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

1State 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,2 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. 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

3

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

3 Expressly permitted in Mary. land; 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. Massachusetts, 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. 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

§ 16. State banks of issue. It is too plain for argument that a bank note is a bill of credit, and that no state under the federal constitution can issue a bill of credit; yet our federal supreme court has decided that the state may do so by the simple expedient of incorporating a bank with such power. It is also too plain for argument that, under the same section of the same article of the federal constitution, no state can make anything but gold and silver a legal tender; yet our highest court has practically decided the exact contrary, although the opinion says it does not. If the prohibition was to be made effective, a state was enjoined from creating corporations with power to emit bills of credit; yet in the same case the court held that the state might create a corporation with the power to issue its notes as currency.* the statute further contained numerous provisions as to the performance by such companies of their trust duties. This later act, so far as it applies to banks with trust powers, is amendatory of the banking act. The one statute gives the power, the other defines the manner of its execution. As to a banking corporation given trust powers after the constitution of 1870, it seems a palpable evasion to give the bank trust powers by a statute ratified by popular vote, and then to define those powers and the manner of their execution by a statute not so ratified. There is reason in the idea, because the trust operations of a bank might bring upon it liabilities that would destroy the security of the depositors. We may suppose a case where the capital of a bank is $100,000. This with the statutory liability would make the capital $200,000. Suppose the bank becomes trustee for claims aggregating a much larger sum. Conceding that the statutory liability would not go to aid the trust

claimants, and also that a deposit is required from trust companies, nevertheless, the trust claims being preferred (see § 235, post), the assets would leave perhaps little for the depositors in case a crash came. But as to banks organized before the constitution of 1870 it would have no retroactive application. Henderson Loan Ass'n v. People, 163 Ill. 196. Trust companies without banking powers would not come under the provision. Roane Iron Co. v. Wisconsin Trust Co., 74 N. W. R. 818. But as to banks with trust powers, a statute defining the powers ought to have a popular adoption. See the principle of the decision in Van Steenwyck v. Sackett, 17 Wis. 645; Rusk v. Van Nostrand, 21 Wis. 161.

1 Art. 1, sec. 10, Fed. Const. See 311, notes 14 and 15, post.

2 Briscoe v. Bank of Commonwealth, 11 Pet. 257.

3 Briscoe v. Bank of Commonwealth, supra.

4 Briscoe v. Bank of Commonwealth, supra.

In fact the state gave the bank a franchise to issue bank notes. A franchise is a part of the power of the state given to the corporation. The opinion seemingly concedes that the state could not emit a bill of credit, yet it could give to a corporation part of the power which it did not have. A more perfect non sequitur cannot be imagined. Yet this opinion has been acquiesced in ever since; but the suppres