws 24 Fifty per cent, of aggregate value, paid to begin business 27 Fractional parts may be issued 35 Holding of, in other banks 67, 62 Instalments, payment and certification of '27 Liable, when 50-57 Lien on association, cannot acquire 95 List of owners kept, and copy sent Comptroller .' ' 102 Loan on security ol, prohibited ! ." ! ! 96 Negotiability depends on United States law, not State , . . . . 119 Oath of Directors relative to [ [ ' 39 Owners of two-thirds, may place association in liquidation . ......... lis Ownership, bank governed Dy register of 61 Organization certificate, to state capital and niunber ol 5 Par value and denomination 24 Payment to begin business 27 Personal property 24, 105 Preference in allotment of. In succeeding association 179 Purchaser liable, if bought for infant • 56 Qualificatiou of Directors 39 Registration, to avoid liability 50 Sale of, when necessary 28, 96 Sale, to give control ot bank 27 State cannot limit transfer quality 24 State taxation of 105 Subscriber, when passed to 25 Tax, illegal 114 Tax in Territories 112 Tax may be higher than State bank 108 Tax not greater than other moneyed capital 106 Taxation of, by State 105, 113 Transfer, right of, etc 24, 26 Transler, record of, legal force 25, i7 Transfer, to defraud , 49, 55 Transfer, when may be refused 26 Trustee holding 6C Value, par, of each 24, 62 Voting 87 Shauholdsbs— Action against only after Comptroller's decision 58 Agentor; to pay, aasets of insolvent association 194 Appointment, quaUflcatlon of agent of 192 Appraisal, stockholders declining to extend 179 Assessment for impairment of capital 99 Assets of insolvent association to be returned ratably 183,184 Association as 07 Capital assessment for impairment of 100, 175 Capital enforcing payment of installmenta 28 Capital increase by and right to new stock 31,32,62,199 Capital increase waiving right to new stock 32 Capital reduction by and liability in 34, 36 Circulation when discharged from liability 122 Conversion of State banks, requirements 62 Courts' attitude as to transfer of shares 57 Creditors' bill against 173 Deceased, estate liable 48 Directors, election or appointment of, by 6, 37, 39, 46 Disqualification to vote 39 Dividends may compel directors to declare 93 Estate trustee liable for assessment 60 Extension of corporate existence 177, 229 Extension, not assenting to 178, 233 Fraudulent transfer or sale of stock, recourse 57 Individual liability and enforcing 47, 60, 130, 173 Liability as pledgee 53 Liability on illegal dividends 93 Liability on registered stock, when not 50, 62 Liability to all creditors alike 56 Lien on stock, bank cannot acquire 96 Limitati(m statute of liability 68 Liquidation, failed association 192 Liquidation, voluntary 118, 226 List of, subject to Inspection 102 List of, to be kept and copy sent to Comptroller 102 Married women, liability as 49 Meetings, rights at 37, 38 Names, residences, etc., in organization certificate 6 Pledged stock sold by bank 96 Pri-ferenreto stock in exteiif'.ing 178 345 LDKBfl— Procedure against for Inaolvenoy W Provlflions for election by iS Proxies, voting by, and form 17, 974 Qualiflcations of directors i'J Rights and liabilities of 24,47,48 Security for assets of insolvent bank 174 Set ofT, right of 58 Suit against directors • 132, 137 Taxation by State 105,113 Title and location of association, change by 184,185 Transfer, right of 26 Trustee holding not personally liable r,Q Vote of, neoeuary to place asaociatlon In liquidation 118 Voting 87 When legally sucli M SignaturbonCirculation— President, or Vice-President, and Cashier 72, 75 Treasurer and Register, United States 71, 72 Silver— Issue, In exchange for fractional currency 170 Issue of, by Treasury 281 , 282 Lawful money 77 Silver Certificates— Clearing-house balances, payable In 182 Issue and redemption ot^ 281, 282 Reserve of National banks, may be 182 Solicitor OP THE Treasury— Conduct of suits, under direction and supervision of . ... 163 Special Commission — (See Examltier). Special Deposits — (See Deposits). Specie Paymhntb — Resumption of 171 Specific Performance— AJ?reement to sell shares to secure control of bank 27 Stakeholder- Association may act as 8 State Banks— Tax on circulation and returns required 143, 172, 173 State Banks, Gonvbrtbd— Branches of converted 65 Conversion to National, procedure 30, 62, 143, 211-215 Corporate relation to old bank 63 Directors continue In conversion to National bank 215 Directors stock 39 Enabling Acts 63 Liability for old bank 9 Loans in excess of limit 95 Return of taxable circulation 143, 144 Shares of converted 24, 62, 143 Shareholders' consent to convert 212 Shareholders' personal liability, exceptions 47 Tax on converted 144 State Courts — (See also