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land and buildings only for the accommodation of their banking business. It is a well-known fact that many banks have placed a large part of their capital in office buildings, a small part of which is used for the bank. But it is doubtful whether such a dealing can be justified without special power given in the charter. But where a bank has lawfully taken real-estate security, there can be no doubt of its power to purchase at its own sale. Or, if the bank has a lien upon real property, it may pay off prior liens in order to protect its own lien." There ought to be no question as to the bank's power to purchase at any execution sale, if the act be done to secure its own lien. While a bank has no power to buy land to sell it again, and while such a contract will not be enforced against either party, yet, unless prohibited by statute, the bank may take real-estate security or may take land in payment of its claim. If a national bank has loaned money to a purchaser of land with which to make the purchase, it may take the land in payment of its debt. It may

acquiring real estate applies in an other state. Metropolitan Bank v. Godfrey, 23 Ill. 579.

2 Thweat v. Bank of Hopkinsville, 81 Ky. 1. Compare Holt v. Winfield Bank, 25 Fed. R. 812.

3 See, however, Bands v. Poiteaux, 3 Rand. 136, where it is held that a bank may buy more land than it needs and build buildings thereon and sell them out. The measure seems to have been taken to protect its own building by erecting fire-proof structures.

4 Farmers' Bank v. Detroit R. R. Co., 17 Wis. 372; Martin v. Branch Bank, 15 Ala. 587; Ingraham v. Speed, 30 Miss. 410; Merchants' Bank v. Harrison, 39 Mo. 433.

5 Brown v. Hogg, 14 Ill. 219; Zantzingers v. Gunton, 19 Wall. 32.

6 Sherry v. Dunn, 8 Blackf. 542. The same rule applies to national

banks. Heath v. Second Nat. Bank, 70 Ind. 106; Holmes v. Boyd, 90 Ind. 332; Roebling v. First Nat. Bank, 30 Fed. R. 744.

7 Bank of Michigan v. Niles, 1 Doug. 401.

8 Thomaston Bank v. Stimpson, 21 Me. 195; Baird v. Bank of Washington, 11 S. & R. 411. The bank may agree to secure a release of a mortgage upon land covered by its own lien. McCraith v. Nat. Mohawk Valley Bank, 104 N. Y. 414. It may take real estate as security, though forbidden to own it. Alexander v. Brumnett, 42 S. W. R. 63. And if it takes real estate from a stockholder to cover a deficit it may hold it. Brown v. Bradford, 103 Iowa, 378.

9 Turner v. First Nat. Bank, 78 Ind. 19.

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take the land and pay to the owner the difference between the value of the land and its own claim,10 or it may purchase its debtor's property at an execution sale, paying for the land more than its debt." If a bank acquires land it may control it as a proprietor,12 and, of course, may sell it.13 If it sells, it may take a mortgage back to secure the purchase price. There will be no presumption of illegality in the transaction. The illegality must be made to appear,15 and this rule applies equally well to every other transaction, whether of a bank or any one else. Finally, it is said to be the law that even if a bank takes the land contrary to law, it gets a good title against everybody except the state.16 But this is not believed to be true where there is an acquisition of land in violation of an express statute."

§ 123. Dealings in mortgages on realty.- Where there is no statute either expressly or impliedly forbidding the acquisition by a bank of real-estate security, there can be no objection to such a dealing by the bank. This right would include the power to take assignments of mortgages. The bank, as a mortgagee, is entitled to the same remedies that any other mortgagee would have.

10 Mapes v. Scott, 88 Ill. 352; Libby v. Union Nat. Bank, 99 Ill. 622.

11 Upton v. National Bank, 120 Mass. 153.

A bank may take real

15 Chatauqua Co. Bank v. Resly, 19 N. Y. 369; Sparks v. State Bank, 7 Blackf. 169; Perkins v. Church, 31 Barb. 84; Richards v. Kountze, 4

12 Roebling v. First Nat. Bank, 30 Neb. 200. Fed. R. 744.

13 Wherry v. Hale, 77 Mo. 20; Jack son v. Brown, 5 Wend. 590. If the bank conveys land it may make covenants of warranty. Talman v. Rochester Bank, 18 Barb. 123. If the deed of the bank is insufficient because not authorized, the deed may take effect as an equitable mortgage. Stapylton v. Stockton, 91 Fed. R. 326.

