violates its charter. But the court, in discussing the facts and the question presented in this case, says:

"In view of all the circumstances disclosed in the case made, seeing that the agency in question was probably established without any deliberate intention to violate the law and that the same has been discontinued, we shall not feel disposed, as at present advised, to declare judgment of forfeiture against the defendants, but in the exercise of that broad discretion with which we are clothed, to adapt the judgment to the circumstances of the case; admonishing those interested in the bank to see to it, that in the meantime, and for all time to come, they so conduct the affairs of the institution as not to render themselves obnoxious to legal proceedings. The public demand of us and of all concerned in the administration of the law, the greatest vigilance in detecting and punishing in the most exemplary manner those who can and do wield so much power, when that power is so exerted as to be productive of evil instead of good. And, while the judgment in this case may not deprive the defendants of important privileges, a repetition of the offense will be visited with the severest penalties of the law."

The court very discreetly in this case looked into the motive and intention of the directors of the bank, and when it found that there was no willful violation of the law, it withheld its power of punishment.

In a very early case reported in 5 Ohio St., the court held that it was in violation of the act which was passed by the Legislature to incorporate the State bank of Ohio, etc., for one of the independent banks chartered by the original bank, to make loans to a director before the adoption by the stockholders of by-laws to regulate the liabilities of directors, and that such violation was a cause for forfeiture of the bank's charter.5

§ 322. Taking usurious interest held to be a violation of charter. In the case of Fleckner v. United States Bank, 8 Wheat. 338, the court holds, that the statute incorporating the bank of the United States does not avoid securities on which usurious

5 The State ex rel. the Attorney-General v. Seneca County Bank, 5 Ohio St. 170.

interest may have been taken, and the usury cannot be set up as a defense to a note on which it is taken, it is merely a violation of the charter, for which a remedy may be applied by the Government.

§ 323. Bank may be indicted for taking usurious interest.

In the case of State v. First National Bank of Clarke, 51 N. W. Rep. 587, it is held, that a national bank may be indicted by the State for taking usurious interest, also that the State law which makes the taking of illegal interest a misdemeanor, and in case of a corporation punishable by the imposing of a fine, is not necessarily an interference with the proper discharge of the banks' duties to the Government as will make such requirement invalid.

Where the statute of a State prescribes that all the capital stock of a corporation shall be subscribed, a bank has no authority to commence doing business until said stock has all been subscribed. And the State may bring an action to forfeit a charter where the corporation commences business before the full capital stock is subscribed.

§ 324. Directors embezzling funds of bank-Mismanagement. In the case of the Bank Commissioners v. Rhode Island Central Bank, 5 R. I. 12, where the commissioners brought an action to enjoin the bank from further doing business on the ground averred in the application, that the bank "is so managing its concerns that the public or those having funds in its custody are in danger of being defrauded thereby." court upon the hearing of the case found that there was gross and illegal management and danger of fraud growing out of such mismanagement, and it, therefore, entered a decree appointing a receiver and perpetually enjoined the bank from further exercising the powers and franchises conferred by its charter.

§ 325. Wrongful act of a single director.

The

The wrongful act of a single director or officer of the bank does not constitute an offense upon which an application will lie upon the part of the State.

People v. Nat. Sav. Bank, 129 Ill. 618, 11 N. E. 170.

But where the board of directors sanction and have knowledge of the facts of an officer or a director, which are in violation of law, it is imputed to and becomes the act of the bank.

§ 326. Bank doing business not authorized.

A bank incorporated to conduct a commercial banking business is restricted by the law to that class of business and cannot conduct a savings bank business, or a mercantile business, or a real estate business. Likewise a savings bank incorporated for the single purpose of conducting a savings bank business, with no other power provided for by its charter, cannot conduct a commercial banking business or buy and sell commercial paper. It is confined by the law in the conduct of its business to the purpose for which it is incorporated. And a corporation that conducts a business not authorized, its charter may be revoked.