Comptroller ; Suits). Embezzlement of officers of association 147,151,154 Jurisdiction of, in what cases 90, 91, 16i>, 161 Limitation in order and attachment 160, 161 State Taxation— /See Tax'. Stock* and Bonds — As security 10 Association not dealing In 9 SiTBscRiBER TO Stock -Capital iuciease 33, 62 Liability 47, 28 Mutual contract to pay for 29 Of fraudulent representation 57 Rescinding subscription 57 Status, if receiver appointed 62, 57 Subscribing to distribute 29, 205 When increase of capital voted, not made 33 Subscription Paper— Importance of. In organizing, form and instructions 195, 196 Subscribed Stock— When to be paid and when forfeited 27, 28 Succession — Period of associations 8 Extension of period 177 Suits— Against receiver, when and how brought 130, 131 Ai;ainst shareholders, may be In law or equity 68 Certified copy of organization certificate, evidence In 163 Cltlaens of State, associations are 187 Conduct of, when U. S. officers or agents, parties 160 Cornorate powers of associations 6 Creaitors' bill against shareholders 173 Crimes, jurisdiction, etc 146 Enjoining Comptroller or Receiver 135, 163 For Illegal certlfving checks 188 For Illegal tax ." 114 For loan cannot recover Illegal Interest 86 Forfeiture of charter 136 Illegal preference of creditors 138 Indian Territory, in 190 Jurisdiction of Circuit Courts IM 346 PACB SiHTS— Jurisdiction, general, Of National bank cases 178,180,187,188 Limitation, in M Sealed certificate of Comptroller, competent evidence 163 Solicitor of the Treasury, supervision in 168 Shareholders' agent 192 Shareholders' liability to enforce 126, 180, 178 Surety Bonds— (See Bonds, Official). Surplus— Converted State bank with capital of 55,0u0,000 47 Creation of • 92 Importance of 226 Receiver may be appointed for deficiency 47 Special 8* T Tax— Assessment only on shareholders 106 Capital invested in U. S. bonds 109 Circulating notes unauthorized 143, 144 Circulation and enforcing payment of 103, 104 Circulation when exempt from . 143 Circulation, rate and time of payment 103 Circulation, refunding excess 104, 105 Circulation, semi-annual return of 104 Concerning exemption to other corporations 109-112 Difference in corporation taxation 108 Exemption in State assessment 109-111 Governed by State constitution 112 May be higher than on certain State corporations 105-109-112 Money of all kinds, subject to, by States, etc 145 National bank act, limitation of, in State tax 106 National bank shares taxable in Territories 112 Not on capital stock as personal property of bank 106 Not to be at greater rate than other moneyed capital 108 Pleading must be specific • • •„ J^* Property, personal, of association, in hands of receiver not taxable 112-114 Provisions restricted 145 Recourse for illegal -■ ^IJ Regulations of collection semi-annual 103, 104, 279, 280 Remission of, on insolvent National banks 176 Shares and capital stock, difference 106 State cannot Impose license tax 113 State may tax circulating notes ■ .... 113 State taxation of National bank shares 1"6 State valuation of shares 108 United States notea taxable i9l Tbllbr— (See also Officers). Embezzlement by 147, 148 Territorial CouRT-(See Comptroller, Redemption, State, etc.). Territorial Law— Concerning banking 190 Title- Comptroller reserve for applicant 197 Form of J97 Association, change of and how to proceed 186 Transfers— (See also Treasurer U.' S. ; Bonds, U. 8 ) Assets of failed bank when transferee ignorant 188 Bonds extended association not necessary 232 Of assets of banks after Insolvency void 138,139 Of bonds 67, 68 Transferof Sharks— (See also Shares). Assets of agent of shareholders • . ■ 192 How made and rights of shareholders 25 State laws on trustee holdings • 24 State laws no control 24 Register to avoid liability 50, 56 Registry, importance of 50-62 Transmission— Circulating notes to U. S. Treasurer ; ■ • /, W. To U. S. Treasurer, U. 8. coin and notes for redemption 284 Treasury Drafts— Endorsement of • ^^o ?2f Treasurer, United States— Association, failure to redeem notes 123-125 Association liquidating 121 Certifying destruction of circulating notes 76 Circulation, withdrawal of, provisions for 181 Deposit of United States bonds with, to secure circulation . 66, 68 Disposition of redemption account 190 Enforcing tax on circulation K'4 Examination of bonds and records, provisions for 69 Interest on bonds to be retained by, when 100, 103, 104 Public moneys may be deposited with 237 ProcpeiHnpp in deiatilt, making rpfurns on circulation ... 