organization until it has been authorized by the Commissioner of the Banking Department to commence the business of banking." The articles of incorporation are required to be executed in triplicate, one to be recorded in the office of the county clerk of the county in which the bank is located; one filed in the office of the Commissioner of the Banking Department; and one filed in the office of the Secretary of State. When such articles of incorporation are properly executed and filed and recorded, as required by law, and the Commissioner of the Banking Department is notified that at least fifty per cent. of its capital has been paid in, and that such bank has complied with all the provisions of the general banking law; before the bank shall be authorized to commence business, the Commissioner is required to examine into the condition of such bank, and if it is found that such organization is in accordance with the statute and that the various provisions of the law have been complied with a certificate of authority to engage in the business of banking is issued by such Commissioner. When the statute is not complied with in any essential particular, it is clearly my opinion that such certificate of authority should be withheld. It seems to me that articles of incorporation which do not fully disclose the name and residence of the cestui que trust, where the stock is subscribed for by a trustee, and which also fails to disclose the authority to subscribe for such stock in that capacity, do not conform to the requirements of the general banking law, and, under such conditions as you have outlined, it would be your duty to refuse to issue the certificate of authority provided for by law. I do not deem it essential to point out the numerous complications that might arise if stock in a banking corporation should be subscribed for in the manner indicated. It is sufficient to say that it does not conform to the requirements of the General Banking Law. Respectfully yours, JNO. E. BIRD, Attorney General. (4) CERTAIN CERTIFICATES OF INDEBTEDNESS ARE LEGAL INVESTMENTS. Lansing, Michigan, October 23, 1907. Hon. H. M. Zimmerman, Commissioner of the Banking Department, "Capitol," Lansing, Michigan: My Dear Sir-I am in receipt of your communication of the 16th inst., in which you ask whether or not certificates of indebtedness issued in payment for voting machines under the provisions of section 13 of Act 217 of the Public Acts of 1905 are proper investments for savings banks under subdivision (b), section 27 of the General Banking Law, which provides that a certain portion of the savings deposits of such banks shall be invested as follows: (b). In the public debt or bonds of any city, county, township, village or school district of any state or territory in the United States, which shall have been authorized by the legislature of such state or territory: Provided the total indebtedness of such municipality does not exceed five per cent. of its assessed valuation, except by a vote of two-thirds of the board of directors, such bonds may be purchased if the total liabilities do not exceed ten per cent. of its assessed valuation." You also state that it has always been the ruling of the Banking Department that the terms "public debt" and "bond" were synonymous and that an issue of bonds, in order to be a proper investment for savings banks under this subdivision must previously have received the approval of the voters of the municipality issuing the bonds. For answer to your inquiry I would say it is my opinion that the ruling of your department places too narrow a construction upon the statute. The terms "public debt" and "bonds" are not synonymous. The term "public debt" includes not only a bonded debt, but also other form of public indebtedness. State v. Hickman, 11 Mont. 541, and cases cited. The statute under which certificates of indebtedness are issued in payment for voting machines reads as follows: "The local authorities, on the adoption and purchase of a voting machine, may provide for the payment therefor in such manner as they may deem for the best interest of the locality and may for that purpose issue bonds, certificates of indebtedness or other obligations, which shall be a charge on the city, town or village. Such bonds, certificates or other obligations may be issued with or without interest, payable at such time or times as the authorities may determine, but shall not be issued or sold at less than par." The legislature has the undoubted right to authorize debts of this character to be incurred without the vote of the electors of the municipality. Callan v. The City of Saginaw, 50 Mich. 7. I am of the opinion that the certificates of indebtedness issued under authority of this section come within the term "public debt" as used in subdivision (b), section 27 of the General Banking Law, and that, consequently, savings banks may lawfully invest their funds in such certificates of indebtedness. STRICTLY COMMERCIAL BANKS MUST AMEND ARTICLES TO TRANSACT SAVINGS BUSINESS. (5) Dear Sir-I am in receipt of your communication of the 16th inst., requesting an opinion upon the question of whether or not a bank organized as a purely commercial bank under the General Banking Law of the State is authorized to advertise for savings deposits and do a general banking business under the exception contained in section 24 of that law, which provides: "Commercial banks may allow interest on accounts or certificates of deposit, but all deposits in such banks shall be payable on demand without notice, except when the contract of deposit otherwise provides." any number of persons, not less than five, "may associate to establish offices of discount and deposit, to