
    William Huber v. The United Protestant Evangelical German Congregation of Cincinnati.
    ■Where a corporation, without other authority than that granted by “ an act in relation to incorporated religious societies,” passed March 5,1836, engages in the business of banking, for the purpose of receiving on deposit, keeping, and circulating the money of others, such business comes within the prohibition of the first section of “ an act to prohibit unauthorized banking,” etc., passed March 12,1845; and a note discounted in the transaction of such business is illegal and void.
    Error to the Superior Court of Cincinnati.
    The original action was brought in the Superior Court of Cincinnati by the defendant in error, the United Protestent Evangelical German Congregation of Cincinnati, to recover one thousand dollars, and interest, upon a promissory note *for that amount, dated May 15,' 1853, payable to the order of its treasurer, and signed by William Huber, the plaintiff in error, and by one Henry Stegner.
    By his answer, filed on the 25th of May, 1860, the plaintiff in error alleged, by way of defense to the action, that the defendant in error jyaá, by its act of incorporation, passed on the 3d of January, 1843, made subject to all the restrictions of the act to incorporate religious societies, passed March 5,1836; that the' defendant in error, for purposes independent of those named in the acts referred to, and without authority of law, established a savings bank, and engaged in and carried on the business of banking, by borrowing and loaning money, by receiving deposits, by keeping and circulating bank paper, and by buying and discounting promissory notes, in violation of law; that the note set forth in the petition was made for the sole benefit of Henry Stegner, with the intention of having the same discounted by the defendant in error, for the sole benefit of Stegner; that the note was presented to the defendant in error at its bank, and discounted for Stegner’s benefit, and the money loaned to him upon it; that the plaintiff in error signed the note, merely as the surety of Stegner, and without consideration ; that the defendant in error received the note, without other consideration than as above set forth, and with knowledge of the facts above stated; that the money so loaned to Stegner was not the legitimate funds of the corporation, nor the proceeds of the same, but the money of other persons, deposited to be loaned; and that the defendant in error had no power to make such a contract, and that so the note was void.
    To this answer there was filed a general demurrer, which was sustained, and judgment rendered in favor of the defendant in error.
    On proceedings in error, in the Superior Court at general term, this judgment was affirmed.
    To reverse these judgments, this petition in error is prosecuted in this court.
    The two cases of G-. Blotter & Co. and of Christian Boss against the same defendant in error, and the cases above cited, present sub stantially the same question.
    
      *Thomas G. Mitchell, for Huber, plaintiff in error :
    There ought not to have been judgment on the note, because: (1.) The defendant in error had no power to enter into such a contract; and (2.) Such transactions are positively prohibited by the laws of 'this state. 41 Ohio L. L. 5; A. & A. on Corp. 233; S. & C. Stat. 152; Key v. Vattier, 1 Ohio, 145 ; Roll v. Raguet, 4 Ohio, 400 ; Raguet v. Roll, 7 Ohio, 77; Spurgeon v. McElwain, 6 Ohio, 442; Nichols v. Poulson, 6 Ohio, 305 ; Bank of Chillicothe v. Swayne, 8 Ohio, 257; Miami Exporting Co. v. Clark, 13 Ohio, 1; Sellers v. Dugan, 18 Ohio, 489; Bloom v. Richards, 2 Ohio St. 387; Bank United States v. Owens, 2 Peters, 527; Wheeler v. Russell, 17 Mass, 258; Springfield Bank v. Merrick, 14 Mass. 322; Ribbons v. Crickett, 1 Bos. & Pull. 264; Aubert v. Maze, 2 Bos. & Pull. 371.
    
      Stallo & Xittredge, for Klotter & Co. and Boss, plaintiffs in error:
    The question raised by the demurrer is, simply, whether a contract made in violation of the express restrictions imposed upon a corporation by the terms of its charter is valid.
    
    The “ act in relation to incorporated religious societies,” passed March 5,1836 (1 S. & C. Stat. 305, note), restricts all religious societies to the ownership of a limited amount of property to be held for a specific purpose.
    The answer avers that the defendant in error violated these restrictions : First, by holding more property than it was authorized to hold; the note sued upon being part of the excess. Secondly, by holding said property for the purposes of banking, and not for the purposes for which it was authorized to hold it by the terms of the law.
    The question thus presented is no longer an open one in Ohio, and argument upon it is unnecessary. We simply cite Strauss & Bro. v. Eagle Ins. Co., 5 Ohio St. 59; Bank of Chillicothe v. Swayne, 8 Ohio, 257.
    The reports of other states are full of cases in point. In Beach v. Fulton Bank, 3 Wend. 573, Savage, C. J., held notes to be void, because they had been discounted in violation of the restraining act. See, also, North River Ins. Co. v. *Lawrence, 3 Wend. 482 ; 7 Wend. 31; 2 Cowen, 678; 8 Johns. 422; 2 Mass. 502; 1 McLean, 41; 4 Wheaton, 518.
    
