m *EST OF WriONAL «'/»NKING LAWS EDinON GIFT OF <^^t^y^ /■ Z. .J^::^y y^ £i^ xA^^v PEATTS' DIGEST. THE FULL TEXT OF THE LAWS RELAXma TO NATIONAL BANKS. WITH EXPLANATORY NOTES, DIGEST OF DECISIONS OF THE COURTS ON THE SEVERAL SECTIONS, INDEX OF CASES CITED AND RULINGS OF THE COMPTROLLER OF THE CURRENCY. ALSO MOiTOGRAPHS ON THE PRINCIPAL SUBJECTS RELATING TO NATIONAL BANKING, REQUIREMENTS AND FORMS OF THE OFFICE OF COMPTROLLER OF THE CURRENCY, AND MISCELLANEOUS REGULATIONS OF THE UNITED STATES TREASURY DEPARTMENT GOVERNING BANKERS IN THE NATIONAL SYSTEM. ^ j6&ition of 1905. •v - i > i » '!»»'> PREPARED AND PUBLISHED BY A. S. PEATT & SOI^S, National Bank Agknts, WASHINGTON, D. C. ¥ Entered according to Act of Congress, in the year 1905, by A. S. PRATT & SONS, In the Office of the Librarian of Congress, at Washington, D, C. PREFACE. This work was first published in the early days of the National Banking System, and then merely as a Digest or Brief of the ITational Bank Act. Later, the application of the Act developed differences of opinion as to the meaning and effect of various pro- visions, and the Courts and Comptroller of the Currency were re- quired to construe them. For this reason the form of the Digest was changed, the Bank Act was given in full, and under each section a digest of the de- cisions of the Courts, and of the rulings of the Comptroller. Further additions were made to the work, consisting of sugges- tions on organizing a National bank, and regulations of the Comp- troller's office, the U. S. Treasurer's office and office of the Secre- tary of the Treasury in their several relations to the National banks. This plan of the book has been followed in numerous revisions, and the amendments to the Bank Act and additional acts passed by Congress given, also the later court decisions and the Comp- troller's rulings. Of late years it nas been evident, on account of the amend- ments and additional acts repealing and modifying many sections of the law, that it was necessary the work should be recast to bring together the existing statutes bearing on the same subject, and to eliminate obsolete matter. This has been done in the new edi- tion of the work, and the court decisions have been brought down to date. The other portion of the work also has been greatly enriched by the publishers, and their long experience as attorneys for National banks before the Treasury Department has qualified them for this (ill) IV PREFACE. work. Important subjects, such as organization, liquidation, ex- tension of charter and Government depositaries, have been treated in monograph form — and the requirements as to reports, reserve, tax, five per cent, fund, bond deposit, transfers, etc., are given, with explanatory notes. The great importance of having a full and carefully prepared general index has been recognized, and special effort made to have it complete. There is also given a Table of Cases Cited, an index of the sec- tions of the Eevised Statutes and additional Acts governing banking under the INTational system, and, at the head of each chapter, an index of section headings. This edition of the Digest is presented to the public in con- fidence that it will be found accurate, clear and comprehensive, both in the construction of the law, and in information concerning the organization, conduct, closing or extending National banks. The compilation of the Statutes, and the digest of the decisions of the Courts, is the work of Mr. John J. Crawford, of the New York Bar, who was, in 1886-1888, the legal counsel to the Comp- troller of the Currency, and who is widely known as the drafts- man of the Negotiable Instrument Law, and a recognized au- thority on Commercial and Banking Law. CONTENTS. A Table of Cases Cited and an Index to Sections of the Bevised Statutes follow this Table of Contents. At the be- ginning of each Chapter is given an Index of Subjects covered in the Chapter, and a General Index is given at end of the work. PART I. THE LAWS RELATING TO NATIONAL BANKS, WITH ANNOTATIONS. CHAPTER FAGB I. Office of Comptroller of the Currency or Currency Bureau. . . 1 II. Organization and Powers of National Banks 7 III. Issue and Redemption of Circulating Notes 77 IV. Regulations of the Banking Business 79 V. Taxation 133 VI. Dissolution and Receivership 150 VII. Crimes and Misdemeanors 176 VIII. Suits, Jurisdiction, and Evidence 191 PART II. MONOGRAPHS.— The Organization and Management of Na- tional Banks ; Extension of Corporate Existence ; Voluntary Liquidation ; Consolidation ; Designation as Government Depositary. I, Organization of National Banks de novo. The Subscription Paper — Corporators— Articles of Asso- ciation—Organization Certificate — Sundry Requirements to Complete Organization and Copies of Forms Used 201 Reorganization of State or Private Bank or Co-partnership 223 Conversion of an Incorporated State Bank 226 A General Form of By-Laws 232 Suggestions as to Management of National Banks 238 V VI CONTENTS. CHAPTER PAGB II. Placing National Banks in Voluntary Liquidation and Forms. . 246 III. Consolidation of National Banks 253 IV. Extension of Corporate Existence and Forms 257 V. Reorganization versus Extension 263 VI. National Banks as Depositaries of Public Moneys. 265 * PART III. Reports to the Comptroller of the Currency ; Lawful Money Reserve ; Five Per Cent. Redemption Fund ; Redemption and Re-issue of Circulating Notes; Semi-annual Tax on Circulation ; Miscellaneous Forms. I. Report of Condition of Bank ; Forms Used ; Explanation of Items ; Instructions 272 Report of Earnings and Dividends ; Forms Used ; Explanation of Items ; Instructions 288 II. Lawful Money Reserve ; Regulations ; Rules for Computing ; Short Methods ; Forms ; Examples 294 m. Five Per Cent. Redemption Fund ; Transportation, Redemp- tion and Re-issue of Currency 309 rV. Tax on Circulating Notes 315 V. Miscellaneous Forms. — Certifying the Comptroller of the Cur- rency Payment on Capital Stock ; Increase or Reduction of Capital and other Forms 319 PART IV. The Issue and Redemption of U. S. Coin and Paper Currency and Transportation ; Transportation of National Bank Cir- culating Notes ; Miscellaneous Regulations as tp U. S. Bonds and Treasury Drafts. I. The Issue, Redemption and Exchange of U. S. Coin and Paper Currency ; Transportation of, and of National Bank Cir- culation 326 II, Miscellaneous Regulations ; U. S. Bonds, Coupon and Regis- tered, Exchange, Assignment, Interest ; Indorsement of Treasury Drafts, etc 336 TABLE OF CASES CITED. Adams v. Nashville, 95 U. S., 19 " V. Spokane Drug Co., 57 Fed. Rep., 888 Adair v. Robinson, 6 Tex. Cir. App., 275 . . . Agnew V. U. S., 165 United States, 36 ... . Albion Bank v. Montgomery, 54 Neb., 681 . . . Albuquerque N. Bk. v. Perea, 147 U. S., 87 . Aldrich v. Chemical National Bank, 176 U. S., 618 " V. Yates, 95 Fed. Rep., 78 •• V. Campbell, 97 Fed. Rep., 663 . . . . Allen V. The First N. Bk. of Xenia, 23 Ohio St., 97 Anderson v. First N. Bk. Grand Forks, 5 N. D., 451 V. Line, 14 Fed. Rep., 405 . . . . « «« M M V. Philadelphia Warehouse Co., Ill U. S Armstrong v. Chemical N. Bk., 41 Fed. Rep., 234 " V. Chemical N. Bk., 83 Fed. Rep., 556 Receiver v. Warner, 49 Ohio St., 376 V. Second N. Bk., 38 Fed. Rep., 883 Aspinwall v. Butler, 133 U. S., 565 . . . . Atlantic N. Bk. v. Harris, 118 Mass.. 147 . . State Bank v. Savery, 82 N. Y. 291 . Auburn Savings Bank v. Hayes, 61 Fed. Rep., 911 Auten V. Manistee N. Bk., 67 Ark., 243 .... 479 PAGK . 143 . 174 . 144 . 179 110, 115, 116 . 147 24 62 . 61, 63 . 120 23 53 57 . 172 16 . 174 . 104 39, 198 68 14 160, 175 17, 156 Bailey t?. Mosher, 63 Fed. Rep., 488 170 " V. Sawyer, 4 Dill., 463; 1 N. B. C, 356 61 " V. Tillinghast, 99 Fed. Rep., 801 61 Baker v. Ault, 78 Fed. Rep., 374 196 " V. Beach, 85 Fed. Rep., 836 ... 64 " V. Reeves, 85 Fed. Rep., 837, 837 59, 60 Baldwin v. State N. Bk., 26 Minn., 43 27 Bank v. Kennedy, 17 Wall., 19 157, 159 V, Lanier, 11 Wall., 369 120, 121 V. Matthews, 98 U. S., 621 26 V. Mclntyre, 40 Ohio St., 528 68 V. Williams, 58 N. J. Law, 45 ... 142 of Bethel v. Pahquioque Bank, 14 Wall., 383 . . 156, 159, 162 Of Cadiz V. Slemans, 34 Ohio St., 142 117 • • Vll tt «< M VIU PAGE Bank of Redemption v. Boston, 126 U. S., 60 139, 141 Barnet v. Muncie N. Bk., 98 U. S., 855 Ill, 115 Batchelor v. United States, 156 U. S., 426 183 Bath Savings Institution v. Sagadehock N. Bk., 89 Maine, 500 . 152 Beckham v. Shackelford, 8 Tex., Cir. App., 660 174 Beall V. Essex Savings Bk., 67 Fed. Rep., 816 Bell V. Hanover N. Bk., 57 Fed. Rep., 821 172 Binghampton Trust Co. v. Auten, 68 Ark., 299 Ill Birmingham N. Bk. v. Mayer, 104 Alabama, 634 152 Blair v. First N. Bk. of Mansfield, 10 Chicago Legal News, 84; 2 N. Bk. Cas.. 173 19 Bletz V. Columbia N. Bk., 87 Penn. St., 87 116, 194 •* V. Bank of Kentucky, 55 S. W. Rep., 697; 21 Ky. L. Rep., 1554 21 Board of Commissioners v. Elkton, 32 Ind., 37 146 Board of Commissioners of Morgan Co. v. First N. Bk., 57 N. E. Rep., 728 142 Bobs V. People's N. Bk., 21 Fed. Rep., 888 114 Boone County N. Bk. v. Latimer, 67 Fed. Rep., 27 173 Bowdell 17. Farmers' and Merchants' N. Bk., 14 BanTcers* Magazine, 378; 2 N. Bk. Cases, 146 67 Bowdell V. Farmers' and Merchants' N. Bk., Brown's N. Bk. Cases, 147 31 Bowden v. Johnson, 107 U. S., 251 69, 159 Bowen v. Needles N. Bk., 94 Fed. Rep., 925 18 Boyd V. Schneider, 131 Fed. Rep., 223 170 124 Fed. R'ap., 539 170 Boyer v. Boyer, 113 U. S., 690 . , 143, 147 Boynoll v. State, 25 Wis., 112. 145 Bradley v. The People, 4 Wall., 459 145 Breese v. United States, 106 Fed. Rep., 680 179, 183 Briggs V. Spalding, 141 U. S., 132 47, 49 BrinkerhofC v. Bostwick, 88 N. Y., 52 161, 170, 194 Brittan v. Evansville N. Bk., 105 U. S., 322 144 Brown v. Ellis, 103 Fed. Rep., 834 63 •• V. Farmers' and Merchants' N. Bk., 88 Tex., 265 .... 51 " V. Finn, 142 U. S., 56 55 V. French, 80 Fed. Rep., 166 147 V. Marion N. Bk. of Lebanon, 169 U. S., 416 . . . . 113, 117 " V. Schleier, 118 Fed. Rep., 981 25 Bullard v. N. Bk.. 18 Wall., 589 120 Bundy v. Cocke, 128 U. S., 185 53 *• 17. Jackson, 24 Fed. Rep., 1628 122 Burnham v. First N. Bk., 53 Fed. Rep., 163 193 Burrows v. Niblack, 84 Fed. Rep., Ill , 122 «« IX PAGE Burrows V. Smith, Treas., 95 Va., 694 144 Bushnell v. Chatauqua County N. Bk., 74 N. Y., 290 ... . 12 V. Leland, 164 U. S. 684, 155 Butler 17. Eaton, 141 U. S., 240 31 V. Poole, 44 Fed. Rep., 586 62, 158, 160, 194 <( << u C Cadle V. Baker, 20 Wall., 650 156 California N. Bk., v. Kennedy, 167 U S., 362 13, 24 Carr v. National Bank of Watertown, 167 N. Y., 375 14 Case V. Citizens' Bank, 100 U. S., 446 31 V. Citizens' Bank of Louisiana, 2 Woods, 23 171 V. Small, 10 Fed. Rep., 722 158 Casey v. Galli, 94 U. S., 673 53, 61, 67, 198 V. La Society de Credit Mobilier de Paris, 2 Woods, 77 . 11, 172 Castles V. City of New Orleans, 46 La. Ann., 542 147 Catch V. Fitch, 34 Fed. Rep., 566 60 Central N. Bk. v. Pratt, 115 Mass., 539 115 Charleston v. People's N. Bk., 5 S. C, 103 38, 139 National Bank v. Bradford, 51 W. Va., 255 . . 112, 115 Chattahoochee N. Bk. v. Schley, 58 Ga., 360 11 Chemical N. Bk. v. Armstrong, 59 Fed. Rep., 372 163 V. Armstrong, 65 Fed. Rep., 573 15 " 17. Bailey, 12 Blackford, 480 162 " " 17. Hartford Deposit Co., 156 111., 522 . . . 156, 159 " 17. Hartford Deposit Co., 161 U. S., 1 . . . . 156 of Chicago v. World's Col. Exposit'n, 170 Ills., 82 164 Church 17. Ayer, 80 Fed. Rep., 543 63 Citizens' Bank of Louisiana i7. Board of Assessors, 52 Fed. Rep., 73 140 Citizens' N. Bk. v. Dowd, 35 Fed. Rep., 340 173 17. Foreman's Assignee, 111 Ky., 206 . . 110, 113 of Kingman i7. Berry, 53 Kan., 696 20, 51 City N. Bk. i7. Phelps, 97 N. Y., 44 68 City of Boston i7. Beall, 55 Fed. Rep., 26 S. C; 51 Fed. Rep., 300 146, 147 City of Carthage i7. First N. Bk., 71 Mo., 508 146 City & County of San Francisco 17. Crocker & Woolworth N. Bk., 92 Fed. Rep., 273 139 City of Richmond 17. Scott, 48 Ind., 568 145 Cleveland, Brown & Co. v. Shoeman, 40 Ohio St., 176 .... 13 Clews 17. Barden, 36 Fed. Rep., 617 49 Cochran v. United States, 157 U. S., 286 180, 181, 184 Coffey 17. N. Bk. of Missouri, 46 Mo., 140 11, 68 Coffin 17. United States, 162 U. S., 664 179, 182, 183 t€ tt «< M X PAGE I Cogswell V. Second N. Bk., 56 Atl. Rep., 574 194 Commercial N. Bk. v. Pirie, 27 C. C. A., 171; 82 Fed. Rep., 799 . 19 " V. Chambers, 182 U. S., 556 141, 145 V. Weinhard, 192 U. S., 243 125 Commissioners of Rice Co. v. Citizens' N. Bk. of Faribault, 23 Minn., 280 * . 142 Commonwealth v. Barry, 116 Mass., 1 182 V. Feltan, 101 Mass., 204 182, 1*4 17. Ketner, 92 Pa. St., 372 182, 194 V. Manf. & Mechs'. Bk. of Phila., 2 Pearson's De- cisions, 386; 2 N. Bk. Cases, 456 146 Commonwealth v. Tenny, 97 Mass., 50 182 Compare San R. County v. California N. Bk., 52 Fed. Rep., 59 . . 173 Conklin v. The Second N. Bk., 45 N. Y., 655 120, 121 Contra State v. Fields (Iowa), 62 N. Miss., 535 183 Cook County N. Bk. v. United States, 107 U. S., 445 . . . 163, 174 Corcoran v. Batchelder, 147 Mass., 541 120 Corn Exchange Bank v. Blye, 101 N. Y., 303 173 Cornell's Executors v. First N. Bk. of Kansas City, 32 U. S. App., 426 38 County Commrs. v. Farmers' and Mechs'. N. Bk., 48 Md., 117 . . 142 Cox V. Elmendorf, 97 Tenn., 518 64 " V. Beck, 83 Fed. Rep., 269 Ill '* V. Montague, 78 Fed. Rep., 845 60 " V. Robinson, 70 Fed. Rep., 760 21 Cragie v. Hadley, 99 N. Y., 131 173 Crocker v. First N. Bk., Thompson's N. Bk. Cases, 317 .... 114 V. Whitney, 71 N. Y., 161 26 Cross V. State of North Carolina, 132 U. S., 131 . . . . 181, 182 Cummings v. N. Bk., 101 U. S., 153 147 D Danforth v. Nat'l State Bank, 48 Fed. Rep., 271 110 Davis V. Cook, 9 Mo., 134 194 V. Essex Baptist Society U. S. D. C, 44 Conn., 569 ... 65 V. Knipp, 92 Hun., 297 174 V. Randall, 115 Mass., 547 115 V. Stevens, 17 Blatchford, 259 69 17. The Elmira Savings Bank, U. S. Sup. Ct., 161 U. S., 275; Reversing S. C, 142 N. Y., 590 176 " 17. Weed, 44 Conn., 569 63 Delano v. Butler, 118 U. S., 634 39 Delaware, Lacka. & Western R. R. Co. v. Oxford Iron Co.^ 38 N. J., Eq., 340 120 Dennis v. First N. Bk. of Seattle, 127 Cal., 453 194 PAGE Denton v. Baker, 24 C. C. A., 476; 79 Fed. Rep., 189 164 Deposit Bank of Owensboro v. Daviess Co., 102 Ky., 174 . . 145 Deweese v. Smith, 106 Fed. Rep., 438 2, 52, 61, 62, 63 Doty V. First N. Bk. of Larimore, 3 N. D.. 9 29, 30 Dow V. United States, 82 Fed. Rep., 904 179, 181 Dresser v. Traders' N. Bk., 165 Mass., 120 21 Driesbach v. N. Bk.. 104 U. S., 52 Ill, 112 Duncan v. First N. Bk. of Mt. Pleasant, 11 Bankers' Magazine, 787 109 E Bans V. Exchange Bank, 79 Mo., 182 68 Earle v. Carson, 188 U. S., 42 54, 60 " V. Carson, 107 Fed. Rep., 639 60 " V. Conway, 178 U. S., 456 196 " V. Pennsylvania, 178 U. S., 449 195 Easton v. State of Iowa, 188 U. S., 220 183 Eaton V. Union County N. Bk., 141 Ind., 136 147 Elder v. First N. Bk. of Ottawa, 12 Kans., 238 120 Ellerbee v. Nat'l Exchange Bank, 107 Mo., 445 15 Ellis V. First N. Bk. of Olney, 11 Bradw., 275 Ill '• V. Little, 27 Kans., 707 157, 158 Elwood V. First N. Bk., 41 Kans., 475 151 Engelke et al v. Schlender, 75 Tex., 559 144 Evans v. United States, 153 U. S., 608 183 Evansville N. Bk. v. Metropolitan N. Bk., 2 Biss., 527 . . . . 120 Exchange Bank v. Peters, 45 Fed. Rep., 13 170 Exeter N. Bk. v. Orchard, 42 Nebraska, 579 116 Faber v. Hanover N. Bk., 64 Fed. Rep., 832 174 V. Stephens, 35 Fed. Rep., 17 174 Farmers' N. Bk. v. Templeton, 40 S. W. Rep., 412 51 Farmers' and Mchts'. N. Bk. v. Smith, 40 U. S. App., 690 . . . 19, 20 Farmers' and Mechs'. Bank v. Hoagland, 7 Fed. Rep., 159 . . 112 Farmers' arwi Mechs'. N. Bk. v. Dearing, 91 U. S., 29 . . . . 115 Farmers' and Traders' N. Bk. v. Hoffman, 93 Iowa, 119, 191 . 140, 147 Finn v. Brown, 142 U. S., 56 55 First N. Bk. v. Bailey, 15 Mont., 301 147 V. Brodhecker, 137 Ind., 693 147 V. Chapman, 173 U. S., 205 141 V. Chehalis Co., 6 Wash., 64 143 V. City of Richmond, 39 Fed. Rep., 309 . . . . 144 V. Douglas Co., 3d Dill., 330 147 V. Forest, 40 Fed. Rep., 705 193 (« xu «( « « *« M «( «« <( «( «« «( ■ PRATTS' DIGEST PART FIRST. THE LAWS RELATING TO NATIONAL BANKS, WITH ANNOTATIONS. .PO^^O* CHAPTEE I. COMPTROLIEE OF THE CUREENCY. Section 1. Title of Act. 2. Bureau of Comptroller of the Currency. 3. Comptroller of the Currency. 4. Oath and Bond of Comptroller. 5. Deputy Comptroller; duties^ etc. 6. Clerks. 7. Interest in !N'ational Banks prohibited. 8. Seal of office. 9. OjBfices, Vaults, etc., for Bureau. 10. Examination of Banks in District of Columbia. 11. Annual Report of Comptroller. 12. When Report to be Printed. § 1. Title of Act. — The act entitled ^'An act to provide a National currency secured by a pledge of United States bonds, and to provide for the circulation and redemption thereof," ap- proved June third, eighteen hundred and sixty-four, shall here- after be known as the " National Bank Act.'' (Act June 20, 1874, Ch. 343, Sec. 1, 18 U. S. Stat. 123.) 1 *>2 > . § 2. Bureau of Comptroller of the Currency. — 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 Currency, and shall perform his duties under the general direction of the Secretary of the Treasury. (Eev. Stat. U. S. Sec. 324.) ' Wliile the construction of the National Bank Act by the Comptroller of the Currency is persuasive, and entitled to careful consideration, yet a court, if satisfied that such construction is error, will not follow it. (Deweese v. Smith, 106 Fed. Rep. 438.) And where the meaning of the Act is clear, the construction placed thereon by the Comptroller cannot be considered. (Studebaker vs. Perrin, 184 U. S., 252.) § 3 Comptroller of the Currency — Appointment — ^Term of OfBce — Salary. — 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 re- moved by the President, upon reasons to be communicated by him to the Senate; and he shall be entitled to a salary of five thousand dollars a year. (Eev. Stat. U. S. Sec. 325.) The Comptroller of the Currency is also ex officio Commissioner of the Freedmen's Savings Bank, and for this receives an additional 11,000 per annum. § 4. Oath and Bond of Comptroller. — 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 hun- dred thousand dollars, with not less than two responsible sureties, to be approved by the Secretary of the Treasury, conditioned for the faithful discharge of the duties of his office. (Eev. Stat. U. S. Sec. 326.) The Bond of a Surety Company is now accepted. § 5. Deputy Comptroller: Duties, etc. — There shall be in the Bureau of the Comptroller of the Currency a Deputy Comp- troller of the Currency, to be appointed by the Secretary, who shall be entitled to a salary of two thousand five hundred dollars a year, and who shall possess the power and perform the duties attached by law to the ofiice 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 pre- scribed by the Constitution and laws of the United States, and shall give a like bond in the penalty of fifty thousand dollars. (Eev. Stat. U. S. Sec. 327.) Salary increased to $3,500 by act of Congress. The court will take judicial notice of the fact that a certain person 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.) § 6. Clerks. — The Comptroller of the Currency shall employ, from time to time, the necessary clerks, to be appointed and clas- sified by the Secretary of the Treasury, to discharge such duties as the Comptroller shall direct. (Eev. Stat. U. S. Sec. 328.) 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. § 7. Interest in National Banks Prohibited.— It shall not be lawful for the Comptroller or the Deputy Comptroller of the Currency, either directly or indirectly, to be interested in any as- sociation issuing National currency under the laws of the United States. (Rev. Stat. TJ. S. Sec. 329.) 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 Congress, which was to forbid the Comptroller and the Deputy Comptroller from having any interest in the banks over which they are to exercise a supervision. § 8. Seal of Office. — 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 approval by the Secretary of the Treasury, shall be filed in the office of the Sec- retary of State. (Rev. Stat. U. S. Sec. 330 as amended by Act, Feb. 18, 1875, correcting Rev. Stat.) § 9. Offices, Vaults, etc., for Bnrean. — There shall be assigned from time to time, to the Comptroller of the Currency, by the Secretary of the Treasury, suitable rooms in the Treasury build- ing for conducting the business of the Currency Bureau, con- taining 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 be- longing to his Department; and the Comptroller shall from time to time furnish the necessary furniture, stationery, fuel, lights, and other proper conveniences for the transaction of the business of his office. (Rev. Stat. U. S. Sec. 331.) f § 10. Examination of Banks in District of Columbia. — 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 ex- amination to be made into the condition of any bank in the Dis- trict of Columbia organized under act of Congress. The Comp- troller, 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 Con- gress for special bank examinations. (Rev. Stat. U. S. Sec. 332.) § 11. Annnal Report of Comptroller. — The Comptroller of the Currency shall make an annual report to Congress, at the com- mencement of its session, exhibiting — Firsi, A summary of the state and condition of every associa- tion 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 circu- lating 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 re- deemed and the amount outstanding. Third, Any amendment to the laws relative to banking by which the system may be improved and the security of the holders of its notes and other creditors may be increased. Fourth. A statement exhibiting under appropriate heads the resources and liabilities and condition of the banks, banking com- panies, and savings banks organized under the laws of the several States and Territories; such information to be obtained by the Comptroller from the reports made by such banks, banking com- panies, and savings banks to the legislatures or officers of the differ- ent States and Territories, and, where such reports can not be ob- tained, 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, andthe whole amount of the expense of the banking de- partment during the year. (Eev. Stat. TJ. S. Sec. 333.) The reports of heads of Departments are 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 made to the head of that Department, but the Comptroller of the Currency, 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 Comptroller. 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. § 12. When Eeport to be Printed. — When the annual report of the Comptroller of the Currency upon the National banks and banks under State and Territorial laws is completed, or while it is in progress of completion, if thereby the business may be sooner dis- patched, the work of printing shall be commenced, under the super- intendence of the Secretary, and the whole shall be printed and ready for delivery on or before the 1st day of December next after the close of the year to which the report relates. (Rev. Stat. U. S. Sec. 3811.) By Act January 12, 1895, Ch. 23 (28 Stat. U. S. 616), It is provided that there shall be printed each year ten thousand copies of the Re- port of the Comptroller of the Currency, one thousand for the Senate, two thousand for the House, and seven thousand for distribution by the Comptroller. CHAPTER II. Organization and Powers of National Banks. Section 13. Who May Form National Banking Association — Ar- ticles of Association. 14. Organization Certificate. 15. Acknowlegment of Organization Certificate. 16. Corporate Powers of Associations. 17. Limitations as to Real Estate and Mortgages. 18. Amount of Capital Required. 19. Par Value of Stock — Transfers — Stockholders' Rights and Liabilities. 20. When Capital Stock Must be Paid In. 21. Failure to Pay Installments on Stock — Sale of Stock — Restoring Capital so Reduced. 22. Comptroller to Determine if Association is Entitled to Commence Business. 23. Certificate of Authority to Commence Business. 24. Publication of Comptroller's Certificate. 25. Increase of Capital Stock. 26. When Increase of Capital Stock Becomes Valid. 27. Reduction of Capital Stock. 28. Rights of Shareholders at Elections — Proxies. 29. Directors — Election of — Term of Office. 30. Qualifications of Directors. 31. Oath Required of Directors. 32. Vacancies — How Filled. 33. Proceedings where No Election is Held at Time Ap- pointed. 34. President must be a Director. 35. Individual Liability of Shareholders. 36. Executors, Trustees, etc., not Personally Liable. 37. Depositaries of Public Moneys. 38. Conversion of State into National Banks. 39. Same Subject — State Banks having Branches. 40. Conversion of National Gold Banks. 41. Rights of Associations Organized under Act of 1863. 3 7 8 43. Change of !N"aine and Location. 43. Same Subject — Continuance of Liabilities. 44. Same Subject. 45. Extension of Corporate Existence. 46. Same Subject — Further Extension. 47. Same Subject — How Articles of Association Amended. 48. Same Subject — Special Examination of Extended Bank — Certificate of Comptroller. 49. Privileges, Liabilities, etc., of Extended Banks. 50. Withdrawal of Shareholders; Preference in Allot- ment. 51. Banks not Extending — Continuance of Franchise for Purpose of Liquidation. 52. Limitation of Banking Under Territorial Law. 53. National Banks in Oklahoma. 54. Branch Banks at Columbian Exposition. 55. Branch Banks at Louisiana Purchase Exposition. § 13. Wlio May Form National Banking Associations — Articles of Association. — Associations for carrying on the business of bank- ing under this Title may be formed by any number of natural per- sons, not less in any case than five. They shall enter into articles of association, which shall specify in general terms the object for which the association is formed, and may contain any other pro- visions, not inconsistent with law, which the association may see fit to adopt for the regulation of its business and the conduct of its affairs. These articles shall be signed by the persons uniting to form the association, and a copy of them shall be forwarded to the Comptroller of the Currency, to be filed and preserved in his ofiice. (Rev. Stat. TJ. S. Sec. 5133.) For full details how to proceed In the organization of a National Bank, with form of articles of association, etc., see page 201. § 14. Organization Certificate. — ^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 subject to the approval of the Comptroller of the Currency. 9 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. (Kev. Stat. U. S. Sec. 5134.) Place of Location — ^How Designated — Branches. — The provision of law requiring that the place where the business is to be carried on shall be stated in the organization certificate 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.) The Comptroller of the Currency holds that the legal residence of the bank is the particular location, that is, the street and number in the place designated in its organiza- tion certificate, or in case of removal its new location, and therefore that it can not have branches in the same city. § 15. Acknowledgment of Organization Certificate. — The or- ganization certificate shall be acknowledged before a judge of some court of record, or notary public; and shall be, together with the acknowledgment thereof, authenticated by the seal of such court, or notary, transmitted to the Comptroller of the Currency, who shall record and carefully preserve the same in his office. (Eev. Stat. TJ. S. Sec. 5135.) For form of certificate see page 215. § 16. Corporate Powers of Associations. — 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 jears from its organization, unless it is sooner dissolved according to the provisions of its articles of association, or by the act of its share- holders owning two-thirds of its stock, or unless its franchise becomes forfeited by some violation of law. 10 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 direc- tors to appoint a president, vice-president, cashier, and other officers, define their duties, require bonds of them and fix the penalty thereof, dismiss such officers or any of them at pleasure, and appoint others to fill tHeir places. Sixth. To prescribe, by its board of directors, b^-law s not in- consistent with law, regulating the manner in which its stock shall be transferred, its directors elected or appointed, its of- ficers appointed, its property transferred, its general business conducted, and the privileges granted to it by law exercised and enjoyed. Seventh. To exercise by its board of directors, or duly author- ized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of banking; by dis- counting and negotiating promissory notes, drafts, bills of ex- change, and other evidences of debt; by receiving deposits; by buying and selling exchange, coin, and bullion; by loaning money on personal security; and by obtaining, issuing, and circulating notes according to the provisions of this Title. But no association shall transact any business except such as is incidental and necessarily preliminary to its organization until it has been authorized by the Comptroller of the Currency to com- mence the business of banking. (Kev. Stat. U. S. Sec. 5136.) Banking Powers. — The banking powers here conferred are such as banks and bankers have customarily exercised. The enumeration 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 country have been framed. The powers here specified are not the incidental, but the principal powers, and to them are to be superadded 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 bank- ing 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 11 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 Society 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 public money of a city; and may agree to pay interest on such deposits, and give bond for their security. (Interstate National Bank v. Ferguson, 48 Kans., 732.) 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 officer has no authority to bind the bank by the receipt of a special deposit for safe-keeping, without an ex- press 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 Mis- souri, 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. (Leach v. Hale, 31 Iowa, 69.) It is competent for a National bank to take steps for the recovery of its property stolen by burglars, and to agree to take like steps for the re- 12 covery 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.) Deposit as 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 de- positor. 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 differ- ence 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.) Savings DepaetmenT. — A National bank may have a Savings Depart- ment, entering on pass-books the deposits and withdrawals, paying in- terest on deposits, etc., and operating in every way as a savings bank, excepting first, a special contract is necessary and should be entered in pass-books, providing as to withdrawal of funds, otherwise deposits are payable on demand, as other deposits of a National bank; second, loans as to amount to individuals and character of security must con- form to the provisions of the National Bank Act. A National bank proposing to operate a savings bank under a sepa- rate charter to avoid the restrictions of the National Bank Act should not establish it in the same building. In several States this is pro- hibited by statute, in the interests of savings banks, to protect them aganst possible manipulation of funds to relieve depleted condition of the State or National bank with which it is connected. Again on account of the sensitiveness of savings deposits, the danger of the National bank suffering in time of financial crises, is, generally increased if the two banks are evidently one and the same institution. 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 makng that a prominent feature of their business, yet the investment of a moderate amount for such purpose in cities where companies can not be properly organized for the sole purpose of con- ducting this line of business is not open to criticism. The Comptroller adopts the view that the matter is one largely in the discretion of the directors of the bank. 13 Secubity 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 afforded 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 mer- chandise (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 indorsement 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 simply a personal security within the meaning of the Na- tional 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. 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 Hagerstown, 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. (Cali- fornia 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 encouraged by the fiscal oflicers of the Government. It is clear that, as financial agents of the Government, they may be em- ployed by 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 transactions in them^ it is not probable that Congress intended to prohibit 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 having them converted into bonds of another class, and that 14 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 Gov- ernment are usually conducted through banks and persons doing banking business." And it has been held that a National bank has power to deal in municipal bonds, and may make a contract with a municipal corpora- tion for the purchase of its bonds. (Newport National Bank v. Board of Education of Newport, Ky., 705 W.. Rep., 186; 24 Ky. L. Rep., 876.) Where the president of a National bank sells bonds which are the property of the bank, under the representation that they were bought by him expressly for the purchaser, the latter, upon discovering the fact re- specting the bank's ownership, may repudiate the transaction, and upon returning the bonds to the bank may reclaim the money paid for them. (Carr v. National Bank of Watertown, 167 N. Y., 375.) Purchasing Commebciajl Paper. — It has been held by the highest % courts of Maryland (Lazear v. National Union Bank of Baltimore, 53 I Md., 78) and Minnesota (First National Bank of Rochester v. Pierson, 24 Minn., 140) that a National bank has no power to purchase com- mercial paper, or acquire any title to such paper by a purchase, made admittedly 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 without authority, and that the bank acquired no title to the note, and can not recover thereon in this sujt. 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 of buy- ing 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 dis- count 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 com- mercial paper is such an incident. (Yerkes v. National Bank of Port Jervis, 69 N. Y., 382.) And it may be said, upon good authority, that the word " discount,*^ when properly interpreted, includes a purchase as well as a loan. In Atlantic State Bank v. Savery (82 N. Y., 291), the Court of Appeals of New York, in considering the question whether a bank 15 organized under the New York banking law of 1838 could purchase a note, cite, with approval from McLeod 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 discount 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 Kans., 440.) In the Maryland case cited it was held that the bank could not main- tain an action on paper which it had acquired by purchase; but, in later cases in other States, it has been held that notwithstanding 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 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 exceeded its authority. ( Fresco tt Na- tional 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; Thomp- son V. St. Nicholas National Bank, 146 U. S., 240.) And even if a National bank does not get the legal title to a promis- sory 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 pro- ceeds thereof to the credit 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. (EUerbee v. National Exchange Bank, 107 Mo., 445.) Borrowing of Money. — The power to borrow money 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 v. 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 oflBcer acting for the bank therein must have I 16 special authority. (Id.) The vice-president, even though he is the principal executive officer of the bank, has no implied authority to bor- row large sums on time. (Id.) And where an officer without authority borrows money for the bank, the mere fact that the 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 constitute 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.) Rediscounts. — ^A rediscount by a National bank of its bills receiv- able, 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 transac- tion is not so far outside the scope of ordinary banking transactions as to impose upon the bank buying such paper the duty of ascertaining that the act has been specially authorized by the board of direct- ors. (Id.) And when a bank has long been in the habit of re- discounting its bills receivable in large amounts, all other banks in the same locality pursuing the same practice, and the president and cashier of such bank proposes to its regular correspondent a rediscount of such bills, 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 borrow money on its behalf unless specially authorized by the directors, is not applicable in a case where a general and long-established usage is shown between correspondent banks, prevailing in both cities where the lend- ing 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 acquiesced in by the directors of the borrowing bank, in the absence of notice to the contrary to its correspondent. (Armstrong v. Chemical National Bank, 83 Fed. Rep., 556.) And in a recent case it was held that the president of a National bank who has the actual management of its operations is authorized to procure the discount of its paper. (Hanover National Bank v. First National Bank of Burlingame, 109 Fed. Rep., 421.) In this case a New York bank discounted a note made by the president of a Kansas bank, and paid the proceeds to the last-mentioned bank, this form of transac- tion having been adopted at the request of the president of such bank, he having stated that he did not wish to report to the Comptroller of the 17 Currency or to publish the fact that his bank was procuring redis- counts. Held, That the knowledge of the New York bank of his inten- tion to violate the National Banking Law did not affect its rights to re- cover the money from the Kansas bank. The subsequent fraud of its cashier will not relieve a National bank from its liability as indorser on paper transferred by him within the scope of his authority to an innocent third person. (Auten v. Manistee National Bank, 67 Ark., 243.) Stocks Taken as Security Fob ob 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, tona fide, in satisfaction or payment, or by way of compromise 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 antici;- pated loss. This right grows out of the implied power to adopt rea- sonable 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 persons 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. {Id.) And where a loan has been made upon the stock of another corpora- tion as collateral security, the bank, in enforcing its rights as pledgee, may become the owner of the collateral. (Fulton v. National Bank of Dennison, 26 Tex. Civ. App., 115.) Where a National bank legally acquires title to stock in another cor- poration, previously held as collateral security or taken for debt, such stock should be. disposed of promptly, and that action will be required by the Comptroller of the Currency in order that the liability attaching to such stock may be definitely determined, as neither the prior owner, nor the National bank so acquiring the stock, is liable to an assessment in case of impairment of capital or failure. Purchase of Stock of Other National Banks. — A National bank can not lawfully acquire and hold the stock of another National bank as an investment. (First National Bank of Concord v. Hawkins, 33 U. S. App., 747.) And where such stock has been purchased the bank may plead its want of power as a defense to an assessment upon the stock, notwith- standing it appears as the registered owner thereof, and has received and retained the dividends thereon. {Id.) The Court in this case said: "We think that the reason which dis- qualify a National bank from investing its money in the stock of an- other corporation 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 18 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 directors must have resided in the State, Territory or district, in which the asso- ciation Is located for at least one year immediately preceding their election, and must be residents therein during their continuance in. office." " One of the evident purposes of this enactment is to confine the man- agement 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 se- lection, 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 capital of a community might be concentrated in one concern, and busi- ness men be deprived of the advantages that attend competition be- tween banks. Such accumulation of capital would be in disregard of the policy of the National Banking Law, as seen in its numerous pro- visions 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 l^e in fact, though not in form, branches of the larger one." Lending Ciiedit — ^Accommodation Papek. — A National bank has no authority to lend its credit, and its accommodation paper or indorse- ment 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. Charlottesville National Bank, 3 Hughes, 647; Johnson v. Charlottesville National Bank, 3 Hughes, 657.) This, it may be remarked, is true of all corporations, and the principle is well established in corporation law. 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.) In the case cited a National bank advised A that it would pay all checks of a third person, although such person had no funds on deposit, as was known to both A and the bank. In reliance on such promise, A cashed checks of sucix 19 person, and transmitted them to the bank for payment. The bank issued and sent to A its drafts on a correspondent for the amount of the checks, which drafts were refused payment. Held, That the contract v/as one purely of guaranty, and was ultra vires on the part of the bank, and the transaction gave A no right of action against it on the drafts. So, it has been held that the officers and directors of a National bank have no authority to bind the bank by a guaranty of the debts of a third person contracted for his own benefit. (Commercial National Bank v. Pirie, 27 C. C. A., 171; 82 Fed. Rep., 799.) So, the cashier has no au- thority to bind the bank by a guaranty of a mortgage bond. (Farmers' and Merchants' National Bank v. Smith, 40 U. S. App., 690.) And it has been held that a National bank has no power, either with or without a consideration, to agree or bind itself that a draft drawn upon one of its customers will be paid. (First National Bank of Moscow v. American National Bank, 173 Mo., 153.) But while a National bank may not lend its credit for the accommoda- tion of others, still it may guaranty the payment of commercial paper as incidental to the exercise of its power to buy and sell the same. (Thomas v. City National Bank of Hastings, 40 Neb., 501.) Thus, A being indebted to a National bank, and being the holder of certain negotiable notes, indorsed them generally, and delivered them to the president of the bank, who accepted 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, That the guaranteeing of the notes under such circumstances was within the powers of the bank. {Id.) Assuming Obligations of Other Bank. — A National bank has power to make a contract whereby, in consideration of the transfer to it of the oflace furniture, lease and cash assets of another National bank, it will assume and pay the liabilities of such other bank. (Schofleld v. State National Bank, 97 Fed. Rep., 282.) 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 Cas , 173.) But the loans must be honest and the borrowers must not par- ticipate in making the loans to themselves. (Id.) Dealing in Checks. — Dealing In checks is a part of the usual busi- ness of banking, and would be within the general powers of a bank without special mention. And there is no difference in this respect be- tween checks payable to bearer and those payable to order. (First National Bank of Rochester v. Harris, 108 Mass., 514.) 20 Lending fob Customebs. — A National bank is not authorized to en- gage 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 v. Cockrill, 63 Ark., 418.) Employment of Attobneys. — Under th« 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, in- cluding the agreement for compensation, may be made by the president of such bank. Such employment by the president is a sufficient authoriz- ation 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. (Na- tional Bank of Guthrie v. Earl, 2 Okl., 617; see also Citizens' National Bank of Kingman v. Berry, 53 Kans., 696.) Beokee in Sale of Faem Moetgages. — A National bank has no power to act as a broker in selling farm mortgages for a commission. (Farm- ers' and Merchants' National Bank v. Smith, 40 U. S. App., 690.) Selling to Acquiee Lien. — 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, 10 S. D., 167.) But even were such a transaction forbidden, only the Government could be heard to complain. (Id.) Binding Bank to Pay Dbaft. — ^An officer of a National bank has no power to bind it to pay the draft of a third person on one of its cus- tomers to be drawn at a future day, when 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 v. California National Bank, 56 Fed. Rep., 959.) False Repeesentation of Cashiee. — 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.) Collection by Cashiee. — The cashier of a National bank has au- thority on behalf of the bank to make a collection from a Savings bank. (Hanson v. Heard, 69 N. H., 190.) 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.) 21 Assigning Judgment. — When a judgment belonging to a National bank is transferred without collecting it, the presumption is that the transfer is unauthorized. (Cox v. Robinson, 70 Fed. Rep., 760.) Manufactuking Business. — A National bank has no power to engage in a manufacturing business. (Bletz v. Bank of Kentucky, 55 S. W. Rep., 697; 21 Ky. L. Rep., 1554.) Partnership. — A National bank has no power to become a member of a partnership, and cannot be held liable as a partner. (Merchants' National Bank v. Wehrmann, 69 Ohio St., 160.) Contract to Pay for the Procuring of Customer. — In the 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 au- thorized 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 person for such a purpose fire insurance to a specific amount. We should be slow in answering che first question in the affirmative. Such a mode of doing business is so inconsistent with sound principles 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 que::i.ion must be answered in the negative. As we understand the declaration, the oflBcers 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 ultra vires of the defendant corporation." 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 a paper-mill in the city of K:—Held, (1) That the making of donations 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 authority, 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 v. Buffalo County National Bank, 40 Neb., 235.) 2Z 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.) 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 specified, to wit, the pleasure of the board of directors. Harrington v. First National Bank of Chitten- ango, 1 Thompson & Cook (N. Y.), 361.) it was intimated in the case cited that the officers could not be hired for a specified time; and it has 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 by-law which provides that he shall hold his office for a stated term, as, for instance, for one year, is void. {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 v. Hill, 63 Fed. Rep., 522.) But special circumstances may exist which will require them to do so. (Id.) It is not necessary that the acceptance of the bond should be signified by memoranda entered upon the joilrnal 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 v. The Lebanon National Bank, 10 Bush., 23.) A surety on the bond of a cashier of a National bank Is not discharged 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 negligence in not discovering them. (Tapley v. Martin, 116 Mass., 275.) Ultra Vires. — Where a National bank makes a contract which is beyond its powers, such contract is void, and not merely voidable, and it cannot be estopped from making the defense of ultra vires when it is sued for non-performance on its part. (Metropolitan Stock EJxchange v. Lyndonville National Bank (Vt.), 57 Atl. Rep., 101.) But there are many cases where such a contract, having been performed, has been enforced. Thus, where bonds were sold to a National bank under a contract by which it agreed to replace the 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 by virtue of the contract, and at the same time refuse to comply with the terms of purchase. (Logan County Bank v. Townsend, 139 U. S., 67.) So, even if a National bank has not authority to purchase commercial paper, this can not be set up as a defense 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 judgment creditor, and the certi- ficate of sale assigned to a National bank, it was held that the de- fendants could not raise the question that the bank had no authority to purchase the certificate. (Hennessey v. 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 vires, (Town Council of Lexington v. Union National Bank, 75 Miss., 1.) And where a borrower has deposited collateral se- curities with a National bank, he cannot set up as a defense that the bank had no power to take the same. (Reynolds v. Touzalin Imp. Co., 62 Neb., 236.) Conversely, where a National bank has received and retained the benefit of a contract made by its officers, it can not plead that the con- tract was unauthorized by the directors, or beyond the power of the bank or its officers to make. (Tootle v. First National Bank of Port Angeles, 6 Wash., 181.) Thus, it can not interpose the defense 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 con- tract. (Trustees of First Presbyterian Church v. National State Bank, 57 N. J. Law, 27.) And an 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 v. Commercial National Bank of Ogden, 77 Fed. Rep., 957.) The fact that the act of a National bank in assuming to represent 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 them 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 guilty of a con- version of such notes. (Anderson v. First National Bank of Grand Forks, 5 N. D., 451.) 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 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, 4 24 Anderson, 172 U. S., 573.) So, where it uses in its business money obtained by one of its officers as a loan to it, it cannot escape liability claiming the loan was not negotiated by it, or by its directors, or that it could not itself have legally borrowed the money. (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 transac- tion 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 to evade the liabilities attached to individuals, and to claim the privileges of National banks. (Gadsen v. Thrush, 56 Neb., 565.) But where a National bank has purchased stock in another corporation, out of the ordinary course of its business, and not as se- curity for a debt previously contracted, it may plead ultra vires, in an action against it as a stockholder of such corporation. (The California National Bank v. Kennedy, 167 U. S., 362, overruling Kennedy v. Cali- fornia Savings Bank, 101 Cal., 495.) Bank as Trustee. — Acting as trustee and holding the securities upon which an issue of bonds is based is not considered as necessarily " in- cidental " to the powers conferred on a National bank, but more in the nature of the business of a trust company, and therefore not a proper undertaking for a National bank. § 17. Limitations as to Eeal Estate and Mortgages. — A Na- tional 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 accommo- dation in the transaction of its business. Second. Such as shall be mortgaged to it in good faith by way of security for debts previously contracted. Third. Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings. Fourth. Such as it shall purchase at sales under judgments, de- crees, or mortgages held by the association, or shall purchase to secure debts due to it. But no such association shall hold the possession of an^y 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 ^ve years. (Kev. Stat. U. S. Sec. 5137.) How Purchases and Conveyances Made. — 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. 25 Bankinq-House — Chabacteb of Improvement — Lease. — If the land which a National bank purchases or leases for the accommodation of its business is very valuable, it may exercise the same rights that belong to other landowners of improving it in a way that will yield the largest income, lessen its own rent, and render that part of its funds which are invested in realty most productive. (Brown v. Schleier, 118 Fed. Rep., 981.) Where a National bank invests in real estate in excess of its powers, and the transaction has been acquiesced in for a long time, only the Government can be heard to complain, and a receiver appointed by the Comptroller of the Currency cannot do so. (Id.) Investment in a banking-house property should not be out of proportion to the capital and business of the bank. A National bank may lease property for a term of years and agree with the lessor to construct such a building as it desires, provided that it acts in good faith, solely with a view of obtaining an eligible location, and not with a view of investing its funds in real property or embarking them in speculations in real estate. (Brown v. Schleier, et ah, 118 Fed. Rep., 981.) Such a lease is not invalid because made for a longer period than the corporate existence of the bank. (Id.) And, even though the lease be assignable only with the consent of the lessor. (Weeks th International Trust Company, 125 Fed. Rep., 371.) Nor is such a lease invalid because the gross rents payable during the term will reach a sum exceeding the amount of the bank's capital stock. (Brown v. Schleier, et al., 118 Fed. Rep., 981.) But a National bank which has not been authorized by the certificate 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.) Nevertheless, persons organizing a National bank may secure an option on property desired for a banking-house with a provisional agreement for a lease to be executed when the bank is chartered. When Real Estate Security May Be Taken. — The authority con- ferred by the second, third and fourth subdivisions of this section 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 corporate power. But, in order that the bank may acquire any interest 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 maturity, or if before it matures, the maker, or the person who negotiated it, becomes embar- rassed, then the bank, acting bona fide, would have the right to take a 26 mortgage or conveyance 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 discounted 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 beyond con- troversy. (Bank v. Matthews, 98 U. S., 621; Fowler v. Scully, 72 Pa. St., 451; Crocker v. Whitney, 71 N. Y., 161; Fridley v. Bowen, 87 Ill.» 151.) ♦ As Secubity fob Debts Pbeviously Conteacted. — The National banks may take mortgages on real estate to secure the payment of debts previously contracted. (First N. B. of Skowhegan v. Maxfield, 83 Me., 576.) And the power of the National banks to secure or satisfy their debts out of real estate is ample for the purpose; and, in the tona fide exercise of their power in this respect, they may do whatever an in- dividual would do under similar circumstances. If the real object of the purchase is 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 pur- pose. (Upton 17. National Bank of South Reading, 120 Mass., 153.) Ac- cordingly, it has been held that, when the inducement to the transaction is the security of an antecedent indebtedness, the bank may make an ad- ditional advance, and take a mortgage on real property to secure both the advance and the prior indebtedness. {Id.) So it may take a convey- ance of real estate worth more than the debt, and pay the difference be- tween the debt and the value of the property. (Libby 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. Merchants' 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.) So, it may be substituted to the rights of a surety who has taken a mortgage. (Magoflln v. Boyle National Bank of Danville (Ky.), 695 W. Rep., 702; 24 Ky. L. Rep., 785.) And, in 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 renewals. (Howard National Bank v. 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.) Debentuees — Stock of Real Estate Companies — ^Wife's Separate Estate. — Very difficult questions frequently arise as to whether a con- templated transaction is within the inhibition against loans on real estate. One question of frequent occurrence, especially in the West, is whether the debentures of mortgage loan companies can be taken as 27 collateral. This point has never been judicially determined, but the Comptrollers of the Currency 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 security of the stock of a corporation whose property consists solely of real estate. (Baldwin v. State Na- tional Bank, 26 Minn., 43.) Where a married woman indorsed a note: " 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) that the indorsement was to be treated as personal security, within the meaning of the Na- tional banking law, and not as a mortgage. Mortgage Given to Indobser to Enure to Bank. — It has been held that a National bank may make an agreement that, in case a note dis- counted by it shall not be paid, a mortgage given by the maker to his indorser shall enure to the benefit of the bank (First National Bank v. Haire, 36 Iowa, 443) ; 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 Comptroller 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. The Comptroller's office formerly accepted this opinion, but now holds that such loans are not lawful. There has been no judicial decision on the subject. 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 otherwise satisfy the debt out of the property. No one but the Government can be heard to complain that the bank has ex- ceeded 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; First National Bank of St. Thomas, Fleth, 10 N. D., 281.) 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 proceeding brought by the Government. (Reynolds v. Crawfords- ville Bank, 112 U. S., 405.) Policy of the Law. — 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 I 28 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 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 objection to real estate security is not to its suf- fiGiency, 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 convertible 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 assets were more than suf- ficient to pay their debts, simply because a large portion 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 com- panies, savings banks, and similar corporations 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. § 18. Amount of Capital Required. — No association shall be or- ganized with a less capital than one hundred thousand dollars, except that banks with a capital of not less than fifty thousand dollars may, with the approval of the Secretary of the Treasury, be organized in any place the population of which does not exceed six thousand inhabitants, and except that banks with a capital of not less than twenty-five thousand dollars may, with the sanction of the Secretary of the Treasury, be organized in any place the population of which does not exceed three thousand inhabitants. No association shall be organized in a city the population of which exceeds fifty thousand persons with a capital of liess than two hundred thousand dollars. (Kev. Stat. U. S. Sec. 5138, as amended by Act March 14, 1900, Ch. 41, Sec. 10.) Detekmination of Population. — ^The Comptroller relies for informa- tion as to population generally on the Census Bureau, which, through its agents in different sections, is usually able to give the required data, but the Comptroller's findings in regard to this are not necessarily final, and, in case the applicants to organize a National bank believe the 29 population reported to the Comptroller not correct, they may furnish such counter evidence as they may be able to obtain. A certificate from the mayor of the place or other good evidence of actual population probably will satisfy the Comptroller. Any error of his as to population can be corrected in appropriate legal proceedings. It sometimes hap- pens that banks have less than the minimum capital required by law for the population of the place. The explanation is that they were either organized when the places were smaller, or were organized in villages afterward absorbed by cities lying near. Authorization of Banks Under $100,000 Capital. — When application is made to the Comptroller for a bank with less than $100,000 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. If parties applying are well endorsed as responsi- ble and acting in good faith, approval will be given regardless of whether there appear to be need of additional banking facilities in the place or not. § 19. Par Value of Stock — Transfers — Stockholders* Rights and Liabilities. — The capital stock of each association shall be divided into shares of one hundred dollars each, and be deemed personal property, and transferable on the books of the asso- ciation in such manner as mav be prescribed in the by-laws or articles of association. Every person becoming a shareholder by such transfer shall, in proportion to his shares, succeed to all the rights and liabilities of the prior holder of such shares; and no change shall be made in the articles of association by which the rights, remedies or security of the existing creditors of the asso- ciation shall be impaired. (Eev. Stat. XJ. S. Sec. 5139.) In What Cases Par Value Less Than One Hundbed Dollars. — The exception to the division into shares of $100 each is in case of State banks converted. (See section 38.) 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 Na- tional Bank of Larimore, 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, Westerp Nation^il ^ank (U. S. Ct. Ct), 2 Nat 30 Bk. Cas., 187.) And it is held that a State statute which provides that the stockholders 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 execu- tion under authority of State laws. (In re Braden's Estate, 165 Pa. St., 184.) Transfee of Stock — Entry of Transfer — Lost Certificates. — ^The transfer of stock in National banks is not governed by different rules from those which are ordinarily applied to the transfer of stock in other corporations. (Johnson v. Laflin, 103 U. S., 800.) The entry of the transaction in the 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. (Id.) 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 blank 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. (Id.) And so it has been decided that where a share- holder who has sold his stock delivers the certificates with a proper 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 trans- fer 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 officers 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 officers 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 un- recorded 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 Larimore, 3 N. D., 9.) But while the noting of the transfer on the books is not necessary for the purpose of passing the title to the stock, it is essential for other purposes. It is important to the transferee that the transfer should be properly registered, for, until this is done, the corporation is not bound 31 to recognize him as a stockholder, and he is 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 stockholder until this is done. (Bowdell v. Farm- ers' and Merchants' National Bank, Brown's National Bank Cases, 147.) The record made of the transfer upon the books of the bank is suf- ficient, as between the transferee and the bank, to work a change of ownership, and new certificates are not necessary to his becoming the ower 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, 141 U. S., 234; Butler v. Eaton, 141 U. S., 240.) In case of loss of a certificate of stock a bond of indemnity should be required before the issue of a duplicate certificate to avoid the possi- bility of the bank becoming liable for an illegal issue. Right of Stockholders to Transfer. — ^A shareholder in a National bank, while it is a going concern, has the absolute right, in the ab- sence of fraud to make a hona fide and actual sale and transfer of his shares at any time, to any person capable in law of purchasing and hold- ing 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. (Johnson v. Laflin, 5 Dill, 65.) The directors are authorized to prescribe regulations under which the transfer of stock shall be made; but these regulations must be reason- able, and under the pretence of prescribing the manner thereof, the directors can not clog the transfer with useless restrictions. (Johnson V. Lafiin, 103 U. S., 800.) The transfer does not require to be approved by the directors, 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 evidently 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 person. Where the person intrusted by the directors with the duty of entering the transfers on the books of the bank, refuses for insufficient reason to note a transfer, the bank will be liable for the damages resulting therefrom. (Case v. Citizens' Bank, 100 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 certificate. 32 By the by-laws of the bank, stock was transferable only on the books of the company. On December 14, 1878, the shares were attached by a judgment creditor of A and sold and transferred 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 officers 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 damages for the refusal to transfer the shares. (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, (1) equity will not generally enforce specific execution of a contract relat- ing to personal chattels, and (2) because a decree enforcing the agree- ment in question would be against public policy. (Foil's Appeal, 21 Alb., L. J.; 2 N. B. C, 411.) § 20. When Capital Stock Must be Paid In.— At least fifty per centum of the capital stock of every association shall be paid in before it shall be authorized to commence business; and the remainder of the capital stock of such association shall be paid in installments 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 the association. (Rev. Stat. U. S. Sec. 5140.) Payment of Subscbiptions. — Probably the theory of the law is, that each subscriber shall pay half of his subscription down, and the re- mainder in five equal monthly installments; this is really what a sub- scriber to National bank stock, who is expected to know the law, agrees to do, but the Comptroller does not usually 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 aggregate been paid in. It is sometimes convenient for some subscribers to pay more at once, and this enables the officers to certify the payments necessary to comply with the letter of the law, without waiting for the slower subscribers. When this plan is adopted in order to hold the other subscribers, a contract should be entered juto With them. (See note to next section.) 33 Cebtifyino Payments. — This is the certificate required by section 5168, par. 22, post, that fifty per cent, of the capital stock, called the first Installment has been paid. Upon the receipt of this the Comptroller may, if bonds have been deposited, authorize the bank to commence business. The date of the Comptroller's certificate of authority to commence business fixes the date of the payment of the succeeding in- stallments. The Comptroller's office furnishes blanks upon which to certify payment of capital. (For form, see page 219.) § 21. Failure to Pay Installments on Stock — Sale of Stock — Restoring Capital so Reduced. — 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 circulation in the city or county where the association is located, or if no newspaper is published in said city or county, then in a newspaper publsihed nearest thereto, to any person who will pay the highest price there- for, to be not less than the amount then due thereon, with the expenses of advertisement and sale; and the excess, if any, shall be paid to the delinquent shareholder. If no bidder can be found who will pay for such stock the amount due thereon to the as- sociation, and the cost of advertisement and sale, the amount pre- viously 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 cancelled and deducted from the capital stock of the association. If any such cancellation and reduction shall reduce the capital of the asso- ciation 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 re- ceiver may be appointed, according to the provisions of section fifty-two hundred and thirty-four, to close up the business of the association. (Rev. Stat. F. S. Sec. 5141.) Subsceiber's Liability. — This section is entirely for the direction of bank managers, and points out the proper course to be taken in bringing in the capital of the bank. It must be remembered that from the time of his subscription a person becomes a shareholder, and that all the shareholders have entered into a contract among themselves, and are mutually responsible to each other. If only five persons start 34 the bank, and subscribe for all the stock, with the purpose of after- ward distributing the same among a number of parties, it is well for each of the five associates 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 doubtless be compelled by legal proceedings. The section under consideration does not refer to this first installment, but to the subsequent install- ments, 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 forfeit, 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, stric.tly, under this section, have the following time to make good its capital before a receiver could be appointed; First, the time until the installment be- came due; then three weeks for notice by publication; then six months from forfeiture to cancellation; and, fianlly, thirty days longer in which to bring up capital to required amount. How capital is to be made good in such case is not distinctly stated, but probably by assessment on remaining stockholders. (See section 120.) § 22. Comptroller to Betermine if Association is Entitled to Commence Business. — ^Whenever a certificate is transmitted to the Comptroller of the Currency, as provided in this Title, and the association transmitting the same notifies the Comptroller that at least fifty per centum of its capital stock has been duly paid in, and that such association has complied with all the provisions of this Title required to be complied with before an association shall be authorized to commence the business of banking, the Comp- troller shall examine into the condition of such association, as- certain 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 35 good faith, and generally whether such association has complied with all the provisions of this Title required to entitle it to engage in the business of banking; and shall cause to be made and attested by the oaths of a majority of the directors, and by the president or cashier of the association, a statement of all the facts necessary to enable the Comptroller to determine whether the association is lawfully entitled to commence the business of banking. (Kev. Stat. U. S. Sec. 5168.) Certificate of Officers and Directors. — The certificate described in this section is that known in the Comptroller's oflace as " Certificate of Officers and Directors." The certificate contains the notification and statements mentioned in the section. (For form see page 219.) Preliminary Examination. — ^The Comptroller has under this and the subsequent section the right to send an examiner to ascertain whether the incorporators have complied with requirements before granting his certificate of authority to commence business. When an incorporated State bank becomes a National bank by conversion the Comptroller has an examination made to ascertain fully the character of the assets of the bank converting before granting a charter. If the bank is or- ganized de novo, the examination is not ordered until after the bank has begun business. If the bank is a reorganization of a State or private bank, the Comptroller requires a statement signed by the directors to the effect that any assets purchased from the State or private bank it succeeds will not include real estate (other than the banking premises), stocks of other corporations, loans secured by real estate, or loans in excess of 10 per cent, of the paid-in capital stock, of the National bank. § 23. Certificate of Authority to Commence Business. — 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 banking, the Comptroller shall give to such association a certificate, under his hand and ofiBcial seal, that such association has complied with all the provisions required to be complied with before commencing the business of banking, and that such association is authorized to commence such business. But the Comptroller may withhold from an association his cer- tificate authorizing the commencement of business, whenever he 36 has reason to suppose that the shareholders have formed the same for any other than the legitimate objects contemplated by this Title. (Rev. Stat. U. S. Sec. 5169.) See note to preceding section. § 24. Publication of Comptroller's Certificate. — 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 published in such city or county, then in the newspaper published nearest thereto. (Rev. Stat. U. S. Sec. 5170.) This refers to the certificate of authority to begin business. An inser- tion in a weekly newspaper or in a weekly edition of a daily newspaper during the sixty days is suflacient. The Comptroller requires the pub- lisher's oath of publication and a copy of the paper containing the notice as evidence of publication for the time required. § 25. Increase of Capital Stock. — Any National banking asso- ciation may, with the approval of the Comptroller of the Currency, by the vote of shareholders owning two-thirds of the stock of such association, increase its capital stock, in accordance with existing laws, to any sum approved by the said Comptroller, notwithstand- ing 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. (Act May 1, 1886, Ch. 73, Sec. 1; 24U. S. Stat., p. 18.) Obsolete (Provisions in Articles of Association. — ^Prior to the Act of 1886, the statute provided that " Any association formed under this title may, by its articles of association, provide for an increase of its capital from time to time, as may be deemed expedient, subject to the limitations of this title. But the maximum of such increase to be pro- vided in the articles of association shall be determined by the Comp- troller of the Currency." (Rev. Stat. U. S. Sec. 5142.) Many banks, therefore, have a provision of this character in their ar- ticles of association. But this is now obsolete. It is no longer necessary to insert in the articles of association provisions for an increase of 37 capital stock; for 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 notwith- standing that the articles of association contain a provision fixing a maximum limit. By Whom Increase Authorized. — The increase must now he made by the shareholders, and not by the directors, and all provisions in the articles of association of banks organized prior to May 1, 1886, au- thorizing directors to increase the stock, have become wholly nugatory. Procedure. — "When it is desired to increase the capital stock the Comptroller should be advised of the fact and of the amount of the proposed increase, as his approval is necessary. If the condition of the bank warrants the increase, he promptly gives his approval, and sends full instructions with blanks necessary to be executed and filed in his office. The next step is to call a meeting of shareholders and secure the adoption of a suitable resolution authorizing the increase. This meeting must be duly called, and the resolution must receive the votes of shareholders representing at least two-thirds of the existing stock. Then subscriptions for the new stock may be taken. When all the new stock shall have been subscribed and paid for, the payment should be certified to the Comptroller of the Currency by the president or cashier. (Forms to be used in making the increase will be found on page 319.) The increase becomes effective on the date of the issue of the Comp- troller's certificate, and the books of the bank should not be changed nor the certificates of stock issued prior thereto. Waives 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 by 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. (Latimer v. Bard, 76 Fed. Rep., 536.) Increase of Capital from Surplus. — Occasionally it is found desirable * where a bank has accumulated a surplus in excess of the twenty per cent, required to be maintained to convert the excess (and only the ex- cess can be used ) into capital. This may be accomplished in the following manner: Declare and pay a pro rata dividend, the proceeds to be accepted in payment for the new stock, issued as the result of the legal adoption of a resolution providing for the increase. In no other manner can surplus be capitalized. The directors have the right to make dividends from excess surplus as from other profits, but the right remains with the shareholders to dispose of the proceeds as they shall determine. I I 38 Right of Shakeholders to Subscribe for New Shares. — It is a gen- eral rule of law that where the capital stock of a corporation is in- creased each shareholder has a right of pre-emption to the new stock in proportion to his shares in the original stock. So that any provision In the articles of association is not actually necessary. 