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order of November 6, 1850, dedicated it to public purposes; since then it has been occupied as a military reservation. By Act of March 2, 1897, California ceded to the United States exclusive jurisdiction over this area with a proviso—“That this state reserves the right to serve and execute on said lands all civil process, not incompatible with this cession, and such criminal process as may lawfully issue under the authority of this state against any person or persons charged with crimes committed without said lands." See United States v. Watkins, 22 F. (2d) 437. The State reserved to herself no power whatever in respect of taxation.

Appellant challenges the validity of the taxing act as construed by the Supreme Court. The argument is that since the State granted to the United States exclusive legislative jurisdiction over the Presidio, she is now without power to impose taxes in respect of sales and deliveries made therein. This claim, we think, is well-founded; and the judgment below must be reversed.

In three recent cases—Arlington Hotel Co. v. Fant, 278 U.S. 439, United States v. Unzeuta, 281 U.S. 138, and Surplus Trading Co. v. Cook, 281 U.S. 647—we have pointed out the consequences of cession by a State to the United States of jurisdiction over lands held by the latter for military purposes. Considering these opinions, it seems plain that by the Act of 1897 California surrendered every possible claim of right to exercise legislative authority within the Presidio-put that area beyond the field of operation of her laws. Accordingly, her Legislature could not lay a tax upon transactions begun and concluded therein.

Arlington Hotel Co. v. Fant, 278 U.S. 439, denied the power of Arkansas by legislation to modify the liability of innkeepers within a reservation ceded by her to the United States.

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United States v. Unzeuta, 281 U.S. 138, affirmed the exclusive jurisdiction of the United States over crimes committed within a reservation lying within Nebraska. Jurisdiction had been ceded by the State.

Surplus Trading Co. v. Cook, 281 U.S. 647, ruled that land within Arkansas purchased by the United States for military purposes with the State's consent was under their exclusive jurisdiction. Private personal property therein was declared not subject to taxation by the State.

The principle approved in those cases applies here. A State can not legislate effectively concerning matters beyond her jurisdiction and within territory subject only to control by the United States.

The judgment of the Supreme Court must be reversed. The cause will be remanded for further proceedings not inconsistent with this opinion.

Reversed.

TEXAS & PACIFIC RAILWAY CO. v. POTTORFF,

RECEIVER.

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE

FIFTH CIRCUIT.

No. 128. Argued December 7, 1933.-Decided February 5, 1934.

1. A national bank has no power to pledge its assets to secure a

private deposit. P. 253. 2. Such pledges are neither customary nor necessary in the business

of such banks, and are inconsistent with provisions of the National Banking Act designed to secure uniform treatment of depositors

and ratable distribution of assets in case of disaster. Pp. 254–255. 3. The Acts of Congress authorizing national banks to give security

for deposits of specified public funds, do not impart or imply

power to pledge assets to secure private deposits. P. 257. 4. The contention that since the relation of bank to depositor is that

of debtor and creditor, and since a national bank may borrow

Argument for Petitioner.

291 U.S.

money upon a pledge of assets, it may likewise pledge assets to secure a private deposit,-is untenable. The difference between

deposits and loans is fundamental and far-reaching. P. 259. 5. A national bank is not estopped to deny the legality of an ultra

vires pledge of assets by which it obtained deposits; still less is its

receiver when the bank has become insolvent. P. 260. 6. The fact that a general deposit was obtained by the bank on the

faith of an ultra vires pledge of its assets does not create a constructive trust or confer upon the depositor a preference over other

creditors in the event of the bank's insolvency. P. 261. 63 F. (2d) 1, affirmed.

CERTIORARI, 290 U.S. 609, to review the affirmance of a decree dismissing a bill brought by the Railway against the receiver of a national bank, and granting relief to the receiver on a cross bill.

Mr. M. E. Clinton, with whom Messrs. Del W. Harrington and T. D. Gresham were on the brief, for petitioner.

The relationship between a bank and its depositors often has been stated by this Court. N.Y. County Nat. Bank v. Massey, 192 U.S. 145; Auten v. U.S. Nat. Bank, 174 U.S. 141, 142; Marine Bank v. Fulton County Bank, 2 Wall. 256.