      W M. Dickson, for defendant in error:
    Stripped of all mere verbiage, the claim in these cases comes to this: that the defendant was in the habit of receiving money on deposit and lending it out again; that the money sued for in these cases was some of the money thus deposited. This is all. These Germans, according to their custom, made their church officers the depositaries of their money. They received either nothing or a very low rate of interest on their deposits, and it was a great convenience to them. The church then lent this money to the members, to their accommodation, at an increased interest, to the advantage of the church, thereby defraying its expenses.
    Though counsel call this simple arrangement of the members of this church a bank, a banking business, yet names do not change the nature of things. After all the transaction is just what I have described it to be. It is very true that borrowing and lending money is one of the things that banks do, yet it is a most common affair with all persons.
    “ All persons in Ohio, artificial as well as natural, may pursue the business of banking, with the single exception of the issuing of notes for circulation as money. This is the mischief the legislature has sought from time to time to remedy; it is the only exclusive, and the principal franchise, except its life, conferred upon a bank. It is against the issue and circulation of notes as currency, that our penal statutes have, without exception, it is believed, been directed from 1816 to the present day. These deposits in savings institutions, however, have but little Semblance to bank deposits. In general bank deposits no interest is paid by tbe bank, and the money is repaid on demand. In savings banks the deposits, though called-such, are strictly loans, on which interest is paid, and are repaid only on express and specific notice.” Corwin v. The Urbana and Champaign Mnt. Ins. Co., 14 Ohio, 12.
    But was this deposit and loan -business—this savings institution, on the part-of defendant—set forth in the answers, such *a violation of its charter—of the law—that these notes sued upon are thereby rendered null and void ?
    1. My first proposition is, that defendant having the power to acquire, hold, and lend money, the borrower will not be permitted to inquire, for the purpose of avoiding his obligation, how defendant got the money, unless the money is claimed by a third person ; neither will he be permitted to allege that in some other respects defendant has violated its charter. Because defendant obtained the money loaned, if you please, by illegally receiving deposits, can plaintiffs avail themselves of this ? . See Parish v. Wheeler, 22 N. Y. 509, and authorities hereafter quoted.
    2. I claim that defendant, by law, had a right to borrow and lend money, to receive deposits and make loans.
    The act of March 5,1836, provides that an incorporated religious society “ Shall have perpetual succession by such name as may be designated, and by such name shall be legally capable of contracting, and of prosecuting and defending suits; and shall have capacity to acquire, hold, enjoy, and dispose of a house for public worship, with the land necessary therefor, not exceeding in quantity one acre ; a burying-ground for such society; a parsonage not exceeding in value the sum of five thousand dollars; and any other property not exceeding the sum of five thousand dollars; and any other property not exceeding the annual value of one thousand dollars, which shall be applied to the support of public worship and such institutions of learning and charity as may be connected with such society, and to no other purpose.”
    The language is, “any other property;” then this may be money—it is property. In the first place, it may be $5,000. In the next place, it maybe a sum whose annual value is $1,000. At six per cent, interest, the legal rate, it would take $16,666.66 to produce “the annual value of $1,000.” So then, by law, by its charter, defendant, in addition to its church building and lot, its burying-ground, and its parsonage, might “ acquire, hold, enjoy, and dispose of” $21,666.66 in money. The manner in which it may acquire it is not defined; it is left unlimited. The defendant may then acquire this money in the ways in which money may be lawfully acquired.
    ^Having acquried this money, it may hold it; it may sei apart officers whose business it will bo to hold and take care of it.
    But money held in a strong box will produce nothing; it must be loaned out to produce “ an annual valúe.” It thus follows that defendant may lend it. This money may then be acquired by the church for a short time or a longer time; it may be held for a longer or shorter time, and it may be, in like manner, lent. There is no limitation in these respects.
    There is then express power given - to this church to borrow $21,666.66 ; to hold and to lend the same.
    I therefore claim that this defendant had express authority to do the thing, the doing of which is set up as a defense to this action.
    The court will perceive that there is then no question of acting beyond the powers granted, or in violation of them; that therefore the authorities of plaintiffs have no application.
    3. The law of 1845 has not'been a favorite with the Supreme Court. Pickaway County Bank v. Prather et al., 12 Ohio St. 497, 502-504.
    In this case the judge says that the particular thing forbidden by this law is the “reception, custody, and circulation of the money or bank paper of others.” Taking this in connection with 14 Ohio, is it not obvious that the thing here prohibited, and in the second section made penal, is the receiving of deposits as banks do; that is, without, in general, paying interest thereon, and holding them subject to payment on demand ? Is not this the “ circulation” complained of, rather than the receiving of deposits on time, and the lending of thenron time? ¡
    2. The law of 1845 only applies to corporations that have “ no express authority of a law of this state.” Defendant has such authority. •
    I think this law was directed against foreign banks doing business in Ohio, and should rather be looked at from that stand-point. But it is clear it does not repeal the express authority given by the charter of defendant, and it is unnecessary to further consider this act. It is of a penal character, and should receive a strict construction.
    
