impaired or affected in any way by state legislation;35 the former directors are continued until others are elected,36 the former stockholders cannot be deprived of their share of the surplus,37 and lastly, the controller's certificate given to the converted bank is conclusive of the regularity of the conversion. 38

Many of the states have passed enabling acts for banks desirous of becoming national associations,39 though they can be legally established without state action.40 But a state cannot impose any bonus or other tax on a state bank that reorganizes as a national one, even though aided by state legislation.11

And

Two-thirds in amount of the stock can effect a conversion, without the consent of the holders of the remainder.42 when a new bank is thus organized as the successor of the other, it can retain the assets.43 Moreover, a married woman who is a stockholder may consent to the conversion.44 Lastly, a bequest of bank stock is not affected by the bank's conversion. 45

Statutes of limitation doubtless operate on the obligations of the former bank in the same manner as though no conversion had been effected. Consequently, the converted bank is liable

35 Ibid. If the notes presented for redemption had never been put into circulation, but were lost or stolen, the bank is not liable therefor. And if the proof shows that the presentor did not pay more than $25.00 for $10,000, he will be treated as a finder, and as having acquired them with notice of all the facts attending their issue. Pelletier v. State Nat. Bank, 38 So. (La.) 132.

36 Lockwood v. Mechanics' Nat. Bank, 9 R. I. 308, 341.

37 State v. Phoenix Bank, 34 Conn. 205; State v. Hartford Nat. Bank, 34 Conn. 240.

38 Keyser v. Hitz, 2 Mackey (D. C.) 473; Casey v. Galli, 94 U. S. 673 39 Stetson v. City of Bangor, 56 Me. 274; Flint v. Board of Aldermen, 99 Mass. 141; Atlantic Nat. Bank v. Harris, 118 Mass. 147.

40 Ibid. See also Thomas v. Farmers' Bank, 46 Md. 43.

41 State v. National Bank, 33 Md. 75.

42 Keyser v. Hitz, 2 Mackey (D. C.) 473.

43 Bank v. McIntire, 40 Ohio 428.

44 Keyser v. Hitz, 2 Mackey (D. C.) 473, 490.

45 Maynard v. Bank, 7 Phila. 6.

for the redemption of the notes issued by the old bank, though presented more than six years after its conversion.46

To facilitate the reorganization of a bank, on several occasions an agreement has been formed among the stockholders that a committee should subscribe for the entire amount, and apportion it among all the members. Such agreements, made in good faith, have usually been sustained, nor will a subsequent subscription outside the agreement invalidate the reorganization if, in the end, the proper deduction is made so that there is no over-issue. The agreement, while honestly executed, will be liberally construed to effectuate the intentions of the parties.1

47

6. State Supervision.

Most of the states supervise the business of their banking corporations. That the legislature possesses power to regulate and control the business of banking is beyond the sphere of questioning.48 That body may authorize an officer to adopt a reasonable system of inspection and reports, with the view of protecting the public and preventing the dissipation of trust funds.49 Whether the state can supervise the business of a private banker has been questioned, but the tendency clearly is toward the exercise of such power."

7. National Supervision.

50

The chief administrator of the national banking law is the Controller of the Currency, who is a national officer and not subject to the jurisdiction of the court.5 Besides him is a deputy whose acts are presumed to be in conformity with

51

46 Metropolitan Nat. Bank v. Claggett, 141 U. S. 520.

47 Somerset Nat. Banking Co. v. Adams, 24 Ky. L. Rep. 2083.

48 See Chap. I. §9; State v. Struble, 104 N. W. (S. Dak.) 465. 49 Ibid.

50 State v. Richcreek, 77 N. E. (Ind.) 1085; State v. Woodmansee, I N. Dak. 246; State v. Struble, 104 N. W. (S. Dak.) 465.

51 Case v. Terrell, 11 Wall. (U. S.) 199; Van Antwerp v. Hulburd, 7 Blaten. (U. S.) 426 and 8 Blatch. 282

law. 52 Most of the states have a supervising officer whose authority, like that of the national bank supervisor, is defined by

statute.

