piled Laws of 1897. The sale of stock was then made pursuant to authority conferred by Sections 10335 to 10338 of the Compiled Laws of 1897. Section 10388 provides: "And the purchaser (at such execution sale) shall thereupon be entitled to a certificate or certificates of the shares bought by him, upon paying the fees therefor, and for recording the transfer." It is clear from the above statutory provision that the bank has authority to issue to itself new certificates to take the place of those sold upon the execution and pursuant to the authority conferred upon it by the General Banking Law would have authority to sell these shares so issued within the statutory period. Very respectfully yours, (Signed) FRANZ C. KUHN, Attorney General. CORPORATIONS TO INVEST IN OR POSSESS BANK STOCK CONDITIONS. ONLY ON CERTAIN May 24, 1911. Hon. Edward H. Doyle, Commissioner of the Banking Department, Capitol, Lansing: Dear Sir-You state in your letter of April 20th that the banking department has ruled that the several sections of the banking law relating to stockholders require the individual ownership of capital stock of state banks; that in recent reports to the department it appears that in numerous instances capital stock of state banks is owned by firms, copartnerships, corporations and two or more individuals jointly. You inquire whether such a holding is legal. In reply thereto will say that it is our view that two or more individuals have the authority to hold bank stock jointly, also that copartnerships have the same right. The question of the right of a corporation to take and hold stock in a bank is dependent upon the statute providing for the organization of such corporation and the manner in which the stock is acquired. The rule is thus stated in Clark and Marshall on Corporations, page 523: "A corporation has no power to subscribe for or purchase shares of stock in another corporation unless such power is expressly granted or unless the nature of the corporation and the circumstances under which the stock is acquired are such as to render the transaction a necessary or reasonable means of carrying out the object for which it was created or of accomplishing some purpose which is authorized by its charter." Without making an extensive examination into the acts providing for the creation of the different classes of corporations doing business in this state, will say that in the great majority of cases the act providing for the organization of such corporations does not authorize the purchasing and holding of shares in other corporations, and under the general and hold shares in banks unless such shares were taken in a manner that could be said to be reasonably necessary to the carrying out of the objects for which the corporation was created. No instance occurs to us where it could be said to be necessary for a corporation to purchase and hold shares of stock in a state bank except as such stock might be taken in payment of debts in good faith owing to the corporation. Section 50 of the Compiled Laws relative to the construction of statutes provides: "The word 'person' may extend and be applied to bodies politic and corporate as well as to individuals." Reference must be had to the provisions of the act of incorporation of the corporation holding the bank stock and a determination must be made of the purpose for which such stock was purchased in order to settle the question of the right of the corporation to take and hold such stock. Very respectfully yours, BANK ABSORBING ANOTHER CANNOT CONTINUE TO HOLD CERTAIN UNAUTHOR· IZED INVESTMENTS. May 24, 1911. Hon. Edward H. Doyle, Commissioner of the Banking Department, Capitol, Lansing, Michigan: Dear Sir-We are in receipt of your letter of May 20th, in which you state as follows: A state bank recently purchased the assets of another state bank, among which were certain bonds coming within the provisions of subdivisions (e), (f) and (g), of Section 27 of the Banking Law, which had not been approved by the Securities Commission. These assets had been permitted to be held by the selling bank by reason of the fact that they were investments prior to the taking effect of the amendments to Section 27 made by Act 262 of the Public Acts of 1905. The purchasing bank contends that because the department permitted them to be held by the selling bank, it should also authorize the purchasing bank to hold the same until maturity. You submit the inquiry as to whether the purchasing bank should be allowed to carry such securities as legal savings investments. In reply thereto would say that it is our opinion that the purchasing bank should be held to the plain requirements of Section 27, and that the fact that the securities mentioned were purchased from another savings bank would not justify you in permitting the bank purchasing same to carry them as legal savings investments. In this connection it may be proper to say that Section 27 requires fifteen per cent of the deposits to be kept on hand as a reserve, in cash or reserve banks, three-fifths of the remainder of the deposits are required to be invested in securities mentioned in subdivisions (a) to (i) inclusive of Section 27. You will note "A portion of said remainder not exceeding the capital and additional stockholders' liability may be invested in negotiable paper approved by the board of directors." This would authorize a savings bank to carry an amount of negotiable bonds or other negotiable paper up to the amount named in the above quoted provision, even though such bonds or other negotiable paper had not received the approval of the Securities Commission. Very respectfully yours, (Signed) FRANZ C. KUHN, Attorney General. JOINT TRUSTEESHIP IN CERTAIN BOND ISSUES PERMISSIBLE. June 29, 1911. Hon. E. H. Doyle, Commissioner of Banking, Capitol, Lansing: Dear Sir-Replying to your letter of June 15th, relative to the first mortgage six per cent bonds of the Oregon-Washington Timber Company, for which the Union Trust Company of Detroit, and the Mississippi Valley Trust Company of St. Louis, are co-trustees, will say that we think this mortgage comes within our ruling of October 15, 1910, to the effect that if the bonds possess the other requisite