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Form and Characteristics.

The function of banks which is of the greatest public importance is that of issuing notes or bills designed to circulate in the community as current money. The power thus to issue is not inherent or essential in the banking business, and is not necessarily implied from the conference of a general power to do banking business. On the contrary it must be distinctly and in terms conferred in the incorporating act, or it will not be enjoyed.

The instruments thus issued for circulation are technically and more accurately designated as bank-notes, and are ordinarily so called in England. The name bank-bills. has, however, come to have the like significance, and in the United States is more frequently used in ordinary parlance. The law, even for the purpose of interpretation in criminal causes, recognizes the terms as equivalent and interchangeable. A bank note or bill, so far as its language goes, is simply the promissory note of the corporation. It expresses nothing but the corporate engagement to pay a certain sum. That the payment is to be made on demand and without interest may or may not be stated. The presence of the statement is not indispensable, for it would always be deemed to be implied. But a bank-bill though in form a promissory note is yet so different from it in the purpose for which it is put forth, and the legal doctrines

i See the National Banking Act, sects. 8, 21, et seq. 2 Eastman v. Commonwealth, 4 Gray, 416.

applicable to promissory notes are so far qualified in their application to bank-bills in consideration of this difference of purpose, that it seems better to regard them as distinct, though cognate, instruments. The one must be, and the other may be, negotiable by mere delivery. But the touchstone by which. we can determine to which class any individual paper belongs is furnished by the question whether or not it was issued for the purpose of passing current as money for an indefinite period, in the daily transactions among the people. If it was so intended it is a bank-bill. Bank-bills are in the United States ordinarily printed on a peculiar paper, called “ banknote paper,” colored or tinted in part or wholly, ornamented with vignettes, and having the figure and word designating the value printed in numerous places and in fanciful patterns upon each. But none of these features are essential to the character of the instrument as a bank-note. None of them, except the peculiar species of paper and a water-mark skilfully inserted into the texture, appear in the notes of the Bank of England. Such peculiarities have come by custom to be regarded as sufficient evidence that the document that bears them is a bank-bill. But intrinsically they have no such force in impressing this legal character. The presence of all of them would not make a document a bank-bill if it was not such in fact and was not issued to circulate as such. Neither would the absence of all of them prevent the document from being a bank-bill if its language and the object of its emission ought.to render it such. A bank would have a perfect right to have all its bills written by hand on ordinary letter paper, and to print all its promissory notes on decorated bank-note paper, if it should choose, and the legal character of neither document would be affected by the fact.

A bank note or bill must be payable over the counter immediately upon demand made in business hours at any time after its issue. If it be made payable at any future time certain, or at any stated number of days after sight, though designed to

circulate after that time, it is not a bank-bill but a post-note. A post-note is of course closely like a bank-note, and at least after the time of payment has arrived, would probably be governed by the same rules rather than by the rules applicable to promissory notes. Still it is properly speaking a distinct instrument. They may be issued by any bank which is empowered in general terms to issue paper for circulation, if no limitation or description of the species of paper which may be issued is added.2

Bank-bills are not money; that is to say they are not legal tender. They pass current as if they were money only by virtue of a general understanding or tacit agreement to that effect.3 No State even has power to render them such by any method of legislative enactments. A law undertaking to do so would be simply void, as directly contravening Article I., Sec. 10 of the Constitution of the United States, which declares that no State shall make any thing but gold or silver coin a legal tender in payment of debts. They are, however, a good tender unless they are specially objected to at the time on the ground that they are not legal money. And though they cannot be made money or legal tender among the community generally, they may be made so as towards the bank itself which issued them. Indeed this has been not unfrequently done by several among the States. But it must be done by

1 Fulton Bank v. Phenix Bank, 1 Hall, 577.
· Campbell v. Mississippi Union Bank, 6 How. (Miss.) 625.

3 United States Bank v. Bank of Georgia, 10 Wheat. 333; Miller v. Race, 1 Burr. 457; Corbitt v. Bank of Smyrna, 2 Harring. 235; Handy v. Dibbin, 12 Johns. 220 ; Wright v. Reed, 3 Term, 554 ; Morris v. Edwards, 1 Ham. 189; Edwards v. Morris, id. 524; Bradley v. Hunt, 5 Gill & Johns. 58; Morrill v. Brown, 15 Pick. 177. It has been also held that a declaration averring a loss of money in bank-notes is not open to objection on the ground that bank-notes are not money. Towson v. Havre de Grace Bank, 6 Har. & Johns. 47.

