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As a general proposition the directors of a bank organized under the General Banking Law of this State are not liable where the capital has been impaired except as stockholders, and under the provision above quoted this liability of the stockholders is "equally and ratably, and not one for another." For the purpose of avoiding liquidation under circumstances such as you have outlined, the commissioner of the banking department is clothed with certain discretionary powers to approve of such action on the part of the directors or stockholders as will make good such impairment and fully protect the depositors and creditors of the bank, but such impairment cannot be made good under the law by any transaction in the nature of a loan, as such a transaction would increase the liabilities of the bank to an amount equal to the sum received. In other words, a director or stockholder may make good the impairment of the capital of a State bank in lieu of an assessment or for the purpose of avoiding liquidation, but there can be no contingent liability therefor on the part of the bank. No action should be approved by the commissioner of the banking department which would leave uncertain the capital of a bank in this particular.

It is my opinion that the course suggested in your communication is not in harmony with the spirit and intent of the General Banking Law of this State, and particularly those provisions designed for the protection of depositors and creditors thereof.

Respectfully yours,
(Signed) JNO. E. BIRD,
Attorney General.

REAL ESTATE MORTGAGES NOT TO BE DEPOSITED WITH COLLATERAL DEPOSIT COMPANIES.

October 12, 1910.

Hon. Henry M. Zimmermann, Commissioner of the Banking Department, Capitol, Lansing:

Dear Sir-We have given careful consideration to your letter of September 22d, in which you submit the inquiry as to whether real estate mortgages may be deposited with collateral deposit companies organized under the provisions of Act 240 Public Acts of 1907 and participation notes therein thereby become lawful investments for savings banks. A conference with the representatives of the institutions affected by the question above stated has developed additional questions, namely: if collateral deposit companies may not be the depositories for such mortgages, may domestic trust company be such depository; also may a foreign trust company or a domestic corporation, partnership or individual not subject to supervision of the banking department be such depository?

The statutory provisions involved in the questions above submitted are Section 9 of Act 240 Public Acts of 1907, which reads as follows:

"Any corporation organized under this act shall have power to conduct a safety deposit business for the safe keeping of any personal prop

also have power to receive or 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."

Also subdivision I of Section 27 of the Banking Law which authorizes State banks to loan and invest savings deposits as follows:

"Upon notes or bonds secured by mortgage lien upon unincumbered 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 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 evidences 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."

Also the proviso of Section 52 of the Banking Law, which is as follows: "Provided, however, That the foregoing limitations shall not apply to loans on real estate or other collateral securities authorized by this act and deposited with the bank or a safety and collateral deposit company organized under the laws of this State."

It is apparent that the proviso to Section 52 can furnish no assistance in determining the scope of the provisions of Subdivision I of Section 27 by reason of the general rule of statutory construction that a proviso does not enlarge the scope of the enacting section.

Sutherland's Statutory Construction, Sec. 352.

It is also apparent that "notes or bonds secured by mortgage lien, etc.," are not included among the securities which are authorized to be deposited in a collateral deposit company under the terms of said Subdivision I of Section 27 above quoted unless it can be said that such "notes or bonds secured by mortgage lien" are also included in "notes, bills or other evidences of debt the payment of which is secured by deposit with the bank of collateral security consisting of personal property or securities of known marketable value, etc." We are of the opinion that they are not so included. It is our view that the second clause of Subdivision I, being that last above quoted, refers to notes, bills or evidences of debt which are secured by the deposit of personal chattels or securities such as promissory notes, bonds or other evidences of debt the title of which passes by the mere act of delivery. This would, of course, exclude real estate mortgages. We therefore hold that real estate mortgages may not be deposited with collateral deposit companies organized under the provisions of Act 240 Public Acts of 1907 and participations therein sold to savings banks as investments.

authorizes banks to loan savings deposits "upon notes or bonds secured by mortgage lien upon unincumbered real estate worth at least double the amount loaned." There is nothing in the Banking Law directly requiring real estate mortgages to be taken in the name of the bank when such loans are made. We are constrained, however, to hold that the law contemplates that the bank shall hold the title to such securities. It is essential that the banking department in making an examination of the affairs of the bank have an opportunity to examine the mortgages upon which such notes or bonds are predicated in order that the department may know the nature of the instrument, the description of the property and such other facts as will enable it to determine whether the loan is proper under the provisions of the statute.

Where, however, such real estate mortgage is placed in a trust company organized under the Michigan laws and over which the banking commissioner has adequate supervision, we think the commissioner would be acting within the spirit of the law if he permitted the mortgage to be taken in the name of such trust company and deposited with it allowing the banks to loan upon participating notes in such mortgage. We do not, however, believe that a bank would be authorized to invest in participating notes secured by a mortage held by a foreign trust company or by a domestic corporation other than a trust company, a partnership or individual for the reason that the banking commissioner would have no authority under the law to examine the mortgage in such cases and thus determine the propriety of the loan.

We are further of the opinion that Section 9 of Act 240 Public Acts of 1907 does not authorize a collateral deposit company to be the owner or trustee of a real estate mortgage, but limits its authority to that of acting as trustee of personal property and collateral such as would pass by manual delivery.

Very respectfully yours,
(Signed) FRANZ C. KUHN,
Attorney General.

