Cornell University Law Library THE GIFT OF Allan H. Treman, Attorney at Law Ithaca, New York Date....M.a.r.c.Ji....8., 19.4.8 /oY R°«i!- \'^\ WSAOA.aYo Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924022794774 VALUABLE BOOKS FOR BANKS AND BANKERS Collier on Bankruptcy, 7th ed. 1909 $7.50 Cumming & Webster's New York Tax Law, 5th ed. 1909, 5.00 Eaton & Gilbert on Commercial Paper 6.30 Eaton & Greene's Annotated Negotiable Instruments Law, 1.50 Ellis Case Law of Banks and Banking, 2 vols 10.00 Frost on New York Corporations, 1909, 6.30 McElroy on the Transfer Tax Law, 2nd ed. 1 909, . . . 6.00 Paine's Banking Laws, 6th ed. State and National, 1 909, 6.00 For sale by all Law Booksellers or the Publishers, MATTHEW BBIVDBR dfc CO., Albany, IN. Y. THE LAWS OF THE STATE OF NEW YORK RELATING TO BANKS, BANKING, TRUST COMPANIES, LOAN, MORTGAGE AND SAFE DEPOSIT CORPORATIONS TOGETHER WITH THE ACTS AFFECTING MONEYED CORPORATIONS GENER- ALLY, INCLUDING THE STOCK CORPORATION LAW, THE GENERAL CORPORATION LAW, THE NEGOTIABLE INSTRUMENTS LAW, AND THOSE PARTS OF THE TAX LAW AND OF THE PENAL LAW APPLICABLE THERETO; UNDER THE CONSOLIDATED LAWS OF 1909 ALSO THE NATIONAL BANK ACT AS AMENDED, AND COGNATE UNITED STATES STATUTES ANNOTATED By WILLIS S.^AINE, LL. D. Author of "Fame's Building and Loan Associations," "Summary of Failed Savings Banks," etc SIXTH EDITION Albany, N. Y. MATTHEW BENDER & COMPANY 1910 B^i'3^6 Entered according to Act of Congress, in the year 1885, by WILLIS S. PAINE, in the Office of the Librarian of Congress, at Washington. Entered according to Act of Congress, in the year 1889, by WILLIS S. PAINE, in the Office of the Librarian of Congress, at Washington. Entered according to Act of Congress, in the year 1894, by WILLIS S. PAINE, in the Office of the Librarian of Congress, at Washington. Entered according to Act of Congress, in the year 1903, by WILLIS S. PAINE, in the Office of the Librarian of Congress, at Washington. Entered according to Act of Congress, in the year 1910, by WILLIS S. PAINE, in the Office of the Librarian of Congress, at Washington. PREFACE TO SIXTH EDITION. In 1909 the " Consolidated Laws " were enacted by the New York Legislature and the " Banking Law " became Oihapter II. thereof. There have been substantial changes from the previous Banking Law which formed part of the " General Laws," and considerable matter previously contained in other statutes was made part of this newly- arranged " Banking Law." The changes in the transposition and rearrangement of the various parts of the law, affecting banks and banking, have resulted in a new series of section numbers. The statutory regulations affecting Co-operative Savings and Loan Asso- ciations and Building and Lot Associations, formerly contained in section 1 to 6 inclusive, chapter 600, Laws of 1906, now repealed, are to be found in sections 240 to 245 inclusive. Chapter 326 of the Laws of 1895, treating of personal loan associations, is con- tained in a new article numbered 10. The provisions of the crim- inal law that affect banking and banking corporations formerly contained in the " Penal Code " are now to be found in the newly- termed " Penal Law " forming part of the Consolidated Laws. The Governor signed the General Construction Law, formerly termed the Statutory Construction Law, to accompany the Consolidated Laws. This provides that legal precedents established by decisions on the original laws should not be disturbed by the consolidation of those statutes. It would seem that an unnecessary variation was made by the revisers in changing the numbering of the sections because the law, as it stood, provided for the incorporation of new sections without disturbing the then existing nimibers. In view of the revision made by the author in the year 1882 and the subsequent compilation made by the revisers appointed in pur- suance of chapter 289 of the Laws of 1889, there is reason to believe that a third revision of the Banking Law was not needed. [iii] IV PEEFAOE. It may be added that the enactment every year of seven hundred or more statutes by the 'New York Legislature is a positive evil already too long continued. '' W. S. P. 56 Bboadwat, New York, October 1, 1909. PREFACE The legislature of the State of New York, May 5, 1880, passed an act (ch. 170) to provide for the compilation and revision of the laws affecting banks, banking and trust companies, as follows: — " Section 1. Within twenty days after the passage of this act, the Governor, by and with the advice and consent of the Senate, is authorized to appoint three per- sons as commissioners to compile and revise all statutes of the State of New York affecting banks, banking and trust companies which shall be in force at the time such commissioners shall make their report, and in the execution of their duties, said commissioners shall have free access to any of the public records and papers of the State, and be permitted to examine the same without fee or reward. " § 2. When the said commissioners shall have completed the compilation and revision of the statutes as aforesaid, they shall cause a printed copy of the same- to be submitted to the legislature for the year eighteen hundred and eighty-one, and at the same time, they shall suggest to the legislature such omissions, con- tradictions and other imperfections as may appear in the original text, with their recommendations for amendment, either by repeal, or by supplementary or ex- planatory legislation, with their reasons for such recommendations. " § 3. Each of said commissioners shall serve without pay. " § 4. The reasonable expenses of said commissioners for clerical services, and other incidental disbursements, provided the same does not exceed the sum of five thousand dollars, shall be paid to them from time to time, upon their requi- sition therefor upon the Comptroller of the State, to be paid into the treasury by the banks, banking and trust companies in the same manner as other expenses of the banking corporations are now paid* " § 5. In case the said commissioners, or either of them, shall refuse to act in the premises, or shall die, resign or remove from the State before the completion of the duties assigned to them, it shall be the duty of the Governor to appoint others or another in their or his stead, who shall have the powers aforesaid. " § 6. This act shall take effect immediately." Under this act Governor Cornell appointed George B. Sloan, of Oswego, David C. Van C'ott, of Brooklyn, and the author, commis- sioners for the piirpo'ses indicated in the law. The then Comptroller of the State was of opinion that the wording of the fourth section of the act was not sufficient authority to warrant his paying the expenses of the commissioners from the funds at that time in the State Treas- [v] Tl PEHFACK ury. TMs defect in the original law, however, was remedied at the session of the succeeding legislature by an act passed June 3, 1881 (ch. 445), amending the above-quoted fourth section so as to read as follows : — • " § 4. The reasonable expenses of said commissioners, providing the same does not exceed five thousand dollars, shall be paid to them from time to time, upon their requisition therefor upon the Comptroller of the State, out of any funds remaining in the treasury of the State and not otherwise appropriated, to be paid into the treasury by the banks, banking and trust companies in the same manner as other expenses of banking corporations are now paid." Mr. Sloan during the meantime having resigned, William Dowd, of the city of !N"ew York, was appointed his successor. Mr. Van Cott ceased to act as a member of the commission, and Mr. Dowd and the author began the preparation of the Eevision. Mr. Dowd's knowl- edge of practical banking was of service. He is entitled to high praise in this connection, as well as in all the other relations of a busy life. The Revision became a law July 1, 1882 (eh. 409), the repeal- ing act, in connection with the same, having passed the same day (ch. 402). In preparing the Revision, the author's attention was repeatedly called to the necessity for such a work as this volume is intended to be. The book would be incomplete without the addition of the constitutional provisions and special statutes of this State ap- plicable to banking corporations. The relations between the State and National banks are of such a character that the same remark may be made in connection with the National Bank Act and cognate statutes. To say that the preparation of the work has been a diffi- cult task, involving very arduous labor, is a statement hardly neces- sary to be made to any member of the Bar who may have occasion to refer to it. It is a labor performed vdthout the slightest pecuniary reward. There is no calling in which promptness and accuracy are more valuable than in banking. It is believed that this volume will facilitate a ready reference to any required statute, thus avoiding that fertile source of litigation, a want of knowledge of the law. To few can memory of the numerous statutes afford a safe guide, to say nothing of the explanatory decisions, without the aid of which mis- take is almost unavoidable. In conclusion, it is hoped that this work PEBFACB. VU is free from errors. If, however, any are found, the attention of the author should be called to them by addressing him through the Bank- ing Department. As the statutes are changed, and new decisions are rendered, this work, it is expected, will be continued. W. S. P. Baj^kenq Depaetmbnt, Albany, N. Y., December 22, 188^. PREFACE TO THIRD EDITION. This work lias met with much, greater success than was anticipated, and an effort has been made in revising tMs edition to make it still more acceptable. WMle it contains much new matter, the number of pages, by reason of the omission of old material and through the use of smaller type, has not been very materially increased. W. S. P. Bakking Depaetment, Albamy, N. Y., Maa-eh 1, 1889. [viii] PREFACE TO FOURTH EDITION. Pursuant to chapter 289 of the Laws of 1889, Oommissioners of Statutory Revision were appointed by the Governor. In their report to the legislature the succeeding year, these commissioners submitted a plan for a complete compilation and revision of all the general stat- utes of this State. In their judgment the revision and consolidation of the existing laws in systematic order was exceedingly desirable. Their plan, which also contemplated a classification of all the gen- eral laws, except the codes, by chapters, so that each chapter should, so fax as might be, embrace all the laws specially relating to a given subject, was approved by the legislature in the year 1892. As a part of said plan, the revisers submitted a draft of a new banking law, being, with some alterations, a consolidation of all the law relating to banking and other moneyed corporations, except insur- ance corporations, which was passed by the legislature, and thereafter approved by the Governor on the 18th day of May, of that year. The commissioners at this time were Daniel Magone, Eli C. Bel- knap and Charles A. GoUin, and, in the author's opinion, they have done their work exceedingly well. The new law, designated by stat- ute as " The Banking Law," is divided into eight articles, the first of which contains the general provisions applicable to all corporations under the supervision of the banking department, each of the remain- ing articles being exclusively devoted to a special class of the corpo- rations which may be formed under the law. The following are the principal changes which have been made, and to which the attention of the reader is especially called. 1. The extension of the jurisdiction of lie banking department to all moneyed corporations except insurance corporations, and an in- crease of its powers. 2. The provisions of chapter 8 of the act of 1882, sections 179 to 188, have been made applicable to all corporations under the super- vision of the superintendent of banks. It had been held that these fix I PEBFAOE. provisions were not applicable to banks organized under the Law of 1838, but to the other moneyed corporations referred to in the act of 1882. 3. The omission of all the provisions of chapter 409 of the Laws of 1882, sections 129 to 165 inclusive. Tbese provisions relating to the appointment and proceedings of receivers properly belong to the Code of Civil Procedure, and they will be enacted together in a law to be known as the receivers' law, and which will form a supplemental chapter to the Code. 4. The transfer to the stock corporation law of all the provisions of the former law (1882) which were, or, with slight changes, could be made, applicable to moneyed corporations in common with other stock corporations. These provisions relate mainly to the conduct of elections, the increase or reduction of capital stock, and the liabil- ity of stockholders. 5. The liability of stockholders has been made to conform to the provisions of the national banking law, so that stockholders of all banks became ratably responsible for the debts of the corporation ac- cording to the amount of stock held by them. This liability, hereto^ fore, applied only to stockholders of banks issuing circulating notes ; but as Stat^ banks had ceased to issue notes, there was practically no liability. The stockholders are also made subject to the liability im- posed by the stock corporation law, which ceases when the capital stock has all been paid in, and a certificate to that effect filed. The only continuing liability of the stockholder is the one first mentioned. 6. Directors are required to own at least one thousand dollars in value of its stock in banks having a capital of fifty thousand dollars or over, and at least five hundred dollars in banks having a capital of less than that amount, and if a director shall cease to own the requisite number of shares, he thereby, {ipso facto) ceases to be a director. Vacancies in the board shall be filled by election of the stockholders, but vacancies not exceeding one-third of the whole num- ber may be filled by the directors until filled by election of the stock- holders at a special or annual meeting. Directors are also required to take an oath of office, which is to be filed with the bank superin- tendent. 7. The insertion of a provision (sec. 44) requiring every bank or PEEFACE. XI individual banker, to keep a " lawful money reserve," wkicli, in cities having a population of eight hundred thousand or over, has been fixed at fifteen per cent., and elsev?here throughout the State at ten per cent., of the aggregate amount of its deposits. 8. An enlargement of the classes of securities in which savings banks may invest, to include all District of Columbia bonds, and, by a special act (ch. 106, Laws 1892), warrants of the city of Buffalo are also included. A statute adopted during the present year per- mits investments in the bonds of certain cities. All penal provisions are transferred to the Penal Code. To render the work complete, the statutory construction law, general corpora- tion law, stock corporation law, and those sections of the Code of Civil Procedure, Penal Code and tax laws, and unrepealed laws, or parts of laws specially applicable or relating to moneyed corporations, have been added. A schedule of laws repealed is appended to each act except the stock corporation law. W. S. P. 36 Waix Stbeet, New Yobk, December 18, 1893. PREFACE TO FIFTH EDITION. Ten years have elapsed since the last edition of this work. Several revisions of the statutes affecting banking and many changes in the la,w have been made; thus a new edition has become necessary. An effort has been made to keep the same within the limits of the previous issues. The numerous decisions reported in the interval have been added, bringing the cases, as well as the official opinions, down to date. W. S. P. 56 Bboadwat, New Yobk, October 1, 1903. Lxii] CONTENTS. PAQB Pbetaoes iii HISTORICAL SKETCH. ARTICLE I. Bai^ks, Banking Associations and iNDiviDtrAi, Bankebs. Bank of North America 4 First and Second Banks of the United States 8 Bank of New York 11 Bestraining Act of 1804 14 Restraining Act of 1813 16 Restraining Act of 1818 18 Bank charters prior to 1825 20 First legislative specification of banking powers 24 Conspiracy trials of 1826 and 1827 24 Statute regulations of 1827 26 Safety fund system 29 Office of bank commissioners 34 General banking act 34 Constitutionality of the general banking law 35 Prominent provisions of the general banking act 36 Individual bankers 37 Responsibility of stockholders 39 Office of superintendent of the banking department 41 Superintendents 42 Increase of banking capital 42 Redemption of bank-notes 42 Taxation 44 Amendments 50 ARTICLE 11. Savings iNSTrrnnoifs. Savings banks benevolent, not charitable 62 Trustees and other officers 63 Investments .' 65 XIV CONTENTS. PAGE Dividends 70 Surplus moneys 72 Pay of trustees 7* Unclaimed deposits 74 Taocation 77 ARIIOLE III. Moneyed Goeporations othee than Banks, Banking Associations and Sav- ings Institutions. Trust companies 79 Mortgage companies 84 Safe deposit companies 84 Building associations 86 THE BANKING LAW. An Act (Chapter 10, Laws of 1909) in relation to Banking Corpora- tions, being Chapter 2 of the Consolidated Laws. ARTICLE 1. Short Titie: Definitions. Section 1. Short title 89 2. Definitions $9 AUTICLE 2. General Provisions. Section 3. The banking department; superintendent 94 4. Official seal of superintendent of banks 94 5. Deputy clerks and examiners of the bank department 94 6. Rooms and furniture 95 7. Expenses, how defrayed 96 8. Powers of superintendent 97 9. Examination of securities deposited 98 10. Unclaimed balances gg 11. Examiners ^ gg 12. Examination and certificate as to payment of capital 99 13. Affidavit to be made before commencing business gg 14. Depoosit of bonds or mortgages with superintendent 100 15. Exchange of securities jgg CONTENTS. XV PAGE. Section 16. Publication of report of examiners 102 17. Impairment of capital lOS 18. Causes for dissolution 104 19. Proceedings against and liquidation of delinquent corporations and individual bankers 105 20. Examination by order of court 112 21. Reports US 22. Penalties for failure to report 117 23. Books, papers and affairs to be examined 118 24. Publication of reports 119 25. Annual report of superintendent 120 26. Reports presumptive evidence 121 27. Restrictions 121 28. Oaloulation of profits 127 29. Losses in excess of profits 128 30. Publication of unclaimed dividends and deposits 129 31. Change of location 131 32. Approval and certificate of superintendent upon incorporation. 132 33. Permission and certificate of superintendent in case of foreign corporations 133 34. Appointment of superintendent as attorney for service of process 133 35. Appointment of receiver 134 36. Merger 135 37. Submission of merger agreement to stockholders 136 38. Rights of dissenting stockholders 137 39. Effect of merger 138 40. Rights of creditors and others having relations witli merged corporations 139 41. Oommunioations from banking department 139 42. Meetings of directors or trustees and reports thereto 140 43. Ofiicial acts of superintendent and details of department business to be made public 140 44. Banks designated as depositaries of court funds toi give bonds and pay interest 142 4<5. Banks designated as depositaries of court funds to keep books of account 142: ARTICLE 3. Banks. Section fiO. Incorporation 145 61. Previous notice of intention to be given 146 62. When superintendent shall file certificate 147 63. Examination by and certificate of superintendent 147 64. Amended certificate of incorporation 148 65. Certificate of individual banker 148 XVI COH^TENTS. PAGE Section 66. General powers 148 67. Lawful money reserve 159 68. Payment of capital stock 160 69. Annual meeting and election of directors 160 70. Oath of directors 162 71. Individual liability of stockholders 162 72. Limitation of liability of stockholders 169 73. Powers of president and vice-president 169 74. Rate of interest 172 75. Interest permitted on advances on collateral security 174 76. Deposit of banks and individual bankers with superintendent. . 174 77. Prohibition against sale of business by individual banker 175 78. Change from state to national bank 175 79. When deemed to have surrendered its charter 176 80. Reduction of capital stock in such cases 177 81. Certificate of change 178 82. National bank may become state bank 178 83. Circulating notes ; plates 179 84. Circulating notes of individual banker 181 85. When bank may receive interest or dividends upon securities deposited 182 86. Redemption agencies 183 87. Destruction of bank notes 185 88. Destruction of plates and counterfeit notes 185 89. Exchange of mutilated notes 186 90. Redemption in notes of other banks 186 91. Protest of notes and proceedings thereon 187 92. Appointment of agent by new corporation 189 93. Revocation of appointment 189 94. Distribution of funds of insolvent banks 190 95. Distribution of residue 190 96. Publication of notices 191 97. Redemption of notes held by banks and individual hankers. . . . 191 98. Banks closing business 192 99. Proceedings on closing bank 193 100. Proportionate amount of securities to be returned when notes are destroyed 194 101. Deposit of cash for redemption of notes 194 102. Circulation of foreign bank notes prohibited 195 103. Notes not receivable at par not to be paid out 197 104. Bills or notes must be payable on demand 197 105. When bills of exchange to be without grace 201 106. Transfers of securities by superintendent to be countersigned by treasurer 202 107. Unauthorized banking prohibited 203 108. Restrictions as to foreign corporations 206 109. Restrictions as to banks and their officers 206 CONTENTS. XVll PAGE Section 110. Bills payable otherwise than in money prohibited 207 111. Certain bills declared to be promissory notes 207 112. Use of sign indicating bank by unauthorized persona prohibited 208 113. Lost bamk certificate; application to court for order requiring payment 208 114. Petition; service of 209 115. Bank to furnish information 209 116. Notice; order, and publishing 209 117. Contents of notice 210 118. Application for final order 211 119. Order; filing, and service; refusal to pay 211 120. Bond discharged; bank released 212 ARTICLE 4. Savings Banks. Section 130. Incorporation 213 131. Notice of intention to organize 214 132. Piling of certificate by superintendent 214 133. Examination by superintendent 215 134. Certificate of authorization '. 215 135. When persons named in certificate become a corporation; powers 216 136. Must begin business within one year 220 137. Trustees and their powers 220 138. By-laws 223 139. Meeting of trustees; quorum 223 140. Vacancies 224 141. Security may be required from employees and salaries fixed 224 142. Dividends, compensation and loans to trustees prohibited 225 143. Eepayment of deposits; regulations; limitation 229 144. Deposits of minors, and trust deposits, and deposits in the names of more than one person 236 145. Wife witness against husband; claimants may be interpleaded. 240 146. In what securities deposits may be invested 242 147. Limitation as to real property 258 148. Available fund for current expenses; how loaned 260 149. Temporary deposits 268 150. Personal security prohibited; loans on bond and mortgage. . . . 268 151. Mortgaged property to be insured 269 152. Eestrictions on methods of doing business 269 153. Rate of interest; extra dividends 271 154. Per centum of surplus, how determined 275 155. Compensation of officers 275 156. No other report or inspection required 276 XVlll CONTENTS. PAGE Section 157. Examination of vouchers and assets by trustees. . .- 276 158. Expenses to be paid 277 169. Certain debts from insolvent banks and trust companies pre- ferred 277 160. Advertisements of unaxithorized savings banks prohibited 278 161. Charters to be conformed to this chapter 281 162. Savingsi bank voluntarily closed 281 163. When dissolution effected 282 164. Deposit of unclaimed moneys 283 ARTICLE 5. Teust Companies. SEcmoN 180. Incorporation 284 181. Previous notice of intention to be given 285 182. When, superintendent shall file certificate 286 183. Examination by and certificate of superintendent 286 184. Capital must be paid in cash 287 185. List of stockholders to be furnished to superintendent 287 186. Powers of corporation 287 187. Additional powers of certain trust companies 291 188. Additional powers, dependent on location 292 189. May be administrator, guardian or trustee 293 190. No security required; trust fund debts preferred 293 191. OflBeial oath not required 295 192. Deposits of minors and trust deposits 295 193. Investments of capital, surplus, undivided profits and deposits. 295 ! 194. Interest and aecvunulations 296 195. Directors 297 196. Liaibility of stockholders and directors 299 197. Powers of specially chartered trust oompanies 299 198. Lewful money reserve 299 ARTICLE 6. Co-operative Savings and Loan Associations. Section 210. Incorporators 303 211. Object and purpose 304 212. Incorporation 304 213. Directors ; by-laws 305 214. Capital and shares 305 215. Dues ; fines ; entrance fees ; advance payments . . 306 216. Withdrawal of free shares 307 COWTElirTS. XIX PAGE Section 217. Dues, when to cease 308 218. Loans, tow made; premium plans 308 219. Security for loans 311 220. Arrearages; forfeitures; withdrawal values 314 221. Loans due when members in arrears 314 222. May purchase at foreclosure sale 314 223. Association may borrow to pay withdrawals 315 224. Profits and losses ascertained annually 316 225. Transfer of shares 317 226. Attorney; auditors; amendments to by-laws; right to vote. . . . 317 227. Eligibility to membership; exemption from execution; from taxation 317 228. Annual reports to banking department 318 229. Forfeiture for failure to report 318 230. Visitation by superintendent of banks 319 231. Annual statement to stockholders 320 232. Provisions applicable to associations formed under certain acts 320 233. Amendments to articles 320 234. Reincorporation 321 235. Assessment of associations for benefit of banking department. . 322 236. Investment of deposits and income 323 237. Payment of expenses 323 238. Construction of term " co-operative savings and loan associa- tion " 324 239. Construction of reference to laws of eighteen hundred ninety- two : 325 240. When association may be dissolved 325 241. Petition for dissolution 326 242. Proceedings on presentation of petition 326 243. Hearing and order for dissolution; appointment of trustee. . . . 327 244. Report and compensation of trustee 327 245. Limitation and construction of article 328 ARTICLE 7. BtriLDING AND LOT ASSOCIATIONS. Section 260. Incorporation 329 261. Powers 330 262. Borrowing money 330 263. Dividends 331 264. Monthly payments 331 265. Liability of stockholders and directors 331 266. Exemption of shares from sale and execution 331 267. Reports 332 X^ COBTTENTS. ARTIOLrE 8. MOETGAGE, Loam and iNVBSTMEirT CiOBPOBATIONS. PAGE! gECMON 280. Incorporation 333 281. Deposit required; authorization, certificate 334 282. Greneral powers 334 283. License 334 284. Verified statement to be furnished 33d 285. Issue of license 336 286. Unlicensed companies prohibited 336 287. Hevocation of license 337 288. Designation of superintendent as attorney 338 AETICLE 9. Safe Deiposit Companies. Seohon 300. Incorporation 339 301. Directors 340 302. OflScers and by-laws 341 303. liability of stockholders 341 304. Remedy for non-payment of rent for safe 341 AiRTICO; 10. Pebsonal Loan Associai'ons. ( BeaaoTH 310. Organization; how effected 343 311. iSuperyisioiii; bond and reports required; examination; ex- penses; proceedings for violation of law 344 312. Powers; rate of interest or discount 346 313. Dividends limited 347 314. Prohibitions 347 ARTICLE 11. Laws Repealed ; When to Taee Effect. Section 330. Laws repealed 349 331. When to take effect 349 CONTENTS. ZXI THE STOCK CORPORATION LAW. ARTIOLE I. &!OTiaN 1. Short title . PAGE . 355 ARTICLE II. Genebax Fsovibions. EHBOnos 6. Application of article 35& 6. Power to borrow money and mortgage properly 356 7. Validating corporate mortgages 357 8. Power to guarantee funds of other corporations 369 9. Reorganization of upon sale of corporate property 359 10. Contents of plan or agreement 361 11. Sale of property; possession of receiver and suits a^inst him. . 361 12. Municipalities may assent to plan of readjustment 362 13. 'Change of place of business 363 14. Comlbinations prohibited 363 15. Merger 364 16. Voluntary sale of franchise and property 365 17. Rights of non-consenting stockholders on Toluntary sale of franchise and property 366 18. Alterations or extension of business 366 ARTICLE III. DiHECTOBS AND QbTIOEES. Seohoit 25. Directors 367 26. Change of nximber of directors 369 27. When acts of directors void 370 28. Liability of directors for making unauthorized dividends 370 29. Liability of directors for loans to stockholders 372 30. Officers 373 31. Inspectors and their oath 376 32. Books to be kept 376 33. Stock ibooks of foreign corporations 379 34. Annual report to secretary of state 380 36. liiability of officers for false certificates, reports or public notices 381 -XXll CONTEIfTS.' ARTICLE IV. Stock and Stockholdees. PAGE Section 50. Issue and transfers of stock 383 61. Transfers of stock by stockholder indebted to corporation 384 52. Purchase of stock of other corporations 384 53. Subscription to stock 385 54. Time of payment of subscriptions to stock 386 55. Ckmsideration for issue of stock and bonds 387 56. Liabilities of stockholders 388 57. Liabilities of stockholders to laborers, servants, or employees. . 389 58. Non-liability in certain cases 390 59. Limitation of stockholder's liability 390 60. Partly paid stock 391 61. Preferred and common stock 391 62. Increase or reduction of capital stock 392 63. Notice of meeting to increase or reduce capital stock 393 64. Conduct of such meeting; certificate of increase or reduction. . . 393 65. Change in par value of shares 395 66. Prohibited transfers to officers or stockholders 395 67. Application to court to order issue of new in place of lost certificate of stock 401 68. Order of court upon such application 402 69. Financial statement to stockholders 403 70. Liabilities of officers, directors and stockholders of foreign, cor- porations 404 ARTICLE V. IiAws Repbialed; When to Take EfbtexJt. ■Section 80. Laws repealed 405 81. When to take effect 405 GENERAL CORPORATION lAW. AEnOLE I. Shobt Title; Classifioation; DErmrnoNB. Section 1. Short title 409 2. Classification of oorporationa 410 3. Definitions 410 CONTENTS. XXIH ARTICLE II. Geneeal Pbovisions. PAGE Section 4. Qvialifioations of incorporators 413 5. Filing and recording certificates of incorporation 413 6. Corporate names 414 7. Amended and supplemental certificates 414 8. Lost or destroyed certificates 415 9. Certificate and other papers as evidence; evidence of consolida- tion 415 10. Limitation of powers; provisions of certificate 416 11. Grant of general powers 417 12. Enlargement of limitations upon the amount of the property of non-stock corporations 419 13. Acquisition of additional real property 419 14. Acquisition of property without the state 419 15. Certificate of authority of a foreign corporation 420 16. Proof to be filed before granting certificate 420 17. Reincorporation of foreign moneyed corporations 422 18. Papers to be filed upon reincorporation 422 19. When reincorporation effective and effect thereof 423 20. Acquisition, of real property in this state by certain foreign corporations 423 21. Acquisition by foreign corporation of real property in this state 423 22. Prohibition of banking powers 423 23. Qualification of members as voters 424 24. Cumulative voting 425 25. Voting trust agreements 425 26. Proxies 426 27. Challenges 426 28. Effect of failure to elect directors 427 29. Mode of calling special election of directors 427 1 30. Mode of conducting special election of directors 428 31. Qualification of voters and canvass of votes at special election. . 428 32. Powers of supreme court respecting elections 429 33. Stay ni proceedings in actions collusively brought 429 34. Quorum of directors and powers of majority 429 35. Directors, as trustees in case of dissolution 432 36. Forfeiture fo* non-user 432 37. Extension of corporate existence 432 38. Revival of corporate existence 433 39. Approval of certificates of extension or revival; when required. . 434 40. Extension when stock is owned by another corporation 434 41. Effect of extension 434 42. When notice of lapse of time unnecessary 434 43. As to acts of directors 435 ' 44. Political contributions prohibited; penalty 435 XXIT CONTENTS. ARTICLE III. Change or Name. FAOE SEonoN 60. Petition by corporation to change name 437 61. Contents of petition 437 62. Notice of presentation of petition 438 63. Order authorizing change 43& 64. When change to take effect 439 65. Substitution of new name in pending action or proceeding 440 ARTICLE IV. Sale or Cobpoeate Real Peopeett. Seotion 70. Application of this article 441 71. Petition 441 72. Hearing on application 442 73. Order to sell, mortgage or lease 442 74. Insolvent corporation 442 75. iServiee of notices 443 76. Practice in cases not herein provided for 443 ARTICLE V. JUDiaiAI. SUPEBVISIOIT OF COBPOBATtON AND OF THE OFFICEES AND MEMBEIBS Thekeof. Section 90. Action against ofiScers of corporation for misoonduet 444 91. Who may bring such an action 446 92. Visitatorial power over eorporation not affected by this article . . 445 ARTICLE VI. Action fob SeqttestbatioNj Action fob Dissolution and Action to En- FOECE Individual Liability of Officeb and Membeb of Cobpoeation. Section 100. Action by judgment creditor for sequestration 446 101. Action to dissolve a eorporation 44S 102. Who may bring action to dissolve a corporation 447 103. Temporary injunction in action authorized by this article 447 104. Temporary receiver . .' 448 105. Additional powers and duties of temporary receiver 448 106. Permanent receiver 448 107. Additional duties and liabilities of permanent receiver 448 108. Application for appointment of receiver 441^ CONTENTS. XX7 PAGE Seotioh 109. OfScers and stockholders may be made parties in action: brought by creditor 449 110. Separate action may ibe brought against ofBcers and stock- holders 450 111. Proceedings in such actions 450 112. Distribution of property of corporation' by judgment in actions under this article 450 113. Recovery of stock subscriptions 450 114. Liability of directors and stockholders 450 115. Effect of this article 451 ARTICLE VII. AonoN TO Annttl a Oobpoeation. Section 130. Action by attorney-general to annul corporation when legisla- ture directs 462 131. Action by attorney-general to annul corporation by leave of court 452 132. Notice of application for leave to oommence action to annul corporation 453 133. Jury trial 453 134. Injunction and receiver in final judgment 453 135. Temporary injunction 453 136. Filing and publishing judgment 454 ARTICLE VIII. Action to DrssoLVE Moneyed Cobpobation. Section 150. Temporary injunction and receiver in action against moneyed corporation 455 151. Order to show cause why injujaction and receiver should not be permanent 455 152. Inventory and appraisal by receiver 456 153. Conversion of assets into cash by receiver 457 154. Employment of counsel by receiver 457 155. Notice to creditors by receiver 457 156. Allowance, rejection and adjustment of claims by receiver. . . . 458 157. Final settlement and distribution by receiver 458 158. Notice of account and accounting by receiver 459 159. Proceedings upon accounting 460 160. Claims barred after distribution of assets by receiver 460 161. Application of article 461 XXVI CONTENTS. ARTICLE IX. Pboceedings for Voluntary Dissolution of Corporation. PAGE Section 170. Petition for voluntary dissolution of corporation 462 171. Directors or tiustees. may be required to petition 463^ 172. Petition when directors or trustees do not agree 46S 173. Corporations excepted from two preceding sections 463 174. Contents of petition 463 175. AflBdavit to be annexed to petition 464 176. Presentation of petition 464 177. Corporations without stockholders 4^4 178. Action by court upon petition for dissolution 465 179. Publication of order to show cause why corporation should not be dissolved 46& 180. Service of order to show cause 465 181. Entering and filing order and papers 465 182. Temporary receiver 465 183. Application for appointment of receiver 466 184. Injunction 466 185. Beferee 46ft 186. Hearing 466 187. Decision 467 188. Use of original papers on hearing 467 189. Amending papers 467 190. Final orders 467 191. Permanent receiver 467 192. Appointment of director, trustee or other oflioer or stockholder as receiver 468 193. Certain sales, transfers and judgments void 468 194. Omission, defect or default of receiver 468 195. Exemption of certain corporations 468 ARTIOLE X. Dissolution of StocK Corporation without Judicial Proceedings. Section 220. Dissolution of stock corporation before beginning business .... 469^ 221. Dissolution of stock corporation before expiration of time limit 469 ARTICLE X-A. Provisions Aepijcable to Temporary and Permanent Receivers or Corporations. Section 225. Security 472 226. Removal or new bond 472 227. Notice to sureties upon accounting 472 CONTENTS. XXVll ARTICUE XI. PowEES, Duties and Liabiijties of Rexjeivebs of Coepokations. FACE Section 230. Appli<;atioii of this article 474 231. Receiver trustee of property 474 232. Eeoeiyer's title to property 474 233. Transfer of assets of corporation to receiver 474 234. Security of receiver 474 235 Authority of single receiver 475 236. Authority where there is more than one receiver 475 237. Surviving receivers 475 238. Oath of receiver 476 239. General powers of receivers 475 240. Power of receiver to institute proceedings to recover assets. . . 476 241. Power of receiver in the settlement of controversies/ 478 242. Power of receiver to employ counsel 479 243. Power of receiver to hold real property 480 244. Power of receiver to recover stock subscriptions 480 245. Duly of receiver to convert assets into money 480 246. Duty of receiver as to private sales 480 247. Duty of receiver to keep accounts 481 248. Duty of receiver to serve copy of report upon attorney-general and superintendent of banks 481 249. Duty of certain receivers to make reports 481 250. Duty of receivers to give notice to creditors 482 251. Delivery of property and payment of debts to receiver after notice 482 252. Penalty for concealing property from receiver 482 253. Duty of receiver to call creditors' meeting 483 254. Proceedings at creditors' meeting 483 255. Deduction of disbursements and commissions by receiver 483 256. Refunding consideration of subsisting contracts 483 257. Retention of funds for subsisting contracts and pending suits. . 484 258. Payment of debts not due , • • ■ ■ 484 259. Allowance of set-offs 484 260. Penalties recovered by receiver 484 261. Order of payment by receiver 484 262. Failure to file claim before first dividend 485 263. Second dividend by receiver 485 264. Surplus to stockholders 485 ■ 265. Disposition of moneys retained by receiver for suits 486 266. Duty of receiver as to unclaimed dividend 486 267. Effect of failure to file claim before second dividend 486 268. Final accounting by receiver 486 269. Notice of final accounting 48T 270. Hearing on final accounting 487 -XXVlll CONTENTS. PAGE Section 271. E«ference of final account 487 272. Further accounting 487 273. Removal of receiver 487 274. Vacancy 487 275. Renunciation by receiver 488 276. Control of receiver by court 489 277. Commissions and expenses of receiver in voluntary dissolu- tion 489 278. Commissions and expenses of receiver except in voluntary dis- solution 489 ARTICLE Xn. Fbotisiohs Appijcable to Two ob Mobe of the FoBEOoiiro Proceed- ings OE Actions. Section 300. Application of preceding articles to certain corporations 490 301. Officers and agents may ibe compelled to testify in certain actions 490 302. Injunction staying actions by creditors in certain aetions 491 303. Creditors of corporation may 'be brought in to prove their claims in certain actions 491 304. When attorney-general must bring certain actions 492 305. Requisites of injunction against corporations in certain cases. . 492 306. Apiwintment of receivers of property of corporations 492 307. Judicial suspension or removal of officer of corporation 493 308. Application of the IfLst three sections 493 309. Misnomer not available in action against stockholder 493 310. Appraisal of property of insolvent corporation 494 311. Application by attorney-general for removal of receiver and to facilitate closing affairs of receivership 494 312. Service of papers upon attorney-general 494 313. Designation of depositories of funds in order appointing re- ceiver 495 314. Application to the court in, certain actions and proceedings 495 315. County wherein action may be brought by attomey-igeneral on behalf of the people 495 316. Preferences in actions of proceedings by or against receivers. . 496 ARTICLE XIII. Alteration and Repeal op Charter of Corporation. "SeOTION 320. Alteration and repeal of charter 497 321. Conflicting corporate laws 497 CONTENTS. XXIX ARTICLE XIV. I1A.WS REFKAIiED; OoNSTBUOnON ; WHEN TO TAKE EFFECT. PAOE Section 330. Laws repealed 498 331. Construction 498 332. When to take effect 498 The Tax Law in so far as it directly relates to Corporations formed under or subject to the Banking Law. Section 4. Exemption from taxation 607 13. Stockholders of hank taxahle on shares 607 14. Place of taxation of indi-ndual bank capital 607 23. Banks to make report 608 24. Bank shares, how assessed 608 26. Individual banker, how assessed 611 26. Notice of assessment to bank or banking association 612 27. Beports of corporations 612 28. Penalty for omission to make statement 612 72. Collection of taxes assessed against stocks in banks and bank- ing associations 613 183. Certain corporations exemipt from tax on capital stock 613 188. Franchise tax on trust companies 614 189. Franchise tax on savings banks 614 190. Purchase of state bonds; credit to be given 614 191. Tax upon foreign bankers 616 192. Eeports of corporations 616 197. Payment of tax and penalty for failure 618 206. Exemption from other state taxation 619 CONSTITTTTIONAL FBOVISIONS, GENERAL STATUTES, ETC. ARTICLE I. Cbeation or Cobfobations. 1894 — Extract from the Constitution of the State of New Tork — Article VIII. SEonoN 1. Corporations, how created 628 2. Debts of corporations 624 3. "Corporations " defined 624 4. Charters for savings banks and banking purposes : . . . . 626 6. Specie payments 628 XXX COITTEN'TS. PAGE Section 6. Registry of bil]s or notes 526 7. Individual responsibility of stockholders 526 8. Insolvency of banks, preferences 527 Extract from General Business Law. Section 374. Oorporations not to interpose defense of usury 527 ARTICLE II. Penal Law Frovisions Affecting Banks and Banking Officials. Section 290. Misconduot of ofScers, directors, trustees or employees of bank- ing corporations 527 291. Sale or hypothecation of bank notes by officer 528 292. Officer of bank putting excessive number of its notes in cir- culation 528 293. Officer or agent of banking corporation making guaranty or indorsement in its behalf, beyond legal limit 529 294. Bank officer overdrawing his account or asking for or receiv- ing commissions or gratuities from persons procuring loans, or making overdrafts of their accounts 529 295. Receiving deposit in an insolvent bank 530 296. Unlawful investments by officers of savings banks 530 297. Misconduct by directors of moneyed corporations 530 298. Misconduct by banks and bankers 531 299. Unlawful discount of bills of foreign banks 532 300. Misconduct by officers of banking department 532 301. Using dies and plates of extinct state bank 532 302. Unauthorized use of the term " bank " 533 660. Frauds in the organization of corporations 533 661. Frauds in procuring organization of corporations 533 662. Fraudulent issue of stocks and bonds 534 663. Acting for foreign corporations not authorized to do business in this state 534 664. Misconduct of officers and directors of stock corporations 535 665. Misconduct of directors, officers, agents and employees of cor- porations 537 666. Unlawful use of certain titles in connection with corporate name 538 667. Presumption of knowledge of corporate condition and business and of assent thereto by directors; definitions 538 668. Misconduct at corporate elections 539 1032. Punishment of corporation convicted of felony 539 , CONTENTS. XXXI THE NEGOTIABLE INSTRUMENTS LAW. ARTICLE I. General Provisions. PAOE Section 1. Short title 543 2. Definitions and meaning of terms 544 3. Person primarily liable on instrument 546 4. Reasonable time, what constitutes 546 5. Time, how computed, when last day falls on holiday 546 6. Application -of chapter 546 7. Law merchant; when governs 546 ARTICLE II. FOEM AND INTBEPEETATION. Section 20. Form of negotiable instrument 546 21. Certainty as to sum; what constitutes 546 22. When promise is unconditional 547 23. Determinable future time; what constitutes 547 24. Additional provisions not affecting negotiability 548 25. Omissions ; seal ; particular money 548 26. When payaible on demand 549 27. When payable to order 549 28. When paya;ble to bearer 549 29. Terms, when suflScient 550 30. Date, presumption as to 560 31. Ante-dated and post-dated 550 32. When date may be inserted 550 33. Blanks ; when may be filled 550 34. Incomplete instrument not delivered 551 35. Delivery; when effectual ; when presumed 551 36. Construction where instrument is ambiguous 551 37. Liability of person signing in trade or assumed name 552 38. Signature by agent; authority; how shown 552 39. Liability of person signing as agent, etc 552 40. Signature by procuration; effect of 552 41. Effect of indorsement by infant or corporation 552 42. Forged signature; effect of 553 ARTICLE III. OoNSIDEItATION OF NEGOTIABLE INSTETJMENTS. Section 50. Presumption of consideration 554 51. Consideration, what constitutes 554 XXXH CONTENTS. PAGE Section 52. What constitutes holder for value 554 53. When lien on instrument constitutes holder for value 554 54. Eflfect of want of consideration 554 55. Liability of accommodation party 555 ARTICLE IV. Negotiation. Section 60. What constitutes negotiation 556 61. Indorsement; how made 556 62. Indorsement must be of entire instrument 657 63. Kinds of indorsement 557 64. Special indorsement ; indorsement in blank 557 65. Blank indorsement; how changed to special indorsement 557 66. When indorsement restrictive 557 67. Effect of restrictive indorsement; rights of indorsee 557 68. Qualified indorsement 558 69. Conditional indorsement 553 70. Indorsement of instrument payable to bearer 558 71. Indorsement where payable to two or more persons 558 72. Effect of instrument drawn or indorsed to a person as cashier. 553 73. Indorsement, where name is misspelled, etc 558 74. Indorsement in representative capacity 559 75. Time of indorsement; presumption 559 76. Place of indorsement ; presumption 559 77. Continuation of negotiable character 559 78. Striking out indorsement 559 79. Transfer without indorsement; effect of 559 80. When prior party may negotiate instrument 559 ARTICLE V. Rights of Hou)eb. SEonoN 90. Right of holder to sue ; payment 560 91. What constitutes holder in due course 560 92. When person not deemed holder in due course 560 93. Notice before full amount paid 560 94. When title defective 581 95. What constitutes notice of defect 561 96. Rights of holder in due course ggi 97. When subject to original defenses ggi 98. Who deemed holder in due course gg2 CONTENTS, XXXlll ARTICLE VI. LlABnJTT OF Paeties. PAGE Section 110. Liability of maker 563 111. Liability of drawer 563 112. Liability of acceptor 563 113. When person deemed indorser 564 114. Liability of irregular indorser 564 115. Warranty where negotiation by delivery, etc 564 116. Liability of general indorser 565 117. Liability of indorser where paper negotiable by delivery 565 118. Order m which endorsers are liable 563 119. Liability of agent or broker 565 AKTICLE VII. Pbesentment foe Payment. Section 130. EflFect of want of demand on principal debtor 566 131. Presentment where instrmnent is not payable on demand 568 132. What constitutes a sufficient presentment 567 133. Place of presentment 567 134. Instrument must be exhibited 567 135. Presentment where instrument is payable at bank 567 136. Presentment where principal debtor is dead 567 137. Presentment to persons liable as partners 568 138. Presentment to joint debtors 568 139. When presentment not required to charge the drawer 568 140. When presentment not required to charge the indorser 568 141. When delay in making presentment is excused 568 142. When presentment may be dispensed with. 568 143. When instrument dishonored by nonpayment 568 144. Liability of person secondarily liable, when instrument dis- honored 569 145. Time of maturity 569 146. Time; how computed 569 147. Rule where instrument payable at bank 569 148. What constitutes payment in due course 569 ARTICLE VIII. Notice op Dishonoe. Section 160. To whom notice of dishonor must be given 570 161. By whom given 570 162. Notice given by agent 571 XXXIV CONTENTS. PAGE Section 163. Effect of notice given on behalf of holder 571 164. Effect where notice is given by party entitled thereto 571 165. When agent may give notice 571 166. When notice sufficient 571 167. Form of notice 571 168. To whom notice may be given 571 169. Notice, where party is dead 571 170. Notice to partners 572 171. Notice to persons jointly liable 572 172. Notice to bankrupt 572 173. Time within which notice must be given 572 174. Where parties reside in same place 572 175. Where parties reside in different places 572 176. When sender deemed to have given due notic 573 177. Deposit in postoffice; what constitutes 573 178. Notice to subsequent party; time of 573 179. Where notice must be sent 573 180. Waiver of notice 573 181. Whom affected by waiver 574 182. Waiver of protest 574 183. When notice is dispensed with 574 184. Delay in giving notice; how excused 574 185. When notice need not be given to drawer 574 186. When notice need not be given to indorser 574 187. Notice of nonpayment, where acceptance refused 575 188. Effect of omission to give notice of nonacceptance 575 189. When protest need not be made; when must be made 575 ARTICLE IX. DlSCHABOE OF NEGOTIABLE INSTEUMENTS. Section 200. Instrimient; how discharged 576 201. When persons secondarily liable on discharged 576 202. Bight of party who discharges instrument 576 ,203. Renunciation by holder 577 204. Cancellation; unintentional; burden of proof 577 205. Alteration of instrument; effect of 577 206. What constitutes a material alteration 577 ARTICLE X. Bills op Exchange; Foem and Intebpbetation. Seotton 210. Bill of exchange defined 578 211. Bill not an assignment of funds in hands of drawee 578 212. Bills addressed to more than one drawee 578 CONTENTS. XXXV PAGE Section 213. Inland and foreign bills of exchange 578 214. When bill may be treated as promissory note 578 215. Referee in case of need 578 ARTICLE XI. Acceptance of Bills or Exchange. Sbotion 220. Acceptance; how made, etc 579 221. Holder entitled to acceptance on face of bill 579 222. Acceptance by separate instrument 579 223. Promise to accept; when equivalent to acceptance 579 224. Time allowed drawee to accept 579 225. Liability of drawer retaining or destroying bill 579 226. Acceptance of incomplete bill 580 227. Kinds of acceptance 580 228. What constitutes a general acceptance 580 229. Qualified acceptance 580 230. Rights of parties as to qualified acceptance 580 ARTICLE XII. Peesentment op Bills op Exchange for Accbiptance. Section 240. When presentment for acceptance must be made « 581 241. When failure to present releases drawer and indorser 581 242. Presentment; how made 581 243. On what days presentment may be made 582 244. Presentment when time is insufficient 582 245. Where presentment is excused 582 246. When discharged by nonacceptance 582 247. Duty of holder where bill not accepted 582 248. Rights of holder where bill not accepted 582 ARTICLE XIII. Protest op Bills op Exchange. Section 260. In what cases protest necessary 583 261. Protest; how made 583 262. Protest; by whom made 583 263. Protest; when to be made 583 264. Protest ; where made 583 265. Protest both for nonacceptance and nonpayment 584 266. Protest before maturity where acceptor insolvent 584 267. When protest dispensed with 584 268. Protest where bill is lost, etc 584 XXXVl CONTENTS. ARTICLE XIV. AooEPTAjsrcE OF Buxs OF Exchange fob Honoe. PAGE Sechon 280. When bill may be accepted for honor 585 281. Acceptance for honor ; how made 585 282. When deemed to be an acceptance for honor of the drawer 585 283. Liability of acceptor for honor 585 284. Agreement of acceptor for honor 586 285. Maturity of bill payable after sight, accepted for honor 586 286. Protest of bill accepted for honor, etc 586 287. Presentment for payment to acceptor for honor; how made 586 288. When delay in making presentment is excused 586 289. Dishonor of bill by acceptor for honor 586 ARTICLE XV. Payment of Bills of Exohange foe Honoe. SBonoN 300. Who may make payment for honor 587 301. Payment for honor ; how made 587 302. Declaration before payment for honor 587 303. Preference of parties offering to pay for honor 587 304. Effect on subsequent parties where bill is paid for honor 587 305. Where holder refuses to receive payment supra protest 587 306. Eights of payer for honor 587 ARTICLE XVI. Bills in a Set. Section 310. Bills in sets constitutes one bill 588 311. Rights of holders where different parts are negotiated 583 312. liability of holder who indorses two or more parts of a set to different persons 588 313. Acceptance of bills drawn in sets 588 314. Payment by acceptor of bills drawn in sets 588 315. Effect of discharging one of a set 588 ARTICLE XVII. Promissoey Notes and Checks. SEOnoN 320. Promissory note defined 589^ 321. Check defined 589 322. Within what time a check must be presented 589 CONTENTS. XXXVIL k^ ; - - '>".:■) PAGE Sbotion 323. Certification of check; effect of 589 324. Effect where the holder of check procures it to be certified. . . . 589 325. When check operates as an assignment 589 ARTICLE XVIII. Notes Given foe Patent Rights and fob a Speculative Considkeation. Section 330. Negotiable instruments given for patent rights 590' 331. Negotiable instruments for a speculative consideration 590 332. How negotiable bonds are made non-negotiable 591 ARTICLE XIX. Law Repealed; When to Take Effect. Section 340. Laws repealed 592 341. When to take effect 592 NATIONAL BANE ACT AND COGNATE UNITED STATES STATUTES. Introduction 595 Treasury notes 596 National bank act 599 National gold banks 601 Amendments 602 Certification of checks 604 National banking system 605 Bevised Statutes of the United States. Title LXn. — National Banks. CHAPTER I. Obganization and Powees. Section 5133. Formation of national banking associations 612 5134. Requisites of organization certificate 614 5135. How certificate shall be acknowledged and filed 614 5136. Corporate powers of associations 614 5137. Power to hold real property 621 5138. Requisite amount of capital 623 5139. Shares of stock and transfers 623 SXXVlll CONTENTS. PAGE Section 5140. How payment of capital stock must be made and proved 627 5141. Proceedings if shareholder fails to pay instalments 627 5142. Increase of capital stock 628 5143. Reduction of capital stock 629 5144. Eight of shareholders to vote 630 5145. Election of directors 630 5146. Requisite qualifications of directors 631 5147. Ooth required from directors 631 5148. Filling vacancies 631 5149. Proceedings when no election was held on the proper day. .. . 636 5150. Election of president of the board 632 5151. Individual liability of shareholders 632 5152. Executors, trustees, etc., not personally liable 636 5153. Duties and liabilities when designated as depositaries of pub- lic moneys 637 5154. Organization of State banks as national banking associations. 638 5155. State banks having branches 640 5156. Reservation of rights of associations organized under act of 1863 640 CHAPTER II. Obtaining and Issuing Cibculating Notbs. ^Section 5157. What associations are governed by chapters 2, 3 and 4 641 5158. Registered bonds intended by the term "United States bonds" 642 5159. Deposit of bonds required before issue of circulating notes. . 642 5160. Increase or redudaon of deposits-to correspond with capital. . 642 5161. Exchange of coupon for registered bonds 643 5162. Manner of making transfers of bonds 643 5163. Registry of transfers 643 5164. Notice of transfer to be given to associations interested.... 643 5165. Examination of registry and bonds 644 5166. Annual examination of bonds by associations 644 5167. Custody of bonds, collection of interest, etc 644 5168. Comptroller to determine if association can commence business 645 5169. Certificate of authority to commence banking to be issued. . . 646 5170. Publication of certificate 646 6172. Printing, denominations and form of the circulating notes. . 646 5173. Plates and dies to be under control of the comptroller 647 5174. Annual examination of plates, dies, etc 648 5175. Limit to issue of notes under five dollars 648 5178. Apportionment of aggregate amount of circulating notes. .. . 648 5179. Equalizing the apportionment of circulating notes 649 5180. How the necessary amount of notes shall be withdrawn 649 COIirTENTS. XXXIX FAQE Section 5181. Removal of assoMation to another State 650 5182. For what demands national bank-notes may be received 650 5183. Issue of other notes prohibited 651 6184. Destroying and replacing worn out and mutilated notes 651 5185. Organization of associations to issue gold notes authorized. . . 652 5186. Their lawful money reserve, and duty of receiving notes of other associations 652 5187. Penalty for issuing circulating notes to unauthorized associa- tions 652 5188. Penalty for imitating national bank-notes, etc 653 5189. Penalty for defacing, etc., national bank-notes 653 CHAPTER III. Regulations of the Banking Business. .Seoiion 5190. Place of business of banking associations 654 5191. " Lawful money reserve " prescribed , 655 5192. What may be counted toward the "lawful money reserve".. 656 6194. Limitation on the power to issue certificates. 656 5195. Place for redemption of circulating notes to be designated. . 656 5196. National banks to receive notes of other national banks 657 5197. Limitation upon rate of interest which may be taken 657 5198. Consequences of taking usurious interest 659 5199. Dividends 662 5200. Limit to liabilities which may be incurred by any one per- son, etc 663 5201. Associations not to loan on or purchase their own stock. . . . 664 5202. Limit upon indebtedness to be incurred 666 5203. R«striction upon use of circulating notes 666 5204. Prohibition upon withdrawal of capital 666 5205. Enforcing payment of deficiency in capital stock 667 5206. Restriction upon use of notes of other banks 668 5207. United States notes not to be held as collateral, etc.; penalty. 668 5208. Penalty for falsely certifying checks 669 5209. Embezzlement; penalty 669 5210. List of shareholders, etc., to be kept 672 5211. Reports to comptroller of the currency 673 5212. Report as to dividends 673 5213. Penalty for failure to make reports 673 5214. Duties payable to the United States 674 5215. Half-yearly return of circulation; deposit and capital stock. . 675 5216. Penalty for failure to make return 675 5217. Penalty for failure to pay duties 675 5218. Refunding excessive duties 676 5219. State taxation 676 xl CONTElirTS. CHAPTER IV. DlSSOLTjnON AND RECEIVERSHIP. PAGE Section 5220. Voluntary dissolution of associations 681 5221. Notice of intent to dissolve 681 5222. Deposit of lawful money to redeem outstanding circulation.. 682 5223. Exemption as to an association consolidating witli another.. 682 5224. Reassignment of bonds; redemption of notes, etc 682 5225. Destruction of redeemed notes 683 5226. Mode of protesting notes 683 5227. Examination by special agent 684 5228. Continuing business after default 684 5229. Notice to holders; redemption at treasury; cancellation of bonds 684 5230. Sale of bonds at auction 685 5231. Sale of bonds at private sale 685 5232. Disposal of protested notes 685 5233. Cancellation of national bank-notes 685 5234. Appointment of receivers 686 5235. Notice to present claims 691 5236. Dividends 692 5237. Injunction upon receivership 693 5238. Fees and expenses 694 5239. Penalty for violation of this title 694 5240. Appointment of occasional examiners 696 5241. Limit of visitorial powers 697 5242. Transfers, when void 698 5243. Use of the title " national" 701 Title XXXV. — Internal Revenue. CHAPTER vril. Banks and Bankers. Section 3407. Definition of the words " bank," " banker " 702 3410. Capital of banks expired or converted into national banks. . . 702 3411. Circulation, when exempted from tax 703 3412. Tax on notes of persons or State banks used as circulation, etc. 703 3413. Tax on notes of town, city or municipal corporations paid out by banks, etc 703 3414. Bonks and bankers' monthly returns 704 3415. In default of returns, commissioner to estimate it, etc 704 3416. State banks converted into national banks; 'returns, how made 705 3417. Provisions for bank tax and returns not to apply to national banks 705 CONTENTS. xli Additional Acts, to 1910. Act of June 20, r874. PAGE SECTION 1. " The National Bank Act," the title 709 2. Reserves on deposit 709 3. Five per cent, on circulation to be deposited in treasury for re- demption 709 4. Withdrawal of circulation, etc 710 5. Charter numbers printed on national bank-notes 711 6. Limit to amount of outstanding notes 711 7. Withwradal of currency to secure equitable distribution 711 8. Duty of Comptroller and Treasurer upon the failure of national banks to comply with requisitions 712 9. Redistribution of currency, etc 712 Act of Januabt 14, 1875. For RESUMP-noN of Specie Payments. Section 1. Resumption of specie payments 713 2. No charge for converting gold bullion into coin 713 3. Circulation of national banks not restricted 714 AOT OF January 19, 187S. Limit to circulation of gold banks removed 715 Act of Febeuabt 8, 1875. Section 19. Tax on circulation of other than national banks 715 20. Tax on circulation of other than national banks paid out, etc. . 715 21. Returns of amount of circulation other than national banks. . . 715 Act of March 3, 1875 716 Act of June 30, 1876. Section 1. Appointment of receivers of national banks 716 2. Individual liability of stockholders, how enforced 716 3. Meeting of shareholders after payment of debts and expenses of receivership 717 4. Sale of stock of shareholders refusing to pay assessments 720 5. Fraudulent notes to be stamped as " counterfeit " 720 6. Reports to Comptroller by savings banks, etc 720 Act op Mabch 1, 1879; Extract pbom. Abating semi-annual duty of insolvent banks 721 Act of February 14, 1880. Conversion of national gold banks 721 xlii CONTENTS. Act op February 26, 1881. PAGE Verification of returns of national banks 722 Act of Jult 12, 1882. To Extend Corporate Existence op National Banking Associations. Section 1. National banking associations authorized to extend corporate existence . 722 2. Consent of shareholders to amendment of articles of association. 723 3. Comptroller to make examination and issue certificate 723 4. Eights, privileges, etc., preserved 723 5. Shareholders not assenting to amendments may withdraw 724 6. Redemption and destruction of certain circulating notes, etc. . . . 724 7. Closing of banking associations not accepting provisions of this act. 725 8. Bonds for security of circulation, etc 726 9. Withdrawal of circulation and deposit of lawful money 726 10. Associations to receive circulating notes upon deposit of bonds.. 727 11. Three per cent, registere'd bonds issued in exchange for three and one-half per cent, bonds 727 12. Gold certificates issued in exchange for good coin 728 13. Penalty for falsely certifying checks 728 14. Right of Congress to repeal, etc 729 Act op March 3, 1883. Repeal of internal revenue and stamp tax 729 Act of March 29, 1886. Section 1. Receiver to certify to Comptroller of equity of bank in property to be sold 730 2. Approval of Secretary of Treasury to be filed 730 3. Purchase; approval of payments by Comptroller .' 730 Act op May 1, 1886. Section 1. Increase of capital stock 731 2. Change of name and location 731 3. Liabilities 731 4. Id., not released 732 Act of July 30, 1886. General incorporation acts amended 732 Act op March 3, 1887. Section 1. Reserve cities 733 2. Central reserve cities 733 3. Redemption of notes at San Francisco, Cal 734 CONTENTS. xliii Act of August 13, 1888. PAGE. National banks deemed citizens of State in which located 734 Act of Mat 2, 1890; Extract feom. As to Oklahoma banks 734- Act of July 14, 1890; Bxtbact feom. As to deposits to pay circulating notes ■ 735 Act of July 28, 1892. Amending National Bank Act as to redemption of bank-notes 736 Act 'of August 13, 1894. As to taxation of legal tender Notes and National Bank Notes 736 CuBKENCY Act of March 14, 1900. Defining and fixing standard of value, etc 737-744 Act of April 12, 1900. As to Porto Rieo 744 Act of April 30, 1900. As to Hawaii 745 Act of March 3, 1903. As to reserve list 745 Act of December 21, 1905. As to Panama Canal bonds 745 Act of January 26, 1907. Political contributions 746 Act of March 4, 1907. Additional notes of small denominations 746 Act of May 30, 1908. Establishing National Monetary Commission, National Currency Associations, and amending certain sections of National Bank Act 747" HISTORICAL SKETCH TIONS. BANKING METHODS. AUTICLE I. Banks, Banking Associations and Individual Bankhes. One of the most remarkable of phenomena is the fact that the first bank ever established won a success unequalled in later times. The Bank of Venice had its origin in llYl, from a forced public loan raised to fit out a fleet, and is the first appearance of a public funded debt. Every citizen was obliged to contribute the one-hundredth part of his possessions.-' The persons assessed were then organized as a chamber of loans for their common protection, and for the receipt of the yearly interest of four per centum. Subsequently, its creditors were permitted to transfer their claims to others, in whole or in part. The government, finding that these transfers were in demand, re- duced the rates of interest until no interest was paid. Afterward, it sold cash inscriptions of credits on its books ; and while these inscrip- tions cost gold, they were not convertible into gold. Its issues were government paper, and the business was carried on solely for the ben- efit of the public treasury.^ This institution was destroyed by the invasion of the French in 1T97. 'Far two hundred years the Bank of Venice stood alone. The magistrates of Barcelona created the Table of Exchange in that city, which was a bank of exchange and deposit. Six years after, the Bank of Genoa came into existence under the title of the Cham- ber of St. George. It was controlled by eight protectors, elected yearly by the stockholders and other creditors. The Bank of Amsterdam was founded January 31, 1609.^ The commerce of this city involved such a variety of transactions that the iPaine's Mass. Paper Currency, 50. 2 Moulton's Science of Money, 66. 8 Goddard'B Hist, of Banking Inst., 11. [3] 4 HISTORICAL SKETCH. expediency of regulating them became evident, and the magistrates, under the authority of the United Provinces, declared themselves the perpetual cashiers of the inhabitants, and declared that all payments above 600 gilders, and bills of exchange should be made in the bank. Merchants V7ere, therefore, obliged to open accounts with it, and the beneficial effects of this institution in Holland were immediately recognized, and the bank money at once commanded a premium. Before the creation of the Bank of England * there were but four large banks in Europe. Its charter was granted by William and Mary, July 27, 1694, for the period of twelve years, determinable on a year's notice ; the original capital subscribed by the proprietors was £1,200,000 in consideration of loaning the government the same sum for which they received a yearly interest of eight per centum. The Bank of Scotland dates from 1695 ; the Bank of Ireland was not established until 1Y83. Bank of ISToeth Ambeica. The incorporation, in the year 1781, of the Bank of North Amer- ica, the first duly organized bank in the United States, was chiefly due to the efforts of Robert Morris, a man of distinguished financial ability, and a representative of Pennsylvania in the Continental Con- gress. The bulk of the circulation for some time previous, consisted of bills of credit, which Congress and several of the States were obliged to issue, in order to obtain supplies for the support of the army. The credit of both Congress and the States having been almost entirely exhausted, the circulating medium became so depreciated in value that it was impossible to secure the necessaries of life for the soldiers. They became sorely dissatisfied, and it was greatly feared that the cause for which our people had suffered must ultimately be abandoned. The substantial aid furnished by this bank to the finan- cial department of the government not only inspired our leaders with confidence, and infused fresh vigor into our troops, but also proved an able auxiliary in the expulsion of the British, from our shores and « The Charter of the Bank of England contained the following noticeable pro- visions : Prohibition AaAnisT teading. — "And to the intent that their Majesties' sub- jects may not be oppressed by the said corporation, by their monopolizing or engrossing any sort of goods, wares or merchandises — Be it further declared and HISTOEICAL SKETCH. O establisliing American independence.^ It came into existence as the result of a meeting of citizens of Philadelphia, which was called to consider plans for the purpose of raising money for the relief of the Eevolutionary Army. At this meeting, held June 17, 1780, a resolu- tion was adopted to open a security subscription to tlie amount of £300,000, Pennsylvania currency real money. The following arti- cles were incorporated in the plan submitted by the promoters of the bank to Congress. enacted by the authority aforeaaid, that the said corporation to be made and created by this act shall not, at any time during the continuance thereof, deal or trade, or permit or suffer any person or persons whatsoever, either in trust or for the benefit of the same, to deal or trade with any of the stock, moneys, or effects of or any ways belonging to the said corporation, in the buying or selling of any goods, wares, or merchandise whatsoever,'' except bullion. The penalty for a violation of the foregoing prohibition was declared to be a forfeiture of treble the amount of the goods or merchandise so purchased or traded for, to be recov- ered by action of debt, wherein no privilege, injunction, restraint, protection, or wager of law should be allowed. § 27. Loans to the king pbohibited. — By section 30 the bank was prohibited from loaning or advancing any sum of money to their Majesties, their heirs or suc- cessors, without the authority of Parliament; and from purchasing lands or revenues belonging to the Crown; and the penalty for a violation of this prohibi- tion was a forfeiture of treble the amount loaned, one-fifth to go to the informer. Tbading in bullion allowed. — By the 28th section it was provided that the bank might buy and sell gold and silver bullion, and bills of exchange; and might sell goods really and bona fide left or deposited for money lent thereon, if not redeemed at the time agreed on, etc. Statutes at Large, quarto ed., Vol. Ill, p. 558. The Bank of Scotland. — The act of the Scotch Parliament, creating this institution, declares " that it shall not be lawful " for the managers, etc., of this bank, " on any pretense whatever, to follow any other trade with the joint stock to be employed in said bank, or any part thereof, or profits arising therefrom," than that of banking, and the same act provides that if the directors should be found guilty of lending, on account of said bank, any money to the King, they shall be liable for every such fault, to triple the value of the money so lent. The Bank op Ireland. — The act of Parliament establishing this corporation prohibited loans to the King, and provides, " that to the intent that the subjects of the King may not be oppressed by the said corporation, by their monopoly of any goods, wares or merchandise, it shall only be lawful for the corporation to deal in bills of exchange or in buying or selling bullion, gold or silver, or in sell- ing any goods, etc., really and Bona fide left or deposited with the said corpora- tion for money lent or advanced thereon and not redeemed at the time agreed on." The Bank of Fbancb is " forbidden to trafflck in anything except money." Rees' Encyelo., article "Bank;" Cleveland's Banking Laws, ix.; Lawson's Hist, of Banking, 362; 1 McCulloch's Diet., 121; Levi's Mercantile Law, 157. Moulton's History of Banks, 1. 6 HISTOKICAL SKETCH. " Item. That the board at every quarterly meeting shall choose two directors to inspect and control the business of the bank for the ensuing three months. Item. That the inspectors so chosen shall, on the evening of every day, Sundays excepted, deliver to the Super- intendent of the Finances of America a state of the cash account, and of the notes issued and received." The capital stock vcas divided into shares of $400 each, in money of gold and silver, to be procured by subscriptions. Twelve directors vsrere appointed to manage the affairs of the bank. Whether from the vsrant of capital in individuals, or from want of faith in the institution, in the fall of the year 1Y81, of the one thou- sand shares proposed, two hundred had not been subscribed, and it was some time after the business of the bank was fairly begun, before the sum received, upon all the subscriptions put together, amounted to $70,000. Under these circumstances the Superintendent of Finance subscribed above $250,000 of the bank stock, for account of the United States. Upon this fund principally the operations of the institution were commenced. The bank was soon viewed as the source and as the support of credit, both private and public. In the beginning of the year 1782, the United States owed considerable sums of money. The requisitions of Congress for $8,000,000 for the expenses of the coming year did not call upon the States to pay be- fore the first of April, and in fact they produced no effect for some time after, and even on the 30th of June the sum paid in did not amount to $30,000. "At that period the public credit had gone to wreck, and the enemy built their most sanguine hopes of overcoming us upon this circumstance; but at that crisis our credit was restored by the bank." The treasury of the United States was so much in arrear that scarcely was the public money paid in with one hand, before it was necessary to borrow it with the other. On the 1st of April, 1782, the United States possessed stock in the bank to the amount of $252,918 28-90, and they were then indebted to the bank for money borrowed, $300,000. On the 1st of July, 1782, the United States held $253,000 28-90 in stock, and were indebted to the bank $400,000. The directors some time after becoming uneasy at this heavy loan, called for payment; in consequence of which the Super- intendent of Finance sold out stock held by the United States to the amount of $200,000, and paid $300,000, in part of the debt; so that HISTOEICAIi SKETCH. ( on the 1st of January, 1Y83, the United States held stock for not quite $54,000, and owed the bank $100,000. On the stock owned by the TJnited States, they received a dividend from ten to sixteen per cent, per annum, and paid but six per cent, upon what they borrowed, but the direct loans of the bank were ob- tained by discounting the notes of individuals, and thereby antici- pating the receipt of public money; besides which, the persons who had contracted for furnishing rations to the army were also aided with discounts upon the public credit.* The bank was established at the close of 1Y81 with a recommenda- tion by Congress that the several States should grant charters to the 6 "And in addition to all this it must be acknowledged that the credit and con- fidence which were revived by means of this Institution, formed the basis of that system through which the anticipations made, within the bounds of the United States, had upon the 1st day of July, 1783, exceeded $820,000. There was due also upon that day to the bank (directly) nearly $130,000. If, therefore, the sums due (indirectly) for notes of individuals discounted, and the like, be taken into consideration, the total will exceed $1,000,000. It may then be not only asserted, but demonstrated, that without the establishment of the national bank, the business of the Department of Finance could not have been performed." But the United States were not alone benefited by this institution. The legis- lature of the State of Pennsylvania, being unable to pay the officers of the army, granted them certificates, and mortgaged the revenue of the excise for payment of the interest. When the interest became due the revenue was not collected, and the distress of the officers was great. On that occasion, without any particular application, the bank advanced the money and took the reimbursement when the revenue was collected. Afterward, on the application of the legislature, they advanced £5,000 for the defense of the frontiers, when the enemy's row-boats took vessels within the very ports of Philadelphia, and the State had not the means of granting protection against so inconsiderable though insulting an enemy; on that occasion the bank, by an advance of about £25,000, enable the merchants to fit out a ship which, within a few days, not only cleared the bay and river, but captured a cruiser of twenty guns belonging to the British fleet. Opposition to this bank gradually increased in Pennsylvania. This antagonism was largely due to demagogism, and to fear arising from the fate of the Continental cur- rency. In 1785, petitions poured into the Pennsylvania legislature praying that body to repeal the bank's charter, and in September of that year, the legislature, powerless to resist the popular demand, repealed the charter. Two years later, however, in March, 1787, the bank obtained a new charter from the State, limit- ing its existence to fourteen years, and after successive renewals it became, December 3, 1864, a national bank, with a capital of $1,000,000, and it is still in existence. Official Statement of the Accounts of the United States; Lalor'a Encyclo., 207; Kees' Encyclo., article "Bank;" Lewis' Hist. Bank of North America; Hildreth's Hist., Vol. III., 405; Lossing's Encyclo. 8 HISTOEICAL SKETCH. institution. TkLs was done by Pennsylvania on the 1st of April, 1782. April 11, 1782, an act was passed by the legislature of the State of New York, entitled "An act to prevent the establishment of any bank within the State, other than the Bank of Iforth America, and for in- corporating the same within this State." The act begins thusr " Whereas, the United States, in Congress assembled, did on the 26th day of May, 1781, resolve in the words following" the act then re- cites the ordinance of the Continental Congress, and adds the follow- ing section: " I. Be it, therefore, enacted hy the people of the State of New York, represented in Semite and Assembly, and it is hereby enacted hy the ataikority of the saxme. That the said bank mentioned in the said ordinance, shall be, and is hereby, incorporated and made a body politic within this State, by the name and style of The President, Directors, and Company of the Bank of IfoBTH America, with all and singular the powers, privil^es and immunities in the said ordi- nance specified, amd that no other bank, public or private, shall be established within, this State during the present war with Great Brit- ain, on pain of the forfeiture of one hundred pounds for every ofFence, by every person concerned in such bank or banks, being there- of convicted in the Supreme Court of judicature of this State; which forfeiture shall go one-half to the complainant, and the other half to the treasury of this State." Two other sections follow, making it felony without benefit of dergy to counterfeit its notes, or for any of its officers or servants to convert any property of the bank to their own use, and it concludes with the following proviso : " Provided always, and it is further enacted, that nothing in this act contained shall be construed to im- ply any right or power in the United States in Congress assembled to create bodies politic or grant letters of incorporation in any case whatever.'' FiEST AND Second Banks of the United STAiis. The first bank of the United States was incorporated February 25, 1791. The capital stock was fixed at $10,000,000 ; $2,000,000 of 'Greenleaf's Ed. Laws, Vol. I., 50; Lalor's Cycle, 207; Flagg's Banks of New York, 1. HISTORICAL SKETCH. » whicli was subscribed by the govemment, to be refunded in ten an- nual instalments. Twenty-five United States citizens constituted the board of directors, wbo served without pay. Tlie notes of the bank were receivable for all debts due to the United States. The bank immediately went into operation. Tbe govemment disposed of its $2,000,000 of stock within the specified time, realizing a profit of fifty-seven per cent, on the original investment.* The second bank of the United States was incorporated April 10, 1816, and began business January 7, 1817. The capital was not to exceed $35,000,000 and the charter required the directors to be resi- dent citizens and to serve without pay. The bank was a public de- pository, and allowed to establish branches and issue circulating notes receivable in payment of debts due the United States, and, in con- sideration of the sum of $1,500,000 to be paid to the United States, it was agreed that no other bank, outside of the District of Columbia, should be established during the ensuing twenty years, the period of its charter. During the first three years of its existence it encoun- tered numerous obstacles, which almost resulted in failure, but after 1820 it gradually recovered and surmounted all opposition until July 16, 1832, when President Jackson vetoed the bill granting a re- charter. During the year 1833 the government deposits were removed from the Bank of the United States to various State banks, by the order of the Secretary of the Treasury. The bank continued its existence by obtaining a charter from the State of Pennsylvania, Pebruary 18, 1836. The disastrous history of the bank under this charter, from 1837 until its last failure in 1843, is shown by the enormous decline in the value of its stock from 137 in 1837 to 1^ in 1843. On finally closing the affairs of the first bank of the United States, the stock- holders received a premium on the par value of their stock of eight and one-half per cent. The second bank of the United States paid nothing to its stockholders, the entire capital of $28,000,000 having 8 With the expiration of the existence of the institution, a large number of State banks were created. In the course of four years (1811-15) one hundred and twenty-three State banks were created, with an aggregate capital of $$40,000,- 000, and an estimated emission of notes to the amount of $200,000,000, a large portion of which, in the Middle States, were issued as loans to the government. Lossing's Encyclo. lO HISTOEICAl SKETCH. been sunk, altbough its charter contained substantially tbe same pro- hibitions and restrictions, but made more severe. The other cred- itors, however, were paid in full.* The second bank in the United States, to be chartered by a State government and to begin business under such charter, was the Massa- chusetts Bank, which was organized under an act of the legislature of Massachusetts in the year 1784.^" With this partial glance at the chronology of banking, we pass to the special history of New York legislation on the subject. When a colony, bills of credit were issued by authority of the co- lonial legislature from time to time. Loan commissioners were ap- pointed for their supervision, and numerous controversies occurred with the home government relative thereto. There were no incor- porated banks here under the colonial governments^ Three distinct and widely differing systems of banking have been successively adopted by the State government. The first lasted from 1791 to 1829 ; the second from 1829 to 1838. These systems, after a lior- ough trial, have been abandoned, while the third has been in force since 1838. The present system is the basis of the ISTational Banking Act, and has gone into general use.^* 9 The recreation of a Bank of the United States in 1816 compelled the State banks to resume specie payment (which had been suspended during the war) or wind up. Of the 446 State banks then in existence, with an aggregate capital of about $90,000,000, a very large number were compelled to liquidate. From 1811 to 1830, 165 banks with a capital of $30,000,000 closed business, with a loss to government and individuals of about $5,000,000. The United States Bank became a, powerful financial machine, and the State banks complained loudly of the tyranny exercised over them by it and its branches. When it ceased to exist in 1836 the number of State banks largely increased, being 634 in 1837, with a capital of nearly $291,000,000. This number was increased in 1840 to 901, with a capital of over $358,000,000. Lossing's Encyclo. 10 This institution is still in existence in the city of Boston and is a national bank. Paine's Mass. Paper Currency, 51. 11 See note, ch. 71, Laws of 1813, Van Ness and Woodworth's edition. 12 Its most distinguishing principle and most useful feature is that which requires ample security for the redemption in specie of all bank issues, and which has become a part of the constitution of the State as follows: "The legislature shall provide by law for the registry of all bills or notes issued, or put in circulation as money, and shall require ample security for the redemption of the same in specie." Art. 8, § 6. In the year 1844, Sir Robert Peel practically carried into eflfect the same principle, in dealing with the Bank of England on the renewal of its charter in that year. By the renewed charter HISTOEICAL SKETCH. 11 BA]srK OF New Yoke. March 21, 1791, about nine years after the granting of the pre- viously-mentioned charter to the Bank of North America, the legis- lature of this State passed an act entitled "An act to incorporate the stockholders of the Bank of New York ; " an institution which had carried on a banking business with a capital of $500,000, in the city of New York, since February 26, 1774. The State government had been in operation nearly fourteen years before any one of the bank- ing companies doing business in this State was permitted to conduct its business under an act of incorporation.^^ The reason for this re- (1844) of this institution, it is enacted that there shall be transferred, etc., "to the issue department of the Bank of England, securities to the value of £14,000,- 000, whereof the debt due by the public to the said governor and company shall be and be deemed a part." Stat. 7 and 8 Viet., ch. 32. " The object of this statute ( Stat. 7 and 8 Vict., ch. 32 ) has been to obviate the chances of over-issue and sudden fluctuations In the quality and value of money, by limiting the power to issue notes payable on demand," etc. . " While the directors are left to manage the banking department at their dis- cretion, their management of the issue department is subjected to what seems to be a well-devised system of restraint. The bank is allowed to issue to £14,000,000 of notes upon securities (of which the debt of £11,015,100 lent by it to govern- ment is a part) ; and whatever paper the issue department may at any time issue over and above this maximum amount of securities, it must have an equal amount of coin and bullion in its coffers. Hence, It is impracticable for the issue department to increase its issues without, at the same time, proportionally increasing its stock of coin and bullion, or to diminish the latter without pro- portionally diminishing the amount of paper supplied to the public and banking department." McCulloch's Diet., Lond. ed., 82-88; Lawson's Hist, of Banking, Amer. ed., 76, 77; Gilbart on Banking, Amer. ed., 61; Levi on Mercantile Law, 202; Cleveland's Banking Law, 84. 13 "A corporation aggregate is a collection of individuals united in one body, under such a grant of privileges as secures a succession of members without changing the identity of the body, and constitutes the members, for the time being, one artificial person or legal being, capable of transacting some kind of business like a, natural person. It does not occur to my mind, that anything else can be essential to the definition. Such a union as I have mentioned can be efifected under a grant of privileges from the sovereign power of the State. A corporation is, therefore, said to be a legal being, or the mere creature of law. It is convenient, though not absolutely necessary, that this artificial person, like a natural one, should have a name by which it may be known and designated in the transaction of business. And when the doctrine was that a corporation could only contract by its seal, a seal was said to be an indispensable requisite. So, immortality was once thought to be an attribute of all corporations; but that 12 HISTOEICAL SKETCH. markable fact is to he found in the condition of affairs that then existed. The Continental paper money system had caused such severe losses that the representatives of the people were unwilling to countenance the creation of a corporation, the establishment of which seemed to favor, however remotely, the issuing of paper money by any association whatever, and this charter expressly states: " It shall not be lawful for the said corporation to emit any notes, or contract debts which shall be payable in the bills of credit emitted by the laws of this State." ^^ This, the first bank ^' charter granted in this State, after the act incorporating the Bank of l^Torth America, was substan- tially the model upon which all the bank charters granted in this State were framed, before the year 1825, at which time the form of these acts was changed, and new and more stringent prohibitions and restrictions were enacted by the legislature. Its original capital was $900,000. April 10, 1792, the Bank of Albany was chartered (ch. 61), with a capital of $240,000. March 6th of the succeeding year, the Bank of Columbia was chartered (ch. 38), with a capital of $160,000. It was located at Hudson, where it was proposed to open a foreign trade and to establish the whale fishery business by a com- pany from Rhode Island.^* Shortly after the organization of the Bank of JSTew York, the State of IsTew York subscribed $50,000, tbus now means no more than a continued succession of members for such period, whether long or short, as may be allotted to this legal entity by its creator." Bbonson, J. The People v. The Assessors of Watertown, 1 Hill, 620. " It has been said, that the great distinction between the common joint-stock companies or partnerships, and corporations, is that in the first, the law looks to the individuals of whom the partnership is composed, and knows the partnership no otherwise than as being such a number of individuals; while in the second, it seems only the creature of the charter, the body corporate, and knows not the individuals." Wordsworth's Law of Joint-Stock Companies, 4. The constitution of this bank, adopted at the time of its organization, con- tained the provision, "No stockholder shall be accountable to any individual or the public for money lodged in the bank for a greater sum than the amount of his stock." Domett's Bank of New York, 14. During the seven years interven- ing between its creation and incorporation, the stockholders were severally liable for the whole indebtedness of the concern, despite the foregoing declaration. " Section 9, ch. 37, Laws of 1791. "This institution has never passed a, dividend except in 1837, when it was obliged to do so by law. Domett's Bank of New York, 109. 10 Hammond's Hist., Vol. I., p. 324. HISTORICAL SKETCH. 13 increasing its capital by that amount/^ and again, in 1832, made a like subscription.^^ 17 The state Comptroller, in his report under date of January 30, 1807, says: " In the act incorporating the Merchants' Bank, the State reserved to itself the right of subscribing for 2,000 shares of the capital stock of that institution, in addition to the stock already held; and the act appropriated all such shares and the dividend thereon to the use of common schools. As it is already ascertained that the stock in this bank produces nine per cent, per annum, it is respectfully submitted to the Honorable the Legislature to provide for taking the residue of the stock from time to time, as the payments on the several items of the school fund shall enable the Treasurer to pay for it, and to provide that thereafter the receipts into the treasury, on account of this fund, be loaned agreeably to the act of 2d April, 1805." The same officer, in his report under date of January 28, 1809, said: "The provision should be a direction to invest in bank stock as the best means of secur- ing the greatest as well as the most regular revenue. First, in the stock, which the State has reserved to itself the right of subscribing for in various banks; and secondly, in the purchase of bank stock in market. In the one case there is but little doubt that the amount invested would produce at least nine per cent, per annum, and the other at least seven. The shares which the State has a right to, and are proposed to be subscribed for, are in the stock of the Manhattan Company to the amount of $50,000; Albany Bank, $20,000; Columbia Bank, $20,000; Hud- son Bank, $15,000; Farmers' Bank, $20,000; State Bank, $20,000, and the Mohawk Bank, $5,000." " The funds have been augmented since the last report $50,000 by an invest- ment to that amount, in the capital stock of the Manhattan Company; $20,000 by an investment in the stock of the Farmers' Bank; and $20,000 by an invest- ment in the stock of the New York State Bank." Extract from Comptroller's report of February 6, 1810, referring to the Manhattan Company. 18 The right reserved by the State to subscribe to the stock of banks chartered by it was sometimes given as a gratuity, as will be seen by the following quota- tion: "And be it further enacted. That the right reserved to this State to sub- scribe to the stock of the Bank of Utica, be, and the same is hereby transferred to the College of Physicians and Surgeons of the Western District, with full power to dispose of the same, or any part thereof, in such way and manner, and at such times as shall by them be deemed most beneficial to the interests of the said college: Provided, that on the said shares so to be subscribed, shall be paid into the said bank a sum not exceeding the amount paid by the former stock- holders, and in like manner from time to time, as calls may be made by the directors of the said bank. And provided further. That no part of the principal of the moneys arising from the sale of the said shares shall be appropriated toward the payment of the salaries of any of the professors or tutors of the said college," § 11, ch. 119, Laws of 1814. The following statement, in connection with the proposed establishment of a, new bank during the year 1814, is taken from the Appendix to Southwick's edition of the Laws of that year, p. 285. 14 HISTOEICAL SKETCH. Eesteainiwg Act of 1804. Tlie legislature, April 11, 1804, passed an act whieh. is known as the Restraining Act of that year. It enacted that from and after the passing of this act, no person unauthorized by law should subscribe to or become a member of any association, institution or company, or proprietor of any bank or fund for the purpose of issuing notes, receiving deposits, making discounts or transacting any other busi- ness which incorporated banks may or do transact by virtue of their respective acts of incorporation ; " and if any person unauthorized by " Bank of Utica." " The Senate added a clause to the supply hill, as follows : 'And be it further enacted, That it shall be lawful for the president and directors of the Bank of Utica, at any time after the passing of this act, to establish an office of discount and deposit in the county of Ontario, under such rules and regulations as are practised in said bank, and to commit the management thereof to not less than one president and twelve directors, to be appointed by the said Bank of Utica.' The Assembly rejected tie said clause, and the Senate receded from its amend- ment by a vote of 15 to 7. " Banks. "The following applications were made: 1. For one bank at Cooperstown. 9. For one bank at Salem. 2. For two banks at Albany. 10. For one bank at Norwich. 3. For one bank at Schenectady. 11. For one bank at Geneva. 4. For one bank at Johnstown. 12. For one bank in Ulster. 5. For one bank at Poughkeepaie. 13. For one bank in Onondaga. 6. For six banks at New York. 14. For one bank at Baliston Spa. 7. For one bank at Auburn. 15. For one bank at Canandaigua. 8. For one bank at Owego. 16. For one bank at Catskill. " Without entering into the merits of these several applications, it is sufficient to mention that the Senate, at an early part of the session, evinced a determina- tion to resist the incorporation of any further banking companies in this State. The Commission Company at New York, the North American Coal, and the New York Coal Company, gave rise to the most interesting debates, but the banking privileges applied for suffered the same fate with other similar applications. It was intended to have taken a brief view of the subject, so far as related to coal companies, etc., but considerations not necessary here to state have induced us to be silent. A bill was brought into the Assembly ' to regulate bankers and bank- ing associations.' It proposed to allow any company of persons, not exceeding ten in number, to transact the ordinary business of banking, such as discounting notes, issuing bills, etc. The bill contained certain restrictions and penalties not necessary to detail. On the question to reject the bill, 66 voted to reject and 24 the contrary. Of course the bill was rejected." HISTOBICAL SKETCH., 15 law as aforesaid, skall hereafter subscribe or become a member or proprietor as aforesaid, he shall forfeit and pay for every such offense the sum of $1,000, to be recovered by any person who shall sue for the same, in an action of debt, one-half thereof to his own use, and the other half to the use of the people of this State ; and all notes and securities for the payment of money, or the delivery of property, made or given to any such association, institution or company, not authorized as aforesaid, shall be null and void : Provided, neverthe- less, that nothing herein contained shall be held in any way to extend to the association in the city of Albany, known by the name of the Mercantile Company, nor the association in the city of New York known by the name of the Merchants' Bank, until the first Tuesday in May, 1805." And it was further enacted, "All unincorporated associations, in- stitutions or proprieties, formed for any of the purposes aforesaid, that now exist in this State, shall, after the first Tuesday in May, 1805, cease to issue notes and to loan money; and any person con- cerned or interested in the issuing such notes, or loaning any such money as aforesaid, after the first Tuesday of May, 1805, shall for- feit and pay, for every such offence, the sum of $1,000, to be re- covered and disposed of in tl^ ma'nner prescribed in the first section of this act." ^9 At this time, gold and silver were not in circulation, and bank paper was, generally speaking, the medium by which business affairs were conducted ; the banks, therefore, had the complete right to emit the money of the people. The total bank capital actually invested at this time, exclusive of the capital of the Manhattan Company, did not aggregate $2,000,000.2» Both the Merchants' Bank and the Mercantile Company, herein referred to, were private associations formed for banking purposes. The first named ^^ obtained a charter in 1805, and some of the pro- is Laws of 1804, 615. 20 Hanunond's Hist., Vol. I., 331. 21 Emtract from, charter of the Merchants' Bank in the city of New York, incor- porated by chapter 43 of the Laws of 1805. "And he it further enacted, That the capital stock of said corporation, exclu- sive of what may be subscribed on the part of the State, shall not exceed $1,250,000, and that a share in the said stock shall be fifty dollars; am.d further, 16 HISTORICAL SKETCH. prietors of the Mercantile Company succeeded, in 1811, in procuring an act incorporating themselves and associates under the title of the Mechanics' and Farmers' Bank of Albany. Under this restraining statute ^^ all unincorporated associations, except those expressly mentioned, were compelled to close. The Ebsteaining Act of 1813. April 9, 1813, the legislature enacted a law that it should be in the power of the person administering the government of this State, or in his absence from the city of New York, of the common council thereof, to authorize and direct the removal of the public records of the said city to some safe place, and also, in case of danger from the enemy, to authorize and direct the temporary removal of the banks, insurance companies and other moneyed institutions from the said city without prejudice to their chartered rights in any respect what- ever, and the directors of the said banks, insurance companies and other moneyed institutions during such temporary removal were ' thereby authorized to execute the powers and to carry on the business committed to them by law. Oh. 87. The first portion of the restraining statute of 1804 was made a part of the restraining act of 1813. The first section enacted that no person or persons whomsoever, within this State, should give or receive in payment of any debt or demand whatsoever, or in any way attempt or offer to circulate, any bank bill or promissory note of any banking company within this State or elsewhere, for the payment of money which should be for less than the nominal value of one dollar ; and that any person offending against this act, either as giver, re- ceiver or circulator of such bank bill or promissory note, should for- feit and pay the nominal amount or value of such bank bill or promis- That this State shall have a right to subscribe any number of shares in the stock of the said corporation not exceeding in the whole three thousand, at any time when the legislature shall, by law, authorize any person or persons for that purpose, and in consequence of the interest or stock which this State may hold in the said corporation the Treasurer of this State shall be ex officio a director of the said company." 22 At common law the right of banking pertains to every member of the com- munity. Its ■ free exercise can only be restricted by legislative enactment, but that it legally can be thus restricted has never been questioned. Grant on Banking, 1. HISTOMCAL SKETCH. 17 sory note so given or received or attempted or offered to be circulated ; the same to he recovered with costs of suit in any court within this State having cognizance thereof, by action of debt, by any person who should sue for the same, to his or her own use; provided, that such suit or action be brought or commenced at any time within thirty days after the offence be committed. 2 E. L. ch. 71. This last act was passed because, while a prohibition was put on the formation of associations for banking purposes, individuals were free to establish banks and issue bills, and both they and the incor- porated banks had overwhelmed the country vnth paper money for six, twelve, twenty-five, fifty and seventy-five cent bills. ^* The re- striction in this law in reference to issuing bills of the nominal value of less than one dollar was abrogated in 1815 until the end of the next session of the legislature. Ch. 32, Laws of 1815. The first Restraining Act was, however, modified by an Explana- tory Act, so as not to apply to the Manhattan Company, as follows: " Whereas^ the Chamber of Commerce of the city of New York have, by their respectful memorial to the legislature, expressed appre- hension that the bill passed both houses of the legislature at the present session, entitled 'An act to restrain unincorporated banking associations,' may be so construed as to subject individuals to incon- venient restrictions in their usual commercial business and pursuits; therefore, for the removal of those apprehensions, " IX. Be it enaicted and declared, That nothing in the said bill con- tained shall be deemed or construed to prevent any person, associa- tion or company from transacting or pursuing any business other than such as companies or banks, incorporated for the express pur- pose of banking, usually do or transact, nor shall anything in the said act contained be deemed or construed in any manner or way to affect the incorporation in the city of ]!^ew York, created by virtue of an act entitled 'An act for supplying the dty of New Yorh with pure and wholesome water.' " ^ The legislature enacted a law, JSTovember 12, 1816, that no banking company should issue, or cause to be issued, any bills or notes, other than for the payment of money; and that the sums which may be 23 Flagg's Banks of New York, 12. 2* 3 Web. Ed. Laws, 611, § 9. 2 18 HISTOiaCAL SKETCH. expressed in any bills or notes which any banks should issue, or cause to be issued, which, according to the terms thereof are receivable only in payment of debts due to the bank, should be recoverable by the bearer of such bills or notes, in like manner as if the same con- tained an express promise for the payment of money. Ch. 17, Laws of 1816. The EssTEAiiriifG Act of 1818. The third Eestraining Act became a law April 21, 1818. It pro- vided that it should not be lawful for any person, or association of persons, or body corporate, from and after the ensuing first day of August, to keep any office of deposit for the purpose of discounting promissory notes, or for carrying on any kind of banking business or operations, which incorporated banks are authorized by law to carry on, or issue any bills, or promissory notes, as private bankers, unless thereunto specially authorized by law. The exceptions were made that nothing in this act contained should be deemed to extend to the bank in New York owned by Jacob Barker, called the Ex- change Bank, until three years after the passing of this act ; or should be deemed or construed to abridge, enlarge, or in any way affect any rights heretofore granted by law to any incorporated company. Ch. 16, Laws of 1818. The enormous increase in the amount of paper money, much of which, especially that issued by private persons, was worthless, led to the passage of this act. It is evident the legislature did not care to distinguish between a private bank which carried on a legitimate business based on actual capital and one created to manufacture paper credits, but seemed to hold the opinion that the issuing of bills was a necessary incident of a banking business. ^^ But it should be borne in 25 Flagg's History of Banks, 13. In connection with these Restraining Acta, the following portion of a well-considered opinion of Savage, Ch. J., delivered in May, 1824, is of interest: "What is the meaning of the terms ' banking" powers ' is next to be ascertained. In the Maine Bank v. Butts, 9 Mass. Rep. 54, Sewali,, Justice, says: 'That expression (banking principles), if it has any peculiar meaning, is an authority to deduct the interest at the commencement of loans, or to make loans upon discounts, instead of the ordinary forms of security for an accruing of interest.' Again: 'The principal attributes of a bank are, the right to issue negotiable notes, discount notes, and receive deposits.' Per Spencee, J., 15 Johns. 390, 8 HISTOEICAL SKETCH. 19 mind that the incorporated banks were as obnoxious to the public condemnation for the state of things wbieh existed in 1818, as the private banks. This is clearly sbown by the message of Governor Clinton, an extract from which is given below.^® Am. Dec. 243. Previous to the Restraining Acts, there was no power possessed by a bank, not also allowed to individuals and private associations. They could, in common, issue notes, discount notes, and receive deposits; the only difference was, that the former were not liable beyond their corporate body, while the latter were accountable in their persons, and to the full extent of their private estates, The first Restraining Act was passed in 1804. It had for its object the guaran- teeing of banks a monopoly of the rights and privileges granted to them, which had been encroached upon, or infringed by private associations. This was re-en- acted in the Revised Laws of 1813; and in 1818, the legislature found it neces- sary to pass the act of April 21, of that year (Sess. 41, ch. 236), which places individuals upon the same footing with private associations, with the same view to a monopoly, by the incorporated banking companies. The first of these acta prohibits the formation of any bank or fund unauthorized by law, ' for the pur- pose of issuing notes, receiving deposits, making discounts, or transacting any other business which incorporated banks may or do transact, by virtue of their respective acts of incorporation.' The second prohibits any person, or association of persons, or body corporate, from keeping any office of deposit, for the purpose of discounting promissory notes, or carrying on any kind of banking business or operations which incorporated banks are authorized by law to carry on; or to issue any bills or promissory notes, as private bankers, unless thereto specially authorized by law. Assuming, therefore, what in my opinion cannot be contro- verted, that banking power consist in the right of issuing notes, making dis- counts and receiving deposits, and that the business which incorporated banks may do, by virtue of their acts of incorporation, is prohibited to all others, unless specially authorized by law, it follows, conclusively, that both the old and new company have done what they were not only not authorized by their charter to do, but what was absolutely prohibited by the Restraining Act." N. Y. Fire Ins. Co. V. Ely et al., 7 Cow. 710. 26 " The evils arising from the disordered state of our currency have been aggra- vated by the banking operations of individuals, and the unauthorized emissions of small notes by corporations. They require the immediate and correcting inter- position of the legislature. I also submit it to your serious consideration, whether the incorporation of banks, in places where they are not required by the exigencies of commerce, trade or manufactures, ought to be countenanced. Such institutions, having but few deposits of money, must rely for their profits prin- cipally upon the circulation of their notes, and they are, therefore, tempted to extend it beyond their faculties. These bills are diffused, either in the shapes of loans, or by appointing confidential agents to exchange them for those of other establishments, but the former mode, being conducive to profit, is at first gen- erally adopted; and in the early stages of their operations, discounts are liberally dispensed. This produces an apparent activity of business, and the indications of prosperity, but it is all fictitious and deceptive, resembling the hectic heat of 20 HISTOEICAL SKETCH. April 12, 1824, it was enacted that no person or persons whomso- ever within this State should, after the ensuing first day of May, give or receive in payment of any debt or demand whatever, or in any way attempt or offer to circulate any bank bill or bills, or promis- sory note or notes of any banking company whatever, made payable or purporting to be made payable otherwise than in lawful money of the United States. Laws of 1824, p. 303. Bank Chaetees Peioe to 1825. It may be noted that none of the bank charters, prior to 1825, con- tained any specification of banking powers. The legislature, from 1791 to 1825, relied only on the restrictive clauses inserted in each charter. Prior to the beginning of the nineteenth century, but five banks had been incorporated by this State, viz. : The Bank of Worth America, 1782; the Bank of New York, 1791; the Bank of Albany, 1792 ; the Bank of Columbia, 1793 ; the Manhattan Company, in 1799 ; the Farmers' Bank was chartered in 1801, and the New York State Bank in 1803. These several bank charters were based upon the acts incorporating the Bank of England, in 1694, and the bank of the United States, in 1791 ; and as neither of these charters, English or American, defined or specified the banking powers intended thereby to be granted, it consuming disease, not the genial warmth of substantial health. A reaction soon takes place. These bills are in turn collected by rival institutions, or passed to the banks of the great cities, and payment being required, the only resources left are to call in their debts, and exact partial or total returns of their loans. The continual struggle between conflicting establishments to collect each others' notes occasions constant apprehension. The sphere of their opera- tions is narrowed. Every new bank contracts the area of their paper circula- tion; and after subjecting the communities, within their respective spheres of operation, to the pernicious vicissitudes of loans — at one period profusely granted, and at another parsimoniously withheld — they finally settle down into a state of torpid inaction, and become mere conduits of accommodation to a few individuals. The legislature is then solicited to apply a remedy by the incor- poration of other banks, whereas every new one of this description, unless attended by peculiar circumstances, paralyzes a portion of capital, and augments the general distress, the banishment of metallic money, the loss of commercial confidence, the exhibition of fictitious capital, the increase of civil prosecutio«s, the multiplication of crimes, the injurious enhancement of prices, and the dan- gerous extension of credit, are among the mischiefs which flow from this state of things." HISTOEICAL SKETCH. 21 became necessary, by probibitory clauses, to limit tbe powers of tbe corporations so created; and we discover in all tbese public enact- ments, extending from 1694 to 1825, unequivocal declarations by the English Parliament, by Congress, and by successive legislatures of this State, that trading in anything, except bullion, foreign coins and bills of exchange, is not banking; and that the power to traffic in stocks or merchandise is not " either necessary or expedient to accom- plish the purpose for which banks are instituted." ^^ While nothing of a political character at first entered into the establishment of banks, that feeling soon manifested itself, and under the circumstances very naturally so. In 1799, John Adams was President, and another presidential election was imminent. The Bank of New York was in Federal hands, and the Republicans naturally wanted a bank of their own to control, but the legislature was in the hands of the Federals, who were jealous of moneyed insti- tutions, and the prospect of a Republican Bank seemed dubious at It was then Aaron Burr's fertile brain came to the rescue. 'Sew York had been visited by the yellow fever, and it was believed that this malady was induced by the lack of wholesome water in that city. Here was the opportunity. It was proposed to incorporate the " Manhattan Company," for the benevolent purpose of supplying N'ew York with pure water; $2,000,000 would do this; and as these water-works might not absorb the entire amount, the petitioners asked for a provision authorizing this institution to employ its stirplus capital : " In the purchase of public or other stock, or in any other moneyed transaction or operations, not inconsistent with the consti^ tution and laws of this state, or of the United States." And as the object was to supply a want that would always exist, it was not unrea- sonable that the grant should be given in perpetuity. This corpora- tion, with its unassuming title, was too late seen to be a banking institution, with a charter of the most liberal character. The charter (ch. 84) passed, the Federals discovered their political mistake. The bill was introduced at the very close of the session, and was hastily pushed through the Assembly and Senate. In the latter body it was reported complete, by a select committee, and never referred to the 2' Talmage v. Pell, 7 N. Y. 345; Cleveland's Banking Laws, xxi. 22 HISTOEICAL SKETCH. committee of tiie whole. The Council of Eevision then existed " to revise all bills about to be passed into laws by the legislature." The attention of this body was called by the Chief Justice, to whom the bill was referred, to the clause under which the banking powers ex- isted. He objected to this clause, because he was apprehensive that the capital would be employed in trade, etc. The minutes of the Council indicate that there was not the slightest thought that the bill created banking powers. ^^ The incorporation of the 'N&w York State Bank, at Albany, in 1803, of the Merchants' Bank in New York, 1805, and of the Bank of America, in 1812, were the cause of bitter partisan contests and intrigues, and corrupt means were used to procure each of these charters. There was a provision in many of these early charters that on pay- ment of some twelve to fifty per centum of the capital in specie the bank might begin business. A natural result was that irresponsible individuals borrowed the necessary small cash capital for a shott time, and then returned the specie, its place being filled by cash obtained from discounting their own notes by the new bank and substituting them for the specie. Such notes were, in those days, termed " stock 28 The Manhattan Company has acted in the capacity of general transfer agent of the State of New York for all the stock issued for canal purposes from the year 1818 to the present time. From that year to the year 1839 the certificates of State stock were signed by the cashier of the Manhattan Company alone; since 1839, these certificates have been signed by the Comptroller of the State and countersigned by the cashier of the bank. The Manhattan Company has issued, transferred and paid the public stocks, and the State has held, from the year 1810, one thousand shares, the nominal or par value of $50 a. share, of the stock of this bank, for the account of the common school fund. Many persons are living in the metropolis who can remember the large water wheel which was located on Keade, between Center and Elm streets. This corporation as a water company was a beneficent institution. Its resources now aggregate over seventy- four million dollars. The following is a list of the incorporated bajiks of the State, the circulation of which is not secured, and which have not advertised for the final redemption of the same: Chemung Canal Bank, Delaware and Hudson Canal Company, Livingston County Bank, Manhattan Company, Onondaga County Bank. Their charters, excepting that of the Manhattan Company, have expired. Report of Superintendent of Banking Dep't, 1909. Hammond's Hist., Vol. I., 229, 309, 325; 1 Burr, 413; People v. Manhattan Co., 9 Wend. 364; N. y. Laws (Web. ed.), 370, § 8. HISTOEICAI, SKETCH. 23 notes." Eebruary 24, 1823, the legislature incorporated the " !N"e-w York Chemical Manufacturing Company " for the purpose of manu- facturing " drugs and medicines, paints and dyers' articles," but specifically provided that this corporation should not engage " in any banking business or transaction whatsoever." Oh. 96. The follow- ing year the act of incorporation was amended (L. 1824, ch. 148) by repealing the section (XI.) prohibiting the business of banking providing for the appointment of commissioners to receive subscrip- tions to the capital stock of the company to the amount of five hun- dred thousand dollars and enacting the following very remarkable provision : " The said corporation shall have the power to employ the whole thereof, excepting the sum of one hundred thousand dol- lars in banking operations in the city of New York, and to issue bills, notes, or other obligations under the seal of the said corporation, or without their corporate seal, as other banks in this State are au- thorized to do, and in such manner as the said corporation shall direct, and to make all proper rules and regulations and to appoint all proper officers, clerks, and agents for carrying on the same." ^^ 20 Under tMs charter a cheinical manufactory was started at Thirtieth street and Tenth avenue, and a hank in the year 1824 at 216 Broadway, where the Park National Bank now stands. The capital was $500,000. At the expiration of this first charter in 1844, it was reorganized with the title of the " Chemical Bank," having a capital of $300,000, under the free banking act of 1838, with a new board of directors and executive officers, and was an entirely new institution. This bank always redeemed its State bank notes in gold, if the holder so requested. In December, 1859, such notes outstanding aggregated $307,349. It now has as a liability such notes to the amount of $10,838. The same were issued previous to 1863. April 30, 1891, two shares of the stock of this bank (the capital stock being at that time $300,000) sold at public auction for $4,785 a share. One share of the stock sold July (1909) for $520. Fifty shares were sold the following month for $431 a share. No dividends were paid until 1849, at which time the surplus was over $200,000. It then began paying annual dividends of 12 per cent., and continued up to 1851 when it paid 18 per cent, annually up to 1854; then 24 per cent, until 1863, 36 per cent, until 1868, and 60 per cent, until 1872, at which time it paid 15 per cent, bimonthly with an additional dividend of 10 per cent, during the year, or 100 per cent, yearly, and continued to do so until 1888. From that time to January, 1907, when the capital stock was readjusted and increased from $300,000 to $3,000,000, dividends at the rate of 150 per cent, per annum were paid. It now pays dividends at the rate of 15 per cent, yearly on $3,000,000 of capital stock. Its gross deposits are now (September, 1909) $38,000,000, and its capital, surplus and undivided profits $8,958,260.63. 24 HISTOEICAL SKETCH. April 12, 1824, it was enacted that no person or persons whomso- ever, within this State, should, after the ensuing first day of May, give or receive in payment of any debt or demand whatsoever, or in any way attempt or offer to circulate, any bank bill or bills, or prom- issory note or notes, of any banking company whatsoever, made pay- able, or purporting to be payable otherwise than in lawful money of the United States. Ch. 303, Laws of 1824. At the close of the first quarter of the nineteenth century, the State of ITew York had forty- two banking institutions with the privileges of $28,900,000 capital. FiEST Legislative Specification oe Banking Powebs. In 1825, the legislature passed a stringent law to prevent fraudu- lent bankrupteies. It granted but two of the numerous applications for bank charters — 'the Commercial Bank, of Albany, and the Dutchess County Bank, of Poughkeepsie. The act (eh. cxvii.) incor- porating the first named is remarkable in that it contains a specifica- tion of banking powers as follows : " The President, Directors and Company of the Commercial Bank of Albany . . . shall have and possess all incidental and necessary powers to carry on the business of banking, by discounting bills, notes and other evidences of debt; by receiving deposits, by buying gold and silver, bullion and foreign coins, by buying and selling bills of exchange and by issuing bills, notes and other evidences of debt; but the said company shall have and possess no other powers whatever, except such as are expressly granted by this act; . . . and the said company shall not, directly or indirectly, through any trustee or otherwise, receive any transfer, pledge or hypothecation of any stock of the said company, or of any other incorporated company, and every such transfer, pledge or hy- pothecation shall be utterly void ; and provided further that the said bank shall be established in the city of Albany, and that its operation of discount and deposit shall be carried on in said city of Albany and not elsewhere." The Session Laws of 1826, 1827 and 1828 show no bank charters to have been granted during either of those years. OoNSPiEACY Trials of 1826 and 1827. During the summer and fall of 1826 and early in 1827, several witizens of high reputation in the city of New York were indicted and HISTOEICAL SKETCH. 25 tried for an alleged conspiracy to defraud the Morris Canal and Banking Company, the Fulton Bank, the Tradesmen's Bank, the Mercantile Insurance Company, the Merchants' Fire Insurance Com- pany, and other moneyed institutions. Several of the officers and directors, or managing agents of the " Life and Fire Insurance Company," the " Sun Fire Insurance Company," the " United States Lombard Association," and the " Madison Fire Insurance Company," were implicated in these crim- inal prosecutions, which were widely and generally known and desig- nated at the time as the " conspiracy trials." Briefly, the Life and Fire Insurance Company was charged with using the express powers given it for insurance purposes, to carry on a banking business. It caused its bonds to be engraved like bank-notes, and, so issued, were placed like so much paper currency in circulation.^" The United States Lombard Association issued similar bank-notes. " In this connection," said Chancellor Walwoeth, " it was an attempt on the part of those who had the control of the affairs of this company, to carry on banking business instead of the business for which they professedly obtained their charter. . . . There was suffi- cient on the face of these bonds to show that they were intended as a circulating medium, and were not given by the company to the payees thereof for an actual indebtedness, in the course of the legitimate business of the company. At least, there was sufficient to put those who received them upon inquiry as to the fact whether they were really given for any purpose within the authority of the corporation, and not in violation of the laws of the State." *^ The conspiracy trials were still in progress, the excitement pro- duced by them still continued, when the legislature met in January, 1827, and Governor Clinton, in his annual message, stated that the then existing commercial convulsions should inculcate the necessity of avoiding a recurrence of such calamities, by avoiding the causes which produced them ; that the calamitous derangements in England had been ascribed to a transition state from war to peace, and to excess of production ; but the better opinion then was that they were chiefly imputable to excessive emissions of paper money in the shape 80 4 Paige, 224; 9 id. 470. 31 9 Paige, 470. 26 HISTOEICAL SKETCH. of bank-notes ; and as similar disasters were experienced almost con- temporaneously in this country, that they might be traced to similar causes ; that a bank might issue notes to three times the amount of its capital paid in ; that this was intended as a wholesome restriction, but was in fact a most pernicious authorization and could never be justified by any condition of affairs; that the authority to create money would invariably be abused ; that the power of making money was a dangerous faculty, and its liability to perversion was in pro- portion to its extension ; that banking privileges deposited in unskil- ful hands might be abused without design — 'but when granted to fraudulent men, who preferred wealth to character, there would be no bounds to the evils that would follow. The Governor further de- clared that experience had proved that applications for banking privi- leges were made for personal benefit, and not for the public accommo- dation. In conclusion, he recommended great caution in making such grants in future ; and stated that " some general restrictions were indispensably necessary for limiting the issue of bank paper, for regaining the possession of a certain quantity of metallic money, and adequate security for the redemption of bank-notes — for com- pelling the attendance and increasing the responsibility of direct- ors — for detecting misstatements in the periodical renditions of the condition of banking institutions, and for prohibiting the circulation of bank-notes below a certain sum." ^^ Statute Kegulations of 1827. In September, 1827, the Board of Kevisers, appointed to revise the statutes of the State, consisting of John Duer, John C. Spencer, and Benjamin E. Butler, reported to the legislature General Statute Regulations to prevent the abuses of moneyed corporations. These were enacted in December, 1827, and took effect January 1, 1828.^' The early bank charters, containing no reservation of power to the legislature to alter or repeal them, were regarded as perpetual com- pacts; it was, therefore, held to be a very questionable exercise of legislative power to make legislation, and so subject the then existing 82 See Gov. Clinton's Message, 1827; Cleveland's Banking Laws, xxxvi. 88 2 R. S. 589. HISTOEICAL SKETCH. 27 corporations to tke new and severe regulations. These exceedingly objectionable portions of this law are as follows: " § 11. Every director guilty of such violations (i. e., the violation of any provision of the ' regulations ') whether a loss shall or shall not result, shall be deemed guilty of a misdemeanor, punishable by fine or imprisonment, or both, in the discretion of the court by which he shall be tried. " § 12. Every director shall be deemed to possess such a knowledge of the affairs of his corporation as to enable him to determine whether any act, proceeding or omission of its directors is a violation of the foregoing provisions of this article; and every director who shall be present at a meeting of the directors, where such a violation shall happen, shall be deemed to have concurred therein unless he shall, at the time, cause, or in writing require, his dissent therefrom to be entered at large in the minutes of the directors. " § 13. Every director not present at a meeting where such a vio- lation shall happen shall, nevertheless, be deemed to have concurred therein, if the facts constituting such a violation appear on the books of the company, and he remain a director of the same company for six months thereafter, and do not, within that time, cause, or in writing require, his dissent from such illegal" proceeding to be entered at large in the minutes of the directors. " § 14. Every insolvency of a moneyed corporation shall be deemed fraudulent, unless its affairs shall appear, upon investigation, to have been fairly and legally administered, and generally with the same care and diligence that agents, receiving a compensation for their services, are bound by law to observe; and it shall be incumbent on the directors and stockholders of every such insolvent corporation to repel, by proof, the presumption of fraud. " § 15. In every case of a fraudulent insolvency, the directors of the insolvent company, by whose acts or omissions the insolvency was, wholly or in part, occasioned, and whether then in office or not, shall each be liable to the stockholders and creditors of the company for his proportional share of their respective losses; the proportion to be ascertained by dividing the whole loss among the whole number of directors liable for its reimbursement; but this section shall not be construed to diminish the liability of directors, as before declared, 28 HISTORICAL SKETCH. who shall have violated or have been eoncemed in violating the pro- visions of this ai-tiele. " § 16. If the moneys remaining due to the creditors of a corpora- tion whose insolvency shall be adjudged fraudulent, after the distribu- tion of its effects, shall not be collected, in whole or in part, from the directors liable for their reimbursement, the deficiency shall be made good by the contribution of the stockholders of the company; the whole amount of the deficiency shall be assessed on the whole number of shares of the capital stock, and the sum necessary to be paid on each share shall be then ascertained, and each stockholder shall be liable for the sum assessed" on the number of shares held by him, not exceeding the nominal amount of such shares in addition to the sums paid, or which he may be liable to pay, on account of those " § 17. If the amount assessed on the shares of any stockholder, under the provisions of the last section, shall not be collected from such stockholder, by reason of his insolvency, or his absence from this State, the sum remaining due on such assessment shall be recov- erable against the person from whom the delinquent stockholder, at any time within six months previous to the insolvency of the com- pany, shall have received a transfer of the shares, or any portion of the shares, then held by him; and every person having made such transfer shall be liable in the same manner, and for the same propor- tion, that he would have been liable had he continued to hold the shares so transferred. " § 18. The term ' stockholders,' as used in the preceding sections of this title, from the fourteenth section inclusive, shall extend to every equitable owner of stock appearing on the books of an insolvent company in the name of another person, and to every person who shall have advanced the instalments, or purchase-money, of any shares of stock standing in the name of any of his children under the age of twenty-one years; but no person holding stock as an executor or administrator, or as a guardian or trustee, appointed by a last will or testament, or by a court of competent authority, and no legal or equi- table owner of stock under the age of twenty-one years shall be indi- vidually responsible on account of the shares so held." April 2, 1829, the legislature, by an act entitled "An act to create a fund for the benefit of certain moneyed corporations, and for other HISTORICAL SKETCH. 29 purposes," enacted, that the above sections, fourteen, fifteen, sixteen, seventeen and eighteen, " so far as they provide for the personal lia- bility of the stockholders of any insolvent corporation, shall not apply to any corporation subject to the provisions of this act; but the directors of every corporation subject to this act shall be liable to the stockholders thereof as provided in the said sections." Ch. 94, Laws of 1829. March 8, 1830, the legislature, by an act entitled "An act to repeal certain sections of title second of the eighteenth chapter of the first part of the Revised Statutes," repealed sections eleven, twelve, thirteen, fourteen, fifteen, sixteen, seventeen and eighteen; but such repeal " shall not be construed to extend to or affect any existing cor- poration, or any officer or member thereof." Ch. 71, Laws of 1830. The eight years from. 1820 to 1828 were characterized mainly by the regular and healthful transaction of business ; but, in the undue expansion of the currency, and consequent pressure upon the banks in 1825, there were particular indications of a disposition to depart from sound principles of finance, the imprudence of which was, per- haps, more clearly perceived by the financiers and statesmen of 'New York than by those of any other State. " Safety Fund " System. In the State of ISTew York, on the 1st day of January, 1829; there were forty banks, the majority of whose charters were about to expire, having a combined capital of $15,000,000 actually paid in, and loans and discounts aggregating more than $30,000,000, with liabilities of about the same amount. The question of renewing the charters greatly agitated the State, and involved problems of the greatest im- portance. Fortunately, during the crisis, the election of Martin Van Buren, as Governor, proved opportune. He reviewed the situation impartially, and in his message to the legislature in 1829, said : " To dispense with banks altogether is an idea which seems to have no advocate ; and to make ourselves wholly dependent upon those estab- lished by Federal authority deserves none." In considering the renewal of the charters of solvent institutions, he concluded with the following words : " The pecuniary convulsion that must result from a compulsory closing of these extensive con- 30 HISTOEICAL SKETCH. cems would be neither slight in its degree nor transient in its dura- tion." He strongly condemned the policy " of requiring the payment of a large bonus to the State, or the performance of some specious service as the price of bank charters," on the assumption that the legisla- ture would decide to renew " the charters of banks whose solvency and present capacity to discharge all their duties shall, after a rigid and impartial scrutiny, be found free from doubt." He suggested the " propriety of making all the conditions you prescribe refer exclusively to the safety and stability of the institu- tions," and commended a plan " to make all the banks responsible for any loss that the public may sustain by the failure of any one or more of them." As to the proposed plan, he said, " Most men will, upon the first impression, view it, as I certainly did, as presenting a rigorous condition, but it is confidently believed by competent judges, that the form in which it is proposed to enforce the responsibility — being an annual and adequate appropriation of a part of their income towards a common fund, to be placed under the control of the State — the aznple supervision over the constitutions which it proposes to place under the direction of the contributing banks, in conjunction with the authority of the State — the consequent high character and corresponding circulation it would give to our paper — the expulsion from circulation of the doubtful paper which now engrosses it, and the substitution in its place of that issued by banks, in full credit with other advantages, would make the conditions such as would, upon more full consideration, be deemed advisable by all concerned." On the resignation of Governor Van Buren, March 12, 1829, he was appointed Secretary of State, and proved an able auxiliary to President Jackson in his opposition to the Bank of the United States. In securing such a currency, the New York legislature was first to move forward and inaugurate a system which will be admitted to have been a step in the right direction. April 2, 1829, the so-called " Safety Fund Act " became a law under the title of "An act to create a fund for the benefit of certain moneyed corporations, and for other purposes." By section 1 of this act it was enacted that " Every moneyed corporation having banking powers hereafter to be created in this State, or whose charter shall be renewed or extended, shall be subject to the provisions of this act," HISTOEIOAL SKETCH. 31 By section 52 of the General Code of Statute Eegulations, amended by this act, it was declared that " The provisions of this title shall h© construed to apply to every moneyed corporation created " after January 1, 1828, " unless such corporation shall be expressly ex- empted from the provisions of this title in the act creating, renewing or extending such corporations." 