The Merchants National Bank of- Cincinnati is a corporation organized under the national banking laws of the United States, and The Elsmere Syndicate was a partnership consisting of forty shares, each partner holding one or more shares, and each share evidenced by a certificate as shown in the foregoing statement of facts, and which certificates were transferable on the books of .the syndicate, and such transfers were intended to make the transferee a partner in the syndicate, instead of the transferor, without a dissolution of the partnership.
The circuit court finds that the bank became owner by transfer of nine shares of this syndicate or partnership, which shares were taken by the bank to secure the payment of a large indebtedness owing to said bank for loans by it made to one of its customers in the usual course of business.
The bank in accepting said transfer evidently regarded it as a collateral, but it so treated the shares, and so transacted the business as to said shares, that the circuit court found that the bank became the owner of the shares, and there was evidence warranting such finding. The case must, therefore, be determined upon the theory that the bank held the shares'as owner and not merely as collateral; the purpose of such ownership, however, being to secure the ultimate payment of said indebtedness out of the proceeds of said shares, and to that end it was necessary that the property of said syndicate should be put into such condition as to yield the most money, and this is what the trustees of the syndicate attempted to do; and in so doing debts were incurred which the syndicate was unable to pay, and after all its property had been consumed in paying said debts, a large debt still remained.
The restrictions contained in our banking laws are for'the purpose of securing the solvency and stability of the banks; [713]*713and the statutes should be so construed and the law administered as to reasonably bring about that end. The wealth and prosperity of the people depend, to a large extent, upon the soundness of the banks and the safety of the currency. The purpose of the government is to foster and encourage sound banking and preserve a safe currency; and it therefore allows national banks to collect claims due them, even though a statute or a rule of law of equity may have been infringed in the incurring of the debt. The punishment for such infringement must come from the federal authorities, in a proceeding instituted for that purpose, and not by a denial by the courts of the right of collection as a punishment.
It is largely for the purpose of maintaining the solvency of banks that a national bank is allowed to collect loans secured by mortgage in violation of Section 5137, U. S. Revised Statutes. National Bank v. Matthews, 98 U. S., 621; National Bank v. Whitney, 103 U. S., 99.
It is to the same end that the solvent shareholders in a national bank can not be compelled to stand good for the individual liability of the insolvent ones, and that the loss caused by such insolvency must be borne by the creditors of the bank. United States v. Knox, 102 U. S., 422; Section 5151, U. S. Revised Statutes.
Hence it is that while banks are hedged about with restrictive laws as to making loans and discounts, so as to incur no bad debts, the most liberal provisions are made for securing debts already incurred, by the taking of such collateral as may seem best in the judgment of the officers of the bank. Such collateral may become the property of the bank in course of enforcing the security. And while a national bank can not lawfully purchase and hold shares in a corporation as an investment (California Bank v. Kennedy, 167 U. S., 362), it may accept the stock of a corporation as collateral security for a loan, and may thereafter, in realizing upon the collateral, become the owner thereof, and liable for individual liability the same as any other stockholder (National Bank v. Case, 99 U. S., 628). This case seems to have been overruled in Scott v. Deweese, 181 U. S., 217, where the court say, at the close of the opinion:
‘‘Whether a national bank may not be deemed a shareholder, within the meaning of Section 5151, if it holds shares of another [714]*714bank as security for previous indebtedness, is a question suggested in former cases, but not decided, and upon which in this case, no opinion need be expressed.”
But conceding that a national bank may take shares in another bank as collateral security for a new loan, or to secure the payment of an old one, and that it may become the owner of such shares in attempting to realize on such collateral, and that it may thereafter be liable to creditors on its individual liability as such shareholder, yet that falls far short of holding a national bank liable as a partner in a partnership, and liable as such partner for, not only its own share of the debts of the firm, but also, the debts of its co-partners. The individual liability of a holder of shares in a national bank is in its nature several and not joint (United States v. Knox, 102 U. S., 422), while the liability of a partner for partnership debts is, as to creditors, usually held to be joint, but some cases hold it to be joint and several.
The individual liability is' an inseparable incident to national bank shares, for which the lawful holder is liable; but this liability is his own debt, and attaches to a specific several article of his property — the share of stock — and is therefore limited, and can not exceed the face value of the stock. But in the case of shares in a partnership, the liability of a partner is not for a specific amount adhering to his share as an incident and limited to a certain amount, but the only limitation is the whole indebtedness of the firm, and which in many cases would far exceed the entire resources of the bank, and drive it into insolvency. The purpose of allowing a national bank to take collateral security is to enhance its solvency, and not to permit it to enter into wild speculations as a partner under the pretext of enforcing its rights as a pledgee or owner.
