Money & Banking Cites

[suijuris]

I thought it would be good to start a thread with cites re money and banking. If you have any good cites on this topic, please add them to this thread.

If you have any questions on these cites, please start a new thread in this forum.

Sui Juris

[suijuris]

"In the federal courts, it is well settled that a national bank has not power to lend its credit to another by becoming surety, endorser, or guarantor for him". Farmers and Miners Bank v. Bluefield Nat'l Bank 11F 2d 83, 271 U.S. 669



“The exercise of powers not expressly granted to national banks is prohibited�. First Nat. Bank v. Nat. Exchange Bank, 92 U.S. 122, 128; California Bank v. Kennedy, 167 U.S. 362, 367; Concord Bank v. Hawkins, 174 U.S. 364.



"checks, drafts, money orders, and bank notes are not lawful money of the United States". State v. Neilon, 73, Pac. 3211, 43 Ore. 168

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12 U.S.C.A. § 24

UNITED STATES CODE ANNOTATED
TITLE 12. BANKS AND BANKING
CHAPTER 2--NATIONAL BANKS
SUBCHAPTER I--ORGANIZATION AND GENERAL PROVISIONS

Current through P.L. 106-73, approved 10-19-1999


§ 24. Corporate powers of associations

> 1. Constitutionality

Any effort of state to curtail powers of national banks is unconstitutional, but national bank is confined in its activities to powers granted state banks within the same jurisdiction. > Berylwood Inv. Co. v. Graham, Cal.App. 1 Dist.1941, 111 P.2d 467, 43 Cal.App.2d 659.

National banking corporations are agencies or instruments of the general government, designed to aid in the administration of an important branch of the public service, and are an appropriate constitutional means to that end. Pollard v. State, Ala.1880, 65 Ala. 628. See, also, > Tarrant v. Bessemer Nat. Bank, 1913, 61 So. 47, 7 Ala.App. 285.


> 2. Construction with other laws

National Bank Act provisions involving bank's express authority to accept deposits and enter into contracts, and authority to incur liabilities and fund its operations, did not specifically relate to business of insurance so as to overcome reverse preemption provisions of McCarran-Ferguson Act with regard to bank's marketing of retirement certificate of deposit (CD) that involved risk shifting and use of actuarial tables. Blackfeet Nat. Bank v. Nelson, C.A.11 (> Fla.) 1999, 171 F.3d 1237.

Underwriting of securities by commercial bank not only triggers prohibitions of section 21 of the Glass-Steagall Act, but also defeats the permissive effective of section 16; section 21 cannot be read as prohibiting that which section 16 permits. > Securities Industry Ass'n v. Board of Governors of Federal Reserve System, C.A.D.C.1986, 807 F.2d 1052, 257 U.S.App.D.C. 137, certiorari denied > 107 S.Ct. 3228, 483 U.S. 1005, 97 L.Ed.2d 734.

Section 82 of this title limits the power conferred by subdivision 3 of this section to make contracts. > Eastern Townships Bank v. Vermont Nat. Bank, C.C.Vt.1884, 22 F. 186.

Section of Glass-Steagall Act prohibiting national bank from purchasing and selling securities for its own account or underwriting any issue of securities or stock did not prevent purchaser of unregistered commercial paper sold by bank holding company to capitalize wholly owned mortgage subsidiary from asserting strict liability action under Securities Act of 1933. > In re NBW Commercial Paper Litigation, D.D.C.1992, 813 F.Supp. 7.

> 3. Purpose

Policies behind this chapter include congressional concern that commercial bank involvement in underwriting and securities regulation would tend to place bank assets at risk and contribute to widespread bank closings and congressional recognition of inherent conflict between promotional role of investment banker and commercial banker's obligation to give disinterested investment advice. > Securities Industry Ass'n v. Board of Governors of Federal Reserve System, C.A.2 1983, 716 F.2d 92, certiorari granted > 104 S.Ct. 994, 465 U.S. 1004, 79 L.Ed.2d 227, affirmed > 104 S.Ct. 3003, 468 U.S. 207, 82 L.Ed.2d 158.

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The limitations contained in this section were intended to insure the safe management of the affairs of a national bank, so as to protect the owners thereof in the safe conduct of its affairs, and as a guaranty that the management of such bank should at all times be free from speculation, the assumption of undue risks, or the doing of anything else calculated to injure the public by impairing the credit of the bank. It also confers upon the directors "all such incidental powers as shall be necessary to carry on the business of banking." Second Nat. Bank of Parkersburg, W.Va., v. U.S. Fidelity & Guaranty Co., C.C.A.4 (> W.Va.) 1920, 266 F. 489, appeal dismissed > 41 S.Ct. 10, 254 U.S. 660, 65 L.Ed. 462.