1 E.. S. 599, § 52. In October, 1852, the Court of Appeals, in the case of Talmage v. Pell, held : " That every association organized under the act to authorize the business of banking, and the acts amending the same, is a moneyed corporation within the meaning of the statutes of this State relating to moneyed corporations, and is bound and affected by those statutes, excepting only so far as such statutes are inconsistent with the provisions either of the act to authorize the business of bank- ing, or of the acts amending the same ; " and also held " that such associations are banking corporations, and possess only authority to carry on the business of banking in the manner, and with the powers, specified in the said act." ^* The " Safety Fund " banks had among their expressed powers, the general, unrestricted, express power to carry on the business of banking " by issuing bills, notes and other evidences of debt ; " yet these banks were expressly prohibited by section 35 from issuing any bill or note payable on time, or with interest. Experience has fully demonstrated that the provisions of the " Safety Fund " Law of 1829, which prohibited the issue of post- dated notes by banks, was more effective as a preventive of bank insolvency, and in establishing a sound and uniform currency for the people of this State, than all the restrictions of the Laws of 1827. It will be seen by reference to the session laws from 1829 to 1836 inclusive, that under the " Safety Fund " system bank charters were precisely alike. These -charters gave the name to each institution, fixed the place of business, the time to which the charter was ex- tended, and the amount of capital of each. Each bank was further required by the " Safety Fund Act " to pay annually to the State Treasurer one-half of one per cent, on its paid-up capital until a sum equal to three percent, of such capital, excepting the amount held by the State, had been thus contributed. 34 7 N. Y. 328, 347. 32 HISTOEICAL SKETCH. Tke " Bank Fund " thus constituted was to be invested by the Comptroller, and used by the Bank Commissioners in payment of the circulation and other debts of insolvent banks, the income from the fund to be applied to the payment of Commissioners' salaries, and the balance to be paid to the solvent banks in proportion to their contributions. If the liquidation of the debts of insolvent corporations reduced the fund below the required three per cent., each bank was required to renew its annual contribution until it had paid the requisite three per cent, of its capital stock. A trial of the new system, while indicating a marked improvement on the old plan, showed the " Bank Fund to be wholly inadequate as an indemnity fund." There was no guaranty afforded the public against bank insolvency by prohibiting the issue of bills or notes beyond twice the capital, or loans and discounts in excess of twice and one^half the capital. It was also seen that the publication of a bal- ance sheet offered in many instances no accurate statement of the actual condition of a bank, even when the directors were disposed to be honest, because bank directors seemed always inclined to ex- aggerate the real value of their assets ; and in this manner discounted notes, which were often placed on a level with coin, proved absolutely worthless. Previous over-trading with foreign nations caused a reaction in 1831, which severely affected New York city. October 1, 1833, pur- suant to the order of President Jackson, the government deposits were removed from the Bank of the United States, which was fol- lowed by a rapid decline in its business. The discounts, which had previously exceeded $20,000,000, were greatly reduced. In 1834, when there was an unusual supply of precious metals, and the Republic stood creditor in account with the commercial world; when there was an abundance of produce throughout the country; and when all branches of natural industry were unusually prosper- ous — an unreasonable demand for specie, which was increased by requiring custom duties to be paid in gold, produced a panic which precipitated a severe pressure on the banks of this State. After the lapse of two years, when business was unusually large and the banks were in a sound and healthy condition, a reaction set in, which be- came universal, and in May, 1837, caused the suspension of specie HISTOEICAl SKETCH. 33 payment in New York city, whicli was partly due to excessive foreign trade. Tlie reaction commenced in Europe, suddenly checking American credit. Our country produce became depressed in the foreign market, large amounts of our bills were returned, creating a demand for specie, and raising it to a premium. Banks being only commercial agents, it is evident tbat tbe suspen- sion of specie payments was the inevitable result of their relations to commerce and not the result of defective organization. The whole amount contributed to the " Safety Fund " prior to 1848 was but a trifle more than seventy-five per cent, of the debts of eleven banks^ belonging to the " Safety Fund " system, which failed, and the deficiency was made good by the issue of six per cent, stocks, by the State; it being agreed that the State should be repaid by the then existing banks. The banking system of 1829 lost all public confidence; the " Bank Fund" became bankrupt; May 10, 183Y, all the IsTew York city banks stopped payment in specie, and the 1st day of January, 1838, found not only all the banks of this State, but also those of the entire country, in a state of suspension. May 16, 1837, the legislature passed an act " suspending for a lim- ited time certain provisions of law, and for other purposes." By this act, every provision of law in force, requiring or authorizing pro- ceedings against any bank in this State, with a view to forfeit its charter, was " suspended for one year." Ch. 450, Laws of 1837.^^ At the bankers' convention in New York city, on April 11, 1838, when eighteen States were represented by one hundred and forty- three delegates, it was resolved " That it be recommended to all the banks of the several States to resume specie payments on the first Monday of January, 1839 ; without precluding an earlier resumption on the part of such banks as may find it necessary or deem it proper." Of the eighteen States represented, fourteen voted in favor of the resolution, and only two against it. 35 Such an act, at the present time, would be unconstitutional. Art. VIII., section 5, N. Y. Const. 1894, provides, " the legislature shall have no power to pass any law sanctioning in any manner, directly or indirectly, the suspension of specie payments by any person, association or corporation issuing bank-notes of any description. 34 HISTOEICAL SKETCH. OrpicH OF Bank Commissioners. Tlie previously mentioned law of 1829 directed the appointment of three Bank Commissioners, whose duty it was to visit the banks of the State, examine their condition at least once in every four months, and report annually to the legislature the result of their in- vestigations. The Governor and Senate appointed one of the Com- missioners; the banks located in the first, second and third Senate districts another; and those in the fourth, fifth, sixth, seventh and eighth the other. The term of office was two years. The State, as representing the whole people, the banks of a certain division, which included the city banks, and the banks of another division, which in- cluded all the country banks, each in theory presumed to have antago- nistic interests, were represented in this commission. In 1837 (ch. 74), a statute was passed authorizing the Governor and Senate to ap- point all the Commissioners. The appointment of a fourth Bank Commissioner was provided for by an act passed ]\£ay 14, 1840, and banks organized under the General Banking Law were placed under the supervision of the Commissioners. The office was abolished April 18, 1843, and the banks directed to report to the Comptroller. Genbieal Banking Act. On the 18th of April, 1838, two days after the adjournment of the before-mentioned bankers' convention, an act was passed by the legis- lature of this State, entitled "An act to authorize the business of banking." Ch. 260. We are now brought to consider some of the distinctive principles of the third and latest system of banking, introduced by the General Banking Act of 1838. We have seen that under the " Safety Fund " system of 1829, banks possessed, among other powers, that of issuing " bills, notes and other evidences of debt," payable on demand and without interest. They had the power to issue currency at pleasure, limited only to the statutory amount The General Banking Law of 1838 instantly swept them away. It wisely separated the issuance of currency from the business of loans, discounts and deposits; and placed the former under the exclusive direction of a State officer, and confined all issues of notes to him, to be duly registered at his department, whose official certificate each note was to bear. HISTOEICAL SKETCH. 35 There is a vast difference in the methods prescribed by the different systems for securing bank issues. By the system of 1829, the " Bank Fund," which was only an annual contribution from each bank, pro- portioned to the amount of its paid-up capital, was only intended for the payment of debts, exclusive of capital stock, of insolvent safety fund banks. The Indemnity Fund, though intended for the liquida- tion of all the debts of insolvent banks, exclusive of capital stock, was limited to a stated amount. COWSTITUTIONALITT OF THE GeJ!TERAL BanKING LaW. The General Banking Law of 1838 passed by a majority vote only; many members of the legislature believing the measure to be uncon- stitutional. By the Constitution of the State of New York, of 1821, it was ordained as follows: " Section IX. The assent of two-thirds of the members, elected to each branch of the legislature, shall be requisite to every bill appro- priating the public moneys or property for local or private purposes ; or ci'eating, continuing, altering or renewing any body politic or cor- porate." The question as to the constitutionality of the act was immediately brought before the courts. In October, 1839, the Supreme Court held, that associations formed under the General Banking Law are corporations, and a ma- jority of the court held that the "Act to authorize the business of banking " was a valid and constitutional law, on the assumption that it received the assent of two-thirds of the members elected to each branch of the legislature, and that it would be presumed to have been thus passed, until the fact was denied by plea; the court refused to pass on this question on a demurrer to a declaration by an association in a suit for the recovery of a debt*® In April, 1840, the Court for the Correction of Errors held, (1) that the law entitled "An act to authorize the business of banking," passed April 18, 1838, was valid and constitutionally passed, al- though it may not have received the assent of two-thirds of the mem- bers elected to each branch of the legislature; and held (2) that the 88 Thomas v. Dakin, 22 Wend. 9. 36 HISTORICAL SKETCH. associations organized in conformity with tlie provisions of the act entitled "An act to authorize the business of banking," were not bodies politic or corporate within the spirit and meaning of the con- stitution, and this court reversed the judgments of the Supreme Court in these cases.®^ In October, 1852, the Court of Appealsi held that every association organized under the General Banking Law was a moneyed corpora- tion, within the meaning of the statutes of this State relating to moneyed corporations ; and was bound and affected by those statutes, excepting only so far as such statutes are inconsistent with the pro- visions of the act to authorize the business of banking or of the acta amending the same; it was further held that such associations were banking corporations, and only possessed authority to carry on the business of banking in the manner and with the powers specified in the said act®* Peominewt Peovisioh's of the Geneeal Banking Act. Under the system of 1838, the Superintendent of the Banking De- partment must be in actual possession of securities which shall fully equal the whole amount of circulating notes issued, before any such notes can be put in circulation; these securities to be held in pledge, exclusively for the redemption of such circulating notes. " Safety Fund " system established a fund by a tax upon the capital regardless of the amount of circulation issued ; the other pro- vided a fund according to the issues, regardless of the amount of capital. By the restraining statutes heretofore quoted of 1804, 1813, 1818 and 1830, banking had become a monopoly ; and bank charters, which could only be obtained by special legislation, were often regarded, as has been stated, " the motive and the means of corruption." The General Banking Act of 1838 completely abolished the banking mo- nopoly, by authorizing any number of persons to form organizations for the purpose of " establishing offices of discount, deposit and cir- culation," in accordance with the terms prescribed by the General 37 Warner v. Beers and Bolander v. Stevens, 23 Wend. 103, 190. asTalmage v. Pell, 7 N. Y. 328; Bank Comm'rs v. St. Lawrence, id. 513. HISTOEIOAL SKETCH. 37 Banking Act, and subject to all general enactments applicable to moneyed corporations. The act of 1838, among other things, provided that bank bills, ■wholly secured by State stocks, should bear the stamp " Secured by pledge of public stocks ; " and that bank bills partly secured by State stocks, and partly by bonds and mortgages, should bear the stamp " Secured by pledge of public stocks and real estate." But there was nothing in the act that required individual bankers or associations to deposit any particular amount of securities before they commenced banking. The country was- then flooded with stocks from almost every State, and the consequence was that numerous banks sprung into existence under this law. Repudiation soon followed. Many States that did not, repudiate failed to meet their obligations, confidence was impaired, credit was shaken, and stocks generally depreciated in the market. The result was that many banks failed, and the legislature partially retrieved its error May 14, 1840 (ch. 363), by excluding all stocks except those issued by tbis State, and required those to b© made equal to a five per cent, stock. The sale of the securities of twenty-six insolvent banks, bearing a nominal or par value of $1,530,697, which were pledged for the redemption of a circulation, amounting to $1,197,559, showed a loss of $600,000. The stocks of the State of ISTew York showed a loss of more than eleven per cent., while the stocks of other States showed a loss of over forty-five per cent, of their nominal value. The bill- holders thereby sustained a loss of $300,000. Individual Baitkees. May 6, 1844, a statute was enacted (ch. 281), section 2 of which provided that every individual banker then doing business under the General Banking Law should state in his quarterly reports whether any person or persons, and who are interested with him, directly or indirectly, in the securities deposited with tbe Comptroller for the circulating notes obtained for such individual banker, or in the busi- ness of circulating said notes, or the benefits or advantages thereof; and if it sbould appear from such report that any other person is so interested with said banker, and in case two successive reports of said 38 HISTORICAL SKETCH. banker should contain such statement, or if he omit twice in suc- cession to make such quarterly reports, such banker should forfeit $1,000 for every omission to make such statement, or to file such reports as aforesaid, to be sued for and recovered by the Attorney- General in the name of and for the benefit of the people of this State. This law was defective in that it only applied to individual bank- ers then engaged in business under the General Banking Law. This defect was amended April 15, 1854 (ch. 242), when a law was passed providing that the law above quoted be made applicable to all in- dividual bankers who may hereafter do business under the General Banking Law. Section 6 of this act provided that when it should appear by the return of any individual banker, or by the report of any person designated by the Superintendent of the Banking Department, that any person is interested with such individual banker, directly or indirectly, in the securities deposited by him for the purpose of obtaining circulating notes, or in the business of circulating sueh notes, or in the benefits and advantages thereof, the said Superin- tendent should withhold all interest and dividends on the securities deposited with him by such banker, and all circulating notes from him, until such banker should have filed in the Banking Department a certificate signed by every person so returned or reported as in- terested as aforesaid, and duly acknowledged by him, stating that such person is interested with such individual banker in the circulating notes obtained, or to be obtained, by him, and in the benefits and ad- vantages of circulating the same, which certificate shall be evidence that the person so signing and acknowledging the same is a general partner with the said original banker in the business of banking, and as such is liable with-him individually for all the debts and obliga- tions created or made by him in the said business. By section 8 of the same act is was enacted that the " circulating notes delivered to individual bankers shall express only the individual liability of the banker issuing them, and shall be signed by him only, and not by any attorney or agent." Section 9 of the same statute, made it unlawful for any individual banker having circulating notes obtained under the General Bank- ing Laws to sell or transfer the business of banking, upon the securi- ties deposited by him to any person ; and until such business shall be closed by the return of the circulating notes issued, and the delivery HISTOEICAL SKETCH. 39 of the securities deposited, the same should be conducted only in the name of the individual banker by whom the said securities were de- posited, and he was made individually liable for the payment of all circulating notes delivered to him.^® Eesponsibilitt of Stockholdees. The Convention of 1846 inserted a clause in the new constitution rendering stockholders of banks issuing circulating notes " individ- ually responsible to the amount of their respective share or shares of stock in any such corporation or association, for all debts and liabili- ties of every kind, contracted after January 1, 1850." (Const. Re- vised 1846, art. VIII., § 7.)*" The legislature was directed to " pro- vide by law for the registry of all bills or notes issued or put in circu- lation as money ; " and to " require ample security for the redemp- tion of the same in specie." It was also provided that " In case of the insolvency of any bank or banking association, the bill-holders thereof shall be entitled to preference in payment over all other creditors of such bank or association; " (Art. "VIII., § 8) and that "the legisla- ture shall have no power to pass any act granting any special charter for banking purposes ; but corporations or associations may be formed for such purposes under general laws." (Art. VIII., § 4.) The first section of chapter 226 of the Laws of 1849 provided that stockholders of " any corporation or joint-stock association for bank- ing purposes, issuing bank-notes or any kind of paper credits to circu- late as money, after the first day of January, 1850," should be indi- vidually responsible equally and ratably to the extent of their shares of stock, for any liability contracted by such corporation or associa- tion after January 1, 1850. The subsequent sections of the act con- sist, mainly, of provisions for enforcing this responsibility. It was subsequently decided that when the bank actually issued bank-notes, this provision required in addition to the loss of the 39 The provisions affecting individual bankers are scattered throughout the present Banking Law herein published, and can be ascertained by reference to the following sections : Njimbers 2, 7-9, 12-22, 25, 27, 29-32, 65, 74-77, 83-98, 100-107, 110-112, all of which should be consulted. As to constitutionality of statute prohibiting private banking, see editorial note to State v. Seougal, 15 L. R. A. 477. 40 See N. Y. Const. E«vised 1894, art. VIII., § 7, post. 40 HISTOEICAL SKETCH. amount of the capital stock paid in, the contribution of an amount equal to the amount of the respective shares of stock. *^ As nearly every Stat© bank issued circulating notes when this act was passed, its provisions afforded a valuable safeguard for the pro- tection of the creditors of State banking institutions. But Congres- sional legislation in the year 1866, imposing a tax of ten per centum on the circulation of State banks, has resulted in driving such circula- tion out of existence. The Attorney-General transmitted an opinion to the Superintend- ent of the Banking Department, September 3, 1884, holding that the provisions of the act, the language of which made the responsibility of stockholders depend upon circulation, no longer afford any practi- cal benefit to such creditors. It will thus be seen that under this and other interpretations of the law, there was no liability except theoreti- cally. Only stockholders of banking corporations issuing circulating notes were ratably responsible for the debts of the corporation accord- ing to their shares of stock. This liability has now been extended to the stockholders of all banks of discount and deposit, and is the same as the liability of stockholders of national banks. The stockholders are also subject to the liability imposed by the stock corporation law, but this liability ceases when the capital stock has all been paid in, and a certificate of such payment filed as the statute requires. It should be noted that when the above mentioned Convention as^ sembled a practice had grown up under the General Banking Law, of establishing banks in obscure places, in remote parts of the State, where little or no business was done, with a view of obtaining a circu- lation merely, and doing no other business. This circulation was then redeemed in New York or Albany by the agent of the bank, at one-half of one per cent, discount, and again put in circulation with- out being returned to the bank, thereby enabling the bank to redeem its own paper at a discount, and again put it in circulation in the same place where it was redeemed. A statute passed April 12, 1848 (ch. 340), appears to be enacted for the purpose of breaking up that practice ; and to insure obedience to its requirements, the legislature provided that the president and 41 Empire City Bank, 18 N. Y. 199; 17 How. Pr. 323; 15 N. Y. 9; 21 id. 9; 22 id. 9. HISTOEICAL SKETCH. 41 cashier should, in every report made to the Comptroller, state that their business had heen transacted at the place required by that act, and that such report should be verified by their oaths. By an act passed April 10, 1849 (ch. 313), incorporated banks were authorized to reorganize under the General Act of 1838. Office op Supebintixndeint of the Banking Depabtment. The banks continued to make their reports to the Comptroller until 1851, when a law (ch. 164) was passed, April 12, creating the office of Superintendent of the Banking Department. He was vested with ■the general supervision of all moneyed associations, except insurance corporations, existing or operated under State laws, and with supervi- sion of individual bankers operating under the banking laws. Re- ports were made to him quarterly, and when they issued circulating notes, they deposited security for their redemption. The act of March 20, 1857, placed the savings banks of the State under his super- vision. Trust, loan, mortgage, guaranty and indemnity companies or associations were required to report to him semi-annually by chapter 324 of the Laws of 18Y4. By an act (ch. 613, Laws of 1875), passed June 21, 1875, coiporations for the saf&-keeping and guaranteeing personal property were also placed under his supervision. The in- stitutions over which he has supervisory powers are regularly ex- amined, savings banks biennially, all others at least once each year, and may also be examined whenever in his discretion he deems proper. (Sect. 8, ch. 689, L. of 1892.) The Superintendent gives a bond, in the sum of $50,000, for the faithful discharge of the duties of his office, and is prohibited from being interested in any corporation in the class under his supervision, and is prohibited from being inter- ested as an individual banker. He makes digests of the reports of the various institutions, which are incorporated in his two annual reports to the legislature. The expenses of the department are paid by the institutions under its supervision. By an amendment (ch. 54) adopted in the year 1902, it is made his duty to appoint a second deputy whose especial province is the supervision of building and lot associations and of mortgage, loan, or investment corporations. The amendment of the law by ch. 143 of 1908 placed in the hands of the Superintendent of Banks the same power with reference to the 42 HISTOEICAL SKETCH. liquidation of delinquent corporations as is given to the Comptroller of the Currency with relation to national banks. The Superintendent receives his appointment from the Governor and Senate, and holds office for three years. Those who have been appointed to the office are: SUPERINTENDENTS. NAMES. EESmENCES. APPOINTED. Daniel B. St. John April 15, 1851 April 4, 1854 January 30, 1856 April 16, 1861 August 9, 1865 January 3, 1866 February 3, 1870 February 19, 1873 April IB, 1880 April 37, 1888 December 33, 1889 Albany Ballston Spa James M. Cook Henry H. Van Dyck Albany CatskiU George W. Schuyler Ithaca Daniel C. Howell Bath De Witt C. Ellis Rochester A. Barljon Hepburn Colton. . . Willis S. Paine Charles M. Preston Frederick D. Kilburn. ... January 8, 1S96 January 17, 1907 October 16, 1907 Buffalo Luther W. Mott Clark Williams New York City October 34, 1907 IlTCEEASH OF Bah-KING CaPITAL. The rapidity with which banks multiplied from 1848 to 1853 is shown by the remarkable increase of banking capital, as compared with previous years. From 1843 to 1848, the increase was $735,- 512, while from 1848 to 1853, the increase exceeded $32,000,000. The stability of our banks during those years is also apparent from the fact that during the financial embarrassment of 1854, the banks of this State, with only a single exception, satisfied the demands of their bill-holders, without resort to the securities deposited with the Banking Department. RETDEMPTIOlir OF BaNK NoTES. By the act for the Redemption of Bank Notes (oh. 202, Laws of 1840), each bank was to appoint an agent in Albany or l^Tew York to redeem its circulating notes, and the holder was authorized to pre- sent them at such agency for redemption, and if the agent failed to HISTOEICAIi SKETCH. 43 redeem them at one-lialf of one per cent, discount, then the bank was to pay interest at the rate of twenty per cent., and if such redemption and payment of interest was not made at such agency within twenty days from the time when the first demand was made, then the Comp- troller was to give ten days' notice to the bank to redeem, and if it failed to do so then, he was to give notice that he would redeem out of the securities in his hands. Thus requiring, when the demand was made at the agency and not at the bank, that the demand should be repeated at the agency on the twentieth day thereafter, to authorize the Comptroller to act. Wo proceedings, therefore, could be had by that officer until after the second demand was made. The only penalty for non-payment on the first demand at the agency was the liability to pay interest at twenty per cent., but when the second demand was made on the twentieth day, then the bank was clearly in default; the Comptroller gave it notice to redeem, and if it did not within the ten days, he further gave notice that he would redeem out of the securities in his hands. It was enacted in 1851 (eh. 203), that it should be the duty of every corporation, banking association and individual banker outside of the cities of JSTew York, Albany, Brooklyn and Troy to redeem and pay on demand all circulating notes issued by such corporation, bank- ing association or individual banker, presented for redemption or pay- ment at the office of their said agent, in the city of E"ew York, Albany or Troy, at a rate of discount not exceeding one-quarter of one per cent. The provision to be found in section 7 of the act of 1838, that to secure the payment of one-half of the whole amount of circulation bonds and mortgages might be transferred to the Comptroller, was not well considered, and this mistake of judgment was not remedied until April 29, 1863, when it was enacted (ch. 241), that from and after the passage of this act, the securities hereafter to be deposited with the Superintendent of the Banking Department for notes for circulation to be issued to any corporation or joint-stock association for banking purposes, or individual banker, should be stocks of this State and of the United States, in the following proportions, that is to say, not to exceed two-thirds per centum in United States stocks, and not less than one-third per centum in stocks of this State; both stocks to be equal to or be made equal to stocks yielding interest at 44 HISTORICAL SKETCH. the rate of six per centum per annum; and the securities then held by the Banking Department, so far as the same consist of United States stocks and stocks of this State, might be adjusted on the ap- plication of any party concerned, so as to be in accordance with the provisions of this law. In 1854, the banks had on deposit in the Banking Department bonds and mortgages to the amount of nearly $7,000,000. Taxatioit. Bank stock was first taxed in this State in 1823, in which year the legislature enacted (ch. 262, §§ 14, 15 and 16), that all incorporated companies receiving a regular income from the employment of capital were to be considered as persons and liable to taxation on the amount of their real and personal property, deducting from the latter the amount of stock held by the State or by any literary or charitable institution. The tax or assessment was made, levied and collected in the same manner as in the case of individuals, and was deducted from the dividends of the stockholders. A bank, however, was given the privilege of paying directly to the treasurer of the county in which it transacted business, ten per cent, of its income, and, if it availed itself of this privilege, no tax could be imposed. Commenting on this statute,*^ Mr. Justice Httwt remarks that it was passed at the instance of the then Comptroller of the State, and that the banks were averse to it It nevertheless remained in force till superseded by the Revised Statutes in 1828. No decisions of cases arising under this act have been reported. The Revised Statutes provided that the capital stock of all moneyed or stock corporations, deriving any income from their capital or other- wise, should be taxed and assessed in the same manner as other real and personal estate of the county, excepting stock held by the State and literary, and charitable institutions. The first reported decision arising under this act was that of Ontario Bank v. Bunnell,** in which it was decided that a banking corporation located in a village authorized by law to raise money by tax for certain purposes was liable to pay its proportion of the village taxes; and when such taxes were directed to be assessed on the free- *2 People V. Dolan, 36 N. Y. 59. 43 10 Wendell, 186, Sup. Ct. 1833. HISTOEIOAI. SKETCH. 46 holders and inliabitaiits of the village according to law, a moneyed or stock corporation having its banking-house for the transaction of business within such village was declared to be an inhabitant within the meaning of the act. In 1838 the General Banking Law hereinbefore mentioned was enacted, (ch. 260). Associations formed under it were held to be corporations, and as such liable, like other moneyed institutions, to taxation on their capital.** Other decisions with respect to the method of assessment were also rendered, it being held that the legislature intended taxing corpora- tions upon the nominal amount of the stock, and not upon its actual value to the stockholders, and that by the term " personal estate " was meant so much of the capital stock paid in, or secured to be paid in, as will remain after deducting therefrom the actual cost of the real estate of the company, and such portions of the stock as were exempt from taxation.** No other law relating to the subject was passed until December, 1847, when the legislature enacted (ch. 419, §§ 4, 5), that all banks and individual bankers " Should be subject to taxation on the full amount of capital paid in, or secured to be paid in, as such capital, by them severally, at the market value of such securities, to be esti- mated by the Comptroller, without any deduction for the debts of such individual banker or banking association." It having been de- cided *® that corporations which were liable to taxation on their capital could not be taxed on their surplus profits remaining on hand and undivided, the legislature next amended the Kevised Statutes so as to render the surplus profits or reserved funds of all corporations, over and above ten per cent, of their capital, liable to taxation in addition to their former liability, (oh. 65, Laws of 1853). Under this statute the banks were held to be liable to city, but not to county taxes on their personal property. Thus the law remained till 1857, in which year another statute was enacted (ch. 456), the third section of which subsequently gave *4 Thomas v. Dakin, 22 Wend. 9; Warner v. Beers, 23 id. 103; People ». Assessors of Watertown, 25 id. 686. 45 Bank of Utiea v. Citj of Utica, 4 Paige, 399, 27 Am. Dec. 72 ; Farmers' Loan & Trust Co. v. The Mayor, etc., of the City of New York, 7 Hill, 261. io Bank of Utica v. City of Utica, supra. 46 HISTORICAL SKETCH. rise to much, conflicting litigation respecting the right of the State to directly or indirectly tax securities of the United Sates which are or may be thereafter exempted by Congress from State taxation. The law of Congress, passed February 25, 1862, declared, " That all stocks, bonds and other securities of the United States, held by individuals, corporations or associations within the United States, shall be exempt from taxation by or under State authority." *^ The State courts held that taxing the paid-up capital stock of a corporation was not equivalent either in fact or principle to the taxa- tion of the property in which the money paid in for that capital was invested.*® It was also decided that so far as this act of Congress was intended to withdraw from State taxation, securities of the United States already subject thereto, it (the act) was extra-constitutional and void.*^ The latter decision seems to have been acquiesced in, as no appeal was taken, but the former was carried to the United States Supreme Court and there reversed,^" thus rendering nugatory the law of 1857. The attempt to tax United States securities in the hands of the National banks by taxing the portion of capital stock they represented having thus failed, it was next attempted to reach these securities by taxing the banks on a valuation equal to the amount of their capital stock. The law of 1863 (ch. 240), passed for this purpose, declared that, "All banks, banking associations and other moneyed corporations and associations should be liable to taxation on a valua- tion equal to the amount of their capital stock paid in or secured to be paid in, and their surplus earnings (less than ten per cent of such surplus), in the manner now provided by law, deducting the value of the real estate held by any such corporation or association, and taxable as real estate." The State courts upheld the validity of this act,®^ but were again reversed by the U. S. Supreme Court.'^ " The effect of these decisions of the Federal court," says Mr. "Acts 1861-62, 346. *8 People V. Com. of Taxes, 23 N. Y. 192; S. C. 34 Barb. 509. 49 People V. Com. of Taxes, 26 N. Y. 163. 50 2 Black, 620, 17 L. ed., 451. See also editorial note to State B'd of Equalization v. People ex rel. Goggin, 58 L. R. A. 513, 568, on taxation of capital stock of corporations, where the cases bearing on this phase of the question are presented. 51 People v.- Com. of Taxes, 40 Barb. 334. 52 People V. Com. of Taxes, 2 Wall. 200, 17 L. ed. 793. HISTORICAL SKETCH. 4T Justice Marvin, in the People v. Board of Education, 46 Barb. 594, " is nothing more and nothing less than that the State cannot by any system of taxation assess and tax the securities of the United States, whether held or owned by corporations or individuals, nor can such holder and owner be taxed on account of such securities." Yielding to the hostility exhibited to the law as it then stood, Con- gress during the year 1864 amended the act of 1862, so as to permit the inclusion of National bank shares held by any person or corpora- tion in the valuation of the personal property of such person or cor- poration, in the assessment of State taxes at the place where such bank was located and not elsewhere. " But not at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such States; provided further, that the tax so imposed under the laws of any State, upon the shares of the associations, authorized by this act, should not exceed the rate imposed upon the shares of any of the banks organized under the authority of the State where such association is located ; provided, also, that nothing in this act should exempt the real estate of associations from either StatO; county or municipal taxes, to the same extent, according to its value, as other real estate is taxed." ^^ In view of this amendment, the legislature the following year passed an act (ch. 97, Laws of 1865), providing that the shares in all State and iN'ational banks held by any person or corporation should be included in the valuation of the per- sonal property of such person or corporate body, etc., the remainder of the act being in conformity to the act of Congress. But this attempt to reach National bank shares by including them in the valuation of the personal property of the holder and owner also proved abortive, for while the Court of Appeals held that the shares in a National bank could be assessed under this law,°* the U. S. Supreme Court decided that as no tax had been laid on shares in State banks at all. the act was void, though there was a tax on tbeir capital."' 53Aet of 1864, § 41. For an exhaustive presentation of the authorities bearing on the subject of State taxation of national banks, see editorial note to McHenry V. Downer, 45 L. E. A. 737. 54 City of Utica v. Churchill, 33 N. Y. 171 ; overruling People v. Barton, 44 Barb. 148. 55 Van Allen v. The Assessors, etc., 3 Wall. 573, 18 L. ed. 229; People v. Com. of Taxes, 4 Otto, 415, 24 L. ed. 164. 48 HISTOEICAL SKETCH. . The legislature now abandoned tlie taxation of tlie capital of both State and National banks by enacting the following year (1866), that no tax should hereafter be assessed upon the capital of any bank or banking association organized under the authority of this State, or of the United States, but the stockholders in such banks and banking associations should be assessed and taxed on the value of their shares of stock therein ; said shares should be included in the valuation of the personal property of such stockholder, in the assessment of taxes at the place, town or ward where such bank or banking association is located, and not elsewhere, whether the said stockholder resides in said place, town or ward, or not, but not at a greater rate than is as- sessed upon other moneyed capital in the hands of individuals in this State. And in making such assessment there should also be deducted from the value of such shares such sum as is in the same proportion to such value as is the assessed value of the real estate of the bank or banking association, and in which any portion of their capital is in- vested, in which said shares are held, to the whole amount of the cap- ital stock of said bank or banking association; it was also provided that nothing therein contained should be construed to exempt from taxation the real estate held or owned by any such bank or banking association; but the same should be subject to State, county, munic- ipal and other taxation to the same extent and rate and in the same manner as other real estate is taxed, (§ 1, eh. 761, Laws of 1866). This act was subsequently unheld by the Court of Appeals in the case of People V. Com. of Taxes,^* which was in turn affirmed by the Su- preme Court of the United States,®^ and thus after repeated efforts a law was finally secured by which a tax on bank shares and bearing indirectly on the securities of the United States could be legally imposed. The substance of the last-mentioned decisions of the State and Federal courts was that the shares of stock in a bank, whether its capital be invested in U. S. bonds or other securities, are subject to taxation and assess.ment under State law at the place where the bank is located and not elsewhere, but not at a greater rate than that im- posed on shares in State banks located at the same place, or upon other 60 35 N. Y. 423. ST S. C. 4 Wall. 244, 18 L. ed. 344. HISTOmCAL SKETCH. 49 moneyed capital in tlie hands of individual citizens of the State im- posing the tax. With respect to this last condition it has been held ^* that the provision of the National Banking Act/^ that the taxation of the shares of National banks " shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citi- zens," refers to the rate of taxation exclusively and not to the assessed valuation. It "was also decided at the same time that placing the valuation of the bank shares in a separate item, in a column with personal prop- erty, does not invalidate the assessment, it being a substantial com- pliance with both the act of Congress authorizing the shares to be " included in the valuation of the personal property " of the owner, and of the last-mentioned State law. It was further decided that the restriction contained in the State law of the place of taxation to the town or ward where the bank is located, whether the stockholders reside there or not, is valid, for this species of property may be considered apart from the owner and a locality given to it for the purpose of taxation.®'' As to the mode of ascertaining the valuation at which bank stock shall be assessed, it is held ®^ to be the duty of the assessor to deduct from the actual value of each share a sum bearing the same propor- tion thereto as the assessed value of the real estate of the bank bears to the actual value of all the capital stock. The expression " whole amount of capital stock," as used in the act, refers to the actual value of the stock, not its nominal amount. Speaking of this system of taxing bank shares. Judge Eael re- marks in People v. Com. of Taxes,®^ that it " is in entire harmony with that of taxing other personal property. The Kevised Statutes provide that all personal estate ' shall be estimated and assessed by the assessors at its full and true value as they would appraise the same in payment of a just debt from a solvent debtor.' This provision requires the assessment to be for the ' full and true value,' and that there may be no mistake or evasion of this duty, it provides a guide 58 Williams v. Weaver, 75 N. Y. 30. 59 U. S. R. S., § 5219 (U. S. Ctomp. Stat. 1901, p. 3502). 60 See also Tappan v. Merchants' National Bank, 19 Wall. 490, 22 L. ed. 189. 81 People V. Com. of Texas, 69 N. Y. 91; S. C. 9 Hun, 650. 82 67 N. Y. 520. 4 50 HISTORICAL SKETCH. which will in all eases give the true value, to wit: What the same would be worth in payment of a just debt to a creditor entitled to and able to procure the cash for his debt." Amendments. During the great panic of 1857, the banking laws received no material amendment, the State of New York presenting the best banking system and the best currency of any State. In 1861 came the civil war, and with it the demand of the govern- ment for millions of dollars when thousands had heretofore answered. Bank suspension and panic became inevitable, and with the applica- tion by Congress of the ]^ew York system to its own currency, and with its taxation of ten per cent, on the circulation of the State banks, the latter at once disappeared, and United States " legal tend- ers " so-called, and IsTational bank currency took its place.®* In the year 1882 a revision of the statutes relating to banks and cognate institutions was enacted.®'* Ten years thereafter another revision was adopted by the legislature as a part of the general re- vision of all the laws.®^ In 1909 a third revision of the statutes of the State was adopted and is known as the " Consolidated Laws " including as part thereof the present revised Banking Law.®® The extension of the liability of stockholders and also of the enlargement of the jurisdiction of the banking department to all moneyed corpora- tions, except insurance corporations, and the increase of its powers have previously been mentioned. The restrictions specified in section 179 to 188 inclusive and 190, 191 of chapter 409 of the Laws of 1882, which did not seem to be applicable to institutions organized under the act of 1838, but only to the other moneyed corporations mentioned in that act of 1882, now apply to all corporations under the supervision of the bank superin- tendent The restriction contained in the twenty-fifth section of the present banking law referring to loans or discounts to any person or persons, to the effect that such loans or discounts shall not exceed one- 83 See introduction to National Bank Act, post. "* See preface to first edition. 85 See preface to fourth edition. 66 See preface to sixth edition. HISTORICAL SKETCH. 51 fiftih the capital stock actually paid, and surplus of the bank or banker making the same, was materially amended (ch. 696) by the legisla- ture of 1893. It was then enacted that such restriction shall not apply to loans or discounts secured by collateral security worth ten per centum more than the amount or amounts loaned thereon, nor to the discount of bills of exchange drawn in good faith against actually existing values, provided, however, that such loans or discounts on such collaterals shall not exceed one-half the actual paid-in capital stock and surplus of such banks or bankers, or of commercial or busi- ness paper actually owned by the person negotiating the same. This percentage of ten per centum was in 1896 increased to fifteen per centum. Other amendments made to the laws by the Legislature in adopting the last-named revision were as follows: Loans to any person, company, corporation or firm, ■ or on paper upon which any such person, company, corporation or firm may be liable, are limited to one-fifth part of the capital stock actually paid in, and surplus. Banks of discount and deposit, having their principal places of business in the cities of Brooklyn or New York are required to have at all times on hand at least fifteen per cent, of their aggregate amounts of deposits, and all other banks ten per cent. This provi- sion, if rigidly enforced, the revisers thought to be sufficient to pro^ vide such a reserve as conservative banking demands. Each director to be qualified is required to own at least one thou- sand dollars in value of its stock in banks having a capital of fifty thousand dollars or over, and at least five hundred dollars; worth in banks having a capital of less than that amount. All vacancies in the office of director are to be filled by election of the stockholders, but vacancies not exceeding one-third of the whole number of the board may be filled by election by the directors then in office. Each director is required to take an oath when elected, promising to discharge his duties faithfully, to declare that he owns the number of shares of stock required, and that the same is not pledged or hypothecated. The provisions relating to the conduct of elections have been trans- ferred to the Stock Corporation Law. A statement of all unclaimed dividends and deposits amounting to fifty dollars or over which have remained unclaimed for five years must be published in a newspaper 62 HISTOUrCAI, SKETCH. of the county of location and in an official paper of Albany at least once a week for six successive weeks. Every provision applicable to corporations in general or to stock corporations in general, was transferred to tbose general laws respect- ively, while all penal provisions have been transferred to the Penal Law. Such provisions relate mainly to the conduct of elections, the increase or reduction of capital stock, the liability of stockholders, and the change of name of banking corporations. Chapter 287, Laws of 1904, enacted a one-year statute of limita- tion of actions by a depositor against his bank for moneys paid by it upon a forged check, or a check raised in amount, the statute be- ginning to run from the date of the return by the bank to the de- positor of the forged or raised check as a voucher for the bank's payment. It gives the depositor, as a period for the detection of such payment, such time as may elapse between the date of payment and the return of the check as a voucher, and one year besides. The new statute does not relate to genuine checks upon which an indorsement has been forged ; as to these, the depositor's remedy is to be found in the existing law. In previous editions of this work a number of special statutes directly affecting the daily business of banking institutions had been carefully collated. Many of these statutes have been transferred to the new revisions. The statutes affecting the taxation of banking institutions have been embodied in the Tax Law, and many enact- ments directly affecting banking organizations and bankers have been made part of the !N"egotible Istruments Law. The latter general law has been adopted almost in its entirely by many of the States, and is destined to become the code of negotiable paper. In a volume in- tended for ready examination by bankers and by members of the bar, these laws seemed a necessary part of this work and have been col- lated herein. It is not out of place to add that whatever is excellent in the pres- ent National bank system belongs not to one Secretary of the Treas- ury or another, but to the fact that the general government borrowed the principles of soimd finance from the State of New York. This method has also been applied to the Bank of England. New York may thus justly claim to be the Empire State of sound banking, HISTOEICAL SKETCH. 53 whose men and whose principles have given a currency the actual value of which is the same as its nominal value, in two hemispheres. AETICLE II. Savings Institutions. A savings institution is thus defined by the Supreme Court of the United States : " It is not a commercial partnership, nor is it an artificial being, the members of which have property interests in it. JSTor is it strictly eleemosynary. Its purpose is rather to furnish a safe depository for the money of those members of the community disposed to intrust their property to its keeping. It is somewhat of the nature of such corporations as churchwardens for conservation of the goods of the parish, the College of Surgeons for the promotion of medical science, or the Society of Antiquaries for the advance- ment of the study of antiquities. Its purpose is a public advantage, without any interest in its members." Judicial decisions in Pennsylvania, New Jersey and Connecticut, respectively, describe them as " really charities for the benefit of the poor," as " large incorporated agencies for the common investment and care of deposits," and as " qiiasi charitable and purely benevolent institutions." As soon as the earning capacity of money became recognized, phil- anthropic persons devised plans whereby the laboring classes might compel their small accumulations to lighten the burden of maintain- ing themselves and those dependent on their efforts. Savings banks had their origin in those plans which were, in the beginning, wholly philanthropic in their character. The first savings bank was founded in Hamburg in 1778, and that of Berne nine years later, intended for and indeed restricted to re- ceiving the savings of servants, mechanics, " and other trades peo- ple." ^ A suggestion of a " frugality bank " was made by Irving Bentham in 1Y97; whether or not he knew of the savings banks already established does not appear. The conclusion of the eighteenth century ^ witnessed the first at- 1 Scratchley's Treatise on Savings Banks, 36. 2 "In this country [Great Britain], the first proposals for a bank of savings were made in 1798." Lewin's Hist, of Savings Banks, 19. 54 HISTORICAL SKETCH. tempt in England at establislung a saving^ bank, when. Rev. Joseph Smith of Wendover, in conjunction with two of his parishoners, offered to receive from any inhabitant of his parish sums from two pence upward, every Sunday evening during the summer months, and to repay to each individual, at Christmas, the amount of his deposit with an addition of one-third of the sum as a bounty upon his frugality. If the money was paid back before Christmas, no bonus was allowed. There can be no doubt that the E«v. Henry Duncan, minister at Euthwell, Dumfriesshire, Scotland, did more than any other man to originate a self-sustaining bank which did not partake of the nature of a charity, and was applicable not to one locality only, but to the whole country.® The scheme, which was started in May, 1810, showed deposits of savings during the first year amounting to £151, which gradually in- creased until 1814, when the deposits amounted to £922. The first savings bank of any not© in the city of London did not begin operations until the end of January, 1816.* In 1817, savings banks were for the first time recognized by the government of Great Britain.' Before this time they were purely voluntary associations of a local character, and necessarily limited in their operations. Sav- ings banks were not established in France until 1834. The first savings bank in the United States was " The Philadelphia Savings Fund Society," which was organized as a private voluntary association in 1816, and commenced to receive deposits on the second of December in that year. This institution was not incorporated by the legislature of Pennsylvania until February 25, 1819, while " the 3 We are warranted on the whole to conclude, that though some institution8, similar both in their principles and details, had been formed before the Parish Bank of Ruthwell, yet it was the first of the kind which was regularly and minutely organized and brought before the public; and further, that as that society gave the impulse which is fast spreading through the kingdom, it is in all fairness entitled to the appellation of the parent society. Loudon Quarterly Review, Vol. XVI., 102. * London Quarterly Review, Vol. XVI., 103. 5 The preamble of this, the first act, begins as follows: "Whereas certain provident institutions or banks for savings have been established in England for the safe custody and increase of small savings belonging to the industrious classes; and it is expedient to give protection to such institutions and the funds established thereby, etc." Act 57, George III., ch. 130, 1817. HISTORICAL SKETCH. 55 Provident Institution for Savings in the town of Boston, Massa- chusetts," was incorporated December 13, .1816, and the Savings Bank of Baltimore, Maryland, in December, 1818. The first meeting in New York for the purpose of establishing a savings bank was held in the assembly room of the City Hotel, New York City, on Friday evening, November 29, 1816. The organiza- tion of the institution then initiated was due to the efforts of Tbomas Eddy, who had been for many years a correspondent of Mr. Patrick Colquhoun, a magistrate of London, and coneeted with many of the benevolent institutions of that city. Mr. Colquhoun advised Mr. Eddy, April 19, 1816, of the savings institutions then existing and being organized in Great Britan and Ireland, and inclosed him " the plan of an institution." To this direct suggestion Mr. Eddy's efforts are, without doubt, to be ascribed. From the report of the meeting given in the Evening Post of the Monday following, December 2, it appears that Mr. Eddy was called to the chair, and Mr. J. H. Cogges- hall was appointed secretary. After discussion of the subject, it was " Resolved, that it is expedient to establish a savings bank for the city of New York." Among the directors appointed were De Witt Clin- ton, Henry Rutgers (who founded and gave his name to Rutgers College), Duncan P. Campbell, Rensselaer Havens, Richard Varick, Thomas Eddy, Peter A. Jay, and Gilbert Aspinwall. On the 10th of December following, several committees were appointed, one to secure a situation for the bank, another to apply to the legislature for an act of incorporation (Peter A. Jay, chairman), and another to draft an address to the public (De Witt Clinton, chairman). On the Tuesday foUovnng, December 17, the following officers were elected: William Bayard, President; Noah Brown, First Vice- President; Thomas R. Smith, Second Vice-President; Thomas C. Taylor, Third Vice-President; Thomas Eddy, Jr., Cashier. From the last day of the year 1816, when a meeting of the directors was held, nothing further seems to have been done in the way of con- ducting business. Mr. Eddy states why this is so in a letter to Mr. Colquhoun, dated " New York, 4th mo., 9th, 1817." Speaking of the savings banks in England, he says : " A plan was formed, and a number of our most respectable citizens agreed to undertake the management of it ; but we found that we could not go into operation without an act of incorporation, for which we made an application 56 HIStOEICAL SKETCH. to the legislature, and the result is not yet known." ® The records of the legislature show that on February 3, 1817, the memorial of Eobert Browne and others, of New York City, was presented to the legislature : — ' the memorial dedaring " Eobert Browne, and others, inhabitants of the city of New York, have formed an establishment in said city for the purpose of receiving on deposit such sums of money from persons belonging to the laboring classes of the com- munity as they are able to save from their earnings, and to allow them an interest thereon." And the memorial further prays the legislature to grant them an act of incorporation as an association to be known as " The Savings Bank of the City of New York." This memorial was read and referred to a select committee, consisting of Mr. Russell, Mr. Sharpe, and Mr. Emmott On the 11th of March following, this committee put forth the opinion : " However de- sirable it may be to encourage the poorer class of the community to save their hard earnings and to produce habits of industry and economy by holding out motives of interest to them to do so, still the committee are not convinced that, under the present state of society in this country, an institution like this, which may be beneficial under other circumstances and in older countries, can be put into operation with advantage." And then, having delivered themselves of this bit of conservative wisdom, the committee further gravely declare " The expense necessarily attendant in such an establishment will lessen, if not defeat, the benevolent views of the petitioners." Still the committee magnanimously add, " We are unwilling to pre- clude, by any opinion of ours, the subject from coming in the usual manner before the house, and therefore we are induced to ask for leave to report by bill." The house adopted the report of the committee, and granted Mr. Eussell leave to bring in his bill, which was entitled " An act to in- corporate the Savings Bank of the City of New York," which was read twice and sent to the committee of the whole for a third reading, the petitioners having leave to " print the usual number of copies of the said bill and the report thereon, for the use of the legislature." Two weeks later, Tuesday, March 25, 1817, the biU was reached in committee of the whole, and the Monday following, the 31st, desig- e Knapp's Life of Eddy, 266. HISTOEICAL SKETCH. 57 nated as tlie day for considering it. The legislators of those days un- derstood the arts of procrastination as fully as they are understood now ; and, instead of ordering the bill to a third reading and putting it on its passage, the very unusual course in committee of the whole was resorted to, of referring the measure to a select committee. This committee, consisting of Messrs. Pendleton, Russell and Williams, reported the bill on the 2d of April following, changing the title from " An act to incorporate the Savings Bank of the City of New York," to " An act to incorporate an association by the name of The Savings Corporation of the City of New York." This bill was again re- ferred to a committee of the whole house.'^ There is no further legislative record of the bill during that session. The reason why the title of the bill was altered from " Savings Bank " to " Savings Corporation " does not appear. There existed at that time a deep- seated hostility to all " banks," as has been stated in the preceding article treating of banks of deposit and discount. It is possible, also, that the legislature did not care to give the name " Bank " to a mere institution of deposit. It should be stated in this connection that, on the 10th of March, the petition of M. Willett and many others, praying to be incorporated as a " New York Interest Bank " — having in view the general purposes of a savings bank — was re- ferred to a select committee, and three days later sent to the com- mittee of the whole, which seems to have as effectually strangled that bill as the other. At least it was not heard from again in that legislature. The first bill for establishing a savings bank in New York City did not pass the legislature and receive the necessary approval of the Council of Revision until March 26, 1819, three years later. It would seem, at the outset, that the parties whose efforts had been directed toward securing a charter for a savings bank were measurably discouraged. After the reported commitment of the measure and changing the name in committee of the whole the bill had failed. A change of method seems to have been resolved upon ; and instead of a measure for incorporating a savings bank, the pro- jectors determined to nominally change the object. Instead of a bill for a savings institution, they endeavored to secure the same ' Keyes' Hist, of Savings Banks, 318. 58 HISTORICAL SKETCH. object under a different name; they applied for an act of incorpora- tion for the relief and permanent benefit of the working classes, and it proved the entering wedge for a savings bank. But this was the outcome of many developing attempts. It was at the New York Hospital, on Friday the 16th December, 1817, that a number of gentlemen met to consider the subject of pauperism. General Mat- thew Clarkson was appointed chairman, and Divie Bethune secre- tary. It was then and there " Resolved, that the citizens present, with those who may hereafter unite in the measure, be constituted a Society for the Prevention of Pauperism." It was also resolved to appoint a committee to prepare a constitution and report sugges- tions for the general management of the society. A committee of eight was appointed, five of whom appeared as directors in the previously projected savings bank. The committee consisted of John Grisoom, Brockholst Livingston, Garrett N. Bleeeker, Thomas Eddy, James Eastburn, Rev. Cave Jones, Zaohariah Lewis and Divie Bethune. February 6, 1818, a meeting of the society was held, at which the committee's report was presented ; among various recommendations by the committee the first proposition is the estab- lishment of savings banks or benefit societies, life insurance, etc. At that meeting a motion was made by Mr. John Griseom, who was a philanthropic gentleman, much interested in educational and scien- tific objects,® that a savings bank be organized, which motion was adopted. Subsequent meetings continued to be held, and soon after the name of the Rev. Dr. John M. Mason appears as among its pro- moters. It was, however, too late to accomplish anything with the legislature at that time. In this connection it may be stated that the project of M. Willett and others for an " Interest Bank," here- inbefore mentioned, and which had failed in the legislature the pre- ceding year, was renewed in the legislature of 1818, but failed in the Senate by a vote of fifteen to seven. The scheme seems to have been of a business rather than a philanthropic character. The conviction that an institution for savings was a desirable and 8 It is interesting to note that out of this " Society for the prevention of Pauperism," and especially owing to the efforts of the same John Griseom, the " Society for the Care of Juvenile Delinquents or House of Refuge " came into existence, .being the first organization of its kind in the world. Ch. 126, Laws of 1824. HISTOEICAL SKETCH. 59 even necessary one was forcing itself upon the public mind ; and no one was quicker in catching its spirit than the far-seeing De Witt Clinton, who was elected Governor by an almost unanimous vote in the fall of 1817. In his message to the legislature Governor Clinton commented at some length on the evils arising from poverty and idle- ness. With remarkable prescience he saw the difficulties in the path of the laboring classes, while yet he regarded with no leniency the evils arising from inconsiderate alms-giving. A portion of the mes- sage is as follows : " While we must consider as worthy of all praise and patronage religious and moral societies, Sunday, free and charity schools, houses of industry, orphan asylums and savings banks . . . we are equally bound to discourage those institutions which furnish the ailment of mendicity by removing the incentives to labor, and administering to the blandishments of sensuality." In those days the legislature sent a formal reply to the Governor's message, a prac- tice borrowed from colonial precedent and not yet become obsolete; and in their reply the Assembly declare they shall consider as highly deserving public patronage " all such institutions as your Excellency has enumerated which are so obviously calculated to alleviate the evils of paupersim by inspiring industry, dispensing employment and inculcating economy." The year 1819 will be ever memorable in the annals of New York, as the year when the first savings bank was chartered by the legisla- ture. From the Assembly journal it appears that before the legisla- ture had been more than two weeks in session — on the 19th of Janu- ary — ' the memorial of M. Clarkson, in behalf of the Society for the Prevention of Pauperism, was received, praying for the incorpora- tion of a savings bank in 'New Yoirk City. On the 13th of February the petition was favorably reported upon and leave given to bring in such a bill. On Saturday, February 27, the measure was discussed in the committee of the whole, and the discussion was continued on the Monday following, March 1, when the bill passed the lower house. The bill was first considered in the Senate on Friday, March 5, and the first enacting clause being amended " William Bayard, John Murray, Jr., iN^oah Brown, William Few, Brockholst Livingston, Cadwallader D. Colden, George Arcularious, Thomas Buckley, Dun- can B. Campbell, Benjamin Clark, James Eastburn, Henry Eckford, Thomas Eddy, Philip Hone, John E. Hyde, Peter A. Jay, Zachariah 60 HISTOEICAL SKETCH. Lewis, Dennis McCartliy, Andrew Morris, James Palmer, John Pintard, Abraham Eussell, Jacob Sherred, Joseph Smith, Najah Taylor, Jeremiah Thompson, William Wilson and Samuel Wood " were " constituted a body corporate and politic by the name of ' The Bank for Savings in the City of New York.' " On the 6th day of March the bill, duly amended, passed the Senate and was sent to the Assembly for concurrence. From March 6th to 22d the bill was repeatedly sent from one house to the other on the question of concurrence in the Senate amendments. Finally on Mon- day, March 22d, the Assembly received from the Senate the bill duly passed without further amendment. The Assembly thereupon ordered " that the clerk deliver the same to the Honorable, the Coun- cil of Revision," from whom the Assembly received a message on Friday, March 26, returning the bill " approved." And thus the " Bank for Savings in the City of "New York " ® became an estab- lished fact in the legislative history of the State of New York. " From the beginning what great results were to flow ? And who shall undertake to measure the sum of the good wrought by the sav- ings banks since their first establishment seventy-five years ago? Who will undertake to state how much poverishment has been pre- vented and how much comfort has been realized us by this system of depositing the savings from labor in approved savings institutions ? " The newly chartered bank's first report, covering a period of six months, was made to the legislature in the winter of 1820. Its suc- cess was assured. An accumulation of " more than $150,000 " was reported as having been received from 1,527 depositors. Of these 840 were " mechanics, laborers, tradesmen and domestics ; 287 were boys; 276 girls; 98 were widows; 20 were orphans; 15 apprentices, and 24 ' unclassified.' " The bank also reported that at the opening 9 This, the first savings bank established in the State of New York, com- menced business on July 3, 1819, in the basement of a building on Chambers street, which was destroyed by fire in 1857, and is now the site of the County Court House. The trustees subsequently built a substantial banking house on Chambers street nearly opposite its first location, and afterwards disposed of that property and erected another banking house on the same street. From 1856 to 1894 it was located at 67 Bleeeker street. The march of improvement and the convenience of depositors, however, induced the trustees to erect the present building at 280 Fourth avenue. Its assets July 1, 1909, aggregated $102,796,697.71. HISTOEICAL SKETCH. 61 of the institution the trustees appointed three of their number in rotation to attend at the bank for one month as a committee " to re- ceive deposits, to see that the entries were duly made, and to make inquiries as to the situation of the depositors, and ask such further questions as might promote the welfare either of the individual or of the institution. By this means the whole of the board of trustees have become familiar with the depositors " and thoroughly acquainted with the methods of transacting that business of the bank, and with the condition of its affairs. The practice still obtains. The original charter of the bank restrained the trustees from investing moneys in any other debentures than in government securities, or in any stock created and issued under and in virtue of any law of the United States or of this State. Accompanying the report mentioned was a petition of the trustees asking the legislature to permit them to in- vest their moneys either in bonds of the city or to loan on bond and mortgage on real estate in the city of New York. The petition of the trustees in this respect was granted. The success of this institu- tion led to the establishment of others. The second savings bank established was on a charter granted to Rev. William James and other citizens of Albany. The petition of Mr. James and others was presented in the Assembly on January 28, 1820, and referred to a select committee consisting of Messrs. James, McKown, Irving and Sharpe. There was no delay as formerly. February ith this com- mittee reported favorably on the petition asking leave to bring in a bill. Leave was granted. On the 18th of March the bill establish- ing the Albany Savings Bank passed the Assembly; five days later it passed the Senate. The bill was returned from the Council of Revision the 24th day of the same month with its approval, and became a law on that day, (ch. 100, Laws of 1820). This institution received its first deposit on June 10 of that year. March 27, 1821 (ch. 163), a bank for savings in the village of TJtica was chartered but not organized. Having given the foregoing account of the inception of savings banks, the subject of this chapter can be best continued by giving, separately, a summary of the course of legislation in connection with the leading features of what may be termed, at this time, the Savings Bank System of this State. 62 historical sketch. Saviitgs Bajstks Beitevoleint, not Chaeitablb. Before doing so, however, it may not be considered out of place to state that under no proper construction of our statutes are the sav- ings banks of this State charitable institutions; and the frequent designation of them as such has become odious. As constituted and regulated by law they are, strictly speaking, benevolent institutions, and while the two terms are to a certain extent synonymous, they have a widely different significance when applied to our savings banks. He who has more than his necessities compel him to expend for the support of himself or family, and has a remainder to loan or save, though trifling in amount, is in no sense an object for charity. A natural person who is liberal in benefactions to the poor, thus relieving them in distress, and an artificial entity which relieves the needy by the giving of alms, are properly termed charitable ; while he who has a disposition to do good, who possesses a love for mankind and a desire to promote their prosperity and happiness, and a corpo- ration based upon such disposition and desire, are accurately termed benevolent. While the motives which primarily brought about the establish- ment of banks " for the savings of the poor," or to receive " the sur- plus earnings of domestic servants," were in the beginning wholly philanthropic, yet the whole character of the institutions which fol- lowed these so-called banks has changed. The use of an expression which savors, however remotely, of the giving of alms, must needs be peculiarly offensive to the thousands of our citizens whose self- denial is represented by the deposits of nearly a billion four hundred millions dollars held by the savings banks of this State. The reports of the savings banks January 1, 1909, show an in- crease over any preceding year in the items of resources and liabili- ties. These facts give evidence of the most positive kind of the thrift and economy of the million and a half of depositors and their absolute confidence in the remarkably meritorious management of these institutions by their officers. From small beginnings they have developed into banks of great proportions, and are entitled to the highest place among the financial institutions which are the pride of the State. histoeical sketch. 63 Teusteces and Othee Oeficebs. We may first treat of diaiiges of tlie laws relative to the officers of savings baaiks. The first savings bank, as we have seen, had twenty- eight corporators. In 1834 a savings bank was authorized with forty- three trustees ; and before and since then the number has varied from forty-three to nine, which represents the extremes ; the average num- ber being about twenty-five. In 1871 the legislature passed a general law authorizing any savings bank to reduce the number of its trustees designated in its charter to not less than fifteen, by omitting to fill vacancies. Here it may ]be said that the matter of a quorum was left to be expressed in the charter or formulated in the by-laws ; no gen- eral law was passed on this subject until the year 18Y5 (§ 18, ch. 371), when it was enacted that a quorum should consist of not less than seven trustees. The smallest number fixed upon by charter was five, and the smallest relative number was six in a board of forty- three. April 15, 1853 (ch. 257, amended June 30, 1853, ch. 492), the legislature passed an act applicable to New York and Kings coun- ties only, prohibiting any trustee of a savings bank to be a trustee of more than one savings bank, and forbidding trustees of any savings bank, thereafter to be incorporated, from being directors at the same time in any bank where any part of the moneys of the savings bank was deposited. The law was special in character, having no applica- tion outside !N^ew York and Kings counties — indeed it was intended for the cities of iN'ew York and Brooklyn — the theory being a tend- ency toward the centralization of monetary interests in these cities. In some instances savings banks are often only adjuncts to other banking institutions, the trustees in the one being directors in the other. No person may be elected a trustee who is not a resident of the State, and removal from the State by a trustee after his election or appointment vacates his ofiice. By the revision of 1882 and subse- quent amendments, the minimum board of trustees was fixed at thir- teen, and two-thirds of the board must be residents of the county where the bank is located, and the insolvency of a trustee vacates his office. There have been but two exceptions to the usual mode of consti- tuting the boards of trustees. The first may be found in the charter 64 HISTOEICAL SKETCH. .2 > i^ «M '-' O CQOi>Tj<-*r-lQ0«DQ00S(SCD05i>IO-T-(T-<0Si00000C0C lO O « lOOO co'o oo'cd''^"co*cD"-r»^crw?"io"w*t-'t- CD i>"o5"io co"i-f 05"^ oTco io (yT 10t-t-0ST-l(M»0«0t-Tt00O •) tH T-l C4 OCDQOIAO^ T-l « CO t- t- «D10i> 10^£> COTf CO CDO c £- CO id"o"o 10 CO CD QO O CO «(Moacoco ccTos" CO r- -<#CD coco 00s OS -«*< CO 0«03 IO"0 CO ^ CO O 05 CD £> t- <^*^'rH (Nco'cooscq" OS OS op i> i> (M 1-1 10 CO 10 T-H T-l « CI 1-t 10 03COQOO CO CO CO lO" CD coo iOCC T-H OS -eilOS^t^ O C— OS OS ® TiJH OS CO CO CO CD i:~ OS o o CO 0000s CO CO COOT T-H ^ 05 ■^ OSiO l>iO OS tH ^ t— 1— I CD rH t" COCOO"^ '«*1 wco CD-^CO T-IOCO CO CDO CO-M com « o th m CD '-H -^ -^ -^ OS tH t- 00 (M tH li in -^ 10 CD coco t -i-Tt^cTT-roo cdt £> t- OS O OS 1— I ■" ■^ T-l TH ffl T-i « C OS OS CQ OS CT oi CD^OS 00 s o'os'co" ^ CO 10 OS 3 0O^-* i'lH'ioT-r 3 1- OS r- t (M (Meet coos Id cD^os a> tHOOS OS TP_«D ■^'irTo QOOOOO (M (MO« OS (MC5O0D T-t i>QOCOO CD^ OS TH OS "^ CD*ic"'^'"T-r Co' CD COOtH 1-1 i> 'ooos "* CO o CO W T-i CO CO 10 co^ao_i> ■ cQ ccToo t CO coo ''«*qd"o' CO CO OS iOiO w COQOCD OS !MOS i>icico_^ os"i>in OOtM CO QOOS^OO T-l-^ CD CD CD CO r*1 cooco OS GO CO 10 m CD^ CO CO CO CD t-I> 00 O 1-1 iiO COOi" CO 00 1-t t-t- GO -^tH OS ^ coos C«_0D_^O_^ i-To^os rnwo t^'<*« oToso'c CD04 oe 000s oc CD-* OiCD tH CD O WD COOOiC t-CDO tC Tt< in t- O CO C400S C0^Q0_^OS JOSCOrH H 1-1 C» CO ■^ CO t-i> oco t^-'i* CO 00 CD^iO 00" wo OiOOS-rH 00 OS CM CD lo'^^^irfco" OCDCDCO ^^^^^w^^c^^E§c^^csSc€e8tic3c4cSe8cdc3e8c3 :^io «£ Sf SK ^Q th 2 « "*" 10 5£ 5f «o os" o COQOCOOOQOQOOSCSOSOSOSOSOSOSOSOSOOOOOO^OOO ooGooooooooocoGooocoooaoooaoaoooasasoso»^osa9os^os Q o p< e h 1 ,4 a >■ o iz; * histoeicaij sketch. 65 of tlie Institution for the Savings of Merchants' Clerks, which was obtained April 12, 1848 (ch. 324). Section 2 of that chapter pro- vided that its officers should consist of a president, two vice-presi- dents and a treasurer, who, together with twenty trustees, should constitute a board of managers, five of whom, if one of the officers be present, should constitute a quorum. Section 3 provided that nine of the first managers should be elected by tbe Cbamber of Commerce of the State of New York, from its own body, and the president, first vice-president and treasurer of the said Chamber of Commerce, and the president, vice-president and treasurer of tbe Mercaiitile Library Association of the city of New York should always be .4{c-officio man- agers, and the nine members elected by the said Chamber of Com- merce, together with six ex-ojficio managers, should elect the remain- ing nine managers. The second exception was in connection with the hybrid concern chartered May 14, 1868 (ch. 816), known as the People's Safe De- posit and Savings Institution of the State of New York. Section 2 thereof provided that after the persons named in the charter should serve as directors for one year, the directors were to be elected by the stockholders. Investmbitts. We may next discuss the policy of the State in relation to the in- vestments which have been from time to time authorized by the legis- lature. As hereinbefore stated, the first act authorizing the estab- lishment of a savings bank permitted investments only in government securities or stocks created and issued under and by virtue of any law of the United States or State of New York. The Bank for Sav- ings in the City of New York subsequently, upon petition to the legis- lature, and with the approval of Governor Clinton, was authorized to invest in bonds of the city of New York ; a warrant which in 1827 (ch. 114) was extended to include the bonds of the State of Ohio, a material enlargement of the scope of investments. The same year the legislature, with a spirit evincing more liberality than sense of security, authorized the Albany Savings Bank to invest its trust funds " in the stock of any of the banks of the cities of Albany and Troy." Here was decided descent in the scale of security from the bonds of the United States or of a particular State to the stock of a 5 66 HISTOiaCAL SKETCH. banking corporation liable to the vicissitudes of commercial pursuits. It was fortunate for the savings bank that its trustees did not take advantage of their enlarged powers, or the suspension or failure of some of the banks, in the stock of which, they were authorized to in- vest, would have led to serious results. In the year 1829 (ch. 17) the Seaman's Bank for Savings was chartered with power to invest in the bonds of the United States, ISTew York, Pennsylvania, Ohio, and the city of New York. In 1830 (ch. 96) the Bank for Savings in the City of New York was authorized to loan on real estate and to make temporary deposits in any incorporated bank in said city. The permission to loan on realty was first without limit as to the propor- tion of loan to the value of the real estate, and later to the limitation of the loan being placed at half the value of the security. It would be practically useless to follow the history of legislation in detail as to savings banks in the ensuing fifteen years, but the fact remains to be emphasized that during this time there was a constant diminution of tbe United States public debt, until 1835, when it was almost nothing, being but $337,500. United States bonds were, therefore, not available for investment by savings banks, now rapidly multiply- ing; more and more bond and mortgage formed the basis of invest- ment, while the legislation of the State relating thereto was capricious and vacillating. Each savings institution had not only to procure its own special charter, but, in the absence of general laws, it secured the most liberal one it could, with as few restrictions as possible ; the charters of no two banks were the same or included precisely the same privileges. In 1846 (ch. 176) a savings bank was incorporated containing a new provision in its charter authorizing the trustees to hold " an available fund of not exceeding $50,000, which they may keep to meet the current payments of said corporation." Here is the first appearance of a reserve fund, but singularly enough it was not made proportionable to capital or deposits as in the national banking sys- tem, but was fixed at an arbitrary amount not to be varied whether the deposits were a hundred thousand or a million of dollars, and a peculiar feature of the law was that this reserve was not necessarily to be in gold, silver or bank-notes, or even negotiable securities, but " in such available form as the trustees may direct." In February of the same year, applications having been made for charters for savings banks at Buffalo and Rochester, the Assembly HISTOEIGAL SKETCH. 67 committee on banks seem to have become aroused to this peculiar condition of affairs. The savings bank deposits, at this time amounted to about $10,000,000. The committee, in their report to the Assembly, express surprise at the want of care in legislation, as they find the only guaranty the public have against loss by fraud or defalcation is " the high character and standing of these several boards of trustees," and declare " the way is open for defaulters and swindlers if they choose to improve their opportunities," and assert that the provisions constituting a quorum (sometimes but one-third of the trustees being required) to be wholly unsatisfactory. They recommend that securities be not charged without the consent of two- thirds of the trustees, that the banks should be subjected to the super- vision of the Comptroller, that the managers be placed under bonds, and they disapprove the requirement that the service of the managers should be gratuitous, for, they say, " where men get nothing for their services they are sure to become careless in their supervision." The legislature chartered the Buffalo Savings Bank, adding several additional safeguards — refused a charter for a second bank at Roch- ester, and also refused to pass a general law for the incorporation of savings banks. The legislature of 1847 (ch. 456) amended the char- ter of the Buffalo Savings Bank, by prohibiting it from discounting business paper, and adding this provision, " whenever the amount of the money in deposit in such bank shall exceed the sum of $400,000, the available fund may, in the discretion of such trustees, be in- creased to any sum not exceeding $100,000." A general act was also passed authorizing deposits to be made vsdth banking associations as well as with incorporated banks. Legislation continued special, pre- senting no marked feature except that the reserve fund was generally fixed at one-third of the deposits. In 1849 (ch. 179) investments were allowed in the stocks of any city in this State; in 1853 (ch. 257) the legislature allowed the savings banks of l^ew York City and Brooklyn to invest in the bonds of any State in the Union, and to loan on any of these securities as collaterals. Town bonds were not an authorized investment until 1863 (ch. 315), when the legis- lature also authorized the savings banks to loan their funds on the bonds of cities or counties of this State, providing the act authorizing the issue of the bonds made provision for their payment by the im- position of a tax. There was no change in the general legislation of the State relative to savings banks until the year 1875 (ch. 371), when a general law was passed. 68 HISTORICAL SKETCH. The amended constitution of the State, ratified by popular vote in 18Y4:, went into operation January 1, 1875 ; among its provisions was one requiring the legislature by general law to conform all charters " of institutions for savings to a uniformity of powers, rights and lia- bilities." In compliance with such requirement, bills were intro- duced in both the Senate and the Assembly early in January of that year, one in the Senate and two in the House. Differences arose on the question whether, as in the case of other corporations, savings banks should be established under the general law to be passed, out- side of any special authority of the legislature, or whether the law being passed, no bank should be established under its provisions until the consent of the legislature was obtained. In the midst of the con- flict of views which prevailed, an entirely new bill was framed con- taining the best features of all, together with some additional pro- visions. This bill was generally favored by the banking interests, and was largely the outcome of consultation with the trustees of savings banks. After extended discussion it passed the Assembly, and was sent to the Senate, which body proposed amendments in which the Assembly refused to concur, and a conference committee became necessary. Ototraiy to general expectation, a conclusion was reached, and a bill agreed upon, substantially that of the Assem- bly, with some of the Senate's modifications incorporated. The bill not only contained the customary repealing clause, but also a pro- vision repealing all charters and parts thereof inconsistent with the act. By its passage every savings bank in the State was brought under the provisions of one fundamental law, containing uniform powers, limits and safeguards for all. Briefly epitomized, the bill provided for the organization of savings banks through the office of the Bank Superintendent; limited individual deposits to $5,000; limited dividends to six per cent, per annum until a surplus of ten per cent, upon deposits was accumulated ; required the accumulation beyond ten per cent, to be divided every three years; made trustees personally liable for dividends declared and credited in excess of earnings; protected deposits of minors and females; prohibited the banks from pleading the statute of limitation in defence of actions brought to recover deposits; and authorized investments in the fol- lowing securities only: 1. Stocks issued or guaranteed by the United States. 2. New York State stocks. 3. Stocks of any State in the Union that has not, within ten years prervious to +^° inTros+mftnt. defaulted in principal HISTOEICAl SKETCH. D» or interest 4. Bonds of any city, county, town or village in this State issued in pursuance of law. 5. Bonds and mortgages on unin- cumbered real estate in this State, worth twice the amount loaned thereon, or when unproductive, not over forty per cent, of its value, the total of such loans not to exceed sixty per cent, of the deposits. 6. In real estate for hanking purposes but under careful restrictions as to the amount. Investment in other securities was made a misde- meanor. An available fund, in the form of cash on hand or deposited, was provided for, a flexible aomount proportionable to deposits being prescribed. In addition the Superintendent of the Banking Depart- ment was charged with the duty of examining every bank once in two years, and as much oftener as he may deem necessary; the expense of such examinations to be borne by the banks. This, in brief, is a summary of the salient features of the general law of 1875, which admirably served its purpose, and the substantial provisions of which were retained in the law of 1882 (ch. 409), in the subsequent " Banking Law " (L. 1892, oh. 689), and are included in the present Banking Law (L. 1909, ch. 10; Oonsol. Laws, oh. 2). Subsequent to the law of 1875 trustees of savings banks were au- thorized to invest the moneys in their custody in the bonds of the District of Columbia, commonly known as the 3-65 bonds, and any interest-bearing obligations issued by the county in which the bank making the investment is situated. Authority for the former was originally granted by Laws of 1879 (ch. 437), and for the latter by chapter 134 pf the Laws of 1880, both of which laws were repealed by and their provisions included in the Laws of 1882 (ch. 409). By chapter 524, Laws of 1887, in- terest-bearing obligations of other States, and like obligations issued by any city or county in this State, were added to the list of invest- ments; and by chapter 373, Laws of 1888, the list was increased so as to include school-district bonds and " union free school-district bonds issued for school purposes." The legislature of 1893 enacted a statute (ch. 440) whereby trustees of savings banks were authorized to invest in " the stocks and bonds of the cities of Boston and Worcester, Mass. ; St. Louis, Mo. ; Cleveland, Ohio ; Detroit, Mich. ; Providence, E. I., and New Haven, Conn." It is, however, expressly provided that " if at any time the debt of any of these cities, less its water debt and sinking fund, shall exceed seven per cent, of its valuation for the purpose of taxation, its bonds and stocks shall thereafter cease to be an au- TO HISTORICAL SKETCH. thorized investment for the moneys of savings banks, but the Bank Superintendent may, in his discretion, require any savings bank to sell or retain sudi bonds or stocks of these cities as may have been brought before this indebtedness." Tbis enlarged scope of invest- ment has been further extended by subsequent amendments to in- clude bonds and stocks of otber cities, and the first-mortgage bonds of certain classified railroads in this State, and certain named rail- roads of other States. The last enactment of this nature was chapter 581, Laws 1906, and is contained in section 146 of the present re- vision. While the deposits in these institutions annually increase at a rapid rate, the range of investments tends constantly to diminish be- cause of tbe maturity and payment of Federal, State and municipal bonds, and it will presimiably become necessary from time to time to enlarge tie classes of securities in wbicb these banks and institu- tions may invest their funds. DiVIDETTDS. An investigation of tbe subject of dividends to depositors is of interest. A customary provision in the charters granted by the legis- lature was in these words: " It shall be the duty of the trustees to regulate the rate of interest to be allowed to depositors so that they sball receive as nearly as may be, a ratable proportion of all tbe profits of the corporation after de- ducting the necessary expenses." An act passed April 23, 1831 (cb. 154), entitled " An act concern- ing the Bank for Savings in the Oity of !N'ew York," authorized tbe board of trustees of the bank to regulate from time to time the in- terest to depositors, so that tbe interest allowed to depositors having $500 or more deposited with the bank should be at least one per cent. less than the interest allowed to otbers. Section 5 of " An act relative to savings banks or institutions for savings in the city and county of New York and county of Kings," passed April 15, 1853 (cb. 257), provided that "Wo such savings bank or institution for savings bereafter to be incorporated sball re- ceive from any individual depositor a larger sum than $1,000, or a larger amount than $3,000,000 in the aggregate amount of deposits, exclusive of its banking-bouse ; and the rate of interest on all deposits of $500 and under, sball be one per cent, per annum greater than shall be allowed on any sum exceeding $500." Tbe steady growth HISTOEIOAl SKETCH. 71 of these institutions is shown in the schedule below.^" Tlie present law may be found in section 143 of the Banking Law, post. 10 Interest Number of Average Deposits. credited or paid open of each to depositors. accounts. account. January 1, 1858 $41,423,673 $2,070,851.00 203,804 $203.24 January 1, 1859 48,194,847 2,197,787.00 380,074 209.47 January 1, 1860 58,178,160 2,610,913.00 273,697 208.91 January 1,1861 67,440,397 2,834,249.00 800,698 224.28 January 1,1862, 64,083,119 3,088,931.00 300,511 213.21 January 1, 1863 76,538,183 3,079,303.00 347,184 320.45 January 1, 1864 93,786,884 3,760,5>4.00 400,194 234.35 January 1, 1865 111,737,763 4,593,901.00 456,403 244.82 January 1, 1866 115,473,566 5,647,505.00 465,001 348.33 January 1, 1867 181,769,074 5,678,453.00 488,501 270.10 January 1, 1868 151,137,563 7,400,110.00 587,466 281.18 January 1,1869 169,808,678 8,666,374.00 588,556 288.51 January 1, 1870 194,360,217 10,320,207.00 651,474 296.80 January 1, 1871 330,749,408 12,148,985.00 713,109 324.03 January 1,1872 367,905,826 13,744,144.00 776,70J 834.93 January 1, 1873 385,386,631 14,977,618.00 822,642 346.79 January 1, 1874 385,520,0S5 16,158,997.00 839,473 340.13 303,935,649 319,360,303 16,139,949.00 16,990,284.00 873,498 859,738 348 35 January 1, 1876 ,871.00 January 1, 1877 316,677,285 16,457,347.00 849,688 373.73 January 1, 1878 313,823,058 14,926,868.00 844,550 370.40 January 1, 1879 299,074,639 13,139,690.00 810,017 369.32 January 1,1880 819,258,501 13,462,081.00 864,470 369.53 January 1, 1881 353,639,657 13,650.977.00 953,707 370.79 January 1, 1882 387,832,893 13,672,308.00 1,036,106 374.32 January 1, 1883 412,147,213 14,153,005.00 1,095,971 876.05 January 1,1884 431,080,010 14,724,663.00 1,147,588 375.64 January 1, 1885 437,107.501 15,023,286.00 1,165,174 375.14 January 1, 1886 457,050,250 15,151,979.00 1,308,073 378.33 January 1, 1887 483,486,730 15,777,022.00 1,364,585 381.55 January 1, 1888 505,017,751 16,731,203.00 1,335,063 881.13 January 1, 1889 533,677,515 17,895,919.00 1,363,853 384.35 January 1, 1890 550,066,657 18,297,998 00 1,420,997 387.10 January 1, 1891 574,669,972 19,335,506.00 1,477,819 388.30 January 1, 1893 588,435,430 80,089,789.00 1,516,289 388.00 January 1, 1893 629,358,273 31,379,956.00 1,593,804 394.87 January 1,1894 617,089,448 33,349,637.00 1,585,155 390.50 January 1, 1895 648,873,574 22,736,140.00 1,615,178 398.63 January 1, 1896 691,764,503 34,328,416.00 1,695,787 407.93 January 1, 1897 718,176,888 25,414,559.00 1,736,968 413.46 January 1, 1898 766,684,916 36,551,733.00 1,805,280 424.69 January 1, 1899 816,144,367 27,907,811.00 1,865,658 437.45 January 1, 1900 887,480,650 29,539,688.00 1,981,371 . 447.91 January 1, 1901 947,129,638 31,339,830.00 3,072,190 457.06 January 1, 1903 1,014,305,857 33,630,994.00 2,174,511 466.45 January 1, 1903 1,077,383,743 34,911,413.00 3,275,388 473.49 January 1, 1904 1,131,281,943 36,843,030.75 3,365,583 478.32 January 1, 1905 1,198,583,143 39,929.616.69 3,443,555 490.50 January 1, 1906 1,293,358,866 43,167,631.68 3,569,779 502.90 January 1, 1907 l,862,03->,836 47,007,918.70 2,685,809 507.12 January 1, 1908 1,380,399,090 49,977,017.15 2,781,447 505.37 January 1,1909 1,396.443,337 50,885,987.89 2,736,285 510.30 July 1,1909 1,58;, 937, 555 53,087,390.00 2,786,514 569.86 72 histoeical sketch. Surplus Moneiys. Another source of legislative discTission was the surplus moneys which had accumulated in the several savings banks. Chapter 254 of the Laws of 1831, passed April 23, entitled " An act concerning the Banks for Savings in the City of New York," provided for the accumulation of a surplus fund as follows: " The board of trustees of the Bank for Savings in the City of New York are hereby author- ized to accumulate gradually and hold invested a surplus fund not exceeding three per cent, on the amount of deposits, to the end that in ease of a reduction in the market price of the public stocks and securities, held or to be held by the said bank, below the par value thereof, any loss to the depositors by reason of such reduction may be prevented or made good by means of the said fund." Chapter 178 of the Laws of 1836, passed April 23, amended the charter of this institution in reference to authorized surplus, as fol- lows : " The board of trustees of the said savings bank are hereby authorized to accumulate gradually, and hold invested, a surplus fund not exceeding ten per cent, on the amount of deposits, to the end that in case of a reduction in the market price of the securities or public stocks, held or to be held by the said bank, below the par value thereof, any loss to the depositors by reason of such reduction may be prevented or made good by means of said fund." A general law, passed May 6, 1839 (ch. 347), made the following provision : " The board of trustees of the said savings banks are hereby authorized to accumulate gradually and hold invested in like securities, as authorized by the act incorporating said banks, a sur- plus fund not exceeding ten per cent, on the amount of depos.its in said banks, respectively, to the end that in case of a reduction in the market price of the securities or public stocks, held or to be held by the said banks, or any of them, below the par value thereof, any loss to the depositors by reason of such reduction may be prevented or made good to them by means of said surplus fund." An amendment to the constitution was adopted November 3, 1874, conforming all charters of savings banks, or institutions for savings, to a uniformity of powers, rights and liabilities, and all " charters hereafter granted for such corporations shall be made to conform to such general law, and to such amendments as may be made thereto. HISTOEICAL SKETCH. 73 And no sueh corporation shall liave any capital stock, nor shall the trustees thereof, or any of them, have any interest whatever, direeu or indirect, in the profits of such corporation; and no director or trustee of any such bank or institution shall be interested in any loan or use of any money or property of such bank or institution for sav- ings. The legislature shall have no power to pass any act granting any special charter for banking purposes; but corporations or asso- ciations may be formed for such purposes under general laws." Sec- tion 4 of Art. VIII, Ctost. N. Y.) As directed by the foregoing amendment, the legislature passed the General Savings Bank Law of 1875 previously mentioned. Chap- ter 256 of the Laws of 1877, passed May 10, amended the General Savings Bank Law by reducing the rate of interest, which savings banks were authorized to pay depositors, to five per cent. It further authorized the accumulation of a surplus fund of fifteen per cent, and required the trustees of savings banks to divide such surplus among depositors when the same shall amount to fifteen per cent, of the deposits held by the bank. The basis on which such surplus was estimated was changed so that the interest-paying stocks and bonds held by a savings bank should not be estimated above their par value or above their market value if below par. All the foregoing pro- visions are retained in the present law (Section 153 and 154). Pat of Trustees. The first savingsi bank charter in this State said : " The trustees or managers of said institution shall not, directly or indirectly, re- ceive any pay or emolument for their services." All other charters prior to 1850 contained a like provision. Indeed, in some charters trustees were prohibited from being depositors except as guardians or trustees for others. The first authorization of trustees to receive pay, when acting in any capacity, is found in an amendment to the charter of the Troy Savings Bank (ch. 216, Laws of 1850), where it was enacted : " It shall be lawful for the managers to pay to the president of the institution such compensation as they shall deem reasonable for superintending the business and concerns of said cor- poration, either wholly or with the aid of such clerk or clerks as the managers may, from time to time, appoint. Again in the year 1858 ^4: HISTORICAL SKETCH. the law was ciianged, making it lawful for trustees of institutions for savings in the counties of !N"ew York and Kings, and in the city of Buffalo, " to pay to their respective presidents such compensation for their services as shall, in the opinion of such trustees, he reason- able," (cL 136). In 1863 (ch. 4Y6) the legislature amended the charter of the Poughkeepsie Savings Bank by authorizing its trustees to pay the president of that bank a reasonable compensation out of the surplus earnings. Tbe law now provides that no trustee of a savings bank shall have any interest whatever, direct or indirect, in the gains or profits thereof, nor as such, directly or indirectly receive any pay or emolu- ments for his services, except as thereinafter provided. Another section provides that it shall be lawful for trustees of such corpora- tion, acting as officers of the same, whose duties require and receive their regular faithful attendance at the institution, to receive such. compensation as in the opinion of a majority of the board of trustees shall be just and reasonable ; but it shall not be lawful to pay trustees, as such, for their attendance at meetings of the board. When ap- pointed, however, as a committee to examine the vouchers and assets, or to investigate and report on investments in bonds and mortgages, they may receive such compensation as a majority of the trustees may deem just and reasonable. (Section 155, Banking Law, post.) Bonds to guarantee the fidelity of the officers and clerks may be accepted from approved surety companies, and the premiums may be paid by the bank, and will be allowed as a necessary disbursement. Uh-claime(d Deposits. The impression that the savings banks of the State hold a vast sum, in the aggregate, of money for which there are no claimants, has quite often afforded a prolific theme for legislative discussion, and numerous measures have been introduced having for their object the transfer of such unclaimed deposits to the custody of the State for its benefit. In the year 1853 a bill was introduced which required savings banks to transfer to the board of supervisors of their respec- tive counties the moneys of all depositors whose accounts had not been added to by new deposits or diminished by drafts during the preceding twenty years. This bill failed to become a law. HISTORIOAL SKETCH. 75 In 1859 the legislature appointed a committee to examine the vari- ous savings banks for the purpose of ascertaining the amount of un- claimed deposits held by each; and again in 1862 a bill was intrc duced in the Assembly, having for its object the confiscation of these so-called unclaimed deposits. A committee of the legislature was appointed with full power to investigate the subject. The report of such committee was submitted to the legislature of 1863, in which they say: " The subject of unclaimed moneys, supposed to be lying in the several savings banks in the State, has been for many years, inside and outside of the legislature, a fruitful source of discussion. The public press has, periodically, teemed with articles on the subject, and year after year bills and propositions have been introduced into the legislature proposing to transfer these unclaimed moneys to tiie custody of the State, supposing them to amount to millions. The result of the present investigation fully demonstrates that the public mind has been greatly misled as to the amount of these moneys. Whatever may be the power of the legislature as to the disposition of the money itself, the amount is clearly not as large as it has gen- erally been supposed to be, judging from the tone of the discussion of the question in the public press and in both branches of the legis- lature. " 'No doubt may have confounded the surplus moneys of our sav- ings banks with the unclaimed, and to this fact, probably, may justly be attributed the extravagant ideas that have been so prevalent in the public mind upon the subject of the latter." The aggregate amount of deposits unclaimed for a period of twenty years, found by the committee, in all of the savings banks of the State, was $89,227.04. The committee in concluding their report further say: " As to the right of the legislature to appropriate to itself the cus- tody of these moneys, the committee have nothing to say ; that ques- tion they have not been asked by the legislature to determine, it be- ing simply their province to ascertain the amount of such, unclaimed moneys. Able legal men have been found on both sides of this ques- tion, and the probability is that it would become a matter of judicial decision should the legislature pass a law on the subject." In 1875 public attention was again dravm to the subject of un- 76 HISTOEICAl. SKETCH. claimed deposits through, a Senate resolution directing the Superin- tendent of the Banking Department to ascertain the amount of de- posits or balances in the several savings banks of this State which have remained unclaimed for a period of twenty years and upward ; also the amount for ten years and upward, and with all convenient dispatch to report the same to the Senate. March 12, 1875, the Su- perintendent reported the amount of unclaimed deposits held hy the several banks to be $854,844.72, of which amount $316,656.60 had remained unclaimed for twenty years and upward, and $538,188.12 for ten years and upward and less than twenty years, while the aggre- gate deposits held by the several savings banks January 1, 1875, was $303,935,649. Under the present law all accounts of depositors amounting to five dollars or over, and which have remained dormant for twenty-two years, are required to be reported annually to the Superintendent of the Banking Department. (Section 30, Banking Law, posf.) A special report was called for by the Bank Superintendent in 1894, but was for amounts in excess of $50.00 instead of $5.00 or over that had remained dormant for twenty-two years. This report showed the so-called " unclaimed " or dormant accounts to aggregate $1,672,458.52 at that time. The whole number of dormant accounts reported to him in 1890, the first year that the law required reports to be made concerning them, plus those that had become dormant between 1890 and the latter part of 1904, was 12,250, and of this total 3,223, or more than 26^, was shown by the reports of 1904 and preceding years to have become active. It may be ladded that the savings banks which hold dormant ac- counts have been earnestly at work to trace those to whom they belong, and with decided success. The number of such accounts decreased very largely since 1899. In one savings bank which at that time had over ttiree-quarters of a million dollars of dormant accounts, there has been a reduction in them aggregating more than $600,000, so that the present average of each is but $97.51. Upon this specific showing it would seem to be a safe assumption that the total of dorm|int accounts in all of the savings banks of the State is under a million dollars, which is six one-hundredths of one per centum of the total resources of these institutions. histoeical sketch. 77 Taxation.^^ Although the clearly defined policy of the State since the inception of the savings bank system has been to grant general exemption to the deposits and surplus of such institutions from taxation by State or local authorities, yet earnest effort has, on several occasions, been made by individual members of the legislature to impose upon these institutions the burdens of taxation. With few exceptions these efforts have proved abortive. A law was passed April 15, 1857 (ch. 456), entitled "An act in relation to the assessment of taxes of incorporated companies," sec- tion 4 of which is as follows : " The deposits in any bank for savings which are due depositors . . . shall not be liable to taxation other than the real estate and stocks which may be owned by such bank . . . and which are now liable to taxation under the laws of the State." An opinion by the Attorney-General was filed in the Banking Department June 12, 1878, in which that officer holds that this sec- tion exempt deposits in savings banks absolutely from taxation. He further states that a depositor cannot, therefore, be taxed for such deposits, this statute protecting the savings institutions as well as their depositors. In 1866 an act of the legislature made the surplus of savings banks subject of taxation; in the following year the law was amended by exempting from taxation so much of the surplus as was invested in United States bonds, which exemption was a practical repeal of the statute. In 1868 the question of taxation was again the subject of legisla- tive discussion, as it has been on several occasions since that date, notably in 1880^ when a bill was introduced, proposing to levy a State tax on deposits in savings banks of one-quarter of one per cent. This measure attracted considerable public attention and met with very general opposition. The press characterized it as a " tax on thrift and frugality," and the proposed law was defeated. September 1, 1879, Mr. Justice Baenabd gave an opinion at Special Term of the Supreme Court of New York that under the 11 See note to section 5219 U. S. R. S. (U. S. Comp. Stat. 1901, p. 3502), post. 78 HISTOEICAL SKETCH. then existing laws both the deposits and surplus of the savings banks of this State are absolutely exempt from taxation. Again, in 1884, the finance committee of the Assembly unani- mously reported an act " to provide revenue for the State by a tax on savings banks and institutions for savings." The bill provided that every savings bank should pay, as a tax on its corporate franchise or business, a sum equal to twenty-five cents on every $100, computed on the amount of its deposits and surplus funds in excess of $500,- 000 whether such was invested in United States securities or other- wise. So determined an opposition to the bill was at once developed that it was recommitted to the committee from which it emanated, and by that committee reported adversely. Under the existing law (Tax Law, § 4, subdiv. 14, post) all savings banks deposits are ex- empt. In 1901 (ch. 117) an annual franchise tax was imposed for the privilege of a corporate existence, of one per cent, on the par value of the surplus and undivided earnings of all savings banks (Tax Law, § 189, post) ; but they were made exempt from the general organiza- tion tax, and from the general annual franchise tax (Tax Law, § 183, post). This tax of one per cent, is a step in the wrong direction and should be repealed. This general exemption would seem to be amply justified by the fact that these institutions have proved good educators; and while the State exempts from taxation all scbool property, both real and endowment, it would seem that both public economy and public morality just as imperatively demand that the means by which our citizens are taught to acquire habits of economy, thrift and enterprise should also be relieved from the burdens of taxation. A tax reduces the surplus, lessens dividends, discourages deposits and impairs the usefulness of these institutions, thus injuring the public far beyond the measure of the tax received. AETIOLE III. Moneyed Corpoeations, other than Banks, Banking Associa- tions, Individual Bankebs and Savings Institutions. Instead of pursuing the plan indicated in the two preceding chap- ters of this sketch, of giving a history of the first of the moneyed corporations, mentioned in the heading of this article, beginning with HISTOEICAI, SKETCH. Y9 the action of the legislature, etc., it has been thought advisable, saving repetition, to speak in a general way of their respective char- ters, and amendments thereto, that have from time to time been obtained from the legislature. The subject is divided into four classes, although in several instances, corporations have been created with such broad powers that they may with propriety be placed under all the various headings of this chapter. Trust Companies. The distinction between trust companies and banks of deposit and discount is not as broad practically as it is in theory. In theory, the latter, subject to but few restrictions, deal in investments of such character as they deem advisable, while the former must have a large capital, which, with their trust funds, should be invested in the best securities. There must be unquestionable security to depositors, and the interest that may be paid them is wholly of secondary considera- tion. The history of these institutions clearly shows that the more completely each has approximated its theoretical character as a class, the greater has been its success ; and the failures that have occurred are due, in every instance, at least, so far as our personal knowledge goes,^ to the liberal provisions of the charter granted by the legis- lature. The trust companies, generally speaking, have been created with all of the customary powers of corporations, and in addition author- ized to receive moneys in trust and accumulate the same, at rates of lawful interest to be agreed upon and to accept and execute all trusts of every description committed to them by any person, persons or cor- poration, or such as may be transferred to them by order of the Su- preme Court or by a surrogate, or by any court of record. To take and accept by grant, assignment, transfer, devise or bequest, and hold any real or personal estate on trusts created in accordance with the laws of this State, and execute such legal trusts in regard to the same, on such terms as may be declared, established or agreed upon, 1 It may not be out of place to state that the author and his associates made, at the request of the then Superintendent of the Banking Department, the first two annual examinations of these and like institutions. Such examinations were authorized by chapter 324, Laws of 1874. 80 HISTORICAL SKETCH. im regard thereto ; to act as agent, for the purpose of issuing, register- ing or countersigning stocks, bonds, or other evidences of debt of any corporation, association, municipality. State or public authority. To accept from and execute trusts for married women in respect to their separate property, and to act as guardian for infants. No bond or other security can in the first instance be required of the corporations named when appointed guardian, receiver, desposi- tory, executor or administrator; but the court or officer appointing the trust company may upon application require proper security. All investments of moneys received by such corporations, in either of the characters mentioned, have been and are at the sole risk of the corporation; and for all losses of such money the capital stock, property and effects of the corporation were and are absolutely liable. In the case of the dissolution of the corporation, the debts due from it in either of the characters mentioned as legal trusts, are made preferred claims. Whenever default is made in the payment of any debt or liability contracted by the corporation, the stockholders, by most charters, are made individually responsible, equally and ratably for the amount of such debt or liability, to an extent equal to the amount of their respective shares of stock in the company. Other of the charters fix the liability of stockholders at the par value of the stock held or owned. For all losses of money for which the capital stock shall not be sufficient to satisfy, the trustees are responsible in the same man- ner and to the same extent that trustees are responsible in law or equity. The trustees usually are required to be citizens of this State, and stockholders of their respective corporations to a fixed amount. Trustees and officers are prohibited from either directly or indirectly borrowing the funds or securities in their custody or under their control. The capital of trust companies is required to be invested in bonds and mortgages on unincumbered real estate, situate in this State, worth sixty per cent, of the amount loaned thereon; or in public stocks of the United States, New York State, or of individual States, or cities or counties of this State. The trustees of these corporations are authorized to invest the premiums and profits, as well as the moneys received by them, in public stocks of the United States, or HISTOEIOAl BKETOH. 81 of any individual State, or in the stock of any incorporated city, or in such, real or personal securities as they may deem proper. The char- ters usually limit to $25,000 the amount of stock they may hold of any private incorporated company. • The charters of several of the older corporations, in addition to the other powers conferred, authorized the insuring of all kinds of property against loss or damage by fire ; to make insurance on lives ; to grant and purchase annuities; to make any other contingent con- tract involving the interest of money and the duration of life. April 30, 1868, a law (ch. 482) was passed authorizing any trust or loan company, by the direction of two-thirds of its board of direc- tors, to purchase or invest, by loan or otherwise, any of its funds in the bonds issued by any county, town or village of this State, any- thing in its charter to the contrary notwithstanding. Previous to the year 1874, trust, loan, mortgage, security, guaranty or indemnity companies or associations were operated under the pro- visions of their respective charters, there being no general laws ap- plicable to them. The reports of the various corporations were made, some to the Comptroller of the State, and others to the Supreme Court. The Law of 18Y4, passed May 5 (ch. 324), placed all cor- porations of the class named under the supervision of the Super- intendent of the Banking Department, and required the several cor- portations to make a full report in writing to him of their condition and affairs on the last business days of June and December in each year; such reports to be verified by the oaths of such officers of the corporation as the said Superintendent should designate, which report shall be in the place of any report the corporations were required to make to the Supreme Court, the Comptroller, or otherwise. The act further required that the reports should be in such form, and contain such statements, returns and information as to the affairs, business, condition and resources of the corporation, as the Superintendent might from time to time prescribe or require. The Superintendent may also require reports from any of the corporations at any time he may deem it desirable. The Superintendent is required annually to visit and examine each of the corporations, or appoint some competent person or per- sons to make such examinations. The expense of examination to be 82 HISTOEICAI- SKETCH. paid by the corporation examined. Tlie Superintendent and ex- ajniners have power to administer oaths, and may compel the appear- ance and attendance of any person whose testimony may be required by summons, subpoena or attachment, in the manner authorized in respect to the attendance of persons as witnesses in the courts of record of this State, and all books and papers which it may be deemed necessary to examine by the Superintendent or the examiner or ex- aminers shall be produced, and their production may be compelled in like manner. On every examination inquiry shall be made as to the condition and resources of the corporation generally, the mode of conducting and managing its affairs, the action of its directors or trustees, the investment of its funds, the safety and prudence of its management, the security afforded to those by whom its engagements are held, and whether the requirements of its charter and of law have been complied with in the administration of its affairs. Whenever any corporation has committed a violation of its charter or of law, or is conducting business in an unsafe or unauthorized man- ner, the Superintendent shall direct a discontinuance of the illegal and unsafe practices, and in case of refusal or neglect to comply vnth such order, or whenever it shall appear to the Superintendent that it is unsafe or inexpedient for any such corporation to continue to transact business, he shall communicate the facts to the Attorney- General, who shall institute such proceedings against the corporation as the nature of the case may require. Every corporation, whether chartered by this State, or any other State or county, engaged in receiving deposits of money in trust in this State is required to trans- fer and assign to the Superintendent of the Banking Department registered public stocks of the United States, or of the State of New York, or of any incorporated city of this State authorized by the legislature, to the amount in value of ten per cent, of the paid-up capital stock of the corporation, but in no case shall such deposit be less than $50,000. The stocks deposited are required to be registered in the name of the Superintendent officially, as held in trust, as security for the depositors with, and creditors of the corporation making the deposit ; and are subject to sale and transfer, and to the disposal of the proceeds by said Superintendent, on the order of any court of competent jurisdiction only. With the approval of the Su- perintendent, the required deposit may be made either wholly or in HISTOEICAL SKETCH. 83 part in bonds and mortgages, on improved, unincumbered, productive real estate situate in this State, and -worth, at least twice the amount loaned tbereon. An additional statute relating to trust companies and certain other moneyed corporations was passed May 18, 18Y8 (ch. 284) ; by it provision was made for the increase or reduction of the capital stock of such corporations. The minimum amount of capital stock author- ized was fixed at $100,000. The act further directed the Superin- tendent of the Banking Department to annually report to the legis- lature a summary of the state and condition of each corporation of the class named from which reports have been received by him dur- ing the preceding year ; such summary was to give the date to which such reports refer, the amount of capital returned by each of said corporations, the whole amount of its debts and liabilities, the total sum of its resources, and such other information as he may deem use- ful ; and he was further required to report an abstract of the regular examination of any such corporation made by his direction. So many attempts were made from time to time by persons not always of the most reputable financial character to obtain charters, that, at the request of the Governor, the author prepared a bill providing for the general incorporation of trust companies which became a law, June 8, 1887 (ch. 546, Laws 1887). By section 180 of the present law (post), the capital stock of any such corporation must be at least five hundred thousand dollars, provided, however, that a corporation with a capital of not less than two hundred thousand dollars may be organized in any city containing more than one hundred thousand inhabitants and less than two hundred and fifty thousand inhabitants, and a corporation may be organized with a capital of not less than one hundred and fifty thousand dollars in any city containing more than twenty-five thousand inhabitants and less than one hundred thousand inhabitants, and with a capital of at least one hundred thousand dollars in a city the population of which does not exceed twenty-five thousand, the number of inhabitants in each case to be ascertained by the last Federal or State enumeration. An act (ch. 337, Laws 1893), approved by the Governor, April 10, 1893, pro- vided that each trust company organized under the General Bank- ing Laws and having its principal place of business within a county containing less than six hundred thousand and over three hundred 84 HISTOEICAL SKETCH. thousand inliabitaiits, may act as a safe deposit company and insure titles to real estate. The same legislature, also enacted two im- portant amendments to the banking law relating to trust companies. 'First, by an additional subdivision to those enumerated in section 186 whereby they are authorized to exercise the powers conferred on individual banks and bankers by section 74 of the Banking Law subject to the restrictions mentioned therein. And, second, by in- serting a very important provision in section 190, which provided, when originally adopted, that all investments of money received by a trust company in its trust capacity should be at its sole risk, and, for all losses of such money, the capital, property and effect of a trust company should be absolutely liable. The amendment de- clares that this provision shall not apply when the investments are such as the courts recognize as proper when made by an individual acting as trustee or in other trust capacities, or provided the invest- ments are permitted in or by the instrument or words creating or defining the trust. MOETGAGH CoMPAJflES. Mortgage companies have the general powers and privileges and are subject to the liabilities declared by title 3 of chapter 18 of the First Part of the Revised Statutes, and, in addition thereto have power to loan on or purchase bonds and mortgages upon real estate; to issue bonds of the company and to sell and dispose of the same; to sell bonds secured by mortgages upon property situated within the United States, and to guarantee the payments of the principal and interest of the same; to purchase, hold and convey all such real and personal estate as may be necessary for the corporation to use in the transaction of its business, or such as it may acquire in the collection or settlement of its demands or claims, or purchase or take on the foreclosure of enforcement of mortgages. The provision of the present revision affecting mortgage, loan and investment corporations will be found in sections 280 to 288 in- clusive. Safe Deposit Companies. Previous to the year 1875, corporations for the safe-keeping and guaranteeing of personal property were created by special charters HISTOBICAL SKETCH. 85 granted by tke legislature. By an act of the legislature passed June 21, 1875 (eh. 613), provision was made for their organization under a general law, which authorizes any five or more persons to form a company for the purpose of taking and receiving upon deposit, as bailee for safe-keeping and storage, jewelry, plate, money, specie, bullion, stocks, bonds, securities and valuable papers of any kind, and other valuables, and guaranteeing their safety upon such terms as may be agreed upon between the company and the respective bailors thereof, and to let out vaults and safes and other receptacles for the uses and purposes of the corporation. They are further authorized to lease, purchase, hold and convey any real or personal estate what- ever which may be necessary to enable them to carry on their business. The corporations are prohibited from making any loan or advance upon property held by them on storage or far safe-keeping.* The shareholders of the respective corporations are liable to an amount equal to the par value of their stock, over and above such stock, for all debts of the corporation. AH corporations of the class named are required to make verified semi-annual reports of their condition to the Superintendent of the Banking Department, and the said Superintendent is required an- nually to examine each of the corporations, either personally or by some competent person to be appointed by him, the expense of such examination to be paid by the corporation examined. It it shall ap- pear from any examination that a corporation has committed a vio- lation of its charter or of law, or is conducting its business in an un- safe or unauthorized manner, the Superintendent shall, by an order under his hand and seal of office, direct the discontinuance of such illegal or unauthorized practices. In the event of non-compliance with such order, or whenever failure to report as required is made, the Superintendent shall communicate the facts to the Attorney-Gen- eral for such action as the nature of the case may require. Chapter 10 of the Laws of 1877, passed February 5, authorized the organization of safe deposit companies with capital stock of $50,000 in cities or villages of less than 100,000 inhabitants. The minimum amount of capital authorized prior to the passage of the act was $100,000 with privilege of increasing the same to $1,000,009. 2 Pratt V. Eaton, 79 N. Y. 452; In re Jaycox, 12 Blatchf. C. Ct. 209; 13 id. 70. 86 HISTOEICAL SKETCH. The minimum amount of capital required for organization was further reduced to $10,000 in cities or villages of less than 100,000 inhabitants, by chapter 273 of the Laws of 1883, passed April 20; $100,000 being the lowest authorized capital in cities containing at least 100,000 inhabitants. The present revision covers this subject by sections 300 to 304, EuiLDiBTG Associations. The organization of building, mutual loan and accumulating fund associations was provided for by chapter 122 of the Laws of 1851, passed April 10. The publication in two newspapers of a statement of the condition of the corporation was all of the information as to their transactions which was required to be made public, until the passage of chapter 564 of the Laws of 1875, by which act these cor- porations were required to report annually, on the 1st day of Janu- ary, to the Superintendent of the Banking Department, a statement of the condition of their affairs; and it was made the duty of the Superintendent to once in two years examine, or cause to be exam- ined, the condition, workings and affairs of each of these corporations transacting business. Chapter 96 of the Laws of 1878, passed April 1, amended that portion of the law which required regular examinations to be made, and provided for examinations only when five or more stockholders should in writing request the same. June 8, 1887, a law was enacted providing for the formation of co-opera- tive savings and loan associations (eh. 556), now superseded by the present law. The former Banking Law (1892, ch. 689), and its amendments separated Building and Mutual Loan Corporations which are desig- nated as " Building and Lot Associations " from Co-operative Sav- ings and Loan Associations; the provisions affecting the former will be found in the present revision in sections 260 to 267 inclusive, and those relating to the latter are contained in sections 210 to 245 in- clusive. THE BANKING LAW. [87] THE BAIS^KIKG LAW. CHAPTER 2 OF THE CONSOLIDATED LAWS. (Ohaptee 10, Laws of 1909.) As Amended 1909. Abticle 1. Short title; definitions (§§ 1, 2). 2. General provisions (§§ 3-45). 3. Banks (§§ 60-117). 4. Savings banks (§§ 130-164). 5. Trust companies (§§ 180-198). 6. Co-operative savings and loan associations (§§ 210-245). 7. Building and lot associations (§§ 260-267). S. Mortgage, loan and investment corporations (§§ 280-288). 9. Safe deposit companies (§§ 300-304). 10. Personal loan associations (§§ 310-314). 11. Laws repealed; when to take effect (§§ 330, 331). ARTICLE 1. Shoet Title; DEFiwiTioiirs. Section 1. Short title. 2. Definitions. § 1. Short title. — TMs chapter shall be known as the " Banking Law," and stall be applicable to all corporations and individuals specified in the next section. (Former section 1; L. 1892, ch. 689.) § 2. Definitions. — Bank. — ■ The term " bank," when used in this chapter, means any moneyed corporation authorized by law to issue bills, notes or other evidences of debt for circulation as money, to receive deposits of money and commercial paper and to make loans thereon, to discount bills, notes or other commercial paper, and to buy and sell gold and silver bullion, foreign coins, or bills of ex- change. [89] 90 THE BAM^KING LAW. Individual Banker. — The term " individual banker," when used in this chapter, means a person who has complied with the require- ments of law, and is authorized by the banking department to engage in the business of banking, and is subject to the banking law and the supervision of the superintendent of banks. Savings Bank. — The term " savings bank," when used in this chapter, means a corporation, authorized by the laws of this state, only to receive money on deposit and pay such rates of interest thereon, and to invest the same in such securities and obligations, as may be prescribed by law. Trust Company. — The term " trust company," when used in this chapter, means any domestic corporation formed for the purpose of taking, accepting and executing such trusts as may be lawfully com- mitted to it, acting as trustee in the cases prescribed by law, receiv- ing deposits of moneys and other personal property, and issuing its obligations therefor, and loaning money on real or personal securities. Co-operative Savings and Loan Association. — The term " co- operative savings and loan association," when used in this chapter, means a corporation formed for the purpose of encouraging industry, frugality, home-building and the saving of money by its members, the accumulation of savings, the loaning of such accumulations to its members, and the repayment to each member of his savings when they have accumulated to a certain sum, or at any time when he shall desire the same, or the association shall desire to repay the same. Building and Lot Association. — The term " building and lot asso- ciation," when used in this chapter, means any association or cor- poration organized for the purpose of accumulating a fund for the purchase of real property, to pay off incumbrances thereon, to aid its members in acquiring a building lot or lots, and making improve- ments thereon in the manner and form specified in the certificate of incorporation, or for all or any of such purposes. Mortgage, Loan or Investment Corporation. — ■ The term " mort- gage, loan or investment corporation," when used in this chapter, means any corporation other than an insurance corporation formed under the laws of this state or of any other state, and doing business in this state for the purpose of selling, offering for sale, or negotiating bonds or notes secured by deed of trust or mortgages on real property THE BANKING LAW. 91 or choses in action, owned, issued, negotiated or guaranteed by it, or for the purpose of receiving any money or property, either from its own members or from other persons, and entering into any contract, engagement or undertaking with them for the withdrawal of such money or property at any time with any increase thereof, or for the payment to them or to any person of any sum of money at any time, either fixed or uncertain;, and when applied to any foreign corpora- tion doing business in this state shall include any association, co- partnership, joint-stock company, individuals or firms organized or existing under the laws of any other state or country, and engaged within this state in any such business. Safe Deposit Company. — The term " safe deposit company," when used in this chapter, means every domestic corporation formed for the purpose of taking and receiving as bailee for safe-keeping and storage, jewelry, plate, money, specie, bullion, stocks, bonds, securities and valuable papers of any kind, and other valuable personal prop- erty, on deposit and guaranteeing their safety upon such terms and for such compensation as may be agreed upon by the company and the respective bailors thereof, and to rent vaults and safes and other receptacles for the purpose of such safe-keeping and storage. Personal Loan Association. — The term " personal loan associa- tion," when used in this chapter, means any association or corpora- tion organized under chapter three hundred and twenty-six of the laws of eighteen hundred and ninety-five, as amended by chapter seven hundred and six of the laws of eighteen hundred and ninety- five, chapter two hundred and six of the laws of eighteen hundred and ninety-six, chapter seventy-eight of the laws of nineteen hundred and two and chapter three hundred and thirty-three of the laws of nineteen hundred and five, or under article ten of this chapter, for the purpose of aiding persons deemed in need of pecuniary assistance by loans not exceeding two hundred dollars of money at interest upon pledges or mortgage of personal property, in the manner provided in said laws and said article. Stockholder. — The term " stockholder," when used in this chap- ter, shall apply not only to such persons as appear by the books of the corporation to be stockholders, but also to every owner of stock, legal or equitable, although the same may be on such books in the name of 92 THE BABTKIITG LAW. another person, but not to a person who may hold the stock as col- lateral for security for the payment of a debt. (Former section 2; L. 1892, ch. 689.) 1. The attorney-general, in an opinion dated November 11, 1895, h'eld that a " trust " company is not a, " bank " subject to the requirements of subdivision 2, section 25, chapter 929, Laws of 1895. 2. "Individual" bankers are those subject to the supervision of the superin- tendent of banks, and " private " bankers are those who are not subject. Perkins V. Smith, 41 Hun, 47; affd 116 N. Y. 141. 3. An " individual " banker is one who has received authority from the banking department to engage in business subject to its inspection and supervision, and " private " banker is one engaged in banking without having secured any special privileges or authority from the State. Hall v. Baker, 66 App. IMv. 131; People V. Doty, 80 N. Y. 225. THE BANKING LAW. 93 AKTIOLE 2. General Pbovisions. Section 3. The banking department; superintendent. 4. Official seal of superintendent of banks. 6. Deputies, clerks and examiners of the banking department. 6. Kooms and furniture. 7. Expenses, how defrayed. 8. Powers of superintendent. 9. Examination of securities deposited, 10. Unclaimed balances. 11. Examiners. 12. Examination and certificate as to payment of capital. 13. Affidavit to be made before commencing business. 14. Deposit of bonds or mortgages with superintendent. 15. Exchange of securities. 16. Publication of report of examiners. 17. Impairment of capital. 18. Causes for dissolution. 19. Proceedings against and liquidation of delinquent corporations and individual bankers. 20. Examination by order of court. 21. Reports. 22. Penalties for failure to report. 23. Books, papers and affairs to be examined. 24. Publication of reports. 25. Annual report of superintendent. 26. Reports presumptive evidence. 27. Restrictions. 28. Calculation of profits. 29. Losses in excess of profits. 30. Publication of unclaimed dividends and deposits. 31. Change of location. 32. Approval and certificate of superintendent upon incorporation. 33. Permission and certificate of superintendent in case of foreign cor- porations. 34. Appointment of superintendent as attorney for service of process. 35. Appointment of receiver. 36. Merger. 37. Submission of merger agreement to stockholders. 38. Eights of dissenting stockholders. 39. Effect of merger. 40. Rights of creditors and others having relations with merged cor porations. 94 THE BANKING LAW. Section 41. Communications from banking department. 42. Meetings of directors or trustees and reports thereto. 43. OflScial acts of superintendent and details of department business to be made public. 