“It is settled that the United States statutes relative tfc, national banks constitute the measure of the authority of such corporations, and that they can not rightfully exercise any powers except those expressly granted, or which are incidental to carrying on the business for which they are established (Logan County Bank v. Townsend, 139 U. S., 67, 73).” California Bank v. Kennedy, 167 U. S., 362, 366.
To become a member of a partnership in any. manner or for any purpose, is not incidental to carrying on the business for [715]*715which national banks are established, and is certainly not expressly granted. The power therefore does not exist. The liabilities for which a national bank must respond, are such only as are created or incurred by its officers, acting in the capacity of officers of the bank alone, and not in connection with other trustees or officers of other companies. "Were it otherwise the other trustees or officers might outnumber the officers of the bank, and impose burdens on the bank which would ruin it; and thus the bank would be controlled, not by its officers, but by outsiders. The officers of a bank can not delegate their powers to others. It is therefore clear that a national bank can not be a partner in a co-partnership, and can not incur a partnership liability.
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The Merchants National Bank of- Cincinnati is a corporation organized under the national banking laws of the United States, and The Elsmere Syndicate was a partnership consisting of forty shares, each partner holding one or more shares, and each share evidenced by a certificate as shown in the foregoing statement of facts, and which certificates were transferable on the books of .the syndicate, and such transfers were intended to make the transferee a partner in the syndicate, instead of the transferor, without a dissolution of the partnership.
The circuit court finds that the bank became owner by transfer of nine shares of this syndicate or partnership, which shares were taken by the bank to secure the payment of a large indebtedness owing to said bank for loans by it made to one of its customers in the usual course of business.
The bank in accepting said transfer evidently regarded it as a collateral, but it so treated the shares, and so transacted the business as to said shares, that the circuit court found that the bank became the owner of the shares, and there was evidence warranting such finding. The case must, therefore, be determined upon the theory that the bank held the shares'as owner and not merely as collateral; the purpose of such ownership, however, being to secure the ultimate payment of said indebtedness out of the proceeds of said shares, and to that end it was necessary that the property of said syndicate should be put into such condition as to yield the most money, and this is what the trustees of the syndicate attempted to do; and in so doing debts were incurred which the syndicate was unable to pay, and after all its property had been consumed in paying said debts, a large debt still remained.
The restrictions contained in our banking laws are for'the purpose of securing the solvency and stability of the banks; [713]*713and the statutes should be so construed and the law administered as to reasonably bring about that end. The wealth and prosperity of the people depend, to a large extent, upon the soundness of the banks and the safety of the currency. The purpose of the government is to foster and encourage sound banking and preserve a safe currency; and it therefore allows national banks to collect claims due them, even though a statute or a rule of law of equity may have been infringed in the incurring of the debt. The punishment for such infringement must come from the federal authorities, in a proceeding instituted for that purpose, and not by a denial by the courts of the right of collection as a punishment.
It is largely for the purpose of maintaining the solvency of banks that a national bank is allowed to collect loans secured by mortgage in violation of Section 5137, U. S. Revised Statutes. National Bank v. Matthews, 98 U. S., 621; National Bank v. Whitney, 103 U. S., 99.
It is to the same end that the solvent shareholders in a national bank can not be compelled to stand good for the individual liability of the insolvent ones, and that the loss caused by such insolvency must be borne by the creditors of the bank. United States v. Knox, 102 U. S., 422; Section 5151, U. S. Revised Statutes.
Hence it is that while banks are hedged about with restrictive laws as to making loans and discounts, so as to incur no bad debts, the most liberal provisions are made for securing debts already incurred, by the taking of such collateral as may seem best in the judgment of the officers of the bank. Such collateral may become the property of the bank in course of enforcing the security. And while a national bank can not lawfully purchase and hold shares in a corporation as an investment (California Bank v. Kennedy, 167 U. S., 362), it may accept the stock of a corporation as collateral security for a loan, and may thereafter, in realizing upon the collateral, become the owner thereof, and liable for individual liability the same as any other stockholder (National Bank v. Case, 99 U. S., 628). This case seems to have been overruled in Scott v. Deweese, 181 U. S., 217, where the court say, at the close of the opinion:
‘‘Whether a national bank may not be deemed a shareholder, within the meaning of Section 5151, if it holds shares of another [714]*714bank as security for previous indebtedness, is a question suggested in former cases, but not decided, and upon which in this case, no opinion need be expressed.”
But conceding that a national bank may take shares in another bank as collateral security for a new loan, or to secure the payment of an old one, and that it may become the owner of such shares in attempting to realize on such collateral, and that it may thereafter be liable to creditors on its individual liability as such shareholder, yet that falls far short of holding a national bank liable as a partner in a partnership, and liable as such partner for, not only its own share of the debts of the firm, but also, the debts of its co-partners. The individual liability of a holder of shares in a national bank is in its nature several and not joint (United States v. Knox, 102 U. S., 422), while the liability of a partner for partnership debts is, as to creditors, usually held to be joint, but some cases hold it to be joint and several.
