The purpose of restraining acts is, of course, to secure the public welfare and safety from the inroads of incompetent men and swindlers. But, serious as is the evil to be guarded against, no other means of defence against it appear to exist save precisely those penalties which are provided in the law itself for any breach of the law. No other punishment can be inflicted than that laid down in the statute, and means of prevention can be sought only from the same source. Equity will not intervene to check infringements, and even systematic conduct of the banking business, in direct contravention of enacted law, will not be enjoined on the ground that it is a mischief or a nuisance to the community.1

Banking corporations or associations, like others, may come into existence, either under a charter or special act of incorporation, or under a general organic law. In the former case, the courts seem generally to have regarded the acts of incorporation, and likewise of course all acts supplementary thereto, as public laws, not requiring to be established by special proof, but to be judicially noticed within the State where the bank is situated.2 The authorities cited do not, however, assume to establish a general and abstract rule of universal application. They simply indicate the tendency of courts in which questions concerning specific acts have arisen. Instances of a contrary nature must be expected occasionally to occur.3

In England, it has been declared by Lord Campbell that the nature of the business of bankers is a part of the law-merchant, and will be judicially noticed by the courts.*

1 Attorney-General v. Utica Ins. Co., 2 Johns. Ch. 371; Same v. Bank of Niagara, 1 Hopk. 354.

2 Stribbling v. Bank, 5 Rand. 132; Bank of Utica v. Magher, 18 Johns. 341; Vance r. Bank, 1 Blackf. 80; Towson v. Havre de Grace Bank, 6 Har. & J. 47 ; Williams v. Union Bank, 2 Humph. 339; Hays v. Northwestern Bank, 9 Gratt. 127.

3 Agnew v. Bank of Gettysburg, 2 Har. & Gill, 478.

4 Bank of Australasia v. Breillat, 6 Moore P. C. 173; 12 Jur. 189; referring to Brandao v. Barnett, 12 Cl. & F. 787; 3 C. B. 519.

Location.

As a general rule, a bank can carry on business only in the place where it is empowered to do so by its charter. Branch banks cannot be established elsewhere, except under actual legislative authority. It seems that agencies for specific purposes, as for the redemption of bills or the dealing in bills of exchange, may be established in other places. In these cases, it is for the convenience of the public that such should be the case. But there is no case which holds that an agency for the exercise of the more important and valuable functions, such as issuing circulating paper or discounting notes, or an agency designed to carry on the general business of banking, would be regarded as legal. For such nominal establishment of agencies might easily result in the practical establishment of a network of branch banks throughout the State.

General and Inherent Powers of Banking Associations.

It is necessary to confer in distinct terms in the charter or act of incorporation only those powers which the company could not otherwise exercise, or those concerning which there might be some doubt. Various powers have been at different times declared by the courts to be inherent, and to be properly enjoyed by banking associations simply by virtue of their creation and existence as such, and for the designated end of conducting the banking business. But powers of this nature, being based only upon a legal implication, must be used only in a manner and for purposes strictly consistent with such restrictions and in furtherance of such duties as are specifically prescribed by law. Thus a bank, though not directly thereto empowered by its charter or by the organic act, may borrow money. It is a necessary and inherent privilege. But it is limited by the same necessity or intrinsic propriety which gives it birth. The borrowing must be incidental to the legiti

1 City Bank of Columbus v. Beach, 1 Blatchf. C. C. 425; Bank of Augusta v. Earle, 13 Pet. 519; People v. Oakland County Bank, 1 Dougl. 282; Tombigbee R. R. Co. v. Kneeland, 4 How. U. S. 16.

Otherwise, the act

mate banking business of the association. would be ultra vires; as, if the loan was obtained for use in speculation. It seems hardly necessary also to say that a bank may deal in checks, whether payable to bearer or to order.2

A banking corporation can engage in no business transaction which is not, properly speaking, of a banking nature, and within the scope of the purposes for which the corporation. was organized. The powers with which it is invested must be exercised in strict subordination to this purpose, for the prosecution of which alone they were conferred. A transgression, though under color of an act covered by the designated power, will be illegal. It cannot speculate or traffic either in financial securities or in merchandise. It has been held not to be incidental to the banking business, nor an implied power pertaining to a bank, to buy or sell stock or bonds. But it may take and hold them as collateral security, and, in case of their loss, will be liable only as an ordinary bailee; i. e., if there has been an absence of proper and sufficient care on its part. The measure of damages will be the value of the bonds at the time of the loss. A bank need not be prohibited by its organic law from engaging in such traffic. For it owes its powers as it owes its existence to the terms of that charter or law. It is not restricted like an individual from the exercise of a wide range of other powers which, in the absence of restriction, it would enjoy; but its power to do any act at all is due wholly to the legislation of which it is a creature, and must be either the direct or necessarily incidental gift of that legislation. When, therefore, it is specifically permitted to conduct a banking business, it has no power to do any other species of business; not because it has been stripped in any manner of that power, but because that power has never attached to it. A

1 Curtis. Leavitt, 15 N. Y. 9; Barnes v. Ontario Bank, 19 id. 152; Leavitt r. Yates, 4 Edw. Ch. 134; Safford v. Wyckoff, 4 Hill, 442; Talman v. Rochester City Bank, 18 Barb. 123.

