namely, a savings bank, a privilege or power which the Legislature assumed it did not or could not possess without the aid of a statute. The necessity of such a statute may be apparent, but a savings bank unless restricted by its charter or a statute is possessed with incidental and implied power authorizing it to issue certificates of deposit in lieu of passbooks, or any other lawful contract as to the receiving and repayment of deposits without the aid of a statute. National banking associations may issue certificates of deposit. There is no special statute of the United States enacted, authorizing such associations to issue certificates of deposit, but they are endowed with such incidental and implied powers, and may issue certificates without the aid of a statute.

The right to issue certificates of deposit is regarded as an incidental right to banking. The courts have never questioned or denied this right, and all banking corporations and associations throughout the United States are endowed with incidental power to issue certificates of deposit.

A certificate of deposit, when issued, is evidence of so high and satisfactory a character as to the sum therein named and deposited, that to escape its effect and the amount claimed therein, the bank must overcome it by clear and satisfactory evidence. See First Nat. Bank of Lacon v. Myers, 83 Ill. 507. It is also held by the same authority, that, where the testimony, aside from the certificate, is balanced as to the amount deposited, the certificate will turn the scale.

§ 226. Payment of certificate.

The bank must pay the certificate when due on presentation and demand, but a certificate of deposit fixing a future time of payment cannot be presented for payment before the due date, and the issuing of such a certificate is not in violation of the National Banking Act. Revised Statutes (U. S.), section 5183, reads: "No national banking association shall issue post notes, or any other notes to circulate as money, than such as are authorized by the provisions of this title." This section only applies where instruments are issued and intended to circulate as money. It does not forbid the issuing of certificates of deposit.2

21

21 William P. Hunt, appellant, 141 Mass. 515.

It must be paid to the owner. The instrument being transferable if presented for payment by a person other than the person named in the certificate as payee, the bank must, before payment, satisfy itself that the transfer and assignment is genuine; that the signature is the signature of the payee named in the certificate.

The bank is held to the same degree of care in payment of a certificate as it is in payment of checks. If it pays a forged check the money is not transferred. If the assignment on the certificate is a forgery, the true owner of the certificate can

recover.

Where a bank issued a certificate of deposit in the following language

"Samuel Stein has deposited in this bank one thousand dollars, payable to the order of himself or Ellen Stein on the return of this certificate."

"J. H. BANDEN,

"Per SMITH, Cashier."

The court held:

"First. That the certificate of deposit did not authorize the payment of the money to Ellen Stein after the death of Samuel Stein.

"Second. That notice to the paying teller of the bank of the death of S. S., received prior to the payment by him to E. S. of the amount of the deposit, was notice to the bank.

"Third. That if he, in making the payment after such notice, mistook the law, the bank whose agent he was must suffer the consequences.

"22

The death of either party and notice to the bank stops payment. But the bank could lawfully pay to either party during the lifetime of both and it would discharge the debt.

22 Second National Bank of Baltimore v. Thomson S. Wrightson, executor of Samuel Stein, 63 Md.. 81.

The principal assets of a bank are its loans, personal and real estate. Personal loans are those where the maker of the note guarantees the payment by the act of executing the same. He thereby becomes the maker of the note, agreeing to pay the same at the place and time specified. Such an obligation is a personal agreement and does not carry with it any security of whatsoever nature or kind other than a personal obligation. But the bank may at the time of taking the note and before the transaction is closed require that the same shall be secured, and this may be done by the maker delivering to the bank personal property, and when delivered and once in possession of the bank, it can be held as a pledge until the debt is paid. The bank's claim to the security or property either becomes a general or special lien. If the property is pledged to secure a particular debt, the law generally provides that the pledge shall be sold. If the security delivered to the bank is an assigned certificate of shares of stock in a corporation, in order that the bank may hold the same free from any claims of creditors of the maker, the stock should be by the bank presented to the secretary of the corporation for transfer to the bank, either as trustee or pledgee. Until this is done, the stock is subject to attachment by creditors.