The individual liability is' an inseparable incident to national bank shares, for which the lawful holder is liable; but this liability is his own debt, and attaches to a specific several article of his property — the share of stock — and is therefore limited, and can not exceed the face value of the stock. But in the case of shares in a partnership, the liability of a partner is not for a specific amount adhering to his share as an incident and limited to a certain amount, but the only limitation is the whole indebtedness of the firm, and which in many cases would far exceed the entire resources of the bank, and drive it into insolvency. The purpose of allowing a national bank to take collateral security is to enhance its solvency, and not to permit it to enter into wild speculations as a partner under the pretext of enforcing its rights as a pledgee or owner.
“It is settled that the United States statutes relative tfc, national banks constitute the measure of the authority of such corporations, and that they can not rightfully exercise any powers except those expressly granted, or which are incidental to carrying on the business for which they are established (Logan County Bank v. Townsend, 139 U. S., 67, 73).” California Bank v. Kennedy, 167 U. S., 362, 366.
To become a member of a partnership in any. manner or for any purpose, is not incidental to carrying on the business for [715]*715which national banks are established, and is certainly not expressly granted. The power therefore does not exist. The liabilities for which a national bank must respond, are such only as are created or incurred by its officers, acting in the capacity of officers of the bank alone, and not in connection with other trustees or officers of other companies. "Were it otherwise the other trustees or officers might outnumber the officers of the bank, and impose burdens on the bank which would ruin it; and thus the bank would be controlled, not by its officers, but by outsiders. The officers of a bank can not delegate their powers to others. It is therefore clear that a national bank can not be a partner in a co-partnership, and can not incur a partnership liability.
The same has been held as to corporations in this state (Geurinck v. Alcott, 66 Ohio St., 94). The first subdivision of the syllabus was omitted by mistake of printer, but is found in the head note, and also in the index, and is as. follows: “A corporation can not be a member of a partnership.”
But it is contended, that while a national bank can not become a partner generally, that where it becomes the owner of a share in an existing partnership, like this Elsmere Syndicate, that in effect it becomes a partner and liable as such. That begs the question. If it had the power to become a partner, such might be the case, but not having the power, it can not go beyond its powers, and can not by any act make itself a partner, and can not incur a partnership liability.
Cases are cited in which a bank has taken some specific piece of property, as a ship for instance, to secure a debt, and has been held liable for the expenses of managing or converting such property; but such expenses were incurred by the bank, and were its individual debt, and not the debt of a partnership. With such cases we fully agree, but in those cases it does not appear that the bank was hampered by a lack of power, as is the ease under our national banking act. Royal Bank of India’s Case, L. R. 4, Ch. App. Cas., 252.
Not having the power to enter into such partnership, it is well settled that the bank may plead such want of power to defeat an attempt to hold it as such partner. California Bank v. Kennedy, 167 U. S., 362.
[716]*716It is further urged that the bank partly realized on some of these shares, and held itself out as partner, and that it is therefore estopped from now claiming that it was not such partner.
That the realizing on stocks by receiving dividends does not create an estoppel was held in the above cited case of Bank v. Kennedy, 167 U. S., 371. In the case of Scott v. Deweese, 181 U. S., 217, the court, near the close of the opinion hold: “Of the powers of a national bank under the statutes providing for their creation, every one must take notice.”
Every one is ■ therefore chargeable with knowledge that a national bank can not be a partner, and therefore this bank could not hold itself out as being that which in law it could not be, and its acts in that behalf could deceive no one, as no one could in law rely upon such acts.. One can not rely upon a representation which he knows to be false or impossible.
The bank having become the Owner of these nine shares, and not having the power to become a partner, it became in legal effect, a part owner of the property of the syndicate, which ownership was in its nature several, and the bank, through its trustee, having managed this several interest in connection with the trustees of the other shares as to their interests, the bank became and is liable for its said share of the expenses of purchasing, managing, handling, holding, improving and disposing of the property. The bank is thus liable for nine fortieth parts of the debts and expenses remaining after applying the proceeds of the property upon the indebtedness.
The record does not clearly furnish the data from which this amount can be ascertained by this court, and therefore the judgment against the plaintiff in error will be reversed, and the cause remanded to the circuit court with instructions to ascertain what nine-fortieth parts of said debts and expenses amount to, and render judgment against said bank for that sum, and also for nine-fortieth parts of the costs.
Judgment reversed and catise remanded.