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Lamb Knit Goods Co. v. Lamb Glove & Mitten Co., 120 Mich. 159;
Penberthy Injector Co. v. Lee-Penberthy Mfg. Co., 120 Mich. 174;
Supreme Lodge of Knights of Pythias v. Improved Order Knights of Pythias, 18
Great Hive L. 0. 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,
JNO. E. BIRD,
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 3rd 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."
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 or 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. The 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, 150 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. Fennell's letter herewith.
Very respectfully yours,
INCREASE OF CAPITAL NOT REQUIRED OF BANKS BY EXTENSION OF CORPORATE LIMITS, BRANCH BANKS PERMITTED IN CERTAIN INSTANCES.
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 the 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 busi
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 to establish within a village which becomes located in a city by reason of the extension of the corporate limits of the city to increase its captial 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 having a much larger capital. A careful consideration of the provisions of the General Banking 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 its business.
In Magee on Banking, page 41, are compiled the provisions in force in the different states relating to the 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 In have been heretofore questioned by the banking department or any officer of the State. 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.
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
In reply would say that this section provides in subdivision (i) that a certain portion 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 subdivsion 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,
"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
REQUIREMENTS IN CONNECTION WITH INCREASE OF CAPITAL STOCK OF BANKS AFFECTED
Nov. 12, 1909.
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, effecting 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 according to the population of the city or village in which they are situated. In order to prevent a reduction of the capital below the minimum, it is provided in Section 10 that "no reduction shall be made to a less amount than is required in Section 1 for capital." To permit this bank to substantially re-organize by increasing its capital, without increasing its capital stock to at least the minimum amount required for the city of.. ...would in my judgment, do violence to the intent of the legislature, as expressed in Sections 1 and 10 of the Banking Law, to which I have referred. The bank is now a corporation of the city of.. The law relating to the amount of capital stock in... ...is different than in. While I do not think the bank could be deprived of its right to continue during the period of its corporate existence, with a capital of twenty thousand dollars, by the annexation, I am constrained to hold that in taking advantage of the statute relative to the increase of capital stock it must be governed by the provision of the statute applicable to the city of... and must, therefore, if it increases its capital at all, increase it to at least the minimum amount required for cities having a population of over one hundred and ten thousand inhabitants, as prescribed by Section 1 of the Banking Law.
Very truly yours,
CONSTITUENT CORPORATIONS ENTITLED TO TWENTY PER CENT LOAN LIMIT.
Jan. 20, 1910.
Hon. Henry M. Zimmermann, Commissioner of Banking, Capitol, Lansing:
Dear Sir-We are in receipt of your letter of the 14th instant in which you ask: "In this state, where a corporation is in' operation and control of other corporations by having acquired a majority of the stock of such corporations what would be the limitation of credit lines which might be extended these corporations, both parent and subsidiary, by our State banks, under the Banking Law, exclusive of real estate or other collateral loans authorized by statute?"
Section 6141, C. L. 1897, as amended, being Section 52 of the Banking Law, provides as follows:
"The total liabilities to any bank of any person or of 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, but the discount of bills of exchange drawn in good faith against actually existing values and the discount of commercial or business paper actually owned by the person negotiating the same shall not be considered as money borrowed; ***Provided, however, That by a two-thirds vote of directors, the liabilities to any bank of any person or company or corporation or firm may be increased to a sum not exceeding
It will be noted that in the case of a company or firm the line of credit includes the liabilities of the company or firm and the several members thereof, except special partners, while no such restriction appears in the case of the corporation. Corporations are recognized by law as distinct legal entities regardless of the ownership of the stock. While we appreciate the fact that the effect of extending a 20 per cent. line of credit to each corporation might in some cases be equivalent in its effect to extending a 40 per cent line of credit to one corporation, yet we are satisfied that the statute does not authorize interference by the Banking Commissioner when the 20 per cent line to each corporation is not exceeded. The situation is one that might properly be brought to the attention of the legislature. Very respectfully yours, (Signed) JNO. E. BIRD, Attorney General.
DIRECTORS' NOTES IN LIEU OF ASSESSMENT, NOT PERMISSIBLE.
March 16, 1910.
Hon. Henry M. Zimmermann, Commissioner of the Banking Department, Lansing, Michigan: Dear Sir-I am in receipt of your communication of the 14th ultimo, requesting my opinion on the following proposition:
"If in case of the impairment of the capital of one of our State banks, in lieu of an assessment, a promissory note were given by the directors to the bank, pledging their personal responsibility to its payment, but with the exception that the stockholders will authorize its retirement from the earnings of the bank, could the makers of the note in case of the earnings of the bank failing to satisfy it avoid payment on the ground of no consideration?"
Replying thereto would say that section 6135 of the Compiled Laws, being section 46 of the act providing for the incorporation of banks in this state, in part, reads 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."
As a general proposition the directors of a bank organized under the General Banking Laws of the 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. Very 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 Banking, 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 becoming 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 property, and provide proper vaults and premises for the same; and shall 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 1 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 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 1 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 1 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 We security consisting of personal property or securities of known marketable value, etc." are of the opinion that they are not so included. It is our view that the second clause of Subdivision 1, 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. The first clause of subdivision 1 of Section 27 of the Banking Law 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 mortgages. We do not, however, believe that a bank would be authorized to invest in participating notes secured by a mortgage 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 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 No. 99, Public Acts of 1909, I desire to say that the act in this 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 v. Butterworth, 106 Mass. 75;
Way v. Butterworth, 108 Mass. 509.
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