§ 11. Question considered on principle. It may be conceded that to take away the business of a private banker, who has for many years carried on a lucrative and honorable business, seems a wholly unwarranted proceeding. Everything that can be urged in favor of the citizen's right to enjoy property can be urged in his favor. But many other kinds of business have been treated in this way, and the step justified by an appeal to the right of the public as against the individual. It is claimed with some reason that the history of private banking shows no more failures than corporate banking; that the worst of bank failures have been those of corporations. But it seems plain that if the right be conceded to the legislature to prohibit private banks of issue, the right to prohibit private banks of deposit necessarily follows. We have shown that both businesses are at common law the rights of the citizen. The issuance of a note payable on demand in the place of a sum of money deposited or borrowed does not differ in the least from a book account payable on demand for a sum deposited. In fact the issuing of the note is the older banking transaction. It is true that the note can circulate as money, and the book account cannot. But certificates of deposit and savings books can so circulate in theory, although the form of the latter is too cumbrous for practical use, and the courts deny to them negotiability. Yet the currency does not become demoralized as long as the banker's credit is perfect. If a bank of issue fails, the notes become, of course, practically worthless,

ancestors have from time immemorial possessed?" This is a somewhat clumsy sentence, but if it is meant to assert that we and our ancestors from time immemorial have enjoyed the right to have a bank, the learned justice is only making a phrase. It cannot be asserted that from time immemorial our ancestors have reveled in the unrestrained right of private note issues. That is a compara

tively recent thing. See Anderson v. Alexander, 7 Am. Law Reg. 173. The question is one to be considered calmly and without the aid of buncombe, which never shows in a worse light than in the permanence of a judicial opinion. The opinion seems to think that the federal constitution made note-issuing a franchise, but that is a mistake. It merely prohibited state bills of credit.

unless secured. The same result follows upon a bank failure as to the deposit accounts. Just as much will be paid on the notes as on the deposits. Rather fewer people are affected by the depreciation of the notes than by the depreciation in the value of the deposits, for the deposit account will generally be much larger than the note issue. The direct and indirect effects of a bank failure on its depositors would perhaps be as large as the same effects upon the note holders. So, therefore, no reason can be urged in favor of the legislative right to suppress private banks of issue that cannot also be urged in favor of the right to suppress private banks of deposit. This consideration does not apply to private banks solely of discount. But such a bank cannot in any proper sense of the term be called a bank, as the word is understood either from a business or a politico-economical standpoint. We do not call a note-shaver or a pawn-broker a banker, but both may be discounters of paper. Yet, even pawn-broking, it is conceivable, might be reduced to a franchise for public convenience. But every one must concede as to banks of deposit that people in general know little of a private banker's responsibility, and are prone to accept the fact that a man is a banker as a guaranty of his perfect financial responsibility. That may be their own fault, but it is none the less a fact. Much could be said, however, against the possibility of any man finding out anything from published bank statements. The loans and discounts may be good or bad; the fact can only be ascertained with much trouble. It is found that bank supervisions and examinations do not insure good banking, and that the ultimate guaranty against loss is the double responsibility of stockholders, which can be secured from private bankers only on terms that would lead to the discontinuance of the business. So that the weight of reason is decidedly in favor of the legislative right to suppress private banking.

§ 12. Further questions.-Even if private banking be absolutely prohibited by the state constitution, the question remains whether the state constitution is opposed to the fed

eral constitution. If the state constitution were older than the fourteenth amendment, it is difficult to see how that provision would apply, and it is not conceivable that under the privilege and immunity clause of the original constitution (art. 4, sec. 2) the question could arise. But even in states with constitutions adopted after the fourteenth amendment was passed, if the act prohibiting private banking were held in consonance with the federal constitution, the question arising under a state constitution requiring banking acts to be submitted to popular vote, and the state court of final resort holding that the act prohibiting private banking was unconstitutional under the state constitution, the further consideration would require decision, whether a popular vote gave the law any efficacy as against the state constitution. Since the constitution is binding upon all the people, it would seem to follow that such a law would be held unconstitutional where a law would be so held if adoption by popular vote were not required.' It is possible that the supreme court of the United States might hold, even in the case of a constitution adopted prior to the fourteenth amendment, that an act suppressing private banking was contrary to those fundamental principles of government which are spoken of in Loan Ass'n v. Topeka, 20 Wall. 655.

