There is a number of other cases, which might at a first glance seem to be opposed to this distinction, yet, if they are carefully examined, it will be seen they are correctly decided, since each case can be treated as one on the loan and not on the contract.16 But as the law stands, the safest rule to follow, where the contract is likely to meet the objection of being beyond the corporate power, is to sue in quasi-contract on the common count joined with a count on the contract. If for any reason that course is not safe, the cause of action, if the act be merely beyond the corporate power and not otherwise illegal, as has been heretofore pointed out, by the great weight of authority, with the exception of a purchase of stock, will be upheld, if from holding otherwise an injustice would result by a party obtaining a benefit with lilan, 72 Mo. 77; First Nat. Bank v. Smith, 8 S. Dak. 7; Warner v. De Witt Co. Bank, 4 Brad. 305; First Nat. Bank v. Elmore, 52 Iowa, 541; State Nat. Bank v. Flathers, 45 La. Ann. 75; Thornton v. Ex. Nat. Bank, 71 Mo. 221; Graham v. National Bank, 5 Stew. 804; Oldham v. First Nat. Bank, 85 N. C. 240; Elmer v. Bank, 12 Kan. 238; Am. Nat. Bank v. Nat. Wall Paper Co., 77 Fed. R. 85; First Nat. Bank v. Elevator Co., 10 S. Dak. 167; Nielsville Bank v. Tuthill, 4 Dak. 295; St. Paul Trust Co. v. Jenks, 57 Minn. 248; Bates v. State, 2 Ala. 451. See $ 181, 191, 338, post. 16 Gold Min. Co. v. National Bank, 96 U. S. 640; Wyman v. Citizens' Bank, 29 Fed. R. 734; Corcoran v. Batchelder, 147 Mass. 541. Some of these cases were where an express prohibition had been violated. The recovery was on the loan. The case of Workingmen's Banking Co. v. Rautenberg, 103 Ill. 460, could have been treated as one on the loan. In other words, it can be said that the suit is really on the loan, and the written contract is simply treated as evidence of the receipt of the money. The parties were not in pari delicto because in many instances the corporation was the party for whose benefit the statute was passed, just as, on the contrary, the borrower under an usurious contract with the bank is considered the one for whose benefit the statute was passed. The corporation was certainly in a better position than a man who had united with its officers to do an act prejudicial to it. These cases illustrate the proposition. Shoemaker v. Nat. Mechanics' Bank, Fed. Cas. No. 12,801; Mills Co. Nat. Bank v. Perry, 72 Iowa, 15; Portland Nat. Bank v. Scott, 20 Oreg. 421; O'Hare v. Second Nat. Bank, 77 Pa. 96; Rich v. State Nat. Bank, 7 Neb. 201; Norton v. Derry Nat. Bank, 61 N. H. 249; Thompson v. St. Nicholas Nat. Bank, 113 N. Y. 325; Thompson v. St. Nicholas Nat. Bank, 146 U. S. 240; Williams v. Am. Nat. Bank, 85 Fed. R. 376, 56 U. S. App. 316. 1 out compensation. But under the decisions of the Supreme Court of the United States the principle so often laid down in decisions, that the objection of ultra vires can only be urged by the government, is not a safe rule to follow. Where it is sought to rescind an ultra vires contract, or an illegal contract, whose illegality depends on an express rule of law, if the contract has been fully executed on both sides, and the only ground for rescission is that the act was either contrary to law or ultra vires in the proper sense, the law leaves the party where it finds him and denies a recovery." If a party seeks for equitable relief against such a contract, the law compels him to do equity by paying back what he has obtained, before granting him any relief. The presump tion in all cases is that the corporate acts are within the corporate powers.19 § 34. Banking powers.-The charter of a banking corporation usually confers upon it general banking powers, with a prohibition, very often inserted, against exercising the power of issuing notes. The meaning of this phrase "banking powers" has been noticed incidentally in the consideration of the definition of banking. The meaning of the phrase varies under different statutory enactments.2 The cases cited 17 First Nat. Bank v. Stewart, 107 U. S. 676; Mapes v. Scott, 94 Ill. 379; Attleborough Nat. Bank v. Rogers, 125 Mass. 339; Hennessy v. City of St. Paul, 54 Minn. 219; Wherry v. Hale, 77 Mo. 20; Chapin v. Merchants' Nat. Bank, 14 N. Y. St. R. 272. But in the case of Burrows v. Niblack. 84 Fed. R. 111, the court utterly forgot this principle, and held that a national bank could recover what it had paid for its own stock, and that too without tendering back the stock. The opinion is incomprehensible. 18 Elder v. First Nat. Bank, 12 Kan. 238. But see the case cited in the last note, where the same prin ciple ought to have applied in an action at law. 19 Morris R. R. Co. v. Sussex R. R. Co.. 21 N. J. Eq. 542; South. Exp. Co. v. Western R. R. Co., 99 U. S. 191; Baker v. N. W. Loan Co., 36 Minn. 185; Rider Raft Co. v. Roach, 97 N. Y. 378. 1 See § 2, ante. 2 See SS 3, 4, 5, ante, and Blair v. Perpet. Ins. Co., 10 Mo. 559; Huber v. Germ. Cong., 16 Ohio St. 371; State v. Stebbins, 1 Stew. 299; Smith v. State, 21 Ark. 294; People v. Manhattan Bank, 9 Wend. 351; State v. Granville Alex Soc., 11 Ohio, 1; People v. Insurance Co., 15 Johns. 358. in the preceding section necessarily are concerned with banking powers. The subject will be examined at length in a subsequent portion of this work. We mention now that while the powers of discounting and depositing are always conferred upon banks, there has been considerable difference of opinion as to whether the power of discounting included the power of purchasing commercial paper. The better opinion is that it does. § 35. Liability of corporators as partners.