4 Dunlap v. Smith, 12 III. 399. But in Illinois an exception is made where the indebtedness to the bank arose upon the debtor's subscription for shares of the capital stock. This he must discharge in good money. Niagara Bank v. Roosevelt, 9 Cow. 409; Bailey v. Bacon, 26 Miss. 455; Moise v. Chapman, 24 Geo. 249; Commercial Bank of Columbus v. Thompson, 7 Sm. & Mar. 443.

statute, for in the absence of legislation there is no rule of the common law which enables a debtor to a bank to discharge himself by an offer of the amount in the bills of the bank.

Set-off. If a bank sues a debtor, the debtor may set off, subject to certain restrictions, the amount of bills of the bank held by him. Though in Massachusetts in the case cited supra, Hallowell and Augusta Bank v. Howard, it was held that the defendant could not be in a position to avail himself of the set-off until he had recovered a judgment on his bills. The right of set-off is for the nominal or face value of the bills, for it is this amount which the bank in fact owes to the holder of them. The credit of the bank may be so poor that its bills are depreciated, but this is not a matter of which the bank itself can be permitted to take advantage as against the holder. Bank-bills may still be legally circulated although they pass for less than their par value, and their legal character remains unaltered as the promise of the bank to pay a certain sum, upon the faith of which promise, at one time or another in the past, the bank has actually received that sum, and to the holder of which promise the bank still remains liable to refund that sum. If its affairs have since been so badly managed that the holder has been able, or has been obliged, to receive the bill as a representative of less amount or value, this is not a matter which the bank can set up to diminish its indebtedness, which has long since accrued in consideration of full value received.?

1 Suffolk Bank v. Lincoln Bank, 3 Mason, 1 ; Hallowell and Augusta Bank u. Howard, 13 Mass. 235. In the absence of any statutory provision on the subject in Massachusetts the rule of the common law necessarily governed in this


2 Robinson v. Bealle, 26 Geo. 17; Taylor v. Cook, 14 Iowa, 501. Two cases in Georgia, Griffin v. Central Bank, 3 Kelly, 371, and Collins v. Central Bank, 1 id. 435, in allotting the assets of an insolvent bank declared that the claims of the bill-holders should be estimated only at the amount actually paid by them respectively for the bills, on the ground that it would be grossly inequitable for the

But though the measure of value is thus rigidly in favor of the holder of the bills, yet the right of set-off will accrue at all only under certain circumstances. If the bank is solvent the holder must have come into possession of the bills at some time prior to the institution of the suit by the bank. The date of the bills is a wholly irrelevant matter. The defendant's right of action is an original one accruing to him directly and primarily at the moment when he becomes the bearer of the bills. He does not take the contract as assignee of the former holder who pays over the bills to him. No holder has any thing to do with the possession or rights of any predecessor in possession. No connection or relationship of a legal character arises between them by reason of the naked act of transmission. The promise of the bank is to pay to the bearer. Whoever is, for the time being, the bearer, is the direct contractor with the bank, and may maintain his suit against it upon the original promise running to himself. He is no more affected with the legal rights or liabilities of an assignee than he would have been had the issue of the bill by the bank been made directly to him in the first place. He does not therefore succeed to a pre-existing right of action against the bank which he can use as a set-off in a pre-existing suit of the bank against himself. But he comes into possession of an original right of action which he cannot set off in a suit already pending at the time when he acquires it. Also it has been questioned whether if the claim is only nominally that of the bank, and is in fact

bill-holders, who had paid only ten cents on the dollar for their bills, to be allowed to exhaust the entire fund which was coming to the creditors to the exclusion of persons who had given cent per cent in labor or property. Bill-holders of course could only “exhaust the fund to the exclusion of others” when they were entitled to priority of payment. In such cases the effect seems certainly grossly inequitable, as the court thought it. But it is obviously a matter to be dealt with by the legislature. The judge cited no authority in his opinion, and the law is certainly as laid down in the text.

1 Jefferson County Bank v. Chapman, 19 Johns. 322; Carpenter v. Butterfield, 3 Johns. Ca. 145; Dickson v. Evans, 6 Term, 57.

2 Bullard v. Bell, 1 Mason, 243.

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