This section enumerating powers of national bank was enacted to minimize risk of loss or insolvency to bank itself. > Golar v. Daniels & Bell, Inc., S.D.N.Y.1982, 533 F.Supp. 1021.

Policy of this chapter is to confine national banks to exercising only such incidental powers as shall be necessary to carry on the business of banking. > American Soc. of Travel Agents, Inc. v. Bank of America Nat. Trust and Sav. Ass'n, N.D.Cal.1974, 385 F.Supp. 1084.

> 4. Law governing

Branch manager of national bank, who was neither appointed nor dismissed by bank's board of directors, was not an "officer" of the bank for purposes of subd. (5) of this section requiring that officers be appointed and dismissed by national bank's board of directors; thus, state law was applicable to determination as to propriety of branch manager's discharge. > Wiskotoni v. Michigan Nat. Bank-West, C.A.6 (Mich.) 1983, 716 F.2d 378.


Where stockholders' suit was not derivative one directly involving national bank but rather sought personal recovery, case was purely one for state law. > McDaniel v. Painter, C.A.10 (Kan.) 1969, 418 F.2d 545.

The extent of powers of national bank must be determined by interpretation of this chapter in the light of the policy therein expressed, and views of state courts on powers of local corporations are irrelevant except as Congress expressly makes them applicable. > Downey v. City of Yonkers, C.C.A.2 (N.Y.) 1939, 106 F.2d 69, certiorari granted > 60 S.Ct. 298, 308 U.S. 547, 308 U.S. 548, 84 L.Ed. 461, affirmed > 60 S.Ct. 796, 309 U.S. 590, 84 L.Ed. 964, rehearing denied 60 S.Ct. 1071, 310 U.S. 656, 84 L.Ed. 1420.

Construction of the term "branch" as used in this section is a matter of federal law; statutory definitions cannot be varied by state law but, instead, constituted in themselves the test to be applied in the first instance in determining extent to which state law is to be permitted to operate on national banks in contravention of this title's general supremacy over state law. > State of Okl. ex rel. State Banking Bd. v. Bank of Oklahoma, N.D.Okla.1975, 409 F.Supp. 71.

In absence of applicable federal law, questions as to nature and construction of agreement to subscribe to stock in national bank are governed by law of place where bank was formed and subscription entered into. > Brown v. United Community Nat. Bank, D.C.D.C.1968, 282 F.Supp. 781.

The effect of ultra vires on an act of a national bank is governed by federal law and not the law of the state where the act takes place. > Perth Amboy Nat. Bank v. Brodsky, S.D.N.Y.1960, 185 F.Supp. 217, order resettled > 185 F.Supp. 219.

Interpretation of acts of Congress, defining authority of national banks, is peculiarly province of federal courts. > Coon v. Smith, E.D.Ill.1933, 4 F.Supp. 960.

The decisions of the United States Supreme Court are ultimate and paramount authority as to the powers and liabilities of national banks. > Hansford v. National Bank of Tifton, Ga.App.1912, 73 S.E. 405, 10 Ga.App. 270. See, also, > Roberts v. National Bank of Tifton, 1912, 73 S.E. 407, 10 Ga.App. 272.

Federal decisions are controlling in dealing with national bank. > Wray v. Citizens' Nat. Bank of Dublin, Tex.Com.App.1926, 288 S.W. 171.

The powers of a national bank under this chapter are essential matters for federal construction and interpretation, and whatever rules may obtain in the several states as to the powers of corporations under such statutes, all state courts must yield to the decisions of the Supreme Court of the United States construing the powers of national banks under this chapter. > First Nat. Bank v. American Nat. Bank, Mo.1903, 72 S.W. 1059, 173 Mo. 153. See, also, > C. E. Healey & Son v. Stewardson Nat. Bank, 1936, 1 N.E.2d 858, 285 Ill.App. 290.

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> 5. State regulation or control--Generally

National banks are subject to state laws, unless those laws infringe the national banking laws or impose an undue burden on the performance of the banks' functions. > Anderson Nat. Bank v. Luckett, U.S.Ky.1944, 64 S.Ct. 599, 321 U.S. 233, 88 L.Ed. 692.

An attempt by a state to define powers and duties of national banks or control the conduct of their affairs is absolutely void wherever such attempted exercise of authority expressly conflicts with the laws of the United States and either frustrates the purpose of the national legislation or impairs the efficiency of these agencies of the federal government to discharge the duties for the performance of which they were created. > Davis v. Elmira Sav. Bank, U.S.N.Y.1896, 16 S.Ct. 502, 161 U.S. 275, 40 L.Ed. 700.

