BANKS AND BANKING.

CHAPTER I.

THE FRANCHISE, AND GENERAL AND IMPLIED POWERS THERE

UNDER.

Right of Banking.— Restraining Acts.

Ar common law, the right of banking pertains equally to every member of the community. Its free exercise can be restricted only by legislative enactment; but that it can legally be thus restricted has never been questioned. After laws upon the subject have been passed, the business must be undertaken and conducted in strict accordance with all the provisions contained in them. It is not in its nature a corporate franchise, though it may be made such by legislation, and individuals may be prohibited from transacting it, either altogether in all its departments or partially in any specified ones. A law which forbids the carrying on of "any kind of banking business" is a total prohibition against each particular department of the business, though conducted singly, and may be infringed equally by exercising any separate one of the various banking functions as by exercising all.1

But the restraining statutes, being really in derogation of common-law rights, will always be interpreted, with reasonable

1 Curtis v. Leavitt, 15 N. Y. 9 (p. 52); Attorney-General v. Utica Ins. Co., 2 Johns. Ch. 371; The People v. Same, 15 Johns. 358; Same v. Bartow, 6 Cow.. 290; Nance v. Hemphill, 1 Ala. 551; State v. Williams, 8 Tex. 255.

liberality, in favor of the supposed infringer; and when they are penal in their character they will be construed with considerable strictness in his favor. Isolated acts do not constitute an infringement. Thus, discounting notes is one of the most important of banking functions, and the one which, next to the utterance of bills for circulation, is of most interest to the public, and has therefore been most frequently and most carefully regulated by statute. But any person may occasionally discount a note for another without coming within the legislative prohibition. If he is simply dealing with his own funds, he is not properly encroaching upon the business of banks in the same department. For, in order to bring discounting within the proper definition of a banking function, it must be done with money, in part at least that of other persons, intrusted to or deposited with the discounter, so that he has the practical use and control of it for these purposes as fully as if it were his own. Even if he does use the money of others, he must do it, not on comparatively rare occasions, and as the special agent of each one of them empowered to this specific end; but with some degree of frequency, and as a general agent having control of the combined or intermingled funds of several.1 In New York, restraining statutes, penal in nature, and in their exact phraseology treating only of "associations or companies," have been declared to have no application to individuals. Any single person may enjoy all his common-law rights unimpeded by them. But, upon the other hand, no person can enjoy any of the powers or privileges granted or appurtenant to associations or companies, even though for the purpose of conducting his business he assumes the style of a corporation. He may furnish all the capital, may control all the business, may be practically the bank itself, yet he must go through all the forms of organiza

1 Utica Ins. Co. v. Scott, 8 Cow. 709; People v. Brewster, 4 Wend. 498.

2 Bristol v. Barker, 14 Johns. 205; Codd v. Rathbone, 19 N. Y. 37. To the

same effect is also the law in Illinois. Hunt v. Divine, 37 Ill. 137.

tion prescribed in the organic banking laws of the country or State before he can be entitled to any of the rights which inhere in corporations only by virtue of those laws.1

The ur ose of restraining acts is, of course, to secure the public welfare and safety from the inroads of incompetent men nd swindlers. But, serious as is the evil to be guarded against, no other means of defence appear to exist against it than precisely those penalties which are provided in the law itself for any breach of the law. No other punishment can be inflicted than that laid down in the statute, and means of prevention can be sought only from the same source. Equity will not intervene to check infringements, and even systematic conduct of the banking business, in direct contravention of enacted law, will not be enjoined on the ground that it is a mischief or a nuisance to the community.2

Acts of Incorporation.

Banking corporations or associations, like others, may come into existence, either under a charter or special act of incorporation, or under a general organic law. In the former case, the courts seem generally to have regarded the acts of incorporation, and likewise of course all acts supplementary thereto, as public laws, not requiring to be established by special proof, but to be judicially noticed within the State where the bank is situated. The authorities cited do not, however, assume to establish a general and abstract rule of universal application. They simply indicate the tendency of courts in which questions concerning specific acts have arisen. Instances of a contrary nature must be expected occasionally to occur.4

1 Hal ett v. Harrower, 33 Barb. 537.

2 Attorney-General v. Utica Ins. Co., 2 Johns. Ch. 371; Same v. Bank of Niagara, 1 Hopk. 354.

3 Stribbling v. Bank, 5 Rand. 132; Bank of Utica v. Magher, 18 Johns. 341; Vance v. Bank, 1 Blackf. 80; Towson v. Havre de Grace Bank, 6 Har. & J. 47 ; Williams v. Union Bank, 2 Humph. 339; Hays v. Northwestern Bank, 9 Gratt.

127.

4 Agnew v. Bank of Gettysburg, 2 Har. & Gill, 478.

Location.

As a general rule, a bank can carry on business only in the place where it is empowered to do so by its charter. Branch banks cannot be established elsewhere, except under actual legislative authority. It seems, that agencies for specific purposes, as for the redemption of bills or the dealing in bills of exchange, may be established in other places. In these cases, it is for the convenience of the public that such should be the case. But it cannot be supposed that an agency for the exercise of the more important and valuable functions, such as issuing circulating paper or discounting notes, or an agency designed to carry on the general business of banking, would be regarded as legal. For, in such case, the nominal establishment of agencies might easily result in the practical establishment of a network of branch banks throughout the State.

General and Inherent Powers of Banking Associations. It is necessary to confer in distinct terms in the charter or act of incorporation only those powers which the company could not otherwise exercise, or those concerning which there might be some doubt. Various powers have been at different times declared by the courts to be inherent, and to be properly enjoyed by banking associations simply by virtue of their creation and existence as such, and for the designated end of conducting the banking business. But powers of this nature, being based only upon a legal implication, must be used only in a manner and for purposes strictly consistent with such restrictions, and in furtherance of such duties, as are specifically prescribed by law. Thus a bank, though not directly thereto empowered by its charter or by the organic act, may borrow money. It is a necessary and inherent privilege. it is limited by the same necessity or intrinsic propriety which

But

1 City Bank of Columbus v. Beach, 1 Blatchf. C. C. 425: Bank of Augusta v. Earle, 13 Pet. 519; People v. Oakland County Bank, 1 Dougl. 282; Tombigbee R. R. Co. v. Kneeland, 4 How. U. S. 16.