its property and began suit to dissolve the same; the president and a director became sureties on the bank's bond of indemnification. The bank transferred $100,000 to such sureties. Before these transactions the bank had suspended but had resumed business with permission of the Comptroller of the Currency, but had become insolvent soon after the above transactions. Held, that the transfer of the $100,000 was not made after the commission of an act of insolvency or in contemplation thereof, or to prevent the application of assets as prescribed by the banking act. Price, Receiver, v. Coleman et al., 22 Fed. Rep. 694.

15. The transfer of the assets of a bank to a creditor whereby he secures a preference over the other creditors, if made after a vote of the directors to go into liquidation, will be presumed to be made with fraudulent intent. National Security Bank v. Price, Receiver, 22 Fed. Rep. 697.

16. The general policy of the banking law, which forbids any kind of preference in case of insolvency and requires the entire assets to be preserved for equitable distribution, does not affect a depositor's right to rescind for fraud. A depositor who deposits a draft in ignorance of the insolvency of a national bank, may rescind and pursue the collection of the draft, if the proceeds have not been mingled with the general assets of the insolvent bank.

14 Abb. N. C. 409.

Cragie v. Smith,

17. "In order to uphold an action under his section, there should be some satisfactory evidence that the cashier or other officer actually paid the money of the bank in contemplation of insolvency for the purpose of giving a preference to the payee, and with a view to prevent the application of the assets of the bank to the creditors generally, as provided in the National Banking Act." Hayes t. Beardsley, 136 N. Y. 299, 32 N. E. 855, aff'g 43 N. Y. St. Rep. 744, 17 N. Y. Supp. 404.

18. In the above cited case (Hayes v. Beardsley, supra), the insolvency of the bank was so concealed by the cashier that none of its directors had any suspicion thereof, and it was not discovered by the bank examiner. Held, that under the circumstances the fact that defendant was a director did not, as a matter of law, charge him with liability for the payments made to him; that it having been found that he acted in good faith and in ignorance of any wrongdoing or of the bank's insolvency, payments made to him were to be tested under said provisions like payments made to other creditors. Hayes v. Beardsley, supra.

19. Where a national bank on the 20th day of a month, telegraphs its acceptance of a draft drawn on it by a national bank in another State and on the following day the drawer fails, and the day after (22d), the acceptor pays the amount of the draft. Held, that in the absence of anything indicating that the action of the payee, drawer or drawee was in contemplation of the insolvency of the drawer or that they had any intimation of its impending failure, that the transaction was not within the inhibition of this section, and that the acceptor had a right to apply the proceeds of collections made by it for the drawee, in its hands at the date of acceptance to the payment of the draft. In re Armstrong, 41 Fed. Rep. 384; see also, Armstrong v. Chemical Nat. Bank, 41 Fed. Rep. 234.

20. The indorser of a note which is discounted by a national bank and which matures after the bank becomes insolvent and a receiver is appointed, is entitled to set off against the note the amount of his deposits in the bank at the time of

its failure. The allowance of such set-off does not violate section 5242. Yardley v. Clothier, 17 L. R. A. 642, 2 U. S. Ct. of Aps. Rep. 349, 3 U. S. App. 207, 51 Fed. Rep. 506.

21. The provisions of U. S. Rev. Stat., § 5242, U. S. Comp. Stat. 1901, p. 3517; against attachment or other provisional remedy or execution, except after final judgment, against national banks applies to solvent as well as insolvent banks. This provision was not affected by Act of July 12, 1882, U. S. Stat. at L. 163, chap. 290, § 4, U. S. Comp. Stat. 1901, p. 3458, which prescribes the forum and does not relate to the provisional remedies to be had therein. Solvency of bank is to be presumed in absence of proof to the contrary. Van Reed v. People's Nat. Bank, 198 U. S. 554, 173 N. Y. 314.

22. After insolvency is declared, a national bank cannot do further business, but its corporate existence continues for certain purposes. Chemical Bank v. Hartford Deposit Co., 161 U. S. 7, 40 L. ed. 598, 16 Sup. Ct. Rep. 439.