be known as commercial banks, and also to establish offices of loan and deposit to be known as savings banks, or to establish banks having departments for both classes of business," etc. Under section 2 of the General Banking Law, the articles of incorporation are required to specify the nature of the business to be carried on, whether that of a commercial bank, savings bank, or both. Sections 23, 24 and 25 of the same law contain certain provisions referring to "any bank which, by its articles of incorporation, shall designate its business as that of a commercial bank;" and section 26 and succeeding sections of the same law contain provisions governing "any bank which by its articles of incorporation shall designate its business as that of a savings bank;" and section 29 contains provisions governing "any bank combining the business of a commercial bank and a savings bank" and provides that "all receipts, investments and transactions relating to each of said classes of business shall be governed by the provisions and restrictions herein specifically provided for the respective kinds of banks." Reading all these provisions of the General Banking Law together, it is clear that it was not intended to permit a bank organized as a strictly commercial bank to engage in the business of a savings bank, and that the exception contained in section 24, to which reference has been made, was not intended to have that effect. Before a commercial bank, organized as such can conduct a savings bank business, it must amend its articles of incorporation so as to provide for conducting both classes of business. Respectfully yours, JNO. E. BIRD, (6) BANKS CANNOT EXTEND THEIR CREDIT TO AN INDIVIDUAL OR BANK. June 10, 1908. Hon. H. M. Zimmermann, Commissioner, Banking Department, "Capitol," Lansing: Dear Sir-I have your communication of June fifth, enclosing certain correspondence with the.. bank. It appears from your communication that this bank, by an arrangement with certain private banks, permits the latter to issue drafts payable out of the funds of the former bank on deposit with its correspondent banks at New York and Chicago. You state that you have taken the position that such practice is illegal, and request an opinion as to the propriety of this holding. Replying thereto would say, any attempt upon the part of any bank to permit anyone or any institution to issue drafts payable out of its deposit with correspondence banks is an attempt to perform an act and permit an arrangement not authorized by law. The bank possesses no authority to extend its credit to any individual or bank in the manner set forth in your communication. Such a practice may operate to the detriment of depositors and may impair the faith and credit of the bank. The practice in question is without authority of law. You possess general power under the statute to prohibit such practice and it is the duty of the officials of the bank to cancel this arrangement. Respectfully yours, SIMILARITY OF TRUST COMPANY TITLES. JNO. E. BIRD, (7) June 30, 1908. Hon. Henry M. Zimmermann, Commissioner of Banking, Lansing, Michigan: Dear Sir-I am in receipt of yours of the 19th instant in which you state that a certain corporation organized under Act 232, Public Acts of 1903, as the ". ...and Trust Company" is engaged in the business of selling various kinds of securities, and request the opinion of this department as to whether it is permissible for such a concern to do business under a name so closely allied to that of institutions organized under Act 108, Public Acts of 1889, under which trust companies are organized. Subdivision 1 of section 2 of Act 232, Public Acts of 1903, contains this proviso: "No name shall be assumed already in use by any other existing corporation of this State. or corporation lawfully carrying on business in this State, or so nearly similar as to lead to uncertainty or confusion." Under the decisions of the courts of this State, it seems to be clear that the question of the right to use a corporate name not identical with that of another existing corporation depends upon whether the names are so similar that persons would be likely to deal with one concern when they believed in good faith they were dealing with the other. See Lamb Knit Goods Co. v. Lamb Glove & Mitten Co., 120 Mich. 159; Supreme Lodge of Knights of Pythias v. Improved Order Knights of Pythias, 13 Great Hive L. O. T. M. v. Supreme Hive, 135 Mich. 392, 415. It would seem also if the similarity of the name of a corporation organized under Act 232. Public Acts of 1903, to the names of corporations organized under Act 108, Public Acts of 1889, which is the trust company act, was such that people dealing with it would be deceived into believing that they were dealing with a corporation which was under the supervision of the Banking Department, that the use of such a name could properly be restrained in a proceeding instituted for that purpose. Very respectfully yours, (9) FOREIGN BANKS NOT PERMITTED TO ENGAGE IN BUSINESS IN STATE. July 29, 1908. Hon. Henry M. Zimmermann, Commissioner of Banking, "Capitol." Lansing: Dear Sir-We are in receipt of yours of the 3d instant in which you enclose a letter from Reginald F. Fennell, under date of June 20, 1908, in which he submits the following inquiry: "Is there any license necessary or other legal form required to be gone through with for banks doing business outside of the State of Michigan, to establish an agency or representative in this State? In the event of there being any restriction, kindly advise to what extent." The In reply to this inquiry will say that the legislature has by statute prescribed strict conditions to be complied with by corporations