Where the statute requires that a certain number of persons must sign and acknowledge the articles of incorporation, and where a corporation attempts to do business, not having complied with the law, the State may forfeit its charter.8

§ 327. Directors liable for losses resulting from violation of law. The directors of a national bank are liable in an action for damages on account of their personal acts, resulting in a violation of a law, and a suit may be brought, though the Comptroller of the Currency has not procured a forfeiture of the charter.9

But where a receiver has been appointed to take charge of the affairs of the bank, it is held that the action should be brought by him.10

Where the receiver neglects or refuses to bring an action against such directors it may be brought by a shareholder."

CHAPTER XLIII.

INSOLVENCY.

§ 328. Insolvency defined.

66

Insolvency means, simple inability to pay, as debts should become payable, whereby the debtor's business would be broken up."

The deposits in a commercial bank are held to be debts due by the bank and are payable upon demand. Therefore, under the above definition, any commercial banking corporation upon failure to pay a deposit upon demand made upon it, would be declared insolvent.

The general rule is laid down that a bank is insolvent when unable to meet its liabilities as they become due in the ordinary course of business, and when it cannot pay its deposits on demand in accordance with its promise.

The rule is supported and held to be the law by many of the States.

In Illinois, the court holds "insolvency, as applied to a person, firm, or corporation, engaged in trade, is its inability to pay debts as they fall due in the usual course of business.'

In Indiana, the court in its construction of a statute, which makes it embezzlement for a banker to receive a deposit when insolvent from anyone not indebted to the bank, whereby the deposit so made shall be lost to the depositor, says:

"When a deposit of money is made, the banker in contemplation of law, has money on hand to the full amount of the sum deposited, ready to deliver when called for, and his contract with the depositor is to refund that same amount on demand. When it is not paid back on demand, as contemplated by the agreement between the banker and the depositor and this because of the insolvency of the banker, and his consequent inability to refund the amount of the sum deposited then, within the true intent and meaning of this statute, which is entitled, An Act for the protection of bank depositors, the deposits so made, or in other words of the statute, the sum 1 Atwater v. American Express Bank, 152 Ill. 605.

fraudulently taken, is lost to the depositor. The crime created by the statute is consummated when the insolvent banker fraudulently receives the deposit, for the statute declares that such banker so receiving such deposit shall be deemed guilty of the embezzlement of the sum so fraudulently taken."

In New York, the court in the case of Levingston v. The Bank of New York, 26 Barb. 305, says:

"The bank we are told is insolvent, but how is that shown? The plaintiffs' 'information and belief' is surely no evidence, especially when in direct contradiction to the regular official reports of the bank, which being made under oath and published by express direction of law are, it is presumed, entitled to at least as much weight, judicially, as the unknown and unsworn informant of the plaintiff.

"We are left then to the mere legal inference of insolvency, resulting from the suspension of specie payments by a bank of issue.

"Is such the necessary inference from suspension, no matter what the bank's assets may amount to, in cases where suspension is general and nearly universal throughout the State and every other section of the Union? It seems to me that it is not. The statute of 1849, which being subsequent in time and especially directed to the case of banks of issue and covering precisely the same ground, would seem to supersede on these points the older enactments. This statute provides that, upon proof by the abortive return of an execution or by other satisfactory evidence before it is returned, that an execution for any debt or liability exceeding $100' cannot be satisfied out of any property of the bank thus sued, the judge'shall at once make an order declaring the insolvency of such corporation or association;' to be followed, of course, by the appointment of a receiver to wind up its business. Under another section, however, a creditor without waiting the first twenty days or the subsequent sixty days, if his demand exceeds $100, may at any time after ten days from the refusal of payment, apply for an order enjoining the bank and declaring it insolvent, and on such application the judge, if in his opinion on the facts presented it be expedient, in order to prevent fraud or injustice,' may grant an order for a temporary injunction. After which, on hearing of the parties on