non-negotiable paper, stocks and other investment securities. Yet the court held that the president was not criminally liable as the officer of a bank. But it is well known that many corporations called trust companies have banking powers, and carry on a general banking business thereunder. Such corporations from any standpoint would necessarily be considered simply as banks, so far as their character as banks was in question. But in quo warranto proceedings it was held that a corporation which was given the right to grant evidences of debt to be issued payable on demand would violate its charter by the issuance of evidences of debt payable on demand to circulate as money, where the violation charged was the illegal exercise of banking powers.1

§ 6. Under penal and forfeiture statutes.-The strictest rule in favor of the citizen is applied in this class of cases. Courts have gone quite far in verbal refinements in order to mitigate penalties. The cases mentioned in the note below are more properly cases of statutory construction, but they show a very dextrous manipulation of banking statutes.1 Coupon notes, where the coupons were payable to bearer, were held not to be, when issued, an act of banking. Negotiable bonds, as the case seems to represent them, issued

3 State v. Reed, 125 Mo. 43. The court in its opinion refers to Mer. Bank v. New York, 121 U. S. 138, as holding that a corporation with such powers was not a bank. But the illegality of the act ought not to have been permitted to be set up by the defendant. The case is therefore wrongly decided.

4 People v. River Raisin Co., 12 Mich. 389. There was a demurrer to the replication. The replication was held bad, but, the plea being bad, judgment went against the defendant. The plea was considered bad because it neither denied nor

confessed and avoided the exercise of banking powers. But the plea did set out just what the corporation was doing under its charter. Hence the opinion, though vague and rambling, must be taken to hold that the charter did not permit the issuance of circulating notes.

1 Bristol v. Barker, Anth. N. P. 235; S. C., 14 Johns. 204; People v. Brewster, 4 Wend. 498. Compare People v. Bartow, 6 Cow. 290; People v. Doty, 80 N. Y. 225.

2 Barry v. Merch. Ex. Co., 1 Sandf. Ch. 280.

by a railroad, were governed by the same rule. The receipt of money on deposit was considered no violation of a charter prohibiting banking, although it seems that the deposits were treated as bank deposits. Under a statute making bank stockholders personally liable for the debts of the bank, the stockholders were held not liable for debts arising from a business of negotiating and guaranteeing mortgages.

§ 7. The right of banking. At common law, the various kinds of banking, whether of issuing notes, discounting paper, or receiving deposits, were the privileges of any one who chose to exercise the right. This would seem to be the necessary conclusion from the development of banking. Originally the relation between a bank and its depositor was not that of debtor and creditor. Some of the greatest of the old European banks received money strictly as a deposit, to return the same money to its owner. But early in the history of banking it came to be a received notion that the relation of debtor and creditor was initiated by a socalled but misnamed deposit. Whether the bank issued to its depositor an evidence of debt in the form of a note or notes, the amount being made payable on demand, or whether the credit was given the customer in his pass book or on the bank book, the obligation was precisely the same, to wit: a debt payable on demand. It therefore seems reasonably certain that banking continued to be at common law a privilege open to all. So the authorities agree.1

§ 8. When a franchise. All the courts seem to have recognized that the power to issue notes to circulate as money could be made a franchise.1 No one ever seems to

have questioned the right of the legislature to make the power to issue currency a franchise grantable by the state.

3 Hubbard v. N. Y. R. R. Co., 36 Barb. 286.

1 Bank of Augusta v. Earle, 13 Pet. 519,596; Curtis v. Leavitt, 15 N. Y. 9;

4 Corwin v. Insurance Co., 14 Nance v. Hemphill, 1 Ala. 551. Ohio, 6.

1 Bank of Augusta v. Earle, supra;

'Kiggins v. Munday, 19 Wash. Myers v. Irvine, 2 S. & R. 368.

233.

It is put on the ground that the government has the power to protect its subjects from a worthless currency. If the legislature can take away one branch of banking from private citizens for the public good, it would seem to follow as a matter of strict logical deduction that all branches of the business could be made franchises."