Even assuming National Bank Act would permit national banks to market retirement certificate of deposit (CD) that required risk shifting and the use of actuarial tables, McCarran-Ferguson Act nonetheless enabled State of Florida to regulate the issuance of the retirement CD in Florida, since retirement CD involved the business of insurance, and relevant provisions of National Bank Act did not specifically relate to the business of insurance so as to overcome McCarran-Ferguson Act's reverse preemption provisions. Blackfeet Nat. Bank v. Nelson, C.A.11 (> Fla.) 1999, 171 F.3d 1237.

RSA N.H. 390:13 prohibiting any bank from advertising or circularizing the fact that it is authorized to act as an executor is not repugnant to federal statute authorizing national banks to act as executors under certain circumstances. New Hampshire Bankers Ass'n v. Nelson, C.A.1 (> N.H.) 1972, 460 F.2d 307, certiorari denied > 93 S.Ct. 320, 409 U.S. 1001, 34 L.Ed.2d 262.

Mississippi statutes regulating national bank's ability to sell insurance were preempted by federal law to extent that state statutes prohibited national bank from selling annuities. > Deposit Guar. Nat. Bank v. Dale, S.D.Miss.1998, 28 F.Supp.2d 395.

Federal court would not abstain, under Pullman doctrine, from hearing bank's action for declaratory judgment that Connecticut automatic teller machine (ATM) statutes did not prohibit bank from charging fees to non-depositor customers using their ATMs and that National Bank Act authorized such fees, thus preempting Connecticut ATM statutes; Connecticut ATM statutes were not unclear, as required for Pullman abstention, and interpretation of statutes by Connecticut court in first instance would not resolve preemption question. > Fleet Bank, Nat. Ass'n v. Burke, D.Conn.1997, 990 F.Supp. 50.

State statute precluding banks from conducting full service operations on Saturdays was preempted by provision of the National Bank Act setting out the powers given to national banks and allowing them to exercise all incidental powers necessary to carry out banking business, provision of the National Bank Act giving national banks the power to prescribe how general business shall be conducted, and provision of the National Bank Act allowing banks to remain open on state-designated holidays. State of > Idaho, Dept. of Finance v. Security Pacific Bank Idaho, N.A., D.Idaho 1992, 800 F.Supp. 922.

All causes of action afforded officers of national bank under state law resulting from wrongful termination are preempted by National Bank Act. > City Nat. Bank of Baton Rouge v. Brown, La.App. 1 Cir.1992, 599 So.2d 787, writ denied > 604 So.2d 999.

> 10. ---- Negotiable instruments

Indiana Bank Collection Code is applicable to national banks in so far as consistent with express or reasonably implied policy or provisions of this chapter or of other federal acts of paramount authority. > Jennings v. U.S. Fidelity & Guaranty Co., U.S.Ind.1935, 55 S.Ct. 394, 294 U.S. 216, 79 L.Ed. 869.

A state statute placing notes payable and negotiable at banks organized in the state under the state or federal laws, and indorsed to, or discounted by, any such bank, on the same footing as foreign bills of exchange, violates no rights secured to national banks by Acts of Congress, such banks being subject to the control of the state in which they are situated, as regards the construction of contracts, the transfer of property, or creation of debts and liability to suit. > Merchants' Nat. Bank v. Ford, Ky.1907, 99 S.W. 260, 30 Ky.L.Rptr. 558, 124 Ky. 403.

> 13. ---- Secured loans

Where a national bank, to secure a loan by it, took notes of a third party, secured by a mortgage on land in another state, the transaction as to the bank being authorized by federal statutes, no state law could make it void. > First Nat. Bank of Pipestone, Minn. v. Walton, S.D.1926, 208 N.W. 221, 50 S.D. 40.

> 41. Congressional grant of power

The measure of powers of national banks is the statutory grant, and powers not conferred by Congress are denied. > City of Yonkers v. Downey, U.S.N.Y.1940, 60 S.Ct. 796, 309 U.S. 590, 84 L.Ed. 964, rehearing denied 60 S.Ct. 1071, 310 U.S. 656, 84 L.Ed. 1420. See, also, > Texas & Pac. Ry. Co. v. Pottorff, Tex.1934, 54 S.Ct. 416, 291 U.S. 245, 78 L.Ed. 777, petition denied > 54 S.Ct. 627, 292 U.S. 600, 78 L.Ed. 1464; > Berylwood Inv. Co. v. Graham, 1941, 111 P.2d 467, 43 Cal.App.2d 659.

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Congress, having power to create a system of national banks, is the judge as to the extent of the powers which should be conferred upon such banks, and has the sole power to regulate and control the exercise of their operations. > Easton v. State of Iowa, U.S.Iowa 1903, 23 S.Ct. 288, 188 U.S. 220, 47 L.Ed. 452. See, also, > Coon v. Smith, D.C.Ill.1933, 4 F.Supp. 960.

