by eminent counsel, and excited unusual interest at the time. The bills sued upon had been completed in every respect with the sole exception of the president's signature. In this condition they were put away in the cashier's desk, a place of very slight security, and were thence stolen; the president's signature was forged, and they were placed in circulation. The plaintiffs, among other arguments, urged that the bank should be held liable on the ground that it had been guilty of gross negligence in leaving the bills thus exposed when they were in a state so nearly perfect. But the court held that no case was made out. The fact that the independent crime of forgery necessarily intervened between the theft and the issuing, and was indispensable to the possibility of issuing, rendered it impossible to hold the bank. Bills which have been improperly pledged to a creditor of the bank, as security, with the distinct understanding that they shall not be put in circulation, but shall be held strictly by way of security, do not constitute a part of the circulating paper of the bank. The pledgee is not a bill-holder, and is not entitled to any of the rights or privileges which are accorded to bill-holders. He cannot use the bills, as bills; but must come in as an ordinary creditor, on his debt.1 Miscellaneous Rulings. Statutory provisions restricting banks from issuing the bills of banks not incorporated within the same State have been quite common. In their absence a bank may of course pass over its counter and circulate any species of money, not absolutely illegal, which the customer will take.2 Such laws do not, however, prevent the sale of foreign bills by one bank to another, simply for the purpose of facilitating their redemption. But if a bank in another State establishes, in a State 1 Davenport v. City Bank of Buffalo, 9 Paige, 12. where such legislation exists, an agency to discount bills with its own bank-notes, this would be a violation of the law. The bank would acquire no title to the bills so discounted and could not maintain a suit for their collection.1 A much finer distinction was drawn in a case decided in the State courts of Alabama, a distinction which seems rather too subtle to be generally adopted, but which shall be given for consideration. A banking company, it was held, receiving from a foreign banking corporation bills of that corporation, upon general deposit, would be entitled to pay them out again, since they would be simply its own money. Neither would it make any difference that it had agreed with the foreign bank to redeem all such bills presented at its counter. It is not the agent of the foreign bank to "issue" such bills, in which case there would certainly be a violation of the statute. The decision, it was intimated, might have been different had the declaration alleged a special deposit of these bills to the end that they should be paid out as money for the benefit of the depositor. Where the same law in one section declares it to be a misdemeanor to " pass or receive" notes below a certain denomination, and in another section inflicts the penalty of a fine upon a bank which "makes or issues" such, the former section does not apply to a bank paying such over its counter. The latter section is exclusive of the other and can alone be enforced against the corporation. A statute "to prohibit" the issuing and circulating of unauthorized bank paper, creates a liability in tort, and not in contract, for its breach.1 Bank-bills are circulated upon the credit of the bank which issues them, not upon that of any individual who pays them over to another. Hence it follows that there is no warranty of 1 Bowman v. Cecil Bank, 3 Grant, 33. 2 Wray v. Tuskegee Ins. Co., 34 Ala. 58. 4 Lawler v. Burt, 7 Ohio St. 340. value, or of ultimate payment, upon the transfer of a banknote. Though it is probable that there is a warranty of its genuineness, as being in fact a note for the amount named on its face, issued and payable by the bank by which it purports to have been issued and to be payable.1 A principle, which would seem too obvious to require judicial sanction, has been declared in Massachusetts: That a bank cannot issue bills or notes upon the basis of a "special" deposit.2 This deposit could not be used for their redemption; it cannot be availed of in business transactions to produce profit and increase the funds of the bank. The bank has not even the right to meddle with it temporarily further than is essential for its safe-keeping. In Pennsylvania the State law required banks to keep their circulation at par, and imposed a forfeiture amounting to a certain percentage upon their circulating paper if they failed to do so. It was held by the courts that the phrase "at par signified ordinarily equivalent to gold and silver for financial and commercial purposes. Also that the forfeiture was in the nature of a penalty, not of a tax.3 Issue of Circulating Notes by Banks of States. In divers States banks have been established, which were, properly speaking, State institutions, and not corporations of the ordinary sort established by individuals from their private funds and conducted by them for their private benefit. The various institutions of this description do not of course repeat each other in all matters of detail, but those of them at least which have come into the courts resemble each other in their main features, and consequently in the legal character impressed by those features. Formally a corporation is created. 1 Edmunds v. Digges, 1 Gratt. 359. 2 Foster v. Essex Bank, 17 Mass. 479. 3 Harrisburg Bank v. Commonwealth, 26 Penn. St. 451. It has its corporate name and seal, its president, directors, and other customary officers of a bank. But the election of the officers is reserved to the legislature. The capital is supplied from the public treasury or from the pledge of public revenues, and the State is the sole stockholder. Further, the State sometimes directly guarantees the ultimate redemption of the circulation. For these banks have been uniformly banks of issue; in fact the plausible purpose of their creation has usually been the furnishing of a stable and reliable currency for the people of the commonwealth. The assumption of this function it is which has caused the constitutionality of the banks and the legality of their notes or bills to be questioned, on the ground that the issuing of these notes or bills was in truth and in substance the emission of bills of credit by the State, in contravention of the provision of the National Constitution. Twice the Supreme Court of the United States has had occasion to hear and determine causes involving this point, and each time after thorough arguments the decision has been in favor of the constitutionality of the bank and the validity of its bills or notes.1 The reasoning in the opinions which embody these rulings must be regarded as perfectly satisfactory. The definition of the term "bills of credit" has, not unnaturally, given considerable difficulty to the judges. Perhaps the best is to be found in the cause cited from 11 Peters, which is as follows: "A paper issued by the sovereign power, containing a pledge of its faith, and designed to circulate as money." To whatever other criticism this may be open, it certainly must be deemed broad enough. Even if it be conceivable that an instrument could. fall within this description and not be a bill of credit, it must at least be admitted that an instrument which does not fall within this description cannot be a "bill of credit," in the sense 1 Briscoe v. Bank of the Commonwealth of Kentucky, 11 Pet. 257; Darrington v. Bank of the State of Alabama, 13 How. (U. S.) 12; Owen v. Branch Bank at Mobile, 3 Ala. 258. of the prohibition of the United States Constitution. It does not require much thought to see that the bills or notes issued by the bank of a State do not display these characteristics. They are not issued by the sovereign power, not even by an agent, at least in a legal sense, of the sovereign power. They are issued by an independent corporation, having every essential and customary attribute of a complete and perfect corporate banking company. They are not issued upon the credit or faith of the State. They do not on their face bear any promise or pledge by or even on behalf of the State for their redemption. The directors of the bank have no authority to offer such a pledge. On the contrary they put forth instruments whose promise purports to be and is based upon the corporate responsibility solely. The corporation may be sued on the bills. It has assets and a capital. It is upon the faith or credit of these primarily and immediately that the circulating notes are issued, or must be conclusively presumed to be issued. The contingent and remote undertaking of the State finally to redeem them if the bank is unable to do so, does not in the view of the law constitute the credit upon which they are issued or circulate. A case which came into the Supreme Court from the State of Missouri is useful in this connection, as demonstrating by contrast the accuracy of these positions. In that case promises to pay were issued under legislative authority; they were signed and countersigned, and offered to the public by State officials; they were to be redeemed in a designated manner also by State officials out of public moneys; they ranged in denomination from fifty cents to ten dollars each. It could not be questioned that these were properly "bills of credit." When the genuine bill thus appears in its proper shape, it appears as a very dif ferent article indeed from the bank-notes of the Bank of the State of Alabama or of the Bank of the Commonwealth of Kentucky. 1 Craig v. State of Missouri, 4 Pet. 410. |