qualifications for investment for savings banks, you would be warranted in permitting savings banks to invest therein. Very respectfully yours, STATE BANKS NOT PERMITTED TO PLEDGE ASSETS. August 23, 1911. Hon. E. H Doyle, Commissioner of Banking Department, Capitol, Lansing, Michigan: Dear Sir-I am in receipt of your communication of the 28th ultimo, calling attention to Section 9 of the Federal Act providing for the establishment of postal savings banks in the United States and also to Section 32 of the General Banking Law of this state. Section 9 of the Federal Act referred to provides for the deposit of postal savings funds in solvent banks whether organized under the national or state laws and contains the following provisions: "The board of trustees shall take from such banks such security in public bonds or other securities, supported by the taxing power, as the board may prescribe, approve, and deem sufficient and necessary to insure the safety and prompt payment of such deposits on demand." Section 32 of the General Banking Law of this state, in part, reads as follows: "No bank or bank officers shall give preference to any depositor or You wish to know if Michigan state banks are prohibited from pledg ing municipal bonds to secure such postal savings bank deposits. If the plan to which you refer is carried out it would result in a state bank pledging its securities, which are a portion of its assets, as a collateral security for the deposit of postal savings funds. In the event of a failure of a state bank under such conditions, it would operate as giving such deposits a preference over the general deposits in the bank, which, in my opinion, is clearly prohibited by the language quoted from Section 32. I therefore advise you that the assets of a state bank cannot be lawfully pledged as security for such deposits. Respectfully yours, (Signed) FRANZ C. KUHN, Attorney General. REAL ESTATE MORTGAGE LOANS NOT TO EXCEED FIFTY PER CENT OF CAPITAL. September 14, 1911. Hon. Edward H. Doyle, Commissioner of the Banking Department, Capitol, Lansing: Dear Sir-In your letter of September 11th, you call attention to Section 23 of the Banking Law, Section 6112 C. L., which provides: "But it (a commercial bank) shall not lend to exceed fifty per cent. of its capital stock upon mortgage or any other form of real estate security, and then only upon the adoption of a resolution by a two-thirds vote of the board of directors." You also call attention to Section 52 of the Banking Law, Section 6141 C. L., which provides, in part, that: "The total liabilities to any bank of any person or any company, corporation or firm for moneys advanced, including in the liabilities of the company or firm the liabilities of the several members thereof except special partners, shall at no time exceed one-tenth part of the amount of the capital and surplus of such bank. Provided, however, That by a two-thirds vote of the directors the liabilities to any bank of any person or company or corporation or firm may be increased to a sum not exceeding one-fifth of the capital and surplus of the bank." * * # You submit the inquiry as to whether under the provisions of Section 23 a bank is authorized when it has accumulated a surplus to loan on real estate security not to exceed fifty per cent of the capital and surplus, or whether such real estate loans must be limited to fifty per cent of the authorized capital stock. In reply thereto will say that it is our view that the word "capital stock" as used in Section 23 of the Banking Law does not include surplus and that the word "capital stock" as used in Section 23 is used in the same sense as used in Section 1 of the Banking Law, and refers only It is therefore our opinion that a commercial bank cannot loan to exceed fifty per cent of its authorized capital stock on real estate security. Very respectfully yours, (Signed) FRANZ C. KUHN, Attorney General. ASSESSMENT ON STOCKHOLDERS NOT LIMITED TO ONE HUNDRED PER CENT. October 14, 1911. Hon. Edward H. Doyle, Commissioner of the Banking Department, Capitol, Lansing, Michigan: Dear Sir-In your letter of September 30th you submit the following inquiries: "In case of an impairment of the capital stock of a state bank to an amount in excess of its total capital, has the board of directors the authority to order, upon the requisition of the Commissioner of the Panking Department, to make good such deficiency, an assessment upon the capital stock of such bank for an amount exceeding 100 per cent of such stock? After having paid an assessment of 100 per cent in accordance with the present banking law, in case of an impairment ascertained subsequently by the department, could a further assessment be levied by the directors, upon requisition of the commissioner, for the purpose of making good such deficiency? Would the payment by stockholders of assessments such as above indicated, lessen their liability in case of the liquidation or insolvency of the bank?" The statutory provisions involved in these inquiries are Section 46 of the Banking Law, which provides as follows: "The stockholders of every bank shall be individually liable, equally and ratably, and not one for another, for the benefit of the depositors in said bank to the amount of their stock at the par value thereof, in addition to the said stock; but persons holding stock as executors, administrators, guardians or trustees, and persons holding stock as collateral security, shall not be personally liable as stockholders, but the assets and funds in their hands constituting the trust shall be liable to the same extent as the testator, intestate, ward or persons interested in such trust funds would be, if living or competent to act, and the person pledging such stock shall be deemed the stockholder and liable under this section. Such liability may be enforced in a suit at law or in equity by any such bank in process of liquidation, or by any receiver, or other officer succeeding to the legal rights of said bank." Also Section 42 of Act 1 of the Public Acts of 1911, which provides, in part, as follows: "Whenever it shall appear from the report of any bank, or the commissioner shall have reason to believe that the capital of any bank is |