Pape v. Capitol Bank of Topeka. be removed from the land of B without any substantial injury to either the house or the land, the house does not thereby become a part of the realty belonging to B, but remains merely a chattel belonging to A, and A may recover the same in an action of replevin. The judgment of the court below will be reversed, and cause remanded with the order, that judgment be rendered in favor of the plaintiff and against the defendant on the agreed statement of facts. A bank, empowered to discount negotiable notes, has power to purchase such W. P. Douthitt and J. D. McFarland, for plaintiffs in error. N. C. McFarland and J. G. Slonecker, for defendant in error. BREWER, J. This was an action brought by "The Capitol Bank of Topeka," to recover a personal judgment against Pape and wife, on three promissory notes made by them, and to foreclose a mortgage on lands in Shawnee county, given by them to secure the payment of said notes. The notes are made payable to "James M. Spencer, or bearer," and have written across the back, "Pay to bearer, without recourse on me: James M. Spencer." The mortgage was made to Spencer, and has indorsed thereon an assignment to "The Capitol Bank of Topeka." The notes and mortgage were made at Topeka on 27th June, 1872, and are alleged to have been *See, contra, Farmers & Mechanics' Bank v. Baldwin (23 Minn. 198), 23 Am. Rep. 683; First Nat. Bank of Rochester v. Pierson (Minn.), 16 Alb. Law Jour. 319, and Thompson's Nat. Bk. Cas. 637, and note, 639. Pape v. Capitol Bank of Topeka. transferred to the defendant in error on 13th March, 1873. The petition also alleges that said bank is a body corporate, duly incorporated under and by virtue of the laws of the State of Kansas, as "The Capitol Bank of Topeka." The defendants answered separately, each interposing several defenses, only two of which are relied on, and they may be briefly stated as follows: First, a denial that plaintiff was or ever had been a body corporate under the laws of the State of Kansas as "The Capitol Bank of Topeka," (which denial was verified by the affidavits of the defendants); second, defendants admitted the making of the notes and mortgage sued on, but alleged that the plaintiff purchased the same of said Spencer at a price agreed upon and for speculative purposes, and did not acquire or hold said notes or mortgage, or either of them, by reason of having made a loan of money on them, or either of them, or for any of the purposes for which it could legally acquire or hold the same, or either of them. [Omitting the consideration of the first defense.] IV. The final question as to the power of the plaintiff to acquire and hold the note and mortgage. The note and mortgage were made to Spencer. From him, as the owner and holder, the bank purchased. Was such a purchase beyond its power? Section 127 of article 16 of the general incorporation law (Gen. Stat. 225), specifically defines the powers of such associations, and is as follows: "Any five or more persons in any county in this State may organize themselves into a savings association, and shall be permitted to carry on the business of receiving money on deposit, and to allow interest thereon, giving to the person depositing, credit therefor; and of buying and selling exchange, gold, silver, coin, bullion, uncurrent money, bonds of the United States, of the State of Kansas, and of the city, county and school district in which any association shall be organized; of loaning money on real estate, and personal security, at a rate of interest not to exceed twelve per cent per annum; and of discounting negotiable notes, and notes not negotiable; and on all loans made may keep and receive the interest in advance." Now the contention is, that the clause under which alone authority for this purchase can be claimed is that which authorizes "discounting negotiable notes, and notes not negotiable;" and that this was not a discount, but a purchase. Counsel for plaintiffs in error say: Pape v. Capitol Bank of Topeka. "Whatever loose or general meaning may have been given to the term discount, when not applied to banking business, no proposition is more firmly established by judicial decisions than this, that discounting paper, as understood in the business of banking, is only a mode of loaning money on the same and taking the interest in advance. Niagara Co. Bank v. Baker, 15 Ohio St. 68; Talmage v. Pell, 3 Seld. 343; Fleckner v. Bank of United States, 8 Wheat. 338; People v. Utica Ins. Co., 15 Johns. 391; Fireman's Ins. Co. V. Ely, 2 Cow. 699; Philadelphia Loan Co. V. Towner, 13 Conn. 259; McLean v. Lafayette Bank, 3 McLean, 597; Dunkle v. Renick, 6 Ohio St. 527; Farmers and Mechanics' Bank v. Baldwin, 23 Minn. 198; 14 Alb. Law Jour. 391 (Dec. 9, 1876); Fowler v. Scully, 72 Penn. St. 456. It necessarily follows from the reasoning of these cases, that there is a difference between discounting a note and buying it. For authority directly on this point, see Morse on Banks and Banking, 20, and 1 Bouv. Law Dict. 481, title Discount, citing Pothier, De l'Usure, n. 128, where it is said the latter expression is used to denote the transaction 'when the seller does not indorse the note, and is not accountable for it."" An examination of some of the authorities chiefly relied on by defendant may be of value. In Fowler v. Scully, 72 Penn. St. 456, the question was as to the power of a national bank to take a mortgage to secure notes to be thereafter discounted; and by a divided court the mortgage was held void. There is nothing in the question or opinion which throws any special light on the question be fore us. In the case of Talmage v. Pell, 7 N. Y. 328, it was decided that a banking corporation, empowered "to carry on the business of banking by discounting bills and other evidences of debt," was not thereby authorized to traffic