2 First National Bank of Rochester v. Harris, 108 Mass. 514.

8 First National Bank of Charlotteville v. National Exchange Bank of Balti

more, 39 Md. 600; Weckler v. First National Bank, 42 Md. 581.

4 Third National Bank of Baltimore v. Boyd, 41 Md. 47.

Ibid.

bank may however do, on isolated and especial occasions, or for certain purposes, what it cannot do generally and for all purposes. It cannot buy and sell merchandise, but it can take merchandise from a debtor, if this is the only way to save the amount, of the debt; and of course having taken property of any nature for this proper purpose, it may sell it in any manner that will bring the best price. It may purchase public stocks in order to deposit them, under a law requiring such stocks to be deposited as a security for circulation; or in order to invest its surplus funds in them; it may loan upon them as security, and sell them if need be to save the debt. But it cannot "traffic" in them; it cannot buy them with the view to sell them shortly at an anticipated advanced price. Such would not fall within any department of the general province of banking, which alone the association can carry on, and which it must carry on only in the manner, with the powers and for the objects, directly set forth or necessarily implied in the law of the corporate existence. Though it has been recently held that a national banking association may properly undertake the business of exchanging one class of the national securities for another. In a case in Vermont, indeed, it was once said that a clause in a bank charter prohibiting the bank from dealing in any goods, wares, merchandise, or commodities was in derogation of the common and ordinary powers of the corporation. The full breadth of this language would certainly set the doctrine of the case at variance with the views expressed above. But the reasoning in support of those views is too clear, and the authorities are too strong, to be brought within the range of doubt by this solitary adjudication; more especially since the sweeping statement of the legal theory in that opinion was enunciated for the insignificant purpose of protecting the bank in a purchase of shares in its own capital stock,

1 Comstock v. Willoughby, Hill & Den. 271; Talmage v. Pell, 3 Seld. 328; Leavitt v. Yates, 4 Edw. Ch. 134; Sacket's Harbor Bank v. Pres. of Lewis County Bank, 11 Barb. 213; Portland Bank v. Storer, 7 Mass. 433; Weckler v. First National Bank of Hagerstown, 42 Md. 581. See also Curtis v. Leavitt, 15 N. Y. 9, which, properly interpreted, supports the above doctrine.

2 Van Leuven v. First National Bank of Kingston, 54 N. Y. 671.

a proceeding which could have been defended at much less expense of questionable generalization.1

The rigidity with which a banking corporation is held to the performance of precisely those acts which it has a right to do, to the exclusion of cognate acts, is well illustrated by the following case. The organic law of the corporation authorized it "to carry on the business of banking by discounting bills, notes, and other evidences of debt, by receiving deposits, by buying and selling gold and silver bullion, foreign coin, and foreign and inland bills of exchange, by loaning money on real and personal securities, and by exercising such incidental powers as may be necessary to carry on such business." In a suit by the bank upon a promissory note, the defence was that the bank had no title in the note, since it had purchased it outright, instead of discounting it. The court held that there was a material difference between purchasing and discounting, and that very evil effects might follow from allowing a bank to purchase where it was strictly authorized only to discount; that under the foregoing statute the bank had no power to purchase; that it could not be the case that "the power to purchase and traffic in promissory notes as a species of personal property belongs to any bank as a necessary incident to its existence, or to the exercise of any of its powers as a bank of circulation and deposit alone;" and that, "having no corporate capacity to make the contract of purchase, the plaintiff never acquired any title to the note in suit, and the attempted act of purchase was strictly ultra vires,' and conferred no rights whatever."2 It has also been said generally that purchasing or trafficking in promissory notes is not a legitimate part of the banking business, properly so called, and that a bank holding a note by purchase has no title thereto.3

On the other hand, however, we have a recent case from Ohio concerning the purchase of an inland draft or bill of

1 Farmers' & Mechanics' Bank v. Champlain Transportation Co., 18 Vt. 131.

2 Farmers' & Mechanics' Bank v. Baldwin, 23 Minn. 198. Also see post, p. 21.

3

* First National Bank of Rochester v. Pierson, 16 Albany Law Journal, 319.