Mr. Justice Scholfield
delivered the opinion of the Court:
The principal question arising upon this record is, did “The Merchants, Farmers and Mechanics’ Savings Bank” have power to borrow money and issue “ investment certificates ” therefor, secured by trust deed, as was here done ?
Sections 3, 4, 5 and 6 of the charter of “The Merchants, Farmers and Mechanics’ Savings Bank” are as follows:
“ Sec. 3. The said corporation shall be authorized to receive money from any person or persons who may wish to deposit the same. Married women and minors may, in their own names, deposit money with said corporation, and receive certificates of deposit in their own names, and which deposits shall be subject to their order only. All deposits of money shall be used and improved in a manner not inconsistent with the laws of this State, and any rate of interest not exceeding that allowed by law shall be paid for such deposits.
“ Sec. 4. The said corporation may accept and execute all such trusts, whether fiduciary or otherwise, as shall or may be committed to it by any person or persons or by the order of any court or tribunal in the State of Illinois; may make such special regulations in reference to trust funds, deposits or savings as shall best aid the depositors and parties interested, by accumulating and increasing the same, allowing and receiving such rate of interest therefor, not greater than hereinbefore mentioned, as may be agreed upon; may grant and purchase annuities, issue letters of credit and other commercial obligations: Provided, the same shall not be in the similitude of bank notes or other evidences of debt designed to circulate as money. The said corporation shall have power to loan money, to receive money on deposit and pay interest therefor, and to loan money at any rate of interest not exceeding ten per cent per annum, or to discount, in accordance with bank usage; and in the computation of time, thirty days shall be a month, and twelve months a year; and take such security as the directors may see proper; may take stock in other corporations; may buy and sell exchange, bills, notes, bonds and other securities, and may have and hold coin and bullion.
“ Sec. 5. The business of said corporation shall be conducted by the directors, and in such manner as they may direct. Three of the directors, one of whom shall be the president or cashier, shall be a quorum to transact any business of the board of directors, and such as are usual in such corporations.
“Sec. 6. The said corporation shall have power to purchase and hold all such real and personal estate as may be convenient for the transaction of its business; to take and hold any real estate as security for and in payment of loans and debts due and to become due to said corporation, and to purchase any real or personal estate at any sale to enforce its securities on the payment of debts due, made by virtue of any process, mortgage, or deed of trust, and to hold said property, or to sell and convey the same, or any part thereof, at such price and under such conditions as the directors or officers may think proper.”
Thus, it will be seen, express power is given to receive money on deposit; to receive and execute trusts committed to the corporation by any person or persons or by order of any court in this State; to grant and purchase annuities; to issue letters of credit and other commercial obligations other than notes designed to circulate as money; to loan money; to receive money on deposij and pay interest therefor; to discount according to bank usage; to take stock in other corporations; to buy and sell exchange, bills, notes, bonds and other securities; to have and to hold coin and bullion; to take and hold real estate as security for and in payment of loans and debts due or to become due to the corporation; to purchase and hold real and personal property at any sale, to enforce its securities or debts due; to hold said property and sell and convey the same; and to purchase and hold such real and personal estate as may be convenient for the transaction of its business. Special power is also given to receive deposits from married women and minors, and to issue therefor certificates payable in their names, and payable to their order only; and to pay and receive any rate of interest not exceeding ten per cent, and to make special regulations in regard to trust funds, deposits or savings.
In addition to these express powers there can be no doubt that such corporations possess, also, the implied power to borrow money. Morse on Banks and Banking, 4; Planter’s Bank v. Sharp, 6 Howard (U. S.) 323; Curtis v. Leavitt, 15 N. Y. 52-3; Brice on Ultra Vires, 122 (Seward’s Ed. 109).
It will not, therefore, be important to determine whether the certificate holders, claiming under the trust deed, are to be regarded as having made deposits or loans for which their certificates were obtained, for in the one case the requisite power is expressly given to the corporation by its charter, and in the other case it possesses the power by necessary implication. Nor can the right of the corporation to assign or mortgage negotiable instruments which it is authorized to take be questioned. Mclntire v. Preston, 5 Gilm. 48; Planters’ Bank v. Sharp, supra.
