holder, and is not to be immediately presented at the bank so as to destroy credit. It is the custom in commercial cities to draw and use such checks merely as due bills (39).

(39) United States v. Isham, 17 Wall. 503.

CHAPTER II

ORGANIZATION AND POWERS OF A BANKING CORPORATION.

The general principles of corporation law apply to banking corporations and only special features need be mentioned—and first as to corporations under state laws. In many of the states the constitution provides for the special regulation of banks and in all the states the subject is treated as a special one, distinct from the law relating to business or other corporations. The charter may be general or special and is always the measure of the powers granted.

§ 26. Construction of charter. The charter is, however, to be construed in the light of the common law and it follows that such words as bank, banking, loan, deposit, check, discount, etc., necessarily bring in all the powers implied by such general words. The bank must live up to the object of its creation and may be dissolved by the state for misuser (i. e. abuse) or nonuser of its powers.

§ 27. Restrictions upon business. The banking business is such that public policy demands that the management shall keep strictly within the lines of legitimate banking and observe certain well defined regulations as to the character, quality, and quantity of the security it may accept in loaning its money.

The temptation to profit by precarious ventures in the speculative field has led to so many losses that from time to time the states and the nation have declared first one and then another of these acts, which tend to endanger the stability of banks or to injure innocent and confiding persons, criminal.

§ 28. Same: Crimes. These crimes are principally of four classes, viz: over loaning to the extent of reducing the available funds below a certain amount proportionate to capital and resources; misappropriation of money-that is applying it directly or indirectly to some purpose outside legitimate channels; loaning without the required security; and receiving deposits after known insolvency. The common forms of theft, embezzlement, forgery, etc., are not peculiar to the banking business and need not be mentioned here. The reason for great strictness in the law as to this subject is found in two directions-first, the danger to public credit; second, the well known private suffering entailed in every bank failure. The letter of our criminal law in this respect is just and adequate, though in some particulars it might properly be more severe, for in almost every case the banker has reason to know that his illegal act will certainly cause the ruin of some or other of his customers. The administration of this branch of our law is in the main all that can be desired, and is not open to the charge that the rich are immune or are unduly favored.

§ 29. Bank officers. In the organization of banks, as in other corporations, the control of the affairs and of the business of the corporation is in the hands of a board

of directors. The management of the business is entrusted to another group of officers, but all are under the control of the board of directors. These officers are usually a president, a vice-president, a cashier and his assistant, tellers, and book-keepers. The secretary and the treasurer of the corporation are distinct officers-and their duties may or may not extend to the administration of the banking business conducted by the corporation (1).

§30. Same: The directors. The directors are the general agents of the bank, but in another sense they are more-they occupy a relation closely analogous to trustees, and more and more the courts are insisting that their neglect is not mere negligence but entails liability. They have an obligation to know all which their duties require they should know (2). The directors have the right to define and limit the authority of all the officers, but, of course, third persons are bound only by the usual and seeming authority except where actual knowledge or notice is given them (3).

§ 31. Same: Administrative officers. The general rule applies to all officers and agents. The ordinary officers and employees usually recognized and used in the conduct of the business are held out to the world as having the power to act according to the general usage and practice of banks in the community where the bank is located

(1) See Zane on Banks, sec. 97 to 102; Nat. Bank v. Drake, 29 Kansas 311.

(2) Prescott v. Haughey, 65 Fed. 656.

(3) Spyker v. Spence, 8 Ala. 333; Auten v. U. S. Bank, 174 U. S. 125.

(4). If then the act is an unusual one the party assuming to deal with the bank must look to the actual authority of the agent. In most cases their ordinary powers are questions of law for the courts, while extraordinary power is always a question of fact. Officers are not indulged in the practice of using the credit or property of the bank for their own personal advantage, and where the transaction itself gives notice, or there is actual notice, a third person dealing with an officer acts at his peril (5).

A cashier for example has no authority to sign accommodation paper (6) or to represent the entire genuineness of checks which he certifies. The issuing of the draft of his bank to pay his own debt has been held to be in the usual course of business (7) but the weight of authority is against the decision, holding that the rule, and the better rule, is one of general corporation law, that an act of an officer done in his own interest is prima facie irregular, and puts the third party on inquiry.

(4) Morse on Banks, sec. 98; Lloyd v. West Branch Bank, 15 Pa. St. 172.

(5) Ward v. City Trust Co., 192 N. Y. 61.

(6) West St. Louis Sav. Bank v. Shawnee Co. Bk., 95 U. S. 557. (7) Ward v. City Trust Co., Note 5, above.