The federal statutes relative to national banks constitute the measure of authority of such corporations; they have no other powers than such as are expressly granted and such as are necessary for the purpose of carrying into effect the powers expressly granted. > Logan County Nat. Bank v. Townsend, U.S.Ky.1891, 11 S.Ct. 496, 139 U.S. 67, 35 L.Ed. 107. See, also, > First Nat. Bank of St. Louis v. State of Missouri ex inf. Barrett, 1924, 44 S.Ct. 213, 263 U.S. 640, 68 L.Ed. 486; California Sav. > Bank v. Kennedy, C.1897, 17 S.Ct. 831, 167 U.S. 362, 42 L.Ed. 198; > Kimen v. Atlas Exchange Nat. Bank of Chicago, C.C.A.Ill.1937, 92 F.2d 615, certiorari denied > 58 S.Ct. 746, 303 U.S. 650, 82 L.Ed. 1110; > Commonwealth Trust Co. of Pittsburgh v. First-Second Nat. Bank of Pittsburgh, 1918, 103 A. 598, 260 Pa. 223, certiorari denied > 38 S.Ct. 425, 246 U.S. 675, 62 L.Ed. 933; Standard Livestock Co. v. Bank of California, National Ass'n, 1924, 227 P. 962, 67 C.A. 381; McBoyle v. Union Nat. Bank, 1912, 122 P. 458, 162 C. 277, appeal dismissed > 37 S.Ct. 370, 243 U.S. 26, 61 L.Ed. 570; > People's Nat. Bank v. Southern States Finance Co., N.C.1926, 133 S.E. 415; > Hansford v. Tifton Nat. Bank, 1912, 10 Ga.App. 270, 73 S.E. 405; McCrory v. Chambers, 1892, 48 Ill.App. 445; Lazear v. National Union Bank, 1879, 52 Md. 78, 36 Am.Rep. 355; Weckler v. Hagerstown First Nat. Bank, 1875, 42 Md. 581, 20 Am.Rep. 95, 1923, 34 Op.Atty.Gen. 1.

The extent of the powers of national banking associations is to be measured by the Act of Congress under which such associations are organized. > Bullard v. National Eagle Bank, U.S.Mass.1873, 85 U.S. 589, 21 L.Ed. 923, 18 Wall. 589.

This chapter, under which national banks are organized, constitutes a complete system for their government. > Downey v. City of Yonkers, C.C.A.2 (N.Y.) 1939, 106 F.2d 69, certiorari granted > 60 S.Ct. 298, 308 U.S. 547, 308 U.S. 548, 84 L.Ed. 461, affirmed > 60 S.Ct. 796, 309 U.S. 590, 84 L.Ed. 964, rehearing denied 60 S.Ct. 1071, 310 U.S. 656, 84 L.Ed. 1420.

National banks cannot generally exercise any powers except those expressly granted or incidental to carrying on business. > Williams v. Merchants' Nat. Bank of St. Cloud, D.C.Minn.1930, 42 F.2d 243. See, also, > Baltimore & O.R. Co. v. Smith, C.A.Pa.1932, 56 F.2d 799.

Federally-chartered and state-chartered banks in Connecticut lack inherent power beyond those powers enumerated or incidentally conferred under the relevant federal or state banking law. > Fleet Bank, Nat. Ass'n v. Burke, D.Conn.1998, 23 F.Supp.2d 196.

National bank has only power expressly given to it and such incidental powers as are necessary to carry on business of powers expressly given. > Suburban Trust Co. v. National Bank of Westfield, D.C.N.J.1962, 211 F.Supp. 694.

National banks' powers are limited to those expressly granted by this section. > Birdsell Mfg. Co. v. Anderson, W.D.Ky.1937, 20 F.Supp. 571, affirmed > 104 F.2d 340.

> 42. Scope of incidental powers
United States Comptroller of Currency acted within his "incidental powers" under National Bank Act in authorizing national banks to offer debt cancellation contracts; such contracts were directly connected to national banks' lending activities. First Nat. Bank of Eastern Arkansas v. Taylor, C.A.8 (> Ark.) 1990, 907 F.2d 775, rehearing denied, certiorari denied > 111 S.Ct. 442, 498 U.S. 972, 112 L.Ed.2d 425.

For an activity to be pursuant to an incidental power necessary to carry on the business of banking, it must be convenient or useful in connection with the performance of one of the bank's established activities pursuant to its express powers under this chapter. > M & M Leasing Corp. v. Seattle First Nat. Bank, C.A.9 (Wash.) 1977, 563 F.2d 1377, certiorari denied > 98 S.Ct. 3069, 436 U.S. 956, 57 L.Ed.2d 1121.

A sine qua non standard would be an inappropriate measure of a national bank's incidental powers under this section. > Arnold Tours, Inc. v. Camp, C.A.1 (Mass.) 1972, 472 F.2d 427.