104 347 PAGB Treasurer, United States— Redemplion fund to be kept with 166, 166 Redemption of circulation by IfrJ Semi-annual, return to, of circulation subject to duty . . . . lo4 Signature of, on circulation 71 Tax, excess, refunding 104 Tax on circulation to be paia 'o 103 Treasury, United States— (See also Treasurer, United Slates). Associations to reimburse, for cost of redemption of circula- tion and plates 166, 1C7, 311 Currency bureau in 1 Notice to present circulation at 124 Penalty for failure of associations to report to be paid Into 103, 104 Redemption a(!Count, disposition of 190 Redemption of circulation at 125, 126 Trust— Purchase of property by receiver to protect 188 Trust Companies— In District of Columbia must make reports 175 Trustee— Evidence of owenership 61 Representative holding stock 60 Voting to extend charter 232 V Ultra Vires— Contracts of association 18 Uncurrbnt Notes — Issue of, prohibited 100 United States Courts— (See Jurisdiction, Officers of U. 8., Crimes, etc.). United States Bonds— (See Bonds, U. 8.). United States Coin — Issue, transportation and redemption 281-284 United States Depositaries— (See Government Depositaries). United States Disbursing Officers- Deposit with National bank depositaries .... 236-239 Fraudulent notes to be marked by 176 Penalty for unauthorized deposit of public money 238 Withdrawal of public money and deposits 237 United States Obligations— (See Obligations of U. S.). Undivided Profits — Defined 99 United States Notes— Association retiring circulation, depositing 167 Circulation of banks to be redeemed in 83, 123, 166 Currency not to be expanded by 81 Deposit by liquidating bank 121 Failed bank, circulation redeemed with 126 Fraudulent to be marked 175 Issue of note certificates on deposit of 81 Minimum to remain outstanding 168 Not subject to State, municipal or local tax 146 Obligations of the United States defined 165 Penalty for dealing in counterfeit 167 Penalty for illegal use of material for printing 166 Penalty for passing counterfeit 166 Penalty for pledging, etc 146 Penalty for having unauthorized Impression of tools, etc 167 Taxable as money 191 United States Treasurer (See Treasurer U. S ). Usury — Action to recover for 86 Constructlon|of statute . 91,92 Contract, eflfect on 90 Interest, vrhen not 83 Interest after maturity 87 Penalty and statute of limitation 88, 89 Provisions in regard to 85, 86, 92 Remedy when action by the bank 86 Rule deminia 92 State court jurisdiction 91 What necessary to bring action 88, 89 Vacancies — Board of Directors 41,42,45 Verification— Reports to Comjjtroller 176 Vice-President— ^ee also Officers). Bonds, United States, may sign transfer of 67 Circulation, may sign 71, 72, 76 Election or appointment of 6 Proxy, not to act as 37 Violation OF Pkovisions of National Bank Act— Forfeiture of charter for 136 VisiTORiAL Powers — Associations, subject to what ... 116 Voluntary Liquidation— (See Liijuidation, Voluntary). Voters— QuallBcationa of shareholders at elections 87 348 W PAQB Withdrawal— Bonds, general provisions respecting 67-70, 167, 181 Bonds, form of board resolution 273 Circulation, associations extending 179 Circulation, provisions for 70, 122, 167, 181 Deposit and, of public money 61, 236 Dissenting shareholders in extension • 178 Expired associations, bonds of 178 Illegal preference of creditors 138 Liquidating associations, bonds of 122 Of capital, when prohibited 98, 99 Reduction of capital 34 Unearned dividends 98 Women— (See Married Women). War Revenue Law— Extracts from • 800-302 Willful Misapplication— Defined 147 T o Bankers We invite correspondence with bankers having interests in Washington, requiring attention, especially any who contemplate entering the National Banking System. We make no charge for furnishing information on the subject, or for examining and filing organization papers with the Comptroller. For over thirty years we have acted as agents and attorneys for National Banks before the Treasury Department, under the provisions of the Bank Act; examining and counting the worn and mutilated currency redeemed at the Treasury for the banks we represent, witnessing and certifying to its destruction; also examining and certifying as to the United States bonds of the banks on deposit with the Treasurer of the United States. We deposit lawful money to retire out- standing circulation of National Banks wishing to reduce circulation or to go into voluntary liquidation, and also withdraw and sell bonds held as security therefor. We are in position to buy and sell Gov- ernment bonds at best market rates, and have also every facility for the collection of claims in all of the Departments of the Government. A. S. PRATT & SONS WASHINGTON, D. C. .-^\tl^«-^lC»ASI&-J«*3»SJ^^ UNIVERSITY OF CALIFORNIA LIBRARY Los Angeles This book is DUE on the last date stamped below. Form L!)-100m-9,'52(A3105)444 ^J. \l AA 000 552 982 i .»i»F': HG 25Ii7 P38p 1901 ~.frri p %ff%^ llr ' Ik. afcSfir^^^Sltfmt ^p ^^ m