14 National Bank v. Raymond, 29 La. Ann. 355; First Nat. Bank v. Kidd, 20 Minn. 234.

16 Leazure v. Hillegas, 7 S. & R. 313. As to national banks the rule is the same. Mapes v. Scott, 94 Ill. 379. 17 See Zantzingers v. Gunton, 19 Wall. 32.

1 Baird v. Bank of Washington, 11 S. & R. 411; Thomaston Bank v. Stimpson, 21 Me. 195; Merchants' Bank v. Harrison, 39 Mo. 433.

2 Trenton Banking Co. v. Woodruff, 2 N. J. Eq. 117.

3 Gage v. Sanborn, 106 Mich. 269; Ahl v. Rhoads, 84 Pa. 319; Lewis v. Jeffries, 83 Pa. 340.

estate security to cover anticipated liabilities if not forbid den so to do. A mortgage given directly to the bank is good, although the statute may require it to be given to an officer. But in the case of national banks there is an implied prohibition against loaning on real-estate security, except to secure a pre-existing indebtedness. Originally, in New York under a similar statute, it had been held that a loan made at the time of taking the security was a preexisting indebtedness. But the courts at first held that national banks could not take real-estate security, either to secure an indebtedness concurrently created or to be created in the future.' But this statute was capable of producing so much injustice that it was authoritatively decided that the debtor could not make the objection. This ruling reconciles the law upon this subject to the distinction between. ultra vires contracts and prohibited contracts stated in section 33, ante. There never was any doubt as to the right of a national bank to take real-estate security to secure a past indebtedness; or to take a mortgage made to a third party as collateral security for a loan to the mortgagee; 10 or to take an agreement that the mortgage security should inure

4 Crocker v. Whitney, 71 N. Y. 161. The case was decided wrongly. 5 Kennedy v. Knight, 21 Wis. 345. 6 Silver Lake Bank v. North, 4 Johns. Ch. 370.

Matthews v. Skinner, 62 Mo. 329; Kansas Nat. Bank v. Rowell, 2 Dill. 371; Fowler v. Scully, 72 Pa. 456; Wood v. People's Nat. Bank, 83 Pa. 57. The statute could not be evaded by taking the mortgage to an officer of the bank. Fridley v. Bowen, 87 Ill. 151. One case held a statute to be directory. Magruder v. State Bank, 18 Ark. 9.

8 National Bank v. Matthews, 98 U. S. 621; National Bank v. Whitney, 103 U. S. 99; Winton v. Little, 94 Pa. 64; Graham v. National Bank, 5 Stew. 804; State Nat. Bank v.

Flathers, 45 La. Ann. 75; First Nat. Bank v. Elmore, 52 Iowa, 541; Oldham v. First Nat. Bank, 85 N. C. 240. The same rule applies to a mortgage to secure future advances. Sessions v. First Nat. Bank, 93 N. Y. 269; National Bank v. Whitney, 103 U. S. 99.

9 Owen v. Merchants' Nat. Bank, 16 Kan. 341. A reorganized state bank might, as a national bank, take the assignment of a note along with the real-estate collateral. Scofield v. State Bank, 9 Neb. 316.

10 Fortier v. New Orleans Nat. Bank, 112 U. S. 439; Worcester Nat. Bank v. Chieney, 87 Ill. 602; Merchants' Nat. Bank v. Mears, 8 Biss. 158.

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to the benefit of the bank, if its debtor, owning the mortgage, should make default." The right of the bank to be subrogated to the rights of the mortgagee would not be defeated by the statute.12 It was also held that the bank might take an assignment of a mortgage as collateral security even though the mortgage was made contemporaneously with the assignment. A renewal note was held to be not the creation of a new indebtedness, but simply evidence of the past indebtedness,1 which is, of course, the general rule. The effect of the statute against taking real-estate security is reduced to the effect the transaction would have as against the state complaining of a violation by the bank of its charter. Such a statute does not, however, abridge the bank's rights as to the acquisition of personal property,15 nor does it enlarge those powers.16 It should be stated in this connection that a bank has the undoubted right to mortgage its real estate to secure its debts."7

§ 124. Dealings in negotiable paper.- One of the proper functions of a banking institution being the acquisition of commercial paper, there can be no doubt as to the general authority of a bank to deal in promissory notes;1 but some courts have denied the power of a bank to purchase negotiable paper; but the better reason and authority is that the power of discounting includes the power of purchasing paper. Sometimes the statute prescribes the paper in which

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11 First Nat. Bank v. Haire, 36 Iowa, 443.