8. Banks Must Make Reports.

The banks, both state and national, are required to make reports to the officers of their respective governments. Not infrequently they either make wrongful ones, or none at all. If they are forbidden to sue when none are made, this does not deprive them of the use of the federal courts, for a state cannot restrain the jurisdiction of the federal tribunals. But a state can deprive an offending bank of access to its own tribunal.53

9. Official and Judicial Construction of Reports.

These reports should be liberally construed, and a substantial compliance with the statutes will satisfy the law.54 If the facts required must be made in two separate reports, the law is not exacting in which report they appear.55 As Justice Allen has remarked: "The reports of corporations should receive a reasonable interpretation and excessive nicety or exactness should not be exercised in bringing them to the test of the statutes.' And if a false report is received by a public examiner signed by only one director, though it should have been signed by two others, it is sufficient to sustain an information against the certifying officer.57

1956

10. Consequences of Not Making Them Within Required Period. A bank's neglect to make them within the prescribed period

52 Young v. Wemple, 46 Fed. 354. He can sign an organization certificate. Keyser v. Hitz, 133 U. S. 138, revg. 2 Mackey 473.

53 Barling v. Bank, 1 C. C. A. (U. S.) 510; Bank v. Alaska Imp. Co., 97 Cal. 28; Bank v. Cahn, 97 Cal. 463.

54 Bank v. Alaska Imp. Co., 97 Cal. 28. See Chap. VIII. §18.

55 Ibid. Bank v. Madison, 99 Cal. 125.

56 Whitney Arms Co. v. Barlow, 63 N. Y. 62, 66.

57 State v. Struble, 104 N. W. (S. Dak.) 465; Cochran v. United States, 157 U. S. 286.

does not work self-destruction.58

On the other hand, a state official is not required to receive a belated report unless adequate reason can be given for the delay."

The statutes usually visit some punishment on directors or trustees for their neglect to make reports. Formerly, as these statutes possessed to the judicial mind a penal character they could be enforced only in the creating state, where the bank lived.60 Now almost everywhere a broader construction is put on such statutes; they are declared to be not penal "in the international sense," and consequently can be enforced in other states.61 The true test of such a statute is, "whether its purpose is to punish an offence against the public justice of the state, or to afford a private remedy to a person injured by the wrongful act."62 This is another wise attempt to supplant a narrow rule with a broader one whose operation will serve the interests of the people as fully in one state as in another. Furthermore, as the liability is contractual, the statute of limitations pertaining to contracts rather than to penalties, governs the period of liability.63

11. False and Erroneous Reports.

Directors occasionally make false and erroneous reports, and it is not always easy to draw the line of liability. As this subject has been fully considered in another chapter, nothing more need be added here.64

58 Bank v. Alaska Imp. Co., 97 Cal. 28.

59 People v. Campbell, 14 Ill. 400.

60 Derrickson v. Smith, 27 N. J. Law 166; Halsey v. McLean, 94 Mass. 438, 441; Garrison v. Howe, 17 N. Y. 458. See Chap. VIII. §41.

61 Huntington v. Attrill, 146 U. S. 657, 673, containing an exhaustive opinion by Justice Gray.

Contra.-Losee v. Bullard, 79 N. Y. 404; Chapman v. Comstock, 58 Hun (N. Y.) 325, 331.

62 Ibid.

63 Nebraska Nat. Bank v. Walsh, 68 Ark. 433, and cases cited in brief. Contra-State Sav. Bank v. Johnson, 18 Mont. 440. In this case it was also decided that if annual defaults continued, the effect of them was not to renew the directors' liability.

64 Chap. VIII. §18.

Statutory regulations for conducting the banking business may be supplemented by every bank with such other regulations, in harmony with law, as its interests may require.1 Whether they possess this character or not is a question for the courts to decide.2

Such regulations or by-laws are regarded as a contract between bank and customer, having proper notice of them,3 for whom they are intended. The ordinary rules of construc

I Union Bank v. Guice, 2 La. Ann. 249; Seneca Co. Bank v. Lamb, 26 Barb. (N. Y.) 595.

2 State v. Bank, 5 Martin (La.) 327, 344; Boisot on By-Laws, §88, and cases cited.

3 Ackenhausen v. People's Sav. Bank, 110 Mich. 175; White v. Commonwealth Nat. Bank, Fed. Cas. No. 17, 544. By accepting a deposit book with the by-laws printed therein, a depositor is charged with notice. Cosgrove v. Provident Sav. Institution, 64 N. J. Law, 653, and other cases cited in note 4. What is notice to the public of a by-law, see note 25 L. R. A. 48. An agreement to a rule, that all notices to depositors placarded in the bank shall be deemed personal to every depositor, does not have a retroactive effect and include notices placarded before becoming depositors. Ranney v. Bowery Sav. Bank, 39 N. Y. Misc. 301.

4 Wallace v. Lowell Institution, 7 Gray (Mass.) 134, 137; Goldrick v. Bristol Co. Sav. Bank, 123 Mass. 320; Kimins v. Boston Sav. Bank, 141