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 reasonable time. But the safer course, and the one which the directors 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. § 26. When Increase of Capital Stock Becomes Valid. — l^o in- crease 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 cei^ificate 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. (Rev. Stat. TJ. S. Sec. 5142.) Comptroller's Approval — Recovery of Money Pah) 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 pro- visions of the statute had not been strictly followed. (McFarlin v. First National Bank of Kansas City, supra.) And the provision of the statute as to payment 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 increase is subscribed and paid for in ful. (Scott V. Latimer, 89 Fed. Rep., 843.) 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 subscribers. (Id.) 39 Whebe Whole Amount of Increase is Not Taken. — The U. S. Su- preme Court in case of Aspinwall v. Butler, 133 U. S., 565, has held that where an increase of the capital stock is authorized in a certain sum there is no implied condition that a subscription shall be void if the whole amount so authorized is not subscribed. (See also Delano v. Butler,, 118 U. S., 634.) Therefore, where a shareholder subscribes his additional share towards doubling the capital and pays his sub- scriptions, the fact that the stockholders, with the assent of the Comptroller, 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.) But if there were a large and material deficiency in the amount of capital contemplated, equity might interfere to protect subscribers. (Aspinwall v. Butler, 133 U. S., 595.) In 1892 the stockholders of the C. National Bank voted to increase capital $300,000. M. subscribed for twenty-three shares of such increase and paid in his subscription. The full amount was not subscribed. The President and Cashier called a meeting of stockholders in 1895, and an increase of capital stock of $150,000 was authorized and ap- proved by the Comptroller. M. was not present at the meeting, though one B., who held a proxy authorizing him to 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 plaintiff may show that stock issued by the bank in his name was is- sued to him merely as collateral security for such deposit. (Williams V. American National Bank of Arkansas City, 85 Fed. Rep., 376.) And it is no defense to the bank that the stock was issued without au- thority of law. {Id.) Fixing Price of New Stock. — Generally, as a result of increase of capital, the additional shares of stock are issued and sold at par. Oc- casionally, however, it is preferred to increase the surplus in the same proportion as the capital; that is, to sell the new shares at the book or market value of the old stock. In such cases it is customary to incor- porate in the resolution for the increase of capital a provision fixing the price, or conferring upon the Directors authority to do so. At common law, and generally under the Articles of Association, share- holders are entitled to participate in an increase of stock pro rata. But whether they are entitled to take the stock at par or whether the price may be fixed at a higher sum, is a mooted question, and has never been determined in a case where a National bank was a party. But, of course, there is no difliculty where all consent. 40 § 27. Bednction of Capital Stock. — Any association formed under this Title may, by the vote of shareholders owTiing 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 ob- tained. (Eev. Stat. U. S. Sec. 5143.) Procedure. — In reducing capital it is best first to advise the Comp- troller to be assured of his approval, which is necessary and which will be given only if he is satisfied the bank is solvent. He will instruct how to proceed and furnish forms. The next step is to'call a meeting of stockholders, which should be done in the manner pointed out in note to the next section. The shareholders should then adopt a resolution authorizing a reduction of the stock. The votes in favor must repre- sent two-thirds or more of all the stock of the bank. It is not sufficient that two-thirds of a quorum vote in favor of it. The resolution should state the intention of the stockholders clearly, but it is not reQuired to be in any special form. If it is desired that the reduction 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. (For forms, see page 320.) Usually the course is for each stockholder to relinquish and surrender up to be cancelled a pro rata portion of his stock. But if some of the stockholders are willing to surrender enough of their stock to make up the whole amount of the reduction, there is no necessity that the hold- ings of the other stockhoders should be reduced at all. The issue of fractional shares is sometimes unavoidable, and is permitted. When Capital Can Not Be Reduced. — The capital stock cannot be reduced below the minimum amount of capital required by Section 5138, R. S, (See Sec. 18), nor can a bank reduce its capital below the amount required for a new bank 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 opinion, and different Comptrollers have held variously on the subject. But, considering that 41 It is a fundamental rule of law, that ;here can be no change whatever made in the capital stock of a corporation, unless there is a clear au- thority 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. The important question is not whether the Comptroller will approve of the reduction, but what are the liabilities of the stockholders and di- rectors 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. — The capital stock set free by reduction belongs to the stockholders, 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 Daly, 400; affirmed, 78 N. Y., 608.) Nor can its retention by the bank be authorized by a majority of the stock- holders, no matter how large. Each stockholder is entitled to his por- tion, and can not be deprived of it against his own consent. But fre- quently shareholders waive their right and agree to leave it with the bank to be used for a surplus fund or otherwise. Reduction of Capital to Meet Impairment. — In reduction to meet impairment of capital there can be no withdrawal of assets; for, prima facie, any further withdrawal of assets would result in still further im- pairment of the capital. (McCann v. First National Bank of Jefferson- ville, 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 Comptroller, 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 re- tained 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 reaJized, proportioned to the amount of stock surrendered: Held, That he could not recover. Relation of Shareholders to Chabged-off Assets. — ^Where the capi- tal of a National bank has been reduced to obviate an assessment to make good an impairment, the relation of shareholders to the charged- off assets is the same as though the reduction of capital had not been made for that purpose, for the reason that a reduction under such cir- cumstances would not be given favorable consideration by the Comp- troller of the Currency, unless as a result the remaining assets, after charging off doubtful and worthless assets equivalent in face value to 42 the capital set free by reduction, equalled or exceeded in actual value the bank's aggregate liabilities to depositors and other creditors, and in addition the capital stock as reduced. Authority to reduce capital stock as a result of the withdrawal of instructions to levy and pay an assess- ment to make good an impairment is granted by the Comptroller of the Currency upon condition that no portion of the reduced capital will be paid to shareholders in cash except such sums as may be realized from assets charged off representing the amount of the reduction of stock. In this position the right of shareholders to the proceeds of the charged- off assets is recognized. Ordinarily such assets are trusted for collec- tion and distribution to shareholders of record at date of the reduction, unless by unanimous action of shareholders authority is conferred upon the Directors to credit collections from such charged-off assets to the bank's profit account. § 28. Eights of Shareholders at Elections — Proxies. — In all elections of directors, and in deciding all questions at meetings of shareholders, each shareholder shall be entitled to one vote on each share of stock held by him. 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 share- holder whose liability is past due and unpaid shall be allowed to vote. (Kev. Stat. U. S. Sec. 5144.) Shabeholders' 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 newspaper, 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 the customary thirty days in advance to avoid any question as to the legality of the meeting. For want of due notice to the shareholders the proceedinc^s, unless acquiesced in or ratified by all, may be set aside as invalid. When any act to be done by the association requires the assenl of the shareholders, their assent, unless unanimous, must be given at a duly convened meeting of shareholders. The assent in writing of share- holders owning the requisite amount of stock is not sufficient, and will not be binding upon any non-assenting shareholder. 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 proxy. The only exception to this rule is in the case of the amendment of the articles of association extending the period 43 of corporate existence, the consent of the shareholders to which the law expressly authorizes to be given in writing. The mistake is frequently made of supposing that business 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 determine the actions of the share- holders, 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. A meeting of shareholders must be duly called. Where the articles of association of a National bank provide that meetings of the stockholders may be called by the board of directors or by any three stockholders, a meeting called by the President and Cashier is not lawfully convened. (Matthews v. Columbia National Bank, 79 Fed. Rep., 558.) Cumulate Voting.. — The laws of some of the States authorize stock- holders at corporate meetings held to elect directors to cumulate their votes; that is, if a stockholder is entitled to one vote on each share of stock held, he might concentrate his entire vote in favor of one candi- date for directorship, instead of casting an equal number for all candi- dates. This method of voting, however, not being authorized by the National Banking Law, is held to be prohibited. 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 president, vice-presi- dent, or cashier, or whether it applies as well to a director. There ap- pears to have been no judicial decision on the point. The view for- merly taken by the Comptrollers of the Currency was that a director is not an officer within the intendment of this provision. But the contrary view is now held. 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 bank is under the control of the directors, and they have in many cases a great personal interest in the action of the meet- ing, especially where the meeting is held for the election of directors, and they 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 with the management of the bank. (For form of proxy, see page 319.) A proxy cannot bind his principal by attending at, and partici- pating in, a meeting of stockholders not lawfully called. (Matthews v, Columbia National Bank, 79 Fed. Rep., 558.) 44 What Liability Disqualifies Shakeholdeb 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 subscrip- tions for stock, and was not intended to disqualify shareholders other- wise indebted to the bank. (United States ex, rel. Cond. v. Barry, 36 Fed. Rep., 246.) § 29. Directors — ^Election of — Term of Office — Annual Meeting. — The affairs of each association shall be managed by not less than five directors, who shall be elected by the shareholders at a meeting to be held at any time before the association is authorized by the Comptroller of the Currency to commence the business of banking; and afterward at meetings to be held on such day in Januar}'^ of each year as is specified therefor in the articles of association. The directors shall hold ofiBce for one year, and until their successors are elected and have qualified. (Kev. Stat. U. S. Sec. 5145.) Annual Meeting — Date of — Business at Annual Meetings — Repre- sentation. — The annual meeting is required to be held in January, but any date may be selected in that month, although in the form of articles of association recommended by the Comptroller the second Tuesday is named and commonly adopted. At the regular annual meeting no business other than the election of directors can be transacted without the required notice having been given, stating that other business will be transacted; otherwise the ratification of action taken should be obtained from shareholders not present at the meeting. No provision being made in the statute for any definite representation of stock at annual meetings, the number of shareholders present is not material to the legality of a meeting. § 30. Qualifications of Directors. — Every director must, dur- ing his whole term of service, be a citizen of the United States, and at least three-fourths of the directors must have resided in the State, Territory, or district in which the association is located, for at least one year immediately preceding their election, and must be residents therein during their continuance in office. Every director must own, in his own right, at least ten shares of the capital stock of the association of which he is a director. 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. (Rev. Stat. U. S. Sec. 5146.) See note Sec. 31, post. Amendment to Sec. 5146, February 28, 1905, provides that a director of a National bank of capital not exceeding $25,000 shall own five shares of stock instead of ten as before required. 45 § 31. Oath Required of Directors. — Each director, when ap- pointed or elected, shall take an oath that he will, so far as the duty devolves on him, diligently and honestly administer the affairs of such association, and will not knowingly violate, or willingly permit to he violated, any of the provisions of this Title, and that he is the o\\Tier in good faith, and in his own right, of the number of shares of stock required by this Title, subscribed by him or standing in his name on the books of the association, and that the same is not hypothecated, or in any way pledged, as security for any loan or debt. Such oath, subscribed by the direc- tor making it, and certified by the officer before whom it is taken, shall be immediately transmitted to the Comptroller of the Cur- rency, and shall be filed and preserved in his office. (Kev. Stat. U. S. Sec. 5147.) Qualifications of Directors. — From the foregoing two sections it will be seen that several things are required to qualify a person for 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; in case of a newly-organized bank paying for same as assess- ments are made, and he must hold the stock free from pledge. As the stock must be held in the director's own right, no person who holds stock in a merely representative capacity — as an executor, administrator, guardian, or trustee — can be a director. The par value of shares not being stated, ten shares of a converted bank, though of lower par value, meet the requirement. A director who owns more than ten shares of stock may sell or pledge all of his stock except ten shares, without becoming disqualified. 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. 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 obligations of a stockholder. Oath of Directors. — The law as regards directors* oaths Is fatally defective in that it fails to provide before what officer it may be taken. In order that an oath can have any efficacy 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 officer duly authorized to administer 46 It The act of February 26, 1881 (see Sec. 126), which authorizes an oath to be taken before a notary public, applies only to the oath pre- scribed by Section 5211, Revised Statutes — the oath to the report of condition. As regards the other oaths prescribed by the National bank- ing law, there does not appear to be any officer competent to administer them. (United States v. Curtis, 107 U. S., 671.) The Comptroller re- quires them to be taken, but they have no legal force. DiEECTOES Can Act Only as a Boaed. — The election of a person as a director does not constitute him an agent of the corporation with au- thority to act separately and independently of his fellow-members. It is the board, duly convened and acting as a unit, that is made the representative of the bank. The assent or determination of the mem- bers of the board acting separately and individually is not the assent of the corporation. The law proceeds upon the theory that the directors shall meet and counsel with each other, and that any determination affecting the association shall be arrived at and expressed only after a consultation at a meeting of the board attended by a quorum. (National Bank 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 Boabd. — A quorum generally consists of a ma- jority of the whole board. A provision to this effect is usually contained in the articles of association (see form of articles on page 208), 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 ex- pressed that it would be competent for the stockholders to provide that a less number than a majority shall constitute a quorum, and we still be- lieve 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 con- sisting 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 stock- holders." 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 47 by expressly 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 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 disqualified, this ipso facto vacates his place in the board, and no removal 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 re- gard to the term of office, is to make it conform to the time of the new election, and not to absolutely require every director to serve the full term. (Movius v. Lee, 30 Fed. Rep., 298.) The resignation of a di- rector should be tendered to the board, and not to the shareholders. As the president 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 mismanagement of the bank. ild.) LiABiLiTT OF DiEECTORS. — 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 5200, Revised Statutes, they will be liable to the bank for all damages sustained by it In consequence of such loan. (See on this subject note to Section 165.) 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 question is ultimately one of fact, to be determined under all the circumstances. (Briggs v. Spald- ing, 141 U. S., 132; Movius v. Lee, 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 reasonable supervision, and they will not be permitted to be shielded from liability because of ignorance or wrong-doing, if such ignorance is the result of gross inattention. (Id.) X 48 The directors of a National bank are vested with a sound discretion in the matter of requiring or not the oflScers 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, 63 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 knowingly 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 they were aware of its insolvency, and erroneously advised an examiner who had taken charge of the bank that it was not necessary to record them: Held, That they were personally liable for the losses caused by such neglect and mismanagement, and the frauds and defalcations of the cashier. Directors are not liable for concealing from creditors the fact of the bank's embarrassment, unless that embarrassment is such as to imperatively demand the bank's suspension. {Id.) But perhaps they might be liable for withdrawing their own deposits when they have knowledge of the bank's embarrassment. {Id.) A National bank hav- ing 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 ap- pointed 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.) If directors who are depositors and know some time before suspension that that event is inevitable, and that the bank can pay only a percent- age 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, and will be held to strict account- ability. (Robinson v. Hall, 63 Fed. Rep., 222.) {Id.) 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 pro- posed cashier was known to the directors, at least by reputation, and was supposed by them to be competent and trustworthy and of con- siderable experience in the business, and they had full confidence 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 presumed 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 49 banking law done without their participation or knowledge. (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. After- wards further loans or discounts were made to the same corporation without the knov/ledge or consent of any of the directors. About eight months after the bank commenced business one or more of the debtors of the bank failed, and the directors thereupon took the active manage- ment into their own hands: Held, That none of the directors had knowingly violated, or knowingly 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 ab- sence on account of ill health, and if frauds are committed during his absence and without his knowleldge, he will not be liable for them. (Briggs V. Spaulding, 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 corpora- tions. § 32. Vacancies: How Filled. — Any vacancy in the board shall be filled by appointment by the remaining directors, and any di- rector so appointed shall hold his place until the next election. (Kev. Stat. U. S. Sec. 5148.) It seems to be the proper construction of this section, that the duty of filling any vacancy in the board is obligatory on the remaining di- rectors, and is not merely discretionary with them. The power is con- ferred upon them for the benefit of the bank and its stockholders, and these have an interest in having the power exercised. § 33. Proceedings Where No Election Held at Time Appointed. — If, from any cause, an election of directors is not made at the time appointed, the association shall not for that cause be dis- solved, but an election may be held on any subsequent day, thirty days' notice thereof in all cases having been given in a newspaper published in the city, town, or county in which the association is located; and if no newspaper is published in such city, town, or 50 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 direc- tors fail to ^ the day, shareholders representing two-thirds of the shares may do so. (Eev. Stat. U. S. Sec. 5149.) Shareholders' Control. — The presence of this section in the law shows the importance attached by the legislators to the exercise of con- trol 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 di- rectors 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 board of directors, such board, by neglecting to have elections held, might retain office for an indefinite period. The Comptroller might, perhaps, require them to renew their oaths each year, or he might construe the law to be man- datory 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 oflBcer 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 Attorney-General of the United States for an opinion. If a shareholders* meeting is held by mistake on the wrong day, an- other meeting must be called, giving the regular thirty-day notice, but if all shareholders waive notice and consent to date fixed, the Comp- troller probably will not object. § 34. President Must Be a Director. — One of the directors to be chosen by the board shall be the president of the board. (Kev. Stat. TJ. S. Sec. 5150.) Ex-Officio Powers. — The president of the board of directors Is the presiding officer of the board, but otherwise his ex-offlcio powers are not 51 sreater 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 oflftcer of the bank, and has large powers dele- gated to him by the board. Vested Powees. — 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 ac- cordingly 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. (Id.) 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, 471) ; or to com- promise or release a debt due to the bank. (Farmers' National Bank v. Templeton, 40 S. W. Rep., 412.) He has no power inherent in his office to bind the bank on the execution of a note in its name; but power to do so may be conferred on him by the board of directors, either ex- pressly 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 conferred by the board of directors. (United States National Bank v. First Na- tional 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 of his as belong virtute officii to the office of cashier. (Simons v. Fisher, 55 Fed. Ren., 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' Na- tional Bank, 88 Tex., 265.) § 35. Individual Liability of Shareholders. — The share- holders of every National banking association shall be held in- 62 dividually responsible, equally and ratably, and not one for an- other, for all contracts, debts, and engagements of such associa- tion, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares; except that shareholders of any 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 ; Eind if at any time there is a deficiency in such surplus of twenty per centum, such association shall not pay any dividends to its shareholders until the deficiency is made good; and in case of such deficiency, the Comptroller of the Currency may compel the association to close its business and wind up its affairs under the provisions of chapter four of this Title. (Rev. Stat. TJ. S. Sec. 5151.) Fob What Liabilities of the Bank Shareholders are Responsible. — The liability is not contractional, but exists by force of the statute. (First National Bank of Concord v. Hawkins, 33 U. S. App., 747.) But see Deweese v. Smith', 106 Fed. Rep., 438.) 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 liabilities of the bank specified in this section. (Stanton v. Wilkeson, 8 Benedict, 357.) But it is restricted to such contracts, debts, and engage- ments of the bank as have been duly contracted in the ordinary course of business. (Richmond v. Irons, 121 U. S., 27; Schrader v. Manu- facturers' National Bank, 133 U. S., 67.) The liability of the stockhold- ers, therefore, cannot be enforced to pay the claims of creditors on new contracts made after the bank has been placed in voluntary liquidation. (Id.) Thus, where a bank had gone into liquidation and certain credi- tors 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. (Id.) 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 53 are insolvent shareholders, the solvent shareholders can not be required to contribute more than their proportion, in order to make good tlio deficiency. (Id.) 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.) Deceased Stockholder. — This liability survives against the represena- tives of a deceased shareholder, and adheres to his estate after his death, though he dies before the insolvency of the bank occurs. (Rich- mond 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 been distributed, defeat an action brought to recover the assessment. (Id.) Married WoMEN.—When the law of the State where the contract 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; In Re National Bank of St. Al- bans, 49 Fed. Rep., 120; Anderson v. Line, 14 Fed. Rep., 405.) And it has been held that 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 au- thorize married women to bind themselves by contracts for the pay- ment 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 con- verture no woman shall be capable of making any contract to affect her real and personal estate without the consent of her husband; and she will be liable for an assessment, although th« stock was purchased with- out the written consent of her husband. (Robinson v. Turrentine, 59 Fed. Rep., 554.) In Vermont a married woman is competent to become a stockholder in a National bank, and to contract to charge her separate property with the payment of any liability which is implied from enter- ing 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 share- holder, although the consideration may have proceeded wholly from the husband. (Keyser v. Hitz, 133 U. S., 438.) 54 Assignment for Ceeditoes — Defrauding Creditors. — In a suit to en- force the individual liability of a stockholder, it is not material that the person who transferred the stock to such stockholder did so for the purpose of concealing his property and defrauding his creditors; there is no connection between the liability of the stockholder and an alleged fraudulent intent on the part of the person from whom the title to the stock was acquired. (Keyser v. Hitz, 133 U. S., 433.) And conversely the fact that one is a stockholder and director in an insolvent National bank, and individually liable for the debts of the bank to the amount of his stock, will not operate so as to prevent him from making an otherwise lawful disposition of his property for the benefit of his credi- tors. ( Peters v. Bain, 133 U. S., 670. ) Where a stockholder in a National bank makes a general assignment after the bank has become insolvent, his estate in the hands of the assignee becomes liable for an assessment upon such stock, (Graham v. Piatt, 28 Colorado, 421.) Registered Owner Liable — What a Sufficient Transfer. — As a general 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 stockholders 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 buyer the certificates with a proper power of attorney to make the transfer, the corporation and its creditors are not affected by the trans- action 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. Accord- ingly, 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 officer of the bank, and requested him to make the transfer 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; Earl v. Carson, 188 U. S., 42; Cox v. Elmendorf, 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 oflfice 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 discharge his liability, and that he 8S 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 stockholder, nearly a year before the failure, had sold his stock to a broker for an undisclosed principal, and indorsed the same, and 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 in 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 relying upon the promise of the latter to have the necessary transfer made, this will not be sufiiient to discharge him. Thus, where T, who owned certain shares of stock in a National bank, sold them to his son, and the latter promised to have them transferred on the books to himself, but failed to do so, it was held, that T remained liable as a stockholder. (Schofield v. Twining, 127 Fed. Rep., 486.) And where 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. (Rich- mond 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 which the divi- dends are declared. (Keyser v. Hitz, 133 U. S., 433.) If he denies own- ing 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. (Id.) Where cer- tificates are issued to a subsequent purchaser 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, 101 111., 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. (Lewis v. Levitz, 74 Fed. Rep., 381.) 56 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 by 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 pre- cluded 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.) SuBSCBiBERs TO New Stock. — ^A Stockholder who elects to subscribe for shares of an increase and actually pays for the same, and is regis- tered 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 liability 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 sub- scribes and pays for a specific number of shares of a proposed increase of stock, which is in fact never issued, and to whom the bank officials transfer old stock instead, without his knowledge 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 increase 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 authoriz- ing the increase 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. (Id.) In McFarlin v. First National Bank (68 Fed. Rep., 868), the plaintiffs subscribed for certain shares in a bank to increase the capital, and, after paying installments thereon, consented that the bank be consoli- dated with a National bank, and that the capital of the latter be in- creased, and that their subscriptions should stand as subscriptions to the increased capital of the National bank and paid installments on their subscriptions. Some preliminary steps were taken by the Na- tional 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. 5? the National bank was placed in the hands of a receiver: Retd, That plaintiffs never became 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., Q2S; Moore v. Jones, 3 Woods, 53; Hale u Walker, 31 Iowa, 344; Wheelock v. Kost, 77 III., 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 ownership and thus become entitled to receive dividends, vote at elec- tions 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 Merchants' 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 for the purposes of security without being made liable as a registered share- holder. (Anderson v. Philadelphia Warehouse Company, 111 U. S., 479.) In 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 irrevo- cable power of attorney for the sale and transfer of the stock. The divi- dends were paid regularly to the pledgor, and the pledgee never re- ceived any dividends, and never acted as a shareholder. 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 shareholders of the bank. It may be said, therefore, upon the authority of this case, that where a National bank is solvent, a person 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 there- for issued to some third person, from whom a power of attorney 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 (07 Fed. Rep., 816), it was held by the United 58 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 by whom it is 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 Loan and Trust Com- pany (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 wno 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 associa- tion 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 re- quired to be kept for the inspection of creditors and others would lose most of its value. But this rule can have no just application when, as in this case, the creditors 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 assessment upon the shares on the insolvency of the bank. (Welles v. Larrabee et al., 36 Fed. Rep., 866.) And though he buys in the stock at the sale 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, un- less he has the stock transferred to himself upon the books of the bank. (Robinson v. Southern National Bank, 94 Fed. Rep., 964.) If the holder in fact holds the stock merely as collateral security, he may list the shares in his own name as pledgee, or in the name of another and irre- sponsible party, even though this be done for the purpose of avoiding liability. (Rankin v. Fidelity Insurance, etc., 189 U. S., 242.) Thus, it has been held that if a person receives shares of the stock of a Na- tional 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 59 books of the bank, and he in good faith causes the shares to he trans- ferred 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. (Nat. Park Bank of the City of New York v. Harmon, 25 C. C. A., 214 Fed. Rep., 891; Higgins v. Fidelity Insurance, Trust and Safe Deposit Co., 108 Fed. Rep., 475.) Where there is a question of fact whether the holder held himself out as owner of the stock, it is to be submitted to the jury. Rankin v. Fidelity Ins., etc., Co., 189 U. S., 242.) When it is proved or admitted that the person in whose name the stock stands is a mere pledgee, then the burden is upon the Receiver attempting to enforce an assessment upon such stock against such person to show that he knowingly per- mitted the stock to stand in his name on the books of the bank. (Tour- telot V. Stoltenben, 101 Fed. Rep., 362.) 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, by transferring his stock, compel credit- ors 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., 1. ) The real owner of the stock cannot escape liability by having it transferred 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., 1.) 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. (Bowden v. Johnson, 107 U. S., 251.) And after a bank has become insolvent, and has closed its doors for business, its shareholders' liablity to creditors is so fixed that any transfer of their shares must be held fraudulent and inoperative as against the creditors of the bank. (Irons v. Manu- facturers' National Bank, 17 Fed. Rep., 308.) Moreover, if the stock- holder has reason to apprehend that the bank is in a failing condition, he cannot escape liability by transferring the stock to a person finan- cially 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., 1.) 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. (Id.) In order that the transferror may be held liable it is not necessary that he should have had actual knowledge of the insol- vency of the bank; it is sufficient if he had good ground to apprehend 1 60 the failure of the bank, and made the transfer to an irresponsible per- son, with intent to relieve himself from individual liability. (Cox v, Montague, 78 Fed. Rep., 845.) But though both the bank and the pur- chaser were insolvent at the time of the sale, the seller will not be liable as a stockholder if he was ignorant of these facts and acted in good faith. (Earle v. Carson, 107 Fed. Rep., 639.) Nor is the trans- ferror liable merely because at the time of the transfer the reserve of the bank was below the amount required by law, and such fact was known to him. (Earle v. Carson, 188 U. S., 42.) Nor merely because the person to whom the stock Is sold is at the time insolvent, and unable to respond to an assessment, and such fact is known to him. (Id.) Where stock has been fraudulently transferred for the purpose of avoiding lia- bility both the transferror and the transferee are liable for the assess- ment. (Baker v. Reeves, 85 Fed. Rep., 837.) But in an action brought by the receiver the transferee of the stock cannot by cross- bill obtain relief against the transferror for having defrauded him in the sale of the stock. (Stuart v. Hayden, 169 U. S., 1.) 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 pur- pose of escaping liability as such stockholder. (Id.) , Purchase in Name of Infant. — One who buys stock of a National bank in the name of an infant will be liable for an assessment, since the infant is incapable of binding himself as a stockholder. (Foster v. Chase, 75 Fed. Rep., 797.) And the ratification 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, there- fore, 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 securing a single de- positor, such mortgage was held void as against a judgment obtained in an action against such stockholder to enforce his individual liability. (Catch V. Fitch, 34 Fed. Rep., 566.) Rescinding Purchase — Fraud of Bank. — A stockholder who has been induced by fraudulent representations to subscribe for stock in a Na- tional bank will not necessarily be precluded from repudiating such sub- scription 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 intending purchaser of bank stock is entitled to rely upon a statement of its president as to the bank's condition, without inquiring further. (Merrill v. Florida Land & Improvement Qo„ ^0 Fe^. Rep., 61 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 restitution. (Id.) Estoppel.— A shareholder against whom suit is brought to recover the assessment made upon him by the Comptroller will not be permitted to deny the existence of the association, or that it was legally incor- porated. (Casey v. Galli, 94 U. S., 673; Wheelock v. Kost, 77 111., 296.) Rules Applicable.— While the liability of stockholders in National banks is to be rigorously enforced, the courts will not treat them with exceptional severity, and apply to their transfers different rules from those which obtain in other business transactions. (Hayes v. Shoe- maker, 39 Fed. Rep., 319.) Pbocedure. — 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 against stock- holders. (Kennedy v. Gibson, 8 Wall, 498.) It is the duty of the Comp- troller of the Currency to decide when proceedings are necessary against the stockholders of a National bank to enforce their personal liability, and to what extent such liability shall be enforced; and in an action by a receiver to enforce such liability, such prior determination of the Comptroller must be distinctly averred and proved. (Kennedy v. Gib- son, 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 conclusive. (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 assessment. (O'Connor v. Witherby, 111 Cal., 523.) The decision of the Comptroller Is conclusive, and cannot be attached collaterally. (Deweese v. Smith, 106 Fed. Rep., 438; Aldrich v. Campbell, 97 Fed. Rep., 663.) FoEM OF Action. — When the full personal 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 necessity for invoking the aid of a court of equity. (Bailey v. Sawyer, 4 Dill., 463; 1 N. B. C, 356.) But the suit may be in equity. (Kennedy V. Gibson, 8 Wall., 498.) 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.) And it is no objection to tho bill that other stockholders, opt within the ^urisdictjon ot the court, are not co-defendants. (Id.) 62 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 individual liability; but where there is great and unexplained delay in making such assess- ment the action may be barred by the statute of limitations though the action is brought shortly after the making of the assessment. (Aldrich V. Yates, 95 Fed. Rep., 78; Price v. Yates, 19 Alb. Law Journal, 295; 2 N. B. Cas., 204.) The State statutes of limitations apply to actions to enforce assessments. (Butler v. iPoole, 44 Fed. Rep., 586; Thompson v. German Insurance Company, 76 Fed. Rep., 892.) The statute begins to run as soon as the assessment is made. (McDonald v. Thompson, 184 U. S., 71; Thompson v. German Insurance Company, supra; Deweese v. Smith, 106 Fed. Rep., 438.) Set-off. — A stockholder of an insolvent National bank, who happens also to be one of its creditors, can not cancel or diminish the assessment to which the provisions of Sec. 5151, Rev. St., make him liable by off- setting 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 de- fendant 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 cer- tain of the stockholders, 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 avail- able 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 purpose 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 63 creditor. (Sowles v. Witters, 39 Fed. Rep., 403.) But the indebtedness on the assessment of a stockholder who is insolvent may be set off a.gainst 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 ot its failure. (King V. Armstrong, 50 Ohio St., 222.) And an assignment by the stock- holder of his claim against the bank, before the direction of the Comp- troller 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 assign- ment, had not determined the amount necessary to be collected from the stockholders 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. (Id.) Agent May Not Enforce. — An agent chosen by stockholders to take charge of the business of a National bank in liquidation can not en- force the individual liability of the stockholders, after all the debts have been paid. (Church v. Ayer, 80 Fed. Rep., 543; Williamson v. American Bank, 109 Fed. Rep., 36.) Suit by Assignee. — Where the liability has become fixed by the as- sessment, the right of action thereon may be assigned by the receiver, and the suit brought in the name of the assignee. (Waldron v. Ailing, 73 App. Div. (N. Y.), 86.) 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. {In Re Beard's Estate, 7 Wyoming, 104.) Books of the Bank as Evidence in Suit to Recover Assessment. — The books of a National bank are, among the shareholders, public rec- ords 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.) Successive Assessments. — The Comptroller of the Currency has power to levy successive assessments upon the stockholders In an in- solvent National bank where the aggregate of the assesments does not exceed the total liability of the stockholders, and his power is not ex- hausted by one assessment. (Studebaker v. Perry, 184 U. S., 252; Aid- rich V. Campbell, 97 Fed. Rep., 663; Studebaker v. Perry, 102 Fed. Rep., 947.) And a judgment in favor of the Receiver for the recovery of an assessment does not estop him from maintaining a second action against the same shareholder for another assessment which had not been made or was not due when the first action was commenced. (Deweese v. Smith, 106 Fed. Rep., 438.) 64 Purchase Procured by Fraudulent Representations of Officers. — In an action at law by the Receiver of an insolvent National bank to en- force the individual liability of a shareholder, the latter can not set up as a defense that he was induced to purchase the stock of the bank by the fraudulent representations of its officers. Lantry v. Wallace, 182 U. S., 536; Scott v. Latimer, 89 Fed. Rep., 843.) Where Bank Has Gone Into Liquidation. — Where the bank has gone into voluntary liquidation, the only authorized procedure for the en- forcement of the individual liability of its stockholders is by a suit in equity in the nature of a creditor's suit brought on behalf of all creditors in a court for the district in which the bank is located, in which the necessity and extent of the ratable enforcement of the stock- holders' liability shall be determined. (Williamson v. American Bank, 115 Fed. Rep., 793.) Such suit should be brought against the bank and all its stockholders, and, in case ancillary proceedings should be neces- sary for the collection from non-resident stockholders of their ratable proportion of the amount necessary to pay creditors, such suits should be authorized by the court of original jurisdiction, and brought by a Receiver or other person appointed by such court. (Id.) ■ § 36. Executors, Trustees, etc.. Not Personally Liable. — Persons holding stock as executors, administrators, guardians, or trustees, shall not be personally subject to any liabilities as stockholders; but the estates and funds in their hands shall be liable in like manner and to the same extent as the testator, intestate, ward, or person interested in such trust-funds would be, if living and com- petent to act and hold the stock in his own name. (Rev. Stat. TJ. S. Sec. 5152.) 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. (Lucas v. Coe, 86 Fed. Rep., 972.) In the case cited C sub- scribed 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 benefi- ciary. 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. (Id.) An executor continues to be liable as such for an an assessment upon National bank stock left by his testator until he has transferred the personal property belonging to the estate. (Baker v. Beach, 85 Fed. pep., 836.) 65 Evidence of Ownership. — ^The fact that the stock is held in a repre- sentative 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 to 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 wishes to disclose his trusteeship there is no difficulty in giving notice upon the books of the bank. If he does not disclose his trusteeship he is guilty of laches, for which others should not suffer. The settlement of the affairs of an insolvent bank would be rendered a matter of great labor, expense, and delay if per- sons who appeared upon the books of the bank as individual stock- holders were permitted to relieve themselves by proving that they held the stock as executors, or guardians, or trustees. If A is permitted to prove that he holds his stock as trustee for B, and B is permitted to show that he is trustee for A, litigation would be protracted, individual stockholders would suffer, and the strength of the personal liability section 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 provision of Section 5152, exempting from such lia- bility persons holding stock as trustees. (Welles v. Larrabee, 36 Fed. Rep., 866.) § 37. Depositaries of Public Moneys. — All National banking as- sociations, 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; but receipts derived from duties on imports in Alaska, the Hawaiian Islands, and other islands under the jurisdiction of the United States may be deposited in such depositaries subject to such regulatons; and such depositaries may also be employed as financial agents of the Gevemment; and they shall perform all such reasonable duties, as depositaries of public moneys and fi- ll ancia J agente of the Government, as may be required of them. 66 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 pay- ment of the public money deposited with them, and for the faith- ful performance of their duties as financial agents of the Govern- ment. And every association so designated as receiver or de- positary 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 Grovemment for internal revenue or for loans or stocks. (Rev. Stat. U. S. Sec. 5153, as amended by act March 3, 1901, Ch. 871; 32 Stat. U. S. 1448.) All arrangements to become public depositaries must be made with the Secretary of the Treasury. The security required is within the dis- cretion of the Secretary. The requirement usually 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 Secre- tary of the Treasury could legally accept other security than United States bonds satisfactory to him and has done so. (See offer of Sept. 29, 1902, to accept State and municipal bonds accepted by savings banks under the laws of such States as had legislated on the subject.) 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 Government, and is liable to the United States as a bailee of such funds. (United States v. Na- tional Bank of Asheville, 73 Fed. Rep., 379.) For further information as to Government Depositaries see page 265. § 38. Conversion of State into National Banks. — Any bank in- corporated by special law, or any banking institution organized under a general law of any State, may become a National asso- ciation under this Title by the name prescribed in its organization certificate; and in such case the articles of association and the or- ganization 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 certificate, and to change and convert the bank or banking institution into a National associa- tion. A majority of the directors, after executing the articles of as- sociation 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 con- tinue to be the directors of the association until others are elected or appointed in accordance with the provisions of this chapter; and any State bank which is a stockholder in any other bank, by authority of State laws, may continue to hold its stock, although either bank, or both, may be organized under and have accepted the provisions of this Title. When the Comptroller of the Cur- rency has given to such association a certificate, under his hand and official seal, that the provisions of the Title have been complied with, and that it is authorized to commence the business of bank- ing, 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 or- ganized 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. (Kev. Stat. U. S. Sec. 5154.) AuTHOEiTY Required. — This section was enacted In order to induce 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 con- vert 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. CoBPOEATE Relation to Old Bank. — The conversion of a State bank into a National bank does not destroy its identity or its corporate exist- ence; it is not a closing of business, but simply a continuation of the same body, with the same officers and stockholders, the same prop- erty, assets and business of banking under a changed jurisdiction. (Metropolitan National Bank v. 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 V. 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 further advances were made, it was held that an action was maintain- able by the National bank upon the guaranty, and that the guarantor was liable for the loans made both before and after the 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 in- stitution. (Cofiee 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 outstanding circulating notes, issued in accord- ance 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 circu- lating 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 reljeve 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. (Eans v. Exchange Bank, 79 Mo., 182.) Assets of Conveetinq Bank. — The Comptroller of the Currency has ruled that a bank entering the National system by conversion 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, Revised Statutes, excepting that under certain circumstances and an assurance of speedy liquidation a small portion of prohibited assets is sometimes permitted to be taken over. Charteb 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. (Hay den 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 69 until others are appointed or elected, though some of them may not have joined in the execution of the articles of association and organiza- tion certificate. (Lockwood v. The American 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 corpora- tion 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.) When 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 v. Hitz. 133 U. S., 138.) For full information, instructions and forms see page 226. § 39. Same Subject — State Banks Having Branches. — It shall be lawful for any bank or banking association, organized under State laws, and having branches, the capital being joint and as- signed to and used by the mother-bank and branches in definite proportions, to become a N'ational banking association in conformity with existing laws, and to retain and keep in operation its branches, or such one or more of them as it may elect to retain ; the amount of the circulation redeemable at the mother-bank, and each branch to be regulated by the amount of capital assigned to and used by each. (Kev. Stat. U. S. Sec. 5155.) 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 Comptrollers of the Cur- rency. § 40. Conversion of National Gold Banks. — That any National gold bank organized under the provisions of the laws of the United States ma}^ in the manner and subject to the provisions prescribed by section fifty-one hundred and fifty-four of the Eevised 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. (Act Feb. 14, 1880, Ch. 21; 21 Stat. U. S. 66.) All the gold banks have either gone out of existence or have been converted into ordinary National banking associations under this Act. at § 41. Eights of Associations Organized Under Act of 1863. — 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, not- withstanding all the steps prescribed by this Title for the organi- zation of associations were not pursued, if such associations were duly organized under that act. (Eev. Stat. U. S. Sec. 5156.) § 42. Change of Name and Location. — That any National bank- ing association may change its name or the place where its opera- tions of discount and deposits are to be carried on to any other place within the same State, not more than thirty miles distant, 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. (Act May 1, 1886, Ch. 73, Sec. 2; 24 Stat. U. S. 18.) Mode of Procedure. — Prior to the passage of this law no bank could change its name or location except by special act of Congress. The Comptroller of the Currency furnishes on application 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 71 Comptroller of the Currency, when. If he approves of the change, he will issue his certificate to the effect that the change has been duly au- thorized and is approved by him. There seems to be no reason why 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 re- quired, this means a vote representing two-thirds of the whole 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, as the Comptroller can readily satisfy himself as to compliance with the law in this particular. There have been several cases of removal under this act, and a number of changes of name. For form of certificate of vote of shareholders, and resolution for transfer of bonds see page 321-2. § 43. Same Subject — Continuance of Liabilities. — That all debts, liabilities, rights, provisions, and powers of the association under its old name shall devolve upon and inure to the associa- tion under its new name. (Act May 1, 1886, Ch. 73, Sec. 3; 24 Stat. U. S. 18.) § 44. Same Subject. — That nothing in this act contained shall be so construed as in any manner to release any N'ational banking as- sociation under its old name or at its old location from any liability, or affect any action or proceeding in law in which said association may be or become a party or interested. (Act May 1, 1886, Ch. 73, Sec. 4; 24 Stat. U. S. 18.) § 45. Extension of Corporate Existence. — ^That any National banking association organized under the Acts of February twenty- fifth, eighteen hundred and sixty-three, June third, eighteen hun- dred and sixty-four, and February fourteenth, eighteen hundred and eighty, or under sections fifty-one hundred and thirty-three, fifty- 72 one hundred and thirty-four, fifty-one hundred and thirty-five, fifty- one hundred and thirty-six, and fifty-one hundred and fifty-four of the Revised Statutes of the United States, may, at any time within the two years next previous to the date of the expiration of its corporate existence under present law, and with the approval of the Comptroller of the Currency, to be granted as hereinafter provided, extend its period of 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, un- less sooner dissolved by the act of shareholders owning two-thirds of its stock, or unless its franchise becomes forfeited by some vio- lation of law, unless hereafter modified or repealed. (Act. July 13, 1882, Ch. 290, Sec. 1; 22 U. S. Stat. 162.) § 46. Same Subject — Further Extension. — 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 twelfth, eighteen hundred and eighty-two, to extend for a further period of twenty years the charter of any National banking associa- tion extended under said Act which shall desire to continue its existence after the expiration of its charter. (Act April 12, 1902, Ch. 503, 32 Stat. U. S., 102.) The regulations of the Comptroller's oflBce for re-extension of charter are the same as for original extension. (See pages 257-62. The Comp- troller should be notified sixty days before expiration of old charter of intention to extend or to close out the business of the bank, in order that he may satisfy himself that the bank is solvent. § 47. Same Subject — How Articles of Association Amended. — That such amendment of said articles of association shall be au- thorized 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 Comp- troller of the Currency, accompanied by an application made by the president or cashier for the approval of the amended articles of as- sociation by the Comptroller; and such amended articles of as- sociation shall not be valid until the Comptroller shall give to snch 73 association a certificate, under his hand and seal, that the associa- tion has complied with all the provisions required to be complied with, and is authorized to have succession for the extended period named in the amended articles of association. (Act July 12, 1882, Ch. 290, Sec. 2; 22 U. S. Stat. 162.) For instructions and forms see page 257-62.) § 48. Same Subject — Special Examination of Extended Bank — Certificate of Comptroller. — That upon the receipt of the applica- tion and certificate of the association provided for in the preceding section, the Comptroller of the Currency shall cause a special ex- amination to be made, at the expense of the association, to deter- mine its condition; and if after such examination or otherwise it appears to him that said association is in a satisfactory condition, he shall grant his certificate of approval provided for in the pre- ceding section, or if it appears that the condition of said associa- tion is not satisfactory, he shall withhold such certificate of ap- proval. (Act July 12, 1882, Ch. 290, Sec. 31; 22 U. S. Stat. 162.) Upon receipt of the application and papers, they are examined in the Comptroller's office, and if found satisfactory the association is notified that the papers are placed on file, and that the examination will be made in due course. The examination is usually made shortly before the date of expiration of the period of succession, and as soon as the examiner'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 regulation of the Comptroller's office. § 49. Privilegfes, liabilites, etc., of Extended Banks. — That any association so extending the period of its succession shall continue to enjoy all the rights and privileges and immunities granted, and shall continue to be subject to all the duties, liabilities and re- strictions imposed by the Eevised Statutes of the United States and other Acts having reference to National banking associations, and it shall continue to be in all respects the identical association it was before the extension of its period of succession. (Act July 12, ISSS^ Chap. 290;, Sec. 4; 22 U. S. Stat. 162.) 74 A bond given to a National bank by the individual members of a cor- poration to secure such paper as the bank may discount for the corpora- tion does not expire with the termination of the twenty years for which the bank was originally incorporated, and the obligors are liable for dis- counts made after the bank has extended the period of its existence. (The National Exchange Bank of Hartford v. Guy, 57 Conn., 224.) § 50. Withdrawal of Shareholders; Preference in Allotment. — That when any National banking association has amended its ar- ticles 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 from the date of the certificate of approval, of his desire to withdraw from said association, in which case he shall he entitled to receive from said banking association the value of the shares so held by him, to be ascertained by an appraisal made by a committee of three persons, one to be selected by such shareholder, one by the directors, and the third by the first two; and in case the value so fixed shall not be satisfactory to any such shareholder, he may ap- peal to the Comptroller of the Currency, who shall cause a re- appraisal to be made, which shall be final and binding; and if said reappraisal shall exceed the value fixed by said committee, the bank shall pay the expenses of said reappraisal, and otherwise the appel- lant shall pay said expenses; and the value so ascertained and de- termined shall be deemed to be a debt due, and be forthwith paid, to said shareholder, from said bank ; and the shares so surrendered and appraised shall, after due notice, be sold at public sale, within thirty days after the final appraisal provided in this section: PrO' vided. That in the organization of any banking association, in- tended to replace any existing banking association, and retaining the name thereof, the holders of stock in the expiring association shall be entitled to preference in the allotment of the shares of the new association in proportion to the number of shares held by them respectively in the expiring association. (Act July 12, 1882, Ch. 290, Sec. 5; 22 U. S. Stat. 162.) § 61. Banks Not Extending^ — Continuance of Franchise for Pur- pose of Liquidation. — That National banking associations whose corporate existence has expired, or shall hereafter expire, and which do not avail themselves of the provisions of this Act, shall be re- 75 quired to comply with the provisions of sections fifty-two hundred and twenty-one and fifty-two hundred and twenty-two of the Ee- vised Statutes in the same manner as if the shareholders had voted to go into liquidation, as provided in section fifty-two hundred and twenty of the Kevised Statutes ; and the provisions of sections fifty- two hundred and twenty-four and fifty-two hundred and twenty-five of the Eevised Statutes shall also he applicable to such associa- tions, except as modified by this Act; and the franchise of such association is hereby extended for the sole purpose of liquidating their affairs until such affairs are finally closed. (Act July 12, 1882, Ch. 290, Sec. 7; 22 Stat. U. S. 162.) The Comptroller sends blanks to expiring associations to enable them to give the notice to his office required by Section 5222, Revised Statutes, see page 251. Such expiring associations must, within six months from the date of expiration of the charter, deposit lawful money to retire their circulation. § 52. Limitation of Banking Under Territorial law. — That sec- tion eighteen hundred and eighty-nine, title twenty-three of the Eevised 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 railroads, wagon-roads, irrigating ditches and the colonization and improvements of lands in connection therewith, or for colleges, seminaries, churches, libraries, or any other benevolent, charitable, or scientific association." (Act July 30, 1886, Ch. 818, Sec. 5; 24 Stat. U. S. 170.) § 53. ITational Banks in Oklahoma. — ^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 elsewhere in 76 the United States : Provided, That persons otherwise qualified to act as directors shall not be required to have resided in said Terri- tory for nwre than three months immediately preceding their elec- tion as such. (Act May 2, 1890, Ch. 182, Sec. 17; 26 Stat. U. S. 181.) § 54. Branch Banks at Columbian Exposition. — That any Na/- tional bank located in the city of Chicago and State of Illinois may be designated by the World's Columbian Exposition to conduct a banking office upon the exposition grounds, and upon such designa- tion being approved by the Comptroller of the Currency, said bank is hereby authorized to open and conduct such ofifice 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 hundred and ninety-four. (Act May 12, 1892, Ch. 71; 27 Stat. U. S. 32.) § 55. Branch Banks at Louisiana Pnrcliase Exposition. — That any bank or trust company located in the city of St. Louis or State of Missouri may be designated by the Louisiana Purchase Ex- position Company to conduct a banking office upon the exposition grounds, and if the bank so designated shall be a National bank, upon such designation being approved by the Comptroller of the Currency, said National 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, if the same shall be a branch of a National bank, shall not be operated for a period longer than two years, beginning not earlier than July first, nineteen hundred and two, and closing not later than July first, nineteen hundred and four. (Act March 3, 1901, Ch. 864, Sec. 21; 31 Stat. U. S. 1444.) CHAPTER III. Issue and Redemption of CiROULATiNa Notes. Section 56. Application of Chapter. 57. United States Bonds Defined. 58. United States Bonds to be Deposited. 59. Amount of Bonds to be Deposited. . 60. Increase and Decrease of Capital and Bonds. 61. Exchange of Coupon Bonds. 62. Issue of Two Per Cent. Bonds Authorized — Deposit of as Security for Circulating Notes. 63. Transfer of Bonds to and by Treasurer. 64. Registry of Bond Transfers. 65. Association to Be Advised of Transfers. 66. Comptroller and Treasurer to Have Access to Books. 67. Annual Examination of Bonds. 68. Bonds to be Held as Security for Circulation — In- terest on — Depreciation — ^Exchange of Bonds. 69. Delivery of Circulation to Associations. 70. Printing of Circulating Notes^ Denominations, etc. 71. Plates and Dies — Expenses of Bureau. 72. Charter Number of Bank to Be Printed on its Notes. 73. Annual Examination of Plates, Dies, etc. 74. Issue of Small Notes Limited. 75. Limit of Circulation, etc.. Repealed. 76. Limit of Circulation of Gold Banks Repealed. 77. For What Circulating Notes Receivable. 78. Bank Liable Though Notes not Signed or Signatures Forged. 79. Issue of Other Notes Prohibited. 80. Destroying and Replacing Mutilated Notes. 81. National Gold Banks. 82. Reserve Required of Gold Banks. 83. Penalties for Imitating National Bank Notes, etc. 84. Penalty for Mutilating Notes, etc. 85. Redemption Agents — Redemption at Counter of Issn- ing Bank. 77 78 86. Redemption Fund — Redemption of Notes at U. S. Treasury. 87. Redemption Fund Covered into Treasury. 88. Retiring Circulation. 89. Same Subject. 90. Circulating Notes of Extended Banks — Lawful Money Deposit — Expense of New Plates. 91. Deposit to Redeem Circulation of Liquidating Banks. 92. Reassignment of Bonds, Redemption of Notes, etc., in such case. 93. Destruction of Redeemed Notes of Liquidating Banks. 94. Mode of Protest of Notes. 95. Examination by Special Agent — Forfeiture of Bonds. 96. Bank Not to Do Business After Protest of Notes. 97. Redemption of Notes at Treasury. 98. Sale of Bonds; the United States to Have a Lien Upon Assets. 99. Sale of Bonds at Private Sale. 100. Expense of Transporting and Assorting Notes — Cost of Plates. 101. Same Subject. 102. Disposition to be Made of Notes Redeemed by Treasurer. 103. Cancellation of Notes. 104. Mode of Destruction. § 66. Application of Chapter. — The provisions of Chapters two, three and four of this Title, which are expressed without restric- tive 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. (Rev. Stat. U. S. See. 5157.) This section gives the same rights to all National banking associations at whatever date organized. § 57. United States Bonds Defined. — ^The term "United States bond," as used throughout this chapter, shall be construed to mean registered bonds of the United States. (Rev. Stat. U. S. Sec. 5158.) 79 § 58. ITnited States Bonds to be Deposited. — Every association, after having complied with the provisions of this Title, prelimin- ary to the commencement of the banking business, and before it shall be authorized to commence banking business under this Title, shall transfer and deliver to the Treasurer of the United States any United States registered bonds, bearing interest, to 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. (Kev. Stat. U. S. Sec. 5159.) Amended as to amount of bonds to be deposited. See next section. § 59. Amount of Bonds to be Deposited. — 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. (Act July 12, 1882, Ch. 290, Sec. 8; 22 Stat. U. S. 164.) As to the amount of bonds required to be deposited by banks with a capital in excess of $150,000. See section 88. § 60. Increase and Decrease of Capital and Bonds. — The de- posits 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 organiza- tion 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, 80 and upon which no circulating notes have been delivered. (Eev. Stat. U. S. Sec. 5160.) Later laws having changed the limit of bonds (see section 59 and note) the limits prescribed in these later laws must be observed in in- creasing or reducing capital stock. Banks, however, may still return circulation under this section, and take up excess of bonds above legal limit on which no circulating notes have been delivered. § 61. Exchange of Coupon Bonds. — 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 nm. (Eev. Stat. TJ. S. Sec. 5161.) Coupon bonds, as well as registered bonds properly transferred, are usually sent to the office of the Comptroller of the Currency by regis- tered mail or express, and the bond clerk in that office takes the neces- sary steps to convert the coupon bonds into registered, and to turn over the bonds in due course to the custody of the Treasurer of the United States in trust for the bank. § 62. Issue of Two Per Cent. Bonds Authorized — ^Deposit of as Security for Circulating Notes. — That the Secretary of the Treas- ury is hereby authorized to receive at the Treasury any of the outstanding bonds of the United States bearing interest at five per centum per annum, payable February first, nineteen hundred and four, and any bonds of the United States bearing interest at four per centum per annum, payable July first, nineteen hundred and seven, and any bonds of the United States bearing interest at three per centum per annum, payable August first, nineteen hundred and eight, and to issue in exchange therefor an equal amount of coupon or registered bonds of the United States in such form as he may prescribe, in denominations of fifty dollars or any multi- ple thereof, bearing interest at the rate of two per centum per annum, payable quarterly, such bonds to be payable at the pleasure of the United States after thirty years from the date of their issue, and said bonds to be payable, principal and interest, in gold coin of the present standard value, and to be exempt from the payment of all taxes or duties of the United States, as well as 81 from taxation in any form by or under State, municipal, or local authority: Provided, That such outstanding bonds may be re- ceived in exchange at a valuation not greater than their present worth to yield an income of two and one-quarter per centum per annum; and in consideration of the reduction of interest effected, the Secretary of the Treasury is authorized to pay to the holders of the outstanding bonds surrendered for exchange, out of any money in the Treasury not otherwise appropriated, a sum not greater than the difference between their present worth, computed as afore- said, and their par value, and the payments to be made hereunder shall be held to be payments on account of the sinking fund created by section thirty-six hundred and ninety-four of the Kevised Statutes: And provided further, That the two per centum bonds to be issued under the provisions of this Act shall be issued at not less than par, and they shall be numbered consecutively in the order of their issue, and when payment is made the last numbers issued shall be first paid, and this order shall be followed until all the bonds are paid; and whenever any of the outstanding bonds are called for pa3rment, interest thereon shall cease three months after such call ; and there is hereby appropriated out of any money in the Treasury not otherwise appropriated, to effect the exchanges of bonds provided for in this Act, a sum not exceeding one- fifteenth of one per centum of the face value of said bonds, to pay the expense of preparing and issuing the same and other expenses incident thereto. (Act March 14, 1900, Ch. 41, Sec. 11; 31 Stat. U. S. 48.) § 63. Transfer of Bonds to and by Treasurer. — All transfers of United States bonds made by any association 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 as- sociation by the Comptroller of the Currency, or by a clerk ap- pointed by him for that purpose, stating that the bond is held in trust for the association on whose behalf the transfer is made, and as security for the redemption and payment of any circulating notes that have been or may be delivered to such association. No assignment or transfer of any such bond by the Treasurer shall 82 be deemed valid unless countersigned by the Comptroller of the Currency. (Eev. Stat. U. S. Sec. 5162.) Deposit of Bonds. — The bonds when sent to the Comptroller should bear the memorandum, written or printed, that they are transferred to the Treasurer in trust for the association, and be signed by the cashier. A receipt is given by the Comptroller of the Currency, and when the bonds are placed in the custody of the Treasurer, a receipt is given in duplicate by that oflacer— one is sent to the bank and the other to the Comptroller of the Currency. WiTHDBAWAL OF BoNDS. — The Comptroller and Treasurer will not per- mit the withdrawal and transfer of bonds from the Treasurer except upon authority given by the board of directors to transfer the same to the designated transferee. (See form of resolution, page 323.) When bonds are 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 readily be found. When it cannot be found the Treasurer requires before bonds can be withdrawn, an affidavit to that effect, and that if found it will be sent to him. § 64. Eegistry of Bond Transfers. — The Comptroller of the Currency shall keep in his office a book, in which he shall cause to be entered, immediately upon countersigning it, every transfer or assignment by the treasurer of any bonds belonging to a National banking association presented for his signature. He shall state in such entry the name of the association from whose account the transfer is made, the name of the party to whom it is made, and the par value of the bonds transferred. (Rev. Stat. U. S. Sec. 5163.) 