12 Matthews v. Abbott, Fed. Cas. No. 9275.

13 First Nat. Bank v. Andrews, 7 Wash. 261. See also Richards v. Kountze, 4 Neb. 200; Oldham v. First Nat. Bank, 85 N. C. 240; Thornton v. Nat. Ex. Bank, 71 Mo. 221. 14 Howard Nat. Bank v. Loomis,

51 Vt. 349.

17 Leggett v. New Jersey, etc. Co., Saxt. 541.

1 State Bank v. Criswell, 15 Ark. 230; Commonwealth v. Comm. Bank. 28 Pa. 391.

2 Farmers' Bank v. Baldwin, 23 Minn. 198; First Nat. Bank v. Pierson, 24 Minn. 140. See also § 34, ante; Lazear v. Nat. Union Bank, 52 Md. 78.

Pape v. Capitol Bank, 20 Kan.

15 Farmers' Bank v. Detroit, etc. 440; Atlantic State Bank v. Savery,

R. R. Co., 17 Wis. 372.

16 Talmage v. Pell, 7 N. Y. 328.

82 N. Y. 291; Salmon Falls Bank v. Leyser, 116 Mo. 51; First Nat. Bank

a bank shall deal; but such a provision does not prevent the bank taking other paper in order to secure a previous indebtedness. A bank has also the undoubted right to transfer its negotiable paper in the ordinary course of business, and it may indorse the same, and may guaranty the paper for its own benefit. One case holds that a bank may not assign its notes, but this was due to an absurd construction of an absurd statute. The statute sometimes prohibits a bank from issuing its bills or notes except in certain forms, or to circulate as money,1o but even in such case a bank may issue its note in the ordinary course of business."

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§ 125. Borrowing money.-A bank with general banking powers may undoubtedly borrow money,' but sometimes the statute forbids the borrowing of money payable at a future day certain. A national bank may borrow money in order to loan it out again at a higher rate of interest than it

v. Sherbourne, 14 Bradw. 566; Smith v. Exchange Bank, 26 Ohio St. 141; Nicholson v. State Bank, 92 Ky. 251. Bank may purchase interest coupons (First Nat. Bank v. Bennington, 16 Blatchf. 53); or a check (First Nat. Bank v. Harris, 108 Mass. 514); or a draft (Union Nat. Bank v. Rowan, 23 S. C. 339).

"she!" This is the court that Sargent S. Prentiss was wont to call the Court of High Errors and Appeals.

9 See James v. Rogers, 23 Ind. 451; Safford v. Wyckoff, 1 Hill, 11. 10 Rockwell v. Elkhorn Bank, 13 Wis. 731.

11 Rockwell V. Elkhorn Bank,

4 John v. Farmers' Bank, 2 Blackf. supra. 367.

5 Planters' Bank v. Sharp, 6 How. 301; Marvine v. Hymers, 12 N. Y. 223; Robb v. Ross Co. Bank, 41 Barb. 586.

1 Tuttle v. National Bank of Republic, 48 Ill. App. 481. This opinion cites a work called “ Aloise on Banking." Ringling v. Kohn, 6 Mo. App. 333; Donnell v. Lewis Co. Sav.

6 Crocket v. Young, 1 Smedes & Bank, 80 Mo. 165; Leavitt v. Yates, M. 241. See next section. 4 Edw. Ch. 134; Barnes v. Ontario

7 Dabney v. State Bank, 3 S. C. Bank, 19 N. Y. 152; Ward v. John124.

son, 95 Ill. 215. A rediscount is not a borrowing, even if the bank indorses. It is a sale. National Bank v. First Nat. Bank, 79 Fed. R.. 296.

8 McIntyre v. Ingraham, 35 Miss. 25. The opinion, beyond being an excellent specimen of state rights, ante bellum balderdash, is chiefly remarkable for speaking of the 2 Commonwealth v. Bank of MutUnited States Supreme Court as ual Redemption, 86 Mass. 1.

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