## Facts

- Nine Illinois citizens filed articles of association and an organization certificate to form Market National Bank of Chicago; the Comptroller of the Currency recorded them in early February 1893.
- Before any Comptroller authorization to begin banking, the bank’s directors elected officers and adopted a seal.
- The bank’s president executed a five-year lease of Chicago offices from McCormick, “to be used and occupied ... as a banking office, and for no other purpose,” at $13,000 annual rent payable monthly, with annual cancellation on 90 days’ notice and no rent until possession.
- A supplemental agreement required additional alterations; McCormick performed the agreed work and paid $2,475 for extra alterations to be shared with the bank.
- The bank took possession in June 1893, installed banking fixtures and supplies, and occupied the premises until April 30, 1895.
- The bank never received Comptroller authorization to commence the business of banking and never began banking operations; only part of its authorized capital stock was paid in.
- McCormick sued in Illinois state court to recover rent and related sums under the lease; the trial court entered judgment for the bank on an agreed statement of facts, and the Illinois Supreme Court affirmed.

## Issues

1. Whether the case was reviewable by the U.S. Supreme Court because the state judgment turned on the construction and effect of Rev. Stat. § 5136 governing national banks.
2. Whether a pre-authorization lease of premises restricted to use as a banking office for a substantial term and rent was “incidental and necessarily preliminary” to a national bank’s organization under § 5136.
3. If the lease violated § 5136, whether it was enforceable by contract (including by estoppel) or only to the extent of the value of benefits actually received by the bank.

## Decision

- The Supreme Court held it had jurisdiction because both parties asserted rights under § 5136 and the state court’s decision necessarily rested on that federal statute.
- The Court held the lease was not an act “incidental and necessarily preliminary” to organization, but a prohibited business transaction undertaken before Comptroller authorization.
- The lease was void; it could not be validated by estoppel based on the bank’s possession, representations, or use of the premises.
- The void lease could not support recovery of rent or other contractual sums beyond the value of what the bank actually received and enjoyed.
- The Court affirmed the judgment for the bank.

## Legal Principles

- A national bank may not “transact any business” before Comptroller authorization except acts incidental and necessarily preliminary to organization.
- A substantial term lease for premises restricted to use as a banking office, executed before authorization to begin banking, falls outside permissible preliminary acts and is void.
- A contract made in direct contravention of a statutory prohibition applicable to national banks is not enforceable as a contract and cannot be made enforceable by estoppel.
- Even when the contract is void, recovery against the bank is limited to restitution measured by the value of benefits actually received and enjoyed, not contract damages.

## Conclusion

The Supreme Court affirmed that Rev. Stat. § 5136 bars national banks from entering non-preliminary business contracts before Comptroller authorization; a pre-authorization banking-office lease was void and could not support contract rent, with any recovery limited to the value of the bank’s actual use and benefit.


McCormick v. Market Nat'l Bank of Chi., 165 U.S. 538 (1897)