own capital. It has been held that merely receiving deposits was not banking;7 but another court has said that, where a couple of attorneys own a private bank, which receives deposits, they are to be considered bankers under the terms of a penal statute.R § 3. Under revenue laws.- It is apparent that courts, in construing revenue laws, will give terms a wider meaning than when construing a penal statute, or a statutory or constitutional prohibition, when it is sought to bring an individual within the terms of the statute. The business of banking, under the license tax law, consists, among other things, in having a place of business where money is received on deposit and paid out upon checks or loaned upon security. But a so-called loan company which did not receive deposits, but loaned its own capital on realty security, and sold and guaranteed its mortgages, was not a bank under this statute. It seems reasonably certain that a place of business performing either the banking function of deposit or that of issue would be considered a bank. The same cannot safely be said of a business confined wholly to discounting. One court has held that a banker can be compelled to pay a license on the ground that he is a "moneychanger." 3 "3 This last decision is historically correct, because originally the sole business of the mediaval prototype of the modern banker was exchanging the different varieties of money. tow, 6 Cow. 290, and Curtis v. Leav- to deal in notes, drafts and bonds, itt, 15 N. Y. 9, 56. and buy and sell bills of exchange, 7 Corwin v. Insurance Co., 14 is not a money broker or exchange Ohio, 6. 8 Commonwealth v. Sponsler, 16 Pa. Co. Ct. R. 116. 1 Warren v. Shook, 91 U. S. 704. 2 Selden v. Equitable Trust Co., 94 U. S. 419. The statute was 13 Stat. at Large, 252, carried into sec. 3407, Rev. Stat. U. S. 3 Hinckley v. Belleville, 43 Ill. 183. But a savings bank authorized dealer under a license statute. State v. Field, 49 Mo. 270. This decision seems to be based upon the idea that it would be impossible to imprison the corporation. 41 Encyc. Pol. Science, 232. The historical excursus in Oulton v. Sav. Inst., 17 Wall. 118, is hardly accurate. § 4. Under constitutional and statutory restrictions.The general restrictions against banking in constitutions have been without exception held to apply only to banks of issue. Courts have been compelled to apply harsh measures to constitutional absurdities. Thus in California the constitution (art. 4, sec. 4) prohibited the grant of a charter for banking purposes. A later section (35) of the same article stated emphatically that the legislature should prohibit any person, association or corporation from exercising the privilege of banking or creating paper to circulate as money; yet these provisions were held to mean banks of issue, not banks of deposit or discount. Similar hold. ings have been made in other states, where bank charters were prohibited or banking laws were required to be submitted to popular vote. The state of Illinois in its last constitution has insisted upon this species of referendum as to any law authorizing banking corporations, whether of deposit or discount or issue, or amendments thereto. A prohibitory statute led to a very extraordinary ruling. A statute forbade the establishment in the Territory of Washington of any branch or agency of a corporation whose charter granted it banking privileges. It was seemingly held that a corporation whose charter gave it the power to "draw, accept, indorse, guaranty [sic], buy, sell and negotiate drafts and bills. of exchange, inland and foreign; to receive coin, money, silver and gold in any form or other [sic], and any kind of valuables on deposit at its offices, and make orders for the payment and delivery of the same or an equivalent at any place whatsoever; to buy, sell and dispose of gold and silver, coin and bullion, gold dust, money and securities for money, and to do a general exchange and collection business, and 1 Martinez v. Hemme Co., 105 Cal. 376; Bank v. Fairbanks, 52 Cal. 196. In the latter case the corporation was organized for banking business, so far as under the laws of California it could legally exist. 2 Pape v. Capital Bank, 20 Kan. 440; People v. Lowenthal, 93 Ill. 191; Dearborn v. Bank, 42 Ohio St. 617. 3 Art. 11, sec. 5. Const. of 1870. See also Reed v. People, 125 Ill. 592; Dupee v. Swigert, 127 Ill. 494. to invest its surplus or unemployed funds," etc., was not a corporation with banking privileges. This was decided in spite of the fact that the corporation was carrying on a very large banking business in various places. It shows how far the courts will go in trying to avoid a seeming injustice. § 5. Construction of charters. The court, in the case just cited, intimates that under such a charter the association might be exceeding its powers in doing a general banking business. Courts, generally, in construing charters, construe them strictly as against the state, and more liberally where the objection comes in a collateral way. A corporation engaged in loaning its own money upon notes and mortgage security was held not to be a banking corporation.' A company investing its profits in loans secured by mortgages would not be engaging in the banking business.2 In another case the president of a trust company was being prosecuted as the officer of a bank receiving a deposit knowing his bank to be insolvent. The trust company had been in the habit of receiving deposits of money subject to check. Its