State, North Ward National Bank, pros., v. Newark.

ing all the shares of National banking associations located within the State, subject only to the two restrictions, that the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such State, and that the shares of any National banking association owned by nonresidents of any State shall be taxed in the city or town where the bank is located, and not elsewhere. The States, then, have the power to tax the stock of any National banking association in such manner and at such places as their legislatures may direct, subject to the restrictions above mentioned, as to discrimination against them, and the place at which shares of non-residents shall be taxed. The act of 1869, of the legislature of this State, directs in what manner and at what place the taxation of the shares of the stock of the National banks in this State shall be imposed.

Every stockholder resident here is to be assessed for his shares in the township or ward where he resides. Incidental to this taxation is his right to a deduction in respect of debts bona fide due and owing from him to creditors residing within this State. This right is liable to be affected by assessing his stock against the bank. He would be deprived of it entirely, if all his property were in the stock. But it is enough to say that it is his right, under the law, to have the assessment of tax upon his property, held in his own name, made against himself, and it cannot lawfully be made against any one else.

The bank, too, has rights in the premises. If the tax is illegally assessed against it, and it pays it, it cannot recover it from the stockholders. The payment would be an unjustifiable use of the funds of the bank. Nor can the suggestion, that in the case under consideration, it does not appear that the Newark stockholders, as to whose stock the assessment has been sustained, do not reside in the ward in which the bank is located, avail to support the assessment as to that stock. The assessment is not against them at all, but against the bank. The intendment is not introduced to support an assessment against the shareholder, but an assessment of his property against another person, and it is no more available to sustain the assessment when made against

COURT. OF ERRORS AND APPEALS, 1880. 293

Graham v. National Bank of New York.

the bank, than it would have been had it been made against a stranger to him, residing anywhere in Newark.

The plaintiff in error insists that the assessment against the bank, so far as the shares of non-resident stockholders are concerned, should also be set aside, because of the injustice which it works against the resident stockholders, who, it is argued, will thus, if the assessment be sustained, be compelled by law to pay tax on their own stock, and also to pay their proportion of the tax on the shares of the non-resident stockholders. But in the first place, the injustice apprehended would not exist, for the bank may recover from the non-resident stockholder the tax, which, under the law, it is compelled to pay for him. And again, it is enough to say, that if the injustice would indeed exist, that would not be a sufficient reason for refusal to execute the law. The legislature has declared that the tax on the shares of non-resident stockholders shall be assessed against and paid by the bank; if this were, in fact, unjust to the resident stockholders, that consideration would not avail to induce this court to refuse to recognize the validity of the law. The remedy for the injustice would be with the legislature. State v. Branin, 3 Zab. 484, 494, 495.

I am of opinion, that for the error as to the assessment against the bank for the shares of stockholders resident in Newark, the judgment should be reversed.

For affirmance-DIXON, WALES, 2.

For reversal- THE CHANCELLOR, CHIEF JUSTICE, KNAPP, REED, WOODHULL, DODD, GREEN, LILLY, 8.

GRAHAM V. NATIONAL BANK OF NEW YORK.

(32 N. J. Eq. 804.)

Mortgage

power to take.

A mortgage to a National bank, to secure a present loan by the discount of commercial paper in the usual course of business, is not void, but only voidable at the election of the government.

Graham v. National Bank of New York.

N the Court of Errors and Appeals, on appeal from the Vice

I Chancellor. Foreclosure of real estate mortgages given to a Na

tional bank to secure the payment of notes on which the bank lent money at the time. The complainant had judgment.

Eugene Stevenson, for appellants.

Wm. H. Morrow, for respondents.

SCUDDER, J. The single question presented to the court on appeal is, whether a bank formed under the act of Congress, authorizing associations for carrying on the business of banking, can legally loan money by taking, as security therefor, a mortgage on real estate. Other defenses that were made in the court below have been abandoned here, and this question alone is presented for our determination. The exact position of the defendants, as set out in their answer to the bill to foreclose the mortgage in controversy, is that the mortgage to the complainant was, in its inception, void under the provisions of section 5137 of the Revised Statutes of the United States. This section enacts, that “a National banking association may purchase, hold and convey real estate for the following purposes, and no others." The two purposes that might be claimed to cover this mortgage are, “second, such as shall be mortgaged to it in good faith by way of security for debts previously contracted," "third, such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings."

