100. Liability of Stockholders for Debts of Bank. Who are Liable as Shareholders.

101.

102.

103.

Enforcement of Shareholders' Liability.

Officers-In General.

104. Civil Liability of Officers-At Common Law. 105.

Statutory Liability.

106. Criminal Liability of Officers.

107. Forfeiture and Dissolution.

108. Voluntary Liquidation.

109. Involuntary Liquidation.

110. Transfers and Payments Affected by Insolvency-Preferences.

111. Attachments, Injunctions, and Executions.

112. Actions by and Against National Banks.

113. Taxation by States.

IN GENERAL

93. National banking associations are corporations formed under the provisions of the National Bank Act. They are governmental instruments, and the states can exercise no control over them, except so far as Congress may permit; but, in general, their contracts, their rights of property, and their right to collect and their liability to be sued for their debts are governed by the state laws.

Scope of Chapter

Many questions relating to national banks, as well as many of the provisions of the National Bank Act, are dealt

with in other chapters. In this chapter it is proposed to take up such of the remaining provisions of the act and matters relating to national banks as are deemed to be within the scope of the book.

National Banks-In General

While the federal constitution does not expressly grant to Congress the power to create corporations, it grants the power by implication, as declared by Chief Justice Marshall, whenever the creation of a corporation is an appropriate measure to execute the powers conferred, and under this implied grant Congress has power to incorporate a bank.1 Under this power Congress has enacted the act entitled "An act to provide a national currency secured by a pledge of United States bonds, and to provide for the circulation and redemption thereof," to be known as the National Bank Act. The constitutionality. of the act "rests upon the same principle as the act creating the second Bank of the United States. * The national

banks organized under the act are instruments designed to be used to aid the government in the administration of an important branch of the public service. They are means appropriate to that end. Of the degree and necessity which existed for creating them Congress is the sole judge." It has been pointed out that the act may fall within the power of Congress to borrow money, to regulate interstate commerce, or to coin money and to regulate the value thereof.*

The national banking system owes its existence to the Civil

1 McCulloch v. Maryland, 4 Wheat. 316, 4 L. Ed. 579; Osborn v. Bank of United States, 9 Wheat. 738, 6 L. Ed. 204. See "Banks and Banking," Dec. Dig. (Key No.) § 233; Cent. Dig. § 879.

2 See Rev. St. U. S. § 5133 (Act June 20, 1874, c. 343, § 1, 18 Stat. 123 [U. S. Comp. St. 1901, p. 3454]).

3 Farmers' & Mechanics' Nat. Bank v. Dearing, 91 U. S. 29, 23 L. Ed. 196. See "Banks and Banking," Dec. Dig. (Key No.) § 233; Cent. Dig. $ 879-888.

Thompson, Corp. (2d Ed.) § 126.

National banks "were established for the purpose, in part, of providing a currency for the whole country, and in part to create a mar

War and to the necessity of finding a market for United States bonds. The first act providing for a system of national banks was passed February 25, 1863; but it proved unsatisfactory, and the act of June 3, 1864, making important changes, was substituted, under which banks chartered by the states could be reorganized as national banks. The reorganization of state banks was stimulated by an act laying a tax of 10 per cent. on all bank notes of state banks and others paid out by them after July 1, 1866. The right of Congress to restrain the circulation of any notes not issued under its own authority was sustained upon the ground that Congress, having undertaken, in the exercise of constitutional power, to provide a currency for the whole country, may constitutionally secure the benefit of it to the people by appropriate legislation."

5

Power of States

The national banks having been brought into existence by Congress as governmental institutions, the states can exercise no control over them, nor in any way affect their operation, except so far as Congress may see proper to permit. As we

ket for the loans of the general government." Tiffany v. National Bank of Missouri, 18 Wall. 409, 21 L. Ed. 862.

As to the power of Congress to provide a currency for the country, see Veazie Bank v. Fenno, 8 Wall. 533, 19 L. Ed. 482. See "Banks and Banking," Dec. Dig. (Key No.) § 233; Cent. Dig. §§ 879888.

5 Rev. St. U. S. § 3412. This is superseded by Act Feb. 8, 1875, c. 36, 18 Stat. 311 (U. S. Comp. St. 1901, p. 2249).

For a history of the legislation, see Veazie Bank v. Fenno, 8 Wall. 533, 19 L. Ed. 482; Dunbar, Theory & Hist. of Banking, 132 et seq. 6 Veazie Bank v. Fenno, 8 Wall. 533, 19 L. Ed. 482. See “Banks and Banking," Dec. Dig. (Key No.) § 233; Cent. Dig. §§ 879-888.

7 Farmers' & Mechanics' Nat. Bank v. Dearing, 91 U. S. 29, 23 L. Ed. 196. See, also, Davis v. Elmira Sav. Bank, 161 U. S. 275, 16 Sup. Ct. 502, 40 L. Ed. 700.