§ 9. Right of private banking.- Originally banking in all its branches was a common-law privilege, as we have stated. The fearful evils of unrestrained banking in its branch of issuing notes caused the privilege to be curtailed. The New York statute forbade all kinds of private banking, and restricted the right to associations authorized by the state. The power of the legislature to do this was challenged in the case of Attorney-General v. Utica Ins. Co., 15 Johns. 358, in an ingenious argument by T. A. Emmett. But his argument was wholly unsound in his case because he was arguing for a corporation, whose rights and privileges were not those of individuals, but simply what the legislature granted it. The court held that, while banking was a common-law right, it had become a franchise under the statute. This ruling was necessary to the case, which was quo warranto. It should be noted that in the New York constitution in force in 1818, when this case was decided, there was no clause against depriving a person of life, liberty or prop erty without due process of law. That was first inserted in the constitution of 1822. The clause in the federal constitution' was binding, of course, only on the general government, and the court assumed the power of the legislature by analogy to the action of the English parliament. But this case seems to have settled the law in New York, and the question was not raised under the new constitution. The case of Bank of Augusta v. Earle, 13 Pet. 519, admitted the right of the legislature to make issuing notes a franchise, but

2 Myers v. Irvine, 2 S. & R. 368. 3 State v. Woodmansee, 1 N. D. 246; State v. Stebbins, 1 Stew. (Ala.)

299; Attorney-General v. Utica Ins. Co., 15 John. 358.

1 Fifth Amendment to the Federal Constitution.

2

3

seems to doubt the right to make other branches of banking a franchise. But since the court was dealing with a corporation's rights in that case, the statement would have been dictum. The two earlier Alabama cases seem to have assumed the right of the legislature to make all banking a franchise. The point at last came before the supreme court of North Dakota, and that court, in an opinion not very well considered, held that the state legislature could prohibit all private banking; but a little later the supreme court of South Dakota held such an act to be unconstitutional.' Other states will probably settle the question for themselves in the near future. The supreme court of the United States will also be required to pass upon the question under the fourteenth amendment. If that court should decide against the legislative right, the question will be completely settled for the whole United States as to any law subsequent to the fourteenth amendment. But should it hold in favor of the right, it is perfectly possible that some states will, nevertheless, hold that such an act would be repugnant to the state constitution, which decision as to that point would be final for that state.

§ 10. The probable rule. The objection to such statutes is that they deprive the citizen of a valuable property right, to wit: the right to pursue a lawful calling. It is claimed to be in violation of the due process of law clause of the state and federal constitutions, as well as the privilege and immunity clause of the federal constitution. The sole question is this: Is the evil of unrestricted banking so great that the police power can take it wholly away, or is the legislature

Nance v. Hemphill, 1 Ala. 551; State v. Stebbins, 1 Stew. (Ala.) 299. Chief Justice Taney, in Bank of Augusta v. Earle, says that the case of State v. Stebbins could only be considered as applying to banks of issue.

3 State v. Woodmansee, 1 N. Dak.

4 State v. Scougal, 3 S. Dak. 55. 1 The usual authorities are cited in the cases above noted. For discussions of the general subject, not confined to banking, see 25 Am. Law Rev. 871, and 27 Am. Law Rev. 857.

required, the business not being a nuisance, to prevent the evil by proper regulation? It is not impossible, it would seem, by requiring the capital stock of a private banker to be paid in, and by providing in some safe way for the double liability of that capital stock, by a deposit of securities to make private banking as safe as corporate banking. But it is apparent that, if this were done, and the private banker required to deposit securities, to make his responsibility equal to the double responsibility of the stockholders of a corporation, the private banker would cease to exist. This is, perhaps, the easiest way for a legislature to accomplish indirectly such a result, if it is so desired. The objection of class legislation, and of a discrimination against the private banker, would need to be met and overcome; but it could be said that the law, applying to all private bankers alike, could not be class legislation. If the legislation attacked consists, however, of a positive prohibition against private bankers, the constitutional question must be fairly met. It is likely that the decision will depend upon the private views of the members of the court upon the proper system of political philosophy. If they are devotees of the laissez faire doctrine of government, they will adopt the rule of non-prohibition. If, however, they belong to the opposing school of political thought, they will follow the opposite rule, for the question belongs far more to politics than it does to law. It will require a very accurate knowledge of the general opinions of the judges composing a court of appeal to form any conjecture as to the probable decision. We are likely to have much judicial exposition upon this question in the near future.3

2 Attorney-General v. Bank of Niagara, 1 Hopk. Ch. 403; AttorneyGeneral v. Insurance Co., 2 Johns. Ch. 371. Both these cases held that an injunction would not lie at the suit of the state against the unlaw ful exercise of banking privileges.

3 The flow of judicial rhetoric, which is not always in the best

literary taste, has already begun. "Whence, then,” the justice writing the opinion in State v. Scougal, supra, indignantly exclaims, "did the legislature of this state derive its power to farm out these privileges to corporations, and to deny to individual citizens the right to exercise them, which he and his