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sion of state banks of issue is achieved by the national tax of ten per centum upon state bank issues. This power cannot be successfully questioned."

§ 17. State bank tax. The state bank tax of ten per cent. upon the notes issued by all state banks and private bankers is the method by which the national government preserves the country from unrestrained note issues. Our political institutions, even when at their worst, fit us so easily that we rarely stop to consider how narrow is the barrier which separates us from the condition of "wild-cat" banking. There are many constitutions which prevent a

ner's Jackson, p. 363. Later in stances of this sort could be easily found, but the same result is often obtained through the election of judges. The whole chapter is a fruitful lesson for all lawyers. A case contra to the one above is Linn v. State Bank, 1 Scam. 87, where the state court was right. Briscoe v. Bank has been affirmed in Woodruff v. Trapnall, 10 How. 205; Darrington v. Bank of Alabama, 13 How. 12; Curran v. Arkansas, 15 How. 317. It has been overthrown in Veazie Bank v. Fenno, 8 Wall. 533, by holding that the national government can tax the power out of existence.

6 Veazie Bank v. Fenno, 8 Wall. 533, holding that such a tax was not a direct tax, but an excise tax. 1 Statute of Feb. 8, 1875, ch. 36, secs. 19-21; 18 Stat. at Large, 311. 2 One of the curious legacies of the days of vicious banks of issue is the idea that the issuance of notes is a source of profit to the banker. This idea really lies at the bottom of the jealousy which exists among a certain class against national banks. So far is it from

being a source of profit that many national banks do not keep their notes in circulation. There is a school of continental economists who think that unrestricted private banking is a good thing - that it regulates itself. See the translation of an article of Adolph Wagner found in 1 Encyc. Pol. Science, 239. It is lamentable to see that this idea has some following among bankers, and that a secretary of the treasury has actually proposed to allow banks to issue notes of hand against their assets. The folly of this proposition is that such issues cannot be successfully supervised. A failing bank would always resort to note issues to prevent bankruptcy. The ignorance of legal conditions involved in the suggestion is appalling. But in this country we have seen the effects of such a system, and it is not likely to be revived. See 29 Am. Law Rev. 94, 459. Whenever there has been any talk of reviving it, "Terruit gentes, grave ne rediret Seculum."

The effects of such a system are likely to prove incalculably disas

state bank from issuing notes, or which provide for security; but there are many states wherein there is no provision of law that would prevent a private banker from flooding the country with worthless currency in the form of unsecured notes. Until such a provision exists in every part of the United States, it is not too much to say, even in a legal treatise, that an advocate of the repeal of the state bank tax is a public enemy.

§ 18. Delegation of power.- The national legislature has delegated to the different territorial legislatures the power to incorporate banks.1 In practice, the duty of passing upon due incorporation, both under the national bank act and under state and territorial legislation, is usually delegated to ministerial officers. No good reason can be urged why jurisdiction ought not to be given to certain courts to pass upon the question of the propriety of the articles of incorporation and the regularity of the steps taken.

§ 19. Formation of corporations.— A corporation may be formed either by the grant of a special charter, where such a course is permissible, or by incorporation under a general law. A bank formed under a special act becomes, by implication, a corporation, although the term is not applied to it in the act.1 A special authority or franchise given

trous. A case which, when read between the lines, shows the evils of this system is Cushman v. Carver, 51 Ill. 509. One banker wrote to another to send him the balance due him at the other banker's in bills of certain kinds. He evidently did not know that some of those bills were likely to depreciate. The other banker, who seems not to have had a fine sense of honor, or perhaps it had become debauched through contact with wild-cat money, gathered a lot of the bills which had depreciated after receipt of the letter and sent

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by a charter remains conditional until the requirements of the act are fully carried out.? Where a banking corporation is attempted to be formed under a general law, it is often said that the requirements of the law must be strictly followed. But this is only relatively true. It will apppear that objections of this character, as a general rule, can be urged only in favor of the state in a direct proceeding to attack the incorporation. The statutes require a name for the corporation and forbid the use of the same name by two corporations, and a bank whose name is infringed may have the remedy of injunction. The location of the bank must be specified, and it would seem to have been held that one state cannot charter a banking company for the purpose of doing business in another state; and when located in one county a bank cannot establish a branch of itself in another county without authority from its charter. An extreme case that worked a great injustice, and cannot be approved, will be found in the note." In the absence of express statutory authority the corporation cannot begin business, except as a de facto corporation, until the whole capital stock is subscribed, but sometimes the statute permits it. The statute governs as to how the capital stock shall be paid, whether in money or otherwise.10 If the statute is silent on the sub

2 Williams v. State, 23 Tex. 264. 3 See § 31, post.

4 International Trust Co. v. International Loan & Trust Co., 153 Mass. 271; In re Bank of Attica, 12 N. Y. Supp. 648. State banks cannot call themselves national. Sec. 5243, Rev. Stat. U. S.

5 Atterbury v. Knox, 4 B. Mon. 90. 6 People v. Oakland Co. Bank, 1 Doug. 282. But this defense is not pleadable to the cashier's bond. Morehead Banking Co. v. Tate, 30 S. E. R. 341.

