ERROR TO THE CIRCUIT COURT OF APPEALS FOR THE EIGHTH CIRCUIT.
MR. JUSTICE McKENNA, after making the above statement, delivered the opinion of the court.
1. To sustain the motion to dismiss, it is contended that the jurisdiction of the case depends on diversity of citizenship, and hence that the judgment of the Circuit Court of Appeals is final. But one of the defendants (plaintiff in error), though a citizen of a different State from the plaintiff in the action
(defendant in error), is also a receiver of a national bank appointed by the Comptroller of the Currency and is an officer of the United States, and an action against him is one arising under the laws of the United States. Kennedy v. Gibson, 8 Wall. 498; In re Chetwood, 165 U.S. 443; Sonnentheil v. Christian Moerlein Brewing Co., 172 U.S. 401. It is, however, urged that such appointment was not shown. It was not explicitly alleged, but we think that it sufficiently appeared, and the motion to dismiss is denied.
2.Against the correctness of the action of the Circuit Court in instructing a verdict for the New York bank, it is urged that the discounting of the notes in controversy was for the personal benefit of Allis, and that the New York bank was charged with notice of it because of the nature of the transaction, the form of the notes and the order of the endorsements, and also because notice was a question of fact to be decided by the jury on the evidence.
It is also contended that the receiver was entitled to a judgment on the set-off. We will examine each of the propositions.
1. The argument to sustain this is that the facts detailed constitute borrowing money, and that borrowing is out of the usual course of legitimate banking business; and one who loans must at his peril see that the officer or agent who offers to borrow for a bank has special authority to do so. But is borrowing out of the usual course of legitimate banking business?
Banking in much, if not in the greater part of its practice, is in strict sense borrowing, and we may well hesitate to condemn it as illegitimate, or regard it as out of the course of regular business, and hence suspicious and questionable. "A bank," says Morse, (sec. 2, Banks and Banking,) "is an institution usually incorporated with power to issue its promissory notes intended to circulate as money (known as bank notes); or to receive the money of others on general deposit to form a joint fund that shall be used by the institution for its own benefit, for one or more of the purposes of making temporary loans and discounts; of dealing in notes, foreign and domestic
bills of exchange, coin, bullion, credits and the remission of money; or with both these powers, and with the privileges in addition to these basic powers, of receiving special deposits and making collections for the holders of negotiable paper, if the institution sees fit to engage in such business."
This defines the functions: what relations are created by them? Manifestly those of debtor and creditor -- the bank being as often the one as the other.
A banker, Macleod says, is a trader who buys money, or money and debts, by creating other debts, which he does with his credit -- exchanging for a debt payable in the future one payable on demand. This, he says, is the essential definition of banking. "The first business of a banker is not to lend money to others but to collect money from others." (Macleod on Banking, vol. 1, 2d ed. pp. 109, 110.) And Gilbart defines a banker to be "a dealer in capital, or more properly a dealer in money. He is an intermediate party between the borrower and the lender. He borrows of one party and lends to another." (Gilbart on Banking, vol. 1, p. 2.)
The very first banking in England was pure borrowing. It consisted in receiving money in exchange for which promissory notes were given payable to bearer on demand, and so essentially was this banking as them understood, that the monopoly given to the Bank of England was secured by prohibiting any partnership of more than six persons "to borrow, owe or take up any sum or sums of money on their bills or notes payable at demand." And it had effect until 1772, (about thirty years,) when the monopoly was evaded by the introduction of the deposit system. The relations created are the same as those created by the issue of notes. In both a debt is created -- the evidence only is different. In one case it is a credit on the banker's books; in the other his written promise to pay. In the one case he discharges it by paying the orders (cheques) of his creditor; in the other by redeeming his promises. These are the only differences. There may be others of advantage and ultimate effect, but with them we are not concerned.
But it may be said these views are elementary and do not
help to a solution of the question presented by the record, which is not what relation a bank has or what power its officers may be considered as having in its transactions with the general public, but what is its relation and what power its officers may be considered as having in its transactions with other banks. Indeed, the question may be even narrower -- not one of power, but one of evidence. If so, the views expressed are pertinent. They show the basis of credit upon which banks rest, and the necessity of having power to support it; it may be to extent it. Borrowing is borrowing, no matter from whom. Discounting bills and notes may require rediscounting them; buying bills and notes may require selling them again. Money may not be equally distributed. It is a bank's function to correct the inequality. The every object of banking is to aid the operation of the laws of commerce by serving as a channel for carrying money from place to place, as the rise ...