Generally, ultra vires contracts of national banks are unenforceable. > Birdsell Mfg. Co. v. Anderson, C.C.A.6 (Ky.) 1939, 104 F.2d 340.

Incidental powers of national banks can avail neither to create powers which expressly or by reasonable implications are withheld nor to enlarge powers granted, since incidental powers are inferred and exist only to carry into effect such powers as are granted. > Kimen v. Atlas Exchange Nat. Bank of Chicago, C.C.A.7 (Ill.) 1937, 92 F.2d 615, certiorari denied > 58 S.Ct. 746, 303 U.S. 650, 82 L.Ed. 1110.

National bank's activity is authorized as incidental power, "necessary to carry on the business of banking," within meaning of this section, if it is convenient or useful in connection with performance of one of the bank's established activities pursuant to its express power under this section but, if this connection between incidental activity and express power does not exist, activity is not authorized as incidental power. > National Retailers Corp. of Arizona v. Valley Nat. Bank, D.C.Ariz.1976, 411 F.Supp. 308, affirmed in part, appeal dismissed in part > 604 F.2d 32.

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The principle of ultra vires is applied with greater firmness to banks than to other corporations. > Birdsell Mfg. Co. v. Anderson, W.D.Ky.1937, 20 F.Supp. 571, affirmed > 104 F.2d 340.

Subdivision 7 of this section contains five distinct grants of power, and no one grant is a limitation upon the others. Shoemaker v. National Mechanics' Bank, C.C.Md.1869, 21 F.Cas. 1331, No. 12801. See, also, > Cleveland v. Shoeman, 1883, 40 Ohio St. 176.

Such powers are not the incidental powers given generally to all bank institutions, but are only those incidental to banks allowed to do such things as are prescribed by this chapter. Seligman v. Charlottesville Nat Bank, C.C.W.D.Va.1879, 21 F.Cas. 1036, No. 12642.
To authorize the exercise of powers by a national bank as incidental to those given, it must appear that they are clearly within the scope and purview of the purpose for which the corporation was created, and that their exercise was a necessary incident to the proper exercise of the corporation's existence or functions. > State ex rel. Barrett v. First Nat. Bank, Mo.1923, 249 S.W. 619, 297 Mo. 397, affirmed > 44 S.Ct. 213, 263 U.S. 640, 68 L.Ed. 486.

> 46. Borrowing money

National banks have power to borrow money and pledge assets to secure a loan, but lack power to pledge assets to secure a private deposit or to secure both a loan and private deposit. > Third Nat Bank & Trust Co of Scranton v. McMahon, M.D.Pa.1937, 17 F.Supp. 869.

Failure of party making loan to national bank on ultra vires contract to return performance received from bank did not prevent his recovery of loan, where performance rendered by bank had become worthless before lender learned of right to avoid contract. > Clark v. Boston-Continental Nat. Bank, D.C.Mass.1934, 9 F.Supp. 81.

A bank in certain circumstances may become a temporary borrower of money; Yet such transactions would be so much out of the course of ordinary and legitimate banking as to require those making the loan to see to it that the officer or agent acting for the bank, has special authority to borrow money. > National Shawmut Bank of Boston v. Citizens' Nat. Bank of Boston, Mass.1934, 191 N.E. 647, 287 Mass. 329.

Where a bank receives the proceeds of a loan on a note signed by its officers, all parties understanding the nature of the transaction, the note constituted a legal obligation of the bank. > First Nat. Bank of Skiatook v. Liberty Nat. Bank of Tulsa, Okla.1924, 229 P. 258, 100 Okla. 221.

> 47. By-laws--Generally

Bank has right to incur liabilities in the regular course of its business, as well as to become the creditor of others. > Western Nat. Bank of New York v. Armstrong, U.S.Ohio 1894, 14 S.Ct. 572, 152 U.S. 346, 38 L.Ed. 470.

Bylaws of national bank are law of bank so long as they are not inconsistent with or prohibited by federal law, and it is not necessary that federal law specifically and expressly permit a bylaw. > McKee & Co. v. First Nat. Bank of San Diego, S.D.Cal.1967, 265 F.Supp. 1, affirmed > 397 F.2d 248.

There are many things done daily in every bank which are in fact and in law the acts of the bank, and of which no mention is made in the by-laws. Libby v. Union Nat. Bank, 1881, 99 Ill. 622.

> 64. ---- Foreign currency

Receipt of deposits in foreign money is against public policy. Webber v. American Union Bank, N.Y.Sup.1926, 217 N.Y.S. 833, 128 Misc. 123, reversed 222 N.Y.S. 359, 221 A.D. 94.

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> 65. ---- Public funds

Bond of national bank given as security for deposits of state funds conditioned as required by state law for performance of all duties required of depository by state law held not to impose obligation which could not be complied with under National Banking Act. > Lewis v. Fidelity & Deposit Co. of Maryland, U.S.Ga.1934, 54 S.Ct. 848, 292 U.S. 559, 78 L.Ed. 1425.