44. Banks designated as depositaries of court funds to give bonds and . pay interest. 45. Banks designated as depositaries of court funds to keep books of account. § 3. The banking department; superintendent. — There shall con- tinue to be a banking department charged with the execution of the laws relating to the corporations and individuals to which this chapter is applicable. The chief officer .of such department shall continue to be the superintendent thereof, to be known as the superintendent of banks, who shall be appointed by the governor, by and with the advice and consent of the senate, and shall hold his office for the term of three years. He shall not either directly or indirectly be interested in any such corporation, or as an individual banker. He shall receive an annual salary of seven thousand dollars, to be paid monthly in the first instance out of the treasury on the warrant of the comptroller. He shall, within fifteen days from the time of notice of his appoint- ment, take and subscribe the constitutional oath of office and file the same in the office of the secretary of state, and execute to the people of the state a bond in the penalty of fifty thousand dollars, with two or more sureties to be approved by the comptroller and treasurer of the state, conditioned for the faithful discharge of the duties of his office. (Former section 3; R. S., 1515; L. 1882, ch. 409, § 2; L. 1897, oh. 134.) § 4. Official seal of superintendent of banks. — The secretary of state shall provide the superintendent of banks with an official seal. Every paper executed by him as such superintendent in pursuance of any authority conferred on him by law, and sealed with his seal of office, shall be received in evidence, and may be recorder in the proper recording offices in the same manner and with the same effect as a deed regularly acknowledged or proven. (Former section 4; L. 1882, ch. 409, § 4; L. 1883, ch. 282; R. S., 1516.) § 5. Deputies, clerks and examiners of the banking department. — The superintendent of banks shall employ from time to time such THE BANKING LAW. 95 clerks and examiners as he may need to discharge in a proper manner the duties imposed upon him by law. They shall perform such duties as he shall assign to them. He shall fix their compensation, which shall be paid monthly on his certificate and upon the waramt of the comptroller in the first instance out of the treasury. He may appoint a first, a second, and a third deputy, each of whom shall within fifteen days from the time of notice of his appointment take and subscribe the constitutional oath of office, and file the same in the office of the secretary of state. In case of a vacancy in the office of superin- tendent, or in his absence or inability to act, for thirty successive days, none of his deputies shall thereafter act as superintendent, until the first deputy, or if there be a vacancy in the office of first deputy, or he be absent or unable to act, the second deputy or, if there be a vacancy in the office of second deputy, or he be absent or unable to act, the third deputy, shall have executed to the people of the state a bond in the penalty of fifty thousand dollars, with two sureties to be approved by the comptroller and treasurer of the state, conditioned for the faithful discharge of the duties of the office of superintendent while such deputy acts as such superintendent. (Former section 5; R. S., 1515, 1574; L. 1882, ch. 409, § 2; L. 1902, oh. 54.) See Penal Law, § 300. 1. The act of granting or refusing a certificate by tlie superintendent is judicial and can only be reviewed by certiorari. Mandamus does not lie except he refuses to act upon an application therefor. People ex rel. Best v. Preston, 62 Hun, 185; aflF'd without opinion in 131 N. Y. 644. 2. When an application for the superintendent's certificate is made by an em- ployee and duly passed upon, the decision is res adjudicata and binding, until reversed, on any subsequent superintendent, in analogy to a judgment of a com- petent court. lb. 3. A special bank examiner's right to demand compensation for his services is complete when he has finished the work assigned him, and the time then begins to run under the statute of limitations and cannot be extended by his neglecting to demand a certificate. lb. § 6. Rooms and furniture. — The trustees or other officers having by law the custody of the public buildings at the state capital, shall assign to the superintendent suitable rooms therein for conducting the business of the banking department. The superintendent shall, from time to time, furnish the neces- sary furniture, stationery, fuel, lights and other proper conveniences for the transaction of such business, the expenses of which shall be 96 THE BANKING LAW. paid on the certificate of the superintendent and the warrant of the comptroller in the first instance out of the treasury. (Former section 6; E. S., 1515; L. 1882, ch. 409, § 5.) § 7. Expenses, how defrayed. — AH the expenses incurred in and about the conduct of the business of the department, including the salary of the superintendent and clerks, shall be charged to and paid by the corporations and individuals required to report to the super- intendent under the provisions of this chapter in such proportions as the superintendent shall deem just and reasonable. The expenses incurred and services performed on account of any such corporation or individual or on account of any foreign cor- poration or its agency shall be charged to and paid by the cor- poration, individual or agency for whom they were incurred or performed. If any corporation, individual or agency shall not, after due notice, pay any such charges, the superintendent may apply the proceeds of the sale of or the dividends on any stock or the interest on any bonds and mortgages in his hands deposited by such corpora- tion or individual to the payment of such charges, with interest at the rate of six per centum. The moneys so applied, and all moneys received by him in pay- ment of such charges, shall be deposited and paid by him into the treasury of the state, to reimburse all sums advanced from the treasury for such expenses, except moneys received from any cor- poration or individual banker for expenses incurred or services per- formed on account of any such corporation or individual, which moneys shall be applied by the superintendent in payment of such expenses and a verified account thereof included in his annual report. If any such corporation or individual or any foreign corporation or its agency shall fail to pay such charges as herein required, and there are no stocks, bonds or mortgages in the department, the dividends or interest on which can be applied in payment thereof, the superintendent shall report to the attorney-general the failure of any such corporation or individual or any such foreign corporation or its agency to pay such charges, and the attorney-general shall thereupon bring an action in the name of the people for the recovery of such charges. (Former section 7; K. S., 1515, 1531, 1560; L. 1882, ch. 409, §§ 6, 74, 226; L. 1889, ch. 414, § 5; L. 1901, ch. 472; L. 1890, ch. 506, § 5.) THE BANKIirG LAW. 97 § 8. Powers of superintendent. — Every corporation and individ- ual banker specified in section two of this chapter shall be subject to tbe inspection and supervision of the superintendent of banks. He shall, either personally or by some competent person or personsi to be appointed by bim, to be known as examiners, visit and examine every bank, trust company and individual banker at least twice in each year, and every savings bank at least once in two years, and every other corporation specified in section two of this chapter at least once in each year. On every such examination inquiry shall be made as to the con- dition and resources of tbe corporation, the mode of conducting and managing its affairs, the action of its directors, the investment of its funds, the safety and prudence of its management, the security afforded to those by whom its engagements are held, and whether tbe requirements of its charter and of law have been complied with in tbe administration of its affairs, and as to such other matters as the superintendent may prescribe. He shall bave power in like manner to examine every corporation and individual banker specified in section two, whenever, in his judgment, its condition and manage- ment is sucb as to render an examination of its affairs necessary and expedient. He shall also bave power to examine or cause to be examined every agency located in this state of any foreign bank or banking corpora- tion for the purpose of ascertaining whether it has violated any law of the state, and for such other purposes and as to such other matters as the superintendent may prescribe. The superintendent and every such examiner shall have power to administer an oath to any person whose testimony may be required on the examination of any corporation or individual banker specified in section two of this chapter, or on the examination of any such agency of any foreign bank or banking corporation, and to compel the appearance and attendance of any such person for the purpose of any such examination. If the examination shall be made by the superintendent, or by one or more of the regular olerks in the department, no charge shall be made except for necessary traveling and otber actual expenses. The result of such examination of a savings bank shall be certi- 7 yS THE BANKING LAW. fied by the examiners, or one of them, upon the records of the cor- poration examined. (Former section 8; R. S., 1515, 1516, 1517, 1559, 1572, 1591, 1606; L. 1875, ch. 564, §§ 3, 4; ch. 613, §§ 12, 13; L. 1878, ch. 96; L. 1882, ch. 409, §§ 3, 7, 11-14, 221, 222, 277; L. 1884, ch. 47; L. 1901, ch. 253.) § 9. Examination of securities deposited. — The president or cashier of every such corporation, and every individual banker, shall once or more during each fiscal year, and at such time or times during ordi- nary business hours as he may select, examine and compare all securi- ties deposited by such corporation or banker in the office of the superintendent with the books of the department, and, if found correct, execute to the superintendent a receipt stating the different kinds of such securities and the amounts thereof, and that they are in the custody and possession of the superintendent at the date of the receipt. Any individual banker unable to make such examination in person may, by written appointment, authorize an agent to make the same in his behalf, whose receipt shall have the same force and effect as if executed by the banker in person. If any such corporation or individual banker shall refuse or neglect to make such examination during any fiscal year, the comptroller, secretary of state and superintendent shall appoint some suitable and discreet person as agent for such corporation or individ- ual banker, who shall make such examination, and if the securities so held by the superintendent shall be found to agree with the books of the department, such agent shall execute the receipt before men- tioned, and it shall be of like force and effect as if executed by the president or cashier of any such corporation, or by any such individ- ual banker, or by an agent appointed by him. Such corporation or individual banker shall pay on demand to the person so appointed and making such examination and executing such receipt, such com- pensation for his services and expenses in making such examination as the superintendent shall certify to be just and reasonable. (Former seetion 9; R. S., 1516, 1517; L. 1882, ch. 409, §§ 8, 9, 12.) § 10. TTnolaimed balances. — The superintendent shall pay into the treasury of the state all balances of money remaining in his hands unclaimed for six years from the date of the deposit with him, to be applied to the current expenses of the banking department, except THE BANKING LAW. 99 the moneys required by this chapter to be kept on deposit with him and the moneys deposited with him by receivers of insolvent savings banks. (Former section 10; R. S., 1516; L. 1882, ch. 409, § 10.) See section 164 as to unclaimed moneys. § 11. Examiners. — Every examiner appointed by the superin- tendent shall, before entering upon the duties of his appointment, take and file in the ofhce of the clerk of the county where he resides, the constitutional oath of oiSce. And when commissioned by the superintendent he shall forthwith examine fully into the books, papers and affairs of the corporation or individual banker specified in his commission, and report on oath to the superintendent the result of such examination. No such examiner shall be appointed receiver of any corporation or individual banker whose books, papers and affairs be shall have examined pursuant to such appointment. (Former section 11; R. S., 1517; L. 1882, ch. 409, §§ 12, 13.) See section 5, ante. § 12. Examination and certificate as to payment of capital. — When . any such corporation or individual banker shall have filed with the superintendent the requisite certificate prior to commencing business under the laws of this state, and shall have made the deposit, if any, required by law, the superintendent shall, before such corporation or individual banker shall be authorized to commence business, examine or cause an examination to be made in order to ascertain whether the requisite capital of such corporation or banker has been paid in, in cash. The superintendent shall not authorize such corporation or individual banker to commence business unless it appears to hi^ satisfaction from such examination or other evidence satisfactory to him that the requisite capital has been in good faith subscribed and paid in cash. (Former section 12; R. S., 1518; L. 1882, ch. 409, § 18.) § 13. Affidavit to be made before commencing business. — No such corporation shall commence its corporate business until its president and cashier or treasurer or secretary, or its two principal officers, by whatever name known, shall have made and subscribed an affidavit stating that the whole of its capital stock, or such portion thereof as 100 THE BAWKEITG LAW. by law shall be required to be paid or secured before the commence- ment of its operations, has been actually paid or secured to be paid, according to law. Such affidavit may be made before any officer authorized to administer oaths in the county where the corporation has its principal place of business, and shall be filed in the clerk's office of such county. Every such corporation shall cease to be a cor- poration if the affidavit above required shall not be made and filed within one year from the time its charter shall be granted. (Former section 13; E. S., 1556; L. 1882, ch. 409, §§ 192, 193, 194.) See General Corporation Law, § 101. § 14. Deposit of bonds or mortgages with superintendent. — Every such corporation, except banks, savings banks and domestic corpora- tions specified in article six, and eight of this chapter, engaged in receiving deposits of money in trust in this state, and required to make a report of its affairs to the superintendent of banks, shall, before engaging in such business, transfer and assign to the super- intendent registered public stocks or bonds of the United States or of this state, or of any city, county, town, village or free school district in this state, authorized by the legislature to be issued, to the amount in value, and to be at all times so maintained by the corpora- tion, of ten per centum on its paid up capital stock, but not less in any case than one hundred thousand dollars in cities the popula- tion of which exceeds five hundred thousand inhabitants, and not less than fifty thousand dollars in cities containing more than one hundred thousand inhabitants and less than five hundred thousand inhabitants, and not less than thirty thousand dollars in cities con- taining more than twenty-five thousand inhabitants and less than one hundred thousand inhabitants, and not less than twenty thou- sand dollars in cities or towns of less than twenty-five thousand in- habitants, the number of inhabitants in each city or town to be ascer- tained by the last federal census or state enumeration. Such stocks must be registered in the name of the superintendent officially as held in trust under and pursuant to this chapter, and the same shall be held by the superintendent in trust, as security for the depositors with and the creditors of such corporation, and subject to sale and transfer, and to the disposal of the proceeds thereof by the superin- tendent, only on the order of a court of competent jurisdiction. THE BANKING LAW. Until the order of such court, authorizing such sale or^^ft^MfeMti-oif other disposition thereof, the superintendent shall pay over to such corporation the interest which may be received on such securities. Should any corporation, at any time, have deposited with the super- intendent more than the amount hereby required, the excess may be refunded. With the approval of the superintendent, such a deposit may be made by the corporation, either wholly or in part, in bonds or mortgages satisfactory to the superintendent, on improved, un- incumbered productive real property in this state worth at least seventy-five per centum more than the amount loaned thereon. In the ease of any foreign corporation, including co-operative savings and loan associations organized or incorporated in any state or county outside of this state, as defined in section two of this chapter, doing business in this state, it shall deposit with the superintendent in trust as security for the depositors with and creditors of said corporation in this state one hundred thousand dollars in securities enumerated in this section. If any foreign corporation doing business in this state shall refuse or neglect to make the deposit herein required with the superintendent, the fact shall be reported by the superintendent to the attorney-general, who shall forthwith take such proceeding as may be necessary to enjoin and restrain such corporation from trans- acting any business in this state, and the court to which such applica- tion shall be made shall be authorized to make such order or decree, and to issue such process in the premises to enforce compliance by the corporation with the provisions of this chapter, or to restrain the transaction of business by it in this state, as it may deem proper. (Former section 14; E. S., 1528; L. 1882, ch. 409, § 67.) See section 76, post. 1. In an opinion by the attorney-general, filed in the banking department, February 16, 1883, that officer held that under the banking law of 1882 the superintendent of the banking department had such incidental power as was necessary to carry out the general powers conferred upon him; and further that such superintendent had the right to approve of mortgages upon property which was of sufficient value, conditional upon the insurance on the property being properly kept up, and in the assignment taken by him might require a clause to that effect. If the insurances were not kept up, then there was not full compli- ance with the provisions of the clause that the amount in value must be main- tained by the corporation. The attorney-general, in conclusion, said : " I do not think it was the meaning of the law to prohibit the taking of a mortgage upon city property upon which 102 THE BAITKING LAW. waa erected a substantial block, though to make that security entirely satisfac- tory, an insurance in proper form in some solvent company might be required." As to the constitutionality of this section as to foreign corporations. People ■V. Granite State Provident Ass'n, 161 N. Y. 492; Blake v. McClung, 172 U. S. 239. § 15. Exchange of securities. — The securities deposited by any corporation pursuant to tlie provisions of this chapter with the super- intendent of bauks in trust for any purpose, may be exchanged from time to time for other securities receivable as provided in this chap- ter ; and so long as the corporation so depositing shall continue solvent and comply with the laws of the state, it may be permitted by the superintendent to collect the interest or dividends on such deposits, and from time to time to withdraw any of such securities on de- positing with the superintendent other like securities, the par and market value of which shall be equal to the par and market value of those withdrawn. When any such deposit consists of bonds and mortgages, the president or authorized agent of the corporation depositing the same shall annex to every such mortgage his affidavit that the mortgage was made and taken in good faith for money loaned by the corpora- tion which he represents, to the amount therein named, and that no part thereof has been since paid or returned ; or if any part has been paid, the amount unpaid, and that he has reason to believe and does believe that the premises thereby mortgaged are worth at least seventy-five per centum more than the amount of the mortgage thereon; and the superintendent shall prescribe such regulations for ascertaining the title and value of the real property mortgaged as he may deem necessary. (Former section 15; R. S., 1528; L. 1882, ch. 409, § 67.) Assigned mortgages are not valid substitutes in exchange for securities deposited with the banking department, as the bank officials cannot make affi- davit that such mortgages were " taken in good faith for money loaned." Opinion Atty.-Gen., June 21, 1909. The above opinion was confirmed by Supreme Court, Special Term, Albany county, in Central Trust Co. v. Clark Williams as Supt., by decision filed August 10, 1909. § 16. Publication of report of examiners. — "Whenever the superin- tendent shall deem it proper, a copy of any report made by any ex- aminer shall be published in the state paper and in at least one daily THE BANKING LAW. 103 newspaper in tlie city of New York, and in one newspaper published in the county where the principal place of business of such corpora- tion or individual is located. (Former section 16; E.. S., 1517, 1518; L. 1882, ch. 409, §§ 12, 15; L. 1884, ch. 47.) § 17. Impairment of capital. — Whenever the superintendent shall have reason to believe that the capital stock of any corporation or individual banker, to which this chapter is applicable, is reduced by impairment or otherwise below the amount required by law, or by its certificate or articles of association, he may require such corpora- tion or individual banker to make good the deficiency within sixty days after the date of such requisition. He may examine or cause to be examined any such corporation to ascertain the amount of such impairement or reduction of capital, and whether the deficiency has been made good as required by him. The directors of every such corporation upon which such requisition shall have been made shall immediately give notice of such requisition to each stockholder of the corporation, 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 place of residence, or served personally upon him. If any stockholder shall refuse or neglect to pay the assessment specified in such notice within, sixty days from the date thereof, the directors of such corporation shall have the right to sell to the highest bidder at public auction the stock of such stockholder, after giving previous notice of such sale for two weeks in a newspaper of general circulation published in the county where the principle office of such corporation is located; or such stock may be sold at private sale, and without such published notice, provided, however, that before making a private sale thereof an offer in writing to purchase such stock shall first be obtained, and a copy thereof served upon the owner of record of the stock sought to be sold either personally or by mailing a copy of such offer to such ovi^er at his place of residence or the address furnished by him to the corporation; and if, after service of such offer, such owner shall still refuse or neglect to pay such assessment within two weeks from the time of service of such offer, the said directors may accept such offer and sell such stock to the person or persons making 104 THE BANKING LAW. such offer, or to any other person or, persons, making a larger offer than the amount named in the offer submitted to such stockholder; but such stock shall in no event be sold for a smaller sum than the valuation put on it by the superintendent in his determination and certificate, which valuation shall not be less than the amount of the assessment called for and the necessary costs of sale. Out of the avails of the stock sold the directors shall pay the necessary costs 6i sale, and the amount of the assessment called for thereon. The balance, if any, shall be paid to the person or persons whose stock has been thus sold. A sale of stock as herein provided shall effect an absolute cancellation of the outstanding certificate or certificates evidencing the stock so sold, and shall make the same null and void, and a new certificate or new certificates shall be issued to the pur- chaser or purchasers of said stock. If it shall appear to the superin- tendent that any such corporation or individual banker has violated its charter or any law binding upon it, he may by an order under his hand and official seal addressed to such corporation or individual banker direct the discontinuance of such violation, or, if it shall appear to the superintendent that any such corporation or individual banker is conducting business in an unsafe or unauthorized manner, he may in like manner direct the discontinuance of such unsafe or unauthorized practices. Such order shall require such corporation or individual banker to show cause before the superintendent at a time and place to be fixed by him, why said orders should not be observed. (Former section 17; K S., 1518, 1562, 1586; L. 1882, ch. 409, §§ 17, 233; L. 1890, ch. 429; L. 1905, eh. 649; L. 1907, ch. 552; L. 1908, ch. 143.) After the superintendent of banks has taken possession of the assets of an insolvent banking corporation with the intention of having an action brought to dissolve the same, proceedings for voluntary dissolution -will not lie. In re Mur- ray Hill Bank, 153 N. Y. 199, 47 N. E. 298. Affirming same case, 14 App. Div. 318, 629, 43 N. Y. Supp. 836, 44 N. Y. Supp. 1125. See notes to section 142. § 18. Causes for dissolution. — If the capital of any corporation to which this chapter is applicable shall be impaired, or if any such corporation shall refuse to submit its books, papers and concerns to the inspection of any examiner, or if any officer thereof shall refuse to be examined upon oath touching the concerns of such corporation, or if it shall violate its charter, or any law of the state, or if such THE BANKING LAW. 105 corporation shall suspend payment of its obligations, or if such cor- poration shall conduct its business in an unsafe or unauthorized manner, or if from any examination or report provided for by this chapter the superintendent shall conclude that such corporation is in an unsound or unsafe condition to transact the business for which it is organized, or that it is unsafe and inexpedient for it to continue business, and the superintendent shall communicate the facta to the attorney-general, an action to procure a judgment dissolving such corporation may be maintained. (Former section 17a; L. 1892, ch. 689; L. 1908, eh. 143, § 2.) § 19. Proceedings against and liquidation of delinquent corporations and individual bankers. — Whenever it shall appear to the superin- tendent that any corporation or individual banker to which this chap- ter is applicable has violated its charter or any law of the state, or is conducting its business in an unsafe or unauthorized manner, or if the capital of any such corporation or individual banker is im- paired, or if any such corporation or individual banker shall refuse to submit its book^, papers and concerns to the inspection of any examiner, or if any officer thereof shall refuse to be examined upon oath touching the concerns of any such corporation or individual banker, or if any such corporation or individual banker shall suspend payment of its obligations, or if from any examination or report provided for by this chapter the superintendent shall have reason to conclude that such corporation or individual banker is in an un- sound or unsafe condition to transact the business for which it is organized, or that it is unsafe and inexpedient for it to continue business, or if any such corporation or individual banker shall neglect or refuse to observe an order of the superintendent specified in sec- tion seventeen of this chapter, the superintendent may forthwith take possession of the property and business of such corporation or individual banker, and retain such possession until such corpora- tion or individual banker shall resume business, or its affairs be finally liquidated as herein provided. On taking possession of the property and business of any such corporation or individual banker the superintendent shall forthwith give notice of such fact tO' any and all banks, trust companies, associations and individuals, holding or in possession of any assets of such corporation or individual 106 THE BANKING LAW. banker. No bank, trust company, association or individual knowing of sucb taking possession by the superintendent, or notified as afore- said, shall have a lien or charge for any payment, advance or clear- ance thereafter made, or liability thereafter incurred against any of the assets of the corporation or individual banker of whose prop- erty and business the superintendent shall have taken possession as aforesaid. Such corporation or individual banker may, with the consent of the superintendent, resume business upon such conditions as may be approved by him. Upon taking possession of the property and business of such corporation or individual banker the superin- tendent is authorized to collect moneys due to such corporation or individual banker, and do such other acts as are necessary to con- serve its assets and business, and shall proceed to liquidate the affairs thereof as hereinafter provided. The superintendent shall collect all debts due and claims belonging to it, and upon the order of the supreme court may sell or compound all bad or doubtful debts, and on like order may sell all the real and personal property of such corporation or individual banker on such terms as the court shall direct; and may, if necessary to pay the debts of such corporation, enforce the individual liability of the stockholders. The superin- tendent may, under his hand and official seal, appoint one or more special deputy superintendents of banks, as agent or agents, to assist him in the duty of liquidation and distribution, the certificate of appointment tO' be filed in the office of the superintendent, and a certified copy in the ofiice of the clerk of the county in which the principal office of such corporation or individual banker was located. The superintendent may from time to time authorize a special deputy superintendent to perform such duties connected with such liquida- tion and distribution as the superintendent may deem proper. The superintendent may employ such counsel and procure such expert assistance and advice as may be necessary in the liquidation and dis- tribution of the assets of such corporation or individual banker, and may retain such of the officers or employees of such corporation or individual banker as he may deem necessary. The superintendent shall require from a special deputy superintendent and from such assistants such security for the faithful discharge of their duties a& he may deem proper. The superintendent shall cause notice to be given by advertisement, in such newspapers as he may direct, weekly THE BANKING LAW. lor for three consecutive months, calling on all persons who may have claims against such corporation or individual banker to present the same to the superintendent, and make legal proof thereof at a place and within a time, not earlier than the last day of publication, to be therein specified. The superintendent shall mail a similar notice to all persons whose names appear as creditors upon the books of the corporation or individual banker. If the superintendent doubts the justice and validity of any claim, he may reject the same, and serve notice of such rejection upon the claimant either by mail or person- ally. An affidavit of the service of such notice, which shall be prima facie evidence thereof, shall be filed with the superintendent. An action upon a claim so rejected must be brought within six months after such service. Claims presented after the expiration of the time fixed in the notice to creditors shall be entitled to share in the distribution only to the extent of the assets in the hands of the super- intendent equitably applicable thereto. Upon taking possession of the property and assets of such corporation or individual banker the superintendent shall make an inventory of the assets of such cor- poration or individual banker in duplicate, one to be filed in the office of the superintendent, and one in the office of the clerk of the county in which the principal office of such corporation or individual banker was located; upon the expiration of the time fixed for the presentation of claims the superintendent shall make in duplicate a full and complete list of the claims presented, including and specifying such claims as have been rejected by him, one to be filed in the office of the superintendent, and one in the office of the clerk of the county in which the principal office of such corporation or individual banker was located. Such inventory and list of claims shall be open at all reasonable times to inspection. The compensa- tion of the special deputy superintendents, counsel and employees and assistants, and all expenses of supervision and liquidation, shall be fixed by the superintendent subject to the approval of the supreme court in the judicial district in which the principal office of such corporation or individual banker is located on notice to such corpora- tion or individual banker, and shall upon the certificate of the super- intendent be paid out of the funds of such corporation or individual banker in the hands of the superintendent. The moneys collected by the superintendent shall be from time to time deposited in one 108 THE BANKING LAW. or more state banks of deposit, savings banks or trust companies, and, in case of the suspension or insolvency of the depository, such deposits shall be preferred before all other deposits. At any time after the expiration of the date fixed for the presentation of claims the superintendent may out of the fimds remaining in his hands after the payment of expenses declare one or more dividends, and after the expiration of one year from the first publication of notice to creditors he may declare a final dividend, such dividends to be paid to such persons, and in such amounts, and upon such notice, as may be directed by the supreme court in the judicial district in which the principal office of such corporation or individual banker is lo- cated. Objections to any claim not rejected by the superintendent may be made by any party interested by filing a copy of such objec- tions with the superintendent, who shall present the same to the supreme court at the time of the next application to declare a divi- dend. The court may make proper provision for unproved or un- claimed deposits. Whenever any such corporation or individual banker, of whose property and business the superintendent has taken possession as aforesaid, deems itself aggrieved thereby, it may, at a;Qy time within ten days after such taking possession, apply to the supreme court in the judicial district in which the principal office of such corporation or individual banker is located to enjoin further proceedings ; and said court, after citing the superintendent to show cause why further proceedings should not be enjoined, and hearing the allegations and proofs of the parties and determining the facts may, upon the merits, dismiss such application or enjoin the super- intendent from further proceedings, and direct him to surrender such business and property to such corporation or individual banker. Whenever the superintendent shall have paid to each and every de- positor and creditor of such corporation (not including stockholders), whose claim or claims as such creditor or depositor shall have been duly proved and allowed, the full amount of such claims, and shall have made proper provision for unclaimed and unpaid deposits or dividends, and shall have paid all the expenses of the liquidation, the superintendent shall call a meeting of the stockholders of such corporation by giving notice thereof for thirty days in one or more newspapers published in the county where the principal office of such corporation was located. At such meeting the stockholders shall de- THE BANKING LAW. 109 termine whether the superintendent shall be continued a liquidator and shall wind up the affairs of such corporation, or whether an agent or agents shall be elected for that purpose, and in so determin- ing the said stockholders shall vote by ballot, in person or by proxy, each share of stock entitling, the holder to one vote, and the majority of the stock shall be necessary to a determination. It case it is de- termined to continue the liquidation under the superintendent, ho shall complete the liquidation of the affairs of such corporation, and after paying the expenses thereof, shall distribute the proceeds among the stockholders in proportion to the several holdings of stock in such manner and upon such notice as may be directed by the supreme court. In case it is determined to appoint an agent or agents to liquidate, the stockholders shall thereupon select such agent or agents by ballot, a majority of the stock present and voting, in preson or by proxy, being 'necessary to a choice. Such agent or agents shall execute and file with the superintendent a bond to the people of the state in such amount, with such sureties and in such form as shall be approved by the superintendent, conditioned for the faithful performance of all the duties of his or their trust, and thereupon the superintendent shall transfer and deliver to such agent or agents all the undivided or uncollected or other assets of such corporation then remaining in his hands ; and upon such trans- fer and delivery, the said superintendent shall be discharged from any and all further liability to such corporation or individual banlter and its or his creditors. Such agent or agents shall convert the assets coming into his or their possession into cash, and shall account for and make distribution of the property of said corporation as is herein provided in the case of distribution by the superintendent, except that the expenses thereof shall be subject to the direction and control of a court of record of competent jurisdiction. In case of the death, removal or refusal to act of any such agent or agents the stockholders, on the same notice, to be given by the superintendent upon proof of such death, removal or refusal to act being filed with him, and by the same vote hereinbefore provided, may elect a suc- cessor, who shall have the same powers and be subject to the same liabilities and duties as the agent originally elected. Dividends and unclaimed deposits remaining unpaid in the hands of the superin- tendent for six months after the order for final distribution shall be 110 THE BAJYKING LAW. by him deposited in one or more state banks of deposit, savings banks or trust companies, to the credit of the superintendent of banks in his name of office, in trust for the several depositors with and credi- tors of the liquidated corporation from which they were received entitled thereto. The superintendent shall report to the legislature annually in his report the names of corporations so taken possession of and liquidated and the sum of unclaimed and unpaid deposits or dividends with respect to each of them respectively. The superin- tendent may pay over moneys so held by him to the persons respec- tively entitled thereto upon being furnished satisfactory evidence of their right to the same. In cases of doubt or conflicting claims he may require an order of the supreme court authorizing and directing the payment thereof. He may apply the interest earned by the moneys so held by him towards defraying the expenses in the pay- ment and distribution of such unclaimed deposits or dividends to the depositors and creditors entitled to receive the same, and he shall include, in his annual report to the legislature, a statement of the amount of interest earned by such unclaimed dividends. (Former section 18; L. 1909, ch. 143.) 1. A corporation organized under Laws 1851, ch. 122, for building, mutual loan, •etc., associations, is subject to section 19. On the question whether it is expedient to continue business, the verified report of bank examiner, as well as the affi- davits on motion for receiver, is to be considered. The conditional consent of shareholders to scaling down of book value of their shares and thus reducing liabilities held to be inoperative. People v. Republic Savings and Loan Associa- tion, 53 App. Div. 384, 65 N. Y. Supp. 1036. 2. The duty of the superintendent, imposed by section 19, to report to attorney- general on delinquent corporations includes reports on co-operative banking corporations organized under Laws 1851, ch. 122; the duty is not discretionary but is absolute, and a relator is not necessary. Where a deficit was caused by gross mismanagement, a scaling down of amounts due shareholders so as to •decrease liabilities and show an excess of assets, will not save prosecution. People V. Mercantile Co-op. Bank, 53 App. Div. 295, 65 N. Y. Supp. 766. 3. An agreement was made between the Madison Square Bank and the St. Nicholas Bank (both of them being State banks) in January, 1891, by which the latter, a member of the New York Clearing House Association, became the agent to clear through the clearing house checks drawn upon the former. The latter bank sub- mitted in writing a, statement of the conditions on which it would undertake this business for the Madison Square Bank as follows: " Fifty thousand dollars balance to be kept at all times, to be free from interest. An allowance at the rate of 2 per cent, per annum shall be allowed on average •exceeding this amount. The Madison Square Bank is to keep with this bank $100,000 in approved bills receivable." THE BANKIITG LAW. Ill The cashier of the Madison Square Bank, in a letter dated January 9, 1891, to the St. Nicholas Bank, says: " Referring to conversation of our president with your good selves, we would say that we accept the terms and conditions on which your bank agrees to clear for us as per your memorandum, namely, $50,000 balance to be kept with you at all times free of interest. Interest at 2 per cent, per annum to be allowed us on average exceeding that amount. This bank to keep with you $100,000 of approved bills receivable. . . . We enclose copy of a letter addressed by us to the clearing house committee to conform with the requirements of their circular of December 18th last." That letter enclosed a, copy of a resolution signifying the acceptance of the Madison Square Bank of the terms of the circular and authorizing its cashier to send a check for the annual payment of $200 required of banks clearing through members. The oral agreement was made between the parties at the time of the arrange- ment referred to in said letter of the 9th of JanuaTy, that other securities of equal value might be substituted from time to time for those first deposited, making up the $100,000 of bills receivable. The object of the Clearing House Association, as stated in its constitution, is " the effecting at one place of the daily exchanges between the several associate banks, and the payment at the same place of balances resulting from such exchanges." The Madison Square Bank was not a member of the association. The twenty-fifth section of the constitution was as follows: " Whenever exchanges shall have been made at the clearing house by previous arrangement between members of the association through one of their number, and banks in the city and vicinity, who are not members, the receiving bank at the clearing house shall in no case discontinue the arrangement without giving previous notice, which notice shall not take effect until the exchanges of the morning following the receipt of such notice shall have been completed." This section was in force at and before January 9, 1891, and is still in force, and it was known to be so by the Madison Square Bank at the time of the making of this arrangement. After the making of this arrangement, and on and after the 13th January, 1891, the St. Nicholas Bank made the clearances at the clearing house for the Madison Square Bank up to and including the 8th day of August, 1893, and the Madison Square Bank deposited and kept good, as to amount and value, its deposit of bills receivable with the St. Nicholas Bank and up to some time in July, 1893, kept good its money balance of $50,000 in addition thereto. Some time prior to August 8, 1893, the St. Nicholas Bank desired to end the arrange- ment for making clearances for the Madison Square Bank. At that date it held, also, certain collateral securities, taken upon loans made upon notes of the Madison Square Bank and by agreement they or their proceeds should be applied to any other obligations of that bank. On the 8th day of August, 1893, the St. Nicholas Bank gave the notice required by the 25th section, that it would cease to make clearances for the Madison Square Bank. This was served upon the banks constituting the Clear- ing House Association on that day. By the terms of section 25 this notice took effect upon the completion of the 112 THE BANKING lAW. exchanges at the clearing house on the 9th of August. These clearances were made every day immediately after 10 o'clock, and were completed before 12 o'clock. The St. Nicholas Bank paid, on the 9th of August, through the clearing house, cheeks drawn upon the Madison Square Bank by depositors having amounts to meet the same to their credit as depositors on the books of the Madison Square Bank, $372,000. On the 8th day of August, 1893, the Madison Square Bank, after ineffectual efforts to obtain a loan to relieve its immediate necessities, was visited by the clearing house committee and its condition examined; also by an examiner of the State banking department. After this examination by the committee of the clearing house their conclusion that the bank was not in a condition to continue business was communicated to the officers and some of the directors of the Madison Square Bank. The Madison Square Bank did not open for business on the following day. It was, in fact, insolvent on the 8th of August, 1893, and the officers of the St. Nicholas Bank knew before the exchanges were made on the 9th of August that the Madiaon Square Bank was insolvent, or that its insolvency was imminent and that it had stopped business. Included in the gross sum of $372,000, the amount of the checks upon the Madison Square Bank, cleared by the St. Nicholas Bank on the 9th of August, were two cheeks drawn by the treasurer of the State of New York, against funds of the State deposited in the said bank, which cheeks were signed and dated on the 8th day of August, 1893, and were deposited in banks in the city of New York, which were members of the Clearing House Association, before 10 o'clock on the morning of the 9th of August, 1893, and were by such banks sent to the clearing house on said 9th day of August. The clearance of said checks was regular and according to the usual course of business among the banks constitut- ing said Clearing House Association, notwithstanding the fact that they were not deposited for collection with a clearing house bank until the morning of the 9th day of August, 1893. The St. Nicholas Bank had no knowledge on the 9th day of August, 1893, of any irregularity in regard to the drawing, deposit or transmission to the clearing house of any of the checks going to make up said gross amount of $372,000. The referee found that the payments of cheeks on the morning of August 9, 1893, were in the performance of its contract with the Madison Square Bank, and were not made with the intent on the part of either of the banks to give a preference to any creditor of the Madison Square Bank over any other creditor; or in violation of the Corporation Law of the State, and he held that the plain- tiffs were not entitled to recover any part of the money or securities held by the St. Nicholas Bank. His decision was sustained by the Court of Appeals. O'Brien v. Grant, 146 N. Y. 165, 28 L. E. A. 361, 40 N. E. 871. 4. A proceeding by the attorney-general for dissolution takes precedence over a preceding for voluntary dissolution. Matter of Murray Hill Bank, 153 N. Y. 199. 5. As to the sufficiency of a complaint and statement of requisite facts. People •17. Man. Real Estate and Loan Co., 175 N. Y. 133. 6. As to application of bankruptcy proceedings, see Collier on Bankruptcy, 7th ed. § 20. Examination by order of court. — The creditors and share- holders of any such corporation whose debts or shares shall amount THE BANKING LAW. to one thousand dollars may make application to the supreme court by a verified petition setting forth facts showing that an examination of the affairs of the corporation should be made, and the court may thereupon, in its discretion, order such an examination to be made by a referee for the purpose of ascertaining the safety of the invest- ments and the prudence of the management of the corporation. The result of every such examination, together with the opinion of the referee thereon, shall be published in such manner as the court shall direct. The court shall make such order in respect to the expenses of.the examination and publication as it may deem proper. (Former section 19; R. S., 1518; L. 1882, ch. 409, § 19.) This gives only a visitorial power and authorizes no interference except examination, and the publication of the result. Parmly v. 10th Ward Bank, 3 Ed. Ch. 395. § 21. Beports. — Every corporation and individual banker subject to the provisions of this chapter shall make a written report to the superintendent of banks, in such form and containing such matters as he shall prescribe. In the case of a bank, trust company or in- dividual banker, the superintendent shall, at least once in every three months, designate some day therein in respect to which the report shall be made. In ease of a bank, individual banker or trust company each such report shall state, in addition to the matters pre- scribed by the superintendent of banks, the amount of deposits the payment of which, in case of insolvency, is preferred by law or other- wise over other deposits. The superintendent of banks shall pre- scribe the manner and form of making such statement. If a savings bank, or safe deposit company, such report shall be made semi- annually on or before the first day of February and August in each year, and shall contain a statement of its condition on the mornings of the first days of January and July preceding. If a savings bank, such report shall state the amount loaned upon bond and mortgage, together with a list of such bonds and mortgages and the location of the mortgaged premises, as have not been previously reported, and also a list of such previously reported as have been since paid wholly or in part, or have been foreclosed, aijd the amount of such payments respectively; the original cost, date of purchase, date of maturity, stated rate of interest, par value and estimated investment value of all stock or bond investments, designating each particular kind of 8 114 THE BANKIITG LAW. stock or bond ; the amount loaned upon the pledge of securities, with a statement of the securities held as collateral for such loans; the amount invested in real estate, giving the cost of the same, , the amount of cash on hand and on deposit in banks or trust companies, and the amount deposited in each ; and such other information as the superintendent may require. The estimate of investment value of stock and bond investment shall be made by each savings bank in the nianner prescribed by the superintendent of banks, provided that no stock or bond shall be estimated at a higher price or value than its investment value by amortization as provided in section one hundred fifty-three of this chapter; or, if the interest upon said security has been in default for more than thirty days prior to the date of such report, or if said security shall cease to be a legal invest- ment for savings banks, at a higher value than the market value thereof. Such report shall also state all the liabilities of such sav- ings corporation on the morning of the said first day of January and July ; the amount due to depositors, which shall include any dividend to be credited to them for the six months ending on that day, and any other debts or claims against such corporation which are or may be a charge upon its assets. Such report shall also state the amount deposited during the year previous, and the amount withdravsm dur- ing the same period ; the whole amount of interest or profits received or earned and the amount of dividends credited to depositors, to- gether with the amount of each semi-annual credit of interest, and the amount of interest that may have been credited at other than semi-annual periods, the number of accounts opened or reopened, the number closed during the year, and the number of open accounts at the end of the year, and such other information as may be required by the superintendent. If a safe deposit company, such report shall contain such particulars as the superintendent may prescribe. If a co-operative savings and loan association, or a mortgage, loan or investment corporation, such report shall be made annually on or before February first in each year, and shall contain a statement of its condition on the first day of January preceding. The superin- tendent may, for good cause shown, extend the time for making any such report not exceeding thirty days. Every such report shall be verified by the oath of the president and cashier or treasurer of such corporation or by such individual banker, to the effect that the same THE BANKING LAW. 115 is true and correct in all respects to the best of his knowledge and belief, and that tbe usual business of such corporation or banker has been transacted at the location required by this chapter, and not elsewhere. The superintendent shall serve a notice designating the day in each quarter when a report shall be made upon each bank, trust company and individual banker required to report to him by delivering the same to some officer or clerk thereof at their respective places of business or by depositing the same in the post-office inclosed in a post-paid wrapper and properly directed to each of them, or some officer thereof, at their places of business respectively. (Former section 20; R. S., 1519, 1521, 1559, 1571, 1590; L. 1875, ch. 564, § 2; L. 1882, eh. 409, §§ 20, 28, 219, 270, 271, 272, 273, 274; L. 1898, eh. 333; L. 1905, ch. 297; L. 1908, ch. 123.) See section 24. 1. The ofiBcers of a bank are liable to anybody injured by misrepresentation in the quarterly reports of the bank for hia losses. Morse v. Switz, 19 How. Pr. 275. 2. The bank can be required to give a true statement of its condition as to its loans and discounts. A mere statement of totals is insufficient. The superin- tendent may require the bank to report " in a, general way the largest loan to " any one individual, firm or corporation — also the aggregate loans upon paper made, accepted or indorsed by directors individually or as members of firms. People, etc., v. Vail, 57 How. Pr. 82. 3. An opinion by the attorney-general was filed in the banking department September 13, 1878, relative to certain new forms prepared under the direction of the superintendent of that department, for the quarterly reports from banks, banking associations and individual bankers, subject to the supervision of the superintendent and the provisions of law relating thereto. The opinion holds that the forms are not beyond the provision of the statutes, and that the facts required to be reported may properly be called for by the superintendent. The attorney-general further says : " The statute creating the banking department, and giving to its head supervisory and inquisitorial powers over moneyed cor- porations, is for the benefit of the public. It is a well-settled rule of construc- tion, that a statute made pro hono publico shall be continued in such manner that it may, as far as possible, attain the end proposed. All statutes made for the convenience or benefit of the public ought to have a liberal construction, to be expounded largely, and not with restrictions. Before the banking department was created it was made the duty of every moneyed corporation, annually on the first day of January, to make out and transmit to the comptroller, in the form prescribed by him, a full statement of its affairs, verified by the oaths of its president and cashier, or treasurer or secretary. By the act creating the banking department, that department is charged with the execution of all laws relating to banks and the business of banking, and the superintendent succeeded to all the powers and duties of the comptroller, and all existing laws were so modified and amended, that every power and duty conferred by them on the comptroller was 116 THE BANKIITG LAW. transferred to and conferred upon the superintendent. Other and additional powers were also given to him. The quarterly reports required to be made to the superintendent by every incorporated bank, banking association or individual banker in this State, the statute declares, ' shall contain a true statement of the condition of the bank, banking association or individual banker making such report,' in respect to the following items and particulars, to wit: 'Loans and discounts, overdrafts due from banks, due from the directors of the bank or bank- ing association making the report, due from brokers, real estate, specie, cash items, stocks and promissory notes, bills of solvent banks, bills of suspended banks, loss and expense account, capital, circulation (distinguishing that received from the superintendent from the outstanding bills, profits, amount due to banks, amount due to individuals and corporations other than banks, amount due to the treasurer of the State, amount due to the commissioners of the canal fund, amount due to depositors on demand, amount due not included under either of the above heads.' The object of these reports is to furnish the superintendent, who is the supervising representative of the State, with accurate and detailed information concerning the condition of the bank. The statute requires a true statement in respect to the various items and particulars enumerated. Mani- festly the superintendent must determine how full and detailed the statement must be, to inform him satisfactorily of the condition of the hank. Mere general statements can give him no useful information. The statute contemplates a complete disclosure of its affairs on the part of the bank. The forms prescribed call for no more than seems essential to a thorough and necessary knowledge of the bank. I think, therefore, the superintendent has not exceeded his duties or powers, in the forms prescribed for the quarterly reports. This view is strength- ened by a subsequent section, which makes it the duty of the superintendent, whenever in his opinion there shall be good cause to suspect that any bank, banking association or individual banker has made an incorrect or imperfect quarterly return, or is in an imsound or unsafe condition to do banking business, to cause an examination to be made forthwith into the books, papers and affairs of the institution, and to cause a, report thereof to be forthwith published at the expense of the bank." 4. A bank has no right to discount paper at any other place than that of its location, and a note so discounted would be void. But it would sqem that a note so discounted to pay a debt due from a third party would be valid. Potter v. Bank of Ithaca, 7 Hill, 530. 5. An individual banker, as far as his business is concerned, stands by law in the main upon the same footing as banking associations. His residence for the purpose of taxation of his capital is the place mentioned in the certificate required by Law of 1844, ch. 281, § 3, whether the banker has removed his residence or not, until after he has actually filed certificate of change and moved his bank. The statute does not intend to abridge a banker's right to live where he pleases, it only fixes his business residence. Miner v. Village of Fredonia, 27 N. Y. 155 ; cited Matter of Metcalf v. Messenger, 46 Barb. 329. 6. As to the prosecution of a suit by an individual banker in a name import- ing a corporate character, see Bank of Havana v. Magee, 20 N. Y. 355. 7. In an opinion of the attorney-general filed in the banking department July 19, 1888, the following ruling was made: " I am firm in the conviction that foreign companies doing business within the THE BANKING LAW. 117 state and selling mortgages and guaranteeing the payment of the principal and interest thereon, are subject to the provisions of section 219 of chapter 409 of the Laws of 1882." (Section 21.) 8. It is not necessary that a report be verified by the unqualified oath of the officers ; an oath that the report is true " to the best of his knowledge and belief " is sufficient. Davenport v. Prentice, 126 App. Div. 451. 9,. A bank cannot withhold a substantial portion of its earnings or surplus, nor can it fail to report the same under the form of report required by banking department. To report a sum arbitrarily set apart as a " Guarantee Fund " as being an amount " Due on cashier's checks " would be an inaccurate statement of fact. There is no provision in the Banking Law for arbitrarily setting apart any such "Guarantee Fund." Section 21a of the Banking Law (old number) provides for a, semi-annual examination of the affairs of a bank by a committee of the board of directors and authorizes the board of directors, as a result of such examina- tion, to make such deductions from the assets or additions to the liabilities as conditions may warrant. This contemplates the charging off or marking down of bad loans or securities, the value of which has been impaired and does not give the directors authority to establish a fund for the purposes stated in your question. If a bank failed to make the report prescribed by the superintendent, it becomes subject to the forfeitures specified in section 21, above referred to, or the super- intendent, under the power vested in him under section 18, may issue his order directing the bank to furnish the report in the form required by him, and in the event of the failure of the bank to comply with such order the proceedings speci- fied in section 18 may be resorted to. The bank has no authority to change the form of report prescribed by the superintendent. In the event that the report failed to cover the facts as they actually existed, it would be competent for the bank to supplement the report by incorporating therein a statement of such facts. The item " Due on cashier's checks," of course, means the amount of such checks issued by the bank remain- ing outstanding and unpaid. Such an item is a liability of the bank and is so carried in the form of report prepared by the banking department. There being no provision for the setting aside of such a " Guarantee Fund," such a fund can be properly required by the superintendent to be included in the surplus of the bank. Opinion Atty.-Grcn., August 26, 1908. 10. The treasurer of a savings bank is the proper official to verify report. People V. Ostrander, 64 Hun, 335. 11. That an officer being prosecuted was not the proper officer to verify report is not a defense if he actually verified it. People v. Bowe, 34 Hun, 528 ; People v. Trumpbour, 64 Hun, 346. § 22. Penalties for failure to report. — If any bank or trust com- pany or individual banker stall fail to make such report witliin ten days from the day designated for the making thereof, or to include therein any matter required by the superintendent, or if any savings bank shall fail to make such report within the time required by this 118 THE BAITKIITG LAW. chapter, or to include therein any matter required by the superintend- ent, every such delinquent bank, banker, savings bank or trust com- pany shall forfeit to the people of the state the sum of one hundred dollars for every day that such report shall be delayed or withheld, and for every day that it shall fail to report any such omitted matter. Every other corporation subject to the provisions of this chapter which shall fail to make such report within the time herein required, or to include therein any matter required by the superintendent to be stated, shall forfeit to the people the sum of ten dollars for every- day for which such report shall be delayed or withheld, and for every day that any such omitted matter may remain unreported. The moneys forfeited by this section, when recovered, shall be paid into the state treasury to be used to defray the miscellaneous expenses of the department. If any corporation or individual banker shall fail to make two successive reports as herein required, every such corporation shall forfeit its charter, and every such individual banker shall forfeit his privileges as such banker; and every such corporation or indi- vidual banker may be proceeded against and the affairs of such cor- poration closed, and such individual banker be restrained from con- tinuance in business, in the same manner as an insolvent corporation or individual banker may be proceeded against. In case of the failure of any corporation or individual banker to make any report required by law, the superintendent shall imme- diately cause the books, papers and affairs of such corporation or banker to be examined as directed by section eight of this chapter. (Former section 21; R. S., 1520, 1572, 1592, 1596; L. 1882, ch. 409, §§ 21, 22, 23, 274; L. 1887, ch. 556.) § 23. Books, papers and affairs to be examined. — It shall be the duty of the board of directors of every bank and trust company in the months of April and October in each year to examine, or to cause a committee of at least three of its members to examine, fully into the books, papers and affairs of the bank or trust company of which they are directors, and particularly into the loans and discounts thereof, with the special view of ascertaining the value and security thereof, and of the collateral security, if any, given in connection therewith, and into such other matters as the supreintendent of banks THE BANKING LAW. 119 may require. Such, directors shall liave power to employ such as- sistance in making such examination as they may deem necessary. Within ten days after the completion of each of such examinations a report in writing thereof, sworn to by the directors making the same, shall be made to the board of directors of such bank or trust company, be placed on file in said bank or trust company, and a duplicate thereof filed in the banking department. Such report shall particu- larly contain a statement of the assets and liabilities of the bank or trust company examined, as shown by the books of the bank or trust company, together with any deductions from the assets or additions to liabilities, which such directors or conunittee, after such examina- tion, may determine to make. It shall also contain a statement, in detail, of loans, if any, which in their opinion are worthless or doubt- ful, together with their reasons for so regarding them ; also a state- ment of loans made on collateral security which in their opinion are insufficiently secured, giving in each case the amount of the loan, the name and market value of the collateral, if it has any market value, and, if not, a statement of that fact, and its actual value as nearly as possible. Such report shall also contain a statement of overdrafts, of the names and amounts of such as they consider worth- less or doubtful, and a full statement of such other matters as affect the solvency and soundness of the institution. If the directors of any bank or trust company shall fail to make, or cause to be made, and file such report of examination in the manner, and within the time, specified, such bank or -trust company shall forfeit to the people of the state on hundred dollars for every day such report shall be delayed, which penalty may be recovered through an action brought by the attorney-general against such bank or trust company, in the name of the people of the state of ISTew York. The moneys forfeited by this section, when recovered, shall be paid into the state treasury, to be used to defray the expenses of the banking department. (Former section 21a; R. S., 1520, 1572, 1592, 1596; L. 1875, ch. 564, § 6; i. 1882, ch. 409, §§ 21-23, 274; L. 1887, ch. 556, § 20; L. 1905, ch. 418; L. 1906, ch. 481.) § 24. Publication of reports. — Within thirty days after any report required by section twenty-one of this chapter shall be made, the superintendent shall, with the exception of the reports made by sav- 120 THE BAHTKING LAW. ings banks, publish a summary statement thereof in a paper at Albany in which notices by state officers are required by law to be published, arranging the reports of individual bankers in a separate class, and specifying the name and place of business of each, and the names and residences of the general partners respectively. Such summary statement shall contain the items of capital, circulation, if any, and deposits, specie and cash items, public securities and private sucurities and sudi other matters as may be necessary to inform the public as to the financial condition and solvency of any such corporation or banker, or which the superintendent may deem proper to include therein. The separate report required by said section of each corporation and individual banker shall be published by such corporation or individual banker in at least one newspaper of the place where its principal place of business is located, if there be one; if not, then in the newspaper published nearest where such corporation or banker is located. (Former section 22; E. S., 1519, 1520, 1559, 1589, 1606; L. 1851, oh. 122, § 10; li. 1875, ch. 613, § 11; L. 1882, ch. 409, §§ 20, 22, 24, 220; L. 1905, eh. 297.) § 25. Annual report of superintendent. — The superintendent shall report annually to the legislature, at the commencement of its first session : 1. A summary of the state and condition of every corporation and individual banker required to report to him and from which reports have been received the preceding year, at the several dates to which such reports refer, with an abstract of the whole amount of capital returned by them, the whole amount of their debts and liabilities, specifying particularly the amount of circulating notes outstanding, if any, and the total amount of means and resources, specifying the amount of specie held by them at the times of their several returns, and such other information in relation to such corporations and bankers as, in his judgment, may be useful. Such corporations shall be divided into classes so as to correspond with the designations thereof in section two of this chapter. 2. A statement of all banks and individual bankers and other cor- porations and individuals authorized by him to do business during the previous year, with their names and locations and dates of in- corporation, and particularly designating such as have commenced business during the year. THB BASKISQ LAW. 121 3. A statement of the banks and individual bankers whose busi- ness has been elased during the year, with the amount of their circulation redeemed and the rate per centum of such redemption, and the amount outstanding. 4. Any amendments to this chapter, which in his judgment, may be desirable. 5. The names and compensation of the clerks employed by him, and the whole amount of the expenses of the department during the year, and the amount, if any, for which the treasury shall be in advance. Such report shall be made by or before the last day of the year, and the usual number of copies for the use of the legislature shall be printed and in readiness for distribution by the printer employed to print legislative documents, and one thousand copies shall be printed for the use of the department, the expense of which shall be charged to the general expenses of the department. Such report may be divided into parts, and the part or parts con-^ taining the reports of corporations other than banks may be made on or before the fifteenth day of March in each year. (Former section 23; E. S., 1521, 1562, 1572; L. 1882, ch. 409, §§ 27, 234, 276; L. 1890, oh. 506, § 8; L. 1907, ch. 408.) § 26. Reports presumptive evidence. — Every official report made by the superintendent to the attorney-general, and every report duly verified of any examination made, shall be presumptive evidence of the facts therein stated in all motions in any action or proceeding for the appointment of a temporary receiver of any corporation to which such report relates. (Former section 24; E. S., 1573; L. 1882, ch. 409, § 278.) The report is a public record. People v. Empire Loan Co., 15 App. Div. 69. § 27. Restrictions. — 1. No bank or trust coinpany shall make any loans to any person, company, corporation or firm, to an amount exceeding the ^one-tenth part of its capital stock , actually paid in, and surplus; provided, however, that a bank or trust company having its principal place of business in a borough in any city of the state which borough had according to the last preceding state or United States census a population of eighteen hundred thousand or over may loan to any person, company, corporation or firm, a sum not 122 THE BANKING LAW. exceeding twenty-five per centum of its capital stock actually paid in and surplus _and a bank or tr ust, c ompany having its principal place of business elsewhere in the state fort^ p er centum of its capital stock actually paid in and surplus upon security worth at least fifteen per centum more than the amount of the loans; or it may loan ten per centum of such capital and surplus as ,^rst above provided, and a bank or trust company having its place of business in a borough in any city in the state which borough had according to the last preced- ing state or United States census a population of eighteen hundred thousand or over may loan a further sum not exceeding fifteen per centum of such capital and surplus an^ a bank or trust company having its principal place of business elsewhere in the state may loan . th i r ty per centum of such capital and surplus upon security worth at least fifteenper centum more than the amount of such loan so secured; and provided further, that a bank or trust company may buy from, or discount for, any person, company, corporation or firm, or loan upon, bills of exchange drawn in good faith against actually existing values, or commercial or business paper actually owned by the person negotiating the same, a sum not exceeding twenty-five per centum of its capital stock actually paid in and surplus if its princi- pal place of business is located in a borough in any city in the state which borough had according to the last preceding state or United States census a population of eighteen hundred thousand or over and not exceeding forty per centum of its capital stock actually paid in and surplus if its principal place of business is located elsewhere in the state; provided further, however, that Avith the exception of the liability of the United States, of this state, or of any county or incorporated city of this state the total liability of any person, com- pany, corporation or firm to a bank or trust company shall not exceed twenty-five per centum of the actually paid in capital stock and surplus of any such bank or trust company having its principal place of business in a borough in any city in the state which borough had according to the last preceding state or United States census a popula- tion of eighteen hundred thousand or over and shall not exceed forty per centum of the actually paid in capital stock and surplus of any such bank or trust company having its principal place of business elsewhere in the state. 2. Wo loan shall be made by any banli or trust company upon the THE BANKING LAW. 123 securities of one or more corporations the payment of which is under- taken in whole or in part severally, but not jointly, by two or more individuals, firms or corporations: (a) if the borrowers or underwriters be obligated absolutely or contingently to purchase the securities or any of them collateral to such loan, unless the borrowers or underwriters shall have paid on account of the purchase of such securities an amount in cash or its equivalent equal to at least twenty-five per centum of the several amounts for which they remain obligated in completing the purchase of such securities; (b) if the bank or trust company making such loan be liable directly, indirectly or contingently, for the repayment of such loan or any part thereof ; (c) if its term including any renewal thereof, by agreement, ex- press or implied, exceed the period of one year; (d) or to an amount, under any circumstances, in excess of twenty- five per centum of the capital and surplus of the bank or trust com- pany making such loan. 3. No corporation to which this chapter is applicable except a building and mutual loan corporation or association or a co-operative savings and loan association shall hereafter make a loan, directly or indirectly, upon the security of real estate upon which there is a prior mortgage, lien or incumbrance, if the amount unpaid upon such prior mortgage, lien or incumbrance, or the aggregate amount unpaid upon all prior mortgages, liens and incumbrances exceeds ten per centum of the capital and surplus of such corporation, or if thb amount so secured, including all prior mortgages, liens and incum- brances shall exceed two-thirds of the appraised value of such real estate as found by a committee of the directors or trustees of such corporation- ;Jbut this provisions shall not prevent the acceptance of any such real estate securities to secure the payment of a debt pre- viously contracted in good faith. Every mortgage and every assign- ment of a mortgage taken or held by such corporation shall imme- diately be recorded in the office of the clerk of the county in which the real estate described in the mortgage is located. After the first day of JSTovember, nineteen hundred and eight, no loan shall be made, directly or indirectly, upon real estate security by a bank having its principal place of business in a borough in any city in the state 124 THE BANKING LAW. which borough had according to the last preceding state or United States census a population of eighteen hundred thousand or over, if its total direct and indirect loans upon real estate security exceed, or by the making of such loan will exceed, fifteen per centum in the aggregate of the total assets of such bank, or by a bank having its principal place of business in a village of not over fifteen hundred inhabitants, according to such census, in which there is no savings bank, if its total loans upon real estate security exceed, or by the making of such loan will exceed, forty per centum in the aggregate of its total assets, or by a bank having its principal place of business elsewhere in the state if its total dirfect and indirect loans upon real estate security exceed, or by the making of such loan "will exceed twenty-five per centum in the aggregate of its total assets. 4. No corporation to which this chapter is applicable except a mortgage, loan or investment corporation, nor any of its directors, officers, agents or servants shall, directly or indirectly, purchase or be interested in the purchase of any pomissory note or other evidence of debt issued by it for a less sum than shall appear on the face thereof to be due. Every person violating the provisions of this subdivision shall forfeit to the people of the state three times the nominal amount of the note or other evidence of debt so purchased. 5. 1^0 corporation to which this chapter is applicable shall deposit any of its funds with any other moneyed *corporations unless such other moneyed corporation has been designated as a depositary for its funds by vote of a majority of the directors or trustees of the corporation making the deposit, exclusive of any director or trustee who is an officer, director or trustee of the depositary so designated. 6. No president, director, cashier, clerk or agent of any corpora- tion to which this chapter is applicable, and no person in any way interested or concerned in the management of its affairs, shall as individuals discount, or, directly or indirectly, make any loan upon any note or other evidence of debt, which he shall know to have been offered for discount to such corporation, and to have been refused. Every person violating the provisions of this subdivision, shall, for each offense, forfeit to the people of the state twice the amount of the loan which he shall have made. 7. No officer, director, clerk or agent of any bank shall borrow, directly or indirectly, from the bank with which he is officially con- THE BACKING LAW. 125 nected any sum of money witliout the consent and approval of a majority of the board of directors thereof. Every person violating this provision shall, for each offense, forfeit to the people of the state twice the amount which he shall have borrowed. 8. No corporation to which this chapter is applicable except a building and mutual loan corporation or co-operative savings and loan association, shall make any loan or discount on the security of the shares of its own capital stock nor be the purchaser or holder of any such shares unless such security or purchase shall be necessary to prevent loss upon a debt previously contracted in good faith ; and stock so purchased or acquired shall, within six months from the time of its purchase, be sold or disposed of at public or private sale. Every person or corporation violating the provisions of this subdivision shall forfeit to the people of the state twice the nominal amount of such stock. 9. No coi-poration to which this chapter is applicable shall here- after make a loan, secured by the stock of another moneyed corpora,- tion, if by the making of such loan the total stock of such other moneyed corporation held by it as collateral will exceed in the aggre- gate ten per centum of the capital stock of such other moneyed cor- poration. 10. The directors of any bank may semi-annually or quarterly declare a dividend of so much of the net profits of the corporation of which they are directors as they shall judge expedient, but each such corporation shall, before the declaration of a dividend, cslttj one-tenth part of its net profits earned since its last preceding divi- dend to its surplus fund until the same shall amount to twenty per centum of its capital. Any surplus fund already accumulated by any such corporation may be counted as part of said twenty per centum. Each corporation shall report to the superintendent of banks vdthin ten days after declaring a dividend the amount of such dividend, and the amount of net earnings in excess of such dividend, and the amount carried to the surplus fund. Such report shall be attested by the oath of the president or cashier of the cor- poration. If the directors of any such corporation shall knowingly violate, or knowingly permit any of the officers, agents or servants of the corporation to violate any of the provisions of this subdivision, all the rights, privileges and franchises of the corporation shall 126 THE BANKING LAW. thereby be forfeited. Suob violation sball, however, be determined and adjudged by the supreme court of the state in a suit brought for that purpose by the superintendent of banks in his own name before the corporation shall be declared dissolved. 11. No savings bank hereafter incorporated shall do business or be located in the same room or in any room communicating with any bank, or national banking association. (Former section 25; K. S., 1553, 1555; amended by L. 1893, ch. 696, § 1; L. 1895, ch. 929, § 1; L. 1896, ch. 452, § 2; L. 1905, ch. 456, § 1; L. 1906, ch. 572, § 1, and L. 1908, ch. 169, § 1. Subd. 9, amended by ch. 240, L. 1909; in eflfect April 22, 1909. Subd. 3, amended by ch. 410, L. 1909; in eflfect May 20, 1909. Subd. 4, amended by ch. 402,' L. 1909; in eflfect May 20, 1909.) See Penal Law, §§ 290-295, 297-300. 1. " The object of the legislature, as appears from the title of the act, was for the special purpose of securing the capital stock to the creditors of the company, instead of allowing it to be divided among the stockholders, and no reason can be shown why it should not be extended to free banks as well as to other moneyed corporations." " This is a, beneficial statute and should not be defeated by a narrow construc- tion." Grillett, Receiver, v. Moody, 3 N. Y. 487. 2. When a bank makes loans and discoxmts to its directors, or upon paper upon which they are responsible, to an amount exceeding in the aggregate one-third its capital, it is such a violation of the statute as will authorize the court of chancery to grant an injunction, and appoint a, receiver to wind up the affairs of the corporation. Loans and discounts will be presumed to he made by the authority of the board of directors, unless it is shown that such funds were mis- applied by the officers of a bank, so as to render them, or any of them, liable for fraud or embezzlement. And where an officer is so guilty of fraud by violating the law, if the directors neglect to remove such officer and continue to trust him with the funds of the bank, they will be considered as sanctioning his fraudulent act. The neglect of oflScers or directors to keep themselves informed of the amounts of loans and discounts made to or upon the security of directors, will not excuse a violation of law on the subject. Where the board authorizes the president or other officer of a bank to make loans and discounts in his discretion, the corpora- tion is liable for the violation of any law binding on it. A loan or discount made for the benefit of a director of a bank, or of a firm with which he is connected in interest, or is a copartner, it is to such a director within the intent and meaning of the statute limiting the amount of loans and discounts to directors. It is a violation of duty for directors to give any officer unlimited discretion to discount paper, or make loans without the sanction of the board. Bank Commissioners v. Bank of Buffalo, 6 Paige, 497. 3. Dividends improperly declared may be recovered by creditors only, and can- not be recovered by the receiver for benefit of stockholders. Butterworth v. O'Brien, 39 Barb. 192. 4. Banking associations organized under the general banking law are within the provisions of the Revised Statutes to prevent insolvency of moneyed corpora- tions. Mabey v. Adams, 9 Bosw. 355. THE BANKING LAW. 5. The attorney-general, in an opinion dated December 20, 1890, replied as fol- lows to the question whether or not it would be proper for a savings bank to loan moneys to a corporation, a stockholder or director of which was also a trustee of the savings bank: " I beg to inform you that a similar question was submitted to the attorney- general in 1887, and his opinion given, in which it was substantially held that the banking law did not prohibit savings banks from having transactions with banking, insurance, or title guaranty companies, in which the trustees of such savings banks were stockholders. It is my judgment that that opinion was sound, and would apply as well to other corporations as to insurance companies. " Of course this opinion is given upon the representation that the transaction between the savings bank and the corporation is made honestly and in good faith." 6. The same officer, in an opinion dated June 16, 1896, held that a lease for twenty-one years, with the privilege of two renewals of twenty-one years each, of a building in the city of New York, is not an incumbrance within the meaning of subdivision 6 of section 116 of the banking law, such as would preclude a savings bank from investing its money upon a, bond and mortgage thereon. 7. A note by the teller of a bank, for a loan made to him by the bank without the approval of the directors, is not void. People's Trust Co. v. Pabst, 113 App. Div. 375, 8. A municipal corporation is included in the term " corporation " as used in this section. Opinion Atty.-Gen., July 2, 1907. 9. When a director is an accommodation endorser, surety, or guarantor, to the bank, and the maker receives the loan, such transaction is not a loan " directly or indirectly " to a director. Opinion Atty.-Gen., June 11, 1909. 10. The defense of ultra vires is not available after a contract has been per- formed by the other party to it. Whitney Hones Co. v. Barlow, 63 N. Y. 62; Linkhauf v. Lombard, 137 N. Y. 417. 11. As to liability of directors and officers for loss from unauthorized loaiis, see 17th Ward Bank v. Smith, 51 App. Div. 259 ; Dunn v. O'Connor, 25 App. Div. 73. § 28. Calculation of profits. — Interest unpaid, although due or accrued on debts owing to the corporation or banker, shall not be included in the calculation of its profits previous to a dividend, un- less such interest be accrued upon loans secured by collaterals as provided by section twenty-seven of this chapter. The surplus profits, from which alone a dividend can be made, shall be ascertained by charging in the account of profit and loss and deducting from the actual profits: 1. All expenses paid or incurred, both ordinary and extraordinary, attending the management of its affairs and the transaction of its business. 2. The interest paid, or then due and accrued, on debts owing by it. 3. All losses sustained by it. In the computation of such losses. 128 THE BANKING LAW. all debts owing to it shall be included which shall have remained due, without prosecution, and upon which no interest shall have been paid for more than one year, or on which judgment shall have been recovered that shall have remained for more than two years unsatis- fied, and on which no interest shall have been paid during that period. (Former section 26; R. S., 1554; L. 1882, ch. 409, §§ 180, 181; L. 1893, ch. 696.) See Penal Law, § 664. 1. All surplus funds are liable for debts, and must be used in payment thereof, before breaking into the capital. Seott v. Eagle Fire Company, 7 Paige, 198. 2. Directors may be compelled to divide the actual surplus profits among the stockholders from time to time, if they neglect to do so without cause. But if they abuse their power, and divide all the surplus, leaving nothing but the capital to satisfy probable losses from risks assumed by the company, it seems they will be personally liable to the creditors if the company becomes insolvent. Scott v. Eagle Fire Ins. Co., 7 Paige, 199. 3. The excess of property of a corporation above the amount limited by its charter is to be regarded as surplus profits from which a dividend may be de- clared. Williams v. Western Union Tel. Co., 93 N. Y. 162. 4. Stock dividends not diminishing or interfering with the property of a cor- poration are not within the class of dividends referred to in the section. Such a dividend does not distribute property, but simply dilutes the shares as they existed before. lb. 5. The declaration of a dividend is within the discretionary powers of the directors or trustees, and will not be controlled by the courts. Beveredge v. N. y. E. R. Co., 112 N. Y. 1, 2 L. R. A. 648, 19 N. E. 489. 6. Where a married woman is the owner of stock of a bank located in a State other than that in which she and her husband are domiciled, the effect of pay- ment, by the bank to her husband, of dividends declared upon her shares of stocks, is to be determined by the law of the place where the bank is located, and not by the law of the owner's domicile. Graham v. First National Bank of Norfolk, 84 N. Y. 393, 38 Am. Rep. 528. 7. Directors failing to obey requirements of section 28 of banking law to deter- mine surplus for payment of dividends are liable, under section 23 of the stock corporation law, which is in the nature of an indemnity, and not a penalty such as section 27 of banking law. Dykman v. Keeney, 10 App. Div. 610, 42 N. Y. Supp. 488. § 29. Losses in excess of profits. — All losses sustained by any cor- poration or banker subject to this chapter, in excess of its undivided profits then realized and possessed, shall be charged as a reduction of its capital stock, and no dividend shall thereafter be made on its shares of stock until the deficit of capital so created shall be made THE BANKING LAW. 129 good, either by the recovery of the moneys charged as lost or from the suhsequently accruing profits of the corporation. (Former section 27; R. S., 1554; L. 1882, ch. 409.) § 30. Publication of unclaimed dividends and deposits. — Every bank and individual banker doing business under any law of the state shall annually, on or before September first, cause to be pub- lished for six successive weeks in one newspaper of the county in which such bank or individual banker is located, and in a paper at Albany in which notices by state officers are required by law to be published, a true and accurate statement, verified by the oath of the cashier, treasurer or president, of all deposits made with such bank or individual banker, and of all dividends and interest declared upon any of the stock, bonds or other evidences of indebtedness of such bank or banker, which at the date of such statement shall amount to fifty dollars or over and have remained unclaimed by any person or persons authorized to receive the same for five years then next pre- ceding. The expenses of such advertising shall be deducted from the sums unclaimed in proportion to the amount of each respectively. Such statement shall set forth the date of the deposit, its amount, the name and residence, if known, of the person making it, the name of the person in whose favor and the time when the dividend may have been declared, or interest accrued, its am.ount, and upon what number of shares, and on what amount of stock, bonds or other evidences of indebtedness, of any such bank or banker, it was de- clared or accrued. Every . savings bank or institution for savings now existing or which hereafter may be organized under and by virtue of any law of this state, shall on or before the first day of June in each year, make a report in writing to the superintendent of banks, verified by the oath of the two principal officers of the institution, concerning such accounts of depositors of amounts of five dollars or more, as have been dormant for twenty-two years and upwards, from the first day of May preceding; that is, accounts which have not been in- creased or diminished by deposits or withdrawals, exclusive of interest credits. The accounts of depositors whose pass-books have been pre- sented at the bank for the entry of interest earned, within the period 9 130 THE BAWKIIfG LAW. of twenty-two years, shall not be deemed dormant accounts within the meaning of this chapter. The first report of each savings bank, made in compliance with the provisions of this section, shall accurately state the full names of all depositors which the books of the savings bank show to have five dollars of more to their credit respectively, whose accounts have been dormant for twenty-two years or upwards; such report shall also state the date on which the original deposit was made, the last known place of residence of the depositor, his or her occupation, date of birth, nationality, parents' name if known, and the date when the savings bank discontinued the crediting of interest on each ac- count, together with any additional data which may aid in determin- ing the ownership of such dormant account. All subsequent reports in addition to dormant accounts not previously reported, shall con- tain a list of such previously reported accounts as have either been paid, or become active accounts since the last report, through partial payments, or the presentation of pass-books for the entry of the interest due to the account. It is expressly provided, however, that the sums to the credit of such dormant accounts are not required to be stated in the reports provided for by this section. Any corporation or banker failing to make any report or statement required by this section shall forfeit to the people of the state the ' sum of one hundred dollars per day for every day such report or statement shall be so delayed or withheld, which, when collected, shall be paid into the treasury of the state and applied to the expenses of the banking department; but the superintendent may, for suffi- cient cause, extend the time for making such report or statement not exceeding thirty days. The superintendent shall keep in his office an index of the names of the persons appearing from such reports or statements to be en- titled to any stich dividends, interest or deposit, and whenever any inquiry shall be made to him concerning the same, he may require the applicant to furnish evidence of his right thereto ; and if satisfied that such applicant or his principal has a lawful claim to any part of such dividends, interest or deposits, he shall indicate to the person making such application by which of the savings banks such divi- dends, interest or deposits are held. THE BANKING LAW. 131 (Former section 28; R. S., 1520, 1521, 1584; L. 1835, ch. 262; L. 1882, ch. 409, §§ 25, 26; L. 1889, ch. 414, §§ 1, 2, 3, 4.) See Historical Sketch, ante. See section 164, post. § 31. Change of location. — Any corporation or banker to which this chapter is applicable may make application to the superintendent of banks for leave to change its place of business to another place in the same or another county. If the proposed place is within the limits of the town, village or city in which the business is carried on, such change may be made upon the written approval of the superintendent; if beyond such limits, notice of intention to make such application, signed by the two principal officers of the cor- poration or individual banker, shall be published once a week for two weeks in a newspaper published in the city of Albany, and in a newspaper published in the county in which such place of business is located, to be designated by the superintendent of banks. The ap- plication shall state the reasons for such proposed change, and be signed by a majority of the board of directors of the corporation, and, except in the ease of corporations enumerated in article six of this chapter, be accompanied by the vmtten assent thereto of stock- holders owning at least two-thirds in amount of the stock of the corporation, or by the banker. If the superintendent shall be satisfied that there is no reasonable objection to such change of location, he shall make a certificate authorizing such change, which shall be filed in the office of the superintendent, and a certified copy thereof with the clerk of the county in which the place of business of the cor- poration or banker is located, and with the clerk of the county to which its place of business is changed, if in another county, and published once in each week for two successive weeks in the news- papers in which the notice of application was published. When the requirements of this section shall have been fully complied with, the corporation or banker may, upon or after the day specified in the certificate, remove its property and eflFeots to the location designated in the certificate, and thereafter its sole business location shall be the location so specified ; and it shall have all the rights and powers* in such new location to which it was entitled at its former location ; but no such change of location shall in any manner lessen or impair 132 THE BANKING LAW. any liability of the corporation or banker incurred or existing at the time such change was made. (Former section 29; R. S., 1583; L. 1887, eh. 517; L. 1895, ch. 39.) See sections 109, 147, 239, post. 1. The question, whether a change of location within a city or town requires conformity to the former act (ch. 517, L. 1887), was ruled upon by the attorney- general in an opinion filed in the banking department, March 28, 1888, as follows: — " The word ' location ' as used in the act is one of narrower meaning than the word 'place; ' and while it might be plausibly maintained that the word 'loca- tion,' as used in section 2 of the act of 1887, means the place designated in the certificate of organization, viz., city, town or village, and when it speaks of changing the location, location means city, town or village, still section 1 of the act seems to require an application to the court to ' authorize it to change its place of business to another place m the same or an adjoining county.' " Although a rule restricting the removal of a banking corporation from one location to another in the same city or village may seem severe and unreasonable, especially when such bank is situated in a small village, nevertheless when a re- moval is proposed in a large city like New York such restriction cannot be said to be an unreasonable or unjust precaution for the protection and convenience of the persons having business with the company. If banks in New York city were permitted and felt inclined to move frequently, without being compelled to give notice, serious inconvenience might arise in the presentation of paper for pay- ment and in other respects. A bank situated at the Battery might remove to the utmost northern limits of the city, to the great annoyance and prejudice of at least a portion of the public." 2. As to locality of corporations, see note in 12 Abb. N. C. 226. 3. In changes of location within the same town, village or city, application must be made. Opinion Atty.-Gen., January 15, 1909. § 32. Approval and certificate of superintendent upon incorporation. — No corporation to which this chapter is applicable shall be in- corporated hereunder, or transact any business in this state other than such as relates to its formation, without the written approval of the superintendent of banks and without his written certificate stating that it has complied with the provisions of this chapter and with all the requirements of law, and that it is authorized to transact within this state the business specified therein, and that such business can be safely intrusted to it ; which certificate shall be recorded in llie office of the superintendent in a book to be kept by him for that purpose and a certified copy thereof filed in the office of the clerk of the county where the corporation is to have its principal business office. (Former section 30.) THE BANKING LAW. 133 § 33. Permission and certificate of superintendent in case of foreign corporations. — No foreign corporation incorporated for the purpose of carrying on the business specified in articles six and eight of this chapter shall transact business in this state without the written per- mission of the superintendent of banks and a written certificate from bim stating that sucb corporation has complied with all of the pro- visions of this chapter applicable to it and with all the requirements of law, and that it is authorized to transact the business within this state specified therein and tbat such business may be safely intrusted to it. Such permission and certificate shall continue in force only for the period of one year from the date thereof, but may be renewed by the superintendent from time to time for a like period if satisfied that the corporation has complied with all of the provisions of this chapter and with the requirements of law and that such business can be safely intrusted to it. (Former section 31.) See General Corporation Law, § 15. Bringing an action is not doing business within the State. Western Nat'l Bank v. Kelly, 48 Misc. 366; Citizens' State Bank v. Cowles, 89 App. Div. 281. § 34. Appointment of superintendent as attorney for service of process. — No foreign corporation, company or association, to which this chapter is applicable, shall transact any business in this state until it has executed and filed with the superintendent of banks a written instrument appointing such superintendent its true and law- ful attorney, upon whom all process in any action or proceeding by any resident of the state against it may be served with the same effect as if it existed in this state and bad been lawfully served with process therein. Service in favor of a resident of this state upon such attorney shall be deemed a personal service upon such corporation, company or association. The superintendent of banks shall forthwith forward a copy of every process served upon him under the provisions of this section by mail, postage prepaid, and directed to the secretary of such corporation, company or association at its last known post- office address. For each copy of process the superintendent shall collect the sum of two dollars which shall be paid by the plaintiff or moving party at the time of such service to be recovered by him as a part of his taxable disbursements if he succeeds in the suit or pro- ceeding. The term " process " in this section includes any writ, 134 THE BANKING LAW. summons, petition or order whereby any suit, action or proceeding shall be commenced by a resident of the state. (Former section 32.) § 35. Appointment of receiver. — If it is made to appear' upon application of any creditor or shareholder of any such corporation, company or association residing in this state that the funds on de- posit with the superintendent of banks are insulEcient to pay in full the creditors and shareholders residing in this state, or that it is insolvent, or has suspended business, or that insolvency or bankruptcy proceedings have been taken against it either voluntarily or involun- tarily, the supreme court may, upon due notice to the attorney- general, and upon such notice to the corporation, company or associa- tion as the court shall prescribe, appoint a receiver of such funds; and pending such application, the court or any judge thereof may enjoin the commencement or prosecution of any other action or pro- ceeding against such corporation, company or association. Upon the qualification of such receiver, the superintendent of banks shall pay over to him the funds remaining in his hands less any charges which he may have against the same, and the receiver shall distribute such funds among the creditors and shareholders of the corporation, com- ' pany or association residing in this state in the manner prescribed by law for the payment of creditors in the case of voluntary dissolu- tion of a corporation. (Former section 33.) See General Corporation Law, §§ 150, 151, 230-278. 1. " From the entry of an order appointing a receiver, the property of the cor- poration vesta in him and is in constructive possession of the court, although not actually in the receiver's possession, and the court has power to prevent any inter- ference with it thereafter by any crditor in any court, State or National. Matter of Schuyler Tow-boat Co., 64 Hun, 384, 19 N. Y. Supp. 565, following Matter of Christian Jensen Co., 128 N. Y. 550, 28 N. E. 665. 2. The appointment of the receiver of a corporation or of its property does not work its dissolution nor prevent it from joining in litigatiop affecting its indebted- ness and being bound by any adjudication therein. Del Valle v. Navarro, 21 Abb. N. C. 136. 3. When receivers are discharged the business of a bank reverts to the directors, and they may make any lawful arrangement for the bank without permission of any court or of the superintendent. People V. Oriental Bank, 124 App. Div. 741. 4. In insolvency proceedings against a bank interest at contract rate should be credited to creditors to date of receiver taking charge, and later is allowable THE BANKIITG LAW. 135 against the bank, but not as between the creditors themselves. If the assets at time of receiver taking charge were sufficient for payment of principal indebted- ness, interest should be allowed at legal rate before distribution of surplus to stockholders. Various adjustments of interest reviewed. People v. Merchants' Trust Co., 187 N. Y. 293. 5. The compensation of temporary receivers in insolvency proceedings against a trust company discussed and reviewed as to special facts and circumstances, and certain allowances held to be excessive. The practice as to fixing allowances stated. People v. Knickerbocker Trust Co., 127 App. Div. 215. 6. To justify appointment of a receiver the facts requiring such action must be proved by legal evidence and not by verified complaint alone. People v. Oriental Bank, 124 App. Div. 741. 7. Closing of a bank and calling upon superintendent to take charge are acts of insolvency, but not conclusive, when such action is shown to be unnecessary and there are suflScient assets to make a large surplus. People v. Oriental Bank, 124 App. Div. 741. 8. Notice of application for a receiver should not be dispensed with when the assets are in possession of the superintendent. Notice should be dispensed with only when the funds are in jeopardy or immediate action is necessary. People v. Oriental Bank, 124 App. Div. 741. 9. The opinions of the superintendent and attorney-general that further busi- ness by a bank is unsafe and inexpedient, are not sufficient to justify judgment dissolving the corporation. People v. Oriental Bank, 124 App. Div. 741. 10. The closing of a bank apd placing it in charge of the superintendent does not work a surrender of the bank's corporate franchise until expiration of the statutory period. It may resume before that period expires. People v. Oriental Bank, 124 App. Div. 741. 11. Where 90 per cent, of the bank's depositors unite in an application to re- sume business, and neither the superintendent nor attorney-general oppose, and a fair appraisal shows that a surplus of assets of $250,000, over a capital of $200,000, the bank is entitled to an order for resumption of business. People v. Hamilton Bank, 57 Misc. 345. 12. The sufficiency of evidence tending to prove insolvency of bank and liability for deposits received with knowledge of insolvency examined. Money deposited under such circumstances cannot be recovered from the bank unless it passed into the assignee's hands. Williams v. Van Norden Trust Co., 104 App. Div. 251. § 36. Merger. — Any two or more corporations, other than savings banks organized under any one article of this chapter, or organized under the laws of this state for the purposes, or either of tliem, men- tioned in any one article of this chapter, are hereby authorized to merge one or more of said corporations into another in the manner following: The respective boards of directors of such corporations may enter into and make an agreement, under their respective cor- porate seals, for the merger of one or more of said corporations into another of them, prescribing the terms and conditions thereof and 136 THE BASTKIITG LAW. the mode of carrying the same into effect, -which agreement shall be subject to the approval of the superintendent of banks, and may- provide that such corporation upon and after such, merger sball have the name of any one of the corporations merged, to be specified in said agreement, and may name the persons, not less than thirteen nor more than twenty-four, who shall constitute the board of directors of such corporation after its merger, or may provide for a meeting of stockholders within sixty days after the merger to elect a board of directors with such temporary provision for conducting the affairs of the corporation meanwhile as shall be agreed upon ; and said directors so named or elected, after qualifying shall divide themselves into classes in manner and -with effect as provided in section one hundred and ninety-five of this chapter and may adopt new by-laws for said corporation. (Former section 34; L. 1895, ch. 382; L. 1900, eh. 199.) See Stock Corporation La-w, §§ 15-17. 1. As to right of corporations in general to consolidate, see editorial note to Wood V. Seattle, 52 L. R. A. 369, presenting in full the authorities on that question. 2. Where trust companies have been created by special acts, and are amenable to such parts of the banking law as are not inconsistent -with the special acts, and later are authorized by special acts to execute trusts, such companies may merge, although such -was originally unlawful under the special acts; and such merger is authorized under sections 36 to 40 of the banking law. Colby v. Equitable Trust Co., 124 App. Div. 262. 3. Sections 36 to 40 (former sections 34-38) held to be constitutional and within Const., art. 8, § 1. Colby v. Equitable Trust Co., 192 N. Y. 535. § 37. Submission of merger agreement to stockholders. — Such agreement shall be submitted to the stockholders of each of such cor- porations at a meeting thereof to be called upon notice of at least two weeks, specifying the time, place and object thereof, addressed to each stockholder at his last known post-office address and deposited in the post-office, postage prepaid, and published for at least two suc- cessive weeks in one of the newspapers in each of the counties of this state in which either of such corporations shall have its principal place of business, and if such agreement shall be approved at each of such meetings of the respective stockholders separately by the vote or ballot of the stockholders owning at least two-thirds of the stock, the same shall be the agreement of such corporations. A sworn copy of the proceedings of such meetings, made by the secretaries thereof, THE BANKING LAW. 137 respectively, shall be presumptive evidence of the holding and action of such meetings. Such agreement and verified copy of proceedings of such meetings shall be made in duplicate and filed in the office of the superintendent of banks and in the office of the clerk of the county in virhich the principal place, of business of the corporation into which such corporation or corporations shall be merged is located, and thereupon such corporations shall be merged as specified in such agreement, and the corporation into which the other or others are merged, shall thereafter have the new name, if any, specified in such agreement pursuant to the provisions of section thirty-six of this chapter, and the provisions of such agreement shaJI be carried into effect as therein provided ; and it shall be lawful for said corporation into which the others shall have been merged to require the return of the original certificate of stock held by each stockholder in each or either of the companies, and in lieu thereof to issue new certificates for such number of shares of its own stock as under the agreement of merger the said stockholder may be entitled to receive. (Former section 35; L. 1900, ch. 199.) § 38. Bights of dissenting stockholders. — If any stockholder not voting in favor of such agreement of merger shall, at such meeting or vfithin twenty days thereafter, object to such merger and demand payment for his stock, or, in the case of co-operative savings and loan associations, if such stockholder be a borrower, liquidation of his indebtedness and cancellation of his stock, such stockholder, if the merger takes effect at any time thereafter may, at any time within sixty days after such merger, apply to the supreme court at any special term thereof held in the district in which the county is situated in which such corporation into which the other or others may be merged may have its principal place of business, upon at least eight days' notice to said corporation, for the appointment of three persons to appraise the value of his stock, or the amount of said indebtedness, if any, and the court shall' appoint such appraisers and designate the time and place of their first meeting, with such direc- tions in regard to their proceedings as shall be deemed proper, and also direct the time and manner in which payment of such stock to such stockholder or liquidation of such indebtedness by him and cancellation of his stock shall be made. The court may fill any 138 THE BAJIKING LAW. vacancies in the board of appraisers occurring by refusal or neglect to hold such office. Tlie appraisers sball meet at the time and place designated and after being duly sworn shall honestly and faithfully discharge their duties and estimate and certify the value of such stock, and the amount of such indebtedness, if any, at the time of such decision, and deliver one copy to such corporation and another to such stockholder if demanded; the charges and expenses of the appraisers shall be paid by the corporation. "When the corporation shall have paid, the appraised value of such stock, or if such stock- holder be a borrower as aforesaid, when he shall have paid the amount of his indebtedness as fixed by such appraisal, as directed by the court, said stock shall be canceled and such stockholder shall cease to be a member of said corporation or to have any interest in such stock and in the corporate property, and such stock may be held and disposed of by the corporation for its own benefit ; and if such stock- holder be a borrower as aforesaid proper instruments of acquittance shall be duly executed and delivered to him by the corporation and thereupon he shall be discharged from all further liability to the corporation. (Former section 36.) 1. The stockholder not voting for a merger who can move for appraisal must be a stockholder of record, the equitable ownership of the stock will not suffice. Matter of Rogers, 102 App. Div. 466. 2. Where a merger is effected, an assignment of a guaranty to one of the banks merged is not necessary. Bank of Long Island v. Young, 101 App. Div. 88. § 39. Effect of merger. — Upon the merger of any corporation in the manner herein provided all and singular the rights, franchises and interests of the said corporation so merged in and to every species of property, real, personal and mixed, and things in action thereunto belonging shall be deemed to be transferred to and vested in such corporation into which it has been merged, without any other deed or transfer, and said last named corporation shall hold and en- joy the same and all rights of property, franchises and interests in the same manner and to the same extent as if the said corporation so merged should have continued to retain the title and transact the business of such corporation; and the title and real estate acquired by the said corporation so merged shall not be deemed to revert by means of such merger or anything relating thereto. (Former section 37.) THE BAITKING LAW. 139 § 40. Rights of creditors and others having relations with merged corporations. — The rights of creditors of any corporation that shall be so merged shall not in any manner be impaired by any such merger, nor shall any liability or obligation for the payment of any money due or to become due, or any claim or demand, in any manner or for any cause existing against such corporation, or against any stockholder thereof, be in any manner released or impaired, and all the rights, obligations and relations of all the parties, creditors, de- positors, trustees and beneficiaries of trusts shall remain unimpaired by the merger, but such corporation into which the other or others shall be merged shall succeed to all such relations, obligations, trusts and liabilties and be held liable to pay and discharge all such debts and liabilities, and to perform all such trusts of the merged corpora- tion in the same manner as if such corporation into which the other shall become merged had itself incurred the obligation or liability or assumed the relation or trust, and the stockholders of the respective corporations so entering into such agreement shall continue subject to all the liabilities, claims and demands existing against them as such at or before such merger, and no suit, action or other proceeding then pending before any court or tribunal in which any corporation that may be merged is a party shall be deemed to have abated or dis- continued by reason of any such merger, but the same may be prosecuted to final judgment in the same manner as if the said cor- poration had not entered into the said agreement, or the said last named corporation may be substituted in the place of any corporation so merged as aforesaid, by order of the court in which such action, suit or proceeding may be pending. (Former section 38; L. 1900, ch. 199.) § 41. Communications from banking department. — Each official communication directed by the banking department to a bank, sav- ings bank, or trust company, pertaining to an investigation or ex- amination conducted by the department, or to the affairs of such bank, savings bank or trust company, or containing suggestions or recommendations as to the conduct of the business thereof, shall be submitted, by the officer receiving it, to the board of directors or trustees of such bank, savings bank or trust company, at the next meeting of such board. (Former section 39.) 140 THE BACKING LAW. § 42. Meetings of directors or trustees and reports thereto. — The directors or trustees of every corporation to whicli this chapter is applicable shall hold a regular meeting once in each month. They shall by resolution duly recorded in the minutes of the proceedings of such corporations designate an officer or officers whose duty it shall b© to prepare and submit to each director or trustee at each regular meeting of the board, or to an executive committee of not less than five members of such board, a written statement of all purchases and sales of securities, and of every discount and loan, exclusive of dis- counts and loans of less than one thousand dollars, made since the last regular meeting of the board, describing the collateral to the loans so made as of the date of the meeting at which such statement is submitted. Such statement shall also contain a list giving the aggregate of loans and discounts to each individual, firm, corporation or association, whose liability to such corporation has been increased one thousand dollars or more since the last regular meeting of the board, together with a description of the collateral to such loans held by such corporation at the date of the meeting at which such state- ment is submitted. A copy of such statement, together with a list of the directors present at such meeting, verified by the affidavit of the officer or officers charged with the duty of preparing and submitting such statement shall be filed with the records of the corporation within one day after such meeting, and be presump'tive evidence of the matters therein stated. (Former section 39a; L. 1908, eh. 155.) § 43. Official acts of superintendent and details of department busi- ness to be made public. — 1. The superintendent of banks shall keep in his office, in a place accessible to the general public, a bulletin board upon which he shall cause to be posted at noon on Friday of each week a detailed statement, signed by him or, in case of his absence from Albany or inability to act, by the deputy superintendent in charge, giving the following items of general information with regard to the work of the department since the preceding statement: (a) The name of every corporation that has filed in the banking department a certificate of incorporation or organization, its location and the date of filing of such certificate. (b) The name and location of every corporation or individual THE BANKING LAW. 141 banker authorized by the superintendent of banks to commence busi- ness, its capital, surplus and the date of authorization. (c) The name of every proposed corporation to which a certificate of authorization has been refused by the superintendent of banks, and the date of notice of refusal. (d) The name of every corporation that has applied to the super- intendent of banks for permission to open a branch, office, the date of such application and the location of the proposed branch. (e) The name of every corporation that has been authorized by the superintendent of banks to open a branch office, the date of approval and the location of such branch office. (f) The name and location of every corporation designated by the superintendent of banks as a depositary for the lawful money reserve of blanks or trust companies, its capital, surplus and the date of designation. (g) The name and residence of every person appointed by the superintendent of banks as a deputy, examiner or employee in the banking department, the title of the office to which appointed, the compensation paid and the date of appointment. (h) The date on which a call for a quarterly report by banks or trust companies was issued by the superintendent of banks and the day designated as the day with reference to which such report should be made. (i) The name and location of every corporation or individual banker of whose property and business the superintendent of banks shall have taken possession and the date of taking possession, and the name and residence of every person appointed by the superintend- ent as a special deputy superintendent of banks. (j) The name and location of every corporation or individual banker which shall have been authorized by the superintendent of banks to resume business, and the date of resumption. (k) The name and location of every corporation whose creditors or depositors have been paid in full by the superintendent of banks and a meeting of whose stockholders shall have been called, together with date of notice of meeting and date of meeting. (1) The name and location of every corporation subject to the banking law whose affairs and business shall have been finally liquidated and the corporation dissolved. 142 THE BACKING LAW. (m) The name and location of every corporation which has ap- plied for approval of a change of name, and the name proposed. 2. Every such statement, after having been posted as aforesaid for one week, shall be placed on a file for such statements to be kept in the office of the superintendent of banks. All such statements shall be public documents and at all reasonable times shall be open to public inspection. (Former section 39b.) § 44. Banks designated as depositaries of court funds to give bonds and pay interest. — The depositaries designated by the comptroller to receive funds or moneys paid into court, shall pay a fair rate of interest, and before receiving any such deposit shall give to the people of the state a good and sufficient bond with two or more sureties, in such form as the attorney-general shall prescribe, such bond to be approved by the county judge of the county in which such savings bank, bank, trust company, bank association or banker shall be located, and by the comptroller of the state, and filed in the office of the comptroller. (Part of section 746, Code Civ. Pro.) July 13, 1905, the attorney-general used the following language in reference to the right of a bank to take deposits from a city and secure the city on these deposits by pledging to it bonds or securities owned by the bank, forming a part of its "reserve." He said: " I infer that the use of the word " reserve " is intended to be equivalent to the use of the word " assets," as the only " reserve," so-called, which the banking law apparently recognizes is the money reserve under section 47 (former number). "I do not find in the banking law any direct prohibition against the method of securing the city on its deposits, but it seems to me that it is against the spirit of the act, and is in effect creating a preferred class of depositors. It ties up so much of the assets of the bank, and in the event of a failure, would reduce the amount applicable to the payment of general depositors to the extent of the bonds so deposited. "It certainly should be reported under section 20 (former number) as a pre- ferred deposit, if the superintendent should allow the bank to secure the city in this manner. It borders very closely on an illegal preference, and it seems to me that the practice is one which the department certainly should not encourage, and, if possible, prevent." § 45. Banks designated as depositaries of court funds to keep books of account. — 'Every bank or trust company holding any funds or money paid into court shall keep a book or books in which it shall make an exact account thereof. Such book or books shall state the THE BANKING LAW. 143 name of the court, the title of the case, the date of receipt, from whom received, the amount of money, if any, and a description of the securities or other property received, if any, and each addition of interest ; also the date and description of each order for payment and the dates and amounts of payments thereunder and to whom paid; also an account of each change of investment, if any. (Part of section 752, Code Civ. Pro.) THE BAlTKIlirG LAW. AETICLE 3. Banks. (Section 60. Incorporation. 61. Previous notice of intention to be given. 62. When superintendent shall file certificate. 63. Examination by and certificate of superintendent. 64. Amended certificate of incorporation. 65. Certificate of individual banker. 66. General powers. 67. Lawful money reserve. 68. Payment of capital stock. 69. Annual meeting and election of directors. 70. Oath of directors. 71. Individual liability of stockholders. 72. Limitation of liability of stockholders. 73. Powers of president and vice-president. 74. Rate of interest. 75. Interest permitted on advances on collateral security. 76. Deposit of banks and individual bankers with superintendent. 77. Prohibiten against sale of business by individual banker. 78. Change from State to national bank. 79. When deemed to have surrendered its charter. 80. Reduction of capital stock in such cases. 81. Certificate of change. 82. National bank may become State bank. 83. Circulating notes; plates. 84. Circulating notes of individual banker. 85. When bank may receive interest or dividends upon securities deposited. 86. Redemption agencies. 87. Destruction of bank notes. 88. Destruction of plates and counterfeit notes. 89. Exchange of mutilated notes. 90. Redemption in notes of other banks. 91. Protest of notes and proceedings thereon. 92. Appointment of agent by new corporation. 93. Revocation of appointment. 94. Distribution of funds of insolvent banks. 95. Distribution of residue. 96. Publication of notes. 97. Redemption of notes held by banks and individual bankers. 98. Banks closing business. 99. Proceedings on closing bank. 100. Proportionate amount of securities to be returned when notes are destroyed. THE BANKING LAW. 14:J> Section 101. Deposit of cash for redemption of notes. 102. Circulation of foreign bank notes prohibited. 103. Notes not receivable at par not to be paid out. 104. Bills or notes must be payable on demand. 105. When bills of exchange to be without grace. 106. Transfers of securities by superintendent to be countersigned by treasurer. 107. Unauthorized banking prohibited. 108. Restrictions as to foreign corporations. 109. Restrictions as to banks and their officers. 110. Bills payable otherwise than in money prohibited. 111. Certain bills declared to be promissory notes. 112. Use of sign indicating bank by unauthorized persons prohibited. 113. Lost bank certificate; application to court for order requiring pay- ment. 114. Petition; service of. 115. Bank to furnish information. 116. Notice; order, and publishing. 117. Contents of notice. 118. Application for final order. 119. Order; filing, and service; refusal to pay. 120. Bond discharged; bank released. § 60. Incorporation. — Five or more persons may form a corpora- tion to be known as a bank. Such persons shall make, acknowledge and file in the office of the clerk of the county where such bank is to be established and in the office of the superintendent of banks, a certificate in duplicate, which shall state : 1. The name by which such bank is to be known. 2. The particular city, town or village where its operations of discount and deposit are to be carried on. 3. The amount of its capital stock, which shall not be less than twenty-five thousand dollars in any village, incorporated or unin- corporated, whose population does not exceed two thousand, and not less than fifty thousand dollars in any city, village or town whose population exceeds two thousand but does not exceed thirty thousand, and not less than one hundred thousand dollars elsewhere, the popula- tion in each case to be ascertained or determined by the last federal or state enumeration; and the number of shares into which such, capital stock shall be divided. 4. The names and places of residence of the stockholders and the number of shares held by each. . 10 146 THE BANKING LAW. 5. The dates at which such corporation shall commence and terminate. 6. The number of directors of the bank, which shall not be less than five, and the names of the stockholders who shall be directors for the first year of its incorporation. A duplicate of such certificate when filed shall be recorded by the county derk in the books kept for the record of certificates of incorporation, and a duplicate by the superintendent of banks in a book to be kept by him for that purpofie. Such certificate may provide for an increase of the capital stock and of the number of persons forming the corporation, from time to time, as the stockholders may deem proper, and for the manner in which the stock of the corporation may be transferred, and for the number of directors necessary to constitute a quorum, and for the time when the annual election of directors shall be held. (Former section 40; R. S., 1522, 1524, 1526; L. 1882, ch. 409, §§ 29, 30, 39, 58; L. 1893, oh. 408; L. 1908, oK 125.) Blank forms for the organization of banking assoeiations may he obtained from the superintendent of the banking department. See sections 12, 32, 68, 69; General Corporation Law, §§ 4, 6, 26, 37; Stock Corporation Law, § 25; Tax Law, §§ 183, 190. 1. All those who execute the organization certificate should be included in the published intention to organize; and where new names are added after the pub- lication of intention, the certificate of organization should be refused. Opinion Atty.-Gen., April 22, 1909. 2. As to constitutionality of later liability imposed on stockholders by statute, see Matter of Lee's Bk. of Buffalo, 21 N. Y. 9. § 61. Previous notice of intention to be given. — Before filing such organization certificate, a notice of intention to organize such bank shall be published at least once a week for four weeks in a newspaper to be designated by the superintendent of banks published in the city or town where such bank is proposed to be located. Such notice shall specify the names of the proposed corporators, the name of the pro- posed corporation and its location as set forth in such organization certificate. If any bank or banks are organized and doing business in such city or town a copy of such notice shall also be sent to each bank so organized and doing business at least fifteen days before the filing of the organization certificate. (Former section 41; E,. S., 1523; L. 1882, ch. 409, § 34.) See General Corporation Law, § 7. THB BAWKIITG LAW. 147 § 62. When superintendent shall file certificate. — Upon the receipt of any such organization certificate at the office of the superintendent, if it shall not be in form and substance, or duly and properly acknowl- edged, as required by this article, or shall not be accompanied by evidence satisfactory to the superintendent of the publication and service in good faith according to the intent and purpose of this chapter of the notice required by this article, the superintendent shall refuse to file such certificate until it shall be amended to conform to the provisions of this article. If such certificate is in due form and duly executed according to the provisions of this article, and is accom- panied by evidence satisfactory to the superintendent of the proper publication and service in good faith of such notice, he shall forth- with indorse the same over his official signature, " filed for examina- tion," with the date of such indorsement. (Former section 42; R. S., 1523; L. 1882, ch. 409, §§ 32, 33.) § 63. Examination by and certificate of superintendent. — When such certificate shall have been filed, the superintendent shall ascer- tain from the best sources of information at his command whether the character and general fitness of the persons named as stockholders in the certificate are such as to command the confidence of the com- ■ munity in which such bank is proposed to be located, and whether the public convenience and advantage will be promoted by its establish- ment. If so satisfied, he shall, within sixty days after such certificate has been filed by him for examination, issue under his hand and official seal the certificate of authorization required by this chapter. The superintendent shall transmit such certificate of authorization to the county clerk of such county, who shall file the same and attach it to the organization certificate previously filed by him and record both certificates in the book of records of incorporation; the super- intendent shall also file a duplicate of such certificate in his own office. If the superintendent shall not be satisfied that the establish- ment of the bank as proposed in any organization certificate filed by him is expedient and desirable, he shall, within sixty days after the filing of such certificate by him, give notice to the county clerk of such county that he refuses to issue a certificate of authorization for 148 THH BANKING LAW. sucli bank, which notice shall he forthwith filed by the county clerk with the organization certificate. (Former section 43; E. S., 1523, 1527; L. 1882, ch. 409, §§ 35, 37, 38.) See General Corporation Law, § 11. § 64. Amended certificate of incorporation. — Whenever any bank shall, by virtue of the provisions of its certificate of incorporation or other lawful authority, make any change in any of the matters re- quired to be stated in such certificate, such change shall not be of any force or validity until a certificate thereof, executed by its presi- dent and cashier under it^ corporate seal, shall have been filed and recorded in the same manner as the certificate of incorporation is by law required to be filed and recorded. (Former section 44; L. 1882, ch. 409, § 34; L. 1908, ch. 125, § 2.) See General Corporation Law, § 7. § 65. Certificate of individual banker. — Every individual banker shall file in the office of the superintendent of banks a certificate stating the town, city or village in which he resides. ISTo individual banker shall transact business under the provisions of this chapter in any other place than the one thus designated, except in case of a change of his residence, and a notice thereof forthwith filed in such office. Every person who neglects to comply with any requirement of this section shall, for each neglect, forfeit one thousand dollars to the people of the state. Every notice of change of residence so filed shall be published by the superintendent in the state paper, and in such other newspapers and for such period of time as he may direct, not exceeding three months, and the expense of such publication shall be paid to the superintendent by the individual banker to whom the notice relates. (Former section 45; L. 1908, ch. 125, § 2.) See section 2, ante. § 66. General powers. — In addition to the powers conferred by the general and stock corporation laws every bank shall have power: 1. To exercise by its board of directors, or duly authorized officers or agents, subject to law, all such incidental powers as shall be neces- sary to carry on the business of banking ; by discounting and negotiat- ing promissory notes, drafts, bills of exchange and other evidences THE BANKING LAW. 149 of debt ; by receiving deposits ; by buying and selling excbange, coin and bullion ; by loaning money on personal security ; and by obtain- ing, issuing and circulating notes according to tbe provisions of this chapter. 2. To take and become the owner of any stocks or bonds or interest- bearing obligations of the United States, or of the state of New York, or of any city, county, town or village of this state, the interest on which is not in arrears. 