23. Remittances made by one bank to another in the ordinary course of business, they will not be taken as made in contemplation of insolvency. McDonald v. Chemical Nat. Bank, 174 U. S. 618, 43 L. ed. 1109, 19 Sup. Ct. Rep. 787.

24. As to clearing house exchanges see Yardley v. Philler, 167 U. S. 357, 42 L. ed. 196, 17 Sup. Ct. Rep. 835.

25. Attachment against national bank as garnishee is not an attachment within section 5242 against the bank. Earle v. Conway, 178 U. S. 456, 44 L. ed. 1149, 20 Sup. Ct. Rep. 918.

26. Where dividends were paid out of capital when bank was not insolvent, the owner of the stock believing them to be out of profits, receiver cannot recover them. McDonald v. Williams, 174 U. S. 397, 43 L. ed. 1022, 19 Sup. Ct. Rep. 743.

27. A national bank cannot be made liable for the debts of a partnership shares in which it has become a qualified owner of by foreclosure of its lien upon them for a debt. Merchants Nat. Bank v. Wehrmann, 202 U. S. 295.

28. A national bank whether solvent or insolvent is exempt from attachment before judgment. A State court cannot gain jurisdiction over a foreign national bank by attaching the bank's property within that State. Pacific Nat. Bank v. Mixter, 124 U. S. 721.

§ 5243. [U. S. Comp. Stat. 1901, p. 3517.] All banks not organized and transacting business under the national currency laws, or under this Title, and all persons or corporations doing the business of bankers, brokers, or savings institutions, except savings banks authorized by Congress to use the word "national" as a part of their corporate name, are prohibited from using the word "national" as a portion of the name or title of such bank corporation, firm, or partnership; and any violation of this prohibition committed after the third day of September, eighteen hundred and seventy-three, shall subject the party chargeable therewith to a penalty of fifty dollars for each day during which it is committed or repeated.

TITLE XXXV.

INTERNAL REVENUE.

CHAPTER VIII.

BANK AND BANKERS.

SECTION 3407. Definition of the words "bank," "banker."

3410. Capital of banks expired or converted into national banks.

3411. Circulation, when exempted from tax.

3412. Tax on notes of persons or State banks used as circulation, etc. 3413. Tax on notes of town, city, or municipal corporations paid out by

banks, etc.

3414. Banks and bankers' monthly returns.

3415. In default of return commissioner to estimate, etc.

3416. State banks converted into national banks; returns, how made. 3417. Provisions for bank tax and returns not to apply to national

banks.

§ 3407. [U. S. Comp. Stat. 1901, p. 2246.] Every incorporated or other bank, and every person, firm or company having a place of business where credits are opened by the deposit or collection of money or currency, subject to be paid or remitted upon draft, check, or order, or where the money is advanced or loaned on stocks, bonds, bullion, bills of exchange, or promissory notes, or where stocks, bonds, bullion, bills of exchange, or promissory notes are received for discount or for sale, shall be regarded as a bank or as a banker.

[Sections 3408 and 3409 (U. S. Comp. Stat. 1901, pp. 2247, 2248), relating to taxes on capital and deposits of banks, bankers and national banking associations, were repealed by section 1, chapter 121, Act of March 3, 1883.]

§ 3410. [U. S. Comp. Stat. 1901, p. 2248.] The capital of any State bank or banking association which has ceased or shall cease to exist, or which has been or shall be converted into a national bank, shall be assumed to be the capital as it existed immediately before such bank ceased to exist or was converted as aforesaid.

See Act of March 3, 1883, § 1, post.

§ 3411. [U. S. Comp. Stat. 1901, p. 2248.] Whenever the outstanding circulation of any bank, association, corporation, company, or person is reduced to an amount not exceeding five per centum of the chartered or declared capital existing at the time the same was issued, said circulation shall be free from taxation; and whenever any bank which has ceased to issue notes for circulation deposits in the Treasury of the United States, in lawful money, the amount of its outstanding circulation, to be redeemed at par, under such regulations as the Secretary of the Treasury shall prescribe, it shall be exempt from any tax upon such circulation.

