Security for Circulation Provision for the protection of the holders of bank notes against the insolvency of the bank have frequently been made, by requiring a certain reserve of cash for the payment of the notes, or by giving the holders a certain preference if the bank becomes insolvent, or by requiring securities to be pledged and deposited with some public officer to secure the payment of the notes. In view of the exclusion of all except national banks from the field of circulation, the law on this subject with reference to state banks need not be considered. National Bank Notes Under the National Bank Act, any bank, proposing to issue notes, must secure them by a deposit with the treasurer of the United States of government bonds. Such deposit entitles the bank to receive from the comptroller of the currency notes, which, when received, are in blank, certifying that the security for them is in the hands of the treasurer, and which, when signed by the proper officers of the bank, become its promises. to pay upon demand, and which can then be issued for circulation. The notes are to be paid by the banks when presented, but the law makes provision for their redemption by the treasury at Washington; each bank being required to maintain in the treasury for that purpose a reserve equal to 5 per cent. of its circulation. While the notes are the obli 41 40 42 40 Rev. St. U. S. §§ 5159, 5160 (U. S. Comp. St. 1901, p. 3469); Id. § 5171 (superseded by Act March 14, 1900, c. 41, § 12, 31 Stat. 49 [U. S. Comp. St. 1901, p. 3475]); Id. § 5172 (amended by Act May 30, 1908, c. 229, § 11, 35 Stat. 551 [U. S. Comp. St. Supp. 1909, p. 1329]). See "Banks and Banking," Dec. Dig. (Key No.) § 272; Cent. Dig. §§ 763767. 41 Rev. St. U. S. § 5182 (U. S. Comp. St. 1901, p. 3481). 42 Act June 20, 1874, c. 343, § 3, 18 Stat. 123 (U. S. Comp. St. 1901, p. 3488). See, also, Act July 14, 1890, c. 708, § 6, 26 Stat. 289 (U. S. Comp. St. 1901, p. 3490); Act July 28, 1892, c. 317, 27 Stat. 322 (U. S. Comp. St. 1901, p. 3491); Act May 30, 1908, c. 229, § 12, 35 Stat. 552 (U. S. Comp. St. Supp. 1909, p. 1331). See "Banks and Banking," Dec. Dig. (Key No.) § 272; Cent. Dig. 88 738-832. gations of the banks, they thus carry with them certain engagements binding upon the government; the provision for redemption at the treasury binding the government to pay on demand all notes when presented in due form, and not merely to the extent of the reserve, while in case of the failure of a bank the law provides for the immediate payment of all its notes at the treasury," the government thus making itself fully liable in any event for the full amount of the notes.* 43 Rev. St. U. S. §§ 5221-5229 (U. S. Comp. St. 1901, pp. 3503-3506). 44 See Dunbar, Theory Hist. Banking, pp. 137-140. 76. Liability of Officers to Bank-At Common Law. 68. Subject to constitutional limitations, banking corporations may be created by the state legislatures and by Congress under general or special laws, with the usual incidents of incorporation. Scope of Chapter Many questions relating to incorporated banks, state and national, have already been treated, or will be treated later, where they more naturally fall. In this chapter it is proposed to consider briefly certain matters relating to banking corporations which remain. Much of the law relating to such corporations is merely a part of the law relating to corporations generally, and the treatment will be confined to a few matters more particularly relating to corporations with banking powers. Incorporation The power of the state legislatures to create corporations, including banking corporations, and to confer powers and privileges upon them within the state, is absolute, except so far as they may be restricted by the state or federal constitutions.1 In some states the constitutions require acts creating corporations with banking powers before they shall take effect to be submitted to the people, but these limitations have been held to apply, not to banks of deposit and discount, but only to banks of issue.2 Congress has power to incorporate a bank, and may by general law provide for the incorporation of national banks.3 Territorial legislatures, vested by Congress with general legislative powers, have power to create banking corporations. In the absence of constitutional limitations, corporations may be created under special as well as under general laws; but in most states the legislature is prohibited from creating corporations, with certain reservations, other than under general laws." A general law authorizing the formation of corporations defines the purpose for which they may be formed, and prescribes the steps necessary to form them. It generally requires, among other steps, articles of incorporation to be filed in some public office, setting forth the certain name of the corporation, the nature of its business and the principal place of transacting it, the period of the corporation's duration, the names and 1 Clark, Corp. (2d Ed.) 29. 2 People ex rel. Badger v. Loewenthal, 93 Ill. 191; Anthony v. International Bank, 93 Ill. 225; Pape v. Capitol Bank of Topeka, 20 Kan. 440, 27 Am. Rep. 183; Dearborn v. Northwestern Sav. Bank, 42 Ohio St. 617, 51 Am. Rep. 851; Bates v. People's Savings & Loan Ass'n, 42 Ohio St. 655; State ex rel. Caples v. Hibernian Savings & Loan Ass'n, 8 Or. 396. See, also, Reapers' Bank v. Willard, 24 Ill. 433, 76 Am. Dec. 755; Smith v. Bryan, 34 Ill. 364; Dupee v. Swigert, 127 Ill. 494, 21 N. E. 622. Sometimes, however, banks of deposit and discount are included. People v. National Sav. Bank (Ill.) 11 N. E. 170. See "Banks and Banking," Dec. Dig. (Key No.) §§ 25, 26; Cent. Dig. §§ 29–33. 3 Post, p. 361. 4 People ex rel. Stickney v. Marshall, 6 Ill. 672; Michigan Bank v. Williams, 5 Wend. (N. Y.) 480. See "Banks and Banking," Dec. Dig. (Key No.) §§ 25, 26; Cent. Dig. §§ 29-33. 5 Clark, Corp. (2d Ed.) 37. 7 places of residence of the incorporators, the number of the directors and the names and places of those who are to act until an election is held, and the amount of the capital stock and how it is to be paid in, and the like. A compliance with the formalities to be observed as conditions precedent to becoming a corporation is essential to the legal existence; but a substantial compliance is sufficient. Moreover, a corporation de facto may exist notwithstanding noncompliance with conditions precedent; and in such case the existence of the corporation can be questioned only by the state in a direct proceeding brought for that purpose. Questions of estoppel also arise where persons pretend to form a corporation and assume to exercise corporate powers, as well as questions as to the personal liability as partners of persons who hold themselves out as a corporation, and contract as such, without having even a de facto corporate existence. The law in respect to the formation of banking corporations and to the other matters above mentioned is part of the law relating to corporations generally, and for its discussion the reader is referred to the books upon corporations and to the statutes of the particular states. An exception will be made, however, in the cases of national banks, both because they are found in all the states and because the distinctive law concerning them lies in narrow compass, admitting of separate treatment. PLACE OF TRANSACTING BUSINESS 69. Generally the principal operations of a banking corporation must be carried on at the place designated therefor by its charter, although it may through agents in other places perform acts properly incidental to its business. Unless expressly authorized, a banking corporation may not establish a branch bank. Clark, Corp. (2d Ed.) 49. 7 Clark, Corp. (2d Ed.) 78. Clark, Corp. (2d Ed.) 91. |