3. To purchase, hold and convey real property for the following purposes : a. Such as shall be necessary for its immediate accoinmodation in the convenient transaction of its business. b. Such as shall be mortgaged to it in good faith, by way of security for loans made by, or moneys due to, such corporation. c. Such as shall be conveyed to it in satisfaction of debts pre- viously contracted in the course of its dealings. d. Such as it shall purchase at sales under judgments, decrees or mortgages held by it. No such corporation shall purchase, hold or convey real property in any other case or for any other purpose, and all conveyances of real property shall be made to it directly and by name. All such corporations and all individual bankers shall be banks of discount and deposit as well as of circulation, and the usual busi- ness of banking of such corporations or individual bankers shall be transacted at the place where such corporations or individual bankers shall be located, agreeably to the location specified in the certificates required by law to be made by them respectively, and filed in the office of the superintendent of banks, and not elsewhere, except as otherwise provided in this chapter in relation to the redemption of circulating notes by agents. (Former section 46; L. 1882, ch. 409; L. 1908, ch. 125, § 2.) See section 27, ante; General Corpora/tion Law, §§ 10, 11, 14; Stock Corpora- tion Law, § 18; Penal Law, §§ 290, 297, 298, 300. 1. A bank, unless restrained by Its charter, may take a mortgage to secure anticipated, as well as actual liability. But the specification of certain powers is an implied prohibition of the exercise of other and distinct powers (citing 15 Johns. 383). A national bank may not take a mortgage for future indebtedness — such mortgage is void under 17. S. Law, June 3, 1864. Crocker v. Whitney, 71 N. y. 161; 10 N. Y. 550; Sandf. Ch. 179. 150 THE BANKING LAW. 2. When a bank loans upon securities not authorized by law the State only can take cognizance of the act. It is not available to an individual in an action. Fifth Ave. Bank v. The Forty-second St., etc., E. R. Co., 44 State R. 379, 17 N. Y. Supp. 826; S. C. 63 Hun, 629. 3. A bank has no right to discount paper at any other place than that of its location, and a note so discounted would be void. But it would seem that a note so discounted to pay a debt due from a third party, would be valid. Potter v. Bank of Ithaca, 7 Hill, 530. 4. The question whether State banks may buy and sell securities other than those mentioned in the above section was passed upon by the attorny-general, in an opinion filed in the banking department, March 26, 1886, as follows : " I am of the opinion that State banks may buy and sell any securities embraced in the term ' evidence of debt,' which may be necessary in the exercise of their legiti- mate banking powers. My opinion, however, must not be construed as warrant- ing banks to buy and sell evidences of debt for merely speculative purposes. Such acts are clearly beyond the scope and powers of all banks." 5. A banking corporation chartered under the laws of this State has no power to subscribe for the stock of a railroad corporation. A State bank cannot enforce against any one an executory contract which it was not authorized by its charter to make. Nassau Bank v. Jones, 95 N. Y. 115, 47 Am. Rep. 14. 6. When bonds or securities are received by a bank in the usual course of busi- ness as collaterial security for loans to a customer it is not a gratuitous bailee, but receives compensation for the bailment and is chargeable with the exercise of a high degree of care in their keeping. Otherwise when it is a gratuitous bailee. Ouderkirk v. Central Natl. Bank, 119 N. Y. 263, 23 N. E. 875. 7. The receipt of special deposits is incidental to the business of banking. Action was to recover value of certain railroad bonds deposited for safe-keeping; bonds were stolen. Special deposit means anything to be specifically kept and redelivered. It is not confined to securities for loans. Bank held liable, but case turned seemingly on question of negligence. Pattison v. Syracuse Nat. Bank, 80 N. Y. 82, 36 Am. Rep. 582 (authorities collated, pp. 90-98). As to when deposits are special so that title remains in depositor, see full presentation of authorities in editorial note to Mutual Accident Asso. v. Jacobs, 16 L. R. A. 516; as to care required of banks in keeping special deposits, see editorial note to Gray v. Merriam, 32 L. R. A. 769, which presents the authorities in full. 8. Where a person is president, general managing agent and financial oflScer at the same time, he occupies the place and possesses all the power of a board of directors. Smith v. Lansing, 22 N. Y. 522. 9. Associations organized under this act (chap. 260, Laws of 1838) have capac- ity to borrow money, as incidental to the banking business and to the powers expressly granted. Curtis v. Leavitt, 15 N. Y. 9. 10. The purchase of stock for the purpose of pledging or selling it as a means of raising money, is not within the powers conferred by the foregoing section. Section 18, chap, 260, Laws of 1838. Such an operation would be evidence that the bank was embarrassed or insolvent, and cannot be deemed necessarily incident to the power of banking (citing State of Ohio v. Leavitt, 7 N. Y. 328). Bk. Commrs. v. St. L. Bk., 7 N. Y. 516. THE BANKING -LAW. 151 11. They possess the power to carry on business only as specified in this act, and to buy State stocks to sell at a profit (except when taken as security for a loan or in payment of a debt) is without their power. State of Ohio v. Leavitt, 7 N. Y. 328 ; Talmage v. Pell, id. 12. A bank has no power to buy and sell stocks. The offleers cannot make the bank liable by signing a contract for the bank to buy stock, and they are liable for any money used in payment for such stocks. Austin v. Daniels, 4 Denio, 299. Cited 10 Bosw. 692. 13. A contract made by a corporation contrary to law is ultra vires, and void as against public policy. Corporations may invoke the aid of the court to relieve them from their illegal contracts in the same manner as individuals. Although courts of equity will not in general interfere to grant relief to either party to an illegal contract, yet where one of the parties asks relief on the ground of public policy, it will be granted. President v. E. E. Co., 7 Lans. 240. 14. The power to borrow money is among the incidental powers conferred in this section. 5 Barb. 10. 15. Money loaned to banks to pay illegal debts not prohibited by statute, is a valid claim against the corporate funds, and the assignment of collaterals to secure such loan is valid. Leavitt v. Blatchford, 5 Barb. 9 ; S. C. 3 N. Y. 19, 51 Am. Dec. 333. 16. A bank may receive uncurrent bank notes from depositors and dealers at the legal rate of discount. 7 How. Pr. 144. 17. An association under the general banking law may borrow money to dis- count notes, and also to purchase State stocks and other securities to be deposited with the Comptroller; but it has no right to borrow money to be used in specu- lation, or in mercantile or other business having no relation to the ordinary busi- ness of a bank. Whether such institutions were corporations was for a long time disputed, but our courts have now settled down to the opinion that they are; and they have all the powers expressly granted them, together with such as are necessary and incidental to carry on the business for which they were incorporated. Leavitt v. Yates, 4 Ed. Ch. 163-166; Comstock v. Willoughby, 1 Hill & D. Supp. 271. 18. Atlantic State Bank bought from a note broker a note for $3,000. Claimed in action by bank to collect note, that this was a purchase, not a discount, and not within powers of bank as conferred by section 18, chapter 260, Laws of 1883. Held, " to buy or purchase a debt is always in commerce termed to discount it " and is within provision of statute (citing p. 462, Tracy v. Talmage, 18 Barb. 456; Johnson v. Nat. Bk. of Gloversville, 74 N. Y. 329, 30 Am. Eep. 302). Atlantic State Bk. v. Savery, 82 N. Y. 291. See editorial note to Nicholson v. National Bank of New Castle, 16 L. R. A. 223, on purchase of notes and bills by bank as distinguished from discounting. " Whenever the law requires notice to be given to a moneyed corporation, it is well served by being communicated to its chief financial officer (New Hope & Del. Bridge Co. v. Phoenix Bank, 3 N. Y. 166), and when his agency is of a continuous character, and the duty rests upon him to communicate information acquired by him to his principal, his knowledge, however and wherever acquired, becomes the knowledge of his principal, and it is bound thereby." Euger, Ch. J., Port Jervis V. First Nat. Bank, 96 N. Y. 559 (citing Holden v. N. Y. & N. E. Bank, 72 N. Y. 286; Fulton Bank v. N. Y. & S. Canal Co., 4 Paige, 127). 152 THE BANKING LAW. 19. Where a notice or information is received by an officer of a bank in his official capacity the bank is presumed to have it. Otherwise if it is received as a private individual. Merchants' Nat. Bank v. Clark, 64 Hun, 175, 19 N. Y. Supp. 136. 20. A mortgage executed to the cashier of a bank to secure an indebtedness to the bank in pursuance of a previous arrangement between it and the mortgagor is a valid security in favor of the bank. Laureneeville Cement Co. v. Parker et al., 39 State Rep. 864, 15 N. Y. Supp. 577, aflf'd 133 N. Y. 622, 30 N. E. 1150. 21. A cashier of a bank has, as incident to his office, implied authority to bor- row money for it and, in the absence of any statutory restraint, to secure the loan by pledge of its property or funds; and, as against third persons, the as- sumption of such authority by the cashier will conclude the bank. Coats v. Don- nell, 94 N. Y. 168. As to power of bank officers and agents to indorse negotiable paper, see full presentation of authorities in editorial note to Gate City Bld'g & Loan Asso. v. National Bank of Commerce, 27 L. R. A. 401. 22. Where the duty is imposed upon the cashier of a baiik carrying on its business, he cannot be held responsible for a neglect of duty in not consulting other officers of the bank or committees, whom by the by-laws he is required to consult in making discounts, where said committees hold no meetings and the officers systematically absent themselves from the performance of their duties. The relations of a bank with its cashier are analogous to those of a principal with his agent, and the principles governing the right of disaffirming unauthor- ized acts of an agent are applicable to similar acts of a cashier. Second Nat. Bank v. Burt, 93 N. Y. 233. 23. Notice to an agent of a bank intrusted with the management of its business is notice to the corporation in transactions conducted by such agent acting for the corporation, in the scope of his authority, whether the knowledge of the agent was acquired in the course of the particular dealing or on some prior occasion. Cragie v. Hadley, 99 N. Y. 131, 52 Am. Rep. 9, 1 N. E. 537. 24. " The relation existing between a bank and its depositor is, in a strict sense, that of a debtor and creditor; but in discharging its obligation as a debtor, the bank must do so subject to the rules obtaining between principal and agent. " In disbursing the customer's funds, it can pay them only in the usual course of business, and in conformity to his directions. In debiting his account, it is not entitled to charge any payments except those made at the time when, to the per- son whom, and for the amount authorized by him. Wheeler v. Guild, 20 Pick. 545, 32 Am. Dec. 231; Dan. on Neg. Inst., § 1818. It receives the depositor's funds upon the implied condition of disbursing them according to his order, and upon an accounting, is liable for all such sums deposited, as it has paid away without receiving valid direction therefor. The bank is from necessity responsible for any omission to discover the original terms and conditions of a check, once properly drawn upon it, because at the time of payment it is the only party interested in protecting its integrity, who has the opportunity of inspection, and it therefore owes its duty to its depositors of guarding the fund intrusted to it from spoliation. This liability arises, although an alteration of a material part of his order has been effected, even though it be done so skillfully as to defy detection by examination. Dan. on Neg. Inst., § 1660. This follows from the fact that after it is put in circulation, it passes beyond the reach of its maker, who has no opportunity until after it has fulfilled its office of inspecting it, and THE BAiq-KING LAW. 153 protecting himself from the loss occasioned by a fraudulent alteration. This opportunity the banker has, and he is responsible for any want of vigilance in detecting the alteration of an order after it has once been correctly drawn, with its blank places properly filled up, and is put in circulation by the maker. " The liability of the banker for a loss occasioned by neglect to exercise such vigilance is confined to the banker alone. So far as other parties through whose hands an altered check passes are concerned, they have the same opportunity for detecting fraudulent alterations in the body of the check that the banker has, and as to them, after payment, he is responsible only for the genuineness of the maker's signature." Euger, ch. J., in Crawford v. West Side Bank, 100 N. Y. 53, 53 Am. Rep. 152, 2 N. E. 881 ; Bank of Commerce v. Union Bank, 3 N. Y. 230. 25. " The rule that when deposits are received by a bank, unless they are spe- cial deposits, they belong to it as part of its general funds, and the relation of debtor and creditor arises, applies where the deposit is of trust money unless the act of depositing it is a misappropriation of the fund." O'Connor v. The Me- chanics' Bank, 124 N. Y. 324, 26 N. E. 816. 26. " Payments made by a bank upon forged indorsements are at its peril, unless it can claim protection upon some principle of estoppel or because of some negligence chargeable to the depositor." Shipman v. Bank of State of New York, 126 N. Y. 318, 12 L. E. A. 791, 22 Am. St. Eep. 821, 27 N. E. 371. As to bank's duty to know signature of drawer, see editorial note to Germania Bank v. Boutel, 27 Xi. E. A. 635, containing an exhaustive presentation of the authorities on that question; as to who must bear loss on check issued or indorsed to imposter and paid by bank, see note to Land Title & Trust Co. v. Northwestern Nat. Bank, 50 L. E. A. 75. 27. An account stated by the bank, by the balancing and return to the depositor of his pass book with the vouchers, can be opened upon proof of fraud or mis- take. The silence of the depositor upon the receipt of his book thus balanced, unles he is chargeable with laches, simply puts upon him the burden of showing the fraud or mistake." Shipman v. Bank of State of New York, 126 N. Y. 318, 12 L. R. A. 791, 22 Am. St. Eep. 821, 27 N. E. 371. As to creation of contract by entries in bank books, see exhaustive editorial note to Talcott v. First Nat. Bank, 24 L. E. A. 737; as to entries constituting an account stated, see similar note to Vanbibber v. Plunkett, 27 L. R. A. 820. 28. " When a bank returns a check payable to the order of a payee named, to a depositor, as evidence of a payment made by his direction, he has the right to assume that the bank has ascertained that the indorsement upon it is genuine; he is not presumed to know the signature of the payee." Shipman v. Bank of State of New York, 126 N. Y. 318, 12 L. R. A. 791, 22 Am. St. Rep. 821, 27 N. E. 371. 29. " Negotiable paper, the payee of which does not represent a real person, cannot be treated as payable'to bearer, unless the paper was put into circulation by the maker with knowledge that the name of the payee does not represent a real person." lb. 30. " A bank by the certification of a check represents that it has on deposit the amount, and agrees that it will retain that amount and apply it in payment, provided that the check shall be indorsed by the payee. When, therefore, the check is transferred without indorsement, the bank is not estopped by the cer- 154 THE BANKING LAW. tification from questioning the validity of the check." The Goshen Natl. Bank V. Bingham, 1X8 N. Y. 349, 7 L. S. A. 595, 16 Am. St. Eep. 765, 23 N. E. 180. 31. " An ordinary uncertified check is neither a legal nor equitable assignment of the maker's funds, and confers no rights upon the payee which he can enforce against the bank." O'Connor v. The Mechanics' Bank, 124 N. Y. 324, 26 N. E. «16. 32. " A refusal to pay to the payee or indorsee thereof upon presentation the amotmt of a check, which presentation is equivalent to a demand for payment, gives to the drawer a right of action, in case he has funds in the bank to meet the check and the refusal to pay was without his authority." Viets v. Union Natl. Bank, 101 N. Y. 563, 54 Am. Eep. 743, 5 N. B. 457. 33. " A failure to honor a depositor's check is a breach of contract for which a, bank is liable. The depositor is not confined to a suit for the amount of his deposit." Citizen's Natl. Bank v. Importers' and Traders' Natl. Bank, 119 N. Y. 195, 23 N. E. 540. As to liability of bank for refusal to pay check for which it has funds, see editorial note to Schaffner v. Brman, 15 L. R. A. 134; as to dis- charge of drawer of check by payee accepting something in lieu of money, see note to Anderson v. Gill, 25 L. R. A. 200. 34. " A bank receiving commercial paper for collection is in this State, in the absence of a special agreement, liable for a loss occasioned by the default of r& correspondents or other agents selected by it to make the collection." St. Nicholas Bank of N. Y. v. The State Natl. Bank, 128 N. Y. 26, 13 L. R. A. 241, 27 N. E. 849. See elaborate editorial note to National Butchers & Drovers Bank V. Hubbell, 7 L. R. A. 852, on bank collections. 35. " A bank which has received for collection a raised draft, and upon receipt of its amount from the drawee, remitted the same in good faith to its corre- spondent, the title to the draft never having been in it, is not liable, on dis- covery of the mistake, to return the excess over the amount for which the draft originally was drawn to the bank making payment." Natl. Park Bank v. Sea- board Bank, 114 N. Y. 28, 11 Am. St. Eep. 612, 20 N. E. 632. 36. " Bankers having a lien upon a deposit to secure them upon outstanding acceptances not yet due, have the right upon the drawer's failure to retain the face amount of the drafts and not merely their then value." Coates v. Donnell, 94 N. Y. 168. 37. " When certain bonds are pledged to a broker or banker to secure payment of a particular note, he has no lien upon such securities for the payment of any other claim." Wyckoflf v. Anthony, 9 Daly, 417. 38. The collector of a depositor indorsed without authority the name of his employer. The collector had been introduced by maker of check on a previous occasion as authorized to receive pajonent. Held, that under these and other specific facts the bank was not authorized in making payment on such indorse- ment. Adler v. B'way Bank of Brooklyn, 30 Misc. 382, 62 N. Y. Supp. 402. 39. A depositor in a bank having branches issued two checks to same payee for more than amount of his balance; the checks were certified at different branches without knowledge of the other, the same day. Held, that the bank was liable to payee only for the actual amount due to depositor on the books, as the payee received the checks for a past due debt, and no right of third parties intervened. Rankin v. Colonial Bank, 31 Misc. 227, 64 N. Y. Supp. 32. 40. A bank is liable for loss when given bonds for collection, and it fails to THE BANKIKG LAW. 155 »| collect whole amount of interest. Kelley v. Phcenix Natl. Bank, 17 App. I>iv. 496, 45 N. Y. Supp. 533. 41. A bank president owed bank an amount more than one fifth of capital stock, and gave a mortgage as security; although loan was improper, the mort- gage held valid. Dunn v. O'Connor, 25 App. Div. 73, 49 N. Y. Supp. 270. 42. A bank has lien on depositor's note deposited for collection, to offset all claims due and payable to bank by depositor before appointment of receiver of his property as insolvent. Smith v. 8th Ward Bank, 31 App. Div. 6, 52 N. Y. Supp. 290. As to application by bank of individual partner's deposit on firm debt, see editorial note to Adams v. First Nat. Bank, 23 L. E. A. Ill; as to right of set-off by or against insolvent bank, see editorial note to Fera v. Wickham, 17 L. R. A. 456. 43. A bank is guilty of fraud in receiving deposits when it knows of it insol- vency; and such deposits may be recovered, if not passed into hands of bona fide holder. Stapleton v. Odell, 21 Misc. 94, 47 N. Y. Supp. 13. As to creation of trust by receiving deposit when insolvent, see full presentation of authorities in editorial note to Bruner v. First Nat. Bank, 34 L. R. A. 532; as to criminal re- sponsibility for so doing, see editorial note to Commonwealth v. Jurkin, 31 L. R. A. 124. 44. A bank must use ordinary care in paying stopped check, although its rules excuse it from liability for such payment. Elder v. Franklin Natl. Bank, 25 Misc. 716, 55 N. Y. Supp. 576. As to right to stop payment of check, see editorial note to Canterbury v. Bank of Sparta, 30 L. R. A. 845, which presents the authori- ties on that question. 45. A bank is liable for loss of check given for collection. Walton v. Riverside Bank, 29 Misc. 304, 60 N. Y. Supp. 519. 46. Ordinary care only by depositor in examining returned vouchers is re- quired. Leaving such duty to trusted clerk sufficient even if he proves dishonest. Clark V. Natl. Shoe & Leather Bk., 32 App. Div. 316, 52 N. Y. Supp. 1064. As to duty of depositor with respect to forged checks charged to him by bank, see editorial note to First Nat. Bank v. Allen, 27 L. R. A. 426, collating the authori- ties on that question. 47. Cashier acting in dual capacity, for bank and for customer; peculiar facts as to payment of check. Wiggins v. Stevens, 33 App. Div. 83, 53 N. Y. Supp. 90. 48. A "lunatic's funds were deposited by his committee in the latter's bank in the latter's name, and subsequently the bank applied the funds to pay a personal loan to the committee. Held, that the representative of the lunatic could not recover the money from the bank. Meyers v. N. Y. Co. Natl. Bank, 36 App. Div. 482, 55 N. Y. Supp. 504. As to liability of bank or other depositary for taking deposit of agent, fiduciary, or other representative to pay his own debt, see full presentation of authorities in editorial note to Rochester & Charlotte Tump. Road Co. v. Paviour, 52 L. R. A. 790. 49. Depositor deposited a certain amount to meet a certain note coming due, the bank failed. Held, that such special deposit when identified was preferred as against general creditors of bank. Bergstrasser v. Lodewick, 37 App. Div. 629, 59 N. Y. Supp. 630. As trust in proceeds of collection made by insolvent bank, see editorial note to Saylis v. Cox, Rec'r, 32 L. R. A. 715. 50. Special circumstances excusing bank officer for omission to examine col- 156 THE BANKING LAW. lateral offered for loan. Clinton Natl. Bk. v. Natl. Park Bank, 37 App. Div. 601, 56 N. Y. Supp. 244. 51. A bank has a lien on a customer's deposit for any indebtedness actually due by customer; and this superior to rights of attaching creditor. People v. St. Nicholas Bank, 44 App. Div. 313, 60 N. Y. Supp. 719. See editorial note to Armstrong v. Chemical Natl. Bank, 6 L. B. A. 226, as to right of bank to lien on deposits. 62. Plaintiff had note on which he was indorser discounted at bank, and he was credited with the proceeds. Subsequently on default of note, and without notice of protest, the bank charged amount against his deposit, and refused to pay checks drawn on it. Held, that bank was liable on contract and in tort to the depositor plaintiff; also, that malice was inferable from repeated refusal to pay checks. Dairs v. Standard Natl. Bank, 50 App. Div. 210, 63 N. Y. Supp. 764. 53. A bank officer is liable to his bank for loss by his negligence in determining value of collateral for loan to one customer for one-fifth of capital and surplus of bank, when collateral is not worth more than 10 per cent, more than loan. That no ratification by directors concludes the bank. 17th Ward Bank v. Smith, 51 App. Div. 259, 64 N. Y. Supp. 888. As to care required of bank directors as regards the bank, its stockholders, and third persons, see note to Swentzel v. Penn. Bank, 15 L. E. A. 305. 54. Negotiable municipal bonds stolen eighteen years ago were pledged by a customer of bank, who was in fact an ex-oonvict, but not suspected to be such. Held, that pledgee bank acquired good title under the special circumstances. Manhattan Sav'gs Inst. v. N. Y. Natl. Exchange Bank, 53 App. Div. 635, 65 N. Y. Supp. 757. 55. Where the president of corporation depositor had his personal note due at the bank, and paid it by a president's check upon the corporation's account in that bank : Held, that corporation could recover from bank the amount paid and this without demand; it being a misapplication of funds. Jas. Keynolds El. Co. V. Merchants Natl. Bank, 55 App. Div. 1, 67 N. Y. Supp. 397. 56. A confidential employee of depositor firm made out checks in course of business and presented them for signature to firm. He then raised the amounts and altered payee's name to " cash " and drew out the money from the bank in person. He in course of business procured the checks so paid, and altered them to their original form, and corrected the stubs to conform to the bank's footings. The bank's teller noticed some defacement in some checks and required this employee's personal indorsement. This clerk had abstracted these checks from sealed envelopes addressed for mailing. Held, that bank could charge depositor only authentic amount of original checks. Critten v. Chemical Natl. Bank, 60 App. Div. 241, 70 N. Y. Supp. 246, modified 171 N. Y. 219, 57 L. R. A. 529, 63 N. E. 969. 57. By-laws of a bank provided that cashier as well as president should sign its drafts, did not prohibit them from obtaining drafts for personal use, and allowed cashier to overdraw his account, and directors loaned him bank assets. He paid for horses for private use with draft of his bank drawn on correspondent bank, entered it at less than face amount which he paid into bank. Held, payee not liable to drawer for the difference. Campbell v. Upton, 66 App. Div. 434, 73 N. Y. Supp. 1084, aff'd 171 N. Y. 644. As to nature of draft drawn by one bank or another, see editorial note to Exchange Bank v. Sutton Bank, 23 L. E. A. 173. THH BAWKHSTG LAW. 157 58. The relation of president to his bank is that of agency, and he is liable for his failure to use reasonable care and diligence in loaning the bank's funds. 17th Ward Bank v. Webster, 67 App. Div. 228, 73 N. Y. Supp. 648. 59. Depositor corporation had two accounts each with diflFerent form of signa- ture, one form stating two names, the other but one. Held that form stating two names did not mean either of such names, but both. Shoe Lasting Machine Co. V. Western Natl. Bank, 70 App. Div. 588, 75 N. Y. Supp. 627. 60. A bank holding note of its depositor cannot, before maturity, retain de- posit to pay note. Pearsall v. Nassau Natl. Banlj of Brooklyn, 74 App. Div. 89, 77 N. Y. Supp. 11. See editorial note to Nashville Trust Co. v. Fourth Natl. Bank, 15 L. E,. A. 710, on right to set off unmatured claim against deposit account of insolvent debtor. 61. Cashier of bank acts within scope of his authority in surrendering bond given to secure an account, and taking in lieu thereof a second bond for larger amount but invalid because of conditional delievery with condition unperformed, with somewhat similar names as sureties. German-Amer. Bank of Tonawanda v. Schwinger, 75 App. Div. 393, 78 N. Y. Supp, 38. 62. Deposits ; — right to follow money paid on forgery under peculiar facts. Nassau Bank v. Natl. Bank of Newburgh, 159 N. Y. 456, 54 N. E. 66. 63. A bank is liable for negligent delay in presenting check deposited with it by customer. Martin v. Home Bank, 160 N. Y. 190, 54 N. E. 717. 64. A certificate of deposit payable to one or " to his order " is not due for purposes of suit until actual demand accompanied by presentation of certificate. Cottle V. Marine Bank of Buffalo, 166 N. Y. 53, 59 N. E. 736. 65. A certificate of deposit is a negotiable instrument; when made by a bank- ing firm, and it bears additional signature of individual held out as partner, the individual and his estate is liable as surety, and individual estate is liable to holder and preferred to firm creditors. Matter of Baldwin, 170 N. Y. 156, 58 L. R. A. 122, 63 N. E. 62, modifying 57 App. Div. 621. As to -iiature of deposit tickets issued by bank, see editorial note to First Natl. Bank v. Clark, 17 L. R. A. 580. 66. The relation between depositor and the bank, is that of creditor and debtor, and payment can be made by bank only on actual direction of depositor; stating the rule on certain peculiar facts as to raised cheeks. Critten v. Chemical Natl. Bank, 171 N. Y. 219, 57 L. R. A. 529, 63 N. E. 969, modifying 60 App. Div. 241, 70 N. Y. Supp. 246. 67. A bank clearing exchanges through New York Clearing House may sue a bank which has presented to it, through the Clearing House (neither bank being a member of Clearing House) worthless paper, and which it has refused to repay on demand the same day: Clearing House rules construed. The check was certi- fied but repudiated before payment or loss. Mt. Morris Bank v. 23rd Ward Bank, 172 N. Y. 244, 64 N. E. 810. For an exhaustive presentation of the authorities relating to clearing-house transactions, see editorial note to Yardley v. Philler, 25 L. R. A. 824. 68. Where a draft is sent to a bank which has a correspondent bank in the distant city on which it is drawn, it implies a duty to collect, in the absence of proof of other purpose: also, that it means a duty to collect and turn over pro- ceeds, or return draft unimpaired; the forwarding of a worthless check not com- 158 THE BANKING lAW. plianee. Natl. Revere Bank v. Natl. Bank of Republic, 172 N. Y. 102, 64 N. E. 799; aff'g S. 0. 54 App. Div. 342, 66 N. Y. Supp. 662. 69. Although a bank's ordinary liability on certifying a check is as to sig- nature, amount, and availability of funds, yet when it has information, not known to holder, that it is a forgery, and disregards such information and certifies check, its liability is extended. Thus where a draft not corresponding to the list before the teller, is certified and subsequently paid through the clearing house, the certifying bank cannot recover back the amount of the forgery. Continental Natl. Bank v. Tradesmens' Natl. Bank, 173 N. Y. 272, 65 N. E. 1108, aff'g 59 App. Div. 103, 69 N. Y. Supp. 82. 70. A bank is the debtor of the depositor and payments to other than the depositor or on his order are not justified. Fricano v. Columbia Natl. Bank of Buffalo, 118 App. Div. 567. 71. Where a check drawn to the order of the executrix is endorsed by her attorney under authority given him and is deposited by the attorney in his personal account, the bank is not responsible to the executrix for such moneys after the attorney has used them. Mills v. Nassau Bank, 52 Misc. 243. 72. Where the owner of a check indorses it, making it payable to bearer, and gives it to another, the bank is justified in paying it although in fact it was given to be placed to credit of owner's account. Peerrot v. Mt. Morris Bank, 120 App. Div. 247. 73. As to note on liability of bank for refusal to pay checks when bank holds sufficient funds, see 15 L. R. A. 134. 74. As to effect of certification of check on liability of drawer. 16 L. R. A. 510. 75. Delay in suing a bank that pays a forged check until death of the forger will not absolve the bank. The circumstances as to negligence of depositor in discovering the forgery examined. When tender of forged check for reimburse- ment waived. When checks are returned by the bank as vouchers, the depositor may assume that the indorsements are genuine. Kearny v. Metropolitan Trust Co., 110 App. Div. 236. 76. As to duty of depositor with respect to forged checks, see 27 L. R. A. 426. 77. A bank being merely a debtor to a depositor, it cannot justify a payment unless made on the direction of the depositor. Seaboard Natl. Bank v. Bank of America, 193 N. Y. 26, aff'g 118 App. Div. 907. 78. A bank is presumed to know the signature of the depositor and cannot charge a forged check to his account. Timbel v. Garfield Natl. Bank, 121 App. Div. 870. 79. As to duty of drawee to know of depositor's signature, see 27 L. R. A. 635. 80. Negligence by depositor in making out check so that alterations are easily made will absolve the bank for its payment. Timbel v. Garfield Natl. Bank, 121 App. Div. 870. 81. Certain facts and circumstances concerning the banking methods of a depositor such as may relieve a bank from liability in paying a series of forged checks discussed and examined. Morgan v. U. S. Mtge. & Trust Co., 125 App. Div. 22. 82. Duty of a depositor with respect to forged checks, notes on. 27 L. R. A. 426, 37 L. R. A. 539. THE BANKIIfG LAW. 159 83. As to certain errors in names by depositor in making deposit, see Schwarta V. State Bank, 63 Misc. 265. 84. As to a specific and peculiar conditional deposit, see Republic Life Ins. Co. V. Hudson Trust Co., 130 App. Div. 618. 85. As to unconstitutionality of a statutory method for compulsory payment of lost or destroyed certificates of deposit. Matter of Ellard, 62 Misc. 374. 86. For further discussion of this subject, see Eaton and Gilbert on Commercial Paper. § 67. lavTful money reserve. — Every bank or individual banker sball at all times have on band in lawful money of tbe United States, gold certificates, silver certificates, or notes or bills issued iby any lawfully organized national banking association an amount equal to at least twenty-five per centum of the aggregate amount of its de- posits, exclusive of deposits which are secured by outstanding un- matured bonds issued by the state of New York, if its principal place of business is located in any borough in any city of the state which borough according to the last preceding state or United States census had a population of one million eight hundred thousand or over ; and an amount equal to at least twenty per centum, if its principal place of business is located in any borough, which borough according to the last preceding state or United States census had a population of one million or over, and less than one million eight hundred thou- sand ; and an amount equal to at least fifteen per centum of the aggre- gate amount of its deposits, exclusive of deposits which are secured by outstanding unmatured bonds issued by the state of "New York, if its principal place of business is located elsewhere in the state. The amount thus to be kept on hand shall be called its lawful money reserve. Two-fifths of such lawful money reserve of any bank or individual banker located in any borough in any city in the state which borough according to the last preceding state or United States census had a population of eighteen hundred thousand or over, one- half of such lawful money reserve of any bank or individual banker located in any borough in any city of the state which borough accord- ing to the last preceding state or United States census had a popula- tion of less than eighteen hundred thousand and which bank or in- dividual banker does .not maintain a branch office in any borough having a population according to the last preceding state or United States census of eighteen hundred thousand or over, and three-fifths of the lawful money reserve of any bank or individual banker located 160 THH BAIfKING LAW. elsewhere in the state may consist of moneys on deposit subject to call with any bank or trust company in this state having a capital of at least two hundred thousand dollars, or a capital of at least one hundred and fifty thousand dollars and a surplus of at least one hun- dred and fifty thousand dollars, and approved by the superintendent of banks as a depositary of lawful money reserve. If the lawful money reserve of any bank or individual banker shall be less than the amount required by this section, such bank or banker shall not in- crease its liabilities by making any new loans or discount otherwisfcr than by discounting bills of exchange payable on sight, or making any dividends from profits until the full amount of its lawful money reserve has been restored. The superintendent of banks may notify any bank or individual banker whose lawful money reserve shall be below the amount herein required to make good such reserve; and if it shall fail for thirty days thereafter to make good such reserve, such bank or individual banker shall be deemed insolvent and may be proceeded against as an insolvent moneyed corporation. (As amended by ch. 223, Laws of 1909; former section 47; L. 1908, ch. 151.) § 68. Payment of capital stock. — All of the capital stock of every bank shall be paid in before it shall commence business. (Former section 49; R. S., 1518; L. 1882, ch. 409, § 18, amended L. 1895, oh. 929; L. 1908, ch. 151.) See section 41, Stock Corporation Iiaw; N. B. A., § 5140, see post. § 69. Annual meeting and election of directors. — Every bank shall hold an annual meeting for the election of directors on the second Tuesday in January or within ten days thereafter. Notice of such meeting shall be given as required by the stock corporation law. No person shall be eligible to election as director of a bank having a capital of fifty thousand dollars or over unless he is a stockholder of the corporation owning in his own right an amount equal to at least o ng thousand dollars in value, nor of a bank having a capital of less than fifty thousand dollars unless he is a stockholder in his own right in an amount equal to at . least five hundred dollars ; and every person elected to be a director who, after such election shall hypothecate, pledge or cease to be the ov^ner in his own right of the amount of stock aforesaid, shall cease to be a director of the corporation, and THE BANKING LAW. 161 his office shall be vacant. The directors shall hold offiice for one year and until their successors are elected and have qualified. Each director must be a citizen of the United States, and at least three- fourths of the directors must be residents of this state at the time of their election and during their continuance in office. All vacancies in he office of director shall be fiUed by election by the stockholders; but vacancies not exceeding one-third of the whole number of the board may be filled by the directors then in office, and the directors so elected may hold their offices until filled by the stockholders at a special or annual meeting. A bank, at any annual meeting for the election of directors, provided notice thereof be given in the notice of the annual meeting, may, by a majority of all of the votes of the stock- holders of such bank, fix or change by resolution the number of directors, to not less than five nor more than a certain number to be named in said resolution, which number, when so fixed, shall be the lawful number of directors of such bank until again changed. Cer- tified copies of all resolutions fixing or changing the number of directors under this section shall be immediately filed in the banking department. One of the directors, to be chosen by the board, shall be the president of the board ; and if the number of directors neces- sary to constitute a quorum is not prescribed in the certificate of incorporation or in the by-laws and no provision is made therein for determining the same, the directors may fix such number, which shall not be less than five, with the same effect as if such number was prescribed in the certificate of incorporation. Whenever the articles of association of any bank organized prior to the first day of January, eighteen hundred and ninety-two, or the certificate of incorporation of any bank organized after that date, shall prescribe a different qualification for directors than such as are prescribed in this section, the qualification of such directors may be changed so as to comply with the provisions of this section in the manner pre- scribed for a change of the number of directors under section twenty- six of the stock corporation law. (Former section 50; amended by L. 1900, ch. 89; L. 1900, ch. 240; L. 1902, oh. 145.) See General Corporation Law, §§ 23-32; Stock Corporation Law, §§ 25, 27, 28; Penal Law, §§ 290, 297, 664, 665, 668. 1. All powers conferred upon a corporation, unless otherwise expressly pre- 11 162 THE BAIJKING LAW. scribed, must be exercised by its directors, who are constituted by law as the agency for that purpose and the consent of or ratification by its stocKholders is not necessary unless expressly required by statute or the by-laws. Beveridge v. N. Y. E. R. R., 112 N. Y. 1, 2 L. R. A. 648, 19 N. E. 489. 2. When the directors of a bank virtually abdicate their powers in favor of the president by allowing him to gain exclusive control of its affairs so that he acts as its sole representative, and, while so acting, commits fraudulent acts in re- spect to third persons whereby his bank is benefited, they (directors) are chargeable with notice of the fraud, and the bank is liable to the extent that it is benefited. City Natl. Bank v. Natl. Park Bank, 32 Hun, 105. 3. A director of state bank, knowing its insolvency and who participates in directing subsequent receipt of deposits which are checked out and paid to favored depositors is liable to the depositor who made the deposits so paid out; the trans- action characterized as fraud. Cassidy v. Uhlmann, 170 N. Y. 505, 63 N. E'. 554, affg 54 App. Div. 205. § 70. Oath of directors. — Each director, when appointed or elected, shall take an oath that he will, so far as the duty devolves on him, diligently and honestly administer the affairs of such cor- poration, and will not knowingly violate, or willingly permit to be violated, any of the provisions of law applicable to such corporation, and that he is the oAvner in good faith and in his own right, of the number of shares of stock required by this chapter, subscribed by him or standing in his name on the books of the corporation, and that the same is not hypothecated, or in any way pledged as security for any loan or debt and, in case of re-election or reappointment, that such stock was not hypothecated, or in any way pledged as security for any loan or debt during his previous term. Such oath shall be sub^ scribed by the director making it, and certified by the officer before whom it is taken, and shall be immediately transmitted to the super- intendent of banks, and filed and preserved in his office. (Former section 51; L. 1908, ch. 119.) 1. In suits by a stockholder against directors for loss caused by their negli- gence, the plaintiflf must be one who was a stockholder at the time of the accru- ing of liability and at the time of bringing suit. Where the plaintiff was not thus qualified and a stockholder who is qualified has intervened, the action will lie. Hanna et al. v. Lyon et al., 179 N. Y. 107. 2. Directors who permit deposits with knowledge of the bank's insolvency are guilty of fraud. Nathan v. Uhlmann, 101 App. Div. 388. § 71. Individual liability of stockholders. — Except as prescribed in the stock corporation law, the stockholders of every such corpora- tion shall be individually responsible, equally and ratably, and not THE BAWKINQ LAW. 163 one for another, for all contracts, debts and engagements of such corporation, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares. In case any such corporation shall have been or shall be dissolved by final order or judgment of a court having jurisdiction, and a permanent receiver or receivers of the said corporation shall have been or shall be appointed, all actions or proceedings to enforce the liability of stockholders under this section shall be taken and prose- cuted only in the name and in behalf of such receiver or receivers, unless such receiver or receivers shall refuse to take such action or proceeding upon proper request in that behalf made by any creditor, and in that event such action or proceeding may be taken by any creditor of the corporation. (Former section 52; R. S., 1542, 1543; L. 1897, ch. 441.) See Stock Corporation Law, §§ 56-59; General Corporation Law, §§ 100-115, 161-161. 1. In 1844, Assistant Vice-Chaneellor Sanford, in Boisgerard v. New York Bank- ing Company (an association under the general banking law), 2 Sandf. Ch. 23, held that banking associations tinder the general banking law of 1838, were within the provisions of the Revised Statutes, entitled " Of proceedings against corporations in equity." This case was afterward affirmed upon appeal by the chancellor. 4 Ch. Sent. 20. See, also, Sagory v. Dubois, 3 Sandf. Ch. 466; Gillet V. Moody, 3 N. Y. 479, and Talmage v. Pell, 7 N. Y. 328; Cleveland's Banking Law, 59. 2. This act was passed to give effect to article 8, section 7, constitution of 1846, which is as follows: "The stockholders in every corporation and joint- stock association for banking purposes, issuing bank-notes or any kind of paper credits, to circulate as money, after the first day of January, one thousand eight , hundred and fifty, shall be individually responsible to the amount of their re- spective share or shares of stock in any such corporation or association, for all its debts and liabilities of every kind contracted after the said first day of January, one thousand eight hundred and fifty." It was held to apply to all banks, as well those organized before, as after 1846, provided right to amend charter was reserved. Reciprocity Bank, 22 N. Y. 14, 15; S. C. 29 Barb. 369; S. C. 17 How. Pr. 323; Empire City Bank, 8 Abb. 192. 3. A statute which imposes upon the stockholders of a corporation a personal liability for the corporate debts must be construed strictly. It is in derogation of the common law; and cannot be extended beyond its literal terms. Chase v. Lord, 77 N. Y. 1. 4. Each stockholder is subject to a ratable share of the debts in proportion to the whole capital stock and whole indebtedness of the bank, and without reference to the solvency of any other stockholder. When one assessment has been made and confirmed, no second assessment can be made to supply a deficiency because some stockholders are insolvent. Hollister Bank of B., 27 N. Y. 393, 84 Am. Dec. 292, approved Hollister v. Hollister Bank, 2 Abb. Ct. App. 367. 164 THE BANKIWG LAW. 5. Though not free from obscurity, its (this act) design in one respect is per- fectly clear. No payment was to be compelled from stockholders until all assets readily convertible into cash have been converted and distributed to creditors. In re Hollister Bank, 23 N. Y. 511. 6. In an action against stockholders of a corporation brought by a creditor to charge them individually vrith a debt, the recovery of a judgment for the debt is sufficient evidence of its indebedness to charge them, unless obtained by fraud and collusion. Although the statute prohibits judgment against the stockholders, until judgment has been recovered against the corporation and remains unpaid, they may be sued together with the corporation, and a judgment against the corporation authorizes a judgment against them also. Oonklin v. Furman, 57 Barb. 484. 7. This act was designed to provide a cheap and expeditious way of winding up the affairs of insolvent banking corporations. One feature of the bill is that it prevents numerous and vexatious suits against the s^ckholders in case of the solvency. The leading features of the bill are 1st. To declare the liabiliiy which equitably exists under the constitution. 2d. The speedy remedy of both creditors and stockholders of insolvent institutions. Senate Document, 1849, No. 42. It supersedes proceedings against corporations in equity of Revised Statutes, inas- much as they apply to banks, etc. Ferry v. Bank of Central New York, 15 How. Pr. 446. 8. Almost immediately after the suspension of specie payments by the New York banks, in October, 1857, a meeting of the justices of the supreme court of the first and second districts was held, for the purpose of determining the proper course to be pursued in respect to proceedings that might be instituted against banks. The following minute of their proceedings is of interest in connection with the above proceedings. At a meeting of the justices of the supreme court held for the purpose of determining a uniform course of action among themselves: Pres- ent, Justices Strong, Emott, Birdseye, Mitchell, Roosevelt, Davles, Clark and Pea- body, the following opinions were unanimously concurred in: In all cases where the act of 1849 is applicable, it is deemed to supersede the provisions of the Revised Statutes. 2 R. S., 464, §§ 39 and 47. Accordingly no creditor of a bank who may have relief under that act, can have it imder the Revised Statutes. That act gives the creditor a right to apply to a justice of the supreme court, only after the expiration of ten days from the refusal of the bank to pay its debts and liabilities. Even then a temporary injunction and immediate injunction can only be granted, if in the opinion of the judge it be expedent in order to prevent fraud or injustice. After both parties shall be heard before the judge, he is to deter- mine whether the bank is clearly solvent or not. A bank is clearly solvent when it is clearly able to pay all its debts, although it may have suspended specie pay- ment for a time. In the case of the N. American T. and B. Co., this principle was held by the supreme court and court of appeals. Curtis v. Leavitt, 17 Barb. 309, 327. When a bank is clearly solvent and its ofScers are acting in good faith, no receiver should be appointed. Where the act of 1849 does not apply, if the part of the Revised Statute does apply, it is discretionary on the part of the supreme court to grant an injunction or not. That discretion is controlled by legal rules, and the injunction should never be granted if the bank is clearly solvent. An ex THE BANKING LAW. 165 parte order for an injunction should not be granted even after a suspension of specie payments, unless it satisfactorily appears to the judge that it is necessary to prevent fraud and injustice. The mere fact of the suspension of specie pay- ments (when it is general), is not of itself sufficient proof of fraud or injustice to authorize such injunction. As a general rule, it is not expedient to grant any injunction against a bank, without previous notice. It was also resolved that Justice Mitchell be requested to furnish a copy of these opinions to each of the justices of the supreme court of the other districts, with a request that they respectively communicate to him their views on the same points. Livingston v. B'k of N. Y., 5 Abb. Pr. 343 (note). 9. A judgment recovered against a corporation, after it has been dissolved, is not even prima facie evidence of a debt due from the corporation at the time of its dissolution, for the purpose of charging those who were then stockholders in the company with the amount of the judgment in a subsequent suit against them. Admissions by assignees are not evidence to prove that a debt was due at the time of the assignment, in a suit to charge the stockholders individually with the debt. To recover from stockholders on a note given after actual insolvency, it must be proved that it was given for a debt actually due. Bonaflfe v. Fowler, 7 Paige, 576. 10. Money collected on an assessment of stockholders should not be repaid until all the debts are paid. The intention of the constitution and acts was, to make the stockholders liable to the full amount of their stock, for the payment of the corporate debts. Pruyn v. Van Allen, 39 Barb. 354. 11. Action under this law is not barred because of a previous judgment in an action under Revised Statutes (2 R. S., 463, §§ 39—40), by a stockholder of bank to compel the application of its assets to the payment of its debts. Diven, Rec'r Yates C. B'k v. Duncan et at, 41 Barb. 520. 12. The provisions of the Revised Statutes (2 R. S., 464-465), entitled "Of proceedings against corporations in equity," are not repealed by this act, at least as far as actions by attorney-general for people are concerned. Livingston v. B'k of N. Y., 5 Abb. Pr. 343. 13. To proceedings by people, act is not applicable — therefore Revised Statutes are in so much still in force. People v. Central B'k, 53 Barb. 420; 35 How. Pr. 434. The right of action against a bank to recover moneys on deposit does not accrue until a demand and refusal of payment has been made; and the presentation and demand of payment of the depositor's check by a wrongful holder, the payee's indorsement thereon being forged, is not such a demand as perfects the depositor's cause of action. Bank of British N". A. v. Merchants' Bank, 16 Jones & Spencer, 4. 14. In determining who the stockholders are, the court will not look into the legal title, except perhaps where there has been a, fraudulent transfer to avoid liability. Adderly v. Storm et al., 6 Hill, 624; Ex parte Van Riper, 20 Wend. 614. 15. In an action brought to enforce the individual liability of a stockholder of an insolvent bank, he cannot set off against such liability its indebtedness to him. Garrison v. Howe, 17 N. Y. 464; In re Empire City Bank, 18 id. 227. 16. The liability of a, stockholder is in the nature of a contract, and as such was a personal liability for which the estate of the stockholder was holden after his death. Bailey v. Hollister, 26 N. Y. 116. 17. The liability of each stockholder is precisely for his ratable proportion of 166 THE BANKING LAW. the sum total of that indebtedness of the bank which is to be borne by the share- holders, whether this be its entire indebtedness of every description, or only its indebtedness upon its circulating bills and notes. After he has once paid this pro- portional amount to any person or persons having a legal right to demand it from him, he is fully acquitted and discharged. His liability is for his share of the total indebtedness, not for his proportion of each item of that indebtedness. Neither are the solvent shareholders, or those who can become at for collection, liable to assessment beyond the proportional amount above described, by reason of the insolvency or inaccessibility of others of the shareholders. Those who are solvent and accessible, have not the burden of paying off the whole sum which is due from all together, but only their own proportionate shares; it is the same if the bank owns shares of its own capital stock. In assessing the other shareholders, the calculation will be made upon a basis including these shares precisely as if they were held by an outside party. Making an equation according to the time-honored rule of three, the liability of each individual may be thus ascertained: as the whole capital stock is to the en- tire indebtedness which all the shareholders are liable to discharge, so is the total par value of all the shares to any one shareholders' proportion of the amount to be redeemed. The last figure gives the sum which the individual is liable to pay. Morse, Treatise on Banks, (2d ed.) 503; United States v. Knox, 102 U. S. 422, 26 L. ed. 216, and cases there cited. 18. The organization of a banking corporation and the subscription of the de- fendant to the capital stock thereof creates a legal liability on his part to pay the corporation the amount of his subscription; and that legal liability may be enforced to an extent necessary to liquidate its debts. Dayton v. Borst, 31 N. Y. 435. 19. The original articles of association relieved stockholders from all liability. The bank issued circulating notes after 1850 as before. Held, that stockholders are personally liable under the constitution and this act. In re Oliver Lee & Co.'s Bank, 21 N. Y. 9. 20. Persons to whom stock has been transferred on books as security for debt are liable as stockholders ( not the borrower and pledgor ) , unless the debt has been paid and re-assignment made before default. It would seem that the pro- vision charging the equitable owner is limited to cases where the registered holder is merely the nominal owner like a trustee, and has no beneficial interest. In re Empire Bank, 18 N. Y. 226. 21. A delivery of a stock certificate as collateral security for a debt with the usual power of attorney indorsed thereon, signed by the owner in blank, transfers all the owner's title subject only to claims of the corporation, though prohibited by by-law, unless made on the books of the company. But the company having no notice of the transfer are protected in payment of dividends to original owner, and allowing him to vote until transferred on its books. Smith v. Am. Coal. Co., 7 Lans. 317. 22. A person who, after having subscribed for stock of a bank, transfers his subscription with consent of bank in good faith to another, is relieved of responsi- bility on account of his subscription, and is not liable under this act. Cowles v. Cromwell, 25 Barb. 415. 23. The means for acquiring jurisdiction under this act over the persons of stockholders are unknown to the common law, and quite different from those re- THE BANKING LAW. 167 quired in actions under the Code. Personal service is not required in any case, and mere advertisement is sufficient as to all stockholders not residents of the county where principal office of banks is situated. Such a method may be justi- fied as to a stockholder, since he would be likely to know that his bank had passed into a receiver's hands. Therefore jurisdiction can thus be acquired only over stockholders, and not over any one who does not come within the definition given in the second section of act. Diven v. Lee, 34 How. Pr. 198, 199; S. C. 36 N. Y. 302. 24. Defendant was the owner of certain shares of the capital stock of the bank- ers and brokers' association, a corporation organized under the act of 1867 (ch. 474), and by it made subject to the provisions of the Revised Statutes in rela- tion to general prowers, privileges and liabilities of corporations. 1 R. • S. 599, § 1 e< seq. He sold said stock to B. & Co., a firm of which the president of said corporation and one of the trustees were members, and transferred his certificate by executing an assignment in blank, no name being inserted as transferee. The stock was not transferred on the books of the corporation; an indorsement was made upon the dividend book, that the dividends were to be paid to B. & Co. For four years thereafter the dividends were paid to B. & Co., as appears by the books of the association on the account of B. with the company, and on the dividend book, where it was marked as credited to them. The transaction relating to the stock was with B. alone. There was no declaration in the charter or by-laws that a transfer could only be made perfect by entry on the books. Said corporation having become insolvent, plaintiff, as the receiver, brought this action to recover an amount unpaid on said stock. Held, that the action could not be maintained, that B. & Co. took a complete and perfect title, and that the corporation could not contest its title, and that the receiver occupied no other position and had no better right than the corporation. Cutting v. Damerall, 88 N. Y. 411; reversing 23 Hun, 339. 25. It is a defense, and a stockholder may show, in his exoneration, that his name was placed on the books of the corporation without his consent; but where he actually buys stock, whether from the corporation or an individual, it is no defense that he was induced to do so through fraudulent representations, e. g., the representations of the president that it was " full-paid capital stock upon which there was no liability of the stockholders," and it makes no difference that he did not know that the representations were false until after the insolvency of the corporation. Briggs v. Cromwell, 9 Daly, 436. 26. Where a bank hag no legal existence because irregularly organized, the stockholders are not liable as partners where they have not taken part in or been cognizant of the management of its business, and have not consented to any of the acts of others, except to receive certificates and dividends, and there are no articles of association and no agreement is shown to exist by which the business was carried on. The receipt of dividends, merely, is not suflaeient. Merchants' Natl. Bank v. Pendleton, 29 State E. 891, 9 N. Y. Supp. 46. 27. The rule that a corporation acting in good faith and without notice of the rights of others may treat registered shareholders as the actual owners of the shares standing in their names, applies only to such transactions as are within the express or implied powers conferred upon the company or its shareholders collectively; and an assignee of shares having possession of a certificate, although holding under an unregistered transfer, is not bound by a contract between the 168 THE BAWKING LAW. registered shareholder and the corporation, which is not within such powers. Campbell v. Am. Zylonite Co., 122 N. Y. 455, 11 L. R. A. 596, 25 N. E. 853. 28. A person may be a, holder of stock without being in the full sense of the term a stockholder; no one can be made a stockholder without his consent, ex- press or implied. Glenn v. Garth, 133 N. Y. 18, 30 N. E. 649, 31 N. E. 344. 29. In Hirschfeld v. Kursheedt, 81 Hun, 555, 30 N. Y. Supp. 1023, it is held that section 55 of the Stock Corporation Law, chap. 688 of the Laws of 1852, must be construed in connection with section 52 of the Banking Law. Case affirmed in Hirschfeld v. Bopp, 145 N. Y. 84, 39 N. B. 817. On this subject see Hirschfeld v. Fitzgerald, 157 N. Y. 166, 46 L. R. A. 839, 51 N. B. 997, which, in part, reverses Hirschfeld v. Bopp, 27 App. Div. 180, 50 N. Y. Supp. 676. This case also discusses the rights of a creditor of an insolvent bank against the stockholders thereof, and how the creditors may proceed to establish their claims against such stockholders. 30. The provisions of section 71 of Banking Law apply to every banking cor- poration continuing in business after its enactment; and stockholders are liable for the bank's debts proportionable to the par value of their shares in addition to the amount invested therein, whether they become stockholders before or after the enactment; except where stock is held as collateral, or in a representative capacity, or the debt is not payable within two years, or excepted by Stock Cor- poration Law. Hagmayer v. Alten, 36 Misc. 59, 72 N. Y. Supp. 623. Distinguish- ing Close V. Noye, 147 N. Y. 597, 41 N. B. 570. 31. Stockholder of insolvent State bank is not relieved from his liability, to the extent of the par value of his stock, to a depositor for interest on unpaid bal- ances from time of closing bank to payment of last dividend, because of a pay- ment to depositor by various dividends of full amount of principal and contractual interest. Creditor of insolvent bank need not demand payment from bank before suing stockholder. Parker v. Adams, 38 Misc. 325, 77 N. Y. Supp. 861. 32. Section 71 controls a banking association organized under L. 1838, ch. 260; it is a moneyed corporation; such liability applies now to banks not of issue. Hirschfeld v. Bopp, 27 App. Div. 180, 50 N. Y. Supp. 676. Reversed on other grounds, 157 N. Y. 166, 46 L. R. A. 839, 51 N. E. 997. 33. An action against stockholders under this section cannot be maintained against less than all of them, if all can be made parties. When one stockholder has been released prevents the prosecution of the others in the suit. Hirschfeld V. Bopp, 39 App. Div. 613, 57 N. Y. Supp. 699. See S. C. 145 N. Y. 84. 34. Stockholder's liability is limited to par value of his stock, but when his liability is ascertained, interest runs as on an ordinary judgment. Mahoney v. Bernhard, 45 App. Div. 499, 63 N. Y. Supp. 642. 35. Section 71 is constitutional in so far as it increases or extends liabilities of stockholders of bank heretofore existing; and does not violate U. S. Const, pro- hibiting legislation impairing obligation of contracts. Deposits payable on de- mand are " debts payable within two years." Barnes v. Arnold, 62 N. E. 1093, 169 N. Y. 611. See also S. C. 45 App. Div. 314, 61 N. Y. Supp. 85; see also S. C. 23 Misc. 197, 51 N. Y. Supp. 1109. 36. A plaintiff creditor suing for himself and others under this section is not a trustee for other creditors, and may stop when his claim is settled. Hirschfeld v. Fitzgerald, 157 N. Y. 166, 46 L. R. A. 839, 51 N. B. 997. THE BANKIIfG LAW. 169 37. As to the right to enforce liability of stockholders outside of state of in- corporation, see full presentation of authorities in note to Gushing v. Perot, 34 L. E. A. 737. 38. The " good faith " of stockholder transferring his stock while the bank is solvent discussed and examined. Persons v. Gardner, 113 App. Div. 597. 39. As to action against stockholders of foreign bank, see Howarth v. Angle, 162 N. Y. 179. § 72, Limitation of liability of stockholders. — ITo person wko has in good faith, and without any intent to evade his liability as a stock- holder, transferred his stock on the books of the corporation when solvent to any resident of this state of full age previous to any default in the payment of any debt or liability of the corporation, shall be subject to any personal liability on account of the nonpayment of such debt or liability of the corporation, but the transferee of any stock so transferred previous to such default shall be liable for any such debt or liability of the corporation to the extent of such stock in the same manner as if he had been the owner at the time the cor- poration contracted such debt or liability. (Former section 53; R. S., 1543.) See Stock Corporation Law, §§ 56-59. 1. A transfer to the bank itself will not relieve former stockholder. It must, to have that eflFect, be to some one who takes a personal liability, distinct from the bank. In re Reciprocity Bank, 22 N. Y. 18. 2. A transfer by a, subscriber of his subscription, and the acceptance of the assignee by the bank, relieves the subscriber from all liability on account of his subscription. Though articles of association declared that no transfer should be made on which any call for an instalment for subscription was unpaid, this was merely for protection of bank, and did not prevent the bank from consenting to the substitution of one stockholder for another. A " transfer " is the act of the holder of the stock alone, a " substitution " is the joint act of the transferee, transferrer, and the bank. Cowles v. Cromwell, 25 Barb. 415. 3. Where a subscriber transfers his stock in good faith, and the company ac- cepts, a surrender of his certificate, and issues a new one to the transferee, and credits him with the stock upon its books, the transaction amounts to a consent by the company to a release of the old stockholder from liability for future calls and a substitution of the liability to the transferee. Billings v. Robinson, 94 N. Y. 415. 4. Where the transfer sufl5ciently appears upon the transfer book, the trans- feree is liable, although no formal certificate has been issued to him. It is not essential that all the prescribed forms should be complied with. lb, citing Isham V. Buckingham, 49 N. Y. 220; Wakefield v. Fargo, 90 N. Y. 213. § 73. Powers of president and vice-president. — All contracts made by any such corporation, and all notes and bills by it issued and put 170 THE BAWKING LAW. in circulation as money, shall be signed by the president or vice- president and cashier thereof. (Former section 54; B,. S., 1527.) See sections 63, 69, cmte. 2. Where a bank made an agreement, alleged to be defective as not signed by cashier, with one from whom it had borrowed money, held, lender might recover for money had and received, whether agreement was defective or not. B. v. N. Y. Bk. Co., 2 Sandf. Ch. 23. 3. A promise or agreement of a corporation within the scope of its legitimate purposes, through its ofl&cers, is valid, though not bearing its corporate seal. The doctrine that no corporate act can be binding without being in writing or under the corporate seal is no longer maintained. Leintauf v. Caiman, 110 N. Y. 60, 17 N. E. 389. 4. It seems that a, contract, or bill, or note, not void on its fact, is valid as to and may be enforced by a holder in good faith, although not signed by the requi- site officers. 4 Hill, 442. 5. It is no part of the business of a bank to act as agent through its president in selecting attorneys and compromising claims for outside parties, and the bank cannot be held liable for such transactions of its president when he had no spe- cial authority, ^nd the bank has been in no way benefited thereby. Ryan v. Man- ufacturers and Mechanics' Bank, 9 Daly, 308. 6. Where a debt of considerable magnitude was owing a bank, and no other mode of avoiding its jeopardy or loss appeared than by purchasing property of the debtor in foreclosure. Held, that it was one of the fiscal affairs of the bank, directly within the authority of the president, to make such purchase, and that it was not improper for him to take title in his own name, the bank being unable to hold title, and that where he subsequently mortgaged the property for' the benefit of the bank, which mortgage was foreclosed, and a deficiency resulted, that the bank was liable therefor, and to indemnify the estate of the president against any loss in respect thereto. Brown v. The Mechanics and Traders' Bank, 35 State R. 665, 12 N. Y. Supp. 861. 7. A cashier of a bank has, as incident to his office, implied authority to borrow money for it, in the absence of any statutory restraint, to secure the loan by pledge of its property or funds; and, as against third persons, the assumption of such authority by the cashier will conclude the bank. Coats v. Donnell, 94 N. Y. 168. 8. Where a cashier of a bank employs a firm of attorneys to collect certain claims without the formal authority of the board of directors, said firm acting under the supervision of the general counsel of the bank regularly employed by the bank. Held, that such employment was within the general scope of the au- thority of the cashier. Root et al. v. Olcott, 42 Hun, 536; 9. A cashier is the business officer of the bank, but only in the sense of one who transacts, not one who regulates or controls its affairs. The directors are the mind, and the cashier the hands of the corporation. They are also likened, the directors to the judge, and the cashier to the clerk of the court. The bank is not responsible for acts of his which are discretionary, semi-official and solely within the prerogative of the directors, though done in good faith, under color of authority, and affecting an innocent dealer. An enumeration of the general THE BANKING LAW. 171 powers and duties of a cashier may be stated as follows : " Collection and pay- ment of debts — power of borrowing money in ordinary course of daily business of the bank — power to draw check upon its money in other institutions — power to indorse negotiable paper — power to conduct correspondence — power to trans- fer shares of stock." Also for such acts as are especially authorized by usage, or by acquiescence or direct authority of the board, though beyond the scope of his ordinary duties. He cannot compromise a debt. Chemical Nat. Bank v. Koh- ner, 8 Daly, 533-534; S. C. 58 How. Pr. 267; Ryan v. M. & M. Bank, 9 Daly, 308. 10. Although the cashier and president may, in the ordinary course of busi- ness, without the action of the board of directors, dispose of the negotiable securi- ties of the bank, yet they have not the power to pledge its assets for payment of an antecedent debt. State of Tennessee v. Davis, 50 How. Pr. 447. 11. K., defendant's intestate, being indebted to plaintiflf's and to two other banks, proposed a, compromise, by paying or securing a percentage, which one or both of the other banks agreed to accept if plaintiff would. K. proposed to plaintiflf's cashier to secure the specified percentage on its claim by a note with G., as indorser. The cashier thereupon, after consultation with plaintiflf's presi- dent, and at the request of K.'s agent, wrote to one of the other banks, using paper with the bank heading and signed as cashier, to the eflfect that plaintiff proposed to take K.'s note, indorsed by G. for the percentage to discharge K. in full on payment thereof. Soon after writing the cashier informed the president, and they concluded not to compromise. When, therefore, the indorsed note was tendered, the cashier refused to accept it, and repudiated the agreement, before this was made known to K., he had settled with the other banks on the terms proposed, and had been discharged. It did not appear that he owed any other debts. K. afterward tendered a. certified check for the amount of the compro- mise. The president and cashier were the active managers of plaintiflf's bank. The compromise was not repudiated on the ground of want of authority of the cashier, and no proof was given that he acted without authority. Compromises were of common occurrence in said bank. In an action upon the original indebt- edness, held, that the authority of the cashier to act was, under the circumstances, to be presumed; that the agreement made was a valid composition agreement, and after performance by the other creditors, it was too late to recede. It seems that had there been proof that the cashier had exceeded his authority, the ques- tion would have been diflferent. Chemical Nat. Bank v. Kohner, 85 N. Y. 189. 12. Where the duty is imposed upon the cashier of a bank of carrying on its business, he cannot be held responsible for a neglect of duty in not consulting other ofiicers of the bank or committees, whom by the by-laws he is required to consult in making discounts, where said committees hold no meetings, and the oflScers systematically absent themselve from the performance of their duties. Second Natl. Bank of Oswego v. Burt, 93 N. Y. 233. 13. As to powers of president and vice-president of corporations in general, see full presentation of authorities in note to Wait v. Nashua Armory Asso., 14 L. R. A. 356. 14. Where a bank president has a, note, made by himself and others, and pay- able to himself as trustee, discounted by his bank, he has no authority to bind the bank to an agreement for its payment out of the results of the investment of such discount proceeds, nor to a renewal note by one maker only. Fowler v. Walch, 119 App. Div. 542. 172 THE BANKING LAW. 15. A bank cashier having full general authority to receive additional security for loans due to the bank may receive security for the bank although he has a personal interest as indorser, on the note in question. Where he so receives collateral and sells it to cover his defalcation the bank is liable for conversion. First Nat. Bank of Sing Sing v. Sing Sing Gas Mfg. Co., 120 App. Div. 542. 16. Cashier of a bank is presumed to be the principal executive officer and as such is generally intrusted with the bank's securities. Davenport v. Prentice, 126 App. Div. 451. 17. That a. bank president allows the cashier to have physical control over securities is not necessarily proof of president's negligence. His duty is to be measured by the circumstances of each case. Davenport v. Prentice, 126 App. Div. 451. 18. As to illegal agreements made by president in which he had a personal interest, and the non-liability of bank therefore, see Bank of Le Roy v. Purdy, 100 App. Div. 64; People v. Mercantile Co-op. Bank, 104 App. Div. 219. § 74. Rate of interest. — Every bank and private and individual banker doing business in this state may take, receive, reserve and charge on every loan and discount made, or upon any note, bill of exchange or otihier evidence of debt, interest at the rate of six per centum per annum; and such interest may be taken in advance, reckoning the days for vs^hich the note, bill or evidence of debt has to run. The knowingly taking, receiving, reserving or charging a greater rate of interest shall be held and adjudged a forfeiture' of the entire interest which the note, bill of exchange or other evidence of debt carries with it, or which has been agreed to be paid thereon. If a greater rate of interest has been paid, the person paying the same or his legal representatives may recover twice the amount of the interest thus paid from the bank or private or individual banker taking or receiving the same, if such action is brought within two years from the time the excess of interest is taken. The purchase, discount or sale of a bona fide bill of exchange, note or other evidence of debt payable at another place than the place of such purchase, discount or sale at not more than the current rate of exchange for sight draft, or a reasonable charge for the collection of the same, in addition to the interest, shall not be considered as taking or receiving a greater rate of interest than six per centum per annum. The true intent and meaning of this section is to place and con- tinue banks and private and individual banliers on an equality in the particulars herein referred to with the national banks organized THB BANKING LAW. 173 under tlie act of congress entitled " An act to provide a national currency secured by pledges of United States bonds, and to provide for tbe circulation and redemption, thereof," approved June third, eighteen hundred and sixty-four. (Former section 55, L. 1900, eh. 310; R. S. 1528, 1529.) See Penal Law, § 2400. 1. The effect of chapter 567, Laws of 1880, was to repeal the penalties imposed by chapter 163, Laws of 1870. Nash v. White's Bank of Buffalo, 105 N. Y. 243, 11 N. E. 946, reversing 37 Hun, 57. 2. It was agreed that P., unincorporated and doing a banking business, should lend money on promissory notes; and that S. should pay, besides legal interest thereon, one-fourth of one per cent, exchange on the face of the notes, and said notes were discounted at Rochester and payable in New York City. There was no rate of exchange between those cities, and it was intended that such extra interest should be payment for collecting the notes. Held, that such agreement was relieved from the taint of usury by section 68. Held, also, that plaintiffs P. were " private bankers," as used in section. Perkins et al. v. Smith et al., 41 Hun, 47. 3. The penalty recoverable from a National bank, under act of congress (U. S. R. S. § 5198, U. S. Comp. Stat. 1901, p. 3493), for usury, is twice the amount of interest paid in excess of legal rate, and not twice amount of entire interest. Forfeiture of entire interest attaches only when action is brought to enforce usuri- ous contract (45 N. Y. 446 and 46 N. Y. 644 distinguished). A debt contracted or obligation given for a usurious loan made by a State or National bank is not void, but the forfeiture is limited to interest. The National Bank of Whitehall V, Lamb, 50 N. Y. 95; Farmers' Bank of F. v. Hale, 59 N. Y. 53, overruled. See note to next section. Hintermister v. First National Bank, 64 N. Y. 212; S. 0. 3 Hun, 345; 5 T. & C. 484. 4. To same effect. Merchants' Bank v. Freeman (citing 64 N. Y. 212), 15 Hun, 360; Marine Bank v. Fiske, 9 Hun, 366; Atlanfic Bk. v. Savery, 18 Hun, 42; 82 N. Y. 303. 5. Banking corporations are taken out of the general usury laws of the State, and, as far as usury goes, are only amenable to this act. Farmers' Bank v. Hale, 59 N. Y. 53. 6. The including (charging) of a percentage, as the difference in the rate of exchange between the place of payee's residence and place of payment, is not, per se, evidence of usury, where the note is made so payable for the accommodation of the maker. Merritt v. Benton, 10 Wend. 117. 7. Since the intention of this act (section 74) was to place State and National banks on an equality in respect to interest on loans, it should receive the same interpretation as the Act of Congress, and as this has been interpreted by U. S. supreme court (1 Otto, 29, 23 L. ed. 196), the same interpretation will be given to the State law. See note preceding section. This act was a transcript from the Act of Congress; it was given an interpretation by the court of appeals, but the U. S. supreme court, having given the act the interpretation above set forth, the court of appeals overrules its former decisions in conformity there- with. Hintermister v. First National Bank, 64 N. Y. 212. 174 THE BANKING LAW. 8. This statute operates retroactively, and takes away the previous penalty for usury. Bank of Monroe v. Finlay, 6 Hun, 584. 9. The usury law of this State is, in effect, repealed as to State banks organ- ized under the Law of 1838. Farmers' Bank of F. ■;;. Hale, 15 Abb. Pr. (N. S.) 276. 10. Where a State bank has in good faith discounted negotiable paper without notice of usury, the defense of usury is not available. But as to notes pur- chased by the bank with knowledge of the usurious origin such defense is good, and Banking Law provisions as to interest will not prevail. Schlesinger v. Lehmaier, 191 N. Y. 69. See, also, Schlesinger v. Gilhooly, 189 N. Y. 1. (See notes under National Bank Act post, as to interest.) § 75. Interest permitted on advances on collateral security. — Upon advances of money repayable on demand to an amount not less than five thousand dollars made upon v^arehouse receipts, bills of lading, certificates of stock, certificates of deposit, bills of exchange, bonds or other negotiable instruments, pledged as collateral security for such repayment, any bank or individual banker may receive or con- tract to receive and collect as compensation for making such advances any sum to be agreed upon in writing by the parties to such trans- action. (Former section 56; E,. S. 2515, L. 1882, eh. 237.) § 76. Deposit of banks and individual bankers with superintendent. — Every bank and individual banker heretofore or hereafter au- thorized to do business, not having given notice of intention to close the business of banting, shall, before commencing or continuing such business, have and keep on deposit in the banking department in addition to the deposit required to secure circulating notes, stocks of this state or of the United States bearing interest, to the amount of one thousand dollars, which shall be held by the superintendent of banks as a pledge of good faith, and guaranty of compliance with the banking laws of the state on the part of such bank or individual banker. The proceeds of such stock or the interest thereon, or so much thereof as may be necessary, may be applied by the superin- tendent to the payment of any penalty incurred by, or the assessment imposed upon, the bank or individual banker, for whom such deposit is held. The superintendent may, in his discretion, maintain an action in his name of office against any bank or individual banker for the recovery of any penalty incurred by, or lawful assessment imposed upon, such bank or individual banker. THE BANKING LAW. 175 Whenever any bank or individual banker is required by law to make a deposit of securities with the superintendent of banks in trust for such bank or individual banker, such deposit shall consist of interest-bearing stock of the state of New York or of the United States. (Former section 57; E. S., 1528; L. 1882, ch. 409.) See section 14, ante. The superintendent of the banking department was requested to execute a duplicate of an assignment of a mortgage executed by his predecessor in ofiBce in 1864, the original of which had been lost. The request was based on the fact, that certain entries in the books of the banking department showed that such an assignment had been executed and delivered at the date named, though the records of that department contained no copy of the assignment. The question of the right of the superintendent to execute the duplicate assignment was sub- mitted to the attorney-general. That officer, in his reply filed in the banking department, October 7, 1882, says: " I do not think you are authorized to do more than furnish an exemplified copy under your hand and seal of office of such entries in the books of your department. You certainly could not furnish a duplicate of an instrument, the terms and provisions of which you are ignorant." § 77. Prohibition against sale of business by individual banker. — No individual banker having circulating notes obtained under the laws of this state, shall sell or transfer the business of banking, upon the securities deposited by him, to any person or persons ; and until such business shall be closed, by the return of the circulating notes issued, and the delivery of the securities deposited, the same shall be conducted only in the name of the individual banker by whom the securities were deposited; and he shall continue individually liable for the payment of all circulating notes delivered to him. But any such individual banker may bequeath his business of banking upon the securities deposited by him to any person or persons, and such business may be continued after his death by his legatee or heir at law. (Former section 58; E. S., 1528; L. 1882, ch. 409, §§ 64. 65.) § 78. Change from state to national bank. — Any bank may become a corporation for the purpose of carrying on the business of banking within this state pursuant to the provisions of the act of congress " to provide a national currency secured by a pledge of United States stocks, and to provide for the circulation and redemption thereof," approved June third, eighteen hundred and sixty-four, and of title 176 THE BANKING LAW. fifty-two of the revised statutes of the United States, whenever stock- holders owning two-thirds of the stock of such bank shall have voted to become such corporation, or have executed a written consent au- thorizing its directors to make the certificate required therefor by the laws of the United States, or whenever a majority of the directors of such bank having been authorized in their discretion to make the change, shall, by a vote of such majority, decide to become such corporation ; and the cashier of such bank shall publish, notice thereof for thirty days in such newspaper as the directors may select, and send a like printed notice by mail or otherwise to all nonvoting or dissenting stockholders, and notify the superintendent of banks of this state that such banks has decided to become a corporation under the laws of the United States. (Former section 59; R. S., 1551; L. 1882, ch. 409, § 169.) 1. Where a State bank at the time of its change to a National bank held a can- -tinning guaranty of loans made by it to one W., upon the strength of which it had made loans, and after the change further advances were made. Held, that an action was maintainable by the National bank upon the guaranty; and that the guarantor was liable for the loans made both before and after the change. City Natl. Bank of Poughkeepsie v. Phelps, 97 N. Y. 44, 49 Am. Kep. 513. 2. Change from State to National bank is not' a closing of the business of the State bank within the meaning of the statute authorizing a closing bank to limit the time within which its notes shall be presented for redemption. Claggett v. Metropolitan Natl. Bank, 4 N. Y. Supp. 115. § 79. When deemed to have surrendered its charter. — Any such bank which shall become a corporation for carrying on the business of banking under the laws of the United States shall cease to be a corporation under the laws of this state, except that for the term of three years thereafter, its corporate existence shall be deemed to con- tinue for the purpose of prosecuting and defending suits by and against it, and of enabling it to close its concerns, and to dispose of and convey its property. The members of the board of directors last in office, when such corporation shall have become a corporation under the laws of the United States, shall continue to be the board of directors of the new corporation, with power to take all necessary measures to carry out and perfect such organization by signing the articles of association and the organization certificate, and adopting such regulations as may be just and proper and not inconsistent with the acts of congress in relation thereto. THE BAITKIITG LAW. 177 Such change from a state to a national bank corporation shall not release any such bank from its obligations to pay and discharge all the liabilities created by law or incurred by it before becoming a national bank corporation, or any tax imposed by the laws of this state up to the date of its becoming such national bank corporation, in proportion to the time which has elapsed since the next preceding payment therefor. (Former section 60; R. S., 1551, 1552; L. 1882, oh. 409.) 1. The identity of a State bank is not so changed by becoming a National bank, as to terminate a, guaranty made in favor of State bank. City National Bank v. Phelps, 22 Hun, 142, aff'd 86 N. Y. 484. 2. An appeal from a judgment by a State bank, subsequently merged in a National bank, is the defense of a suit within the meaning of this act; and if such appeal is taken within three years from its conversion to National bank, the State bank must be deemed to continue in existence, as to such appeal or defense of the suit, until the appeal is heard and determined. Claflin v. The F. & C. Bank of Long Island, 54 Barb. 228. 3. P. & K., a firm of which defendant was a partner, executed to a State bank a written undertaking to be responsible for the payment of any sum not to exceed $5,000, which W. might require of said bank " for legitimate business purposes." The said bank, after loans had been made to W. upon the faith of the guaranty, abandoned its State organization, and was reorganized as a Na- tional bank as authorized by the act of 1865 (chapter 97, Laws of 1865). A portion of said loans had not been paid, new notes having been given in renewal. Held, that for whatever sum the defendant was bound to the State bank, when it was reorganized, that indebtedness passed to plaintiff; and conceding that plain- tifif could not renew without the assent of defendant, of make fresh advances and still hold him liable, it had the right to enforce the liability to the State bank. City National Bank v. Phelps, 86 N. Y. 484; S. C. 22 Hun, 142. § 80. Beduction of capital stock in such cases. — The directors of such new corporation may reduce the capital stock of the bank to its par value by dividing the surplus among its stockholders, or may retain such portion of such surplus as they may deem necessary ; and in case of an increase of the capital stock under the provisions of the acts of congress, may charge the shares of such increased capital stock with a like amount, to place the whole of such capital stock on an equality; and may award such new stock, or such proportion or fractional parts thereof, to such persons as they shall determine are entitled thereto, and as are provided in their articles of association and in the acts of congress ; but new directors may be chosen at such 13 1Y8 THE BANKING LAW. time and in the manner provided in the articles of association and the acts of congress. (Former section 61; E.. S., 1551; L. 1882, eh. 409, § 172.) When a National bank reduces its capital, each shareholder is entitled to a return of his proportional amount, and the bank cannot retain the funds as surplus, or for any other purpose; and having refused to permit shares thus retired to be transferred on its books, the bank is liable for the value of the shares to the holders. Seeley v. New York National Exchange^ Bank, 4 Abb. New Cases, 61. § 81. Certificate of change. — When any such bank has decided to become a corporation under the laws of the United States, the direct- ors shall immediately thereafter execute and transmit to the comp- troller of the currency the proper certificate and other instruments for its conversion into a national bani corporation under the laws of the United States. When any such bank shall have become au- thorized to commence the business of banking under the laws of the United States, all the property of such bank shall immediately, by act of law, and without any conveyance or transfer, be vested in and become the property of the national bank corporation, into which such bank shall have been converted ; and it shall be entitled, on re- turning the bills of such bank to the banking department of this state, to receive the stocks pledged to secure the redemption of the same, in the same manner as the bank issuing the same is now entitled by law ; and shall be subjected to the same rules as state banks in respect to the final redemption of the circulating notes of such bank so con- verted into national bank corporations. The plates and dies of any such bank, in the banking department of this state, shall be forthwith so obliterated as to prevent all future use of the same. (Former section 62; R. S., 1551, 1552; L. 1882, ch. 409, §§ 173, 174.) § 82. National bank may become state bank. — Whenever any bank- ing corporation organized and doing business under the laws of the United States shall, under the provisions of any act of congress, be authorized to dissolve its organization as such national bank corpora- tion, and shall have taken the action required to effect such dissolu- tion, a majority of the directors of such dissolved corporation may, upon the authority in writing of the owners of two-thirds of its THE BANKING LAW. 179 capital stock, execute the certificate of incorporation required by section sixty of this chapter. Upon the execution and proof or acknowledgment of such certifi- cate, which shall also set forth the authority in writing of the stock- holders as required by this section, and upon filing a copy thereof in the office of the superintendent of banks, with proof that the original is duly recorded in the office of the clerk of the county where any office of such corporation shall be located, such corporation shall be held and regarded as an incorporated bank under and in pursuance of the laws of this state, and shall be entitled to all the privileges and be subject to all the liabilities of banks so incorporated; and thereupon all the property of the dissolved national bank corpora- tion shall immediately by act of law and without any conveyance or transfer be vested in and become the property of such state bank. The directors of the dissolved corporation at the time of such dissolu- tion, shall be the directors of the bank created in pursuance hereof until the first annual election of directors thereafter, and shall have power to take all necessary measures to perfect its organization, and to adopt such regulations concerning its business and management as may be proper and just and not inconsistent with law. (Former section 63; R. S., 1552; L. 1882, ch. 409, §§ 177, 178.) § 83. Circulating notes; plates. — Any bank or individual banker may deposit with and transfer to the superintendent of banks any interest-bearing stocks or bonds of the United States or of the state of New York, or of any county or incorporated city of this state au- thorized to be issued by the legislature, or bonds and mortgages on improved, unincumbered real property of the state of l^ew York worth seventy-five per centum more than the amount thereon loaned ; but no such stock or bonds shall be received by the superintendent at a rate above their par value or above their current market value. The superintendent may thereupon issue to such bank circulating notes in the similitude of bank notes in blank, engraved and printed in the best manner to guard against counterfeiting, in denominations of one, two, five, ten, twenty, fifty, one hundred, five hundred and one thousand dollars, which shall be countersigned, numbered and registered in proper books to be provided and kept for that purpose 180 THE BAWKING LAW. in the office of the superintendent, under his direction, by such per- son as he shall appoint for that purpose, so that each denomination of such circulating notes shall bear the uniform signature of such register, or one of such registers. Such notes shall also have stamped on their face the words " secured by the pledge of public stocks." The aggregate amount of notes thus issued to any bank or indi- vidual banker shall not exceed ninety per centum of the market value, nor ninety per centum of the par value, of the stocks, bonds or other securities so deposited with or transferred to the superintendent by such bank or banker. Such bank or banker, after having executed and signed such circulating notes in the manner required by law to make them obligatory promissory notes payable on demand, if of a denomination less than one thousand dollars, at the place of business within this state of such bank or banker, if of a denomination of one thousand dollars, payable at such place of business or at any redemp- tion agency of such bank or banker, may loan and circulate the same as money according to the ordinary course of banking business as regulated by the laws and usages of this state. The securities so deposited with and transferred to the superintendent shall be held by him as security for such circulating notes and exclusively for their redemption and until the same are paid. The plates, dies and materials procured by the superintendent for printing and making such circulating notes shall remain in his custody and under his direction. (Former section 64; E. S., 1530, 1531, 1533, 1540, 1555, 1578; L. 1882, eh. 409, §§ 70-74, 84, 116, 189, 306.) Blank forms for conversion from the National to the State system may be obtained from the superintendent of the banking department. 1. It was adjudged by the court of appeals, in October, 1852, in Talmage v. Pell, 7 N. y. 328, 347, 348, that associations, organized under the General Bank- ing Law, " have no power to purchase State or other stocks for the purpose of selling them for profit, or as a means of raising money, except when such stocks have been received in good faith as security for a loan made by, of a debt due to, such association, or when taken in payment, in whole or in part, of such loan or debt." See, also. The Bank Commissioners v. The St. Lawrence Bank, 7 N. Y. 513. All bank charters granted by this State, from 1791 to 1838, contained an express prohibition, substantially in the following words : " The said corpora- tion shall not, directly or indirectly, deal or trade in buying or selling any goods, wares, merchandise or commodities whatsoever, or in buying or selling any stock created under any law of the United States, or of any particular State, unless in selling the same when truly pledged by way of security for debts due to the THE BANKING LAW. 181 said corporation." See the charters of every safety fund bank, as well as the charters granted before 1829. The two charters of the National Bank of the United States, granted by Con- gress in 1791 and 1816, contained express prohibitions against trading in any- thing except bullion, etc.; also, against purchasing any public debt whatever. See these charters in the United States Statutes at Large. The charters of the Bank of England, Bank of France, Bank of Scotland, and Bank of Ireland also contain express prohibitions against trading. See historical sketch, ante. The principle of separating the issue from the banking department was in 1838 adopted by the legislature of New York; and in 1844 Sir Eobert Peel practically carried into effect the same principle in dealing with the Bank of England, on the renewal of its charter in that year. In that renewed charter it is enacted, that there shall be transferred, etc., " to the issue department of the Bank of England, securities to the value of £14,000,000, whereof the debt due by the public to the said governor and company shall be and be deemed a part." See this act, Stat. 7 & 8 Vict. ch. 32. " The object of this statute [Stat. 7 & 8 Vict. eh. 32] has been," says Mr. MeCulloch, " to obviate the chances of over-issue and sudden fluctuations in the quality and value of money, by limiting the power to issue notes payable on demand," etc. ..." While the directors are left to manage the banking department at their discretion, their management of the issue department is subjected to what seems to be a well-devised system of restraint. The bank is allowed to issue £14,000,000 of notes, upon securities (of which the debt of £11,015,100 lent by her to government is a part) ; and whatever paper the issue department may at any time issue over and above this maximum amount of securities, it must have an equal amount of coin and bullion in its coffers. Hence, it is impracticable for the issue department to increase its issues without, at the same time, proportionally increasing its stock of coin and bullion, or to diminish the latter without proportionally diminishing the amount of paper supplied to the public and banking department.'' In 1846 the people of this State made it a part of the fundamental law, that " the legislature shall provide by law for the registry of all bills or notes issued, or put in circulation as money, and shall require ample security for the redemp- tion of the same in specie." Constitution 1846, art. 8, § 6; McCulloch's Diet. (London ed.) 82 to 88; Lawson's History of Banking (Am. ed.) 76, 77; Gilbart on Banking (4th Am. ed.) 61; Levi on Mercantile Law, 202; Cleveland's Banking Law, 83. § 84. Circulating notes of individual banker. — The circulating notes delivered to an individual banker shall express only the indi- vidual liability of the banker and shall be signed by bim only and not by any attorney or agent. Any banker or person acting as his attorney or agent wbo shall violate any provisioii of this section sball forfeit to the people of the state one hundred dollars for each offense, to be collected and paid into the treasury to defray the general ex- penses of the banking department. 182 THE BANKING LAW. The superintendent shall not issue circulating notes to any indi- vidual banker designating such individual as a bank unless as an addition to his own proper name. If such individual shall have partners in the business of banking at the time of commencing the same, such fact shaU be shoven by the v?ords " and company," to be added to his own proper name, upon every note issued to him or them from the banking department. If it shall appear, by the return of any individual banker or by the report of any person designated by the superintendent of banks, that any other person is interested with such individual banker directly or indirectly in the securities deposited by him for the purpose of obtaining circulating notes, or in the business of circulating such notes, or in the benefits or advantages thereof, the superintendent shall withhold all interest and dividends on the securities deposited with him, by such banker, and all circulating notes from such banker, until he ihall have filed in the banking department a certificate, signed and acknowledged by every person so returned or reported as interested in such securities, stating that such person is interested with such individual banker in the circulating notes obtained or to be obtained by him, and in the benefits and advantages of circulating the same. Such certificate shall be evidence that the person signing and acknowledging the same is a general partner with such banker in the business of banking, and as such is liable with him individu- ally for all the debts and obligations created or made by such indi- vidual banker in his business. (Former section 65; R. S., 1531; L. 1882, ch. 409, §§ 76-78.) § 85. When bank may receive interest or dividends upon secTirities deposited. — The superintendent may give to any bank or individual banker depositing and transferring securities to him pursuant to this chapter, a power of attorney to receive the interest or dividends thereon, and such bank or banker may thereupon receive and apply such interest or dividends to its or his own use. Such power may be revoked if such bank or banker fails to redeem the circulating notes so issued, or if, in the opinion of the superintendent, the prin- cipal of such securities shall become an insufficient security for the redemption of the circulating notes issued; and the superintendent may in his discretion, upon the application of any such bank or THE BANKING LAW. 183 banker, ohange or transfer any securities deposited by it or him for other securities of the kinds hereinbefore specified, or he may re- transfer such securities or any part thereof to the bank or banker depositing the same upon receiving and canceling a proportional amount of the circulating notes delivered by him to such bank or banker, in such manner that the circulating notes remaining out- standing shall always be secured in full. If the securities so deposited for the redemption of circulating notes shall, in the opinion of the superintendent, become insufficient for that purpose, he may receive the dividends on all such securities and deposit the same in some safe bank in the city of Albany in his name in trust for the bank or banker to whom the same may belong, on such terms and at such rate of interest as the superintendent may deem most conducive to the interest of any such bank or banker, and to be withdrawn and paid over whenever in the opinion of the super- intendent the securities of such bank or banker shall be sufficient to warrant it. If it shall appear from any examination made by or at the instance of the superintendent that any bank or individual banker is in an unsound or unsafe condition to do business, or that the business of banking is not prosecuted by it or him at the place where such circulating notes are dated and purport to be issued, or is not trans- acted in the manner prescribed by law, the superintendent shall with- hold and refuse to issue and deliver any registered notes to such bank or banker, and shall retain the interest on all securities held in trust for such bank or banker until such time as he shall be satis- fied that such bank or banker is in a sound or safe condition to do banking business, and that the business of banking is transacted by it or him at the place where such circulating notes are dated and purpor o be issued. (Former section 66; R. S., 1532, 1533; L. 1882, ch. 409, §§ 82, 83, 85.) § 86. Redemption agencies. — Every bank or individual banker issuing oirculaing notes, except those whose place of business is in the city of New York, Albany, or Troy, not already having made such an appointment, shall forthwith appoint in writing an agent who shall keep an office in the city of New York, Albany or Troy, for the redemption of all circulating notes issued by it or him which 184 THE BAlTKIlirG LAW. shall be presented to such agent for payment or redemption ; and such appointment shall be delivered to the superintendent forthwith and filed in his office. Any bank or individual banker or other person may be such agent. If any such bank or banker shall omit to ap- point such agent forthwith, the superintendent shall appoint such agent for such bank or banker and file such appointment in his office. The superintendent shall, immediately after such appointment and filing thereof in his office, publish during such times as he may deem proper, a list of such agents in the state paper and in at least two daily newspapers in the city of New York. If the agent of any bank or banker shall neglect or refuse to redeem its notes on demand, such bank or banker shall pay to the person making such demand, interest on such notes at the rate of twenty per centum per annum. If such redemption and payment of inter- est is not made at such office within twenty days from the time when first demanded, such bank or individual banker may be proceeded against by the superintendent of banks in the same manner and witii the like effect as though insolvent; and such bank or banker shall not issue or put in circulation any bills or notes; and the superin- tendent shall also proceed in the manner directed in section ninety- one of this chapter. Every bank and individual banker outside of the cities of 'Sew York, Albany, and Troy shall redeem and pay on demand all circulating notes issued by it or him presented for re- demption or payment at the office of its or his such agent in the city of New York, Albany or Troy, at a rate of discount not exceeding one-quarter of one per centum. (Former section 67; R. S., 1533, 1534; L. 1882, ch. 409, §§ 86-90.) 1. When the circulating notes of a bank are not paid immediately upon their first presentation for payment, the holder may commence suit for the amount thereof, and add twenty per cent, interest, without waiting twenty days. The notes must be presented on or after the expiration of twenty days, and » demand be made, to enable the holder to apply to the comptroller (superintendent) for payment, or subject the association to forfeiture for non-payment. The associa- tion which has once made default ip payment, must at its peril provide its agent with funds to redeem its bills whenever they are again presented for payment, even after the twenty days prescribed by law. Bank Comm'rs v. James Bank, 9 Pai'ge, 456. 2. The right of action against a bank to recover moneys on deposit does not accrue, until a demand and refusal of payment has been made; and the presenta- tion and demand of payment of the depositor's check by a wrongful holder, the THE BAWKIITG LAW. 185 payee's indorsement thereon being forged, is not such a demand as perfects the depositor's cause of action. Bank of British N. A. v. Merchants' Bank, 16 J. & S. 4. See, also, Howell v. Adams, 68 N. Y. 314, and cases there cited. 3. The constitutional provision (art. 8, § 6) of this State, that bills be re- deemed in specie, is not self-operative, and an offer to redeem in legal tender, and refusal to redeem in specie, does not authorize bank superintendent to sell securi- ties deposited with him. Metropolitan Bank v. Van Dyck, 27 N. Y. 400. § 87. Destruction of bank notes. — When any circulating notes of any bank or individual banker shall be returned to the superintendent for destruction, the same shall be burned by or under the direction of the superintendent, and such bank or individual banker shall pro- cure the attendance of an agent to witness the counting and destruc- tion of such circulating notes at the department and sign a certifi- cate thereof. If such bank or banker shall refuse or neglect to ap- point or procure the attendance of such agent within ten days after the receipt of the bills at the department, the superintendent shall select and appoint some indifferent person, who shall, as the agent of such bank or individual banker, witness and certify the counting and destruction of such notes, and such bank or individual banker shall forthwith pay on demand to the person so appointed, witnessing and certifying, such compensation therefor as the superintendent shall certify to be just and reasonable. (Former section 68; R. S., 1532; L. 1882, ch. 409, § 79.) § 88. Destruction of plates and counterfeit notes. — The superin- tendent shall destroy, or cause to be destroyed, all bank-note plates in his custody of banks or individual bankers becoming insolvent, or which have given notice of closing their business, and any impres- sions made therefrom on hand. Hereafter .when any bank or in- dividual banker shall become insolvent or discontinue the business of banking, the superintendent shall destroy, or cause to be destroyed, all plates and impressions belonging to such bank or individual banker, and include in his next annual report a statement of the plates so destroyed. Every public officer into whose hands shall come any counterfeit bank-note plate or other device for counter- feiting bank notes, or any counterfeit or spurious bank notes, imme- diately after using them when necessary in evidence against the parties implicated, shall surrender the same to the superintendent, to be destroyed under his supervision, and he shall destroy all such 186 . THE BANKING LAW. plates, devices or notes thus surrendered to him in the same manner as in case of banks whose charters has expired, or which have be- come insolvent, and report the same to the legislature in his annual report (Former section 69; R. S., 1532; L. 1882, ch. 409, § 80.) § 89. Exchange of mutilated notes. — The superintendent shall re- ceive mutilated circulating notes issued by bim and deliver in lieu thereof other circulating notes to the same amount. Every person who shall mutilate, cut, deface, disfigure or perforate with boles, or shall unite or cement together, or to any other thing, any bank bill, draft, note or other evidence of debt issued by a bank, or shall cause or procure the same to be done with intent to render sueb bank bill, draft, note or other evidence of debt unfit to be re- issued by such bank, shall forfeit fifty dollars to the corporation injured thereby. (Former section 70; R. S., 1532; L. 1882, ch. 409, § 81.) § 90. Bedemption in notes of other banks. — When an action shall be brought against any bank or individual banker for the recovery of the amount due on any circulating notes registered in tbe superin- tendent's office, the payment of which shall have been demanded at tbe banking-house or other place of business of the defendant, if it shall appear on the trial or otherwise, to the court in which such suit is brought, that at the time such demand of payment was made, the defendant offered in payment the circulating notes issued by any other bank or banker wbich were at the time at par in the city of New York, Albany or Troy, or a draft on any bank or banker in either of such cities, for the amount of the circulating notes so pre- sented, with an affidavit, if required, that such draft is available to its full amount, to insure the immediate payment thereof on presenta- tion, or in case any action shall be commenced upon such notes before the expiration of fifteen days from the time of the first demand thereof; and if such bank or banker shall be ready and prepared to redeem such notes in the lavsrful money of the United States at the ordinary place of business of such bank or banker, at the expiration of fifteen days from the time of the first demand thereof, with in- terest, then in either case the plaintiff in such action shall not re- THE BANKIKG LAW. 187 cover any costs, fees or disbursements whatever against the defendant, and shall be entitled to recover no more than six per centum interest in lieu of all damages for the non-payment of such dreulating notes. No interest shall be recovered upon such notes in any action unless the plaintiff or holder thereof shall have again presented the same for payment at the ordinary place of business of the defendant on or after the fifteenth day after such first demand and before the twentieth day, and the defendant shall have neglected or refused to pay the same with interest to that time. If such bank or banker at the time of the first presentation of such notes shall have offered to pay current bank notes or drafts, or both, or either, in the manner above provided, and shall, at the time of such second presentation, pay or tender the amount of such notes in the lawful money of the United States at its ordinary place of busi- ness, then such bank or banker shall not be deemed to have suspended or refused specie payment or payment of its circulating notes, within the meaning of any statute authorizing proceedings for the dissolu- tion of such bank, or to restrain or enjoin such bank or banker from the transaction of its business, or shall such bank or banker in such case be liable to any other or greater damages for the non-payment of such notes than above provided, notwithstanding any contrary provision in the charter of such bank or of any other statute. (Former section 71; R. S., 1534; L. 1882, ch. 409, § 91.) § 91. Protest of notes and proceedings thereon. — If the maker of any circulating notes countersigned and registered as herein pro- vided, shall at any time hereafter on lawful demand during the usual hours of business, between the hours of ten and three o'clock, at the place where such notes are payable, fail or refuse to redeem such notes in the lawful money of the United States, the holder thereof making such demand, may cause the same to be protested in one package for non-payment by a notary public under his seal of office in the usual manner, unless the president, cashier or teller of the bank shall offer to waive demand and notice of the protest, and shall, in pursuance of such offer, make, sign and deliver to the party mak- ing such demand, an admission in writing, stating the time of the demand, the amount demanded and the facts of the non-payment thereof. The superintendent on receiving and filing in his office 188 THE BAWKING LAW. such, admission or protest, together with such notes, shall forthwith give notice in writing to the maker thereof to pay the same, and if such maker shall omit to do so for fifteen days after such notice, the superintendent shall immediately, unless satisfied that there is a good and legal defense to the payment of such notes, give notice in the state paper that all the circulating notes issued by such bank or banker will be redeemed out of the trust funds in his hands for that purpose; and the superintendent shall apply such funds to the payment pro rata of all circulating notes put in circulation by such bank or banker pursuant to the provisions of this chapter, and adopt such measures for the payment of such notes as will, in his opinion, most effectually prevent loss to the holders thereof. If payment of such notes is not made for a period of ten days after the first publication of such notice, the superintendent shall sell at public auction the securities so pledged, or any of them, and out of the proceeds of such sale pay and cancel such notes, but the state shall not be deemed as under any pledge for the payment of such notes beyond the proper application of the proceeds of such securi- ties for their redemption. Damages for non-payment of any such notes in lieu of interest at the rate of six per centum per annum from the time of refusal of payment, shall be paid by the banls or banker, refusing to pay such notes on demand. This section shall not apply to cases where circulating notes regis- tered in the superintendent's office shall be presented for payment to an agent of any incorporated bank or individual banker appointed according to the provisions of this chapter relating to the redemption of bank notes, nor to any bank or individual banker for whom there shall not be at the time an agent duly appointed, as prescribed in this chapter; nor to any bank or individual banker whose place of busi- ness is in the city of ISTew York, Albany, or Troy. All fees for protesting any such notes shall be paid by the person procuring the service to be performed and the bank or banker issuing such notes shall be liable for the same, but no part of the securities deposited by such bank or banker shall be applied to the payment of such fees. (Former section 72; R. S., 1535, 1536; L. 1882, ch. 409, §§ 92-96.) See New York Constitution, Art. VIII, § 5. THE BANKENG LAW. 189 1. The provision of the Constitution that specie payment shall not be suspended is not self-executing, and a refusal of a, bank to redeem in specie, but offer to redeem in legal tender, does not authorize bank superintendent to sell securities in his hands. The sale is only to be made when note is not redeemed in lawful money of the United States. Metropolitan Bank v. Van Dyck, 27 N. Y. 400. 2. The legislature shall have no power to pass any law sanctioning in any manner, directly or indirectly, the suspension of specie payments, by any person, association or corporation issuing bank-notes of any description. Art. 8, § 5, Constitution of New York. Though this power was given to secure speedy redemption after the failure, it does not interfere with the superintendent's power to collect before failure, where it may be for the interest of any of the parties beneficially interested, and its collection by superintendent discharges the security. Flagg v. Hunger, 9 N. Y. 494. § 92. Appointment of agent by new corporation. — Every bank and individual banker wJio shall hereafter commence business under the laws of. this state shall, upon first receiving circulating notes from the superintendent, appoint an agent for the purpose of redemption, and be subject in all respects to the provisions of this chapter in relation thereto; and the superintendent shall not deliver any circu- lating notes to such bank or banker until such appointment is made and filed in his o£B.ce, v?hich shall be immediately published by the superintendent in the manner hereinbefore provided. (Former section 73; R. S., 1536; L. 1882, ch. 409, § 97.) § 93. Revocation of appointment. — Appointments of agents for the purpose of redemption may be revoked and new appointments of agents may be made from time to time by delivering such revoca- tion of appointment to the superintendent, who shall cause the same to be published as hereinbefore provided. Several banks may ap^ point a common agent. Any number of banks and individual bank- ers may by agreement associate for raising a joint fund to be placed in the hands of their common agent for the redemption of their circulating notes in the city of New York or Albany, and also the circulating notes of other banks and individual bankers in such man- ner and under such regulations as may be agreed upon, and employ such agents and clerks as they may deem necessary to carry on the business of the common agency. 'No such agency shall redeem or purchase any circulating notes at a discount of more than one-half of one per centum, nor relieve or discharge any such bank or banker from any duty or liability required or imposed by this chapter, nor 190 THE BANKING LAW. shall any bank or individual banker purchase, buy in or take up, directly or indirectly, its or his circulating notes at an amount less than what purports to be due thereon at any other place or in any other manner than is directed in or by this chapter. (Former section 74; R. S., 1536; L. 1882, eh. 409, §§ 98-100.) § 94. Distribution of funds of insolvent banks. — The superintend- ent shall make a final distribution of the funds in his hands arising from the sale of securities deposited with him by banks and indi- vidual bankers, which have failed or may hereafter fail to redeem their circulating notes. At the expiration of six years after the firsi sale made by the superintendent of such securities, he shall issue a final notice to the holders of the circulating notes issued by such bank or banker requiring the presentation thereof within six months after the date of the notice, and any of such notes which shall not be pre- sented within the time thus specified shall cease to be a charge or claim upon the funds of such bank or banker remaining in the hands of the superintendent Any such notes which shall be presented within the period above limited shall be received and paid by the superintendent at the same rate which shall have been paid on like notes previously presented, and if all the notes of any bank or in- dividual banker so presented shall have been redeemed at their par value, he shall pay to such bank or banker, the residue of such funds remaining in his hands belonging thereto. If such notes shall not have been redeemed at par, then the holder shall be entitled to a cer- tificate showing the balance, if any, due thereon. (Former section 75; R. S., 1536; L. 1882, eh. 409, § 101.) § 95. Distribution of residue. — At the expiration of the notice required by the preceding section, the superintendent shall ascertain the amount of the residue of the fund remaining in his hands be- longing to the creditors of such bank or banker and after deducting therefrom the expenses justly chargeable thereon, he shall make a pro rata distribution of the residue upon the outstanding certificates given for the balance due to the holders of the circulating notes of such bank or individual banker, which shall have been redeemed in part, and he shall issue a notice to the holder of such certificates stating the rate or amount payable thereon, and requiring them to THB BANKING LAW. 191 present the same within six months after the date of such notice. Any certificate not presented within that time shall cease to be a charge or claim upon the residuary fund in the hands of the super- intendent. After making the final distribution herein directed, if any portion of such fund shall remain unclaimed, it sball be de- posited in the treasury and applied towards paying the ordinary ex- penses of the banking department. (Former section 76; E. S., 1537; L. 1882, ch. 409, §§ 102-104.) § 96. Publication of notices. — Tbe notices required to be given by this chapter to the creditors of an insolvent bank or banker shall be published at least six weeks in one or more newspapers which the superintendent shall deem best calculated to inform such creditors, and the cost of such publication shall be defrayed out of the fund to which such notice shall refer. (Former section 77; K. S., 1537; L. 1882, ch. 409, § 105.) § 97. Redemption of notes held by banks and individual bankers. — Any bank or individual- banker receiving in the couse of its business the circulating notes issued by any other bank or individual banker, may present such notes for redemption and payment in the manner and upon the terms herein provided, either to tbe lawful redeeming agent or at the counters of the banks or individual bankers issuing them; but every such bank or individual banker so presenting suck notes for redemption, shall present all of such notes on hand at the time of such presentation either to the lawful agent or at the counters of the banks or individual bankers issuing them for redemption and payment in the manner provided by law as often at least as once in each successive week, when more than the sum of ten thousand dollars of such notes are held by the bank or bankers presenting them for payment. Any such bank or individual banker holding such circulating notes who shall elect to present the same for redemption and payment at the counters of the bank or individual bankers issuing them, shall cause written or printed notice of such election, attested by the signature of the president or cashier of the bank or banker holding them, under seal, that all of such notes on hand at the time will be presented duly sealed at the counter of the bank or banker issuing 192 THE BANKING LAW. them, as often at least as once in each, successive week when more than the sum of ten thousand dollars is held by such bank or banker, to be redeemed and paid in the manner required by law. When such notice shall have been given and received, such notes shall there- after be presented at such counters and not elsewhere for redemption and payment, unless a further notice of ten days shall b© given in the same manner that such notes will thereafter be presented for redemption and payment to the lawful redeeming agent of the bank or individual banker issuing them vnthin the times and upon the terms prescribed by law. Any bank or individual banker may re- deem, present, hold, pledge or exchange the circulating notes of any other bank or banker in the manner, within the times and upon such terms conformable to the provisions of law as may have been agreed upon. Every bank or individual banker who shall knowingly and wilfully neglect or refuse to comply with any provision of this section shall forfeit and pay to the people of the state the sum of one thousand dollars. (Former section 78; K. S., 1537, 1538; L. 1882, ch. 409, §§ 106-108.) § 98. Banks closing business. — Any bank, or its receiver, trustees or legal representatives, and any individual banker or his assignee, administrator, personal representative or successor, may give notice to the superintendent of the intention of such bank or individual banker to close the business of banking, and thereupon such bank or individual banker shall be entitled to deposit with the superin- tendent, and he may receive a deposit of, money equal to the amount of the outstanding circulation at the time of such deposit to be placed by him in some bank in the city of Albany, in good credit, upon the receipt of which the superintendent may return and retransfer to such bank or individual banker all securities in his hands thereto- fore deposited with him for the redemption of circulating notes by such bank or individual banker. Upon the receipt of such deposit the superintendent shall immediately cause to be published in the state paper and in at least one newspaper in the county where such bank or banker shall have been located or doing business at least once a week for six months, a notice that the notes of such bank or banker will be redeemed by him at pax at the bank where such, deposit is THE BACKING LAW. 193 made, and that all the outstanding circulating notes of such bank or banker must be so presented for redemption within six years from the date of such notice, and that all notes which shall not be thus presented for redemption and payment within the time specified in such notice shall cease to be a charge upon the fund in the hands of the superintendent for that purpose. After the expiration of such notice the superintendent may sur- render to such bank or banker, and such bank or banker, or any receiver, assignee, trustee or legal representative thereof, shall be entitled to reveive from the superintendent, all the money remaining in his hands after such redemption, except so much thereof as may be necessary to pay the reasonable expenses chargeable against such bank or banker, including the payment for the publication of such notices. All circulating notes of such bank or banker which shall not have been presented for payment vsdthin the period prescribed in such notice shall, at the expiration thereof, cease to be a lien or charge upon the property of such bank or banker in the hands of any such receiver, assignee, trustee or legal representative, and all liability of such receiver, assignee, trustee, bank or banker, for or on account of any circulating notes which shall not have been presented within such time shall cease. Any such trustee, receiver, assignee, bank or banker may, after the full payment of all the circulating notes issued by them respec- tively which shall have been presented within the time required by such notice, and of all other lawful claims and demands against such bank or banker, divide the remaining property of the bank or banker among the stockholders thereof, their personal representatives or assigns, according to their respective shares or interest therein. ■ If the bank so designated shall at any time fail or refuse to redeem such notes at par when presented, they shall be protested as required by this chapter, and the superintendent shall thereupon, in the man- ner required in this chapter for the redemption of circulating notes, provide for the redemption of such notes. (Former section 79; R. S., 1538, 1539; L. 1882, ch. 409, §§ 109, 110.) § 99. Proceedings on closing bank. — The stockholders of a bank may at any time direct that it be closed for the purpose of winding 18 194 THE BAWKIITG LAW. Tip its affairs. Sueh directon may be given at a stockholder's meet- ing by a two-thirds vote of its stock after written notice by mail to each stockholder of record, at his last known place of residence, which notice shall contain a statement of the purpose for which such meeting is called. A copy of the proceedings of the stockholders' meeting duly certified by the president and cashier of the bank must be filed in the banking department. The supreme court shall there- upon in a proper case after due notice to the superintendent of banks, make an order declaring the business of said bank closed, and pre- scribing the notice to be given to creditors to present their claims to the bank for payment. Upon the granting of said order, said bank shall cease to do a banking business, but may wind up its affairs, pay its debts and distribute its assets among its stockholders. Upon a petition of the bank showing that all its debts and obligations are discharged, and on notice to the attorney-general and superintendent of banks, and such further notice as the court prescribes, the court may on such terms as justice requires, make an order declaring the said bank dissolved, and the corporate existence thereof terminated. On filing a certified copy of said order in the banking department, said bank shall cease to exist as a corporation. (Former section 79a; L. 1900, eh. 567.) See General Corporation Law, §§ 170-195. § 100. Proportionate amount of securities to be returned when notes are destroyed. — On the return to the superintendent and the destruc- tion by him of any of the notes of any bank or individual banker making a deposit as herein required, such bank or individual banker, or its legal representatives, shall be entitled to receive from him a proportionate amount of the securities so deposited. At the expira- tion of six years from the date of the notice given by the superintend- ent for the redemption of the circulating notes of banks closing busi- ness, such notes shall cease to be a lien upon the securities so de- posited, and the same shall be surrendered to the lawful claimant therefor. (Former section 80; E. S., 1539; L. 1882, ch. 409, § 111.) § 101. Deposit of cash for redemption of notes. — The superintend- ent may receive from any bank or banker a deposit of cash, pursuant THE BANKING LAW. 195 to the provisions of this chapter relating to the deposit of cash by banks closing business, for the redemption of its circulating notes, without notice of intention to close the business of banking; but the bank or individual banker making such deposit shall continue to make the reports and statements and to publish the same as re- quired of the banks of this state by the laws thereof, and be in all respects amenable to the banking laws of this state, as if in full operation as a bank of discount and deposit, until due notice and evidence of the discontinuance of such business of banking shall be given to the superintendent, which discontinuance shall require the concurrence of the owners of a majority of the shares of stock in the bank. This provision shall extend and apply to any bank that has heretofore made such deposit to redeem its outstanding circulation without having given notice of intention to close its business. Any bank or individual banker having given such notice and made the deposit of cash or securities as required by law, may withdraw such notice at any time within two years after making such deposit, and may thereupon resume the business of banking under its corporate name and subject to the laws of this state ; but such withdrawal shall not affect the redemption of its circulating notes previously issued according to the terms advertised by the superintendent as required by law, nor shall such bank be entitled to issue any circulating notes until the time for the redemption of its previous issue shall have expired. (Former section 81; E. S., 1539; L. 1882, ch. 409, § 113.) § 102. Circulation of foreign bank notes prohibited. — No bank or individual banker authorized to carry on the business of banking under the laws of this state shall receive, pay out, give or offer in payment, as money, to circulate or attempt to circulate as money, any bill, note or other evidence of debt issued or purporting to have been issued by any corporation or individual situated or residing without this state, and which bill, note or other evidence of debt shall, upon any part thereof, purport to be payable or redeemable at any place, or by any person or corporation within this state. No such bank or banker or any person whatever within the state, directly or indirectly, on any pretense whatever, shall procure or receive, or offer to receive, from any corporation or person, any bank 196 THE BAITKING LAW. bill or note or other evidence of debt in the similitude of a bank note, issued or purporting to have been issued by any corporation or individual situated or residing without this state, at a greater rate of discount than is or shall be at the time fixed by law for the redemp- tion of the bills of the banks of this state at their agencies. ITo such bank or individual banker shall issue, utter or (Circulate as monejr, or in any way directly or indirectly aid or assist in the issuing, uttering or circulating as money within this state of any such bank bill, note or other evidence of debt issued or purporting to have been issued by any corporation or individual situated or residing without this state, or procure or receive in any manner whatever, any such bank bill, note or evidence of debt, with intent to issue, utter or circulate, or with intent to aid or assist in issuing, uttering or circu- lating the same as money within this state. Any bank or individual banker may receive and pay out such foreign bank bills as it shall receive at par in the ordinary course of its business, and it may receive foreign notes from its dealers and customers in the regular and usual course of its business, at a rate of discount not exceeding tbat which is or shall be at the time fixed by law for the redemption of the bills of the banks of this state at their agencies, and may obtain from the corporations or individuals by which such foreign notes were made the payment or redemption thereof. Every bank and individual banker who shall offend against any of the provisions of this section or of section one hundred three of this chapter, shall forfeit for each and every offense the sum of one thousand dollars to be recovered with costs in the name and for the use of any person who shall sue for the same. (Former section 82; R. S., 1539, 1540, 1541; L. 1882, eh. 409, §§ 114, 118, 119.) 1. The delivery of Canada bank bills to an individual banker, who makes agree- ment to receive them at one-quarter of one per cent, discount, and to -pay by seventeen days' draft on New York, is not a violation of this statute. Receiver is merely the agent of vendor to send them back for redemption. It was not a circulation of the notes. Buffalo City Bank v. Codd, 25 N. Y. 165. 2. This statute does not prohibit banks or individual bankers from selling or delivering such notes for any purpose, except circulation as money within this State. It is no offence for a bank or banker having lawfully taken such notes at par, to sell them to another bank or banker at any rate of discount, provided it be not with a view to their circulation in this State. The prohibition is only on the banker buying at a greater than the legal discount. Sacketts Harbor Bank V. Codd, 18 N. Y. 240. THE BAITKING LAW. 197 § 103. Notes not receivable at par not to be paid out. — No bank or individual banker authorized to carry on the business of banking under the lavs^s of this state shall directly or indirectly lend or pay out for paper discounted or purchased, any bank bill or note or otber evidence of debt which is not received at par by such bank or banker for debts due to such bank or banker. (Former section 83; K. S., 1540; L. 1882, ch. 409, § 115.) 1. Bank gave Canada bank bills to an individual banker, who advertised to redeem them, and received a draft on New York city for amount less one-fourth of one per cent. This transaction cannot be tortured into loan or purchase of the draft of defendant with Canada bank bills. Bank might have sent them home for redemption itself, and might as well give them to another for redemption and take an equivalent. Buffalo City Bank v. Codd, 25 N. Y. 168. 2. No recovery can be had for money loaned in violation of this section of this statute, but this defense must be set up in the answer. Codd v. Rathbone, 19 N. Y. 39. § 104. Bills or notes must be payable on demand. — JSTo bank or individual banker shall issue or put in circulation any bill or note of such bank or banker unless the same shall be made payable on demand and without interest, except bills of exchange on foreign countries or places beyond the limits or the jurisdiction of the United States, which bills may be made payable at or within the customary usance, or at or within ninety days' sight, and, except certificates of deposit payable on presentation, with or without interest, to bearer or to the order of a person named therein; but no such certificate of deposit shall be issued except as representing money actually on deposit. (Former section 84; R S., 1540; L. 1882, ch. 409; L. 1887, ch. 564.) 1. A post-dated draft taking effect by delivery is a time draft, and within pro- hibition of this statute. It seems the intention of the legislature to forbid the issue of contracts of a certain description, and to punish them, but not to enable them to repudiate their own obligations. The bank is prohibited from issuing, but the receiver is not forbidden to take such obligation, and may recover, if not on the obligation, certainly for money had and received. Oneida Bank v. Ontario Bank, 21 N. Y. 490; to same effect Curtis v. Leavitt, 15 N. Y. 95 and 96. See note to section 297. 