of course presumed that the person actually owning and negotiating such paper would indorse it, or guarantee its payment by the maker. If this view is incorrect we look in vain for any valid reason for the exception made in its favor.

It seems not unreasonable to assume, therefore, that the word "negotiating," as used in par. 7, section 5136, and following so closely after the word "discounting" in the same clause, has the same significance as that implied in section 5200, and that it was intended to confer upon a bank only the power to "offer for discount" or to "rediscount" paper which, under the power granted in the same paragraph, it had already "discounted."

At all events, so long as this point is not definitely adjudicated by the Supreme Court, it would seem to be the safer course for such National banks as claim the right to exercise this power to purchase paper without indorsement or guarantee, that they should consider money invested under such circumstances practically as "money borrowed" by the makers of the paper or as direct loans to them; and, therefore, should limit such purchases in each and every case to an amount not exceeding onetenth part of their capital stock as prescribed by section 5200.

CHAPTER V.

TRANSACTIONS IN REAL ESTATE.

SEC. 5137. A National banking association may purchase, hold, and convey real estate for the following purposes, and for no others:

First. Such as shall be necessary for its immediate accommodation in the transaction of its business.

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.

Fourth. 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.

Restrictions Imposed by Law.

It will be clearly perceived from the language of this section that the only purpose for which a National bank may lawfully "purchase, hold, and convey real estate" (other than its "banking house") is by way of security for "debts previously contracted." This is emphasized by the use of the

words "and for no others" in the first paragraph of the section, and altogether the intent of the statute is as explicitly expressed as plain language can do this, yet in case any doubt arises as to this intent, we have further the plain construction placed upon it by the Supreme Court in the decision already quoted on page 44 in the following language:

Thus, as to real estate, it is provided (section 5137) that it may be accepted in good faith as security for, or in payment of, debts previously contracted; but if accepted in payment, it must not be retained more than five years.

This limit of five years was probably fixed by the framers of the law as affording ample time for disposing of such real estate.

It is presumed in some cases where a bank is either unable or unwilling to dispose of real estate at the end of the five-year limit, that it conforms to the legal requirement when it charges the value of the real estate off its books, but this is a mistaken. view of the law, which requires that the title to, or mortgage on, real estate should be disposed of, and makes no reference to the appearance of its value among the assets of the bank.

In some cases the law on this particular point of

holding possession is construed as referring to the actual occupancy by the bank of the real estate for which the bank holds title or mortgage. It is scarcely necessary to state that the word "possession" refers to the holding of the written legal instrument by the bank, and not to the actual occupancy by the bank of the property over which the title or mortgage gives it legal control.

Securities Based on Real Estate Values.

Besides titles and mortgages, however, there are so many other forms under which an interest in real estate may be acquired, to which the letter of the law does not apply, and with regard to the holding of which the question of legality will arise, that the language of the opinion of the United States Supreme Court, in its decision in the case of Union. National Bank vs. Matthews (98 U. S., 658), is quoted below as bearing directly on this question.

The court, with regard to section 5136, which permits a bank to loan money "on personal security," said:

Section 5136 does not, in terms, prohibit a loan on real estate, but the implication to that effect is clear. What is so implied is as effectual as if it were expressed.

Passing on to the restrictions imposed by section 5137, it defined the object of these as follows:

The object of the restrictions (in section 5137) was obviously threefold. It was to keep the capital of the banks flowing in the daily channels of commerce, to deter them from embarking in hazardous real estate speculations, and to prevent the accumulation of large masses of such property in their hands to be held, as it were "in mortmain." The intent, not the letter of the statute, constitutes the law.

With this language in view, it would appear that the holding of real estate in any form except for the purposes clearly stated in section 5137 should be carefully avoided by all bank managers who desire to conform to the "intent of the statute."

For this reason, the holding, as investments, of any and all stocks, bonds, or other securities, the value of which rests directly upon real estate,. except to save debts previously contracted, should be regarded by such managers as violations of the spirit of the law, if not of its letter.

Some of the forms, other than deeds and mortgages, in which real estate values present themselves, are the following: land debenture bonds; the stocks and bonds of land improvement companies, mortgage and trust companies, building and loan associations; of companies whose capital is