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. § 65. Association to be Advised of Transfers. — The Comptroller of the Currency shall, immediately upon countersigning and enter- ing any transfer or assignment by the Treasurer of any bonds be- longing to a National banking association, advise by mail the association from whose accounts the transfer is made of the kind and numerical designation of the bonds and the amount thereof BO transferred. (Rev, Stat. U. S. Sec. 5164.) 83 Advice to the bank Is required as an additional precaution against erroneous or fraudulent transfers from its account in trust. § 66. Comptroller and Treasurer to Have Access to Books. — 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 as- signment of the bonds deposited by an association, presented to the Comptroller to countersign; and the Treasurer shall have the like access to the book mentioned in section fifty-one hundred and sixty- three, during office hours, to 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. (Eev. Stat. U. S. Sec. 5165.) This section prescribes further check? on mistakes or frauds. § 67. Annual Examination of Bonds. — 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 siuch association duly appointed in writing for that purpose; and his certificate before mentioned shall be of like force and validity as if executed by the president or cashier. A duplicate of such certificate, signed by the Treasurer, shall be re- tained by the association. (Rev. Stat. U. S. Sec. 5166.) 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. 84 § 68. Bonds to be Held as Security for Circulation — Interest on — Depreciation — ^Exchange of Bonds. — 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 Currency 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 transferred to the Treasurer; but such power shall become inoperative when- ever such association fails to redeem its ciitjulating notes. When- ever 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 may demand and receive the amount of such depreciation in other United States bonds at cash value, or in money, from the association, to be deposited with the Treasurer as long as such depreciation continues. And the Comptroller, upon the terms prescribed by the Secretary of the Treasury, may 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 exchange can be made without prejudice to the United States; and he may direct the return of any bonds to the association which transferred the same, in sums of not less than one thousand dollars, upon the surrender to him and the can- cellation of a proportionate amount of such circulating notes: Provided, That the remaining bonds which shall have been trans- ferred by the association offering to surrender circulating notes are equal to the amount required for the circulating notes not surren- dered by such association, and that the amount of bonds in the hands of the Treasurer is not diminished below the amount re- quired to be kept on deposit with him, and that there has been no failure by the association to redeem its circulating notes, nor any other violation by it of the provisions of this Title, and that the market or cash value of the remaining bonds is not below the amount required for the circulation issued for the same. (Kev. Stat. U. S. Sec. 5167.) Inteeest on Bonds. — ^For the method of obtaining the interest on these bonds see page 339. This interest may be retained in certain 85 cases: 1st, as mentioned in this section, for failure to redeem circulat- ing notes; 2d, for failure to make reports (see p. 128); 3d, for failure to pay taxes (see p. 134.) 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. This may be done on approval of the Comptroller by a deposit of lawful money to cover the depreciation or by a temporary deposit of additional U. S. bonds while the depreciation continues, or by substituting for the depreciated bonds other U. S. bonds of value satisfactory to the Comp- troller, or by reducing the circulation of the bank. § 69. Delivery of Circulation to Associations — ^Amonnt of — ^De- nominations. — That upon the deposit with the Treasurer of the United States, by any National banking association, of any bonds of the United States in ihe manner provided by existing law, such association shall be entitled to receive from the Comptroller of the Currency circulating notes in blank, registered and countersigned as provided by law, equal in amount to the par value of the bonds so deposited; and any National banking association now having bonds on deposit for the security of circulating notes, and upon which an amount of circulating notes has been issued less than the par value of the bonds, shall be entitled, upon due application to the Comptroller of the Currency, to receive additional circulating notes in blank to an amount which will increase the circulating notes held by such association to the par value of the bonds deposited, such additional notes to be held and treated in the same way as cir- culating notes of National banking associations heretofore issued, and subject to all the provisions of law affecting such notes : Pro- vided, That nothing herein contained shall be construed to modify or repeal the provisions of section fifty-one hundred and sixty- seven of the Kevised Statutes of the United States, authorizing the Comptroller of the Currency to require additional deposits of bonds or of lawful money in case the market value of the bonds held to secure the circulating notes shall fall below the par value of the circulating notes outstanding for which such bonds may be deposited as security : And provided further. That the circulating notes furnished to National banking associations under the pro- visions of this Act shall be of the denominations prescribed by law, except that no National banking association shall, after the passage 86 of this Act, be entitled to receive from the Comptroller of the Currency, or to issue or reissue or place in circulation, more than one-third in amount of its circulating notes of the denomination of five dollars : And provided further. That the total amount of such notes issued to any such association may equal at any time but shall not exceed the amount at such time of its capital stock actually paid in: And provided further. That under regulations to be prescribed by the Secretary of the Treasury any National banking association may substitute the two per centum bonds issued under the provisions of this Act for any of the bonds deposited with the Treasurer to secure circulation or to secure deposits of public money; and so much of an Act entitled "An Act to enable National banking associations to* extend their corporate existence, and for other purposes," approved July twelfth, eighteen hundred and eighty-two, as prohibits any National bank which makes any deposit of lawful money in order to withdraw its circulating notes from receiving any increase of its circulation for the period of six months from the time it made such deposit of lawful money for the purpose aforesaid, is hereby repealed, and all other Acts or parts of Acts inconsistent with the provisions of this section are hereby repealed. (Act March 14, 1900, Ch. 41, Sec. 12; 31 Stat. U. S. 49.) § 70. Printing of Circulating Notes, Denominations, etc. — 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 dollars, 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 Treas- urer of the United States, by the written or engraved signatures of the Treasurer and Eegister, and by the imprint of the seal of the Treasury; and shall also express upon their face the promise of the association receiving the same to pay on demand, attested 87 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 regula- tion, direct. (Eev. Stat. U. S. Sec. 5172.) § 71. Plates and Dies — Expenses of Burean. — The plates and special dies to be procured by the Comptroller of the Currency for the printing of such circulating notes shall remain under his con- trol and direction, and the expenses necessarily incurred in execut- ing the laws respecting the procuring of such notes, and all other expenses of the Bureau of the Currency, shall be paid out of the proceeds of the taxes or duties assessed and collected on the circu- lation of National banking associations under this Title. (Eev. Stat. U. S. Sec. 5173.) § 72. Charter Number of Bank to be Printed on its Notes. — > That the Comptroller of the Currency shall, under such rules and regulations as the Secretary of the Treasury may prescribe, cause the charter numbers of the association to be printed upon all National bank notes which may be hereafter issued by him. (Act June 20, 1874, Ch. 343, Sec. 5; 18 Stat. U. S. 124.) § 73. Annual Examination of Plates, Dies, etc. — The Comp- troller of the Currency shall cause to be examined, 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 regulations as shall be prescribed by the Comptroller of the Currency and approved by the Secretary of the Treasury. The expenses of any such examination or destruction shall be paid out of any appropriation made by Congress for the s.pecial examination of National banks and bank-note plates. (Rev. Stat. U. S. Sec. 5174.) § 74. Issue of Small Notes Limited. — Not more than one-sixth part of the notes furnished to any association shall be of a less denomination than five dollars. After specie payments are re- 8 88 Bumed no association shall be furnished with notes of a less de- nomination than five dollars. (Eev. Stat. U. S. Sec. 5175.) § 75. Repeal of Limit of Circulation, etc. — 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 asssociations may be organized in ac- cordance 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. (Act Jan. 14, 1875, Ch. 15, Sec. 3; 18 Statu. S. 296.) § 76. Limit of Circnlation of Gold Banks Kepealed. — ^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 million 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 limitation. (Act Jan. 19, 1875, Ch. 19; 18 Stat. 302.) There are at present no gold banks. § 77. Circulating Notes: for What Receivable. — After any as- sociation receiving circulating notes under this Title has caused its promise to pay such notes on demand to be signed by the presi- dent or vice-president and cashier thereof, in such manner as to make them obligatory promissory notes, payable on demand, at its place of business, such association may issue and circulate the same as money. And the same shall be received at par in all parts of the United States in pajrment 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 public debt, and in re- demption of the National currency. (Rev. Stat. U. S. Sec. 5182.) 89 Signing Cieculating Notes. — Stamped signatures affixed by the offi- cers themselves would be sufficient to make the notes " obligatory pro- missory notes," and probably printed or engraved signatures would also suffice for this purpose. But Congress probably had in view the usual manner in which promissory notes are signed; that is, by the manual signature of the maimer, and intended that the notes of the banks should be signed in this way. There appears, however, to be no penalty for hav- ing printed signatures rather than written ones, as the Comptroller has in some of his reports recommended a law imposing a penalty. See note to next section. § 78. Bank Liable Though Notes Not Signed or Signatures Forged. — That the provisions of the Revised Statutes of the United States, providing for the redemption of National bank notes, shall apply to all National bank notes that have been or may be issued to, or received by, any National bank, notwithstanding such notes may have been lost or stolen from the bank and put in circulation without the signature or upon the forged signature of the president or vice-president and cashier. (Act July 28, 1892, Ch. 317; 28 Stat. U. S. 322.) National banks being required by the provisions of this act to redeem circulating notes issued to them, though lost or stolen from the bank unsigned, the matter of signatures of officers is evidently not im- portant, and in view of this fact many banks have the signatures of their officers engraved or stamped on the notes, and they are frequently ordered sent direct from Washington to the Reserve Agent of the bank for credit, arrangement having been made with the correspondent to have signatures of officers printed on notes. § 79. Issue of other Notes Prohibited. — No National banking association shall issue post-notes or any other notes to circulate as money than such as are authorized by the provisions of this Title. (Rev. Stat. U. S. Sec. 5183.) Applies to Cibculatinq Notes. — In the revision of the United States Statutes the words " post-notes " were omitted, but were afterward put back by the act of February 18, 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, Appel- lant, 141 Mass., 515; Riddle v. First National Bank, 27 Fed. Rep., 503.) Thus, it has been held, that this section does not forbid the issue of cer- tificates of deposit. ( See cases cited above. ) Nor does it forbid the certifi- cation of checks, although the purpose of a certification, by making the 90 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. § 80. Destroying and Replacing Mutilated Notes. — It shall be the duty of the Comptroller of the Currency to receive worn-out or mutilated circulating notes issued by any banking association, and also, on due proof of the destruction of any such circulating notes, to deliver in place thereof to the association other blank circulating notes to an equal amount. Such worn-out or mutilated notes, after a memorandum has been entered in the proper books, in ac- cordance with such regulations as may be established by the Comp- troller, as well as all circulating notes which shall have been paid or surrendered to be cancelled, 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 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 cancelled. (Eev. Stat. U. S. Sec. 5184.) § 81. National Gold Banks. — 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 associations, it shall be lawful for the Comptroller of the Currency to issue to the association making the deposit circulating notes of different denominations, but none of them of less than five dollars, and not exceeding in amount eighty per centum of the par value of the bonds deposited, which shall express the promise of the association * See Section 104, which provides for destruction by maceration. 91 to pay them, upon presentation at the ofiQce at which they are issued, in gold coin of the United States, and shall be so re- deemable. But no such association shall have a circulation of more than one million of dollars. (Rev. Stat. U. S. Sec. 5185.) There are now no gold banks in existence. 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. § 82. Keserve Required of Gold Banks. — Every association or- ganized under the preceding section shall at all times keep on hand not less than twenty-five per centum of its outstanding circula- tion, 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 ap- plying 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 limitation of circulation mentioned in this Title. (Eev. Stat. U. S. Sec. 5186.) See previous section and remarks. § 83. National Bank Notes Not to Be Imitated. — It shall not be lawful to design, engrave, print, or in any manner make or execute, or to utter, issue, distribute, circulate, or use, any business or professional card, notice, placard, circular, hand-bill, or advertisement, in the likeness or similitude of any circulating note or other obligation or security of any banking association organized or acting under the 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 what- ever. 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. (Eev. Stat. U. S. Sec. 5188.) 92 § 84. Penalty for Mutilating Kotes, etc. — 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 National banking association, or who causes or procures the same to be done, with intent to render such bank-bill, draft, note, or other evidence of debt unfit to be re-issued by said association, shall be liable to a penalty of fifty dollars, recoverable by the association. (Eev. Stat. U. S. Sec. 5189.) § 85. Bank to Eedeem Its Notes at Its Counter. — 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. (Eev. Stat. U. S. Sec. 5195.) The other provisions of the section required the selection of banks in certain cities as redemption agents. These provisions were repealed by the act of June 30, 1874. See next section. § 86. Redemption Fund; Redemption of Notes at United States Treasury. — That every association organized, or to be organized, under the provisions of the said act, and of the several acts amen- datory 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 ^Ye 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 section two of this act; and when the circulating notes of any such associations, assorted or unassorted, shall be presented for re- demption, 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 of such redemptions; and whenever such redemptions for any associa- tion shall amount to the sum of five hundred dollars, such asso- ciation so notified shall forthwith deposit with the Treasurer of the United States a sum in United States notes equal to the amount of its circulating notes so redeemed. And all notes of 93 National banks, worn, defaced, multilated, or otherwise unfit for circulation, shall, when received by any Assistant Treasurer, or at any designated depository of the United States, be forwarded to the Treasurer of the United States for redemption, as provided herein. And when suck redemptions have been so reimbursed, the circulating notes so redeemed shall be forwarded to the respective associations by which they were issued ; but if any of such notes are worn, mutilated, defaced, or rendered otherwiwse unfit for use, they shall be forwarded to the Comptroller of the Currency and destroyed, and replaced as now provided by law.f * * * And provided further^ That so much of section thirty-two of said Na- tional 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. (Act June 20, 1874, Ch. 343, Sec. 3; 18 Stat. U. S. 124.) The Five Per Cent. Fund. — This section requires, in lieu of the re- serve on circulation 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 circulation. 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 association are presented in sums of $1000, or any multiple thereof, the Treasurer is required to redeem the same. He has no authority in law for redeeming a lot less than $1000, or any lot unless it is in even thousands. The object of this was undoubtedly to avoid a multi- plicity of accounts with the outside public. The notes are charged to the respective associations issuing them until the notes so redeemed for any association amount to a few hundred dollars, when that associa- tion is notified and required to deposit lawful money equal to the amount redeemed. Theoretically, the five per cent, redemption fund is never touched. It remains intact, and this explains why it can consist- ently be counted 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 be- comes indistinguishably mingled therewith. The Treasury redeems the notes as they come in, from its own funds, and in the contemplation of law no charge is made to the flve-per-cent. tThe provision omitted in this place requires the banks to reimburse the Treasury the expense incurred. (See Sec. 100.) 94 account of the bank, but from time to time redemptions made are re- ported to the bank and then it is notified and required to reimburse the Treasury for the sum paid on its behalf. The requirement that Na- tional bank notes unfit for circulation shall be sent in by the Assistant Treasurers and designated depositaries of the United States is in- tended 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 Sec- tion 5184, Rev. Stat. U^S. Leqal Tender and Lawful Money — ^What Is. — The following state- ment concerning the legal tender properties of money of the United States is based upon United States Revised 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, public and private, except where otherwise expressly stipulated in the con- tract; 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 public debt. Grold certificates, silver certificates and National bank notes are non- legal-tender money. Both kinds of certificates, however, 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 un- derstood to apply to every form of money which is endowed by law with the legal tender quality. (See Opinions of Attorneys-General, vol. 17, p. 123.) § 87. Redemption Fund Covered into Treasnry. — That upon the passage of this act the halanees 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 circulating notes of said banks which may come into his possession subject to redemption, and upon the certificate of the Comptroller of the Currency that such notes have been received by him and that they have been destroyed and that 95 no new notes will be issued in their place, reimbursement of their amount shall be made to the Treasurer, under such regulations as the Secretary of the Treasury may prescribe, from an appropriation hereby created, to be known as National bank notes Kedemption account, but the provisions of this act shall not apply to the de- posits received under section three of the Act of June twentieth, eighteen hundred and seventy-four, requiring every National bank to keep in lawful money with the Treasurer of the United States a sum equal to five per centum of its circulation, to be held and used for the 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. (Act July 14, 1890, Ch. 708, Sec. 6; 26 Stat. U. S. 289.) § 88. Ketiring Circulation. — ^That any association organized under this act, or any of the acts of which this is an amendment, de- siring 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 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. An association which is in good faith winding up its business for the purpose of consolidating with another associa- tion shall not be required to deposit lawful money for its out- standing circulation; but its assets and liabilities shall be reported by the association with which it is in process of consolidation. (Act June 20, 1874, Ch. 343, Sec. 4; 18 Stat. U. S. 124; Eev. Stat. U. S. 5223.) The minimum of bonds required to be kept on deposit by National banks, with a capital of $150,000 and less, was further reduced hy the Act of July 12, 1882. See Section 59. 96 § 89. Same Subject. — That any National banking association now organized, or hereafter organized, desiring to withdraw its circulating notes, upon a deposit of lawful money with the Treas- urer of the United States, as provided in section 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 provided in this act, is authorized to deposit lawful money and withdraw a proportionate amount of the bonds held as security for its circulating notes in the order of such deposits * * * Provided, That not more than three millions of dollars of lawful money shall be deposited during any calendar month for this pur- pose: And provided further, That the provisions of this section shall not apply to bonds called for redemption by the Secretary of the Treasury, nor to the withdrawal of circulating notes in conse- quence thereof. (Act July 12, 1882, Ch. 290, Sec. 9; 22 U. S. Stat. 164.) The provision omitted provided that " no National bank which makes any deposit of lawful money in order to withdraw its circulating notes shall be entitled to receive any increase of its circulation for the period of six months from the time it made such deposits of lawful money for the purpose aforesaid." This was repealed by Act March 14, 1900. See Section 59. § 90. Circulating Notes of Extended Banks — Lawful Money Deposit — Expense of New Plates. — 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 provided in section three of the Act of June twentieth, eighteen hundred and seventy-four, en- titled "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 Comptroller of the Currency and destroyed, as now provided by law ; and at the end of three years from the date of the extension of the corporate existence of each bank the association so extended shall deposit lawful money with the Treasurer of the United States sufficient to redeem the remainder of the circulation which was outstarxfling at the date of its extension, as provided in sections 97 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 circu- lating notes for redemption shall inure to the benefit of the United States ; and from time to time, as such notes are redeemed or law- ful money deposited therefor as provided herein, new circulating notes shall be issued as provided for by this act, bearing such de- vices, to be approved by the Secretary of the Treasury, as shall make them readily distinguishable from the circulating notes here- tofore issued: Provided, however. That each banking association which shall obtain the benefit of this Act shall reimburse to the Treasury the cost of preparing the plate or plates for such new cir- culating notes as shall be issued to it. (Act July 12^ 1882, Ch. 290, Sec. 6; 22 Stat. U. S. 162.) § 91. Deposit to Redeem Circulation of liquidating Banks. — Within six months from the date of the vote to go into liquidation, the association shall deposit with the Treasurer of the United States lawful money of the United States sufficient to redeem all its outstanding circulation. The Treasurer shall execute duplicate receipts for money thus deposited, and deliver one to the associa- tion and the other to the Comptroller of the Currency, stating the amount received by him, and the purpose for which it has been received; and the money shall be paid into the Treasury of the United States, and placed to the credit of such association upon redemption account. (Rev. Stat. U. S. Sec. 5222.) Limit of Time. — If not otherwise determined, the vote to liquidate takes effect immediately, and the six months run from that date; but If the vote itself is that the liquidation shall take place at a future date, then that future date is the actual date on which the vote takes effect, and the six months run therefrom. Lawful Money. — ^Lawful money is United States gold coin, silver dol- lars or legal-tender notes. How Deposit Made. — The usual method Is to make the deposit either directly or through a correspondent or agent with the Treasurer of the United States at Washington, or an Assistant Treasurer. When the de- posit is made with an Assistant Treasurer, he issues a certificate of de- posit which is sent to Washington. When the deposit is made, and the 98 bank has paid to the United States Treasurer all amounts due for taxes on circulation and all amounts due for expenses of redeeming notes, its bonds on deposit will be surrendered to it. § 92. Keassignment of Bonds, Redemption of Notes, etc., in Sncli Case. — Whenever a sufficient deposit of lawful money to re- deem the outstanding circulation of an association proposing to close its business has been made^ the bonds deposited by the associa- tion to secure payment of its notes shall be reassigned to it in the manner prescribed by section fifty-one hundred and sixty-two. And thereafter the association and its shareholders shall stand dis- charged from all liabilities upon the circulating notes, and those notes shall be redeemed at the Treasury of the United States. And if any such bank shall fail to make the deposit and take up its bonds for thirty days after the expiration of the time specified, the Comptroller of the Currency shall have power to sell the bonds pledged for the circulation of said bank, at public auction in New York city, and after providing for the redemption and cancella- tion of said circulation, and the necessary expenses of the sale, to pay over any balance remaining to the bank or its legal representa- tive. (Kev. Stat. U. S. Sec. 5224.) § 93. Destruction of Bedeemed Notes of Liquidating Bank. — Whenever the Treasurer has redeemed any of the notes of an asso- ciation which has commenced to close its affairs under the six [five] preceding sections, he shall cause the notes to be mutilated and charged to the redemption account of the association; and all notes so redeemed by the Treasurer shall, every three months, be certified to and burned * in the manner prescribed in section fifty- one hundred and eighty-four. (Eev. Stat. U. S. 5225.) § 94. Mode of Protesting Notes. — Whenever any National bank- ing association fails to redeem in the lawful money of the United States any of its circulating notes, upon demand of payment duly .made during the usual hours of business, at the office of such asso- ciation, or at its designated place of redemption, the holder may cause the same to be protested, in one package by a notary public, unless the president or cashier of the association whose notes are ♦See Section 104, which provides that such notes be destroyed by- maceration. 99 presented for payment, or the president or cashier of the association at the place at which they are redeemable offers to waive demand and notice of the protest, and, in pursuance of such offer, makes, signs, and delivers to the party making such demand an admission in writing, stating the time of the demand, the amount demanded, and the fact of the non-payment thereof. The notary public, on making such protest, or upon receiving such admission, shall forth- with forward such admission or notice of protest to the Comptroller of the Currency, retaining a copy thereof. If, however, satisfactory proof is produced to the notary public that the payment of the notes demanded is restrained by order of any court of competent jurisdic- tion, he shall not protest the same. When the holder of any notes causes more than one note or package to be protested on the same day, he shall not receive pay for more than one protest. (Rev. Stat. U. S. Sec. 5226.) Redemptiox After Lawful Money Deposit. — It is, perhaps, open to dispute whether a bank, after it has deposited lawful money to retire a portion of its circulation under the act of June 20, 1874, is obliged to re- deem its notes at its own counter until the deposit of lawful money is exhausted by presentation of notes at the Treasury. In other words, it is held by some that while lawful money remains on deposit in the Treasury the bank might refuse to redeem a note presented at its own counter, and refer the presentor to the Treasury. However this may be, while Section 5226 is in force, a bank might place itself in a very dis- agreeable position, and perhaps injure its credit, by refusing to redeem any of its notes at its own counter, that is, so long as it continues a going bank. § 95. Examination by Special Agent — ^Forfeiture of Bonds. — On receiving notice that any National banking association has failed to redeem any of its circulating notes, as specified in the pre- ceding section, the Comptroller of the Currency, with the con- currence of the Secretary of the Treasury, may appoint a special agent, of whose appointment immediate notice shall be given to such association, who shall immediately proceed to ascertain whether it has refused to pay its circulating notes in the lawful money of the United States, when demanded, and shall report to the Comptroller the fact so ascertained. If from such protest, and the report so made, the Comptroller is satisfied that such asso- ciation has refused to pay its circulating notes and is in default, he 100 shall, within thirty days after he has received notice of such fail- ure, declare the bonds deposited by such association forfeited to the United States, and they shall thereupon be so forfeited. (Rev. Stat. U. S. Sec. 5227.) § 96. Bank Not to Do Business After Protest of Notes. — Aft^r a default on the part of an association to pay any of its circulating notes has been ascertained by the Comptroller, and notice thereof has been given by him to the association, it shall not be lawful for the association suffering the same to pay out any of its notes, discount any notes or bills or otherwise prosecute the business of banking, except to receive and safely keep money belonging to it, and to deliver special deposits. (Rev. Stat. U. S. Sec. 5228.) § 97. Redemption of Notes at Treasnry. — Immediately upon declaring the bonds of an association forfeited for non-payment of its notes, the Comptroller shall give notice, in such manner as the Secretary of the Treasury shall, by general rules or otherwise, direct, to the holders of the circulating notes of such association, to present them for payment at the Treasury of the United States ; and the same shall be paid as presented in lawful money of the United States; whereupon the Comptroller may, in his discretion, cancel an amount of bonds pledged by such association equal at current market rates, not exceeding par, to the notes paid. (Rev. Stat. U. S. Sec. 5229.) . § 98. Sale of Bonds — ^Lien of United States "Upon Assets. — Whenever the Comptroller has become satisfied, by the protest or the waiver and admission specified in section fifty-two hundred and twenty-six, or by the report provided for in section fifty-two hundred and twenty-seven, that any association has re- fused to pay its circulating notes, he may, instead of cancelling its bonds, cause so much of them as may be necessary to redeem its outstanding notes to be sold at public auction in the city of New York, after giving thirty days' notice of such sale to the association. For any deficiency in the proceeds of all the bonds of an association, when thus sold, to reimburse to the United States the amount expended in paying the circulating notes of the asso- ciation, the United States shall have a paramount lien upon all its • » » ' » » 101 assets; and siich deficiency shall be made good out of such assets in preference to any and all other claims whatsoever, except the necessary costs and expenses of administering the same. (Rev. Stat. U. S. Sec. 5230.) § 99. Sale of Bonds at Private Sale. — The Comptroller ma}^ if he deems it for the interest of the United States, sell at private sale any of the bonds of an association shown to have made default in paying its notes, and receive therefor either money or the cir- culating notes of the association. But no such bonds shall be sold by private sale for less than par, nor for less than the market value thereof at the time of sale; and no sales of any such bonds, either public or private, shall be complete until the transfer of the bonds shall have been made with the formalities prescribed by sections fifty-one hundred and sixty-two, fifty-one hundred and sixty-three, and fifty-one hundred and sixty-four. (Eev. Stat. U. S. Sec. 5231.) § 100. Expense of Transporting and Assorting Notes — Cost of Plates. — That each of said associations shall reimburse to the Treasury the charges for transportation and the costs for assorting Buch 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 association respectively; and the amount assessed upon each association shall be in proportion to the circulation redeemed, and be charged to the fund on deposit with the Treasurer. (Act June 20, 1874, Ch. 343, Sec. 3; 18 Stat. U. S. 124.) § 101. Same Subject. — That the ^N'ational 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 as- sessed for the cost of transporting and redeeming their notes then outstanding a sum equal to the average cost of the redemption of National bank notes during the preceding year, and shall there- upon 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 102 Act approved June twentieth, eighteen hundred and seventy-four, for the cost of transporting and redeeming their notes redeemed from such deposits subsequently to June thirtieth, eighteen hun- dred and eighty-one. (Act July 12, 1882, Ch. 290, Sec. 8; 22 Stat. U. S. 164.) § 102. Disposition to be Made of Notes Eedeemed by Treasurer. — The Secretary of the Treasury may, from time to time, make such regulations respecting the disposition to be made of cir- culating notes after presentation at the Treasury of the United States for payment, and respecting the perpetuation of the evi- dence of the payment thereof, as may seem to him proper. (Kev. Stat. U. S. Sec. 5232.) Notes of Failed Banks. — This section was originally part of Section 47 of the act of June 3, 1864, and had application only to notes of banks in default, the bonds of which were forfeited, and which notes were redeemed, under a further provision of the same Section 47 (now Section 5229, Rev. Stat. U. S., at the Treasury of the United States. Certificates of Destruction. — ^The disposition to be made of this particular class of notes is left to the discretion of the Secretary of the Treasury. If Section 5232 as it now stands is construed to apply solely to the notes of banks in default redeemed at the Treasury, then a cer- tificate of destruction of all other classes of notes redeemed at the Treasury, whether of banks in liquidation or of banks retiring circula- tion, must be furnished to the respective associations issuing the notes, as the mode of destruction of all other classes of notes is fixed in the various sections of the law regarding the same. (See Section 5225, R. S. U. S.; Section 3 of the act of June 20, 1874; Sections 6 and 7 of the act of July 12, 1882, and Section 5184, Rev. Stat. U. S. See Sections 93, 104.) § 103. Cancellation of Notes. — All notes of National banking associations presented at the Treasury of the United States for payment shall, on being paid, be cancelled. (Eev. Stat. U. S. Sec. 5233.) This provision is modified as to notes fit for circulation redeemed from the 5 per cent, redemption fund by the act of June 20, 1874, Section 3, which permits such notes to be returned to the banks for reissue. 103 § 104. Mode of Destruction. — 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 destroyed may be destroyed by maceration instead of burning to ashes, as now provided by law; and that so much of sections twenty-four and forty-three of the National Currency Act as requires National bank notes to be burned to ashes is hereby repealed. (Act June 23, 1874, Ch. 455, Sec. 1.) By Act June 20, 1874, Ch. 343, Sec. 8 (18 Stat. U. S. 124) it Is made the duty "of the Treasurer, Assistant Treasurers, designated depositaries, and National bank depositaries of the United States, * * * to assort and return to the Treasury, for redemption, the notes of such National banks as have failed, or gone into voluntary liquidation, for the purpose of winding up their affairs." 9 » 4 V • CHAPTEE IV. Eegulation of the Banking Business. Section 105. Place of Business. 106. Requirements as to Lawful Money Reserve. 107. Lawful Money Reserve on Circulation Abolished. 108. Redemption Cities and Reserve Required. 109. Comptroller May Designate Additional Reserve Cities. 110. Comptroller May Designate Central Reserve Cities. 111. Each Bank to Receive Notes of Other Banks. 112. Rate of Interest Limited. 113. Penalty for Taking Usurious Interest. 114. Dividends and Surplus Funds. 115. Liabilities of any Person, etc., to Bank. 116. Banks Not to Loan Upon Their Own Stock. 117. Limit of Indebtedness. 118. Circulating Notes Not to be Hypothecated. 119. Withdrawal of Capital — Dividends — Bad Debts. 120. Enforcing Payment of Capital Stock. 121. Banks Not to Pay Out Uncurrent Notes. 122. Check Not to be Certified Unless Drawer Has Amount on Deposit. 123. List of Shareholders. 124. Reports of Banks to Comptroller. 125. Reports of Dividends and Net Earnings. 126. Verification of Returns of National Banks. 127. Penalty for Failure to Make Reports. 128. Reports of Savings Banks in District of Columbia. 129. Stamping Counterfeit Notes. 130. Bank Examiners — Duties — Powers, etc. 131. Limitation of Visitorial Powers. 132. Other Banks Forbidden to Use Word " National.'^ § 105. Place of Business. — The usual business of each National banking association shall be transacted at an office or banking house located in the place specified in its organization certificate. (Rev. Stat. U. S. Sec. 5190.) 104 105 Place of Business. — This provision must be construed reasonably; and where a part of the legitimate business of the bank can not be trans- acted at the banking-house it may be done elsewhere. (Merchants' Na- tional 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 ofllce 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 busi- ness of every bank away from its ofiice — 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." Bbanch 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. In Armstrong v. Second National Bank (38 Fed. Rep., 883). 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 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. The word " place " and " at an office or banking house " have always been construed by the Comptroller to mean the legal domicile of the corporation, of which it can have but one, and this construction is sustained by the Solicitor of the Treasury in an opinion rendered August 10, 1899, on the question of the right of a National bank to establish and maintain an auxiliary cash room at some point distant from its banking house for the puri)ose of receiving deposits and paying checks. As to branch banks at the Columbian and Louisiana Purchase Expositions, see Sections 54 and 55. § 106. Requirements as to Lawful Money Reserve. — Every N'a- tional banking association in either of the following cities: Albany, Baltimore, Boston, Cincinnati, Chicago, Cleveland, De- troit, Louisville, Milwaukee, New Orleans, New York, Phila- delphia, Pittsburg, St. Louis, San Francisco, and Washington, shall 106 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 circultion 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 de- posits and its lawful money of the United States, has been restored. And the Comptroller of the Currency may notify any association, whose lawful-money reserve shall be below the amount above re^ quired 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 con- currence 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. (Eev. Stat. U. S. Sec. 5191.) Obsolete Pbovision. — The Act of June 20, 1874, relieved National banks of the necessity of keeping reserve upon circulation, but it is still required on deposits. (See next section.) Calculating Reserve, etc. — ^The method of calculating reserve, and the funds available therefor, are fully treated of elsewhere in this work. (See page 294.) § 107. Lawful Money Eeserve on Circulation Abolished. — 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 dreason of the amount of their respective circulations; but the moneys required by said section to be kept at all times on hand shall be determined by the amount of deposits in all respects, as 107 provided for in the said section. (Act June 20, 1874, Ch. 343; Sec. 2; 18 Stat. U. S., Part 3, 123.) § 108. Redemption Cities and Reserve Required. — Three-fifths of the reserve of fifteen per centum required by the preceding section * to be kept may consist of balances due to an association, available for the redemption of its circulating notes, from associations approved by the Comptroller of the Currency, organized under the act of June three, eighteen hundred and sixty-four, or under this Title, and doing business in the cities of Albany, Baltimore, Boston, Char- leston, Chicago, Cincinnati, Cleveland, Detroit, Louisville, Milwau- kee, New Orleans, New York, Philadelphia, Pittsburg, Eichmond^ St. Louis, San Francisco, and Washington. Clearing-house certifi- cates, representing specie or lawful money specially deposited for the purpose of any clearing-house association shall also be deemed to be lawful money in the possession of any association belonging to such clearing-house holding and owning such certificate within the preceding section. (Kev. Stat. U. S. Sec. 5192.) By Sec. 5195 Rev. Stat, banks in the cities named above may keep one-half of their reserve in New York City. § 109. Comptroller May Designate Additional Reserve Cities. — "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 Kevised 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." (Act March 3, 1887, Ch. 378, Sec. 1, as amended by Act March 3, 1903, Ch. 1014; 32 Stat. U. S. 1223.) The Act of March 3, 1903, reduced the requirement from fifty thousand to twenty-five thousand. The procedure is, in brief, for each bank • Section 106 above. 108 which wishes to join in the application to authorize, by resolution of its directors, some officers 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 forms see page 322.) § 110. Comptroller May Designate Central Reserve Cities. — 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 provided in section fifty-one hundred and ninety-five of the Revised Statutes, the Comptroller shall have au- thority, with the approval of the Secretary of the Treasury, to grant such request, and every bank located in such city shall at all times thereafter have on hand, in lawful money of the United States, twenty-five per centum of its deposits, as provided in section fifty- one hundred and ninety-one of the Revised Statutes. (Act March 3, 1887, Ch. 378, Sec. 2; 24 Stat. U. S. 560.) 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 322.) § 111. Each Bank to Keceive Notes of Other Banks. — Every Na^ tional 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 as- sociation. But this provision shall not apply to any association or- ganized for the purpose of issuing notes payable in gold. (Rev. Stat. U. S. Sec. 5196.) As there are no gold banks now in existence, the last clause of this section has, at present, no importance. By Act July 12, 1882, Ch. 260, Sec. 12, it is provided that no National bank shall be a member of any clearing-house in which gold and silver certificates are not receivable in settlement of clearing-house balances, and that such certificates may be counted as a part of the bank's lawful reserve. See also Act March 14. 1900, Ch. 41, Sec. 6; 31 Stat. U. S. 48. 109 § 112. Rate of Interest limited. — Any association may take, receive, reserve, and charge on any loan or discount made, or upon any note, bill of exchange, or other evidences of debt, interest at the rate allowed by the laws of the State, Territory, or district where the bank is located, and no more, except that where by the laws of any State a different rate is limited for banks of issue organized under State laws, the rate so limited shall be allowed for asso- ciations 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. (Rev. Stat. U. S. Sec. 5197.) 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. (Tiffany v. National Bank, 18 Wallace, 409.) The Supreme Court of the United States has explained the meaning of this section as fol- lows: " 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 empowered to reserve interest at the same rates, whatever those rates 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 ordinary rate allowed to natural persons. National banking associations 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 specially authorized to 110 take a higher rate does not warrant the National banks in doing the same. (Gruber v. First National Bank, 87 Pa. St., 468; Duncan v. First National Bank of Mount Pleasant, 11 Bankers' Magazine, 787. But see First National Bank of Mount Pleasant v. Tinstman, 36 Legal Intelli- gencer, 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; affirmed in National Bank v. Johnson, 104 U. S., 271.) Seven Peb Cent. Limit. — ^And where the State law does not limit the rate of Interest which may be charged on loans to corporations, a Na- tional bank located in that State can not charge more than seven per cent, on such loans. (In re Wild, 11 Blatchford, 243.) But if the statutes of the State expressly authorize parties to contract for any rate of interest National banks may do likewise, and are not, in such case, limited to seven per cent. (Daggs v. Phoenix Bank, 177 U. S. 549; Hinds V. Marmelejo, 60 Cal., 229; National Bank v. Bruhn, 64 Tex., 571; Rockwell v. Farmers' National Bank, 4 Colo. App., 562; Wol- verton v. Exchange National Bank, 11 Wash., 94; Yakina National Bank v. Kinne, 6 Wash., 384; Guild v. First National Bank of Dead- wood, 4 South Dakota, 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 al- lowed to retain interest in advance, but can charge interest only on the sum actually loaned. (Timberlake v. First National Bank, 43 Fed. Rep., 231.) A National bank located in Ohio may, since the repeal of the statute of that State, fixing the rate of interest for bank of issue, reserve and charge interest at the rate of eight per cent. (La Dow v. First National Bank of New London, 51 Ohio St., 234.) Agreement as to Time of Entering Credit. — The bank and its cus- tomer 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 differ- ent items, and not for the purpose of receiving illegal interest, 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 con- Ill stitute usury, when such agreement is made in good faith in order to save involved calculations. (Id.) Application of Payments. — Where payments are made generally to a National bank on a promissory note which includes unlawful interest, they will be applied on the principal. (Hall v. First National Bank of Fairfield, 30 Neb., 94; Citizens' National Bank v. Forman's Assignee, 111 Ky., 206.) The fact that the payments made by the debtor have been applied by the bank on its books to interest as such does not authorize the presumption that the debtor so applied them, where he had no access to the books, and no knowledge of the application made by the bank. (Second National Bank of Richmond v. Fitzpatrick, 111 Ky., 228.) Purchase of Drafts. — 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 discount larger than the rate of interest allowed by the law of the State, this will be usury. (Danforth v. National State Bank, 48 Fed. Rep., 271.) UsuRT Paid by Corporations. — The inhibition contained in this sec- tion is general and forbids the taking of usurious interest from an arti- ficial, as well as from a natural, person. (Albion Bank v. Montgomery, 54 Neb., 681.) Promise of Cashier to Pay Usurious Interest. — The promise of the Cashier to pay interest upon a deposit at an usurious rate will not bind the bank; but the bank would be bound to return the amount actually received by it. (Hanson v. Heard, 69 N. H., 190.) Usury Paid by National Banks. — A State statute providing that cor- porations shall not plead usury applies to National banks. (Bingham- ton Trust Company v. Anten, 68 Ark., 299.) § 113. Penalty for Taking TJsurious Interest. — The taking, re- ceiving, 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 representa- tives, may recover back, in an action in the nature of an action of debt, twice the amount of the interest thus paid from the as- sociation taking or receiving the same; provided such action is commenced within two years from the time the usurious trans- action occurred. (Rev. Stat, U, S. Sec. 5198.) 112 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. (1) Where illegal interest has been knowingly stipulated for, but not paid, then only the sum lent, without- interest, can be recovered. (2) Where such illegal interest has been paid, then twice the amount so paid can be recovered in a penal action of debt^ or suit in the nature of such action, against the offending bank, brought by the persons paying the same, or their legal representatives." (Bar- net V. Muncie National Bank, 98 U. S., 855.) Remedy Where Action is by the Bank. — ^Where the bank sues to re- cover 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 princi- pal of the loan sued on; but he must bring a separate action therefor. (Barnet v. Muncie National Bank, 98 U. S., 855; Haseltine v. Central National Bank, 183 U. S., 132; 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 National Bank v. Thompson, 101 Ky., 277; First National Bank V. Hunter, 109 Tenn., 91; Cox v. Beck, 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 them, be applied in satisfaction of the debt (Dries- bach V. National Bank, 104 U. S., 52; Charleston National Bank v. Brad- ford, 51 W. Va., 255.) What Interest Forfeited— Interest afteb Maturity. — Where the instrument carries with it illegal interest, the whole interest is for- feited, 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 (Lucas v. Grovemment National Bank, 78 Pa, St., 228; Shunk v. First National Bank of Galion, 22 Ohio St., 508; National State Bank v. Brainard, 61 Hun., 339; First National Bank v. Grimes, 49 Kans., 219), though the latter rate be lawful (Shafer v. First National Bank, 53 Kans., 614), or the interest which otherwise would accrue by law upon non-payment after maturity. (Henderson National Bank v. Alves, 91 Ky., 142.) And an amount paid on the paper after the maturity thereof must be credited on the principal without regard to when the interest thereon accrued. (National State Bank v. Brain- ard, 61 Hun., 339.) By charging more than legal interest on over-drafts 113 the bank will lose the right to recover any interest at all. (Third Na- tional Bank of Philadelphia v. Miller, 90 Pa. St., 241.) Though it has been held that a National bank by contracting for usurious interest for- feits interest only to the date of bringing suit on the note, and judgment for the principal should bear interest at the legal rate from the date of filing the petition. (Second National Bank of Richmond v. Fitzpatrick, 111 Ky., 228.) 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. (Id.) 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 portion of 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 advanced. (Snyder v. 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. Hoagland, 7 Fed. Rep., 159.) A note given for already accrued interest, in part usurious, is without consideration; and suspension of the right of col- lection, 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 doubling the amount of interest 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 — ^Allegations 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 know- ingly received. (Timberlake v. First National Bank, 43 Fed. Rep., 231.) And the petition or complaint must allege that it was knowingly re- ceived. (Henderson National Bank v. Alves, 91 Ky., 142; Schuyler Na- tional Bank v. Bullong, 24 Neb., 321.) As to when allegations of com- plaint are sufficient to sustain a judgment in an action against a 114 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. (First National Bank v. Watt, 184 U. S., 151; Henderson National Bank V. Alves, 91 Ky., 142; Schuyler National Bank v. Bullong, 28 Neb., 684; Hill V. National Bank of Barre, 15 Fed. Rep., 432; Second National Bank v. Fitzpatrick, ill Ky., 228; Watt v. First National Bank, Minn., 76 Minn., 458.) But in a suit to recover such penalty the plaintiff can- not be allowed interest on the amount. (McCreary v. First National Bank of Morristown, 109 Tenn., 128.) It has been held, however, that a judgment against a National bank for twice the amount of interest paid, as a penalty for taking usury, should allow interest from the date of filing the petition to recover the penalty, that being the date of the first demand therefor. (Second National Bank v. Fitzpatrick, 111 Ky., 22S.) Payment of Interest — ^What Is. — In order that the borrower may maintain an action against the bank to recover the penalty provided by 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.) 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; Citizens' National Bank v. Forman's Assignee, 111 Ky., 206), but where commercial paper is transferred to and discounted by the bank at a rate of interest exceeding the legal rate, and the net proceeds after deducting the interest charged, are credited to the transferee, this Is a payment of the interest within the meaning of the statute. (Na- tional Bank of Rahway v. Carpenter, 52 N. J. Law, 165.) When Right of Action Accrues — Limitations. — The period of two years within which the action to recover the penalty must be brought begins to run from the time the interest is actually paid, and not from the time it was agreed to be paid. (National Bank of Daingerfield V. Ragland, 181 U. S., 45.) And if such usurious interest is included in a note, the limitation does not begin to run until the note is paid. (Id.) So, where the interest upon one note is included in the amount of an- other note, which is subsequently paid in full. (Second National Bank V. Fitzpatrick, 111 Ky., 228.) Each payment of illegal interest is re- garded as " a transaction " within the intent of the statute, and when such payment is actually made, or accrues, the two years' limitation commences to run. (First National Bank of Dorchester v. Smith, 39 Neb., 90; Lynch v. Bank, 22 West Va., 534; National Bank v. Carpenter, 115 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 paid fully 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. (Hintermister v. First National Bank, 64 N. Y., 212.) Who May Being Action foe Penalty. — Only the party paying the il- legal 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. (Lazear 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 Corcordia v. 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 v. First National Bank, Thompson's National Bank Cases, 317; Henderson National Bank v. Alves, 91 Kentucky, 142. But see Osborn v. First National Bank of Athens, 175 Pa. St., 474.) But if the trustee in bankruptcy fails to administer such asset, the bankrupt, after discharge, may sue on the claim. (Lasater v. First National Bank of Jacksboro, 96 Tex., 345.) The right is conferred upon an artificial, as well as upon a natural, person. (Albion National Bank v. Montgomery, 54 Neb., 681.) 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, 5 Kan. App., 300.) The statute confers upon the parties separate rights. That they have paid equal amounts can not change the rule. The cause of action ac- crues to the one paying the unlawful interest, and to each one making such payments. 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 pay- ments, ild.) Effect of Usuey on the Conteact of the (Paeties. — Usury does not render the contract void (Farmers' and Mechanics' National Bank v. Dearing, 91 U. S., 29 )j nor defeat the title of the bank to the instru- 116 ment (Newell v. Somerset First National Bank (Ky.), 13 Ky. L. Rep., 275) ; nor does it avoid an endorsement or guaranty of the paper upon which the usurious interest is reserved or paid. (Lazear v. National Union Bank, 52 Md., 78; Gates v. First National Bank, 100 U. S., 239.) And the usurious character of the transaction between the bank and the payee will not affect the liabilities of antecedent parties to the instrument. (Smith v. Exchange National Bank, 26 Ohio St., 141.) State Laws. — The penalties provided by this section of the National Bank Act are exclusive; and the usury laws of the State, and the penal- ties therein provided, have no application to the National banks. (Farmers* and Mechanics' Bank v. Bearing, 91 U. S., 29; Stephens v. Monongahela Bank, 111 U. S., 197; Barnet v. Muncie National Bank, 98 U. S., 855; Hintermister v. First National Bank, 64 N. Y., 212; Cen- tral National Bank v. Pratt, 115 Mass., 539; Davis v. Randall, 115 Mass., 547; First National Bank v. Garlinghouse, 22 Ohio St., 492; Wiley v. Starbuck, 44 Ind., 298; Florence Railroad and Improvement Company v. Chase National Bank, 106 Ala., 364; Slaughter v. First National Bank of Montgomery, 109 Ala., 157; Charleston National Bank v. Bradford, 51 W. Va., 255.) Nor do the provisions of the Judiciary Acts of March 3, 1887, and August 13, 1888, have the effect of subjecting National banks to the penalties fixed by the States for exacting unlawful interest. (Norfolk National Bank v. Schwenk, 41 Neb., 381.) Nor is this the effect of the proviso to Section 4 of the Act of July 12, 1882. (Lanhum V. First National Bank of Crete, 46 Neb., 663,) But a National bank which has succeeded to the business of a private bank may incur the penalties which attached to the former institution when endeavoring to enforce the obligation acquired from it. (Exeter National Bank v. Orchard, 42 Neb., 579.) Where usurious interest is paid to a National bank, the transaction is governed by the laws of the United States, though the security is taken in the name of the President of the bank in his individual name. (Schuyler National Bank v. Gadsen, 191 U. S., 451.) JuBiSDiCTioN OF STATE CouRTS. — The defense of usury may be set up in an action brought in a State court (National Bank of Winterset v. Eyre, 52 Iowa, 114), and State courts have jurisdiction of actions for the recovery of the penalty prescribed for taking illegal interest. (Ord- way V. Central National Bank, 47 Md., 217; Beltz v. Columbia National Bank, 87 Pa. St., 87; Hade v. McVey, 31 Ohio St., 231; McCreary v. First National Bank, 109 Tenn., 128.) Such action may be brought in any local court in the county having jurisdiction of the amount in- volved. (Schuyler National Bank v. Bullong, 28 Neb., 684; First Na- tional Bank of Tecumseh v. Overman, 22 Neb., 116; Henderson National Bank v. Alves, 91 Ky., 142. But see Newell v. National Bank of Som- erset, 12 Bush, 57.) But the courts of one State have no jurisdiction 117 of an action against a National bank located in another State to recover the penalty. (Missouri River Telegraph Company v. First National Bank of Sioux City, 74 111., 217.) Construction of the Statute. — The statute will be liberally con- strued to effect the ends for which it was passed, but a forfeiture under Its provisions will not be declared unless the facts upon which it rests are clearly established. And since the courts uniformly incline against the declaration of a forfeiture, the party seeking such declaration should be held to make convincing proof of each fact essential to forfeiture. (Wheeler v. Union National Bank, 96 U. S., 785.) A doubt as to whether there has been a taking of illegal interest will be resolved in favor of the bank. (Timberlake v. First National Bank, 43 Fed. Rep., 231.) Thus in case of a claim of forfeiture for taking unlawful interest upon the discount of bills of exchange payable at another place, it should appear affirmatively that the bank knowingly received or reserved an amount in excess of the statutory rate of interest and the current ex- change for sight drafts; and if it is not shown what the rate of ex- change was, a charge of one-quarter of one per cent, in addition to the statutory rate of interest would not be sufficient to authorize a for- feiture. (Wheeler v. Union National Bank of Pittsburg, 96 U. S., 785.) But the statute is not a penal statute, and does not require to be strictly construed. (Albion National Bank v. Montgomery, 54 Neb^ 681.) UsuBious Loans to Dibectobs. — ^A director is not, by reason of his position, estopped from setting up the defense of usury in an action brought against him by the bank. (Bank of Cadiz v. Slemans, 34 Ohio St., 142.) When Rule de Minimis Applies. — ^Where the illegal interest exacted amounts to only five cents, the rule de minimis non curat lex applies, and the bank will not be liable to a penalty therefor. (Slaughter v. First National Bank of Montgomery, 109 Ala., 157.) Waiveb. — The forfeiture declared by the National Bank Act for taking illegal interest is not waived or avoided by giving a separate note for this interest, or by giving a renewal note in which is included the usurious interest. (Brown v. Marion National Bank of Lebanon, 169 U. S., 416.) § 114. Dividends and Surplus Funds. — The directors of any as- sociation may, semi-annually, declare a dividend of so much of the net profits of the association as they shall Judge expedient; but each association shall, before the declaration of a dividend, 118 carry one-tenth part of its net profits of the preceding half year to its surplus fund until the same shall amount to twenty per centum of its capital stock. (Rev. Stat. U. S. Sec. 5199.) Dividend Peeiods. — This section is permissive, and it is doubtful if under it any other than semi-annual dividends are strictly legal. Some National banks, however, declare quarterly dividends, and a few de- clare dividends monthly. SuBPLus Fund. — The section also provides for the accumulation of a surplus fund up to a certain limit. The sections intervening be- tween Sections 5199 and 5204, Revised Statutes U. S., contain pro- visions which, if strictly observed, insure the sound condition of the bank and prevent the payment of unearned dividends, or the payment of dividends when the bank's business is too extended and the value of its assets in doubt Wrongful Refusal to Declabe Dividends. — ^Where the earnings prop- erly applicable to a dividend are ample for such purpose, and the direc- tors, or a majority of them, acting in bad faith and without reasonable cause, refuse to declare a dividend, the courts will interpose on behalf of those stockholders who otherwise would be without remedy, and re- quire the directors to make a dividend of a reasonable amount. (His- cock V. Lacy, N. Y., 9 Misc. (N. Y.), 578.) An action for this purpose may be maintained in a State court. (Id.) Suit to Recover Illegal Dividends. — The Receiver of an insolvent National bank may maintain a suit in equity against all the sharehold- ers of the bank to recover dividends unlawfully paid to them out of the capital stock when the bank had earned no net profit and was in fact insolvent (Hayden v. Thompson, 36 U. S. App., 361.) In such a case Amendment of Sec. 5200, Rev. Stat, (page 118 ** Digest") approved June 22, 1906 : ** Sec. 5200. The total liabilities to any association, of any per- son, or of any company, corporation, or firm for money borrowed, including in the liabilities of a company or firm the liabilities of the several members thereof, shall at no time exceed- one-tenth part of the amount of the capital stock of such associations, actually paid in and unimpaired and one-tenth part of its unimpaired surplus fund : Provided J however, That the total of such liabilities shall in no event exceed thirty per centum of the capital stock of the asso- ciation. But the discount of J)ills of exchange drawn in good faith against actually existing values, and the discount of commercial or business paper actually owned by the person negotiating the same shall not be considered as money borrowed." Note : — The Comptroller rules that the surplus of a National Bank referred to above does not include " undivided profits " and that therefore the latter can not be included as a basis for loans unless carried to the surplus fund by vote of the Directors. 119 Intent of Restriction. — The general purpose of this section Is ob- vious. It is to prohibit any bank from hazarding a large amount of its funds in loans to any one person, and to require such a distribution of the risks among a large number of persons that the failure of any one or two customers will not so seriously involve the bank as to endanger its solvency. But the transactions of the banks would be unduly ham- pered if this rule applied in the case of all discounts, and so an ex- ception is made in favor of " bills of exchange drawn against actually existing values," and " commercial or business paper actually owned by the person negotiating the same." In Second National Bank of Oswego V. Burt (93 N. Y., 233), it was said by the New York Court of Appeals: " The object of this provision of the currency act was to guard National banks from the hazard of loaning money in improvident amounts upon speculative and accommodation paper, but it contemplated and per- mitted, to an unlimited amount, the discount of paper used and re- quired in faciltating the transfer of property and money in the trans- action of the legitimate business of the country." When Applicable. — Numerous questions arise under this section which cause bank officers much perplexity. A question of frequent occurrence is. Whether a loan may be made to a person who is already an indorser on paper discounted by the bank to the amount of one- tenth of the capital stock? It is quite clear from the language of the section that where one negotiates paper actually owned by him the liabilities of none of the parties to such paper are within the meaning of the provision. It has no more application to the maker or to the prior endorser than it has to the person negotiating the paper. Now, are the liabilities of the sureties included when the paper is accommo- dation paper? It is to be observed that the liabilities to which the law refers are for money borrowed. But the indorsers are not borrowers, and their liability, such as it is, is merely contingent. There does not appear to be anything in the spirit or intent of the law which would require the prohibition to be applied in the case of any person other than those to whom the loans are made. If it applied to the sureties as well, then the bank could not lawfully take any paper however numer- ous the parties thereto — if it, at the time, held paper to the amount of one-tenth of its capital stock, on which the name of any one of those parties appeared, and notwithstanding, moreover, that on the paper al- ready held by the bank there might be many other and different sureties besides this one. We do not believe that any view of the law which would lead to such a conclusion would be sustained by the courts. But it is to be remembered that the question, who is the borrower? is not always to be determined from the positions of the parties as they appear on the paper. The borrower may be the maker, or he may be an indorser. It is the person who negotiates the paper with the 10 120 bank, who procures the money upon it, that is the borrower, irrespective of whether he appears thereon as indorser or guarantor or maker. Another question which often arises is. When one person is a partner In two firms, will a loan of the maximum amount to one of these firms preclude a loan to the other firm? The Comptroller of the Currency holds that the liability of the common partner is to be deemed the liability of each of the two firms. But as to the correctness of this ruling there may be some doubt. It is the individual indebtedness of the different parties which is mentioned in the statute. Nothing is said about including the liabilities of any other partner- ship, nor is such an intention necessarily to be inferred. As each partner is liable for all the debts of the firm, it is reasonable that his individual liability to the bank should be Included in the liabilities of the partnership; but the fact that there is a common partner will not make one partnership liable for the debts of the other, and there would, therefore, be no reason why the liabilities of one firm should affect the right of the bank to make loans to the other firm. Still another question is. Whether it is a violation of this provision to make a loan in excess of one-tenth of the amount of the capital stock, when such loan is secured by collaterals? Such loans would seem to be within the spirit, as well as the letter, of the law. There is the same danger that the collaterals may turn out badly that there is that the borrower himself may become involved or insolvent. The bank's esti- mate of their value must be, like its estimate of the responsibility of the borrower, merely a matter of judgment and opinion. Penalty. — The only penalty for violation of this section is the lia- bility which the bank incurs of a forfeiture of its franchises, as pre- scribed in Sec. 5239, Rev. Stat. U. S., and though the loan is in excess of the amount here prescribed, the bank can recover the full amount from the borrower. (Grold Mining Company v. Rocky Mountain National Bank, 96 U. S., 640; Corcoran v. Batchelder, 147 Mass., 541; O'Hare v. Second National Bank of Titusville, 77 Pa. St., 96; Wyman v. Citizens' National Bank of Faribault, 29 Fed. Rep., 734; Stewart v. The National Union Bank of Maryland, 2 Abb. U. S., 424; Smith v. First National Bank, 45 Neb., 444.) And a court of equity will not enjoin the bank, at the instance of the borrower, from transferring to innocent third per- sons notes and securities, on the ground that the notes represent part of a loan made in excess of 10 per cent, of the capital of the association. (Elder v. First National Bank of Ottawa, 12 Kans., 238.) Where a State bank makes a loan to one person of an amount in excess of one- tenth part of its capital, and is afterwards converted into a National bank, it may, after conversion, extend the time for payment of such loan without violating this section. (Allen v. The First National Bank of Xenia, 23 Ohio St., 97.) 