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STATE BANKS MAY NOT REMOVE THEIR LOCATION FROM ONE VILLAGE TO ANOTHER.
Hon. Hugh A. McPherson, State Banking Commissioner, Lansing, Michigan:
March 25th, 1925.
Dear Sir-You request my opinion whether a bank, organized under the laws of this State can remove from one village to another.
The general rule is, that where the statute of the State so provides, a banking corporation may remove its principal place of business from one place to another in the same county, but where no such provision is granted by the statute, the corporation has no right to remove its principal place of business.
The banking act contains no provision expressly authorizing a bank, organized in this State, to change its principal place of business, and you are therefore advised that in my opinion, your question should be answered in the negative.
ANDREW B. DOUGHERTY,
CERTAIN FEES FOR THE ADMINISTRATION OF ESTATES BY A TRUST COMPANY PROHIBITED.
June 29, 1925.
Hon. Hugh A. McPherson, Commissioner, State Banking Department, Lansing, Michigan.
We have examined the proposed plan, together with the proposed form of declaration
The Trust It is a clearly recognized prinYou are clearly justified in witholding your approval of the proposed plan. Company as trustee is allowed certain compensation which must be regarded as adequate since the trustee has accepted the trust and is operating thereunder. ciple of law that a trustee may not profit in dealing with the funds intrusted to him, and the compensation agreed upon being intended to cover all services performed would necessarily cover the bookkeeping and clerical services of the trustee's employees.
The Trust Company's assertion that your failure to approve its plan submitted will diminish by more than half the earnings of the small trusts committed to its care, is wholly unwarranted. A trust fund committed to a trustee for investment is required to be safely held and productively invested, and the trustee cannot justify against any complaint of a cestui que trust Without any effort to find opportunity for safe as to failure to productively invest with the claim that without a violation of the law it could not earn more than two and one-half per cent. and profitable investment, and without burdensome clerical services, a trustee could secure from three to four per cent in' the savings banks of Michigan.
Where, as the trust company asserts, there are "first lien high grade real estate mortgages drawing six per cent interest" available, the trustee may easily group the available credits for investment of two or more trusts and invest them in one of the six per cent mortgages referred to. That would entail little bookkeeping and should not be burdensome upon the trustee, and would show that the trust company in its capacity as trustee was honestly endeavoring to faithfully discharge the trust which it had assumed.
The justification for creating a special trust by a declaration of trust is that it will facilitate the investing for short periods of small amounts with opportunity to the cestui que trusts or to the trusts to obtain the cash thereon whenever needed. Unless the trust company is in the guise of a trust accepting moneys for deposit upon which interest is to be paid, it should not have so many accounts of this character as to justify tying all of such small credits into one group and thereby reducing the return for all of them one-half of one per cent. Inasmuch however as the trust company under the declaration of trust proposed would permit the withdrawal of moneys invested thereunder, it might do the same thing with equal propriety under a simple grouping of such amounts as would handle a single mortgage.
Undoubtedly many trusts and the administration of many estates are confided to trust companies upon the assumption that the scope of their operations, their opportunities for profitable and safe investment, and their supervision by a State agency, will operate for the benefit of the beneficiaries. That being so, it would be against public policy for the State to approve the operation of a company under a State charter which neglected all proper opportunities for If a fee is to be charged for services and then profitable investment of the funds committed to its care when permitted to make a profit thereon in excess of the fee it has contracted for.
a profit made on beneficiaries' funds, the State would better discontinue chartering the conduct of such business and leave all persons desiring to create a trust relationship in a position where they would readily understand that their only protection against a disregard of the trustee's obligation would be found in a court of equity.
VACANCY ON BOARD OF TRUST COMPANY BY REASON OF FAILURE TO ELECT MAY NOT
Mr. Harry O. Mohrmann, Deputy Banking Commissioner, Lansing, Michigan.
July 2, 1925
Dear Sir: Your letter of the 26th ultimo is at hand and you have enclosed copy of a memorandum brief which we have considered very carefully and at your request are returning same herewith.