The result of the authorities is concisely stated by Daniels, in his work on “ Negotiable Instruments,” vol. 1, p. 287, § 382, thus: “In this country three propositions respecting private corporations may be regarded as settled: First, That it (the corporation,) has implied power to contract debts like an individual, whenever necessary or convenient in furtherance of its legitimate objects. Second, That whenever it may contract a debt it may borrow money to pay it. And, Third, That whenever it contracts a debt for materials, services, or otherwise, in the scope of its-business, or borrows money, it may execute a negotiable bill, note or bond, and secure it by mortgage to the creditor in payment.” See, also, authorities cited in note.
The creation of the “investment department” was not the creation of a new corporation or new agency. It was merely giving a name to a branch of business clearly within the corporate power, and indicating the system that would be pursued in its transaction. The corporation was authorized to contract and agree with persons desiring to make deposits or loan money as to the terms. It might execute its bond, note or certificate as evidence of the indebtedness, and secure the same by pledge or chattel mortgage, or note, securities, etc., or by real estate mortgage or trust deed, just as should be mutually agreed. And there has been no reason suggested, and we can conceive of none, why providing a system for securing loans and deposits generally in a particular way is objectionable, when it would not be objectionable to conduct a single transaction in that way. The business is simply that of the bank obtaining money, and so far as the public was concerned, presumably needed in its business, and securing it by a trust deed upon terms mutually satisfactory to the respective parties in interest. The name is not of the slightest consequence. The transaction itself, individually considered, is neither unusual nor extraordinary.
The bill alleges that on the 23d day of December, 1873, the bank was the holder and owner of certain promissory notes which were secured by mortgages and deeds of trust on real estate, and such notes were given for money belonging to said bank; and on the last named day the said bank assigned said notes to George Chandler, as trustee, and executed to him a deed of trust, being that involved in the present controversy, and which is there set out in liceo verba.
It is afterwards further alleged that there were four directors of the bank,—two were president and cashier and stockholders, and the other two were not stockholders; that after the deed of trust had been executed and the notes and securities assigned to Chandler, various persons loaned and paid to the bank various sums of money, and received therefor investment certificates at par, bearing interest at the rate of 7jo per cent per annum, payable quarterly; and that the said bank mixed such money with its other funds, and used the same to pay depositors, to purchase bonds, stocks, exchange, and loaned on real estate security, and in all the modes usual among bankers; and many of said certificates were paid or redeemed according to the terms thereof, and others in like manner issued for other money paid and loaned to the bank, so that at the time of the suspension of business there were outstanding certificates to the amount of $93,300.
The answer states “that defendant has no personal knowledge as to how many persons were acting as directors at the time of the execution of the deed of trust, but admits that the four .persons signed the records, and that the records show that on the 23d day of December, 1873, a quorum being present, the following preamble and resolutions were adopted.” Then follow the preamble reciting reasons for assigning the notes and executing the deed of trust to Chandler, and resolutions directing the same to be done. After which, the answer admits that after the deed of trust had been executed and delivered, various persons received investment certificates bearing interest at 7^- per centum per annum, payable quarterly, and that many of the certificates so issued were paid or redeemed and others issued; and that at the time of the suspension of the bank there were outstanding investment certificates to the amount, in the aggregate, of $93,300.
The proof shows that the money for which the certificates of investment were issued went into the general business of the bank, and was used for paying everything for which the bank used money.
The contract, therefore, having been in good faith performed by the certificate holders, and the bank having had the full benefit of the contract, it is not allowed to interpose the defence of ultra vires. Darst v. Gale, 83 Ill. 141; Ex parte Chippendale, D. G. M. & G. 19; Bradley v. Ballard, 55 Ill. 413; West v. Madison County Agricultural Board, 82 id. 206; Maher v. Chicago, 38 id. 266; Railway Co. v. McCarthy, 96 U. S. 267; San Antonio v. McChoffy, id. 315; Hitchcock v. Galveston, id. 351; Morris Railroad Co. v. Railroad Co. 29 N. J. Eq. 452; Whitney Arms Co. v. Barlow, 63 N. Y. 62.