131 § 116. Banks Not to Loan Upon Their Own Stock. — No asso- ciation shall make any loan or discount on the security of the shares of its own capital stock, nor be the purchaser or holder of any such shares, unless such security or purchase shall be neces- sary to prevent loss upon a debt previously contracted in good faith ; and stock so purchased or acquired shall, within six months from the time of its purchase, be sold or disposed of at public or pri- vate sale; or, in default thereof, a receiver may be appointed to close up the business of the association, according to section fifty- two hundred and thirty-four. (Rev. Stat. U. S. Sec. 5201.) Bank Can Not Acquire Lien. — It is held under this section that a National bank can not acquire a lien on its own stock in the hands of its stockholders, and that any provision in the articles of association or by-laws, or in the certificates of stock prohibiting a transfer until the liability of the stockholder to the bank is paid, is wholly void. (Bank V. Lanier, 11 Wall., 369; Bullard v. National Bank, 18 Wall., 589; Third National Bank v. Buffalo German Ins. Co., 193 U. S., 581; S. C, 162, N. Y., 163; Conklin v. The Second National Bank, 45 N. Y., 655; Dela- ware, Lackawanna and Western Railroad Company v. Oxford Iron Company, 38 N. J. Eq., 340; Smith v. First National Bank, 115 Ga., 608; Evansville National Bank v. Metropolitan National Bank, 2 Biss., 527.) A provision of this character in the certificate of stock does not affect th-e rights of a transferee, or operate as notice to him, since the provision is wholly void. (Third National Bank v. Buffalo German In- surance Company, 192 U. S., 581.) But when a stockholder has pledged his stock to the bank, he can dispute the validity of such pledge only while the contract is executory, and the security still subsists in the possession of the bank; if the stock has been sold, and the proceeds applied to the payment of the debt, the court will not aid him to recover the value of his stock. (National Bank of Xenia v. Stewart, 107 U. S., 676.) Where a bank takes a pledge of its own stock to secure a de- posit made with another bank, this is a lending upon the security of its stock within the meaning of this section. (Bank v. Lanier, 11 Wall., 369.) So this section forbids the bank to hold the stock of the share- holder to secure an indebtedness due from him to it on account of col- lections made for its account. (Conklin v. Second National Bank, 45 N. Y., 655.) But this section will not prevent a bank from holding a cash dividend as pledged for the indebtedness of the shareholder to the bank. (Hager v. Union National Bank, 63 Me., 509.) Nor does it for- bid the shares of the stockholder to be attached for his indebtedness to the bank. {Id.) in Effect of Violation. — Inasmuch as no penalty is imposed either upon the bank or the borrower for a violation of this section, such violation may not be urged against the validity of the transaction by any one ex- cept the Government, at least unless the objection was made before the contract was executed or while the security was in the hands of the bank. (Walden National Bank v. Birch, 130 N. Y., 221.) Therefore, wher»i the stock is held by the cashier in trust for the bank the invalidity of the transaction can not be set up as a defense in an action against his sureties for his wrongful conversion of the stock. (Id.) Nor is the statute available as a defense to one who has bought the stock of the bank, when sued by the Receiver for an assessment upon the same. (Lantry v. Wallace, 182 U. S., 536.) Bank Disposing of. — Where a National bank purchases shares of its own stock, and divides them among its directors, to whom the shares are transferred upon the stock books, the transaction is void, and no title passes. (Meyers v. Valley National Bank, 13 National Bankruptcy Register, 34.) The sale by an officer to himself of the stock of the bank owned by the bank may be ratified by the bank or its legal representative; but a sale by himself to the bank of its own stock, where he acts in the double capacity of seller and buyer, cannot be ratified when the pur- chase of the stock by the bank is not necessary to prevent loss upon a debt previously contracted. In the one case the sale of the stock is en- joined by law, and its sale by the president may be ratified, however irregular it may have been in the first instance; but the purchase of its own stock by the bank is interdicted by law, and for this act there can be no authorization in advance and no ratification afterwards. (BunJy V. Jackson, 24 Fed. Rep., 1628.) Where a purchase of its own stock is made by a National bank for cash, and not for the purpose of preventing loss upon a debt previously contracted, the Receiver of the bank may recover from the seller the amount of money so paid to him. (Burrows v. Niblack, 84 Fed. Rep., 111.) This section does not forbid a National bank to make a loan upon the security of the stock of another National bank. (National Bank v. Case, 96 U. S., 628.) § 117. Limit of Indebtedness of Association. — "No association shall at any time be indebted, or in any way liable, to an amount exceeding the amount of its capital stock at such time axrtually paid in and remaining undiminished by losses or otherwise, ex- cept on account of demands of the nature following: First ISTotes of circulation. Second. Moneys deposited with or collected by the association. Third. Bills of exchange or drafts 123 drawn against money actually on deposit to the credit of the asso- ciation, or due tliereto. Fourth, Liabilities to the stockholders of the asssociation for dividends and reserve profits. (Kev. Stat. U. S. Sec. 5202.) A National bank may become indebted upon any contract within the scope of its powers to the full amount of its capital stock then actually paid in, notwithstanding that it has notes of circulation, deposits, special funds subject to draft, or funds for the payment of declared divi- dends to stockholders, which either alone or in the aggregate equal its paid-up capital stock. (Weber v. Spokane National Bank, 64 Fed. Rep., 208.) The fact that an indebtedness of a National bank was incurred in violation of Rev. Stat. U. S., 5202, is no defense to the bank or its receiver. {Id. reversing the decision of the United States Circuit Court in the same case. See 50 Fed. Rep., 735.) § 118. Circulating Notes Not to Be Hypothecated. — N'o asso- ciation shall, either directly or indirectly, pledge or hypothecate any of its notes of circulation, for the purpose of procuring money to be paid in on its capital stock, or to be used in its banking opera- tions, or otherwise; nor shall any association use its circulating notes, or any part thereof, in any manner or form, to create or in- crease its capital stock. (Eev. Stat. U. S. Sec. 5203.) Notes of circulation are to be issued by the bank in ordinary course of business. This section is intended to prevent the organization of more than one National bank with the same capital. Thus it was feared that unscrupulous persons with a small capital, say sufficient to purchase the minimum of bonds required by law^ might start an alleged bank, and by dishonestly certifying the capital paid up secure circulation which they could use in procuring additional payments of capital or money in bank. If the notes alone were in the bank, the suspicions of the examiner might be excited; but by changing them for other money, and with dummy paper to fill up, a bank with very little real capital could make a good showing on its books. This section be- comes especially important, since the reduction of the minimum deposit of United States bonds to one-quarter of capital, in case of banks with a capital of $150,000 or less. § 119. Withdrawal of Capital— Dividends— Bad Debts.— No association, or any member thereof, shall, during the time it shall continue its banking operations, withdraw, or permit to be with- drawUj either in the form of dividends or otherwise, any portion of 124 its capital. If losses have at any time been sustained by any such association, equal to or exceeding its undivided profits then on hand, no dividend shall be made; and no dividend shall ever be made by any association, while it continues its banking operations, to an amount greater than its net profits then on hand, deducting therefrom its losses and bad debts. All debts due to any associa- tions, on which interest is past due and unpaid for a period of six months, unless the same are well secured, and in process of collection, shall be considered bad debts within the meaning of this section. But nothing in this section shall prevent the re- duction of the capital stock of the association under section fifty- one hundred and forty-three. (Kev. Stat. U. S. Sec. 5204.) To Prevent Impaibment. — This section is intended to guard against any impairment of the paid-in capital, especially against that insidious form of impairment so dangerous to stockholders — its withdrawal in the shape of dividends. Undivided Profits. — It has been contended that the undivided profits mentioned in the second sentence are undivided profits exclusive of legal surplus, which, if Section 5199 is strictly adhered to, should at all times equal one-tenth of the total net profits of the bank until such one-tenth exceeds one-fifth of the capital, and it is the rule of the Comptroller's oflice that the legal surplus must never be used to pay dividends, although it can, of course, be used to meet losses that un- divided profits other than legal surplus are insufficient to meet. Net profits, both in this section and in Section 5199. seem to mean profits other than legal surplus which remain at the end of each six months after deducting all expenses, losses, and bad debts. Bad Debts. — The definition of bad debts is as plain as can be made of a thing so difficult to define. There is one positive sign, viz., interest past due and unpaid for six months, and two qualifications; that is, even if interest is due and unpaid for six months, they are still not bad debts, if, first, they are well secured, and, second, also in process of collection. The indefiniteness of this definition consists in the differ- ence of opinion which may arise as to security. § 120. Enforcing Payment of Capital Stock. — Every associa- tion which shall have failed to pay up its capital stock, as required by law, and every association whose capital stock shall have become impaired by losses or otherwise, shall, within three months after receiving notice thereof from the Comptroller of the Currency, pay 125 the deficiency in the capital stock, by assessment upon the share- holders pro rata for the amount of capital stock held by each; and the Treasurer of the United States shall withhold the interest upon all bonds held by him in trust for any such association, upon notification from the Comptroller of the Currency, until other- wise notified by him. If any such association shall fail to pay up its capital stock, and shall refuse to go into liquidation, as pro- vided by law, for tliree months after receiving notice from the Comptroller, a receiver may be appointed to close up the business of the association, according to the provisions of section fifty-two hundred and thirty-four. '*And provided. That if any 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 posting such notice of sale in the office of the bank, and by publishing such notice in a newspaper of the city or town in which the bank is located, or in a newspaper published nearest thereto), to make good the deficiency; and the balance, if any, shall be returned to such delinquent shareholder or shareholders. (Rev. Stat. U. S. 5205, as amended by Act June 30, 1876, Ch. 156, Sec. 4; 19 Stat. U. S. 63.) Procedure to Restore Capital. — Under this section the Comptroller takes the initiatory steps in the proceedings to restore an impaired or unpaid capital stock. He discovers this condition of affairs either through reports made to his office by the banks, or from reports made to him by examiners. After the notice is issued, the matter of making the assessment is in the hands of the directors, but they have no au- thority to make the assessment themselves. For this purpose it is necessary to call a meeting of the stockholders, and for the stock- holders to lay the assessment themselves. (Commercial Bank v. Wein- hard, 192 U. S., 243; S. C, 41 Oregon, 359; Hulitt v. Bell, 85 Fed. Rep., y. 98.) The assessment is enforceable only by subjecting the stock of the f persons refusing to pay, and no action will lie against a stockholder i personally. (Id.) Appointment of Receiver,^ — The Comptroller, however, in his discre- tion, may appoint a receiver after three months. This, it would seem, makes it a matter of judgment for the directors or others most inter- ested in the bank either to make goo^ the impaired stock of the de- 126 linquent stockholders and trust to the sale to reimburse themselves, or to let the bank go into a receiver's hands at the end of three months, if the Comptroller should insist on the appointing a receiver. § 121. Banks Not to Pay Out Uncurrent Notes. — No associa- tion shall at any time pay out on loans or discounts, or in pur- chasing drafts or bills of exchange, or in payment of deposits, or in any other mode pay or put in circulation the notes of any bank or baulking association which are not, at any such time, re- ceivable at par, on deposit, and in payment of debts by the asso- ciation so paying out or circulating such notes; nor shall any as- sociation knowingly pay or put in circulation any notes issued by any bank or banking association which at the time of such paying out or putting in circulation is not redeeming its circulating notes in lawful money of the United States. (Kev. Stat. U. S. Sec. 5206.) This section was inserted in the law at a time when there was still a large amount of State bank notes in circulation, and it had reference to these State bank notes as well as to the notes of National banking associations. § 122. Check Not to Be Certified Unless Drawer Has Amount Thereof on Deposit. — It shall be unlawful for any officer, clerk, or agent of any National banking association to certify any check drawn upon the association unless the person or company drawing the check has on deposit with the association, at the time such check is certified, an amount of money equal to the amount specified in such check. Any check so certified by duly authorized officers shall be a good and valid obligation against the association; but the act of any officer, clerk, or agent of any association, in violation of this section, shall subject such bank to the liabilities and pro- ceedings on the part of the Comptroller as provided for in section fifty-two hundred and thirty-four. (Rev. Stat. U. S. Sec. 5208.) Liability for Certification. — The bank will be liable upon the certifi- cation, though it is made in violation of this section. (Thompson v. St. Nicholas National Bank, 146 U. S., 240, S. C, 113 N. Y., 325.) In the case cited the following language of the New York Court of Appeals is quoted with approval by the Supreme Court of the United States: 127 '* It will be seen that the statute affirms the legality of the contract of certification, and expressly prescribes the consequences which shall follow its violation. It therefore appears that, so far from making the contract of certification void and illegal, its validity is expressly af- firmed, and the consequences which follow a violation are specially defined, and impliedly limit the penalty incurred to a forfeiture of the bank's charter and the winding up of its affairs. There is a clear impli- cation from this provision that no other consequences are intended to follow a violation of the statute. It would, indeed, defeat the very policy of an act intended to promote the security and strength of the National banking system, if its provisions should be so construed as to infiict a loss upon them, and a consequent impairment of their financial responsibility." § 123. List of Shareholders. — The president and cashier of every National banking association shall cause to be kept at all times a full and correct list of the names and residences of all the share- holders in the association, and the number of shares held by each, in the office where its business is transacted. Such list shall be subject to the inspection of all the shareholders and creditors of the association, and the officers authorized to assess taxes under State authority, during business hours of each day in which business may be legally transacted. A copy of such list, on the first Mon- day of July of each year, verified by the oath of such president or cashier, shall be transmitted to the Comptroller of the Currency. (Eev. Stat. IJ. S. Sec. 5210.) Blanks for this list are sent to all banks from the Comptroller's office each year, in time to enable the bank to make and send the list. § 124. Reports of Banks to Comptroller. — Every association shall make to the Comptroller of the Currency not less than five reports during each year, according to the form which may be prescribed by him, verfied by the oath or affirmation of the president or cashier of such association, and attested by the signatures of at least three of the directors. Each such report shall exhibit, in detail and under appropriate heads, the resources and liabilities of the associations at the close of business on any past day by him specified; and shall be transmitted to the Comptroller within five days after the receipt of a request or requisition therefor from him and in tbe same form in which it is made to the Comptroller shall be published in a newspaper published in the place where such 128 association is established, or if there is no newspaper in the place, then in one published nearest thereto in the same county, at the expense of the association; and such proof of publication shall be furnished as may be required by the Comptroller. The Comp- troller shall also have power to call for special reports from any particular association whenever in his judgment the same are necessary in order to a full and complete knowledge of its con- dition. (Rev. Stat. IT. S. Sec. 5211.) The blanks for these reports are furnished by the Comptroller of the Currency. The reports must be signed and sworn to by the president or cashier. The vice-president or assistant cashier cannot sign. The attestation of the directors is an attestation of the correctness of the report. The directors are expected to know the condition of their bank. The reports, when made, are abstracted and filed in the Comp- troller's office. . § 125. Reports of Dividends and Net Earnings. — In addition to the reports required by the preceding section, each association shall report to the Comptroller of the Currency, within ten days after declaring any dividend, the amount of such dividend, and the amount of net earnings in excess of such dividend. Such re- ports shall be attested by the oath of the president or cashier of the association. (Rev. Stat. U. S. Sec. 5212) Full instructions as to making reports of conditions, of dividends and of earnings will be found on page . § 126. Verification of Eetnms of National Banks. — 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, authorized in such State to administer oaths, shall be a sufficient verification as contemplated by said section fifty-two hundred and eleven: Provided, That the officer administering the oath is not an officer of the bank. (Act Feb. Z% JSai^ Ch. 82 ; 21 Stat. U. S. 352.) 129 § 127. Penalty for Pailure to Make Eeports. — Every association which fails to make and transmdt any report required under either of the two preceding sections shall be subject to a penalty of one hundred dollars for each day after the periods, respectively, therein mentioned, that it delays to make and transmit its report. When- ever any association delays or refuses to pay the penalty herein imposed, after it has been assessed by the Comptroller of the Currency, the amount thereof may be retained by the Treasurer of the United States, upon the order of the Comptroller of the Cur- rency, out of the interest, as it may become due to the associa- tion, on the bonds deposited with him to secure circulation. All sums of money collected for penalties under this section shall be paid into the Treasury of the United States. (Rev. Stat. U. S. Sec. 5213.) These penalties for failure or delay in making reports are often en- forced. § 128. Reports from Savings Banks, etc., in District of Colum- bia. — All savings banks or savings companies or institutions or- ganized under authority of any act of Congress to do business in the District of Columbia 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 5211, 5212 and 5213 of the Eevised Statutes, and shall be subject to the same penalties for failure to make or publish such reports as are therein provided, which penalties may be collected by suit before the supreme court of the District of Columbia. (Act March 3, 1901, Chap. 854, Sec. 713, 31 U. S. Stat., page 1302, as amended by Act June SO, 1902, Chap. 1329, 32 U. S. Stat., page 534.) § 129. Stamping Counterfeit Notes. — That all United States officers charged with the receipt or disbursements 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 circu- late as money which shall be presented at their places of business; and if such officers shall wrongfully stamp any genuine note of 130 the United States, or of the National banks, they shall, upon presentation, redeem such notes at the face value thereof. (Act June 30, 1876, Ch. 156, Sec. 5; 19 Stat. U. S. 63.) § 130. Bank Examiners — Duties — Powers, etc. — The Comp- troller of the Currency, with the approval of the Secretary of the Treasury, shall, as often as shall be deemed necessary or proper, appoint a suitable person or persons to make an examination of the affairs of every banking association, who shall have power to make a thorough examination into all the affairs of the as- sociation, and, in doing so, to examine any of the officers and agents thereof on oath; and shall make a full and detailed report of the condition of the association to the Comptroller. All persons ap- pointed to be examiners of National banks not located in the re- demption cities specified in section five thousand one hundred and ninety-two of the Eevised Statutes of the United States, or in any one of the States of Oregon, California, and Nevada, or in the Territories, shall receive compensation for such examination as follows: For examining National banks having a capital less than one hundred thousand dollars, twenty dollars; those having a capital of one hundred thousand dollars and less than three hundred thousand dollars, twenty-five dollars; those having a capital of three hundred thousand dollars and less than four hun- dred thousand dollars, thirty-five dollars; those having a capital of four hundred thousand dollars and less than five hundred thou- sand dollars, forty dollars; those having a capital of ^Ye hundred thousand dollars and less than six hundred thousand dollars, fifty dollars ; those having a capital of six hundred thousand dollars and over, seventy-five dollars; which amounts shall be assessed by the Comptroller of the Currency upon, and paid by, the respective as- sociations so examined, and shall be in lieu of the compensation and mileage heretofore allowed for making said examinations; and persons appointed to make examinations of National banks in the cities named in section five thousand one hundred and ninety- two of the Eevised Statutes of the United States, or in any one of the States of Oregon, California, and Nevada, or in the Terri- tories, shall receive such compensation as may be fixed by the Secretary of the Treasury upon the recommendation of the Comp- troller of the Currency; and the same shall be assessed and paid 131 in the manner hereinbefore provided. But no person shall be ap- pointed to examine the affairs of any banking association of which he is a director or other officer. (Kev. Stat. U. S. Sec. 5240.) Examinations. — The examinations mentioned in this section are. as a rule, made about once a year in the case of each National bank. There is no provision as to the number of persons who may be em- ployed as examiners by the Comptroller, or the number of times he may examine each bank within a given period. In practice, the territory of the United States is laid off into districts, which districts are, however, varied from time to time to suit the convenience of the Comptroller's oflace, or to conform to its views as to the eflSciency of the service. Examinees. — A National-bank examiner receives a regular appoint- ment, and then awaits orders from the Comptroller. He may be as- signed to a district, or may be employed at large. An examiner may be employed steadily in one district, or he may be shifted from one dis- trict to another. There is no fixed salary. The amount earned each year depends on the number of banks which each examiner has assigned to him for examination. When the reports are received from the examiners they are scrutinized in the Comptroller's office, and if they indicate faults in the management of the banks, letters are addressed usually to the president or cashier calling attention to the points where improvement is necessary; sometimes, in bad cases, the directors are ad- dressed either singly or collectively. The examiners from time to time send in their bill to the Comptroller, who, finding such bills correct, assesses each bank of which examination has been made according to the legal rule. When the money is paid in to the Comptroller oy the banks it is sent to the examiner. The examiner has no right to ask a bank for any money in any way, shape, or form. His dealings are with the Comptroller, from whom he receives his directions and to whom he renders his bills. Examinees' Fees. — Section 5240, U. S. R. S., provides that a certain rate should be assessed against all banks in proportion to their capital in the States then existing, excepting from this fixed rate banks located in Oregon, California, Nevada, the Territories and the reserve cities. The fees for examination of banks located in the sections and cities excepted are, under the provisions of the section named, fixed by the Secretary of the Treasury upon the recommen- dation of the Comptroller of the Currency. The fees named in Sec- tion 5240, U. S. R. S., do not apply to banks in States which have been admitted as States since the passage of the law until such States become sufficiently settled to warrant the regular assessment. The special fees for the various localities exempted from the fixed rates 132 are according to the capital of the bank, and each Siate or Territory is considered separately according to the distances to be traveled expenses incurred, etc., in covering the entire State or Territory. § 131. Limitation of Visitorial Powers. — ISTo association shall be subject to any visitorial powers other than such as are authorized by this Title, or are vested in the courts of justice. (Rev. Stat. U. S. Sec. 5241.) m The only visitorial powers mentioned in the act are those mentioned in the preceding section and in Section 5210, which permits officers authorized to assess taxes under State authority to inspect the list of stockholders during business hours. There are, also, the general visitorial powers of the Comptroller of the Currency. The courts of justice have, of course, the same power as they have over other persons or corporations, and subject to the same limitations of jurisdiction. The right of a stockholder of a National bank to inspect its books is a common-law right, and not dependent upon a State statute; and it is not impaired by the provisions of this section. (Harkness v. Guthrie (Utah), 75 Pac. Rep., 624.) § 132. Other Banks Forbidden to TTse Word " National."— All banks not organized and transacting business under the National currency laws, or under this Title, and all persons or corporations doing the business of bankers, brokers, or savings institutions, except savings banks authorized by Congress to use the word *" Na- tional " as part of their corporate name, are prohibited from using the word " National '^ as a portion of the name or title of such bank, corporation, firm, or partnership; and any violation of this prohibition committed after the third day of September, eighteen hundred and seventy-three, shall subject the party chargeable therewith to a penalty of fifty dollars for each day during which it is committed or repeated. The penalty under this section is a general one. If any one has knowledge of a violation of this provision he can lay a complaint before a United States commissioner, or the attention of the United States attorney of the district where the offense has been committed can be called to it. The court will assume that a bank which includes in its title the word " National ** is organized under the National Bank Act. (Slaughter v. First National Bank of Montgomery, 109 Ala., 157.) CHAPTER V. Taxation. Section 133. Tax on Circulating Notes — General Provision. 134. Tax on Circulating Notes Secured by Two Per Cent. Bonds. 135. Semi-Annual Eetum of Circulation. 136. Assessment if Eeturn is Not Made. 137. How Tax May be Collected. 138. Eefunding Excess of Duties. 139. Duty on Notes of Insolvent Bank Abated. 140. When Circulating Notes Exempt from Tax. 141. Tax on Notes of State Banks, etc.. Used for Circu- lation. 142. Tax on Notes of Cities, etc.. Used for Circulation. 143. Monthly Eeturns of Notes of State Banks, Cities, etc.. Used. 144. In Default of Returns Commissioner to Estimate. 145. Returns for Converted State Bank. 146. Certain Provisions Not to Apply to National Banks. 147. State Taxation of Shares of Stock and Real Estate. 148. State Taxation of National Bank Notes. 149. United States Bonds Exempt from Taxation. 150. Taxation of Banks in District of Columbia. § 133. Tax on Circulating Notes — General Provision. — In lieu of all existing taxes, every association shall pay to the Treasurer of the United States, in the months of January and July, a duty of one-half of one per centum each half year upon the average amount of its notes in circulation. (Rev. Stat. U. S. Sec. 5214.) The tax is upon the average amount of notes in circulation — not those held by the bank or in transit between it and the Comptroller's office or notes due from the Treasurer for redemption. The average may be calculated by adding together the amount of circulation out- standing each business day of the semi-annual period, and then di- viding by the number of business days. See next Section. 133 134 § 134. Tax on Circulating Notes Secured by Two Per Cent. Bonds. — That every National banking association having on de- posit, as provided by law, bonds of the United States bearing in- terest at the rate of two per centum per annum, issued under the provisions of this Act, to secure its circulating notes, shall pay to the Treasurer of the United States, in the months of January and July, a tax of one-fourth of one per centum each half year upon the average amount gf 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 im- posed by section fifty-two hundred and fourteen of the Revised Statutes. (Act March 14, 1900, Ch. 41, Sec. 13; 31 Stat. U. S. 49.) § 135. Semi- Annual Return of Circulation. — In order to enable the Treasurer to assess the duties imposed by the preceding section, each association , shall, within ten days from the first days of January and July of each year, make a return, under the oath of its president or cashier, to the Treasurer of the United States, in such form as the Treasurer may prescribe, of the average amount of its notes in circulation,! * * * * for the six months next preceding the most recent first day of January or July. Every association which fails so to make such return shall be liable to a penalty of two hundred dollars, to be collected either out of the interest as it may become due such association on the bonds deposited with the Treasurer, or, at his option, in the manner in which penalties are to be collected of other corporations under the laws of the United States. (Eev. Stat. U. S. Sec. 5215.) The blanks for these returns are sent to the banks by the Treasurer, and contain full instructions as to the proper manner in which to make these reports. For form and instructions see page 315. The tax on capital stock and deposits having been repealed, no return of the amount thereof is now necessary. § 136. Assessment if Eetum is Not Made. — Whenever any asso- dation fails to make the half-yearly return required by the preced- t The provisions omitted here required a return of the average amount of capital stock and deposits. These have been rendered obsolete by the repeal of the tax on those items. 135 ing section, the duties to be paid by such association shall be assessed upon the amount of notes delivered to such association by the Comptroller of the Currency. (Eev. Stat. U. S. Sec. 5216.) It Is best for the bank to make up its own average, as that made by the Treasurer would necessarily include notes of the bank not actually in circulation. § 137. How Tax May Be Collected. — Whenever an association fails to pay the duties imposed by the three * preceding sections, the sums due may be collected in the manner provided for the collection of United States taxes from other corporations; or the Treasurer may reserve the amount out of the interest, as it may become due, on the bonds deposited with him by such defaulting association. (Rev. Stat. U. S. Sec. 5217.) § 138. Kefunding Excess of Duties. — In all cases where an aeso- ciation has paid or may pay in excess of what may be or has been found due from it, on account of the duty required to be paid to the Treasurer of the United States, the association may state an account therefor, which, on being certified by the Treasurer of the United States and found correct by the First Comptroller of the Treasury, shall be refunded in the ordinary manner by warrant on the Treasury. (Rev. Stat. U. S. 5218.) There is, however, no special appropriation for this purpose. The claim for recovery of excessive taxes paid, if presented and found correct in the manner indicated in this section, is taken into account by the Secretary of the Treasury in making his estimates to Congress. The amount necessary to pay the claim is usually appropriated by Congress, and the claimant will then receive what is due him, by war- rant, etc., as stated in the section. § 139. Duty on Notes of Insolvent Bank Abated. — That when- ever 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 ♦In this compilation, this comprises the four preceding Sections, ii 136 such National banks as are found by the Comptroller of the Cur- rency to be insolvent; and the Commissioner of Internal Kevenue, 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. (Act March 1, 1879, Ch. 125, Sec. 22; 20 Stat. U. S. 351.) Johnson v. United States, 17 Court of Claims Reports, 157. § 140. When Cixculating Notes Exempt from Tax. — ^Whenever the outstanding circulation of any bank, association, corporation, company, or person is reduced to an amount not exceeding five per centum of the chartered or declared capital existing at the time the same was issued, said circulation shall be free from taxation; and whenever any bank which has ceased to issue notes for circulation, deposits in the Treasury of the United States, in lawful money, the amount of its outstanding circulation, to be redeemed at par, under such regulations as the Secretary of the Treasury shall pre- scribe, it shall be exempt from any tax upon such circulation. (Rev. Stat. U. S. Sec. 3411.) This section refers to State as well as National banks. State bank circulation has now been mostly if not entirely retired, and National banks ceasing to issue circulating notes generally deposit lawful money. § 141. Tax on Notes of State Banks, etc., Used for Circulation. — ^Every National banking association, State bank, or State banking association shall pay a tax of ten per centum on the amount of notes of any person, or of any State bank, or State banking asso- ciation, used for circulation and paid out by them. (Rev. Stat. U. S. Sec. 3412.) § 142. Tax on Notes of Cities, etc., Used for Circulation. — 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. (Rev. Stat. U. S. Sec. 3413.) § 143. Monthly Eetnms of Notes of State Banks, Cities, etc., Used. — A true and complete return of the monthly amount of cir- culation, of deposits, and of capital, as aforesaid, and of the 137 monthly amount of notes of persons, town, city, or municipal cor- porations. 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, corporations, companies, or persons with a declaration annexed thereto under the oath of such person, or of the president or cashier of such bank, asso- ciation, corporation, or company, in such form and manner as may be prescribed by the Commissioner of Internal Eevenue, that the same contains a true and faithful statement of the amounts subject to tax, as aforesaid; and one copy shall be transmitted to the col- lector of the district in which any such bank, association, corpora- tion, or company is situated, or in which such person has his place of business, and one copy to the Commissioner of Internal Eevenue. (Rev. Stat. U. S. Sec. 3414.) It is believed that no notes of the description mentioned are now issued. § 144. In Default of Ketums, Commissioner to Estimate. — 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 Com- missioner of Internal Revenue, upon the best information he can obtain. And for any refusal or neglect to make return and payment, any such bank, association, corporation, company, or person so in default shall pay a penalty of two hundred dollars, besides the addi- tional penalty and forfeitures provided in other cases. (Rev. Stat. U. S. Sec. 3415.) § 145. Returns for Converted State Bank. — Whenever any State bank 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 banking association, including the redemption of its bills, by any agreement or under- standing whatever with the representatives of such State bank or banking association, such National banking association shall be held to make the required return and payment on the circulation 138 outstanding, so long as such circulation shall exceed five per centum of the capital before such conversion of such State bank or bank- ing association. (Rev. Stat. U. S. Sec. 3416.) There are now no cases under this section. § 146. Certain Provisions Not to Apply to National Banks. — The provisions of this chapter, relating to the tax on the deposits, capital, and circulation of banks, and to their returns, except as contained in sections thirty-four hundred and ten, thirty-four hundred and eleven, thirty-four hundred and twelve, thirty-four hundred and thirteen, and thirty-four hundred and sixteen, and such parts of sections thirty-four hundred and fourteen and thirty- four hundred and fifteen as relate to the tax of ten per centum on certain notes, shall not apply to associations which are taxed under and by virtue of Title, " National Banks.'' (Rev Stat. U. S. Sec. 3417.) The constitutionality of the taxes imposed by the preceding sections has been sustained by the Supreme Court of the United States. (Veazie Bank v. Fenno, 8 Wallace, 533; Merchants' National Bank v. United States, 101 U. S., 1.) 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, constitutionally, secure the benefit of it to the people by appropriate legislation. To this end Congress has denied the quality 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 circulation 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.) § 147. State Taxation of Shares of Stock and Real Estate. — Noth- ing herein shall prevent all the shares in any association from being included in the valuation of the personal property of the owner or holder of such shares, in assessing taxes imposed by authority of the State within which the association is located; but the Legis- lature of each State may determine and direct the manner and place of taxing all the shares of National banking associations located within the State, subject only to the two restrictions, that the taxa- 139 tion shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such State, and that the shares of any National banking association owned by non-residents of any State shall be taxed in the city or town where the bank is located, and not elsewhere. Nothing herein shall be construed to exempt the real property of associations from either State, county or municipal taxes, to the same extent, according to its value, as other real property is taxed. (Rev. Stat. XJ. S. Sec. 6219.) Taxes Authorized by this Section Exclusive. — The taxes which the States are authorized by this section to impose are exclusive, and the National banks are not liable to any other tax imposed under State authority. (National State Bank of Oskaloosa v. Young, 25 Iowa, 311.) And the provision in Section 5214, Rev. Stat. U. S., " in lieu of all existing taxes," includes all State, county and municipal taxes. (Id.) Taxes Upon the Shares — Difference Between Shares and Capital Stock. — The personal property of a National bank can not be directly assessed for taxation by State authority. (City and County of San Francisco v. Crocker-Woolworth National Bank, 92 Fed. Rep., 273.) The taxes which the States are authorized to impose are taxes upon the shares of stock in the hands of the stockholders. Such taxes are not the same as taxes upon the capital of the bank. (Van Allen v. The Assessors, 3 Wall., 573.) " The interest of the shareholder entitles him to participate in the net profits earned by the bank in the employment of its capital, during the existence of its charter, in proportion to the num- ber of his shares, and, upon its dissolution or termination, to his proportion of the property that may remain of the corporation after the payment of its debts. This is a distinct independent interest or property, held by the shareholder like any other property that may be- long to him. Now, it is this interest which the act of Congress has left subject to taxation by the States, under the limitations prescribed." (Id.) Where new shares are issued they can not be taxed until the increase is approved by the Comptroller of the Currency. (Charleston v. People's National Bank, 5 S. C, 103,) The shares are taxable without regard to their ownership, and where a National bank owns stock in another National bank, it may be taxed thereon. (Bank of Redemption V. Boston, 126 U. S., 60.) To Whom Assessed. — As the tax can be only on the shares they must be assessed to the shareholders in their names, and not in the name of the bank. (Miller v. First National Bank of Cincinnati, 46 Ohio St., 424.) And an assessment of the capital stock as the personal property 140 of the bank without mention of the shareholders is void. (Farmers* and Traders' National Bank v. Hoffman, 93 Iowa, 119.) And the shares cannot be assessed in solido against the bank. (First National Bank of Leoti V. Fisher. 45 Kan., 726; National Bank of Virginia v. City of Rich- mond, 42 Fed. Rep., 877; Citizens' Bank of Louisiana v. Board of As- sessors, 52 Fed. Rep., 73; Whitney National Bank v. Parker, 41 Fed. Rep., 402. But see First National Bank of Aberdeen v. Chehalis County, 6 Wash., 64.) But, as we shall see hereafter, the bank may be re- quired to pay the tax for its shareholders. Meaning of the Tebm "Moneyed Capital." — The provision that the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens is to be construed in the light of the purpose and object of Congress. The main purpose was to render impossible for the States, in levying taxes, to create and foster an unequal and unfriendly competition, by favoring institutions or individuals carrying on a similar business, and operations and in- vestments of a like character. The meaning of the term " moneyed capital " must, therefore, be limited to such capital as comes into com- petition with the National banks. It '* includes shares of stock or other interests owned by individuals in all enterprises in which the capi- tal employed in carrying on its business is money, where the ob- ject of the business is the making of profit by the use of money. The money capital thus employed is invested for that purpose in securities by way of loan, discount, or otherwise, which are from time to time, according to the rules of the business, reduced again to money and re- invested. In this way the moneyed capital in the hands of individuals is distinguished from what is known generally as personal property. * * * But * moneyed capital ' does not mean all capital the value of which is measured in terms of money. In this sense, all kinds of real and personal property would be embraced by it, for they all have an estimated value as the subjects of sale. Neither does it necessarily in- clude all forms of investment in which the interest of the owner is expressed in money. Shares of stock in railroad companies, mining companies, manufacturing companies, and other corporations, are rep- resented by certificates showing that the owner is entitled to titerest, expressed in money value, in the entire capital and property of the corporation, but the property of the corporation which constitutes its invested capital may consist mainly of real and personal property, which, in the hands of individuals, no one would think of calling moneyed capital, and its business may not consist in any kind of dealing in money, or commercial representative of money. So far as the policy of the Grovernment in reference to National banks is concerned, it is indifferent how the State may choose to tax such corporations as those just mentioned, or the interest of individuals in them, or whether they should be taxed at all. Whether property interests in railroads, in 141 manufacturing enterprises, in mining investments, and others of that description are taxed or exempt from taxation in the contemplation of the law, would have no effect upon the success of National banks. There is no reason, therefore, to suppose that Congress intended, in respect to these matters, to interfere with the power and policy of the States. The business of banking, as defined by law and custom, consists in the issue of notes payable on demand, intended to circulate as money, where the banks are banks of issue, in receiving deposits payable on de- mand, in discounting commercial paper, making loans of money on col- lateral security, buying and selling bills of exchange, negotiating loans, and dealing in negotiable securities issued by the Government, State, National and municipal and other corporations. These are the opera- tions in which the capital invested in National banks is employed, and it is the nature of that employment which constitutes it in the eye of this statute 'moneyed capital/ Corporations and individuals carrying on these operations do come into competition with the busi- ness of National banks, and capital thus employed is what is intended to be described by the act of Congress." (Mercantile National Bank v. New York, 121 U. S., 138; Talbott v. Silver Bow County, 139 U. S., 438; Palmer v. McMahon, 133 U. S.. 660; Bank of Redemption v. Boston, 125 U. S., 60; First National Bank v. Chapman, 173 U. S., 205; Commercial National Bank v. Chambers, 182 U. S., 556.) Accordingly, it has been held by the United States Supreme Court that the exemption from taxation of shares of stock in corporations, the business of which does not come into competition with that of the National banks, is not a discrimination against National banks within the intendment of the law; and that the fact that a less rate of tax, or no tax at all, is imposed upon such corporations as railroad companies, manufacturing companies, mining companies, and insurance companies does not invalidate the tax upon National-bank stock. (Mercantile Na- tional Bank v. New York, 121 U. S., 138.) And in a recent case in the Supreme Court it was held that the powers conferred upon Trust Com- panies by the laws of New York do not call for any limitation of the decision in Mercantile National Bank v. New York; and such institu- tions are not in any proper sense banking institutions within the in- tendment of this section. (Jenkins v. NefC, 186 U. S., 230; S. C, 163 N. Y., 320.) And a tax upon National-bank stock is not void, even though the State statute exempts from taxation the stock of many corporations the entire capital of which is invested in assessable property in the State, and though some of the property of such corporations, not moneyed capital, is not assessed at all, or at a lower rate than bank stock. (Tal- bott V. Silver Bow County, 139 U. S., 441.) What is Meant by " Greater Rate." — Any system of assessment of taxes which exacts from the owner of the shares of a National bank 142 a larger sum in proportion to the actual value of those shares than it does from other moneyed capital, valued in like manner, taxes the shares at a greater rate, notwithstanding that the percentage of tax on the valuation is the same as that applied to other monej^ed capital. (Pelton V. Commercial National Bank, 101 U. S., 143; see also Whitbeck V. Mercantile Bank, 127 U. S., 193.) But where there is no discrimina- tion against National bank stock in favor of other personal property, the fact that the assessment for taxation upon personal estate is at a higher ratio of valuation than upon real estate is no ground for the intervention of a court of equity at the instance of a National bank. (Mercantile National Bank v. Mayor, 172 N. Y., 35.) Valuation of Shabes. — In estimating the value of the shares, all the property and assets of the bank may be taken Into consideration unless such property is taxed separately. (St. Louis National Bank v. Papin, 3 Cent. L. J., 669; 1 Nat. Bank Cas., 326; Stafford National Bank v. Davis, 59 N. H., 38.) And it has been held that where shares are taxed at their par value, the surplus fund may be taxed separately if it is not invested in Federal securities. (First National Bank v. Peterborough, 56 N. H., 38; North Ward National Bank v. City of Newark, 39 N. J. Law, 380. But see National State Bank v. Young, 25 Iowa, 311; County Commissioners v. Farmers' and Mechanics' National Bank, 48 Md., 117). If the shares are assessed at their actual cash value without any deduction for real estate, the latter should not be taxed separately. (Commissioners of Rice County v. Citizens' National Bank of Faribault, 23 Minn., 280.) As the tax is upon the shares and not upon the capital stock, it is not necessary that any deduction should be made for that portion of the capital which is invested in United States bonds or other non-taxable securities. (Van Allen v. The As- sessors, 3 Wall., 573; Mechanics' National Bank v. Baker, 65 N. J. Law, 113.) In fixing the actual value of shares of bank stock for the punwse of taxation, the real estate of the bank is to be taken at its actual value, notwithstanding it is assessed at a lower valuation. (Jenkins v. Neff, 163 N. Y.. 320.) Under the statutes of Indiana the real estate owned by a National bank is not to be included in the valuation of the shares of stock for purposes of taxation. (Board of Commissioners of Morgan County V. First National Bank, 57 N. B. Rep., 728.) But where the real estate has been so included, and the bank has also paid a tax upon the real estate as such, the latter tax can not be recovered by the bank; for the wrong done was in the over-valuation of the stock, and not in the assessment of the real estate to the bank. {Id.) As to the rule in New Jersey, see Bank v. Williams (58 N. J, Law, 45), Mechanics' Na- tional Bank v. Baker (65 N. J. Law, 113), 143 Exemptions. — In Adams v. Nashville (95 U. S., 19) it was said by the Supreme Court, " the act of Congress was not intended to curtail the State power on the subject of taxation. It simply required that capital invested in National banks should not be taxed at a greater rate than like property similarly invested. It was not intended to cut off the power to exempt particular kinds of property if the legislature chose to do so." Accordingly, it has been held by that court that a partial exemption of other moneyed capital will not deprive the State of the power to levy a tax on National bank stock. (Hepburn v. School Di- rectors, 23 Wall., 480; see also Washington National Bank v. King County, 9 Wash., 607.) Thus bonds issued by a State, or under its authority, by its public municipal bodies, although they undoubtedly represent moneyed capital, may be exempted without this effect, since they are not ordinarily the subject of taxation. (Mercantile Bank v. New York, 121 U. S., 138.) So the State may exempt savings-bank deposits (Id.), or the credits of individuals such as accounts, promis- sory notes, and mortgages. (First National Bank v. Chehalis Co., 6 Wash., 64.) But all exemptions must be founded upon just reason, and not operate as an unfriendly discrimination against investments in National bank shares. (Id.) Where the exemptions in favor of other moneyed capital are so palpable as to show that there is a serious dis- crimination against capital invested in the shares of National banks, the tax upon such shares will be declared invalid. (Boyer v. Boyer, 113 U. S., 690.) And where a tax is imposed on the market value of the shares of a National bank without allowance of any deduction for the non-taxable securities and specifically taxed property held by the bank, and where it is also so assessed that the owners of shares thus taxed are deprived of the privilege allowed other moneyed capitalists of deducting from the amount of securities held by them the amount of bonds, securities, liquidated claims and demands due from them respectively to others, such a tax violates the provisions of the Statutes of the United States, and is void. (The First National Bank of Rich- mond V. The City of Richmond, 39 Fed. Rep., 389.) If in the practical execution of a State tax law it is found impracticable to list more than a small portion of the property subject to taxation, other than National bank shares, the National banks may demand such forms of relief as will protect the shareholders from paying a greater rate of taxation than is imposed on individual citizens. (First National Bank V. Lindsay, 45 Fed. Rep., 619.) Deductions. — Stockholders of the National banks must be allowed the same deductions from the assessment against them upon their shares of stock that are allowed to the other taxpayers in the State on their moneyed capital. (People v. Weaver, 100 U. S., 539, reversing S. C, 67 N. Y., 516, and overruling People v. Dolan, 36 N. Y., 59.) And if the owners of other moneyed capital are permitted to deduct from the 144 assessed value thereof the amount of debts which they owe, the same privilege must be allowed to the holders of National bank stock. (People V. Weaver, 100 U. S., 539; Britton v. Evansville National Bank, 105 U. S., 322; Supervisors v. Stanley, 105 U. S., 305; First National Bank of Leoti v. Fisher, 45 Kans,, 726; Mercantile National Bank v. Shields, 59 Fed. Rep., 952.) And the mode of assessment must be such that these deductions can be made; and, therefore, an assessment of all the shares against the bank in solido which would preclude such deductions, would be void. (First National Bank v. City of Richmond, 39 Fed. Rep., 309.) But it is immaterial that such deductions are al- lowed to holders of stock in railroad, insurance and manufacturing cor- porations, since such stock is not regarded as " moneyed capital." (Mer- cantile National Bank v. Shields, 59 Fed. Rep., 952.) Non-resident stockholders are entitled to the same deductions as resident stock- holders. (Id.; Town of Farmington v. Downing, 67 N. H., 441.) Where the laws of a State require National bank shares to be assessed for taxation at their real value, it is not a discrimination against these banks that private banks are permitted to deduct the amount of their deposits from their taxable assets, and this privilege is withheld from National banks, for the general deposits are debts against the bank, and the real value of the shares depends upon the value of the bank's franchise, capital and property of all kinds, less the amount of its debts. (Engelke v. Schlender, 75 Tex., 559.) Under the statutes of Virginia a stockholder in a National bank is not entitled to have his in- debtedness deducted from the value of his stock before it is assessed for taxation. (Burrows v. Smith, 95 Va., 694.) Non-taxable Propebty. — The intention of Congress was that the rate of taxation should be the same as, or not greater than, the tax upon moneyed capital, which is subject and liable to taxation, and which the State has the capacity to tax. (People v. Commissioners, 4 Wall., 241 j Lionberger v. Rouse, 9 Wall., 468.) It is, therefore, no ground of ob- jection to the validity of a tax on National bank stock that, while de- ductions are made from the personal estates of individuals and the capital of State corporations for the Grovernment bonds owned by them, no such deduction is made on account of the capital of National banks invested in such bonds, or that private bankers are allowed to deduct legal tender notes, and no deduction is allowed for such notes held by National banks. (Adair v. Robinson, 6 Tex., Civ. App., 275; People v. Commissioners, supra.) And where a State had previously contracted with the banks, which it had chartered, that they should not be taxed above a certain rate, it was held by the Supreme Court that a tax on National bank stock at a greater rate is not invalid, if this rate is not greater than that assessed upon all moneyed capital within the State, except that of the State banks. (Lionberger v. Rouse, 9 Wall., 468.) 145 Real Estate in Other States. — The National Bank Act does not re- quire that real estate situated outside of the State in which the bank is located shall be excluded in estimating the value of the shares for pur- poses of taxation. (Commercial National Bank v. Chambers, 182 U. S., 556.) Mode in Which State Banks Must Be Taxed. — Where the State banks are taxed upon the capital, no tax can be imposed upon the shares of National banks, for as the capital of the State banks may- consist of bonds of the United States which are exempt from taxation, a tax on capital is not equivalent to a tax on shares. (Van Allen v. The Assessors, 3 Wall., 573; Bradley v. The People, 4 Wall., 459.) But though the tax upon the State banks is not eo nomine a tax on shares, yet if it is equivalent to such a tax, the shares in the National banks located in that State may be taxed. (Frazer v. Seibern, 16 Ohio St., 614; Van Slyke v. State, 26 Wis., 655; Boynoll v. State, 25 Wis., 112.) But Congress meant no more than to require of the States, as a condi- tion to the exercise of the power to tax the shares in National banks, that they should, as far as they had the capacity, tax in like manner the shares of banks of their own creation. (Lionberger v. Rouse, 9 Wall., 468.) Therefore, where a State has previousely contracted with the banks which it has chartered that they should not be taxed above a certain 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 individual citizens having moneyed capital. (First National Bank v. Lindsay, 45 Fed. Rep., 619.) National and State banks in Kentucky are subject to county and municipal taxation. (Deposit Bank of Owensboro v. Daviess County, 102 Ky., 174.) And the acceptance by the banks of the act known as the " Hewitt Law " does not preclude the State from subject- ing them to other modes of taxation. (Id.) Taxation by Terbitobies. — Although the word " territory " is not mentioned specifically in the statute, the Territories have the same power of taxation of National banks that the States have. (Talbott v. Silver Bow Co., 139 U. S., 441.) Insolvent National Bank. — ^The personal property of an insolvent National bank in the hands of a receiver appointed by the Comptroller of the Currency is exempt from taxation under State laws. (Rosen- blatt V. Johnston, 104 U. S., 462; see Woodward v. Ellsworth, 4 Colo., 146 580.) And where a National bank has become insolvent and the prop- erty representing the capital stock has been swept away, no tax on the shares can be collected from the receiver under a statute requiring a tax to be paid by the bank. (City of Boston v. Beal, 55 Fed. Rep., 26; S. C, 51 Fed. Rep., 306.) State Bank Convebted into National Bank. — While a State bank is changing to a National bank, and before the requirements of the State statute are fully complied with, it is subject to State taxation. (Com- monwealth V. Manufacturers' and Mechanics' Bank of Philadelphia, 2 Pearson's Decisions, 386; 2 Nat. Bank Cas., 459.) Bbanch Bank. — A National bank located in New Jersey, for the con- venience of persons in Philadelphia, kept a clerk in that city who re- ceived deposits: Held, That the bank did not become located in Phila- delphia so as to be liable to taxation. (National State Bank of Camden V. Pierce, 18 Albany Law Journal, 16; 2 Nat. Bank Cas., 177.) Repobt to Compteolleb Not Evidence of Value of Shares. — The written report of the officers of a National bank to the Comptroller of the Currency, made pursuant to Section 5211, Rev. St. U. S., does not purport to give the actual or estimated value of the bank's property, and is incompetent, alone, as a basis from which to deduce the actual value of the bank's stock. (Patterson v. Plummer, 10 N. D., 95.) License Tax — Tax on Circulating Notes. — ^Neither the State nor its municipalities can impose a license or privilege tax upon the Na- tional banks. (Mayor v. First National Bank, 59 Ga., 648; City of Carthage v. First National Bank, 71 Mo., 508; National Bank of Chat- tanooga V. Mayor, 8 Heiskell (Tenn.), 814.) As to whether the States could tax the circulating notes of the National banks the decisions were in conflict. In North Carolina (Lilly v. Board of Commissioners, 69 N. C, 300; Ruffin v. Board of Commissioners, 69 N. C, 498) and Indiana (Board of Commissioners v. Elston, 32 Ind., 37) it was held that such a tax was invalid, while in Mississippi the contrary was held. (Home v. Greene, 52 Miss., 452.) But now by the act of Con- gress approved August 13, 1894, such tax is expressly authorized. See next section. Collection of Taxes. — ^While the tax is upon th€ shares it is usually collected from the banks, they paying for their shareholders. The right of the States to collect the tax in this manner has been sustained by the United States Supreme Court. (National Bank v. Common- wealth, 9 Wall., 353.) But the bank is not absolutely liable for the tax upon the shares; to render it liable it must be shown to have, or have had, dividends or other property belonging to the shareholders. 147 (Farmers' and Traders' National Bank v. Hoffman, 93 Iowa, 191; s6^, also, Hershlre v. First National Bank, 35 Iowa, 272. But see First National Bank v. Douglas County, 3 Dill., 330.) A State may require the officers of National banks located within its territory to transmit lists of its stockholders to the taxing officers of the various towns and villages in which th« stockholders who are residents reside. (Waite v. Dowly, 94 U. S., 527. But see First National Bank of Youngstown v. Hughes, 2 Nat. Bank Cas., 176.) And State courts have jurisdiction to compel the officers of National banks by mandamus to exhibit to the county assessors the list of the shareholders in their banks; and to this end it is not necessary the statute should be supplemented by State legislation. (Paul v. McGrau, 3 Wash. St., 296.) Where a National bank has become insolvent and the property representing the capital stock has been swept away, no tax on the shares can be collected from the receiver under a statute requiring the tax to be paid by the bank. (City of Boston v. Beal, 51 Fed. Rep., 306; S. C, 55 Fed. Rep., 26.) Agreement of Bank to Pay Taxes. — An agreement by a National bank to pay taxes on its stock to it, and assessed at the time against the sellers, in consideration of being allowed to retain the dividends and surplus, is not illegal, although the taxes are not properly assessed. (Lull V. Anamosa National Bank, 110 Iowa, 537.) Remedy fob Illegal Taxation. — If the tax is for any reason illegal the bank may, on behalf of its stockholders, maintain a suit to enjoin the collection thereof. (Cummings v. National Bank, 101 U. S.. 153; Hills V. Exchange Bank, 105 U. S., 319; Pelton v. Commercial National Bank, 101 U. S., 143; Boyer v. Boyer, 113 U. S., 143; Third National Bank v. Hughes, 76 Fed. Rep., 385.) But two banks against the stock of which separate assessments have been made can not join in such a suit. (Jones v. Rushville National Bank, 138 Ind., 87.) And where there is a statutory tribunal empowered to grant full relief in such cases, an injunction will not be issued until application shall have first been made to such tribunal. (Albuquerque National Bank v. Perea, 147 U. S., 87; First National Bank v. Bailey, 15 Mont., 301. See Eaton V. Union County National Bank, 141 Ind., 136; Castles v. City of New Orleans, 46 La. Ann., 542; First National Bank v. Brodhecker, 137 Ind., 693.) And where a National bank seeks an injunction to restrain the collection of a tax on the ground of excessive valuation of its shares, the sum admitted to be due must be first paid or tendered. (Al- buquerque National Bank v. Perea, 147 U. S., 87.) A court of equity has jurisdiction to restrain the sale of the property of the bank for taxes assessed upon the stock of its shareholders. (Brown v. French, 80 Fed. Rep., 166.) And an action for this purpose may be maintained by the Receiver of an insolvent National bank. (Id.) 148 Pleading. — To make a case entitling a National bank to relief, it must be shown that there is a discrimination in favor of some con- siderble amount of other moneyed capital. (Washington National Bank v. King's County, 9 Wash., 607.) The classes of unassessed moneyed capital must be stated with succinct particularity to enable the court to judge whether they belong to the class contemplated by the statute. (Id.) An allegation, " all the moneyed capital in the State owned by resident individual citizens, and invested as aforesaid in interest-bearing loans, discounts and securities, except that owned by and invested in incorporated banks located in this State " is too general a description of the capital in favor of which there is dis- crimination. {Id.) § 148. State Taxation of National Bank Notes. — That circu- lating 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 currency, and gold, silver, or other coin shall be subject to taxation as money on hand or on deposit under the laws of any State or Territory : Provided, That any such taxation shall be exer- cised in the same manner and at the sajne rate that any such State or Territory shall tax money or currency circulating as money within its jurisdiction. That the provisions of this act shall not be deemed or held to change existing laws in respect of the taxation of National banking associations. (Act August 13, 1894, Ch. 281, Sees. 1 and 2, 28 Stat. U. S., 278.) This does not apply to the bank issuing the notes, but to the holders thereof. § 149. United States Bonds Exempt from Taxation. — 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. (Eev. Stat. U. S. Sec. 3701.) So far as this section prohibits State taxation of legal-tender notes it was repealed by Act August 13, 1894. (See preceding section.) § 150. Taxation of Banks in District of Columbia. — Each Na- tional bank located in the District of Columbia, as trustee for its stockholders, is required, through its president or cashier, to make 149 aflfidavit to the board of personal tax appraisers on or before the first day of August in each year as to the amount of its gross earn- ings for the year ended the 30th of June preceding, and to pay a tax thereon at the rate of six per cent, per annum. The real estate owned by such bank is taxed as other real estate in the Dis- trict. (Act July 1, 1902; 32 U. S. Stat, 619.) CHAPTEK VI. Dissolution and Keceivership. Section 151. Voluntary Liquidation. 152. Notice of Intention to Go into Liquidation. 153. Mode of Enforcing Stockholders' Liability. 154. Appointment of Keceiver for Failure of Bank to Pay its N'otes. 155. Appointment of Eeceiver Where Franchises Forfeited — In Cases of Insolvency. 156. Duties and Powers of Eeceiver. 157. Advertisement of Comptroller to Creditors. 158. Dividends to Creditors. 159. Injunction Upon Eeceivership. 160. Expenses of Protest, Examination and Eeceivership. 161. Equities in Eeal Estate, etc. — Protection of — Eecom- mendation of Eeceiver. 162. Same Subject — Approval of Comptroller and Secre- tary of Treasury. 163. Same Subject — Mode of Paying for Property. 164. Disposition of Assets After Payment of Creditors — Agent for Stockholders — Mode of Distribution. 165. Violation of National Bank Act — How Determined — Penalty For — Liability of Directors. 166. Transfers in Contemplation of Insolvency — Prefer- ences. § 151. Voluntary Liquidation. — ^^Any association may go into liquidation and be closed by the vote of its shareholders owning two-thirds of its stock. (Eev. Stat. U. S. Sec. 5220.) Shabeholdeks* Power Undeb this Section. — Shareholders owning two-thirds of the stock have it in their power to place the bank in liquidation at any time, and so it would appear that the Comptroller's consent is not necessary; but as such vote does not debar the Comp- troller from passing upon the bank's solvency and appointing a Re- ceiver if insolvent, he should be promptly informed of the intention to go into voluntary liquidation. 150 161 Shareholders' Meeting. — Th« action must be taken at a meeting of stockholders duly assembled. (See note to Section 28.) The notice of meeting should clearly indicate the business to be transacted. The vote in favor of the liquidation must represent two-thirds of all the stock. But shareholders owning two-thirds of the stock may place the bank in liquidation, though this may be contrary to the wishes, and against the interests, of the owners of the minority of the stock. (Wat- kins V. National Bank of Lawrence, 51 Kans., 254.) A person who, with full knowledge of all the steps taken in placing a bank in liquidation, receives and retains a dividend paid by the officers in control of the liquidating bank, will not be heard to deny the validity of the liquidation. (Id. See also First National Bank of Centralia v. Marshall, 26 111. App., 440.) New Contracts. — After a National bank has been placed in liquida- tion, its officers have no authority to transact any business in its name, except such as is implied in the duty of winding up its affairs. (Rich- mond V. Irons, 121 U. S., 27; Schroder v. Manufacturers' National Bank of Chicago, 133 U. S., 67; Elwood v. First National Bank, 41 Kans., 475; Moss v. Whitzel, 108 Fed. Rep., 579=.) Creditors who, after the bank has suspended payment and gone into liquidation, receive in set- tlement of their claims bills receivable, indorsed or guaranteed in the name of the bank by its President, can not claim as creditors against the shareholders, as the original debt is paid. (Elwood v. First Na- tional Bank, supra.) Right of Stockholders to Inspect Books. — The stockholders of a National bank in process of liquidation may in a proper case by writ of mandamus require the officers and directors to exhibit to them the books, papers and assets of the bank, and permit them to examine the same. (Matter of Tuttle v. Iron National Bank, 170 N. Y., 9.) Corporate Existence. — The placing of the bank in liquidation does not dissolve it as a corporation; but it will continue to exist as a body corporate for the purpose of suing and being sued until its affairs are finally closed. (National Bank v. Insurance Company, 104 U. S., 54; Ordway v. Central National Bank, 47 Md., 217. But see Hodgson v. McKinstry, 3 Kans. App., 412.) Receiver. — Where the bank is insolvent the Comptroller of the Cur- rency may appoint a receiver therefor, notwithstanding the stock- holders have voted to place the bank in liquidation. (Washington National Bank of Tacoma v. Eckels, 57 Fed Rep., 870.) And a court of competent jurisdiction may appoint a receiver for a liquidating bank, where the bank is insolvent, or its affairs are being mismanaged. (Irons V. Manufacturers' National Bank, 6 Biss., 301; Elwood v. First 12 152 National Bank, 41 Kans., 475). But the appointment of a receiver by a court rests largely within the discretion of the court, and before it will take the property and business of a liquidating bank from the control of the directors into its own hands, it must appear that the danger of loss or injury to the rights of the plaintiff is clearly proved, and the necessity and right for the appointment of a receiver free from reasonable doubt. (Watkins v. National Bank of Lawrence, 51 Kans., 254.) Liquidating Bank as Gabnishee. — The right of a creditor of a de- positor to make the bank a garnishee is not affected by the fact that the bank has gone into voluntary liquidation. (Birmingham National Bank V. Mayer, 104 Ala., 634.) Dividends. — Liquidation dividends of a National bank belong to the holder of shares, whether those shares be recorded upon the books of the bank or not, and must be paid to the holder of such shares on de- mand. The negotiability or transferable character of the stock of a National bank depends upon the laws of the United States, and is not affected by State laws. (Bath Savings Institution v. Sagadahoc Na- tional Bank, 89 Maine, 500.) Liquidation fob Pubpose of Consolidation. — The best plan, if two banks desire to consolidate, is to increase (see Section 5142) the capital of No. 1 to the extent necessary to equal the stock of both; put No. 2 in liquidation in the regular way, and sell out its assets to No. 1, pay- ing for them in the increased stock to be distributed among stock- holders of No. 2. The circulation of No. 2 being provided for by a deposit of lawful money, its bonds can be transferred to account of No. 1. which last will receive circulation thereon. The whole transac- tion in regard to circulation need not occupy over ten days. The law- ful money can doubtless be borrowed for the necessary time. For full information as to placing a bank in liquidation see page 246. § 152. Notice of Intention to (Jo into liquidation. — Whenever a vote is taken to go into liquidation it shall be the duty of the board of directors to cause notice of this fact to be certified, under the seal of the association, by its president or cashier, to the Comp- troller of the Currency, and the publication thereof to be made for a period of two months in a newspaper published in the city of New York, and also in a newspaper published in the city or town in which the association is located, or if no newspaper is there published, then in the newspaper published nearest thereto, that 153 the association is closing up its affairs, and notifying the holders of its notes and other creditors to present the notes and other claims against the association for payment. (Eev. Stat. U. S. Sec. 5221.) Date of Liquidation.— The liquidation takes effect on the date of the vote and not on the receipt of the notice by the Comptroller, or it may talce effect on some future date if so voted and reported to the Comptroller. Thus two-thirds may vote to liquidate; the vote may be taken on the third of the month; the notice may be sent on the sixth, and be received by the Comptroller on the ninth. The books of the Comptroller's office will place the association in liquidation on the third, but if the vote be taken on the third to commence to liquidate the association on the twentieth, then the Comptroller will note the liquidation as of that date. Notice, Etc.— Blanks for certifying the notice to the Comptroller of the Currency are furnished by that office, and can be obtained on ap- plication there; also form to be used in making the publication required by the section. (See forms, page 247.) Insertion of notice in a weekly paper or in the weekly issue of a daily In New York and at home, is regarded as fulfilling the requirements of the law. The notice should appear in each weekly issue of the paper within the two months from the date of the first issue in which the notice appears. Pbocess of Liquidation." — Associations in voluntary liquidation re- tain their corporate existence, and can sue or be sued until their affairs are finally liquidated. The process of liquidation may be conducted by the directors and officers of the bank, or the directors may appoint a committee from their own number for the purpose. In any event it is better to keep up the board of directors by regular annual elections until the liquidation is complete. The usual course is to pay depositors In full, and then, as funds are realized from assets, pay pro rata divi- dends to stockholders. Usually there is a residue of deposits which are not called for. Before dividends are paid to stockholders funds to meet this residue if called for should be set aside. § 153. Mode of Enforcing Stockholders' Liability. — That when any National banking association shall have gone into liquidation under the provisions of section five thousand two hundred and twenty of said Statutes, the individual liability of the shareholders provided for by section fifty-one hundred and fifty-one of said Statutes may be enforced by any creditor of such association, by 154 bill in equity in the nature of a creditor's bill, brought by such creditor on behalf of himself and of all other creditors of the as- sociation, against the shareholders thereof, in any court of the United States having original jurisdiction in equity for the dis- trict in which such association may have been located or established. (Act June 30, 1876, Ch. 156, Sec. 2; 19 Stat. U. S. 63.) The only authorized procedure for enforcing the individual liability of the shareholders of a National bank which has gone into voluntary liquidation is by a bill in equity in the nature of a creditor's bill, brought by a creditor " on behalf of himself and of all other creditors of the association." (Williamson v. American Bank, 109 Fed., 36; 115 Fed. Rep., 793.) § 154. Appointment of Eeceiver for railnre of Bank to Pay its Notes. — On becoming satisfied, as specified in sections fifty-two hundred and twenty-six and fifty-two hundred and twenty-seven, that any association has refused to pay its circulating notes as therein mentioned, and is in default, the Comptroller of the Cur- rency may forthwith appoint a receiver, and require of him such bond and security as he deems proper. (Kev. Stat. TJ. S. Sec. 5234.) § 155. Appointment of Keceiver Where Franchises Forfeited— in Cases of Insolvency. — That whenever any National banking asso- ciation shall be dissolved, and its rights, privileges, and franchises declared forfeited, as prescribed in section fifty-two hundred and thirty-nine of the Revised Statutes of the United States, or when- ever any creditor of any National banking association shall have ob- tained a judgment against it in any court of record, and made ap- plication, accompanied by a certificate from the clerk of the court stating that such judgment has been rendered and has remained un- paid for the space of thirty days, or whenever the Comptroller shall become satisfied of the insolvency of the National banking as- sociation, he may, after due examination of its affairs, in either case, appoint a receiver, who shall proceed to close up such as- sociation, and enforce the personal liability of the shareholders, as provided in section fifty-two hundred and thirty-four of said statutes. (Act. Jime 30, 1876, Ch. 156, Sec. 1; 19 Stat. U. S. 63.) 