      4. Counsel allege that defendant held more property than *it was authorized to hold, and that the notes sued upon were part of the excess. Pray, how do they know that? May every man who deals with a corporation and borrows its money decline to pay, and set up as a defense that the corporation has more property than it is allowed to hold ? Must a corporation every time it sues make an exhibit of its assets? The law is clearly settled otherwise. See Bogardus v. Trinity Church, 4 Sandf. Ch. 634, 758, 759; Humbert v. Trinity Church, 24 Wend. 587, 604, 629; Harpending v. Dutch Church, 16 Pet. 492, 493; Vernon Society v. Hills, 6 Cow. 23; Baird v. Bank of Washington, 11 Serg. & Rawle, 417; Banks v. Porteaux, 3 Rand. 186.
    5. Again, it is ai’gued that defendant did not intend to use this money for the purposes for which the church was incorporated, but for speculation, etc., and therefore that plaintiffs may keep it.
    If this be a defense which may thus be set up, then whenever any corporation sues for money loaned, it will be compelled to prove that when it gets the money it will use it for lawful purposes. Is not this defense, I beg pardon, sheer impudence?
    Defendant therefore claims that it had a perfect right and full power to make the loan it has made to these plaintiffs, and has full power to recover it back.
    But suppose there was a doubt about its power to do this; suppose it has exceeded its authority, or acted without authority, what then? May this be set up by way of defense by the plaintiffs? The law is fully settled that it can not. 17 Barbour, 378, 384; Bissell v. The Michigan Southern and Northern Indiana Railroad Companies, 22 N. Y. 269, 270; Trumbull County Mutual Fire Ins. Co. v. Horner, 17 Ohio, 407; 15 Abbott’s Pr. 66; 37 Barbour, 601; 4 Johns. Ch. 370; 29 Barbour, 305; 16 Peters, 492, 493.
   Day, J.

The demurrer admits the facts alleged in the answer to be true. Do these facts constitute a defense to a recovery on the note upon which the suit was brought ?

It is claimed that they do; because, first, the defendant in error had no power to enter into such a contract; and, ^secondly, such transactions are positively prohibited by the laws of this state.

Under the view taken by the court, it will be unnecessary to consider the first proposition further than it may be incident to the second.

The defendant in error is a corporation, and derives all its powers from an act of the general assembly, passed January 3,1843, which provides that it “ shall be entitled to all the rights, privileges, and immunities granted by, and shall be subject to all the restrictions of the act in relation to - incorporated religious societies, passed March 5, 1836.” 41 Ohio L. L. 5.

The act of March 5, 1836, provides that an incorporated religous society “ shall have perpetual succession by such name as may be designated, and by such name shall be legally capable of contracting and of prosecuting and defending suits’, and shall have capacity to acquire, hold, enjoy, and dispose of a house for public worship, with the land necessary therefor, not exceeding in quantity one acre; a burying-ground for such society; a parsonage, not exceeding in value the sum of five thousand dollars; and any other property not exceeding in value the sum of five thousand dollars; and any other property not exceeding the annual value of one thousand dollars, which shall be applied to the support of public worship and such institutions of learning and charity as may be connected with such society, and to no other purpose.” S. & C. Stat. 305, note 1.

This corporation, as well as all others, is restricted by the act to prohibit unauthorized banking and the circulation of unauthorized bank paper,” passed March 12, 1845, the first section of which provides: “ That no body politic or corporate shall establish a bank, or engage in the business of banking, to receive on deposit, keep, and circulate the money or bank paper of others, without express authority of a law of this state.”