desiring to engage in the business of banking, or in loaning and investing money. There is no statutory provision which permits foreign corporations to come into this State for the purpose of engaging in that kind of business. fact that the legislature has seen fit to lay down these conditions for domestic corporations desiring to engage in such business and to place them under the supervision of the State Banking Department indicates clearly an intention on the part of the legislature to prohibit foreign corporations from engaging in such business. In this connection we desire to call your attention to the case of New York Mortgage Co. v. Sec. of State, 50 Mich. 197, 202, which was a mandamus proceeding against the Secretary of State to compel the issuance of a license to do business in this State to. a corporation desiring to engage in the business of making "loans secured by mortgages on real estate, to sell such mortgages and bonds of this company secured by mortgages on real estate, but said bonds are not to be sold on the installment plan." In response to the contention of the relator in that case that it should be admitted to do business under our foreign corporation law, the court said: "In other words such construction would operate as to such foreign corporations as a repeal of all the beneficial and protective provisions of Act No. 205, Public Acts of 1877. To hold that such was the legislative intent would be contrary to every suggestion that arises to the mind, upon the consideration of the proposition. Our construction of the act is that banking corporations and those corporations which are within the contemplation of our banking laws are not within the provisions of the act authorizing foreign corporations to transact business in this State." In view of the above, we are of the opinion that foreign banks have no right to engage in business in this state, or to establish an agency or representative in this State for the transaction of business. We return Mr. Fennel's letter herewith. Very respectfully yours, JNO. E. BIRD, Attorney General. INCREASE OF CAPITAL NOT REQUIRED OF BANKS BY EXTENSION OF CORPORATE LIMITS, BRANCH BANKS PERMITTED IN CERTAIN INSTANCES. (10) May 27, 1909. Hon. Henry M. Zimmermann, Commissioner of the Banking Department, Capitol, Lansing, Michigan: Dear Sir-I am in receipt of your letter of the 29th ultimo in which you state that a bank organized with a capital of $20,000.00 in a village adjacent to a large city subsequently became located within the corporate limits of the city by an extension of the boundaries of the city to include the territory formerly embraced within the limits of the village; the bank thus coming into the city with a capital less than is required by statutes of banks organized within the city. You also state that it is now suggested that this bank may establish branches within the city and request an opinion upon the following: First, Whether or not you have authority to require a bank organized in a village, when it becomes located in a city by the extension of the corporate limits of the city, to increase its capital in accordance with the number of inhabitants of the city. Second, Whether or not a State bank has authority to establish branches in the city or village in which it is authorized by its articles of incorporation to transact business. In reply will say that Section 1 of the General Banking Law, (Section 6090 C. L.) provides for the establishment of commercial and savings banks in cities and villages in the State and prescribes the minimum capital that banks may have, based on the population of the city or village in which the bank is to be located. Section 2 of the act provides that the articles of incorporation shall specify among other things: "The county and city or village where such bank is to be located and to conduct its business." Section 7 provides that upon compliance with the statute the Commissioner of the Banking Department shall give the bank a certificate under his hand and official seal that the bank has complied with the statute and is authorized to commence business. The contingency arising in the case of the bank to which you refer apparently was not anticipated by the framers of the General Banking Law, as that law contains no provision requiring a bank established within a village which becomes located in a city by reason of the extension of the corporate limits of the city to increase its capital in accordance with the population of that city. Neither is there in the Banking Law any provision requiring a bank after its organization within a city of certain population to increase its capital as the population of the city increases. The bank upon complying with the provisions of the statute was given the right by the State to conduct its business within the village. It did not voluntarily remove to the city but became located therein by operation of law through the extension of the corporate limits of the city. The provision of the statute, requiring banks to have a certain capital according to the population, evidently has reference to the establishment of banks in the first instance. As heretofore stated, a bank once lawfully established with the required capital according to the population of the city is not required to increase its capital although the population of the city may increase to such an extent that a new bank could not be established therein without ing Law leads me to the conclusion that a bank once lawfully established in a village with the required capital in accordance with Section 1 of the General Banking Law is not required under the provisions of that law to increase its capital when it becomes located within a city by reason