155 This section is not unconstitutional. (Bushnell v. Leland. 164 U. S., 684.) Decision of Comptbolleb. — Formerly, when a bank became insolvent, It was necessary, before the Comptroller could appoint a receiver, that one of the notes of the bank should be presented and protested for non- payment; but by the act of June 30, 1876, it was provided that a re- ceiver might be appointed whenever the Comptroller shall become satis- fled of the insolvency of the bank. And it has been held under this act that the decision of the Comj)- troller that the bank is insolvent is final, and is not reviewable by the courts (Washington National Bank v. Eckels, 57 Fed. Rep., 870.) Nor Is the Comptroller's power in this respect limited by the authority given to the stockholders under Rev. Stat. U. S., Sec. 5220, to place the bank In liquidation (Id.); nor by the act of 1876, authorizing the appointment of an " agent " for the stockholders. (Id.) Evidence. — In making the appointment the Comptroller is not re- quired to have strictly legal evidence of the facts upon which he bases his action; but he is left to be satisfied as best he can be, under the peculiar circumstances of each case, of the facts and the necessity for his action. (Piatt v. Beebe, 57 N. Y., 339.) Removal of Receiveb. — The receiver appointed by the Comptroller may be removed by him at any time. (Kennedy v. Gibson, 18 Wallace, 505.) JuBiSDiCTioN OF CouBTs TO APPOINT Receiveb. — It has been held in several cases that the power of the Comptroller to appoint a receiver is not exclusive, and that a court of equity of competent jurisdiction may direct a receivership where, according to the rules of equity, it may do BO in the case of other corporations. (Irons v. Manufacturers' National Bank, 6 Bissell, 301; Wright v. Merchants' National Bank, 1 Flippin, 561; King v. Pomeroy, 121 Fed. Rep., 287; 58 C. C. A., 209.) A re- ceiver so appointed may enforce the individual liability of the stock- holders for the debts of the bank. (King v. Pomeroy, 121 Fed. Rep., 287; 58 C. C. A., 209.) That a receiver may be appointed in a proper case by a Federal court for a bank which has gone into voluntary liquidation, there is no question. (Irons v. Manufacturers' National Bank, supra; Richmond v. Irons, 121 U. S., 27.) The expenses of such a receiver can not, however, be charged to the stockholders as a part of their statutory liability. (Richmond v. Irons, supra.) Peoof OF Insolvency. — The return of an execution unsatisfied is proof of the insolvency of the bank. (Wheelock v. Kost, 77 111., 296.) 156 Effect of Appointment of Receivee. — ^The failure of a bank and the seizure by the Comptroller of the Currency ends the exercise of volition by the officers of the bank, suspends the payment of checks, matures all demand notes held by the bank, and applies to the payment of such notes, all balance on the books of the bank, standing to the credit of the makers of the notes. (Park National Bank of Chicago v. Niblack, 67 111. App., 583.) But the appointment of a receiver for a National bank by the Comptroller of the Currency does not operate to dissolve the corporation. (Chemical National Bank v. Hartford Deposit Com- pany, 161 U. S., 1; Bank of Bethel v. jPahquioque Bank, 14 Wall., 383; Chemical National Bank v. Hartford Deposit Company, 156 111., 522.) And after passing into the hands of a receiver, a National bank re- mains liable through the remainder of the term, for accrued and accru- ing rent under a lease of premises occupied by it, although the receiver may have abandoned and surrendered them. (Chemical National Bank V. Hartford Deposit Company, 161 U. S., 1.) But if the lessor in the exercise of a power conferred by the lease re-enters and re-lets the premises, the liability of the bank thus re-letting is limited to the rent then accrued and unpaid, and the diminution, if any, in the rent for the remainder of the term, after the re-letting. (Id.) Presentment of Papeb. — Where a National bank has been placed in the hands of a receiver paper payable at the bank should be presented at the office of the Receiver. (Hutchison v. Crutcher, 98 Tenn., 421.) Presentment at the office of the receiver is not excused because the re- ceiver has removed his office and the assets of the bank to another building in the same place. (Id.) Where a bank examiner is in charge the paper should be presented to him. (Auten v. Manistee National Bank, 67 Ark., 243.) Bankbuptcy Law Does Not Apply. — Insolvent National banks can be wound up only in the mode provided by the National-bank act; and it was held that the bankrupt act had no application to them. (In re Manufacturers' National Bank, 5 Bissell, 499.) Questioning Validity of Appointment. — The legality of the appoint- ment of a receiver can not be inquired into by the debtors or stockhold- ers of the bank when sued by him; as to them, the action of the Comp- troller in making the appointment is conclusive until set aside on the application of the bank. (Cadle v. Baker, 20 Wallace, 650; Peters v. Foster, 56 Hun., 607; Young v. Wempke, 46 Fed. Rep., 354.) SuPEBvrsoRY PowEB OF CoMPTBOLLEE. — The receivcr is the instrument of the Comptroller, and is subject to the general direction of that officer. (Kennedy v. Gibson, 8 Wallace, 505.) But the language of the statute that the receiver shall act under the direction of the Comih 157 troller means no more than that the receiver shaJl be subject to the direction of the Comptroller; it does not mean that he shall do no act without special instructions. Thus, he may bring an action to re- cover an ordinary debt due to the bank without having received special instructions from the Comptroller to do so. (Bank v. Kennedy, 17 Y/allace, 19.) Specific authority given to a receiver to bring an action against a stockholder to recover an assessment is not withdrawn or affected by a subsequent general authority to compromise or sell all the claims or assets of the bank. (McLain v. Rankin, 119 Fed. Rep., 110.) § 156. Duties and Powers of Keceiver. — Such receiver, under the direction of the Comptroller, shall take possession of the books, records, and assets of every description of such association, collect all debts, dues and claims belonging to it, and, upon the order of a court of record of competent jurisdiction, may sell or com- pound all bad or doubtful debts, and, on a like order, may sell all the real and personal property of such association, on such terms as the court shall direct; and may, if necessary to pay the debts of such association, enforce the individual liability of the stock- holders. Such receiver shall pay over all money so made to the Treasurer of the United States, subject to the order of the Comp- troller, and also make report to the Comptroller of all his acts and proceedings. (Kev. Stat. U. S. Sec. 5234.) Contracts of Recei^ter. — ^The receiver can not charge the estate of the bank by any executory contract, unless authorized so to do by the pro- visions of the law and the order of a court of competent jurisdiction obtained ui)on the terms of the law. (Ellis v. Little, 27 Kans., 701.) Persons dealing with him are bound to take notice of the limitations on his authority; and where he acts outside of his functions, and be- yond his authority, the estate and the property of the bank are not charged thereby. (Id.) A Receiver has authority, upon sufficient con- sideration, to extend the time of payment of a debt owing the bank, where by so doing he can, in his judgment, strengthen the security he holds for the payment of the debt. (People's State Bank of Lakota v. Francis, 8 N. D., 369.) Sales by Receitee. — Before the receiver can sell any of the property of the bank he must first have an order from a court of competent jurisdiction. (Ellis v. Little, 27 Kans., 707.) But it is not necessary that he should obtain from the Comptroller of the Currency formal authorization to make the application; nor is it essential that he should 158 likewise have the authority of the Comptroller to sell. (Richardson v. Turner, 52 La. Ann., 1613.) A Receiver may apply to a court of record of competent jurisdiction for an order to sell stocks and bonds in pledge in his hands. (Richardson v. Turner, 52 La. Ann., 1613.) But as the courts are not vested with any general supervisory, or directing power over National banks, they cannot order or authorize a receiver to sell at private sale securities held by the bank as pledgee, which do not come within the authority given by this section to order the sale or compounding of bad or doubtful debts, or the sale of real or personal property of the association. (In re Earle, 92 Fed. Rep., 22.) The provision that the Receiver " may, if necessary to pay the debts of such association, enforce the individual liability of the stockholders," does not impose a personal trust and duty which will prevent him from selling and transferring the claim against a stockholder. (Wal- dron V. Ailing, 73 App. Div. (N. Y.), 86.) And where the order directs him to sell, he can not exchange or trade the property for other prop- erty. (Ellis V. Little, 27 Kans., 707.) A sale made by a receiver under order of a court is to all intents and purposes a judicial sale. {In re Third National Bank, 9 Biss., 535; 4 Fed. Rep., 775); and the approval thereof by the court has the force and effect of a judgment, and such proceedings are not subject to collateral attack. (Schaberg's Estate v. McDonald, 60*xs^eb., 493.) Compounding Debts. — Debts due to a National bank can not be com- pounded upon the order of the Comptroller of the Currency; but for this purpose the order of some court of competent jurisdiction is re- quired. (Case V. Small, 10 Fed. Rep., 722.) Such an order may be made by a United States District Court. (Petition of Piatt, 1 Benedict, 534.) But the court can authorize a composition of only such claims as are " bad or doubtful." (iPrice v. Yates, 2 Nat. Bank Cases, 204.) It is questionable whether the court has power to authorize the compounding of the statutory liability of a stockholder in a National bank. (In re certain stockholders of the California National Bank of San Diego, 53 Fed. Rep., 38; Butler v. Poole, 44 Fed. Rep., 586.) But even if it has the power, the court will refuse to compound such liability where it appears that some of the stockholders have conveyed away their property for the purpose of avoiding their liability, though it appear that in this way more money would be realized for the creditors. (Id.) And it has been held that a judgment recovered by the Receiver of an insolvent National bank against a stockholder on an assessment made by the Comptroller, although uncollectible, is not a *'bad or doubtful debt," which a court may authorize the receiver to compound, under Rev. St., Section 5234. (In re Earle, 96 Fed. Rep., 678.) But a receiver may enforce a compromise agreement entered into for the settlement of a stockholders' liability. (McClain v. Rankin, 119 Fed. Rep., 110.) 159 Suits By and Against Receiveb. — The receiver may sue either in his own name or in the name of the bank. (National Bank v. Kennedy, 17 Wallace, 19.) And a creditor may bring suit either against the receiver or the bank. (Bank of Bethel v. Pahquioque Bank, 14 Wallace, 833.) Thus, an action may be brought against a National bank, after the ap- pointment of a receiver, to recover for rent due on a lease, and for breach of the terms thereof; and the receiver is not a necessary party to such action. (Chemical National Bank of Chicago v. Hartford De- posit Co., 156 111., 522.) In the case of ordinary debts due to the bank the receiver may bring a suit to recover them without special directions from the Comptroller. (Id.) But when the individual liability of the stockholders is to be enforced, the receiver, before beginning suit, must have the direction of the Comptroller. The determination on the part of those charged with winding up the affairs of the bank to resort to this ultimate remedy requires the exercise of due consideration; and a receiver ought not take it upon himself to decide so important a ques- tion without reference to the Comptroller under whose direction he acts; and, although it is his duty to collect the assets of the institution, he does not distribute them, and can not ordinarily know, without refer- ence to the Comptroller, whether a prosecution of the stockholders will be necessary or not. (Kennedy v. Gibson, 8 Wallace, 505; Bank v. Kennedy, 17 Wallace, 19.) But a letter from the Comptroller, directing the receiver to institute suit, is sufficient evidence, if not objected to, that the Comptroller has decided that it is necessary to enforce the individual liability of the stockholders. (Bowden v. Johnson, 107 U. S., 251.) While a creditor of a National bank has a right to resort to the courts to have his claim adjudicated when it has been refused by the Comptroller of the Currency, it is doubtful whether the receiver of the bank, in a suit in which the Comptroller of the Currency is not a party, can be made to account for an administration for which the Comptroller is solely responsible. (Mervill v. National Bank of Jack- sonville, 41 U. S. App., 529.) JuBiSDiCTioN OF FEDERAL CouET. — The reccivcr of an insolvent Na- tional bank may bring suit in a Federal court to collect assets of the bank regardless of the citizenship of the parties. (Fisher v. Yader, 53 Fed. Rep., 565; Linn County National Bank v. Crawford, 69 Fed. Rep., 532.) So, a suit by the receiver to enforce the individual liability of the stockholders in a case arising under the laws of the United States, and where the amount involved exceeds $2000, is within the jurisdiction of the United States Circuit Court. (Thompson v. German Insurance Company, 76 Fed. Rep., 892.) And so a suit against the receiver 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 Federal court. (Hot Springs Independent School District v. First National Bank of Hot 160 Springs, 61 Fed. Rep., 417.) And the question whether a savings bank which was a depositor with a National bank which has become in- solvent shall be paid in full pursuant to a State statute, is a question arising under the laws of the United States, and entitles the receiver of a 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.) The receiver is an officer of the United States within the meaning of Section 563, Rev. Stat. U. S., which gives the District Courts jurisdiction of " all suits at common law brought by the United States, or any officer thereof authorized by law to sue." (Stephens v. Bemays, 41 Fed. Rep., 401; Stanton v. Wilkinson, 8 Benedict, 357; Price v. Abbott, 17 Fed. Rep., 506; Piatt v. Beach, 2 Benedict, 303.) Where the receiver takes a case by appeal or writ of error to the Supreme Court of the United States, he is not required to give a bond to answer in damages and costs. (Pacific National Bank v. Mixter, 114 U. S., 462; Pepper v. Fidelity and Casualty Co., 125 Fed. Rep., 822.) State Courts — State Statutes. — In New York it is said that he will not be treated by the courts of that State as a foreign receiver, and can sue therein to recover an assessment levied on the shareholder of a bank located in another State. (Peters v. Foster, 56 Hun., 607.) And being a person expressly authorized to sue, he is excepted from the pro- visions of the code that the action must be brought in the name of the real party in interest. {Id.) An action by a receiver against the stock- holders is governed by the State statute of limitations. (Butler v. Poole, 44 Fed. Rep., 586.) District Attorney — State Statutes. — As the receiver is the agent of the United States, suits instituted by him should, under Section 380, Revised Statutes, be conducted by the United States district at- torney for the district, but this provision is only directory, and if the receiver employs other counsel in a suit against a debtor of the bank, the defendant can not be heard to make the objection that this duty of the local officer of the Grovernment has been devolved upon another. (Kennedy v. Gibson, 8 Wallace, 498.) But United States district attor- neys are not entitled to any compensation, in addition to their salaries, for conducting suits brought by receivers of National banks. (Gibson V. Peters, 150 U. S., 342.) The receiver may at any time dismiss an attorney employed by him, regularly or otherwise, to prosecute claims of the bank, and employ another in his place, whom the court will, by order, substitute in the place of the dismissed attorney, except as to such cases as the latter may have commenced and finished. {In re Herman, 50 Fed. Rep., 517.) Where a contract has been entered into between the receiver and the attorney that the latter shall receive the attorney's fees provided for in the notes he was employed to collect, the court will not direct the substitution of another attorney in un- 161 finished cases until the receiver deposits the amount of the attorney's fees reserved in the notes as a security to the dismissed attorney for Buch services as he may have rendered. {Id.) Receiveb Occupies Same Position as the Bank. — Where a Receiver is placed in charge of the assets of a National bank, he stands, as to such assets, in the place of the bank, and is chargeable with knowledge of all facts known to the bank affecting the character of such assets. (People's State Bank of Lakota v. Francis, 8 N. D., 369.) Suits Against Directors. — Suits against the directors for neglect or mismanagement of the affairs of the bank should usually be brought by the receiver, but if the receiver refuses to act, such suit may be brought by any shareholder on behalf of himself and the other share- holders. (Brinkerhoff v. Bostwick, 88 N. Y., 52.) And so, the suit may be brought by a shareholder on behalf of himself and the other share- holders when the receiver is himself a director and one of the persons charged with neglect or misconduct ild,) See further on this subject note to Section 165. Power of Bank Examiner in Charge of Bank. — A bank examiner, who takes charge of the assets of a National bank under the directions of the Comptroller, is not the agent for the bank in such negotiations as the bank may be permitted to enter into with a view to the re- sumption of the business. (Tecumseh National Bank v. Chamberlain Banking House, 63 Neb., 163.) Duty of Directors to Preserve Assets. — ^The duty of the directors to take the necessary steps to preserve the assets of the bank does not end merely because a bank examiner has taken possession of the bank by direction of the Comptroller of the Currency. (Robinson v. Hall, 63 Fed. Rep., 222.) Their duties as directors in this regard do not cease until a receiver has been appointed. (Id.) Thus, it would be their duty to see that a mortgage given to the bank was duly recorded, notwithstanding a bank examiner was in charge. (Id.) § 157. Advertisement of Comptroller to Creditors. — The Comp- troller shall, upon appointing a receiver, cause notice to he given, by advertisement in such newspaper as he may direct for three consecutive months, calling on all persons who may have claims against such association to present the same, and to make legal proof thereof. (Eev. Stat. TJ. S. Sec. 5235.) I 162 § 158. Dividends to Creditors. — From time to time, after full provision has been first made for refunding to the United States any deficiency in redeeming the notes of such association, the Comp- troller shall make a ratable dividend of the money so paid over to him by such receiver on all such claims as may have been proved to his satisfaction or adjudicated in a court of competent juris- diction, and, as the proceeds of the assets of such association are paid over to him, shall make further dividends on all claims pre- viously proved or adjudicated; and the remainder of the proceeds, if any, shall be paid over to the shareholders of such association, or their legal representatives, in proportion to the stock by them respectively held. (Rev. Stat. U. S. Sec. 5236.) How Claims Established. — The claims of creditors may be proved before the Comptroller, or established by suit against the bank. But creditors must seek their remedy through the Comptroller in the mode prescribed by the statute; they can not proceed directly in their own names against the stockholders or debtors of the bank. (Kennedy v. Gibson, 8 Wallace, 505; Bank of Bethel v. Pahquioque Bank, 14 Wallace, 383.) The decision of the receiver rejecting a claim is not final, but the creditor still has the right to sue therefor. (Bethel v. Pahquioque Bank, 10 Wallace, 383.) But a judgment only determines the validity of the claim, and the creditor must await the pro-rata distribution by the Comptroller, and can not have execution on his judgment. {Id.) A judgment against the receiver directing the manner in which the assets of the bank shall be distributed should be certified by the receiver to the Comptroller of the Currency and be paid in due course of distri- bution. (Mervill v. National Bank of Jacksonville, 41 U. S. App., 529.) Interest. — Claims when proved to the satisfaction of the Comptroller are upon the same footing as if they had been put in judgment, and bear interest the same as a judgment. (National Bank of Common- wealth V. Mechanics' National Bank. 94 U. S., 437.) But a creditor who has obtained a judgment against the bank is not entitled to interest upon the face of the judgment, but only upon the amount of the claim at the date of the failure. (White v. Knox, 111 U. S., 784.) A de- positor is entitled to interest from the time the bank suspends payment, and it is not necessary that he should have made any demand on the bank. (Chemical National Bank v. Bailey, 12 Blatchford, 480.) In es- timating the dividends to be paid out of the assets, the value of the claims at the time the insolvency is declared is to be taken as the basis of distribution. (White v. Knox, 111 U. S., 784.) Interest should be allowed during the period of administration. (National Bank of Com- monwealth V. Mechanics' National Bank, 94 U. S., 437; White v. Knox, 163 111 U. S., 784.) The refusal of a creditor to accept the receiver's ofter to allow part of a claim without prejudice to a suit for allowance of the remainder, or to the receiver's right to still further reduce the claim if the court should hold such reduction proper, bars the creditor's right to interest on subsequent dividends on the part offered to be allowed, although it is subsequently adjudged that the whole of his claim should have been allowed; but he is entitled to interest on the divi- dends on the part rejected. (Chemical National Bank v. Armstrong, 59 Fed. Rep., 372.) Claims fob Tokts. — Claims which arise out of the neglect or wrong- ful acts of the bank are to be paid out of the assets the same as the debts, technically so called. (Turner v. First National Bank, 26 Iowa, 562.) Secubed Cbeditobs — CoLLATEBALs. — A secured creditor of an insolvent National bank may prove and receive dividends upon the face of his claim as it stood at the time of the declaration of insolvency, without crediting either his collaterals, or his collections made afterwards, sub- ject always to the proviso that dividends must cease when from them and the collaterals realized the claim has been paid in full. (Merrill v. National Bank of Jacksonville, 173 U. S., 131; Chemical National Bank V. Armstrong, 59 Fed. Rep., 372-; Mervill v. National Bank of Jackson- ville, 41 U. S. App., 529. See also People v. Remington, 121 N. Y., 328.) Claims Due the United States. — The priority of the United States is only for the deficiency in redeeming the notes of the bank. (Cook County National Bank v. United States, 107 U. S., 445.) Section 3466, United States Revised Statutes, which gives the United States a priority for all claims due it from insolvent debtors, does not apply. (Id.) As against the proceeds of the bonds deposited to secure the notes of the bank, the United States can set ofC no claim except for such deficiency. (Id.) And upon the failure of a National bank, its five per cent, re- demption fund can not be retained by the Treasurer to pay taxes due to the United States, but the fund passes to the Comptroller as an asset of the association. (Jackson v. United States, 20 Ct. Cls., 298.) Authobity of the Comptbolleb. — Under Sections 5234 and 5236 of the Revised Statutes, the assets of an insolvent National bank so collected by the receiver are entirely within the control and disposition of the Comptroller of the Currency, and the receiver is without power in re- spect to the payment of dividends. The receiver is the mere instrument of the Comptroller, and is subject in all respects to his instructions. (Mervill v. National Bank of Jacksonville, 41 U. S, App., 529.) Suns ON Rejected Claims. — ^Notwithstanding the insolvency of a Na- tional bank, and the appointment of a receiver by the Comptroller of 164 the Currency, the corporation continues as a legal entity, and an action may be maintained against it on a claim rejected by the receiver. (Denton v. Baker, 24 C. C. A., 476; 79 Fed. Rep., 189.') As in such case there is an adequate remedy at law, the holder of the claim cannot maintain a suit in equity for an injunction to restrain the receiver from rejecting it. (Id.) Acceptance of Dividends — Estoppel. — The acceptance of dividends upon a claim against an insolvent National bank as allowed by the Comptroller of the Currency does not estop the depositor from after- wards maintaining an action against such bank upon a claim not cov- ered by such allowance of the Comptroller. (Chemical National Bank of Chicago v. World's Columbian Exposition, 170 111., 82.) § 159. Injunction upon Receivership. — Whenever an association against which proceedings have been instituted, on account of any alleged refusal to redeem its circulating notes as aforesaid, denies having failed to do so, it may, at any time within ten days after it has been notified of the appointment of an agent, as provided in section fifty-two hundred and twenty-seven, apply to the nearest circuit, or district, or territorial court of the United States to enjoin further proceedings in the premises; and such court, after citing the Comptroller of the Currency to show cause why further proceedings should not be enjoined, and after the decision of the court or finding of a jury that such association has not refused to redeem its circulating notes, when legally presented in the lawful money of the United States, shall make an order enjoining the Comptroller, and any receiver acting under his direction, from all further proceedings on account of such alleged refusal. (Eev. Stat. U. S. Sec. 5237.) This section gives a bank opportunity to disprove mistaken charges, and a method of stopping unwarranted proceedings. (See Moss r. Whitzel, 108 Fed. Rep., 579.) § 160. Expenses of Protest, Examination and Receivership. — All fees for protesting the notes issued by any National banking as- sociation shall be paid by the person procuring the protest to be made, and such association shall be liable therefor; but no part of the bonds deposited by such association shall be applied to the pay- ment of such fees. All expenses of any preliminary or other ex- aminations into the condition of any association shall be paid by 165 such association. All expenses of any receivership shall be paid out of the assets of such association before distribution of the proceeds thereof. (Rev. Stat. U. S. Sec. 5238.) Expenses of receivership are a first lien upon all assets except bonds to secure circulation. § 161. Equities in Real Estate, etc. — ^Protection of — Recom- mendation of Receiver. — That whenever the receiver of any Na- tional 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 Comp- troller 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. (Act March 29, 1886, Ch. 28, Sec. 1; 24 Stat. U. S. 8.) It often occurred that real estate of the bank or other assets might be Incumbered by mortgages or claims. This act was passed to provide a way in which these incumbrances might be removed, by paying them oft with money derived from the collection of other assets. § 162. Same Subject — Approval of Comptroller and Secretary of Treasury. — 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 ap- proved by him, the request shall be by the Comptroller of the Cur- rency allowed, and notice thereof, with copies of the request, cer- tificate of facts, and indorsement of approvals, shall be filed with the Treasurer of the TJnited States. (Act March 29, 1886, Ch. 28, Sec. 2; 24 Stat. U. S. 8.) 166 § 163. Same Subject — ^Mode of Paying for Property. — That whenever any such requests shall be allowed as hereinbefore pro- vided, 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 recom- mended 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 property and under any such allowance shall be made by the Comptroller of the Cur- rency direct, with the approval of the Secretary of the Treasury, for such purpose only and in such manner as he may determine and order. (Act March 27, 1886, Ch. 28, Sec. 3; 24 Stat. U. S. 8.) § 164. Disposition of Assets After Payment of Creditors — Agent for Stockholders — Mode of Distribution. — That whenever any as- sociation shall have been or shall be placed in the hands of a re- ceiver, 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 association, whose claim or claims as such creditor shall have been proved or allowed as therein pre- scribed, the full amount of such claims, and all expenses of the receivership and the redemption of the circulating notes of such association shall have been provided for by depositing lawful money of the United States with the Treasurer of the United States, the Comptroller of the Currency shall call a meeting of the shareholders of such association by giving notice thereof for thirty days in a newspaper published in the town, city, or county where the business of such association was carried on, or if no newspaper is there published, in the newspaper published nearest thereto. At such meeting the shareholders shall determine whether the re- ceiver shall be continued and shall wind up the affairs of such as- sociation, or whether an agent shall be elected for that purpose, and in so determining the said shareholders shall vote 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 167 shall be necessary to determine whether the said receiver shall be continued, or whether an agent shall be elected. In case such majority shall determine that the said receiver shall be continued, the said receiver shall thereupon proceed with the execution of his trust, and shall sell, dispose of, or otherwise collect the assets of the said association, and shall possess all the powers and au- thority, and be subject to all the duties and liabilities originally conferred or imposed upon him by his appointment as such re- ceiver, so far as the same remain applicable. In case the said meeting shall, by the vote of a majority of the stock in value and number of shares, determine that an agent shall be elected, the said meeting shall thereupon proceed to elect an agent, voting by ballot, in person or by proxy, each share of stock entitling the holder to one vote, and the person who shall receive votes repre- senting 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 satis- faction of the Comptroller of the Currency, conditioned for the payment and discharge in full of each and every claim that may thereafter be proved and allowed by and before a competent court, and for the faithful performance of all and singular the duties of such trust, the Comptroller and the receiver shall thereupon trans- fer and deliver to such agent all the undivided or uncollected or other assets of such association then remaining in the hands or subject to the order and control of said Comptroller and said re- ceiver, 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 writ- ing 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 liabilities to such association and to each and all the creditors and shareholders thereof. Upon receiving such deed, assignment, transfer, or other instrument the person elected such agent shall hold, control, and dispose of the assets and property of such association which he may receive under the terms hereof for the benefit of the shareholders of such association, and he may in his own name, or in the name of such association, sue and be sued 13 168 and do all other lawful acts and things necessary to finally settle and distribute the assets and property in his hands, and may sell, compromise, or compound the debts due to such association, with the consent and approval of the circuit or district court of the United States for the district where the business of such associa- tion was carried on, and shall at the conclusion of his trust render to such district or circuit court a full account of all his proceedings, 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 share- holder may call a meeting of the shareholders of such association in the town, city, or village where the business of the said asso- ciation was carried on, by giving notice thereof for thirty days in a newspaper published in said town, city, or village, or if no news- paper 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 en- titling the holder to one vote, and when such agent shall have received votes representing at least a majority of the stock in value and number of shares, and shall have executed a bond to the share- holders 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 Baid bond in the office of the clerk of a court of record in the county where the business of said association was carried on, he shall have aU the rights, powers, and duties of the agent first elected as hereinbefore provided. At any meeting held as here- inbefore provided administrators or executors of deceased share- holders may act and sign as the decedent might 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 qui trust. The proceeds of the assets of property of any such association which may be undisturbed at the time of such meeting or may be subse- quently received shall be distributed as follows: " First. To pay the expenses of the execution of the trust to the date of such payment. "Second. To repay any amount or amounts which have been paid in by any shareholder or shareholders of such association upon 169 and by reason of any and all assessments made upon the stock of such association by the order of the Comptroller of the Currency in accordance with the provisions of the Statutes of the United States; and, " Third. The balance ratably among such stockholders, in pro- portion 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 Comp- troller or said agenf (Act June 30, 1876, Ch. 156, Sec. 3, as amended by Act March 2, 1897, Ch. 354; 29 Stat. U. S. 600.) § 165. Violation of National Bank Act — How Determined — Penalty For — ^Liability of Directors. — If the directors of any Na- tional banking association shall knowingly violate, or knowingly permit any of the officers, agents, or servants of the association to violate any of the provisions of this Title, all the rights, privileges, and franchises of the association shall be thereby forfeited. Such violation shall, however, be determined and adjudged by a proper circuit, district, or territorial court of the United States, in a suit brought for that purpose by the Comptroller of the Currency, in his own name, before the association shall be declared dissolved. And in cases of such violation, every director who participated in or assented to the same shall be held liable in his personal and individual capacity for all" damages which the association, its shareholders, or any other person, shall have sustained in con- sequence of such violation. (Kev. Stat. U. S. Sec. 5239.) When Bank Liable to Fobfeitube. — To render a National bank liable to a forfeiture of its franchises for violation of law, the acts must have been committed by the directors, or have been knowingly permitted by them. (Trenholm, Comptroller of the Currency, v. Commercial Na- tional Bank of Dubuque, 38 Fed. Rep., 323.) Violations of law by the executive officers or agents of the bank, without the knowledge and consent of the directors, do not constitute grounds for forfeiting the franchises. (Id.) And in an information to procure the forfeiture of the bank's franchises, it is not sufficient to aver that the association committed the act complained of, for this averment might be sustained by showing that the act was committed by some executive officer or agent; but the information must charge that the act was done by the directors, or that they knowingly permitted it to be done. (Id.) Such a suit is within Section 1047, Rev. Stat. U. S., and must be brought within five years. (Welles v. Graves, 41 Fed. Rep., 459.) 170 Actions Against Dibectors — How Brought. — An action to recover damages from the directors for losses resulting from a violation of law may be brought, though the Comptroller of the Currency has not procured a forfeiture of the charter. (Stephens v. Overstolz, 43 Fed. Rep., 465. But see Welles v. Graves, 41 Fed. Rep., 459.) Where a re- ceiver has been appointed for the bank, the action should be brought by him; for the personal liability of the oflacers and directors is an asset of the bank belonging equally to all creditors, and must therefore be enforced by the receiver for their benefit in proportion to the amount of their claims; and the action can not be brought by a creditor. V-- (Boyd V. Schneider, 124 Fed. Rep., 239; Bailey v. Mosher, 63 Fed. Rep.. 488; Exchange Bank v. Peters, 45 Fed. Rep., 13) ; nor by the individual stockholders. (Howe v. Barney, 45 Fed. Rep., 668.) But where the receiver refuses to bring an action against negligent directors to re- cover the amount which the shareholders have been compelled to con- tribute to pay the debts of the association, an action against such di- rectors may be brought by a shareholder on behalf of himself and the other shareholders. (Nelson v. Burrows, 9 Abb. N. C, 280; Zinn v. Baxter, 65 Ohio St., 341.) 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 be- half of himself and the other shareholders. (Brinkerhoff v. Bostwick, 88 N. Y., 52.) Such an action may be brought in a State court. (Id.) It must be brought by such shareholder on behalf of himself and all the other shareholders, the bank must be made a party, the judg- ment must be in its favor, and the proceeds of such judgment will inure to the common benefit of all the shareholders aliko. (Zinn v. Baxter, 65 Ohio St., 341.) But in order that a stockholder may bring an action against the directors for losses caused by their negligence, he must have been a stockholder at the time when the acts com- plained of were committed, and must also be such stockholder when the action is brought. (Hanna v. Lyon, 179 N. Y., 107.) It has also been held that the depositors in a National bank may maintain an action against the directors to recover for losses caused by the negligent performance of their duties as such directors. (Boyd v. Schneider, 131 Fed. Rep., 223.) And where a number of depositors are affected by the same acts of negligence, they may join in one suit against such directors. (Boyd v. Schneider, 131 Fed. Rep., 223.) 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. Overstolz, 43 Fed. Rep., 465.) 171 WHETHEB AC5TI0N IN EQUITY OR AT LaW — STATUTORY REMEDY NOT EX- CLUSIVE. — ^As to whether the suit against the directors should be brought in equity or at law, the authorities are not agreed. (See Stephens v. Overstolz, 43 Fed. Rep., 771; National Exchange Bank of Baltimore v. Peters, 44 Fed. Rep., 13; Welles v. Graves, 41 Fed. Rep., 459; Hirsh v. Jones, 56 Fed. Rep., 137.) The remedy of a creditor's suit given by the statute is cumulative and not exclusive. (King v. Pomeroy, 121 Fed. Rep., 287; 58 C. C. A., 209.) Thus, it does not preclude a common law action of deceit against the directors for false and fraudulent represen- tations made by them. (Prescott v. Haughey, 65 Fed. Rep., 653.) False Reports — Liability of Directors for. — Directors of a National bank who, in a simulated performance of the duties prescribed 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 by parties, to their damage, are liable for the damages, in an action for the deceit. (Stuart v. Bank of Staplehurst, 57 Neb., 569.) § 166. Transfers in Contemplation of Insolvency — ^Preferences. — All transfers of the notes, bonds, bills of exchange, or other evi- dence of debt owing to any National banking association, or of deposits 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 a view to the preference of one creditor to another, except in payment of its circulating notes, shall be utterly null and void. (Eev. Stat. U. S. Sec. 5242.) Meaning or *' Insolvency." — The term " insolvency " as used in this section has the same meaning as it has in the National bankrupt 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.) 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. 172 What Constitutes a Pbefeeence. — 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 insolvency, but it is sufllcient if the insolvency is in the contemplation of the bank only. {Id.; 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 preference, 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 insolvent 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 over others. (Id.) 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 payment illegal. (Id.) 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 creditors, was made with the intent to prefer. (National Security Bank 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. Soci6t6 de Cr6dit 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. CJhemical Na- tional 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 cer- tain 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.) So 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 by it on paper in its pos- session belonging to the insolvent bank to the payment of the debt, since its lien on such collections ran from the date of the acceptance. (McDonald v. Chemical Bank, 174 U. S., 610; In re Armstrong, 41 Fed. Rep., 381.) Remittances made in usual course of business to a corres- pondent 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. (Hayden v. Chemical National Bank, 80 Fed. Rep., 587.) 173 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.) Deposits Made When Bank Insolvent — Recoveby 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 con- sidered 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 re- claim 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 identity, 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 equivalent thereto remained continuously on hand in the bank until removed by the re- ceiver. (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; Lake Erie, Etc., R. R. Co. V. Indianapolis 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 remittance, 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. Latimer, 67 Fed. Rep., 27.) A creditor of an insolvent National bank, whose demand grows out of a fraudulent transaction perpetrated by the oflScers of the bank in contemplation 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.) Action of Replevin. — ^A person claiming title to property in the pos- session of a receiver which has come into his possession with the property belonging to the bank, may maintain an action of replevin therefor. (Com Exchange Bank v. Blye, 101 N. Y., 303.) Hence, where money was deposited with the receiving teller of a bank a few minutes 174 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 the 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 condition delivered to the receiver, it was held that the depositor could replevy the 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 insolvency. (Arm- strong, Receiver, v. Warner, 49 Ohio St., 376; Scott v. 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 v. Spokane Drug Co., 57 Fed. Rep., 888; Mercer v. Dyer, 15 Mont., 317; Hughitt v. Hayes, 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 v. Taylor, 56 Pa. St., 14). though the assignment was made before the appoint- ment of a receiver (Davis v. Knipp, 92 Hun., 297; Beckham v. Shackel- ford, 8 Tex. Civ. 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 dei)osited to secure circulation the United States can set-off no claim, except for money advanced to re- deem notes. (Cook County National Bank v. United States, 107 U. S., The indebtedness of the stockholders on their individual liability, together with the other assets of the insolvent bank, constitute a trust fund for the benefit of its creditors; and in equity such indebtedness of a stockholder who is insolvent may be set-off against a dividend pay- able 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 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 lia- bility 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 stockholders for the payment of the creditors. It is suflicient that such direction has been given, and amount so determined when the set-off is made. (Id.) 175 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 bank, since such statute is in conflict with the provisions of the Na- tional-bank Act. (Davis v. 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. S., 347.) Such a statute is not in conflict with any provisions of the National Bank Act. {Id.) 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 question 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 Cir- cuit Court. (Auburn Savings Bank v. Hayes, 61 Fed. Rep., 911.) While an Illinois National bank in which a Michigan National bank had kept an account as a depositor, as to the payment of check and draft holders might act under the Illinois law as against the law prevailing in Federal courts, when such Michigan bank became insolvent and went into the hands of a Receiver appointed by the Comptroller, the Federal law became the law of the distribution of the assets, and the payment of checks by the Illinois bank under the Illinois law is no excuse in an action by the Receiver against the Illinois bank for the balance in its hands at the time of the appointment of the Receiver. (First National Bank v. Selden, 120 Fed. Rep., 212. CHAPTER VII, Crimes and Misdemeanors. Section 167. Unlawfully Countersigning Notes. 168. Eeceiving United States or National Bank Notes as Security. 169. Embezzlement, Abstraction and Misapplication of Bank Funds — False Entries. 170. Illegal Certification of Check. 171. Obligations of the United States Defined. 172. Forging and Counterfeiting National Bank Notes. 173. Wrongful Use of Plates, False Plates, Notes, etc. 174. Passing, Selling, etc.. Counterfeits. 175. Taking Impressions of Plates, etc. 176. Persons Having Impressions, etc., in their Possession. 177. Buying, Selling, etc.. Counterfeits. 178. Issuing, etc.. Notes of Closed Banks. 179. Eeceipt of Public Money When Not Authorized De- positary. § 167. Unlawfully Countersigning Notes. — No oflBcer 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 imprisoned not less than one year and not more than fifteen years. (Kev. Stat. U. S. Sec. 5187.) This applies to officers of the Grovernment. No cases have arisen under it since the National banking law went into force. § 168. Eeceiving United States ot ITational-Bank Notes as Security. — 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 176 177 promise of custody of such notes as security, or as collateral se- curity, or consideration for any loan of money. Any association offending against the 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 whc 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 in- curred by a violation of this section shall be recoverable for the benefit of the party bringing such suit. (Rev. Stat. U. S. Sec. 5207.) The provision of this section was designed to prevent the locking up 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. § 169. Embezzlement, Abstraction and Misapplication of Banks' Funds — False Entries. — 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 asi- Bociation; or who, without authority from the directors, issues or puts in circulation any of the notes of the association; or who, without such authority, issues or puts forth any certificate of de- posit, 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. ^ ] ;i try in any book, report, or statement of the association, with inte nt, 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 affiairs 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 ^Ye years nor more than ten. (Kev. Stat. U. S. Sec. 5209.) Intent. — ^An Intent to defraud or injure the bank is an essential in- gredient of every offense specified in this section. (McKnight v. United States, 115 Fed. Rep., 972; 54 C. C. A., 358.) And for the purpose of showing the intent, evidence of other transactions of similar character 178 is admissible, but may be considered by the jury only on the question of the knowledge and intent of the accused when he committed the acts charged in the indictment. (United States v. Breese, 131 Fed. Rep., 916.) But the intent to injure or defraud need not necessarily have been the object or purpose with which the act was done; it is sufficient if the natural and necessary effect of the act was to injure or defraud the bank or others, and it was willfully and intentionally done. (United States V. Breese, 131 Fed. Rep., 916.) If the acts charged are proved, the intent must be inferred therefrom, and while such inference or pre- sumption is not conclusive, it throws the burden of proof upon the defendant. (United States v. German, 115 Fed. Rep., 987.) Willful Misapplication and Abstraction. — The words " willfully misapplies " are new in statutes creating offenses, and they are not used in describing any offense at common law. They have no settled techni- cal 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 misap- plication 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. (Id.) It is something different from the acts of official maladministration referred to in Section 5239. (Id.) It is not neces- sary that the person charged with the offense should have been previ- ously in the actual possession of such moneys, funds, and credits under or by virtue of any trust, duty, or employment committed to him. Nor is it necessary to the commission of this offense that the officer making the willful misapplication should derive any personal benefit therefrom. When the funds or assets of the bank are unlawfully taken from its possession, and afterward willfully misapplied by converting them to the use of any person other than the bank, with intent to injure and defraud, the offense, as described in the statute, is committed. (United States V. Harper, 33 Fed. Rep., 471; United States v. Breese, 131 Fed. Rep., 915.) The act may be done directly and personally, or it may be done indirectly through the agency of another. If the officer charged with it has such control, direction, and power of management by virtue of his relation to the bank as to direct an application of its funds In such manner and under such circumstances as to constitute the offense of willful misapplication, and actually makes such direction, or causes such misapplication to be made, he is equally guilty as if it was done by his own hands. (United States v. Harper, 33 Fed. Rep., 471; United States V. Fish, 24 Fed. Rep., 585.) A loan made in bad faith, and with the Intention of defrauding the bank, is a wilful misapplication of its funds. (United States V. Fish, sttpra.) So is the allowance of a fraudu- lent overdraft. (In re Van Campen, 2 Benedict, 419.) And a bank president has no right to permit overdrafts, when he does not believe, 179 and has no reasonable grounds to believe, that the moneys can be re- paid; and if coupled with such wrongful act, the proof establishes that he intended by the transaction to injure and defraud the bank, the wrongful act becomes a crime. (Coffin v. United States, 162 U. S., 664.) But the mere fact of the payment by the officers of a National bank of a check which creates an overdraft does not necessarily constitute a fraudulent misapplication of the funds of the bank. (Dow v. United States, 82 Fed. Rep., 904.) The procuring of a dividend to be declared by the bank when there are no net profits to pay it is not such an of- fense. (United States v. Britton, 108 U. S., 199.) Nor to allow a customer indebted to the bank to withdraw his deposit, though such act might be an act of maladministration on the part of the officer, and a gross neglect of official duty. (United States v. Britton, 108 U. S., 193.) Nor for an officer to procure the discounting by the bank of his own note, though he and the other parties to the note are insolvent. (Id.) It is no defense that the funds were misapplied with the consent of some of the directors; but the intent to defraud will be conclusively presumed from the commission of the offense. (United States v, Taintor, 11 Blatchford, 374; Breese v. United States, 106 Fed. Rep., 680.) False Entbies-— -Any entry on the books of the bank which is inten- tionally made to represent what is not true, with intent either to de- fraud the bank or to deceive its officers, is a false entry within the meaning of this section. (Agnew v. United States, 165 U. S., 36; United States V. Harper, 33 Fed. Rep., 471.) If the false entry is calculated to deceive, the making of it in the books of the bank, with intent to deceive, is all that is necessary to bring the act within the meaning of the statute; and the fact that the act was not an adroit and skillful one does not relieve it of its criminal character. (United States v. Britton, 107 U. S., 655.) The erasure of figures already written in the books of the bank, and the substitution of other figures which falsify the state of the account, are a false entry. (United States v. Crecelius, 34 Fed. Rep., 30.) The entries may be made either personally or by direction. (Agnew v. United States, 165 U. S., 36; United States v. Harper, 33 Fed. Rep., 471; In re Van Campen, 2 Benedict, 419; United States V. Allen, 47 Fed. Rep., 696; Scott v. United States, 130 Fed. Rep., 429.) The entry upon the books of the bank from deposit slips, which contain false statements, is a false entry within the statute. (Agnew v. United States, 165 U. S., 36.) But it is not merely the making of false entries which is criminal, but the making them with intent to deceive such persons as those named in the statute. (United States v. Means, 42 Fed. Rep., 599.) A mere mistake, made inadvertently, or even through negligence, though in fact false, if believed by the officer making it to be true, will not constitute the offense. (United States v. Graves, 53 Fed. Rep., 700; United States v. Allen, 47 Fed. Rep., 696.) 180 Intention to deceive any one director or officer is as criminal under this section as the intention to deceive any number or all of them. (United States V. Means, 42 Fed. Rep., 599.) And the statute does not require that any person should have been in fact defrauded or actually deceived by the false entry in order to make the crime complete; if there was an attempt to deceive, and the false entry was knowingly entered, and was a false entry which was naturally and necessarily calculated to mis- lead, this would be sufficient, in the absence of contravening proof to authorize a finding that the person making it made it with intent to deceive. (United States v. Graves, 53 Fed. Rep., 700.) But if the officers alleged to have been deceived were accomplices in the fraudulent speculations which the false entries were made to hide, an intent to deceive them cannot be inferred. (United States v. Means, 42 Fed. Rep., 599.) False entries in a report made by the President and transmitted to the Comptroller of the Currency constitute this offense, though the report was not called for by the Comptroller. (United States v. Hughitt, 45 Fed. Rep., 47.) A false statement is a crime though done to save the bank. (United States v. Means, 42 Fed. Rep., 599.) Di- rectors are officers within the meaning of the statute. (United States v. Means, 42 Fed. Rep., 599.) It is no defense that the entries were made by a clerk and verified by the officer without actual knowledge of their truth, since it was his duty to inform himself. (United States v. Allen, 47 Fed. Rep., 696.) The assistant cashier is indictable under this section for making a false entry in a report to the Comptroller, although he is not one of the officers authorized by Section 5211 to make such a report; for he may be regarded as within the category of " clerk or agent," within the terms of this section. (Cochran v. United States, 157 U. S., 286.) The president and assistant cashier are indictable as principals, under this section, for making a false entry in a report, although neither of them actually signed or attested the report. {Id.) Where false entries were made by a bookkeeper in a statement requested by a National-bank examiner purporting to give the balance due to depositors, which state- ment it was the duty of the examiner to make and not the book- keeper, an indictment for making " false entries in a statement of the association " will not be sustained. (United States v. Ege, 49 Fed. Rep., 852.) When the managers of a National bank make arrangements with depositors in the bank to give them credit at the bank for larger sums than appear upon the credit side of their accounts up to specified amounts and for a fixed time, and the proper officers of the bank make entries thereof in the books of the bank in good faith and in the belief that they have a right to do so, such an entry is not a false entry within the meaning of that term as used in Rev. Stat. Sec. 5209, and the person so making it is not guilty of a violation of that statute in so 181 doing. (Graves v. United States, 165 U. S., 323.) If an overdraft is made and allowed under circumstances making it a fraud upon the bank, the entry of the transaction just as it occurred on the books of the bank is not a false entry under this section. (Dow v. United States, 82 Fed. Rep., 904.) Forgery by an oflBcer of a National bank for the purpose of defrauding the bank or its stockholders does not constitute the offense described in Section 5418, Rev. Stat., and is not an offense against the United States, cognizable only by the Federal courts. (Cross v. State of North Caro- lina, 132 U. S., 131.) FoBM OF Repobt. — A National bank is not required to conform the headings of the various accounts on its books to any prescribed names, nor to the names stated in the form of report prescribed by the Comp- troller, and therefore when a report is called for, if the person making it enters, under the headings in the prescribed form, a statement of the bank's condition which is true with respect to the headings in said form, he has fulfilled the Remands of the law. (United States v. Graves, 53 Fed. Rep., 634.) But where the form of report, as prescribed by the Comptroller, con- tains headings of " Loans and Discounts," and also of " Overdrafts," it is the duty of the bank officer to make his entries in such report in such manner that each of these headings shall truthfully state the con- dition of his bank as to such heading. (United States v. Graves, 53 Fed. Rep., 634.) It is not a " false entry " to enter under heading of ** Loans and Discounts " items which, on books of the bank, and for con- venience of its officers, have been temporarily withdrawn from that heading, and which are, from day to day, carried on the books of the bank under heading of " Suspended loans " while awaiting action of directors as to same being withdrawn from character of loans and entered up as a loss on profit and loss account. (Id.) The " liabilities," which are required by this section to be stated in the reports to the Comptroller, include contingent as well as absolute liabilities; and hence an unmatured note, pajnment of which at maturity is guaranteed by the bank, should be included in the list of liabilities. (Cochran v. United States, 157 U. S., 286.) As a director is personally liable to the bank on paper made to it by a firm of which he is a member, the amount of such paper should be entered under the heading of " Liabilities of directors (individual and firm) as payers." (United States v. Graves, 63 Fed. Rep., 634.) The entry of " Loans and Discounts " in reports to the Comptroller does not guarantee the solvency of the makers of the paper, but is a state- ment that in truth and fact, at the date named in the report, the bank actually held and owned loans and discounts to the aggregate so reported. (7(2.) 182 Aiding and Abetting. — Persons who are not officers or agents of the hank may be aiders and abetters of the officers in the violation of this section. (Coffin v. United States, 162 U. S., 664.) When Ceiminal Laws of State Apply. — ^As the offense of embezzle- ment of the funds and property of the bank are provided for in the National banking law, an officer of the bank cannot be indicted there- for under State laws, nor have the State courts jurisdiction of such offense. (Commonwealth v. Ketner, 92 Pa. St., 372; Commonwealth v. Felton, 101 Mass., 204.) But where the property fraudulently converted belongs to the customers of the bank, as, for instance, property left on special deposit, the criminal laws of the State apply. (State v. Tuller, 34 Conn., 280; Commonwealth v. Tenney, 97 Mass., 50.) In State v. Tuller it was said: "That provision [in respect to embezzlement] goes to the being an internal working of the bank, and is intended to pro- tect its property from its agents. It was not intended to regulate, and has not the effect of regulating the business of the bank with its cus- tomers. Now, the business of the bank is conducted within the jurisdic- tion of this State with our citizens and in conformity with our laws, and it is competent for the legislature to pass any laws affecting that business, or protect the bank or its customers in the conduct of that business by any penalty, and such law and penalty will not be pre- dicated on any law or offense created by Congress or have any relation or be repugnant to the currency act, or in any manner infringe the juris- diction of Congress or the Federal courts. It is theft by our law to steal from a National bank; it is burglary to break Into one for the purpose of stealing, and it is cheating to obtain money from one by false pretenses. As a corporate being located in the State its property and interests and business are protected by State laws and subject to State legislation, and so it is competent for the legislature to protect its customers, the citizens of the State, in their business dealings with it, whatever they may be, whether constituting the relation of borrower and lender or of special or general depositor and bailee; and they may be controlled and protected by penal enactments without interference with the laws of Congress." Larceny of the funds or property of the bank is punishable under State laws. (Commonwealth v. Barry, 116 Mass., 1.) And an officer of a National bank may be indicted for forgery under State laws, al- though such forgery might have been committed in order that the in- strument forged might thereafter become the basis of false entries upon the books of the bank, within this section. (Cross v. State of North Carolina, 132 U. S., 131.) So an officer of the bank may be indicted under a State statute for making false and fraudulent entries in the books of the bank, such offense amounting to forgery at common law. (Luberg v. Commonwealth, 94 Pa. St., 85.) But the State courts have no jurisdiction of the crime of " false entries " as defined by this 183 section. (In re Eno, 54 Fed. Rep., 669.) A State statute forbidding banks to receive deposits when the bank is insolvent, and making such action a penal offense on the part of the officers of th« bank, can have no application to National banks located in such State. (Easton v. State of Iowa, 188 U. S., 220; Slaughter v. First National Bank, 109 Ala., 157; State v. Menke, 56 Kans., 77; Contra State v. Fields (Iowa), 62 N. W. Rep., 653; State v. Easton, 113 Iowa, 516; State v. Bardwell, 72 Miss., 535.) Prior to the Act of February 26, 1881, a notary public hold- ing his commission under a State had no authority to administer the oath required by Section 5211, Rev. St.; and, therefore, a cashier who made oath before such notary to a false statement of the condition of his bank was not guilty of perjury. (United States v. Curtis, 107 U. S., 671.) Indictment — Form of — ^Allegations in. — An indictment for a misap- plication of the funds of a National bank must specify the particulars of the application, so as to show the application charged to be a criminal misapplication as distinguished from applications that are unlawful, but not criminal. (United States v. Eno, 56 Fed. Rep., 218; United States V. Warner, 26 Fed. Rep., 616; Batchelor v. United States, 156 U. S., 426.) Hence an allegation that the defendant, for the use, benefit, and advantage of himself, misapplied certain moneys of the bank by paying them to A & Co. is not sufficient; for it does not show that such payment was criminal; but the facts showing that the payment to A was not only unlawful, but a criminal application of the money, should be stated. (United States v. Eno, 56 Fed. Rep., 218.) But if the indict- ment describes specifically the funds misapplied, and the manner of the misapplication, it need not negative every possible theory consistent with an honest purpose in the disposition of the funds specified. (Evans v. 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 abetting 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. North way, 129 U. S., 327.) In an indictment for embezzlement of moneys, etc., it is not necessary to specify what portion was money, and what portion was Other funds or credits. (Breese v. United States, 106 Fed. Rep., 680.) An indictment for making a false entry in a report to the Comptroller need not allege that such report was made by the banking association, or that it was actuaJly verified by the oath or affirmation of the presi- dent or cashier, or attested by the directors, as required by Section 5211; but It is sufficient to aver that the defendant made such false 14 184 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 5211. (Cochran v. United States, 157 U. S., 286.) And it is sufficient if the Indictment allege the substance of the reports in ques- tion without setting them out in full. (United States v. French, 57 Fed. Rep., 382.) It is not necessary to allege specifically that the re- ports were transmitted to the Comptroller of the Currency, or that they were published. (United States v. Potter, 56 Fed. Rep., 83.) Embezzlement, abstraction, and willful misapplication of the moneys, funds, etc., of a National bank, as described in this section, 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 de- fendant " did steal, abstract, take and carry away " property of the asso- ciation, does not charge two offenses. (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. (Id.) An allegation that defendant, an officer and agent of a National bank- ing association, did secretly, in a manner and by particulars to the jurors unknown, willfully, unlawfully and fraudulently convert to his own use, and misapply, from said association to himself, certain funds, sufficiently charges the offence of " willful misapplication " of property, under this section. (United States v. Jewett, 84 Fed. Rep., 142.) Agent in Liquidation. — This section applies to an agent In liquida- tion appointed by the stockholders. (United States v. Jewett, 84 Fed. Rep., 142.) § 170. Illegal Certification of Check. — That any officer, clerk, or agent of any National banking association who shall willfully violate the provisions of an act entitled, "An Act in reference to certifying checks by National banks," approved March third, eighteen hundred and sixty-nine, being section fifty-two hundred and eight of the Eevised Statutes of the United States, or who shall resort to any device, or receive any fictitious obligation, direct or collateral, in order to evade the provisions thereof, or who shall certify checks before the amount thereof shall have been regularly entered to the credit of the dealer upon the books of the banking association, shall be deemed guilty of a 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 185 imprisoned not more than five years, or both, in the discretion of the court. (Act July 12, 1882, Ch. 290, Sec. 13; 22 Stat. U. S. 162.) 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 offense would be complete if, after he had written 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, 155 U. S., 438.) To constitute the offense the certifica- tion must 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. Ud.) § 171. Obligations of the United States Defined. — The words " obligation or other security of the United States " shall be held to mean all bonds, certificates of indebtedness, National bank cur- rency, coupons. United States notes, Treasury notes, fractional notes, certificates of deposit, bills, checks or drafts for money, drawn by or upon authorized officers of the United States, stamps and other representatives of value, of whatever denomination, which have been or may (be) issued under any act of Congress. (Eev. Stat. U. S. Sec. 5413.) § 172. Forging and Counterfeiting National Bank Notes. — 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 banking association now or hereafter authorized and acting under the laws of the United States; or who passes, utters, or publishes, or attempts to pass, utter, or publish, any false, forged, or counterfeited note, purporting to be issued by any such association doing a banking business, knowing the same to be falsely made, forged, or counterfeited, or who falsely alters, or causes or procures to be falsely altered, or willingly aids or assists in falsely 186 altering any sucli circulating notes, or passes, utters, or publishes, or attempts to pass, utter, or publish as true, any falsely altered or spurious circulating note issued, or purporting to have been issued, by 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. (Rev. Stat. U. S. 5415.) § 173. Wrongful Use of Plates — ^False Plates, Notes, etc. — ^Every person having control, custody, or possession of any plate, or any part thereof, from which has been printed, or which may be pre- pared 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 en- graved after the similitude of any plate from which any such obligation or other security has been printed, with intent to use such plate, or suffer the same to be used in forging or counterfeit- ing 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 obliga- tion 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, photographing, making, or executing 187 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 im- pression, 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 im- prisonment at hard labor not more than fifteen years, or by both. (Kev. Stat. U. S. Sec. 5430.) Notes issued by a State bank are not obligations issued under au- thority of the United States within the meaning of this section. (United States v. Conners, 111 Fed. Rep., 734.) § 174. Passing, Selling, etc., Counterfeits. — Every person who, with intent to defraud, passes, utters, publishes, or sells, or at- tempts 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 than five thousand dollars, and by imprisonment at hard labor not more than fifteen years. (Kev. Stat. U. S. Sec. 5431.) § 175. Taking Impressions of Plates, etc. — 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 in- 188 tended to be used, in printing, stamping, or impressing any kind or description of obligation or other security of the United States, now authorized or hereafter to be authorized by the United States, or circulating note or evidence of debt of any banking association under the laws thereof, shall be punished by imprisonment at hard labor not more than ten years, or by a fine of not more than five thousand dollars, or both. (Rev. Stat. U. S. Sec. 5432.) § 176. Persons Having Impressions, etc., in Their Possession. — Every person who, with intent to defraud, has in his possession, keeping, custody, or control, without authority from the United States, any imprint, stamp, or impression, taken or made upon any substance or material whatsoever, of any tool, implement, instru- ment, or thing, used or iitted or intended to be used, for any of the purposes mentioned in the preceding section; or who, with intent to defraud, sells, gives, or delivers any such imprint, stamp, or impression to any other person, shall be punished by imprison- ment at hard labor not more than ten years, or by a fine of not more than five thousand dollars. (Rev. Stat. U. S. Sec. 5433.) § 177. Buying, Selling, etc., Counterfeits, etc. — 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 association organized or acting under the laws thereof, which has been or may hereafter be issued by virtue of any act of Congress, with the intent that the same be passed, published, or used as true and gen- uine, shall be imprisoned at hard labor not more than ten years, or fined not more than five thousand dollars, or both. (Rev. Stat. U. S. Sec. 5434.) § 178. Issuing, etc., Notes of Closed Banks. — 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 pur- pose of paying or redeeming its notes and obligations, knowingly 189 'ssues, reissues, or utters as money, or in any other way knowingly puts in circulation any bill, note, check, draft, or other security purporting to have been made by any such corporation whose charter has expired, or by any officer thereof, or purporting to have been made under 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. (Kev. Stat. U. S. Sec. 5437.) 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 embodied this old act in the Revised Statutes. § 179. Receipt of Public Money When Not Authorized De- positary. — 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 public money for any purpose not prescribed by law, and every president, , 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. (Kev. Stat. U. S. Sec. 5497.) 190 It will be seen from this section that all hanks other than public depositaries are put on notice in regard to dealings with disbursing oflScers, 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 importance to bankers in this 'X)nnection as having reference to public moneys. CHAPTER VIII. SuiTs^ Jurisdiction and Evidence. Section 180. Jurisdiction of Suits By and Against National Banks. 181. Same Subject — Federal Courts. 182. Attachment, etc.. Before Final Judgment Prohibited. 183. Proceedings to Enjoin Comptroller — Where Had. 184. United States District Attorney to Conduct Suits. 185. Instruments Certified by Comptroller as Evidence. 186. Certified Copy of Organization Certificate as Evidence. § 180. Jurisdiction of Suits By and Against National Banks. — That the jurisdiction for suits hereafter brought by or against any association established under any law providing for National bank- ing associations, except suits between them and the United States, or its officers and agents, shall be the same as, and not other than, the jurisdiction for suits by or against banks not organized under any law of the United States which do or might do banking busi- ness where such National banking associations may be doing busi- ness when such suits may be begun. And all laws and parts of laws of the United States inconsistent with this proviso be, and the same are hereby, repealed. (Act July 12, 1882, Ch. 290, Sec. 4; 22 Stat. U. S. 162.) § 181. Same Snbject — ^Federal Courts. — That all National bank- ing associations established under the laws of the United States shall, for the purposes of all actions by or against them, real, personal, or mixed, and all suits in equity, be deemed citizens of the States in which they are respectively located ; and in such cases the circuit and district courts shall not have jurisdiction other than such as they would have in cases between individual citizens of the same State. The provisions of this section shall not be held to affect the jurisdiction of the courts of the United States in cases commenced by the United States or by direction of an officer thereof, or cases for winding up the affairs of any such bank. (Act Aug. 13, 1888, Ch. 866, Sec. 4; 25 Stat. U. S. 436.) 