See Act of July 12, 1882, §§ 6 and 8, post.

This section does not lay a direct tax. Congress having undertaken, in the exercise of undisputed constitutional power, to provide a currency for the whole country, may secure the benefit of it to the people by appropriate legislation, and to that end may restrain, by suitable enactments, the circulation of any notes not issued under its authority. Veazie Bank v. Fenno, 8 Wall. 533, 19 L. ed. 482.

§ 3412. [U. S. Comp. Stat. 1901, p. 2249.] Every national banking association, State bank or State banking association shall pay a tax of ten per centum on the amount of notes of any person, or of any State bank or State banking association used for circulation and paid out by them.

See Act of February 8, 1875, §§ 19 and 20, post.

§ 3413. [U. S. Comp. Stat. 1901, p. 2249.] Every national banking association, State bank, or banker, or association, shall pay a tax of ten per centum on the amount of notes of any town, city, or municipal corporation paid out by them.

See Act of February 8, 1875, §§ 19, 20, post.

"The only question presented is as to the constitutionality of section 3413 of the Revised Statutes, the objection being that the tax is virtually laid upon an instrumentality of the State of Arkansas.

"We think this case comes strictly within the principles settled in Veazie Bank v. Fenno, 8 Wall. 533, 19 L. ed. 482, where it was distinctly held that the tax imposed by that section on national and State banks, for paying out the notes of individuals or State banks used for circulation, was not unconstitutional.

"The reason is thus stated by Mr. Chief Justice CHASE: Having thus, in the exercise of undisputed constitutional powers, undertaken to provide a currency for the whole country, it cannot be questioned that Congress may constitutionally secure the benefit of it to the people by appropriate legislation. To this end Congress has denied the quality of legal tender to foreign coins, and has provided by law against the imposition of counterfeit and base coin on the community.

To the same end Congress may restrain, by suitable enactments, the circulation as money any notes not issued under its authority. Without this power, indeed, its attempts to secure a sound and uniform currency for the country must be futile' (p. 549, 19 L. ed. 488).

"The tax thus laid is not on the obligation, but on its use in a particular way. As against the United States, a State municipality has no right to put its notes in circulation as money. It may execute its obligations, but cannot, against the will of Congress, make them money.

"The tax is on the notes paid out, that is, made use of as a circulating medium. Such a use is against the policy of the United States. Therefore the banker who helps to keep up the use by paying them out, that is, employing them as the equivalent of money in discharging his obligations, is taxed for what he does. The taxation is no doubt intended to destroy the use; but that, as has just been seen, Congress has the power to do." WAITE, Ch. J. Merchants' Nat. Bank v. United States, 101 U. S. 1, 25 L. ed. 979.

§ 3414. [U. S. Comp. Stat. 1901, p. 2250.] A true and complete return of the monthly amount of circulation, of deposits, and of capital, as aforesaid, and of the monthly amount of notes or persons, town, city, or municipal corporations, State banks, or State banking associations paid out as aforesaid for the previous six months, shall be made and rendered in duplicate on the first day of December and the first day of June by each of such banks, associations, corporations, companies, or persons, with a declaration annexed thereto, under the oath of such person, or of the president or cashier of such bank, association, corporation, or company, in such form and manner as may be prescribed by the Commissioner of Internal Revenue, that the same contains a true and faithful statement of the amounts subject to tax, as aforesaid; and one copy shall be transmitted to the collector of the district in which any such bank, association, corporation, or company is situated, or in which such person has his place of business, and one copy to the Commissioner of Internal Revenue. See Act of February 8, 1875, § 21, post.

§ 3415. [U. S. Comp. Stat. 1901, p. 2250.] In default of the returns provided in the preceding section, the amount of circulation, deposit, capital, and notes of persons, town, city, and municipal cor porations, State banks, and State banking associations paid out, as aforesaid, shall be estimated by the Commissioner of Internal Reve nue, upon the best information he can obtain. And for any refusal or neglect to make return and payment, any such bank, association, corporation, company, or person so in default shall pay a penalty of