of the extension of the corporate limits of the city to include the village. For answer to your second question I would say that no authority to establish branches is conferred upon banks by any provision of the laws of this State. In the absence of statute a bank has no authority to establish branches at which a general banking business is conducted. MaGee on Banks and Banking. Page 41. Atty. Gen. v. Oakland Co. Bank, Walk, page 90. While a bank has no authority to establish branches unless expressly authorized by statute so to do, it seems that it may have an agency for the transaction of some parts of its business in the city or village designated in its charter as the place where the bank is to be located and to conduct is business. In MaGee on Banking, page 41, are compiled the provisions in force in the different states relating to this subject and of this State it is said: "There is no law authorizing the establishment of branches. Agencies are permitted which are restricted in their operations to receiving and paying out of deposits and issuing exchange:" and several instances of banks located in the cities of Detroit and Lansing having established agencies of this character are noted. The agencies established by the banks at the cities indicated have been conducted by the banks for some time and the right of the banks to establish such agencies does not appear to have been heretofore questioned by the banking department or any officer of the State. In view of the foregoing I am of the opinion that a bank may establish agencies of the character of those indicated herein within the limits of the city or village in which the bank is located. Inasmuch as a bank originally located in a village, and which becomes located in a city by the extension of the corporate limits of the city, has authority to conduct its business within the city, it would have the same right to establish agencies of this character as a bank originally organized within the city. Respectfully yours, (11) NOTES AND SECURITIES DEPOSITED WITH TRUST COMPANIES NOT LEGAL SAVINGS May 27, 1909. Hon. Henry M. Zimmermann, Commissioner of the Banking Department, Capitol, Lansing, Michigan: Dear Sir-I am in receipt of your letter of the 29th ultimo in which you ask whether or not notes and securities representing fractional parts of large loans where the security is deposited with a trust company are legal investments for a State bank under Section 27 of the General Banking Law (Section 6116 C. L.) as amended by Act 322 of the Public Acts of 1907. In reply would say that this section provides in Subdivision (i) that a certain proportion of the savings deposits of the bank shall be invested by the board of directors as follows: "Upon notes or bonds secured by mortgage lien upon unencumbered real estate worth at least double the amount loaned; the remainder of such deposits may be invested in notes. bills or other evidences of debt the payment of which is secured by the deposit with the bank, of collateral security consisting of personal property or securities of known marketable value, worth ten per cent more than the amount so loaned and interest for the time of the loan or may be invested in notes, bills or other evidence of debt, the payment of which is secured by such property or securities deposited in a collateral deposit company organized under the laws of this State." It is evident that the notes and securities in question come within the class last referred to in this subdivision, to-wit: "notes, or bills or other evidence of debt, the payment of which is secured by such property or securities deposited in a collateral deposit company organized under the laws of this State." This provision was incorporated in this subdivision of Section 27 by Act No. 322, Public Acts of 1907. The same legislature enacted a law providing for the incorporation of "safety and collateral deposit companies," the same being act No. 240 of the Public Acts of 1907, having power under the provisions of Section 9: "To receive on deposit, in trust, any personal property deposited with it by individuals, partnerships or corporations, as collateral security for the payment of bonds, or other obligations issued by such individuals, partnerships or corporations, and to enter into and execute any instruments in writing necessary and proper to carry such trusts into effect. Section 11 places every corporation organized under the act and engaging in this branch of the business under the supervision of the Commissioner of the Banking Department. These acts were passed by the same legislature; are in pari materia and must be construed together. Thus construed, the collateral deposit companies organized under the laws of this State referred to in the amendment to the General Banking Law must be held to refer to collateral deposit companies organized under the provisions of Act 240 of the Public Acts of 1907. I am informed that at this time there are no collateral deposit companies organized in this State under that act. Consequently, I am of opinion that savings banks have no authority to invest their funds in notes and securities under subdivision (i) of Section 27 of the General Banking Law where the security for the same is deposited with a trust company. Respectfully yours, JNO. E. BIRD, (12) STATE BANKS ORGANIZED BY STOCKHOLDERS OF NATIONAL BANKS. June 10, 1909. Hon. Henry M. Zimmermann, Commissioner of the Banking Department, Capitol, Lansing: Dear Sir-I am in receipt of your communication of the 29th ultimo requesting an opinion upon the question of whether or not a State bank may legally be organized in this State by the stockholders of a National bank under a plan substantially as follows: