1. A national bank, organized under the National Banking Act of
1864, cannot, even by provisions framed with a direct view to that
effect in its articles of association and by direct bylaws, acquire
a lien on its own stock held by persons who are its debtors.
2. Where a thing is against the spirit and policy of a statute
(as this sort of lien is here declared to have been contrary to the
spirit and policy of the Banking Act of 1864), a permission in
favor of it cannot be implied from general expressions, even
supposing that, liberally construed, they embraced the case.
3. A bylaw giving to a bank a lien on stock of its debtors is
not "a regulation of the business of the bank, or a regulation for
the conduct of its affairs" within the meaning of the National
Banking Act of 1864, and therefore not such a regulation as under
the said act national banks have a right to make.
Congress in February, 1863, passed an act authorizing voluntary
associations for the purpose of banking, the act by which a system
of national banks was established. [
Footnote 1]
The eleventh and twelfth sections of the act gave to these
associations power to make bylaws, not inconsistent with the
provisions of the act for the management of their property, the
regulation of their affairs, and
for the transfer of their
stock.
The thirty-sixth section enacted:
"No shareholder in any association under this act shall have
power to transfer or sell any share held in his own right so long
as he be liable, either as principal debtor, surety, or otherwise
to the association for any debt which shall have become due and
remained unpaid."
In June, 1864, Congress passed a new act on the same subject of
the national banks. [
Footnote
2] This new act retained or reenacted many or most of the
provisions of the old one,
Page 85 U. S. 590
but did not retain or reenact the thirty-sixth section
above-quoted. On the contrary, the new act by its thirty-fifth
section enacted,
"That no association shall make any loan or discount on the
security of the shares of its own capital stock, nor be the
purchaser nor holder of any such shares, unless such security or
purchase shall be necessary to prevent loss upon a debt previously
contracted in good faith."
The new act in terms repealed the old act. It provided,
however,
"That such repeal shall not affect any appointments made, acts
done, or proceedings had, or the organization, acts or proceedings
of any association organized or in the process of organization
under the act aforesaid."
And provided also,
"That all such associations so organized or in process of
organization, shall enjoy all the rights and privileges granted,
and be subject to all the duties, liabilities, and restrictions
imposed by this act . . . without prejudice to any right acquired .
. . under any act hereby repealed."
The new Banking Act -- that, namely, of 1864 -- after providing
by its fifth section that associations for carrying on banking
might be formed
"by any number of persons not less than five, who shall enter
into articles of association which shall specify, in general terms,
the object for which the association is formed,
and may contain
any other provisions not inconsistent with the provisions of this
act which the association may see fit to adopt for the regulation
of the business of the association, and the conduct of its
affairs,"
enacted:
"SECTION 8. That every association formed pursuant to the
provisions of this act shall from the date of the execution of its
organization certificate be a body corporate . . . and its board of
directors shall have power to define and regulate by bylaws
not
inconsistent with the provisions of this act, the manner in
which its stock shall be transferred . . . , its general business
conducted, and all the privileges granted by this act to
associations organized under it shall be exercised and enjoyed.
"
Page 85 U. S. 591
"SECTION 12. That the capital stock of any association formed
under this act shall be divided into shares of $100 each, and be
deemed personal property and transferable on the books of the
association in such manner as may be prescribed in the bylaws or
articles of association."
Under this said new act, a bank styled the National Eagle Bank
was formed at Boston on the 29th of March, 1865. The articles of
association constituting it, referring to the Act of 1864,
contained a provision that the directors of the association
shall
"Have the power to make all bylaws that it may be proper and
convenient for them to make under said act, for the general
regulation of the business of the association, and the entire
management and administration of its affairs,
which bylaws may
prohibit, if the directors so determine, the transfer of stock
owned by any stockholder who may be liable to the association,
either as principal debtor or otherwise, without the consent of the
board."
Subsequently, on the 22d of November, 1871, at a meeting of the
directors, the following bylaw was adopted:
"In pursuance of one of the articles of association, and to
carry the same into effect, and in the exercise of an authority
conferred by an act under which the bank was organized, to define
and regulate the manner in which its stock may be transferred, it
is hereby declared,"
" All debts actually due and payable to the bank (days of grace
for payment being passed) by a stockholder, as principal debtor or
otherwise, requesting a transfer must be satisfied before such
transfer shall be made, unless the board of directors shall direct
to the contrary."
And on the 7th of December, 1871, this bylaw was amended by
adding the words,
"And no person indebted to the bank shall be allowed to sell or
transfer his or her stock without the consent of a majority of the
directors, and this whether liable as principal or surety, and
whether the debt or liability be due or not."