PRIVATE BANKS NOT DEPOSITORIES FOR PUBLIC FUNDS.

December 7, 1910.

Hon. Henry M. Zimmermann, Commissioner of Banking, Capitol, Lansing: Dear Sir-In response to your request for an opinion upon the question of whether or not private banks, so-called, may be designated as depositories of county funds, under the provisions of Act 99, Public Acts of 1909, I desire to say that the act in its title and provisions refers to the designation of "a bank or banks" as depositories without specifying whether private or incorporated banks were intended.

I am of the opinion that the statute should not be construed to include private banks. Generally, when reference is made to a bank this means an incorporated bank and not a private bank. For example, when a note is made payable at any bank in a city, this is held to mean an institution incorporated for banking purposes and does not include a private bank.

Way vs. Butterworth, 106 Mass. 75;

The legislature has passed a law providing for the incorporation and organization of banks and making them subject to the State supervision. Under that law, as under the federal law providing for the organization of national banks, the stockholders are liable in double the amount of the stock held by them. It seems to me that when reference is made in the statute to a bank, it means an incorporated bank organized under the State or national banking laws. A private banker, so-called, conducts his business under Chapter 133 of the Compiled Laws of 1897, the same being an act relative to brokers and exchange dealers. The law prohibits the private banker from advertising or putting up any sign tending to convey the impression that the place of business is an organized bank. If he advertises, he must use his individual name and máy add thereto "bank," "banking office" or exchange office."

I do not think the place of business of one conducting a private bank is a bank within the meaning of Act 99, Public Acts of 1909.

A somewhat similar question was before the court in the case of the City of DuQuoin vs. Kelly, 176 Ill. 218. An ordinance was passed by the city requiring the treasurer to keep the city funds in a regularly organized bank. It was held that the ordinance contemplated a bank organized under the State or national banking law and not a private bank owned by an individual. The court said:

"We are of the opinion that the term 'regularly organized bank' in the City and Village act, means a bank organized under either the State law or the act of Congress, and that it was not intended by the legisla ture that a city officer who has given bond for the safe keeping of the funds in his hands should be required to deposit them in a private bank. There would seem to be no more reason for that than there would be for turning the funds over to a private individual. It is true, provision is made that such banker or bankers shall give bond; but we do not think this alters the case."

I believe as was said by the court in this case, that there is no more authority for depositing the public funds in a private bank than there is for loaning them out to an individual, and the fact that security is required to be given makes no difference.

I am of the opinion, therefore, that the Board of Supervisors cannot lawfully designate a private bank as a depository of county funds, under the provisions of Act 99, Public Acts of 1909.

Very respectfully yours,

(Signed) FRANZ C. KUHN, Attorney General.

AS TO EXAMINERS' SALARIES.

January 19, 1911.

Hon. W. Donovan, Deputy Banking Commissioner, Capitol, Lansing: Dear Sir-We are in receipt of your letter of January 11th, calling our attention to Section 6127 of the Compiled Laws, as amended by Act 103 of the Public Acts of 1909, relative to the salaries of bank exam iners and requesting the opinion of this department as to the salaries

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these examiners will be entitled to receive when they receive commissions from the newly appointed commissioner.

The language of the statute in question is as follows:

"Salaries of the examiners shall be the sum of $1,700 per annum during the first year of their employment and shall be increased $100 each year of such employment until the full sum of $2,000 is reached, which sum shall be their annual salary thereafter."

This amendment took effect on September 1, 1909. It is the general rule of statutory construction that statutes are presumed to be prospective only in their operation and will be retroactive only when the legis lative intent is clear. There is certainly nothing in this amendment which indicates a legislative intent to make it retroactive. It is, therefore, our view that no matter what length of time an examiner had served, he was not entitled to an increase in pay until a service of one year after September 1, 1909. Examiners who have been in service continuously since September 1, 1909, would be entitled, upon receiving their new commission, to receive a salary of $1,800 until September 1, 1911, when they would be entitled to receive a salary of $1,900, and so Those who have been appointed examiners since that time would, of course, be entitled to an increase based on the time of service, when they have completed a year's service in the department.

on.

Very respectfully yours,

(Signed) FRANZ C. KUHN, Attorney General.

BANK STOCK MAY BE CANCELLED UNDER PROVISIONS OF SECTIONS 10335-8,

COMPILED LAWS.

March 10, 1911.

Hon. Edward H. Doyle, Commissioner of the Banking Department, Capitol, Lansing, Michigan:

Dear Sir-In your letter of February 25th, you state that the... Bank of ........、 Michigan, recently sought to enforce its rights, under Section 6090 of the Compiled Laws of 1897, by a sale of shares of its own bank stock, which is at the present time held by Chicago parties as collateral to a loan made by them. This sale was made by the sheriff, by order of the court and stock bid in by the ... Bank. The

Chicago parties refused to surrender the stock in question, and you inquire by what authority, under the statute, can the officers of the bank cancel the old outstanding.issue and a new issue of stock be made, which, when sold, will reimburse the bank for the amount which they have already applied on the stockholders' obligation, as noted above.

Since receiving this communication we have received a copy of the proceedings under which the sheriff's sale, above referred to, was made. It appears that this sale was not made pursuant to the authority conferred by the General Banking Law, Section 6090, to which you refer in your letter, but was made pursuant to an agreement confessing judg

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