But the question here is not solely between the bank on the one side and depositors or loaners of money on the other. It is between depositors or loaners of money for investment certificates secured by the deed of trust, and depositors or loaners of money who are not thus secured, as well as the bank. Such depositors or loaners of money, it is argued on behalf of appellant, are entitled to come in and share equally in the security afforded by the trust deed, because the notes, bonds, etc., held by the trustee, under the deed of trust, were trust property held by the bank for its depositors, etc., generally, which could not hence be pledged to any individual or class of individual creditors of the bank.
The charter of the Merchants, Farmers and Mechanics’ Savings Bank provides for a capital stock of $50,000, with power to increase to $500,000, divided into shares of $50 each. The bank is a stockholders’ bank, controlled and operated under the direction of a board of directors, for the benefit of the shareholders. It is, therefore, totally dissimilar to “ savings banks,” as defined by Grant in his treatise on the Law Relating to Bankers and Banking, 425, * 614. Such banks, he says, derive no benefit whatever from any deposit or the produce thereof. The corporation may receive on deposit, for the use and benefit of the depositors, all sums of money offered for that purpose, and invest the same, etc., but the increase or interest of all deposits shall be divided among the depositors or their legal representatives, etc. See also, Huntington v. Savings Bank, 96 U. S. (6 Otto), 388. The bank there is clearly but the agent or trustee of the depositor, and any appropriation of the deposit to a purpose other than that for which it was intended would be a perversion of the trust, and it might, at the election of the depositor, be followed and reclaimed wherever it could be distinctly identified.
But in a stockholders’ bank the property belongs to the stockholders. The bank is carried on for their benefit. The profits belong to them, and, ordinarily, the depositor is but a creditor entitled to recover from the bank his deposit, with such interest as by contract, express or implied, his deposit may have earned. Morse on Banking, 25, 26; Tinkham v. Heyworth, 31 Ill. 519.
The rule is, a deposit is general unless the depositor makes it special, or deposits it expressly in some particular capacity, and, where the deposit is general, there is an implied uudertaking on the part of the bank to restore, not the same funds, but an equivalent sum, whenever it should be demanded. Brahm et al. v. Adkins, 77 Ill. 263.
But the position of the counsel for the appellant is, “it made no difference, as to the powers conferred or nature of the corporation, whether, in this case, the corporation was a savings bank or commercial bank,” because, as they contend, “the corporation accepted the money of the depositors ” whom they represent, “ to be held specifically as trust money, and treated as such under any agreement.”
There is no evidence, and no pretence that there is any, of a special contract whereby the bank in so many words expressly contracted to receive and hold in trust the money or property of the depositors whom the counsel represent. But the counsel contend that such a contract is to be inferred from the charter and by-laws of the bank and the making of the deposit and accompanying circumstances. Reliance is especially placed on these facts. The bank calls itself a “ savings bank.” In every depositor’s book there is printed a three page circular which expressly declares that in this case the stock and capital of the bank constitute a capital or safety fund for the benefit of savings depositors.
Article 6, section 2 of the by-laws provides “that all deposits received from any person or persons, including minors and married women, are to be held in trust for them, or for such person or persons as they may designate; also, from any court, society or corporation, through their proper officers, but no sum less than one dollar shall be withdrawn if the balance due exceeds that amount.”
Section 7 of same article 6 requires “ that all persons making deposit shall place their names on the signature book. Such book shall contain a copy of all by-laws and regulations of the institution which have reference to savings deposits or depositors, and every person signing said book shall be deemed to have assented thereto.”
Article 8 requires the savings deposit to be invested in : “1, Stocks and obligations of the United States; 2, Or of the State of Illinois; 3, Or in the evidences of indebtedness of the city of Chicago; 4, Or in bonds and mortgages on real estate of double the value of the amount loaned, clear of all incumbrances; 5, Or upon such securities as the board may direct, in accordance with the provisions of the charter, or such as are used by the oldest and most reliable savings banks in the United States.”
Section 4 of the charter provides “that the corporation may accept and execute all such trusts, fiduciary or otherwise, as shall or may be committed to it by any person or persons, or by order of any court in Illinois, and may make such special regulations in reference to trust funds, deposits or savings as shall best aid the depositors, parties interested, by accumulating and increasing the same.”
And section 5 of the charter provides “ that the business of the institution shall be conducted and managed by the directors and officers, and not by third persons acting as trustees or otherwise.”