191 192 General Effect of this Section — Change in Law. — The effect of these enactments is to repeal the tenth subdivision of Section 629, Rev. Stat. U. S., which conferred 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 was held. (National Bank of Jefferson v. Fare, 25 Fed. Rep., 200.) The change in the law affected only suits brought after the passage of these enactments. (First National Bank v. Morgan, 132 U. S., 141.) National banks are now on precisely 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 v. 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, 36 U. S. App., 530.) The assets of an insolvent National bank are not brought under the control or protection 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 stock- holders. (Snohomish County v. Puget Sound National Bank, 81 Fed. Rep., 518.) Federal Questions — Diverse Citizenship. — But these enactments do not place National banks under any disadvantage with reference to raising Federal questions in Federal courts. (Walker v. Windsor Na- tional 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 jurisdiction of the Federal courts regardless of the residence of the parties. {Id.) So, the United States Circuit Court has jurisdiction 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. (Wit- ters 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 Federal court. (Hot Springs Independent School District, etc., v. First National Bank of Hot Springs, 61 Fed. Rep., 417.) When a State bank acting under a statute of the State calls in its circulation 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 outstanding circulation, the defense of the State statute of limitations having been set up, a Federal question 193 arises which may give the Supreme Court of the United States jurisdiction In error. (Metropolitan 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 Na- tional 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 possession of a State probate court for purposes of administration, and the Federal court has jurisdiction to adjudge whether a liability exists, but can not issue execution to enforce the same. (Wickham v. Hull, 60 Fed. Rep., 326.) Actions by and Against Receivers. — These enactments do not afCect 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 with- out regard to the citizenship of the parties. (Fisher 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.) Thus, a suit brought by the Receiver of a National bank, by direction of the Comptroller of the Currency, to enforce a liability due to the bank, and to secure a sale under the order of the court of pledged securities, constituting a con- siderable part of its assets, is one for winding up the affairs of the bank, and within the jurisdiction of a Circuit Court of the United States, without regard to the citizenship of the parties. (McCartney v. Earle, 115 Fed. Rep., 462.) So, the Receiver may be sued in a Federal Court in relation to a contract made by him on behalf of the estate in the course of its administration. (Gilbert v. McNulta, 96 Fed. Rep., 83.) 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 juris- dictional amount is to be determined solely by the amount of complain- ant'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.) Agent of Stockholders. — The Federal courts have Jurisdiction of an action by or against the agent of the shareholders, chosen under the 194 Act of June 30, 1876, regardless of the question of citizenship. (Guar- antee Co. v. Han way, 104 Fed. Rep., 369; Weeks v. International Trust Co., 125 Fed. Rep., 371.) Jurisdiction of State Coubts.— For jurisdictional purposes, a Na- tional bank is a citizen of the State in which it is located. (Hazen v. Lyndonville National Bank, 70 Vt., 543; Davis v. Cook, 9 Mo., 134.) The State courts have jurisdiction of an action brought by a share- holder on behalf of himself and other shareholders to recover of the directors of an insolvent National bank damages for injuries resulting from their negligence and misconduct. (Brinckerhoff v. Bostwick, 88 N. Y., 52.) And State courts have jurisdiction of actions against Na- tional banks to recover the penalty prescribed by Congress for taking usurious interest. (Schuyler v. Bullong, 28 Neb., 684; Henderson Na- tional 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.) They also have power to issue a writ of mandamus requiring the directors of a National bank in liquidation to exhibit the books to the stockholders. (Matter of Tuttle v. Iron Na- tional Bank, 170 N. Y., 9.) And where the period of corporate existence of a National bank has expired, and its affairs are being wound up, a Receiver for its property may be appointed by a State court upon the application of a stockholder. (Cogswell v. Second National Bank, 56 Atl. Rep., 574.) But State courts have no jurisdiction in criminal cases arising under the National-Bank Act. {In re Eno. 54 Fed. Rep., 669; Commonwealth v. Felton, 101 Mass., 204; Commonwealth v. Ketner, 92 Pa. St., 372.) And a State court has no power to make an order direct- ing the receiver of a National bank who has been appointed by the Comptroller 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 assess- ment upon his stock to pay the debts of the bank. (Butler v. Poole, 44 Fed. Rep., 586.) § 182. Attachment, etc., Before Final Judgment Prohiliited.— 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. (Rev. Stat. U. S. Sec. 5242.) This section is constitutional. (Dennis v. First National Bank of Seattle, 127 Cal., 453.) 1^5 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 division of the proceeds of the property of an insolvent bank, its operation is by no means confined to cases of actual or contemplated insolvency; but the remedy is taken away altogether, and can not be resorted to under any circumstances. The effect 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 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 attach- ment is void, a bond given by a National bank to dissolve such attach- ment, served by summons of garnishment, is also void. (Planters' L. & S. Bank v. Berry, 92 Ga., 264.) Nor is the giving of such bond an appearance in the attachment case so as to make valid a judgment en- tered on the bond in that case against the bank and the sureties execut- ing the bond. (Id.) 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 receiver 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 attachments 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 National Bank, 93 N. Y., 371.) The prohibition applies whether the bank is solvent or insolvent. (Van Reed v. People's National Bank, 173 N. Y., 314.) But it does not apply where the bank intervenes in an attach- ment suit and claims the property. (Willard Mfg. Co. v. Tierney, 130 N. C, 611.) And an attachment sued out against a National bank as garnishee is not an attachment against the bank or its property within the meaning of this Section. (Earle v. Pennsylvania, 178 U. S., 449.) The right acquired by such an attachment is not lost to the at- taching creditor by the suspension of the bank and the appointment of a receiver. (Id.) But the distribution of the bank's assets in the hands of the receiver cannot be in any wise directly controlled by the 196 State court issuing tLe attachment, or seized under an attachment or execution in the hands of any State officer. (Id.) The receiver may be notified by service upon him of an attachment issued from a State court of the nature and extent of the interest asserted or sought to be acquired by the plaintiff in the attachment in the assets in his custody. (Earle v. Conway, 178 U. S., 456.) But such an attachment cannot create any lien upon specific assets of the bank in the hands of the Receiver nor disturb his custody of those assets, nor prevent him from paying to the Treasurer of the United States, subject to the order of the Comptroller of the Currency, all moneys coming to his hands or realized by him as Receiver from the sale of the property and assets of the bank. (Id.) Injunctions. — This section forbids State courts to grant injunctions against National banks before final judgment; and the prohibition is not repealed by Stat. U. S. 1882, C. 290, Sec. 4, or Stat. U. S. 1887, C. 373, Sec. 4, or Stat. U. S. 1888, C. 866, Sec. 4. (Freeman Manufacturing Com- pany V. National Bank of the Republic, 160 Mass., 398.) But this sec- tion 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 injunction. (Id.) 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 ap- plies to prohibit the issue of an injunction by a Federal court, at the suit of the Receiver, to restrain the enforcement of such judgment. (Baker v. Ault, 78 Fed Rep., 374.) § 183. Proceeding's to Enjoin Comptroller — Where Ead. — All proceedings by any National banking association to enjoin the Comptroller of the Currency, under the provisions of any law re- lating to National banking associations, shall be had in the district where such association is located. (Eev. Stat. U. S. Sec. 736.) § 184. United States District Attorney to Conduct Snits.— All suits and proceedings arising out of the provisions of law govern- ing 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. (Eev. Stat. U. S. Sec. 380.) 197 A commission from the Department of Justice to an attorney ap- pointing him a special assistant to a district attorney is not to be con- strued with technical nicety, and such a commission appointing an at- torney as special assistant to a district attorney, to assist " in the pre- paration and trial " of cases of the United States against the officers of an insolvent National bank against some of whom indictments had previously been returned, is to be construed as having been given under Rev. St., Sec. 363, U. S. Com. St., 1901, p. 208, and to authorize the person so commissioned to assist in the performance of any duties of the district attorney, including appearing before the grand jury to present evidence for new indictments. (United States v. Twining, 132 Fed. Rep., 129.) The fact that such commission is signed by the Solicitor General In the Department of Justice as " Acting Attorney General " does not affect the validity of the appointment. (Id.) Nor does the fact that the person appointed as a special assistant to a district attorney in the prosecution of criminal actions against the officers of an insolvent National bank had previously been employed by the receiver of such bank to prosecute civil suits against such officers. (Id.) § 185. Instruments Certified by Comptroller as Evidence. — 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 impression of such seal directly on the paper shall be as valid as if made on wax or wafer. (Kev. Stat. U. S. Sec. 884.) Certified copies of papers are usually furnished by the Comptroller's office upon affidavit setting forth what they are required for, and that the evidence can be procured in no other way, provided the parties re- questing are entitled to receive them, and if the giving of the copies would not be detrimental to the public service. § 186. Certified Copy of Organization Certificate as Evidence. — Copies of the organization certificate of any National banking as- sociation, 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 19^ the production of the original certificate. (Eev. Stat. XJ. S. Sec. 885.) 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 suflScient evidence to establish, at least prima facie, the exist- ence 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. Glendon, 120 Mass., 97.) And such certifi- cate is competent evidence in a State court. (Tapley v. Martin, 116 Mass., 275.) In a suit against the bank or its stockholders this cer- tificate is conclusive evidence of the organization. (Casey v. Galll, 94 U. S., 673.) Certificate of Deputy Compteolleb. — ^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. (Keyser v. Hitz, 133 U. S., 438.) And it is no objection that it is signed by him as Acting Comptroller. (Id.) (Aspinwall 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. Knipe, 6 Wash., 348.) PART SECOND. MONOGEAPHS ON NATIONAL BANK SUBJECTS. Methods of Organizing and Form of By-Laws. Management of National Banks. Liquidation and Consolidation. Extension of Charter. Reorganization Versus Extension. National Banks as Government Depositaries. METHODS OF ORGANIZING. In organizing a National bank one of three methods may be pur- sued, according to existing conditions : 1. De Novo — creating a new bank. 2. Reorganization of State or private bank or co-partnership. 3. Conversion of an incorporated State bank. ORGANIZATION DE NOVO. Section 5133 TJ. S. R. S. provides that any number of natural persons, not less in any case than five, may organize a National bank. Corporators Must Be Natural Persons. — ^The corporators must be natural persons (Section 5133, Revised Statutes) — that 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 legal enti- ties is obvious. Such powers as they have are limited, and in most cases they are not authorized to become corporators of an- other artificial being, and their participation in the organization might give rise to questions affecting its validity. Partnerships, equally with corporations are excluded under the terms of the statute as corporators, but may be stockholders of a bank if not pro- hibited by the laws of the State in which the bank is located. 15 201 202 Married Women as Corporators. — Whether a married woman 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, 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. Infant Can Not Be Corporator. — An infant — ^that is, a person under legal age — should never be allowed to become a corporator, for his contract would not be binding and he could repudiate it upon becoming of age. 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., L. E. and W. E. R. Co., 99 N. Y., 12.) 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 execute in his name the articles of as- sociation and organization certificate and any other necessary papers and to take shares for him in the proposed association. It should be acknowledged in the same way as the organization cer- tificate, and should be filed in the ofiice of the Comptroller of the Currency together with the other papers. 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 sign and execute all papers and instruments that it shall be proper and necessary for the corporators of the National banking asso- ciation to be located in the of , county of , State of . and to be known as the , and to subscribe for ■ 203 Ehares in the original capital stock of the said ; 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.] State of , County of : } *»• 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 executed the foregoing instrument, and acknowledged that he executed the same. [Signature of notary.] ^ [Seal of notary.] Tlie Subscription Paper. — The law does not require a prelim- inary subscription for the stock of the proposed bank, though such subscription is advisable, and is frequently the means of greatly facilitating the organization. By it the persons are brought to- gether in a mutual contract, and are thus enabled to come to a full understanding on matters preliminary to the organization of the bank, about which there may be great difference of opinion. To postpone doing so nntil the articles of association are pre- sented for signature to the various persons who are to become cor- porators might cause confusion and delay. For example, it is well to have an understanding as to 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; the exact number of shares each person interested is to have, and it fre- quently happens that persons are willing to become shareholders only upon prescribed conditions; that a certain man shall be president; that the banking house shall be located on a certain street, etc. ; so it will be seen that the chances of misunderstandings and future disagreements are very materially lessened if the con- ditions are plainly set fori;h in a subscription paper. The signing of the subscription paper does not necessarily con- stitute 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 promoting the organization, each subscriber would be bound to join in the execu- tion of all the instruments necessary that the corporators should 204 execute for the formation of the corporation. Should any sub- scriber 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 subscribers, decree specific performance. (See Londley on Part- nership, p. 925, and cases there cited.) FoBM OF Subscription Paper. We whose names are hereunto signed do hereby subscribe. In tho proportions 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 Baid National banking association to be located in the — of — , State of , and to be called " The ." Signatures. jj Shares. Capital Bequired. — The capital required is according to the population of the place, as follows: I 25,000 where the population does not exceed 3,000 50,000 « " - U U U gQQQ 100,000 " " - m m u 50,000 200,000 «« « • exceeds....*,... 50,000 Entite Stock May Be Taken by a Few Persons and After- wards Distributed. — ^When a considerable number are to be- come stockholders, and it is not definitely known how many shares will be taken by each, it may expedite the case to have a few (say the incorporators) listed in the organization certificate as the owners of the entire stock, but in order that the stock ledger may show the orginal holdings of stock the original stock certificates should be issued in the names of those listed, the certificates to be ultimately surrendered for reissue and assignment, in accordance with the agreement which may have been entered into in antici- pation of the organization of the bank. 205 Temporary Stock Certificates. — The payment of the first and subsequent installments on stock should be credited on the tem- porary stock certificates, the latter to be surrendered in exchange for permanent certificates when the final installment is paid. The following form of temporary certificate is in general use : No. Temporaby Ceetificate. Shares. The National Bank of This is to certify that is entitled to stock of the National Bank of shares of the capital -, capital $ , and that upon payment of all installments, amounting to $ , and surrender of this temporary certificate, a certificate of stock will be issued. Witness the seal and the signatures of the president and cashier of the bank. Dated , 190—. The — National Bank of . By , , Cashier. President. First installment. Second Third Fourth Fifth Sixth Payments on Account of Capital. per cent., amounting to $ , paid M •C M M 190—. 190—. 190—. 190—. 190—. 190—. Assignment. ) For' value received I hereby transfer and assign to temporary certificate, and hereby appoint and constitute - this my true and lawful attorney to transfer said certificate, with full I)Ower of substitution in the premises. Dated at , this day of , 190 — . Witness: . . Application to the Comptroller for Title. — When the promoters have fixed upon a name for the bank, the Comptroller should be notified, his approval of title selected being necessary. If capital is to be less than $100,000, the approval of the Secretary of the Treasury is also required. (Sec. 5138 K. S.) The notice should read as follows: 206 Sib: Notice is hereby given that we, the undersigned, being natural persons and of lawful age, intend, with others, to organize a National banking association, 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. This application must be signed by at least five of the persons who are to participate in the organization, each applicant stating his residence, business and, in figures, his financial strength. The Form of Title. — The name of the place in which the bank is to be located must constitute a part of the title. For example, " 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, as they would be superfluous. The addition of the name of the State is not al- lowed. It is best to make the title brief, not using unnecessary words, nor a long name or compound word as the distinguishing part. E. g,, "The National Susquehanna-Kiver Bank, of the City of Harrisburg" would be very cumbersome. The title "The First National Bank of '' will not be igranted in case another National bank has ever been organized at the place in question, whether still in existence or not, and the Comptroller will not grant the title of Second National Bank where such title would be a misnomer on account of the exis- tence of two or more National banks in the place. Nor will he grant a title liable to be confounded with that of another National or State bank. Standing of Parties Must Be Vonclied For. — The Comptroller requires that the public ofiBcial endorsing the applicants shall be sufficiently acquainted with them to be able to certify that he believes their statement correct, and that they are acting in good faith, and unless the applicants are reasonably well rated in Mer- cantile Agency reports further evidence of their good financial standing should be furnished. 207 Practice of Comptroller to Eeserve Title. — It is the practice of the Comptroller, when an application, satisfactorily endorsed, is received, to reserve for the parties, for a reasonable time, the title selected. The time allowed is sixty days, but extension is some- times granted under certain circumstances. 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. Written forms will be accepted only in exceptional cases, a great amount of labor is involved in examining papers thus pre- pared, which is avoided by the use of printed forms. The organization blanks are as follows: Articles of Association. Organization Certificate. Oaths of Directors. Certificate as to Payment on. Capital Stock. Order for Circulation. Signatures of Officers. In the case of reorganization a Certificate of Directors in re- gard to assets purchased from the old bank is required, and if a conversion of a State bank, there is an additional form for share- holders to authorize conversion. The execution of these papers is a very simple matter, but mistakes are very frequently made through 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 misspelled; errors made in jurat; oaths of di- rectors antedating organization certificate, etc. Care should be taken to prepare the papers correctly, so as to avoid the delay inci- dent to their return by the Comptroller for correction. Articles of Association. — This is the first instrument to be exe- cuted. Sec. 5133 Revised Statutes provides that the 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.'* 208 The following is the form furnished by the Comptroller: Abticles 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 sub- scribers for the stock of the association hereinafter named do enter into the following articles of association: First. The name and title of this association shall be " The .** Second. The place where its banking house or office shall be located and its operations of discount and deposit carried on and its general business conducted shall be . Third. The board of directors shall consist of shareholders. The first meeting of the shareholders for the election of directors shall be held at , on the , or at such other place and time as a majority of the undersigned shareholders may direct Fourth. The regular annual meetings of the shareholders for the election of directors shall be heW at the banking house of this associar tion on the second Tuesday of January of each year; but if no election shall be held on that day it may be held on any other day, according to the provisions of section 5149 of the Revised Statutes of the United States; and all 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 time by shareholders owning two-thirds of the stock, according to the provisions of an act of Congress approved May 1, 1886; and in case of the increase of the capital of the association, each share- holder 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 associa- tion, who shall hold his office (unless he shall be disqualified, or be sooner removed by a two-thirds vote of all the members of the board), for the term for which he was elected a director; the directors shall have power to elect a vice-president, who shall also be a member of the board of directors, and who shall be authorized, in the absence or in- ability 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 209 such other officers and clerks as may be required to transact the busi- ness of the association, to fix the salaries to be paid to them, and con- tinue them in office, or to dismiss them, as in the opinion of a majority of the board the Interests of the association may demand. The directors shall have power to define the duties of the officers and clerks of the association, to require bonds from them and to fix the penalty thereof; to regulate the manner in which elections of directors shall be held, and to appoint judges of the election; to make all by- laws that it may be proper for them to make, not inconsistent with law, for the general regulation of the business of the association and the management of its affairs; and, generally, to do and perform all acts that it may be legal for a board of directors to do and perform, under the Revised Statutes aforesaid. Seventh. This association shall continue for the period of twenty years from the date of the execution of its organization certificate, unless sooner placed in voluntary liquidation by the act of its share- holders 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 associa- tion in any manner not inconsistent with law; and the board of directors, or any three shareholders, may call a meeting of the share- holders for this or any other purpose, not Inconsistent with law, by pub- lishing 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 flve.3 It formerly was required that the President or Cashier certify that the Articles of Association had been executed in duplicate. The Comptroller of the Currency now rules that the execution of the Organization Certifi- cate by the parties executing the Articles of Association (as is required) and the acknowledgment of the same is sufficient. This form, of course, may be varied to meet the views of the corporators, and any provisions may be inserted which are not in- consistent with the National banking laws, but, unless conditions specially require, it is advisable to conform to this form provided by the Comptroller of the Currency. 210 Signing of Articles. — It is unnecessary for more than five of the subscribers to the capital stock to act as incorporators and sign the articles of association How Corporators Should Sign. — In executing the organization papers, each person should sign his Christian name and surname in full, as is usually done in the execution of deeds and other legal instruments. Should Be Executed in Duplicate. — ^The law requires that a copy of the articles of association shall be filed in the office 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. Sliding Scale of Directors. — It is well to have article three read, *' The board 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 dur- ing the year, the Comptroller may give his consent. Then it will be necessary, at a meeting of the shareholders called for the pur- pose and by a majority vote, to amend article three to read : " The board of directors shall consist of (number desired) share- holders," or the amendment may be an increase in the limit of the sliding scale. The shareholders (not the directors) may then elect the additional directors provided for, and the Comptroller consent to the change in number for the year. 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 designate, if they choose, in the articles the persons who shall constitute the first board of directors. In this event the third article in the preceding form should be made to read as follows: 211 The board of directors shall consist of stockholders, and the following persons [here insert names] have been duly elected directors of this association, to hold their offices as such until the regular annual election takes place, pursuant to the fourth article of these articles of association, and until their successors are chosen and have qualified. ftnalification of Directors. — Section 5146, K. S., provides that a director of a National bank must be a citizen of the United States, 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. This amount of the proposed stock it is necessary to pay for only as the regular payments on the stock of the bank are required by law. Election of Directors. — Section 5145, K. 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 afterwards at annual meetings in January. The usual date is the second Tuesday of January, but this is not obligatory. Not- withstanding 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 immediately after the execution of the organization papers that they may elect the officers of the bank, to meet the Comptroller's requirement that the president or cashier certify to the execution of the articles of association. It is required that the annual election be held in January, even though a bank is organized and directors elected only shortly before that time, and though no change in the Directory may be desired. A full meeting is not necessary, as the number of shareholders present or repre- sented is not material for a legal election. Number of Directors. — In fixing the number of directors, it is well, as before stated, to adopt a sliding scale in articles of associa- tion, to avoid the necessity of calling a meeting of stockholders to 212 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 a board of at least seven members — as the law requires that the reports of condition, made five times during the year, shall be attested by 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 of directors required by Sec. 5147, R. S., may be taken singly or jointly as is most convenient; gen- erally they are taken at the meeting to organize the board. They must not antedate the execution of the articles and organization certificate. The oath should be administered by an officer having an official eeal, and promptly sent to the Comptroller. Blank forms for directors' oaths are furnished by the Comp- troller of the Currency, but written oaths if in legal form may be accepted. FoBM FOB Joi\T Oath of Dibectobs. State of , 1 County of ' *** We, the undersigned^ directors of the ^ of , in the State of , beting 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, dili- gently 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, subscribed by him or standing in his name on the books of the said association; and that the same is not hypothecated, or in any way pledged as security for any loan or debt. Signature. | Residence. Subscribed and sworn to this day of , 19 — , before the undersigned, a in and for said county. [SEAL.] Notary Public. 213 Note. — 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 for an individual. The Comp- troller sends copies of both forms, but the execution of either is sufficient, the individual forms being for use in case of absence of a director at time of organizing. Not Necessary to Provide for Increasing Capital Stock. — It was once required to provide in the articles of association for an increase of the capital stock (Section 5142, Eevised Statutes), but Buch a provision is no longer necessary, for the Act of May 1, 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 an association, to incorporate in either the articles of association or the by-laws, and in stock certificates, a provision to the effect that no shareholder, when indebted, either directly or indirectly, to the bank, could transfer his stock without 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 gen- erally, 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 Section 5201, Eevised Statutes. (Bank v. Lanier, 11 Wall., 369.) Official Signatures.— The Comptroller requires that the official signatures of the officers of the bank be furnished him with the organization papers. The officers should be promptly elected to avoid any delay in the execution of papers of the association re- quiring their signatures. 214 The seal of the bank is required to attest the signatures; yet, if it has not been made, the signatures should be forwarded, and later the Comptroller will send another blank for execution with seal. This paper must not antedate the Oaths of Directors. The form is as follows : To the Comptroller of the Curency: OFFICIAL SIGNATURES of the President. Vice-Presidents, Cashier, and Assistant Cashiers of " The National Bank of " appointed at a meeting of the Board of Directors held on the day of , 190. ., as follows iOriffinal signatures necessary. 1 Note. — The signatures of oflBcers should be forwarded annually, al- though no change may have taken place, and this paper will be returned for correction unless these directions are followed: (1) The signatures of the Vice-President and Assistant Cashier must be given, if the bank have such officers, in addition to those of the President and Cashier. (2) Write the word "none" where the office is vacant. (3) Affix the seal of the bank in the place designated. (4) Fill in the title of the bank, and be careful to insert date of appointment of officers. (5) Promptly forward to the Comptroller of the Currency. The Organization Certificate. — ^The next step is to execute an organization certificate. The provisions to be made in this certifi- cate are specially 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 the Currency. Second. The place where its operations of discount and deposit are to be carried on, designating the State, Territory, or District and the particular county and city, town, or village. Third. The amount of capital stock and the number of shares into which the same is to be divided. Fourth. The names and places of residence of the 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 the National Bank Act. Every one of these provisions must be stated clearly and definitely in the certificate, but nothing else should be included in it. 215 The following is the form for the organization certificate, fur- nished by the Comptroller of the Currency: Obganization Cebtificate. We, the undersigned, whose names are specified in article fourth of this certificate, having associated ourselves for the purpose of organiz- ing an association for carrying on the business of banking under the laws of the United States, do make and execute the following organiza- tion certificate: First. The name of the association shall be "The t» 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 (I ), 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 association, 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 ourselves 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 incorporators.] State of . County of : }**•• On this the day of A. D. 190 — , before me, a of , personally came , to me well known, who severally acknowledged that they executed the foregoing certificate for the pur- poses therein mentioned. Witness my hand and seal of office the day and year aforesaid. [Seal of notary or Judge of court.] Must be Signed and Acknowledged. — The persons signing the articles of association must also sign the organization certificalo (Section 5134, Revised Statutes), and, in addition, each person signing such certificate is required to acknowledge his signa- ture thereto before a notary public or a judge of some court of 216 record. (Section 5135, Revised Statutes.) In acknowledging signatures see that names are properly spelled if inserted by notary or person other than incorporators. Before What Officer Acknowledgement Can Be Made. — The ac- knowledgment must be made before one of the officers specified above, but before no other. The acknowledgment can not be taken by the clerk of the court. Officer Must Affix Seal. — The acknowledgment must be authen- ticated by the seal of the notary or court. This requirement is not dispensed with by any State law, that notaries are not re- quired to have seals, and no certificate from a State officer or other evidence, that the attesting officer is a notary 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 organiza- tion certificate must be signed by the same persons who execute the Articles of Association ; others also may sign if for any special reason their signatures are desired, but they must be subscribers to the stock of the proposed bank, and it is usually beat not to have these papers signed until all preliminary matters are ar- ranged 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 subscribers are sufficient, and to save the trouble of obtaining: many signatures often a few subscribers are selected for this purpose ; but the names of all subscribers to the stock must be listed in the organization certificate, with their places of residence, though not necessarily in their own handwriting. (R. S., Sec. 5134.) The names of those who sign the application for permission to organize the bank must appear in the organization certificate as 217 corporators or at least as shareholders, otherwise waiver of right to participate in the organization of any one or more such appli- cants, not participating, must be furnished the Comptroller. In the event that less than a majority of the applicants are parties to the organization either as corporators or stockholders, the Comp- troller will not permit the organization to proceed until waivers are submitted and satisfactory information furnished as to the character and financial standing of the successors of the non-par- ticipating applicants. When Organization Papers Should be Filed. — It is best to file the articles and organization certificate with the Comptroller as soon as executed, for until filed the association cannot act as a body corporate. (Sec. 5136, E. 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. 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 corpo- rate from the date on which the organization certificate was exe- cuted. (Section 5136, R. S.) It can then enter into contracts as a corporation, call for payments upon capital stock and transact in its corporate name and capacity any business incidental and necessarily preliminary to beginning the banking business. (Sec- tion 5136, R. S.) The U. S. Supreme Court has held (McCormick vs. Market National Bank, Chicago, 165 U. S., 538) that a lease or purchase of a banking house may not be contracted for until the bank has been fully organized and chartered, nevertheless the parties in- terested may secure an option, and thus hold the property until the lease or purchase can be legally made. 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 16 218 may be avoided by a few of the subscribers to the stock making payments sufficient to cover this requirement without waiting to receive the pro rata proportion from all the subscribers ; still it is a question, in view of the provisions of Section 5141, relative to the sale of stock of delinquent stockholders whether this course is advisable. The pointy however, has never been submitted for legal determination. Calling for Payment on Stock. — The directors may call for the payment of 50 per cent, of the capital stock at any time, 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 subscriptions to stock would appear to be limited by Section 5140, Kevised Statutes, which provides that after the first payment of 50 per cent, of the capital, the balance shall be paid in monthly installments of at least 10 per cent., beginning one month from the date of the issue of charter. It might be held that this section merely pre- scribes 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, au- thorizing 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 restricted to 10 per cent, each, as the capital stock may be paid if desired in advance of the time required by law. Certificates to the Comptroller of payments of installments should not include a fraction of a dollar. Book Entry of Payments on Subscriptions. — Payments on sub- scriptions to capital stock should not be carried to stock account, 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 ac- count and entered in the reports to the Comptroller under head- ing " Liabilities other than those stated " or " capital paid in, not certified." 219 Certificate of Payment on Stock. — ^When fifty per cent, of the capital stock has been paid in it is required by Section 516S, Eevised Statutes, that this be certified to the Comptroller by the president or cashier and a majority of the directors of the bank. The form of such certificate is as follows; Cebtipicate op Officebs and DnsECTOBS TO Payment of Capital Stock. 190—. The undersigned, oflacers and directors of , located at , organized under the provisions of the Revised Statutes of the United States authorizing the organization of National banking associations do hereby certify that of the authorized capital stock of % there has been paid into said bank, in cash, as permanent capital, $ , constituting the first installment, and that no part of this sum is represented by promissory notes or other evidences of debt; also that th« name and place of residence of each director, and the amount of stock individually owned in good faith, are as follows: Name of Director. Place of Residence. (Town or City and State.) Number of Shares of Stock. Note. — The names, etc., of all the directors of the association must be listed, but only a majority of the directors and the president or cashier are required to certify and make acknowledgment. It is further certified that the association has in good faith complied with all of the provisions that are required to be complied with before receiving authority to commence the business of banking. [Signature of President or Cashier.] [Signatures of a majority of the directors.] State of , County of : } "•■ Before the undersigned, a of , personally appeared the above-named directors and other ofllcers of the aforesaid National bank, and made oath that the foregoing certificate and the matters and things therein set forth are true to the best of their knowledge and belief. Witness my hand and seal of ofllce this day of , 190 — . [Official seal of officer.] The Deposit of Bonds. — The organization papers including oaths of directors and certificate of payment of first installment of capital stock having been filed with the Comptroller, it only re- 220 mains 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. A certain deposit, Lccording to capital, 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 au- thorized to receive and issue registered bonds for them, bearing same interest, etc. The minimum amount of bonds required to be deposited is as follows : 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, and he then wires the bank its charter number and authority to begin business. The bank may open for business on receiving advice that the charter has been issued, without awaiting receipt of the document. Certificate Must be Published. — ^The bank must publish the Comptroller's certificate for at least sixty days in a newspaper published in the city or county where the bank is located. (Sec- tion 5170, E. S.) An insertion in a weekly newspaper or a weekly edition of a daily is sufficient. 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. Circulating Notes. — It is optional with a National bank whether it issues circulating notes or not, but as the law requires a cer- tain bond deposit to be maintained with the U. S. Treasurer, regardless of note issue, the banks^ with few exceptions, take out circulation. 221 Signing Circulating Notes. — Section 5172, Kevised Statutes, requires that circulating notes of National banks shall be at- tested 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 with- out 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 litho- graphed, printed, or even stamped with rubber stamp. Order for Circulation. — A National banking association is en- titled to circulating notes to the amount of the face value of the U. S. bonds deposited as security therefor, unless the market value of the bonds is below par, and is entitled to a total amount equal to its capital stock paid in and certified to the Comptroller of the Currency, but not over one-third in five-dollar notes. An order for plates and notes should be sent to the Comptroller, with the organization papers. The Comptroller furnishes a blank for the order as follows: Oeiginal Oeder fob Plates aitd Cibcxjlation. National Bank of , -, 190- To the Comptroller of the Currency: You are requested to have plates engraved for this bank, the cost to be paid upon demand, and circulating notes printed therefrom, as follows: Cost of Plates. 175. 75. 50. No. of Sheets Ordered. Denominations on Sheets. Value per Sheet $5, $5, $5, $5 . - . $10, $10, $10, $20 $50, $100 Total $20.. 50.. l.'SO. Amount of Circulation. Cashier. Amount and Kind of Notes. — Original orders for circulation should be for one and one-fourth of the par value of bonds to be deposited. Circu- lation ordered in excess of the bonds deposited will be retained by the Comptroller to replace mutilated notes received for redemption and destruction. 222 The Act of March 14, 1900, provides that no national bank shall he entitled to receive from the Comptroller, or to issue more than one-third in amount of its circulating notes of the denomination of $5. Banks desiring the full amount of circulation to which they are entitled, in- cluding notes of the denomination of $5, must order, at least, two plates. Time for Printing Notes. — It will require about forty days to engrave the plate and to print circulating notes, but the order can not be acted upon until all legal requirements are satisfied, including the deposit of bonds with the Treasurer of the United States, as the charter number of the association, which can not be previously determined, must appear upon the plate from which the notes are printed. Cost of Engraving Plate. — There is no charge for printing the circu- lating notes of a National bank, but a charge as noted above is made for engraving plates. The plate generally ordered by banks is for $10 and $20 notes. No orders will be accepted for any combination of notes different from those specified. Preparation of Organization Papers. — The foregoing instmc- tions if carefully followed should save the delay of the return of papers by the Comptroller for correction, but we have found that frequently errors are made, and many of the banks organizing send their papers to us when executed to examine and make any corrections called for that do not require to be made by the organizers themselves or by the notary. Our firm has represented National banks before the Treasury Department for over thirty years, and, from long experience, is in position to render efficient service in preliminary matters of organization, for which service we make no charge, and after the organization is completed act as attorney here for a small annual fee. Purchase of Bonds. — We are in close touch with the large dealers in Government bonds, therefore are able to secure for the banks the amount they require for deposit with the United States Treas- urer at the lowest market price. 223 KEORaANIZATION OF STATE AND PRIVATE BANKS. Where it is proposed to reorganize a State or private bank as a national banking association it is necessary to close the old bank in conformity with the provisions of the laws of the State governing, in which the bank is located, and then effect a new organization in conformity with the provisions of the Na- tional Banking Act, the procedure being the same, in so far as the execution of the corporate papers is concerned and the pay- ment of capital, as though the organization was not to succeed any other bank. It is assumed that the resolution, or other legal action on the part of the stockholders of the State bank placing it in liquida- tion, will be coupled with a provision for the organization of the National bank as its successor, in order that the interests of the stockholders of the old bank may*be conserved in the new asso- ciation. When the proposed incorporators of the National bank have filed an application with the Comptroller of the Currency for reservation of title and authority to organize, and approval thereof is received, they may immediately proceed with the organization of the association. Payment of Capital. — The Comptroller construes the law as requiring the payment of capital stock of a National bank in cash^^^ not in not^s or other evidences of debt; it therefore will be found advisable to collect from the most liquid assets of the State bank the amount necessary to enable the shareholders to pay their sub- scriptions to the stock of the National bank ; that is, fifty per cent, prior to being authorized to begin business, and the balance in monthly installments of ten per cent. each. The directors may then contract with the liquidating agent of the closed bank for the assumption of liabilities to depositors and other creditors on a transfer of an equivalent amount of assets of a character which can be held by a National bank. The construction of the law that pajrment of capital is to be made in cash is doubtless correct, although it is not specifically BO stated. 224 In case a State bank wishes to effect a change to the National system without delay, and a sufficient amount of the assets cannot be converted at once into cash to enable the stockholders to make the 50 per cent, payment on capital required, it would appear that a credit might be given or loan made to the stockholders of the State bank by said bank on their stock or other security, so that they could pay the assessment on their stock in the new bank, in part or whole by check. These payments being then passed to the credit of the stockholders would be sufficient evidence of payment, and satisfy the requirements: some such arrangement would seem to be perfectly legitimate. The subscription to the stock of the new bank by the stockholders of the old bank and the purchase of assets of the old bank are, practically, mere matters of entry and counter entry on the books. A portion at least of the capital paid in is at once to be re-invested in assets of the State bank, such as bank building, etc., thus really returning the payments on stock to the stockholders for their interests in the assets of the liquidating bank. The requirement that only fifty per cent, of the capital be paid at once when a bank reorganizes is sometimes an inducement to adopt this method in preference to conversion when a portion of the assets of the bank are not readily convertible into cash. Certificate Regarding Assets. — The organization papers should be accompanied by a statement of the directors to the effect that no assets the holding of which contravene the provisions of the National banking law will be purchased or otherwise acquired by the association, the statement being in the following form and language : Certificate, Non-acquibement of Peohibited Assets. We, the undersigned, a majority of the board of directors of the National Bank of , in the of , State of , hereby certify that any assets purchased or which may be other- wise acquired by said association from the Bank of , will not include real estate, except banking premises, stocks, loans secured by real estate, nor any loan in excess of 10 per cent, of the paid-ia capital stock of the National bank. [Signatures of Directors.] Subscribed and sworn to before me, , this day , 190—. [Notorial Seal.] ■■■■ ■ ' ■■ , Notary Public 225 These papers, having been filed with the Comptroller, and the required deposit of bonds made, the Comptroller will issue his certificate authorizing the bank to begin business. Pnrchase of Assets of Liquidating Bank. — The National bank, in acquiring the business of the State or private bank, necessarily enters into a specific contract for the purchase of assets and as- sumption of liabilities to depositors and other creditors of the liquidating bank. In such cases bills receivable and other assets should be listed, carefully scrutinized and properly endorsed; the banking house, if purchased, deeded to the new bank, and the deed recorded ; all general and individual accounts closed and transferred and new accounts opened and old pass books called in and new books issued. Keorganization of a Private Bank. — The reorganization of a private bank requires a similar proceeding as that of a State bank, excepting that it is presumed the proprietors have authority, as individuals, to terminate their business and sell and transfer the assets to the National bank which is organizing. Business Unintemipted. — Arrangements may be made to enable the bank reorganized as a National bank to begin business simul- taneously with the closing of the State or private bank which it succeeds, so that there need be no interruption in the business of the bank. We will be glad to furnish any further information desired, or assist in effecting reorganization without charge. Papers when executed may be sent us to examine before filing with the Comp- troller. We also are in position to furnish Government bonds for deposit with the United States Treasurer at the lowest price. 226 COITTEESION OF STATE BANK TO NATIONAL. The National Bank Act provides (Section 5154, Kevised Statutes,) that an incorporated State bank may enter the National System by conversion, the bank continuing without reorganization. This plan is sometimes found advantageous, although generally it is found to be preferable to close up the affairs of the old bank and reorganize. * Only Incorporated Banks Can Convert. — A bank proposing to convert to a National bank must be a State institution incor- porated either by special charter or under some general statute. Capital of Bank. — A State bank converting must have a capital paid in and unimpaired of not less than the amount prescribed by the National Bank Act (see amount required as given under organizing de novo). When it is necessary to increase capital of bank to convert, it depends upon the requirements of the laws of the State in which the bank is located whether it is better to in- crease under State laws, and then convert, or to put the State bank in liquidation and reorganize. Sometimes considerable delay is avoided by taking the latter course. When a bank increases its capital before conversion the Comptroller requires as evidence of payment of such increase a certificate of the State officer with whom the certificate of increase is filed. Conversion papers cannot be lawfully executed prior to effecting the necessary increase in capital. Assets of Bank. — The National Bank Act prohibits holding real estate other than the banking house property, loans on real estate or mortgages, or loans in excess of one-tenth of its capital (Section 5137 and 5200, Revised Statutes), and the Courts hold that it is ultra vires of a National bank to invest its funds in the stock of any other corporation. The Comptroller, therefore, requires that a State bank shall liquidate such assets before being chartered as a National bank, although if the assets of a State bank have been JaFfBlly acquired under its State charter and the bulk of them are 227 found to be such as a National bank can hold, the Comptroller may charter the bank under guarantee that the balance will be liqui- dated within a specified time. Examination. — In order to ascertain the condition of a bank pro- posing to convert, the Comptroller orders an examination before granting it a charter as a National bank. Directors Continue to Be Such. — The board of directors of the State bank (if composed of not less than five members) may con- tinue in oflBce imtil the first annual election, regardless of the number of shares owned by each director (Section 5144, K. S.). But the directors' oath must be taken and forwarded to the Comptroller with the conversion papers. At the time the first annual election is held subsequent to conver- sion, every shareholder, to be eligible as a director, must be the owner of at least 10 shares of stock of the bank, regardless of its par value. « Consent of Shareholders. — The first step in the process of con- version 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 au- thority furnished by the Comptroller of the Currency, 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 meet- ing, 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 question relating to the corporate business, it is not meant that they can act wholly independently of the other shareholders, without giving them any voice in the matter, but every shareholder must be af- forded an opportunity to express his assent or dissent; and, there- fore, 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 228 Comptroller of the Currency of intention to convert, naming the title desired 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. FOBM OF AUTHOBITY FOE CONVEESION. 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 convert said bank into a National banking association under the sections of the Revised Statutes which authorize the conver- sion of State banks into National asociations, 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 contem- plated 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 perform all such acts as may be necessary to transfer the assets of every descrij)- tion and character of said to the National banking association into which it is to be converted, so that the said conversion may be abso- lute and complete; and we do hereby assume, and authorize the said di- rectors to assume, as the name of the National banking association into which the said is to be converted, " The ; " and we do hereby appoint , who are now the directors of the said , to hold their offices as such directors until the regular annual election of directors is held, pursuant to the provisions of said Revised Statutes, and until their successors are chosen and qualified; and we do 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. 18—. Signatures of stockholders. | Number of shares ov/ned by each. Should Be Presented for Signature at Shareholders' Meeting. — For the reasons above mentioned the instrument should be pre- sented 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 229 the action of the stockholders at a corporate meeting shall he 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 Whom 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 authorize 3 by the owners of two-thirds of the capital stock of said bank to change and convert the said bank into a National banking association, under section 5154 of the Revised Statutes of the United States, and of subse- quent acts in addition to or amendatory thereof, and to execute articles of association, do hereby, in our own behalf and in behalf of the stock- holders 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 form given under organization de novo. The following is the form for organization certificate furnished by the Comptroller of the Currency in cases of conversion: Obqanization Cebth'icate. We, the undersigned, directors of the , having been duly au- thorized 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 organization 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 amenda- 230 tory 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 opera- tions of discount ani 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 stockholders 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 , -.! County of ^ * On this the day of , A. D. 19—, personally came before me, a of said country^ , directors of the , to me well known, who severally acknowledged that they executed the foregoing certificate for the purposes therein mentioned. Witness my hand and seal of office the day and year aforesaid. Certificate of Capital Paid In. — ^This is a certificate of the president or cashier of the bank to the Comptroller of the Cur- rency, showing that the amount of paid-in and unimpaired capital of the bank converting meets the legal requirement. The following is the form : Certificate Relative to Payment op Capital Stock of State Bank CONVEBTINQ INTO NATIONAL BANE. It Is hereby certified, that The Bank of , , which is to be converted into "The National Bank of ," in conformity with the provisions of Section 5154 of the Re- 231 vised Statutes of the United States, authorizing the conversion of " any bank incorporated by special law or any banking institution organized under a general law of any State," has a paid in and unimpaired capital of $ . , President or Cashier. State op , 8s: County of -.} Subscribed and sworn to before the undersigned, a of the said county, this day of , 190 — . rsEAL.! (Official title) Certificates of Stock. — A State bank converting to a National bank is not required to issue new certificates of stock, although it is preferable to do so. If the old certificates are retained they should be stamped to show the new corporate title and date of the changed jurisdiction. Closing Affairs of Old Bank. — A State bank converting 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 jurisdiction; its rights to sue and be sued on obligations of the old bank are not affected. Conversion or Reorganization. — It is impossible to determine without some knowledge of the status of a bank and local con- ditions which plan is preferable in changing to the National system. We are always pleased to have banks write us on the subject, and to advise as we may be able to. We have had long experience in National bank affairs, and assist without charge. Organization papers when executed may be sent to us to examine and make any corrections that may be necessary before filing with the Comptroller, and we are always pleased to furnish Government bonds required for deposit with the United States Treasurer at the lowest market price. 232 BT-IAWS. The power to adopt by-laws for a National bank is conferred on the directors by the National Bank Act (Sec. 5136, R. S.), and is generally incorporated in the articles of association. It is a requisite of every valid by-law of a National bank 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, as before stated, no amend- ment must conflict with provisions of the articles of association, as these provisions can be changed only by amendment of the Articles by the stockholders, and then only in conformity with law. Thus, a by-law prescribing the number of directors the bank shall have, and how many shall constitute a quorum, can not be amended by the directors to conflict with any provision of the articles of association. The following form of by-laws has been found to cover the general requirements of National banks, but the by-laws may contain any provision not inconsistent with the law or articles of association. GENEEAL FOEM FOB SY-IAWS. By-laws of the Ihere insert the title of the hank^ organized under the laws of the United States, and authorized by the Comptroller of the Currency to carry on the business of banking. Elections. 1. — ^The regular annual meetings of stockholders of this bank for the election 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 linsert location of 233 paper in which puhlication is to "be made.'] The board of di- rectors shall, within one month previous to the date fixed for such meetings, appoint three stockholders to be judges of the election for directors, who shall hold and conduct the election, 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 re- turns 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 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 in attendance, the 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 election, but shall not do any business whatever prior to qualifying by taking the oath of ofllce as re- quired 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 oflBce shall order a special election, of which notice shall be given. Judges appointed, and returns made and recorded upon the min- nte-book; and the directors chosen thereat shall be certified to the cashier, and notified as provided by laws 1 and 2. Officers. 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 transac- tion 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 a member was elected, un- less 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. 17 234 OffiCBrs. 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 them 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 and volume of "business of the bank, — a surety company bond pre- ferred.2 9. — The president of the bank shall be responsible for all such such sums of money and property of every kind as may be in- trusted to his care or placed in his hands by the board of di- rectors 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 honestly apply and account for all sums of money and other property of this bank that may come into his hands as such president, and pay over and deliver them to the order of the board of directors, or to any other person or persons authorized by the board to receive them. 10. — ^The teller shall be responsible for all such sums of money, property, and funds of every description as may from time to time be placed 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 discharge of his duties, and that he will faithfully apply, account for, and pay over all moneys, property, and funds of every description pertaining to this 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 them. 11. — ^The bonds of the officers shall be placed in the custody of a stockholder of this bank, to be designated by the board of di- rectors, who shall not be one of the bonded officers, to be sur- rendered by him only upon the order of the board. Seal. 22. — ^The impression made below is an impression of the seal adopted by the board of directors of this bank. {Impression of Seal."} 235 Conveyance of Eeal Estate. 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 presi- dent or cashjer. Increase of Capital Stock. 14. — ^Whenever an increase of stock shall be determined upon in accordance with the articles of association of this bank, it shall be the duty of the board of directors to cause all the stock- holders to be notified thereof, and a subscription to be opened therefor, specifying the terms of payment agreed upon by sub- scribers. 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 sub- scription according to agreement, the board or directors shall de- termine what disposition shall be made of the privileges of sub- scribing for the new stock not taken. Business of the Sank. 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 that 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 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 committee, 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 236 exchange; and who shall, at each regular meeting of the board of directors, make a report of all bills, notes, and other evidences of debt discounted and purchased by them for the bank since their last previous report. 18. — The board of directors may appoint one of its members or an officer of the bank to act as its secretary. 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 proceedings at all regular and special meet- ings 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 expedient, to change the form of books and accounts to be used in the transaction of the business of this bank, and to pre- scribe the general or particular manner in which its affairs shall be conducted. Transfer of Stock. 23. — ^The stock of this bank shall be assignable and transfer- able only on the books of this bank, subject to the restriction and provisions of the banking 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 declaration of dividends; and unless an agreement to the 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. 237 25. — Certificates of stock signed by the president and cashier shall be issued to stockholders, and the certificates shall state upon their face that the stock is transferable only on the books of the bank. Expense. 26. — All the current expenses of this bank shall be paid by the cashier, who shall, every six months, or oftener if required, make to the board of directors a detailed statement thereof. Contracts. 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. Examinations. 28. — There shall be appointed by the board of directors a com- mittee of members thereof, whose duty it shall be to ex- amine every three months the affairs of this bank, to count its cash, and compare its assets and liabilities 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 sol- vent condition, and to recommend to the board such changes in the manner of doing business, etc., as shall seem to be desirable, the result of which examination shall be reported to the board at the next regular meeting thereafter. Qnomms. 29. — ^A majority of the directors, including the president, (or in his absence the vice-president,) shall be a quorum to do busi- ness. Amendments. 30. — These by-laws may be changed or amended by the vote of two-thirds of the directors. 31. — A copy of the by-laws of this bank as in force shall be kept In a convenient place In the bank, to which any stockholder shall have free access during the regular hours of business. 238 MAN'AGEMEJSTT OF I^ATION'AL BANKS. The primary and principal object of banking is loaning money for the profit of the corporation, and the business is established and maintained by accommodating the public in receiving and disburs- ing its funds. This relation to the public calls for a variety of services, and thus a large amount of detail is involved in the conduct of a bank. The Management of a bank is the Board of Directors, and under the Board an executive ofiicer, generally the Cashier, and a clerical force, the executive officer's assistants — tellers, bookkeepers, discount clerk, collection clerk and messenger. In sma.ll banks the work of the clerical force is done by two or three persons, and in very large banks the work requires departments, with a force for each — even in the executive management. It therefore will be seen that a com- prehensive treatment of the subject would require more space than can be given in a book of this character ; but it may suffice to note briefly the duties of the Management, the officers and clerical force and some of the important points about bank affairs. The Board of Directors. — ^This is the responsible representative of both shareholders and the depositors of the bank; therefore a shareholder accepting the office of a director should do so only after a very clear understanding of the trust he assumes, viz. : his personal liability and his responsibility for the proper management of the affairs of the bank. Hence the importance that he should inform himself as fully as possible from such evidence as he can obtain, especially by observation within and outside of the bank — First. That the executive officer is trustworthy and competent, and that the several employees of the bank are of good character. This is seen in their general habits and social relations. Second. A director should keep informed as to the business methods and the accounts of the bank, and have frequent examina- tions made by a committee of the Board of the cash and the books, also of collaterals and other valuables. Third. He should scrutinize carefully the paper discounted, both as to the security and the amount of loans, and see that all in- vestments of funds are reasonably safe and only such as a com- mercial bank should make. 239 The Comptroller of the Currency emphasizes the responsibility of directors by the following instructions : " 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 oflQcially connected, and therefore should not be held responsible for the same, all letters 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/' President. — The work of a bank President varies according to cir- cumstances. He may or may not share in the active management of the bank. As a rule, it may be said, he exercises a general over- sight of the affairs of the bank, with special duties in connection with his position as President of the Board of Directors. Vice-President. — As the title indicates, this officer is authorized, in the absence or inability of the President, to perform all acts and duties pertaining to the office of the President, excepting such as the law specifies shall be performed by the President. The N*ational Bank Act provides in one or more instances that the Vice- President may act in place of the President, e. g., it provides that he may sign the bank's circulating notes, the Comptroller's office there- fore holds that in other cases where the Act does not specifically so provide he cannot perform the duties named for the President; for example, signing reports of condition of Bank, etc. Cashier. — The Bank Cashier is usually the chief executive of- ficer of the bank. Primarily he represents the will of the Board of Directors, and his duty is to see that the policy and plans for- mulated by it are properly carried into execution ; yet he is not the mere representative and subordinate of the Board, he has also responsibilities as the chief executive officer and agent of the cor- poration. To him is generally intrusted the general management of the affairs of the bank, the receiving of deposits, the safe keep- ing of all funds, and their disbursement. His judgment is gen- erally deferred to as to what paper the bank shall discount, and as to all invesments of the funds of the bank. He therefore should 240 be thoroughly conversant with the laws, customs and practices of the banking business, and especially of those of his office ; he should maintain a vigilant oversight of all the work of his subordinates, being responsible for the good conduct and faithful service of the clerical force of the bank. To the public the bank usually is what the Cashier is; therefore while keeping uppermost in mind the trust committed to him, he must also recognize the bank^s obliga- tions to the public, upon which it is dependent for its profits. He should be known as one always approachable, and ready to con- sider 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 customer, to manifest by kindly manner his regret. He should not let political or other prejudices influence his con- duct of the affairs of the bank, but manage it as a business insti- tution, for the profit of the shareholders, yet also for the benefit of the community. Assistant Cashier. — This officer is required only where the duties of the Cashier are more than can be performed by him. Hence, the work of an assistant is to relieve the Cashier in such ways as the Cashier or the Board may direct, and to perform his duties in his absence, excepting in such matters as the National Bank Act requires the action of the Cashier, the Comptroller holding that the Assistant Cashier can only act instead of the Cashier in cases where the law so states. Paying Teller. — The Paying Teller occupies a position of great importance, being the disbursing officer 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. Eeceiving Teller. — The Eeceiving Teller, as his name implies, receives deposits; sometimes also payments of collections and loans, if the bank is small and not requiring collection and discount clerks. His position is closely related to the Paying Teller, to whom he turns over his cash at the close of the day. He should possess strict integrity, good ability and a courteous manner, and have a jiatural tact for handling money and of passing on its genuineness. 