Real estate loans are those secured by mortgage. A deed made and delivered to the bank to secure a debt is in equity a mortgage and the title to the property remains in fact in the grantor, and to divest him of the title the deed must be foreclosed. As deeds in such cases are always declared to be mortgages, it is advisable in the first instance to take a mortgage.

All commercial State banks, and national banks, are duly authorized to make personal loans. Savings banks, by provision of law, may be restricted by the statute of the State wherein they may be organized in taking personal security

loans. Where the statute provides that savings banks may invest their money, or any portion thereof, in personal security loans, their business becomes more in the nature of commercial transactions. They are usually restricted by statute and are limited to making loans upon real estate security, or in the purchase of such bonds of municipal and other corporations as the law of the State may provide.

§ 228. Liabilities of any person, etc., to national banks. Section 5200, Revised Statutes (U. S.), provides that: "The total liabilities to any association, of any person, or of any company, corporation, or firm, for money borrowed, including in the liabilities of a company or firm the liabilities of the several members thereof, shall at no time exceed onetenth part of the amount of the capital stock of such association actually paid in. But the discount of bills of exchange drawn in good faith against actually existing values, and the discount of commercial or business paper actually owned by the person negotiating the same, shall not be regarded as money borrowed."

The purpose of this section is to prohibit any bank from leaning its funds in large amounts to any one person. But the rule does not apply "in the case of all discounts, and an exception is made in favor of bills of exchange' drawn against actually existing values." The exception also applies to "commercial or business paper owned by the person negotiating the same."

In the case of Second National Bank v. Burt, 93 N. Y. 244, the court says:

"The object of this provision of the Currency Act was to guide national banks from the hazard of loaning money in improvident amounts upon speculative and accommodation paper, but it contemplated and permitted to an unlimited amount, the discount of paper used and required in facilitating the transfer of property and money in the transaction of the legitimate business of the country."

Where a person is already an indorser on paper discounted by the bank to the full amount of one-tenth of its capital stock, it is not a violation of the banking laws to discount additional paper actually owned by him. Another ques

tion of importance arising under this section of the statute, is, does the bank violate the provisions of the statute in making a loan in excess of one-tenth of the capital stock where such loan is secured by collaterals?

It is clear that the adding of or securing of a loan by collateral security does not enlarge the power of the bank.

The only penalty, however, which may be enforced against the bank for violation of this section of the statute, is the liability which the bank may incur of a forfeiture of its franchise, and this action can only be brought by the government. The loan, though in excess of the amount prescribed by the statute, can be recovered in full from a borrower.1

Section 5201, Revised Statutes of the United States, provides that "no association shall make any loan or discount on the security of the shares of its own capital stock nor be the purchaser or holder of any such shares, unless such security or purchase shall be necessary to prevent loss upon a debt previously contracted in good faith."

This section prohibits a national bank from acquiring a lien on its own stock against its stockholders, and a provision in the by-laws or in the certificate of stock, prohibiting a transfer until the liability of the stockholder to the bank is paid, is declared wholly void.2

It is held in Bank v. Lanier, 11 Wall. 369, that where a bank takes a pledge of its own stock which has been made to secure a deposit with another bank, the transaction is a lending of money upon the security of its stock within the meaning of the law.

Section 5137, Revised Statutes of the United States, provides that:

"A national banking association may purchase, hold, and convey real estate for the following purposes and no others: "First. Such as shall be necessary for its immediate accommodation in the transaction of its business.

1 Gold Mining Co. v. Rocky Mountain Nat. Bank, 96 U. S. 640; Corcoran v. Batchelder, 147 Mass. 541; Wyman v. Citizens' Nat. Bank of Faribault, 29 Fed. Rep. 734; Stewart v. The Nat. Union Bank of

Maryland, 2 Abb. (U. S.) 424; Smith v. First Nat. Bank, 45 Nebr. 444.

2 Conklin r. The Second Nat. Bank, 45 N. Y. 655.