A trust company in Detroit had its last annual meeting December 9, 1924, and fixed the number of directors at forty. The stockholders at that meeting elected thirty-six and passed a resolution that the other four be elected by the board of directors from time to time during the coming year and whenever it seemed best to the board of directors to take such action.
The question has been raised as to the right of the board of directors to elect directors to fill the four remaining offices and upon this question you have asked the opinion of this department.
Section 7 of the trust company act, being section 8050 of the compiled laws of 1915 provides: "The stock, property and affairs of such corporation shall be managed by not less than seven directors *** to be elected after the first election on the second Tuesday of December of each year ** and shall hold their office for the period of one year and until their successors shall be duly chosen. The said board of directors shall have the power to fill any vacancy which may happen in their board by death, resignation or otherwise for the current year." The trust company takes the position that a vacancy has otherwise occurred and that the board of directors is authorized by virtue of the action of the stockholders in filling such vacancy; that it is within the power of the stockholders at a general meeting to create offices of any character and leave them to be filled by the other directors.
The business which the stockholders of a corporation in meeting assembled have the power to transact is not extensive but it is of great importance. They elect the directors, pass upon amendments to the charter, determine increases of capital stock, make the by-laws and dissolve or continue the corporation. These constitute the chief functions of the stockholders meeting. They are extraordinary in their character and although they are exercised at long intervals they are of vital importance.
It seems to be generally held that the right of a stockholder in a corporation to vote at the ⚫ annual election for directors is an inherent right which cannot be taken away from him by the directors or by the will of a majority of the stockholders. It is an incident of ownership of capital upon which he may insist on the right of an election vote and it has been very generally held that where officers or directors whose duty it is to call annual meetings and elections in case they neglect or refuse to issue such call may be compelled by mandamus to call such a meeting at the instance of a stockholder.
Sec. 593, Cook on Corporations.
"The right of voting stock at corporate meetings is an incident of ownership to be exercised, of course, in the mode and under the restrictions prescribed by the charter and by-laws but nevertheless a part of the stockholder's property, inherent in him by virtue of his title."
7 R. C. L., 344.
The question very naturally presents itself if a majority of stockholders have the right to confer on the board of directors the power to elect four directors, would it not have the power to grant to such board the right to elect all of the directors of the corporation.
Another situation presents itself with reference to the statutory right of cumulative voting, authorized by the corporation code, act 84, public acts 1921, which grants to stockholders the right of cumulating their votes and thus participate in the election of directors.
Attorney General ex rel Dusenbury vs. Looker, 111 Mich., 198.
The phrase "any vacancy which may happen in their board by death, resignation or otherwise" is not entirely free from ambiguity as applied to the facts now before us. Some courts have construed the failure to elect as not constituting a vacancy inasmuch as the old officers would hold over.
People vs. Crissey, 91 N. Y., 616.
The word "otherwise" is a blanket word which does not throw any light upon the intention of the legislature as to cases in which the board may fill the vacancy. In my opinion it should not be construed as conferring on the board the power to abrogate cumulative voting or take away from a stockholder his inherent right to vote at annual elections.
Very truly yours,
BOARD OF COUNTY ROAD COMMISSIONERS MAY NOT BORROW MONEY FOR CERTAIN PURPOSES.
State Banking Department, Lansing, Michigan.
August, 4, 1925
Gentlemen:-Attention Mr. Harry O. Mohrmann, I have your letter of the 10th ultimo, relative to the authority of the board of county road commissioners of Gratiot County to borrow money for the purpose of purchasing a gravel pit.
Section 4365 of the Compiled Laws of 1915, as last amended by Act No. 195 of the Public Acts of 1921, authorizes boards of county road commissioners to "grade, drain, construct; gravel, shale or macadamize any road under its control or to place thereon any form of improvement
which, in its judgment may be best, and extend and enlarge such improvements **
this purpose said board of county road commissioners may incur indebtedness, borrow money, enter into contracts and pledge the credit of the county in the manner and within the limitations provided by law. For any indebtedness incurred, money borrowed, obligation assumed or pledge of credit given, the bonds of the county may be issued and sold when authorized by the electors in the manner provided by law."