2. Prior to the act of 1840 (ch. 363), banking associations could issue their time notes to secure moneys loaned, provided such obligations were not intended to circulate as money. It was not prohibited, and the right was incidental to the . business. Curtis v. Leavitt, 15 N. Y. 9. Though the issue of such a draft (not payable on a demand) is a violation of this statute on the part of the banker, it is not. on the part of the payee. The statute being penal is strictly construed. The seller may surrender the illegal draft, and recover on the implied assxunpsit. 198 THE BANKING LAW. Buffalo City Bank v. Codd, 25 N. Y. 163; to the same effect Tracy v. Talmage, 14 N. Y. 178, 67 Am. Dec. 132. 3. All notes issued by banks, unless payable on demand without interest, are illegal though not intended to circulate as money. The act has no reference to the circulation of such notes as money, but was designed to prohibit them alto- gefther for any purpose. A guaranty for the payment of such notes partakes of the character of the principal contract, and is equally illegal. Swift v. Beers, 3 Denio, 70. 4. Securities by banks as (collateral) security for illegal notes are also void, and confer no title on assignees. Tyler v. Yates, 3 Barb. 222. 5. Acknowledgment of debt signed by the president in pursuance of resolution of board of directors is valid, although there is no contract to repay signed as prescribed in this section. 5 Barb. 9. 6. In December, 1839, the case of Safford ■;;. Wyekoff, President of the Farmers' Bank of Seneca County, was tried before Cushman, circuit judge. This was an action against that bank as the drawer of a negotiable bill or draft for $3,000, dated August 15, 1839, and payable thirty days after -date and signed " J. J. Fen- ton, Cashier." The bank was an association, formed under the general banking law of 1838. It was objected on the trial, among other things, that the bank " had no power to issue drafts on time, or any other paper except such as had been countersigned according to law." These objections were overruled by Judge CusHMAKf, who directed a verdict for the plaintiff, which the jury rendered. 1 Hill, 12. In April, 1840, the court for the correction of errors, in Warner v. Beers, 23 Wend. 101-190, held, that " associations organized in conformity with the pro- visions " of the general banking law were " not bodies politic or corporate within the spirit and meaning of the Constitution" of 1821. But Senator Verplanck (who insisted in this case, in opposition to the chancellor and to other senators, that these associations were, in no sense, corporations, but merely partnerships, relieved by a conditional appeal from the inhibitions of the General Restraining Act ) , held, that " certain conditions are imposed to entitle them to the benefit of this conditional repeal. They can issue no paper unless it be secured in a, certain way, and duly attested by the comptroller. The very same conditions are imposed on every individual who thinks fit to engage in this business." 23 Wend. 159. See Safford v. Wyekoff, 1 Hill, 11. Shortly after the decision of Judge Cushman, the officers of some of the asso- ciations assumed the power of issuing evidences of debt, which an association under the general bank law had not only no legal power to issue, but the issue of which, by such a moneyed corporation having banking powers, was expressly pro- hibited by the 35th section of the amendatory act of April 2, 1829. Laws of 1829, § 1 and § 35. But this was not the only evil — the individual bankers were not within the terms of this prohibition of the said 35th section, and were not then required by the general law of 1838 to file any certificate stating their places of residence or of business, or to make any annual statement of their affairs to the comptroller; but these individual bankers were authorized by the same section (§3) and in the same language (as corporations formed under the 15th section) to loan and circulate countersigned notes — and by the act of 1837 they had previously been authorized to keep ofl[ices of discount and deposit. Certain individual bankers, in 1839 and 1840, established banking ofiices in various part THE BANKING LAW. , 199 of the interior of this State remote from business centres, and commenced busi- ness by issuing countersigned notes in the name of the "Atlas Bank," " The North River Banking Company," or other assumed names. When these counter- signed notes became current, and the name of the "Atlas Bank," etc., familiar, it was not difficult to put in circulation post-notes in the name of the "Atlas Bank,'' etc., engraved from plates similar to the authorized plates in the custody of the comptroller; but such post-notes were not countersigned by him or in any manner secured. To prevent the issue of a spurious currency by individual bankers, the legisla- ture interfered by the act of May 14, 1840. This act was passed one month after the decision by the court of errors of the case of Warner v. Beers, and before the supreme court had set aside the verdict in Saflford v. Wyekoff; the decision in the latter case was not made until January, 1841. 1 Hill, 11. One of the main objects of the legislature in enacting the prohibition in the 4th section of the act of May 14, 1840, was to reach the illegal issue of post-notes, or other evidences of debt, by individual bankers in the assumed name of the "Atlas Bank," etc. Hence the language of this section is that " No individual banker, as such, shall issue or put in circulation any bill or note, unless the same shall be made pay- able on demand and without interest," and that every violation of this section by any individual banker shall be deemed and adjudged a misdemeanor, etc. The legislature was compelled afterward to pursue this policy of restricting' and resertaining the operations of individual bankers. See Laws of 1841, eh. 319; Laws of 1844, ch. 281 ; Laws of 1848, eh. 340. While providing a remedy for the prevention of the evils resulting from illegal issues by individual bankers as such, the legislature of 1840 reiterated the prohibition of the 35th section of the act of April 2, 1829, against an issue of post-notes by moneyed corporations formed under the General Bank Act, so as to leave no room for doubt as to its applica- tion to them; in thus re-enacting this prohibition, the legislature added the sanction of an express reference to the penalties imposed for a violation of the statute — in other words declared that such a violation was a misdemeanor, punishable by fine or imprisonment, or both. It should also be borne in mind that before the passing of the act of May 14, 1840, it had been questioned whether associations under the general law were, in the language of Judge Bbonson, " corporations or something else." It was not until December, 1844, that the court for the correction of errors finally settled this question, by deciding that they were " moneyed or stock corporations " within the meaning of the statute subjecting such corporations to taxation on capital. 1 R. S. 414, § 1; Super- visors of Niagara v. The People, 7 Hill, 504. The Safety Fund, as well as the General Law banks, had the express power to buy and sell bills of exchange; yet both classes of moneyed corporations were pro- hibited from issuing any bill on time. Laws of 1829, § 1 and § 35; Cleveland's Banking Law, 114. See the following decisions as to the issue of post-notes and post-bills: Smith and Warner v. Strong (post-bill), 2 Hill, 241; Bank of Orleans v. Merrill (post- certificate of deposit), 2 Hill, 295; Swift v. Beers (guarantee of a post-note), 3 Denio, 70; Leavitt v. Yates (assignment to secure post-notes called "Yates Trust-Notes"), 4 Edw. Ch. 134; Tylee v. Yates et al. (Yates Trust Post-Notes), 6 Barb. 222. 200 THE BAJVTKIIirG LAW. Leavitt v. Blatehford and Leavitt v. Palmer (assignment to secure post-notes), 3 N. y. 19, 51 Am. Bee. 333. Bank Commissioners v. St. Lawrence Bank (time notes four to twelve months void), 7 N. Y. 513. Saflord v. Wyckoff (post-bill, dated August 15, 1839), 1 Hill, 11; 4 Hill, 442. Bank of Chillicothe v. Dodge (post-bill, dated September 30, 1839), 8 Barb. 233; Attorney-General v. Life and Fire Insurance Company (post-notes, called "Life and Fire Bonds"), 4 Paige, 224; 9 Paige, 471. 7. This act was (originally) passed because the courts began to regard notes payable abroad in the coin of a foreign country (Leavitt v. Palmer, 3 N. Y. 19, 51 Am. Dee. 333), as within the prohibition of section 4, chapter 363, Laws of 1840, and consequently void. The amendment was explanatory. Curtis v. Leavitt, 17 Barb. 320. The true construction of this section is " that the issue and circula- tion thereby intended to be prohibited was that of bank-notes proper, or of iotes which were likely to enter into, and being on time or interest, to affect injuriously the circulating medium of the State." Notes, therefore, to come within the prohibition, must not only be on time or interest, but in similitude of bank-notes, or adapted to circulate as money. Id. 311; Leavitt v. Blatehford, 17 N. Y. 521; 5 Barb. 9. 8. They are not prohibited from giving their engagements on time, provided such engagements are not adapted nor intended to circulate as money. Tracy v. Talmage, 18 Barb. 456. 9. A bank cannot make an accommodation indorsement, and same is not binding except in hand of hona fide holder for value. Mosford v. Farmers' Bank, of S., 26 Barb. 568. For a full presentation of the authorities on this question, see editorial note to Flannagan v. California Nat. Bank, 23 L. E,. A. 836. 10. This section is not confined in its interpretation to bills and notes capable of circulating as money. Applied to negotiable promissory note at twelve months with interest, such held illegal and void, p. 33. This issue of time paper belongs to commercial or mercantile business, not to that of bankers, and the acts ( 1829- 1840-1851) were passed with view to remedy this evil. That these statutes extend to negotiable promissory notes and bills of exchange payable at a future day has been decided both here and elsewhere (citing 3 Denio, 70; 3 Barb. 222; 3 McLean, 102, Fed. Cas. No. 12,037, 3 McLean, 276, Fed. Cas. No. 6,259; 10 Paige, 113), p. 34. The legal liability remains, but the notes are void. Leavitt V. Palmer, 3 N. Y. 19, 51 Am. Dec. 333. 11. Receiving money on deposit on agreement to pay five per cent, interest, and issuing a certificate of deposit therefor is not within this statute. In Leavitt v. Palmer, 3 N. Y. 19, 51 Am. Dec. 333, the paper declared void was a promise to pay to order of W. E,. C, twelve months after date, with interest, for value received, and it was plain from the nature of the transaction that the notes were designed for circulation, and were within the language of the act an issue of the bank. In that case forty-eight notes for £1,000 each were issued. In Swift v. Beers, 3 Denio, 70, a promise to pay to the order of S. & Co., for value received and interest, that was held void as violation of this section. In Saiford v. Wyckoff, 1 Hill, 11, and Smith v. Strong, 2 id. 241, both were negotiable bills of exchange. In all these cases the instruments were negotiable paper, and evidently THE BANKIITQ LAW. 201 issued for circulation. But in this case the certificate of deposit was merely given as a eonveuient evidence of debt. Pelham v. Adams, 17 Barb. 386. § 105. When bills of exchange to be without grace. — All checks, bills of exchange or drafts appearing on their face to have been drawn upon any bank or individual banker carrying on banking business under the laws of this state, which are on their face payable on any specified day or in any number of days after the date or sight thereof, shall be deemed due and payable on the day mentioned for the pay- ment of the same, without any days of grace being allowed, and it shall not be necessary to protest the same for non-acceptance. (Former section 85; E,. S., 1541; L. 1882, ch. 409, § 120.) See Negotiable Instruments Law, §§ 145, 146. 1. This act was intended to abolish grace on short time bills on banks or bankers — it is specially confined to bills drawn on their face in days or a specified day, so that the holder should get his money upon such short bills at the day specified — and does not apply to bills drawn for 'months or years on their face. Commercial Bank of Ky. v. Varnum, 49 N. Y. 278. 2. Such bills are due on the day following, not that preceding a public holiday. Id. 279. 3. Under date of January 16, 1908, the attorney-general held the following form of certificate of deposit to be unlawful because not payable on demand and because not payable to bearer or to the order of one named: " Incorporated under the Laws of the State of New York. Certificate of Amount Deposit. $100. No. A 248 BANK THE BANK OF hereby certifies that has deposited with it the sum of One Hundred Dollars lawful money of the United States of America, which said sum is payable in goIS coin of the United States of America, of its present standard of weight and fineness to or to order after date upon presentation for and cancellation of this certificate, with interest thereon at the rate of 4% per annum, and payable half yearly to wit, on the first days of January and July in each year at the said Bank. The Bank reserves the right to pay ofF this certificate or to change the rate of interest at any time upon giving the registered holder hereof 90 days' previous written notice of their intention so to do. This certificate may, with the consent of the said Bank, be trans- ferred by endorsement thereon and proper registration thereof at the office of the said Bank, but until such registration has been completed, the transfer shall not be valid and the registered holder hereof shall, to all intents and purposes, be deemed the holder. 202 THE BAITKIWG LAW. Given under the seal of the Bank of , and signed by the proper officers thereof, this day of in the (Seal) year of our Lord, one thousand, nine hundred and at the City of New York, in the State of New York, and in the United States of America. Cashier. Vice-President. Attached thereto were ten coupons each in the following form, except that they were payable alternately on the first days of January and July: $2.00 No. 1 Due at BANK To Bearer Two Dollars ($2.00) in gold coin of the United States of America, of its present standard of weight and fineness, on the first day of January, being six months' interest then due on certificate of deposit. No. A 248 BANK OF Cashier. Vice-President." § 106. Transfers of securities by superintendent to be countersigned by treasurer. — If o transfer of securities now held or hereafter re- ceived by the superintendent to secure circulation shall be valid or of binding force or effect unless countersigned by the treasurer of the state, or in his absence or inability to perform the duties of his office, by his deputy. The treasurer shall keep in his office or in the office of the superintendent of banks, a book in which shall be entered the name of every bank or individual banker, from whose account such transfer of securities is made by the superintendent, and the name of the party to whom such transfer is made, unless such transfer shall be made in blank, in which case the fact shall be stated in such book ; and the par value of any stock so transferred shall be entered therein, and the treasurer shall immediately upon countersigning and enter- ing the same, advise by mail the bank or individual banker from whose accounts such transfer is made, of the kind of security and amount of the same thus transferred. The treasurer shall present in his annual report to the legislature, the total amount of such trans- fers or assignments countersigned by him. The treasurer shall, during office hours, have access to the books THE BANKING LAW. 203 of the superintendent of banks for the purpose of ascertaining the correctness of the transfer or assignment presented to him to counter- sign; and the superintendent shall, during office hours, have access to the hook above mentioned kept by the treasurer to ascertain the correctness of the entries upon the same. (Former section 86; R. S., 1541, 1542; L. 1882, ch. 409, §§ 121-124.) § 107. Unauthorized banking prohibited. — No person unauthor- ized by law shall subscribe to or become^ a member of, or be in any way interested in any association, institution or company formed or to be formed for the purpose of issuing notes or other evidences of debt to be loaned or put in circulation as money ; nor shall any such person subscribe to or become in any way interested in any bank or fund created or to be created for the like purposes or either of them. 'So corporation, without being authorized by law, shall employ any part of its property, or be in any way interested in any fund which shall be employed for the purpose of receiving deposits, making discounts or issuing notes or other evidences of debt to be loaned or put into circulation as money. All notes and other securities for the payment of any money or the delivery of any property, made or given to any such association, institution or company, or made or given to secure the payment of any money loaned or discounted by any corporation or its officers, contrary to the provisions of this sec- tion, shall be void. No person, association of persons or corporation, except such as are expressly authorized by law, shall keep any office for the purpose of issuing any evidences of debt, to be loaned or put in circulation as money ; nor shall they issue any bills or promissory notes or other evidences of debt as private bankers, for the purpose of loaning them or putting them in circulation as money, unless thereto specially authorized by law. Every person, and every corporation, director, agent, officer or member thereof, who shall violate any provision of this section, directly or indirectly, or assent to such violation, shall forfeit one thousand dollars to the people of the state. (Former section 87; R. S., 1578; L. 1882, eh. 409, §§ 297-303.) See General Corporation Law, § 10! See Penal Law, §§ 302, 666. 204 THE BANKING LAW. See New York Constitution, art. VIII, § 4. 1. The prohibitions against unauthorized banking are still in force, but banks organized under the general banking law are authorized to issue notes on con- dition of having the same secured and countersigned as specified in the said law; without performing these conditions, notes or obligations of any kind intended to circulate as money cannot be issued. Curtis v. Leavitt, 15 N. Y. 70, 71. 2. A negotiable draft or bill of exchange in ordinary form issued by an asso- ciation organized under the general banking law, though without the sanction of the superintendent, will bind the association in favor of a, bona fide holder, even if signed by the cashier only. Otherwise, however, as between the association and one who is not a hona fide holder, if it appear that it was issued as a loan or to be put in circulation as money. It appears a negotiable note or bill, though given by a corporation having only an incidental right to issue paper in certain special eases, must be presumed to be legally issued, until the contrary appears; but where there is sufficient on the face of a negotiable note or bill, etc., to' create a suspicion that it is issued contrary to law, and put the party who takes it upon his guard, he is not entitled to be considered a bona fide holder. Safford v. Wyckoff, etc., 4 Hill, 442. 3. A note given to and discounted by a corporation, which by its charter has power to receive deposits, but not expressly to discount paper, is void, and note cannot be collected, but action may be maintained for money had and received. The policy of Restraining Act until 1837 was to give banks a monopoly of busi- ness, but since then it rests Only on the principle of restraining corporations from exercising powers not given by their charter. The legislature did not intend money loaned on prohibited security should be lost. Pratt et al. v. Short et al., 79 N. Y. 437. 4. Mo'rtgage to People's Safe Deposit and Savings Institution to secure notes — notes held void, but mortgage held valid. Though one security may be void, it does not follow that the other is. Cites Curtis v. Leavitt, 15 N. Y. 97 ; to same eflfect, Pratt et al. v. Eaton, 79 id. 449. The history of the Restraining Act is given in the above cases, with the authorities. The eases known as the Utica Insurance eases (19 Johns. 1) decided the law that the securities taken on such discounts were void, but the loans could be recovered. The court in 19 Johns, said : " The lending of money is not declared to be void, and, therefore, when- ever money has been lent it may be recovered, although the security itself is void." This law has been followed in 8 Cow. 20; 3 Wend. 296; 4 id. 652. It has been criticised and not overruled in 25 id. 64, 35 Am. Dec. 653 ; Tracy v. Talmage, 14 N. Y. 189, 67 Am. Dec. 132, and Curtis v. teavitt, 15 id. 97; 1 Wend. 56, 555. 5. The People's Safe Deposit and Savings Institution discounted notes. The notes were held void, and a mortgage given to secure them held void also. The Utica Insurance cases were referred to, and it was stated that their soundness had been repeatedly questioned. That the better opinion was that since the cor- poration was particeps criniinis, the money loaned could not be recovered on grounds of public policy. This doctrine (though it has much in its favor both in reason and precedent) is overruled by cases cited below. Pratt et al. v. Baton, 18 Hun, 294 (June, 1879). 6. A corporation whose charter allows it to receive deposits, which is a bank- ing power, may not issue notes to circulate as money or discount commercial paper, and is subject to Restraining Act. The penalty, however, will not be car- THE BANKING LAW. 205 ried beyond that given in act; an action will lie for money had and received. Pratt et al. v. Short, 79 N. Y. 437, 35 Am. Rep. 531; Pratt et al. v. Eaton, id. 449, reversing 18 Hun, 294; 84 N. Y. 190. 7. The principal attributes of a bank are the rights to issue negotiable notes, discount notes and receiver deposits. New York Trust and Loan Co. was author- ized by special charter to buy or receive all kinds of property, real, personal or mixed, and to advance moneys on any property, real or personal. Held, that the act of discounting commercial paper for the purpose of raising money, and plac- ing the proceeds to the credit and subject to the cheek of customers, constituted the business of banking, and was illegal, and that even if the charter authorized it, such authorization is in violation of section 4, article 8 of the constitution of this State (citing P. v. Utica Ins. Co., 15 Johns. 388-390, 8 Am. Dec. 243). N. Y. T. & L. Co. V. Helmer, 12 Hun, 42. 8. A contract for the loan of, as well as the security taken on loan made by corporation not authorized to make loans, is void. See note to section 301; 79 N. Y. 437, 35 Am. Rep. 531, and 77 id. 64; Beach v. Fulton Bk., 3 Wend. 583. But this section does not preclude individuals or corporations otherwise author- ized from lending money on promissory notes by way of discount or otherwise. People V. Brewster, 4 Wend. 498. 9. The Restraining Acts prohibited corporations not expressly authorized from engaging in the business of banking. Corporations formed before the passage of these acts are not prohibited thereby, and may carry on banking business. The People V. The President, etc., 9 Wend. 351. 10. A foreign corporation conducting an illegal banking business in this State made a, lawful loan on bond or mortgage. Held, that the only penalty incurred was that given by statute, and that so much of its business as was not in contra- vention of statute (including said loan), was valid. Bard v. Poole, 12 N. Y. 505. 11. Negotiable security of an association, which upon its face appears to be duly issued, is valid in the hands of a bona fide holder without notice, although issued in fact without authority and in violation of law. A contract made in this State by a foreign corporation is valid, unless prohibited by law. Stoney v. Am. Life Ins. Co., 11 Paige, 635. 12. Non-negotiable notes and drafts, which cannot be used and circulated as money, are not prohibited by statute, and may be issued' by banks and banking associations, either as evidences of indebtedness to particular individuals, or for other legitimate purposes. Ontario Bk. v. Schermerhorn, 10 Paige, 110. 13. The legislature intended to prohibit the issuing of any bills or promissory notes by any individual or corporations as private bankers, and the prohibition becomes absolute and unqualified. People v. Brewster, 4 Wend. 500; see notes to section 299. 14. A foreign bank may keep an office within the State to redeem its notes or bills brought into the State in the ordinary course of business. DeGroot v. Van Duzer, 17 Wend. 170. 15. A foreign corporation, keeping an office in this State for receiving deposits and discounting notes, cannot recover on note or other security, or in action for money loaned. Bridge Co. v. Silk Co., 25 Wend. 648. 16. A Canada bank furnished parties in Buffalo their bills for doing a, dis- count and exchange business, taking a valid mortgage from the mortgagor as security. Held, a violation of this statute, and that bank could not recover 206 THE BABTKIJiTG LAW. on tlie mortgage, since the violation of this statute was a defense to mortgagor. DeWitt V. Brisbane, 16 N. Y. 508. 17. It is not necessary that they should have been capable of circulating as money; it is enough to constitute an offense against the statute that they should be issued to be loaned. The issuing of negotiable certificates of deposit for £1,000 each, payable at a distant day, in England, is not a violation of statute forbid- ding issue of certificates to circulate as money. But where such certificates are proved to have been issued to be loaned as money, it is a violation of the statute. Schermerhorn v. Tolman, 14 N. Y. 93. 18. A note discounted by a foreign bank at its place of business, given by a resident of this State, is valid, as is also a mortgage taken to secure the same. Although the note is discounted at a higher rate than allowed by the law of the State where bank is situated, if it does not exceed our rate, it does not constitute usury. Hackettstown National Bank v. Eea, 64 Barb. 175. 19. The right of banking was formerly a common-law right to be exercised by any one at pleasure. But the legislature thought proper' by the Restraining Act of 1804, and which has since been re-enacted (1813, ch. 71), to take that right away from all persons not specially authorized by law. But the remedy against those violating statute is in court of law, for the statutory penalty, not in court of equity, and injunction will not lie. Attorney-General v. Utica Ins. Co., 2 Johns. Ch. 375. 20. If an incorporated bank of another State lends money on mortgage in this State, it is not a violation of the statute. It only applies to operations done in State. 4 Johns. Ch. 373. § 108. Restrictions as to foreign corporations. — l^o foreign cor- poration, other than a national bank, shall keep any office for the purpose of receiving deposits or discounting notes or bills, or issuing any evidence of debt to be loaned or put in circulation as money within this state. (Former section 88; E. S., 1578; L. 1882, ch. 409, § 304.) See General Corporation Law, § 15. § 109. Restrictions as to banks and their officers. — 'Eo bank in this state, or any officer or director thereof, shall open or keep an office of deposit or discount other than its principal place of business, except that any bank located in a city of over one million inhabitants, according to the last state or federal enumeration, and whose certifi- cate of incorporation shall so provide, may open and keep one or more branch offices in such city for the receipt and payment of deposits and for making loans and discounts to the customers of such branch offices only; provided, however, that no bank shall open a branch office without first having obtained the written approval of the super- intendent of banks to the opening of such branch office, which written THE BAETKING LAW. 207 approval may be given or v^ithheld in his discretion, and shall not be given by him until he has ascertained to his satisfaction that the public convenience and advantage will be promoted by the opening of such branch oiEce and, provided further, that no bank, or any officer or director thereof, shall open or maintain a branch office, unless the capital of such bank actually paid in cash shall exceed the amount required by section sixty of this chapter by the sum of one hundred thousand dollars for each branch office hereafter opened and the sum of fifty thousand dollars for each branch office heretofore opened and hereafter maintained. Every bank and every such officer or director violating the provisions of this section shall forfeit to the people of the state the sum of one thousand dollars for every week during which any branch office hereafter opened shall be maintained without such written approval. (Former section 89; E. S., 1578; L. 1882, eh. 409, § 305; L. 1898, ch. 410; L. 1908, ch. 156.) § 110. Bills payable otherwise than in money prohibited. — No per- son shall give, pay or receive in payment, or in any way circulate, or attempt to circulate, any bank bill, or any promissory note, bill, check, draft or other evidence of debt, issued by any bank or individual banker, which shall be made payable otherwise than in lawful money of the United States. Every person violating this provision shall forfeit to the people of the state the face amount or value of such bill, note or other evi- dence of debt so given, paid, received, circulated or offered, to any person who will sue for the same within sixty days after the commis- sion of the offense. (Former section 90; R. S., 1579; L. 1882, eh. 409, §§ 308, 309.) § 111. Certain bills declared to be promissory notes. — AH bills notes or other instruments which shall be issued by any bank or individual banker purporting to be receivable in payment of debts due to it, shall be deemed and taken to be promissory notes for the payment on demand of the sum or value expressed in such instru- ment, and such sum shall be recoverable by the holder or bearer of such instrument, in like manner as if the same were a promissory note. (Former section 91; R. S., 1579.) 208 THE BANKING LAW. § 112. Use of sign indicating bank by unauthorized persons pro- hibited. — JSTo person engaged in the business of banking in this state, not subject to the supervision of the superintendent and not required to report to him by the provisions of this chapter, shall make use of any office sign at the place V7here such business is transacted, having thereon any artificial or corporate name, or other vrords indicating that such place or office is ihe place or office of a bank ; nor shall such person or persons make use of or circulate any letter-heads, bill- heads, blank notes, blank receipts, certificates, circulars, or any virritten or printed or partly written and partly printed paper what- ever, having thereon any artificial or corporate name, or other word or words, indicating that such business is the business of a bank. Every person violating this provision shall forfeit the sum of one thousand dollars. But this section shall not apply to any person or persons engaged in the business of banking prior to October first, eighteen hundred and ninety-two. (Former section 92; R. S., 1579; L. 1882, eh. 409, § 311; L. 1885, ch. 329.) See Penal Law, § 302. § 113. Lost bank certificate; application to court for order requiring payment. — Where a deposit of money has been made in any bank doing business in the state and a certificate of deposit has been issued therefor, and such certificate has been lost or destroyed, the person to whom it was issued, his or her executors or administrators, or in case of assignment the assignee thereof or his or her executor or administrator, may apply to the supreme court of this state at a special term thereof appointed to-be held in the judicial district where said bank is situated, by petition, duly verified by the petitioner, in the same manner as a complaint in a civil action in the supreme court is verified, for an order requiring the payment of the money due on such certificate, or if a bond or undertaking has been given to secure the payment of such a certificate and the same has been paid to the person to whom it was issued, his or her ex- ecutors, administrators or assigns, the obligors thereon, or any one of them, or the executors, administrators or assigns of such obligors, •or the persons or corporation executing such bond or undertaking, or any one of them, may apply to said court on petition verified in the same said manner for an order declaring such certificate null and THB BANKING LAW. 209 void and for the release, discharge and satisfaction of any such bond or undertaking and of the obligors thereon. (L. 1899, ch. 451, § 1; L. 1901, ch. 171, § 1.) As to the questioned constitutionality of this and following sections, see Matter of Ellard, 62 Misc. 374; Matter of Cook, 86 App. Div. 586. § 114. Petition; service of. — Such petition shall set forth the date of such certificate, the amount for which it was issued, the name of the bank issuing it, and the place where said bank is located, the name of the person to whom it was issued, and if assigned, the name of the assignee, and if a bond or undertaking has been given to pro- cure the payment of such certificate and the release, discharge and satisfaction thereof is sought, said petition in addition shall also state the date of the same, the time when, by whom and to whom given and the names of the obligors thereon. A copy of such petition shall be served on said bank in the same manner as a summons in the supreme court is served on a corpora- tion, at least eight days before the time specified therein for a hear- ing before the court, and if the release, discharge and satisfaction of a .bond or undertaking given to procure the payment of such a certificate is sought, then such petition shall be also served at the same time and in the same manner on the obligors thereof and the persons giving the same, their executors, administrators or assigns, other than the party making said petition. (L. 1899, ch. 451, §§ 2, 3; L. 1901, eh. 171, §§ 2, 3.) § 115. Bank to furnish information. — The bank issuing such certificate shall, upon application of the person who made the deposit, or his executors, administrators or assigns, furnish to such applicant the date and number of the certificate and the amount for which it was issued, and shall upon like application furnish to any obligor, on any bond or undertaking given to procure the payment of such certificate, or his executors, administrators or assigns, like informa- tion. (L. 1899, ch. 451, § 4; L. 1901, ch. 171, § 4.) § 116. Notice; order, and publishing. — Upon due proof of the service of such petition on said bank, the court, if it shall be satisfied that the facts set forth in the petition are true, may make an order 14 210 THE BAinaNG LAW. to the effect that a notice shall be published in two papers to be designated by the judge holding such term of court, and to be entitled " In the matter of the application of (naming the petitioner) to require the bank of (naming the bank) to pay over money deposited in said bank by (naming the depositor)" or in case a bond or undertaking has been given to procure the payment of such a certificate and it is sought to obtain an order from the court declaring such certificate null and void and the release, discharge and satisfac- tion of such bond and undertaking, then such petition is to be entitled " In the matter of the application of (naming the petitioner) to obtain an order declaring a certificate of deposit issued by the (naming the bank) null and void and the release, discharge and satisfaction of the bond (or the undertaking, as the case may be) given to said bank by (naming the party giving such bond) to secure the payment of such certificate." Such notice shall be published once in each week in each of such papers for thirteen consecutive weeks. (L. 1899, eh. 451, §§ 5, 6; L. 1901, ch. 171, § 5; L. 1901, eh. 503, § 1.) § 117. Contents of notice. — Such notice shall also contain the name of the bank issuing such certificate, the date of the certificate, the number, the amount for which it was issued; and in case it is sought to have any bond or undertaking given to secure the payment of such certificate, released, discharged and satisfied, said notice shall give the date thereof, the names of the parties by whom and to whom given and the obligors thereon; and said notice shall also provide that any person having such certificate in his or her possession, or under his or her control, shall produce tihe same within a time named in said notice, and present the same to the bank issuing the same, and upon default thereof shall forfeit all right or claim thereto, or to the money due thereon. Sucb notice shall also provide that at the expiration of the time of publication, an application will be made to the said court for an order declaring said certificate null and void ; and directing the payment of the money so deposited in and held by said bank to the petitioner if the same shall not have been previously paid, and if a bond or undertaking shall have been given to secure THE BANKING I-AW. 211 from sucti bank the payment of such certificate and its release, dis- charge and satisfaction is sought, in addition to having said certificate declared null and void, then said notice shall also state that said application will also be made at said time to said court to have such order declare such bond or undertaking released, discharged and satis- fied and the obligors relieved therefrom. (L. 1899, ch. 451, § 7; L. 1901, ch. 171, § 6.) ' § 118. Application for final order. — At the expiration of the time of the publication of such notice, the petitioner may apply to said courts, after giving said bank and each party to said bond or under- taking, his executors, administrators or assigns, other than the petitioner, at least eight days' personal notice of such second applica- tion for a final order declaring such certificate null and void, and directing said bank to pay over the money so deposited to the peti- tioner if the same shall not have been previously paid, and if such bond or undertaking has been given to such bank to procure the pay- ment of such certificate, and its release, discharge and satisfaction is sought, such notice of such second application shall give notice of an application for a final order declaring such certificate null and void and also for the^ release, discharge and satisfaction of such bond or undertaking and the discharge of the sureties therefrom. And if it appears on said application for said final order that the provisions of this article have been complied with the court shall grant the same. (L. 1899, eh. 451, § 8; L. 1901, eh. 171, § 7.) § 119. Order; filing, and service; refusal to pay. — Such final order shall contain a recital of the first order and shall be filed and entered in the clerk's office of the county in which said bank is situated, and upon the production of a certified copy of said second order to said bank, it shall pay to such petitioner the amount due on said certificate of deposit if the same shall not have been previously paid. After the service upon said bank of a certified copy of the said second order if said bank shall refuse or neglect to pay over the money due on said certificate, it may be recovered of said bank in the same manner as if such certificate had not been lost or destroyed. (L. 1899, ch. 451, §§ 9, 10; L. 1901, ch. 171, § 8.) 212 THE BAITKIITG LAW. § 120. Bond discharged; bank released. — No claim thereafter made by any person having such certificate in his or her possession, shall be available against such bank, and the bank shall forever there- after be fully and entirely relieved of any liability by reason of its having issued such certificate or for the money due thereon. After the granting of any such order declaring any such certificate null and void, and any bond or undertaking given to any bank to secure the payment of such a certificate, released, discharged and satisfied, no claim made on any such bond or undertaking shall be available or be enforced against any party or corporation giving such 'bond or any obligor thereon but each such person and corporation shall be fully and entirely relieved from all liability on such bond or under- taking. (L. 1899, ch. 451, § 11; L. 1901, ch. 171, § 9.) THE BANKING LAW. 21 AUTIOLE 4. Savings Banks. Section 130. Incorporation. 131. Notice of intention to organize. 132. Filing of certificate by superintendent. 133. Examination by superintendent. 134. Certificate of authorization. 135. When persons named in certificate become a corporation; powers. 136. Must begin business within one year. 137. Trustees and their powers. 138. By-laws. 139. Meeting of trustees; quorum. 140. Vacancies. 141. Security may be required from employees and salaries fixed. 142. Dividends, compensation, and loans to trustees prohibited. 143. Repayment of deposits; regulations; limitation. 144. Deposits of minors, and trust deposits, and deposits in the names of more than one person. 145. Wife witness against husband; claimants may be interpleaded. 146. In what securities deposits may be invested. 147. Limitation as to real property. 148. Available fund for current expenses; how loaned. 149. Temporary deposits. 150. Personal security prohibited; loans on bond and mortgage. 151. Mortgaged property to be insured. 152. Restrictions on methods of doing business. 153. Rate of interest; extra dividends. 154. Per centum of surplus, how determined. 155. Compensation of ofScers. 156. No other report or inspection required. 157. Examination of vouchers and assets by trustees. 158. Expenses to be paid. 159. Certain debts from insolvent banks and trust companies preferred. 160. Advertisements of unauthorized savings banks prohibited. 161. Charters to be conformed to this chapter. 162. Savings bank voluntarily closed. 163. When dissolution effected. 164. Deposit of unclaimed moneys. § 130. Incorporation. — Thirteen or niore persons, two-thirds of whom shall be residents of the county where the proposed bank shall be located, may become a savings bank by executing under their hands and seals and acknowledging a certificate in duplicate, one 214 THE BANKING LAW. duplicate to be filed in the office of the clerk of sueh county, and the other in the office of the superintendent of banks within sixty days after its acknowledgment, which shall set forth : 1. The name by which the corporation shall be known. 2. The place where its business is to be transacted, designating the particular city, village or town, and, if in a city, the ward therein. 3. The name, residence, and, if in a city, the street and number, occupation and post-office address, of each member of the corporation. 4. A declaration that each member of the corporation will accept the responsibilities and faithfully discharge the duties of a trustee in such corporation when authorized according to the provisions of law. (Former section 100; R. S., 1563, 1564; L. 1882, eh. 409, §§ 236-238.) Blank forms for the organization of savings institutions may be obtained from the superintendent of the banking department. See General C!orporation Law, §§ 4-6. See New York Constitution, art. VIII, § 4. See Tax Law, § 4, subd. 14, §§ 183, 189. § 131. Notice of intention to organize. — A notice of intention to organize such savings bank shall be published at least once a week for four weeks previous to filing such certificate in at least one news- paper of the largest circulation published in the city, village or town where such savings bank is proposed to be located, or, if there is no newspaper published therein, then in some newspaper published in the county; if none in the county, in an adjoining county; which notice shall specify the names of the proposed corporators, the name of the proposed savings bank, and the location of the same as set forth in the certificate; and if there is any savings bank organized and doing business in sueh county, a copy of sudi notice shall also be sent to every sueh savings bank so organized and doing business, at least fifteen days before the filing of such certificate. (Former section 101; R. S., 1654; L. 1882, ch. 409, § 239.) Certain advertisements by a National bank using the word " savings " therein, held to be prohibited. Opinions Atty.-Gen'l, February 6, 1908, and November 19, 1908. § 132. Filing of certificate by superintendent. — If such certificate shall not be in form and substance as required by this article and not duly and properly acknowledged, or not accompanied by evidence satisfactory to the superintendent of the publication and service in THE BANKIITG LAW. 215 good faith according to the intent and purpose of this article of the notice required by the preceding section, the superintendent shall refuse to file such certificate until it shall be amended to conform to the provisions of this article. If such certificate is in due form and duly executed according to the provisions of this article and is ac- companied by evidence satisfactory to the superintendent of the proper publication and service in good faith of such notice, he shall forthwith indorse the same over his official signature " filed for ex- amination," with the date of such indorsement. (Former section 102; R. S., 1564; L. 1882, eh. 409, §§ 240, 241.) § 133. Examination by superintendent. — The superintendent shall thereupon ascertain from the best sources of information at his com- mand: 1. Whether greater convenience of access to a savings bank will be afforded to any considerable number of depositors by opening a savings bank in the place designated in the certificate. 2. Whether the density of the population in the neighborhood designated for such savings bank, and in the surrounding country, affords a reasonable promise of adequate support to the enterprise. 3. Whether the responsibility, character and general fitness for the discharge of the duties appertaining to such a trust of the persons named in the certificate, are such as to command the confidence of the community in which such savings bank is proposed to be located. (Former section 103; R. S., 1564; L. 1882, eh. 409, § 242.) § 134. Certificate of authorization. — If the superintendent shall be satisfied from his own knowledge or from information gained con- cerning the several matters specified in the last section, that the organization of the savings bank as proposed in such certificate will be a public benefit, he shall, within sixty days after the same has been filed by him for examination, issue under his hand and official seal the certificate of authorization required by this chapter to the persons named in such certificate, or to a portion of them, together with such other persons as a majority of those named in such certifi- cate shall in writing approve, which shall authorize the persons named therein to open an office for the deposit of savings as desig- nated in the certificate, subject to the provisions of this chapter. 'No 216 THE BANKIIfG LAW. person shall be named in such, certificate of authorization, who shall not have made and duly acknowledged the declaration prescribed in subdivisions four of section one hundred and thirty of this chapter. The superintendent shall transmit such certificate of authorization to the county clerk of the county in which the savings bank is to be located, who shall file the same and attach it to the certificate of incorporation previously filed by him and record both certificates in the book of record of incorporations; and the superintendent shall also file a duplicate of such certificate in his own office. If the superintendent shall not be satisfied that the establishment of a savings bank as proposed in any certificate filed by him is ex- pedient and desirable, he shall, within sixty days after the filing thereof, give notice to the county clerk of the county in which such savings bank is proposed to be located, that he refuses to issue a certificate of authorization for such savings bank, which notice shall forthvdth be filed by the county clerk with the certificate of incor- poration of such savings bank. (Former section 104; K. S., 1565; L. 1882, ch. 409, §§ 243-245.) § 135. When persons named in certificate become a corporation; powers. — Upon the filing of any certificate of authorization of a savings bank as hereinbefore provided, the persons named therein, and their successors, shall thereupon become and be a corporation, and be vested with all the powers and charged with all the liabilities conferred and imposed by law upon savings banks; and in addition to the powers conferred by the general corporation law, every such corporation shall have power to receive on deposit any sum of money that may be offered for that purpose by any person, or by any cor- poration or society, and to invest the same, and to declare, credit and pay dividends thereon, and further, to transact the business of a sav- ings bank as hereinafter provided and not otherwise. Wo such cor- poration shall receive deposits until it shall have transmitted to the superintendent of banks the name, residence and post-office address of each of the officers of such savings bank. (Former section 105; K. S., 1563, 1565, 1557; L. 1882, ch. 409, §§ 235, 246, 247, 256.) See General Corporation Law, §§ 11, 13, 14. 1. A savings institution and a national bank entered into an agreement, where- THE BANKING LAW. 217 by all of the business of the two corporations was to be done in the same office and over the same counter, by the same individuals, the only separation being in the books of account. The institution as such received no money, but all of its funds were to be deposited in the bank, and corresponding credits were to take the place of actual payments by the bank. The business of the institution and the bank was carried on under this arrangement, the former keeping no cash- drawer or safe for the deposit of money. One C. delivered over the counter of the bank to B., who was both the treasurer of the institution and the cashier of the bank, a sum of money, which she desired deposited with the institution to her credit. B. received the money, entered it in C's pass-book, as deposited with the institution, and, as he testified, placed it in the cash-drawer of the bank; it was not entered on the bank cash book or credited to the institution, and, in some manner unexplained, it disappeared. In an action to recover, among other things, the amount of this deposit, held, that while as between C. and the institu- tion, B. received the money as its treasurer, as between the bank and the institu- tion at the same instant he received it as cashier, it became the money of the bank, and the bank was liable to the institution therefor; also, that this was so, although the money did not go into the cash-drawer, but was embezzled by the said cashier and treasurer B. Fishkill Savings Institute v. Bostwick, Receiver, 92 N. Y. 565. 2. The superintendent of the banking department in January, 1882, asked the opinion of the attorney-general whether a savings bank has the right to delegate its powers, and inclosed for his examination a contract which provided, that in consideration of the receiving by a certain national bank of all the deposits, and also the income and interest from all the assets belonging to a savings bank occupying adjoining rooms, the national bank agreed with the savings bank — To pay five per cent, interest per annum on deposits in said institution, to be computed and paid in accordance with the rules of said institution with its depositors. To pay all salaries of the clerks and officers of said institution and all rents, taxes and incidental expenses connected with the keeping of the account thereof. To pay the interest upon the surplus fund of the savings bank at the rate of five per cent, per annum, which interest shall be paid semi-annually and added to the surplus fund. The amount of the surplus fund for the purpose of comput- ing the interest thereon is understood and agreed to be by the parties on the 1st day of July, 1876, the sum of $9,285.78, and shall hereafter be increased only by crediting to it all premiums which shall hereafter be saved on bonds and other securities, gold and gold drafts, sold or redeemed; but it was understood that all gold received for interest and premiums thereon should belong to and be the prop- erty of the national bank; said surplus fund should also be increased by credit- ing to it the difference between the price paid for the bonds or securities and par, when such bonds or securities should be purchased at less than par. All pre- miums which should hereafter be paid by said institution for bonds, stocks, mortgages or other securities, should be charged to and deducted from such surplus fund. The national bank to pay all drafts made on it by the savings bank, either to pay depositors, or for investments. The national bank to be responsible for the safe-keeping of the bonds or other securities, and the moneys of the savings bank. 218 THE BANKING LAW. The savings bank to bear all losses sustained on account of bad debts, depre- ciations and otherwise, and all expenses of litigation. The contract to take effect on a certain day, and continue in force for the term of two years. In the reply by the attorney-general filed in the banking department, January 11, 1882, that officer, after quoting the law regulating the management of savings banks, says: " I think the contract amounts to an attempt to delegate the trust power of the trustees. " The general rules applicable to trusts apply with equal force to trustees of savings banks. The law permits such institutions to exist as places of safe deposit for the accumulation of limited amounts. They are generally patronized by people of small means, and the law takes cognizance of that fact. It means, therefore, that savings banks shall be safe and secure, and in order to so provide, it has hedged them about with the provisions of law' above enumerated. The law clearly points out the path to be pursued by its officers in the discharge of their trust. Being creatures of the statute, as well as trustees, the officers ot such institutions are not permitted to deviate from the express rules laid down by statute for their guidance. . " The trust is personal to the trustees. They cannot lawfully delegate their trust powers. Trustees of savings banks have no authority to provide for the investment and management of money received on deposit in any other way than by themselves, or the proper officers immediately employed by them and directly accountable to them. After trustees of a savings bank have invested the moneys received on deposit, they are accountable to depositors for the actual proceeds of such investment as trustees, but not personally, if acting prudently and in good faith. * • * " The trustees have no right to sell or bargain away those proceeds for a stipu- lated sum. The law does not contemplate that the trustees shall, by any bargain or arrangement, subject to hazard these trust funds. On the contrary, it has pointed out the course which must be pursued by them strictly, and whether a contract of this nature might be more advantageous to the depositors than for the trustees to obey the strict letter of the law, is not to be considered. Trustees are not permitted in any manner to speculate with these trust funds. " If the facts in this ease should reveal that the stockholders of the national bank are the same persons who are the trustees of the savings institution, then clearly such an arrangement as is set forth in this contract, wliereby the trustees should seek, under the guise of a contract between the savings bank and the national bank, to make money for themselves out of the deposits of the savings bank, would render the contract clearly illegal. ***** "Any arrangement, therefore, by which they should seek, directly or indirectly, to make money for themselves out of the deposits, and thereby deprive the de- positors of the surplus which might accrue if they carried out strictly the pro- visions of the act, would be illegal. " I do not think the mere contract by a savings bank with a discount bank to have the clerical work of the savings bank done by such discount bank, would Tdc illegal or a violation of the provisions of the Savings Bank Act, but if an THE BANKING I.A.W. 219 arrangement is made by which a delegation of power to exercise judgment or discretion is conferred it would be illegal." 3. In August, 1886, the author submitted the following questions to the attorney-general : First: May the board of trustees of the institution lawfully pay to the per- sonal representatives of a deceased president, or other officer, the unearned salary for the remainder of the term for which he was elected? Second. May the salary be paid to the personal representatives up to the close of the leave of absence granted to a president, or other officer now deceased? In reply thereto the attorney-general in an opinion filed in the banking depart- ment, August 25, 1886, held as follows: " To both of these questions I am constrained to return a negative answer, for the following reasons: " Savings banks are vested with certain well-defined powers, principal among which are the rights to contract and be contracted with; to receive money on deposit and invest the same; to act as banks for savings; and generally to exercise any corporate powers necessary to the exercise of the main powers. Section 235, ch. 409, Laws of 1882. Further than this they inay not go. They do not possess, nor can they exercise, any corporate powers, except such as are necessary to the exercise of their main powers. 1 E,. S. 600, § 3. While they may pay salaries to their officers and employees, they cannot make gratuities to them." 4. An opinion by the attorney-general was filed in the banking department June 12, 1878. In reply to a communication inquiring whether a depositor in a savings bank is liable to be assessed and taxed for his deposit, that officer says : " In my opinion, section 4 of chapter 456 of the Laws of 1857 exempts such deposits absolutely from taxation, and a depositor cannot, therefore, be assessed for such moneys. The law above mentioned, in my opinion, protects the individual depositor as well as the bank." 5. The authorities of the Poughkeepsie Savings Bank applied to the supreme court for a writ of certiorari to review their assessments, and Mr. Justice Babn- aed's opinion was filed September 1, 1879. It is as follows: " The deposits in savings banks are not taxable. Under the Revised Statutes moneyed corporations were taxable upon their capital. Savings banks have no capital; they simply receive deposits, for which they become liable to the de- positor with accrued interest. The design was to afford institutions which would receive deposits generally in small amounts, and to invest the same so that the depositors would have an income from their earnings. There was nothing upon which to base taxation. The savings banks were debtors for the entire sums in their hands. Ordinarily the depositors would have been taxable, but the legis- lature by chapter 456, Laws of 1857, ordered that these deposits should not be taxable. " By chapter 761, Laws of 1867, section 7, it was provided that the privileges and franchises of savings banks should be deemed personal property, and liable to taxation, ' to an amount not exceeding the gross sum of the surplus earned.' It is under this law that this assessment seems to have been imposed. If the tax was imposed upon the savings bank under the Revised Statutes, the bank would have been liable for the entire deposit, less its real estate. If this was the correct view, then there was no need of the statute taxing the franchise so far 220 THE BANKING LAW. as the ' surplus earned.' The act of 1866, taxing surplus, is conclusive proof that before that act there was no liability of savings banks to taxation. There are two fatal objections to this tax under the Laws of 1866. In the first place, the banks have invested in U. S. bonds an amoimt greater than the entire sur- plus earned. These bonds are free from taxation, and must be deducted before a surplus for the purpose of taxation is made up. In the second place the act of 1866 is repealed by the act of 1875 (chapter 371, Laws of 1875]. Among the designated acts and parts of acts repealed, is enumerated section 7, chapter 751, Laws of 1866, and also ' any other acts or parts of acts relating to savings banks or institutions for savings; the Law of 1875 is wholly silent as to taxation of savings banks, although it provides one rule for every savings bank, whether incorporated before the Act of 1875, or to be thereafter incorporated. " Moreover, it gives the surplus to the depositors, reserving ten per cent, of the deposits for a surplus to cover depreciation of investments. The law exempt- ing deposits on taxation is not repealed, except it be held repealed by the general words repealing ' any other act or parts of acts relating to savings banks or institutions for savings.' This question will be material only when depositors are taxed. That question is not presented by this return. My conclusion is, that the tax imposed by the assessors for the surplus earned is illegal, and must be set aside without cost." § 136. Must begin business witMn one year. — Every such cor- poration which shall not organize and commence business within one year after the certificate of authorization has heen filed, shall forfeit its rights and privileges as a corporation under this chapter. The superintendent of banks may, for satisfactory cause to him shown, by an order under his hand and official seal, extend the term within which such organization may be effected and such business com- menced, for not more than one year. Such order shall be transmitted to the county clerk of the county in which such savings bank is to be located, who shall file the same, together with its certificate of incor- poration and certificate of authorization. (Former section 106; L. 1882, ch. 409, § 248.) § 137. Trustees and their powers. — There shall be a board of not less than ^xsb^en trustees of every 'such corporation, who shall have the entire management and control of all its affairs, and who shall elect from their number, or otherwise, a p residen t and t wo vice- presidents, and such other officers as they may deem fit. The persons named in the certificate of authorization shall be the first trustees. A vacancy in the board shall be filled by the board, as soon as prac- ticable, at a regular meeting after the vacancy occurs. Each trustee, whether named in the certificate of authorization or elected to fill a THE BANKEITG LAW. 221 vacancy, shall, when such certificate of authorization has been issued or when notified of such election, take an oath that he will, so far as it devolves on him, diligently and honestly administer the affairs of such corporation, and will not knowingly violate, or willingly permit to be violated any of the provisions of law applicable to such corpora- tion. Such oath shall be subscribed by the trustee making it and certified by the officer before whom it is taken, and shall be imme- diately transmitted to the superintendent of banks and filed and pre- served in his office. ISTo person who is not a resident of this state or against whom a judgment for any sum of money shall have been recovered or shall hereafter be recovered and remain unsatisfied of record, or unsecured upon appeal, for a period of more than three months, or who hereafter takes the benefit of any law of bankruptcy or insolvency, or who makes a general assignment for the benefit of creditors, shall be a trustee of any savings bank, and the office of any such trustee is hereby vacated. It shall be lawful for the board of trustees of every such corporation by a resolution to be incorporated in its by-laws, a copy of which shall also be filed with the- superin- tendent of banks, to reduce the number of trustees named in the original charter of such corporation to a number not less than the minimum named in this article. Such reduction shall be effected gradually by the occurrence of vacancies by death, resignation, or forfeiture, until the number is reduced to thirteen, or to such greater number as shall be designated in the aforesaid resolution; or the number of trustees may be increased to any number designated in a resolution for that purpose, where reasons therefor are shown to the satisfaction of the superintendent and his consent in writing is obtained thereto. It shall not be lawful for a majority of the board of trustees of any savings bank to belong to the board of directors of any one bank or national banking association. When any trustee of a savings bank shall, by becoming a director of a bank or national banking assocation,* cause a majority of the trustees of such savings bank to be directors of any one bank or national banking association, his term of office as trustee of the savings bank shall thereupon end. Any savings bank knowingly violating this provision shall forfeit all its rights, privileges and franchises. Such violation shall be de- * So in original. 222 THE BANKING LAW. termined in the same maimer as a violation of subdivision six of section twenty-seven of article two of this ckapter. [Former section 107; L. 1895, ch. 415, 929; L. 1896, ch. 453; L. 1908, oh. 153.) See Penal Law, §§ 295-298. 1. A transaction entered upon the books of a savings bank, although made by the bank officers, is presumed to have been done with the knowledge and assent of the trustees, who are responsible for the acts of the officers whom they place and retain in position. Trustees are legally chargeable with notice of the acts of the officers, especially when those acts are entered upon the books of the bank. And if trustees desire to escape liability, they must desist from illegal or improvident actions and try to remove officers who do them. Paine, Receiver, v. Mead, 59 How. Pr. 318. 2. A bond deposited for safe-keeping with the cashier of a savings bank, who placed the bond in the bank's safe, held to be in the custody of the bank and not of the cashier personally, and that the bank was chargeable with notice of the owner's rights, 1879. Zuger v. Best, Receiver, 44 Super. Ct. (J. & S.) 393. 3. The superintendent of the banking department submitted to the attorney- general the question of the right of a savings bank chartered in 1871, but sub- ject to the provisions of the General Savings Bank Law, passed in 1875, to increase, by a resolution of its board of trustees, duly adopted, the number of trustees of the bank to nine, the number provided for by their charter being seven, and in addition asks, "Are not savings' banks, by said chapter 371 of the Laws of 1875, and amendatory acts, required to increase the number of trustees to at least the minimum therein provided for, viz., thirteen ? " Also, the further question, " Can the superintendent of the banking department lawfully approve an increase of the members of a board of trustees of any savings bank, to a number less than the minimum fixed by the Law of 1875, to wit, thirteen?" In an opinion by the attorney-general filed in the banking department May 3, 1880, that officer says he has " carefully examined the provisions of the General Savings Bank Act, and other statutes bearing upon the subject of inquiry, and is of opinion that section 16 (250) of that act, which fixes the minimum number of trustees at thirteen, has reference only to savings banks organized under the provisions of said act. The language of the section is : ' The business of every such corporation shall be managed and directed by a board of trustees of not less than thirteen.' The words ' such corporation ' manifestly refer to the cor- poration which the preceding sections provide for organizing, namely, new savings banks. Section 50 ( 284 ) of the act in question applies to both classes of savings corporations, those previously organized and those organized under the Act of 1875, and provides that it shall be lawful for the board of trustees of any sav- ings corporation ... to reduce the number of trustees named in the original charter of such corporation to a number not less than the minimum named in this act ... or the number of trustees may be increased to any number desig- nated in a resolution for that purpose, where reasons therefor are shown to the satisfaction of the superintendent, and his consent in writing obtained thereto." He further states : " It will be observed that while the right to decrease down to the minimum ' thirteen ' is absolute, the right to increase to any number is subject to the condition that reasons therefor must be shown to the satisfaction THE BANKIIfG LAW. 223 of the superintendent, and his consent in writing be obtained thereto. This seems to indicate very plainly that the legislature, in the Act of 1875 (ch. 371, ch. 10 of this revision), while fixing a minimum of thirteen for corporations organized under its provisions, also recognized the fact that other savings banks existed under charters previously granted, with a less number of trustees than thirteen, which it did not intend to disturb in this particular, and that it regarded it entirely safe and proper to leave the matter of the increase in the number of trustees of both classes of savings corporations to be regulated by the sound discretion of the superintendent. " I am of opinion, therefore, that the said savings bank may lawfully increase the number of its trustees from seven to nine, subject to such approval and con- sent to the superintendent, and that he may lawfully approve of and consent to the same, if the reasons therefor appear to him satisfactory." 4. The attorney-general, in an opinion dated November 14, 1895, held that the trustee of a savings bank was not ineligible by reason of the fact that a money judgment had been obtained against him and remained unsatisfied of record for a period of more than three months as declared in chapter 415, Laws of 1895, provided he had been granted a full discharge in bankruptcy of his debts. § 138. By-laws. — The board of trustees of any suck corporation may from time to time make such by-laws, rules and regulations, not inconsistent with law, as they may think proper for the election of officers, for prescribing their respective powers and duties and the manner of discharging the same, for the appointm e nt and duties of committees^ and generally for transacting, managing and directing the affairs of the corporation ; and a copy of the same shall be trans- mitted to the superintendent of banks, who shall also be notified of any amendment or change therein. (Former section 108; R. S., 1566; L. 1882, ch. 409, § 251.) See General Corporation Law, § 11. 1. A by-law may be part valid and part void. Imposing same penalties for offenses, imposed by statute, does not make same void. Rogers v. Jones, etc., 1 Wend. 237, 19 Am. Dec. 493. 2. September 29, 1905, the attorney-general held as invalid a by-law of a savings institution which provided that all accounts upon which no deposits have been made and no draft drawn for ten years in succession shall be closed and cease to draw interest after the- expiration of ten years from the time of the last deposit or draft, unless the board of trustees or executive committee shall otherwise direct. 3. The following by-law of a savings bank held to( justify the disapproval of superintendent: "All payments made to persons producing the pass book of » depositor issued by this bank shall be valid payments to discharge the bank of all liability." Opinion Atty.-Gen., April 8, 1908. § 139. Meeting of trustees; quorum. — Kegular meetings of the board of trustees shall be held as often as once a month for the pur- 224 THE BANKIHG LAW. pose of receiving the reports of their officers and committees, and for the transaction of other business. A quorum at any regular or special or adjourned meeting shall consist of not less than seven, of whom the president sliall be one, except when prevented from attending by- sickness or other unavoidable detention, when be may be represented in forming a quorum by the vice-president, who, in case of his absence for like cause, may be represented by the second vice-president; but less than a quorum shall have power to adjourn from time to time or until the next regular meeting. (Former section 109; R. S., 1566; L. 1882, ch. 409, § 252.) In an opinion by tlie attorney-general, filed in the banking department under date of April 12, 1884, that ofBcer holds that a by-law, stating the time of hold- ing of the regular or annual meeting of the trustees of a savings bank is in itself sufficient notice to all parties. All proceedings, therefore, had at such a, meeting (assuming that the meeting transacts only legitimate business, and is a fair and open meeting) are valid. § 140. Vacancies. — Whenever a trustee of any savings bank shall become a trustee, officer, derk or employee of any other savings bank, or when he shall borrow directly or indirectly, any of the funds of the savings bank in which he is trustee, or become a surety or guar- antor for any money borrowed of or any loan made by such savings bank, or when he shall fail to attend the regular meetings of the board, or perform any of the duties devolved upon him as such trustee, for six successive months, without having been previously excused by the board for such failure, the office of such trustee shall thereupon immediately become vacant; but the trustee vacating his office by failure to attend meetings, or to discharge his duties, may, in the discretion of the board, be eligible to re-election. (Former section 110; R. S., 1566; L. 1882, ch. 409, § 253.) § 141. Security may be required from employees and salaries fixed. — The trustees of any such corporation shall have power to require from the officers, clerks and agents of the corporation such security for their fidelity and the faithful performance of their duties as they shall deem necessary, and to fix the salaries of such officers and agents, subject to the provisions of this chapter. Such security may be accepted from any company authorized to furnish fidelity bonds, doing business under authority of the New York insurance department, which may be approved by the superin- THE BANKING LAW. 225 tendent of banks and the premiums paid therefor may be paid by and shall be allowed to said corporation as a necessary disbursement. (Former section 111; R. S., 1565; L. 1882, eh. 409, § 254.) 1. In reply to an inquiry made by the superintendent of the banking depart- ment, the following opinion was rendered by the attorney-general, December 8, 1886: " Your letter of the 30th ult. has been duly received, from which it appears that ' a proposition has been introduced in the board of trustees of a savings bank that individual bondsmen as sureties for the fidelity of officers and em- ployees should not hereafter be accepted, but that the bonds of the corporations which make a business of insuring or guaranteeing the fidelity of employees should be required; and that the institution should pay as a regular expense the premiums on such bonds or policies.' " My opinion is requested ' whether such payment of premium would be an allowable and necessary expense under the law, assuming that the board believes such corporate suretyship to be for the greater protection of the funds of the depositors.' " In reply thereto I beg leave to state that section 254 (former number) of the Banking Act (page 262, Paine's Banking Laws, first edition), authorizes the trustees of savings banks to require from the officers security for the faithful performance of their duties, but nowhere do I find in the act any provision authorizing the trustees to pay out bank funds for the purpose of getting guar- anty corporations to guarantee the fidelity of the officers and employees." § 142. Dividends, compensation and loans to trustees prohibited. — No trustee of any such corporation shall have any interest, direct or indirect, in the gains or profits thereof, nor as such, directly or in- directly, receive any pay or emolument for his services, except as hereinafter provided ; and no trustee or officer of any such corporation shall directly or indirectly, for himself or as an agent or partner of others, borrow any of its funds or deposits, or in any manner use the same except to make such current and necessary payments as are authorized by the board of trustees; nor shall any trustee or officer of any such corporation become an indorser or surety, or become in any manner an obligor, for moneys loaned by or borrowed of such corporation. (Former section 112; R. S., 1566; L. 1882, ch. 409, § 255.) See Penal Law, §§ 294, 297. 1. A mortgage made by a trustee to a third party, and assigned by him to bank to make good a deficiency of assets, is not void; a mortgagor is estopped from claiming that there was no consideration therefor, since he authorized it to be reported as part of assets of bank, and on strength of it bank was allowed to continue business. Best v. Thiel et al., 79 N. Y. 16. 15 226 THE BANKING LAW. 2. Neither the foregoing defense, nor an allegation that obligor was deceived by the other trustees as to the real condition of the bank, is a defense to action on a bond given to be used as an asset of bank. Hurd v. Kelly, 78 N. Y. 588, 34 Am. Rep. 567. 3. Vice-president Bowling Green Savings Bank took checks signed by president and secretary, and used them in individual stock speculations. These checks were paid by other checks upon bank of discount where savings bank kept its deposit. It was claimed that there was no conversion, since no money was taken. Held, it amounted to unlawful taking and misappropriation. Ejiapp, Receiver, V. Roche, 62 N. Y. 614, memorandum. 4. An action was brought by the receiver of the People's Savings Bank, to recover from the trustees thereof money lost by the bank by reason of the illegal purchase of North Carolina bonds, which, except under certain circumstances not existing when the purchase was made, the trustees were prohibited from buying. After the purchase of the bonds, the superintendent of the banking department having caused the bank to be examined, and having found its financial condition to be unsatisfactory, required the trustees of the bank, as a, condition precedent to not closing it, to give to it their bonds and other securities to make good any and all deficiencies in its assets to meet its liabilities. Upon he trial the court below found that the entire loss resulting from the illegal purchase had been reimbursed, principal and interest, by the obligors mentioned in the bond. Held, that the defendants were released from liability by the payment of the damages sustained by reason of their illegal acts, although such payment was made by other persons, and that this action could not be maintained. Hun, Receiver, v. Van Dyek et al., 26 Hun, 567, aff'd 92 N. Y. 660. 5. The relation between a savings bank and its trustees or directors is that of principal and agent, and that between the trustees and depositors, is similar to that of trustee and, cestui que trust. If such trustees transcend the limits placed upon their powers in the charter of the bank, and cause damage to the bank or its depositors, they are liable. They are also bound to exercise care and prudence in the execution of their trust, in the same degree that men of common prudence ordinarily exercise in their own affairs. When loss is occasioned by the failure of a trustee to exercise ordinary care and judgment, he cannot excuse himself by claiming that he did not possess them; by voluntarily taking the position, he undertakes that he does possess and will execute them, and it is immaterial that the services are rendered gratuitously. Defendants were trustees of C. P. Savings Bank. When the deposits were only $70,000, the trustees bought a lot for $29,500 and erected a building thereon costing $27,000, and gave a mortgage on it for $30,500. At time of purchase, bank's expense exceeded its income, and had for some years, as trustees knew. Held, the facts justified a finding that it was a case of reckless improvidence and mismanagement, and that trustees were liable. Hun, Receiver, v. Gary et at, 82 N. Y. 65, 37 Am. Rep. 546. 6. Where a savings bank in the city of New York purchased from a trustee of such bank bonds and mortgages owned by him aggregating $32,000, made by one person upon unproductive property in the city of Brooklyn of uncertain value, not worth twice the value of the mortgages, such trancation is ultra vires. Paine, Receiver, v. Erwin et al., 59 How. Pr. 316. THE BANKIITG LAW. 227 7. The cases of Hurd v. Green, 17 Hun, 327, and Hurd v. Kelly, id. note, aff'd in 78 N. Y. 588, 34 Am. Rep. 567, holding savings bank trustees liable on a bond conditioned to make good any deficieny in assets, in consideration of its continuance in business, followed. Hun v. Salter, 14 Weekly Dig. 413. 8. A trustee, who sanctioned the use of money by a co-trustee, equally with him violates a prohibition of the charter against any trustee directly or indi- rectly borrowing its funds, and the prohibition cannot be avoided by resorting to a purchase from a trustee of mortgages, instead of loaning to him thereon. Id. 9. A transaction made by the bank officers and entered on the books may, for the purpose of sustaining an action against the trustees for a negligent and Illegal transaction, be presumed to have been done with the knowledge and con- sent of the trustees. Paine, Receiver, v. Mead, 59 How. Pr. 318. 10. In reply to an inquiry from the superintendent of the banking department,' as to whether a person who directly or indirectly sustains the relation of debtor to a savings bank, either as owner of real estate upon which a, mortgage is held by the bank, or as obligor upon any kind of instrument securing a loan by a bank, or one who has interests with a borrower from, or a debtor to, a bank which might conflict with strict and paramount fidelity to the bank, is eligible to the office of trustee under the provisions of the savings bank statutes of this State, the attorney-general, in an opinion filed in the banking department April 4, 1879, says: " The object of the statute is to secure disinterested management of savings institutions solely in the interest of depositors, and to this end no circumstance should exist inconsistent with the fiduciary relation of the trustee to his trust. " The policy of the statute is to exclude absolutely from the management of the savings bank trusts all persona who have any pecuniary relations with a bank, or with a borrower from a bank, which might induce a lack of vigilance as trustee, or antagonize duty by private interest. This is equally a rule of reason; and experience has too frequently shown that, where official duty and personal interests come in conflict, the former is likely to suffer. " The only rule of safety, therefore, for all classes in the different forms in which they may arise, is to adhere rigidly to the policy indicated by the statute, to deem as ineligible for the position of trustee or officer of a savings bank all persons who have any pecuniary interest, whether as owner of property subject to mortgage held by the bank, or as borrower, guarantor or partner of a debtor to a bank, which may influence in any degree the performance of official duty. " Strict enforcement of this rule may occasionally exclude a good man from such trust, but like results are incident to all general rules of public policy, and the number of improper men excluded will be much greater. The statute applies practically the principle that no man can faithfully serve two masters." 11. The superintendent of the banking department in February, 1887, sub- mitted the following series of questions to the attorney-general: " First. Is it illegal for the trustees of a savings bank to accept a guaranty of title of property upon which the bank loans money, from a title guaranty company in which one or more of the trustees of the savings bank are stock- holders T " Second. Is it illegal for savings banks to accept policies of fire insurance, when one or more of the trustees of the bank are directors or stockholders of 228 THH BANKING LAW. the fire insurance company, ■which contracts to pay loss occasioned by fire to the bank as mortgagee? " Third. Is it illegal for a savings bank to deposit money with a discount bank or trust company where one or more of the trustees of the savings bank are directors or stockholders of such discount bank or trust company? " Fourth. Is it illegal for trustee of savings bank who acts as counsel to issue a certificate as to the validity of the title of borrowers to real estate upon which the bank loans money ? " . . . In an opinion filed February 16, 1887, the attorney-general held as follows: "Said section 255 of the law in reference to savings banks (Paine's Banking Laws, page 262) provides as follows: " ' No trustee of any such corporation shall have any interest whatever, direct or indirect, in the gains or profits thereof, nor as such, directly or indirectly, receive any pay or emolument for his services, except as hereinafter provided; and no trustee or officer of any such corporation shall directly or indirectly, for himself or as the agent or partner of others, borrow any of its funds or deposits, or in any manner use the same, except to make such current and necessary pay- ments as are authorized by the board of trustees; nor shall any trustee or oflScer of such corporation hereafter become an indorser or surety, or become in any manner an obligor for moneys loaned by or borrowed of such corporation." " This is the only section of the law. which appears to prescribe the powers and duties of the trustees in respect to the matters to which the questions relate. " It is the duty of the trustees to satisfy themselves as to the validity of titles to real estate upon which he money of the institution is loaned. The manner in which they shall proceed to ascertain the validity of such titles rests in the discretion of such trustees ; and if in the sound use of such discretion they deem it advisable to have a title investigated and guaranteed by a corporation engaged in such business, I do not think there is anything in section 255 {supra) which can be construed into a prohibition from such services being performed by a corporation in which one of the trustees of the bank owns stock. " This would not give such a trustee ' any interest, direct or indirect, in the gains or profits ' of the bank, nor would the services rendered by the corporation in searching and guaranteeing the title, strictly speaking, be considered services rendered by a trustee. Even were it so construed the act does not prohibit the rendition of such services by the trustees, but simply forbids such trustees re- ceiving compensation therefor. It is not borrowing money from the bank, nor is it becoming indorser or surety by a trustee, or an obligor for moneys loaned by or borrowed of such bank. " Second question. A person ovming real estate is at liberty to insure it against fire in a fire insurance company, irrespective of who or what the directors in such company are. The fact that the property is subsequently or previously mortgaged to a savings bank cannot abridge this right. The title to the prop- erty is not in the savings bank. The loss, if any, may be made payable to the bank as mortgagee. This does not affect the right of the insured to choose his own company. A trustee of the savings bank, who may be a stockholder in the company in which the property is insured upon which the bank has a mortgage, receives no benefit, direct or indirect, from the bank. The contract is not with the bank, and is not necessarily made with a corporation designated by the bank. THE BANKING LAW. 229 The profits derived by the insurance company do not come from the bank, but from the owner of ihe property by whom the premiums are paid. " Third question. The section under consideration forbids a trustee of a sav- ings bank, either for himself or as agent or partner of others, from borrowing any of its funds or deposits. Is a deposit in a discount bank or trust company of which one of the trustees is a director or stockholder, such a borrowing as is meant by the statute? There is a well-recognized legal distinction between a loan or ' borrowing ' and a deposit ; and the rights and responsibilties of parties under these different species of contract are quite different. "'Receiving deposits,' said the vice-chancellor, in Leavitt v. Yates (4 Edw. Ch. 165), ' as understood in the practice of banking, is different from borrowing money in the ordinary acceptation of that term, and agreeing to allow interest on moneys deposited with a bank, and giving notes or certificates or any other evidence of debt therefor does not constitute the doing so an act of borrowing.' See, also, to same effect, Payne v. Gardiner, 29 N. Y. 146. " I think the word ' borrowing,' as used in the section, was intended to be employed in its ordinary legal signification, and does not include deposits of money with banks of discount, and that when a savings bank deposits its funds with said discount bank the latter cannot be said to be a borrower; and the fact of one of the directors being a trustee does not, therefore, bring it within the prohibition of section 255. "Fourth question. A trustee may act as counsel in investigating and certify- ing the validity of titles to real property upon which the bank desires to loan money, subject to the prohibition from receiving any pay or emoluments from the bank for his services. " In my opinion, therefore, the above questions should all be answered in the negative, subject to the qualifications above stated." 12. September 29, 1905, the attorney-general was informed that one of the sav- ings banks had recently elected as trustee a gentleman who had borrowed a large simi of money from that institution upon real estate security, and he was asked as to the eligibility of the trustee mentioned. He replied: " The claim of counsel for the institution is, as I understand, that because the trustee was an obligor for moneys borrowed of the corporation at the time of his election, he did not become an obligor within the meaning of the statute above referred to, and is, therefore, eligible and entitled to hold the position. " In my opinion the trustee referred to is not eligible as trustee of the savings bank to which he is obligated. . . . " The intent of the law clearly was to prevent such a relationship between a trustee and a savings bank corporation in relation to which he has such import- ant duties to perform. " I, therefore, advise you that the person referred to is not eligible as trustee." § 143. Repayment of deposits; regulations; limitation. — The sums deposited with any savings bank, together with any dividends or interest credited thereto, shall be repaid to such depositors re- spectively, or to their legal representatives, after demand, in such manner and at such times, and after such previous notice, and under 230 THB BANKIJSTG LAW. such regulations, as the board of trustees shall prescribe. Such regulations shall be posted in a conspicuous place in the room where the business of the corporation shall be transacted, and shall be printed in the pass-books or other evidences of deposit furnished bv it, and shall be evidence between the corporation and the depositors holding the same, of the terms upon which the deposits therein acknowledged are made. Every such corporation may limit the aggregate amount which any one person or society may deposit to such sum as it may deem expedient to receive, and may, in its dis- cretion, refuse to receive a deposit, and may also at any time return all or any part of any deposit. The aggregate amount of deposits to the credit of any individual at any time shall not exceed three thousand dollars, exclusive of deposits arising from judicial sales or trust funds or interest ; and to the credit of any society or corporation at any time, shall not exceed five thousand dollars, exclusive of accrued interest, unless such deposit was made prior to May seven- teenth, eighteen hundred and seventy-five, or pursuant to an order of a court of record. (Former section 113; E. S., 1567, 1576, 1586; L. 1878, ch. 347, § 2; L. 1882, eh. 409; L. 1885, ch. 477.) 1. A payment to one who produces pass book and forged order exonerates bank, the depositor having been negligent in delaying notice of loss of pass book. (There was the usual regulation, that payment to one who should produce pass book should discharge bank.) Such a by-law is void, if it declares that though claimant be the wrong party, yet if he has the pass book, even though feloniously obtained, a payment to him shall protect the bank. It is an attempt without authority to change the rule of law, and strip the business of the defendants of a proper risk, and shift it upon the plaintiff. This the defendants cannot do. Kelly V. Emigrant Ind. Sav. Bank, 2 Daly, 229. 2. S. deposited with defendant, a savings bank, a certain sum of money, receiv- ing a pass book which stated that the account was with her, in trust for Christo- pher Boone, plaintiff's intestate. S. received the pass book, and drew out one year's interest. After her death defendant paid the amount to her administrator, upon production of his letters of administration and of the pass book. In action to recover the deposit, held, that in the absence of any notice from the beneficiary, the payment was good and eflfectual to discharge the defendant; that the deposit constituted S. trustee and transferred the title to the fund from her individually, to her as such trustee; that upon the death of S. her rights as trustee to demand and receive the fund devolved upon her administrator, and upon his demand defendant was bound to pay over it; it had no right to inquire into the nature of the trust, and owed no duty to the beneficiary, until the latter by notice, by for- bidding payment, or by demanding it himself, created such right and duty. Boone V. Citizen's Sav. Bank, 84 N. Y. 83, 38 Am. Eep. 498, rev'g same case, 21 Hun, 235. THE BANKING LAW. 231 3. The defendant, the plaintiff's father, deposited in a savings bank a sum of money, upon an account then opened by the bank in the name of the defendant " in trust '' for the plaintiff. He made the deposit in this form for the purpose of obtaining the highest rate of interest which the bank allowed, and not intend- ing to part with the ownership or right of receiving back the money from the bank, nor to make a gift or transfer of it or any part of it to the plaintiff; and upon an agreement with the bank that money, or any part of it, should be with- drawn from the bank without the production of the bank book, which he retained in his possession. He afterwards withdrew a part of the sum deposited. Held, that the circumstances under which such a deposit is made are admissible to vary or explain its apparent character as a trust; that there was no intent on the part of the defendant to create any trust in this fund for the plaintiff, and that he created none. Weber v. Weber, 9 Daly, 211. 4. Notice to the beneficiary, or knowledge of the deposit, is not necessary to confirm his right to funds deposited in a savings bank " in trust " for him. S. deposited in savings bank money belonging to her, declaring she wanted the account in trust for M. M. was ignorant of deposit in her favor until after the death of trustee, S. Held, transaction was a valid and sufficient declaration of trust. Martin v. Funk, 75 N. Y. 134, 31 Am. Rep. 446. 5. Husband deposited in name of "Kichard or Kate Ward" (his wife). She never had possession of bank book during his life. Held, presumptively his property exclusively. In re Estate Richard Ward, 2 Redf. Sur. 251. 6. Payment to a person producing pass book is good, in absence of notice of fraud on depositor, and if reasonable care and diligence are exercised to insure payment to proper person. Ordinary care is not dispensed with by any rule. Schoenwald v. Met. Savings Bank, 57 N. Y. 418. To same effect, Appleby v. Erie Co. Sav. Bank, 62 id. 12. For a full presentation of authorities on this question, see editorial note to MeCaskill v. Connecticut Sav. Bank, 13 L. R. A. 737. 7. A savings bank, in the absence of any rules assented to by its customers, is to be governed by the same legal principles which apply to other moneyed institutions; but when it has prescribed rules, and its depositor has assented to them, such rules constitute the contract, and each party must keep it to pre- serve rights against the other. Ct. App. 1877, Allen v. Williamsburgh Sav. Bank, 69 N. Y. 314, aff'g 2 Abb. N. C. 342. 8. Where one who had given his bond and mortgage to a savings bank was also a depositor therein, and the bank became insolvent and a receiver was ap- pointed, held, that the mortgagor was entitled to a, credit on his bond of the amount of his deposit at the time of the failure of the bank. New Amsterdam Sav. Bank v. Tartter, (1877) 4 Abb. N. C. 215. 9. The primary relation of a depositor in a savings bank to the corporation is that of creditor, and not that of a. beneficiary of a, trust. The deposit when made becomes the property of the corporation. The depositor is a creditor for the amount of the deposit, which the corporation becomes liable to pay, accord- ing to the terms of the contract under which it is made; when payment is made, the claim of the depositor is extinguished, and he has no further claim upon the funds or assets of the bank. Upon insolvency, the assets and property of the corporation, as in the case of other corporations, is a trust fund for the pay- ment of creditors, and depositors stand as other creditors, having no greater, but 232 THE BAWKIlfrG LAW. equal rights to be paid ratably out of the insolvent estate. Ct. App. 1883, People V. Mechanics' and Traders' Sav. Inst., 92 N. Y., rev'g 28 Hun, 375. 10. The rules of a savings bank printed in the deposit book are, when properly made known to the depositor, a part of the contract between him and the bank; and if the rules provide that payment to a person producing the deposit book shall be deemed a good and valid payment to the depositor, the latter cannot recover, in an action for his deposit, which the bank has paid out to a person who has wrongfully obtained possession of the book, without showing a failure of the bank officials to exercise reasonable care and prudence in disbursing the money. N. Y. Com. PI. 1881 ; Israel v. Bowery Sav. Bank, 9 Daly, 507. 11. The pass book of a savings bank cannot be regarded as negotiable, and its possession does not constitute proof of a right to draw money thereon. It im- ports a liability of the bank to the depositor for the amount of moneys entered therein as deposited, and an agreement to repay at such time and in such manner as he shall direct. Assuming that the by-laws printed in such book are binding upon the depositor and constitute a contract between the parties, the duty devolves upon the officers of the bank to exercise care and active diligence in order that its depositors may be protected from fraud and larceny. Hence, not- withstanding the pass book contained the provision " for any fraud committed on its officers in producing the pass book and drawing money without the knowl- edge or consent of the owner," the bank should not be liable, where money was drawn on a forged check or receipt by a stranger who had stolen the pass book. Held, that the bank was liable to the owner on the finding of the jury that the bank's officers in making the payment were chargeable with negligence. Kum- mel V. Germania Sav. Bank, 127 N. Y. 488, 13 L. E. A. 786, 28 N. B. 398. 12. Where a depositor furnishes such information to a stranger as enables him to perpetrate a fraud on the bank and draw the depositor's money, the depositor may thereby be guilty of such contributory negligence as will bar a recovery. This will be the case where the proximate cause of the fraud or loss to the depositor is due to his own negligence. Wall v. Emigrant Industrial Sav. Bank, 64 Hun, 249, 19 N. Y. Supp. 194. 13. Payment of the entire deposit to the administratrix of one of two joint depositors upon her presentation of the pass book, made out to her intestate and plaintiflF, after notice by plaintifiE not to pay, held, not to discharge the bank from liability to the plaintiff for the amount deposited by her, notwith- standing the deposit was made on an agreement that either might draw out any part or all of the deposit, and a rule of the bank, printed in the pass book, pro- vided that payment to any one presenting it should discharge the bank. Citing Blake v. Sanborn, 8 Gray, 154: "The case was a proper one for an interpleader, in which the rights of the parties could be judicially ascertained." Andrews, C. J., Mulcahey v. Em. Ind. Sav. Bank, 89 N. Y. 435, rev'g 62 How. Pr. 463. 14. Upon insolvency of the corporation the depositors stand as other creditors, having no greater, but equal fights to be paid ratably out of the insolvent estate. Accordingly held, where a creditor of a savings bank obtained » judgment against a receiver thereof, in an action brought against the bank before the appointment of the receiver, in which action the receiver was substituted as defendant, that the plaintiff was not entitled to a preference over depositors in the payment of his judgment. Id. THH BANKING LAW. 233 15. Where a husband and wife have a bank account in their two names, and each draws and deposits in the absence of the other, the presumption is that at least half of the money belongs to the husband. Gelster v. Syracuse Sav. Bank, 17 Week. Dig. 138. As to rights of joint depositors, see full presentation of authorities ih editorial note to Metropolitan Savings Bank v. Murphy, 31 L. R. A. 454. 16. Depositors in a savings bank are creditors, not beneficiaries, of a trust. Other creditors have no superior equity to the depositors to payment, in case of a deficiency of assets. People v. Mechanics and Traders' Sav. Bank, rev'g same case, 15 Week. Dig. 254, 16 id. 374. 17. When a husband makes a deposit for his wife in a bank, it becomes her property, irrespective of whether the funds were his or her own; and where he deposited funds of his wife in one bank in his own name, and drew the same out from time to time, replacing them with his own money, and subsequently made a deposit for her in another bank by delivering thereto a check upon the first bank, held, that the deposit belonged to his wife. McGraw v. Tatham, (1881) 84 N. Y. 677; see, also. Bates v. First Nat. Bank of Brockport, (1881) 23 Hun, 420, and In re Ward, 2 Eedf. Sur. 253. 18. For an article of interest as to stolen books (citing cases), see Albany Law Journal, vol. I., 406. 19. Where a bank teller has entered in a special agreement with a depositor, other than that contained in the pass book, namely, to pay the amount deposited only at the request of three certain persona, the bank will not be responsible for any loss arising from said special agreement or its breach of it. It seems that if a savings bank on receiving a depsosit should agree that it was not to be drawn except when the three persons who were present to make the deposit should be also present, the agreement should not be construed to terminate by implication, at the death of the beneficiary and one of such persons, and the bene- ficiary administrator could not recover without a demand in the presence of the others. Riley, Admrx., v. Albany Savings Bank, 36 Hun, 513. 20. A depositor is bound by reasonable by-laws. The requirement that in the event of the loss of a pass book the depositor must furnish indemnity to the bank before payment is made to owner of such lost book, is a reasonable one. Mitchell V. Home Savings Bank, 38 Hun, 255. 21. A deposit in a savings bank in the name of A. "in trust for" or "for his daughter " shows an intention to convey title to the fxind to A. as trustee for the daughter. The retention of the pass book by A. until his death, nor a will by him leaving legacies to his other children, and leaving no other property, will not change his title as trustee. The law presumes that the depositor in such case intended that result which the law declares shall be the legal consequences of such deposit. Weaver v. Emigrant Savings Bank, 17 Abb. N. C. 82. 22. Where a pass book is issued to one S., and is found among the effects of one v., who was a miser and thief according to common repute, and the book is given to V.'s administrator. Subsequently, one S., who answered the descrip- tion of the original S., and whose signature compared favorably with that in the signature book, applied with a duplicate of the pass book to defendant's receiver for dividend, and was paid same. On suit brought by V.'s administrator, it was proven that V.'s signature compared favorably with the original signature, and that the original or seemingly original pass book had been in V.'s possession. 234 THE BAHKING LAW. Held, that payment to S. was proper and made with due care. That if V. really made deposit, he had, by his own secrecy, misrepresentation and confusion, occa- sioned the erroneous payment, if such it were. The People v. Third Ave. Savings Bank, 98 N. Y. 661. 23. When a deposit is made in a savings bank in the joint name of the husband and wife, but the husband is the sole owner of the fund, the title thereto will pass upon his death to his personal representatives notwithstanding the form of the deposit. 1887, Wortman v. Robinson, 44 Hun, 357. 24. Notwithstanding a by-law of savings bank providing that a pass book should be the voucher of the depositor, and that all payments to persons presenting the book should be valid payments to discharge the bank, in an action by a depositor, where the defense was payment to one producing the pass book, it was decided that the bank was not relieved from the exercise of that investiga- tion which is necessary to carry on the undertaking expressed in one of its by- laws, that the bank "will endeavor to prevent frauds on its depositors.'' (Citing Israel v. Bowery Bank, 9 Daly, 507 ; Allen v. Williamaburgh Sav. Bank, 69 N. Y. 314, and other cases.) 1887, Cornell v. Emigrant Industrial Sav. Bank, 9 N. Y. State Eep. 72. 25. During the month of May, 1882, the superintendent of the banking depart- ment addressed the following questions to the attorney-general: " 1. Does the section quoted (section 2, chap. 347, Laws of 1878) limit the aggregate amount of deposits that may be received by any savings bank, to the credit of any one depositor (except it be a deposit arising from judicial sales or trust funds ) , to the sum of three thousand dollars ? " 2. Can savings banks lawfully pay interest to any depositor upon a deposit exceeding in the aggregate three thousand dollars, and which deposit has been received in whole or in part since May 23, 1878, the date of the passage of the act above referred to ? " The reply of that oflBcer filed in said department May 12, 1882, is as follows: " Section 2 of the act referred to provides as follows, viz. ; ' It shall be un- lawful after passage of this act for any savings bank, directly or indirectly, to receive from any individual a deposit or deposits in excess of three thousand dollars, but this limitation shall not apply to deposits arising from judicial sales or trust funds.' The language of this section is too plain to admit of a doubt as to the intention of the act. Beyond question it limits the aggregate amount of deposits that may be received by any savings bank from any one depositor, except in cases specially excepted, to the sum of three thousand dollars. It would seem plain also, that the prohibition against receiving would also com- prehend all subsequent acts, and that if the initial act be against the express provisions of the statutes, no subsequent act based thereon could, so far as the public is concerned, ever be legal. I am of opinion, therefore, that in the cases suggested the bank could not legally pay interest on the deposits above three thousand dollars. In reference to the right of the depositor to enforce payment of the interest, in cases where a, savings bank has violated the provisions of the law by receiving deposits in excess of the sum allowed, I express no opinion. That is a question of private rights which does not come within my province to decide." 3. " Trust funds " as here contemplated mean funds directed to be deposited THB BANKING LAW. 235 by a court or judicial officer. Personal trusts are not excepted in above section. Opinion of attorney-general filed September 30, 1884, in the banking department. 26. An opinion by the attorney-general, dated September 24, 1892, was filed in the banking department, in which he states that section 9, chapter 399, Laws of 1892, provides: "No safe deposit company, bank or other institution, person or persons holding securities or assets of a decedent, shall deliver or transfer the same to the executors, administrators or legal representatives of said decedent, unless notice of the time and place of such intended transfer be served upon the county treasurer or comptroller, at least five days prior to said transfer." He held that a deposit in a savings bank to the credit of a deceased depositor is an asset within the meaning of such section, and the same should not be trans- ferred to the representatives of the deceased until the required notice is given to the county treasurer and the comptroller. 27. A bank whose paying teller knowing the depositor by name, pays out with- out inquiry entire account to a stranger who has the book is liable for negligence. Geitelsohn v. Citizens' Savings Bank, 20 Misc. 84, 45 N. Y. Supp. 90. 28. Code, section 1917, requiring indemnity on lost instruments, does not apply to savings bank book, and no bond can be required except by special agreement. Usual rules not applicable to peculiar facts. Mills v. Albany Exch. Savings Bank, 28 Misc. 251, 59 N. Y. Supp. 149. 29. A depositor made his mark as signature, and another person produced the book and was identified by a third person as the real depositor. Held, that ver- dict against the bank for payment to such other person without consent of de- positor was proper ; the degree of care by bank being a question of fact. Rosen V. State Bank, 32 Misc. 231, 65 N. Y. Supp. 666. 30. A wife deposited her husband's wages in her name and in his presence. Held, to belong to her estate upon her death and not to husband. Kopf v. Dry Dock Savings Inst., 32 Misc. 35, 65 N. Y. Supp. 364. 31. A grandfather opened an account for his infant grandchild in the names of both. The father of infant produced the bank book and bank paid him the account. Subsequently the guardian of the infant sued the bank. Held, that bank was liable for its negligence although it had a printed rule in book that deposits were properly payable to holder of the book. Ficken v. Em. Ind. Savings Bank, 33 Misc. 92, 67 N. Y. Supp. 143. 32. Where the same person was treasurer of savings bank and cashier of a national bank occupying same offices, took up savings bank books of depositors getting their receipts to the savings bank, and returned pass books purporting to be of national bank. Held, the savings bank was not liable for these moneys which were actually stolen by the treasurer. Kelley v. Chenango Valley Savings Bank, 22 App. Div. 202, 47 N. Y. Supp. 1041. 33. Payment; peculiar facts surrounding a special payment on production of book. Hale v. Seamen's Bank for Savings, 28 App. Div. 407, 51 N. Y. Supp. 140. 34. A rule that " on death of depositor money shall be paid to legal repre- sentative "... and " that payment to one producing bank book shall be valid payment." Held, that the latter rule did not apply after death of depositor or after bank knew of death, and that then payment to holder of book must rest on a legal title to book by the person producing it. Podmore v. South Brooklyn Savings Inst., 48 App. Div. 218, 62 N. Y. Supp. 961. 236 THE BANKING LAW. 35. A bank had a rule printed in pass book to the effect that valid payment would be made to bearer of book, with or without written order, and " the book is the order of withdrawal." Depositor gave book for keeping to her husband who said he lost it. She failed to notify bank, and did not sign the orders on which bank paid. Held, bank not liable to her for payments made on book under these circumstances. Waiter v. Williamsburgh Savings Bank, 68 App. Div. 193, 74 N. Y. Supp. 140. 36. One Diedrich Grafing had $1,000 in a savings bank, and changed the account to " Diedrich or George Grafing," made additional deposit, and withdrew some moneys. Upon his death his executrix presented the book and was paid the balance. Then George Grafing, after such payment, never having possession of the book, nor made any deposit, nor previous demand for the funds, demanded payment. Held, that payment to executrix was proper. Grafing v. Irving Sav- ings Inst., 69 App. Div. 566, 75 N. Y. Supp. 48, aff'g 37 Misc. 20, 74 N. Y. Supp. 741. 37. A depositor in New York bank, residing in New Jersey, died there and an administrator was appointed in that State to whom bank paid the account, he having the book. An administrator had been appointed in New York five months before New Jersey appointment. Subsequent to payment the latter ad- ministrator demanded the deposit. It did not appear that there were any New York creditors. Held, the bank was not liable to the New York administrator. Maas V. German Savings Bank, 73 App. Div. 524, 77 N. Y. Supp. 256, rev'g 36 Misc. 154, 72 Y. Supp. 1068. 38. Payment by a savings bank to a person not entitled to receive the de- posit, though he may have possession of the pass book and present it at the time of payment, will not discharge the bank, unless it exercised at least ordinary care and diligence in paying the money to the wrong person. If at the time a fact or circumstance was brought to the knowledge of the defendant's officers, which was calculated to and ought to have excited suspicion and inquiry of an ordinarily careful person, it was clearly their duty to institute such inquiry, and their failure to do so presents a question for the consideration of the jury. When, therefore, the bank set up payment to a person who had produced the pass book and a power of attorney authorizing him to draw the funds of another estate, it was held that the question of the care and diligence of the bank's officers in making a payment under such circumstances were of such a character as to require their submission to a jury. Gearns v. Bowery Savings Bank, 135 N. Y. 559, 32 N. E. 249. 39. Rules of savings banks on payment of funds of deceased depositor con- strued, and degree of care explained. Mahon v. South Brooklyn Sav. Inst., 175 N. Y. 69, 67 N. E. 118. 40. A woman opens an account in her name in trust for her husband without his knowledge. When he dies she testifies that she meant he should have the funds if he survived her. Held, not a valid trust in favor of husband's estate. Matter of Smith, 40 Misc. 331, 81 N. Y. Supp. 1035. § 144. Deposits of minors, and trust deposits, and deposits in the names of more than one person. — When any deposit shall he made by or in the name of any minor, the same s.hall be held for the exclusive THE BANKING LAW. 237 right and benefit of such depositor, and free from the control or lien of all other persons, except creditors, and shall be paid, together with the dividends and interest thereon, to the person in whose name the deposit shall have been made, and the receipt or acquittance of such minor shall be a valid and sufficient release and discharge for such deposit or any part thereof to the corporation. When any deposit shall be made by any person in trust for another, and no other or further notice of the existence and terms of a legal and valid trust shall have been given in writing to the bank, in the event of the death of the trustee, the same, or any part thereof, together with the dividends or interest thereon, may be paid to the person for whom the deposit was made. When a deposit shall be made by any person in the names of such depositor and another person and in form to be paid to either or the survivor of them, such deposit thereupon and any additions thereto made by either of such persons upon the making thereof shall become the property of such persons as joint tenants and the same together with all interest thereon shall be held for the exclusive use of the persons so named and may be paid to either during the lifetime of both or to the survivor after the death of one of them, and such payment and the receipt or acquittance of the one to whom such pay- ment is made shall be a valid and sufficient release and discharge to said bank for all payments made on account of such deposit prior to the receipt by said bank of notice in writing not to pay such deposit in accordance with the terms thereof. (Former section 114; R. S. 1567, L. 1882, ch. 409, § 258; L. 1907, oh. 247.) 1. Plaintiff in her own name deposited a certain sum with defendant. In proceedings subsequently commenced against defendant supplementary to an execution against plaintiff's husband, he, she and an officer of the defendant appeared before a referee and were examined. Upon the report of the referee, an order was granted by the court before whom the proceedings were pending, requiring defendant to pay to the judgment creditor the amount of the deposit which order defendant obeyed. In an action to recover the deposit, it did not appear that plaintiff had notice of the application for the order, or that she was heard in reference thereto, or that she was in any way a party to the ap- plication. Held, that such payment was no defense, that she was not a party to the adjudication or bound thereby. Schrauth v. Dry Dock Savings Bank, 86 N. Y. 390. 2. An action was brought to determine the title to a deposit made by plaintiff's intestate, one U., with one of the defendants, the Seamen's Savings Bank of the city of New York. Said U., in 1850, deposited a sum of money in said sav- 238 THE BANKING LAW. inga bank, which was credited to an account then opened with her, in trust for S. J. U., her daughter. The bank issued a pass book, in which the account was entered as with her, in trust for her said daughter. This deposit was subse- quently drawn out. In 1874, U. deposited $2,000 to the credit of said account, which was entered in said pass book. She also, at the same time, deposited $25 to the credit of an account, with her in trust, for a grand-daughter, receiving another pass book therefor, and on the same day she deposited the sum of $2,500 to her own individual account, in the Bowery Savings Bank. U. retained the pass book until her death. In an action to determine the title to the deposit, held, that the transaction disclosed an intention to create a trust for the benefit of the daughter, and that the latter was entitled to the fund. Willis v. Smythe et al., 91 N. Y. 297; sustaining Martin v. Funk, 75 id. 134, 142, 31 Am. Rep. 446. 3. When money is deposited in the name of a wife by her husband as agent, and it is proven that the wife has used part of the money drawn by him as her agent and that she has seen the pass book; held, that the savings bank is justi- fied in paying to said agent. Wilcox v. Onondaga County Savings Bank, 40 Hun, 298. 4. In the absence of extrinsic evidence. A savings bank deposit, entered in the pass book in the name " Michael Smith for Mary Smith," belongs to Mary and goes to her legal representatives. In the names "Michael Smith, Mary Smith, Administratrix," the deposit belongs to Michael's estate. In the names of " Michael and Mary Smith, either to draw," upon the death of Michael followed by that of Mary, the representative of either deceased person is entitled to draw, and the one in possession cannot be compelled to surrender the pass book under § 2712 of the Code of Civil Procedure. When in the names "Michael and Mary Smitt,'' on Michael's death the money vests in Mary, and on her death in Mary's representatives, who hold for the benefit of Michael's estate as far as he was interested in the funds. Smith's Estate, 17 Abb. (N. C.) 78. 5. K. deposited moneys in a savings bank in trust for A., a minor. On K.'s death her administrators were paid the moneys by the bank. On an action brought by the administrators of A., held, that payment by the bank to K.'s representatives in the absence of any hostile claim was proper. 6. Also held that chapter 371, Laws of 1875 (the above section), does not sub- vert the right of the bank to pay the jrepresentatives of a deceased depositor. That said act was a concession to the legal infancy of minors, but not intended as an abrogation of the bank's right. Sehlater v. Bowery, Sav. Bank, 13 State Eep. 413. 7. Accounts were opened "Mary S. Miller in trust William R. Miller," her brother. She had other accounts in her individual name. Held, that on her death in the absence of other facts, the account in trust belonged to her brother. Miller v. Seaman's Bank for Savings, 33 Misc. 708, 68 N. Y. Supp. 983. 8. Where one deposits funds in form in trust for another, and there is the intention to create an actual trust, it is irrevocable. When changed to another beneficiary the first beneficiary is entitled to the funds. Evidence of intention construed. Decker v. Union Dime Savings Inst., 15 App. Div. 653, 44 N. Y. Supp. 521. 9. Where one deposits money in form in trust for another without any inten- THE BANKING LAW. 239 tion to give a beneficial interest to the other, the depositor does not lose title to the fund. Matter of Mueller, 15 App. Div. 67, 44 N. Y. Supp. 280. 10. A woman had an account " in trust for " her husband, she retaining book and collecting interest. The husband died first and his representative collected the account from bank. Later the widow died, and her representative sued bank. Held, the latter could not recover. Bishop v. Seaman's Bank for Savings, 33 App. Div. 181, 53 N. Y. Supp. 488. 11. Right of survivorship to an account in two names is not to be presumed, but to be determined by facts of the case. De Puy v. Stevens, 37 App. Div. 289, 55 N. Y. Supp. 810. 12. A deposit in form " William Williams in trust for Owen Williams " is a trust for Owen in the absence of explanatory evidence, although the former re- tains the bank book, and draws some of the account, and the latter lives abroad and does not know of the account. Williams v. Brooklyn Savings Bank, 51 App. Div. 332, 64 N. Y. Supp. 1021. 13. A woman opened an account in her name " in trust for John T. Scallan," and retained bank book until the day she died, and on that day handed the book to the person named as her executrix. Held, that these facts, with proofs of declaration by depositor to declare a trust, justified the finding of a trust for said Scallan. Scallan v. Brooks, 54 App. Div. 248, 66 N. Y. Supp. 591. 14. Accounts were opened in savings banks by husband and wife as " Chris- topher and Mary Meehan," " Mary J., and Christopher Meehan," and " Chris- topher or Mary Meehan.'' Meehan gave his wife moneys to deposit from time to time ; she drew some money ; Meehan had access to the books at all times, and had declared that these accounts were to go to his wife on his death. Held, that on husband's death the accounts became the property of his widow. Matter of Meehan, 59 App. Div. 156, 69 N. Y. Supp. 9. 15. Depositor had an account in his name and at least some of it was his money when deposited; it was changed to joint account of himself and his daughter. Upon his death the daughter withdrew the account. Held, that it was not necessarily under the special circumstances, the property of the daughter, but became a question of fact determinable by a jury. Wood v. Zornstorff, 59 App. Div. 538, 69 N. Y. Supp. 241. 16. A woman deposited sums in her name " in trust for son Thomas " and " in trust for son John " stating alleged ages which would make their birth after she was 52 years old. She had declared to others that she never had children, and there was no proof that children were ever born to her. Held, that the deposits belonged to her estate and her administrator was entitled to them. Washington V. Bank for Savings, 65 App. Div. 338, 72 N. Y. Supp. 752, aff'd 171 N. Y. 166, 89 Am. St. Rep. 800, 63 N, E. 831 ; see, also, Washington v. Seaman's Savings Bank, 29 Misc. 492, 61 N. Y. Supp. 971. 17. Depositor in savings bank withdrew her account and immediately deposited the amount in the joint names of herself and of a woman present with her, went to Europe, and died abroad. Held, a question of fact for the jury as to what were the intentions of depositor, under the circumstances. Gansherg v. Sagemohe, 67 App. Div. 554, 73 N. Y. Supp. 984. 18. See also presentation of authorities in editorial note to Cunningham v. Davenport, 32 L. R. A. 373, on " effect of depositing money in bank in trust for third person." 240 THE BANKING LAW. 19. A specific and peculiar state of facts as to transfer of deposit and death of the depositor examined. O'Brien v. Elmira Savings Bank, 99 App. Div. 76. 20. As to delivery of pass book to sustain gift, see note to 19 L. R. A. 700. 21. Where a depositor by his negligent care of his pass book brings about a condition making unwarranted drafts possible, the loss is on him primarily, unless the bank's oi&cials have been negligent. Campbell v. Schenectady Savings Bank, 114 App. Div. 337. 22. As to payments to fraudulent claimants see 69 L, R. A. 317, note. 23. Where a forged check is presented, and the teller notices a dissimilarity between the questioned signature and the filed signature, and the treasurer orders payment without further investigation, such payment may be recovered by the depositor from the bank for such negligence. Arbitrary rules of the bank will not avoid its liability for failure to exercise proper care when suspicion is aroused. Gerardi v. N. Y. Savings Bank, 58 Misc. 183. 24. A depositor of a savings bank may assign his deposit for a valuable con- sideration without the delivery of the pass book. Augsbury v. Shurtlifi, 114 App. Div. 626. 25. Where a bank is ignorant of the death of a depositor, and the pass book and a forged draft are presented and paid, the bank is not liable if, due and ordinary care is used. Failure to compare the filed signature with the forged one is not due care. Kelly v. Buffalo Savings Bank, 180 N. Y. 171. 26. Where a deposit is in joint names and the intent to create a joint owner- ship appears, the survivor becomes owner of the entire fund without regard to the possession of the pass book. Farrelly v. Empire Indust. Savings Bank, 92 App. Div. 529. 27. As to care of bank in investigating as to forged order under special circum- stances, see Ferguson v. Harlem Savings Bank, 43 Misc. 10. 28. An account " payable to either or survivor " opened by a husband and wife with husband's money, is subject to draft by either and on the death of one becomes the absolute property of survivor. Moore et al v. Smith, 131 App. Div. 399. 29. After an order of interpleader in city court of the city of New York the action may proceed there under the authority of this section (115), notwith- standing § 820 of Code Civ. Proc. Gottschall v. German Savings Bank, 45 Misc. 27. § 145. Wife witness against husband; claimants may be inter- pleaded. — In all actions in any court of this state against any sav- ings bank by a husband to recover for moneys deposited by bis vrife in her own name, or as her own money, the wife may be examined and testify as a witness in like manner as if she were an unmarried woman. In all actions against any savings bank to recover for moneys on deposit therewith, if there be any person or persons, not parties to the action, who claim the same fund, the court in which the action THB BANKING I,AW. 24:1 is pending, may, on the petition of suoh savings bank, and upon eight days' notice to the plaintiff and such claimants, make an order amending the proceedings in the action by making such claimants parties defendant thereto; and the court shall thereupon proceed to determine the rights and interests of the several parties to the action in and to such funds. The funds on deposit which are the subject of the action may remain with such savings bank upon the same interest as other de- posits of like amount to the credit of the action, until final judgment therein, and the same shall be paid by such savings bank in accord- ance with the order of the court; or the deposit in controversy may be paid into court to await the final determination of the action; and when so paid into court the corporation shall be stricken out as a party to any such action, and its liability for such deposit shall cease. The costs in the actions referred to in this section shall in all cases be in the discretion of the court, and may be charged upon the fund affected by the action. The statutes limiting the time within which actions shall be commenced shall have no application to actions brought by depositors, their representatives or assigns, against savings banks for deposits made therein. (Former section 115; K. S., 1567, L. 1882, eh. 409, § 259.) 1. A savings bank pass book is not negotiable paper, and its possession, in itself, constitutes no evidence of a right to draw money thereon. It merely im- ports a liability of the bank to the depositor for the money deposited, and an agreement to pay it at such time and in such manner as he shall direct. The defendant paid a depositor's money to a stranger who had possession of his pass book, and sought to justify such payment under a by-law printed in the pass book at the time it was delivered to the depositor, as follows: "All deposits and drafts must be entered in the pass book at the time of the transac- tion, and all payments made by the bank upon the presentation of the pass book entered therein will be regarded as binding upon the depositor. Money may also be drawn upon the written order of the depositor or his attorney, when ac- companied by the pass book." Held, that assuming that the mere acceptance by the depositors of a pass book containing a by-law regulating the manner of making deposits and pay- ments constituted a contract between the parties. Yet the by-laws referred to could not be construed to justify a payment to a third party unless a written order accompanied the pass book. Smith v. Brooklyn Savings Bank, 101 N. Y. 58, 54 Am. Dec. 653, 4 N. E. 123, distinguishing Schoenwald v. Metropolitan Bank, 57 N. Y. 418. See Crawford v. West Side Bank, 100 N. Y. 51, 53 Am. Rep. 152, 2 N. E. 881. 16 242 THB BANKIlirG LAW. 2. Neither the rule as to payment to one producing book, nor § 115 (now 146), justify refusal to pay one to whom deposit account was given before depositor's death. Cosgriflf v. Hudson City Savings Inst., 24 Misc. 4, 52 N. Y. Supp. 189. 3. This right of interpleader does not apply when the persons claiming, the funds have only a future interest. Gifford v. Oneida Savings Bank, 99 App. Div. 25. 4. It is discretionary with the court to refuse this interpleader. Steiner v. East River Savings Bank, 60 App. Div. 232; McGuire v. Mt. Auburn Savings Bank, 78 App. Div. 22. § 146. In what securities deposits may be invested. — The trustees of any savings bank may invest the moneys deposited therein and the income derived therefrom only as follows : 1. In the stocks or bonds or interest-bearing notes or obligations of the United States, or those for which the faith of the United States is pledged to provide for the payment of the interest and principal, including the bonds of the District of Columbia. 2. In the stocks or bonds or interest-bearing obligations of this state, issued pursuant to the authority of any law of the state. 3. In the stocks or bands or interest-bearing obligations of any state of the United States which has not within ten years previous to making such investment by such corporation defaulted in the pay- ment of any part of either principal or interest of any debt authorized by the legislature of any such state to be contracted; and in the bonds or interest-bearing obligations of any state of the United States, issued in pursuance of the authority of the legislature of such state, which have, prior to May twenty-ninth, eighteen hundred and ninety- five, been issued for the funding or settlement of any previous obliga- tion of such state theretofore in default, and on whidh said funding or settlement obligation there has been no default in the payment of either principal or interest since the issuance of such funding or settlement obligation, and provided the interest on such funding or settlement obligation has been paid regularly for a period of not less than ten years next preceding such investment. 