This is an adjudication of the question to the present time and it may again be stated that the court decides this case independently of the question as to the scope of the power of a National Bank to borrow money to be used in its business; not declaring that a national bank cannot borrow under certain. circumstances, nor establishing a precedent that it may do so as an ordinary power and that such a power is an incident to the bank. The court decides that the Fidelity Bank became liable because it obtained money from the Chemical Bank and used it in its business, and that the mode of obtaining the money, while not regular upon its face, the bank received it, deriving a benefit from its use and should therefore be required to pay it back. A national bank may then borrow money to an extent not to exceed its capital paid up, when duly authorized by its directors, and this may occur as an ordinary transaction in the course of rediscounting notes personally made to it in the ordinary course of business, and such transactions may be performed by the duly appointed and authorized officers. But the borrowing of money by executing the note of the bank to bring it within the power of the corporation, the transaction not being authorized by statute, nor a customary or an ordinary or usual one, an exigency should exist, and the transaction should be authorized by the Directors at the time. If not, it should afterwards be ratified by them. The rule that a National Bank can borrow money for the express purpose of re-loaning it again for profit or speculation, seems too broad. Borrowing money is only an incidental power not being expressly authorized, and therefore should not be exercised as an express power. The power to borrow money is not expressed and authorized by the statute because evidently it was considered a dangerous privilege and one that would be abused. And for the further reason the power is not authorized, because it is not considered a part of the ordinary business of banking. The transactions are considered so much outside of the general scope of the bank's power, that the officer acting in behalf of the bank should, in each case, have special authority. $232. State banks borrowing money. State banking corporations being creatures of the law, their powers and rights are derived from the Constitution and statutes of the various States under which they are incorporated. They have only such powers as are granted to them by constitutional and legislative authority, together with such implied powers as are necessary to put into execution and use those powers which are expressly enumerated in the law, and set forth in their charter. A banking corporation is an artificial person when incorporated under the general laws of a State, and may be endowed with capacity to enter into any obligation or contract essential for its purpose, and for the transaction of its ordinary affairs. The statute may give it power to issue evidences of debt; to borrow money to carry on the business for which it was incorporated, and this right may be used although not reserved by its charter. As has been stated, banking corporations are not incorporated for the purpose of borrowing money to speculate in business. It is their purpose rather, to receive on deposit and to loan money. The power of borrowing money by a State bank, where not specially authorized by statute or by the bank's charter, is governed by the same law and rules that govern national banks and should be limited to cases of extreme emergency. Such an emergency can only arise where funds are required to meet the urgent and unexpected demands made on the bank. In the case of Tuttle v. National Bank of the Republic, 48 Ill. (App.) 481, the court says: "It has been suggested that the debt was incurred without lawful power on the part of the Edwards County Bank, in whose charter there is no specific authority to borrow money; but we understand that is an incidental or implied power possessed by banking corporations generally, unless especially denied or restricted. "Of course it is not a part of the continuous practice of any bank to borrow, but it is often necessary in the reasonable exercise of express power, and hence it is usually regarded as a necessary incident. Aloise on Banks and Banking, section 63. Certainly the borrowing must be incidental to the usual and legitimate business of a bank, otherwise the act is ultra vires; but it is not apparent that there was anything extraordinary or illegitimate in this loan. "Other questions suggested in the briefs need not be discussed, as in the view we are inclined to take of the case, the foregoing considerations require us to affirm the judgment." The court sustains the reasonable rule that, the borrowing of money is always lawful under a power expressed; but where the power is used as an incidental power, it must only be used in the usual and legitimate business of banking. And this business is not the borrowing of money to speculate on. The Supreme Court of the State of Indiana, in the case of James, Administrator v. Rogers, 23 Ind. 451, in discussing the power of a banking corporation to issue promissory notes, says: "No corporation has authority to issue its promissory notes, except, as it received such authority through its charter, either expressly conferred, or as