It is stated in express terms in the answer, that this corporation was engaged in and carried on the business of banking; ” and it is also shown that its transactions wore such as pertained to that business. But the section above cited prohibits only a particular kind *or species of banking. Its obvious purpose is to prohibit corporations from receiving deposits and doing thereon a banking business. The prohibition contained in the section is limited to such banking as may be engaged in for the purpose of receiving, keeping, and circulating the money or bank paper of others. Pickaway County Bank v. Prather, 12 Ohio St. 497.

The facts alleged in the answer clearly show that the defendant in error was engaged in the very business prohibited by the statute; for it had established a savings bank, and was engaged in the business of banking by receiving deposits, by keeping and circulating bank paper, etc.; and the note in suit was, also, executed and discounted in the prosecution of such business. It is, moreover, expressly stated in the'answer that “the money thus loaned was not the legitimate funds of the corporation, nor the proceeds of the same, but the funds of others deposited in said bank to be loaned.”

There can be little doubt but that this transaction came within the prohibition of the statute, unless this corporation had “ express authority of a law of this state ” for so doing.

By the term “ express authority,” in the section under consideration, something more was intended than the general power conferred on corporations to contract, and to acquire, hold, and dispose of property.

This is shown by other sections of the same statute, and accords with the obvious purpose and policy of the act. In addition to the prohibitions of the first section, it is provided in the third that no person, association, or corporation shall make, or attempt to make and circulate any notes or bills as money “ without express authority of a law of this stateand, in the fifth section, the establishment of an office for the redemption of such money, without like express authority,” is forbidden.

The legislature had, at the same session, previous to the enactment of this statute, passed the general “ act to incorporate the State Bank of Ohio and other banking companies,” which was intended to regulate the whole subject of banking in this state, by carefully considered and guarded ^provisions. Banks organized under its provisions were authorized to do “ any business properly appertaining to banking;” and, among other powers specified, were authorized, in express terms, to “ receive deposits.” S. & C. Stat. 136, sec. 51. The same power is given in express terms in the “ act to authorize free banking,” subsequently passed. S. & C. Stat. 169, sec. 10. '

Moreover, at the time of the passage of the act of March 12,1845, to prohibit unauthorized banking, before alluded to, there were certain corporations supposed to be engaged, under their general powers, in the business prohibited by the first section of that act; yet, while the act was to take effect on the first day of June following its passage, it is provided in the eleventh section “ that the first section shall not take effect before the first day of March, 1846, upon any existing corporation now engaged in the business prohibited by that section, and which has duly reported, and shall continue to report, its dividends and profits to the auditor of state for taxation.” After the expiration of that period, even these corporations would, like others, be subjected to the prohibitions of the first section, for want of “express authority” to engage in the prohibited business.

It would seem, from, a review of this act, in connection with the general banking law, -that it was the policy and purpose of the framers of those acts, in their effort to restrain unauthorized banking, to require that a corporation, before it could be permitted to engage in the business of banking upon deposits, should have the authority of a law of this state as clear and express as would be required to authorize a corporation to do a like business upon notes of its own creation and issue.

.Under this view of the spirit of this statute and the meaning of its first section, it remains to be considered whether this corporation had “express authority of a law of this state” to engage in the business of banking as set forth in the answer, and prohibited in that section. It is quite immaterial whether the power may be inferred from the express powers granted; the question is whether this authority is expressly conferred.

*The defendant in error was created by a special act of the legislature, conferring upon it the powers granted by a general ■statute to “ incorporate religious societies.” ¥e would scarcely expect to find all such societies endowed with banking privileges. Recurring to the act, we find that this society is empowered with capacity to acquire, hold, enjoy, and dispose of a house of public worship, a grave-yard, a parsonage, a limited ambunt of other property, and property of the income of one thousand dollars, to be applied to the support of public worship and such other institutions of learning and charity as may be connected with such society, and for no other purpose. Among these provisions where can banking powers be discerned ? It is, however, sufficient for the case before us, to say that there is conferred here no “ express authority” for this “incorporated religious society” to “establish a bank, or engage in the business of banking, to receive on de]308it, keep, and circulate the money or bank jtaper of others.”

Since, then, the note in suit was discounted by the corporation in the transaction of a business forbidden by statute, it is illegal and void. It follows, that the judgment rendered upon it at the special term should have been reversed at the general term of the court below.

The two cases following the present one on the docket—that of G. Elotter & Go., and that of Ghristian Boss, each against the same defendant in error—are argued by counsel with this, and it is conceded that the questions presented in all of the eases are substantially the same.

In each case the judgment of both the general and special term must be reversed, and the causes remanded for farther proceedings

Scott, C. J., and Welch and Brinkerhoee, JJ., concurred.

White, J., concurring in the proposition stated in the syllabus, dissented to its application to the cases.  