4. In the stocks or bonds of any city, county, tovm or village, school district bonds and union free school district bonds issued for school purposes, or in the interest-bearing obligations of any city, county, town or village of this state, issued pursuant to the authority of any law of the state for the payment of which the faith and credit of the municipality issuing them are pledged. THB BANKING LAW. 243 5. In the stocks or bonds of any incorporated city situated in one of the states of the United States which was admitted to statehood prior to January first, eighteen hundred and ninety-six, and which, since January first, eighteen hundred and sixty-one, has not re- pudiated or defaulted in the payment of any part of the principal or interest of any debt authorized by the legislature of any such state to be contracted, provided said city has a population, as shown by the federal census next preceding said investment, of not less than forty- five thousand inhabitants, and was incorporated as a city at least twentjj-fije years prior to the making of said investment, and has not, since January first, eighteen hundred and seventy-eight, de- faulted for more than ningjy„d,gys in the payment of any part either of principal or interest of any bond, note or other evidence of in- debtedness, or effected any compromise of any kind with the holders thereof. But if, after such default on the part of any such state or city, the debt or security, in the payment of the principal or interest of which such default occurred, has been fully paid, re funded or compromised by the issue of new securities, then the date of the first failure to pay principal or interest, when due, upon such debt or security, shall be taken to be the date of _sudi^efault, within the provisions of this subdivision, and subsequent failures to pay instal- ments of principal or interest upon such debt or security, prior to the refunding or final payment of the same, shall not be held to con- tinue said default or to fix the time thereof, within the meaning of this subdivision, at a date later than the date of said first failure in payment. If at any time the indebtedness of any such city, together with the indebtedness of any district, or other municipal corporation or subdivision except a county, which is wholly or in part included within the bounds or limits of said city, less its water debt and sink- ing funds shall exceed seven per centum of the valuation of said city for purposes of taxation, its bonds and stocks shall thereafter, and until such indebtedness shall be reduced to seven per centum of the valuation for the purposes of taxation, cease to be an authorized investment for the moneys of savings banks, but the superintendent of banks may, in his discretion, require any savings bank to sell such bonds or stock of said city as may have been purchased prior to said increase of debt. 6. In bonds and mortgages on unincumbered real property situated 244 THE BAWKIITG LAW. in this state, to the extent of sixty per centum of the value thereof. Wot more than sixty-five per centum of the whole amount of deposits shall be so loaned or invested. If the loan is on unimproved and unproductive real property, the amount loaned thereon shall not be more than forty per centum of its actual value. No investment in any bonds and mortgages shall be made by any savings bank except upon the report of a committee of its trustees charged with the duty of investigating the same, who shall certify to the value of the premises mortgaged or to be mortgaged, according to their best judg- ment, and such report shall be filed and preserved among the records of the corporation. Also in the following securities : (a) The first mortgage bonds of any railroad corporation of this state, the principal part of whose railroad is located within this state, or of any railroad corporation of this or any other state or states connecting with and controlled and operated as a part of the system of any such railroad corporation of this state, and of which connect- ing railroad at least a majority of its capital stock is ovsoied by such a railroad corporation of this state, or in the mortgage bonds of any such railroad corporation of an issue to retire all prior mortgage debt of such railroad companies respectively; provided that at no time within five years next preceding the date of any such investment, such railroad corporation of this state or such connecting railroad corpora- tion respectively shall have failed regularly and punctually to pay the matured principal and interest of all its mortgage indebtedness, and in addition thereto regularly and punctually to have paid in dividends to its stockholders during each of said five years an amount at least equal to four per centum upon all its outstanding capital stock ; and provided, further, that at the date of every such dividend the out- standing capital stock of such railroad corporation, or such connect- ing railroad company respectively, shall have been equal to at least one-third of the total mortgage indebtedness of such railroad cor- porations respectively, including all bonds issued or to be issued under any mortgage securing any bonds in which such investment shall be made. (b) The mortgage bonds of the following railroad corporations: The Chicago and ^Northwestern railroad company, Chicago, Bur- lington and Quincy railroad company, Michigan Central railroad company, Illinois Central railroad company, Pennsylvania railroad THE BANKING LAW. 245 company, Delaware and Hudson company, Delaware, Lackawanna and Western railroad company, New York, New Haven and Hart- ford railroad company, Boston and Maine railroad company, Maine Central railroad company, the Chicago and Alton railroad company, Morris and Essex railroad company. Central railroad of New Jersey, United New Jersey railroad and canal company, also in the mortgage bonds of railroad companies whose lines are leased or operated or controlled by any railroad company specified in this paragraph if said bonds be guaranteed both as to principal and interest by the railroad company to which said lines are leased or by which they are operated or controlled. Provided that at the time of making invest- ments authorized by this paragraph the said railroad corporations issuing such bonds shall have earned and paid regular dividends of not less than four per centum per annum in cash on all their issues of capital stock for the ten years next preceding such investment, and provided the capital stock of any said railroad corporations shall equal or exceed in amount one-third of the par value of all its bonded indebtedness; and further provided that all bonds authorized for investment by this paragraph shall be secured by a mortgage which is a first mortgage on either the whole or some part of the railroad and railroad property of the company issuing such bonds, or that such bonds shall be mortgage bonds of an issue to retire all prior mortgage debts of such railroad company ; provided, further, that the mortgage which secures the bonds authorized by this paragraph is dated, executed and recorded prior to January first, nineteen hun- dred and five. (c) The mortgage bonds of the Chicago, Milwaukee and Saint Paul railway company, and the Chicago, Eock Island and Pacific railway company, so long as they shall continue to earn and pay at least four per centum dividends per annum on their outstanding capital stock, and provided their capital stock shall equal or exceed in amount one-third of the par value of all their bonded indebted- ness, and further provided that all bonds of either of said companies hereby authorized for investment shall be secured by a mortgage which is a first mortgage on either the whole or some part of the rail- road or railroad property actually in the possession of and operated by said company, or that such bonds shall be mortgage bonds of an issue to retire all prior debts of said railroad company; provided, 246 THE BANKING lAW. further, that the mortgage which secures the bonds authorized by this paragraph is dated, executed and recorded prior to January first, nineteen hundred and five. (d) The first mortgage bonds of the Fonda, Johnstown and Gloversville railroad company, or in the mortgage bonds of said rail- road company of an issue to retire all prior mortgage debts of said railroad company, and provided the capital stock of said railroad company shall equal or exceed in amount one-third of the par value of all its bonded indebtedness and provided also that such railroad be of standard gauge of four feet eight and one-half inches, and in the mortgage bonds of the Buffalo Creek railroad company of an issue to retire all prior mortgage debts of said railroad company, provided that the bonds authorized by this paragraph are secured by a mortgage dated, executed and recorded prior to January first, nineteen hun- dred and five. (e) The mortgage bonds of any railroad corporation incorporated under the laws of any of the United States, which actually owns in fee not less than five hundred miles of standard gauge railway ex- elusive of sidings, within the United States, provided that at no time within five years next preceding the date of any such investment such railroad corporation shall have failed regularly and punctually to pay the matured principal and interest of all its mortgage indebted- ness and in addition thereto regularly and punctually to have paid in dividends to its stockholders during each of said five years an amount at least equal to four per centum upon all its outstanding capital stock; and provided further that during said five years the gross earnings in each year from the operations of said company, including therein the gross earnings of all railroads leased and operated or controlled and operated by said company, and also including in said earnings the amount received directly or indirectly by said company from the sale of coal from mines owned or controlled by it, shall not have been less in amount than five times the amount necessary to pay the interest payable during that year upon its entire outstanding indebtedness, and the rentals for said year of all leased lines, and further provided that all bonds authorized for investment by this paragraph shall be secured by a mortgage which is at the time of making said investment or was at the date of the execution of said mortgage (1) a first mortgage upon not less than seventy-five per THE BANKING LAW. 24:7 centum of the railway owned in fee by the company issuing said bonds exclusive of sidings at the date of said mortgage or (2) a refunding mortgage issued to retire all prior lien mortgage debts of said company outstanding at the time of said investment and covering at least seventy-five per centum of the railway owned in fee by said company at the date of said mortgage. But no one of the bonds so secured shall be a legal investment in case the mortgage securing the same shall authorize a total issue of bonds which together with all outstanding prior debts of said company, after deducting therefrom in case of a refunding mortgage, the bonds reserved under the pro- visions of said mortgage to retire prior debts at maturity, shall exceed three times the outstanding capital stock of said company at the time of making said investment. And no mortgage is to be regarded as a refunding mortgage, under the provisions of this paragraph, unless the bonds which it secures mature at a later date than any bond which it is given to refund, nor unless it covers a mileage at least twenty-five per centum greater than is covered by any one of the prior mortgages so to be refunded. (f) Any railway mortgage bonds which would be a legal invest- ment under the provisions of paragraph (e) of this subdivision, except for the fact tbat the railroad corporation issuing said bonds actually owns in fee less than five hundred miles of road, provided that during five years next preceding the date of any such investment the gross earnings in each year from the operations of said corpora- tion, including the gross earnings of all lines leased and operated or controlled and operated by it, shall not have been less than ten million dollars. (g) The mortgage bonds of a railroad corporation described in the foregoing paragraph (e) or (f) or the mortgage bonds of a rail- road owned by such corporation, assumed or guaranteed by it by indorsement on said bonds, provided said bonds are prior to and are to be refunded by a general mortgage of said corporation the bonds secured by which are made a legal investment under the provisions of said paragraph (e) or (f ) ; and provided, further, that said general mortgage covers all the real property upon which the mortgage secur- ing said underlying bonds is a lien. (h) Any railway mortgage bonds which would be a legal invest- ment under the provisions of paragraph (e) or (g) of this subdivis- 248 THB BAITKING LAW. ion, except for the fact tliat the railroad corporation issuing said bonds actually owns in fee less than five hundred miles of road, pro- vided the payment of principal and interest of said bonds is guaran- teed by indorsement thereon by, or provided said bonds have been assumed by, a corporation whose first mortgage is, or refunding mort- gage bonds are, a legal investment under the provisions of paragraph (e) or (f ) of this subdivision. But no one of the bonds so guaranteed or assumed shall be a legal investment in case the mortgage securing the same shall authorize a total issue of bonds which, together with all the outstanding prior debts of the corporation making sueb guaranty or so assuming said bonds, including therein the authorized amount of all previously guaranteed or assumed bond issues, shall exceed three times the capital stock of said corporation, at the time of making said investment. (i) The first mortgage bonds of a railroad the entire capital stock of which, except shares necessary to qualify directors, is owned by, and which is operated by a railroad whose last issued refunding bonds are a legal investment under the provisions of paragraph (a), (e) or (f ) of this subdivision, provided the payment of principal and interest of said bonds is guaranteed by indorsement thereon by the company so owning and operating said road, and further provided the mortgage securing said bonds does not authorize an issue of more than twenty thousand dollars in bonds for each mile of road covered thereby. But no one of the bonds so guaranteed shall be a legal investment in case the mortgage securing the same shall authorize a total issue of bonds which together with all the outstanding prior debts of the company making said guaranty,, including therein the authorized amount of all previously guaranteed bond issues, shall exceed three times the capital stock of said company, at the time of making said investment. Bonds which have been or shall become legal investments for sav- ings banks under any of the provisions of this section shall not be rendered illegal as investments, though the property upon which they are secured has been or shall be conveyed to another corporation, and though the railroad corporation which issued or assumed said bond has been or shall be consolidated with another railroad corporation, if the consolidated or purchasing corporation shall assume the pay- ment of said bonds and shall continue to pay regularly interest or THB BANKING IxAW. 249 dividend or both upon the securities issued against, in exchange for or to acquire the stock of the company consolidated or the property purchased, or upon securities subsequently issued in exchange or substitution therefor, to an amount at least equal to four per centum per annum upon the capital stock outstanding at the time of such consolidation or purchase of said corporation which has issued or assumed said bonds. !N"ot more than twenty-five per centum of the assets of any savings bank shall be loaned or invested in railroad bonds, and not more than ten per centum of the assets of any savings bank shall be invested in the bonds of any one railroad corporation described in paragraph (a) of this subdivision, and not more than five per centum of such assets in the bonds of any other railroad corporation. In determining the amount of the assets of any savings bank under the provisions of this subdivision its securities shall be estimated in the manner pre- scribed for determining the per centum of surplus by section one hundred and fifty-four of this chapter. Street railroad corporations shall not be considered railroad corporations within the meaning of this subdivision. 7. In real property subject to the provisions of section one hundred and forty-seven. (Former section 116; L. 1893, ch. 440; L. 1895, ch. 813; L. 1896, ch. 454; L. 1897, ch. 386; L. 1898, eh. 236; L. 1899, ch. 386; L. 1900, ch. 42; L. 1902, ch. 440, 598; L. 1903, ch. 328, 640; L. 1905, oh. 401; L. 1906, ch. 581.) See Penal Law, § 296. 1. Westchester county savings banks authorized to loan money to Union free school district number eight, in the town of Cortland, of said county, and its board of education, upon certain bonds of that district. Section 4, chapter 148, Laws of 1882. 2. Subdivision 1 of this section was frequently amended, leaving out and taking in District of Columbia bonds. 3. Corporation loaned money on stocks collateral — employed broker to sell stocks, who sold same. Bank had formerly sold stock and omitted to notify broker, who could not deliver, and was compelled to pay purchaser $4,119 dam- ages. In an action against bank, held, that though illegality of loan might be a defense to the original parties thereto, it had nothing to do with, and could not affect broker's right to recover. The securities became the property of the bank, and it might sell them. Citing De GrofF v. Am. Linen Thread Co., 21 N. Y. 124 : " If corporations acquired goods in such a way as to make transaction doubtful as a question of power, what are corporations to do with property thus forced upon their hands ? Must they purge the illegality by giving the goods away or destroying them, or may they not sell and transfer a good title to purchaser ? I 250 THE BANKING LAW. think, beyond all doubt, that they may, and that the contract can be upheld and enforced on that ground." Bruce v. Fulton Nat. Bank, 23 Hun, 614-615. 4. The charter of a savings bank, and the general laws relating to it, required that its loans upon real estate should be upon unincumbered property, but this fact does not render the loaning of money upon a mortgage which is subject to prior incumbrances available as a defense to the borrower in an action to recover the debt. Citing Davis Sewing Machine Co. v. Best, 30 Hun, 638; Union Gold Mining Co., etc. v. Rocky Mountain Nat. Bank, etc., 96 U. S. 640, 24 L. ed. 648; Nat. Bank v. Matthews, 98 U. S. R. 621, 25 L. ed. 188; Nat. Bank v. Whitney,' 102 id. 99, 26 L. ed. 443; 1887, Auburn Savings Bank v. Brinkerhoff, 44 Hun, 142. 5. A loan of this character is not within the prohibition against making loans on notes, bills of exchange, or other personal securities, when the loan was made upon the additional security of a bond and mortgage assigned to the savings bank at the time of making the loan. Id. 6. The illegal action of the oflBcers of a savings institution, in loaning its funds to an individual upon his note, does not work a forfeiture of the money loaned, and the institution has a cause of action for the money, even if the note be void, and an action may be maintained upon a new note taken in satisfaction of such cause of action. Citing N. Y. State Loan & T. Co. v. Helmer, 77 N. Y. 64; Pratt V. Short, 79 N. Y. 437, 35 Am. Rep. 531 ; Rome Savings Bank v. Krug, 102 N. Y. 331, 6 N. E. 682, aflf'g 12 Daly, 212. 7. Where such second note is made, at least in part, by strangers to the first note, it cannot be said to be taken simply in exchange for the former, but is taken in satisfaction of the prior debt; it is, therefore, founded upon a good considera- tion, and is valid. Id. 8. The superintendent of the banking department submitted to the attorney- general a copy of a mortgage made by a safe deposit company to a certain .trust company, both of which corporations were organized under the laws of this State. The mortgaged property was situated in the city of New York. The mortgage was given for the purpose of securing the bonds of the deposit company, issued under authority of a resolution of the directors of the company to the amount of $100,000. It was provided in the said mortgage that the trust company, in case of a failure of the deposit company to make the payments when due of any money, principal or interest secured by said mortgage, may, when requested so to do, in writing, by the holder of at least ten per centum of the bonds secured by said mortgage, proceed to the foreclosure thereof. The opinion of the attorney-gen- eral was asked on the following propositions: ( 1 ) As to whether it would be investing in " unincumbered real estate," within the meaning of the statute, for a savings bank to purchase ten or more of these bonds, or a number suflScient to enable them to enforce payment in case of default. (2) Does the word "unincumbered" mean without prior incumbrance, or does it mean without incumbrance except such as the savings bank owns in entirety? (3) Is there any legal objection to savings banks investing in one or more of a series of bonds secured by a mortgage upon real estate, there being no prior lien, and the sum held being sufficient to entitle the bank to institute foreclosure proceedings in case of default, the property mortgaged being situated wholly ■within this State, and worth at least double the amount loaned thereon, as certi- THH BANKING LAW. 251 fied by a committee charged with investigating the same, and the statute in other respects being complied with? That ofScer in his reply, filed in the banking department July 28, 1882, says: " In my opinion, the mortgage submitted for my inspection does not fall within the class of bonds and mortgages intended by the statute authorizing savings banks to invest in bonds and mortgages on unincumbered real estate, for the fol- lowing reasons: " First. Because the mortgage executed for the purpose of securing the pay- ment of said bonds does not require the trust company to institute foreclosure proceedings when requested to do so by the holder of ten per centum of the bonds, but only provides that it shall not institute such proceedings unless requested so to do by a holder of that amount of the bonds, and a refusal to take such proceed- ings, when so requested, could only be remedied by a suit in equity to compel the trust company to act. " Second. By ' unincumbered real estate,' in my opinion, is meant real esta,tu without incumbrance, except such as the savings bank owns in entirety. The statute intends that the savings bank shall have the exclusive control of its in- vestments, both as to the amount and the time for which they are made. Al- though as in the present instance they may have the power, when owning a cer- tain number of these bonds, to cause to be instituted foreclosure proceedings to secure the payment of such bonds, still any other holder of the same number of bonds would have the same right, and thus the bank could have no certainty as to the time or permanency of their investments, and no certainty as to the amount it might be forced to invest in such property at almost any time, in order to save itself from loss because of foreclosure proceedings instituted by parties over whom it had no control. " Third. I am further of the opinion that the statute authorizing the incor- poration of savings banks does not intend that they shall act and be contracted with through the medium of a trustee outside of the directors of the corporation. The trustee, if an individual, may die, or if a corporation, may be dissolved, or have its franchises annulled before completion of the duties of the trust, and thus throw the affairs of the savings institution into a confusion, that only a recourse to the courts could unravel. These corporations are provided with directors and officers, whose duty it is to manage their affairs; and, in my opinion, the statute intends that all contracts with the corporation shall be made directly with its governing body, without the aid of an intermediary trustee. " For the forgoing reasons, I am of the opinion that savings banks have not the power to invest in one or more of a series of bonds not amounting to the whole number of such bonds, secured by a mortgage on real estate, there being no prior lien, and the sum held being sufficient to entitle the bank to institute fore- closure proceedings in ease of default, even though all the other conditions of the statute be complied with.'' 9. An opinion of the attorney-general, filed in the banking department June 30, 1882, held, " That the investment by savings banks of this State in Minnesota State bonds is contrary to the spirit and scope of the Act of 1880, and cannot be allowed; the State within ten years having defaulted in the payment of a debt authorized by the legislature; " and further held: "The object of this statute 252 THE BANKING LAW. undoubtedly was, to prevent the investment by savings banks in the stocks of a State which had authorized repudiation of any debt sanctioned by the law-mak- ing power of the State, as contra-distinguished from those bonds issued by some executive oflBcer without any authority or warrant of law." 10. The superintendent of the banking department submitted to the attorney- general the question, whether subdivision 4 of this section authorized savings banks of this State to invest their deposits in the bonds issued by school districts. In an opinion, filed in the banking department under date of April 4, 1884, the attorney-general holds that: "There is nothing in the provision which gives them the power to buy the bonds issued by school districts, either expressly or by tacit implication. The fact that a school district comprises a whole town, the boundaries of which were the same, would make no difference. The officers who issued town bonds would act in an entirely different capacity, would derive their power from a different source, and generally would be a different set of men from the officers who issue the bonds of a school district." 11. The author submitted to the attorney-general the question as to the legal right of savings banks to invest the moneys deposited with them, in interest-bear- ing obligations, which the Conunonwealth of Massachusetts issues from time to time, under the authority of the legislature of the State, in anticipation of taxes. The obligations are designated revenue certificates or revenue bonds, and are sub- stantially in the following form: " commonweaith of massachusetts, " Tebastjey Dbpaetmbnt, Boston, , 188 . "Borrowed and received under authority of resolution , chapter , of the year , of , of , the sum of dollars, for the use of the said Commonwealth, the same to be repaid to or order, , at this office in currency, in months from date, without grace, with inter- est, payable also in Currency, at the rate of per cent, per annum. "(Signed), , Treasurer. "(Countersigned), , Auditor . "(Approved), Qovernar.'' That officer, in his opinion, filed in the banking department May 15, 1884, holds as follows; " It is doubtless true that this instrument is evidence of a loan to the State of Massachusetts, for the payment of which the faith and credit of that State is pledged, and it is unquestionably safe as an investment. " Obligations of this character, however, are evidently not intended as perma- nent loans; the form of the security on its face indicates that the debt evidenced thereby is to be paid by the State in a very short time, perhaps in a few months from the date of issue, or even sooner. It is a mere temporary experient to secure funds for the State treasury in anticipation of taxes levied and in process of collection, to be cancelled and paid as soon as the taxes are received by the State treasurer. " I do not think that it was the intention of the legislature, by subdivision 3, of section 260, of chapter 409, of the Laws of 1882, to include certificates of in- debtedness of such a temporary and transient character within the terms ' stocks or bonds of other States.' THB BANKIITG LAW. 253 " This term as used in the statutes was, in my opinion, intended to apply to and include the permanent loans of the State, and not mere certificates of indebted- ness issued from time to time for temporary purpose, and liable to be called in and cancelled within a few weeks or a few days from the date of their issue." 12. Savings banks may lawfully purchase bonds issued by the State of Indi- ana. Opinion of attorney-general filed in the banking department May 1, 1885. 13. They may purchase bonds issued by the State of Missouri. Opinion of at- torney-general filed February 8, 1886. 14. The purchase of bonds of Alabama unlawful. Opinion of attorney-general filed March 25, 1886. 15. The purchase of bonds of Georgia unlawful. Opinion of attorney-general filed September 21, 1885. 16. Savings banks are not authorized to make voluntary contributions for the public benefit. The following opinion of the attorney-general was filed December 9, 1886, in the banking department: " I beg leave to acknowledge the receipt of your communication of the 4th inst., of which the following is a copy: " ' A certain railroad corporation proposes to use a second station or depot in one of the cities of this State, on condition that owners of property in the vicinity of the location selected, purchase and convey to the railroad the necessary land, and erect a station or depot thereon, without expense to the company. In con- sideration for which the railroad will agree to maintain the station and stop all local trains thereat. It is claimed that the prospective advantages to be de- rived from the stoppage of trains at the location selected will justify the pur- chase and donation demanded, and a pro rata assessment for the sum required has been levied by a self-constituted committee of citizens, on the property which it is supposed will be benefited. Included among the property assessed is a savings bank building, and while the trustees of the bank are desirous of con- tributing the amount assessed from its funds, they have doubts as to their legal rights to do so, and have requested a ruling from me on the question. " ' As a decision of the question involves a construction of the spirit and in- tent of the statute, I submit the above statement of facts and request your opinion as to the proper interpretation to be given to those provisions of the savings bank law bearing upon the subject.' " The purpose of a savings bank is to receive upon deposit, funds, and to in- vest and keep them safely for the benefit of depositors, to whom the bank is to return the amount deposited with whatever interest the trustees, in their judg- ment, are able to pay. This is the whole aim and purpose for which savings banks are intended. All other powers exercised by the trustees are merely incidental to this main feature, and are only possessed when actually and abso- lutely, or in the judgment of the legislature necessary, to the proper execution of this purpose. " The legislature has declared the powers of savings banks in reference to the investment of the funds intrusted to them. They may invest in stocks or bonds, or interest-bearing notes or obligations of the United States, or those for which the faith of the United States is pledged, to provide for the payment of the inter- est and principal, including the bonds of the District of Columbia. In stocks and bonds of this State bearing interest. In bonds of any State of the Union that has 254 THE BANKING LAW. not, within ten years previous to making such investment, defaulted in the pay- ment of principal or interest of any duly authorized debt. In the stocks or bonds of any city, county, town or village of this State, issued in pursuance of law, or in interest-bearing obligations issued by the city or county in which such bank shall be situated. In bonds and mortgages on unincumbered real estate situate in this State. In sufficient real estate upon which to erect a building, not to ex- ceed in cost fifty per cent, of the net surplus of the institution, and such real estate as is necessary for them to purchase upon the foreclosure of any of their mortgages. (Paine's Banking Law, §§ 260 and 263.) Until the funds are or can be safely invested as above directed, they are to be safely kept. (Id. § 262.) " The above are substantially the investments allowed to be made by savings banks, and when the money is not invested it must be safely kept until it can be, and it is the duty of the trustees to invest the funds of the bank in some of the above-mentioned securities, as soon as practicable, with the exception of suffi- cient money to pay current expenses, etc. I find nothing in this list of author- ized investments which can, in my opinion, be construed into a direct or implied power to the trustees to invest the funds of the institution in a scheme having for its purpose the mere convenience of the inhabitants of a particular district. With no expectation of, nor stipulation for, the repayment of either the principal or interest, but the same being invested solely upon the idea that some future substantial, although unknown, benefit may possibly arise therefrom and attach itself to the bank building. Such a disposition of the bank funds might be more properly termed a donation for the public benefit, than a prudent and careful in- vestment of trust funds. " I am of the opinion, therefore, that the trustees have no authority to pay the assessment out of the bank funds; that such a payment would be in excess of their powers, and not within the general policy or authority of the banking laws." 17. In June, 1888, the author submitted the following questions to the at- torney-general: " First. What is meant by the term ' accumulated surplus,' in connection with investments by savings banks on bonds and mortgages on real estate! Secondly, what restrictions are there to prevent savings banks from investing all their surplus in bonds and mortgages on real estate or in other securities mentioned in section 260 of the Banking Act?" In reply thereto the following opinion was received: " First question : There are in fact no such words used in the Savings Bank Act as ' accumulated surplus.' The surplus authorized by §§ 267 and 268 is the only ' surplus ' which the Savings Bank Act authorizes or makes provision for. " In the report required to be made by § 271, while the ' costs, par value and estimated value/ of all such investments is required to be stated, the idea of a surplus which the figures used in making this report may convey, is simply one on paper. It is not a surplus recognized by the statute. The law in other words here requires a statement to be made to the bank superintendent; but it does not follow that because a balance appears after deducting the liabilities from the actual value of the assets, that there is any ' surplus,' within the meaning of the Savings Bank Act. " Second question : Section 260, as amended by chapter 524 of the Laws of THH BANKING LAW. 255 1887, provides that ' it shall be lawful for any savings bank to invest the moneys deposited therein only as follows, namely; ' then follows a detailed statement of the securities in which said moneys may be invested. " This section, it will be observed, apparently refers only to ' moneys de- posited,' and does not in terms and by name refer to surplus moneys of savings banks, and the solution of the question will depend on whether we so interpret this section as to include or exclude such surplus moneys. " Section 261, as amended by chapter 569 of the Laws of 1886, makes it the duty of the trustees of any savings bank, as soon as practicable, to invest ' the moneys deposited with them ' in the securities named in the last preceding sec- tion, except that, for the purpose of meeting current payments and expnses in excess of receipts, there may be an available fund of not exceeding ten per cent. of the whole amount deposited with such corporation, and the same may be kept on hand or on deposit in any bank or banking institution in the State of New York, organized under the laws of the State of New York. " Section 263 provides that the only cases in which it shall be lawful for such corporation to purchase, hold or convey real estate are, first to buy a plot whereon is erected or may be erected a building or buildings located for the convenient transaction of its business, and from portions of which, not required for its own use, a revenue may be derived, the cost of such building and lot, however, in no case to exceed fifty per cent, of the net surplus of such corporation ; second, such as shall have been purchased by it at sales upon foreclosure of mortgages owned by such corporation or upon judgments or decrees obtained for debts due to it, or in settlements effected to secure such debt. " Section 264 provides that ' it shall not be lawful for the trustees of any savings bank to loan the moneys deposited with them, or any part thereof, upon notes, bills of exchange, drafts or any other personal securities whatever, and in all cases of loans upon real estate, a sufficient bond secured by a mortgage thereon shall be required of the borrower. . . .' " I think the Banking Act contemplates that all the moneys, except the avail- able funds authorized by section 261, should be kept invested in proper securities, and the act expressly prohibits the trustees from dealing in personal property or real estate, or personal securities, notes or bills, etc.; and the provision in section 286, making it a misdemeanor to inyest in securities not named in the act, does not confine such investments to money deposited but appears to apply to all moneys in the keeping of the institution, and inasmuch as section 289 declares that the act shall be construed favorably, for every beneficial purpose therein contained, I am of the opinion that it should be so construed that section 260, designating the kinds of securities in which the money may be invested, should apply to all funds and money of, or in charge of, the institution, whether it be surplus or deposits, except as provided in section 261." 18. In October, 1886, the superintendent of the banking department requested an opinion from the attorney-general as to the power of the banking department and of the trustees of savings banks in this State to allow, in case of loans upon real estate, in the place of the ordinary searches from the county clerks' and registers' offices of the counties in which the real estate is situated, the searches and abstracts of title furnished by corporations known as title guaranty com- panies, and also as to the propriety of using such searches, if the power existed. 256 THE BAITKING LAW. In the opinion of the attorney-general filed in the banking department, that officer states in effect that such matters must be left with the trustees of the bank, subject to the directions and regulations of the superintendent of the bank- ing department. " I will only add that a high degree of care and caution should be required in regard to the title and the liens upon real estate upon which the funds of de- positors in savings banks are loaned. In every case where the contracts or obli- gations of title guaranty companies are taken in lieu of official searches, too, much care cannot be taken in regard to the responsibility of the corporation making the contract. ... If the contracts of these corporations are substituted at all in the place of the official searches of public officers who have the custody of the records of title and of liens, they should be clear, comprehensive, absolute and unconditional. The legal effect of numerous and complicated conditions in- serted in a contract in the nature and form of an insurance policy cannot always be determined by the trustees of savings banks at the time of making the loan. They are liable to be misunderstood by the directors, to become inoperative by a failure to observe the conditions, and after the lapse of many years, to impair the contract as a protection and indemnity to depositors." 19. In a supplemental opinion filed in the banking department May 19, 1887, the attorney-general declares hia opinion to be that " if the trustees engage com- petent lawyers to search and examine titles upon which the funds of the banks are loaned, they would not be chargeable with negligence, whether such counsel were engaged directly or through the medium of the guaranty company. " The insurance of the title is, in my opinion, immaterial to the question. The banks would not be justified in depending upon such insurance without having the titles examined." 20. The attorney-general gave an opinion, dated September 24, 1892, relating to the question whether savings banks in this State can invest their deposits in bonds secured by a first mortgage, executed to a trustee, where the savings bank takes and becomes the ovsmer of such bond. He was also asked whether savings banks can legally invest their deposits in such bonds where the bank takes all the bonds issued under such first mortgage. He states in reply that he understands the inquiry relates to bonds issued by a corporation secured by a first mortgage upon its real estate, executed to a trustee named as mortgagee. He then says: " If the mortgage, by its terms, cannot pass by assignment with the bonds, but must be foreclosed through the intervention of a trustee in case of default, in the payment of principal or interest, then, in my opinion, the bonds and mortgage referred to are not such as are included in the class of bonds and mortgages specified in the above act. " The bonds there mentioned are those given for the payment of money secured by mortgage upon real estate, executed directly to the obligee named in the bond. "That the title to the mortgage as well as the bond should be vested in the savings bank making the investment, securing to it the ownership and control of the same, with the right to foreclose in case of failure to pay, without the inter- vention of a trustee. " In the case of a corporate bond secured by a mortgage upon corporate rights and franchises, or in case of bonds executed to and held by a trust company, or THB BABTKHiTQ LAW. 257 other trustees as security for the hondholders, savings banks, in case of invest- ment in such bonds, would not be the holders of the mortgage, or have any direct control over it. In case of default in the payment of the bonds, or compliance with its conditions as to interest or insurance, the savings banks so investing would be obliged to seek their remedies through the intervention of trustees to whom the mortgage had been executed. " The uniform construction by the banking department and this oflSce has been to the effect above indicated, and I am disinclined to depart therefrom; it is certainly safer to hold as stated; that loans on bonds and mortgages which savings banks may make are those in which the mortgages as well as the bonds are made or assigned to, and held and controlled by the savings bank." 21. The attorney-general gave an opinion, dated September 24, 1892, relating to the bonds of the State of Alabama as a legal investment for savings banks. He says : " I am unable to say whether there are now any bonds or obligations outstanding against that State, the principal or interest of which has been de- faulted by the State. If the said sum of $9,249,000 includes the entire legal indebtedness of the State and there has been no default in the payment of the interest thereon, during the last ten years, and no default in the payment of the principal, I know of no reason why savings banks in this State may not invesi^ in the securities; but as it is almost impossible for this department to be in posses- sion of all the material facts relating to the financial condition of the several States in the Union, and this department not being in possession of the facts relating to the actual financial condition of the State of Alabama, I would recommend that, before any savings bank invests its funds in such securities, that they obtain from the Alabama State ofiicials the facts relating thereto." 22. The attorney-general in an opinion dated November 12, 1895, interpreting subdivision 5 of section 116 of the Banking Law as amended by chapter 440 of •the Laws of 1893, held that " when the indebtedness of any of said cities, de- creased by its water debt or sinking fund, exceeds seven per cent. ' of its valuation for taxation purposes,' then the bonds or stocks of said city are no longer avail- able as investments for the savings banks of New York. In other words, in determining the indebtedness of any such city, it should have credit for the amount of its sinking fund. \ "Again concerning the effect to be given to ' tax certificates ' upon the indebted- ness of a city. " Without a reference to the peculiar provisions of the statute authorizing the issue of such form of obligation, we are unable to frame an intelligent reply. If -the tax certificate were to be issued as a general obligation of the city, it no doubt should be added to the sum of nLunicipal indebtedness. If, on the contrary, such certificate should be issued against the proceeds of certain assessments or uncol- lected taxes, a particular fund, such certificate should not constitute a general •obligation of the corporation. Indebtedness of a general character, if any there might be, would not accrue until the certificates were issued, and of course these -would, as before stated, be entirely dependent for their validity and effectuality upon the particular terms in which the legislative will was expressed. 23. As to bonds of Missouri-Pacific Railway Co. on which dividends had Tecently been made payable in stock, held, that such an investment, legal when. 17 258 THB BANKING LAW. made, should be changed when the conditions of security change, and the super- intendent may order such change. Opinion Atty.-Gen., January 15, 1908. 24. As to whether bonds secured by the Northern Division mortgage of the Eastern Railway Company of Minnesota which had been absorbed by the Great Northern Railway are a legal investment for savings banks in view of the fact that the corporation issuing the bonds did not own 500 miles of trackage for five years before the investment, held, that the five years' period in above sec- tion did not apply to the ownership of trackage, and that the investment was legal if the 500 miles of trackage was owned at the time of the investment. Opinion Atty.-Gen., April 10, 1909. 25. A savings bank may invest in what is technically a second mortgage, where it holds the first mortgage, as the word "unencumbered" means that there is no lien prior to that of the bank. Opinion Atty-Gen., June 11, 1909. 26. An agreement by a savings bank to sell certain of its securities at a fixed price to a national bank, and to deposit the proceeds with the buyer which will, on demand of the seller, resell all or any of said securities, and upon demand of the buyer the savings bank (seller) will buy back the same securities, the original purchasing bank to pay interest to the savings bank for the deposit; the resulting purpose being that the national bank may gain additional circula- tion from the U. S. Treasurer by reason of said securities being placed in the U. S. treasury; held, to be actually a loan by the savings bank of its securities and illegal. Opinion Atty.-Gen., June 7, 1909. 27. September 7, 1906, the attorney-general replied to an inquiry as to the construction to be placed upon section 146 of the Banking Law in regard to the investment of moneys deposited therein, and the income therefrom. He stated: " Subdivision 6 of the section above referred to requires that such investments shall be in bonds and mortgages on unincumbered real property situate in this State to the extent of sixty per cent, of the value thereof. Not more 'than sixty- five per centum of the whole amount of deposits shall be so loaned and invested. " I think a fair construction of that section would be that the deposits and the income derived therefrom, which of course would be the accumulated surplus, must be treated as a whole, and sixty-five per cent, thereof and no more, may be invested as provided by subdivision 6 above referred to." § 147. limitation as to real property. — Every such corporation may purchase, hold or convey real property only as follows: 1. A plot whereon is erected or may be erected a building or buildings requisite for the convenient transaction of its business, and from portions of which not required for its own use a revenue may be derived. The cost of such building or buildings and lot shall in no case exceed twenty-five per centum of the net surplus of the corporation, except by written permission of the superintendent of banks. The estimate of the cost of said building and lot, and the plans of the building to be erected, shall first be submitted to the superintendent of banks for his approval, before the purchase of the lot is made or before the erection of the building is commenced. THB BAISTKIITG LAW. 259 2. Such as shall have been purchased by it at sales upon the fore- closure of mortgages owned by it, or on judgments or decrees obtained or rendered for debts due to it, or in settlements effected to secure such debts. All such real property shall be sold by such corporation within five years after the title to the same shall be vested in it, unless, upon application by the board of trustees, the superintendent shall extend the time within which such sale shall be made. Every such corporation may, with the approval in writing and under the seal of the superintendent of banks, change its location within the limits of any city or town wherein it may be established. In effecting such change of location such corporation owning a banking-house and lot, may purchase such additional plot under the provisions of subdivision one of this section as the corporation may require; and such banking-house and lot previously owned and occupied shall be sold asi provided in this subdivision concerning real property acquired in satisfaction of debts. (Former section 117; R. S., 1569; L. 1882, ch. 409, § 263; L. 1894, ch. 178.) 1. A loan was made by the B. S. Savings Bank to three persons of $20,000, $15,000 and $15,000 respectively, upon a promissory note by each for the amount he received, with collateral security of promissory notes of an Illinois corpora- tion, which notes were secured by trust deeds of such corporation upon unim- proved vacant lots in that State, not worth over $10,000, and where one of the trustees of the bank at the time of the loan was a large stockholder in such foreign corporation, and the loans were intended to be and were in fact loans to the corporation, such facts being known to the trustees of the bank, or could with reasonable diligence have been learned by them, and where the loans were intended to be to said trustee, and were made because of his interest in the corporation, and the loans were in fact loans upon the security of the lots. Held, that under the laws of this State affecting savings banks, such transaction is unauthorized and illegal. Paine, Receiver, v. Barnum et al., 59 How. Pr. 303. 2. Where a savings bank loaned money on certain notes, which notes were taken up by giving a second note for the amount; held, the bank could recover on such subsequent notes, and that the statute should not be made to work an evil to the savings when in fact it was intended for its benefit. Rome Savings Bank v. King et al., 102 N. Y. 331, 6 N. E. 682. 3. An opinion by the attorney-general was filed in the banking department September 26, 1879, in which that officer holds as follows: "In my opinion, a savings bank can only purchase and hold real estate (other than such as may be bought in at foreclosure sales) necessary for a banking building. The statute declares that ' it shall be lawful for any such corporation to purchase, hold or convey real estate only as follows: 1st. A plot whereon is erected, or may be erected, a building or buildings requisite for the convenient transaction of its business, and from portions of which, not required for its own use, a revenue may be derived.' § 29 ( 263 ) . 260 THE BANKIliTG LAW. " It is very clear that, under this statute, it is not lawful for a savings bank to purchase adjoining property, upon the theory of protecting its vaults, nor for the purpose of erecting and renting buildings thereon. A bank should, of course, own a lot large enough for the safety and security of the building and vaults, and no definite rule can be laid down on that subject; but the trustees should exercise a prudent discretion. " In respect to purchase at foreclosure sales, and conveyances to the bank in settlement of mortgages, or other debts due the bank, I am of opinion that the amount which should be reported as invested in real estate, so acquired, should be the face of the loan or debt liquidated by the conveyance, with the accrued interest, and any costs attending the acquisition of title. " This should be regarded as the rule in all cases, unless other payments or other securities are received by the bank, and in such cases the amount of such payments or securities would diminish the investment in real estate to that extent." 4. In reply to an inquiry made by the superintendent of the banking depart- ment as to his power to extend the time allowed savings banks to hold real estate purchased upon foreclosure or judgment, when such extension is requested after the lapse of five years from the time title is vested in such bank, the attorney- general, in his opinion filed in the banking department March 1, 1888, holds as follows : " The banks should endeavor to carry out the provisions of the act and sell the property within the five years; if they do not, it is for the superintendent to say whether the case is a proper one for granting the relief. Extending the time before the expiration of five years would tend to defeat rather than carry out the general policy of the statute. Which policy evidently was, that the property should not, except in case of necessity, be held by the banks in excess of that period, and should the superintendent extend the time during the limited period, the banks would have no incentive to endeavor to dispose of the property within the five years allotted. " I am of the opinion, therefore, that the superintendent may extend the time for savings banks to sell their real estate, acquired in the way above set forth, after the expiration of the five years allowed them to hold it." 5. A savings bank cannot legally erect buildings on real estate purchased by it on foreclosure. Opinion Atty.-Gen., January 29, 1908. § 148. Available fund for current expenses; how loaned. — The trustees of every such corporation stall as soon as practicable invest the moneys deposited with them in the securities authorized by this article; but for the purpose of meeting current payments and ex- penses in excess of the receipts, there may be kept an available fund not exceeding ten per centum of the whole amount of deposits with such corporation, on hand or deposit in any bank in this state organ- ized under any law of this state or of the United States, or with any trust company incorporated by any law of the state ; but the sum so deposited in any one bank or trust company shall not exceed twenty- THE BANKING LAW. 261 five per centum of the paid-up capital and surplus of any such bank or company; or such available fund, or any part thereof, may be loaned upon pledge of the securities or any of them named in sub- divisions one, two, t hree, four and five of section one hundred and forty-six, or upon the first mortgage bonds, or any of them, of the railroads mentioned and described in subdivision six of said section, but not in excess of ninety per centuni of the cash market value of such securities so pledged. Should any of the securities so held in pledge depreciate in value, after making any loan thereon, the trus- tees shall require the immediate payment of such loan or of a part thereof, or additional security therefor, so that the amount loaned shall at no time exceed ninety per centum of the market value of the securities pledged for the same. (Former section 118; L. 1901, ch. 406; E. S., 1568; L. 1882, ch. 409, § 261; L. 1886, ch. 509.) 1. Loaning money on promissory notes, cashing checks, or permitting depositor to overdraw his account renders any officer of a savings bank that is, or was, a, party to it liable. Elnapp, Receiver, v. Roche, 44 Super. Ct. (12 J. & S.) 248. 2. A deposit by a savings bank of its funds in a national bank is not illegal where such deposit is not shown to exceed ten per cent, of their deposits, although the terms of such deposit secure to the savings bank a payment of interest upon its amount, as such agreement to pay interest does not convert the deposit into an unauthorized loan. 1887, Erie County Sav. Bank v. Coit, 104 N. Y. 532, 11 N. E. 54. 3. The author trusts that the length of this note needs no apology, and that the unusual prominence given to a referee's opinion in the subjoined case is justified by reason of the fact that at the time of its rendition it caused much comment. The professional standing of the counsel employed, the novelty of the issues, and the large amount (comparatively speaking) claimed to be due from the defend- ants, all contributed to make the case a prominent one. See article " Trustees as tortfeasors" by one of the counsel. Am. L. Rev. XIV. 36; XV. 159.) The superintendent of the banking department forwarded in December, 1878, a circular to all the savings banks of this State, calling attention to this decision. And in his annual report to the legislature, concerning savings banks, dated April, 1879, he uses the following language: " Duties of trustees defined. — In one of the failed savings banks in New York, a legal contest arose from suits brought by the receiver, Willis S. Paine, Esq., against trustees. The case was referred to Clifford A. Hand, Esq. The opinion is so wide in its comprehension, so broad and logical in its conclusions, so exhaustive in the authorities cited, and so luminous in the statement of the responsibilities and duties of trustees, that I have deemed it very useful to give it a place in the Appendix to this Report." In July, 1879, said superintendent addressed a formal communication to the attorney-general asking the following questions: 262 THE BANKING LAW. " 1. Can trustees of a savings bank lawfully appropriate the funds of the cor- poration, to other purposes than those expressly named in laws regulating their administration ? • " 2. If funds have been, or should be, misappropriated by trustees of a savings bank, are not the trustees making such appropriations liable, personally, for the funds so used? " 3. Would the ordinary statute of limitations hold in such cases of misappro- priation of money, or is the liability of trustees continuous, as Mr. Hand holds in the ease of Willis S. Paine, Receiver of the Bond Street Savings Bank, v. Trus- tees? " 4. Is it the duty of the superintendent of the bank department to require the restitution of funds misappropriated unlawfully by the trustees of a savings bank, to purposes wholly foreign to the affairs of the bank? " 5. Would not the misuse of funds in such unlawful ways by any trustees, and refusal to restore them, constitute probable cause for the removal of such trustees from office under the Law of 1879 (chapter 422) ?" The reply of that officer was substantially as follows: " It is a settled rule of law that the powers of corporations are limited by the acts creating them. Being artificial creatures they have only such powers as are granted for the purposes of their creation. Trustees of corporate bodies can only exercise the powers granted to the corporation they represent. Their office is a trust, and their duty is to execute the trust conferred upon them; and the duties imposed are the measures of their powers. Trustees acquire no interest in, or authority in respect to, the trust property, personal to themselves, nor any power over it beyond the charter or statutes under which they act. The courts have been rigid in enforcing these principles, and in holding trustees to personal accountability for abuses of their trust, in assuming the exercise of powers not conferred, in the waste or illegal application of trust funds or property, and in restraining corporations to authorized acts. The court of appeals, upon this subject, uses the following explicit language: " ' The public are interested in restraining corporations to the enjoyment of the precise franchise granted, and the exercise of the powers expressly conferred, and the incidental powers essential to the express power. Shareholders are also interested in keeping their trustees, the governing boards, within the limits of the delegated power with which they are clothed. It is axiomatic that a corpora- tion can make no contracts, and do no acts, except such as are authorized by its charter, either expressly, or as incidental to its existence. Corporations neces- sarily depend, both for their powers and the mode of exercising them, upon the construction of the statute which gives them life and being.' 60 N. Y. 294, 19 Am. Eep. 181. "By the act relating to savings banks (chap. 371, Laws of 1875), the powers of savings banks and their trustees are clearly defined, and their powers are limited to those expressed in the statute. Every trustee of a savings bank takes his position subject to the limitations of the statute ' and to the duties it imposes. By this statute savings banks have power, to receive money on deposit, to invest the same, and further transact the business of a savings bank as hereinafter provided.' § 1, sub. 7. (§ 235, sub. 7.) " By section 26 ( § 260 ) the manner in which savings banks may invest the moneys deposited therein is particularly prescribed. Section 27 (§ 261) au- THE BANKING LAW. 263 thorizes a limited percentage of deposits to be kept on hand for current payments and expenses, and for violating ' the spirit and intent ' of this provision the superintendent, by section 28 (§ 262), is required to report the bank to the attorney-general, to be proceeded against for mismanagement. By section 23 (§ 257) the sums deposited, together with any dividend, or interest credited thereto, are required to be repaid to the depositors after demand and notice. " The trust, as thus defined by law, is to receive deposits, to invest them only in the manner prescribed, and to return the principal and interest to the de- positor. The whole fund is protected by careful provisions of law. For the purpose of executing this trust, every bank is required to have a board of trustees of not less than thirteen, who must elect from their number a president and two vice-presidents, and also elect or appoint from their number, or otherwise, such other officers as they may see fit, § 16 (§ 250); and the trustees, acting as officers of the corporation, whose duties require and receive their regular and faithful attendance at the institution, are authorized to receive such compensation as, in the opinion of a majority of the board of trustees, shall be just and reasonable; such majority to be exclusive of any trustee to whom such compensa- tion shall be given. And trustees are prohibited from receiving pay as trustees, for their attendance at meetings of the board. " In addition to the compensation of officers, clerks and attorneys, expenditures may be lawfully made from the income, for the incidental and necessary expenses of the institution, such as furniture, rents, taxes, fuel, light, stationery, watch- men, and whatever may be requisite for the proper management of the trust property and its protection. Expenditures for those purposes fall within the legitimate duties of the trust; but neither the deposits, nor their income, can be lawfully used or expended for other purposes. They cannot be used ' to pay trus- tees compensation for services upon committees; ' nor 'the chairman of a regular standing committee for services as trustee in acting as such chairman; ' nor 'to pay for an annual supper or entertainment for the trustees ; ' nor ' to pay for a service of plate donated to a local organizer of a railroad enterprise; ' nor 'to make contributions ' for charitable, benevolent or sanitary objects ; nor to make ' gratuitous appropriations to the widows of deceased officers ; ' nor ' to pay costs and expenses to get bills through the legislature to pay interest ' on illegal loans ; nor to make 'gratuities to officers for past services, who had been paid regular salaries; ' nor to lobby agents 'to procure general legislation relative to savings banks.' " Payments from the money of depositors for all such purposes are clearly illegal, and render the trustees who authorize or consent to them personally liable for the diversion of the funds. " It is undobutedly the duty of the superintendent of the bank department to require the restitution of the funds misappropriated, or unlawfully diverted by the trustees of a savings bank; and in case of failure to make restitution, to report the facts to the attorney-general that proceedings may be instituted for their recovery, according to law. Nor is there any doubt that the misuse of the funds, or their illegal expenditure by the trustees, and a refusal to make restitu- tion, constitute such abuses of trust as to furnish ground for the removal of the culpable trustees under the provisions of chapter 422 of the Laws of 1879, and the Revised Statutes. " The statutes of limitations have no proper application to cases of trusts, but 264 THE BANKING LAW. the liability of trustees, for illegal appropriation of trust funds, continues while the trust relation exists. If proper proceedings are delayed unreasonably after the relation ceases, the recovery will be barred by lapse of time." The essential portion of Mr. Cliflford A. Hand's opinion is as follows: " This case presents the alternative that heavy losses must be visited either upon the multitude of depositors in a savings bank, or upon a small number of trustees to whom the management of the bank was intrusted. Whatever the event, there is unavoidable hardship. The bank was itself in effect merely a trustee. Its function or office was declared by the charter to be the receiving of deposits and investment of them ' for the use, interest and advantage of the said depositors.' From the time when its doors were first opened for business, until they were closed by the decree of this court, every transadtion was under this trust responsibility. It was the aim of the charter, in all its provisions, to secure safety of deposits, and to prevent exposure of them to hazard or venture for loss or gain. The persons for whose use and benefit the bank was thus chartered were known to be such as were in need of special safeguards. Their savings were in amounts insuflScient for separate investments, and they lacked the skill requisite to prudently invest them. At the same time a loss, however small, might easily cause them suffering which they were little able to bear. " Duties of trustees defined. — But we must rest content with the plan and pro- visions which the legislature has seen fit to prescribe. By that plan, the trustees were charged with the duty of keeping deposits duly invested, and they were clothed with ample power and discretion for the discharge of this duty. In the exetcise of their discretion within the prescribed limits, it would be manifestly oppressive to hold them liable for every loss or misfortune happening to the fund. To such an injustice the reasoning of Lord Haedwicke would apply: ' For as a trust is an ofloice necessary in the concerns between man and man, and which if faithfully discharged is attended with no small degree of trouble and anxiety, it is an act of great kindness in any one to accept it. To add hazard or risk to that trouble, and to subject a trustee to losses which he could not foresee, would be a manifest hardship, and would be deterring every one from accepting so necessary an office.' Knight v. Plymouth, 3 Atk. 480; and see Thompson v. Brown, 4 Johns. Oh. 628. And this language is peculiarly applicable to the office of unpaid director, or gratuitous trustee. In short, the case must be tested by its circumstances and the established principles of equity jurisprudence, with- out undue regard to the hardship necessarily resulting to the one or the other of the parties. " That the director or trustee of a corporation is subject to the rules of duty and responsibility incident to other trusts, so far as these rules are capable of practical application, and except as they may be modified by special statutes, will hardly be denied. Whenever the point has arisen (as in French, Receiver, v. Ingram, decided by Mr. Justice Van Bktjnt; Butts v. Wood, 38 Barb. 181), the courts have so declared. And the cases are abundant where the analogy has been taken for granted. The degree of skill and diligence required of such a trustee, serving without compensation, is not so easy to define. The general requirement, that it must equal that of a man of ordinary capacity and prudence in the man- agement of his own affairs, is, perhaps, to be qualified, in view of the 'gratuitous character of the service, although trusts have always been regarded in English jurisprudence as offices of friendship or personal confidence, rather than of profit. THB BANKING LAW. 265 But whether an unpaid trustee is responsible for only gross, or for a less degree of negligence, there are certain rules of liability which admit of no question. There must be the strictest good faith, and there must be strict observance of the restraints established or approved by the courts, and of special conditions or directions whenever they are affixed to the trust. See 1 Perry on Trusts, 2d edition, §§ 420-460. If a trustee passes the bounds set for the exercise of his discretion, no degree of care, diligence or good faith will protect him. See 1 Perry on Trusts, § 460; Ackerman v. Emott, 4 Barb. 626; King v. Talbot, 40 N. Y. 76. " The available fund and its use. — It is, however, contended on the part of the defendants, that the loan was not subject to the restraints prescribed for invest- ments upon real estate security, inasmuch as the sum loaned was outside the two-thirds of total amount of deposits required to be kept invested, and was part of the available fund. It is argued that the charter provisions for the safety of ordinary investments, did not apply to this part of the resources of the bank. And it appears from the evidence of the forme rsuperintendent of the banking department that such was the construction adopted by him at the time, in similar cases, after consultation with the attorney-general. By the charter (section 6) it was made the duty of the trustees to keep invested in the specified securities, ' all sums received by them beyond an available fund of not exceeding one-third of the total amount of deposits,' ' which they may keep to meet the current payments of the corporation, and which may, by them, be kept on deposit on interest, or otherwise, in such available form as the trustees may direct.' And temporary deposits could be made in banks in the city of New York, at rates of interest to be agreed upon. It is claimed that the phrase ' or otherwise ' applies to the entire disposition or management of the available fund, and that the discretion of the trustees over it was absolute, provided only that the fund was not so placed as to deprive them of the legal right to recall it in case of need. The loan in question was shaped in harmony with this idea. While the mortgage security and the obligations of the mortgagor provided for a fixed period of credit, they were made collateral to promissory notes payable on demand. But I am unable to accede to this view of the statute, or of its efficiency to shield the trustees. In order to make the available fund readily and certainly available for the current needs of the bank, the trustees were authorized to ' keep ' it, instead of investing it. As a safe and convenient mode of keeping, the deposit of it ' on interest or otherwise ' was authorized. And the selection of depositories might be from banks in the city of New York. This seems to me the only con- struction consistent with the entire section, and with the end in view. And it makes impossible so anomalous a proceeding as the keeping of a fund available for current use in New York, by sending it to Illinois as a loan upon real estate there. At all events, it is not reasonable to suppose that in providing for a fund of that character and having that office, the legislature designed to authorize, by implication, a species of investments, the use of which for investment purposes was by the same charter expressly forbidden. Nor is it reasonable to infer that an act betraying such solicitude for the safety of deposits tacitly consented to the lending on mere personal security, which is a disposition of trust moneys regarded by courts of equity as especially reprehensible. To combine the two qualities of a call loan upon promissory notes, and the security of a mortgage, in which speci- 266 THB BANKIITG LAW. fled periods of credits were reserved, was assuredly not within the true scope of the charter provisions for an available fund." Payment to trustees for committee work. — The payments made to trustees fdi: services rendered by them as members of examining committees are also com- plained of. ■ The charter (sec. 3) provides that the trustees "shall not, as such, directly or indirectly, receive any pay or emolument for their services." It is unnecessary to observe that all covert or circuitous methods of realizing com- pensation for the services of the trustee " as such " fall within the prohibition. In the present case there is no indication that an impropriety or indirection was intended. The by-laws provided for appointment by the board in each De- cember, of an examining conxmittee of three of its members, and the provision was one of obvious propriety. The duties of the conunittee, " to make a thorough examination of the books and assets," and report upon them in detail, were onerous as well as important. The compensation awarded to the committees by the board appears to have been as moderate as the most rigid economy could demand. Nevertheless I am compelled to decide that the allowance was forbidden by the charter. By delegation of trust duty to part of their number, the trustees could not alter the character of the duty or service, which remained that of trus- tee. The policy of the law is unyielding in this respect, and there would seem to be hardly any conceivable service personally rendered by a trustee to the trust estate, for which he is permitted to charge special compensation upon the ground that it is outside the bounds of his duty as trustee. See Morgan v. Hannas, 49 N. Y. 667. The liability of trustees — how long it lasts. — The remaining defense is, that each of the cause of action set forth in the complaint is barred by the statute of limitations; and it is undisputed that neither of the breaches of trust com- plained of by the plaintiff occurred within the six years immediately preceding the commencement of the action. The liability would seem to be of that continuous character which, of itself, suspends or delays the operation of the statute in the case of a trustee. Robin- son V. Robinson, 5 Lans. 5; Eain v. Bloodgood, 7 Johns. Oh. 90, 11 Am. Dec. 417; Decouche v. Savetier, 3 id. 190, 8 Am. Dee. 478; Hubbell v. Medberry, 53 N. T. 98. So long as the trustee is in office, his duty to respond for the trust estate is one of continuous obligation, not terminated by past neglect to discharge the duty. It is not, perhaps, until he ceases to be trustee, or openly asserts title in hostility to the trust, or afiSrmatively refuses to account, that a cause of action can be said to accrue within the meaning of the statute of limitations. And the propriety of such a rule is evident. No lack of diligence can fairly be imputed to the cestui que trust for delay in suing the trustee, when that delay is the natural result of the confidential relation subsisting between them, and of the essential dependence of one upon the good faith of the other. " If mistaken, however, in this view of the subject, it seems to me that the proper limitation is that of ten years, provided by statute for the general cases in which equitable relief is given. The liability of trustees is one over which courts of equity have ' long exercised unquestioned jurisdiction. And this jurisdiction is by statute law expressly extended, or recognized as extending, to directors and trustees of cor- porations, who can be compelled to account for their official conduct in the management and disposition of the funds and property, and to pay to the cor- THE BAH-KIITG LAW. 267 poration or its creditors whatever may have been lost or wasted by any violation of their duties.'' It may be well to add that no appeal was taken by the defendants, and that this, and like litigations brought against the trustees of the above-named bank, were settled by their paying to the plaintiff the sum of one hundred and thirteen thousand five hundred dollars. 4. The superintendent of the banking department requested the opinion of the attorney-general, as to whether there is any provision of law justifying the trus- tees of a savings institution in borrowing money, or pledging its securities. The reply of that officer, filed in the banking department October 8, 1883, is as fol- lows: " The statutes, so far as I have been able to examine them, contain no express authorization, or prohibition, of such a course of procedure on the part of the trustees of a savings institution. " I think, however, that it would be contrary to the spirit of the act, chapter 409 of the Laws of 1882, as that act describes very specifically as to how the money shall be invested, and provides for keeping an available fund to meet current expenses, and generally is very explicit in all its details as to the man- agement and conduct of an institution of that description. If a savings bank «an pledge part of its securities, it could pledge them all, and thus virtually defeat the effect of the statutes, providing for the safe-keeping and investment of the funds of its depositors. , " I am of opinion that such course would be contrary to the policy of the stat- ute and should not be adopted." 5. A bank may deposit part of its available fund in a bank under § 148, and may deposit in same account a temporary deposit under § 149. Even if total exceeds available fund amount authorized by § 148. Chenango Valley Savings Bank v. Dunn, 40 App. Div. 552, 58 N. Y. Supp. 38. 6. It was held, June 5, 1894, that section 5242 of the National Bank Act (quoting Scott v. Armstrong, 146 U. S. 499, 36 L. ed. 1059, 13 Sup. Ct. Rep. 148) was not intended to require that in the distribution of assets of a failed national bank, rights lawfully acquired by a creditor, or superior equities, should be annulled, therefore liens or rights arising by express agreement between the bank and one contracting vsdth it, or implied from the nature of the dealings between the parties, or by operation of law, prior to insolvency, and not in con- templation of it, are not invalidated. It is the voluntary act of the bank " in contemplation of its insolvency, and with the view of then preventing the ratable application of its property, which is avoided by the national law." Sections 118 and 130, ch. 689, Laws of 1892 (present sections 148, 159), were held contrary to the national banking law; a savings bank having deposits with a national bank when the latter failed, was entitled to a preference in payment .from the assets of the insolvent bank, the circulating notes having been provided for, and all other conditions of the Banking Law having been complied with, so as to entitle the claim to be allowed. Elmira Savings Bank v. Davis, 142 N. Y. 593, 2S L. E. A. S46, 37 N. E. 646, aff'g 73 Hun, 359, 26 N. Y. Supp. 200; but reversed in 161 U. S. 290, 40 L. ed. 703, 16 Sup. Ct. Rep. 502. See note to I 159. 268 THE BANKING LAW. § 149. Temporary deposits. — Every such corporation may also deposit temporarily in the banks or trust companies specified in sec- tion one hundred and forty-eight the excess of current daily receipts over the payments, until such time as the same can be judiciously invested in the securities required by this artide. Whenever it shall appear to the superintendent of banks that the trustees of any such corporation are violating the spirit and intent of this provision by keeping permanently uninvested all or an undue proportion of the moneys received by them, he shall report the facts to the attorney- general, who shall proceed against such corporation in the manner provided in section one hundred twenty-seven of chapter six hundred eighty-nine of the laws of eighteen hundred ninety-two. (Former section 119; E.. S., 1569; L. 1882, eh. 409, § 262.) 1. In reply to the question of the author, " Is it proper for a savings bank to deposit money with a bank of deposit or trust company upon the conditions that a certain number of days' notice of the intention to withdraw it shall be given to the depositary before it can be drawn? " the attorney-general, in an opinion filed in the banking department, July 13, 1886, ruled as follows: " It is made the duty of savings banks to invest money deposited with them as soon as practicable in the designated class of securities. They may, however, keep available funds on hand to an amount not exceeding ten per cent, of the deposits for the purpose of current expenses and payments in excess of deposits; and they may also deposit temporarily in banks and trust companies the excess of the Banking Law having been complied with, so as to entitle the claim to be " It appears to me that the general intention of the law could easily be de- feated by allowing the trustees to deposit the funds of the corporation with bank» or trust companies upon an agreement that they should not be withdrawn for a certain specified time. If such an agreement could be made for one day, it could be made for one year, and would, to all intents and purposes, if not in name, be a loan. It would not be a temporary deposit, but would put the funds so deposited out of the immediate control of the trustees, and might materially interfere with them in their duty of investing the moneys in the authorized securities as soon as practicable. " It would be impracticable to so deposit the founds allowed to be kept in hand for current expenses, as such funds deposited under such an arrangement would not be available for the very purposes for which they are authorized to be kept uninvested. " I do not think, therefore, that the general policy of the law will permit the trustees of savings banks to deposit the funds of the institution with banks and trust companies under an arrangement by which said trustees are bound not tO' withdraw the money so deposited within any agreed length of time." § 150. Personal security prohibited ; loans on bond and mortgage. — The trustees of any savings bank shall not loan the moneys deposited with them or any part thereof, upon notes, bills of exchange, drafts THB BANKING I/AW. 269 or any other personal securities whatever. In all cases of loans upon real property, a sufficient bond secured by a mortgage thereon shall be required of the borrower, and all expenses of searches, examina- tions and certificates of title, and of drawing, perfecting and record- ing papers, shall be paid by the borrower. (Former section 120; L. 1898, ch. 556.) § 151. Mortgaged property to be insured. — Whenever buildings are included in the valuation of any real property upon which a loan shall be made by any such corporation, they shall be insured by the mortgagor in such company or companies as the directors shall direct, and -the policy of insurance shall be duly assigned, or the loss made payable as its interest may appear, to such corporation ; and any such corporation may renew such policy of insurance in the same or any other company or companies as they may elect, from year to ear, or for a longer or shorter term, in ease the mortgagor shall neglect to do so, and may charge the amoimt paid to the mortgagor. All the necessary charges and expenses paid by such corporation for such renewal or renewals shall be paid by the mortgagor to the corpora- tion, and shall be a lien upon the property mortgaged, recoverable with interest from the time of payment as part of the moneys secured to be paid by the mortgage. (Former section 121; R. S., 1569; L. 1882, eh. 409, § 265.) As to application of this section, see Heal v. Richmond Co. Savings Bank, 127 App. Div. 428. § 152. Bestrictions on methods of doing business. — 'Eo savings banks shall directly or indirectly deal or trade in real property in any other case or for any other purpose than is authorized by this article, or deal or trade in any goods, wares, merchandise or com- modities whatever, except as authorized by this article, and except such personal property as may be necessary in the transaction of its business; nor shall any savings bank or any officer thereof in his regular attendance upon the business of the bank, in any manner buy or sell exchange, or gold or silver, or collect or protest promissory notes or time bills of exchange; but savings banks may sell gold or silver received in payment of interest or principal of obligations owned by them, or from depositors in the regular course of business. 270 THB BANKING LAW. and may pay regular depositors wlieii requested by them by draft upon deposits to the credit of the bank in the city of New York, and charge current rates of exchange for such drafts. ITo savings bank shall borrow money or pledge or hypothecate any of its securities, except with the written approval of the superintendent of banks and in pursuance of a resolution adopted by vote of a majority of its board of trustees, duly entered upon their minutes, whereon shall be recorded the ayes and nays upon each vote. No savings bank shall make or issue any certificate of deposit payable either on demand or at a fixed day, or pay any interest except regular quarterly or semi- annual dividends upon any deposits or balances, or pay any interest or deposit, or portion of a deposit, or any check drawn upon itself by a depositor unless the pass-book of the depositor be produced, and the proper entry be made therein at the time of the transaction. The board of trustees may, by their by-laws, provide for making payments' in cases of loss of pass-book, or other exceptional cases where the pass-book can not be produced without loss or serious inconvenience to depositors, the right to make such payments to cease when so directed by the superintendent of banks, upon his being satisfied that such right is being improperly exercised by any savings bank; but payments may be made upon the judgment or order of a court or the power of attorney of a depositor. (Former section 122; R. S., 1570; L. 1882, eh. 409, § 266; L. 1908, oh. 154.) 1. Where a savings bank authorized a broker to sell on, Change stock owned by it at a fixed price for cash or for cash in sixty days "seller's option; " held, in action against the bank for damages for non-delivery, that it. was not ultra vires. Sistare v. Best, Receiver, 88 N. Y. 527. 2. The opinion of the attorney-general was asked by the superintendent of the banking department, upon the proposition whether it is within the corporate powers of a savings bank to receive special deposits of valuables for hire, under the terms of statutes permitting the organization and governing the management of such institutions. That officer holds that savings banks have no power to receive special deposits of valuables, and in his opinion, filed in the banking department October 7, 1882, says: "They are corporations formed for a special and limited purpose, and cannot engage in the common and ordinary business which a banking institution may conduct. They may not directly or indirectly deal or trade in real estate, or in any goods, wares or merchandise, buy or sell or exchange gold or silver, collector protest promissory notes or time bills, or issue certificates of deposit (§ 266, eh. 409, Laws 1882). Their business is to receive money on deposit, and to invest the same in particular ways which are carefully specified in the statutes." " It is a well-known rule that corporations created by statute can exercise no THE BANKING LAW. 271 powers, and have no rights, except such as are expressly given or necessarily im- plied. Huntington v. Savings Bank, 6 Otto, 388, 24 (L. ed.) 777; First National Bank of Manhattan v. Citizens' Bank of Topeka, 21 Int. Rev. Rec. 382, Fed. Cas. No. 4,802. The power to receive such special deposits has not been given to such institutions by statute, and cannot be said to be one of those incidental powers which it is necessary or customary for them to exercise; in this respect they differ from corporations authorized to transact a general banking business. 80 N. Y. 98, 36 Am. Rep. 582. I am of the opinion, therefore, that .the receiving of special deposits of valuables, for hire, by savings banks, is ultra virea and un- authorized." 3. In December, 1887, the superintendent of the banking department sub- mitted the following question to the attorney-general : " May the trustees of a savings bank use the surplus for the purpose of paying dividends in excess of the amount actually earned during the period for which such dividend is declared, until such time as the surplus equals fifteen per cent, of its deposits ? " In reply thereto the following opinion was filed in the banking department January 3, 1888: "When the statute, section 266, chap. 409, Laws of 1882 (above), speaks of declaring a dividend, it means a dividend earned during one of the interest periods, or during the half or quarter year for which it is declared. The ofiicers of the bank act for the depositors, who are entitled to all the earnings of their money during any proper interest period, less the authorized deductions for ex- penses and the surplus provided for in section 267. I find nothing in the statute which would authorize the trustees of a savings bank to withhold any earnings of one period, in order to add them to and increase the dividends of a subsequent period. This would work injustice to depositors, and result in depriving de- positors who withdrew their deposits of the full amount of interest earned. They can only be withheld for the purpose of accumulating a surplus in the manner indicated in section 267. " Nor do I find any provision authorizing the use of the established surplus for the payment of dividends. The surplus, to the amount at least of fifteen per cent, of the deposits, is declared to be for the security of the depositors, and the statute contemplates its being kept intact for that purpose. There is an express provision for the disposition of the excess of surplus. Such excess of authorized surplus must be divided as a dividend, once in three years (§ 267, supra). " I am of the opinion, therefore, that it is the duty of the trustees of a savings bank to declare a dividend for each interest period, equal to the amount of earn- ings for that particular period, less the expenses and amount properly applicable to the accumulation of the authorized surplus, as aforesaid, and that they should not retain the earnings of one period for the mere purpose of increasing the dividend of a subsequent period, nor use the established surplus for the purpose of increasing the dividends, except when such surplus exceeds the amount au- thorized by statute, and, in that case, such excess of surplus should only be converted into dividends in accordance with the provisions of the statute above quoted." § 153. Rate of interest; extra dividends. — Tke trustees of every such corporation shall regulate the rate of interest or dividends not 272 THB BAHKIIfG LAW. to exceed five per centum per annum upon the deposits therewith, in such manner that depositors shall receive as nearly as may be, all the profits of such corporation, after deducting necessary expenses and providing in a manner approved by the superintendent of banks, for the amortization or gradual extinction of premiums or discounts on all securities owned by such corporation so as to bring them to par at maturity, and reserving such amounts as the trustees may deem expedient as a surplus fund for the security of the depositors, which to the amount of fifteen per centum of its deposits, the trustees of any such corporation may gradually accumulate and hold, to meet any contingency or loss in its business from the depreciation of its securities or otherwise. The trustees may classify their depositors according to the character, amount and duration of their dealings with the corporation, and regulate the interest or dividends allowed in such manner that each depositor shall receive the same ratable portion of interest or dividends as all others of his class. The trus- tees of any such corporation shall not declare or allow interest on any deposit for a longer period than the same has been deposited, except that deposits made not later than the tenth business day of the month, commencing any semi-annual interest period, or the third business day of any month, or withdrawn upon one of the last three business days of the month, ending any quarterly or semi-annual interest period, may have, interest declared upon them for the whole of the period or month when so deposited or withdrawn. IlTo dividends or interest shall be declared, credited or paid, except by the authority of a vote of the board of trustees duly entered upon their minutes, whereon shall be recorded the ayes and nays upon each vote; but accounts closed between dividend periods may be credited with interest at the rate of the last dividend, computing from the last dividend period to the date when closed, if the by-laws so provide. Whenever any interest or dividend shall be declared and credited in excess of the interest or profits earned and appearing to the credit of the corporation, after making the deduction for expenses and amortization aforesaid, the trustees voting for such dividend shall be jointly and severally liable to the corporation for the amount of such excess so declared and credited. The trustees of any such corpora- tion whose surplus amounts to fifteen per centum of its deposits, at least once in three years, shall divide equitably the accumulation THE BAJCifKING LAW. 273 beyond such authorized surplus as an extra dividend to depositors, in excess of the regular dividends authorized. A notice posted con- spicuously in a bank of a change in the rate of interest shall be equivalent to a personal notice. (Former section 122; E. S., 1570; L. 1882, ch. 409, § 267; L. 1884, ch. 48; L. 1908, ch. 124.) See Penal Law, § 297. 1. The provisions of said section, declaring the trustees of savings banks who vote for the declaring and crediting of any interest or dividend in excess of the interest or profits earned, personally liable to the corporation for the amount of the excess, does not limit the interest which may lawfully be voted for to net profits. If the trustee votes for a dividend less than the whole amount of interest or profits earned, without any deduction therefrom for expenses, although the earnings have not been actually received, he does not, in the absence of fraud or bad faith, overstep his statutory duty, and is not liable to the penalty. " He may inquire what interest has been earned, and does not incur this penalty in declar- ing a dividend on it as a basis, although it has not been actually received." Van Dyck, Eeceiver, v. McQuade, 86 N. Y. 54. 2. Whenever a dividend is declared and credited to a depositor, it becomes his property, to which he is entitled in preference to the creditors of the corporation. Same case, 52. 3. It seems that a trustee, in an action against him to recover the penalty, cannot avoid liability because the manner of voting and of recording the vote prescribed by the statute was not followed; he could waive the direction, for it was made for his safety, but he cannot take advantage of the omission. But only the trustee voting is liable, not one who is not present. Same ease, 50. The Y. Savings Bank, of which defendant was a trustee, in pursuance of the requirements of its charter (§ 6, ch. 338, Laws of 1869), at the opening of its bank, posted notices of the rate of interest to be paid by it upon deposits, and thereafter paid interest at the rate stated up to January, 1877. In an action brought by plaintiff, who was appointed receiver of said bank in July, 1877, to recover the interest so paid, the referee found that the interest received from investments of the funds of depositors exceeded the interest paid them, but that its expenses exceeded its earnings and income. No fraud or other misconduct, or want of ordinary care and skill, was imputed to defendajit. Held, that defend- ant was not liable; that the order of payment of the debts of the bank, and what portion of its profits the trustees might from time to time divide, related to its general business, which was left to the judgment of the trustees (§§ 4-7), and' as long as it was exercised in good faith, and in due course of management, no common-law liability was incurred, nor was there any injury to the corpora- tion, so that in the light of the common law there was no rule by which damages could be assessed; that no liability was imposed under the chapter of the Revised Statutes in reference to moneyed corporations (7 R. S., ch. 18) to which by said charter the bank was made subject " so far as applicable," as the prohibition in said chapter against paying dividends to stockholders save from " surplus profits " has no application, the interest payable to depositors of savings banks not being dividends within the meaning of the statute, and as said statute pre- 18 274 THB BANKING LAW. scribes the remedy for its violation; that if said chapter of the Revised Statutes ever had any force as applicable to savings banks, it became inoperative after the passage of the said act of 1875; also that no liability attached imder the provision of the act last mentioned § 33 ( 267 ) declaring the trustees of a savings bank, who vote for a dividend in excess of the interest or profits earned, liable to the corporation for the amount of the excess, as the interest paid was not in excess of that earned. Same case. 4. For references to kindred cases, see 23 Moak's Eng. 39. 5. An opinion of the attorney-general, filed in the banking department July 3, 1878, contains his interpretation of a portion of this section: " In my opinion a savings bank can lawfully pay interest on deposits with- drawn on any of the last three days of a semi-annual interest or dividend period, for the length of time the money has actually been on deposit since the last preceding dividend. For example, if the dividend period be January first and July first, interest may be paid on deposits withdrawn on any of the last three days of Jime or December, if the deposits have been held the length of time required by section 33 of the act of 1875. In case of quarterly payment of dividends by a bank, I think the same rule does not apply, and that a with- drawal of the deposit before the end of the quartely interest period forfeits the right to interest. Section 33, before referred to, seems to contemplate only semi- annual payments of interest, and its provisions in reference to the withdrawal of deposits on the last three days have reference solely to such semi-annual pay- ments. " I am also of opinion that when deposits are withdrawn before the end of a quarterly dividend period, or more than three days before the end of a semi- annual dividend, a savings bank cannot lawfully pay interest on such deposits. I think payment of interest in such cases is plainly and clearly prohibited by the statute, and that the prohibition i's founded upon sound principles of banking. It is a necessary measure of protection to savings banks. They would be very much at the mercy of transient depositors, under a rule allowing interest on deposits withdrawn at any time." 6. An opinion by the attorney-general was filed in the banking department under date of June 24, 1884, in response to a request from the present super- intendent of that department for an official interpretation of the above-mentioned chapter 48 of the Laws of 1884. The attorney-general, in his reply, says: "My construction of chapter 48 of the Laws of 1884, concerning which you ask my opinion, is that all savings banks which allow interest semi-annually on deposits may pay interest for the whole ' interest period,' provided the deposit upon which the interest is allowed is made any time within ten days from the commencement, or withdrawn on either of the last three days of the ending thereof. I find nothing in the act which makes the same exception in favor of banks which pay interest quarterly. If the ten days' provision could be extended by implication to banks paying interest quarterly, it could, with equal propriety, be extended to banks paying interest monthly, which would, in effect, abrogate by implication the express provision of the statute which declares 'that it shall be unlawful for the trustees of any savings bank to declare or allow interest on any deposit for a longer period than the same has been deposited.' " 7. A promissory statement by a savings bank that it will pay dividends at a THE BANKING LAW. 275 certain fixed rate in the future, if profits justify them, is proper, but a contract to do so would be ultra vires. Opinion Atty.-Gen., May 28, 1909. § 154. Per centum of surplus, how determined. — In determining the per centum of surplus held by any savings bank its interest-paying stocks and bonds shall not be estimated above their par value or above their market value if below par. Its bonds and mortgages on which there are no arrears of interest for a longer period than six months shall be estimated at their face, and its real property at not above cost. The superintendent of banks shall determine the valu- ation of such stocks or bonds, or bonds and mortgages, as are in arrears of interest for six months or more, and of all other invest- ments not herein enumerated, from the best information he can obtain, and he may change the valuation thereof from time to time as he may obtain other and further information. (Former section 124; R. S., 1571; L. 1882, ch. 409, § 268.) § 155. Compensation of officers. — The trustees of any such cor- poration acting as officers of the same, whose duties require and receive their regular and faithful attendance at the institution, and the trustees appointed as a committee to examine the vouchers and assets pursuant to section one hundred and fifty-seven of this chapter, or to perform the duties required by subdivision six of section one hundred and forty-six of this chapter, may receive such compensation as in the opinion of a majority of the board of trustees shall be just and reasonable; but such majority shall be exclusive of any trustee to whom such compensation shall be voted. Trustees, as such, shall not be paid for their attendance at meetings of the board. (Former section 125; R. S., 1571; L. 1882, ch. 409, § 269.) 1. "The relation existing between the corporation and its trustees is mainly that of principal and agent, and the relation between the trustees and depositors is similar to that of trustee and cestui que trust. " The trustees are bound to observe the limits placed upon their powers in the charter, and if they transcend such limits and cause damage they incur liability. If they act fraudulently or do a wilful wrong, they may be held for all the damage they may cause the bank or its depositors. But if they act in good faith within the limits of powers conferred, using proper prudence and diligence, they are not responsible for mere mistakes or errors of judgment. . . . " When one deposits money in a savings bank, or takes stock in a corporation, thus divesting himself of the immediate control of his property, he expects, and has the right to expect, that the trustees or directors, who are chosen to take his 276 THB BAWKING LAW. place in the management and control of his property, will exercise ordinary care and prudence in the trust committed to them — the same degree of care and prudence that men prompted by self-interest generally exercise ip their own a,flfairs. When one voluntarily takes the position of trustee or director of a cor- poration, good faith, exact justice and public policy unite in requiring of him such degree of care and prudence, and it is a gross breach of duty, crassa negli- geniia, not to bestow them." (Authorities cited.) "As I understand this language, I cannot assent to it as properly defining, to any extent, the nature of a director's responsibility. Like a mandatary, to whom he has been likened, he is bound not only to exercise proper care and diligence, but ordinary skill and judgment. As he is bound to exercise ordinary skill and judgment, he cannot set up that he did not possess them. When damage is caused by his want of judgment, he cannot excuse him- self by alleging his gross ignorance. One who voluntarily takes the position of director or trustee and invites confidence in that relation, undertakes with those whom he represents, or for whom he acts, that he possesses at least ordinary knowledge and skill, and that he will bring them to bear in the discharge of his duties. Such is the rule applicable to public officers, to professional men and to mechanics; and such is the rule which must be applicable to every person who imdertakes to act for another in a situation or employment requiring skill and knowledge, and it matters not that the service is to be rendered gratuitously. . . . " The trustees may be treated as agents of the bank, and for any misfeasance or nonfeasance causing damage to the bank, they were responsible to it upon the same principle that any agent is for like cause responsible to his principal." Eael, J., in Hun, Receiver, v. Gary et at, 59 How. Pr. 441 (aff'g same case, id. 462). 2. The "majority" as here contemplated is a majority of the full board of trustees exclusive of those to whom compensation is proposed to be paid. A majority of actual trustees is not sufficient if vacancies exist. Opinion of attorney-general filed in the banking department October 2, 1884. § 156. No other report or inspection required. — No sucli corpora- tion shall hereafter be required to make any annual or other report to the legislature or to the mayor or commonalty of any city, nor to the board of supervisors of any county, nor to any other officer or authority except as provided in this chapter ; nor shall it be subject to the inspection or supervision of any local officer or board, nor to any interference from any such ofSx3er or board, in any manner appertain- ing to its business or dealings. (Former section 126; R 8., 1572;_L. 1882, ch. 409, § 275.) § 157. Examination of vouchers and assets by trustees. — The trus- tees of every savings bank, by a committee of not less than three of their number, on or before the first days of January and July in each year, shall thoroughly examine the books, vouchers and assets of such rHH BANKIKS liAW. 27T savings bank, and its affairs generally. The statement or schedule of assets and liabilities reported to tbe superintendent of banks for tbe first of January and July in each year sball be based upon such examination, and shall be verified by the oath of a majority of the trustees making it ; and the trustees of any savings bank may require such examination at such other times as they shall prescribe. The trustees shall, as often as once in each six months during each year, cause to be taken an accurate balance of their depositors' ledgers, and in their semi-annual report to the superintendent they shall state the fact that such balance has been taken, and the discrepancies, if any, existing between the amount due depositors, as shown by such balance, and the amount so due as shown by the general ledger. (Former section 128; R. S., 1573; L. 1882, ch. 409, § 279.) § 158. Expenses to be paid. — For the purpose of defraying the expenses incurred in the performance by the superintendent of the duties imposed upon him with respect to savings banks, other than the examinations thereof, each such corporation shall annually pay five dollars into the treasury of the state, and the residue of such expenses to be apportioned among them by the superintendent shall be paid into the treasury of the state by savings banks whose deposits exceed one hundred thousand dollars, in proportion to the amount of assets severally held and reported by them. If any savings bank shall, after due notice, refuse or neglect for thirty days to pay its *alloted share of such charges, the superintendent shall report the fact to the attorney-general, who may maintain an action in the name of the people against such corporation for the recovery of such charges, and the same, when recovered, shall be paid into the treasury of the state. (Former section 129; E. S., 1574; L. 1882, ch. 409, § 281.) § 159. Certain debts from insolvent banks and trust companies pre- ferred. — All the property of any bank or trust company which shall become insolvent shall after providing for the payment of its circulat- ing notes, if it has any, to be applied by the trustees, assignees or receivers thereof in the first place, to the payment in full of any sum * So in original. 278 THB BANKING LAW. or sums of money deposited tkerewith by any savings bank and by any co-operative savings and loan association ratably and proportion- ately but not to an amount exceeding that authorized to be so de- posited by the provisions of this chapter, and subject to any other preference provided for in the charter of any such trust company. (Former section 130; R. S., 1574; L. 1882, ch. 409, § 282; L. 1904, eh. 693.) 1. This section only applies to deposits made in the ordinary course of busi- ness, and subject to the draft of the depositors. Loans on time, or payable on call, are not within the meaning of this provision. Loan cannot be changed into a deposit, because loan was illegal. Rosenback v. Manufacturers and Trad- ers' Bank, 69 N. Y. 358; aff'g 10 Hun, 148. 2. Troy Savings Bank made an agreement with Merchants and Mechanics' Bank, to deposit with it one-quarter of all moneys received during coming three years; other three-quarters to be deposited in three other banks named, the deposits in the four banks to be kept as nearly equal as possible. The four banks agreed to pay checks of savings bank at sight, allow four per cent, interest, and not pay interest on any deposits of less than $1,000, from any person or cor- poration, and at the end of three years they were to account and settle balance of principal and interest. Held, the savings bank was entitled to its preference as against Receiver M. and M. Bank. That even if it was admitted that deposit was greater than statute allowed, that that was a question for the State, and though it might thereby in action by State have forfeited its charter, that the M. and M. Bank was not thereby relieved from paying its debts. Matter of Patterson, Receiver, etc., 18 Hun, 223-224; aff'd 78 N. Y. 608. 3. This section of act applies as well to deposits made prior to, as to those made subsequent to the act. Upton v. N. Y. & E. Bank, 13 Hun, 269. 4. This section preferring savings banks deposits in insolvent banks, is void as to national banks, with respect to such preference, and contravenes § 5236 U. S. R. S. [TJ. S. Oomp. Stat. 1901, p. 3508], N. B. A. (post), which requires ratable dividends. Davis v. Blmira Savings Bank, 161 U. S. 290, 40 L. ed. 703, 16 Sup. Ct. Rep. 502, reversing b. c. 142 N. Y. 593. § 160. Advertisements of unauthorized savings banks prohibited. — No bank, banking association, individual banker, firm, association, corporation, person or persons shall make use of the word " savings " in their banking business, or advertise or put forth any advertising literature, or sign as a savings bank, or in any way solicit or receive deposits as a savings bank, other than a savings bank or a co-operative savings and loan association organized under the laws of the state of New York. It shall, however, be lawful for the principal or superintendent of any public scbool or schools in the state of New York or for any person designated for that purpose by the board of education or other school authority under whidb such school shall be to collect once a week, or from time to time, small amounts of savings THE BANKING T^AW. 279 from the pupils of said school, the same to be deposited by said principal or superintendent or designated person on the day of col- lection in some savings bank in the state or, in villages and cities in ■which there is no regularly established savings bank,, in any savings and loan association, trust company, state or national bank, located in the state .and having an interest department. These moneys shall be placed to the credit of the respective pupils from whom the money shall be collected, or if the amount collected at any one time shall be deemed insufficient for the opening of individual accounts, in the names of said principal or superintendent or designated person, in trust, and to be by him eventually transferred to the credit of the respective pupils to whom the same belongs. In the meantime, said principal or superintendent or designated person shall furnish to the bank a list giving the names, signatures, addresses, ages, places of birth, parents' names and such other data concerning the respective pupils as the savings bank may require, and it shall be lawful to use the words " system of school savings banks " or " school savings banks " in circulars, reports and other printed or written matter used in connection with the purposes of this section. Any bank, banking association, individual banker, firm, association, corporation, person or persons violating this provision shall forfeit to the people of the state for every offense the sum of one hundred dollars for every day such offense shall be continued; provided however, that upon the subsequent establishment of a saving bank, the deposit of such moneys, or the continuance of deposits, in any savings and loan asso- ciation, trust company, state or national bank, previously used as a depository of school savings shall not be deemed a violation of the provisions of this act. (Former section 131; E. S., 1574; aa amended by L. 1882, ch. 409, § 283; L. 1904, ch. 568, § 1; L. 1905, ch. 564, § 1; L. 1909, ch. 497. In effect May 27, 1909.) See General Corporation Law, §§ 6, 15. See Penal Law, §§ 302, 666. 1. The term "individual banker" applies only to one who has availed himself ■of the banking statutes of this State, and has become empowered to do banking thereunder. It does not apply to a private banker, who exercises in his business no more than the rights and privileges common to all. Action was for penalty. (Doty &, Warner did a regular banking business, under the name of "The Farmers' Bank of Batavia," except that they issued no circulating bills. They were not organized under any law of this State. They had a sign up: "L. Doty's Savings Bank.") The term "individual banker" is used throughout the 280 THB BAITKIITG LAW. statutes to diatinguish one person doing business in the way those acts au- thorize, from an association or persons joined together therefor. People v. Doty, 80 N. Y. 230. 2. The various banking acts expressive of the legislative intent in the use of the term " individual bankers," collated. Same case. 3. The words " person or persons," in third line, have been added to section since the foregoing decision. 4. In reply to an inquiry made by the superintendent of the banking depart- ment, the attorney-general rendered the following opinion, filed in the banking department. May 15, 1888: " It appears that the Charity Organization Society of the city of New York is desirous of receiving from poor people small sums of money, to be Kept and taken care of by such society, for the use and benefit of such poor people, to whom it shall be repaid upon demand. The question is submitted for my con- sideration whether the society has the power and legal right to do this. " I do not discover by any of the papers submitted that the society is a cor- poration, and assume, therefore, that it is simply a voluntary association of individuals. "Section 283 of chapter 409 of the Laws of 1882 (Paine's Banking Law, page 301, former ed.), provides that ' It shall not be lawful for any bank, banking asso- ciation or individual banker, firm, association, corporation, person or persons, to advertise or put forth a sign as a savings bank, or in any way to solicit or receive deposits as a savings bank; and any . . . firm, association, corporation, person or persons, which shall offend against these provisions, shall forfeit and pay for every such offence the sum of $100 for every day such offence shall be continued. . . .' "This prohibition is against advertising or receiving or soliciting deposits 'as a savings hank.' It does not interfere with the common-law right of one person, or two or more persons acting together, taking money for the purpose of keeping it safely for an individual. " If this association in any way whatever advertises itself as a savings bank, or receives deposits from individuals knowing that such individuals are acting under the impression or belief that they are putting their money in a savings bank, receives or solicits deposits as a savings bank, or in any manner attempts to create the impression that they are a savings bank, the section above quoted would be violated by such association. " But I do not think there is anything in the section which interferes with the right of the association acting as such, or as individuals, from receiving sums of money from any person who, with full knowledge that the association is not and does not claim to be a savings bank, simply puts it in th^r hands for safe- keeping." 5. It is not unlawful for a trust company to transact its business upon the general plan or in the manner usually adopted by savings institutions, and that the provisions of the Banking Act of 1882 (§ 283, ch. 409) only required that a trust company, in soliciting and receiving deposits, should not advertise itself as a savings bank for the purpose of deceiving the public. People v. Binghamton Trust Co., 139 N. Y. 191, 34 N. E. 898. 6. In reply to an inquiry whether it was legal for a school to collect money from its pupils, deposit it to the general account of the school in a local bank, and, when an individual pupil's savings amounted to $25, transfer it to the THB BAlTKIlirG LAW. 281 pupil's account, interest being allowed under both phases of the account, the attorney-general in an opinion dated October 13, 1903, quoting section 131, stated: " I am of the opinion that the scheme outlined for saving the money of pupils is a violation not only of the above provision of the Banking Law, but of the general purpose of such law, which provides for the general supervision and control of all savings banks and banking institutions by the State banking de- partment. While the scheme may be commendable in many respects, it will unquestionably be subject to many abuses were it allowable and proper to con- stitute the various schools of the State practically savings banks for instructing and encouraging the pupils to save money, without any restrictions or control on the part of the State banking department." 7. National banks may not use the word " savings " in connection with their business or advertising. Opinion Atty.-Gen., July 2, 1907. § 161, Charters to be conformed to this chapter. — The powers, privileges and duties, and all restrictions, conferred or imposed upon any savings bank by whatever name known, by its charter or act of incorporation, are hereby abridged, enlarged or modified, as each particular case may require, in such manner that every such charter or act of incorporation shall be made to conform to the provisions of this chapter in relation thereto, and to such amendments thereof as may be hereafter made. Every such savings bank shall possess the powers, rights and privileges, and be subject to the duties, restric- tions and liabilties, conferred and imposed by this chapter, notwith- standing anythiug to the contrary in their respective charters or acts of incorporation. The legality of investments heretofore made, or of transactions heretofore had, pursuant to any provisions of law in force when such investments were made or transactions had, shall not be affected by the provisions of this chapter, nor shall such pro- visions require the change of investments for those named in this chapter, except as the same can be done gradually by the sale or redemption of the securities so invested in, in such manner as to prevent loss or embarrassment in the business of such savings bank, or unnecessary loss or injury to the borrowers on such securities. (Former section 132; R. S., 1575; L. 1882, eh. 409, § 286.) This section controls all earlier statutory regulations affecting corporations organized before the act. Opinion Atty.-Gen., August 14, 1907. § 162. Savings bank voluntarily closed. — If the trustees of any solvent savings bank shall deem it necessary or expedient to close the business of such corporation, they may, by the affirmative vote of not 282 THB BANKING LAW. less than two-thirds of the whole number of trustees, at a meeting to be called for that purpose, of which all the trustees shall have notice, declare by resolution their determination to close such business and to pay the moneys due depositors and creditors and to surrender the corporate franchise. The vote on such resolution shall be taken by ayes and noes and the resolution and the vote thereon shall be re- corded in the minutes of the board of trustees. A copy of the record of such proceedings certified by the president and the secretary of the corporation shall be filed in the banking department. The trustees shall thereupon give notice to all the depositors and creditors of the adoption of such resolution by publication thereof in a newspaper or newspapers most likely to give the same proper publicity, and by written or printed notice personally served upon or mailed to each depositor and creditor of such savings bank at his last known resi- dence, postage prepaid. (Former section 133; R. S., 1576; L. 1882, eh. 409, § 293.) " Savings banks are corporations, and I think, therefore, should be legally and formally dissolved by order of the court in order to have their existence de'finitely and efifectually terminated." Opinion Atty.-Gen., filed in the banking department, December 31, 1886. The property of such a corporation belongs to the depositors. People v. Peck, 157 N. Y. 51. § 163. When dissolution effected. — When the trustees of any such savings bank shall have paid the stmis due respectively to all the depositors and creditors who claim their deposits, or the money due, the trustees shall make a transcript or statement from the books of the savings bank of the names of all the depositors and creditors who do not claim or have not received the balance of the credit due them, and of the sums due them respectively, ajid shall file such transcript in the banking department, and pay over and transfer all such un- claimed and unpaid deposits, credits and moneys to the superin- tendent of banks. The trustees shall then report their proceedings duly verified to the supreme court, and upon such report and the petition of the trustees and upon notice to the attorney-general and the superintendent, and such other notice as the court may deem necessary, the court shall adjudge the franchise surrendered and the existence of the corporation terminated. (Former section 134; R. S., 1576; L. 1882, ch. 409, § 294.) See General Corporation Law, §§ 170-195; 150-161. THE BANKIITG LAW. 283 § 164. Deposit of unclaimed moneys. — Tlie superintendent sliall receive the moneys so deposited with him by the trustees of any solvent savings bank voluntarily closing its business, and all moneys whicb may be deposited with him by the receivers of insolvent savings banks pursuant to the provisions of any law or the order of any court, and shall give a receipt therefor, and forthwith, deposit the same in some solvent savings bank or savings banks to the credit of the super- intendent of banks in his name of office, in trust for the depositors and creditors of the closed savings bank from which they were re- ceived. The superintendent shall report to the legislature annually in his report the names of such closed savings banks and the sums of unclaimed and unpaid deposits to the credit of each of them respectively. The superintendent may pay over to the persons respectively en- titled thereto the moneys so held by him upon being furnished witli satisfactory evidence of their right to the same. In cases of doubt or of conflicting claims he may require an order of the supreme court authorizing and directing the payment thereof. He may apply the interest earned by the moneys so held by him towards defraying the expenses in the payment and distribution of such unclaimed dividends to the depositors and creditors entitled to receive the same, and he shall include, in his annual report to the legislature, a statement of the amount of interest earned by such unclaimed dividends. (Former section 135; R. S., 1577; L. 1882, ch. 409, § 296; L. 1883, ch. 439; L. 1884, ch. 504.) See section 30, ante. 1. The following opinion of the attorney-general was filed in the banking department July 8, 1887: " Your communication of the 7th inst. has been duly received, requesting my opinion as to what proof should be required by you as to the proper person to pay money deposited with your department pursuant to sections 294, 295 and 296 of chapter 409 of the Laws of 1882, the person to whom the money belonged haying removed to Nevada and died. It appears that letters of administration have been presented to you purporting to have been issued by the county district court of Nevada, and the administrator named therein requests payment to him. " I think the only person to whom you can safely pay the money is an admin- istrator appointed by the courts of this State. If an administrator has been legally appointed in the State of Nevada, such administrator can take out ancillary letters here." 284 THE BANKING LAW. AETICLE 5. TeUST COMPAliriES. Section 180. Incorporation. 181. Previous notice of intention to be given. 182. When superintendent shall file certificate. 183. Examination by and certificate of superintendent. 184. Capital must be paid in cash. 185. List of stockholders to be furnished to superintendent. 186. Powers of corporation. 187. Additional powers of certain trust companies. 188. Additional powers, dependent on location. 189. May be administrator, guardian or trustee. 190. No security requirey; trust fund debts preferred. 191. Official oath not required. 192. Deposits of minors and trust deposits. 193. Investments of capital, surplus, undivided profits and deposits. 194. Interest and accumulations. 195. Directors. 196. Liability of stockholders and directors. 197. Powers of specially chartered trust companies. 198. Lawful money reserve. § 180. Incorporation. — Tliirteen or more persons may form a corporation to be known as a trust company. Such persons shall under their hands and seals execute and acknowledge an organization certificate in duplicate, which shall specifically state: 1. The name by which the corporation shall be known. 2. The place where its business is to be transacted. 3. The amount of its capital stock, and the number of shares into which the same is to be divided. 4. The name, residence and post-office address of each member of the corporation. 5. The term of its existence, not exceeding fifty years. 6. A declaration that each member of the corporation wiU accept the responsibilities and faithfully discharge the duties of a director therein, if elected to act as such, when authorized by the provisions of this chapter. Such certificate shall, within sixty days after its acknowledgment, be filed, one duplicate in the office of the county clerk of the county THE BANKING LAW. 285 ■wherein suck trust company is proposed to he located, and one dupli- cate in the office of the superintendent of banks of the state. The capital stock of any such corporation must be at least five hundred iJiousand dollars; provided, however, that a corporation with a capital of not less than two hundred thousand dollars may be organ- ized in any city containing more thaji one hundred thousand in- habitants and less than two hundred and fifty thousand inhabitants, and a corporation may be organized with a capital of not less than one hundred and fifty thousand dollars in any city containing more than twtnty-five thousand inhabitants and less than one hundred thousand inhabitants, and with a capital of at least one hundred thousand dollars in a city or town the population of which does not exceed twenty-five thousand, the number of inhabitants in each case to be ascertained or determined by the last federal or state enumera- tion. (Former section 150; R. S., 1596, 1597, 1599; L. 1887, ch. 546, §§ 1-3, 19; Xi. 1893, ch. 314.) See sections 31, 36-40, ante. See General Corporation Law, §§ 4^8, 23, 25, 26-33, 37-41. See Stock Corporation Law, §§ 8, 13, 15, 52-54, 62-64. See Penal Law, §§ 660-662, 668. See Tax Law, §§ 183, 188. 1. An officer of a trust company need not be a citizen. Opinion Atty.-Gen., 1897. 2. A trust company may transact its business on the general plan of a savings bank. People v. Binghamton Trust Co., 139 N. Y. 185. § 181. Previous notice of intention to be given. — Before filing the organization certificate, a notice of intention to organize such trust company shall be published at least once a week for four weeks in a newspaper to be designated by the superintendent of banks published in the city or town where such trust company is proposed to be located. Such notice shall specify the names of the proposed cor- porators, the name of the proposed corporation and the location of the same as set forth in such organization certificate. If there is any trust company or trust companies organized and doing business in such city, a copy of such notice shall also be sent to each at least fifteen days before the filing of the organization certificate. (Former section 151; R. S., 1597; L. 1893, ch. 313; L. 1887, ch. 546, § 4.) 286 THE BAISTKING LAW. § 182. When superintendent shall file certificate. — Upon the re- ceipt of any such organization certificate at the office of the superin- tendent, if it shall not be in form and substance, or duly and properly acknowledged, as required by this article, or shall not be accompanied by evidence satisfactory to the superintendent of the publication and service in good faith according to the intent and purpose of this chapter of the notice required by this article, the superintendent shall refuse to file such certificate, until it shall be amended to conform to the provisions of this article. If such certificate is in due form and duly executed according to the provisions of this article, and is ac- companied by evidence satisfactory to the superintendent of the proper publication and service in good faith of such notice, he shall forthwith indorse the same over his official signature, " filed for examination," with the date of such indorsement. (Former section 152; R. S., 1597; L. 1887, ch. 546, §§ 5, 6.) § 183. Examination by and certificate of superintendent. — When such certificate shall have been filed, the superintendent shall ascer- tain from the best sources of information at his command whether the general fitness for the discharge of the duties appertaining to such a trust of the persons named in the certificate is sudi as to com- mand the confidence of the community in which such trust company is proposed to be located, and whether the public convenience and advantage would be promoted by such establishment. If so satisfied,, he shall, within sixty days after such certificate has been filed by him for examination, issue under his hand and official seal the certificate of authorization required by this chapter to the persons named in such certificate, or to a portion of them, together vdth such other persons as a majority of those named in such organization certificate shall by writing approve, which certificate, so issued by him, shall authorize the persons named therein to become a trust company as designated in the organization certificate, subject to the provisions of this chapter; but no person shall be named in such certificate of authorization who shall not have duly made and acknowledged the declaration prescribed in 'subdivision six of section one hundred and eighty. The superintendent shall transmit such certificate of au- thorization to the county clerk of such county, who shall file the same and attach it to the organization certificate previously filed by him, THE BANKING LAW. 287 and record both certificates in tbe "book of records of incorporation, and the supe^rintendent sliall also file a duplicate of sucli certificate in Ms own office. If the superintendent sliall not be satisfied that the establishment of a trust company as proposed in any organization certificate filed by him is expedient and desirable, he shall, within sixty days after the filing of such, certificate by him, give notice to the county clerk of such county that he refuses to issue a certificate of authorization for such trust company, which notice shall be forthwith filed by the county clerk with the organization certificate. (Former section 153; E. S., 1597, 1598; L. 1887, ch. 546, §§ 7-10.) § 184. Capital must be paid in cash. — The superintendent of banks shall, before issuing a certificate of authorization to any such corporation, examine, or cause an examination to be made, in order to ascertain whether the requisite capital of such corporation has been paid in in cash; and if it appears from such examination that such capital has not been fully paid in in cash, a certificate of au- thorization shall not be granted ; and no such corporation shall com- mence business until such certificate of authorization has been granted. (Former section 154; R. S., 1598; L. 1887, ch. 546, § 12.) § 185. List of stockholders to be furnished to superintendent. — Be- fore entering upon active business, every such corporation shall file with the superintendent of banks a list of its stockholders, giving the name, residence, post-office address and number of shares of stock held by each of them respectively, which shall be verified by the two principal officers of the corporation. (Former section 155; E,. S., 1598; L. 1887, ch. 546, § 13.) § 186. Powers of corporation. — Upon the filing of any such certifi- cate of authorization of a trust company, the persons named therein and their successors shall thereupon and thereby become a corporation and in addition to the powers conferred by the general corporation law and the stock corporation law, shall have power : 1. To act as the fiscal or transfer agent of any state, municipality, body politic or corporation ; and in such capacity to receive and dis- 288 THE BANKIM-Q LAW. burse money, to transfer, register and countersign certificates of stock, bonds or other evidences of indebtedness, and to act as agent of any corporation, foreign or domestic, for any lawful puropse. 2. To receive deposits of trust moneys, securities and other per- sonal property from any person or corporation, and to loan money on real or personal securities. 3. To lease, hold, purchase and convey any and all real properly necessary in the transaction of its business, or which the purposes of the corporation may require, or whicb it shall acquire in satisfaction or partial satisfaction of debts due the corporation under sales, judg- ments or mortgages, or in settlement or partial settlement of debts due the corporation by any of its debtors. 4. To act as trustee under any mortgage or bonds issued by any municipality, body politic or corporation, and accept and execute any other municipal or corporate trust not inconsistent with the laws of this state. 5. To accept trusts from and execute trusts for married women, in respect to their separate property, and to be their agent in the management of such property or to transact any business in relation thereto. 6. To act under the order or appointment of any court of record as guardian, receiver or trustee of the estate of any minor, and as depositary of any moneys paid into court, as provided by the code of civil procedure whether for the benefit of any such minor or other person, corporation or party. 7. To take, accept and execute any and all such legal trusts, duties and powers in regard to the holding, management and disposition of any estate, real or personal, and the rents and profits thereof, or the sale thereof, as may be granted or confided to it by any court of record, or by any person, corporation, municipality or other au- thority; and it shall be accountable to all parties in interest for the faithful discharge of every such trust, duty or power which it may so accept. 8. To take, accept and execute any and all such trusts and powers of whatever nature or description as may be conferred upon or in- trusted or committed to it by any person or persons, ?>r any body politic, corporation or other authority, by grant, assignment, transfer, devise, bequest or otherwise, or which may be intrusted or committed THE BACKING LAW. 289 or transferred to it or vested in it by order of any court of record, or any surrogate, and to receive and take and liold any property or estate, real or personal, v^liicli may be the subject of any such trust. 9. To purchase, invest in and sell stocks, bills of exchange, bonds and mortgages and other securities; and when moneys or securities for moneys are borrowed or received on deposit, or for invest- ment, the bonds or obligations of the company may be given therefor, but it shall have no right to issue bills to circulate as money. 10. To be appointed and to accept the appointment of executor of or trustee, under the last will and testament, or administrator vdth or without the will annexed, of the estate of any deceased person, and to be appointed and to act as the committee of the estates of lunatics, idiots, persons of unsound mind and habitual drunkards. 11. To exercise the powers and possess the privileges conferred on banks and individual bankers by sections seventy-four and seventy- five of this chapter, subject to the restrictions contained in said sec- tions. No such corporation shall have any right or power to make any contract, or to accept or to execute any trust whatever, which it would not be lavsrful for any individual to make, accept or execute. "So loan exceeding in amount one-tenth of its capital stock, shall be made by any such corporation, directly or indirectly, to any director or officer thereof and no loan to such director or officer shall be made without the consent of a majority of the directors. No such corpora- tion shall receive funds and moneys paid or brought into court, except it be designated by the comptroller of the state of New York a depositary thereof. No such corporation shall transact its ordinary business by branch office in any city not named in its certificate of incorporation or charter as the place where its business is to be trans- acted. No trust company shall open a branch office without first having obtained the written approval of the superintendent of banks* to the opening of such branch office, which written approval may be given or withheld in his discretion, and shall not be given by him until he has ascertained to his satisfaction that the public convenience and advantage will be promoted by the opening of such branch office ; and, provided further, that no trust company in this state, or any officer or director thereof, shall open or maintain a branch office, unless the capital of such trust company actually paid in cash shall 19 290 THB BANKING LAW. exceed the amount required by the law under which it was incor- porated by the sum of one hundred thousand dollars for each branch office so opened or maintained. Every trust company and every such officer or director opening a branch office without such written ap- proval shall forfeit to the people of the state the sum of one thousand dollars for every week during which any branch office shall be main- tained without such written approval. No foreign corporation shall have or exercise in this state the power to receive deposits of trust moneys, securities and other personal property from any person or corporation or any of the powers specified in subdivisions one, four, five, six, seven, eight, ten and eleven of this section, nor have or maintain an office in this state for the transaction of, or transact directly or indirectly, any such or similar business. (Former section 156; R. S., 1598, 1600, 1602, 1603; L. 1887, cli. 546, §§ 11, 21, 28, 35; amended by eh. 660 of 1901.) See General Corporation Law, §§ 11, 13, 14. 1. This section (former number 156, L. 1893, ch. 696), authorizing trust com- panies to exercise banking powers merely placed trust companies on an equality with banks as to interest, and did not give trust companies power to discount or purchase paper. Jenkins v. Neff, 186 U. S. 234, 46 L. ed. 1141, 22 Sup. Ct. Kep. 905. 2. A trust company has no power to guarantee the sale of certain corporate stocks at a. given price when it has no interest therein other than commissions on the sale. And when the party so guaranteed does not deliver such stocks to the trust there is no part performance so as to make the defense of ultra vires inequitable. Gause v. Commonwealth Trust Co., 55 Misc. 110. ,3. This section forbids the loan by a trust company of more than one-tenth of its capital stock to a firm or corporation of which a director is a member. Opinion Atty.-Gen., June 11, 1909. 4. A foreign trust company may not act as trustee in this State for bond- holders under a trust mortgage. Opinion Atty.-Gen., August 14, 1907. 5. A trust company has not power to guarantee mortgages given by a third person, or by the trust company £is trustee, although it is conceivable that such guarantee might be legal under the general powers of a trust company if done as an incident to other power. Opinion Atty.-Gen., March 13, 1909. 6. In an opinion dated December 19, 1906, the attorney-general held as fol- lows on the question whether a trust company can change to a national bank: "Upon the broad proposition, I am clearly of the opinion that a trust com- pany organized under the banking laws of the State of New York and having exercised its powers as such by accepting and executing trusts, and while acting as trustee in the cases prescribed by law, is not authorized to change from a trust company to a national bank and that any attempt on the part of such trust company to so change should be promptly enjoined by the banking department from such action." THE BANKING LAW. 291 7. The superintendent of the banking department issued in May, 1908, the following " DEPARTMENTAL RULINGS. " Under an opinion of the attorney-general, it has been held that bonds con- stituting a part of the capital investment of a trust company cannot be loaned or hypothecated, but must remain in the possession of the company. " Money borrowed of another financial institution cannot be reported as a deposit, but must be reported as borrowed money or ' bills payable.' " In all reports to the banking department, all the assets of corporations under its supervision should be reported at a fair valuation. Any concealment of assets as well as any concealment of liabilities renders a report untrue. " The Banking Law as interpreted by various attorneys-general of the State prohibits a State bank of deposit and discount from investing in the stock of private corporations. " The board of directors or trustees of a corporation subject to the Banking Law must, under opinions of various attorneys-general, be fixed and definite. The number can be changed only upon compliance with the provisions of the statute. " Under an opinion of the attorney-general, it is held that a loan to a firm or copartnership of which a director of a trust company is a member must be limited to ten per centum of the capital of the trust company making the loan. Loans to a director, including any such firm or copartnership liabilties, cannot exceed ten per centum of the capital of such trust company." § 187. Additional powers of certain trust companies. — Each trust company organized under this chapter, and having its principal place of business with in a county containing less than six hundred thou- sand and over three hundred thousand inhabitants, as appears by the last state or federal enumeration of its inhabitants, and having a capital of five hundred thousand dollars or upwards, and each trust company organized under this chapter, and having its principal place of business within a county containing less than three hundred thou- sand and over sixty-five thousand inhabitants, as appears by the last state or federal enumeration of its inhabitants, and having a capital of two hundred thousand dollars or upwards, and each trust com- pany organized under this chapter and having its principal place of business within a county containing less than sixty-five thousand and over fifty thousand inhabitants as appears by the last state or federal enumeration and having a capital of one hundred thousand dollars, or upwards, may possess and exercise, in addition to the other powers conferred upon it by this chapter, the power, upon terms and con- ditions to be prescribed by its by-laws, to receive upon deposit for safe keeping bonds, mortgages, jewelry, plate, stocks, securities and 292 THE BANKIliTG LAW. valuable papers of any kind, and other personal property, for hire, and to let out receptacles for safe deposit of personal property, and each trust company of the class first above specified may also for hire examine titles to real estate, procure and furnish information in relation thereto, and guarantee or insure the title to real estate to persons interested in such real estate or in mortgages thereon against loss by reason of defective title or of other incumbrances upon such real estate; and any trust company specified in this section may be appointed guardian, trustee or administrator, with or without will annexed, on the application or consent of any person acting as such or entitled to such appointment and in the place and stead of such person; or such trust company may be joined with any person so acting or entitled to such appointment; but such appointments shall be made upon such notice, as is required by law, to the persons in- terested in the estate or fund and on the consent of such of the princi- pal legatees or other persons interested in the estate or fund as the court, surrogate or judge making the appointment shall deem proper. No appointment hereunder shall be deemed to increase the number of persons entitled to full compensation beyond the number so entitled under the terms of the will or deed creating a trust or appointing a guardian or authorized by law. Whenever a person is joined with such trust company in any appointment as guardian, trustee or ad- ministrator with or without the will annexed, his appointment may be under such limitation of powers and upon such terms and con- ditions as to deposit of assets by such person with suoh trust company or otherwise, and upon such reduced bond or security to be given by him as the court, surrogate or judge making the appointment shall prescribe. (L. 1893, ch. 337, § 1; L. 1898, ch. 73, § 1; L. 1901, ch. 443, § 1; L. 1902, ch. 360, § 1.) § 188. Additional powers, dependent on location. — Each trust company organized under this chapter, and having its principal place of business within a town adjoining a city, containing over eight hundred thousand and less than one million inhabitants, according to the last state census, and having a capital of two hundred and fifty thousand dollars, or upwards, may possess and exercise in ad- dition to the other powers conferred upon it by this chapter, lie THE BANKING LAW. 293 power, upon terms and conditions to be prescribed by its by-laws, to .receive upon deposit for safe keeping, bonds, mortgages, jewelry, plate, stocks and valuable property of every kind for bire, and also for bire, to examine titles to real estate, to procure and fumisb in- formation in relation thereto, and to guarantee or insure the title to real estate to persons interested in such real estate or in mortgages thereon, against loss by reason of defective title or of other incum- brances of or upon such real estate. (L. 1896, ch. 851, § 1.) § 189. May be administrator, guardian or trustee. — AVben any trust company is appointed executor in any last will or testament, tbe court or officer authorized to grant letters testamentary in tbis state shall, upon tbe proper application, grant letters testamentary thereon to such corporation. Wben application is made to any court or officer having authority to grant letters of administration with the will annexed, upon the estate of any deceased person, and there is no person entitled to such letters who is qualified, competent, willing and able to accept such administration, such court or officer may at the request of any party interested in the estate, grant such letters of administration with the will annxed, to any such corporation. Any court or officer having authority to grant letters of guardianship of any infant, may upon the same application as is required by law for the appointment of a guardian of such infant, appoint any such cor- poration as guardian of the estate of siich infant. Any court having jurisdiction to appoint a trustee, guardian, receiver or committee of the estate of a lunatic, idiot or habitual drunkard, or to make any fiduciary appointment, may appoint any such corporation to be such trustee, guardian, receiver or committee, or to act in any other fiduciary capacity. All moneys brought into court by order or judge- ment of any court of record may be deposited with any such corpora- tion, that has been designated by the comptroller of the state of iN'ew York, as provided by the code of civil procedure. (Former section 157; R. S., 1600, 1601, 1603; L. 1887, ch. 546, §§ 22, 23; L. 1885, ch. 425, § 1; amended by ch. 552 of 1900.) § 190. No security required; trust fund debts preferred. — J^o bond or other security, except as hereinafter provided, shall be required from any such corporation for or in respect to any trust, nor when 294 THE BANKING LAW. appointed executor, administrator, guardian, trustee, receiver, com- mittee or depositary. All investments of money received by any such corporation, and by any trust company chartered by special act, prior to May eighteenth, eighteen hundred and ninety-two, in either of such characters shall be, at its sole risk and for all losses of such money the capital stock, property and effects of the corporation shall be absolutely liable, unless the investments are such as the courts recognize as proper when made by an individual acting as trustee, executor, administrator, guardian, receiver, committee or depositary, or such as are permitted in and by the instrument or words creating or defining the trust. If dissolved by the legislature or the court, or otherwise, the debts due from the corporation as such executor, administrator, guardian, trustee, committee or depositary shall have the preference. The court or officer making such appointment may, upon proper application, require any corporation which shall have been so appointed, to give such security as to the court or officer shall seem proper, or upon failure of such corporation to give security as required, may remove such corporation from and revoke such ap- pointment. Such court or officer may make orders respecting such trusts and require the corporation to render all accounts which such court or officer might lawfully require if such executor, administra- tor, guardian, trustee, receiver, committee or depositary were a natural person. Whenever any such corporation shall be designated by the comptroller of the state of New York as a depositary for funds and moneys paid into court, before receiving any such deposit, it shall give to the people of the state a bond in the form and manner, as provided by section forty-four of this chapter. (Former section 158; R. S., 1601, 1603; as amended by L. 1885, oh. 425, §§ 1, 3; L. 1887, ch. 546, § 26; L. 1893, ch. 696; L. 1898, ch. 98; L. 1909, eh. 240.) 