§ 13. Formation of a bank.- Where private banking is lawful and a private bank is started by an individual or individuals, there appear to be no special circumstances requiring notice whether the bank is formed by an individual or a partnership. But one question deserves notice. It seems to have been held that since a partnership can be formed as between the partners on other terms than the joint and several liability of the partners, it follows that the partners will not be jointly and severally liable as to third parties who have notice of the terms of the partnership. It would seem

1 State v. Hastings, 12 Wis. 47, seems to hold otherwise, but is not sound.

1 Hastings v. Hopkinson, 28 Vt. 108. Contra, Manhattan Brass Co.

v. Allin, 35 Ill. App. 336; Riggs v. Swan, 3 Cranch, C. C. 183; Hess v. Werts, 4 S. & R. 356. And see § 209, post, note 2.

to follow, if that be the law, that a partnership limited as to the liability of partners can exist as to persons having notice, even at common law. This result shows the absurdity of the rule. But all the states that permit limited partnerships forbid such a partnership for banking purposes, with few exceptions. There seems to be no question that a limited partnership that fails because of a failure to comply with the statute becomes a general partnership, or, if the particular partnership be not permitted to be limited, such a partnership, although otherwise formed in accordance with the statute, becomes general. It is said that a limited partnership formed in a state permitting such a partnership, but in order to do business in another state, would be a general partnership in both states. But this would appear not to be true as to a limited partnership formed in a foreign country to do business in a state permitting limited partnerships.7 The discussion as to the conflict of laws as to limited partnerships is reserved for the subject of "Unauthorized Banking." 8

§ 14. Joint-stock companies. In states permitting jointstock companies to be formed for banking purposes the statute must be strictly followed. If this be not done the joint-stock company is a general partnership. The rule as to de facto corporations cannot be invoked to make a de facto joint-stock company. If the liability is limited, such joint-stock companies would be generally considered corporations. If they are to be so considered, the fact would

2 See George on Partnership, 424 et seq., for full references to statutes.

3 Expressly permitted in Maryland; by implication in Illinois by not being forbidden.

4 Bates on Lim. Part. 49.

5 McGehee v. Powell, 8 Ala. 827. 6 George on Partnership, 428. 7 Jacquin v. Brisson, 11 How. Pr. 385.

8 See § 29, post.

1 Maloney v. Bruce, 94 Pa. 249; Elliot v. Himrod, 108 Pa. 569.

2 Same cases as in last note. 3 Eliot v. Himrod, supra. 4 Liverpool Ins. Co. v. Massachu setts, 10 Wall. 566. Contra, Curtis v. Leavitt, 17 Barb. 309. See also Bates on Lim. Part., sec. 208 et seq.; Robbins Electric Co. v. Weber, 172 Pa. 635.

have an important bearing upon the conflict of laws as to private banking, which will be noticed later.5

§ 15. Corporations.— A corporation can be formed only under authority from the sovereign power. In the divided sovereignty as between the general government and the states, it was early settled' that congress had the power to charter a United States bank. A state court has given encouragement to congress by deciding that it had power to pass the national bank act.2 The state legislatures have, of course, power to charter banking corporations. This power, in the absence of constitutional restrictions, may be exercised either by a grant of a special charter, a proposition never disputed, or by the passage of a general law permitting the formation of such corporations. But the granting of special charters is now forbidden in almost all the states, and congress has forbidden such a power to the territories. In some of the states the legislature is forbidden to pass any banking law unless the law is ratified by a vote of the people. If the law is passed, it ought not to be amended except by a law ratified by popular vote. Under such a provision it is questionable whether additional powers not of a banking character can be given to banks unless the law be referred to the people and adopted by them.

powers, whether of issue, deposit or v. Maryland, 4 discount, nor amendments thereto,

5 See § 29, infra. 1 McCulloch

Wheat. 316.

2 Pollard v. State, 65 Ala. 628. See Farmers' Bank v. Dearing, 91 U. S. 29.

3 Porter v. State, 46 Wis. 375, citing earlier cases. Contra, Smith v. Bryan, 34 Ill. 364, citing earlier cases. These last decisions have been condemned by the provision in the Illinois constitution of 1870, which applies to amendments.

The Illinois constitution provides (art. 11, sec. 5) that no act authorizing or creating corporations or associations with banking

shall be in force unless ratified by a vote of the people. An act ratified by a vote of the people (1 Starr & Curtis, ch. 16a, sec. 4) provides that banking corporations organized under the act shall have power "to accept and execute trusts." An act not so ratified (1 Starr & Curtis, ch. 32, sec. 89 et seq.) authorized all trust companies, and all companies authorized to accept trusts, to be appointed to execute such trusts as assignee or trustee by deed, or executor or guardian or trustee by will; and