It is obvious that these loans were made by the bank on the security of these two separate mortgages, and that the making of the notes, the payment of the money by checks, and the delivery of the mortgages, duly executed as security therefor, were concurrent acts. They were not, therefore, given as security for debts previously contracted, nor were the mortgaged premises conveyed in satisfaction of debts previously contracted in the course of the dealings of the bank.

These cases, therefore, stand without the authority of the statute to purchase and hold real estate for such purpose. Each mortgage was given as security for a concurrent loan of money by

COURT OF ERRORS AND APPEALS, 1880.

Graham v. National Bank of New York.

295

discounting commercial paper. The case has been well argued by the counsel for the appellants, on the ground that contracts forbidden by statute are void, and that courts will refuse to enforce such contracts from regard to the law itself, and without ref erence to any equities between the parties. A like argument has been successfully presented in some reported cases, and some courts of high authority have held that such mortgages given as security for debts contracted at the time, or for future advances, are invalid, and not enforceable at law or in equity, because of the alleged prohibition of the statute. Crocker v. Whitney, 71 N. Y. 161; s. c., Thomp. N. B. Cas. 745; Fowler v. Scully, 72 Penn. St. 456; s. c., 13 Am. Rep. 699; Thomp. N. B. Cas. 854; Ripley v. Harris, 3 Biss. 199; Kansas Valley Bank v. Rowell, 2 Dill. 371; s. c., Thomp. N. B. Cas. 254; Woods v. People's Nat. Bank of Pittsburgh, 83 Penn. St. 57; s. c., Thomp. N. B. Cas. 888; 1 Jones on Mort. (2d. ed.), § 134.

But we are spared an examination of these cases, and others with like conclusions, and the reasoning upon which they are based, for a late decision in the Supreme Court of the United States has given a construction of this statute, and has authoritatively determined the validity of mortgages like these in controversy. In National Bank v. Matthews, 8 Otto, 621 (ante, p. 12), §§ 5136 and 5137 were construed in their application to a deed of trust of lands with power of sale of like effect with a mortgage, assigned to a National bank as security for a loan of money to the holder. The conclusion was, that where a corporation is incompetent by its charter to take a title to real estate, a conveyance to it is not void, but only voidable, and the sovereign alone can object. It is valid until assailed in a direct proceeding instituted for that purpose, The court cites, with approval, the high authority of Chancellor KENT, in Silver Lake Bank v. North, 4 Johns. Ch. 370, where similar terms in a statute were construed. The bank, in this ruling case, directed the trustee named in the bill of trust to sell, and on bill to enjoin the sale, the question of the validity of the security was raised. It is therefore an express authority upon the defense here raised on the bill to foreclose the mortgages to the bank.

The decrees in both cases will be affirmed, with costs. Decrees unanimously affirmed.

Strafford National Bank v. Dover Yerkes v. Nat. Bank of Port Jervis.

STRAFFORD NATIONAL BANK V. DOVER.*

Reserve surplus taxable.

The surplus fund which a National bank is required to reserve from its net profits is not excluded in the valuation of its shares for taxation.

(Supreme Court of New Hampshire, 1878.)

DOE, C. J. The surplus fund which a National bank is required by U. S. Gen. Stat., § 5199, to reserve from its net profits, is not excluded in the valuation of its shares for taxation. First National Bank v. Peterborough, 56 N. H. 38; Thomp. N. B. Cas. 658; Nat. Bank v. Com., 9 Wall. 353; Thomp. N. B. Cas. 34; People v. Com'rs, 67 N. Y.; s. o., 94 U. S. 415.

Petition denied.

YERKES V. NATIONAL BANK OF PORT JERVIS.

(69 N. Y. 383; 25 Am. Rep. 208.)

Agreement to exchange bonds — banking powers.

A National bank held, as depositary, United States bonds belonging to plaintiff; in the spring of 1869, its cashier, for a sufficient consideration, agreed with the plaintiff to exchange them for registered bonds; the bank neglected to make the exchange, and in the fall of that year the bonds were stolen. Held, that the bank was liable for their value. †

A

CTION to recover United States bonds, wnich defendant had

refused to deliver upon demand. The plaintiff was a customer of and depositor with the defendant; the banks had several times bought government bonds for her, retaining them, collecting the interest, and crediting her with it in her deposit account.

* To appear in 58th N. H.

+ See contra, First Nat. Bk. of Allentown v. Hoch, post.