We think that there can be no question but that the board of county road commissioners have the authority to purchase a gravel pit. See also subdivision (b) of Section 1 of Act 352 of the Public Acts of 1925.
The authority to purchase gravel for road construction or maintenance purposes does not imply authority to borrow money for such purposes, but such authority must be found in the statutes, either expressly given or necessarily implied.
It will be noted that the power to borrow money and incur indebtedness, given by Section 4365 of the Compiled Laws of 1915, as amended, above quoted from "must be in the manner and within the limitations provided by law."
Section 4366 of the Compiled Laws of 1915, as last amended by Act No. 367 of the Public Acts of 1921, provides the manner in which money may be appropriated for use by the board of county road commissioners. Under this section the board of county road commissioners makes a determination of the amount of the tax, which in its judgment, should be raised for county road purposes.
At the annual meeting of the board of supervisors held in October, the county clerk lays the determination before the board of supervisors. If a majority of the board of supervisors agree with the determination of the board of county road commissioners, then the tax therein determined is apportioned among the several townships and cities of the county. If the determination of the board of county road commissioners does not meet with the approval of the majority of the board of supervisors, then the board of supervisors decides upon the amount of taxes to be raised for county purposes.
Section 4367 of the Compiled Laws of 1915, as amended by Act No. 388 of the Public Acts of 1919, provides in part:
"Said board of county road commissioners shall have no power to contract indebtedness for any amount in excess of the moneys credited to such board and actually in the hands of the county treasurer; Provided, That the board may incur liability to complete roads under construction and upon contracts after a tax is voted, to an amount not exceeding three-fourth of the said tax."
In case it is deemed necessary to borrow money for such purposes the board of supervisors may, by a majority vote of the members elect, submit the matter to a vote of the electors, and, if a majority of the electors voting upon the proposition vote in favor thereof, bonds of the county may be issued. See Section 4367 of the Compiled Laws of 1915 and Act No. 118 of the Public Acts of 1923. Having provided a way by which money may be secured for such purpose, we think that the board has no power or authority to borrow money from a bank and evidence its indebtedness by notes, or to raise money in any way except "in the manner provided by law." Very respectfully, ANDREW B. DOUGHERTY, Attorney General.
STATUTORY LIEN ON BANK STOCK NOT AFFECTED BY ACT 10, P. A. 1925.
October 24, 1925
Hon. H. A. McPherson, Commissioner of Banking, Lansing, Michigan.
Dear Sir: This will acknowledge receipt of your communication of recent date wherein you state: "Will you kindly advise us whether or not in your opinion Act 10 of the Public Acts of 1925 in any way affects the provisions of the general banking law as it pertains to the statutory lien on a bank's capital stock?"
Section 9 of Article XII of the Constitution provides in part:
"No general law providing for the incorporation of trust companies or corporations for banking purposes, or regulating the business thereof, shall be adopted, amended or repealed except by a vote of two-thirds of the members elected to each house of the Legislature."
The legislative history of this act discloses that the bill passed the House of Representatives by a vote of 63 ayes and no nays. The act is not intended as an amendment to the banking law and in view of the above quoted Constitutional provision could not operate to repeal the therefore advised that, in my opinion, your question should be
same by implication. You are answered in the negative. Very truly yours, ANDREW B. DOUGHERTY,
MICHIGAN STATE BANKS.
Abstracts of reports made by the state banks of Michigan to the Commissioner of the Banking Depart ment, the reports being called for on the past days unknown to bank officers, viz., December 31, 1924, April 6, June 30, and September 28, 1925. For reports of individual state banks see succeeding pages.
MICHIGAN TRUST COMPANIES.
Abstracts of reports made by the Trust Companies of Michigan to the Commissioner of the Banking Department, the reports being called for on the past days unknown to Trust Company officers, viz., December 31, 1924, April 6, June 30, and September 28, 1925. For reports of individual Trust Companies see succeeding pages.