Of this bank one Clapp became a stockholder, purchasing one
hundred and fifty shares. He afterwards (in July,
Page 85 U. S. 592
August, September, and October) borrowed money from the bank on
several notes, having different dates of maturity. On the 8th of
November, he failed to pay some of it then due, and on the 19th of
January, 1872, was decreed a bankrupt therefor. His trustee in
bankruptcy, one Bullard, claiming the stock as part of the assets
in bankruptcy, demanded of the bank a transfer of it to him. The
bank, asserting a lien to the extent of the notes held by it,
refused to allow the transfer asked for. Certain of the notes given
in October, 1871, had not fully matured when Bullard made his
application.
Bullard now brought suit against the bank for refusing to allow
the transfer asked for. The judges in the court below differed in
opinion as to what judgment should be given, and certified to this
Court for answer these questions:
First. Whether a national bank organized under and
controlled by the Act of 1864 can acquire a valid lien upon the
shares of its stockholders by the articles of association or
bylaws, as proved in this case?
Second. Whether if such articles of association and
bylaws, or both, created any valid lien upon the shares of the
stockholders in a national bank organized under the Act of 1864,
such lien attached to the shares before the time when there was an
existing debt, from the stockholders to the bank, due and
unpaid?
Third. Whether the National Eagle Bank is entitled to
hold the interest of Clapp in the stock mentioned by way of lien or
security for all or any of the notes mentioned?
Page 85 U. S. 593
MR. JUSTICE STRONG delivered the opinion of the Court.
The extent of the powers of national banking associations is to
be measured by the Act of Congress under which such associations
are organized. The fifth section of that act enacts that the
articles of association
"shall specify in general terms the object for which the
association is formed, and may contain any other provisions, not
inconsistent with the provisions of this act, which the association
may see fit to adopt for the regulation of the business of the
association and the conduct of its affairs."
And the eighth section of the same act empowers the board of
directors "to define and regulate by bylaws, not inconsistent with
the provisions of this act, the manner in which its stock shall be
transferred." There are other powers conferred by the act, but
unless these confer authority to make and enforce a bylaw giving a
lien on the stock of debtors to a banking association, very plainly
it has not been given.
Page 85 U. S. 584
What, then, were the intentions of Congress respecting the
powers and rights of banking associations? The act of 1864 was
enacted as a substitute for a prior act, enacted February 25, 1863,
and in many particulars the provisions of the two acts are the
same. But the earlier statute, in its thirty-sixth section,
declared that no shareholder in any association under the act
should have power to transfer or sell any share held in his own
right so long as he should be liable, either as principal debtor,
surety, or otherwise, to the association for any debt which had
become due and remained unpaid.
This section was left out of the substituted act of 1864, and it
was expressly repealed. Its repeal was a manifestation of a purpose
to withhold from banking associations a lien upon the stock of
their debtors. Such was the opinion of this Court in
Bank v.
Lanier. [
Footnote 3] In
that case, it appeared that a bank had been organized under the Act
of 1863, and that it had adopted a bylaw, which had not been
repealed, that the stock of the bank should be assignable only on
its books, subject to the provisions and restrictions of the Act of
Congress, among which provisions and restrictions was the one
contained in the thirty-sixth section, that no shareholder should
have power to sell or transfer any share so long as he should be
liable to the bank for any debt due and unpaid. And when the bank
was sued for refusing to permit a transfer of stock, it set up in
defense that the stockholder was indebted to it and that under the
bylaw he had no right to make the transfer. But this Court
said,
"Congress evidently intended, by leaving out of the Act of 1864
the thirty-sixth section of the Act of 1863, to relieve the holders
of bank shares from the restrictions imposed by that section. The
policy on the subject was changed, and the directors of banking
associations were, in effect, notified that thereafter they must
deal with their shareholders as they dealt with other people. As
the restrictions, fell so did that part of the bylaw relating to
the subject fall with them. "
Page 85 U. S. 595
But this could have been only because the restriction was
regarded as inconsistent with the policy and spirit of the act of
1864. It cannot truly be said that the bylaw was founded upon the
thirty-sixth section, though it doubtless referred to that section.
It was not in that the power to make bylaws was given. The eleventh
section was the one which authorized associations to make bylaws,
not inconsistent with the provisions of the act, for the management
of their property, the regulation of their affairs, and for the
transfer of their stock, and that was substantially reenacted in
the act of 1864. Moreover, the sixty-second section of the latter
act, while repealing the act of 1863, enacted that the repeal
should not affect any appointments made, acts done, or proceedings
had, or the organization, acts, or proceedings of any association
organized or in the process of organization under the act
aforesaid, and gave to such associations all the rights and
privileges granted by the act, and subjected them to all the
duties, liabilities, and restrictions imposed by it. It is
therefore manifest that it was not the repeal of the thirty-sixth
section which caused the bylaw to fall. It fell because it was
considered a regulation inconsistent with the new Currency Act, the
policy of which was to permit no liens in favor of a bank upon the
stock of its debtors. It is impossible, therefore, to see why the
decision in the case of
Bank v. Lanier does not require
that the certified question should be answered in the negative.