1. October 12, 1905, the attorney-general held that the corporation acting as executor, administrator, guardian, trustee, receiver, committee or depository can, without any risk whatever, invest in the same kind of securities as those in which savings banks of this State are by law authorized to invest the money deposited therein, and the income derived therefrom, and in bonds and mortgages on unin- cumbered real estate worth fifty per centvmi more than the amount loaned thereon. An investment in any other kind of security would constitute a contingent liability. . . . In the event of depreciation of values, the liability of the corporation would be determined by well settled principles. Judge Haight, now of the court of appeals, has stated these principles aptly in, the case of Mills v. Hoffman, 26 Hun, 594, in the following language: THE BANKING LAW. 295 " From our examination of the authorities and the cases referred to, we have come to the conclusion that as a general rule it is the duty of the trustees to invest funds held by them in government or state securities, or in bonds and mortgages or unincumbered real estate. That while this rule is not arbitrary and inflexible so as to admit of no possible exception, it is the basis upon which trustees should usually act; that in any event the trustee is bound to employ such diligence, care and prudence in the management of the trust as diligent, careful, prudent men of discretion and intelligence generally employ in their own like affairs, and that for a neglect to make use of such diligence, care and prudence, the trustee becomes liable." Of course, the prudence and good faith of the investment must necessarily be determined by the particular facts surrounding each case in which that question is the subject-matter of inquiry. The expression in the statute " unless the investments are such as the courts recognize as proper when made by an individual acting as trustee, executor, administrator, guardian, receiver, committee or depositary," means such an investment as the court would recognize as proper upon the facts of the particular case, applying the rule stated by Judge Haight, as above. § 191. Official oath not required. — Upon the appointment of sucli corporation as executor, administrator, guardian, trustee, receiver or committee, as ji'-ovided by tbis chapter, no official oath shall he required from sudh corporation or trust company. (Former section 158b, as amended By L. 1907, eh. 612, § 1.) § 192. Deposits of minors and trust deposits. — When any deposit shall be made by or in the name of any minor, the same shall be held for the exclusive right and benefit of such depositor, and free from the control or lien of all other persons, except creditors, and shall be paid, together ■with the dividends and interest thereon to the person in vrhose name tbe deposit shall have been made, and the receipt or acquittance of such minor shall be a valid and sufficient release and discharge for such, deposit or any part thereof to the cor- poration. When any deposit shall be made by any person in trust for another, and no other or further notice of the existence and terms of a legal and valid trust shall have been given in writing to such trust company in the event of the death of the trustee, the same, or any part thereof, together with the dividends or interest thereon, may be paid to the person for whom the deposit was made. (Former section 158a, as added by L. 1907, ch. 612, § 1.) See section 144, ante. § 193. Investments of capital, surplus, undivided profits and de- posits. — The capital of every sucih corporation shall be invested in 296 THE BANKING LAW. bonds and mortgages on unincumbered real property in this state not exceeding sixty per centum of the va:lue thereof, or in the stocks or bonds of this state, ol* of the United States, or of any county or in- corporated city of this state duly authorized by law to be issued. Stocks or bonds constituting a part of the lawful investment of capital of any such corporation shall not be valued upon its books or entered in its reports to the superintendent of banks at a higher price or value than their investment value as determined by amortization, after providing in a manner approved by the superintendent of banks for the gradual extinction of premiums or discounts on all such securi- ties so as to bring them to par at maturity. The moneys received by any such corporation in trust may be invested in its discretion in the securities of the kind in which its capital is required to be invested, or in the stocks or bonds of any state of the United States, or" in such real or personal securities as it may deem proper. No such corpora- tion shall hold stock in any private corporation to an amount in excess of ten per centum of the capital, surplus and undivided profits of the corporation holding such stock ; nor shall any such corporation hold or own stock of another moneyed corporation the par value of which is in excess of ten per centum of the total amount of the stock of such other moneyed corporation issued and outstanding, provided, however, that this limitation shall not apply to the ownership of capital stock of a safe deposit company the vaults of which are con- nected with or adjacent to an ofB.ce of such trust company. Any trust company which, on the thirteenth day of April, nineteen hundred and eight, held stock in another moneyed corporation in excess of ten per centum of the total amount of the stock of such other moneyed corporation issued and outstanding shall sell or dispose of the excess so held on or before April thirteenth, nineteen hundred and eleven. (Former section 159; R. S., 1599, 1601; L. 1887, eh. 546, §§ 20, 27; L. 1860, ch. 439, § 1; L. 1903, ch. 160; amended by L. 1909, oh. 294.) § 194. Interest and accumulations. — On all sums of money not less than one hundred dollars which shall be collected and received by such corporation acting as executor, administrator, guardian, trustee, receiver or committee under the appointment of any court or officer, or in any fiduciary capacity under such appointment, or as a depositary of moneys paid into court, interest shall be allowed by THE BANKING LAW. 297 Bueli corporation at not less than the rate of two per centum per annum until the moneys so received shall h© duly expended or dis- tributed. If such interest moneys, or any part thereof, shall not annually be expended or distributed pursuant to the terms or pro- visions of the tmist under which such moneys are held, the amount thereof not so expended or distributed shall be accumulated by such corporation for the benefit of the parties interested in such trust fund, and shall be added to the principal to constitute a new principal, upon which interest shall thereafter be computed. (Former section 160; R. S., 1601; L. 1887, ch. 546, §§ 24, 25.) § 195. Directors. — The affairs of every such corporation shall be managed and its corporate powers exercised by a board of directors of such number, not less than thirteen nor more than thirty, as shall from time to time be prescribed in its by-laws. The number of directors necessary to form a quorum for the transaction of business may be fixed by the organization certificate, or the by-laws; such quorum shall not be less than one-third of such number of directors, and in no case less than seven. No person can be a director who is not the holder of at least ten shares of the capital stock of the cor- poration; and every person elected to be a director, who after such election shall hypothecate, pledge or cease to be the owner in his own right of the amount of stock aforesaid, shall cease to be a director of the corporation, and his office shall be vacant. The persons named in the organization certificate, or such of them respectively, as shall become holders of at least ten shares of such stock, shall constitute the first board of directors, and may add to their number not exceed- ing the limit of thirty, and shall severally continue in office until others are elected to fill their respective places. Within six months from the time when such corporation shall commence business, the first board of directors shall classify themselves by lot into three classes, as nearly equal as may be. The term of office of the first class shall expire on the third Wednesday of January next following such classification ; the term of office of the second class shall expire one year thereafter; and the term of office of the third class shall expire two years thereafter. At or before the expiration of the term of the first class, and annually thereafter, a number of directors shall be elected equal to the number of directors whose term will then 298 THE BANKING LAW. expire who shall hold their offices for three years or until their suc- cessors are elected. Such election shall be held at the office of the corporation and at such time and upon such public notice not less than ten days, by advertisement in at least one newspaper approved by the superintendent of banks published in the city where such coi^ poration is located, as shall be prescribed in the by-laws. In case of failure to elect any director on the day named, the directors whose terms of office do not that year expire, may proceed to elect a number of directors equal to the number in the class whose term that year expires, or such number as may have failed of re-election. The persons so elected, together with the directors whose terms of office shall not that year expire, shall constitute the board of directors until another election shall be held according to law. Vacancies occurring in the intervals of elections shall be filled by the board. Each direc- tor when appointed or elected shall take an oath that he will, so far as the duty devolves on him, diligently and honestly administer the affairs of such corporation and will not knowingly violate, or will- ingly permit to be violated, any of the provisions of law applicable to such corporation, and that he is the owner in good faith and in his own right, of the number of shares of stock required by this section, subscribed by him or standing in his name on the books of the cor- poration, and that the same is not phyothecated or in any way pledged as security for any loan or debt and, in case of re-election or reap- pointment, that such stock was not hypothecated, or in any way pledged as security for any loan or debt during his previous term. Such oath shall be subscribed by the director making it, and certified by , the officer before whom it is taken, and shall be inmiediately transmitted to the superintendent of banks and filed and preserved in his office. (Former section 181; K. S., 1598, 1599; L. 1887, ch. 546, §§ 14, 15; amended by ch. 510 of 1901.) See General Corporation Law, §§ 26-32; Stock Corporation Law, §§ 34, 35; Penal Law, §§ 290, 297, 664, 665, 668. 1. May 22, 1907, the attorney-general replied to the question, whether a trust company, in a proceeding for a change in the number of its directors, may elect whether it shall pursue the method prescribed by (then section 161) of the Banking Law, or the method provided for by section 21 of the Stock Corporation Law at its pleasure. He said: " There appears to be no conflict between the provisions of the Banking Law THE BANKING LAW. 299 and section 21 of the Stock Corporation Law relative to the subject of changing the number of directors. " While the provisions of the two acts relate to the same subject-matter, yet they are not in conflict with each other, and, therefore, in conformity with the rule laid down in section 33 of the General Corporation Law, the provision in the Banking Law must be deemed to be in addition to the provisions contained in the Stock Corporation Law relating to the same subject-matter, and both pro- visions must be regarded as applicable to the proceeding to change the number of directors." § 196. Liability of stockholders and directors. — If default shall be made in the payment of any debt or liability contracted by any such corporation, the stockholders thereof shall be individually respon- sible, equally and ratably, for the then existing debts of the corpora- tion, but no stockholder shall be liable for the debts of the corpora- tion to an amount exceeding the par value of the respective shares of stock by him held in such corporation at the time of such default. For all losses of money which the capital stock shall not be suffi- cient to satisfy, the directors shall be responsible in the same manner and to the same extent that directors are now responsible in law or equity. (Former section 162; R. S., 1602; L. 1887, ch. 546, §§ 29, 30; L. 1889, ch. 558.) See Stock Corporation Law, §§ 28, 35, 56-59; Penal Law, §§ 290, 292-295, 298, 664. 1. Before action can be brought against stockholder to enforce such liability in a case where the trust company has not been dissolved and is subject to suit, a judgment against the trust company must first be had. Cause v. Boldt, 188 N. Y. 546. § 197. Powers of specially chartered trust companies. — Every trust company incorporated by a special law shall possess the powers of trust companies incorporated under this chapter and shall be sub- ject to such provisions of this chapter as are not inconsistent with the special laws relating to such specially chartered company. (Former section 163.) This section grants no new powers. Jenkins v. Neff, 186 U. S. 230, 163 N. Y. 320. § 198. Lawful money reserve. — Every trust company having its principal place of business or a branch offiice for the receipt and pay- ment of deposits in a borough in any city in the state which borough had according to the last preceding state or United States census a population of eighteen hundred thousand or over shall at all times 300 THE BANKING LAW. have on hand a reserve fund equal to at least fifteen per centum of the aggregate of its deposits, exclusive of moneys held by it in trust, ■which are not made payable under the conditions of the trust ■within thirty days and also exclusive of time deposits not payable within thirty days represented by certificates showing the amount of the deposit, the date of isisue, and the date when due and also exclusive of deposits which are secured by outstanding unmatured bonds issued by the state of New York. The whole of such reserve fund must consist of either lawful money of the United States, gold certifi- cates, silver certificates, or notes or bills issued by any lawfully organized national banking association. Every trust company hav- ing its principal place of business in a borough in any city in the state which borough had according to the last preceding state or United States census a population of less than eighteen hundred thousand which does not maintain a branch office in a borough having a population of over eighteen hundred thousand inhabitants accord- ing to the last preceding state or United States census, shall at all times have on hand a reserve fund equal to at least fifteen per centum of the aggregate of its deposits, exclusive of moneys held by it in trust, which are not made payable under the conditions of the trust within thirty days and also exclusive of time deposits not apayable within thirty days represented by certificates showing the amount of the deposit, the date of issue and the date when due and also ex- clusive of deposits which are secured by outstanding unmatured bonds issued by the state of 'New York. The whole of such reserve fund may, and at least two-thirds thereof must, consist of either lawful money of the United States, gold certificates, silver certifi- cates, or notes or bills issued by any lawfully organized national banking association, and the balance thereof over and above the part consisting of lawful money of the United States, gold certificates, silver certificates, notes or bills issued by any lawfully organized national banking association must consist of moneys on deposit sub- ject to call in any banks or .trust company in this state having a capi- tal of at least two hundred thousand dollars or a capital and surplus of at least three hundred thousand dollars, and approved by the su- perintendent of banks. Every trust company having its principal place of business elsewhere in this state shall at all times have on hand a reserve fund equal to at least ten per centum of its aggregate THB BANKING LAW. 301 deposits, exclusive of moneys held by it in trust whicli are not made payable under the conditions of the trust within thirty days and also exclusive of time deposits not payable within thirty days represented by certificates showing the amount of deposit, the date of issue and the date when due and also exclusive of deposits which are secured by outstanding unmatured bonds issued by the state of New Tork. The whole of such last mentioned reserve fund may, and at least fifty per centum thereof must, consist either of lawful money of the United States, gold certificates, silver certificates, or notes or bills, issued by any lawfully organized national banking association; and the balance thereof over and above the part consisting of lawful money of the United States, gold certificates, silver certificates, notes and bills, issued by any lawfully organized national banking asso- ciation, must consist of money on deposit subject to call in any bank or taist_comgany in this s^tate having a capital of at least two hun- dred thousand dollars or a capital and surplus of at least three hun- dred thousand dollars and approved by the superintendent of banks. The amounts to be kept on hand, as above provided, shall be called the lawful money reserve. If the lawful money reserve of any trust company .shall be less than the amount required by this section such trust company shall not increase its liability by making any new loans or discounts otherwise than by discounting bills of exchange, payable on sight or making any dividends of its profits until the full amount of its lavpful money reserve has been restored. The super- intendent of banks may notify any trust company whose lawful money reserve shall be below the amount herein required to makt- good such reserve, and if it shall fail for thirty days thereafter to make good such reserve such trust company shall be deemed in- solvent, and may be proceded against as an insolvent moneyed corporation. (Former section 164; L. 1906, eh. 337, § 1; L. 1908, eh. 152, § 1.) 1. May 4, 1906, the attorney-general gave the following opinion as to the above section: " First. That the whole of the reserve required may be held in cash. " Second. In the city of New York at least one-third must be. held in cash, and in the balance of the State at least three-tenths must be held in cash. " Third. In the city of New York one-third, and in the balance of the Sta'te three-tenths of such reserve moj/ be held in securities, or any of them named in said chapter 337 of the Laws of 1906, but the securities in which the capital of 302 THE BAlfKIJirG LAW. any trust company is invested or those deposited with the superintendent of banks under section 14 of the Banking Law cannot be counted or used for reserve purposes. Any securities, however, of the kind defined in such chapter, held by any trust company aside from those in which its capital is invested, may be counted and used as a, part of the reserve, up to but not beyond the percentage permitted by said chapter. " Fourth. The balance of the reserve, over and above that held in cash and that portion held in securities (not to exceed one-third) may consist of moneys on deposits subject to call in any bank or trust company having a capital of at least $200,000, or a capital and surplus of $300,000, and approved by the super- intendent of banks. " Fifth. None of the balance over and above the one-third or more held in cash, need be in such securities, but all of such balance may be on deposit subject to call in any bank or trust company approved by the superintendent of banks." 2. As to a trust company certificate of deposit to pay to payee a sum named with interest on a fixed future day (more than 31 days later) or 31 days after date of certificate, such amount is exempt from the required reserve. But it violates Penal Law, § 595 because it allows payment before maturity. Opinion Atty.-Gen., April 26, 1909. THE BANKING LAW. 303 AETICLE 6. Co-oPEEATivE Savings and Loan Associations. Section 210. Incorporators. 211. Object and purpose. 212. Incorporation. 213. Directors; by-laws. 214. Capital and shares. 215. Dues; fines; entrance fees; advance payments. 216. Withdrawal of free shares. 217. Dues, when to cease. 218. Loans, how made; premium plans. 219. Security for loans. 220. Arrearages; forfeitures; withdrawal values. 221. Loans due when members in arrears. 222. May purchase at foreclosure sale. 223. Association may borrow to pay withdrawals. 224. Profits and losses ascertained annually. 225. Transfer of shares. 226. Attorney; auditors; amendments to by-laws; right to vote. 227. Eligibility to membership; exemption from execution; from tax- ation. 228. Annual reports to banking department. 229. Forfeiture for failure to report. 230. Visitation by superintendent of banks. 231. Annual statement to stockholders. 232. Provisions applicable to associations formed under certain acts. 233. Amendments to articles. 234. Reincorporation. 235. Assessment of associations for benefit of banking department. 236. Investment of deposits and income. 237. Payment of expenses. 238. Construction of term " co-operative savings and loan association." 239. Construction of reference to laws of eighteen hundred ninety-two. 240. When association may be dissolved. 241. Petition for dissolution. 242. Proceedings on presentation of petition. 243. Hearing and order for dissolution; appointment of trustee. 244. Report and compensation of trustee. 245. Limitation and construction of article. § 210. Incorporators. — Any fifteen or more persons of full age and residents of the state of New York, may form an association as provided in this article. All associations formed under the pro- visions hereof shall be known as co-operative savings and loan asso- 304 THE BAJ^KING LAW. ciations; and the name of every association so formed shall contain as a part thereof the words " co-operative savings and loan asso- ciation." (Former section 170; L. 1894, ch. 705, § 1.) See section 180, a/nte. § 211. Object and purpose. — The object and purpose of such associations shall be to encourage industry, frugality, home-building and savings among its members; the accumulation of savings, the loaning of such accumulations to its members and the repayment to each member of his savings when they have accumulated to a certain sum, or at any time when he shall desire the same, or the association shall desire to repay the same. (Former section 171; L. 1894, ch. 705, § 1.) § 212. Incorporation. — Said association shall become incorpo' rated by the said fifteen or more persons making, signing and acknowledging, in the manner and form prescribed for the acknowl- edgment of doods in this state, a certificate, wherein shall be stated the name of said association; that the association is formed under and for the purpose prescribed in this article; the town, village or city where the association is located within this state. When made as aforesaid, said certificate shall be filed and recorded in the office of the superintendent of banks, and upon said certificate being so filed and recorded, the superintendent of banks shall upon the pay- ment of a fee of one dollar therefor, issue a certificate, in proper and suitable form, declaring the facts contained in said original certificate, and the filing and recording thereof in his office, and such latter certificate shall thereupon be recorded in the county clerk's office of the county where said association is located; and upon the same being so recorded, the persons named in the certificate first above mentioned, their associates and successors, shall become a cor- porate body with power to adopt by-laws relating to the manner of conducting their business not inconsistent with the provisions of this article. A copy of such by-laws and all subsequent amendments thereof shall be filed with the superintendent of banks within thirty days of their adoption. (Former section 172; L. 1894, ch. 705, § 1.) See General Corporation Law, §§ 4, 7, 8; Penal Law, §§ 660, 661. THE BANKING LAW. 305 § 213. Directors; by-laws. — The officers of the association shall consist of a board of directors of not less than thirteen members, including therein a president, vice-president, secretary and treasurer. Said last named officers shall be elected annually by the shareholders or by and from the board of directors, and the other members of the board, or not less than one-third thereof, shall be elected annually, as the by-laws shall determine. Other officers may be authorized by the by laws, subject to the restrictions hereinafter contained. The duties and compensation of the officers, their terms of office, the time of their election, the manner of filling vacancies, the time of the periodical meetings of the officers and shareholders, the manner of calling special meetings and the manner of voting, shall be de- termined by the by-laws, except that the board of directors shall fix each year the compensation of the secretary and treasurer, unless otherwise determined by the by-laws; and provided, further, that no officer, agent or other person shall receive compensation by salary, fees, expenses or otherwise for soliciting the sale of shares of the association to any person or persons. All officers named in this article shall hold office until their successors are duly elected and assume the duties of their offices, l^o association shall expire from neglect to elect officers at the time prescribed in its by-laws. (Former section 173; L. 1894, ch. 705, § 1.) § 214. Capital and shares. — The capital of said association shall consist of the accumulated savings of its members which it holds, and shall be divided into shares of a matured value of not less than fifty dollars nor more than two hundred and fifty dollars, as shall be fixed by the by-laws. The shares shall be issued in series, or at any time, as the by-laws shall determine. No shares of a prior series shall be issued after the issuing of shares in a new series when issued upon the serial plan, except, at the book value at the last distribution of profits plus dues and interest since such distribution. Shares which have not been pledged as security for the payment of a loan shall be called " free shares." Shares that have been so pledged shall be called " pledged shares." Any association incorporated under the provisions of this article, or under the acts enumerated in section two hundred and thirty-two of this chapter, may issue juvenile savings shares, of a matured value not exceeding fifty dollars, to, or 20 306 THE BANKING LAW. in the name of any minor, wMcli shall be held for the exclusive right and benefit of such minor, and free from the control or lien of all other persons, and the accumulated savings, together with the divi- dends thereon, shall be paid to the person in whose name the shares have been issued, and the receipt or acquittance of such minor shall be a valid and sufficient release and discharge for such accumulated savings, together with the dividends accredited thereon, or any part thereof, to the association. Juvenile savings shares shall not be chargeable with fines or losses of any kind, or be required to make regular or specific payments, nor shall they be entitled to vote at any meeting of shareholders. Such shares shall be entitled to dividends from the apportioned profits not exceeding four-fifths of the dividend credited upon regular instalment shares. The matured value of all the juvenile savings shares issued by any association shall not ex- ceed in the aggregate, at the time of issue, ten per centum of the aggregate matured value of the shares in force in all other classes. The manner of withdrawing all or a part of such shares, or of trans- ferring all or a part of such shares for prepaid or instalment shares, shall be clearly set forth in the articles of association, certificate of incorporation, or by-laws of every association issuing such shares. (Former section 174; L. 1894, oh. 705, § 1; L. 1905, eh. 604, § 1; L. 1906, ch. 438, § 1.) § 215. Dues; fines; entrance fees; advance payments. — Kegular payments made to the asociation upon shares shall be called " dues." At or before each stated meeting of the board of directors, or at any stated meeting for receiving dues, each shareholder shall pay to the board, or a committee thereof, or some officer of the association, as designated by the by-laws, upon each share held by him, such amount of dues as the by-laws require until the share of stock reaches its matured value, or is withdrawn, canceled or forfeited. Payment of dues on shares in each series shall commence from the time that shares began to be issued in such series, when issued upon the serial plan, and, when not issued in series, from the date of issuing. The association shall have the power to impose and collect a fine from each shareholder for every neglect or refusal to make his payment of dues, interest or premiums when due, in such sums and in such manner as its by-laws determine. The association shall also have THH BAITKING LAW. 307 power to charge an entrance fee upon each share issued, not exceed- ing twenty-five cents on each share, or, in lieu thereof, a membership fee not exceeding one dollar. Payments of dues, interest or premium may be made in advance, but no association shall allow interest on such advance payments at a greater rate than six per centum per annum, nor for a longer period than one year. (Former section 175; L. 1894, ch. 705, § 1.) As to fines in building and loan associations, see editorial note to Daipuy v. Eastern Bldg. & L. Asso., 35 L. R. A. 215, collating the authorities on that ques- tion. § 216. Withdrawal of free shares. — The accumulation upon free shares may be withdrawn and the shares canceled after one month's written notice of such intention, filed with the secretary on or before a stated meeting of the board, but the directors may waive such one month's notice. If filed before such meeting the one month's notice shall not be deemed to have commenced until the first regular meet- ing after the filing. The withdrawing shareholder shall be paid the amount of the withdrawal value of his accumulations, as deter- mined under the by-laws at the last distribution of profits before the notice of withdrawal, together with all dues paid since sucb distri- bution, and with or without such interest on the value of the shares at the time of the last distribution, and on the dues thereafter paid, as the by-laws shall determine, less any fines unpaid, provided, that at no time shall more than one-third the receipt of the association be applicable to the payment of matured and prepaid shares and one- third to tbe payment of instalment shares, vnthout the consent of the board of directors; and when the demands of the withdrawing shareholders exceed the money applicable to their payment, they shall be paid in the order in which their notices of withdrawal were filed with the secretary. The board of directors of permanent plan asso- ciations may permit a member to withdraw a part of the accumu- lations to his credit, without thereby reducing the number of shares held by him. The board of directors may, at their discretion, under rules made by them, retire the free shares and prepaid shares by en- forcing vsdthdrawals of the same, provided that the by-laws shall clearly state the manner in which the withdrawals may be enforced and that they shall be paid the full value of their shares, les all fines. No corporation shall hereafter pay to a withdrawing shareholder any 308 THE BACKING LAW. sum in excess of the dues or stock payments credited to him upon its books, together with such dividends as have been duly apportioned and credited thereon, and such interest on the value of the shares at the time of the last distribution of profits before the notice of with- drawal was filed and on the dues thereafter paid, as its articles of association, certificate of incorporation or by-laws shall determine, but less all unpaid fines, all deductions for expenses authorized bj its articles of association, certificate of incorporation or by-laws. This section applies to every association or corporation organized under this article and under the provisions of chapter one hundred and twenty-two of the laws of eighteen hundred and fifty-one, chapter five hundred and fifty-six of the laws of eighteen hundred and eighty- seven, chapter six hundred and eighty-nine of tbe laws of eighteen hundred and ninety-two and the acts amendatory of each and every of said laws. (Former section 175; L. 1894, oh. 705, § 1.) (Former section 176; L. 1894, oh. 705, § 1; L. 1901, ch. 328, § 1; L. 1905, ch. 757, § 1.) 1. See note to Englehardt v. Fifth Ward Permanent Dime Sav. & L. Asso., 35 L. R. A. 289, presenting the authorities on the subject of withdrawals from building and loan associations. 2. When there is not sufficient cash, a withdrawing shareholder if consenting thereto may receive land in payment, if taken at fair value, and provided that such payment is not made out of the order prescribed statute. Opinion Atty.- Geu., February 4, 1908. § 217. Dues, when to cease. — When each free share reaches its matured value all payments of dues thereon shall cease, and the holder thereof shall be paid out of the funds of the association, the matured value thereof with such rate of interest as shall be deter- mined by the by-laws, from the time the board of directors shall de- clare such shares to have matured until paid; but at no time shall' more than one-third of the receipts of the association be applicable to tbe payment of matured shares, without the consent of the board of directors. The order of payment of the matured shares shall be determined by the by-laws. (Former section 177; L. 1894, ch. 705, § 1.) § 218. loans, how made; premium plans. — At each stated meet- ing of the board, or a committee thereof, or other meeting, as fixed by the by-laws for the purpose of making loans, they shall offer to THB BANKING LAW. 309 members of the assocdation desiring to borrow all accumulations ap- plicable to that purpose ; the same shall be loaned in sums correspond- ing with the value of a matured share, or a multiple thereof, or tbe fractional part thereof. If there shall be more than one member desiring to borrow, the right to a loan shall be determined by the open bidding of a premium upon one of the three plans following, which each, association shall determine for itself by its by-laws, namely : 1. Tbe " gross plan," witb or without " rebates," as the by-laws stall determine; that is, the premium sball be bid in the form of a certain sum per share, wbicb shall b© paid in cash or deducted from the loan made to the successful bidder. 2. The " instalment plan," that is, the premium shall be bid in the form of a certain sum per share, whicb tbe successful bidder will pay at each regular payment of interest, in addition to the in- terest which the association requires during the continuance of his loan. 3. The " premium interest plan," that is, the premium shall be bid in the form of the rate of interest the successful bidder will pay upon his loan during the continuance thereof ; the association in this plan sball determine the minimum rate of interest at which the bid- ding shall begin. But such minimum rate shall not exceed the legal rate of interest. In all these plans tbe member bidding the highest premium shall be entitled to the loan upon giving the security required therefor, including the interest and premium ; the interest and premium shall be payable from the date of bidding off tbe loan, unless otherwise ordered by the by-laws, and in case the sale takes place at an ad- journed or special meeting, the same shall be payable from tlie last preceding regular meeting for the loaning of money unless tbe by- laws otherwise provide. Requiring and receiving such interest and premiums or any other moneys which the association may require under the provisions of this actricle, shall not be deemed a violation of the statute relating to usury. 'No member or members shall bor- row a larger stmi than shall be equal to the matured value of the shares held by him or them, nor shall the association take security upon real estate located more than fifty miles from its principal office for the transaction of its business. A borrowing member for 310 THE BANKING LAW. each share or fractional part thereof boricowed upon, shall in addition to the dues on his shares pay interest and premium, if any, on his loan at such times as the by-laws shall prescribe, until the shares borrowed upon shall reach their matured value or the loan is repaid ; and when such matured value is reached the shares shall cancel the loan upon them and the proper surrender and acquittance be made. 4. The " limited payment plan," that is, a plan whereby associa- tions incorporated hereunder, or under chapter one hundred and twenty-two of the laws of eighteen hundred and fifty-one, chapter five hundred and fifty-six of the laws of eighteen hundred and eighty- seven, chapter six hundred and eighty-nine of the laws of eighteen hundred and ninety-two, and acts amendatory thereof, may issue and sell instalment shares as a basis for making loans or advances, on which the maximum number of payments may be definitely fixed. The premium shall be bid in the form of the rate of interest the successful bidder will pay upon his loan during the continuance thereof; the association shall determine the minimum rate of such premium-interest at which such bidding shall begin, but such mini- mum rate shall not exceed six per centum per annum. On such stock a definite or fixed rate per centum of dividend per annum shall be credited from the profits of the association, if its earnings are sufficient for that purpose, but such rate shall in no case exceed the rate of premium-interest bid upon the loan for which such stock is the basis, and in no case shall such rate exceed six per centum per annum. There shall be paid on such stock such sum or sums in equal periodical instalments, exclusive of any expense fund or other de- ductions which are authorized by the articles of association or the by-laws, as will, when taken together with the dividend hereinbefore mentioned, equal the matured value thereof at the end of the maxi- mum period during which payment upon such stock may be required. In consideration of such fixed rate of dividend as above provided, the borrowing member shall waive his right to full participation in the profits of such association. Out of the profits, if any, which remain after paying the expenses of said association and apportioning to thq borrowing member the fixed rate agreed upon in the contract with him, there shall be apportioned to the instalment stock such rate of dividends as may be determined by the board of directors, and if such rate so determined and apportioned shall exceed the rate ap- THE BAITKING LAW. 311 portioned to the stock of the borrowing members, tbere shall also then be apportioned to the stock of said borrowing members an ad- ditional profit, wbich sball amount to one-half of the difference be- tween the rate first apportioned to sucL. borrowing members' stock and the rate apportioned to the instalment stock, and the other balf of said difference shall be credited to and stall constitute a perma- nent contingent fund for the payment of losses lawfully chargeable to tbe profit and loss account of such association, and for no other purpose; and in consideration of sucb contribution to the contingent fund, sucb stock stall, as between the members of the association issuing it, be exempt from any further charges or assessments for losses sustained, incurred or paid by sucb association. When the borrowing member shall have made all the payments required under his contract with the corporation and its articles of association or by-laws, the association shall, unless the shares of stock held by him shall have sooner matured, in consideration of the amount standing to the credit of such stock upon its books, and his agreement to con- tribute to the contingent fund of the corporation, a portion of the profits to which he otherwise might have been entitled, as herein- before provided, accept the amount standing to his credit upon the books of the association, and the sums so contributed, in full satis- faction of the loan or advance made to him; and the shares so issued shall be canceled and proper surrenders and acquittances be made. (Former section 178; L. 1894, eh. 705, § 1; L. 1899, ch. 704, § 1.) § 219. Security for loans. — For every loan made, except as here- inafter provided in this section, a bond secured by a first mortgage on real estate shall be given, accompanied by a transfer and pledge to the association of the shares borrowed upon and all accumulations that have or shall accrue thereon, as collateral security for the repay- ment of the loan ; or, in lieu of the mortgage, the borrower or another may transfer and pledge to the association for the payment of the loan, free shares, the withdrawal value of which under the by-laws at the time of such borrowing shall exceed the amount borrowed and interest thereon for six months, and all fines that could accrue in case the borrower should default in the payment of the dues upon the shares borrowed upon, but an association may provide by its by-laws that it will not make stock loans. If the borrower neglects to offer 312 THE BANKHiTG LAW. securitj satisfactory to the board of directors, within the time pro- vided by the by-laws, his right to the loan shall be forfeited and he shall be charged with interest and preminm, if any, for one month, and all necessary expenses incurred, if any, under the by-laws in reference to the proposed loan. All bonds and mortgages given to the association shall be deemed conditioned upon the performance of the provisions of this article relating to the payment of loans, premiums, interest and fines thereon, and the by-laws of the associa- tion, although the same may not be fully expressed therein. A bor- rower may repay a loan, and all arrears of interest, premium, if any, and fines thereon, or one or more shares thereof, at any stated meet- ing or at any time, but the by-laws may otherwise provide ; when not made at a stated meeting, he shall pay interest up to the first stated meeting after such payment, or he may, by a proper notice, and directions as to the application, have the withdrawal or holding value of the shares borrowed upon, applied in payment or part pay- ment, as the by-laws shall determine. Should there at any time be money in the treasury not called for by the borrowing or withdraw- ing members, the board of directors may make temporary loans to members out of the same, at sucb rate of interest not exceeding six per centum, and under such provisions and restrictions as the 1^-laws may prescribe. Such temporary loans shall not run more than ninety days and shall be secured by the personal note of the borrower, and also by a pledge of shares to the association, the withdrawal value of which shares shall be at least ten per centum more than the amount of the loan and the interest thereon to its maturity. If at any time there is money in the treasury as above in excess of the amount needed to meet the demand for such temporary loans, it may be invested in the same kind of securities and under the same restrictions as allowed to savings banks by section one hundred and forty-six of this diapter. No corporation incorporated under the provisions of this article or under the provisions of the repealed acts hereafter enumerated in section two hundred and thirty-two of this chapter which upon the first day of March, nineteen hundred and one, was not engaged in the business of loaning its funds upon second mortgages upon real estate, shall hereafter loan any portion of its funds upon the security of real estate upon which there is a prior lien or incumbrance, or accept from a borrower a mortgage upon real estate which is not a THE BAJTKIIS'G LAW. 313 first mortgage, or purchase real estate securities, or invest any por- tion of its funds, in real estate securities -whicli are not first liens upon the property described in them, unless every prior mortgage, lien or incumbrance is owned by it, and no prior mortgage, lien or incumbrance shall be sold, assigned or transferred by any such cor- poration until all subsequent mortgages, liens or incumbrances owned by it shall have been fully paid and satisfied. A corporation incorporated under the provisions of this article, or under the provisions of either of said repealed acts hereinafter enumerated, which was, on the first day of March, nineteen hundred and one, engaged in the business of loaning its funds, or any portion thereof, upon second or divided mortgages or upon subsequent or secondary liens upon real estate, whether the prior mortgages or liens are given to or held by such corporation or not, and which shall hereafter continue to make loans upon such second mortgagesi or liens, shall not advance in any such loans a sum which taken together with the amount of all prior liens or incumbrances, exceeds seventy- five per centum of the appraised valtie of the real estate upon which such loans are made. ISTor shall the total amount so loaned by any such corporation exceed at any time an amount equal to thirty-three and one-third per centum of the net amount paid in on its capital stock in good standing. Provided further that such corporation shall invest not less than fifteen per centum the first year, twenty per centum the second year, and thereafter twenty-five per centum of its receipts applicable for loaning purposes in the sajne securities in which savings banks are by section one hundred and forty-six of this chapter, authorized to invest their deposits and the income derived therefrom, until the funds so invested shall amount to at least twenty- five per centum, and to be at all times so maintained, of all mortgages and liens underlying the mortgages or liens held by it (except that after said fund shall amount to fifteen per centum of all underlying mortgages and liens held by such corporations, the remainder, or any portion of the remainder thereof, may be used in cases of emergency in the payment of withdrawals). Provided, however, such invest- ment in such securities need not exceed five hundred thousand dol- lars in any case. No such corporation engaged on the first day of March, nineteen hundred and one, in the business of loaning its funds or any portion thereof upon second or divided mortgages, or 314 THE BANKING LAW. subsequent or secondary liens, shall after the eleventh day of April, nineteen hundred and one, make any such loans upon the security of vacant or unimproved real estate. (Former section 179; L. 1894, ch. 705, § 1; K 1896, eh. 452, § 4; L. 1901, eh. 328, § 2; L. 1905, oh. 491, § 1.) § 220. Arrearages; forfeitures; withdrawal values. — Whenever any member shall be six months in arrears in the payment of his dues upon free shares, the secretary shall give him notice thereof in writing, and a statement of his arrearages, by mailing the same to him at the last post-office address given by him to the association, and if he shall not pay the same within two months thereafter, the board. of directors may, at their option, declare his shares forfeited; and at the time of such forfeiture the withdrawal value thereof shall be determined and stated, and the defaulting member shall be en- titled to withdraw the same without interest within one year upon such notice as shall be required of a withdrawing shareholder, and upon failure to so withdraw the same, then, and in that ease, it may revert to the association. (Former section 180; L. 1894, ch. 705, § 1.) § 221. loans due when members in arrears. — Whenever a bor- rowing shareholder shall be in arrears in the payment of his dues, interest or premium two months, the whole loan shall become due at the option of the board of directors, and they may proceed to enforce collection upon the securities held by the association. The withdrawal value at the time of the commencement of the action of all shares pledged as collateral security for the loan, shall be applied upon the loan and arrearages of interest, premium and fines thereon, and the shares deemed surrendered to the association. (Former section 181; L. 1894, ch. 705, § 1.) § 222. May purchase at foreclosure sale. — Any corporation in- corporated under the provisions of this article or under the provisions of either of the repealed acts hereafter enumerated in section two hundred and thirty-two of this chapter may purchase at any sale, public or private, any real estate upon which it may have a mortgage, judgment lien or other incumbrance, taken or obtained in good faith in the regular transaction of the business of the association, and may sell, exchange, convey, lease or mortgage the same or any real estate THH BANKIHQ LAW. 315 it now owns at pleasure to any person or persons ; it may also hold and own real estate for the purpose of occupying the same with its own business office. Except that no exchange of real estate shall be made except by the unanimous vote of the directors of the corpor- ation making such exchange, and no such exchange shaU. be made upon a basis involving the payment by said corporation of any difEer- ence in value unless approved by the superintendent of banks. No corporation incorporated under the provisions of this article or under the provisions of either of the repealed acts hereafter enumer- ated in section two hundred land thirty-two of this chapter, shall hereafter purchase or exchange real estate except as hereinbfore pro- vided; and every contract hereafter made by or on behalf of any such association for the purchase or exchange of real estate or for any purpose not hereinbefore expressly authorized shall be void. Any officer of any association, who shall consent to or participate in the making of any such void, illegal or unauthorized contract for the purchase or exchange of real estate, or who shall transfer to any person or persons any property of the corporation in pursuance of any such void, illegal or unauthorized contract shall be guilty of a misdemeanor. (Former section 182; L. 1894, ch. 705, § 1; L. 1901, oh. 328, § 3.) § 223. Association may borrow to pay withdrawals. — An y associa- tion organized in pursuance of the provisions of this article may borrow money for the purpose of making loans or paying with- drawals, not exceeding, however, two thousand dollars, so long as its accumulated capital shall not exceed twenty thousand dollars, and when its accumulated capital exceeds that sum, not exceeding ten per centum thereof. No money borrowed shall be for a longer term than one year. Any association having a surplus in its treasury for which there is no demand for loans, withdrawing stockholders, matured or paid-up stock, may loan the same to another association, organized under the provisions of this article, subject to the pro- visions of this section, on the part of the borrowing association. No association shall borrow or make loans in this section authorized, except by a majority vote of all the members of its board of directors, the vote to be recorded by ayes and nays in its regular minutes. (Former section 183; L. 1894, ch. 705, § 1.) 316 THE BANKING LAW. § 224. Profits and losses ascertained annually. — Profits and losses shall be ascertained at least annuially, and shall be distributed to all shares outstanding at the time of such distribution, in the manner provided by the by-laws of the association. At each periodi- cal distribution of profits, the board of directors shall reserve and carry to a reserve or contingent fund, a sum equal to at. least five per centum of the net earnings during the period since the last previous dividend was declared, until such reserve or contingent fund shall be equal to at least five per centum of the dues and divi- dends credited to members by series or otherwise, ^and equal to at least fifty per centum of the book value of all real estate owned by the association. The directors may carry to such reserve or con- tingent fund any further portion of the undivided earnings that in their discretion seems wise. When any association takes property at a foreclosure sale or in extinguishment of a debt, it shall not be put upon the books of the association at a figure in excess of the sum due the association at the time of first default. Whenever, by any loss which an association may sustain, from this or any other cause, the reserve or contingent fund is reduced below five per centum of the dues land dividends credited to members by series or other- wise, or below fifty per centum of the book value of all real estate owned by an association, the board of directors shall, at each periodi- cal distribution of profits, carry to such reserve or contingent fund five per centum of the net earnings during the preiod since the last previous dividend was declared, until such reserve or contingent f imd shall again be equal to at least five per centum of the dues and dividends credited to members, by series or otherwise, and equal to at least fifty per centum of the book valuation of all real estate owned by the association. This section applies to every association or corporation organized under the provisions of this article and under chapter one hundred and twenty-two of the laws of eighteen hundred and fifty-one, chapter five hundred and fifty-six of the laws of eighteen hundred and eighty-seven, chapter six hundred and eighty- nine of the laws of eighteen hundred and ninety-two and the acts amendatory of each and every of said laws. (Former sfection 184; L. 1894, ch. 705, § 1; L. 1906, oh. 432, § 1.) THB BANKING LAW. 317 § 225. Transfer of shares. — No transfers of shares shall be bind- ing upon the association until the same have been made upon the books of the association; and the transferee thereof shall take the same charge with all the liabilities and conditions attaching thereto in the hands of the one transferring the same. The association may require a " transfer fee," not exceeding twenty-five cents per share, or in lieu thereof a total fee not exceeding one dollar on each transfer. (Former section 185; L. 1894, eh. 705, § 1.) § 226. Attorney; auditors; amendments to by-laws; right to vote. — The board of directors shall have the power to appoint and remove, at pleasure, an attomey-at-law for the association. The by-laws of the association may provide for the election of auditors, and prescribe their duties and compensation, and shall provide in what manner the by-laws themselves may be amended. At the time of the adoption of by-laws on the formation of an association, only those members who have joined in the certificate of incorporation are entitled to vote, and each incorporator shall have only one vote. (Former section 186; L. 1894, ch. 705, § 1.) § 227. Eligibility to membership; exemption from execution; from taxation. — Any person of full age and sound mind may become a member of the association by taking one or more shares therein and subscribing to the by-laws, and annexing to his signature his post- office address ; and whenever he desires his post-office address changed he shall give written notice thereof to the secretary of the associa- tion ; and for the purpose of giving any member notice, by mail, the last post-office address given by him shall be deemed the proper one. A minor may hold shares in the name of a parent, guardian or next friend, as trustee for him, but the association shall not be respon- sible to said infant for any moneys received by said trustees on account of said shares from the association. All accumulations upon shares in said association held by any person shall be exempt from execution and proceedings supplementary thereto to the amount of six hundred dollars; and the association itself shall be deemed an institution for savings, and not taxable under any tax law which shall exempt savings banks or institutions for savings from taxation, nor shall any law passed hereafter, taxing corporations in any form, 318 THE BANKING LAW. be deemed to include associations formed under this article, unless they are specifically named in such law. (Former section 187; L. 1894, eh. 705, § 1.) See Tax Law, § 4, subd. 14. § 228. Annual reports to banking department. — Every association organized under the provisions of this article or under the provi- sions of chapter one hundred and twenty-two of the laws of eighteen hundred and fifty-one and the acts amendatory thereof, or under chapter five hundred and fifty-six of the laws of eighteen hundred and eighty-seven, or under articles five and six of chapter six hun- dred and eighty-nine of the laws of eighteen hundred and ninety- two, shall, annually, on or before the thirtieth day of January, make a full report in writing of the affairs and conditions of such corpora- tion on the thirty-first day of December of the next preceding year to the superintendent of banks, in such form and by such officers of the corporation as the said superintendent may designate. Every payment made to an officer or agent of the association, by authority of the association, or by virtue of any provision of its by-laws or articles of association, shall, for the purposes of this section, be deemed a payment to the association and accounted for by it. Such report shall be verified by the oath of the officers making the same, and shall include the receipts of such association from all sources, including membership or share fees, land all other compensation paid to officers or agents by members or persons expecting to become members. Such report shall also include all expenditures made by such association, and for what purpose expended. Every association shall make any further reports which said superintendent of banks shall require, and in such form and as to such matters relating to the condition and conducting of the business of the association, as such superintendent shall designate. Any wilful and false swearing in making and verifying any such report shall be deemed perjury. (Former section 188; L. 1894, oh. 705, § 1.) § 229, Forfeiture for failure to report. — If any such association shall fail to furnish to the superintendent of banks any report re- quired by this article at the time so required, it shall forfeit the sum of ten dollars per day for every day such report shall be delayed or THB BAITKING lAW. 319 "witKheld ; and the superintendent of banks may maintain an action in his name of office to recover such penalty and the same shall be paid into the treasury of the state and applied to the expense of the said department, or he may report the facts to the attorney-general, who may bring an action for recovery in the name of the people of the state of !N"ew York; provided, however, that the superintendent may, for good cause shown, extend the time within which such re- port is to be filed not exceeding twenty days. He shall also annually publish a full report of the condition of all associations formed under the provisions of this article or under the provisions of the acts enumerated in section two hundred and thirty-two of this chapter. (Former section 189; L. 1894, ch. 705, § 1.) § 230. Visitation by superintendent of banks. — All associations organized under the provisions of this article or under the acts specified in section two hundred and twenty-eight of this article shall at all times be subject to visitation and examination by the superin- tendent of banks, his deputies or duly authorized agents; and he shall examine or cause to be examined each of said associations at least once in each year. It shall also be the duty of said superin- tendent by himself, his deputies or duly authorized agents to make examination of the affairs of any of said associations whenever in the judgment of said superintendent the annual or any other report made to said department as required in this article shall in any manner indicate or reveal that its business is being conducted in a manner not authorized by its articles of association or by-laws or by the laws of the state of New York under which it is organized or in an irregular or unsafe manner, and when any association shall fail wholly to make the reports required by the provisions of this article; all expenses incurred in making such examination or in- vestigation herein authorized shall be paid from the funds provided by section two hundred and thirty-five of this chapter, except the annual examination herein provided for land also excepting exam- inations made by reason of the business being conducted in a manner not authorized by its articles of association or in violation of law or in an irregular or unsafe manner as hereinbefore provided ; but no charge shall be made therefor when the examination is made by said superintendent personally or by one of the salaried employees of his 320 THB BAITKING LAW. department, except for traveling or other necessary expenses, but when made by some person duly appointed by said superintendent other than a salaried officer of his department, the amount charged shall not exceed the sum of ten dollars per day for the time actually expended in making the examination land reports of same and in getting to and from the place of examination and the actual necessary expenses incurred. (Former section 190; L. 1894, ch. 705, § 1.) § 231. Annual statement to stockholders. — Each association shall at least annually publish and deliver to each shareholder on applica- tion a complete and detailed statement of its financial situation and the business conducted since the issuing of its last prior statement. (Former section 191; L. 1894, ch. 705, § 1.) § 232. Provisions applicable to associations formed under certain acts. — Chapter one hundred and twenty-two of the laws of eighteen hundred and fifty-one, chapter five hundred and sixty-four of the laws of eighteen hundred and seventy-five, chapter ninety-six of the laws of eighteen hundred and seventy-eight, and chapter five hun- dred and fifty-six of the laws of eighteen hundred and eighty-seven, and article six of chapter six hundred and eighty-nine of the laws of eighteen hundred and ninety-two, are hereby repealed, except as to associations organized prior to May fifteenth, eighteen hundred and ninety-four, under either of said acts, but such association shall be subject to the provisions of section two hundred and twenty-two, two hundred and twenty-eight, two hundred and twenty-nine, two hundred and thirty, and two hundred ^and thirty-five of this chapter and to such provisions of section two hundred and sixteen and two hundred and nineteen as are expressly made applicable to them. (Former section 192; L. 1894, ch. 705, § 1; L. 1901, ch. 328, § 4.) § 233. Amendments to articles. — No change, alteration or amend- ment shall be made in or to the articles of association, certificate of incorporation or by-laws of any corporation incorporated under the provisions of this article or of the acts enumerated in the preceding section unless such change, alteration or amendment shall have first been submitted to the superintendent of banks and shall have re- ceived his written a|pproval, which may be given or withheld in his THE BANKING LAW. 321 discretion, and shall also have been duly adopted at a meeting of stockholders, of which meeting thirty days' notice by mail shall be given to each shareholder of record. Such notice shall contain a true copy of the proposed change, alteration or amendment. Any corporation deeming itself aggrieved by the refusal of the superin- tendent of banks to give such written approval may apply to any justice of the supreme court, upon notice to the superintendent of banks, for a review of such decision. Such justice shall upon such application being made review the decision of the said superintend- ent upon such evidence as may be presented to such justice, who may set aside the action of the said superintendent and approve such change, alteration or amendment. And such approval by said justice shall permit such corporation to make such change, alteration or amendment as approved. (Former section 192; L. 1894, eh. 705, § 1; L. 1901, ch. 328, § 4.) § 234. Reincorporation. — Any association now existing and heretofore incorporated under the provisions of chapter one hundred and twenty-two of the laws of eighteen hundred land fifty-one, and of the acts amendatory thereof, or chapter five hundred and fifty-six of the laws of eighteen hundred and eighty-seven, or articles five and six of chapter six hundred and eighty-nine of the laws of eighteen hundred and ninety-two, may become entitled to the benefits of this article and reincorporate under its provisions in the following manner : 1. Upon a majority vote of all the directors so requesting, the president and secretary of the association shall call a special meeting of the shareholders to consider and determine the question whether the association shall reincorporate under the provisions of this article. Such notice shall specify the object of such meeting and be mailed postage prepaid, not less than thirty days prior to the date fixed for the meeting, to every shareholder at his last post-ofiice address known to the association. 2. At such meeting a majority vote of those in attendance shall decide all questions considered at the meeting, the vote being by member or by shares, according to the rule already existing in the association. The meeting may be adjourned from time to time if deemed advisable. 21 322 THE BANKING LAW. 3. If the shareholders decide not to reincorporate, another meeting for such purpose shall not be called until one year has passed. 4. If the shareholders decide to reincorporate they shall proceed to adopt by-laws for the association when reincorporated, the voting thereon to be the same as provided in the foregoing subdivision two and such by-laws shall be in conformity with the provisions of this article. 5. The shareholders having decided to reincorporate, and having adopted by-laws, shall next designate the fifteen or more persons who may make and file the certificate, and have the certificate re- corded as provided in section two hundred and twelve of this chapter. 6. Upon the said fifteen or more persons complying with the pro- visions of said section two hundred and twelve and filing said by- laws with the superintendent of banks, the association shall become fully incorporated under this article. All obligations in favor of the old association at the time of such change shall belong to the new association and be enforceable by it and in its name as fully and completely as the old association might have enforced them if no change had been made, and aU demands, claims and rights of action against the old corporation may be en- forced against the new corporation as fully and completely as though no change had been made. (Former section 193; L. 1894, ch. 705, § 1.) § 235. Assessment of associations for benefit of banking department. — The superintendent of banks is hereby empowered to levy an assessment upon each association incorporated hereunder or under chapter one hundred and twenty-two of the laws of eighteen hundred and fifty-one and acts amendatory thereof, or chapter five hundred and fifty-six of the laws of eighteen hundred and eighty-seven or articles five and six of chapter six hundred and eighty-nine of the laws of eighteen hundred and ninety-two, for the purpose of defray- ing the necessary expenses of his department in the supervision of said associations, examination and publication of reports as follows, viz. : Said assessment shall be levied upon said association in pro- portion to their assets as shown by the last preceding annual report, and said associations shall pay the same within ten days after notice THB BANKING LAW. 323 is given by said superintendent; and in no event shall any portion of said expenses be borne by the state. (Former section 194; L. 1894, ch. 705, § 1.) § 236. Investment of deposits and income. — A co-operative sav- ings and loan association, or a building and loan association, incor- porated under and doing business pursuant to the laws of this state, may invest its deposits and the income derived therefrom in the same securities in which savings banks are, by section one hundred and forty-six of this chapter, authorized to invest their deposits and the income derived therefrom. (Former section 195a; L. 1898, ch. 348, § 1.) § 237. Payment of expenses. — A co-operative savings and loan association, a building and mutual loan association, a building, mutual loan and accumulating fund association, or a building and lot association or any other similar corporation or association, in- corporated under and doing business pursuant to the laws of this state, shall not make deductions from stock payments for running expenses; nor shall any such corporation pay, or become liable to pay, either directly or indirectly, in the course of any calendar year, as salaries, commissions, fees or other compensation to its officers, directors, auditors, attorneys, agents, clerks and all other employees, and for rent, advertising, commissions and all other operating ex- penses, sums of money the aggregate of which shall exceed two and one-half per centum of the total amount of the dues actually received and credited to its members and the dividends duly apportioned and credited thereon, on the first day of such calendar year, including dues and dividends credited to the holders of matured stock. The term " operating expenses " as used in this section shall not be con- strued to include tax on mortgages, taxes, . assessments, repairs or insurance on real estate, commissions on the sale of real estate, reasonable charges for collecting the rent or superintending the re- pair or improvement of real estate situated outside of the limits of "New York state and more than two hundred miles from the main office of the corporation, interest on matured shares or any other interest which the corporation may have paid or become liable to pay, proper legal charges for searching titles or the preparation of 324 THB BANKIUG LAW. legal papers, expenses of foreclosure suits or other bona fide litiga- tion, nor charges for examinations made by the direction of the superintendent of banks. The provisions of this section, in so far as they limit the expenditures for expenses, shall not apply to build- ing and lot associations nor to any corporation whose accumulated capital, consisting of the dues and dividends standing to the credit of its members, is less than twenty thousand dollars. In case of the violation of the provisions of this section, by any such corporation, the superintendent of banks shall, upon learning of such violation, by an order under his hand and official seal, addressed to such cor- poration and served upon it in the manner prescribed for the service of a summons by section four hundred and thirty-one of the code of civil procedure, direct a discontinuance of such violation and con- formity with the requirements of this section, and if such corporation shall refuse or neglect to bring its said expenses within the limit prescribed by this section, within six months from the time of the service of such order, as aforesaid, the superintendent of banks shall communicate the facts to the attorney-general, who shall thereupon institute such proceedings lagainst the corporation as are authorized in the case of involvent corporations or such other proceedings as the nature of the case may require. The provisions of this section shall apply to all foreign corporations doing business under the per- mission and certificate of the superintendent of banks, and said superintendent of banks shall not renew such permission or issue such certificate to any corporation that shall have violated the pro- visions of this section. (Former section 195b; L. 1903, oh. 84; L. 1905, ch. 673; L. 1906, ob. 573.) § 238. Construction of term " co-operative savings and loan asso- ciation." — The term, " co-operative savings and loan association," shall include every corporation, company or association doing busi- ness in this state and having for la part of its title or name the words " building *assoication," " building and loan association," " build- ing and mutual loan association," " savings and loan association," " savings association," " co-operative loan association," or " co-opera- tive bank," and every corporation, company or association whose * So in original. THB BAJTKIIfG lAW. 325 stock is wholly or in part payable by a cumulative fund in regular or periodical instalments, or wMch is doing business in the form and of a character similar to that authorized by this article organized or incorporated in this state or in any state or country outside of this state. (Former section 2; L. 1892, ch. 689.) § 239. Construction of reference to laws of eighteen hundred ninety- two. — Whenever reference is made prior to May thirty-first, eighteen hundred and ninety-eight, in any of the statutes of the state of New York to article five or six land to articles five and six of chapter six hundred and eighty-nine of the laws of eighteen hundred and ninety- two of the said reference shall be construed to mean and refer to article six of this chapter. (Former section 195; L. 1894, ch. 705, § 1.) § 240. When association may be dissolved. — In either of the fol- lowing cases, any association incorporated under chapter one hun- dred land twenty-two, laws of eighteen hundred and fifty-one, entitled " An act for the incorporation of building, mutual loan and accumu- lating fund associations," and the acts amendatory thereof, may 13 dissolved, or the court may declare and adjudge that it has been dis- solved, or that its corporate existence has terminated, and the assets of such corporation may be distributed among those entitled thereto : 1. Whenever the time of the existence of such association, as specified in its certificate of incorporation, has expired ; 2. Whenever all the shares of such association shall be redeemed by advances thereon, or whenever the owners of unredeemed shares shall be paid the ultimate value thereon, as provided in the articles of lassociation ; 3. Whenever it shall appear to the satisfaction of the court that the association has ceased to do business, and that the purposes of its existence, as contemplated by the said act and by its certificate of incorporation, have been accomplished; 4. In any of the cases specified in section one hundred and one of the general corporation law, where no officer, director, agent or other person can be found upon whom service of process in behalf of the corporation is authorized by law. (L. 1906, ch. 600, § 1.) 326 THE BANKUTQ LAW. § 241. Petition for dissolution. — In eitter of the cases specified in section two hundred and forty a petition may be presented to the supreme court in the district where the real property of such associa- tion, or any part of said property, is or was situated, or where the place of business of such association is or was located. Such petition may be presented by any oificer, director or trustee, member, share- holder or creditor of such association or by the executor, adminis- trator or assigns of any such officer, shareholder, member or creditor, or by any other person or corporation who has or may have an in- terest in obtaining the relief prayed for in such petition, or who may have an interest in procuring from some one authorized to represent said corporation some conveyance or other instrument to perfect title, or to remedy an apparent defect in title to real property which, or some interest in which, may at some time have been or might be claimed to have been ovsmed by said association. Such petition shall be verified and shall set forth the name of the association and the place where its certificate of incorporation is filed ; the nature of the interest of the petitioner in the association or in the application; under which of the cases specified in section two hundred and forty of this chapter the application falls ; and a concise statement of the condition of the affairs of such association, to the best of the peti- tioner's knowledge, information and belief, together with any other facts that may be deemed appropriate. (L. 1906, ch. 600, § 1.) § 242. Proceedings on presentation of petition. — Upon the pre- sentation of such petition the court must make an order, returnable in not less than twenty-one days, requiring such association, its offi- cers, directors or trustees, members, shareholders and creditors, and all other persons having any interest in such association or in its assets, to show cause why the relief provided for in section two hun- dred and forty of this chapter should not be granted; such order shall be published once a week for three successive weeks in a news- paper specified in the order, published in the county wherein the order is entered, or where the certificate of incorporation of such association is filed, and such publication shall be deemed to constitute sufficient service of the order and of notice of the application upon all persons and classes of persons designated in the order. But the THE BANKING LAW. 327 court may direct sucli different or other service thereof as it may deem proper. A copy of such petition and of the order to show cause granted thereon shall be served upon the attorney-general and the superintendent of hanks of the state of New York, at least eight days before the return day thereof. (L. 1906, eh. 600, § 3.) § 243. Hearing and order for dissolution; appointment of trustee. — At the time and place specified in the order, or to which the hearing is adjourned, the court, or the referee, if the court should direct a reference, must hear all persons opposing the praper of the petition, hear the allegations and proofs of the parties, and determine the facts. If the court shall be satisfied that the association has already been dissolved, or that its legal existence has terminated, it shall make an order so declaring and adjudging. If it shall find that the association, though legally in existence, ought to be dissolved, it shall make an order dissolving it, and upon the entry of such order the association is dissolved. In either case it shall appoint a trustee or trustees for the purpose of settling its affairs, collecting and pay- ing any outstanding debts, and dividing among the persons entitled thereto the money or other property remaining after payment of debts and necessary expenses. Such trustee or trustees shall have the same powers and duties as trustees under section thirty-five of the general corporation law, and shall give security as the court may direct for t^i^faithful performance of his or their duties. The trustee or trustees so appointed may, from time to time, sell, at public or private sale, all or lany of the property and assets, including claims of any kind, which belonged to the association when it was dissolved or ceased to exist, and may execute all conveyances or instruments requisite to perfect the title of the purchaser. (L. 1906, oh. 600, § 4.) § 244. Beport and Compensation of trustee. ^— Such trustee or trustees shall be subject to the control of the court in the same manner as a receiver appointed in a proceeding for the voluntary dissolution of a corporation, and when he or they shall have com- pleted the liquidation, shall render an account of his or their pro- ceedings, and the net proceeds in his of their hands shall be dis- 328 THE BA: the referee, if one be appointed for that purpose, shall have power to adjourn such examination from time to time, and may rule upon any question or objection arising in the course of such examination, to the same extent that might be done if the person so examined were testifying as a witness in the trial of an action. When the examination of any person under such order shall be concluded, the testimony shall be signed' and sworn to by the person so examined, and shall be filed in the office of the clerk of the county where the action is pending, or was tried, in which the receiver was appointed ; and if from such testimony it shall appear to the satisfac- tion of the court that any person so examined is wrongfully conceal- ing or withholding, or has in his possession or under his control, any property which of right belongs to such receiver, the court may make an order commanding the person so examined forthwith to deliver the same to such receiver, who shall hold the same subject to the further order of the court in relation thereto; and otherwise, the court may, at the conclusion of any such examination, make such final order in the premises as the interests of justice require. § 241. Power of receiver in the settlement of controversies. — If any controversy shall arise between the receivers and any, other per- son, in the settlement of any demands against such corporation, or of debts due to such corporation the same may be referred to one or more indifferent persons, who may be agreed upon by the receivers and the party, with whom such controversy shall exists, by a writing to that effect, signed by them. If such referee or referees be not selected by agreement, then the receiver':' or the other party to the controversy, provided no action at law is pending arising out of any such debts or demands, may serve a notice of their intention to apply to any judge of the supreme court at chambers, residing in the same district with said receivers, for the appointment of one or more referees, specifying the time and place when such application will be made, which notice shall be served at least ten days before the time so therein specified. On the day so specified, upon due proof of the service of such notice, the judge before whom the application is made may, in his discretion, proceed to select one or more referees, the same in all THE GBNEEAL COEPOEATION LAW. 47& respects as they are now selected according to the rules and practice of the supreme court. When any witness to such controversy shall reside out of the county where the said receivers resided at the time of their appointment, the referee or referees appointed to hear said controversy shall have power to issue a commission or commissions in like manner as justices of the peace are now authorized to issue the same, and the testimony so taken shall be returned to said referee or referees in the same manner, and be read before them on a hearing, in like manner as testimony taken on commission before justices of the peace. The officer before whom they shall be selected, shall certify such selection in writing. Such certificate, or the written agreement of the parties, shall be filed by the receivers in the office of a clerk of the supreme court, and an order shall thereupon be entered by such clerk in vacation or in term, appointing the persons so selected to determine the controversy. Such referees shall have the same powers, and be subject to the like duties and obligations, and shall receive the same compensation, as referees appointed by the supreme court, in personal actions pend- ing therein. The report of the referees shall be filed in the same office where the order for their appointment was entered, and shall be conclusive on the rights of the parties, if not set aside by the court. § 242. Power of receiver to employ counsel. — If the receiver of a corporation employs counsel he shall within three months after he has qualified as receiver enter into a written contract fixing the compensation of such counsel at not exceeding a certain amount or a certain percentage of the sums received and disbursed by him, which contract must be approved by the supreme court, on at least eight days' notice to the attorney-general. A payment by such receiver to his counsel on account of services shall only be made, pursuant to an order of the court, on notice to the attorney-general and subject to review on the final accounting. A contract with counsel shall not be made for a longer period than eighteen months, but may be renewed from time to time for periods of not more than one year, if approved by the supreme court on at least eight days' notice to the attorney-general. In case of the intervention of 480 THE GEannection with above, Johnson, Eeceiver, v. Lafflin, 17 Alb. L. J. 146, Fed. Cas. No. 7,393. 1. The provision that national banks shall keep open for inspection a list of stockholders was intended to give creditors and state officers opportunity for information as to liability of stockholders. Pauly v. State Loan Ann'n, 165 U. S. 621, 41 L. ed. 850, 17 Sup. Ct. Eep. 465. 2. A shareholder of a national bank is entitled to examine its list of share- liolders and to make extracts therefrom for the purpose of negotiating for the THE NATIONAL BANKING LAW. 673 purchase of its stock. The State corporation laws apply to national banks. People ex rel. Lorge v. Consol. Nat. Bank, 105 App. Div. 409. § 5211. [U. S. Comp. Stat. 1901, p. 3498.] Every association shall make to the Comptroller of the Currency not less than five re- ports during each year, according to the form which may be pre- scribed by him, verified by the oath or affirmation of the president or cashier of such association, and attested by the signature of at least three of the directors. Each such report shall exhibit in detail and under appropriate heads, the resources and liabilities of the association at the close of business on any past day by him specified; and shall be transmitted to the Comptroller within five days after the receipt of a request or requisition therefrom from his, and in the same form in which it is made to the Comptroller shall be published in a newspaper published in the place where such association is established, or if there is no newspaper in the place, then in the one published nearest thereto in the same county, at the expense of the association; and such proof of publication shall be furnished as may be required by the Comp- troller. The Comptroller shall also have power to call for special re- ports from any particular association whenever in his judgment the same are necessary in order to a full and complete knowledge of its condition. See Act of February 26, 1881, post. See Act of June 30, 1876, post. § 5212. [U. S. Comp. Stat. 1901, p. 3499.J In addition to the reports required by the preceding section, each association shall re- port to the Comptroller of the Currency, within ten days after de- claring any dividend, the amount of such dividend, and the amount of net earnings in excess of such dividend. Such report shall be attested by the oath of the president or cashier of the association. § 5213. [U. S. Comp. Stat 1901, p. 3499.] Every association which fails to make and transmit any report required under either of the two preceding sections shall be subject to a penalty of one hun- dred dollars for each day after the periods, respectively, therein men- tioned, that it delays to make and transmit its report. Whenever any association delays or refuses to pay the penalty herein imposed, after it has been assessed by the Comptroller of the Currency, the 43 674 THE NATIONAL BANKING LAW. lamount thereof may be retained by the Treasurer of the United States, upon the order of the Comptroller of the Currency, out of the interest, as it may become due to the association on the bonds deposited with him to secure circulation. All sums of money col- lected for penalties under this section shall be paid in to the Treasury of the United States. " § 5214. l^ational banking associations having on deposit bonds of the United States, bearing interest at the rate of two per centum per annum, including the bonds issued for the construction of the Panamia Canal, under the provisions of section eight of 'An Act to provide for the construction of a canal connecting the waters of the Atlantic and Pacific oceaiis,' approved June twenty-eighth, nineteen hundred and two, to secure its circulating notes, shall pay to the Treasurer of the United States, in the months of January and July, a tax of one-fourth of one per centum each half year upon the average amount of such of its notes in circulation as are based upon the de- posit of such bonds ; and such associations having on deposit bonds of the United States bearing interest at a rate higher than two per cen- tum per annum shall pay a tax of one-half of one per centum each half year upon the average amount of such of its notes in circulation as are based upon the deposit of such bonds. National banking asso- ciations having circulating notes secured otherwise than by bonds of the United States shall pay for the first month a tax at the rate of five per centum per annum upon the average amount of such of their notes in circulation as are based upon the deposit of such securities, and afterwards an additional tax of one per centum per annum for each month until a tax of ten per centum per .annum is reached, and thereafter such tax of ten per centum per annum, upon the average amount of such notes. Every national banking association having outstanding circulating notes secured by a deposit of other securities than United States bonds shall make monthly returns, under oath of its president or cashier, to the Treasurer of the United States, in such form as the Treasurer may prescribe, of the average monthly amount of its notes so secured in circulation ; and it shall be the duty of the Comptroller of the Currency to cause such reports of notes in circulation to be verified by examination of the banks' records. The taxes received on oireulating notes secured otherwise than by bonds THE NATIONAL BANKING LAW. 675 of the United States shall be paid into the Division of Eedemption of the Treasury and credited and added to the reserve fund held for the redemption of United States and other notes." (As amended May 30, 1908.) See Act of March 3, 1883, and notes to section 5219, U. S. Comp. Stat. 1901, p. 3502. See section 13, Act of Marcli 14, 1900, post. § 5215. [U. S. Comp. Stat. 1901, p. 3501.J In order to enable the Treasurer to assess the duties imposed by the preceding section, each association shall, within ten days from the first days of Jan- uary and July of each year, make a return, under the oath of its president or cashier, to the Treasurer of the United States, in such form as the Treasurer may prescribe, of the average amount of its notes in circulation, and of the average amount of its deposits, and of the average amount of its capital stock, beyond the amount in- vested in United States bonds, for the six months next preceding the most recent first day of January or July. Every association which fails so to make such return shall be liable to a penalty of two hun- dred dollars, to be collected either out of the interest as it may be- come due such association on the bonds deposited with the Treasurer, or, at his option, in the manner in which penalties are to be collected of other corporations under the laws of the United States. § 5216. [U. S. Comp. Stat 1901, p. 3601.J Whenever any asso- ciation fails to make the half-yearly return required by the preceding section, the duties to be paid by such association shall be assessed upon the amount of notes delivered to such association by the Comp- troller of the Currency, and upon the highest amount of its deposits and capital stock, to be ascertained in such manner as the Treasurer may deem best. § 5217. [U. S. Comp. Stat. 1901, p. 3501.] Whenever an asso- ciation fails to pay the duties imposed by the three preceding sec- tions, the sums due may be collected in the manner provided for the collection of United States taxes from other corporations; or the Treasurer may reserve the amount out of the interest as it may become due, on the bonds deposited with him by such defaulting association. 676 THE WATIOBTAl BANKING LAW. The obligations and penalties imposed on national banks by sections 5214r-5217, U. S. Comp. Stat. 1901, pp. 3500-3501, relate to solvent banks and not to a bank in the hands of the Comptroller of the Currency. Jackson, Receiver, v. United States, 20 Court of Claims, 298. § 5218. [U. S. Comp. Stat. 1901, p. 3502.] In all cases where an association has paid or may pay in excess of what may be or has been found due from it, on account of the duty required to be paid to the Treasurer of the United States, the association may state an account therefor, which on being certified by the Treasurer of the United States and found correct by the first Comptroller of the Treasury, shall be refunded in the ordinary manner by warrant on the Treas- ury. § 5219. [U. S. Comp. Stat. 1901, p. 3502.J IS'othing herein shall prevent all the shares in any association from being included in the valuation of the personal property of the owner or holder of such shares, in assessing taxes imposed by authority of the State within which the association is located ; but the legislature of each State may determine and direct the manner and place of taxing all the shares of national banking associations located within the State, subject only to the two restrictions, that the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of in- dividual citizens of such State, and that the shares of any national banking association owned by non-residents of any State shall be taxed in the city or town where the bank is located, and not else- where. Nothing herein shall be construed to exempt the real prop- erty of associations from either State, county or municipal taxes, to the same extent, according to its value, as other real property is taxed. 1. Under this section and within the limitations therein prescribed, the whole interest of a shareholder in the shares h«ld by him in a national bank are left subject to State taxation, which the State has a sovereign right and concurrent power with Congress to impose (but from the exercise of which Congress, by reason of its paramount authority, may exclude the State), although the capital of such bank be wholy invested in securities of the United States. Van Allen v. Assessors, 3 Wall. 373, 18 L. ed. 229. 2. The intention of Congress in the first of said limitations was that the rate of taxation of the shares should be the same, or not greater, than upon the moneyed capital of the individual citizen which is subject or liable to taxation. That is, no greater proportion or percentage of tax in the valuation of the shares THE NATIONAL BANKING LAW. 677 should be levied, than upon other moneyed taxable capital in the hands of the citizens. Id. 3. The test by which to prevent discrimination against the shares is confined to the rate of assessments upon moneyed capital in the hands of individual citizens, so that the fact of insurance companies created under the laws of the State, and doing business in the city of New York, being respectively assessed upon the balance of their capital and surplus profits, liable to taxation, after deducting therefrom such part as is invested in United States securities, has no bearing on the question of the taxation of shares. These institutions are not within the words or the contemplation of Congress; they are taxed on their capital, and not on the shareholder, at the same rate as other personal property in the State. People v. The Commissioners, 4 Wall. 244, 18 L. ed. 344. 4. Shares of stock in national banks are a species of personal property which is in one sense, intangible and incorporeal, but the law which creates them may separate them from the person of their owner for the purposes of taxation, and give them a situs of their own. This has been done by this section, which is a law of the property, and by virtue of which every person, resident, or non-resident, on becoming owner, voluntarily subjects himself to the jurisdiction of the State in which the bank is established for all the purposes of taxation on account of such ownership, and the State may legislate accordingly. Tappan v. Merchants' National Bank, 19 Wall. 490,'22 L. ed. 189. 5. The effect of this section is not limited to a discrimination in the percent- age levied as a tax without regard to equality in the valuation on which that tax is levied. It is intended to prevent any rule of valuation which will operate unjustly or unequally against these shares, as well as to secure uniformity in percentage. People v. Weaver, 100 U. S. 539, 25 L. ed. 705. In this case it was held that a statute of the State of New York, which refused to plaintiff the same deduction for debts due by him from the valuation of his shares of national bank stock, that it allows to those who have moneyed capital otherwise invested, is in conflict with this section. 6. Where, notwithstanding a statute required all moneyed capital to be ap- praised for the purpose of taxation at its true cash value, the assessors system- atically appraise all other moneyed capital at much less than its true value while national bank shares are assessed at their full value. Held, that the tax on shares thus assessed was invalid, and that upon payment into court of the amount due upon a valuation determined according to the rule by which other moneyed capital ia valued, a court of equity will restrain the collection of the balance. Pelton v. Commercial National Bank, 101 U. S. 143, 25 L. ed. 901. See, also, on this subject, Cummings v. Merchants' National Bank, 101 U. S. 153, 25 L. ed. 903; Pollard v. Zuber, 65 Ala. 635; Miller v. Heilburn, 58 Cal. 133. 7. But where by a State statute the citizen may have the amount of his indebtedness deducted from the total value of his personal property, thus ascer- taining the amount of his personal estate subject to taxation, and a subsequent statute relating to taxation of bank shares makes no provision for such deduc- tion, the latter statute is nevertheless the valid rule for assessing such shares in all instances which there are no debts to be deducted. That the latter statute does not authorize a deduction for debts does not invalidate it, except as to that distinct and separable principle. Under such statutes, assessments of bank 678 THE WATIOlfrAL BANKING LAW. t shares, where there are no debts to deduct, are valid. Even in cases of assess- ments where debts exist, which should be deducted, but are not, the assessments are voidable only, not void. Supervisors of Albany v. Stanley, 105 U. S. 305, 26 L. ed. 1044. 8. National bank shares may be assessed for the purpose of taxation at an amount above the par value, when the latter i^ exceeded by the market value, if such valuation is made by the State law, on other moneyed capital in the assessment of taxes. Hepburn v. School Directors, 23 Wall. 480, 23 L. ed. 112. 9. The right of a. national bank to conduct its business is in no way depend- ent on a license to be obtained from the State where located, or any of its munici- palities, and a fee therefore cannot be exacted. Carthage v. Carthage National Bank, 71 Mo. 508, 36 Am. Rep. 494; National Bank v. Titusville, 13 Fed. Eep. 429. 10. By a statute of Pennsylvania, it was enacted that " all mortgages, judg- ments, recognizances and money owing upon articles of agreement for the sale of real estate shall be exempt from taxation, except for State purposes." It waa objected that this exemption by relieving certain specified property from taxa- tion brought the case within the first restriction mentioned in this section, and thus violated the tax sought to be enforced. The court held otherwise in Hep- burn V. School Directors, 23 Wall. 480, 23 L. ed. 112. See Adams v. Nashville, 95 U. S. (5 Otto) 19, 24 L. ed. 369. 11. Where national bank shares are required in any State to be taxed at their par value, the surplus fund, if any, of such bank, in excess of the amount they are required by law to keep on hand, is taxable (First National Bank v. Peter- borough, 56 N. H. 38, 22 Am. Rep. 416), and, when the State laws so provide, may be taxed against thf- bank as to non-residents; but where such law provides that it be taxed in connection with the capital stock in the hands of the stock- holders, it is not taxable separately. State, etc. v. City of Newark, 10 Vroom, 380; reversed, 11 id. 559, on ground that bank cannot be taxed for shares of resident stockholders (note amended in accordance therewith). 12. The surplus fund which a national bank is required by this section to reserve from its net profits is not excluded in the valuation of its shares for taxation. Strafford National Bank v. Dover, 58 N. H. 316; First National Bank V. Peterborough, 56 id. 38, 22 Am. R«p. 416; Thomp. N. B. Cases, 658; National Bank v. Commonwealth, 9 Wall. 353, 19 L. ed. 701; Thomp. N. B. Cases, 34; People V. Commissioners, 67 N. Y. 516; S. C, 94 U. S. 415, 24 L. ed. 164. 13. The personal property of an insolvent national bank, in the hands of a receiver appointed under section 5234, XJ. S. Comp. Stat. 1901, p. 3507, is exempt from taxation under State laws. Such property is legal contemplation still belongs to the bank, though in the hands of a receiver, to be administered under the law. The bank does not cease to exist on the appointment of a received. Its corporate capacity continues until its affairs are finally wound up and its assets distributed. If the shares have any value, they are taxable in the hands of the holders or owners under this section; but the property held by the receiver is exempt to the same extent it was before his appointment. Waite, C. J. Rosen- blatt V. Johnston, 104 U. S. (14 Otto) 462, 26 L. ed. 832. 14. The tax on capital and deposits was abolished by the Act of March 3, 1883, and it is a question how far the same is retroactive. The tax of one half THE NATIONAL BANKING LAW. 679 of one percentum each half year on notes in circumation is all that remains of the original act. See Act of March 3, 1883, post. 15. The purpose of Congress in fixing limits to State taxation of shares of national banks was to prevent the State from creating unfriendly competition hy favoring institutions or individuals carrying on a similar business. The term " moneyed capital," as used in section 5219, U. S. Comp. Stat. 1901, p. 3502, includes capital employed in national banks, and capital employed by individuals in the business of making profit by the use of moneyed capital as money. It does not include the capital of a corporation even if its business is such as to make its shares moneyed capital when in the hands of individuals, or if it invests capital in securities payable in money. Savings banks deposits are exempted from taxation in New York for just reasons, and such exemption does not discriminate unjustly against national bank investments. Mercantile Bank V. New York, 121 U. S. 138, 30 L. ed. 895, 7 Sup. Ct. Rep. 826, followed in 125 U. S. 60, 31 L. ed. 689, 8 Sup. Ct. Rep. 772. 16. Section 5219, U. S. Comp. Stat. 1901, p. 3502, does not require perfect uni- formity of taxation between national and State banks; but requires the avoid- ance of a method of discrimination unfavorable to investments in national banks and favorable to State banks and corporations. A statute regulating State taxation which is not on its fact intended to dis- criminate as above, in the absence of proof that it works an actual and unjust discrimination, will not be unconstitutional. Davenport Bank v. Davenport Board of Equalization, 123 U. S. 83, 31 L. ed. 94, 8 Sup. Ct. Rep. 73. Affirmed in Bank of Redemption v. Boston, 125 U. S. 60, 31 L. ed. 689, 8 Sup. Ct. Rep. 772. 17. The intent of this section is to permit the State in which a national bank is located, to tax the shares of capital stock without regard to the residences of the owners of such shares; subject, however, to the limitations of the section. This is also the intent where national banks in other States are the owners of such stock. Bank of Redemption v. Boston, 125 U. S. 60, 31 L. ed. 689, 8 Sup. Ct. Rep. 772. 18. Where a county officer fixed the taxable value of national bank stock at 60 per cent, of true value in money, as was the local custom adopted for the valuation of other moneyed capital of individuals in that State, and a broad of equalization increased the national bank valuation to 65 per cent, without a, corresponding increase in the valuation of other moneyed capital stock. Held, to be a discrimination in violation of section 5219 [U. S. Oomp. Stat. 1901, p. 3502]. Whitbeek v. Mercantile Nat. Bank. 127 U. S. 193, 32 L. ed. 118, 8 Sup. Ct. Sep. 1121. 19. The method of appraisal and the time for the correction of errors in assess- ments are within the legislative control of the State. The legislature may remedy any omission or error, provided that intervening rights are not impaired. The statute passed by the Legislature of New York, April 30, 1883, to confirm the assessments in Albany for the years 1876, 1877 and 1878 is not in conflict with the Acts of Congress respecting taxation of national bank stock and was a valid exercise of State legislative control. Williams v. Albany Supervisors, 122 U. S. 154, 30 L. ed. 1088, 7 Sup. Ct. Rep. 1244. 20. This section does not authorize a tax upon the bank itself-^ in. solido. Only the shares can be assessed, and these only as the shares, i. e., individual 680 THE NATIOWAI, BAK'KING LAW. property of the shareholders, and of resident shareholders only. First National Bank v. City of Richmond, 39 Fed. Rep. 309. 21. Capital of national and State banks invested in United States securities cannot be subjected to State taxation; but shares of bank stock may be taxed in the hands of their individual owners at the actual, instead ofHheir par value, without regard to the fact that part or whole of the capital of the corporation might be so invested. Palmer v. McMahon, 133 U. S. 660, 33 L. ed. 772, 10 Sup. Ct. Rep. 324. 22. " Under acts permitting the deduction of debts from the value of all a person's taxable property, such deductions must be permitted from the value of auch shares; but a statute is not void because it does not provide for a deduc- tion; nor is the assessment void if the deductions are not made but voidable only." Id. 23. When a law provides a mode for confirming or contesting an assessment for taxation, with appropriate notice to the person charged, the assessment can- not be said to deprive the owner of his property without due process of law. Idj 24. Assessors should give all persons taxed an opportunity to be heard, but it is sufficient if the law provides for a board of revision, authorized to hear com- plaints respecting the justice of the assessment, and prescribes the time during which and the place where such complaints may be made. Id. 25. The territories possess the same power of taxing national banks which the States enjoy. Talbot v. Silver Bow County, 139 U. S. 438, 35 L. ed. 210, 11 Sup. Ct. Rep. 594. 26. Trust companies in New York are not engaged in a " banking business " in a legal or commercial sense under the Banking Law, and assessing bank stock at a greater rate than individual capital is assessed in trust companies does not vio- late section 6219, U. S. Comp. Stat. 1901, p. 3502. Jenkins v. Neff, 163 N. Y. 320, 57 N. B. 408. 27. The deduction of debts from credits allowed in personal assessments, not allowed to national bank stock is not illegal discrimination. First National Bank of Wellington v. Chapman, 173 U. S. 205, 43 L. ed. 669, 19 Sup. Ct. Sep. 407. 28. Ab to state taxation of national banks, see editorial note to McHenry V. Downer, 45 L. R. A. 737, containing a full presentation of the authorities on that question; see also editorial note to South Covington & Cincinnati Street R. Co. v. Bellevue, 57 L. R. A. 56, as to state taxation of franchises of such banks. 29. The tax on property of a ban):: in which United States securities are included is beyond the State power, and is also within the prohibition of section 3701 of U. S. Revised Statutes. Home Sav. Bank v. Des Moines, 205 U. S. 503. THE NATIONAL BANKING LA"W. 681 CHAPTEK IV. Dissolution and Rbceiveeship. Section 5220. Voluntary dissolution of association. 5221. Notice of intent to dissolve. 5222. Deposit of lawful money to redeem outstanding circulation. 5223. Exemption as to an association consolidating witli another. 5224. Reassignment of bonds; redemption of notes, etc. 5225. Destruction of redeemed notes. 5226. Mode of protesting notes. 5227. Examination by special agent. 5228. Continuing business after default. 5229. Notice to holders; redemption at Treasury; cancellation of bonds.^ 5230. Sale of bonds at auction. 5231. Sale of bonds at private sale. 5232. Disposal of protested notes. 5233. Cancellation of national bank-notes. 5234. Appointment of receivers. 5235. Notice to present claims. 5236. Dividends. 5237. Injunction upon receivership. 5238. Fees and expenses. 5239. Penalty for violation of this title. 5240. Appointment of occasional examiners. 5241. Limit of visitorial powers. 5242. Transfers when void. 5243. Use of the title "national." § 5220. [U. S. Comp. Stat. 1901, p. 3503.] Any association may go into liquidation and be closed by the vote of its skareholders own- ing two-tbirds of its stock. It was not intended by this section that, upon simply resolving to go into liquidation, and providing for the redemption of its circulating notes, the banking association should be dissolved. If by such acts it were dissolved, all actions by or against it would abate, and parties might be left utterly without remedy for the enforcement of the plainest right, or recompense for the most grievous wrong. Ordway v. Central Nat. Bank, 47 Md. 217, 28 Am. Rep. 455. § 5221. [U. S. Comp. Stat. 1901, p. 3503.] Whenever a vote is taken to go into liquidation it shall be the duty of the board of direct- ors to cause notice of this fact to be certified, under the seal of the' association, by its president or cashier, to the Comptroller of the Cur- rency, and publication thereof to be made for a period of two months ■682 THE NATIOITAL BAITKING LAW. in a newspaper published in the city of ISTew York, and also in a news- paper published in the city or town in which association is located, or if no newspaper is there published, then in the newspaper published nearest thereto, that the association is closing up its affairs, and notifying the holder of its notes and other creditors to present the notes and other claims against the association for payment. See Act of July 12, 1882, §§ 6 and 7, post. § 5222. [TJ. S. Comp. Stat. 1901, p. 3503.] "Within six months from the date of the vote to go into liquidation, the association shall deposit with the Treasurer of the United States lawful money of the United States sufficient to redeem all its outstanding eirculatioii. The Treasurer shall execute duplicate receipts for money thus de- posited, and deliver one to the association and the other to the Comp- troller of the Currency, stating the amount received by him, and the purpose for which it has been received ; and the money shall be paid into the Treasury of the United States, and placed to the credit of such association upon redemption account. See Act of July 12, 1882, §§ 6 and 7, post. § 5223. [U. S. Comp. Stat. 1901, p. 3504.J An association which is in good faith winding up its business for the purpose of consolidat- ing with another association shall not be required to deposit lawful money for its outstanding circulation; but its assets and liabilities shall be reported by the association with which it is in process of con- solidation. § 5224. [U. S. Comp. Stat. 1901, p. 3504.J Whenever a sufficient -deposit of lawful money to redeem the. outstanding circulation of an association proposing to close its business has been made, the bonds deposited by the association to escure payment of its notes shall be reassigned to it, in the maimer prescribed by section fifty-one hun- dred and sixty-two. And thereafter the association and its share- holders shall stand discharged from all liabilities upon the circulating notes, and those notes shall be redeemed at the Treasury of the United States. And if any suoh bank shall fail to make the deposit and take up its bonds for thirty days after the expiration of the time specified, the Comptroller of the Currency shall have power to sell THE NATIONAL BANKING LAW. 683 the bonds pledged for the circulation of said bank, at public auction in New York city, and, after providing for tlie redemption and can- cellation of said circulation and the necessary expenses of the sale, to pay over any balance remaining to the bank or its legal representa- tive. (As amended by Act of February 18, 1875.) See Act of July 12, '1882, §§ 6 and 7, post. § 5225. [U. S. Comp. Stat. 1901, p. 3504.] Whenever the treas- urer has redeemed any of the notes of an association which has com- menced to close its affairs under the five preceding sections, he shall cause the notes to be mutilated and charged to the redemption ac- count of the association ; and all notes so redeemed by the Treasurer shall, every three months, be certified to and burned in the manner prescribed in section fifty-one hundred and eighty-four. (As amended by Act of February 27, 1877.) See Act of June 23, 1874, post; Act of July 12, 1882, §§6 and 7, post. § 5226. [U. S. Comp. Stat. 1901, p. 3505.] Whenever any na- tional banking association, fails to redeem in the lawful money of the United States any of its circulating notes, upon demand of payment -duly made during the usual hours of business, at the office of such association, or at its designated place of redemption, the holder may cause the same to be protested, in one package by a notary public, unless the president or cashier of the association whose notra are pre- sented for payment, or the president or cashier of the association at the place at which they are redeemable, offers to waive demand and notice of the protest, and in pursuance of such offer, makes, signs and •delivers to the party making such demand an admission in writing, stating the time of the demand, the amount demanded, and the fact of the non-payment thereof. The notary public, on making such pra- "test, or upon receiving such admission, shall forthwith forward such admission or notice of protest to the Comptroller of the Currency, retaining a copy thereof. If, however, satisfactory proof is produced to the notary public that the payment of the notes demanded is re- strained by order of any court of competent jurisdiction, he shall not protest the same. When the holder of any notes causes more than one note or package to be protested on the same day, he shall not receive pay for more than one protest. 684 THE ITATIONAL BANKISTG LAW. § 5227. [U. S. Comp. Stat. 1901, p. 3505.] On receiving notice that any national banking association has failed to redeem any of its circulating notes, as specified in the preceding section, the Comp- troller of the Currency, with the concurrence of the Secretary of the Treasury, may appoint a special agent, of whose appointment im- mediate notice shall be given to such association, who shall im- mediately proceed to ascertain whether it has refused to pay its circulating notes in the lawful money of the United States, when demanded, and shall report to the Comptroller the fact so ascertained. If from such protest, and the report so made, the Comptroller is satisfied that such association has refused to pay its circulating notes and is in default, he shall, within thirty days after he has received notice of such failure, declare the bonds deposited by such associa- tion forfeited to the United States, and they shall thereupon be so forfeited. § 5228. [U. S. Comp. Stat. 1901, p. 3506.] After a default on the part of an association to pay any of its circulating notes has been ascertained by the Comptroller, and notice thereof has been given by him to the association, it shall not be lawful for the association suffer- ing the same to pay out any of its notes, discount any notes or bills, or otherwise prosecute the business of banking, except to receive and safely keep money belonging to it, and to deliver special deposits. The provision of this section which makes it lawful for a national bank, after its failure to " deliver special deposits," implies that such banks may, aa a part of their legitimate business, receive special deposits, and this implication is as effectual as an express declaration of the same thing would be. The phrase " special deposits," thus used, embraces securities of the United States. National Bank v. Graham, 100 U. S. (10 Otto) 699, 25 L. ed. 750. And see Pattison V. Syracuse National Bank, 80 N. Y. 82, 36 Am. Rep. 582. § 5229. [U. S. Comp. Stat. 1901, p. 3506. J Immediately upon declaring the bonds of an association forfeited for non-payment of its notes, the Comptroller shall give notice, in such manner as the Secre- tary of the Treasury shall, by general rules or otherwise, direct, to the holders of the circulating notes of such association, to present them for payment at the Treasury of the United States ; and the same shall be paid as presented in lawful money of the United States; whereupon the Comptroller may, in his discretion, cancel an amount of bonds pledged by such association equal at current market rates, not exceeding par, to the notes paid. THE UATIONAX BANKING LAW. 685 § 5230. [U. S. Comp. Stat. 1901, 3506.J Whenever the Comp- troller lias become satisfied, by the protest or the waiver and admis- sion specified in section fifty-two hundred and twenty-six, or by the report provided for in section fifty-two hundred and twenty-seven, that any association has refused to pay its circulating notes, he may, instead of cancelling its bonds, cause so much of them as may be necessary to redeem its outtanding notes to be sold at public auction in the city of New York, after giving thirty days' notice of such sale to the association. For any deficiency in the proceeds of all the bonds of an association, when thus sold, to reimburse to the United States the amount expended in paying the circulating notes of the association, the United States shall have a paramount lien upon all its assets; and such deficiency shall be made good out of such assets in preference to any and all other claims whatsoever, except the necessary costs and expenses of administering the same. § 5231. [U. S. Comp. Stat. 1901, p. 3507.] The Comptroller may, if he deems it for the interest of the United States, sell at private sale any of the bonds of an association shown to have made default in paying its notes, and receive therefor either money or the circulating notes of the association. But no such bonds shall be sold by private sale for less than par, nor for less than the market value thereof at the time of the sale; and no sales of any such bonds, either public or private, shall be complete until the transfer of the bonds shall have been made with the formalities prescribed by sections fifty- one hundred and sixty-two, fifty-one hundred and sixiy-three, and fifty-one hundred and sixty-four. § 5232. [U. S. Comp. Stat. 1901, p. 3507.] The Secretary of the Treasury may, from time to time, make such regulations respecting the disposition to be made of circulating notes after presentation at the Treasury of the United States for payment, and respecting the perpetuation of the evidence of the payment thereof, as may seem to him proper. § 5233. [U. S. Comp. Stat. 1901, p. 3507.] All notes of national banking associations presented at the Treasury of the United States for payment shall, on being paid, be cancelled. See Act of June 20, 1874, § 3, post. 686 THE ITATIONAX BANKIHG LAW. § 5234. [U. S. Comp. Stat. 1901, p. 3507.J On becoming satis- fied, as specified in sections fifty-two Imndred and twenty-six and fifty-two hundred and twenty-seven, that any association has refused to pay its circulating notes as therein mentioned, and is in default, the Comptroller of the Currency may forthwith appoint a receiver and require of him such bond and security as he deems proper. Such receiver, under the direction of the Comptroller, shall take possession of the books, records and assets of every description- of such association, collect all debts, dues and claims belonging to it, and upon the order of a court of record of competent jurisdiction, may sell or compound all bad or doubtful debts, and, on a like order, may sell all the real and personal property of such association, on such terms as the court shall direct; and may, if necessary to pay the debts of such association, enforce the individual liability of the stockholders. Such receiver shall pay over all money so made to the Treasurer of the United States, subject to the order of the Comp- troller, and also make report to the Comptroller of all his acts and proceedings. See Act of June 30, 1876, § 1, and Act of March 2, 1897, amendment of seetion 3 of the same, post. 1. The receiver is the instrument of the Comptroller. He is appointed by the Comptroller, and the power of appointment carries with it the power of removal. It is for the Comptroller to decide when it is necessary to institute proceedings against the stockholders to enforce their personal liability, and whether the whole or a part, and if only a* part, how much shall be collected. These questions are referred to his judgment and discretion and his determination is conclusive. The stockholders cannot controvert it. It is not to be questioned in the litigation that may ensue. He may make it at such a time as he may deem proper, and upon such data as shall be satisfactory to him. This action on his part is indis- pensable, whenever the personal liability of the stockholder is sought to be enforced, and must precede the institution of suit by the receiver. The fact must be distinctly averred in all such cases, and if put in issue must be proved. Kennedy v. Gibson, 8 Wall. 498, 19 L. ed. 476; approved in Casey v. Galli, 94 U. S. 673, 24 L. ed. 168. 2. It is sufficient for the appointment of a, receiver that the Comptroller is satisfied of the facts, as required by this section, to authorize him to make the appointment. No legal proofs or evidence of the facts are required. The Comp- troller is left to be satisfied, as best he can be under the peculiar circumstances of each case, of the existence of the facts and the necessity of his action. Hence, in an action by the receiver, the validity of the latter's appointment, or the right of the Comptroller to make it, cannot be questioned, notwithstanding the facts alleged in the certificate of appointment are not established by competent THE NATIONAL BANKING LAW. 687' legal evidence on the trial. Piatt v. Beebee, 57 N. Y. 339; Cadle v. Baker, 20- Wall. 650, 22 L. ed. 448. 3. The action of the Comptroller in making the appointment is conclusive as to debtors, until set aside on application of the bank, for vphich provision is made in section 5237 [U. S. Comp. Stat. 1901, p. 3508], post. Id. 4. The language of the statute authorizing the appointment of a receiver, to act under the direction of the Comptroller, means no more than that the receiver shall be subject to the direction of the Comptroller. It does not mean that he- shall do no act without special instructions. His very appointment makes It his duty to collect the assets and debts of the association. With regard to ordinary assets and debts no special direction is needed. Bank v. Kennedy, 17 Wall. 19, 21 L. ed. 554. 5. Stockholders are not ordinary debtors of the bank, and the receiver cannot, enforce their personal liability without the direction of the Comptroller. Id.; and Kennedy v. Gibson, 8 Wall. 499, 19 L. ed. 476. 6. The receiver is the statutory assignee of the association, and is the proper party to institute all suits; they may be brought both at law and in equity, in his name, or in the name of the association for his use. He represents both the creditors and the association, and when he sues in his own name it is not neces- sary to make either a party to the suit. Id. 7. The liability of the stockholders is several, and not joint. The limit of their liability is the of the stock held by each one. Where the whole amount is sought to be recovered, the proceeding must be at law. Where less is required, the proceeding may be in equity, and in such case an interlocutory decree may be taken for contribution, and the case may stand over for the further action of the- court — if such action should subsequently prove to be necessary — until the full amount of the liability is exhausted. It would be attended with injurious con- sequences to forbid action against the stockholders until the precise amount nec- essary to be collected shall be formally ascertained. Id. ; and Casey V. Galli, 94 U. S. 673, 24 Ii. ed. 168. It was held in Stanton, Receiver, v. Wilkeson, 8 Ben. 357, Fed. Cas. No. 13,299, that where less than the par value was assessed, the action might be at law, at the option of the receiver. 8. Though the stockholders are only conditionally liable for the debts of thfr bank, after all the ordinary resources have been exhausted (Bank v. Kennedy, above cited), still suits to enforce their personal liability may properly be brought before the actual exhaustion of all the assets. Kennedy v. Gibson, 8 Wall. 499, 19 L. ed. 476. 9. When contribution only is sought, all the stockholders who can be reached by the process of the court may be joined in the suit. It is no objection that there are others beyond the jurisdiction of the court who cannot for that reason be made co-defendants. Id. 10. In ordering an assessment, the stock certificates and the stock ledger are the basis upon which the Comptroller of the Currency, in the absence of fraud or mistake, must rely. Davis, Receiver, v. Essex Baptist Society, 44 Conn. 582, Fed. Caa. No. 3,633, oUter. 11. Where a shareholder of a corporation (as a national bank) is called upon to respond to a liability as such, and where a party has contracted with a cor- poration, and is sued upon the contract, neither is permitted to deny the exist- ■688 THE NATIONAI, BANKING LAW. ence or the legal validity of such corporation. Casey v. Galli, 94 U. S. 673, 24 L. ed. 168. 12. The assessment bears interest from the date of the 'Comptroller's order. Id. 13. A stockholder of an insolvent national bank, who is also a creditor thereof, cannot in an action by the receiver to enforce an assessment, set off his individual claim against such assessment. Hobart v. Gould, 8 Fed. Kep. 57; Sawyer v. Hoag, 17 Wall. 610, 21 L. ed. 731. In the latter case it was decided by the United States Supreme Court, that a stockholder who had given his notes for his stock subscription, and who was sued thereon after the insolvency of the institu- tion, could not offset debts due him from the corporation, is the ordinary course of business, on the ground that the money arising from the unpaid shares was a trust fund to be equally divided among all the creditors. See also Scammon v. Kimball, 92 U. S. (2 Otto) 362, 23 L. ed. 483; Garrison v. Howe, 17 N. Y. 458; In re Empire City Bank, 18 id. 199. 14. The United States District Court has jurisdiction to authorize a receiver of an insolvent national bank to compromise a debt. Matter of Piatt, 1 Ben. 534, Fed. Cas. No. 11,211. 15. A court is not authorized by this section to order a receiver to " sell or compound " other than " bad or doubtful debts," from which category the per- sonal liability of the stockholder is excluded, both by a separate classification in the section as well as by the import of its terms. Price, Keceiver, v. Yatea, 19 Alb. L. J. 295, Fed. Cas. No. 11,418. 16. The receiver of an insolvent national bank represents the bank, its stock- holders and its creditors, but not in any sense the government; and neither he nor the Comptroller can subject the rights of the government to litigation in any ■court without some express provision of law to that effect. Case v. Terrell, 11 Wall. 199, 20 L. ed. 134. 17. An action will not lie against the receiver, upon a claim against an insol- vent national bank. He has no control over the assets, except to pay their pro- -ceeds over to the Treasurer of the United States. If any action could be main- tained against the Comptroller, it would be to enforce a proper distribution of the fund; but such action will lie against the bank which continues to exist for the purpose of being sued. Chemical National Bank v. Bailey, 12 Blatchf. 480, Fed. Cas. No. 2,635. 18. A suit against a national bank to enforce the collection of a demand is abated by a decree dissolving the corporation, and forfeiting its rights and fran- chises. National Bank v. Colby, 21 Wall. 609, 22 L. ed. 687. 19. The property of a national bank orgajiized under the Act of Congress of June 3, 1864 (13 Stat, at Large, 99), attached at the suit of an individual cred- itor, after the bank has become insolvent, cannot be subjected to the sale for the payment of his demand, against the claim for the property by a receiver of the bank subsequently appointed. Id. 20. A depositor in a national bank which has failed and passed into the hands •of a receiver, may set off the amount of his deposit against his debt to the bank on a note. Piatt, Receiver, v. Bentley, 11 Am. Law Keg. 171. Even though the note has not matured. Berry, Receiver, v. Brett, 10 Supr. 627. A depositor of a bank is entitled to set off on a. bond and mortgage the amount of his deposit. Matter of New Amsterdam Bank v. Gartter, 54 How. Pr. 385. But it THE WATIONAL BANKING LAW. 689 was held in Oborne v. Byrnne, 43 Conn. 155, 21 Am. Dec. 641, that a deposit could not be set off against a debt due the bank on a note, unless, perhaps, the deposit was made for the purpose of applying on such indebtedness, and the bank officer knew that fact. 21. A national bank having become insolvent, a depositor therein assigned his deposit to a debtor of the bank, Held, that the latter could not off set such deposit against his debt in an action thereon. Venango National Bank v. Taylor, 56 Penn. St. 14. 22. Usurious interest paid cannot be set off. Hade v. McVay, 31 Ohio St. 231 ; Barnet v. National Bank, 98 U. S. 555, 25 L. ed. 212. 23. The priority of payment of debts given the United States by the provision of section 3466, U. S. R. S. [U. S. Comp. Stat. 1901, p. 2314], does not include demands against an insolvent national bank. Cook County National Bank v. United States, 107 U. S. (17 Otto) 445, 27 L. ed. 537, 2 Sup. Ct. Rep. 561, over- ruling S. C. 25 Int. Rev. Record, 266. 24. If a registered owner transfers his stock in a failing corporation to an irre- sponsible person for the mere purpose of escaping liability, or if his transfer is colorable only, the transaction is void as against creditors, so as to leave the real owner liable to assessment as a stockholder. One S. bought shares in a national bank, and caused them to be transferred to one E., a porter in the office of his New York broker, and irresponsible. At the time of the transfer, there was no suspicion of the insolvency of the bank, and it remained in good credit for more than a year afterward. Held, that S. was liable as stockholder upon the failure of the bank. National Bank v. Case, 99 U. S. 628, 25 L. ed. 488. See also Davis, Receiver, v. Stevens, 17 Blatchf. 259, Fed. Cas. No. 3,653. 25. The liability incurred by a holder of national bank stock is statutory, and not by contract. Being so, it attaches, as an incident of ownership, to all who are capable of such ownership, without reference to any supposed voluntary assumption by contract, express or implied. Therefore when national bank stock is held by a feme covert, either in her own right or subject to the marital rights of her husband, the liability to be assessed affects her alone, and it is not neces- sary, in an action to enforce collection of an assessment, to join her husband, aa would be necessary if it were a common-law obligation or liability of the wife. Keyser v. Hitz, 2 Maekey (D. C.) 474. 26. Certain shares of stock were transferred directly from a husband to his wife, and a suit was instituted against both. Held, tha,t the coverture did not exempt her from the liability imposed by this act on all the stockholders of a national bank. Anderson v. Line, 14 Fed. Rep. 405. That the liability of a shareholder in a national bank is by contract, or in the nature thereof. See Davis V. Weed, 44 Conn. 569, Fed. Cas. No. 3,658; citing Hawthorne v. Calef, 2 Wall. 22, 17 L. ed. 779; Loury v. Inman, 46 N. Y. 119; Bailey v. Hollister, 26 id. 112. 27. T. owed a national bank $35,000; R. had a deposit in the bank of $40,000; the bank, becoming insolvent, stopped payment. The next day R. assigned his deposit to T. Held, that T. could not set off the deposit against the indebtedness due from him to the bank, as it would give a preference of one creditor over the others, after the insolvency of the bank. Sections 5234 and 5242 [U. S. Comp. Stat. 1901, pp. 3507, 3517], apply to legal as well as voluntary transfers of the 44 690 THE NATIONAL BANKING LAW. bank. The law will not compel a payment or transfer which it prohibits a debtor from making. Venango National Bank v. Taylor, 56 Penn. St. 14. 28. The Comptroller of the Currency has no power to compound or settle claims of a national bank against its debtors; that requires the authority of the court under this section. Davis v. Stevens, 17 Blatchf. 259, Fed. Cas. No. 3,653, 99 U. S. 628, 25 L. ed. 448. 29. A receiver of a national bank is a federal officer, and may sue in his own name to enforce assessments against stockholders, and for that purpose he may bring separate actions at law against the several stockholders. Stanton, Receiver, V. Wilkeson, 8 Ben. 357, Fed. Cas. No. 13,299; Bailey, Eeoeiver, v. Sawyer, 4 Dill. 463, Fed. Cas. No. 744. 30. The residuary interest of a national bank in bonds pledged as security for its circulating notes is an asset of the bank,- which, if not transferred before its insolvency, is thereafter to be applied by the receiver under this section to the payment of its debts. There is no other provision in the act for the disposition of the moneys arising out of such residuary interest. Van Antwerp v. Hulburd, 8 Blatchf. 282, Fed. Cas. No. 16,827. 31. There is no provision in the act authorizing the Comptroller or Treasurer to dispose of the residue or surplus proceeds of such bonds in payment of the debts of the bank, or otherwise, and, as it is only of the moneys paid over by the receiver, under this section, that the Comptroller is authorized to make a divi- dend, therefore, until such surplus has passed into the hands of the receiver and has by him been paid over to the Treasurer, subject to the order of the Comp- troller, the latter has no power to make any distribution thereof in payment of the general debts of the bank. Id. See also notes 2 and 3, section 5159 [U. S. Comp. Stat. 1901, p. 3469]. 32. The United States Circuit Court, in rendering a judgment against an insol- vent national bank in charge of a ^receiver, may provide for its payment by order- ing therein, that it (the judgment) be paid by the receiver, or certified by him to the Comptroller to be paid in due course of administration. Case v. Bank, 100 U. S. 446, 25 L. ed. 695. 33. Eeoeiver of national bank may enforce in his own name or in the name of the bank, against the directors for the benefit of stockholders and creditors, any claim for non-performance or negligent performance, that the bank might have enforced. Movius, Receiver, v. Lee et al., 30 Fed. Rep. 298. 34. A receiver of a national bank appointed by the Comptroller of the Currency is not responsible in equity to owner of real estate for rent, received officially and paid into United States Treasury. Hitz v. Jenks, 123 U. S. 298, 31 L. ed. 156, 8 Sup. Ct. Rep. 143. 35. The expenses of a receivership occasioned by a creditor's suit, are not chargeable to stockholders but to the creditors. Richmond v. Irons, 121 U. S. 27, 30 L. ed. 864, 7 Sup. Ct. Rep. 788. 36. The assessment made by the Comptroller of the Currency is conclusive upon the stockholders, and an action at law may be maintained by the receiver therefor. At least it is only necessary in the complaint to allege that the Comptroller deter- mined that it was necessary to enforce the liability of the stockholders, and did levy the assessment. Young v. Wempe, 46 Fed. Rep. 354. 