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The statute may define who have the right to examine, or inspect certain books of the corporation, and where language is used that "every person having an interest therein," etc., shall have such a privilege, it may be construed to be a depositor or creditor.

The privilege is denied to such, however, unless the statute expressly provides that they may do so.

No book, journal, or document can be made the subject of examination by a depositor or creditor, unless the authority is expressly provided for in the statute or authorized by order of a court of competent jurisdiction.

A creditor is one who has a lawful claim against the bank. The claim may be one which the bank disputes and refuses to recognize; and when disputed and invalid, the bank may refuse access to its books for the purpose of examination; and where there is no penalty or measure of damages fixed by the law against the bank, for a refusal to allow depositors and creditors the right to inspect any such books of the corporation, the bank can be held for only the actual damage arising from such refusal. A violation of any national or State law can be inquired into only through an action brought by the Comptroller of the Currency or the Attorney-General of the State.

CHAPTER III.

BANKING WITHOUT AUTHORITY.

§ 3. Unauthorized banking.

The business of banking, or the privilege, being one which is withheld or granted by the legislative power of a State, all persons being prohibited unless the privilege is first obtained, the act of banking when conducted without obtaining this right is termed unauthorized banking.

A private banker, being one who conducts the business of banking without first securing such a right, where the law requires that such a privilege must be obtained from the power authorized to grant the same, is conducting an unlawful business; and is subject to punishment as in such cases made and provided. Advertising that deposits will be received and checks paid implies the business or act of banking.

A corporation, organized to conduct a business of constructing and operating railroads, buying and selling real estate, dry goods, and the like, if it conducts the business of receiving money on deposit for others, and repaying the same upon orders or checks, is conducting the business of banking unlawfully.

The law of a State may permit the formation of a partnership, and authorize the partnership to conduct the business of buying and selling property, both personal and real, and (discount notes and other securities which is a part of the authorized business of banks) such a business may not be unauthorized banking as construed by the law of said State. Where the partnership is formed, the receiving of money and holding the same for others and paying checks is an act of banking.

Again, a Building and Loan Association which, in its general working and in its nature, is very similar to banking, may conduct the business of trusts, holding money placed in trust with it, either by individuals, corporations, or courts; but it has no authority to conduct the business of banking where the act or law authorizing its creation does not grant it the power to do

any business other than that for which it is specifically incorporated; and if it conducts the business of banking, receiving money on deposit, discounting notes, and securities, and loaning money to its customers on commercial paper, or otherwise, it is conducting an unlawful banking business.

§ 4. A de facto corporation.

A de facto corporation is one acting as a corporation in good faith.1

A corporation de facto exists where a number of persons have organized and are acting in good faith as a corporation." A bank may act as a de facto corporation, and while acting as such in good faith without authority of law, its acts are lawful and cannot be inquired into excepting through the proper authorities of the State.

All acts or business done by such corporation are not illegal, and its right to exercise corporate powers while performed in good faith, the bank claiming that it has the right to act, will be enforced as against all parties dealing with it.

It is also held that one who borrows money from such a corporation cannot defeat a recovery by alleging that the company is not a corporation.3

One who has contracted with such a corporation, and received the benefits of its performance, cannot defeat an action brought by the corporation by alleging its lack of power to contract or its want of legal existence.*

A bank that acts as a corporation, and is not such, with the knowledge of the fact, but induces another by fraud to deal with it, that other is not estopped from denying the existence of the corporation.

§ 5. Ultra vires acts.

An ultra vires act is the doing of a thing by the corporation which it has no power to do. It is also the doing of a thing which the charter or law says the corporation shall not do. A banking corporation may, in the first instance, believe that it has the power; and in the second, do a thing forbidden it by

1 Lakeside Ditch Co. t. Crane, 80 Cal. 181.

2 Martin v. Deitz, 102 Cal. 55, 41 Am. St. Rep. 151.

3 Grangers Business Asso. V. Clark, 67 Cal. 634.

4 Myer . Bishop, 129 Cal. 204.

its charter or the law, knowing that it did not have the power. The latter act is forbidden by Statute, and is illegal.

An illegal act cannot be enforced. It is doing, or attempting to do, something the law says cannot be done. This act should not be called an ultra vires act. It is a violation of an expressed law.

The court in Central Trans. Co. v. Pullman Palace Car Co., 139 U. S. 24, says:

"The view which the court has taken of the question presented by this branch of the case, and the only view which appears to us consistent with legal practice, is as follows: A contract of a corporation which is ultra vires, in the proper sense, that is to say, outside the object of its creation as defined in the law of its organization, and therefore beyond the powers conferred upon it by the Legislature, is not voidable only, but wholly void, and of no legal effect. The objection to the contract is, not merely that the corporation ought not to have made it, but that it could not make it. The contract cannot be ratified by either party, because it could not have been authorized by either. No performance on either side can give the unlawful contract any validity, or be the foundation of any right or action upon it.

"When a corporation is acting within the general scope of the powers conferred upon it by the Legislature, the corporation, as well as persons contracting with it, may be estopped to deny that it has complied with the legal formalities which are prerequisites to its existence, or to its action, because such requisites might in fact have been complied with. But when the contract is beyond the powers conferred upon it by existing laws, neither the corporation, nor the other party to the contract can be estopped, by assenting to it, or by acting upon it to show that it was prohibited by those laws.

"The doctrine of the common law by which a tenant of real estate is estopped to deny his landlord's title has never been considered by this court as applicable to leases by realty corporations for their roads and franchises. It certainly has no bearing upon the question, whether this defendant may set up that the lease sued on, which is not of real estate, but of personal property, and which includes, as inseparable from the other proper transfer, the inalienable franchise of the plaintiff,

is unlawful and void for want of legal capacity in the plaintiff to make it.

"A contract ultra vires being unlawful and void, not because it is in itself immoral, but because the corporation, by the law of its creation, is incapable of making it, the courts, while refusing to maintain any action upon the unlawful contract, have always striven to do justice between the parties so far as could be done consistently with adherence to law, by permitting property or money, parted with on the faith of the unlawful contract, to be recovered back, or compensation to be made for it. In such case, however, the action is not maintained upon the unlawful contract, nor according to its terms; but on the implied. contract of the defendant to return, or, failing to do that, to make compensation for, property or money which it has no right to retain. To maintain such an action is not to affirm, but to disaffirm, the unlawful contract."

The courts hold, that where a contract is not purely ultra vires, it may be enforced. For example, where, by a failure to enforce it, a legal wrong might be perpetrated.

In the case of Whitney Arms Co. v. Barlow et al, 63 N. Y. 62, the court says:

"The doctrine of ultra vires, whether invoked for or against a corporation, is not favorable in the law. It should never be applied where it will defeat the ends of justice."

The court further says:

"It is now very well settled that a corporation cannot avail itself of the defense of ultra vires when the contract has been in good faith fully performed by the other party, and the corporation has had the full benefit of the performance of the contract. If an action cannot be brought directly upon the agreement, either equity will grant relief or an action in some other form will prevail. The same rule holds e converso. If the other party has had the benefit of a contract fully performed by the corporation, he will not be heard to object that the contract and performance were not within the legitimate powers of the corporation."

In the case of McCormick v. Market National Bank, 165 U. S. 538-549, the court says:

"The doctrine of ultra vires by which a contract made by a corporation beyond the scope of its corporate powers, is unlaw

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