This chapter does not confer power on national bank to pledge assets to secure any public deposits except those made thereunder by Secretary of Treasury of the United States. > City of Marion, Ill., v. Sneeden, U.S.Ill.1934, 54 S.Ct. 421, 291 U.S. 262, 78 L.Ed. 787, rehearing denied > 54 S.Ct. 557, 291 U.S. 651, 78 L.Ed. 787.

Deposit in national bank by receiver of state bank appointed by state court is a "private deposit," and not a deposit of "public money of a state or any political subdivision thereof" within this section authorizing national banks to secure deposits of such public moneys. > Griffin v. Royall, C.C.A.4 (S.C.) 1934, 70 F.2d 103.

A national bank, though not designated as a depository of public moneys, which accepts deposits by a postmaster of government money, is liable to the government as a bailee for all sums not withdrawn in the manner required by law, and it cannot apply on its personal claim against the postmaster a payment made by him to be applied toward making good a shortage in his balance. > U.S. v. National Bank of Asheville, C.C.W.D.N.C.1896, 73 F. 379.

> 66. ---- Subscription to capital stock

Where a depositor sued the receiver of a bank for the amount of a deposit, and he pleaded that a part of the deposit was used to pay the depositor's subscription to the capital stock of the bank, the burden of proof was on the receiver to show that the purchase of stock was actually made. > Somerset Nat. Banking Co.'s Receiver v. Adams, Ky.1903, 72 S.W. 1125, 24 Ky.L.Rptr. 2083.

> 67. Special deposits--Generally

Where a national bank has been accustomed to take deposits of money, securities, or other valuables for the accommodation of the depositor for safe-keeping, and this practice is known to and acquiesced in by the directors, and the property deposited is lost by gross carelessness of the bank, liability ensues in like manner as if the deposits had been authorized by the bank's charter. > First Nat Bank of Carlisle, Pa, v. Graham, U.S.Pa.1879, 100 U.S. 699, 10 Otto 699, 25 L.Ed. 750. See, also, Ouderkirk v. Central Nat. Bank, 1890, 119 N.Y. 263, 23 N.E. 875; > Mansfield First Nat. Bank v. Zent, 1883, 39 Ohio St. 105; Pattison v. Syracuse Nat. Bank, 1880, 80 N.Y. 82, 36 Am.Rep. 582; Monmouth First Nat. Bank v. Strang, 1888, 28 Ill.App. 325, affirmed > 138 Ill. 347, 27 N.E. 903; Allentown First Nat. Bank v. Rex, 1879, 89 Pa. 308, 33 Am.Rep. 767; Chattahoochee Nat. Bank v. Schley, 1877, 58 Ga. 369; Lyons First Nat. Bank v. Ocean Nat. Bank, 1875, 60 N.Y. 278, 19 Am.Rep. 181; Wiley v. Brattleboro First Nat. Bank, 1875, 47 Vt. 546, 19 Am.Rep. 122; Scott v. National Bank, 1873, 72 Pa. 471, 13 Am.Rep. 711; Dearbourn v. Union Nat. Bank, 1870, 58 Me. 273; Turner v. Keokuk First Nat. Bank, 1869, 26 Iowa 562; Lancaster County Nat. Bank v. Smith, 1869, 62 Pa. 47; Smith v. Westfield First Nat. Bank, 1868, 99 Mass. 605, 97 Am.Dec. 59; Foster v. Essex Bank, 1821, 17 Mass. 479, 9 Am.Dec. 168.

By agreement, deposits which would otherwise be general may be given character of trust funds. > Texas & P. Ry. Co. v. Pottorff, C.C.A.5 (Tex.) 1933, 63 F.2d 1, certiorari granted > 54 S.Ct. 55, 290 U.S. 609, 78 L.Ed. 533, affirmed > 54 S.Ct. 416, 291 U.S. 245, 78 L.Ed. 777, amended > 54 S.Ct. 525, 291 U.S. 649, 78 L.Ed. 777, rehearing denied > 54 S.Ct. 627, 292 U.S. 600, 78 L.Ed. 1464.

Fund, deposited in bank for special purpose subject to depositor's check, remains property of depositor. > U.S. Shipping Board Emergency Fleet Corporation v. Atlantic Corporation, D.C.Mass.1925, 5 F.2d 529, error dismissed > 16 F.2d 27.

'In the case of a special deposit, the bank assumes merely the charge or custody of property, without authority to use it, and the depositor is entitled to receive back the identical money or thing deposited. In such case, the right of property remains in the depositor, and if the deposit is of money, the bank may not mingle it with its own funds. The relation created is that of bailor and bailee, and not that of debtor and creditor.' 3 R.C.L. 522. > Tuckerman v. Mearns, App.D.C.1919, 262 F. 607, 49 App.D.C. 153.