The stockholders of the national bank enter into an agreement with the officers of the national bank by the terms of which the stockholders agree that the officers may take necessary steps to organize a State bank with a prescribed capital, the shares of which may be prescribed for in the first instance by such persous as may be selected by the officers, but when paid for shall be held in the names of such persons as from time to time shall be the officers of the national bank, as trustees, which said trustees may exercise during the life of the trust all the rights and powers of absolute owners of the stock except to the extent that they may be ordered otherwise by express directions in writing signed by a majority of at least two thirds in interest of the persons beneficially interested in the stock. The dividends upon said stock are to be received by the trustees and paid by them to the national bank for distribution among the stockholders of the national bank pro rata according to their ownership of record of shares of stock in the national bank, the trust to continue as long as the national bank shall continue to do business unless sooner terminated by a request in writing of a majority of at least two-thirds in interest of the capital stock of said bank. The necessary capital for the State bank is to be furnished by a special or extra dividend declared by the national bank. It is provided that the stock in the State bank shall be held by the trustees and that no person shall have the right to transfer his interest therein otherwise than by the transfer of the ownership of stock in the national bank upon the books of the latter. The only evidence of the beneficial interest of any person in the stock of the State bank is that given by an indorsement on the back of the certificates of stock of the national bank to the effect that the owner of the shares represented by that certificate is beneficially interested in common with all other stockholders of the national bank in a pro rata amount of the capital stock of the State bank and that said beneficial interest cannot be sold or transferred otherwise than by the transfer of the shares of stock represented by the certificate upon the books of the national bank, and that the beneficial interest in the stock of the State bank shall pass with the transfer of the shares of the national bank represented by the certificate. It is further provided that no person shall be eligible to the office of director of the State bank who is not a director of the national bank. For reply to your inquiry I would say that the General Banking Law of this State contains no provision that would prohibit the stockholders in a national bank from organizing a State bank upon compliance with the provisions of the General Banking Law. Neither is there in that law any provision expressly prohibiting the stockholders in a State bank from entering into an agreement in substantially the form indicated above. The agreement is not between the national bank and the State bank, but is between the stockholders in those banks. As between the State bank and the State, any agreement of this character between the stockholders of the bank would be wholly ineffectual to prevent the State from exercising a supervisory control over the affairs of the bank, or enforcing the liability of the stockholders in accordance with the provisions of the General Banking Law. It is true that there are cases holding that agreements between stockholders in corporations imposing a permanent restraint upon the alienation of their shares of stock are invalid, but under the terms of this agreement a stockholder may transfer his shares of stock in the State bank provided he also transfers his shares of stock in the national bank. It does not seem that there is in that case such a restraint upon the alienation of the shares as would render the agreement invalid. Upon due consideration of the matter I am of opinion that. so far as the State is concerned, the plan outlined for the organization of a State bank is. in its general features. valid under the General Banking Law of the State. I express no opinion, however, upon the validity of the details of any particular plan for such organization, leaving those questions to be determined when it is sought to organize a State bank upon this plan and details of the proposed plan of organization are before me. Respectfully yours. JNO. E. BIRD, REQUIREMENTS IN CONNECTION WITH INCREASE OF CAPITAL STOCK OF (13) .... BANKS AFFECTED Hon. Henry M. Zimmermann, Commissioner of Banking, Capitol, Lansing: Dear Sir-Replying to your letter of the 19th ult., in which you request our opinion as to whether the Bank which was located in the village of recently annexed to the city of may increase its capital stock from twenty thousand dollars to fifty thousand dollars, will say that we held, in an opinion to you under date of May 9, 1909, that this bank could not be deprived of its right to do business under its original incorporation with a capital stock of twenty thousand dollars, by the fact of annexation of the village of to the city of We reached that conclusion by reason of the fact that the bank was lawfully incorporated with a capital of twenty thousand dollars to do business in .; that the annexation of placed the bank in the city of without its consent. and that it could not be thus deprived of its right to do business under its original incorporation. Now, however, this bank proposes, by its own voluntary act to increase its capital stock, thus in a measure, affecting a reorganization. The whole aim and purpose of the statute. Section 1 of the General Banking Law, is to provide a minimum capital for banks graded |