an incident to the purpose for which it was created." In New York, in the case of Coats v. Donnell, et al, 94 N. Y. 168, the court, in discussing the powers of a bank through its cashier to borrow money, says: "There can, we apprehend, be no serious doubt of the proposition that the agreement of June 10, 1878, was one which the cashier of the bank was authorized to make, first, as incident to his office of cashier, in the absence of any special authority to enter into the particular transaction, and second, by reason of the by-laws of the bank defining the authority of the cashier, which declares that "he shall have the immediate charge and supervision of the bank; shall attend to the making of loans, discounts and other active business transactions of the bank, exercising his own judgment as to all such matters, when not otherwise directed by the finance committee or board of directors." The drafts in question, were drawn and negotiated for the purpose of procuring money for the use of the bank and to enable it to carry on its legitimate and usual business. The cashier of a bank is its executive officer, and it is well settled that as incident to his office, he has authority, implied from his official designation as cashier, to borrow money for, and to bind the bank for its repayment, and the assumption of such authority by the cashier, will conclude the bank as against third persons who have no notice of his want of authority in the particular transaction, and deal with him upon the basis of its existence.3 The negotiation of the drafts in this case by the cashier, was within his authority. The power to borrow being admitted, the power to secure the loan by pledge of the property or funds of the bank (in the absence of any statutory restraint), in the ordinary course of business, would seem to be a necessary inference from the primary powers, and this is recognized in the cases to which we have referred. The exigency of the bank when the agreement in question was made, rendered it of the utmost importance to its interests to prevent the protest of the drafts, and the authority of the cashier to make the agreement of June 10, 1878, giving to Donnell, Lawson & Co., a lien upon any deposit in their hands, for their security, if at all doubtful, irrespective of the by-laws, was ample under the comprehensive grant of authority thereby conferred." The authority to borrow money, while generally recognized, in the opinion of the court in the above case, was authorized because it was a necessity. Where a run threatens the bank or its drafts are liable to go to protest, its cashier has the power when authorized by the directors to temporarily borrow money to pay depositors or to protect the credit of the bank. Where the statute of a State restrains a banking corporation, prohibiting it from borrowing money, its officers have no authority, impliedly or otherwise, to enter into such contracts. A bank may, by statute, be prohibited from borrowing money of another bank, payable at a future day certain.1 Where the Constitution or the statute of a State provides that a corporation shall not create a debt in excess of its capital paid up and where a banking corporation derives all its authority through incorporation under such general laws, the directors have no authority to create a debt in excess of its paid up capital. 3 Curtis r. Leavitt, 15 N. Y. 9, Barnes v. Ontario Bank, 19 id. 152. 4 Commonwealth v. Bank of Mutual Redemption, 4 Allen (Mass.) 1. CHAPTER XXVI. BANKS DEALING IN STOCKS AND BONDS. § 233. National banks, power limited. A national bank has no power to deal as an agent in stocks and bonds. It is also prohibited from buying or selling them upon commission. Such transactions and operations are not deemed incidental to the national banking business. A national bank has no charter, statutory or incidental powers to act as a broker or agent in the purchase of bonds and stocks. Mr. Justice Mercur, in Bank of Allerton v. Hoch, 89 Pa. St. 324, says: "It is a well recognized law, that a national bank is not, by its charter, authorized to act as a broker or agent in the purchase of bonds and stocks. Its specified powers given by Statute nor its incidental powers necessary to carry on the business of banking, do not extend to the transaction of such business.1 When the paper on its face shows the transaction not to be within the usual course of business of the bank, it is not binding on the bank, although signed by the president thereof, as such officer. He is the executive agent of the board of directors within the ordinary business of the bank, but cannot bind it by a contract outside thereof, without special authority. I do not understand these general rules to be denied." The power to deal in stocks is not expressly prohibited by the Statute, but such a prohibition is implied from the failure to grant the power. The Supreme Court of the United States, in the case of First National Bank of Charlotte v. National Exchange Bank of Baltimore, 92 U. S. 122, holds that a national bank may accept stock in payment and satisfaction of a doubtful debt, with a view to a subsequent sale or conversion into money of said stocks so as to make good or reduce an anticipated loss. 1 First National Bank of Charlotte v. Exchange Bank, 2 Otto (U. S.) 122: Fowler r. Scully, 22 P. F. |