National banks are liable for the loss of property held by them merely for the accommodation of their customers, without any consideration for the keeping of it except the profit derived from the banking business of such customers. > Security Nat. Bank v. Home Nat. Bank, Kan.1920, 187 P. 697, 106 Kan. 303.

A "deposit for a specified purpose" is one in the making of which a trust fund is constituted with respect to which a special duty as to its application is assumed by the bank. > Cooper v. National Bank of Savannah, Ga.App.1917, 94 S.E. 611, 21 Ga.App. 356, certiorari granted > 38 S.Ct. 423, 246 U.S. 670, 62 L.Ed. 931, affirmed > 40 S.Ct. 58, 251 U.S. 108, 64 L.Ed. 171.

Receipt of "special deposits" is within the powers of a national bank. > Harper v. Merchants' & Planters' Nat. Bank of Mt. Vernon, Tex.Civ.App.1934, 68 S.W.2d 351, error dismissed.

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A national bank may become the depository of a fund which is to stand as security and be paid to a third person under certain contingency. Bushnell v. Chautauqua County Nat. Bank, 1878, 74 N.Y. 290. See, also, > Sykes v. Canton First Nat. Bank, 1891, 2 S.D. 242, 49 N.W. 1058.

> 68. ---- Collateral for contract performance

The act of a national bank in accepting a deposit to be held by it as collateral security for the performance of a contract between the depositor and another is not illegal, and it would be estopped to set up the defense of ultra vires against one making such a contract with it relying thereon. Bushnell v. Chautauqua County Nat. Bank, Sup.1877, 10 Hun 378, affirmed in 74 N.Y. 290.

National bank is not authorized under national banking laws to lend deposited money on depositor's behalf. > Carr v. Weiser State Bank of Weiser, Idaho 1937, 66 P.2d 1116, 57 Idaho 599.

Under this section, a national bank had no authority to enter into a contract for loaning money of a depositor kept in a deposit account through its cashier authorized by the depositor to draw thereon to make loans. > Holmes v. Uvalde Nat. Bank, Tex.Civ.App.1920, 222 S.W. 640, error refused.

A bank has no right to loan the money of other persons. > Grow v. Cockrill, Ark.1897, 39 S.W. 60, 63 Ark. 418.

A national bank may receive, before maturity, payment of debts owing to the bank, although such debts bear a high rate of interest, if the money is needed for the legitimate business of the bank. Keyser v. Hitz, D.C.Sup.1883, 13 D.C. 513, affirmed > 8 S.Ct. 143, 123 U.S. 297, 31 L.Ed. 156.

> 77. Partnership agreements

A national bank is liable in a civil action for fraud perpetrated under the guise of a partnership agreement, though it had no power to make such an agreement. > Pronger v. Old Nat. Bank, Wash.1899, 56 P. 391, 20 Wash. 618.

In a suit by national bank on a promissory note wherein defendants claimed partnership with the bank, such contract, if any, although performed, was not binding on the bank, it being ultra vires and the bank not having profited thereby. > First Nat. Bank v. Stokes, Ark.1918, 203 S.W. 1026, 134 Ark. 368.

A national bank, having joined with other persons in a partnership to operate a mill, cannot be prevented from recovering moneys loaned to the firm, on the ground that it had no power to become a partner in a mill. > Cameron v. First Nat. Bank, Tex.Civ.App.1896, 34 S.W. 178.

> 111. Generally

The discount of negotiable paper is the form according to which national banks are authorized by this section to make their loans, and the terms "loans" and "discounts" are synonymous. > National Bank v. Johnson, U.S.N.Y.1881, 104 U.S. 271, 14 Otto 271, 26 L.Ed. 742.

The words "by discounting and negotiating promissory notes, drafts, bills of exchange," and so forth, are not to be read as limiting the mode of exercising "such incidental powers as shall be necessary to carry on the business of banking," but as descriptive of the kind of "banking" which is authorized. > First Nat. Bank v. National Exch. Bank, U.S.Md.1875, 92 U.S. 122, 2 Otto 122, 23 L.Ed. 679. See, also, > Western Nat. Bank v. Armstrong, Ohio, 1894, 14 S.Ct. 572, 152 U.S. 346, 38 L.Ed. 470; > Nebraska v. Orleans First Nat. Bank, C.C.Neb.1898, 88 F. 947; > Shinkle v. First Nat. Bank of Ripley, 1872, 22 Ohio St. 516; > Cleveland, Brown & Co. v. Shoeman, 1883, 40 Ohio St. 176.