An attempt was made in the argument to distinguish that case
from the present by the fact that the articles of association of
the Eagle Bank contain the provision to which we have referred --
namely that the directors should have the power to make bylaws
which may prohibit the transfer of stock owned by any stockholder
who may be a debtor to the association without the consent of the
board, a provision which, it is said, the associates were justified
in making by the fifth section of the act of 1864. The argument is
that, though the act of Congress does not itself create a lien on a
debtor's stock (as did the act of 1863), it does by the words of
its fifth section authorize the creation of such a lien by
Page 85 U. S. 596
the articles of association, and by bylaws made under them. This
leads to the inquiry whether the fifth section does authorize any
provision in the articles of association that bylaws may be made
prohibiting the transfer of stock of debtors to a bank, for if it
does not, the foundation of the argument is gone. Certainly there
is no express grant of authority to make such a prohibition
contained in that section. There is no specification of such a
power. And if such a grant could be implied from the words used by
Congress, the implication would be in direct opposition to the
policy indicated by the repeal of the thirty-sixth section of the
act of 1863, and the failure to reenact it, as well as by the
provisions of the thirty-fifth section, which prohibit loans and
discounts by any bank on the security of the shares of its own
capital stock and prohibit also every bank from purchasing or
holding any such shares unless such security or purchase shall be
necessary to prevent loss upon a debt previously contracted in good
faith. Surely an implication is inadmissible which contradicts
either the letter or the spirit of the act. Surely when the statute
has prohibited all express agreements for a lien in favor of a bank
upon the stock of its debtors, there can be no implication of a
right to create such a lien from anything contained in the fifth
section. But were there no such policy manifest in the act, the
words of the fifth section would not bear the meaning attributed to
them. The articles of association required by that section to be
entered into must specify in general terms the object for which the
association is formed, and may contain any other provisions, not
inconsistent with the provisions of the act, which the association
may see fit to adopt
for the regulation of its business and the
conduct of its affairs. To us it seems that a bylaw giving to
the bank a lien upon its stock as against indebted stockholders
ought not to be considered as a regulation of the business of the
bank or a regulation for the conduct of its affairs. That Congress
did not understand the section as extending to the subject of stock
transfers is very evident in view of the fact that in another part
of the statute express provision was made for such transfers.
Page 85 U. S. 597
The eighth section empowers the board of directors of every
banking association to define and regulate by bylaws, not
inconsistent with the provisions of the act, the manner in which
its stock shall be transferred. This would be superfluous if the
power had been previously given in the fifth section. That Congress
considered it necessary to make such an enactment is convincing
evidence that they thought it had not elsewhere been made. Whatever
power, therefore, the directors of a bank possess to regulate
transfers of its stock, they derive not from the fifth section of
the act and not from the articles of association, but from the
eighth and twelfth sections by express and direct grant. It cannot,
therefore, be maintained that the present case is not governed by
the decision made in
Bank v. Lanier, because the articles
of association for the Eagle Bank authorized the directors to make
a bylaw restricting the transfer of stock. In that case, there was
a bylaw prohibiting the transfer, as in this. Independent of the
thirty-sixth section of the Act of 1863, there was as much
authority to make and enforce such a bylaw as is given by the Act
of 1864. The eleventh and twelfth sections of the Act of 1863
enacted that associations formed under it might make bylaws, not
inconsistent with the laws of the United States or the provisions
of the act, for the transfer of their stock, and that the stock
should be transferable on the books of the association "in such
manner as might be prescribed in the bylaws or articles of
association." These powers given to the associates under that act
are quite as large as those given by the act of 1864. Yet this
Court held that after the passage of the latter act, a bylaw giving
a lien upon a debtor's stock was inconsistent with its provisions
and invalid. Of course, if the act destroyed an existing bylaw, it
must prevent the adoption of a new one to the same effect.
We hold, therefore, on the authority of
Bank v. Lanier,
that the first question certified must be answered in the negative,
and consequently the same answer must be given to the other two
questions.
Answered in the negative.
[
Footnote 1]
12 Stat. at Large 665.
[
Footnote 2]
13
id. 99.
[
Footnote 3]
78 U. S. 11 Wall.
369.
MR. JUSTICE CLIFFORD, dissenting:
I dissent from the judgment and opinion of the Court in this
case for the reasons assigned in the opinion delivered by me in the
case of
Knight v. Bank, decided in the Circuit Court,
Rhode Island District, June Term 1871, which I still believe to be
correct, and consequently refer to that case as a full expression
of the reasons of my dissent in the present case.