in State stocks, and that a purchase of such stocks, with a view of sale, was beyond its powers. In Niagara Co. Bank v. Baker, 15 Ohio St. 68, the plaintiff, a bank of the State of New York, sued the defendants as indorsers of certain promissory notes. The answer alleged a loan from the bank to them, and a discount of these notes at usurious rates. The reply denied any loan, and alleged that it discounted the notes in the usual course of business. Counsel for defendant laid down two propositions in their brief — 1st, that if the transaction was a loan, it was void for usury; and 2d, if a purchase, void for want of power in the bank to make it. The court in its opinion, after givVOL. XXVII-24 Pape v. Capitol Bank of Topeka. ing the general meaning of the word discount, as we quote hereafter, proceed: "And this brings us to the precise question upon which the decision of this case depends. Was this bank empowered to discount, by way of purchase, promissory notes? or must all such discounts be deemed loans, and thus be brought within the purview of the usury law?" And they conclude in favor of the latter alternative, saying, "But the naked power to discount paper is not given; it is the power to carry on the business of banking by (among other things) discounting bills, notes, and other evidences of debt." And then inquiring what "discounted paper" means, as used in the business of banking, hold, that it refers simply to loans, referring with especial stress to the case of Talmage v. Pell, supra, as an authoritative exposition of the New York statute under which plaintiff was organized. 66 In the case of Farmers & M. Bank v. Baldwin, 23 Minn. 198; 23 Am. Rep. 683, the language of the statute appears similar to that referred to in 15 Ohio St., supra. The bank was given 'power to carry on the business of banking by discounting bills, notes," etc.; and a majority of the court held, that that was not a power to purchase such securities, but simply to loan thereon, with the right to take lawful interest in advance. In Fleckner v. Bank, 8 Wheat. 338, it appeared that the plaintiff purchased from another bank a note which had passed to it through several parties from the original holder. The bank was forbidden to deal in any thing except bills of exchange, gold, or silver, or take more than six per cent upon its loans or discounts. It was claimed that the purchase of this note was ultra vires; but the court held otherwise, holding that such purchase was but a discount. In the opinion, STORY, J., speaking for the court, says: "But in what manner is the bank to loan? What is it to discount? Has it not a right to take an evidence of the debt, which arises from the loan? If it is to discount, must there not be some chose in action, or written evidence of a debt, payable at a future time, which is to be the subject of the discount? Nothing can be clearer than that by the language of the commercial world, and the settled practice of banks, a' discount' by a bank means ex vi termini, a deduction or drawback made upon its advances or loans of money, upon negotiable paper, or other evidences of debt, payable at a future day, which are transferred to the bank." We may also at this time properly notice a late case cited by the Pape v. Capitol Bank of Topeka. We see plaintiff, that of Smith v. Exchange Bank, 26 Ohio St. 141; Thompson's Nat. B'k Cases, 836. In that case the defense was, that the bank (a national bank) purchased the paper of the payees, and that it had no authority to make such purchase. Upon this the court uses this language: "It does not state that the purchase was made at a usurious rate of discount; but it avers that under the act of Congress to provide a national currency, under which the bank was incorporated, it had no authority to purchase the bill. It seems to be the idea of counsel making the objection, that negotiable paper, perfect, and available in the hands of the holder, is not the subject of purchase by a national bank at any rate of discount. This view, we think entirely erroneous. nothing in the act of Congress, nor in reason, why a borrower may not obtain the discount by a bank of the existing notes and bills of others of which he is the holder, as well as of his own paper, made directly to the bank. It is true, that, as between natural persons, the purchase of such paper when made in good faith, and not as a disguise for a loan, is not subject to the usury laws; but it is otherwise as to a bank. In the business of banking, the purchasing and discounting of paper is only a mode of loaning money."" And further on, in reference to any question of usury, the court holds that it arises between the bank and its customer, and not between it and the original parties to the paper. These authorities go no further than this: that where an ordinary commercial bank is created, and power given it, not generally to discount, but specially to carry on the business of "banking by discounting," its power is limited to that of loaning money on paper, and on such loans subjects itself to the operations of the usury laws. It may not purchase, as an individual may, paper already existing at any price it may agree upon with the holder, but can only deduct from its face the legal interest in advance. We express no opinion upon these authorities, or the propositions. they assert. But we draw two clear distinctions between them and the case at bar. And first, the plaintiff is not an ordinary commercial bank. At least, whatever may have been the practical workings of this bank, the intention of the legislature in the statute was, a "savings bank." That is the title of the article. The grant is of authority to organize a savings association. The first power is to receive money on deposit, and allow interest thereon; and that is the main purpose of a savings bank. It is true, among |