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National bank has no right to deal in negotiable paper except in manner provided by law, which is limited to discounting such paper, and it cannot trade negotiable paper held by it for other paper. > National Bank of the Republic v. Price, Utah 1923, 234 P. 231, 65 Utah 57.

The purchase of a note from the payee, with the latter's indorsement, is a purchase by discounting in the usual course of business, and is not a purchase by barter and sale, as would be the case if the note was taken without indorsement, or by indorsement without recourse. > Nicholson v. National Bank of Newcastle, Ky.1891, 17 S.W. 627, 13 Ky.L.Rptr. 478, 92 Ky. 251.

This section contemplates loans and discounts as understood in commercial law and according to the known usage and practice of banks. Greenville First Nat. Bank v. Sherburne, 1884, 14 Ill.App. 566. See, also, > Merchants' Nat. Bank v. Sevier, C.C.Ark.1882, 27 Alb.L.J. 447, 14 F. 662.

The words, "by discounting and negotiating promissory notes, drafts, bills of exchange," do not limit the mode of exercising the "incidental powers" necessary to carry on the business of banking, so that under this section a national bank may carry on banking "by discounting and negotiating promissory notes, drafts, bills of exchange," etc., and may exercise "all such incidental powers as shall be necessary" for that purpose. > Shinkle v. First Nat. Bank of Ripley, Ohio 1872, 22 Ohio St. 516.

In an action by a national bank to recover on a note held by it, it alleged in the petition that the holder of the note "sold, assigned, transferred, and discounted" the note to the plaintiff. Held, that the words "sold" and "discounted" were intended by the pleader to have the same meaning the word "sold" being used to convey the idea of a transfer by discount, according to the usages of business and the regular rates of discount, rather than a barter and sale. Van Leuven v. First Nat. Bank, 1873, 54 N.Y. 671.

> 112. Exchange

Exchange of negotiable paper by national banks, made in good faith and in regular course of business, is protected just as purchase would be, under this section. > National Bank of the Republic v. Beckstead, Utah 1926, 250 P. 1033, 68 Utah 421.

Exchange of notes belonging to a national bank for other notes held by another bank is ultra vires. > Stockmen's Nat. Bank v. First Nat. Bank, Idaho 1923, 221 P. 150, 38 Idaho 395.

> 113. Purchase

The right to "discount and negotiate" includes the right to buy. > Morris v. Third Nat. Bank, C.C.A.8 (Mo.) 1905, 142 F. 25, 73 C.C.A. 211, certiorari denied > 26 S.Ct. 762, 201 U.S. 649, 50 L.Ed. 905. See, also, > Danforth v. National State Bank, N.J.1891, 48 F. 271, 1 C.C.A. 62, 17 L.R.A. 622; Union Nat. Bank v. Rowan, 1885, 23 S.C. 339, 55 Am.Rep. 26; Atlas Nat. Bank v. Savery, 1879, 127 Mass. 75; National Pemberton Bank v. Porter, 1878, 125 Mass. 333, 28 Am.Rep. 235; > Smith v. Exchange Bank, 1875, 26 Ohio St. 141; Rochester First Nat. Bank v. Harris, 1871, 108 Mass. 514.

This section confers no authority on national banks to acquire notes, drafts, etc., otherwise than by way of discount, for the term "negotiating" merely concerns disposal by a bank of the notes, etc., it may have acquired, and authorizes the transfer thereof. > Danforth v. National State Bank, C.C.A.3 (N.J.) 1891, 48 F. 271, 1 C.C.A. 62.

National bank had power to purchase warrants issued by sewer district at their face value. > State ex rel. Boatmen's Nat. Bank of St. Louis v. Webster Groves General Sewer Dist. No. 1 of St. Louis County, Mo.1931, 37 S.W.2d 905, 327 Mo. 594.

A purchase by a national bank of notes of a construction company was not ultra vires, where it appeared that the notes were secured by stocks and bonds of a railroad company and that the construction company was formed by the first mortgage bondholders of the railroad company pursuant to a reorganization plan after the purchase by them of the railroad property on a foreclosure sale. > National Bank of Commerce in St. Louis v. Francis, Mo.1922, 246 S.W. 326, 296 Mo. 169, certiorari denied > 43 S.Ct. 362, 261 U.S. 618, 67 L.Ed. 829.

Purchase by a national bank of notes issued by a construction company organized by railroad first mortgage bondholders, acting under a reorganization agreement after foreclosure of the mortgage, held not ultra vires under this section, empowering a national bank to discount and negotiate promissory notes and other evidences of debt, and to loan money on personal security, such notes being "evidences of debt," although they may not have been, strictly speaking, promissory notes, as containing no absolute promise to repay by the maker, and limiting payment out of stocks and bonds pledged, which were "personal security," upon which the bank was authorized to loan money. Attleborough Nat. Bank v. Rogers, 1878, 125 Mass. 339.