tal 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, (Signed) JNO. E. BIRD, Attorney General. CONSTITUENT CORPORATIONS ENTITLED TO TWENTY PER CENT LOAN LIMIT. January 20, 1910. Hon. Henry M. Zimmermann, Commissioner of Banking, Capitol, Lansing. Dear Sir-We are in receipt of your letters 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 subsidary, 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 one-fifth of the capital and surplus of bank: * * * 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, 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 PERMISSABLE. 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 expectation 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 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 certain 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, 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 a 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 safekeeping of any personal property, and to provide proper vaults and premises for the same; and shall also have power 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." 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 marketvalue worth ten per cent more than the amount so loaned and interest dences 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 duthorized 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. The first clause of Subdivision I 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 mort 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 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 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 estage 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, 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 may |