241 Bookkeepers. — ^Very great responsibility rests upon the book- keepers, since the paying out of the funds of the bank is governed by their records. They should be therefore accountants of great accuracy, understanding thoroughly bank bookkeeping, and keep- ing abreast of the times in adopting improved methods. The General Bookkeeper of a National bank has the aggregates of all the business of the bank coming through the various chan- nels, including accounts with correspondent banks, capital stock, profit and expense accounts; besides the usual general accounts he keeps an account with the U. S. Treasurer and Eeserve Agents. The Individual Bookkeeper has the accounts of the local de- positors. This position involves a great amount of detail and re- quires great care and accuracy. Discount Clerk. — The care of the record of loans and receiving payment for them falls to the Discount Clerk. He should be pro- ficient in calculating time and interest. And his duties being of a confidential nature, he should avoid divulging the business of his desk to any persons but those entitled to know. Collection Clerk. — The Collection Clerk has charge of the drafts, bills of exchange, notes, etc., sent to the bank for collection. He should be familiar with the laws and customs as to the various kinds of paper placed in his hands. The Messenger. — The duty of the Bank Messenger is to pre- sent paper to those who are to pay or accept. He should be well posted in the law and regulations regarding collections. Clerical Force. — The Clerical Force should be characterized by fidelity and efficient service, and of this there should be due recogni- tion by the officers of the bank in a kindly word of appreciation from time to time, and, better still, in an increase of salary or an extra allowance occasionally when good dividends are declared. Verification of Work. — One of the best rules for a bank to adopt is, that the work of each employee be examined and verified often by shifting of clerks, under the direction of the executive oflScer, and occasionally full examinations of the bank made in the 242 same manner. As often as every quarter a committee of directors, appointed for the purpose, should make an examination and a re- port thereof should be entered upon the minute-book. Appointment and Bonds of Officers. — The officers, other than the President, should be appointed to hold their offices indefinitely, 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 employees liberal but not ex- travagant salaries, so as to remove from them the temptation of speculating with or otherwise wrongly using the bank's funds. legal Attorney. — It is an excellent plan for banks to have a special attorney, possibly retained by the year, 30 that the executive officer of the bank m-ay be able to command counsel and decide with promptness questions constantly arising which require knowledge of the law. loans and Disconnts. — Ample and undoubted security should be required for all loans, and of a readily convertible character if in the shape of collaterals. Let nothing be done to encourage specu- lation, but give facilities only to legitimate business operations. Make loans and discounts on as short time as the needs of cus- tomers 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 re- newals of their paper to suit their own convenience. Such practice is not the attribute of good banking, the proper foundation of which is impartiality of treatment, and the exaction of the per- formance 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 to equally good advantage, for it is only by always requir- ing prompt settlements that the discount line can be controlled, and made at all times reliable. Distribute the accommodations of the bank as widely as possible. 243 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. 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 stock- holders take out in loans the money they have put in as capital, for such a bank, being rendered unable to accommodate the busi- ness public outside of its owners, deprives itself of one of the princi- pal means of success. 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 institu- tions. There are few items, if any, that look better upon a balance sheet of a bank than a large surplus, and none so well calcu- lated to secure for it public confidence; it is, therefore, on all accounts the best policy to accumulate such a fund as rapidly as possible, even if dividends to stockholders have to be kept down to a low rate for a time. The wisdom of this is seen in the provision of the Bank Act for the accumulation of and maintaining a surplus of at least fifty per cent, of the capital of the bank. Keports. — The instructions given by the Comptroller of the Cur- rency 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 correspondence. This may be avoided by verifying the reports before forwarding. 244 Stock Certificates. — The greatest care should be exercised in re- gard to stock certificates and transfers, and when new certificates are issued to see that those in lieu of which they are given are promptly surrendered and cancelled. Collaterals. — The stocks, bonds, etc., held by banks as collateral 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. Bank Eecords. — In all corporate bodies the recording and care- ful preservation of the record of proceedings of all meetings held 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 elec- tion of directors fully recorded, so that there may be in permanent 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 recording 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 officers should also be recorded, bonds required of them, and the bonds approved by the directors; in short, all matters pertaining to the organiza- tion of the bank, and the subsequent proceedings of the directors in the supervision and management of its affairs clearly and fully set out in the records. U. S. Treasurier's Receipt. — This receipt for U. S. bonds de- posited by the bank with the Treasurer should be kept where readily available. Banks frequently are unable to find it when required by the Treasurer in the withdrawal of bonds. In case of loss a dupli- cate may be issued on affidavit that after diligent search the original cannot be found and will be surrendered if found, and such affidavit will be accepted for withdrawal of bonds in lieu of the Treasurer's receipt. 245 Certificates of TT. S. Bond Examinations. — The certificate of the annual examination made by the agent of the bank, of the U. S. bonds of the bank on deposit with the Treasurer is generally called for by the Bank Examiner, and therefore should be kept where it can be readily produced. In Conclusion. — It should be remembered that integrity, force, ability, faithfulness, promptness, 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 the better 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 contantly developing, and the most successful and most useful bank is the one which most quickly adapts itself to the times. 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 provisions of the laws govern- ing National banks. VOLTJNTARY IIQTJIDATION. The closing of the business of a National bank is either by- voluntary liquidation or involuntarily by appointment of a Ke- ceiver. The closing by Eeceivership is treated fully in the first part of this work under the section of the Revised Statutes pertaining to Receivership. Voluntary Liquidation may be for various purposes: an Asso- ciation may for some reason wish to discontinue business before its charter expires, or on expiration of its charter, without renew- ing. In either case the object may be : To close business ; To sell the business; To reorganize as a new association, or to consoli- date with one or more other associations. The procedure of liquidation, for whatever purpose, is prac- tically the same, but as there are certain points to be noted ac- cording to the particular object in view, the subjects will be treated to some extent separately. * IiaTJIDATION TO DISCONTINUE BUSINESS. Authority. — The law authorizes any National bank to go into liquidation by a vote of its shareholders owning two-thirds of its stock. (Revised Statutes, 5220.) Nothing is said in the statute about the 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 if he deems it necessary ; for until he is satisfied that the bank is solvent, he will not consent to the withdrawal of the bonds of the bank deposited with the U. S. Treasurer, and, although a vote may have been taken to place the bank in liquidation, the Comptroller still has authority to appoint a receiver should he consider such action called for. Procedure. — By implication. Section 5144 R. S. requires that a vote of the stockholders be taken at a meeting called for the pur- pose in the manner provided for in the articles of association 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 246 247 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 shareholders may vote by proxy at this, as well as at other meetings, but a director, other oflBcer, clerk, teller or bookkeeper of the bank is prohibited by law from acting as such proxy. The shareholders should incorporate in the resolution for liqui- dation a provision either that liquidation shall begin immediately on the day the vote is taken, or at a determined future date. FoEM OF Resolution. Resolved, That The National Bank be placed in voluntary liquidation under the provisions of sections 5220 and 5221, United States Revised Statutes, to take effect , 19 — . If desired there may be prefixed to the resolution such recital of the reasons for the action of the shareholders as may be deemed appropriate. Certifying to the Comptroller. — The evidence to be furnished to the Comptroller of the Currency of the fact of liquidation is a copy of the resolution of the shareholders; a certificate of the cashier or president, under seal of the bank, that shareholders own- ing two-thirds of the stock have voted to place the bank in liquida- tion, and a copy of the notice calling the meeting, showing date of mailing or publication. Notice to Creditors. — Notice to note-holders and other creditors to present their claims for payment should be published, as re- quired by Section 5221 of the Kevised 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 or in a weekly edition of a daily paper is suflBcient. > 248 Witlidrawal of Bonds. — The bonds can be withdrawn as soon as the liquidation begins, provided the Comptroller of the Cur- rency 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, and pay any tax due on circulation and charges for redemptions over the amount to the credit of the bank in the five per cent, redemption fund. Ordinarily, the five per cent, fund is ample to meet the tax and charges. In case thil fund is more than sufficient or an excessive amount is deposited, the excess will be returned to the depositing bank. This deposit must be made within six months from date of going into liquidation. (Sec. 5222 E. S.) No New Business. — When the bank has been placed in liquida- tion it can not transact any new business and the power of its officers to bind the shareholders is only that which results by implication from the duty to wind up and close its affairs. (Richmond v. Irons, 121 U. S., 27; Schroder v. Manufacturers' N'ational Bank, 133 U. S., 67.) The following is the form of resolution for liquidation and cer- tification of vote to the Comptroller of the Currency and notice to be published, also form of oath of publisher. These forms are fur- nished by the Comptroller. Resolution foe Voluntabt Liquidation. The National Bank of ^ , 19—. Charter No. . At a meeting of the shareholders of the National Bank of , held on , 19 — , thirty days' notice of the proposed busi- ness 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 "The National Bank" be placed in voluntary liquidation, under the provisions of sections 5220 and 5221, United States Revised Statutes, to take effect , 19 — . The above resolution was adopted by the following vote, representing two-thirds of the capital stock of the association : Names of Shareholders. Kesidbncb. Name of Proxy. No. of Shares. 249 Stock Voted Against Resolution. Names of Shareholders. Besioengb. Name of Proxy. No. of Shares. Stock Not Repbesented at Meeting. Names of Shareholders. Besidbncb. No. of Shares. Total number of shares voted in favor of the resolution . Total number of shares voted against the resolution . . . Total number of shares represented at the meeting Total number of shares not represented at the meeting Total number of shares of capital stock I hereby certify that the foregoing 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 , 19 — . [ seal of bank.] , President or Cashier. Subscribed and sworn to before me, this day of , A. D. 19 — . [ seal or NOTAEY.] -, Notary Public. The following is the form of notice to be published for a period of two months from date on which resolution to liquidate takes effect, in a New York and local newspaper and publication in a weekly or weekly edition of daily is sufficient. When publication has been made, affi- davit of the publisher should be sent to the Comptroller of the Currency: FoEM OF Notice. The National Bank , located at , in the State of , is closing its affairs. All note-holders and other creditors of the association are therefore hereby notified to present the notes and other claims for payment. Dated -, 19-. President or Cashier. Affidavit of Publication. State of County of -.} ss: of of -, being duly sworn, deposes and says that he is the publisher -, a newspaper published in the of , county 18 State of and that the annexed advertisement of the 250 Certificate for Voluntary Liquidation of the National Bank of has appeared in each issue of said paper for a period of at least sixty days, beginning the day of and ending the day of , 190 — . Subscribed and sworn to before me, ^ a in and for the State and County aforesaid, this day of , 190 — . [Seal of Officer.] Oath to be sent to the Comptroller with clipping of advertisement. liquidating Agent. — When a National bank has been placed in liquidation, either by vote of shareholders or as a result of expira- tion of charter, the settlement of its affairs devolves by law upon the shareholders, either through an agent or committee specifically authorized by the shareholders, or in event of such non-authoriza- tion then through the board of directors and frequently the direc- tors, by formal resolution, authorize one of their number to act as the liquidating agent. All obligations of the bank become due and payable when the bank is legally closed, and they should be settled immediately. The assets remaining should be converted into money as promptly as possible and distribution made pro rata among the shareholders. Dividend Payments. — Where full settlements with shareholders are not effected at once, the amount of the first dividend should be entered on stock certificates, when presented, and endorsements sub- sequently made as additional dividends are paid. When the assets have been fully paid to shareholders the certificates should be sur- rendered and cancelled. Power of Liquidating Agent. — ^The liquidating agent stands in the same relation to the bank as do the directors during its active existence; that is, any transactions in connection with the sale or other disposition of assets, and general transactions relating to liquidation, should be effected under the name of the association by the liquidating agent. 251 nQTJIDATING TO SELL BUSINESS OE TO REORGANIZE. Procedure. — See under Liquidation to Discontinue Business. Private Disposition of Assets. — Where a bank is closed for the purpose of selling its business to another bank, or in contemplation of reorganization, by the unanimous consent of shareholders, all of the property of the bank may be legally disposed of without the for- mality of a public sale, the claims of creditors having been paid or provided for. Shareholders' Rights. — Shareholders are entitled to the full value of their stock in cash, and the proper method of ascertaining the real value of the property, unless shareholders representing the stock are satisfied with the offer made, is by public sale, upon which they may insist. Sale of Assets to New Bank. — Where the directors representing a majority of the stock of the closed bank organize a new bank they are at liberty as directors of the new association to buy the property of the closed bank at public sale, but have no right to buy it at a private sale at a price which they may put upon it themselves. Where, however, the price is a fair one and share- holders are allowed to participate in the reorganization, it is not likely that a court would order a public sale, there being no reason- able prospect of benefit from such public sale. LIQUIDATION BY EXPIRATION OF CHARTER. Settlement of Affairs. — The settlement of the affairs of a bank closed by expiration of the corporate existence is the same as though the bank had been placed in liquidation by vote of shareholders during its legal life. Usually the board of directors is kept up to superintend the liquidation, or a liquidating agent or committee may be appointed for the purpose. No Vote Necessary. — !N"o action on the part of shareholders is required to terminate the corporate existence of a National bank which has reached the end of its corporate life of twenty years. Expiration legally results from failure to effect extension. 252 Certification of Closing by Expiration of Charter. — Certification of expiration of a bank's corporate existence must be made to the Comptroller of the Currency, under seal of the association, by the President or Cashier, and notice to creditors that the association is closing published in a New York and local newspaper for a period of two months from the date of expiration of charter. Notice may be in a weekly paper or a weekly edition of a daily. FoBM OF Ceetification. To the COMPTBOLLEB OF THE CUBEENCY, Washington, D. C: 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 , 19 — , 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, h-ereto 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 to Cbeditobs. 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 , 19 — . 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. Dated , 19 — , President or Cashier. Note. — An affidavit of the publisher that the required publication has been made with a clipping, containing notice from one issue of each paper should be sent to the Comptroller of the Currency. See form of Affidavit under Liquidation. Withdrawal of Bonds, — ^Bonds on deposit to secure circulation may be withdrawn at any time within six months of the date of expiration by depositing lawful money for the redemption of out- standing notes of the bank. .253 « Extension to Liquidate. — The corporate existence of a National bank the charter of which has expired by limitation is extended by Act of July 12, 1882, for the purpose of effecting liquidation and only for that purpose. naUIDATION FOR CONSOUDATION. Authority. — The only reference in the Bank Act to the consoli- dation of National banking associations is that contained in Section 5223, U. S. E. S.^ which is to the effect that an association which is in good faith winding up its business for the purpose of consoli- dating with another association shall not be required to deposit money for its outstanding circulation, but that its assets and lia- bilities shall be reported by the association with which it is in progress of consolidation. By implication this provision would appear to authorize the assignment of bonds on deposit with the Treasurer of the United States to secure the circulation of the liquidating bank to the absorbing association, and to require the maintenance of a redemp- tion fund for outstanding issues of the bank which has gone into liquidation. With the redemption of circulation of the closed bank would follow the issue of a like amount of notes of the ab- sorbing association. As a matter of fact, this permissive feature has rarely been availed of, as it has been found more advantageous to deposit lawful money to redeem the notes of the liquidated bank and to simultaneously issue new notes of the absorbing association on the additional bonds assigned. In the event, however, that the banks in interest desire to pursue the course authorized by Section 5223, upon filing documentary evidence with the Comptroller of the Currency that the absorbing association has assumed all the liabilities, including circulation of the liquidating bank, the Treas- urer of the United States, upon proper authority from the board of directors of the latter association, will assign and transfer bonds on deposit to secure such circulation to the continuing association. Forms of resolutions relating to assumption of liabilities of a liquidated association, and transfer of bonds on deposit to secure circulation, to be executed and filed with the Comptroller of the Currency, are as follows : 254 Resolution Assuming the Liabilities of an Association Placed in Liquidation fob Pubpose of Consolidation. I, , cashier of the National Bank of , hereby certify that at a meeting of the Board of Directors of said association, held on the day of , a resolution was adopted relative to the consolidation of the National Bank of with the asso- ciation first mentioned, under section 5223 of the Revised Statutes of the United States, which resolution is in the words following : "Resolved, That this association as a part of the consideration for the purchase of all the assets of the National Bank of * does hereby assume all the liabilities of said National Bank of , Including the redemption of its circulating notes." And, in pursuance of said resolution, the National Bank of has acquired all of the assets of the said National Bank of , and assumed a^l its liabilities, including the redemption of its circulating notes, the association last mentioned having been placed in voluntary liquidation in conformity with the provisions of sections 5220 and 5221 of the United States Revised Statutes for the purpose of consolidation. , [seal.] Cashier and Secretary of the Board of Directors. Resolution Authoeizing Withdbawal and Assignment of Bonds as a Result of Consolidation. At a meeting of the Board of Directors of , held at its banking house on , the following resolution was adopted : Resolved, That the Comptroller of the Currency be, and he is here- by authorized to withdraw $ , U. S. bonds, deposited with the Treasurer of the United States by this bank to secure circulation, and described as follows : $ per cent, of the loan of , and that the Treasurer U. S. be, and is hereby authorized to assign and transfer the same to said Treasurer in trust for , which association assumes the liabilities of the said , including the redemption of its circulat- ing notes. I certify that the above is a true extract from the minutes of said meeting. , [seal of bank.] Cashier and Secretary of Board of Directors. Note. — The Treasurer's receipts for the bonds proposed to be with- drawn must be forwarded, with this form properly flljed, to the Comp- troller of the Currency. Riglits of Shareholders. — No rights exist, or are conferred by law, upon the shareholders of a liquidating association as share- holders of the bank with which its business is being consolidated. 255 nor can such shareholders become shareholders of the absorbing bank, except through the voluntary action of shareholders of the latter. Increase of Capital and Allotment of Stock. — Assuming that shareholders of the liquidated bank are to become shareholders of the continuing association, it becomes necessary for the shareholders of the latter association to increase the capital stock to the requisite amount .in conformity with the provisions of the Act of May 1, 1886, and to waive their right to participate in the increase in order that the stock can be sold to shareholders of the closed association. The right to participate in an increase in the capital stock of a bank exists at common law and is generally written anto the articles of National banking associations. Waiver of that right is essential I to enable the stock to be sold to others. Assumption of Liabilities. — When shareholders of the continuing bank have effected an increase in capital, and authorized the sale of the stock to shareholders of the liquidated bank, the directors of the former may contract with the directors or liquidating agent of the closed association for the assumption of liabilities to depositors and other creditors, on transfer of an equivalent amount of assets, and for the purchase of assets representing shareholders' interests, to enable shareholders, with the proceeds, to pay for stock to be issued to them. Payment for Stock. — It is not regarded as essential that the payment for such assets should be made in actual money, as a check (cashier's) or draft will answer the purpose as constituting a demand obligation, to be satisfied either in cash or in stock to be issued to the shareholders as a result of the contemplated con- solidation. Pnrchasingf Assets of liqnidating Bank. — Where consolidation is effected without making provision for shareholders of the liquidated bank by increasing the capital of the continuing association, the consolidation resolves itself into a mere purchase of the business of the closed bank which may carr}- with it an assumption of liabili- ties to depositors and other creditors, offsetting an equivalent 256 amount of assets transferred, and the payment in cash of the liquidating value of assets representing shareholders^ interests. A contract of that character may be entered into between the absorb- ing bank and the directors or liquidating agent of the closed asso- ciation. Liquidating Two or More Banks for Consolidation. — In some instances, where consolidation of business only is deemed advisable, it has been found preferable to place the associations interested in voluntary liquidation in conformity with the provisions of Section 5220 of the Revised Statutes, and organize a new bank. When the capital stock has been paid in, as required by law, the asso- ciation may acquire the business of the liquidated banks in the manner hereinbefore outlined. This course is frequently found advisable where it is desired to effect a change in the personnel of the shareholders and to start business with a "clean sheet.'' Assets of the closed banks, not purchased by the new association, are ordinarily placed in charge of liquidating agents for collection and pro rata distribution to shareholders of record at date of liquidation. EXTENSION OF COEPORATE EXISTENCE. Provision for Extension. — The Act of Congress approved July 12, 1882, provided that any National banking association, 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, may extend its period of suc- cession, by amending its articles of association, for a term of not more than twenty years. The Act of Congress approved April 12, 1902, authorizes the Comptroller of the Currency in the manner provided by, and under the conditions and limitations of the Act of eJuly 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. The course of procedure, on the part of an association, in effect- ing a second extension of charter is the same as in the case of a first extension. Date of Expiration of Old Charter. — The date of expiration of the old charter is determined by the date of execution of the organi- zation certificate, as Section 5136 of the Eevised Statutes provides that all associations organized under it shall have succession for twenty years from the date of the execution of the organization certificate. If the paper is lost, or the date in any way uncertain, information can be obtained on application to the Comptroller of the Currency. Application for Extension. — Under the Act of July 12, 1882, and the regulations of the Comptroller's ofiice, banks are permitted to file their application for extension with the proper papers at any time within two years prior to their expiration ; but usually applica- tion for extension is not made until within a few months prior to expiration of charter, and this gives the Comptroller sufficient time to satisfy himself as to the condition of the bank, and upon re- quest the necessary blanks will be sent from that office. The following are the forms furnished by the Comptroller: ^57 258 Amendment of Abticles of Association. 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, or any amendment thereof, we, the undersigned, shareholders of " The /* located at , in the County of and State of , owning the number of shares of the capital stock of said association set op- posite our respective names, aggregating not less than two-thirds of the stock of said association, do hereby consent and agree that the article of the Articles of Association of said National Banking Associa- tion be, and is hereby, amended to read as follows : " This association shall continue until close of business on , 19 — , unless sooner placed in voluntary liquidation by the act of its shareholders owning at least two-thirds of its stock, or otherwise dis- solved by authority of law." In witness whereof, we, the undersigned, have hereto set our hands. Date of Signing. Signature of Shareholder. Address. Signature of Proxy. No. of Shares. Certificate to the Comptbolleb. -, 19—. To the Comptbolleb of the Cubbency, Washington, D. C: Sib : 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, or any amendment of said act, I hereby certify that shareholders owning not less than two-thirds of the •capital stock of " The ," have consented in writing to the exten- sion of the charter of said association; that the signatures to the at- tached amendment of the Articles of Association, executed in dupli- cate, are the true and correct signatures of said shareholders, or of their lawfully appointed attorneys, and that one of the instruments, in all respects like the other, is on file in the bank. The foregoing certificate is made under seal of the association in ac- cordance with a resolution of the Board of Directors adopted at a meeting held on the day of , 190 — , in which the president, or cashier, was also authorized to make an application for the approval of the amended Articles of Association, a copy of which resolution has been recorded on the minute book of the bank. [seal of the bank.] President or Cashier. (The above certificate should not be made prior to date on which the aiBPiuiiiigjoJ; is last signed.) 259 Request fob Approval. The Comptroller of the Currency is hereby requested to approve the foregoing amendment of the Articles of Association of said bank, ex- tending its corporate existence for twenty years, pursuant to the act of Congress entitled " An act to enable National Banking Associations to extend their corporate existence, and for other purposes," approved July 12, 1882, or any amendment of said act. [SEAL OF THE BANK.] President or Cashier. Consent of Shareholders. — The law does not provide that a meet- ing of the shareholders shall be held, as it is necessary only to secure the written consent of those representing two-thirds of the stock, and this may be done by sending in advance to shareholders at a distance a power of attorney to be signed and returned, any person competent being empowered to act as attorney. The follow- ing form may be used for this purpose : PowEB OF Attorney. Know all men by these pbesents : That I, ', of , hereby constitute and appoint irrevocably my true and lawful attorney, for me and in my name and stead to sign all necessary papers in connection with the extension of the corporate existence of the , under the act of Congress approved July 12, 1882, or any amendment thereof, and I hereby consent that the article of the Articles of Association of The be so amended as to read as follows: " This association shall continue until close of business on , unless sooner placed in voluntary liquidation by the act of its share- holders 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 effectually as I might do if personally present. In witness whereof I have hereunto set my hand and seal this day of , in the year 190 — . ^ Signed and sealed in presence of . Authority of Repbesentative of Otheb Corpobation Consenting to Extension Cobpobate Existence of National Bank. , 190—. At a meeting of the of the of < — , held on the day of • — , 190 — , it was Voted, That be, and he is hereby, appointed irrevocably as its attorney, with power of substitution, to consent to and sign, in its 260 behalf, the amendment of the article of the Articles of Associa- tion of The National Bank , said amendment read- ing as follows: " This Association shall continue until close of business on , unless sooner placed in voluntary liquidation by the act of its share- holders owning at least two-thirds of its stock, or otherwise dissolved by authority of law." A true copy from the records. Attest : # [AFFIX SEAL.] These powers of attorney, signed by the shareholders, should not be sent to the Comptroller with the amendment to the articles of association, but retained in the files of the bank. If preferred, a shareholders' meeting may be called for a con- venient date to enable the shareholders to sign the necessary papers. Notice of the meeting may be sent by mail to each shareholder, or given by publication. At this meeting the shareholders may appear in person or by attorney, the power given to the latter being similar in form to that inserted above. Certificate of President or Cashier. — The certificate of the president or cashier that shareholders owning two-thirds of the stock have consented in writing to the extension and the request for approval should be executed, and transmitted to the Comp- troller, at least two months previous to the expiration of the cor- porate 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 12, 1882, and to enable the bank to comply with possible conditions before the time for renewal of charter. Anthority to Sign. — If any shares of the bank stand in the name of administrators, executors, trustees, or guardians, and it becomes necessary to have the consent of the owners of these shares to make up the majority required to authorize the amendment, duly certified copies of the legal appointment of such administrators, executors, trustees, or guardians should be obtained and filed with the bank's records relating to the extension. When stock stands in the name of an assignee, who signs the amendment^ there must be evidence showing that the shares of stock 261 have been regularly transferred to him, as such assignee, on the books of the bank. When the amendment is signed by an attorney acting for shareholders, properly executed power of attorney is required. Certificate of Extension. — The certificate of the Comptroller ap- proving extension will be issued on the date of expiration of the existing charter. Circulating Notes. — The law requires that circulating notes issued to the bank after the new period of succession begins shall be of different devices from those issued before; and this necessitates the procuring of new plates, which are prepared at the expense of the bank. This expense will be $50 for a plate of two impressions — $50s and $100s— and $75 for a plate of four, viz. : $10, $10, $10, $20, or $5, $5, $5, $5, the cost being the same as for the original plates. A blank to enable banks to order the preparation of plates for the printing of new circulation will be furnished by the Comp- troller, and the order should be made out and sent with the exten- sion papers so that the plates may be engraved and the currency printed to be ready when the charter is renewed. The new circulating notes for the full amount of the bond deposit will be issued to the bank at date of extension on deposit of lawful money sufficient to redeem its outstanding circulation, or they will be issued as the old notes 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 portion of the old circulation as may then remain outstanding ; but the full deposit may be made at once or in instalments, or at the end of three years. Bond Deposit witli XT. S. Treasurer. — No transfer of bonds is necessary, as the extended association is in all respects identically the same as before extension, being placed in the same position as if the law had allowed it at the outset forty years from the date of its organization, of which twenty have expired. 262 Shareholders Dissenting to Extension. — Section 5 of the Act of July 12, 1882, conserves the interest of shareholders not desiring to continue their connection with the bank, but desiring to with- draw and to be paid the surrender value of their stock. The act provides that notice of intention to w^ithdraw shall be given to the directors within thirty days from the date of issue of certificate authorizing extension of the charter, and that a committee of ap- praisal shall be appointed — one member by the withdrawing share- holder, one by the bank, and a third by the two. The bank and the dissenting shareholder may select as members of the committee expert accountants or any other persons competent to perform the duties of appraisers. In case the value fixed is unsatisfactory to the shareholder, he may appeal to the Comptroller of the Currency, whose appraisal shall be final and binding. The right of appeal is not given to the bank. In case the valuation fixed by the Comp- troller exceeds the amount fixed by the committee, the expense of reappraisal must be borne by the bank ; otherwise by the share- holder appealing. The law makes no provision for payment of expenses incident to the first appraisal ; hence it is incumbent upon the withdrawing shareholder and the bank to determine this ques- tion. The shares appraised and surrendered must, after due notice, be sold at public sale within thirty days after the final appraisal. Generally speaking, the market price of stock represents the sur- render value, although, in some instances, the market price may be above or below the actual value of the stock. The proper course to pursue is to have a very careful examination made of the assets, taking into consideration the actual value of items exceeding the book value, and deducting items admittedly worthless. The ques- tion of " good will " is not to be considered, although it may be of material value to a bank continuing business. EEORGANIZATION VERSUS EXTE13fSI0N. Reorganization May be Preferable to Extension. — The foregoing instructions apply to the extension of the bank which legally con- tinues it in all respects what it was prior to extension. . It may, however, be deemed best by those principally interested in the National bank about to expire if owning the controlling stock not to avail themselves of the foregoing method. There are obvious reasons for thus. For example : In a twenty years' life the personnel of the stockholders of an association undergoes great changes. The stock which was originally 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-resi- dents, whose only interest in the institution is to draw dividends. The active stockholders remaining in such associations will doubt- less prefer in many instances to let the old association expire, and, with their proportion of the capital, joining with themselves other new capitalists siuch as they may think will add strength, form a new association to occupy the place vacated by the one which has expired. ITame of New Bank. — The proviso in Section 5 of the Act of July 12th, 1882, prevents the use of the old name for a new association unless all the shareholders in the old bank are assigned shares in the new bank proportionately to those they held in the old ; therefore unless for some reason this is done it will be necessary to select a title materially different from that of the expiring asso- ciation, as the Comptroller otherwise will not give his approval. Procedure. — The new associates should make application to the Comptroller for authority to organize, and upon receipt of advice of approval and of organization blanks they should execute articles of association, organization certificate, oath of directors, and file these papers, with an order for circulation, in the office of the Comptroller of the Currency about two months 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 certified to the Comptroller at the same time bonds are deposited, and this should be done some time before the old bank expires. 263 264 As ciTCulating notes can not be delivered under forty-five days from date of issue of certificate authorizing the bank to begin busi- ness, it may be found advisable to complete the organization a suf- ficient time in advance of the expiration of the charter of the old bank and opening of the new to insure the delivery of notes at that time. The shareholders of the new bank can put into it moneys 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 share- holders, and generally it is advantageous to sell to the new bank all that can be legally taken by it. It cannot take any real estate except banking house nor real estate paper or mortgages, nor any stocks or assets of any kind known to be of questionable value. 'No stockholder of the old bank can be compelled to take stock in the new bank. The transfer of deposits from the old bank to those of the new should be made by check or by agreement of new bank to honor checks of depositors in old bank, any depositor being at liberty to withdraw his deposit either before or after the change. A set of new books, of course, should be opened by the new asso- ciation. liqnidation of Old Association. — The method of liquidating the old bank which goes out on expiration of charter is given in the chapter on Liquidation. NATIONAL BANKS AS GOVERNMENT BEPOSITAEIES. Depositaries for Government funds are established in different parts of the country for the convenience of the Government, and thus serve also general business interests. Prior to 1840, the banks were utilized for this purpose; then an Independent Sub-Treasury System was established, and this system, as remodeled in 1846, is still maintained. In 1864 provision was made in the National Bank Act that National banks might be desig- nated by the Secretary of the Treasury as Depositaries of Public Moneys, excepting receipts for customs. (Section 5153, R. S.) The exception of customs was made on account of gold being then (during the Civil War) at a premium. The Government having to pay in- terest on the Public Debt in gold, all revenues payable in coin were brought into the Treasury. It would be of advantage to the Government and banks on the Cana- dian and Mexican borders and elsewhere to have receipts for customs so deposited, but Congress has not yet changed the law so as to permit it. The necessity of designating National banks Government Deposi- taries, in addition to the Sub-treasuries, has been that the latter sys- tem is not sufficiently extended to meet the requirements of Collectors and Disbursing Officers, and the designation of banks is determined by the requirements of the Government in this regard, that is, the designation of what are known as Regular or Permanent Depositaries, as distinguished from Temporary Depositaries. Regular Depositaries are, as before stated, designated for the convenience of the Government as to its revenue receipts and its disbursements. Temporary Depositaries are National banks designated for special deposit of Government funds. The provisions of Section 5153, R. S., invests the Secretary of the Treasury with authority to deposit all Public Moneys with the banks, excepting receipts from customs, so that when there has accumulated a large surplus in the Treasury, the Secretary has, for the business interests of the country, utilized the banks to put in circulation a certain portion of such surplus. The first extensive use of the banks for this purpose was made in 1879, at the time of the resumption of specie payments, which re- sulted in the accummulation of a large surplus, and, from time to time, when the Government receipts have been largely in excess of expenditures, the Secretary has placed such surplus in circulation by designating some of the banks as Depositaries. 19 265 J266 This latter class of Depositaries are, as above mentioned, desig- nated in various sections regardless of locality, with a view to pro- moting business interests. Secueity fob Public Money Deposits. — ^The deposit of Public Moneys with the banks, whether Permanent or Temporary Depositaries, is made only upon the banks furnishing security satisfactory to the Secre- tary of the Treasury in accordance with the provision of the law (Sec. 5153, R. S.) that he shall require the association designated ** to give satisfactory security by the deposit of United States bonds and otherwise." The security at present and ordinarily required is Grovernment bonds, In amount (at their face value) equal to the deposit of Public Moneys, which a bank is authorized to hold. The minimum bond deposit re- quired is $50,000, face value, and the ruling of the Department is that no bank with less than $50,000 capital will be designated. The Secretary has construed this provision as including, not only Government bonds, but in addition to them (not without them) other bonds, which in his judgment would be good security. Upon this construction of the law he has accepted certain State and Municipal bonds; but the policy of the Treasury Department is to accept other security in addition to (Government bonds only when the former are at a very high premium, and therefore diflBcult to obtain. Amount of Deposit. — In the case of Regular Depositaries, the amount of deposits allowed is according to the receipts in the dis- trict where located, and if the receipts are large, two or more banks in the same place may be designated. The Collector of Internal Rev- enues is governed by the instructions of the Secretary as to the bank or banks with which he shall deposit. Generally, where there are two or more Depositaries he is permitted to alternate his deposits. Excess of Deposits. — Any excess of Public Moneys deposited over the amount for which the bank has given security is required to be remitted to the nearest sub-treasury on the day it is deposited. If this excess is continuous and large, the Secretary may permit a bank to increase its limit by the deposit of additional security, or may designate another bank an additional Depositary. Kind of Deposits. — The deposits with banks are very largely from Collectors of Taxes on liquors and tobacco, the bulk of Internal Revenue being from these two sources, there are also receipts from sales of Public Lands and more or less from miscellaneous sources. These deposits of revenue receipts from all sources, excepting on im- ports, are the usual deposits with Regular Depositaries. 267 Other sections of the Revised Statutes provide that certain other Government Funds may be deposited with the banks. FIRST: — Funds of Disbuesing Officers. — Sec. 3620, R. S., pro- vides that " in places where there is no Treasurer or Assistant Treasurer, the Secretary of the Treasury, when he deems it essential to the public interest, may specially authorize in writing the de- posit of such money in any other public depositary, or, in writing, authorize the same to be kept in any other manner and under such rules and regulations as he may deem most safe and effectual to facilitate the payments to public creditors." It will be noted that such deposits cannot be made with banks in places where there is a Sub-treasury. Second. That the designation of a National bank as a Government Depositary under Sec. 5153, R. S., does not authorize it to receive such deposits, but in order to be- come a Depositary for such funds, a Regular Depositary must be further designated specially for the purpose. Third. The provision that the Secretary may " in writing authorize Disbursing Oflacers' Funds to be kept in any other manner, as he may deem most safe and effectual to facilitate the payments to public creditors;" up to the present time has only been used for Disbursing Officers in out of the way places, permitting them to hold their own funds at their own risk, but generally when so situated Disbursing Officers keep their funds in some Depositary in New York, and local banks are glad to secure eastern exchange by cashing their New York drafts. SECOND:— Funds of Postmasters. — Section 4046, R. S., provides that any Postmaster may deposit under the direction of the Post- master-General in a National bank designated by the Secretary of the Treasury for that purpose, to his own credit as Postmaster any money-order or other funds in his charge, or negotiate drafts or other evidences of debt through such bank, when instructed or required to do so by the Postmaster-General for the purpose of remitting sur- plus money-order funds from one post-office to another, to be used in payment of money-orders. The Post-office Department has found very little occasion for availing itself of this provision, excepting that in various sections of the country designated Depositaries have been authorized to receive surplus money-order funds for the convenience of local Postmas- ters, as otherwise it is necessary for the Postmasters to purchase ex- change to transfer such funds. These deposits are reported to the Treasury Department like other deposits, and the latter credits the Post-office Department. THIRD: — Postmasters Where No Depositary. — Section 3847, R. S., provides that a Postmaster within a county where there is no 268 designated Depositaries, Treasurer of a mint or Sub-Treasurer, may, at his own risk and in his official capacity, deposit in a National bank, in the place or county where he resides. In case of such deposit this section provides that no authority or permission is, or shall be, given for the demand or receipt by the Postmaster, or any other person of interest, directly or indirectly, on any deposit made as herein described; and every Postmaster who makes any such 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. It will be seen from this provision of the law that arrangements for deposits referred to in this section are to be made, not with the Postmaster-General, but with the local Postmaster. CouET Funds. — Provision is made in Sections 995 and 996, Revised Statutes, that "All moneys paid into any court of the United States or received by the officers thereof, in any case pending or adjudicated in such court, shall be forthwith deposited with the Treasurer, an Assistant Treasurer, or a Designated Depositary of the United States, in the name and to the credit of such court: Provided, That nothing therein shall be construed to prevent the delivery of any such money upon security, according to agreement of parties, under the direction of the court." But that (Sec. 996, R. S.) no money deposited as aforesaid shall be withdrawn except by order of the judge or judges of said courts respectively, in term or in vacation, to be signed by such judge or judges, and to be entered and certified of record by the clerk; and every such order shall state the cause in or on ac- count of which it is drawn. The deposit of moneys referred to in these sections of the Revised Statutes come under Miscellaneous Deposits. Other miscellaneous items, such as " the Semi-Annual Tax on National Bank Circulation, Patent Fees," etc., are not frequent. Prohibitions. — Section 5488, R. S., imposes a penalty on any Dis- bursing Officer of the United States depositing public money in- trusted to him, except as authorized by law. Section 5497, R. S., imposes a penalty on any banker or broker or other person not an authorized depositary of public moneys, receiving from a Disbursing Officer, Collector of Internal Revenue, or other agent of the United States, any public moneys excepting in payment of a debt against the United States. Accounting for Deposits and Disbursements. — A National bank having received the designation as a Depositary of public moneys. Regular or Temporary, and having made the deposit with the U. S. 269 Treasurer of the security required, the Secretary of the Treasury, through his " Public Moneys Division," orders the transfer to the bank of the amount of funds the bank is authorized to hold, unless the daily receipts from revenues, etc., are about suflacient to cover it. This amount can be used as any ordinary deposit, and in the case of Temporary Depositaries is simply charged to the bank until called in by the Secretary. In the case of Regular Depositaries, the account becomes active by deposits from Revenue Collectors, etal. and trans- fers. Collectors are required to deposit daily. The account is in the name of the Treasurer of the United States. It is credited with all receipts of public moneys, from whatever source the Depositary is authorized to receive, and debited with any transfer of excess of deposits over balance allowed; Treasury drafts paid, and counter entries, if any, of errors in account, such entries being first approved by the Department. These items are to be reported daily to the United States Treasurer, and a transcript of account sent him, four each month on certain days fixed annually by the Department, and a duplicate of the trans- cript to the Secretary of the Treasury, this duplicate to be accom- panied with a detailed list of the deposits which make up the total receipts reported in transcript. A separate list for each officer deposit- ing, and a certificate of deposit for each deposit made, is also to be sent on the day the deposit is made to the Secretary. This double relation with the Department is regarded as necessary on account of the Depositaries being under the direct supervision and control of the Secretary, while the management of the funds is neces- sarily in the hands of the Treasurer. The transcript shows on debit side all moneys paid. These payments may be on transfer orders. Treasurer's warrants, or on Treasurer's •letter of instructions. The certificates of deposits are issued in triplicate or duplicate ac- cording to the nature of the deposit, which determines the record to be made of same; for instance, for deposits of Collectors of Internal Revenue, the certificate is in triplicate, the original being sent to the Secretary, the duplicate to the Collector of Internal Revenue, to check account of Collector, and the triplicate for files of the De- positary. PART THIRD. Concerning Ecports of National Banks to the Comptroller of the Currency — Lawful Money Eeserve — Five Per Cent. Kedemption Fund — Eedemption and Eeissue of National Bank Notes — Semi- annual Tax on Circulation. Eeport of Condition of Banks. Eeport of Earnings and Dividends. Lawful money Eeserve. Deposits Eequiring. Funds Available for. Eules for Computing. Examples of Computation. Five Per Cent. Eedemption Fund. Eemittances for. Ledger Account of. Assessment for Expenses of. Disposition of Notes Eedeemed. New Issue for Notes Eedeemed and Destroyed. Semi-annual Tax on Circulation. Form for Making Eeturn. Eequirement and Penalty for Failure. Payments, How Made. Amount of. Calculation of. .' • 271 272 Charter No De FORM OF REPORT OF CONDITION REQUIRED Report of the condition of " The ," at , in the State Resources. Dollars. 1. 2. 3. 4. 5. 6. 7. Loans and discounts on which officers and directors are liable either as pay- ers or indorsers (see schedule) $. Loans and discounts on which officers and directors are not liable as payers or indorsers $ . Overdrafts, secured, $ — ; unsecured, $ — (see schedu U. S. Bonds to secure Circulation (par value), per cents, per cents U. S. Bonds to secure U. S. Deposits (par value) e) per cents, Other Bonds to secure U. S. Deposits U. S. Bonds on hand (par value) per cents Premium on Bonds for Circulation, $ ; Premium on other U. S. Bonds, $ 8. Bonds, Securities, etc., including premium on same (see schedule) 9. Banking House, $ ; Furniture and Fixtures, $ 10. Other Real Estate owned (see schedule) Cts. 11. Due from National banks ( not approved reserve agents) 12. Di:: from State and private banks and bankers, trust companies, and savings banks 13. Due from approved reserve agents (see schedule) . . 14. 15. 16. 17. 18. Checks and other cash items (see schedule) . . Exchanges for Clearing-house Bills of other National banks Fractional paper currency, nickels, and cents Grold coin $ . . Gold certificates $ . . Gold ctf s. p'ble to order $ . . Gold cl'g-house certifi's $ . . Silver dollars ? . . Silver certificates $ . . Fractional silver coin. $.. CO Specie, viz : Total coin and ctf s. $ , Legal-tender notes ^ . 19. Redemption fund with U. S. Treasurer (not more than 5 per cent, on circulation) 20. Due from U. S. Treasurer Total I, -, of the above-named bank, do solemnly swear that the above statement is true, and that the schedules on back of the report fully and correctly represent the true state of the several matters herein contained, to the best of my knowledge and belief. State of , County of , Sworn to and subscribed before me this day of , 190—. Place for seal. No- tary must not be an officer or director of the bank. Notary Puhlic. Correct. Attest : Cashier. Directors. To be rttested by three Directorr oth^r than the officer veri- fying the report. 273 BY THE COMPTROLLER OF CURRENCY. [Form 2130— Reports— 8-30-04] of , at the close of business on the day of , 190 — . Ce. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. Liabilities. T Capital stock paid in, 2. Surplus fund 3. Undivided profits, including amounts, if any, set aside for special purposes . . $ . Less current expenses and taxes paid. $. 4. Circulating notes secured by U. S. bonds $. Less amount on hand and in Treasury for redemption or in transit $. 5. State bank circulation outstanding. Due to National banks (not approved reserve agents) Due to State and private banks and bankers Due to trust companies and savings banks Due to approved reserve agents (see schedule) Dividends unpaid Individual deposits subject to check.... $.. Demand certificates of deposit $. . Time certificates of deposit $ . . Certified checks $ . , Cashier's checks outstanding $ . . United States deposits Deposits of U. S. disbursing oflScers. Bonds borrowed Notes and bills re-discounted Bills payable, including certificates of deposit repre- senting money borrowed Liabilities other than those above stated Total. Dollars. Cts. Note 1. — This report must be sworn to by the president or cashier, NOT by any other officer; attested by not less than three directors, and forwarded to the Comptroller of the Currency with the least possible de- lay, as it is desired to complete the summary of reports as soon as possi- ble after a call has been issued. Note 2. — If special items, use the blank lines, but do not erase or change any printed item. Note 3. — Write the word " no " where no amount Is to be entered. 274 Loans and discounts. (Including loans and discounts on which officers and directors are Ua'ble.) A. — On demand, paper with one or more individual or firm names %, B. — On demand, secured by stocks, bonds, and other personal securities $ , C. — On time, paper with two or more individual or firm names $ , D. — On time, single name paper (one person or firm) without other security ^ %. E. — On time, securect by stocks, bonds, and other per- sonal securities ' $ , F. — Secured by real estate mortgages or other liens on realty (see schedule) $, X. — Loans for account of correspondents $- % Total (item 1, resources) $ Included in the above are — G. — Bad debts, as defined in Section 5204, Re- vised Statutes $ . H. — Other suspended and overdue paper $ . '■{ Overdrafts. Secured : Standing six months or over Temporary Ofiicers and Directors. . . Total (item 2, resources) \ \ Unsecured : Standing six months or over Temporary Officers and Directors . . Total (item 2, resources) Bonds, Securities, etc. (Bonds, Claims, Judgments, and similar items should be included under this head.) Enter face value of bonds. Name of corporation issuing bonds, etc. Am't at which carried on books. Estim'd actual market value. State whether taken for "debts previously contracted." Total (item 8, resources) "' Other Real Estate Owned. Describe property, state form of conveyance.and from whom obtained. Amount at which ca'd on books. Prior liens on property. Estimated value of , property. _ Dat titl ace ewhen e was [uired. , State whe'r taken for *' debts previ- ously contrac'd." • •• ••«••• Total (item 10, resources) ^••••••* ••••••••••••••••••••• 275 Loans and Discounts Secured hy Real Estate Mortgages or other Liens on Realty. Give name of borrower, form of collateral, and describe i>roperty. Amount at which ca'd on books . Am't prior lienonpr'y, if any. Estimated value of property. Date when security was taken. State whe'r taken for " debts previ- ously contrac'd." Total (itwn "F.^LoMH «nd Dii'g.) Checks and Cash Items other than Exchanges for C. H. Checks and drafts on banks, etc., this city, not members of clearing-house Checks and drafts on other banks not members of clearing-house Total (item 15, resources) Average Reserve and Interest. Average reserve for last thirty days (in bank and with Reserve Agents) on deposits and bank balances, was per cent. The high- est rate of Interest paid by the bank on deposits is per cent. On notes and bills re-discounted is per cent; and on bills payable is per cent. Certificates of Deposit Representing Money Borrowed. To whom issued. Address. Amount on demand. Amount on time. Rate of Int. Total (include in item 20, liabilities) Loans Exceeding the Limit Prescribed ty Section 5200 of the Revised Statutes, including Amounts which Exceed this Limit due from State, Private Banks and Bankers, Trust Companies, and Savings Banks, Overdrafts, if any, to be classed with Loans. Name of borrower. Enter f 'uU amount ' loan. Name of borrower. Enter i ol "ull amount rioan. 276 Balances Due From or to Approved Reserve Agents. From — To — Enter name and loca-< tion of bank. Amount. Enter name and loca- tion of bank. Amount. f 1 Total (item 14, resources) 1 Total (item 9, liabilities) LiaMUties of Officers and Directors. Names of Officers and Directors. Official TiUe. President .. Cashier Vice-Pres't Asst. Cash'r Directors. do do do do .See "Sis Total (see item 1, resources) CG ^O o AGE CiBCULATiNG NoTES — Plates, dies, etc., of to be examined annually by Comp- troller 87 Printed signatures suflScient 89 Private sale of bonds of failed association to redeem, . . . 101 Prohibition of pledge of, reason for 123 Proportion of to capital 79 Protest on failure to redeem on demand 98 Provision for security on depreciation of value of bonds. 85 Provision for face of note 86 Provision for destroying mutilated and replacing 90 Reassignment of bonds on retiring 98 Redeemable in lawful money 108 Redeemed and fit for circulation returned to Bank. 93, 102, 313 Redeemed disposition of. Secretary of Treasury to de- termine and perpetuate evidence of 102 Redeemed, remittance for 310 Redemption fund of 5 per cent, to be maintained. . . .92, 309 Redemption regulations 93 Reduced when bonds withdrawn 84 Reduction on depreciation of bond security 85 Repeal of limit on aggregate amount 88 Retirement of, of liquidating association to consolidate.. 152 Retiring on expiration of charter 75 Signing of 222 State Bank issue, association liable for after conversion. 68 State Bank tax on 136 Taking impression of plates, penalty for 187 Tax on, how collected when Bank fails to pay 135 Tax on provision for and regulations 133, 134, 315 Tax on secured by 2 per cent, bonds 134 Tax paid in excess, how secure refund 135 Taxable under State laws as money 146, 148 Territories cannot charter Bank of issue 76 Time required for preparing 222 Transportation and assorting for redemption, expense, how paid 101 Transportation by registered mail Insured 332 Unauthorized possession of plates, penalty for 188 Uncurrent notes, association not to pay out 126 U. 'S. notes and coin, issue of 326 U. S. Treasurer to redeem on lawful money deposit. . . .95, 98 Use of printed or engraved signatures 89 When exempt from taxation 136 "Withdrawal by Association 96 Worn and mutilated destroyed to be replaced by Comp- troller 93 Worn and mutilated to be destroyed by maceration 103 Claims — (See Insolvency; Receiver). Cleabiko House — Association may be member of 22 Certificates of, counted as reserve 107 Clebks — Appointment for Comptroller of Currency Office 3 Names and compensation of Comptroller Clerks in annual report 6 Not act as proxy for shareholder 43 Prohibited certifying checks not covered by deposits 126 Provision in by-laws for 233 Qualifications of 241 Coin — Issue of United States 327 Redemption of 329 Collateral. Security — Loans secured by, Included in individual liability 119 Secured creditor of insolvent association 163 Shares registered held as 39, 54, 68 Stocks and mortgages 13, 26 Ultra Vires, for purchase, borrower on, not set up ... . 23 Collections — (See Corporate Powers). Collections Clerk — Position of and duties 241 Collector of Taxes — Vested with visitorial powers 131 Columbian Exposition — Provision for Branch Association in 76 Commercial Papeb — Association exceeding authority In purchase of, not re- lease maker or endorser 22 Discount of not limit individual borrowing 118 Guaranteeing payment of 18, 19 Purchase by Association 14 Compensation — Clerks of Comptroller of the Currency 6 Comptroller of the Currency 3 359 1>AGE Compensation — Deputy Comptroller 3 Examiners of Association 130 Compounding Debts — Authority necessary when association insolvent 158 CoMPTBOLLEB OP THE CuBKENCY — Access to U. S. Treasurer's books and bonds held for Associations 83 Action of on proof association failing to re- deem notes 99 Annual report to Congress 4, 5, 6 Appointment, duties, etc 2 Authorize association to begin business 34 Authorize conversion of State Bank 67 Bonds of association authorized to sell on failure to make deposit to retire circula- tion 98, 101 Bureau, clerical force, etc 2, 3 Capital stock impairment action required. . 125 Capital stock increase of to be approved by 36, 37, 38 Capital stock reduction to be approved by. . 40 Certificate to begin business 35 Circulation, duties as to. on depreciation of bond security 84 Circulating notes to furnish association equal to par value of bond deposit 85 Creditors of insolvent association to notify. . 154 Decision final for assessment of shares 61 Deputy Comptroller acting as 3 Designation of reserve and central reserve cities 107, 108 Directors, to bring suit against for violation of Bank Act 169 Enforce shareholders' liability 61 Engraving plates and printing circulation to provide for 86 Examiners of associations, to appoint 130 Examination of association on failure to re- deem circulation 99, 100 Ex-officio Commissioner of Preedmen's Sav- ings Bank 2 Extension of corporate existence to au- thorize 72, 73 Insolvent association dividends to distribute. 162 Insolvent associations, to call shareholders' meeting 166 Instruments certified by as evidence in suit. 197 May levy successive assessments on shares. . 63 Penalty for failure of association to make report 129 Place of business, ruling as to 105 Plates and dies of circulation, when useless to destroy 87 Plates and dies for circulating notes, charged with safe keeping of 87 Plates and dies, etc.. of circulating notes, to make annual examination of 87 Prohibited interest in association issuing currency 3 Purchase of real estate may authorize with approval of Secretary of Treasury to pro- tect equities 165 Receiver, may appoint though association in liquidation 161 Receiver, may appoint on evidence of insol- vency 154 Receiver, may remove at pleasure 156 Receiver, to appoint where reserve short not made good 106 Receiver under direction of 156 Report of condition of association prescribed by 127, 128 Reserve of association when short, to notify to make good 106 Reserves title for applicants organizing as- sociation 207 Shareholders against extension of charter may appeal to, for appraisal of stock .... 74 ^60 . tAGE CoMPTROLLEK OP THE CURRENCY — Shareholders' agent of insolvent association action as to 167 Security offered, to approve on depreciation of bond deposit 85 Title and location change of, to approve. . .70, 71 To approve title of association 8, 205 To malte assignment and give receipt for U. S. bonds deposited by association 81 To provide for destruction of mutilated notes and re-issue 90 Transfer of bonds for deposit with Treasurer, to keep record of 82 Transfer of bonds withdrawn from Treas- urer, to advise Bank of 82 Treasurer to receipt to for deposit to retire circulation 97 Visitorial powers vested with 131 Comptroller op the Currency Office — Clerks 3 Expense of to be paid from tax on circulating notes 87 Title of Bureau and object 2 Consolidation — ^Allotment of stock 255 Assumption of liabilities of liquidating association 255 Authorization of and procedure 253 Forms for 254 Increase of capital for 255 Liquidation of association for 152, 253 Liquidation of two or more Banks for 256 Payment for stock in new association 255 Purchase of assets of liquidating association 255 Rights of shareholders of liquidating association 254 Contracts — Association making beyond its power, void 22 Association may make 10, 11 Association not make to aid other business to advance its own. . . 21 Association not plead ultra vires, when receive benefit of 23 Association purchase of bonds agreeing to replace 22 Liquidating association not make 151 Provision in by-laws for execution of 237 Subscribers to stock when few subscribe first for entire amount. . 34 Subscription to stock, what involve 33 To pay liabilities of another Bank 19 To sell stock to give control of association 32 Usurious interest not render void 115 Converted State Banks — (See State Banks Converted). Corporate Existence — Association in liquidation still sue and be sued 151 Certificate of officers to Comptroller for extension .... 260 Date of expiration of charter 9, 267 Examination required for extension 73 Extended association circulating notes of 261 Extended association bond deposit transfer only re- quired 261 Extended association, old circulation to be retired. ... 96 Extended assciation rights and liabilities same as be- fore 73, 257 Extended association form of amendment to articles and certificate to Comptroller 72, 258, 260 Extended association, form of proxy for shareholders. 259 Extended, only if association in satisfactory condition 73 Extended association, shareholders dissenting from . . . 262 Extended association, special examination required... 73 Extended association, provision for and procedure 71, 72, 257 Extended association, shareholders' action required 72, 259 Extension to liquidate 74, 253 Liquidation on expiration of 251 Reorganization when preferable 263 Shareholders' action not necessary to close association 251 Shares in estate, how voted for extension 260 Corporate Powers — Board of Directors, may elect 10 Board of Directors to adopt by-laws 10 Capital may increase 36 Capital stock, reduction of 40 Clearing house membership 22 Commercial paper, dealing in 14 Contracts, what legitimate for association 11 Dealing in checks 19 361 PAGB COKPOKATE PowEHS — Dealing In U. S. Bonds 13 Deposits as stakeholder 12 Deposits, association may contract to repay 11 Deposits, general and special 11 Deposits, municipal funds and paying interest on 11 Deposits, special may receive for safe keeping 11 Directors refuse transfer of stock, when lawful 31 Guarantee of Commercial Paper 19 Holding mortgage on property 26 Income from Banking House property 25 Legal attorney, may employ 20 Liabilities of other Bank may contract to pay 19 Limitations under Territorial laws 75 Limited until chartered 10 Loans 13 Loans to officers 19 May have succession for 20 years 9 May remove officers of association at pleasure 22 May sell grain on credit to acquire lien 20 May take action to recover stolen property of depositors 11 Mortgage may foreclose 26 Municipal bonds, dealing In 14 Not specified not necessarily prohibited 10 Principal and incidental 10 Property acquired In excess of debt 26 Purchase of stock of other associations for debt 17 Real estate mortgage to endorser to inure to association. 26 Real estate security on notes renev^red 26 Re-discounts 16 Safe deposit boxes 12 Savin ^s department 12 Security for loans . 13 Specified •.. 10 Stock taken for debt 17 To sue and be sued 10 COBPORATB Powers — Restrictions. Accommodation paper, Illegal 18 Associations may not loan money for customers 20 Forfeiture of charter for violation of Bank Act 169 Guarantee of Association when Illegal 18 Lending credit of association illegal 18 Liability In refusal to transfer stock 31 Not bind association for draft depending on future de- posits 20 Not engage m manufacturing business 21 Officers not authorized to donate funds 21 Partnership, not to be a mem"ber of 21 Real estate, illegal holding, liability 27 Real estate policy of law in restrictions on 27 Stocks and bonds, not dealing In 13 Stock of anoth.er association not hold as investment 17 Ultra vires 22 Corporation — Association may become before any capital paid 34 When association becomes 9, 217 Corporators of Association — Agent or attorney may act ; form of power of attorney , 202 Infant cannot be 202 Married women as 202 Minimum number 8 Must be natural persons 8, 201 Cost — (See Expenses). Counterfeits — Genuine notes stamped counterfeit to be redeemed 130 Penalty for 185, 187, 188 Regulations regarding counterfeit notes 129, 332 Coupons of U. S. Bonds — Detached from called bonds provision for 346 Lost 343 Courts — (See also Jurisdiction). Creditors' bill In equity enforcing shareholders' liadility 154 Decides liability on stock where question of fact involved 59 Full liability of shareholders to be enforced by 61 Jurisdiction of 159, 160, 182. 191 May appoint Receiver though as.socIatlon In liquidation 151 May enjoin Comptroller and Receiver 164 May review Comptroller of Currency construction of Bank Act 2 Procedure In liability of shareholders similar to all procedures 61 Protest of circulating notes when restrained by 99" 25 362 PACK Courts — Shareholders may ask to interpose for declaration of dividends 118 Suit to enforce liability on stock in voluntary liquidation 64 Vested with visitorial powers to association 131 Creditobs — Association required to notify of purpose to go Into liquidation. . . 153 Bill in equity against shareholders 154 Cannot bring action against Director personally for violation of Bank Act 170 Checks falsely certified valid against Association 126 Circulating notes of failed association to be paid at Treasury. . . . 100 Depositor in insolvent association to recover must trace funds to Receiver 173 Directors' liability 169 Forfeiture of right to interest on claims of insolvent associations. 163 How establish claim against insolvent association, and right of appeal 162 Insolvency of association not relieve shareholders' liability 59 May bring suit against Receiver or association 159 May sue Association on claim rejected by Receiver 164 No right to proceeds of fraudulent sale of stock 61 Not preferred, on demand growing out of fraud by officers antici- pating insolvency 173 Notice of liquidation 247, 252 Of Depositor, right to garnishee association in liquidation 152 Of insolvent association, what interest entitled to 162 Of State Association settlement with in reorganizing 223 Procedure when association becomes insolvent 61 Record of shareholdings, may inspect r 127 Rights not to be impaired 29, 60 Secured of insolvent a.ssociation, what rights < 163 Shareholders' agent, settlement with 166 Shareholders assigning stock to avoid liability 64 Shareholders having claim cannot set off against assessment.... 62 Suit against directors, whether in equity or at law 171 What constitutes a preference anticipating insolvency, and what not 172 When receive dividends on assets of insolvent association 162 When settled with, by association, claim against shareholders de- barred 151 Cbimeb — (See also Courts, Jurisdiction, Penalty). Association receiving public moneys unless depositary 189 Bank note distinctive paper, illegal possession of 187 Counterfeiting circulation 186 Improper countersigning or delivering circulation 176 Issuing circulation of expired association 188, 189 Material for circulation, illegal possession or use of 187 Official malefeasance 177 Pledging U. S. notes or Bank circulation 177 Unauthorized impressions of tools, having or taking 188 CUMTTiiATrVE VOTING — Prohibited Associations 43 CUBBBNCY BuBBAU — (See Comptroller of the Currency Office). D Debentubes — Of Mortgage Loan Company as collateral. 26 Debt — Authority necessary for compounding debts of insolvent association 158 Payor of usurious interest may recover in action of Ill Real estate taken for and held for 24, ^5 Stock may be taken for ^ • Deceased Shareholders — (See Shareholders). Definitions — Bad debts • • ^^^ Banking powers iii Greater rate f\ Legal tender and lawful money ^4 Moneyed capital %q National Banks ^8 Obligations of the U. S 180 Post notes J%^ Willful misapplication •'-^° Sbnominations — Shares converted State Bank ^ 67 Shares of National Bank stock 29 Depositabies — (See CJovernment Depositaries). Circulating notes oo. oo Depositobs — Classes of V "^' ' 2 "fi " \" " 't io Insolvent associations to recover must trace funds to Receiver. . 