charter gave it the power of receiving money in trust and of accumulating the same, and to loan money on real estate and collateral, and to execute and issue notes and debentures, and to buy and sell all kinds of negotiable and 4 Wells, Fargo & Co. v. Nor. Pac. Ry. Co., 23 Fed. R. 469, per Deady, Dist. Judge. The case was mandamus to compel the defendant railroad to furnish express facilities. The court apparently lost sight of the statute altogether and held that it made no difference that Wells, Fargo & Co. were doing a banking business elsewhere; the test would be whether they were doing such a business in Washington. The statute, however, made the test to consist of the powers granted to the corporation by its charter, not what business it was actually doing. The case refers to an earlier unreported case of the territorial court. 1 Oregon, etc. Investment Co. v. Rathburn, 5 Sawy. 32. The court went so far as to assume that the corporation was loaning its own capital. But there was no proof whatever to show that fact. The question arose collaterally. 2 Life Ass'n v. Levy, 33 La. Ann. 1203. This case is apparently one of construction of a charter. non-negotiable paper, stocks and other investment securities. Yet the court held that the president was not criminally liable as the officer of a bank. But it is well known that many corporations called trust companies have banking powers, and carry on a general banking business thereunder. Such corporations from any standpoint would necessarily be considered simply as banks, so far as their character as banks was in question. But in quo warranto proceedings it was held that a corporation which was given the right to grant evidences of debt to be issued payable on demand would violate its charter by the issuance of evidences of debt payable on demand to circulate as money, where the violation charged was the illegal exercise of banking powers.* § 6. Under penal and forfeiture statutes.-The strictest rule in favor of the citizen is applied in this class of cases. Courts have gone quite far in verbal refinements in order to mitigate penalties. The cases mentioned in the note below are more properly cases of statutory construction, but they show a very dextrous manipulation of banking statutes.' Coupon notes, where the coupons were payable to bearer, were held not to be, when issued, an act of banking. Negotiable bonds, as the case seems to represent them, issued 3 State v. Reed, 125 Mo. 43. The court in its opinion refers to Mer. Bank v. New York, 121 U. S. 138, as holding that a corporation with such powers was not a bank. But the illegality of the act ought not to have been permitted to be set up by the defendant. The case is therefore wrongly decided. 4 People v. River Raisin Co., 12 Mich. 389. There was a demurrer to the replication. The replication was held bad, but, the plea being bad, judgment went against the defendant. The plea was considered bad because it neither denied nor confessed and avoided the exercise of banking powers. But the plea did set out just what the corporation was doing under its charter. Hence the opinion, though vague and rambling, must be taken to hold that the charter did not permit the issuance of circulating notes. 1 Bristol v. Barker, Anth. N. P. 235; S. C., 14 Johns. 204; People v. Brewster, 4 Wend. 498. Compare People v. Bartow, 6 Cow. 290; People v. Doty, 80 N. Y. 225. 2 Barry v. Merch. Ex. Co., 1 Sandf. Ch. 280. by a railroad, were governed by the same rule. The receipt of money on deposit was considered no violation of a charter prohibiting banking, although it seems that the deposits were treated as bank deposits. Under a statute making bank stockholders personally liable for the debts of the bank, the stockholders were held not liable for debts arising from a business of negotiating and guaranteeing mortgages. 7. The right of banking.— At common law, the various kinds of banking, whether of issuing notes, discounting paper, or receiving deposits, were the privileges of any one who chose to exercise the right. This would seem to be the necessary conclusion from the development of banking. Originally the relation between a bank and its depositor was not that of debtor and creditor. Some of the greatest of the old European banks received money strictly as a deposit, to return the same money to its owner. But early in the history of banking it came to be a received notion that the relation of debtor and creditor was initiated by a socalled but misnamed deposit. Whether the bank issued to its depositor an evidence of debt in the form of a note or notes, the amount being made payable on demand, or whether the credit was given the customer in his pass book or on the bank book, the obligation was precisely the same, to wit: a debt payable on demand. It therefore seems reasonably certain that banking continued to be at common law a privilege open to all. So the authorities agree.1 § 8. When a franchise.- All the courts seem to have recognized that the power to issue notes to circulate as money could be made a franchise. No one ever seems to have questioned the right of the legislature to make the power to issue currency a franchise grantable by the state. 3 Hubbard v. N. Y. R. R. Co., 36 Barb. 286. 1 Bank of Augusta v. Earle, 13 Pet. 519, 596; Curtis v. Leavitt, 15 N. Y. 9; 4 Corwin v. Insurance Co., 14 Nance v. Hemphill, 1 Ala. 551. Ohio, 6. 1 Bank of Augusta v. Earle, supra; 5 Kiggins v. Munday, 19 Wash. Myers v. Irvine, 2 S. & R. 368. 233. |