Let the effect of these, as proofs from which to infer a contract that the deposits were made in trust, so that the property continued to be that of the depositors, be considered.
Since the position of counsel concedes that the bank was, in fact, a stockholders’ commercial bank, and not a savings bank, in which the stockholders were the owners of the capital,and the corporation but a trustee for them in its management, it would seem the name, in the absence of proof that the depositors were deceived and deluded thereby, could be of no importance. The bank is not, in truth, what the name indicates, but unless harm has thereby resulted, the law attaches no consequence to that. With the charter and bylaws of the bank before the depositors, showing what the real character of the bank was, we are not authorized to assume, in the absence of proof, that they were misled and deceived by the name.
The circular, declaring that the capital and stock of the bank constitute a capital or safety fund for the benefit of savings depositors, does not declare that the capital and stock of the bank belong to the savings depositors, nor does it amount to a legal declaration of trust in that regard. The particular language of the circular to which reference is made is, doubtless, this: “In one feature, however, it differs from most savings banks now in operation, inasmuch as it has a capital, and a provision for a gradually increasing safety fund, to which all its earnings, over and above a certain percentage, are to be applied, until said fund shall equal the whole amount of the capital stock, which, by the charter, may be increased to $500,000.” The capital here, it will be observed, is not represented as belonging to the depositors, but to the bank. Nor is it represented that this capital shall be used only for the payment of dues to savings depositors. Nor is it represented that the bank has, in fact, a safety fund, etc., but the representation is, simply, that the bank has a capital, and a provision for a gradually increasing safety fund, to which all its earnings, over and above a certain percentage, are to be applied, etc., etc.—that is to say, this provision requires that they shall be so applied. The substance is, in brief, a laudation, ad captandum, of the charter of the bank, and the system contemplated to be put m practice in carrying it on. It falls far short of the creation of a trust, and it does not have the elements of an estoppel in pais.
Apart from this consideration, however, upon what principle do appellees become bound by these representations of the bank? They were not parties to them. It is not shown that they caused or encouraged them to be made, nor that, when they became depositor's, they knew that they had been made, still less that anybody had acted in reliance solely upon their truthfulness. Even, then, if they be conceded to be binding upon the bank, we do not think they could be binding upon appellees. '
Article 6, section 2 of the by-laws is: “ Deposits of $1 and upwards may be received "by the officers of this institution, from any person or persons, including minors and married women, to be held in trust for them, or for such person or persons as they may designate; also, from any court, society or corporation, through their proper officers; but no sum less than $1 shall be withdrawn, if the balance due exceed that amount.” This, instead of proving that all deposits were to be received in trust, proves directly the reverse. In the event they were to be thus received, this by-law would have been wholly unnecessary. But we have seen that, by section 4 of the charter, power is given to the corporation to “ accept and execute all such trusts, whether fiduciary or otherwise, as shall or may be committed to it by any person or persons, or by the order of any court or tribunal in the State of Illinois,” and this by-law is in strict conformity with that grant of power. It authorizes the officers of the bank to execute the power and accept the specified trusts.
Mr. Chambers, who was in the employ of the bank as bookkeeper, shows what was done in conformity with this by-law, thus: “We received money on special trusts, and had a special book showing the conditions under which the account should be kept, and to whom paid. There were many cases of minors and societies. These special trusts were not entered on the depositors’ book, but were entered on a book kept by the bank.”
It does not appear that the counsel represent any who are affected by this by-law. It has, as will be observed, no reference whatever to savings deposits, but refers exclusively to deposits on special trust indicated by the depositor and agreed upon at the time of making the deposit.
Power to receive savings deposits, as has been seen, is conferred upon the corporation by section 3 of the charter, and section 4 thereof, in addition to conferring power to receive and execute trusts, also confers, besides other named powers, power “to receive money on deposit and pay interest therefor”—thus showing that this could not have been contemplated as being within the prior granted power, in the same section, of receiving and executing trusts. And in the same section power is also conferred upon the corporation to make such special regulations in reference to trust funds, deposits or savings as shall best aid the depositors, etc., etc.—thus again plainly showing that “trust funds,” “deposits” and “savings ” were regarded as separate and distinct, and neither included within the other.