17^5 Loaning for, illegal : • • • • .• • * * *,•, .. ?2 May bring action against director for losses through negligence.. 170 Set off against liability on paper 174 363 PAGE Deposits — (See also Lawful Money Deposits — Bonds U. S.). Association authority to repay 11 Classes of ll» 12 Funds in controversy 12 Liability for loss of special deposits 11 Made after insolvency, how recovered 173 Not counted in limit of indebtedness 122 Of bonds and securities 11 Public moneys 66 Public moneys with association in other than Government deposi- taries, penalty for 189 Relating to appraisal of, damage for converted 11 Replevin set off, etc 62, 173 Reserve required on 106 Shares as collateral for 39 Special, association may receive 11 Transfer of, in reorganization 264 Uncalled for of association in liquidation, provision for 153 Deputy Comptbolleb — Appointment, oath, bonds, duties, salary, etc 3 Authority as Acting Comptroller 3 Certified copy of organization certificate as Acting Comptroller evidence in court 198 Prohibited interest in association issuing Currency..., 3 Directors — (See also Board of Directors). Can act only as a Board 46 Cannot be examiner of own association 131 Collectively, not individually agent of Corporation 46 Creditors' suit against, remedy cumulative not exclusive <.. 171 Deposits personal, withdrawing in crisis 48 Deposits special, liability for 48 Disqualified ceases to be a director 44 Disqualification, resignation 47 Duties and liabilities in general as of other corporations 49 How prosecuted for violation of Bank Act 170 Leave of absence 47, 49 Liability for false statement in reports 171 Liability from concealing embarrassment of association 48 Liability from ignorance of affairs of association 48 Liability of estate of shareholder deceased 170 Liability of 47 Liability on usurious loans to 117 Loans to 19 May resign during year 47 Names and residences to be ascertained by Comptroller 34 No control over capital released by reduction 41 Oath, before what ofiicer taken 45 Oath, legal force of 45, 46 Oath required 45, 212 Oversight of association and responsibility 47 Payment to, when ignorant cf insolvency not illegal 172 Personal liability an asset of Bank for benefit of creditors 170 Qualification of, and election 44, 45, 211 Reorganized State Bank certificate of assets purchased 224 Representative holders of stock not eligible 45 Resignation and when submitted 47 Shareholdings required free from pledge 45 Stockholdings approved though not full paid 45 Suits against, whether in equity or at law 171 Suits by shareholder brought in State Court 194 Suit on personal liability remedial not penal so Statute of Limita- tion not apply 170 Time of residence required to act in Oklahoma 75 Women, when eligible 45 Disbursing Officer's Funds — Deposit of 267 Discounts — (See also Loans; Interest). Attorney fee clause affixed 113 Bills of Exchange not limit Individual borrowing 118 Embezzlement, when 178 Includes purchase 14, 15 Mortgage clause attached 27 Notes on mortgage taken for debt may be renewed 26 Prohibited when reserve deficient 105 Rates of interest 108, 109 Real estate and mortgage security prohibited 26 Security of endorsement charging personal estate 26 Suggestions as to making 242 Unpaid, when become bad debts 124 364 PAGE Discount Clerk — Position of and duties 241 District Attorneys — To conduct National Bank suits for the U. S 196 District of Columbia — Associations in subject to personal tax 148 Real estate of associations in, taxed as other 129 Savings Banks to report to the Comptroller of the Currency 129 Dividends — Association may hold if pledged for indebtedness 121 Association not declare when reserve short 106 Capital cannot be withdrawn as 123 Comptroller to make ratable, of insolvent association 162 Declaration of, in converting surplus to capital 37 Directors, when may declare 117, 118 Due not counted in limit of indebtedness 123 Explanation of items in report to Comptroller 289 Illegal, Receiver may sue to recover 118 Liquidating association, to shareholders 250 Maximum amount may declare 124 Not restriction on liability of association 122 Of liquidating association property of actual shareholders 152 On assets of insolvent association, provision for distribution 162 On claim against insolvent association not estop depositor from further action 164 Receipt of involving liability on stock 55, 56, 57 Report to Comptroller required on declaring 128 Right to set-off on assessment 63 When may not be declared 124 When shareholders may compel Directors to declare 118 Donations — Ofllcers cannot bind Bank 21 E Earnings and Dividends — (See also Dividends). Amount to surplus before dividend declared 117 Provision in by-laws for distribution 236 Report of to Comptroller, and explanation of items 288, 289 EJLECTioN — (See also Meetings). Authority and procedure for Directors, etc 10, 44, 211 Change of title or location 70 Of Judges for annual, provision in by-laws 233 Shareholders' agent 166 Shareholders' rights at 42 When articles do not fix date or not held on day fixed 49, 50 Embezzlement — (See also Crimes). Deposit of public funds with other than Government deposi- taries 189 Indictment, what must show and penalty 183 Misapplication of funds, etc., penalty 177 Must be shown 178 When criminal laws of State apply 182 Endorser — Liable though purchase of paper by association ultra vires 23 Engraving Plates — For circulation, association to pay for 101 Estoppel — Acceptance of dividend on claim against insolvent association not operative against depositor's further action 164 In Receivership 164 Shareholder in action by Receiver not deny legal existence of asso- ciation 61 Evidence — Books of association public records 63 Certified copies of organization certificate 198 Comptroller of Currency of insolvency of association 155 Copies of papers, certified by Comptroller 197 Of association, carrying on business 198 Examination — Bonds of association on deposit with U. S. Treasurer 83 Comptroller before charter association 34 Comptroller on failure of association to redeem circulation. ... 99 Examiner, regular, and expense 130, 131 Expense of association supposed insolvent, how paid 164 Limitation of visitorial powers 131 List of shareholders subject to 126 Of association, provision in by-laws for 237 Of accounts of associations, suggestion as to 241 Of new organization, follows granting charter 36 Plates and dies of circulating notes 87 Special of extended association 73 State Bank converting precedes granting charter 35, 227 365 PAGB BxAMiNERs — Appointment, duties, powers, compensation, etc 130 In charge of association not agent as to resumption of business. . 161 May examine officers of association on oatti 130 Officer may not be of own association 130 Presentment of paper to, in charge of association 156 Special commission 36, 73, 99 Special fee in large cities and certain Territories 130 To report condition of association to Comptroller 130 Execution — (See Suits). ExECUTOB — (See Trustee). EixpfiNSES — Annual examination or destruction of plates and dies of circu- lating notes, how paid 87 Assessment, for redemption of circulating notes. 312 Association to bear, of special examination in extension of charter 73 Bureau of Comptroller to be given in annual report 5 Circulation for redemption, transportation and assorting 101 Circulation, semi-annual duty 133, 134, 315 Examiner, regular and special 130, 131, 164 Printing circulating notes to be paid from tax on 87 Protest of note of association, how paid 164 Publishing report of condition 128 Reappraisal for shareholder withdrawing on extension of charter.. 74 Receivership, appointment by the courts not charge to shareholders, statutory liability 155 Receivership, first lien on assets 165 Sale of bonds of association to redeem circulation 98, 101 Sale of delinquent stock 33 Shareholders' ag6nt, duties relative to 167 Express Charges — Transportation of National Bank notes and U. S. Currency 330 Express Company — Government contract with for transporting of currency. . . 330 Extension op Corporate Existence — (See Coporate Existence). Failed Banks — (See Receivership). False Entries — Defined 179 In report to Comptroller 180, 181 Records of association, penalty for 177 What constitutes offence of 180, 181 Fees — (See also Examiners, Receivership, Expenses). Examiners of association 130 None for witnessing assignment of bonds by U. S. minister, etc 339 Protesting circulation of association 164 Special for examining in cities and certain localities 130 Federal Courts — Association exempt from attachment until final judgment. . . 195 Enjoining associations 196 Jurisdiction in action by and against association. .191, 192, 193 Jurisdiction in action by and against Receiver and limita- tions 193 Transfer of suits 192 Five Pee Cent. Fund — Association required to maintain on circulation and regulations 93, 309 Deposits under Act June 20, 1874 94 Ledger account of 311 Transportation of notes, assortment, etc., expense of. . 101 Firm or Company — (See Liability of Association). Forms — (See also Subject requiring). Miscellaneous 319 Forgery — Circulation, penalty for 185 Signatures to circulating notes not effect liability of association. ... 89 Fragments — U. S. and N. B. notes, redemption of 312, 328 G Garnishee — Association in liquidation for creditor 152 Gold Banks — Laws Governing 88, 91 Government Depositaries — Association provision to become, regulations . . 65, 265 Court funds 268 Deposits allowed 65, 265, 267, 268 Deposits by Postmasters 66 Disbursing officers' and Postmasters' accounts . 267 Penalty for Government deposits with other asso- ciations 189 Regular and temporary 265 Regulations for accounting 268 Security for deposits, amount and kind 266 To act as fiscal agent of Government 65 36G PAGR Greateb Rate — Application of term governing taxation of shares 141 Exceptions as to 109 Penalty for receiving Ill Guaranty — Association accommodation illegal 18 State Bank converted liable as guarantor on loans of old Bank. ... 68 H Hypothecation — Circulation, of association, prohibited 122 I Impaiembnt — Capital stock, how made good 12& Capital stock, provision against 124 Incidental Powers — (See also Corporate Powers). If not specified not necessarily prohibited 10- What 10 Incomplete Currency — (See also Circulation). Association liable for 89 Issuing 314 Transportation by registered mail insured 332 Unlawful countersigning or delivering 176 Increase of Capital. STOcii — (See also Capital Stock). Change of location may require 7L Procedure, rights of shareholders, fixing price, etc 36, 37, 38, 39 Indebtedness — Association, what limit of and what not included 122 Shares of association held may be attached for debt 121 To association, limitation 118 Indian Territory — Provision of Act May 2, 1890, Sec. 31, that the National Bank Act shall have same force there as elsewhere. (See N. B. Associations.) Individual Liability — (See also Liability). Construction of Statute lid- Intent of restriction on loans 119 Limit of 118 Limit of loan only to actual borrower 119, 120^ Infant — (See Minor). Injunction — Against association by State and Federal Courts 196 Not issue against association before final judgment 194 Of Comptroller 196 To restrain collection of excessive tax 147 Insolvency — (See also Receivership). Appointment of Receiver, because of 154 Creditors, how proceed 61 Defined 171 Duties and powers of Receiver 157 Liability on stock not a preferred claim on estate 63 Limitations on tax assessment 135 Proof of 155 Restriction on transfer of stock 31 Shareholders' agent, appointment of, duties and powers 167 State statute prohibiting association receiving deposits, not ap- plicable 183 Transfer of stock, etc., in contemplation of, void 171 U. S. suits against association. Government may appoint special attorney 197 Interest — Appointment of attorney to collect, form of 341 Agreement with customer to equalize not usury 110 Associations protected against unfriendly State legislation 109 Collection of, on bonds with Treasurer 84, 339 Form of power of attorney to collect on XJ. S. Bonds 340 Form of power of attorney to endorse Treasurer's checks for 341 General State rate, not special rate, governs 110 Illegal, association not liable when only five cents 117 Illegal, forfeiture not waived by separate note for 117 Illegal rate, entire amount forfeited 112 National Banks may pay on deposits 11 On claims and judgment against insolvent association 162 On public debt not payable in National Bank notes 88 Pajonent on U. S. Bonds to joint holders, minors, etc 342 Period included in two years limitation to recover usurious 114 Rate, limit association may charge 109, 110 Rate, when State law does not fix or rate unlimited 110 Usurious, charged, effect on contract 115 Usurious, action to recover only if interest actually paid 114 367 PAGE Interest — Usurious, Federal law governs though security In name of in- dividual 116 Usurious, Jurisdiction of State courts in action for 116 Usurious, included in notes renewed not recoverable 113 Usurious, penalty enforcible only when knowingly received 113 Usurious, penalty for receiving Ill, 114 Usurious, paid after maturity of paper 112 Usurious, who may bring action for penalty 114 Usury, law of State not applicable to associations 116 When U. S. Treasurer retain on bonds 84, 85, 125, 129, 124, 134 J Judgment — (See also Suits). Association assigning without collecting 21 Certificate assigned to association not release debtor 23 For usury when allegations sufficient 113 Notes of as security 27 Purchase of real estate under 24 Receiver, appointment for 154 State Courts, final before certain proceedings 194 To Receiver for assessment on stock not estop action for another assessment 63 JUBISDICTION — Association deemed citizen of State 194 Of suits by and against association 159, 160, 191, 193 Of state Courts in action for usury 116 Receiver for Insolvent association, court of equity may ap- point 155 L Larceny — (See Crimes). Lawful Money — Defined 94, 97 Deposit, how made to retire circulation 97 Circulating notes of failed Bank to be redeemed with.... 98, 100 Circulation of association redeemable in 108 Reserve of association to be in 105 Lawful. Money Deposit — Association making to retire circulation to be as- sessed for transporting and assorting 101 Extended Banks to make, to retire circulation and limit of time 96 Liquidating association to retire circulation and limit of time 97, 98, 152 Maximum amount permitted in any month to retire circulation 96 Requirement to redeem circulation, question of . . . . 99 Retiring circulation on called bonds, monthly limit of deposit not apply 96 Retiring circulation not prevent immediate reissue of circulation 86 Retiring circulation on expiration of charter 75 To cover depreciation of bonds, security for cir- culation 85 To release bonds on deposit In excess of minimum required 79 To retire circulation 95, 248 Lawful Money Reserve — (See Reserve; Lawful Money). Lease — Banking House, liability of insolvent association 156 Of Banking House 25 Only valid after association chartered 25 Leave of Absence — Board may give Director and during relieve of liability. . 49 Directors 47 Legal, Tender — Defined 94 National Bank circulation to be with all associations 108 Llabilities — (See also Liability), Association report of condition to contain 127 Association, change of name and location not effect 71 Associations organized under Act of 1863 70 Borrowed Money 282, 286 Comptroller's annual report to contain of associations 5 Converted State Bank 67 Dividends due not counted In limit of association's Indebtedness. 123 Extended associations 71 Individual or firm limit, to association, and when applicable. . . . 118 Limit allowed association 122 Liquidating association conKondating, assumption of 255 Receiver, duties as to« of association 154, 15T 368 IJABILITY — (See also Liabilities; Penalty; Crimes). ^^^^ Association refusal to transfer stock 31 Association under Receiverstiip for lea.se !!!!!!! 156 Association liable for conversion in purchase of notes, when given it for sale 23 Association when illegal interest stipulated for not paid or paid! . ! 112 Creditor's bill , 154 • Directors' mismanagement of association ..*.*.*.'.*...* 48 Enforcement may be in equity !.!!!!!!' 61 Estate of deceased shareholders .'....', * 53 64 Executors not personally liable on stock held as such.'.'.'. , . .'. '64 False entries 279 Fraudulent intent in transfer of stock not relieved. ...'.'.....'...'.'. 54 Individual not enforcible by Receiver, except on order of Comp- troller g2 159 Individual or firm limit to association *. . . .'..*.,.. . .' 118 Individual not enforcible after all debts paid 63 Individual on shares, not preferred claim against estate. ..!.'!!!.'! 63 Individual, Comptroller may enforce when association Insolvent 154, 157 Loans, actual borrower alone chargeable 119 Pledgee, when !!..!! 57 Pledging circulation, etc ! ! ! ! ! 177 Procedure in enforcing on stock when Bank in liquidation ........ 64 Receiver, if reserve short and not made good 106 Shareholders, how enforce 153 Shareholder liable though purchase stock on misrepresentation.... 64 Shareholder's personal 51, 62 Shareholders to successive assessments on stock 63 Shares for all creditors, no preference 60 Shares as collateral, when not liable 58 Shares owned of another association 17 Shares transferred not registered 54 Shares, when registered 64 Subscriber to increased capit? 1, when 56 Transfer of stock when relieved of 54, 55, 56 Transfer of stock to avoid 59 Unlawful certification of checks 126 When fixed by assessment, right of action may be assigned 63 When purchaser in case of fraud not liable 60 When association released on circulating notes 98 License Tax — (See Taxation). Lien — Association may sell on credit to acquire 20 Association not acquire on own stock 121, 213 Illegal preference of creditors 171 Interest on bonds U. S. on deposit with Treasurer 128, 134 U. S. prior to assets of failed association 100 U. S. on assets, for circulating notes 101, 163 LIMITATION — Association minimum reserve on deposits 106 Association, rate of interest 109 Association declare dividends, when not 117 Authority of Court as to sale of property of Insolvent association. 158 Banks in Territories not issue circulation 75 Capital of State Bank converting to National 67 Capital stock, requirement 28 Capital stock, impairment of and assessment 33, 125 Change of name and location 70, 71 Circulation, denominations 86, 87 Circulation of association on depreciation of bonds deposited.... 85 Circulation, taxable only as personal property 148 Corporate existence 9 Creditors of insolvent as.sociatIon on lease of building 156 Deposits with associations as Government Depositaries 65, 266 Destruction of notes of liquidating association after redemption. . . .98 Directors, minimum number 44 Director, minimum stock holding required 44 Issue of attachment, etc., before final judgment prohibited 194 Lawful money deposit of extending association 96 Lawful money deposit of liquidating association 97, 98 Liability to association of person or firm and when applicable. . . . 118 Minimum bond deposit of association with U. S. Treasurer 79, 80 On real estate and mortgages 24 Period for taking action as to illegal Interest 114 Place of business 104 Post notes, application of prohibition 90 Heceiver on impairment of stock, when appointed 33 Reserve with agent lOG 369 PAGB XiUaxATioN — Shareholders' personal liability 52 Shares of stock, par value 29 Statute of, may bar assessment on stock 62 State taxation, shares of association 138 Suit for usury 114 Tax on insolvent association 135 Tax returns on circulation 134 Time allowed for payment of capital 32 Transmitting report of condition to Comptroller 127 Use of word National 132 Visitorial powers with association 131 Voting at elections 42, 43 What indebtedness may exceed capital stock paid in 122 Liquidation or Insolvent Association — (See Receivership). Liquidation Voluntaky — Association in, penalty for issuing circulation 188 Association reorganizing 263, 264 Association to consolidate, procedure 152, 253 Association to deposit lawful money to withdraw cir- culation 97, 98 Authorization to close association and form of reso- lution 246 By expiration ot charter 251 Certiflcate to Comptroller of 247 Certificate to Comptroller on expiration of charter... 252 Committee association may appoint for 153 Consolidating association, increase of capital for. . . . 255 Consolidation, allotment of stock 255 Consolidation, assumption of liabilites 255 Consolidation, payment for stock 255 Consolidation, purchase of assets 255 Corporation not dissolved 151 Creditor or depositor still may garnishee association, 152 Destruction of notes of liquidating association after redemption 98 Dividends of association liquidating, property of shareholders 152 Extension of corporate existence only for 253 No new business or make new contracts 151 Not debar Comptroller appointing Receiver 150 Notice to creditors 247 Notice required 152 Procedure and form 150, 153, 246, 256 Procedure to «;nforce shareholders' liability 153 Provision for destruction of plates 87 Provision In charter for 9 Purchase of assets of State Bank reorganized 225 Shareholders' right to inspect books, how enforce... 151 Shareholders' agent for 250 Shareholders' rights In consolidation 254 To sell business or reors^anize 150, 251 When take effect. Immediate or future 153 List of Shabeholdebs — Annually furnished Comptroller of Currency 127 Association required to keep 127 State may require of officers with residence, for tax- ation of shares 147 Loans — Actual borrower governs as to limit to individual 119 Association can recover though excessive 120 Association not on own stock 121 Borrower liable loan on real estate though Illegal 27 Care required in making 242 Circulation not collateral for 122 Excessive, directors' personal liability on damage from. ..." 47 Excessive to individuals, penalty 120 Illegal interest HI Individual or firm limit, etc 118 Interest allowed 109 Liabilities, what not limit 122 Real estate as security prohibited 25 Report to Comptroller 181, 277 Reserve short not allowed 105 Usurious to Directors' liability holds 117 Location or Association — Chanjre of and provision for 70, 71 Comptroller holds legal location street and number 9 Defined 104 Organization certiflcate to state^ and how desig- nated 9 370 page: Lost or Destroyed Circulation — (See Circulation). Lost, Defaced or Destroyed U. S. Bonds — (See Bonds U. S.). Louisiana Purchase Exposition — Provision for Branch Bank at 76 M Maceration — Circulation worn and mutilated to be destroyed by ICJ Management of Association — Suggestions as to ',[ 238 Married Women — As corporators of association 202 As shareholders and directors ,,', 45 Liability as shareholders \[ 53 Personal security in endorsement , 13 Messenger — Position and duties \ 241 McCuLLOCK, Hugh — First Comptroller of the Currency .', 5 Meetings Shareholders — Annual when no election of directors 49 ^l^nnual, held on wrong day, remedy 60 Annual, when to be held for election of Directors. . 44 Annual only Directors elected unless notice of other business 44 Capital increase, to provide for 36 Fixing date of, if not in Articles 50 Individual rights of at 42 No definite representation of stock required for annual 44 Provision for 42 Provision against failure to hold 50 Provision for holding if day not fixed or meeting not held 50^ Provision in by-laws for holding 233 Shareholders what disqualifies to vote 44 Shareholders who may not vote proxies 43 What constitutes a quorum 46 When no election held possible action by Comp- troller 50 Minors — Bonds TJ. S. standing in name, interest, how paid 342 Corporator of association not to be 202 Purchase of stock in name of, liable 60 Misapplication or Funds — Association indictment for 183 Penalty for 177 Willful, application of Statute 178 Miscellaneous Forms — (See Forms). Misdemeanors — (See Crimes, Penalty). Moneyed Capital — How distinguished from personal property In assessment of shares 140 Meaning of term governing taxation of shares 140 Taxation of (see Taxation). Mortgages — Debentures of mortgage loan companies as collateral 26 Foreclosure by association 26 Limitation on holdings 24 Mortgagee liable on, though associaton exceed power In taking. . . 23 Note for, taken for debt, may be renewed 26 Ofllcial malfeasance 177 Purchase of by Receiver 165 Selling of farm 20 To endorser of note may Inure to benefit of association 27 Taken for debt, rights In holding, etc 36 MUNlClPAii Funds — Association may receive as deposit 11 Mutilated Notes — Provision for destroying and replacing 90 Redemption of fragments 312, 328 To be sent to U. S. Treasurer for redemption 93 N Names — Association required to keep shareholders 127 Directors to be furnished Comptroller annually 45 Of associations (see Title). Shareholders to be furnished Comptroller annually 127 National — Restriction on use of word 132 National Banking Association — Government supervision of by Comptroller of the Currency under direction of Secre- tary of Treasury, and annual report to Congress 1—6 Circulating notes. Issue, redemption and withdrawal cf. U. S. Bonds security for deposit of, for- feiture, etc 77-103 371 PAOB NATIONAL BANKING ASSOCIATION— Organization and powers of Organization papers to be executed, capi- tal required and payment of U. S. Bond deposit required, corporate powers, gen- eral and Incidental, Board of Directors, liability of shareholders, increase or re- duction of capital stock, change of title or location, extension of corporate exist- ence, conversion of State Banks^ deposi- tary of public moneys, etc., etc. 7-76, 201-237, 257-269 Regulation of Banking Business, li-arnings, diviaenas and surplus. Examiners, examinations, visitorial pow- ers, etc. Interest rate of and restrictions. Liability of and to associations. Loans and restrictions on. Place of business. Real estate, limitations as to holdings of. Reports to Comptroller. Reserve required. K,GS6rv© cit.i6s Management 103-132, 238-245, 271-314 Taxation. State, what subject to, rate, etc 138—150 Circulating notes, rate, assessment, col- lection, etc 183, 315—318 Crimes and misdemeanors 176-190 Suits, jurisdiction and evidence 191-198 Voluntary liquidation and Receivership, provisions respecting 150-175, 246-256 NATiOaiAi. Bank Act — Comptroller to execute, but his construction, persuasive not final 2 February 25, 1863, Banks organized under 70 Index to sections and amendments 25, 26 The title and object 1 National Bank Notes — (See Circulation). National Banking Laws — (See National Bank Act; National Banking Asso- ciations). National Bank Redemption Agency — Division of U. S. Treasurer's Offlc« ; pvovision for redemption of circula- tion of association 92 National Bank Reserve — (See Reserve). National Cukrency — An act to provide 1 National Gold Banks — Circulation to be issued to on deposit of bonds 90 May convert to regular association 69 None now in existence 70 Not required to take circulation of other associations at par 108 Provision for 90 Nattjbal Pebsons — Only may organize association, what constitutes 8, 201 Net Profits — (See Profits). New York City — Association in may be reserve agent 105, 106, 107 Bonds, forfeited, sale of in 101 Notice of expiration of corporate existence or voluntary liquidation published in 75, 153 Sale of bonds to redeem circulation to be made in 98 NON-BESIDENTS OF STATE — Directors allowed by law 44 State taxation of stock of 139 Notary Public — Acknowledgment reports to Comptroller 128 Acknowledgment, organization certificate to be taken by or Judge of court 9, 215 Directors make oath before 45 Provision to protest notes if not redeemed, and notice to Comptroller 98, 99 Shareholders' list, acknowledgment of 126 NOTICF — (See also Publication). Application to organize to Comptroller 205 Appraisal dissenting stock, in extension 74 Capital, increase of, to Comptroller 36, 37, 38 Capital, reduction of to Comptroller 40 Comptroller of Currency, of impairment of capital 125 Comptroller of Currency, receipt of bonds to secure circulation 81 Comptroller of Currency, to advise association of transfer of bonds ... 82 Comptroller to association on restraint of protest of notes 99 372 FA6B Notice — Comptroller to holders of circulating notes of failed association to pre- sent 100 Extension of corporate existence 72, 73 Meeting for election of Directors postponed 49 Meeting of shareholders when annual not held 49 Meetings, shareholders 42 Name and location, change of, to Comptroller 70 Protest on circulating notes to Comptroller 99 Reserve to make good 105 Sale of bonds of failed association 100 Shareholders' meeting to close association 151 Special for business other than election of Directors at annual meet- ing 44 To Comptroller, payment on capital 33, 34 Treasurer of the U. S. to notify association of circulation redeemed. . . 92 o Oath — (See also Notary Public). Comptroller of Currency, of Office 2 Deputy Comptroller, of Office 3 Directors, of Office, and form of 45, 212 Directors, law not provide before what office taken 45 Officers and Directors certifying to Comptroller payment of capital. . . 32, 35 Officers of association, tax returns on circulation 134 Organization Certificate, corporators' acknowledgment 9 Publishers, of notice of certificate to begin businesss 36 Obligations — (See Bonds U. S. ; Crimes). Office of Comptkolleb of Currency — (See Comptroller of the Currency Office). Officers of Association — (See also President; Cashier). ^^ ^^ « „.« Bonds of 10. 22, 48, 242 Cannot be examiner of own Bank 131 Certifying Comptroller of vote for voluntary liquidation 1B2 Certifying payment of stock to Comptroller. 32, 35 Commission cannot offer for securing de- posits 21 Election or appointment of by Board of Di- rectors 10, 242 Expiration of corporate existence certifica- tion 74, 252 Extension of corporate existence, application to Comptroller 72, 260 Failure to record transfer of stock liability for 54 Impairment of capital, duties In regard to. 33 Increase of capital, payment of 37 Independent action of, not to forfeit charter 169 Loans to 19 May be examined by Examiner 130 May not vote proxies 42 Not bind association by guarantee to pay draft 20 Not indictable under State law for em- bezzlement 182 Penalty for embezzlement, etc., of funds and false entries 177, 178, 179 Penalty for illegal certification of checks. . . 184 Penalty for Issuing circulation after ex- piration of charter 188 Penalty for receiving U. S. or National Bank notes as security 177 Penalty for official malefeasance 177 Petition for designation as reserve city to be signed by 108 Prohibited certifying checks not covered by deposit 126 Provision for in by-laws 233 Returns to make on circulation for taxation 134 Sale to association of shares 122 Signing circulating notes 87, 88, 89, 221 Term of office the pleasure of Board 22 Transfer of U. S. Bonds security for circula- tion 81 Willful misapplication of funds 178 373 PAGB OFncERS or U. S. — (See Government Depositaries; Penalty; Crimes). Official. Bonds — (See Bonds, OfBcial). Official Signatures — (See Signatures). OkIaAuoma — ProTision for National Banks in. and qualification of Directors... 75 Obganizaxion or Associations — Autboriaation. who may participate and pa- pers to be executed 8 Capital may be subscribed by a few and later distributed 204 Capital required and payment of 28, 32 Circulation (see). Corporate Powers (see). Directors (see). How effected, and forms 201-237 Lease and purchase of building 25 Location of association 9, 105 Stock certificates, temporary 205 Oboanization Certimcatb — Acknowledgment required 9 Certified copy as evidence 197, 198 Conversion of State Bank 66, 229 Determines place of business 104 Execution of 9, 215 Specifications and form of 8, 214 Organization Papers — Enumerated 207 Execution of 9, 66, 207, 229 When to be filed with Comptroller 217 OvERj>RAFTS — False entry, when and when not 180, 181 Interest on 112 When allowed should be on demand note 277 When embezzlement 179 Partnership — Association may not be member of 21 Loans to each member, limits to firm 119 Payino Teller — Position of and duties 240 Penalty — Appointment of Receiver for violation of Bank Act 169 Association receiving usurious interest Ill, 114 Counterfeiting or forging circulating notes 185 Directors for violation of Bank Act 169 Embezzlement, abstraction and misapplication of Bank's funds 177 Excessive loans to individuals 120 Failure to pay installment on stock 33 Failure to make report of condition 129 Failure to make return for tax on circulation 134 Failure to redeem circulation 84, 154 Illegal certification of checks 126 Illegal use of word " National " 132 Illegal possession of imprints of counterfeit U. S. Bonds 188 Imitating circulating notes 91 Interest on deposit with Treasurer, when withheld 85 Issuing circulation after expiration of charter 188, 189 Loaning on U, S. and National Bank notes as security, etc 176 Mutilating circulating notes, etc 92 None prescribed for printed signatures on circulation 89 Passing counterfeit U. S. obligations 187 Passing, selling, etc., counterfeit circulating notes 187, 188 Receiving deposits of public moneys If not depositaries 189, 268 Reserve not maintained 105 Shares of association taken as security for debt if not disposed of. . 121 Taking impressions of plates of circulating notes 187 Taking or having impressions of tools, etc., of U. S. obligations.... 188 Unauthorized possession of impressions of circulating notes 188 Unlawful countersigning circulating notes by officers of the Govern- ment 176 Wrongful use of plates or false plates 186 Personal Liability — (See Liability; Shareholders; Trustees). Personal Property — (See also Taxation). Shares of association taxable only as 138 Personal Security — (See Loans). Place or Business — Defined 104, 105 Circulating note* payable on demand at 86, 92, 100 List of shareholders' residence and shares kept at 127 To appear in Organization Certificate 9 Plates and Dies — Comptroller to have prepared for circulation 80 Comptroller to have custody 4, 87 Engraving, association to pay for and cost of 101, 222 374 PAGH Plates and Dies — ^Expense of examination and destruction of 87 Extended Banks 97 False, penalty for 186 Of circulating notes, Comptroller to examine annually. ... 87 Penalty for unauthorized possession 188 Taking impression from, penalty for 187 Wrongful use of, penalty for 186 Pledgee — Liable on shares if registered 57 Of stock as collateral not liable though registered if so noted 68 Of stock not registered not liable 68 Pledging Cikculation — (See Hypothecation). Population — Change of location. Comptroller ascertain 71 Comptroller findings not final 28 Evidence of Mayor of place as to 29 Relation to capital and how determined 28 Postmasters — Deposit of public funds with association 66, 267 Post Notes — Association prohibited circulating as money 89 Defined 90 Issue only prohibited as money 90 POWEB or Attokney — Assignment of U. S. Bonds 336 For endorsing interest checks 341 Form of, to collect interest on U. S. Bonds 340 Form of, for shareholders in extension of charter 259 Form of, to send currency by registered mail insured. . 325 Form to act for corporator 202 Proxy of shareholders to extend corporate existence. . . . 259 Required for agent of association to witness destruction of notes and examine bonds, and form of 83, 90, 324 Powers — (See Corporate Powers). Preference — Government on circulating notes only 101, 163 Recovery of deposits made after insolvency not constitute 173 Shareholders for stock in association succeeding another and retaining name 74 State Statute making certain deposits prioj* lien on insolvent association not applicable 175 What constitutes in insolvency, and what not 172 President — (See also Officers of Association). Absent from sickness not liable for mismanagement 47 Acting as Cashier association bound by acts 51 Action required In extension of corporate existence 72, 260 Action required to prevent protest of circulating notes 98 Authority of 51 Bond of, when binding 22 Certificate of stock payment to Comptroller 32 Director to be 50, 51 Duties defined In by-laws 234 Elected by Board of Directors 10 Employment of legal attorney binds association 20 False certification of checks 126, 185 Liable for loans to minors 51 Liable for statement of condition of association 180 Limitation of powers 51 List of shareholders to keep 127 Managing association, may obtain discount of its paper 16 May act for association to purchase real estate 24 May be examined by Examiner 130 Not donate funds for business Interests of association 21 Office of 239 Official malefeasance, penalty 177 Powers of, ex-officio and vested 50, 51 Presiding officer of Board 50 Provision in by-laws for election, etc 232, 233 Proxy not act as 42, 43 Public money, unauthorized receipt by 189 Report of condition to Comptroller, oath to 127 Report on circulation to Comptroller 124 Signature of, or "Vice-President required on circulation 87, 88, 89, 221 Term of office the pleasure of Board of Directors 22, 51 To certify Comptroller of liquidation on expiration of charter. . . . 2o2 To certify dividends declared and net earnings to Comptroller. . . . 128 Violation of Bank Act, penalty 169 President of U. S. — To appoint Comptroller, and power of removal 2 Printing — Charter number to be on circulation • • • • 87 Circulation and time required 87, 221, 222 Comptroller's annual report 6 Extended association, circulation • • • 97 Signatures of officers on circulation .'.89, 221 375 PAGB Prtvatb Banks — Reorganization of as National 223, 225 Pbofits, Net — Amount to surplus before dividends declared 117 Losses deducted before declaring dividends 123 Other than legal surplus « 123 Report of to Comptroller 127 Undivided, defined 123 Promissory Notes — Attorney fee clause 113 Set off for endorser 174 With mortgage clause 27 With unlawful interest, payments applied on principal. . . Ill Protest of Circulation — Bonds forfeited for, when 100 Bonds, sale of, when 101 Expense of, how paid 164, 165 Failure to redeem 154 Mode of 98 Notice of to Comptroller 99 Proxies — Form of for election of Directors 319 Not bind principal in illegal meeting 43 Shareholders may vote by 42 Who prohibited acting as. 42, 43 Publication — (See also Notice). Change of title or location, notice of 70 Comptroller's certificate of extension of charter 73 Comptroller's certificate to begin business 36 Comptroller notice to creditors of insolvent association 161 Meeting, shareholders to elect agent insolvent association 166 Meeting shareholders for other business than election of Di- rectors 44 Meeting shareholders, postponed election of Directors 49 Meeting shareholders to close association 151 Non-payment of circulation, notice to present 100 Report of condition of association 128 Sale of bonds, notice of 101 Sale of delinquent stock 33 Voluntary liquidation, notice of 152, 153 Public Auction — (See Auction). Public Moneys — Deposits with association 65 Penalty for deposit with other than Government depositaries. 189 Regulation in regard to deposits with depositaries 66, 265 Q Qualification — Comptroller of the Currency 2 Deputy Comptroller 3 Directors 44, 45, 211 Directors of association in Oklahoma 75 Examiners of association 130 Officer before whom organization certificate executed 9, 216 Receivers of association 154 Shareholders' agent •. . 169 Quorum — Board of Directors and provision for in by-laws 46, 237 Law not require in meetings for election of Directors 44 R Rate of Interkst — (See Interest). Real Estate — (See also Taxation). Assignment of certificate of Judgment to association not Invali- date 23 Association, how taxable by State 138, 139 Associations In District of Columbia, taxation of 148 Conveyance not void though association exceeds rights 27 Conveyance of, provision for In by-laws 235 Discounting paper having real estate security 25 Estimated at actual value in valuation of shares for taxation . . 142 Excessive investment In Banking House 25 How association proccv^d to purchase 24 Illegal borrowing on, not defence against association 27 In Indiana not Included In valuation of shares for taxation. . . . 142 In Indiana tax paid on In valuation of shares, when not recov- erable 142 Limitation on holdings 24 May be taken for more than the debt 26 Mortgage of maker to endorser as collateral 27 Mortgage to endorser enuring to benefit of association 27 Not in State, included in tax valuation of shares 145 376 PAGE Real Estate — Objection to as security for loans, kind not suflBlciency 28 Policy of restrictions on real estate dealings 27 Purchase by Receiver to protect equity involved 165 Purchase only voidable by the Comptroller 27 Security of indorsement charging personal estate 26 Stock as collateral 27 Stock of real estate companies 26 Violation of law not hinder foreclosure 26, 27 When association authorized to acquire 25 Rbcbivee — (See also Receivership). Acting for shareholders after creditors paid 167 Action against for property noc strictly of association 173 Appointment on failure to restore impaired capital 33, 125 Appointment for association holding own stock 121 Appointment for failure to pay circulating notes 154 Appointment when association franchises forfeited 154 Appointment for insolvent association not unconstitutional 155 Appointment does not dissolve corporation 156 Authority to enforce liability must furnish 61 Books of association admissible evidence 63 Cannot complain of excessive banking house Investment 25 Charging estate of associaton by executory contract 157 Claim rejected by, creditor may sue association for 164 Comptroller to appoint if reserve short not made good 106 Comptroller may appoint though association in liquidation 151 Comptroller may remove at pleasure 155 Court of equity may appoint and enforce individual liability 155 Counsel for and authority to dismiss 160 Creditor forfeiture of right to interest 163 Deficiency of surplus $5,000,000 State Bank appointment of 62 Determining shareholders of association 54 Determining liability of pledgee of stock 59 Disposition of assets of association 157 Dutes and powers of 157 Effect of appointment of 156 Enforcing directors' personal liability 170 Enjoin sale of property for tax assessed on shares 147 Expenses of appointment by Court not charged to shareholders' statutory liability 155 Federal Courts' jurisdiction and limitations 193 How property to cover equity paid for 165 Insolvent association suits by and against 159 Liability on stock to enforce 61, 154 May purchase real estate to protect equity involved 165 New York Court suit against shareholder in another State 160 No power to pay dividends 163 Not restricted in action to instructions from the Comptroller 157 Order of Court necessary to make sale and restrictions under. .157, 158 Question of accounting to Court requiring action over ruling Comp- troller 159 Questioning validity of appointment of 156 Recover amount paid for shares illegally purchased 122 Responsible for assets of association 161 Successive assessments may enforce 63 Suit against Director for mismanagement 161 Suits to recover illegal dividends paid 118 Suits removable to Federal Courts 160 Surrendering to shareholder's agent balance of assets 167 To report acts to Comptroller of Currency 156, 167 Transfer of stock to avoid liability may set aside 60 TJ. S. District-Attorney acting as counsel for, no extra pay 150 When may assign right of action and assignee enter suit 63 Rbceivebship — (See also Receiver). Action of replevin / • : V « ' * ' I * ' ,*, ili Assets of insolvent association controlled by Comptroller xbd Authority necessary for compounding debts of insolvent asso- elation •. ,..«...••••••••••••.• i&o Claims and Judgments, interest on 162 Claims due the U. S., what preference 163 Claims for torts 1^^ Comptroller's decision of insolvency final 154 Comptroller to notify creditors of insolvent association 161 Creditor obtaining judgment, cause for 154 Deposits made by Savings Bank not a prior lien 175 Disposition of assets after pajnment of creditors 166 Distribution of assets in dividends 162^ 377 PAGE. Receivership — Evidence necessary for Comptroller to declare Insolvent ISS- Expense of to be first lien on assets 16& How claims established 162 Independent illegal action of executive ofllcer not ground for. . 169 Injunction upon by association, procedure 164 Preference in State Statute making certain deposits prior lien not apply to insolvent associations 175 Presentment of paper for payment 15ft Recovery of deposits made after insolvency when not prefer- ence 173 Renewals of bills receivable, original notes not evidence of debt 173' Secured creditors 163 Set-off by Receiver for debtor, what and what not 174 Statute imposing tax if property gone not collectible 14T Statute of Limitation not apply in action against Directors. . . . 170 Suits of rejected claims 163 Transfer of shares in contemplation of insolvency void 171 What constitutes a preference and what not 172 When franchises forfeited 154 When transfers prior to Insolvency, not held as preference. . . . 172 Records of Association — How kept 244 List of shareholders, shares held and residence. . . . 127 Provision for In by-laws 236 Shareholders' right to inspect 30 Receiving Teller — Position of and duties 240 Redemption Fund— Association to keep with U. S. Treasurer 92, 93, 309 Covered into general cash of Treasury 94 Five per cent, to count as lawful reserve 92 Redemption Cities — (See Reserve Cities). Redemption of Circulation — At own counter 87, 92, 93 Bond sale to cover circulation of failed associa- tion 100 Circulation though unsigned or forged sig- natures 89 Deposit of lawful money, association in liquida- tion to make to redeem 97 Disposition of circulation redeemed by Treas- urer 102, 313 Enjoining the Comptroller action for alleged failure to redeem 164 Expenses of, transportation and redemption, association to pay 101, 312 Extended associations 96 Five per cent, fund for 93 Fragments 312, 328 Interest on bonds withheld, failure to redeem . . 85 Issue of new circulation for redemption. . .314, 326 Profit on circulation not presented 97 Protest of circulation If not redeemed 98 Question of lawful money deposit required .... 99 Receivership on association failure to redeem. 154 Redeemed fit for re-issue returned to associa- tion 102 Regulations in regard to 92, 93, 100, 101, 102, 309, 328 Remittances to reimburse Treasurer U. S 310 Secretary of Treasury to determine disposition of notes redeemed 102 U. S. Notes 328 Re-discounts — Authority to make 16 Illegal interest, right of action Ill Not borrowing money 16 Officers' action binding if habitual 16 Usurious Interest of paper not relieved by 113 Reduction op Capital — (See also Capital Stock). Cancellation of delinquent stock unsold 33 Form of resolution 320 Procedure, rights of shareholders, restrictions, etc. .40, 41 Shareholders reducing amount of proposed increase. . 39 Register of Treasury — Name on circulating notes 86 Registered U. S. Bonds — (See Bonds, U. S.). Regulation of Association — (See National Banking Association). Reorganization — Ordering circulation before time of taking effect 264 Question of vs. extension of charter 263 State and private associations as National 223 Stockholders of old Bank not bound 264 Replevin — Action against Receiver for property not strictly of association. . . . 173 26 378 PAGE Bepobts — Annual of Comptroller to Congress 5 Association of condition, contents, etc 127 Care in making 243 Circulation, semi-annual return to U. S, Treasurer 134 Condition of association to be published 127 Examiner to Comptroller of association failing to redeem notes. ... 99 Examiner on condition of association 130 Explanation of items, reports to Comptroller 277, 289 Failure to make report of condition 85, 129 False entries in 180, 181 Form of reports to Comptroller 272, 288 List of shareholders to Comptroller .' 127 Receiver to Comptroller 154 Special Comptroller may call for 128 Hesebve Agknt — (See also Reserve Cities). Association may keep portion of reserve with 107 Cities in which may be located 107, 108, 301 Kesebve, Lawful. Money — (See also Reserve Agent). Five per cent, redemption fund to count as 92 Funds available for 295 Penalty for failure to maintain 106 Proportion of with reserve agents 107 Required by association 105 Requirements, computation, examples, etc 294, 295 Requirement of gold Banks 91 Restriction on business when short 106 Rbseevb Cities — (See also Reserve Agent). Additional Comptroller may designate and how become. 107, 109 Application to become to be made to Comptroller 107 Classes of 107, 108, 294 Form of authority to sign application for designation 323 Form of application for designation 322 Other than Central 107 Provision for becoming and requirements 107, 108 Residence — Association required to keep of shareholders 127 Of association 104 Of shareholders in organization certificate 9 Requirement of Directors 44 Resolution — Appointing attorney to endorse interest checks 341 Assuming liabilities of association, liquidating to consolidate.... 254 Authority to convert State Bank 228 Change of title and transfer of bonds 321, 322 Extension of corporate existence 258, 259 Liquidation 42, 247, 248 Reorganization of State or private Bank 223 Reserve cities to become 322, 323 Shareholders' reduction of capital stock and form 40, 320 Shareholders to increase capital and form 36, 37, 319 Withdrawal of bonds on deposit with Treasurer, and form... 82, 323 Withdrawal and assignment of bonds in consolidation 254 Retubns — (See also Circulation, Reports, Taxation). Association failing to make Comptroller assess 135 Default of State Bank on circulation, how tax estimated 137 Required of circulation of State Banks, cities, etc 136 Semi-annual for tax on circulation 134 Revised Statutes U. S. — Index of Sections of Bank Acts, and of additional acts 25, 26 s Sate Deposit Boxes — Of National Banks 12 Sale — Bonds of failed association to redeem circulation 98 Private of bonds of failed association 101 Shares of association for debt pieviously contracted 121 Stock of delinquent subscribers 33 Stock of shareholders not assenting to extension of charter 74 Savings Department — Of association, how operate 12 JSeal — Association aiRx to Certificate of Liquidation 152 Association may adopt and provision in by-laws 9, 234 Of Comptroller of Currency 4 OflScial taking acknowledgments to aflRx on organization certificate 216 Required of oflacer taking acknowledgment of report of condition 128 Treasury to be on circulating notes 86 Secbetaby of State — Impression and certified copy seal of Comptroller filed with 4 379 PAGE Secbetaby of Treasury — Appoint Deputy Comptroller of Currency 3 Appoint clerks of Comptroller of Currency 3 Approve seal of Comptroller of Currency 4 Approve destruction of plates and dies of circula- tion when useless 87 Approve appointment of Examiners of association. . 130 Approve purchase of real estate by Receiver to pro- tect equity 165 Approve payment of property purchased by Re- ceiver 166 Association designated Government Depositaries by 65 Certifying destruction, worn notes redeemed 90 Circulation redeemed to determine disposition of . . . 102 Circulation redeemed to perpetuate evidence of . . . . 102 Comptroller examination of association to concur in on failure to redeem notes 99 Concurrence required for Comptroller to appoint Receiver 106 Concurrence with Comptroller to designate reserve cities 108 Conversion of U. S. Bonds into 2 per cent, bonds 80, 81, 86 Design circulation for extended association 97 Exchange, coupon for registered bonds 80 Fix Examiners' fees in certain localities 130 Fix security from association as Government De- positary and financial agent 66 Notice to holders of circulating notes to present shall direct 100 Obtain appropriation for refund of excessive tax. . . 135 Organization with capital under $100,000 to be ap- proved by 28 Prescribe form of circulating notes of association, , . .86 Prescribe printing charter number on circulating notes 87 Prescribe regulations for redemption of circulation. 136 Recommend for position. Comptroller of Currency. . 2 Supervise printing Comptroller's annual report.... 6 Supervision of and assign office of Comptroller 2 To approve bond of Comptroller 2 Secukity for Loans — Endorsement charging personal estate 13, 26 Mortgage of maker of note to endorser as collateral. ... 27 Not limited to personal security 10, 13 Policy of Bank Act as to 28 Real estate for debts previously contracted 26 Shares of own association not to be taken 120 Should be readily convertible 242 Stock of real estate company collateral 27 Semi-annuai. Duty — (See also Taxation). Excess, how secure refund 135 How collected when association fails to pay 135 Provision for on circulation 133 Regulations for assessment and payment 315 Returns for, when 134 Senate of U. S. — Approve appointment of Comptroller of Currency 2 Set-off — Against insolvent association " 174 Payor of Illegal interest not apply on loan 112 Rights of, etc 62 Shareholder creditor not apply claim as 62 Shareholders — (See also Shares). Absolute right to transfer stock 31 Action of not necessary to close association on expiration of charter 251 Agent of. Statute as to embezzlement applicable to 184 Agent of, suits by and agninst 193 Agent of for insolvent assorlation, duties and powers. . . .167, 168 Agent of reappointed in case of resignation or death 168 Assessable, not association on shares 139 Assignee liable to assessment 54 Assessment on, for deficiency in capital 125 Assignment of stock to avoid liability 54 Assessment when debarred by Statute of Limitation 62 Association may close 9 Become on payment of subscription, and entry of name 31 Books of association admissible evidence to recover assess- ment 63 380 PAGB Shabeholders— Cannot prefer creditor 60 Cannot question validity of appointment of Receiver by Comp- troller 156 Capital increase by, and right to new stock 37, 38, 39, 213 Comptroller of Currency to decide when prov.eed against and to what extent 61 Consent of, in State Bank converting 67, 227 Consent required for extension of charter 259 Cumulative voting prohibited 43 Creditor's bill against I54 Debarred claims, when association in liquidation 151 Deceased estate liable 53, 64 Delinquent in payment, forfeiture and sale of shares 33, 124 Directors, election or appointment by 10, 44, 50 Disqualification to vote 44 Dividends of liquidating association, property of 152, 250 Due notice required of meetings 43 Enforcing payment of installment 33 Enforcement assessment in court of equity but not necessarily 61 Enforcement assessment on stock not lie against personally. . 125 Executor, etc., holding stock when not personally liable 64 Extension of corporate existence, dissenting from 262 How credited for payment on subscription 218 How enforce right to inspect books of association In liquida- tion 151 Increase of capital to authorize 37 Individual liability of, and enforcing 51, 52, 153 Individually cannot bring action against directors. 170 Interest in stock of consolidating association 255 In Virginia not deduct indebtedness from value of stock to be assessed 144 Jurisdiction of State Court in action against Directors 194 List of, association to keep and who may inspect 127 List of, annually transmitted to Comptroller 127 Liable until transfer of stock recorded 31 Liable for principal and interest of debts 63 Liability as pledgee 57 Liable though stock purchased by misrepresentation of oflB- cers ••• ...•..••«••••■♦• • 64 Liability of when association Insolvent not preferred claim on estate •• ........••• do Management of insolvent association after payment of credi- tors by agent 166 Married women, liability as V," ",. May appeal to Comptroller for appraisal of stock In dissent from extension of charter 74 May reduce amount of increase determined on 39 May leave for surplus fund shares released by reduction.... 41 May bring suit against directors if Receiver refuses 161 Meetings, how provided for and rights In 42, 43 Meetings, when not legal *^ Meeting to vote association into liquidation 101 No individual liability after all debts paid. • . . • 6d Non-resident same reduction in assessment for tax as resident 144 Not assenting to extension of charter, may withdraw and ob- tain value of stock • • • • • • • • • ' * Not liable for shares as collateral held In name of another party ' Notice of' Impairment of capital, form of . • • • • 323 Of association insolvent may dispose of property to satisfy Option on stock Venders liable for same • 56 Organization certificate to contain names, residence, etc » Power to place association in liquidation, vote necessary 150 Procedure against on stock, in voluntary liquidation 64 Property assigned after association insolvent o* Purchaser of shares in name of infant liable ou Receiver may enforce Individual liability 10 « Receiving dividends not contest validity of liquidation 151 Record of stock necessary to recognize holder <5W Registered liable unless fault of association not recording transfer • • • • ^4, 55, 56 Relation to bad debts or paper charged off. 4i Requirement in transfer of stock to avoid liability o* Restriction on transfer of stock ,• • • ^} Right to full value stock of liquidating association ^ol 381 PAOB Shareholders — Right of action against, only on decision of Comptroller 62 Rights of in liquidating association consolidating 254 Rights and liabilities of, succeeding owner of stock 29 Sale of stock for assessment unpaid 125 Set-off on assessment cannot make as creditor 62 Security given for liability inures to benefit of all creditors. . 60 Shares as collateral no liability if so noted in registering. ... 58 Shares pledged association sold and applied on debt< cannot recorer 121 Solvent not held for liability of insolvent 52, 53 State Bank reorganizing, payment for new stock 224 State Bank converting may retain holding in another Bank. . 67 Stock held as collateral, when liable 67 Stock released by reduction absolute property of pro rata .... 41 Subscriptions to increased capital, relation to 38 Successive assessments may be levied 63 Sued cannot deny legal existence of association 61 Surrendered proportion of stock on reduction of capital 40 Title and location, change by 70 Vote required to put association in liquidation 72 Vote required to extend charter.* 72 Vote required to reduce capital stock 40 When become liable on increased capital stock 66 When both transferror and transferee liable 60 When may compel directors to declare dividends 118 When not liable to association for purchase through fraud. . . 60 When not liable on stock transferred association failing or failed 60 When receive dividends on assets of insolvent association. . 162 When released from liability on circulating notes 98 When relieved of liability in transfer of stock 54, 55 When right to stock in association succeeding another 74 When transfer not relieve liability 59 Shareholders' Agent — Appointment and duties of insolvent association 166 Suits by and against 193 Shares — (See also Capital Stock and Shareholders). Acquired for debt, when to be dii^osed of 121 Appraisal and sale of, for shareholders not assenting to extension of charter 74 As collateral security, how holder avoid liability 57 Assessment of for deficiency in capital 125 Assessment on, may be barred by Statute of Limitation 62 Association to record transfer on demand 32 Association not hold for liability of shareholders 121 Association may take as security shares of another association 122 Association liable on oflBcers' statement of value 60 Association when not to own or hold own 121 Attachable for indebtedness by association 121 Certificates, care of 244 Collateral security for deposits 39 Consolidating association, how paid for 255 Converted State Banks may hold of other Banks 67 Delinquent, forfeiture and sale 33 Directors' individual liability on 169 Directors' minimum holding required 44, 45 Disposition of delinquent 33, 124 Enforcing individual liability 33, 154 Executor liable until transfer property of estate 64 Execution under State laws 30 Force of record of transfer 30, 31 Fractional parts may be issued 40 Fraudulent sale not benefit creditors 61 Held in representative capacity, stock book must show, to avoid per- sonal liability 63 Illegal holding or pledge of to association 122 Increased of association, when taxable 139 Individual liability on 62 Individual liability only enforced on Comptroller's decision 62 Legal status before payment on 34 Liability for damage, refusal to transfer stock 31 Liability in favor of all creditors 60 Liability of subscriber 33 Loans on, as security for, prohibited 120 Loss of certificate, bond of indemnity required 31 Married women holding liable 53 Negotiability of In liquidation, character of 152 382 FAQS Shakes — ^Number held by each shareholder, association to keep record of 127 Organization certificate to state number 9 Original shareholders, right to increased stock 38 Par value and denomination 29 Par value of stock of State Banks converted 29 Payment for increased stock 37 Personal property 29 Personal property of holder, transfer of 29 Pledged association if sold and applied on debt, shareholders cannot recover 121 Purchaser for infant, liable for assessment 60 Reorganized State Bank payment for 224 S£,le of shares by oflBcer of association to himself or to association. . . 122 Sale to give control of association. Court not approve 32 Shareholders, how forfeit right of pre-emption to increase 38 Shareholders' right of pre-emption to increase 38 State Bank converted to National may remain same 67 State cannot limit transfer quality of 29 State laws on trustee holdings 29 Stock book evidence of ownership 65 Subscribers* right when increase not approved before insolvency 38 Subscribers' right when total increase not made 39 Subscriptions to increased stock 39 Surirendered, former holder no claim on proceeds collateral charged off 41 Taxable as personal property only 138, 139 Taxation of, manner, place and restrictions on 138 Taxation of, not same as capital 139 Temporary certificates 205 Territory power to tax same as States 145 Transfer of, provision for in by-laws 236 Transfer, record of legal force 30 Transfer, right of 29 Transfer to avoid liability 59 Transfer without registration 32 Vote required to increase capital 36 What determines transfer of ownership 31 When Receiver may recover for illegal purchase of by association. . . 122 When title passes by transfer 30 Signatures— Circulation, printed sufficient 89, 221 Official of officers required by Comptroller and form of 214 Officers' on circulating notes 87, 88, 89, 221 Of Government officers printed on circulation 86 Solicitor of Treasury — Construction of Statute as to place of business 105 U. S. District Attorney under supervision of in suits. United States a party 196 State Banks Converted — Assets of old Bank, what take over 68 Assets and deposits of old Bank, relation to in reor- ganizing 68, 223, 224 Authority from State not necessary 67 Capital stock of in conversion , 67, 226 Certificate of capital paid in 230 Certificates of stock 69, 231 Charter old Bank, when expires 68 Closing affairs of old Bank 67, 231 Conversion to National, procedure 35, 66, 226 Conversion of, why the provision 67 Converting thereby surrenders State charter 68 Conversion or reorganization, question of 231 Denomination of shares 29 Directors, majority may execute papers 66 Directors may continue same 67, 68, 227 Examination of assets 35, 227 Execution of papers 229 Incorporated only may convert to 66 Loans prohibited. Comptroller may temporarily allow 120 Relation to old Bank 67, 231 Returns for tax on circulation of State Bank 137 Shares may continue same 67, 68, 227 Shareholders' meeting 228 Shareholders' liability. State Bank capital $5,000,- 000 52 Title may use, old, in suits of old Bank. . . : 69 Vote required and form of 66, 67, 227, 228 State Banks — Circulation, tax on and returns 136, 137 Comptroller to report on to Congress 5 383 PAGS State Courts — (See also Suits). , . ^ ^ ,. Against Directors for violation of Bank Act may be brought in 170 , Embezzlement of officers of association 182 Jurisdiction V.%* 'H?' ^ft^ Limitation in order and attachment Ill, 194, 195 State Taxation — (See Taxation). Statute of Limitation — (See Limitation). Stock Account — When payment of subscriptions carried to 21S Stocks and Bonds — As security for debts 17 Association holding of another association can plead ultra vires in tax assessment 24 Dealing in 1§ Of another association not legal investment 17 Real estate company's 2ft SUBSCRIBEB to Stock — Contract to pay for 34r Entry of shareholders and full payment secures rights without certificate 31 Execution of organization certificate 21ft In arrears disqualifying to vote 44r Increased capital, when liable 5ft Legal status 33, 203 Not liable for through fraud 60' Original subscribers to distribute 34 Payments 32, 33. 21S Recovering amount paid in on insolvency before in- crease approved 3& Rescinding subscription 60, 204 When forfeit 33 When relieved of by action reducing increase deter- mined upon 39 Subscription Paper — Advantage of in organizing association 203 Form of 204 Suits — (See also Crimes, Penalty). Action against Directors for false report 171 Assignee right to enter when liability on stock fixed 63 Association power to sue and be sued 10 Comptroller for violation of Bank Act 169 Converted State Bank may prosecute under old title 69 Creditors against Directors, remedy cumulative not exclusive 171 Creditors' bill against shareholders 154 Directors' personal liability remedial not penal 170 Enjoining Comptroller or Receiv3r 164, 196 Equity to enforce liability on stock 64 Evidence of instruments certified by Comptroller 197, 19S For usury, who may bring 114 Government may have special attorney 197 Illegal certifying checks 185 Injunction against collection of illegal tax 147, 148 Jurisdiction of by and against association 191, 192 Limitation against shareholders 62 May be in law or equity 61 Receiver by and against 159 Receiver or shareholders against Director 161, 170 Receiver to recover illegal dividends paid 118 Replevin 173 Unauthorized purchase of paper not defence 15 U. S. District Attorney to conduct if U. S. a party 19ft Surety Bonds — (See Bonds, Official). Surplus Fund — Accumulation of, good policy 243- Buying notes with 14 Dividends for excess 37 Excess of may increase capital 3'7' Increasing when increase capital 39 Receiver may be appointed for deficiency 52 Required amount before oeclare dividends , 117 Taxation of (see Taxation). When may be taxed separately from shares 142 T Taxation — Actual valuation of real estate in fixing value of shares 142 Application of term greater rate governing assessment of shares, . . 141 Assessment of capital of association as personal property void if shareholders not mentioned 139, 140 Assessment on shares may be collected from association 14ft- 384 PAGE Taxation — Assessment only in name of shareholders 139 Assessment to be made so as to allow for deductioos 144 Association exempt from 10 per cent, tax on circulation 138 Associations in District of Columbia 129, 148 Association legally liable to pay for shareholders when 146 Branch oflSce in another State not liable for tax 146 Capital stock as such not taxable by State 139 Circulating notes of association only as money 146 Deduction in assessment for portion in non-taxable securities not necessary 142 Deduction on shares same as on other moneyed capital 143 Deductions allowed other moneyed capital 144 Exemption of stock of other corporations when not discrimination against association 140, 141 Exemption of certain moneyed capital by State when not discrimi- nation against association 143 Illegal, remedy for 147, 148 Illegal by State of association 143 Increased stock, when taxable 139 In Indiana real estate not included in valuation of shares 142 In Indiana real estate paid on in valuation of shares not recoverable 142 In Kentucky shares subject to county and municipal tax, Hewitt law not govern 145 Insolvent association property gone, shares not taxable 146, 147 Intent of Bank Act States should tax State Banks as National 145 In Virginia shareholders not deduct indebtedness from value of stock 144 License, association not subject to 146 Limit of tax by State on shares of association 139 Meaning of moneyed capital as governing taxation of shares 140 Non-resident holders taxable where Bank located 139 Not at greater rate than other moneyed capital 139, 140, 141 Of association must conform to State institutions 145 Of shares to be equitable under State constitution as other moneyed capital 145 On other competitive corporations of State not to be discrimination against association 145 Personal property of insolvent association, exempt 145 Real estate assessable separate from shares, when 142 "Real estate of association in another State 145 "Real property of association same rate as other by State 139 Report to Comptroller not full evidence in valuation of shares.... 146 Shareholders not association assessable on shares 140 Shares assess as of shareholder not of association 139 Shares by State governed by employment of capital 140 Shares held by association of another 139 Shares in proportion to rate ol moneyed capital not necessarily rate of State Banks 144, 145 '.Shares not assessable in solido 140 Shares of association, manner and place of and restriction 138 Shares of association not liable when capital of State Banks taxed. 145 Shares of association as personal property 138, 139 Shares of association. State legislation to determine manner of and place with restriction 138 Shares of association distinguished from those of other corporations for , }il Shares of not same as tax on capital 139 State Bank while converting to National subject to assessment by State 146 State laws may not discriminate against associations 143 State may require list of shareholders with residence 147 State not limited in tax of association by previous limited tax on State institutions 145 State on shares and real estate of association 138 State tax on circulating notes only as money 148 Statute relating to • • 133, 138 Surplus fund assessable separately from shares when 142 Territories may tax association as States 145 TJ. S. Bonds exempt from 148 Valuation of shares of association for . . . 142 Virtual tax on shares of State Banks association subject to 145 Taxes — (See Semi-annual Duty; Taxation). Tklleb — (See also OflFicers). „ Duties defined in by-laws /••;•• ^^t Tebbttobibs — Banks organized under laws of, not issue circulatlor 7& Laws concerning Banking , •» 385 PAOB Territobibs — Power to tax association as State 145 Rate of interest governing association 109 Title — Association reorganizing 263 Association to be approved by Comptroller 8, 205 Change of, provisions for 70, 71 Form of 206 National Bank Act 1 Reservation of, by Comptroller, time allowed 207 The word " National " 132 Transfer of U .S. Bonds — (See Assignment, also Bonds, U. S.). Transfxb of Sharks — After Bank insolvent, inoperative 59 Approval of Directors not necessary 31 Bank liable for refusal 32 Certificates as evidence of 56 Directors prescribe regulations for, of stock 31 How to avoid liability 54, 55, 59 Made as in other corporations 30 Owner absolute right to transfer 31 Record 31 Rights of holder of stock, etc 30 State law not control 29 TsEASTTSY Drafts — Provision for endorsement of 348 Tbeasuree of U. S. — Association to deposit bonds with to secure charter 220 Association to keep redemption fund with 92 Association to deposit U. S. Bonds before chartered 79 Certify for successive tax to Comptroller of Treasury. . . . 135 Circulation mutilated and worn, to deliver Comptroller for destruction 93 Circulation of association, to redeem 95, 96 Circulating notes to redeem on deposit of lawful money 95, 98 Examination of bonds deposited with, provision for 83 Interest on bonds to withhold for deficiency in capital. . . . 125 Interest on bonds to withhold for failure to make report.. 129 Name on circulating notes 86 Provision for destruction of notes liquidating association. 98 Receiver to pay to, assets collected for insolvent associa- tion 157 Redemption fund to be kept with 92, 309 Redemption of circulation expenses, how paid 94 Return for tax on circulation to be made to 134 U. S. Bonds of association for circulation to hold in trust 81, 85 TBUSTEE — Administrator, executor, guardian or trustee not personally liable for stock held as 64 Liability for assessment until personal property of estate trans- ferred 64 May act with shareholders for extension of charter 260 May act with shareholders as to assets of liquidating association. . . . 168 Stock held as must be so noted on stock book to avoid personal lia- bility 65 u Ultra Vibes — Bank offering fire insurance to secure customers 21 Guarantee of paper 19 Of association 22 When not enf orcible 22 Undivided Pbofits — What constitutes 124 USUBY — ^Actual pajrment of, liability 114 Actual payment of required to enforce penalty for double amount 113 Allegations, when sufllcient 113 Amount of penalty 114 Association succeeding private Bank liable for on obligations of latter 116 Association liable, though mortgage security in name of individual ... 24 Association may not plead Ill, 113 Construction of Statute 117 Discounting note with provision to pay attorney fee 113 Effect on contract 115, 116 Equalizing interest on difTerent items not constitute 110 Federal law governs though security In name of individual 116 Forfeiture, not waive by separate note for 117 Illegal interest included in paper renewed not recoverable 113 Inhibition general whether persons natural or artificial Ill Intent of the law 112 Interest after maturity 112, 113 Interest forfeited 112 Knowledge of necessary to liability 113 Limitation for enforcing .114, 115 386 PAGE USTJET — ^Loans to Directors, association liable for 117 Payor not plead as set-off against principal 112 Payor to bring special action for 112 Penalty of association receiving Ill, 113 Period included in limitation to recover 114 Purchase of draft at illegal rate HI Remedy where action by association 112 Renewal notes 113 Right of action, when accrues 114^ 115 Rule di minimis ' 117 State Courts, jurisdiction of [[ 116 State laws not apply Hg Waiver II7 Who may bring action II5 U. S. Bonds — (See Bonds, U. S.). U. S. DEPOSITARIES — (See Government Depositaries). U. S. Disbursing Officer^ (See Government Depositaries). U. S. District Attorney — No extra pay acting for Receiver 160 Suit if U. S. a party to conduct 196 U. S. Notes — Coins, etc., issue and redemption of 326 U. S. Obligations — Defined 185 National Bank circulation included 185 V Vice-President — (See also Officers of Association). No implied authority to borrow money 16 Office of 239 Prohibited signing report of condition 128 Signature may attest circulating notes. 87, 88 Visitorial Powers — Limitation to association 132 Voluntary Liquidation — (See Liquidation). Voting — Capital to increase 36 Capital to reduce 40 Changing of name or location 70 Cumulative not allowed 43 Extension of charter 72 Liquidation of association 97 Proxies at shareholders' meetin'?, who not permitted 43 Restore impaired capital 125 Shareholders' agent in liquidation 166 State Bank of Shareholders to convert to National 66 w Willful Misapplication — (See also Crimes). ^^^ Defined 178 Women — Married, as corporators 202 Married, liable as shareholders 53 Married or unmarried, as directors 45 Married, purchase of stock by 53 World's Fair — Provision for Branch Banks at "« To Bankers We invite correspondence with bankers having interests in "Washington requiring attention, es- pecially 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 w^ith 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 w^e 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 outstanding circulation of National Banks wishing to reduce circulation or to go into voluntary liquidation, and also withdra^v and sell bonds held as secur- ity therefor. We are in position to buy and sell Govern- ment 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, Corcoran Building, Opposite Treasury Department, WASHINGTON, D. C. UNIVERSITY OF CALIFORNIA LIBRARY