The bank depositors' guaranty act of Kansas, which authorizes banks incorporated under the laws of the state and possessing prescribed qualifications to join in contributing to and maintaining a fund for securing certain classes of their depositors against loss in

8

have seen, the provisions of the act relating to interest chargeable by the banks supersede the state laws on the subject of usury. So a state law attempting to prohibit national banks from receiving deposits when insolvent and prescribing a penalty is invalid as an attempt to control and regulate the powers of national banks." "Undoubtedly a state has the legitimate power to define and punish crimes by general laws applicable to all persons within its jurisdiction.10 So, likewise, it may declare, by special laws, certain acts to be criminal offenses when committed by officers or agents of its own banks or institutions. But it is without lawful power to make such special acts applicable to banks organized and operating under the laws of the United States." 11

Of course, national banks are not wholly withdrawn from the operation of state legislation. "They are subject to the laws of the state, and are governed in their daily course of business far more by the laws of the state than of the nation. All their

case of the insolvency of any of their number, is not unconstitutional as denying to the national banks within the state the equal protection of the law. Nor is such act unconstitutional on the ground that its effect may be to attract depositors from the national to the guaranteed banks, and thus increase competition with the national banks, and impair their efficiency as instrumentalities of the national government. Dolley v. Abilene Nat. Bank of Abilene, Kan., 179 Fed. 461, 102 C. C. A. 607, 32 L. R. A. (N. S.) 1065. See, also, Noble State Bank v. Haskell, 219 U. S. 104, 31 Sup. Ct. 186, 55 L. Ed. 112, 32 L. R. A. (N. S.) 1062; Schallenberger v. First State Bank of Holstein, Neb., 219 U. S. 114, 31 Sup. Ct. 189, 55 L. Ed. 117. See "Banks and Banking," Dec. Dig. (Key No.) § 233; Cent. Dig. § 880.

8 Ante, p. 239.

Sce

Easton v. Iowa, 188 U. S. 220, 23 Sup. Ct. 288, 47 L. Ed. 452. "Banks and Banking," Dec. Dig. (Key No.) § 233; Cent. Dig. § 880. 10 See Cross v. North Carolina, 132 U. S. 131, 10 Sup. Ct. 47, 33 L. Ed. 287; State v. First Nat. Bank, 2 S. D. 368, 51 N. W. 587. See "Banks and Banking," Dec. Dig. (Key No.) § 233; Cent. Dig. § 880. 11 Easton v. Iowa, 188 U. S. 220, 23 Sup. Ct. 288, 47 L. Ed. 452. See "Banks and Banking," Dec. Dig. (Key No.) § 233; Cent. Dig. § 880.

contracts are governed and construed by state laws. Their acquisition and transfer of property, their right to collect their debts, and their liability to be sued for debts, are all based on state law. It is only when the state law incapacitates the banks from discharging their duties to the government that it becomes unconstitutional." 12 Thus a state statute requiring the cashiers of national banks, under penalty, to transmit to the clerks of the towns in which shareholders may reside a list of such stockholders, is valid.13 It has been held that it is not competent for state legislation to limit or interfere with the transferable quality of national bank stock, as left by the federal statutes.14

FORMATION

94. A national banking association may be formed by any number of persons, not less than five, who shall enter into articles of association, make an organization certificate, and comply with the other formalities prescribed. A state bank may become a national banking association by complying with the requirements of the act, without loss of its identity.

In General

The National Bank Act provides that associations for carrying on the business of banking may be formed by any number

12 First Nat. Bank v. Kentucky, 9 Wall. 353, 19 L. Ed. 701. See, also, McClellan v. Chipman, 164 U. S. 347, 17 Sup. Ct. 85, 41 L. Ed. 461; Merchants' Nat. Bank v. Ford, 124 Ky. 403, 99 S. W. 260; Hawley v. Hurd, 72 Vt. 122, 47 Atl. 407, 52 L. R. A. 195, 82 Am. St. Rep. 922. See "Banks and Banking," Dec. Dig. (Key No.) § 233; Cent.

Dig. § 880.

13 Waite v. Dowley, 94 U. S. 527, 24 L. Ed. 181; post, p. 435. See "Banks and Banking," Dec. Dig. (Key No.) § 233; Cent. Dig. § 880.

14 Doty v. First Nat. Bank, 3 N. D. 9, 53 N. W. 77, 17 L. R. A. 259. See, also, Scott v. Pequonnock Nat. Bank, 15 Fed. 494; Braden's Estate, 165 Pa. 184, 30 Atl. 746. See "Banks and Banking," Dec. Dig. (Key No.) § 233; Cent. Dig. § 880.