- Sometimes it will happen that a number of persons will assume to institute a corporation without having received any charter whatever. If a corporation be afterwards formed and the act be lawfully ratified, either expressly or by receiving a benefit, the corporation may be held upon the act done before the formation of the corporation.' The corporation may claim the benefit of an act done on its behalf before the incorporation. But if there be no ratification, because no corporation results, the promoters or alleged corporators incur the responsibility of partners and may be held liable as such. If a ratification has taken place, it would seem to be true that where the other party has contracted with the corporation he ought not to be permitted to hold the corporators liable as partners. Yet if the act was one incapable of ratification, the corporation afterwards formed cannot be held; as, for instance, where the act was prohibited by an express rule of law. If no corporation be afterwards See § 118 et seq., post. 4 The cases may be found collected in 9 Am. & Eng. Encyc. Law (2d ed.), 471, notes 1 and 2. 11 Thomp. on Corp., sec. 480. 24 Thomp. on Corp., sec. 5321. 3 Kaiser v. Lawrence Sav. Bank, 56 Iowa, 104; Pettis v. Atkins, 60 Ill. 454; Allen v. Pegram, 16 Iowa, 163; McLennan v. Anspaugh, 2 Kan. App. 269; Hauser v. Tate, 85 N. C. 81. 'See Huffcutt, Agency, 44. 5 This statement applies only to those acts which are beyond the scope of the corporate powers because forbidden by law, as explained in § 32, ante. But all torts and contracts merely beyond corporate powers may be ratified. See next note. 6 California Bank v. Kennedy, 167 U. S. 362, 368, contains a correct statement of the rule, but it is wrongly applied in that case. But it is properly applied in Central formed, he may hold the parties liable on the theory of an implied warranty of authority,' under the general principles of the law of agency. § 36. Direct liability for unauthorized banking. — We have in the preceding sections noticed the result of acts of unauthorized banking as between other parties than the bank and the state. How far the state may go in forfeiting the charter of the bank for illegal banking in quo warranto or in actions in the nature of quo warranto will be considered later in this work. The statutes often prescribe a criminal responsibility for illegal acts by the various officers of the bank. This subject will be considered in connection with officers. There have been statutes of various states which impose a penalty upon individuals for illegal banking, and in other cases define the conduct as a crime. The cases will be found referred to in the note below.3 Transp. Co. v. Pullman's Car Co., 139 U. S. 24, 59, and in McCormick v. Market Nat. Bank, 165 U. S. 538, 549. In Jacksonville Ry. Co. v. Hooper, 160 U. S. 514, 524, the principle is correctly applied as to an innocent act ultra vires, but put upon a slightly different ground than the one above. 71 Thompson on Corp. 416; Medill v. Collier, 16 Ohio St. 599; Seeberger v. McCormick, 178 Ill. 404, 73 Ill. App. 87, although in the latter case a corporation was formed. 1 See § 319 et seq., post. State v. Williams, 8 Tex. 255; Williams v. State, 23 Tex. 264; State v. Presbury, 13 Mo. 342; Brown v. State, 11 Ohio, 276; Commonwealth v. Scott, 4 Rand. 143; Mills v. State, 23 Tex. 295; Burkett v. Lanata, 15 La. Ann. 337; People v. Bartow, 6 Cow. 290; People v. Brewster, 4 Wend. 498; People v. Doty, 80 N. Y. 225; Commonwealth v. Sponsler, 16 Pa. Co. Ct. R. 116; State v. Scougal, 3 S. Dak. 55. CHAPTER III LEGISLATIVE REGULATION OF BANKING. - § 37. General scope of power. It has already been stated that the state in the exercise of its legislative power can prohibit private banking altogether.1 A very different question would arise if the state should attempt to abolish banking altogether. The question has not presented itself, nor can any one conceive that a legislature would attempt so to do. Such an act would unquestionably be not a valid exercise of the police power. But the state has always the power to regulate the business of banking,2 and has done so in many ways. How far the state governments can regulate national banks by taxation has been already noticed. The purpose of this chapter is to state those regulations that have been made both as to state banks, corporate or private, and to national banks. § 38. License taxes.- A preliminary question as to a license fee by a municipality will always be whether the power to license has been granted. This is simply a question of statutory construction. When a national or state license is in question the sole inquiry is whether the person, natural or artificial, falls within the terms of the act. This is also a question of statutory construction. As to licenses 1 See § 9, ante, and § 45, post. 2 Blaker v. Hood, 53 Kan. 499; Cummings v. Spannhorst, 5 Mo. App. 21. La. Ann. 1029; City of New Orleans v. New Orleans Sav. Inst., 32 La. Ann. 527; State v. Southern Bank, 31 La. Ann. 519; State v. Columbia, See § 25, ante, and see further 6 Rich. 495; City of New Orleans § 44, post. 1 Macon v. Macon Sav. Bank, 60 Ga. 133; Hinckley v. Belleville, 43 Ill. 483. 2 State v. Bank of Mansfield, 48 v. New Orleans Banking Co., 32 La. Ann. 104; Warren v. Shook, 91 U. S. 704; Selden v. Equitable Trust Co., 94 U. S. 419. |