CHAPTER XXIX. BANKS HOLDING PUBLIC FUNDS. - § 239. National banks depositaries Public moneys. Section 5153 Revised Statutes U. S. provides that: "All National banking associations, designated for that purpose by the Secretary of the Treasury, shall be depositaries of public money, except receipts from customs, under such regulations as may be prescribed by the Secretary; and they may also be employed as financial agents of the Government; and they shall perform all such reasonable duties, as depositaries of public moneys and financial agents of the Government, as may be required of them. The Secretary of the Treasury shall require the associations thus designated to give satisfactory security, by the deposit of United States bonds and otherwise, for the safe-keeping and prompt payment of the public money deposited with them, and for the faithful performance of their duties as financial agents of the Government. And every association so designated as receiver or depositary of the public money shall take and receive at par, all of the national currency bills, by whatever association issued, which have been paid into the Government for internal revenue or for loans or stocks." By the provisions of this section, national banking associations which are designated for that purpose by the Secretary of the Treasury, shall be depositaries of public moneys. Public money is defined by Black as follows: "This term, as used by the laws of the United States, includes all the funds of the general Government derived from the public revenues or intrusted to the fiscal officers." When a national banking association desires to be designated as a depositary of public money, application for that purpose must be made directly to the Secretary of the Treasury. Upon receipt of such application, the Secretary of the Treasury has discretionary power to refuse or grant the application. If the application is granted, the security required will be furnished by the depositary bank. The security re quired to be furnished as to amount is discretionary with the Secretary of the Treasury; but in no instance will a designation be made on security less than $50,000. Where a national bank, not designated as a depositary of public money, under the permissive authority of law receives deposits made by postmasters in their official capacity, the money so deposited assumes a fiduciary relation to the Government and the bank thereby becomes the bailee, and as such bailee, it becomes directly responsible to the Government for moneys which it knowingly or negligently allows the postmaster to withdraw by private check.1 Sections 3620, 4046, 3847, 4046, 5488 and 5497 Revised Statutes, U. S., treat upon the duty concerning disbursing officers and upon postmasters depositing with depositaries, and postmaster's deposits where made within a county where there are no designated depositaries, and also penalty where unauthorized deposits of money and penalty for unauthorized receipts or use of public money. A national bank designated as a depositary of public money does not constitute the bank an agent of the Government, and the Government, in case of failure of the bank, will not be liable for the deposit.2 A national bank does not have to be designated as a depositary of public money to give it authority to receive public moneys or funds belonging to States, counties, cities and like municipalities. In the case of State of Nebraska v. First National Bank of Orleans, 88 Fed. Rep. 947, held: "Where a State Treasurer places State funds in a national bank subject to check, the bank giving security therefor and agreeing to pay interest on daily balances, the transaction is a deposit and not a loan to the bank." State banks, unless prohibited by statute, may accept public moneys on deposit. But where the statute of a State forbids the taking and holding of such funds, they can only (if at all), be accepted as a special deposit, which is a deposit made of a particular thing, with a depositary; and when made of money which is sealed up, the title to it remains in the depositor. A deposit of public funds, when made a special deposit in a bank, 2 Branch v. The U. S., 1 N. B. C. 363. 1 United States v. National Bank of Ashville, 73 Fed. Rep. 379. the relationship of debtor and creditor as between the depositor and the bank is not established, and the funds when so deposited cannot be carried or intermingled with other funds of the bank. They must be kept separate and apart from the general deposits, and be turned over to the public officer or authority authorized to receive them at any time when demanded. A State bank prohibited by statute from accepting public money on deposit in a general way, is not permitted to pay interest on a special deposit. Public funds cannot be loaned by the bank when accepted as a special deposit; but when a bank has the right by law to accept public funds on deposit in a general way, it may agree to pay interest on the same and may loan the deposits. It has been held that, as between the treasury of a school district, handling school funds, where a depositor deposited such funds in the bank by a general deposit, which ordinarily creates the relationship of debtor and creditor, the banker receiving such funds, knowing them to be held by the depositor in an official capacity, if the bank accepts the same, it becomes a trustee for the beneficial owner, the school district. Where the Constitution of a State by its provisions forbids the depositing of public moneys in a bank, to be held by it as a general deposit, the taking of such deposit is a direct violation of law; and where the statute provides that it is a felony the officers of such bank become criminally liable. CHAPTER XXX. BANKS DEALING IN REAL ESTATE. § 240. Limitations upon national banks. The National Banking Act, section 5137, Revised Statutes of the United States, provide: "A national banking association may purchase, hold, and convey real estate for the following purposes, and for no others: "1st. Such as shall be necessary for its immediate accommodation in the transaction of its business. "2nd. Such as shall be mortgaged to it in good faith by way of security for debts previously contracted. "3rd. Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings. "4th. Such as it shall purchase at sales under judgments, decrees, or mortgages held by the association, or shall purchase to secure debts due to it. "But no such association shall hold the possession of any real estate under mortgage, or the title and possession of any real estate purchased to secure any debts due to it, for a longer period than five years." A national banking association cannot purchase or convey real estate by conveyance executed by its officers, unless such conveyance be duly authorized by a resolution passed by the board of directors. A national bank may purchase and hold real estate, first, such as shall be necessary for its immediate accommodation in the transaction of its business. There are no restrictions or limitations imposed as to the amount that may be invested in real estate or in a banking house to be used by the bank in the conduct of its business. The amount that it may invest is a discretionary measure to be determined only by the board of directors. Where a banking association invests a large portion of its capital stock in real estate, and a banking house is erected thereon, which investment is far in excess of the requirements necessary for its immediate accommodation in the transaction of its business, such an act would certainly be bad policy, if not a violation of the statute. The bank may claim that the investment is a profitable one, but the statute restricts it and limits its power to the purchase of such real estate as shall be necessary for its immediate accommodation in the transaction of its business. The Supreme Court of the United States, in the case of McCormick v. Market Bank, 165 U. S. 538, denies the power of a bank to contract by lease (at a large rent of) an office to be occupied "as a banking office and for no other purpose," for a term of years, before having been duly authorized by the Comptroller of the Currency, the privilege of commencing business.1 A national bank may "hold" such (real estate) "as shall be mortgaged to it in good faith by way of security for debts previously contracted." The bank is expressly prohibited from taking a mortgage to secure a debt unless the debt is one which has been previously contracted. A debt previously contracted is one made at a date prior to the date of the mortgage. The debt may be one antedating the mortgage a month or a day. If the mortgage is taken on the same day the debt is contracted, it would be tainted with suspicion, from which evidence could only relieve it. In the case of First National Bank of Fort Dodge v. Haire et al., 36 Iowa, 443, where a national bank refused to negotiate a loan upon the responsibility of a firm, but agreed to and did make the loan upon a note made by one member of the firm to the other and indorsed by the latter to the bank, the maker giving a bond and mortgage upon separate property to secure the indorser against liability upon his indorsement, with an agreement that, in case of default, the security should inure to the bank, held: That the bond and mortgage were not within the prohibition of the act of Congress creating national banks against such banks holding real estate by purchase or mortgage; that the same were, therefore, legal and binding 1 McCormick . The Market Nat. Bank of Chicago, 162 Ill. 100. |