Much reliance is, seemingly, placed by counsel upon section 1, article 8 of the by-laws, as showing that the savings deposits were a trust. That section is as follows: “All savings deposited in this bank, over and above such sums as it may be expedient to reserve for immediate use, as provided in the charter and these by-laws, shall be invested in the stocks and obligations of the United States, or the State of Illinois, or in the evidences of indebtedness of the city of Chicago, or in bonds and mortgages on real estate in the city of Chicago, or upon real estate of double the value of the amount loaned, clear of all incumbrances, or upon such securities as the board of directors may select, in accordance with the provisions of the charter, or such as are used by the oldest and most reliable savings banks in the United States.”
If it were conceded that all savings were deposited in trust, it would follow that the investments in these securities would also be in trust; but this section furnishes no proof that' savings were to be deposited in trust. It does not declare that these investments are to be made for the benefit of depositors; nor assume to give them any right to control or withdraw them in any contin'genóy whatever. If it were conceded that savings were not deposited in trust, it would then follow that these investments were to be made' for the benefit of the bank, and the savings depositors would have precisely the same rights in regard to them that they would have in regard to any other promise of good management in regard to the affairs of the bank. But the investments being the general property of the bank, the board of directors might authorize them to be sold, assigned, or pledged or mortgaged in good faith, to secure whatever loans or deposits they might deem it advisable to obtain. Since this section relates exclusively to the investment of the deposits, after they are made, we must look to other sections to determine the character of the deposits.
Without again recurring to what has been heretofore said in this regard, it will be sufficient to notice a few other sections of the by-laws.
Section 1 of article 6 of the by-laws provides that deposits may be received and paid in gold or silver coin, or in such funds as, may be current in Chicago or as may be arranged by special agreement made in writing by the president, vice-president or cashier.
This is limited to no class of deposits, but is comprehensive enough to include all that may be made of every class. It, as clearly as language can, recognizes that the deposit becomes a debt of the bank, and authorizes the officers named to stipulate for its payment, without reference to the securities in which it may be invested.
Section 4 of the same article authorizes the savings deposit to be withdrawn, after giving a certain notice—and this without regard to the condition of the investment at the time. It is obvious, if the depositor has a trust in the investment, he can not withdraw his deposit without having regard to the condition of the investment, for if the money be loaned upon note not yet due, secured by real estate mortgage, he will have to await the maturity and collection of the note, or withdraw the note and mortgage, if they could be identified— neither of which is contemplated, but the payment of money only, as upon a debt due.
And again, article 7 provides for the payment of interest semi-annually at 6 per cent upon the savings deposits. And this contemplates the payment shall be made, at all events, whether money to that extent be realized on the securities in which the deposits are invested or not. But if the investment were in trust for the benefit of the depositor, he would not be entitled to interest, at all events, but only to follow his money into the security in which it is invested, and take the security for what it is worth.
If it were conceded that, under all the circumstances, it should be held the bank promised to use these securities for the benefit of the savings depositors, it certainly could not be held that such promise created a mortgage or pledge, and we are aware of no principle upon which it could be held to create a trust. If, as we think is clear, the bank became the debtor of the savings depositor, and legally bound to pay him his deposit with accruing interest, at all events, he could only have become interested in the bonds, etc., in -which his deposit was subsequently invested, as a security, collateral to the legal obligation of the bank to pay him his debt. If the bank paid him the security would be released,—and it could only be realized from by legal proceedings subjecting it to sale for the payment of his debt. But a lien of this kind, in our opinion, could only be created by aNmortgage or a pledge.
We do not regard the by-law directing the investment of savings deposits otherwise than as binding upon the officers and members of the banking corporation alone. The general rule is, that the by-laws of a corporation are binding upon none but its members and officers. Angelí & Ames on Corp. § 359.
We do not think, in any view, the proof shows that these certificate holders had such knowledge of the by-laws of this corporation as to be bound and concluded by them. They were, practically, strangers to the corporation, and could not hence be affected by any disobedience of its officers or directors to its by-laws, of whose contents they were ignorant. Their good faith is unquestioned by the proof, and they are entitled to the protection given them by the decree of the Appellate Court.
The decree is affirmed.
Deoree affirmed.
Scott, J., dissenting.