While recognizing that the power to borrow money is not expressly given, this Court nevertheless has upheld pledges to secure such loans because a national bank has the implied power “to incur liabilities in the regular course of its business," Aldrich v. Chemical Nat. Bank, 176 U.S. 626, and because “it is not in terms prohibited by the National Banking Act,” Wyman v. Wallace, 201 U.S. 243. Since a deposit is a loan and a loan may be secured by a pledge of assets, it follows that deposits may be so secured. Morse, Banks and Banking, 6th ed., Vol. 1, $ 63, p. 182; Paton's Digest of Banking Law, 1926, Vol. 1, $ 641.

Such implied power is clearly conferred by § 24 of the Act. First Nat. Bank v. National Exchange Bank, 92

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245

Argument for Petitioner.

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U.S. 127. In that section, the word necessary not mean “indispensable." Cf. McCulloch v. Maryland, 4 Wheat. 316, 412, 413.

It should be presumed that Congress used the word necessary” in its liberal sense and intended it to convey the meaning ascribed to it in McCulloch v. Maryland, supra. Employing this definition and applying it to the opinion in First Nat. Bank v. National Exchange Bank, 92 U.S. 122, we find that the power conferred upon national banks was two-fold: (1) “To transact such a business as is specified,” i.e., the business of “receiving deposits ”; and (2) “all such incidental powers necessary,” i.e., convenient, useful, or essential, “ to carry it on," i.e., the business of procuring deposits, and securing them. It should be observed that the implied power thus granted, to use other language of Chief Justice Marshall, "is placed among the powers ..., not among the limitations on those powers. Its terms purport to enlarge, not to diminish the powers.

It purports to be an additional power, not a restriction on those already granted.” 4 Wheat. 419, 420.

“Subject to law” means “subject to whatever law” the legislative body might think fit to pass. Head v. University, 19 Wall. 530. But we find nothing in the Act prohibiting national banks, while solvent, from pledging a part of their assets to procure or retain deposits. The plain implication of § 52 is to the contrary.

If a bank be solvent, there can be no valid objection to its giving in good faith a dollar security for a dollar gained by deposit, for the bank at any time can fully discharge all of its obligations. Cf. Scott v. Armstrong, 146 U.S. 510; 30 Op. Atty. Gen. 341; Burrowes v. Nimocks, 35 F. (2d) 152.

There is no valid distinction between the giving of security for a public and a private deposit. Schumaker v. Eastern Bank & T. Co., 52 F. (20) 925.

Argument for Petitioner.

291 U.S.

a

The pledging of a bank's securities as protection for a deposit for the purpose of saving bond premiums is a reasonable exercise of the authority of a bank's vice president to procure such deposit and within the principle announced by this Court in First Nat. Bank v. National Exchange Bank, 92 U.S. 122

What the bank did in the case at bar amounted to a compromise. By it the bank would be able to keep the railway company's account, which carried an average daily deposit balance of approximately $50,000, and at the same time save the bond premiums. This the bank clearly had authority to do. It was “a reasonable incident to the business of receiving deposits.”

The National Bank Act does not require every act of a national bank to “accord with national banking practices and customs” before such act is legal. Those banks are authorized to exercise all incidental powers which are convenient or useful (if not prohibited) in carrying on the business of banking, which includes the business of receiving deposits. A transaction, therefore, which comes within this implied power is valid even when performed for the first time by a national bank. And it is manifestly improper for the courts, as was done in this case, to place a burden of proof upon the railway company greater than the Act itself required. The facts raised a presumption in favor of the validity of the pledge under the rule that corporations are presumed to contract within their powers, and, in the absence of proof to the contrary, their contracts are presumed to be valid when not foreign to the purposes for which the corporation is created. Ohio & M. R. Co. v. McCarthy, 96 U.S. 258; Union Pacific R. Co. v. Chicago, R. I. & P.R. Co., 163 U.S. 564. Moreover, the pledge agreement being on its face valid, the receiver, who asserts that it was ultra vires, had the burden of proving its invalidity. Clews v. Jamieson, 182 U.S. 490.

The power to receive deposits is indispensable to the

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