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,

(Signed) FRANZ C. KUHN,

Attorney General.

BANK ABSORBING ANOTHER CANNOT CONTINUE TO HOLD CERTAIN UNAUTHORIZED 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 that subdivison (i) provides that:

"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.

Hon. E. H. Doyle, Commissioner of Banking, Capitol, Lansing:

June 29, 1911.

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 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,

(Signed) FRANZ C. KUHN, Attorney General.

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 officer shall give preference to any depositor or creditor by pledging the assets of the bank as collateral security."

You wish to know if Michigan state banks are prohibited from pledging 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.

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 Banking 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 ment, 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 depositories 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 impaired or reduced below the amount required by law, it shall be the duty of the commissioner and he shall have the power to examine the said bank and ascertain the facts, and in case he finds such impairment or reduction of capital, he shall require such bank to make good the deficiency so appearing within sixty days after the date of such requisition. The directors of every such bank upon which such requisition shall have been made shall levy an assessment upon the stock thereof to repair such deficiency, and shall cause notice of such requisition to be given to each stockholder of the bank and of the amount of the assessment which he must pay for the purpose of making good such deficiency, by a written or printed notice mailed to such stockholder at his last known place of residence or served personally upon him."

These two sections are plainly intended to subserve entirely different purposes. Section 46 refers only to cases where the bank is in process of liquidation and limits the amount of the assessment which may be made upon the stockholders for that purpose to 100 per cent. Section 42, above quoted, is for the purpose of preventing the bank from going into liquidation and maintaining it as a going concern. The language used is equivalent to saying to the stockholders, "The capital of your bank is impaired, you must make it good or it will be obliged to go into liquidation at the hands of a receiver,"

It is our view that the two sections have no relation to each other and that under Section 42 of Act 1 of the Public Acts of 1911, the Commissioner has a right to order the bank to make good an impairment of any amount, whether less than or in excess of 100 per cent. I am also of the opinion that in case an assessment had been levied pursuant to Section 42 to make good an impairment, a further assessment or assessments could be made to meet future contingencies. I am further of the opinion that payment by stockholders of assessments under Section 42 would in no way lessen their liability to an assessment by the receiver in case of the liquidation or insolvency of the bank.

Very respectfully yours,

(Signed) FRANZ C. KUIIN, Attorney General.

BONDS OWNED BY DIRECTORS OR STOCKHOLDERS MAY BE PLEDGED TO SECURE POSTAL

SAVINGS DEPOSITS.

October 20, 1911.

Hon. Edward H. Doyle, Commissioner of the Banking Department, Lansing, Michigan: Dear Sir-We are in receipt of your letter of October 13th, enclosing letter from the Bank. You inquire whether or not individuals may pledge bonds with the board of trustees at Washington, D. C., for the purpose of having a state bank in which they are interested designated as a depository for postal savings funds.

In reply thereto will say that there is nothing in the General Banking Law which would prohibit stockholders or officers of a state bank from pledging their personal securities in order to obtain for the bank the benefits which might accrue from its being made a depository for postal savings funds. Such a pledge of securities would in no manner affect the assets of the bank or the personal liability of the stockholders.

We are of the opinion that it would not be a violation of the Banking Law for the stockholders, directors or other persons interested in a state bank to pledge securities, not a part of the assets of the bank, as security for deposits of postal savings funds.

The letter from the

Bank is herewith returned.

Yours respectfully, (Signed) FRANZ C. KUHN, Attorney General.

TRUST COMPANIES IN ORDER TO QUALIFY AS TRUSTEE IN OTHER STATES MAY DEPOSIT SECURITIES.

October 28, 1911.

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

Dear Sir-We have had under consideration your letter of October 13th, in which you submit the following inquiries :

"Can a corporation organized under Act No. 108 of the Public Acts of 1889, as amended, acting as trustee under an issue of bonds covering property located in part in Michigan, and in part in one or more other states, deposits its bonds or mortgages with a state department or official, in either one or all of the states in which the property is located in order therein to legally qualify and act as such trustee? Would the depositing of such assets be considered as giving preference to one creditor over another, as mentioned in Section 34 of said act?"

You have also submitted a letter of Louis H. Withey embodying his views relative to the question involved. Under date of October 17th a letter from Messrs. Butterfield & Kenney, attorneys-at-law, Grand Rapids, Michigan, containing a discussion of these questions was received by this Department.

The statute of Illinois regarding this deposit is Sections 129 to 147 of the Revised Statutes of Illinois for 1909. It is clear under the decision of the United States Supreme Court in Blake vs. McClung. 172 U. S. 239, that the deposit of securities made with the State Auditor of Illinois could not be used for the purpose of giving preference to creditors of a trust company residing in Illinois. On the other hand, a Michigan trust company could not be admitted to do a trust company business in Illinois even to the extent of enforcing an active trust partially in Illinois and partially in Michigan without making this deposit.

Farmers' Loan Company v. Elevated Ry. Company, 173 III. 439.

Section 6179 of the Compiled Laws of 1897 provides as follows:

"All transfers of notes, bonds, bills of exchange, or other evidences of debt owing to any such corporation, or of deposit to its credit, all assignments of

G

mortgages or other security on real estate, or judgments, or decrees in its favor, or deposits of money, bills or other valuable things for its use, or for the use of its stackholders or creditors, all payments of money, either after the commission of an act or insolvency, or in contemplation thereof, with a view to prevent application of its assets in the manner prescribed in this act, or with a view to the preference of one creditor over another, shall be held to be null and void."

The interest upon deposits of securities made pursuant to the Illinois statute is paid to the depositing company as long as it remains solvent. We are unable to see how the making of this deposit under the statute of Illinois and the decision of the Supreme Court of the United States, hereinbefore referred to, constitute any preference to Illinois creditors in violation of the provisions of Section 6179 of the Compiled Laws.

We are of the opinion that it would not be in violation of the provisions of Act 108 of the Public Acts of 1889 for a Michigan trust company to make a deposit of securities with the Auditor of the State of Illinois under the provisions of the statutes now in force in that state, in order to permit such trust company to carry out the provisions of an act of trust in that state.

LAND CONTRACTS NOT EVIDENCES OF INDEBTEDNESS AS CONTEMPLATED BY BANKING LAW.

December 7, 1911.

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

Dear Sir-I am in receipt of your communication of November 23rd in which you ask whether or not land contracts evidencing the sale of real estate are legal investments for savings banks under subdivision (i) of Section 27 of the General Banking Law, which reads as follows:

"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."

It appears from your statement that certain savings banks in the state invest savings deposits in these contracts, taking an assignment thereof from the vendor who also transfers to the bank the legal title to the real estate conracted to be conveyed. In some instances the legal title to the property is transferred and the assignment made as collateral security for a loan to the vendor and I do not understand that your inquiry relates to the legality of this practice, it being conceded that this may lawfully be done, but that your inquiry relates to the right of a savings bank to so invest its savings deposits in these contracts when no loan is made to the vendor. The savings banks claim that these contracts are "evidences of debt" within the meaning of the subdivision quoted and that the investment of savings deposits therein in the manner outlined is permissible and legal.

For reply thereto would say that when a contract of this character for the sale of real estate is made, the vendor holds the legal title only as trustee for the vendee and equitable title vests in the vendee. The vendor retains the legal title as security for the proper performance of the contract on the part of the vendee.

Hooper v. Van Husan, 105 Mich. 592;

City of Marquette v. Iron & Land Company, 132 Mich. 130, 132.

In the ease last cited the court held that there was no legal distinction between these obligations and credits secured by mortgages.

While these contracts may under our decisions be "evidences of debt," I do