7 Armstrong v. Second Nat. Bank, 38 Fed. R. 883. The decision is wrong because it would deny to a

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national bank the right to have a clearing agent.

8 See 1 Thompson on Corp., sec. 1235.

9 Reese v. Bank of Mont. Co., 31 Pa. 78. See Gray v. Portland Bank, 3 Mass. 364.

10 It seems to be held in an old case that the capital stock must be paid in money (King v. Elliot, 5 Smedes & M. 428), where a creditor of the bank garnished a stockholder for his unpaid subscription. See on the general proposition, Moses v. Ocoee Bank, 1 Lea, 398; Marr v. Bank of West Tennessee, 4 Lea, 578.

ject and the doctrine of payment "in money's worth " is held in the particular jurisdiction, there seems to be no reason why payment for the capital stock should not be made in property, provided such property was proper for use in the business." The statutes usually require the issuance of a certificate by proper authority where the organization is made under general laws, which certificate is always evidence of due incorporation, but it will be seen that it is not the only evidence thereof.12 The effect of the failure to issue a certificate will be noticed in a later chapter.13

$ 20. Conversion of state into national banks.-The national bank act gives the right to convert any bank organized under a special act or general law of a state into a national bank upon the certificate of the directors that twothirds of the stockholders have agreed thereto. This authority is all that is necessary for the conversion of a state into a national bank. Under another statute, banks in the District of Columbia are authorized to convert themselves into national banks. The directors of the state bank continue to act until their successors are elected, and they are not required to take a new oath, but a majority of the old directors is required to perform any corporate act. If the state bank has voting and non-voting stock, the non-voting stock cannot participate in the voting upon the change of organization, and the act of the voting stockholders transfers the non-voting stock as well. The new bank succeeds to all the property of the old bank, and a suit upon an obligation held by the old bank can be brought in the name of the new bank, although a state law provides that the old 1 Sec. 5154, Rev. Stat. U. S. See § 212, post.

11 The Illinois banking act does not require, except by a weak implication, the payment of stock in money. See on the general subject, 2 Thomp. on Corp., sec. 1562 et seq. See also Pacific Trust Co. v. Dorsey, 72 Cal. 55.

12 See § 23, post.

13 See § 31, post.

2 Casey v. Galli, 94 U. S. 673. 3 Act of Congress June 30, 1876. 4 Lockwood v. Mechanics' Nat. Bank, 9 R. I. 308, 11 Am. R. 253. 5 State v. Phoenix Bank, 34 Conn. 205.

6 State v. Phoenix Bank, supra.

incorporation shall continue to exist for three years for the purpose of prosecuting and defending suits. Even if the national bank was not in form converted from a state bank, yet, if such was the fact, the new national bank is merely the successor of the former state bank and may hold its assets.

§ 21. Alteration of bank charter.- After a charter has been granted to a bank the charter becomes a contract under well settled rules, and is not subject to amendment by a state legislature, unless the amendment is immaterial or of a remedial character, or unless the power to amend has been reserved. Whether the doctrine of Munn v. Illinois, 94 U. S. 113, would be applied to charters of banks not of issue may well be doubted. The charter could not be repealed except by authority reserved or by virtue of the police power; but that subject belongs to a treatise on constitutional law or corporations and not especially to a work of this nature.2

§ 22. Power as to by-laws.-The power of a banking corporation to enact by-laws, whether the right is granted by the charter or is used as an inherent power, does not differ from the rules in regard thereto governing other corpora

7 Atlantic Bank v. Harris, 118 Mass. 147.

v. Bopp, 50 N. Y. Supp. 676. And it applies to debts thereafter incurred.

8 Western Res. Bank v. McIntire, Barnes v. Arnold, 51 N. Y. Supp. 40 Ohio St. 528.

1 See 2 Cook on Corp., sec. 492 et seq.; 1 Thompson on Corp., secs. 66105; 4 Thompson on Corp., sec. 5380. See also Wheeler v. Frontier Bank, 23 Me. 308; In re Reciprocity Bank, 22 N. Y. 9; In re Oliver Lee Bank, 21 N. Y. 9. Compare United States Trust Co. v. Fire Ins. Co., 18 N. Y. 199; Lowry v. Inman, 46 N. Y. 119; Marr v. Bank, 4 Lea, 578; Owen v. Purdy, 12 Ohio St. 73; Sherman v. Smith, 1 Black, 587. A charter was altered to impose a stockholder's liability. Hirshfield

1109. A by-law that requires the consent of the directors to a transfer of the stock is void. McNulta v. Corn Belt Bank, 164 Ill. 427.

2 One case holds squarely that a bank is a corporation charged with public duties (Mechanics' Bank v, Debolt, 1 Ohio St. 591; reversed, 18 How. 380); but it can choose its de positors (Thacher v. State Bank, 5 Sandf. 121), and its charter is a contract. See Planters' Bank v. Sharp, 6 How. 301; Claghorn v. Cullen, 13 Pa. 133; People v. Manhattan Co., 9 Wend. 351.

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