37. It is by no means clear that the statutory liability of the stockholder is a THE NATIONAL BANKING LAW. 691 debt, within the meaning of this section, and it is therefore doubtful whether the court has the power to authorize the compounding of the statutory liability of a stockholder in a national bank. In re certain stockholders of California Nat. Bank, 53 Fed. Kep. 38. 38. A married woman is liable in equity to be assessed under this section when by the law of the place of her residence she can become a stockholder. Bundy v. Cocke, 128 U. S. 185, 32 L. ed. 397, 9 Sup. Ct. Rep. 242. They are also liable in law. Keyser v. Hitz, 133 U. S. 138, 33 L. ed. 531, 10 Sup. Ct. Bep. 290. 39. Where stock was sold to pay assessment caused by misconduct of directors in making worthless loans. Held, that stockholder damaged by such forced sale may sue such directors, for himself and others similarly situated. Hanna v. People's Nat. Bank, 35 Misc. 517, 71 N. Y. Supp. 1076. 40. Stockholder's liability. Comptroller's decision conclusive. Receiver of insolvent bank. The decision of Comptroller of Currency that it is necessary to begin proceedings against stockholders to enforce personal liability, is conclusive; by his decision the liability of a stockholder becomes a definite liquidated claim. Section 5234, U. S. Kev. Stat., U. S. Comp. Stat. 1901, authorizing receiver to enforce personal liability of stockholders is not a personal trust which bars its transfer to assigne of claim. Waldron v. Ailing, 73 App. Div. 86, 76 N. Y. Supp. 250. 41. Statute requiring enforcement of amount of assessment on national bank stock against next of kin or distributive share so far as such share goes, is not in conflict with federal law. Matteson v. Dent, 176 U. S. 530, 44 L. ed. 576, 20 Sup. Ct. Rep. 419. 42. A transfer of stock properly delivered to oflScer of the bank although there is a failure to enter it, will operate as a, proper transfer. Matteson v. Dent, sup'a. 43. A national bank, receiving shares of another as collateral, will be presumed not to intend to become owner, and if sued for assessments on such shares may set up lack of power. Robinson v. Southern Nat. Bank, 180 U. S. 309, 45 L. ed. 541, 21 Sup. Ct. Rep. 383. 44. The duty of Comptroller under this section empowers him to make a further assessment if necessary, and if previous one is not sufficient to exhaust par value of shares. Studebaker v. Perry, 184 U. S. 261, 46 L. ed. 530, 27 Sup. Ct. Rep. 463. 45. Receiver is not liable to suit by stockholders for fraud of bank officers in inducing him to buy stock. Lantry v. Wallace, 182 U. S. 554, 45 L. ed. 1227, 21 Sup. Ct. Rep. 878. 46. Receiver of national bank appointed by Comptroller is not an officer of the court but the officer of the United States. In re Chetwood, 165 U. S. 458, 41 L. ed. 787, 17 Sup. Ct. Rep. 385. § 5235. [U. S. Comp. Stat. 1901, p. 3508. J Tte Comptroller shall, upon appointing a receiver, cause notice to be given, by adver- tisement in suck newspapers as he may direct, for three consecutive months, calling on all persons who may have claims against such association to present the same, and to make legal proof thereof. 692 THE NATIONAL BANKING LAW. Proof of claim under this section must be as the claim exists at the time proof is made, and not at the time or date of the suspension of the bank, so that where after the suspension and before filing proof of his claim a creditor of the bank realizes on securities held by him as collateral to the loan he must deduct the amount so received from the amount of his claim. Chemical Nat. Bank v. Arm- strong, 50 Fed. Rep. 798. § 5236. [U. S. Comp, Stat. 1901, p. 3508.J From time to time, after full provision has been first made for refunding to the United States any deficiency in redeeming the notes of such association, the Comptroller shall make a ratable dividend of the money so paid over to him by such receiver on all such claims as may have been proved to his satisfaction or adjudicated in a court of competent jurisdic- tion, and, as the proceeds of the assets of such association are paid over to him, shall make further dividends on all claims previously proved or adjudicated; and the remainder of the proceeds, if any, shall be paid over to the shareholders of such association, or their legal representatives in proportion to the stock by them respectively held. See Act of June 30, 1876, § 3, as amended March 2, 1897, post. 1. The claims of creditors may be proved before the Comptroller, or established by suit against the association. Creditors must seek their remedy through the Comptroller in the mode prescribed by the statute; they cannot proceed directly in their own name against the stockholders or debtors of the bank. Kennedy v. Gibson, 8 Wall. 506, 19 L. ed. 479; Bank of Bethel v. Pahquioque Bank, 14 Wall. 383, 20 L. ed. 840. 2. The claims, when proved to the satisfaction of the Comptroller, are upon the same footing as if they had been reduced to judgments. National Bank of Com- monwealth V. Mechanics' National Bank, 94 U. S. 437, 24 L. ed. 176. 3. Claims disallowed by the Comptroller may be presented in a court having jurisdiction in such cases. Bank of Bethel v. Pahquioque Bank, Id. 4. But judgment, when recovered, will not, in any case, give the creditor any lien on the property of the delinquent association, nor secure to the judgment creditor any preference over other creditors, whose claims are proven before the receiver. All alike must await the action of the Comptroller of the Currency, and be content with a just and legal distribution of the proceeds of the assets collected by the receiver, and liquidated by the Comptroller according to the Act of Congress in such case made and provided. Id. 5. Claims proved to his satisfaction are to be paid by the Comptroller, as debts proved against an insolvent are to be paid by his assignee; and in the one case, as in the other, the interest is an incident of the debt or claim, and to be paid before distribution of the surplus, without regard to the fact whether the debts are those upon contract conditioned for the payment of interest, or not. Chemical National Bank v. Bailey, 12 Blatchf. 480, Fed. Cas. No. 2,635. THE NATIONAL BANKING LAW. 693 6. An action in assumpsit will not lie against either the Comptroller or receiver to recover such interest, but will lie against the bank. Id. 7. Ordinarily, an action cannot be maintained by a depositor against a bank, until a formal demand has been made; and, of course, no interest can be recov- ered, except that arising after the demand. The bringing of an action does not amount to a demand in such cases. Payne v. Gardiner, 29 N. Y. 146. But if the bank, by words or contract, denies the depositor's right to his balance, it becomes presently liable to an action, without formal demand, and interest would be recoverable as damages. Such is the case where a bank, by its default, initiates proceedings which result in a transfer of the moneys of its depositors to a receiver, and thus puts it out of its power to pay its depositors when called upon to do so. A demand, under such circumstances, would have been an idle cere- mony. The bank cannot be permitted to say that the depositor should have made a demand, when, if made, it would have been nugatory and useless. It has been held, that, in cases of insolvency, where a debt is payable on demand, and no special demand is shown, interest is to be computed from the first publication of the proceedings in insolvency. Brown v. Lamb, 6 Mete. 203. Eeason and analogy favor the application of the rule to the case of such depositors. Wal- lace, J. Id. In a similar case in the United States Supreme Court (National Bank of Commonwealth v. Mechanics' National Bank, 94 U. S. 437, 24 L. ed. 176, above cited), it was held that a demand for the interest was properly made. 8. If such interest be not paid by the Comptroller at the time of the repayment of the deposit, an action not only lies to recover the former, but, being a liqui- dated sum at the time, to recover interest thereon also. National Bank of Com- monwealth V. Mechanics' National Bank, 94 TJ. S. 437, 24 L. ed. 176. 9. The United States, as a creditor of a national bank, is not entitled to a priority of payment, out of its assets, over other creditors. Cook County National Bank v. United States, 107 U. S. 445, 27 L. ed. 537, 2 Sup. Ct. Rep. 561. 10. Where a national bank was put into insolvency by the Comptroller of the Currency, and a creditor, whose claim was disputed, recovered judgment, seven years after, for an amount much larger than the amount of his claim at the time of the failure. Held, that the dividend should be calculated and paid upon the amount of his claim at the time of the failure of the bank, and not the amount found due when the same was adjudicated. United States eco rel. White V. Knox, 111 U. S. (3 Davis) 784, 28 L. ed. 603, 4 Sup. Ct. Rep. 686. 11. It is the intent of sections 5234-5236 to throw the entire control of an insolvent bank into the hands of the Comptroller of the Currency for the purpose of winding up its affairs. Jackson, Receiver, v. United States, 20 Court of Claims, 298. § 5237. [U. S. Comp. Stat. 1901, p. 3508.] Whenever an associa- tion against which, proceedings have heen instituted, on account of any alleged refusal to redeem its circulating notes as aforesaid, denies having failed to do so, it may, at any time within ten days after it has been notified of the appointment of an agent, as provided in section fifty-two hundred and twenty-seven, apply to the nearest circuit, or district, or territorial court of the United States, to enjoin 694 THE NATIOITAL BANKING LAW. further proceedings in tke premises ; and such court, after citing the Comptroller of the Currency to show cause why further proceedings should not be enjoined, and after the decision of the court or finding of a jury that such association has not refused to redeem its circulat- ing notes, when legally presented, in the lawful money of the United States, shall make an. order enjoining the Comptroller, and any re- ceiver acting under his direction, from all further proceedings on account of such alleged refusal. See, in connection with, above, note 6 to section 5133 [U. S. Oomp. Stat. 1901, p. 3454], cmte. The action of the Comptroller, in the appointment of a receiver of the bank, cannot be qu'estioned by the debtors of the bank, until set aside by the bank, in contest brought by it as provided for in this section. The Comptroller appoints the receiver, and can, therefore, remove him. Cadle v. Baker, 20 Wall. 650, 22 L. ed. 448. § 5238. [U. S. Comp. Stat 1901, p. 3509.J All fees for protest- ing the notes issued by any national banking association shall be paid by the person procuring the protest to be made, and such association shall be liable therefor ; but no part of the bonds deposited by such association shall be applied to the payment of such fees. All expenses of any preliminary or other examinations into the condition of any association shall be paid by such association. All expenses of any receivership shall be paid out of the assets of such association before distribution of the proceeds thereof. See Act of June 30, 1876, post. § 5239. [U. S. Comp. Stat. 1901, p. 3515.] If the directors of any national banking association shall knowingly violate, or know- ingly permit any of the officers, agents, or servants of the association to violate any of the provisions of this Title, all the rights, privileges and franchises of the association shall be thereby forfeited. Such violation shall, however, be determined and adjudged by a proper circuit, district, or territorial court of the United States, in a suit brought for that purpose by the Comptroller of the Currency, in his own name, before the association shall be declared dissolved. And in cases of such violation, every director who participated in or assented to the same shall be held liable in his personal and individual capacity for all damages which the association, its shareholders, or THE WATIOKTAI- BANKING LAW. 695 any other person shall have sustained in consequence of such viola- tion. See Act of June 30, 1876, post. ' 1. A suit against the bank is abated by a decree dissolving the corporation, and forfeiting its rights and franchises in an action brought by the Comptroller for that purpose. National Bank u. Colby, 21 Wall. 609, 22 L. ed. 687. 2. The Comptroller is the only person who can bring a suit to have the charter of a national bank forfeited for violation of its organic act. Shoemaker v. National Mechanics' Bank, 2 Abb. (U. S.) 416, Fed. Cas. No. 12,801; to same eflfect. Union, etc., v. Rocky Mountain National Bank, 1 Colo. 531. 3. An action to enforce the liability of a director of a national bank for mis- conduct in office, as provided for in this section, should in general be brought by the bank, when capable of acting; but if it refuses, the stockholders will be per- mitted to sue in a court of equity in their own names, making the corporation a defendant ; and this course of proceeding is also allowed where it appears that the corporation is still under the control of those who must be made defendants. In the latter case a demand upon the corporation is unnecessary. If, owing to insol- vency, the corporation be in the hands of a receiver, so that it canuot sue, the receiver may maintain the action. If he refuses, or is himself involved, a person aggrieved may sue. When the shareholders are numerous the action may be brought by one or more in behalf of all, and the bank and receiver are necessary parties — the latter, as it is through him that the amount which may be adjudged against the directors is to be collected and paid over. When the action is brought by a stockholder or stockholders, while the bank is in a receiver's hands, the com- plaint need not allege a demand on the Comptroller, and his refusal to direct the receiver to use, or a demand upon and refusal of the latter to do so, for this sec- tion does not require that the action be instituted by the Comptroller, and the liability of the directors of corporation for breaches of trust and the jurisdiction of courts of equity to afford redress to the corporation, and in proper cases to its shareholders, for such wrongs, exists independently of any statute. Brinckerhoflf v. Bostwick, 88 N. Y. 52, reversing same case, 23 Hun, 237; Ackerman v. Halsey, 37 N. J. Eq. 356. See, also, Conway v. Halsey, 44 N. J. Law, 462. 4. The officers of a national bank are not personally responsible to creditors for losses incurred in transactions made in good faith, and appearing profitable at the time of the transactions. Witters, Beceiver, v. Sowles et al., 31 Fed. Hep. 1. 5. Directors are not liable to the common-law liability for inattention to official duties in preventing a disastrous loan, if such loan is made without their actual knowledge. Id. 6. A director who sells his stock, and receives the money therefor, and orally resigns before the expiration of his term of office, ceases to be a director, and is not liable for the subsequent loss through the negligence of directors. Movlus, Receiver, v. Lee et al., supra, 30 Fed. Rep. 298. 7. A president of a national bank, on leave of absence for good cause, is not liable for the negligence of other officers or directors in his absence. Id. 8. Directors are not liable for the secret illegal transactions of one of the directors. Id. 9. To show ground for forfeiting its charter it must be shown that in carrying 696 THE WATIONAX BANKING LAW. on the business of the bank some act or transaction in violation of the provisions of title 62 of the U. S. R. S. was done, and that the directors were either the doers thereof or knowingly permitted it to be done by some officer, agent or servant of the bank. Trenholm v. Commercial Bank, 38 Fed. Rep. 323. 10. The Comptroller has not the right to decide that the directors shall be pro- ceeded against to enforce the liability created by this section, until he has, by a proper proceeding in a United States court, had it determined that acts have been done which justified the forfeiture of the bank's charter. Neither the Comptroller nor any one else can determine that such acts do exist, and after the proper court has decided that they exist it is still a question for the Comptroller to determine whether the receiver shall proceed to enforce the director's liability. Welles v. Graves, 41 Fed. Rep. 459. 11. The right to recover under this section, of a bank director, the damages sustained in consequence of an excessive loan under section 5200 is in no wise affected by the fact that the Comptroller has or has not procured a forfeiture of the charter. Stephens v. Overstoltz, 43 Fed. Rep. 771. 12. The provisions of the National Banking Act enter as part into the contracts of creditors with national banks, and the provisions creating the liability of directors, and prescribing the proceedings to enforce the liability, when guilty of violations of the act, are exclusive of other liability and proceedings. In view of this section and section 5234, U. S. Comp. Stat. 1901, p. 3507, a court of equity cannot entertain the suit of a creditor against the directors of a national bank. Only the receiver, under the direction of the Comptroller, can bring suit. Nat. Exch. Bank v. Peters, 43 Fed. Rep. 13. 13. Where officers attest an official report wherein assets excluded by the Comp- troller as doubtful, and a third person buys the bank stock on the faith of such false statement, they are liable to such buyer for depreciation of such stock because of such shrinkage in value but not liable for loss by impairment unknown to the officers. Taylor v. Thomas, 124 App. Div. 53. 14. This section affords the exclusive rule measuring the right to recover dam- ages from directors for a loss caused by their violation of any provision of the National Banking Act. Yates v. Jones Nat. Bank, 206 U. S. 158. § 5240. The Comptroller of the Currency, with the approval of the Secretary of the Treasury, shall, as often as shall be deemed necessary or proper, appoint a suitable person or persons to make an examination of the affairs of every banking association, who shall have power to make a thorough examination into all the affairs of the association, and, in doing so, to examine any of the officers and agents thereof on oath ; and shall make a full and detailed report of the condition of the association to the Comptroller. That all persons appointed to be examiners of national banks not located in the re- demption cities specified in section five thousand one hundred and ninety-two of the Eevised Statutes of the United States, or in any one of the States of Oregon, California, and Nevada, or in the Terri- THE NATIONAL BANKING LAW. 69r tories, shall receive compensation for such examination as follows: For examining national banks having a capital less than one hun- dred thousand dollars, twenty dollars; those having a capital of one hundred thousand dollars and less than three hundred thousand dol- lars, twenty-five dollars ; those having a capital of three hundred thou- sand dollars and less than four hundred thousand dollars, thirty-five dollars ; those having a capital of four hundred thousand dollars and less than five hundred thousand dollars, forty dollars; those having a capital of five hundred thousand dollars and less than six hundred thousand dollars, fifty dollars; those having a capital of six hundred thousand dollars and over, seventy-five dollars; which amounts shall be assessed by the Comptroller of the Currency upon, and paid by, the respective association so examined, and shall be in lieu of the- compensation and mileage heretfoore allowed for making said ex- aminations, and persons appointed to make examinations of national banks in the cities named in section five thousand one hundred and ninety-two of the Revised Statutes of the United States, or in any one of the States of Oregon, California, and Nevada, or in the Terri- tories, shall receive such compensation as may be fixed by the Secre- tary of the Treasury upon the recommendation of the Comptroller of the Currency; and the same shall be assessed and paid in the manner hereinbefore provided. But no person shall be appointed to examine the affairs of any banking association of which he is a director or other officer. (As amended by Act of February 19, 1875.) See Act of July 12, 1882, § 3, post. § 5241. [IT. S. Comp. Stat. 1901, p. 3517.] No association shall be subject to any visitorial powers other than such as are authorized by this Title, or are vested in the courts of justice. 1. The officers of a national bank cannot be compelled by county officials to pro- duce the books of the bank for the former's inspection, for the purpose of obtain- ing the necessary information for imposing a tax on deposits. First National Bank v. Hughes, Browne's N. B. Cas. 176, Fed. Cas. No. 4,811. 2. The Supreme Court of New York has jurisdiction in the case of a national' bank where the charter has expired by limitation, to direct its officers to furnish certified statement showing its assets and certain specified facts relating thereto,, Tuttle V. Iron Nat. Bank of Plattsburgh, 170 N. Y. 9, 62 N. E. 761, aflf'g 67 App. Div. 627, 73 N. Y. Supp. 1150. 3. Any attempt by a State to define the duties of a national bank is void' 698 THE l^TATIOWAL BANKING LAW. wherever conflicting with federal law. Davis v. Elmira Sav. Bank, 161 U. S. 283, 40 L. ed. 701, 16 Sup. Ct. Eep. 502. § 5242. [U. S. Comp. Stat. 1901, p. 3517.] All transfers of the notes, bonds, bills of exchange, or other evidences of debt owing to any national banking association, or of deposits to its credit; all assignments of mortgages, sureties on real estate, or of judgments or decrees in its favor ; all deposits of money, bullion, or other valu- able thing for its use, or for the use of any of its shareholders or creditors; and all payments of money to either, made after the com- mission of an act of insolvency, or in contemplation thereof, made with a view to prevent the application of its assets in the maimer prescribed by this chapter, or with a view to the preference of one creditor to anotber, eixcept in payment of its circulating notes, shall be utterly null and void, and no attachment, injunction, or execution shell be issued against such association or its property before final judgment in any suit, action, or proceeding, in any State, county, or municipal court. 1. The words, " act of insolvency," in this section are to be taken in their usual sense and not simply such an act as authorizes the Comptroller to appoint a receiver. Irons v. Manufacturers' National Bank, 6 Biss. 301, 27 Fed. Eep. 591. 2. To make transfers, assignments, deposits and payments void under this sec- tion, it is only necessary that the insolvency should be in contemplation of the bank making the transfers, etc., and not that it should also be known to or con- templated by the party to whom they are made. Case, Eecciver, v. Citizens' Bank, 2 Woods, 23, Fed. Cas. No. 2,489 ; Peckham v. Burroughs, 3 Story, 544, Fed. Cas. No. 10,897. 3. The respective rights and liabilities existing between the bank and its creditors and debtors became fixed when its insolvency occurred, and it passed into the hands of the receiver appointed by the Comptroller of the Currency. All the property and assets of the association then became a fund legally dedicated, first, to the satisfaction of any claim of the United States government for any deficiency in the proceeds of the bonds pledged for the redemption of its notes, to meet the amount necessary to be expended for that purpose; and second, for a ratable distribution of the balance among its general creditors, upon the principle -of equality. Balch v. Wilson, 25 Minn. 299, 33 Am. Eep. 467. 4. The word " insolvency," as used in this section, is synonymous with the same word as used in the (late) bankrupt act, and means a present inability to pay in the ordinary course of business. Case, Eeceiver, v. Citizens' Bank, 2 Woods, 23, Fed. Cas. No. 2,489. 5. The provisions of this section prohibiting the issuing of an attachment, etc., :againat a national bank with property, before final judgment, applies only to an association which has become insolvent, or to one about to become so, as specified in the preceding part of the section. Eobinson v. National Bank of New Berne, THE NATIONAL BANKING LAW. 699 81 N. Y. 385, 37 Am. Rep. 508; People's Bank v. Mechanics' National Bank, 62 How. Pr. 422 ; Market National Bank v. Pacific National Bank, 2 Civ. Pro. E. 330. 6. An attachment issued against an insolvent national bank, or one in contem- plation of insolvency, or which has committed an act of insolvency, is illegally issued in violation of this section, and cannot be made valid by the subsequent acquisition by the bank of further capital. Raynor et al. v. Pacific National Bank, 93 N. Y. 373. 7. And when such bank after the issuing of an attachment pays a large amount of its debts in full, this fact will not estop it from setting up its insolvency to a.void the att£w;hment, at least where the application to vacate is made for the benefit of the remaining creditors, and not the stockholders. Id. 8. This section is not repealed by the Act of Congress of July 12, 1883, provid- ing that the jurisdiction for suits thereafter brought against national banks shall be the same as for suits against State banks, and repealing laws inconsistent therewith. This section is not inconsistent with such provision. Id. 9. The property of a national bank, attached, at the suit of an individual creditor, cannot be sold on an attachment levied after the bank become insolvent, when the same property is claimed by a receiver of the bank, who was subse- quently appointed. National Bank v. Colby, 21 Wall, 609, 22 L. ed. 687. 10. The preference of one creditor to another by a national bank, mentioned in the foregoing section, is a preference given to the creditor to secure or pay a pre- existing debt. When a national bank, being embarrassed, receives a loan of money, or other valuable material aid, from a person who knows its embarrassed state, on condition that the party making the loan or giving the aid shall be secured therefor, and the security is accordingly given by pledging a part of the assets of the bank, Held, this is not giving him a preference over other creditors within the meaning of this section. " If a customer or friend of a bank, knowing it to be embarrassed and in need of assistance, proffers it, for instance, a loan of $50,000 in cash, on receiving security for the amount by a transfer of a part of its portfolio, that cannot be fairly construed as giving him a preference over other creditors. Other creditors are not injured by such a transaction; for the securi- ties that such a creditor takes out he leaves an equivalent in cash. He becomes a creditor solely on condition of receiving security. ... It clearly was not the purpose of the act to forbid the bank from giving security to its friends for means to be advanced on the spot or in the future." Woods, J. Casey, Receiver, v. La Soci«t6 de Credit Mobilier de Paris et at, 2 Woods, 77, Ped. Cas. No. 2,496. 11. A return of rmlla bona upon an execution against the bank is ample evi- dence of its insolvency. Wheelock v. Kost, 77 111. 296. 12. An attachment cannot issue from a Circuit Court of the United States, in an action against a national bank before final judgment. Pacific National Bank V. Mixter, 124 U. S. 721, 31 L. ed. 567, 8 Sup. Ct. Rep. 718. 13. A receiver of a national bank can acquire no right to property in posses- sion of bank which it does not own, as against the owner. Section 5242 of U. S. Rev. Stat. [U." S. Comp. Stat. 1901, p. 3517], was not intended to protect such receiver's possession as against the owner. Further held, that section 5242 does not prohibit the issuing of a requisition to the sheriflF to take possession of the property in question. Corn Exchange Bank v. Blye, 101 N. Y. 303, 4 N. E. 625. 14. Certain creditors whose claims were disputed by a national bank attached 700 THE NATIOliTAL BANKING LAW. its property and began suit to dissolve the same; the president and a director became sureties on the bank's bond of indemnification. The bank transferred $100,000 to such sureties. Before these transactions the bank had suspended but had resumed business with permission of the Comptroller of the Currency, but had become insolvent soon after the above transactions. Held, that the transfer of the $100,000 was not made after the commission of an act of insolvency or in contemplation thereof, or to prevent the application of assets as prescribed by the banking act. Price, Receiver, v. Coleman et at, 22 Fed. Kep. 694. 15. The transfer of the assets of a. bank to a creditor whereby he secures a preference over the other creditors, if made after a vote of the directors to go into liquidation, will be presumed to be made with fraudulent intent. National Security Bank v. Price, Receiver, 22 Fed. Rep. 697. 16. The general policy of the banking law, which forbids any kind of prefer- ence in ease of insolvency and requires the entire assets to be preserved for equitable distribution, does not affect a, depositor's right to rescind for fraud. A depositor who deposits a draft in ignorance of the insolvency of a national bank, may rescind and pursue the collection of the draft, if thi proceeds have not been mingled with the general assets of the insolvent bank. Gragie v. Smith, 14 Abb. N. C. 409. 17. " In order to uphold an action under his section, there should be some satisfactory evidence that the cashier or other officer actually paid the money of the bank in contemplation of insolvency for the purpose of giving a preference to the payee, and with a view to prevent the application of the assets of the bank to the creditors generally, as provided in the National Banking Act." Hayes v. Beardsley, 136 N. Y. 299, 32 N. E. 855, aff'g 43 N. Y. St. Rep. 744, 17 N. Y. Supp. 404. 18. In the above cited case (Hayes v. Beardsley, supra), the insolvency of the bank was so concealed by the cashier that none of its directors had any suspicion thereof, and it was not discovered by the bank examiner. Held, that under the circumstances the fact that defendant was a, director did not, as a matter of law, charge him with liability for the payments made to him; that it having been found that he acted in good faith and in ignorance of any wrongdoing or of the bank's insolvency, payments made to him were to be tested under said provisions like payments made to other creditors. Hayes v. Beardsley, supra. 19. Where a national bank on the 20th day of a month, telegraphs its accept- ance of a, draft drawn on it by a national bank in another State and on the following day the drawer fails, and the day after (22d), the acceptor pays the amount of the draft. Held, that in the absence of anything indicating that the action of the payee, drawer or drawee was in contemplation of the insolvency of the drawer or that they had any intimation of its impending failure, that the transaction was not within the inhibition of this section, and that the acceptor had a right to a.pply the proceeds of collections made by it for the drawee, in its hands at the date of acceptance to the payment of the draft. In re Armstrong, 41 Fed. Rep. 384; see also, Armstrong v. Chemical Nat. Bank, 41 Fed. Rep. 234. 20. The indorser of a note which is discounted by a national bank and which matures after the bank becomes insolvent and a receiver is appointed, is entitled to set off against the note the amount of his deposits in the bank at the time of THE NATIONAL BANKING LAW. TOl its failure. The allowance of such setoff does not violate section 5242. Yardley V. Clothier, 17 L. R. A. 642, 2 U. S. Ct. of Aps. Rep. 349, 3 U. S. App. 207, 51 Fed. Rep. 506. 21. The provisions of U. S. Rev. Stat., § 5242, U. S. Comp. Stat. 1901, p. 3517; against attachment or other provisional remedy or execution, except after final judgment, against national banks applies to solvent as well as insolvent banks. This provision was not affected by Act of July 12, 1882, U. S. Stat, at L. 163, chap. 290, § 4, U. S. Comp. Stat. 1901, p. 3458, which prescribes the forum and does not relate to the provisional remedies to be had therein. Solvency of bank is to be presumed in absence of proof to the contrary. Van Reed v. People's Nat. Bank, 198 U. S. 554, 173 N. Y. 314. 22. After insolvency is declared, a national bank cannot do further business, but its corporate existence continues for certain purposes. Chemical Bank v. Hartford Deposit Co., 161 U. S. 7, 40 L. ed. 598, 16 Sup. Ct. Rep. 439. 23. Remittances made by one bank to another in the ordinary course of busi- ness, they will not be taken as made in contemplation of insolvency. McDonald V. Chemical Nat. Bank, 174 U. S. 618, 43 L. ed. 1109, 19 Sup. Ct. Rep. 787. 24. As to clearing house exchanges see Yardley v. Philler, 167 U. S. 357, 42 L. •ed. 196, 17 Sup. Ct. Rep. 835. 25. Attachment against national bank as garnishee is not an attachment within section 5242 against the bank. Earle v. Conway, 178 U. S. 456, 44 L. ed. 1149, 20 Sup. Ct. Rep. 918. 26. Where dividends were paid out of capital when bank was not insolvent, the owner of the stock believing them to be out of profits, receiver cannot recover them. McDonald v. Williams, 174 U. S. 397, 43 L. ed. 1022, 19 Sup. Ct. Rep. 743. 27. A national bank cannot be made liable for the debts of a partnership flhares in which it has become a qualified owner of by foreclosure of its lien upon them for a debt. Merchants Nat. Bank v. Wehrmann, 202 U. S. 295. 28. A national bank whether solvent or insolvent is exempt from attachment before judgment. A State court cannot gain jurisdiction over a foreign national bank by attaching the bank's property within that State. Pacific Nat. Bank ■;;. Mixter, 124 U. S. 721. § 5243. [U. S. Comp. Stat. 1901, p. 3517.] All banks not organ- ized and transacting business under the national currency laws, or under this Title, and all persons or corporations doing the business of bankers, brokers, or savings institutions, except savings baaiks au- thorized by Congress to use the word " national " as a part of their corporate name, are prohibited from using the word " national " as a portion of the name or title of such bank corporation, firm, or part- nership; and any violation of this prohibition committed after the third day of September, eighteen hundred and seventy-three, shall subject the party chargeable therewith to a penalty of fifty dollars for each day during which it is committed or repeated. 702 THE NATIOIfAIi BANKING LAW. TITLE XXXV. INTERNAL REVENUE. CHAPTEE VIII. Bank and Bankers. Section 3407. Definition of the words " bank," " banker." 3410. Capital of banks expired or converted into national banks. 3411. Circulation, when exempted from tax. 3412. Tax on notes of persons or State banks used as circulation, etc. 3413. Tax on notes of town, city, or municipal corporations paid out by banks, etc. 3414. Banks and bankers' monthly returns. 3415. In default of return commissioner to estimate, etc. 3416. State banks converted into national banks; returns, how made. 3417. Provisions for bank tax and returns not to apply to national banks. § 3407. [U. S. Comp. Stat. 1901, p. 2246.J Every incorporated or other bank, and every person, firm or company having a place of business where credits are opened by the deposit or collection of money or currency, subject to be paid or remitted upon draft, check, or order, or where the money is advanced or loaned on stocks, bonds, bullion, bills of exchange, or promissory notes, or where stocks, bonds, bullion, bills of exchange, or promissory notes are received for discount or for sale, shall be regarded as a bank or as a banker. [Sections 3408 and 3409 (U. S. Comp. Stat. 1901, pp. 2247, 2248), relating to taxes on capital and deposits of banks, bankers and national banking associations, were repealed by section 1, chapter 121, Act of March 3, 1883.] § 3410. [U. S. Comp. Stat. 1901, p. 2248.] The capital of any State bank or banking association which has ceased or shall cease to exist, or which has been or shall be converted into a national bank, shall be assumed to be the capital as it existed immediately before such bank ceased to exist or was converted as aforesaid. Sec Act of March 3, 1883, § 1, post. THE NATIONAL BANKING LAW. 703 § 3411. [U. S. Comp. Stat. 1901, p. 2248.J Whenever the out- standing circulation of any bank, association, corporation, company, or person is reduced to an amount not exceeding five per centum of the chartered or declared capital existing at the time the same was issued, said circulation shall be free from taxation; and whenever any bank which has ceased to issue notes for circulation deposits in the Treasury of the United States, in lawful money, the amount of its outstanding circulation, to be redeemed at par, under such regu- lations as the Secretary of the Treasury shall prescribe, it shall be exempt from any tax upon such circulation. See Act of July 12, 1882, §§ 6 and 8, post. This section does not lay a direct tax. Congress having undertaken, in the exercise of undisputed constitutional power, to provide a currency for the whole country, may secure the benefit of it to the people by appropriate legislation, and to that end may restrain, by suitable enactmsnts, the circulation of any notes not issued under its authority. Veazie Bank v. Fenno, 8 Wall. 533, 19 L. ed. 482. § 3412. [U. S. Comp. Stat. 1901, p. 2249. J Every national bank- ing association. State bank or State banking association shall pay a tax of ten per centum on the amount of notes of any pe^rson, or of any State bank or State banking association used for circulation and paid out by them. See Act of February 8, 1875, §§ 19 and 20, post. § 3413. [TJ. S. Comp. Stat. 1901, p. 2249.J Every national bank- ing association. State bank, or banker, or association, shall pay a tax of ten per centum on the amount of notes of any town, city, or mu- nicipal corporation paid out by them. See Act of February 8, 1875, §§ 19, 20, post. " The only question presented is as to the constitutionality of section 3413 of the Revised Statutes, the objection being that the tax is virtually laid upon an instrumentality of the State of Arkansas. " We think this case comes strictly within the principles settled in Veazie Bank V. Fenno, 8 Wall. 533, 19 L. ed. 482, where it was distinctly held that the tax imposed by that section on national and State banks, for paying out the notes of individuals or State banks used for circulation, was not unconstitutional. " The reason is thus stated by Mr. Chief Justice Chase : ' Having thus. In the exercise of undisputed constitutional powers, undertaken to provide a currency for the whole country, it cannot be questioned that Congress may constitutionally secure the benefit of it to the people by appropriate legislation. To this end Congress has denied the quality of legal tender to foreign coins, and has provided by law against the imposition of counterfeit and base coin on the community. Y04: THE WATIOITAI, BANKING LAW. To the same end Congress may restrain, by suitable enactments, the circulation as money any notes not issued under its authority. Without this power, indeed, its attempts to secure a sound and uniform currency for the country must be futile' (p. 549, 19 L. ed. 488). " The tax thus laid is not on the obligation, but on its use in a particular way. As against the United States, a State municipality has no right to put its notes in circulation as money. It may execute its obligations, but cannot, against the will of Congress, make them money. " The tax is on the notes paid out, that is, made use of as a circulating medium. Such a use is against the policy of the United States. Therefore the banker who helps to keep up the use by pajdng them out, that is, employing them as the equivalent of money in discharging his obligations, is taxed for what he does. The taxation is no doubt intended to destroy the use; but that, as has just been seen, Congress has the power to do." Waite, Ch. J. Merchants' Nat. Bank v. United States, 101 U. S. 1, 25 L. ed. 979. § 3414. [U. S. Comp. Stat. 1901, p. 2250.J A true and complete return of the monthly amount of circulation, of deposits, and of •capital, as aforesaid, and of the monthly amount of notes or persons, town, city, or municipal corporations. State bants, or State banking associations paid out as aforesaid for the previous six months, shall be made and rendered in duplicate on the first day of December and the first day of June by each of such banks, associations, corpora- tions, companies, or persons, with a declaration annexed thereto, under the oath of such person, or of the president or cashier of such bank, association, corporation, or company, in such form and manner as may be prescribed by the Commissioner of Internal Revenue, that the same contains a true and faithful statement of the amounts sub- ject to tax, as aforesaid; and one copy shall be transmitted to the ■collector of the district in which any such bank, association, corpora- tion, or company is situated, or in which such person has his place •of business, and one copy to the Commissioner of Internal Revenue. See Act of February 8, 1875, § 21, post. § 3416. [U. S. Comp. Stat. 1901, p. 2250. J In default of the returns provided in the preceding section, the amount of circulation, deposit, capital, and notes of persons, town, city, and municipal cor- porations. State banks, and State banking associations paid out, as aforesaid, shall be estimated by the Commissioner of Internal Reve^ nue, upon the best information he can obtain. And for any refusal ov neglect to make return and payment, any such bank, association, ■corporation, company, or person so in default shall pay a penalty of THE KATIONAX, BANKIBTG LAW. 705 two liimdred dollars, besides the additional penalty and forfeitures provided in other oases. § 3416. [U. S. Comp. Stat. 1901, p. 2251.] Whenever any State bank or banking association bas been converted into a national bank- ing association, and such national banking association has assumed the liabilities of such State bank or banking association, including the redemption of its bills, by any agreement or understanding whatever with the representatives of such State bank or banking association, such national banking association shall be held to make the required return and payment on the circulation outstanding, so long as such, circulation shall exceed five per centum of the capital before such conversion of such State bank or banking association. § 3417. [U. S. Comp. Stat. 1901, p. 2251. J The provisions of this chapter, relating to the tax on the deposits, capital and circula- tion of banks, and to their returns, except as contained in sections thirty-four hundred and ten, thirty-four hundred and eleven, thirty- four hundred and twelve, thirty-four hundred and thirteen, an'd thirty-four hundred and sixteen, and such parts of sections thirty- four hundred and fourteen and thirty-four hundred and fifteen as relate to the tax of ten per centum on certain notes, shall not apply to associations which are taxed under and by virtue of title " JSTational Banks." 1. United States securities are exempted from local taxation by the following section of Title XLII. U. S. R. S., entitled "The Public Debt:" § 3701, [U. S. Comp. Stat. 1901, p. 2480.] All stocks, bonds, treasury notes, and other obligations of the United States shall be exempt from taxation by or under State or municipal or local authority. 45 ADDITIONAL ACTS, TO AND INCLUDING THE SIXTIETH CONGRESS. 1874-1909. M7] ADDITIONAL ACTS. Act of Jime 20, 1874. An act fixing the amount of the United States notes, {)roviding for a redistribution of the national bant currency, and for other pur- poses. Be it enacted hy the Senate and Hovse of Representatives of the United States of Americm m Congress assembled, Ttat the act en- titled "An act to provide a national currency secured by a pledge of United States bonds', and to provide for the circulation and redemp- tion thereof," approved June third, eighteen hundred and sixty-four, shall hereafter be known as " the National Bank Act." § 2. That section thirty-one ^ of " the I^Tational Bank Act " be so amended that the several associations therein provided for shall not hereafter be required to keep on hand any amount of money vs'hat- ever by reason of the amount of their respective circulations ; but the moneys required by said section to be kept at all times on hand shall be determined by the amount of deposits in all respects, as provided for in said section. § 3. That every association organized, or to be organized, under the provisions of the said act, and of the several acts amendatory thereof, shall at all times keep and have on deposit in the Treasury of the United States, in lawful money of the United States, a sum equal to five per centum of its circulation, to be held and used for the redemption of such circulation ; which sum shall be counted as a part of its lawful reserve, as provided in section two of this act ; and when the circulating notes of any such associations, assorted or unassorted 1 This " section thirty-one " refers to the old division by sections in the Act of June 3, 1864; it refers to "reserve" and was incorporated in U. S. Rev. Stat., §§ 5191, 5192. The " section thirty-two " hereinafter referred to was incorporated in U. S. Rev. Stat., § 5195. The U. S. Rev. Stat, were enacted 1874, and embraced the laws in force Dec. 1, 1873. [709] TlO THE NATIONAL BANKING LAW. shall be presented, for redemption, in sums of one thousand dollars or any multiple thereof, to the Treasurer of the United States, the same shall be redeemed in United States notes. All notes so redeemed shall be charged by the Treasurer of the United States to the respective associations issuing the same, and he shall notify them severally on the first day of each month, or oftener, at his discretion, of the amount of such redemptions ; and vs^henever such redemptions for any associa- tion shall amount to the sum of five hundred dollars, such association so notified shall forthwith deposit vrith the Treasurer of the United States a sum in United States notes equal to the amount of its circu- lating notes so redeemed. And all notes of national banks, worn defaced, mutilated, or otherwise unfit for circulation, shall, when received by any assistant treasurer or at any designated depository of the United States, be forwarded to the Treasurer of the United States for redemption as provided herein. And when such redemptions have been so reimbursed, the circulating notes so redeemed shall be for- warded to the respective associations by which they were issued ; but if any of such notes are worn, mutilated, defaced, or rendered other- wise unfit for use, they shall be forwarded to the Comptroller of the Currency and destroyed, and replaced as now provided by law : Pro- vided, That each of said associations shall reimburse to the Treasury the charges for transportation, and the costs for assorting such notes ; and the associations hereafter organized shall also severally reimburse to the Treasury the cost of engraving such plates as shall be ordered by each association respectively ; and the amount assessed upon each association shall be in proportion to the circulation redeemed, and be charged to the fund on deposit with the Treasurer: And provided fwrther. That so much of section thirty-two ^ of said National Bank Act requiring or permitting the redemption of its circulating notes elsewhere than at its own counter, except as provided for in this sec- tion, is hereby repealed. § 4. That any association organized under this act or any of the acts of which this is an amendment, desiring to withdraw its circulat- ing notes, in whole or in part, may, upon the deposit of lawful money with the Treasurer of the United States in sums of not less than nine 2 See note to section 2, axite. THE NATIONAL BANKING LAW. 711 thousand dollars, take up the bonds which said association has on deposit with the Treasurer for the security of such circulating notes, which bonds shall be assigned to the bank in the manner specified in the nineteenth section of the National Bank Act ; and the outstanding notes of said association, to an amount equal to the legal-tender notes deposited, shall be redeemed at the Treasury of the United States, and destroyed as now provided by law : Provided, That the amount of the bonds on deposit for circulation shall not be reduced below fifty thousand dollars. § 5. That the Comptroller of the Currency shall, under such rules and regulations as the Secretary of the Treasury may prescribe, cause the charter numbers of the association to be printed upon all national bank-notes which may be hereafter issued by him. § 6. That the amount of United States notes outstanding and to be used as a part of the circulating medium shall not exceed the sum of three hundred and eighty-two million dollars, which said sum shall appear in each monthly statement of the public debt, and no part thereof shall be held or used as a reserve. § 7. That so much of the act entitled "An act to provide for the redemption of the three per centum temporary loan certificates, and for an increase of national bank-notes," as provides that no circula- tion shall be withdrawn under the provisions of section six of said act, until after fifty-four millions granted in section one of said act shall have been taken up, is hereby repealed; and it shall be the duty of the Comptroller of the Currency, under the direction of the Secre- tary of the Treasury, to proceed forthwith, and he is hereby author- ized and required, from time to time, as applications shall be duly made therefor, and until the full amount of fifty-five million dollars shall be withdrawn, to make requisitions upon each of the national banks described in said section, and in the manner therein provided, organized in States having an excess of circulation, to withdraw and return so much of their circulation as by said act may be apportioned to be withdrawn from them or, in lieu thereof, to deposit in the Treasury of the United States lawful money sufficient to redeem such circulation; and upon the return of the circulation required, or the deposit of lawful money, as herein provided, a proportionate amount 112 THE NATIONAL BANKING LAW. of the bonds held to secure the circulation of such association as shall make such return or deposit shall be surrendered to it. § 8. That upon the failure of the national banks upon which requisition for circulation shall be made, or of any of them, to return the amount required, or to deposit in the Treasury lawful money to redeem the circulation required, within thirty days, the Comptroller of the Currency shall at once sell, as provided in section forty-nine of the National Currency Act, approved June third, eighteen hundred and sixty-four, bonds held to secure the redemption of the circulation of the association or associations which shall so fail, to an amount sufficient to redeem the circulation required of such association or associations, and with the proceeds, which shall be deposited in the Treasury of the United States, so much of the circulation of such association or associations shall be redeemed as vdll equal the amount required and not returned ; and if there be any excess of proceeds over the amount required for such redemption, it shall be returned to the association or associations whose bonds shall have been sold. And it shall be the duty of the Treasurer, assistant treasurers, designated depositaries, and national bank depositaries of the United States, who shall be kept informed by the Comptroller of the Currency of such associations as shall fail to return circulation as required, to assort and return to the Treasury for redemption the notes of such associations as shall come into their hands until the amount required shall be redeemed, and in like manner to assort and return to the Treasury, for redemption, the notes of such national banks as have failed, or gone into voluntary liquidation for the purpose of winding up their affairs, and of such as shall hereafter so fail or go into liquidation. § 9. That from and after the passage of this act it shall be law- ful for the Comptroller of the Currency, and he is hereby required to issue circulating notes, without delay, as applications therefor are made, not to exceed the sum of fifty-five million dollars, to associa- tions organized, or to be organized, in those States and Territories having less than their proportion of circulation, under an apportion- ment made on the basis of popiulation and of wealth, as shown by the returns of the census of eighteen hundred and seventy; and every THE FATIOWAL BANKING LAW. I i-O association hereafter organized shall be subject to, and be governed by, the rules, restrictions, and limitations, and possess the rights, privi- leges, and franchises, now or hereafter to be prescribed by law as to national banking associations, with the same power to amend, alter, and repeal provided by " the National Bank Act ; " Provided, That the whole amount of circulation withdrawn and redeemed from banks transacting business shall not exceed fifty-five million dollars and that such circulation shall be withdrawn and redeemed as it shall be necessary to supply the circulation previously issued to the banks in those States having less than their apportionment: And provided further. That not more than thirty million dollars shall b© withdrawn and redeemed as herein contemplated during the fiscal year ending June thirtieth, eighteen hundred and seventy-five. Approved June 20, 1874. See Act of July 12, 1882, post; Act of July 14, 1890, post; Act of March 14, 1900, post. Act of Jajstuaet 14, 1875. An act to provide for the resumption of specie payments. Be is enacted hy, the Semite and House of Representatives of the United States of America! m Congress assembled, That the Secretary of the Treasury is hereby authorized and required, as rapidly as prac- ticable, to cause to be coined at the mints of the United States, silver coins of the denominations of ten, twenty-five, and fifty cents, of standard value, and to issue them in redemption of an equal number and amount of fractional currency of similar denominations, or, at his discretion, he may issue such silver coins through the mints, the sul>treasuries, public depositaries, and post-offices of the United States ; and upon such issue, he is hereby authorized and required to redeem an equal amount of such fractional currency, until the whole amount of such fractional currency outstanding shall be redeemed. § 2. That so much of section three thousand five hundred and twenty-four of the Revised Statutes of the United States as provides for a charge of one-fifth of one per centum for converting standard gold bullion into coin is hereby repealed; and hereafter no charge shall be made for that service. 714 THE NATIONAL BANKIBTG LAW. § 3. Tkat section five thousand one hundred and seventy-seven of the Revised Statutes of the United States, limiting the aggregate amount of circulating notes of national banking associations, be, and is hereby, repealed; and each existing banking association may in- crease its circulating notes in laccordance with existing law without respect to said aggregate limit ; and new banking associations may be organized in accordance with existing law without respect to said aggregate limit; and the provisions of law for the withdrawal and redistribution of national bank currency among the several States and Territories are hereby repealed. And whenever, and so often, as cir- culating notes shall be issued to any such banking association, so in- creasing its capital or circulating notes, or so newly organized as aforesaid, it shall be the duty of the Secretary of the Treasury to redeem the legal tender United States notes in excess only of three hundred million of dollars, to the amount of eighty per centum of the sujn of national bank notes so issued to any such banking association as aforesaid, and to continue such redemption as such circulating notes are issued until there shall be outstanding the sum of three hun- -dred million dollars of such legal tender United States notes, and no more. And on and after the first day of January, Anno Domini eighteen hundred and seventy-nine, the Secretary of the Treasury shall redeem in coin, the United States legeal-tender notes then out- standing, on their presentation for redemption at the office of the assistant treasurer of the United States in the city of !New York, in sums of not less than fifty dollars. And to enable the Secretary of the Treasury to prepare and provide for the redemption in this act authorized or required, he is authorized to use any surplus revenues, from time to time, in the Treasury not otherwise appropriated, and to issue, sell, and dispose of, at not less than par, in coin, either •of the description of bonds of the United States described in the act of Congress approved July fourteenth, eighteen hundred and seventy, entitled "An act to authorize the refunding of the national debt," with like qualities, privileges, and exemptions, to the extent necessary to carry this act into full effect, and to use the proceeds: thereof for the purposes aforesaid. And all provisions of law inconsistent with the provisions of iihis act are hereby repealed. Approved January 14, 1875. See Act of MaTch 3, 1887. THE NATIONAL BANKING LAW, 715 Act of January 19, 1875. An act to remove the limitation restricting the circulation of banking associations issuing notes payable in gold. Be it enacted by the Benaie and House of Representatives of the United States of America in Congress assembled. That so much of section five thousand one) hundred and eighty-five of the Eevised Statutes of the United States as limits the circulation of banking associations organized for the purpose of issuing notes payable in gold, severally to one million dollars, be and the same is hereby repealed; and each of such existing banking associations may in- crease its circulating notes, and new banking associations may be organized in accordance with existing law, without respect to such limitation. Approved January 19, 1875. Act of rEBEUARY 8, 1875. EXTRACTS FROM An act to amend existing customs and international laws and for other purposes. Be it enacted by the Senaite and House of Representatives of the United States of America in Congress assembled^ * * * § 19. That every person, firm, association other than national bank associations, and every corporation. State bank or State banking association, shall pay a tax of ten per centum on the amount of their own notes used for circulation and paid out by them. § 20. That every such person, firm, association, corporation. State bank or State banking association, and also every national banking association, shall pay a like tax of ten per centum on the amount of notes of any person, firm, association other than a national banking association, or of any corporation. State bank or State banking asso- ciation, or of any town, city or municipal corporation, used for cirou- lation and paid out by them. § 21. That the amount of such circulating notes and of the tax due thereon, shall be returned, and the tax paid at the same time, and 716 THE NATIONAL BANKING LAW. in the same manner, and "witli like penalties for failure to return and pay the same, as provided by law for the return and payment of taxes on deposits, capital and circulation, imposed by the existing provisions of internal revenue law. Approved February 8, 1815. Act of Maech 3, 18Y5. * * * That the national-bank notes shall be printed under the direction of the Secretary of the Treasury, and upon the distinctive or special paper which has been, or may hereafter be, adopted by him for printing United States notes. Act of June 30, 1876. An act authorizing the appointment of receivers of national banks, and for other purposes. Be it enacted hy the Senate and House of Representatives of the United States of America, in Congress assembled. That whenever any national banking association shall be dissolved, and its rights, privi- leges and franchises declared forfeited, as prescribed in section fifty- two hundred and thirty-nine of the Revised Statutes of the United States, or whenever any creditor of any national banking association shall have obtained a judgment against it in any court of record, and made application, accompanied by a certificate from the clerk of the court stating that such judgment has been rendered and has remained unpaid for the space of thirty days, or whenever the Comptroller shall become satisfied of the insolvency of a national banking asso- ciation, he may, after due examination of its affairs, in either case, appoint a receiver, who shall proceed to close up such association, and enforce the personal liability of the shareholders, as provided in section fifty-two hundred and thirty-four of said statutes. § 2. That when any national banking association shall have gone into liquidation under the provisions of section five thousand two hundred and twenty of said statutes, the individual liability of the shareholders provided for by section fifty-one hundred and fifty-one of said statutes may be enforced by any creditor of such association, by bill in equity in the nature of a creditor's bill, brought by sucb THE N-ATIOWAX BANKING LAW. 717 creditor on behalf of himself and of all other creditors of the associa- tion, against the shareholders thereof, in any court of the United States having original jurisdiction in equity for the district in which such association may have been located or established. " § 3. — That whenever any association shall have been or shall be placed in the hands of a receiver, as provided in section fifty-two hundred and thirty-four and other sections of the Eevised Statutes of the United States, and when, as provided in section fifty-two hun- dred and thirty-six thereof, the Comptroller of the Currency shall have paid to each and every creditor of such association, not includ- ing shareholders who are creditors of such association, whose claim or claims as such creditor shall have been proved or allowed as therein prescribed, the full amount of such claims, and all expenses of the receivership and the redemption of the circulating notes of such association shall have been provided for by depositing lawful money of the United States with the Treasurer of the United States, the Comptroller of the Currency shall call a meeting of the shareholders of such association by giving notice thereof for thirty days in a newspaper published in the town, city, or county where the business of such association was carried on, or if no newspaper is there pub- lished, in the newspaper published nearest thereto. At such meeting the shareholders shall determine whether the receiver shall be con- tinued and shall wind up the affairs of such association, or whether an agent shall be elected for that purpose, and in so determining the said shareholders shall vote by ballot, in person or by proxy, each share of stock entitling the holder to one vote, and the majority of the stock in value and number of shares shall be necessary to de- termine whether the said receiver shall be continued, or whether an agent shall be elected. In case such majority shall determine that the said receiver shall be continued, the said receiver shall thereupon proceed with the execution of his trust, and shall sell, dispose of, or otherwise collect the assets of the said association, and shall possess all the powers and authority, and be subject to all the duties and liabilities originally conferred or imposed upon him by his appoint- ment as such receiver, so far as the same remain applicable. In case the said meeting shall, by the vote of a majority of the stock in value and number of shares, determine that an agent shall be elected, T18 THE NATIOITAL BAITKING LAW. the said meeting shall thereupon, prcx;eed to elect an agent, voting by ballot, in person or by proxy, each share of stock entitling the holder to one vote, and the person who shall receive votes representing at least a majority of stock in value and number shall be declared the agent for the purposes hereinafter provided ; and whenever any of the shareholders of the association shall, after the election of such agent, have executed and filed a bond to the satisfaction of the Comptroller of the Currency, conditioned for the payment and discharge in full of each and every claim that may thereafter be proved and allowed by and before a competent court, and for the faithful performance of all and singular the duties of such trust, the Comptroller and the re- ceiver shall thereupon transfer and deliver to such agent all the un- divided or uncollected or other assets of such association then remain- ing in the hands or subject to the order and control of said Comp- troller and said receiver, or either of them ; and for this purpose said Comptroller and said receiver are hereby severally empowered and directed to execute any deed, assignment, transfer, or other instru- ment in writing that may be necessary and proper; and upon the execution and delivery of such instrument to the said agent the said Comptroller and the said receiver shall by virtue of this act be dis- charged from any and all liabilities to such association and to each and all the creditors and shareholders thereof. Upon receiving such deed, assignment, transfer, or other instrument the person elected such agent shall hold, control, and dispose of the assets and property of such association which he may receive under the terms hereof for the benefit of the shareholders of such association, and he may in his own name, or in the name of such association, sue and be sued and do all other lawful acts and things necessary to finally settle and distribute the assets and property in his hands, and may sell, com- promise, or compound the debts due to such association, with the consent and approval of the circuit or district court of the United States for the district where the business of such association was carried on, and shall at the conclusion of his trust render to such district or circuit court a full account of all his proceedings, receipts, and expenditures as such agent, which court shall, upon due notice, settle and adjust such acacounts and discharge said agent and the sureties upon said bond. And in case any such agent so elected shall THE NATIOBTAIi BANKING LAW. 7 Id" refuse to serve, or die, resign, or be removed, any shareholder may call a meeting of the shareholders of such association in the town, city, or village where the business of the said association was carried on, by giving notice thereof for thirty days in a newspaper published in said town, city, or village, or if no newspaper is there published, in the newspaper published nearest thereto, at which meeting the shareholders shall elect an agent, voting by ballot, in person or by proxy, each share of stock entitling the holder to one vote, and when such agent shall have received votes representing at least a majority of the stock in value and number of shares, and shall have executed a bond to the shareholders conditioned for the faithful performance of his duties, in the penalty fixed by the shareholders at said meet- ing, with two sureties, to be approved by a judge of a court of record, and file said bond in the office of the clerk of a court of record in the county wherb the business of said association was carried on, he shall have all the rights, powers, and duties of the agent first elected as hereinbefore provided. At any meeting held as hereinbefore pro- vided administrators or executorsi of deceased shareholders may act and sign as the decedent might have done if living, and guardians of minors and trustees of other persons may so act and sign for their ward or wards or cestui que trust. The proceeds of the assets or property of any such association which may be undistributed at the time of such meeting or may be subsequently received shall be dis- tributed as follows: " First. To pay the expenses of the execution of the trust to the date of such payment. " Second. To repay any amount or amounts which have been paid- in by any shareholder or shareholders of such association upon and by reason of any and all assessments made upon the stock of such association by the order of the Comptroller of the Currency in ac- cordance with the provisions of the Statutes of the United States; and, " Third. The balance ratably among such stockholders, in propor- tion to the number of shares held and ovsTied by each. Such distribu- tion shall be made from time to time as the proceeds shall be received and as shall be deemed advisable by the said Comptroller or said agent." Amended March 2, 1897. 720 THE NATIONAL BANKING LAW. § 4. That the last dause of section fifty-two hundred and five of said statutes is hereby amended by adding to the said section the fol- lowing proviso: "And provided. That if any shareholder or shareholders of such bank shall neglect or refuse, after three months' notice, to pay the assessment, as provided in this section, it shall be the duty of the board of directors to cause a sufiicient amount of the capital stock of such shareholder or shareholders to be sold at public auction (after thirty days' notice shall be given by posting such notice of sale in the office of the bank, and by publishing such notice in a newspaper of the city or town in which the bank is located, or in a newspaper published nearest thereto), to make good the deficiency; and the balance, if any, shall be returned to such delinquent shareholder or shareholders." (Incorporated in text of section 5205 [U. S. Comp. Stat. 1901, p. 3496].) § 5. That all United States officers charged with the receipt or disbursement of public moneys, and all officers of national banks shall stamp or write in plain letters the word " counterfeit," " altered," or " worthless," upon all fraudulent notes issued in the form of, and intended to circulate as money, which shall be presented at their places of business ; and if such officers shall wrongfully stamp any genuine note of the United States, or of the national banks, they shall upon presentation redeem such notes at the face-value thereof. § 6. That all savings banks or savings and trust companies organ- ized under authority of any act of Congress shall be, and are hereby, required to make, to the Comptroller of the Currenqjr, and publish, all the reports which national banking associations are required to make and publish under the provisions of section fifty-two hundred and eleven, fifty-two hundred and twelve and fifty-two hundred and thirteen of the Revised Statutes, and shall be subject to the same penalties for failure to make or publish such reports as are therein provided; which penalties may be collected by suit before any court of the United States in the district in which said savings banks or savings and trust companies may be located. And all savings or other banks now organized, or which shall hereafter be organized, in the District of Columbia, under any act of Congress, which shall have THE NATIONAL BANKING LAW. 721 capital stook paid up in whole or in part, shall be subject to all the provisions of the Revised Statutes, and of all acts of Congress appli- cable to national banking associations so far as the same may be applicable to such savings or other banks, provided that such savings banks now established shall not be required to have a paid-in capital exceeding one hundred thousand dollars. Approved June 30, 1876. Extract from an Act approved March 1, 1879. Abating semi-annual duty of insolvent banks. That whenever and after any bank has ceased to do business by reason of insolvency or bankruptcy, no tax shall be assessed or col- lected, or paid into the Treasury of the United States, on account of such bank, which shall diminish the assets thereof necessary for the full payment of all its depositors ; and such tax shall be abated from such National banks as are found by the Comptroller of the Currency to be insolvent ; and the Commissioner of Internal Revenue, when the facts shall so appear to him is authorized to remit so much of said tax against insolvent State and savings banks as shall be found to affect the claims of their depositors. See Johnson v. U. S., 17 Ct. of Claims Rep. Act OB February 14, 1880. An act authorizing the conversion of national gold banks. Be it enacted hy the Senaie and Howse of Representatives of ihe United States of Americm vn Congress assembled. That any national gold bank organized under the provisions of the laws of the United States may, in the maimer and subject to the provisions prescribed by section fifty-one hundred and fifty-four of the Revised Statutes of the United States, for the conversion of banks incorporated under the laws of any State, cease to be a gold bank, and become such an association as is authorized by section fifty-one hundred and thirty- three, for carrying on the business of banking, and shall have the same powers and privileges, and shall be subject to the same duties, responsibilities and rules, in all respects, as are by law prescribed for such associations : Provided, That all certificates of organization 46 722 THE NATIONAL BANKING LAW. which, shall be issued under this act shall bear the date of the original organization of each bank respectively as a gold bank. Approved February 14, 1880. Act of Febeuakt 26, 1881. An act defining the verification of returns of national banks. Be it enacted iy the Senate and House of Bepresentatives of the United States of America in Congress aissemhled, That the oath or affirmation required by section fifty-two hundred and eleven of the Revised Statutes, verifying the returns made by national banks to the Comptroller of the Currency, when taken before a notary public properly authorized and commissioned by the State in which such notary resides and the bank is located, or any other officer having an official seal, authorized in such State to administer oaths, shall be a sufficient verification as contemplated by said section fifty-two hun- dred and eleven. Provided, That the officer administering the oath is not an officer of the bank. Approved February 26, 1881. Act of July 12, 1882. An act to enable national banking associations to extend their cor- porate existence, and for other purposes. Be it enaxied hy the Senate and House of Representatives of the United States of America in Congress assembled. That any national banking association organized under the acts of February twenty- fifth, eighteen hundred and sixty-three, June third, eighteen hundred and sixty-four, and February fourteenth, eighteen hundred and eighty, or under sections fifty-one hundred and thirty-three, fifty-one hundred and thirty-four, fifty-one hundred and thirty-five, fifty-one hundred and thirty-six and fifty-one hundred and fifty-four of the Revised Statutes of the United States, may, at any time within the two years next previous to the date of the expiration of its corporate existence under present law, and with the approval of the Comp- troller of the Currency, to be granted as hereinafter provided, extend its period of succession by amending its articles of association for a period of not more than twenty years from the expiration of the per- THE NATIONAL BANKIITG LAW. 723 iod of succession named in said articles of association and shall have succession for such extended period, unless sooner, dissolved by the act of shareholders owning two-thirds of its stock, or unless its franchise becomes forfeited by some violation of law, or unless hereafter modi- fied or repealed. See Act of April 12, 1902, following this act. § 2. That such amendment of said articles of association shall be authorized by the consent in writing of shareholders owning not less than two-thirds of the capital stock of the association; and the board of directors shall cause such consent to be certified under the seal of the association, by its president or cashier, to the Comptroller of the Currency, accompanied by an application made by the presi- dent or cashier for the approval of the amended articles of associa- tion by the Comptroller; and such amended articles of association shall not be valid until the Comptroller shall give to such association a certificate under his hand and seal that the association has complied with all the provisions required to be complied with, and is authorized to have succession for the extended period named in the amended article of association. § 3. That upon the receipt of the application and certificate of the association provided for in the preceding section, the Comptroller of the Currency shall cause a special examination to be made, at the expense of the association, to determine its condition; and if, after such examination or otherwise, it appears to him that said association is in a satisfactory condition, he shall grant his certificate of approval provided for in the preceding section, or if it appears that the con- dition of said association is not satisfactory, he shall withhold such certificate of approval. § 4. That any association so extending the period of its succession shall continue to enjoy all the rights and privileges and immunities granted and shall continue to be subject to all the duties, liabilities and restrictions imposed by the Revised Statutes of the United States and other acts having reference to national banking associations, and it shall continue to be in all respects the identical association it was before the extension of its period of succession: Provided, however. That the jurisdiction for suits hereafter brought by or against any T24 THE WATIONAl BANKING LAW. association established under any law. providing for national banking associations, except suits between them and the United States, or its officers and agents, shall be the same as, and not other than, the juris- diction for suits by or against bants not organized under any law of the United States which do or might do banking business where such national banking associations may be doing business when such suits may be begun. And all laws and parts of laws of the United States inconsistent with this proviso be, and the same are hereby, repealed. § 5. That when any national banking association has amended its articles of association as provided in this act, and the Comptroller has granted his certificate of approval, any shareholder not assenting to such amendment may give notice in writing to the directors, within thirty days from the date of the certificate of approvel, of his desire to withdraw from said association, in which case he shall be entitled to receive from said banking association the value of the shares so held by him, to be ascertained by an appraisal made by a committee of three persons, one to be selected by such shareholder, one by the directors, and the third by the first two ; and in case the value so fixed shall not be satisfactory to any such shareholder, he may appeal to the Comptroller of the Currency, who shall cause a reappraisal to be made, which shall be final and binding ; and if said reappraisal shall exceed the value fixed by said committee, the bank shall pay the ex- penses of said reappraisal, and otherwise the appellant shall pay said expenses ; and the value so ascertained and determined shall be deemed to be a debt due, and be forthwith paid, to said shareholder, from said bank; and the shares so surrendered and appraised shall, after due notice, be sold at public sale, within thirty days after the final appraisal provided in this section: Provided, That in the organiza- tion of any banking association intended to replace any existing bank- ing association, and retaining the name thereof, the holder of stock in the expiring association shall be entitled to preference in the allot- ment of the shares of the new association in proportion to the number of shares held by them respectively in the expiring association. § 6. That the circulating notes of any association so extending the period of its succession, which shall have been issued to it prior to THE NATIONAL BANKING LAW. Y25 such extension shall he redeemed at the Treasury of the United States, as provided in section three of the act of June 20th, eighteen hundred and seventy-four, entitled "An act fixing the amount of United States notes, providing for redistrihution of national bank currency; and for other purposes," and such notes when redeemed shall be forwarded to the Comptroller of tbe Currency, and de- stroyed, as now provided by law ; and at the end of three years from the date of the extension of the corporate existence of each bank the association so extended shall deposit lawful money witb the Treas- urer of the United States sufficient to redeem tbe remainder of the oireulation which was outstanding at the date of its extension, as provided in sections fifty-two hundred and twenty-two, fifty-two hun- dred and twenty-four, and fifty-two hundred and twenty-five of the Revised Statutes; and any gain that may arise from the failure to present such circulating notes for redemption shall inure to the bene- fit of the United States; and from time to time, as such notes are redeemed or lawful money deposited therefor as provided herein, new circulating notes shall be issued as provided by this act, bearing such devices, to be approved by the Secretary of the Treasury, as shall make them readily distinguishable from tbe circulating notes here- tofore issued: Provided, however, That each banking association which shall obtain the benefit of this act shall reimburse to the Treas- ury the cost of preparing the plate or plates for such new circulating notes as shall be issued to it § 7. That national banking associations whose corporate existence has expired or shall hereafter expire, and which do not avail them- selves of the provisions of this act, shall be required to comply vsdtb the provisions of sections fifty-two hundred and twenty-one and fifty- two hundred and twenty-two of the Revised Statutes in the same manner as if the shareholders had voted to go into liquidation, as provided in section fifty-two hundred and twenty of tbe Revised Statutes ; and the provisions of section fifty-two hundred and twenty- four and fifty-two hundred and twenty-five of the Revised Statutes shall also be applicable to such associations, except as modified by this act; and the francbise of such associations is hereby extended for the sole purpose of liquidating their affairs until such affairs are finally closed. 726 THE NATIONAL BANKING LAW. § 8. That national banks now organized or hereafter organized, having a capital of one hundred and fifty thousand dollars or less, shall not be required to keep on deposit or deposit with the Treasurer of the United States United States bonds in excess of one-fourth of their capital stock as security for their circulating notes, but such banks shall keep on deposit or deposit with the Treasurer of the United States the amount of bonds as herein required; and such of those banks having on deposit bonds in excess of that amount are au- thorized to reduce their circulation by the deposit of lawful money as provided by law: Provided, That the amount of such circulating notes shall not in any case exceed ninety per centum of the par value of the bonds deposited as herein provided: Provided further. That the national banks which shall hereafter make deposits of lawful money for the retirement in full of their circulation shall, at the time of their deposit, be assessed, for the cost of transporting and redeem- ing their notes then outstanding, a sum equal to the average cost of the redemption of national ban^-notes during the preceding year, and shall thereupon pay such assessment; and all national banks which have heretofore made or shall hereafter make deposits of law- ful money for the reduction of their circulation, shall be assessed, and shall pay an assessment in the manner specified in section three of the act approved June twentieth, eighteen hundred and seventy- four, for the cost of transporting and redeeming their notes redeemed from such deposits subsequently to June thirtieth, eighteen hun- dred and eighty-one. " § 9. That any national banking association desiring to withdraw its circulating notes, secured by deposit of United States bonds in the manner provided in section four of the act approved June twentieth, eighteen hundred and seventy-four, is hereby authorized for that purpose to deposit lawful money with the Treasurer of the United States and, with the consent of the Comptroller of the Currency and the approval of the Secretary of the Treasury, to withdraw a pro- portionate amount of bonds held as security for its circulating notes in the order of such deposits: Provided, That not more than nine millions of dollars of lawful money shall be so deposited during any calendar month for this purpose. " Any national banking association desiring to withdraw any of ita THE WATIONAL BANKING LAW. 727 circulating notes, secured lay the deposit of securities other than bonds of the United States, may make such withdrawal at any time in like manner and effect by the deposit of lawful money or national bank notes with the Treasurer of the United States, and upon such deposit a porportionate share of the securities so deposited may be with- drawn: Provided, That the deposits under this section to retire notes secured by the deposit of securities other than bonds of the United States shall not be covered into the Treasury, as required by section six of an act entitled ' An Act directing the purchaser of silver bullion and the issue of Treasury notes thereon, and for other purposes,' approved July fourteenth, eighteen hundred and ninety, but shall be retained in the Treasury for the purpose of redeeming the notes of the bank making such deposit." (As amended May 30, 1908.) See Act of March 14, 1900, post; section 5167, ante. § 10. That upon a deposit of bonds as described by sections fifty- one hundred and fifty-nine and fifty-one hundred and sixty, except as modified by section four of an act entitled " An act fixing the amount of United States notes, providing for a redistribution of the national bank currency, and for other purposes," approved June twentieth, eighteen hundred and seventy-four, and as modified by section eight of this act, the association making the same shall be entitled to receive from the Comptroller of the Ctirreney circulating notes of different denominations, in blank, registered and counter- signed as provided by law, equal in amount to ninety per centum of the current market value not exceeding par, of the United States bonds so transferred and delivered, and at no time shall the total amount of such notes issued to any such association exceed ninety per centum of the amount at such time actually paid in of its capital stock; and the provisions of section fifty-one hundred and seventy- one and fifty-one hundred and seventy-six of the Revised Statutes are hereby repealed. § 11. That the Secretary of the Treasury is hereby authorized to receive at the Treasury any bonds of the United States bearing three and a half per centum interestj and to issue in exchange therefor an equal amount of registered bonds of the United States of the denomi- nations of fifty, one hundred, five hundred, one thousand and ten 728 THE NATIONAL BANKING LAW. thousand dollars, of sucli form as lie may prescribe, bearing interest at the rate of three per centum per annum, payable quarterly at the Treasury of the TJiiited States. Such bonds shall be exempt from all taxation by or under State authority, and be payable at the pleasure of the United States; Provided, That the bonds herein au- thorized shall not be called in and paid so long as any bonds of the United States heretofore issued bearing a higher rate of interest than three per centum, and which shall be redeemable at the pleasure of the United States, shall be outstanding and uncalled. The last of the said bonds originally issued under this act, and their substitutes, shall be first called in, and this order of payment shall be followed until all shall have been paid. § 12. That the Secretary of the Treasury is authorized and di- rected to receive deposits of gold coin with the Treasurer or assistant treasurers of the United States, in sums not less than twenty dollars, and to issue certificates therefor in denominations of not less than twenty dollars each, corresponding with the denominations of United States notes. The coin deposited for or representing the certifi- cates of deposit shall be retained in the Treasury for the payment of the same on demand. Said certificates shall be receivable for cus- toms, taxes and all public dues, and when so received may be re- issued; and such certificates, as also silver certificates, when held by any national banking association, shall be counted as part of its law- ful reserve; and no national banking association shall be a member of any clearing-house in which such certificates shall not be receivable in the settlement of clearing-house balances: Provided, That the Secretary of the Treasury shall suspend the issue of such gold certifi- cates whenever the amount of gold coin and gold bullion in the Treasury reserved for the redemption of United States notes falls below one hundred millions of dollars ; and the provisions of section fifty-two hundred and seven of the Revised Statutes shall be appli- cable to the certificates herein authorized and directed to be issued. § 13. That any officer, clerk or agent of any national banking association who shall willfully violate the provisions of an act en- titled " An act in reference to certifying checks by national banks,'* approved March third, eighteen hundred and sixty-nine, being section fifty-two hundred and eight of the Eevised Statutes of the United THE NATIONAL BANKING LAW. 729' States, or who shall resort to any device, or receive any fictitious obligation, direct or collateral, in order to evade the provisions thereof, or who shall certify checks before the amount thereof shall have been regularly entered to the credit of the dealer upon the books of the banking association, shall be deemed guilty of a misdemeanor, and shall, on conviction thereof in any circuit or district court of the United States, be fined not more than five thousand dollars, or shall be imprisoned not more than five years, or both, in the discretion of the court. § 14. That Congress may at any time amend, alter, or repeal this act and the acts of which this is amendatory. Approved July 12, 1882. See section 12, Act of March 14, 1900, repealing inconsistent part of foregoing^ post. The act of April 12, 1902, affecting section 1 of foregoing Act, extension of corporate existence, provides as follows * * * That the Comptroller of the Currency is hereby authorized in the manner provided by, and under the conditions and limitations of the act of July 12, 1882, to extend for a further period of twenty years the charter of any national banking association extended under said act which shall desire to continue its existence after the expiration of its charter. Act of March 3, 1883. hxteacts from An act to reduce internal revenue taxation and for other purposes. Be it enacted hy the Senate and House of Bepresentatwes of the United States of America in Congress assembled. That the taxes hereinafter specified imposed by the laws now in force be, and the same are hereby repealed, as hereinafter provided, namely: On capital and deposits of banks, bankers and national banking associa- tions, except such taxes as are now due and payable ; and on and after the first day of July, eighteen hundred and eighty-three, the stamp tax on bank checks, drafts, orders and vouchers. * * 4f- * * * *■ Approved March 3, 1883. 730 the national banking law. Act of Maech 29, 1886. An aet additional to an act entitled " An act to provide a national currency secured by a pledge of United States bonds, and to pro- vide for the circulation and redemption thereof," passed June 3, 1864. Be it enacted hy the Sencde wnd House of Bepresentatwes of the United States of America in Congress assembled. That whenever the receiver of any national bank duly appointed by the Comptroller of the Currency, and who shall have duly qualified and entered upon the discharge of his trust, shall find it in his opinion necessary, in order to fully protect and benefit his said trust, to the extent of any and all equities that such trust may have in any property, real or personal, by reason of any bond, mortgage, assignment, or other proper legal ■claims attaching thereto, and which said property is to be sold under any execution, decree of foreclosure, or proper order of any court of jurisdiction, he may certify the facts in the case together with his opinion as to the value of the property to be sold, and the value of the equity his said trust may have in the same, to the Comptroller of the Currency, together with a request for the right and authority to use and employ so much of the money of said trust as may be neces- sary to purchase such property at such sale. By the concluding portion of section 5234 of the National Bank Act, the receiver of a national bank was required to pay over all money collected by him to the Treasurer of the United States subject to the order of the Comptroller. § 2. That such request, if approved by the Comptroller of the Currency, shall be, together with the certificate of facts in the case, and his recommendation as to the amount of money which, in his judgment, should be so used and employed, submitted to the Secre- tary of the Treasury ; and if the same shall likewise be approved by liim, the request shall be by the Comptroller of the Currency allowed and notice thereof, with copies of the request, certificate of facts, and indorsements of approvals, shall be filed with the Treasurer of the United States. § 3. That whenever any such request shall be allowed as herein- before provided, the said Comptroller of the Currency shall be, and is, empowered to draw upon and from such funds of any such trust THE NATIONAL BANKING LAW. 731 as may be deposited with the Treasurer of the United States for the benefit of the bank in interest to the amount as may be recommended and allowed, and for the purpose for which such allowance was made : Provided, however. That all payments to be made for or on account of the purchase of any such property and under any such allowance shall be made by the Comptroller of the Currency direct, with the approval of the Secretary of the Treasury, for such purpose only and in such manner as he may determine and order. Approved, March 29, 1886. Act of Mat 1, 1886. An act to enable national banking associations to increase their capi- tal stock and to change their names or locations. Be it enacted hy the Senate and House of Bepresentatives of the United States of America in Congress assembled. That any nation's banking association may, with the a;pproval of the Comptroller of the Currency, by the vote of shareholders owning two-thirds of the stock of such association, increase its capital stock, in accordance with existing laws, to any sum approved by the said Comptroller, notwith- standing the limit fixed in its original articles of association and de- termined by said Comptroller; and no increase of the capital stock of any national banking association either within or beyond the limit fixed in its original articles of association shaU be maxie except in the maner herein provided. § 2. That any national banking association may change its name or the place where its operations of discount and deposit are to be carried on, to any other place within the same State, not more than thirty miles distant, with the approval of the Comptroller of the Currency, by the vote of shareholders owning two-thirds of the stock of such association. A duly authenticated notice of the vote and of the new name or location selected shall be sent to the office of Comp- troller of the Currency; but no change of name or location shall be valid until the Comptroller shall have issued his certificate of ap- proval of the same. § 3. That all debts, liabilities, rights, provisions, and powers of the association under its old name shall devolve upon and inure to the association under its new name. 732 THE NATIONAL BAITKING LAW. § 4. That nothing in this act contained shall be so construed as in any manner to release any national banking association under its old name or at its old location from any liability, or affect any action or proceeding in law in which said association may be or become a party interested. Approved, May 1, 1886. Notice should be taken «f the final clause of the first section, because it deprives the board of directors of idle power to increase capital, even when this power is granted in the articles of association. As repeals by implication are not favored, and as the Act of 1886 is not in con- flict or inconsistent with second and third requirements under section 5142, U. S. K. S., U. S. Comp. Stat. 1901, p. 3462, " that the whole amount of the pro- posed increase shall be paid in, and that the Comptroller, by his certificate specifying the amount of such increase of capital stock, shall approve thereof, and certify to the fact of its payment," it follows that such payment and cer- tification by the Comptroller are still required under this act (1886) in order to make the increase of capital stock legal. Witners v. Armstrong, 37 Fed. Rep. 508. If},,- ^ . Act of July 30, 1886. extract feom An act to prohibit the passage of local or special laws in the Terri- tories of the United States to limit Territorial indebtedness, or for ether purposes. Be it enacted hy the Senate and House of Representatives of the United States of America in Congress assembled, * * * § 5. That section eighteen hundred and eighty-nine, title twenty- three of the Revised Statutes of the United States be amended to read as follows : " The legislative assemblies of the several Territories shall not grant private charters or special privileges, but they may, by general incorporation acts, permit persons to associate themselves together as bodies corporate for mining, manufacturing, and other industrial pursuits, and for conducting the business of insurance, banks of dis- count and deposit (but not of issue), loan, trust, and guarantee asso- ciations, and for the construction or operation of railroads, wagon- roads, irrigating ditches, and the colonization and improvement of lands in connection therewith, or for colleges, seminaries, churches, THE NATIONAL BANKING LA"W. 733 libraries, or any other benevolent, charitable, or scientific associa- tion." Approved July 30, 1886. Act of March 3, 1887. An act to amend sections 5191 and 5192 of Kevised Statutes of United States, and for other purposes. Be it enacted hy the Senate and House of Representatives of the United States of America in Congress assembled. That whenever three-fourths in number of the national banks located in any city of the United States having a population of fifty thousand people, shall make application to the Comptroller of the Currency, in writing, asking that the name of the city in which such banks are located shall be added to the cities named in sections fifty-one hundred and ninety- one and fifty-one hundred and ninety-two of the Revised Statutes, the Comptroller shall have authority to grant such request, and every bank located in such city shall at all times thereafter have on hand, in lawful money of the United States, an amount equal to at least twenty-five per centum of its deposits, as provided in sections fifty- one hundred and ninety-one and fifty-one hundred and ninety-five of the Revised Statutes. § 2. That whenever three-fourths in number of the national banks located in any city of the United States having a population of two hundred thousand people shall make application to the Comptroller ■of the Currency, in writing, asking that such city may be a central reserve city, like the city of l^ew York, in which onef-half of the law- ful money reserve of the national banks located in other reserve cities may be deposited, as provided in section fifty-one hundred and ninety- five of the Revised Statutes, the Comptroller shall have authority, with the approval of the Secretary of the Treasury, to grant such request, and every bank located in such city shall at all times there- after have on hand, in lawful money of the United States, twenty- :five per centum of its deposits, as provided in section fifty-one hun- dred and ninety-one of the Revised Statutes. In accordance with the amendment Chicago and St. Louis have been made cen- tral reserve cities. The application should be made the same as in the case of 'the designation of a reserve city. 734 THE NATIONAL BANKING LAW. § 3. That seotion three of the act of January fourteenth, eighteen hundred and seventy-five, entitled " An act to provide for the resump- tion of specie payments," be, and the same is hereby, amended by adding, after the vt^ords " New York," the words " and the city of San Francisco, California." Approved March 3, 1887. See Act of March 3, 1903, post. This amendment permits legal-tender notes presented in sums of not less than fifty dollars at the sub-treasury at San Francisco to be redeemed there in gold or silver coin. See section 12, Act of June 12, 1882, ante. See Harland v. United Lines Tel. Co., 6 L. E. A. 252, 40 Fed. Rep. 308. Act of August 13, 1888. An act to correct the enrolment of an act approved March 3, 1887, entitled " An act to amend sections one, two, three and ten of an act to determine the jurisdiction of the circuit courts of the United States, and to regulate the removal of causes from the State courts, and for other purposes, approved March 3, 1875." Be it enacted hy the Semite and House of Representaiwes of the United States of America in Congress assembled, * * * § 4. That all National banking associations, established under the laws of the United States shall, for the purposes of all actions by or against them, real, personal, or mixed, and all suits in equity, be deemed citizens of the States in which they are respectively located ; and in such cases the circuit and district courts shall not have juris- diction other than such as they would have in cases between indi- vidual citizens of the same State. The provisions of this section shall not be held to affect the juris- diction of the courts of the United States in cases commenced by the United States or by direction of any officer thereof, or cases for wind- ing up the affairs of any such bank. Approved August 13, 1888. See proviso to section 4, Act of July 12, 1882; First Nat. Bank v. Forest, 4ft Fed. Eep. 705. Extracts feom Act of Mat 2, 1890. National Banks in Oklahoma. § 17. That the provisions of title sixty-two of the Revised Statutes of the United States relating to National banks, and all amendments THE NATIONAL BANKING LAW. 73 & thereto, shall have the same force and effect in the Territory of Okla- homa as elsewhere in the United States: Provided, That persons otherwise qualified to act as directors shall not be required to have resided in said Territory for more tlian three montlis immediately preceding their election as such. National Banking Laws Extended to Indian Territory. § 31. * * * Tliat all laws relating to national banking associa- tions shall have the same force and effect in Indian Territory as else- where in the United States. (Note. — The Act of May 2, 1890, is "An act to provide a temporary govern- ment for the Territory of Oklahoma, to enlarge the jurisdiction of the United States court in the Indian Territory, and for other purposes." Sections 17 and 31 are the only sections which relate to national banks.) EXTEACTS BTtOM AcT OF JuLY 14, 1890. Deposits to Pay Circulating JSTotes to Be Covered into Treasury. § 6. That upon the passage of this act the balances standing with the Treasurer of the United States to the respective credits of Na- tional banks for deposits made to redeem the circulating notes of such banks, and all deposits thereafter received for like purpose, shall be covered into the Treasury as a miscellaneous receipt, and the Treas- urer of the United States shall redeem from the general cash in the Treasury the circulating notes of said banks which may come into his possession subject to redemption, and upon the certificate of the Comptroller of the Currency that sucb notes have been received by him and that they have been destroyed and that no new notes will be issued in their place, reimbursement of their amount shall be made to the Treasurer, under such, regulations as the Secretary of the Treasury may prescribe, from an appropriation hereby created, to be known as National bank notes Hedemption account, but the pro- visions of this act shall not apply to the deposits received under' section three of the act of June twentieth, eighteen hundred and seventy-four, requiring every National bank to keep in lawful money with the Treasurer of the United States a sum equal to five per centum of its circulation, to be held and used for the redemption of its circulating notes; and the balance remaining of the deposits so 736 THE WATIOBTAL BANKING LAW. covered stall, at the close of each month, be reported on the monthly public debt statement, as debt of the United States bearing no interest See Act of March 14, 1900, post. Act of July 28, 1892. An act to amend the National Bank Act in providing for the redemp- tion of national bank-notes stolen from or lost by banks of issue. Be it enacted hy the Senate cmd House of Bepresentatwes of the United States of America i/n Congress assembled, Tliat the provisions of the Revised Statutes of the United States, providing for the re- demption of national bank-notes, shall apply to all national bank- notes that have been or may be issued to, or received by, any national bank, notwithstanding such notes may have been lost by or stolen from the bank and put in circulation without the signature or upon the forged signature of the president or vice-president and cashier. Approved July 28, 1892. Act of Au&ust 13, 1894. Taxation of Legal Tender Notes and National Bank Notes. Approved August 13, 1894. § 1. That circulating notes of National banking associations and United States legal-tender notes and other notes and certificates of the United States, payable on demand and circulating or intended to circulate as cuirency, and gold, silver, or other coin shall be subject to taxation as money on hand or on deposit under the laws of any State or Territory: Provided, That any such taxation shall be ex- ercised in the same manner and at the same rate that any such State or Territory shall tax money or currency circulating as money within its jurisdiction. § 2. That the provisions of this act shall not be deemed or held to ■change existing laws in respect of the taxation of National banking associations. (Note. — Act of June 13, 1898, was the War Revenue Act, and its repeal took •effect July 1, 1902, pursuant to Act of April 12, 1902.) THE NATIONAL BANKING LAW. 737 OiTBREiircT Act of March 14, 1900. An act to define and fix the standard of value, to maintain the parity of all forms of money issued or coined by the United States, to re- fund the paablic debt, and for other purposes. Be it enacted by the Senate and House of Bepresentcdwes of the United States of Americm in Congress aissemhled. That the dollar consisting of twenty-five and eight-tenths grains of gold nine-tenths fine, as established by section thirty-five hundred and eleven of the Revised States of the United States [U. S. Comp. Stat. 1901, p. 2343], shall be the standard unit of value, and all forms of money issued or coined by the United States shall be maintained at a parity of value with this standard, and it shall be the duty of the Secretary of the Treasury to maintain such parity. § 2. That United States notes, and Treasury notes issued under the Act of July fourteenth, eighteen hundred and ninety, when pre- sented to the Treasury for redemption, shall be redeemed in gold coin of the standard fixed in the first section of this act, and in order to secure the prompt and certain redemption of such notes as herein provided it shall be the duty of the Secretary of the Treasury to set apart in the Treasury a reserve fund of one hundred and fifty million dollars in gold coin and bullion, which fund shall be used for such redemption purposes only, and whenever and as often as any of said notes shall be redeemed from said fund it shall be the duty of the Secretary of the Treasury to use said notes so redeemed to restore and maintain such reserve fund in the manner following, to wit: rjfirst, by exchanging the notes so redeemed for any gold coin in the general fund of the Treasury; second, by accepting deposits of gold coin at the Treasury or at any subtreasury in exchange for the United States notes so redeemed; third, by procuring gold coin by the use of said notes, in accordance with the provisions of section thirty-seven hundred of the Eevised Statutes of the United States. [U. S. Comp. Stat. 1901, p. 2480.J If the Secretary of the Treasury is unable to restore and maintain the gold coin in the reserve fund by the foregoing methods, and the amount of such gold coin and bul- lion in said fund shall at any time fall below one hundred million dollars, then it shall be his duty to restore the same to the maximum 47 738 THE WATIOWAL BANKING LAW. sum of one Iraiidred and fifty million dollars by borrowing money on the credit of the United States,, and for the debt thus incurred to issue and sell coupon or registered bonds of the United States, in such form as he may prescribe, in denominations of fifty dollars or any multiple thereof, bearing interest at the rate of not exceeding three per centum per annum, payable quarterly, such bonds to be payable at the pleasure of the United States after one year from the date of their issue, and to be payable, principal and interest, in gold coin of the present standard value, and to be exempt from the payment of all taxes or duties of the United States, as well as from taxation in any form by or under State, municipal, or local authority; and the gold coin received from the sale of said bonds shall first be covered into the general fund of the Treasury and then exchanged, in the manner hereinbefore provided, for an equal amount of the notes redeemed and held for exchange, and the Secretary of the Treasury may, in his discretion, use said notes in exchange for gold, or to purchase or redeem any bonds of the United States, or for any other lawful pui^ pose the public interests may require, except that they shall not be used to meet deficiencies in the current revenues. That United States notes when redeemed in accordance with the provisions of this section shall be reissued, but shall be held in the reserve fund until exchanged for gold, as herein provided ; and the gold coin and buUion in the reserve fund, together with the redeemed notes held for use as provided in this section, shall at no time exceed the maximum sum of one hundred and fifty million dollars. § 3. That nothing contained in this act shall be construed to affect the legal-tender quality as now provided by law of the silver dollar, or of any other money coined or issued by the United States. § 4. That there be established in the Treasury Department, as a part of the office of the Treasurer of the United States, divisions to be designated and known as the division of issue and the division of redemption, to which shall be assigned, respectively, under such regulations as the Secretary of the Treasury may approve, all records and accounts relating to the issue and redemption of United States notes, gold certificates, silver certificates and currency certificates. There shall be transferred from the accounts of the general fund of THE NATIOITAL BANKING LAW. T39 the Treasury of the United States, and taken up on the books of said divisions, respectively, accounts relating to the reserve fund for the redemption of United States notes and Treasury notes, the gold coin held against outstanding gold certificates, the United States notes held against outstanding currency certificates, and the silver dollars held against outstanding silver certificates, and each of the funds repre- sented by these accounts shall be used for the redemption of the notes and certificates for whioh they are respectively pledged, and shall be used for no other purpose, the same being held as trust funds. § 5. That it shall be the duty of the Secretary of the Treasury, as fast as standard silver dollars are coined under the provisions of the acts of July fourteenth, eighteen hundred and ninety, and June thirteenth, eighteen hundred and ninety-eight, from bullion pur- chased under the act of July fourteenth, eighteen hundred and ninety, to retire and cancel an equal amount of Treasury notes whenever re- ceived into the Treasury, either by exchange in accordance with the provisions of this act or in the ordinary course of business, and upon the cancellation of Treasury notes silver certificates shall be issued against the silver dollars so coined. § 6. That the Secretary of the Treasury is hereby authorized and directed to receive deposits of gold coin with the Treasurer or any assistant treasurer of the United States in sums of not less than twenty dollars, and to issue gold certificates therefor in denominations of not less than ten dollars, and the coin so deposited shall be retained in the Treasury and held for the payment of such certificates on demand, and used for no other purpose. Such certificates shall be receivable for customs, taxes, and all public dues, and when so re- ceived may be reissued, and when held by any national banking association may be counted as a part of its lawful reserve : Provided, That whenever and so long as the gold coin and bullion held in the reserve fund in the Treasury for the redemption of United States notes and Treasury notes shall fall and remain below one hundred million dollars the authority to issue certificates as herein provided shall be suspended: And provided further. That whenever and so long as the aggregate amount of United States notes and silver cer- tificates in the general fund of the Treasury shall exceed sixty million 740 THE NATIONAL BANKING LAW. dollars the Secretary of the Treiasury may, in his discretion, suspend the issue of the certificates herein provided for: And provided further. That of the amount of such outstanding certificates one- fourth at least shall be in denominations of fifty dollars or less : And provided further, That the Secretary of the Treasury may, in his discretion, issue such certificates in denominations of ten thousand dollars, payable to order. And section fifty-one hundred and ninety- three of the Revised Statutes of the United States is hereby repealed. (As amended March 4, 1907.) § 7. That hereafter silver certificates shall be issued only of de- nominations of ten dollars and uhder, except that not exceeding in the aggregate ten per centum of the total volume of said certificates, in the discretion of the Secretary of the Treasury, may be issued in denominations of twenty dollars, fifty dollars, and one hundred dollars; and silver certificates of higher denomination than ten dol- lars, except as herein provided, shall, whenever received at the Treas- ury or redeemed, be retired and canceled, and certificates of de- nominations of ten dollars or less shall be substituted therefor, and after such substitution, in whole or in part, a like volume of United States notes of less denomination than ten dollars shall from time to time be retired and canceled, and notes of denominations of ten dollars and upwards shall be reissued in substitution therefor, with like qualities and restrictions as those retired and canceled. § 8. That the Secretary of the Treasury is hereby authorized to use, at his discretion, any silver bullion in the Treasury of the United States purchased under the act of July fourteenth, eighteen hundred and ninety, for coinage into such denominations of subsidiary silver coin as may be necessary to meet the public requirements for such coin : Provided, That the amount of subsidiary silver coin outstand- ing shall not at any time exceed in the aggregate one hundred millions of dollars. Whenever any silver bullion purchased under the act of July fourteenth, eighteen hundred and ninety, shall be used in the coinage of subsidiary silver coin, an amount of Treasury notes issued under said act equal to the cost of the bullion contained in such coin shall be canceled and not reissued. THE NATIONAl BANKING LAW. 741 § 9. That the Secretary of the Treasury is hereby authorized and directed to cause all worn and uncurrent subsidiary silver coin of the United States now in the Treasury, and hereafter received, to be re- coined, and to reimburse the Treasurer of the United States for the difference between the nominal or face value of such coin and the amount the same will produce in new coin from any moneys in the Treasury not otherwise appropriated. § 10. That section fifty-one hundred and thirty-eight of the Re- vised Statutes is hereby amended so as to read as follows : " Section 5138. [U. S. Comp. Stat. 1901, p. 3461.J No associa- tion shall be organized with a less capital than one hundred thousand dollars, except that banks with a capital of not less than fifty thousand dollars may, with the approval of the Secretary of the Treasury, be organized in any place the population of which does not exceed six thousand inhabitants, and except that banks with a capital of not less than twenty-five thousand dollars may, with the sanction of the Secretary of the Treasury, be organized in any place the population of which does not exceed three thousand inhabitants. No association shall be organized in a city the population of which exceeds fifty thousand persons with a capital of less than two hundred thousand dollars." Amendment incorporated in text of § 5138^ presumptive evidence 121 Eesebve (see Lanoful Money Reserve). Kestbictions : loans limited to one-fifth of capital and surplus 121 Ofiicers prohibited from purchasing notes 121 oflScers prohibited from loaning as individuals 121 as to foreign corporations 206 banks restricted to usual place of business 20ff Safe Deposit Business of, by Tbust Company 292 Saie Deposit Companies: definition of 91 incorporation of 339 not less tfian five may incorporate 33^ 778 GENEEAL INDEX. Safe Deposit Compaotes — continued. page may receive goods on storage 339 may receive goods on deposit 339 may let out vaults and safes 339 certificate to be filed with county clerk 339 certificate to be filed with superintendent of banks 339 limit of capital stock 339 contents of certificate of incorporation 339 certificate must be approved and filed 339 capital must he paid in before commencing business 339 directors to be elected annually 340 shall be not less than five nor more than thirteen 340 notice of elections shall be published 340 oflBcers to be elected 340 may be required to give security 341 directors may make by-laws . . . . ^. 340 liability of stockholders for debts 341 remedy for nonpayment of safe rent 341 Savings Bank (see Bamngs Bank Index). Seal: corporation to have 417 ofificial of superintendent 94 Securities : exchange of, with superintendent, can be made 102 examination to he made annually 118 affidavit as to value of 102 to be held by the superintendent in trust 100 excess in deposit may be refunded 182 to be deposited for circulating notes , 179 to be held by superintendent for redemption of notes / 179 banks may receive interest on 182 may be returned when notes are destroyed 194 transfers to be countersigned by state treasurer 202 if not deposited, attorney-general to bring action 100 in banking department, examined by agents 118 safe deposit companies must deposit with superintendent 100 sequestration action for 146, 446 Sign fob Banking Business, Unatjthoeized ,. 208 penalty for violation 208 letter-head, etc 208 as savings bank, unauthorized 278 Special Election of Directors: notice of, to be given 427 how conducted and when held 428 right to vote at, how determined 428 GENERAL INDEX. 779 State Bank: page jChange to national bank , 175 consent of stockholders to 175 certificate of change 178 change from national bank 178 circulating notes of such banks 179 Stock (see also Stock Corporations) : lost certificate of 401, 403 represented by certificates 383 subscriptions to 385 calls on, must be paid before transfer 384 consideration for issue of 387 par value of 395 subscriptions to, when, how paid 386 forfeiture of 386 reissue of, upon forfeiture 386 cancelation of 386 reduction or increase of, when reduced by cancelation 392 meeting therefor 393 preferred and common 391 exchange of preferred for common 391 capital, increase or reduction of number of shares 392, 395 partly paid stock 386, 391 Stock Cobpobation Law 355 nonapplication of, to moneyed corporations 356 Stock Coepoeations : when may acquire stocks and bonds in other corporations 384 when may guarantee bonds of other corporations 359 when officer of, may be director in another 373 dissolution of, voluntary 462 merger of 364 directors of 367 vancancies in board 367 elections of 367 change of number of directors 369 void acts of directors, when 370 directors' liability for unauthorized dividends 370 directors' liability for loans to stockholders 372 stock, transfer of, by indebted stockholder 384 security for officers or employees 373 election, inspectors of 375 books of stock corporations 376 liability of stockholder 388, 389 limitation of 390 powers 356, 359 780 QENEBAL INDEX. Stock Cobpobations — continued. page validating mortgage of 357 annual report, contents 380 false certificates, liability for 381 extension of business of 366 liability of officers, waived, limited to 395 transfers to officers, fraudulent 395 Stockholdebs : executor, administrator, etc., not liable as 390 financial statement to, on their demand 403 liability of, general 162, 163, 388, 389 450 limitation of liability of 169, 390 qualification of, as voters 424 may assent to plan of readjustment of banking corporation 359 may apply to court for examination 112 may apply for receiver 134 of banks, names and residences must be filed 145 of banks, number of shares held by, must be filed 145 submission to, merger agreement 136 approval of merger, by 136, 137 dissenting as to merger, stock of, to be appraised 137 vacancies in board of directors to be filled by 160 foreign corporations, stock book of 379 definition of 91 of trust company, liability 299 SUBSCETPTIONS : proportion to be paid 385 SUPEBINTBNDENT OP BANKS: chief officer of department 94 how appointed 94 term of office 94 not to be interested in any banking corporation 94 salary of 96 oath and bond of 94 official seal of 94 deputy 94 bond of deputy 94 vacancy in office of 95 rooms, etc 95 expenses 96 duties and powers of 97 examinations to be made by 98 may examine under oath 97 ' examination of securities in custody of 98 shall pay unclaimed balances into state treasury 98 GBNBEAL INDEX. 781 SuPEBrNTENDETNT OF BANKS COnttimed. PAGE corporations rnuBt deposit securities with 100 examiners appointed by 94, 99, 102 bulletin of business done 140 examination as to payment of capital 99 may publish report of examiners 102 duty when capital is impaired 103 to take possession of unsound bank 103 shall proceed against delinquent corporations 104 reports to be made to 113 publication of reports by 102, 140 annual report of, to legislature 120 duty to suggest amendment of law 120 reports, presumptive evidence 121 approval of certificate upon incorporation 132 certificate of, in case of foreign corporations 101, 133 to act as attorney for service on foreign corporation 133 service of process on 133 to approve reserve depositories ' 159 deposits of banks with, to secure notes 174 deposits of individual bankers with 174 may issue circulating notes to banks 179 may give power of attorney to collect interest 182 to approve redemption agents 183 certificate of savings bank to be filed by 132 to make examination previous to certificate of organization 99 proceeding against delinquent banks 105 to receive unclaimed deposits when dissolution is effected 98 shall pay such deposits to persons entitled thereto 98 consent of, to change number of directors 369 incumbents of ofSce, since creation 42 supervision judicial, of corporations 444 unclaimed balances 98 SUPEEME COUBT: may direct sale of property 361 may order issue of new in place of lost certificate of stock 401 T. Tax Law, The 507-519 bank shares 508 banks, to report for 508 bank stockholders 507 bank capital 507 corporate stock, taxation 507 corporations paying franchise tax 516 corporations, place of taxation of 507 T82 GEITEEAL INDEX. Tax Law, The — contmued. page collection, as to bank stock 508 exemption from taxation 507, 513, 514, 519 dividends on bank stock, retained 513 foreign bankers 515, 517 franchise tax 514 franchise tax on savings banks 514 franchise tax on trust companies 514 franchise tax on foreign bankers 515 individual banker, assessed 511 interest on tax 518 notice of assessment to banks 512 payment of tax 518 penalties 512-518 place of taxation 507 reports of corporation 512, 516 savings banks, deposits in, exempt 507 stock, owner of certain, exempt 507 stock, value of, appraised 515 trust companies franchise tax 514 Terminating Coepobate Existence op Bank 193 order of court 193 notices therefor 193 Title Insurance: business of, by trust company 292 Title — Short 89 Transfers, Certain to Oppicbes or Stockhoujers, Prohibited 395 transfers void 468 Trust Companies: definition of 90 must deposit securities with superintendent 100 reports to superintendent 113 failure to report 117 deposits of savings banks preferred 277 incorporation of 284 what organization certificate shall state 284 amount of capital stock 284 certificate to be filed with county clerk and superintendent 284 notice of intention to organize to be published 285 certificate to be filed for examination of superintendent 286 certificate of authorization by superintendent 286 capital must be paid in cash before authorization 287 names and residence of stockholders must be filed 287 GENEEAL INDEX. 783. Tbust Companies — continued. page address and number of shares must be filed 29 1 authorized to act as fiscal or transfer agent 291 authorized to receive deposits and to make loans 291 authorized to hold and convey real estate 291 authorized to act as trustee and executor 293 authorized to purchase and sell securities 291 business limited to location named 287 as to receiving on deposit, bonds, mortgages, jewelry, etc 292 may insure titles 292. limitation of powers 287 may exercise powers conferred on individual banks and bankers subject to restrictions 292 not required to give security except as provided 293 must render accounts respecting trusts 298 capital must be invested in certain securities 295 no security required 293 taxation of 514 trust funds preferred 293 moneys received in trust shall be invested in certain securities 293 interest on trust funds 296 affairs to be managed by board of directors 297 number and election of directors 297 directors must hold at least ten shares of stock 297 vacancies in board to be filled by directors 297 stockholders liable for debts 299 directors liable for losses 299 powers of specially chartered companies 291-299" deposits of minors 295 Tbcstees : in case of dissolution 432 powers of 432 Unauthobized Banking Prohibited 203 Unclaimed Balances: to be paid by Superintendent into state treasury gg Unclaimed Dividends and Deposits: banks and bankers must publish annually 129 expenses of publication of 129 savings banks must report to superintendent 129- UsuEY (see Interest). 784: GENEEAL IITDEX. V. Vacancies : page inspectors of election 375 directors 367 Vatjlts : of safe deposit companies 341 volubttaet dissolution of corporation 462 Voters 424 right of, to vote, how determined 425, 428 not to sell vote 424 qualification of members as 424, 428 cumulative voting 425 voting trust agreement 425 challengers 426 SAVINGS BANK INDEX. (See also Genebai Index.) A. AcnoNS (see General Indesc). Advebtising (see Publications) : page as a saTings bank, by banks, etc., forbidden 278 penalty for violation 279 Amount of Deposit (see Deposits). Abtic!LES (see Certificates). Assessments (see Expenses) . on banks for expenses of banking department 277 Attobney-Geneeal : Opinions of: as to unclaimed moneys 283 as to trust funds 234 as to taxing depositors 219 as to the transfer of deposit to representatives of deceased depositor . . . 235 as to salary of deceased oflScer 219 as to investing in unincumbered real estate 250, 251 as to right of Charity Organization Society to receive deposits 280 as to collecting savings in schrools, etc 280 as to maximum deposit to be received 234 as to power to receive special deposits of valuables for hire 270 as to payment of dividends on deposits withdrawn before end of period. 274 as to method of dissolution of bank 282 as to using surplus for payment of dividends 271 as to obtaining security for fidelity of employees 225 as to title insurance 227 as to fire insurance, directors' interest in 227 as to trust company as a savings bank 280 as to national banks advertising " savings " 281 OS to right of savings bank to delegate its powers. . 217 as to power of banks to hold real estate 259, 260 as to meaning of " majority " of board 276 as to number of trustees 222 50 [785] 786 SAVINGS bank: index. AlTOElJET-GrBNEEAL COnti/nued. PAGE as to duties of trustees 361, 264, 266 as to who are eligible to office of trustee 223, 227, 229 as to various indirect interests of trustees 227, 228, 229 as to various investments by savings banks 251, 265 as to trust funds 258 as to word " savings " advertising 214 as to invalid by-laws 223, 224 AUTHOEIZATION : certificate of, to be issued within sixty days 215 to whom to bo issued 215 to be transmitted to county clerks 215 duplicate to be filed in banking department 215 superintendent may refuse to issue 215 county clerks to be notified of refusal to grant 215 when granted, in whom powers are vested 215 Available Fund: may be deposited in bank or trust company, or loaned 260 limitations on loans of 260 deposits of 26(J B. Bank Building ( see Real Estate) : authority to purchase land for 258 Banking Depaetment (see Superintendent) : general expenses of, how paid 277 unclaimed deposits of closed bank and list of depositors to be sent to . . 283 Banks of Discount: available fund may be deposited in 269 excess of daily receipts may be deposited in 269 to give preference to deposits by savings banks in case of insolvency. . . . 277 not to advertise as savings banks 278 Beginning of Business : within one year 220 extending time 220 Bonds (see In/vestments) : Business (see Location) : to be begun within one year after authorization 220 extending time 220 restrictions on methods of 269 SAVINGS BANK INDEX. '787 BY-IiA.-WS : PAGfi trustees empowered to make 223 as printed in pass-books, form part of contract with depositor 229 copy to be transmitted to superintendent 223 c. Ceetificates : of incorporation 215 contents of 215 filing of 215 notice of intention 214 examination by superintendent 211 Of Authorization: issue of, by superintendent 215 to be transmitted to county clerk 215 refusal of superintendent to issue 216 Chaeteeb : of savings bank conformed to this act 281 to be uniform 281 Claimants : to fund, interpleader of 240 Closing Savings Banks (see Insolvent Banhs) : provisions for dissolution 281, 282 unclaimed deposits of 283 voluntary 281 Committees (see Trustees) : I Compensation or Officebs 275 fixed by trustees ; 275 for special services 275 CoSFOBATlONS (see Savings Bank). Costs: in suits for deposits 241 discretionary • 241 chargeable upon deposits 241 788 SAVINGS BANK INDEX. } D. Debts Due Savings Banks: page preferred in insolTencies of other banks 277 Defxnition of Savings Banks 90 Depositobs : trustees may classify 229 number of, to be reported 229 ledger of, to be balanced 229 Deposits (see Unclaimed Deposits) : savings bank may refuse 229 of individuals of more than $3,000 not to be received 229 of corporations not to exceed $5,000 230 of trust fimds or by order of court, of more than $3,000 allowed 230 in action to recover, all claimants to be made parties 240 savings banks authorized to invest 242 of savings banks in insolvent bank preferred 277 investment of, by trustees 242 amount of, may be limited 229 repayment of, trustees to make regulations 229 in trust, what are 236 in trust, when to be paid to beneficiary 237 temporary deposits by savings banks 268 unclaimed, of closing banks, to be transferred to department 284 or minors 236 dissolution, when effected 282 Dividends or Inteeest: trustee to regulate rate of 271 rate of, not to exceed five per cent 271 notice to be given of change of rate of 271 extra, payment of, from surplus 271 t E. EVIDENCE: testimony of wife allowed as in action by husband to recover deposits . . 240 ESAMINATIONS : by superintendent, preliminary 215 expenses of, how to be paid 277 by committee of trustees 276 Exemption (see Toio Law). SAVINGS BANK INDEX. Y89 Expenses (see Salaries) -. page payable from " available fund " 260 compensation of trustees acting as oflScers 225, 275 salaries to be fixed by trustees 224 certain incidental, allowed and prohibited 225 of examination of title to be paid by borrower 269 of banking department, how paid 277 I'EMAT.E (see Married Woman). FoEECLOSUEE (sce Real Estate) : property acquired by, to be sold 258 FOBPEITXrBE: of charters by banks delaying to organize 220 Feanchise Tax (see Tax Law). Fund (see Availahle Fund). G. GotD: dealing in, by savings banks, restricted 269 H. EiSTOBiCAL Sketch: of savings banks 53 I. INCOEPOEATION, CERTIFICATE OF 213 Infant (see Minors). Insolvency of Tecst Company, etc. : savings bank claim preferred 277 Insolvent Savings Banks (see Closing Banks). INSXJBANCE {see Real Estate) . Inteeest {see Dividends) . 790 SAVIlfGS BANK INDEX. iNrajEPLEADEE : PAGE of claimants to fund 240 Investments : authorized, of deposits 242, 269 L. LEGAi Peooeedings (see Actions; General Index). Liabilities (see General Index). Limitations : no statute of, in actions for deposits 241 Loans (see Trustees). LOCATION: to be designated in certificate of organization 214 superintendent to investigate fitness of 214 bank may purchase plot of ground for 258 may be changed with approval of superintendent 253 Lo^T Pass-book 269 M. Maeeied Women (see Deposits) : testimony of, allowed, in action by husband 240 Meetings (see Trustees). Minoes : deposits in trust for, to be paid to, directly 236 deposits by 236 HoBTGAGES (see Real Estate) : investment of deposits in, authorized 243 property acquired by foreclosure of, to be sold 258 property to be insured 269 value of, how estimated, in determining surplus 275 N. Name, Coeporatb: to be set forth in organization certificate 214 SAVIWGS BAWK INDEX. Y91 Notices : pagb of intention to organize, to be published and served 214 of change of rate of interest 273 to creditors and depositors of closing bank 283 0. Ofpicbbs {see Trustees) . Opinions (see Attorney-Oeneral) . Oesanization (see Oertifioates) : notice of intention to organize 214 filing certificate of superintendent 214 P. Pass-books : by-laws to be printed in 269 by-laws printed in, are part of contract with depositor 269 lost 269 payments to be made only on presentation of 269 trustees may make provisions for loss of 269 Penalties (see General Index) : for advertising as savings bank 278 Peesonai Sbottbitt Prohibited: loans not to be on notes, etc 263 Preferences : to be made to savings banks, by insolvent banks 277 Profits (see Dividends). PuBUCAUONs (see Notices). QuoBUM (see Trustees). Rate of Interest (see Dividends). Q. R. V92 SAVIIirGS BANK INDEX. Ke:ai. Estate (see Mortgages) : page investment of deposit in, authorized 243 purchase, holding and conveying of certain, allowed 253 acquired by foreclosure, to be sold 258 mortgaged, to be insured 269 dealings in, restricted 258 for banking houses, limitations 258 EECErvBE (see General Indeai). Regulations (see By-laws) : residence to be named 229 to be posted in bank to be printed in pass-book as to repaying deposits to be made by trustees Eepayment op Deposits 229 Repoet by Supebintendent (see General Index). Reports to Superintendent (see General Index) : reports other than, not required 276 RESTEICnONS ON METHOD Or BUSINESS 269 not to trade 269 not to issue certificates of deposit 269 Saiabies (see Ecopenses). Savinos Banks: definition of 90 historical sketch of early 53 become incorporated, when 216 Seoubitt roB Loans : not prsonalty 268 bond with mortgage. 243 expenses for examining title 243 Sebtice: of notice of intention to organize on other savings banks 214 SAVINGS BANK INDEX. Y93- States : page investments in stock of certain, allowed 242, 260 Stocks {see Investments, Deposits) . Stjpeeintendent op the Banking Depabtment (see General Indeao) : may file or refuse to file organization certificate 21& may extend time within which to begin business 220 to inquire into fitness of organizers 215 issuing of certificate of authorization by 215 refusal of, to authorize 216 SuBPLUS (see Attorney- general, Opinions of) : per cent, of, how determined 275 accumulation of, authorized 275 stocks and bonds, how estimated, in determining surplus 275 T. Taxation (see Tax Law, General Index). Testimony (see Evideruie, Witness). Tbust Companies (see Banks of Discount, General Index). Trustees and Othee Ofpioees; meetings of 220, 223 quorum of 220, 223 have power to manage business and elect officers 220 those named in authorization certificate shall act as first 220 only residents of the state eligible as 221 judgments against . . ; 221 insolvency of 221 reduction in number of 221 vacancies in board 224 increase in number 221 directors also of discount bank 221 a majority in board 221 penalties 221 not to be officer of two banks 221 not to be a borrower or surety 221 225 must meet monthly 223 compensation of, acting as officers 225, 275 to make regulations for repayment of deposits 229 may limit amount of deposits 230 794 SAVINGS BANK INBBX. Tbustees AMD Othee OrFiOBBS — continued. page may classify depositors « 229 committee of, to examine bank, -vouchers, etc 27C may require security from and fix salaries of employees 224 cannot grant gratuities to officers 224 u. Unclaimed Deposits, Bepobts op 283 superintendent to receive 283 penalty for failure to report 674 index of 674 V. ViSITATIOIT: relieved from other 276 w. WiTHESs (see Married Women). NATIOKAL BANK INDEX. A. Acts, Additional and Amendatobt : page act of June 20, 1874, for a " redistribution of the national bank cur- rency," etc 709 January 14, 1875, to provide " for the resxunption of specie pay- ments " 713 January 19, 1875, as to limitation restricting issue of notes payable in gold 715 February 8, 1875 — ten per cent, tax on other bank-notes 715 March 3, 1875 716 June 30, 1876 — appointment receivers of national banks 716 March 1, 1879 — extract from, abating semi-annual duty, etc 721 February 14, 1880 — authorizing conversion of national gold banks . . 721 February 26, 1881 — verification of returns of national banks.... 722 July 12, 1882 — enabling national banking associations to extend their corporate existence, etc 722 March 3, 1883 — extract from, to repeal stamp tax, etc 729 March 29, 1886 — additional to that of June 3, 1864 730 May 1, 1886 — enabling national banks to increase capital stock change name, etc 731 July 30, 1886 — extract from, prohibiting special laws in territories 732 March 3, 1887 — amending sections 5191, 5192, U. S. Eev. Stat 733 August 13, 1888 — banks deemed citizens in state of location 734 May 2, 1890 — banks in Oklahoma 734 July 14, 1890 — deposits for circulating notes 735 July 28, 1892 — redemption of lost or stolen notes 736 August 13, 1894 — taxation of legal tender and bank-notes 736 March 14, 1900 — Currency Act of 1900 737 March 3, 1900 — cities to be added ot reserve list 745 April 12, 1900 — as to Porto Rico 744 April 30, 1900 — as to Hawaii 745 March 3, 1903 — as to reserve list 745 December 21, 1905 — as to Panama Canal bonds 745 January 26, 1907 — political contributions 746 March 4, 1907 — as to additional notes of small denominations .... 746 May 30, 1908 — Monetary Commission and amending National Bank- ing Act 747 Association (see National Banks). Attachments (see Transfers). [795] 796 STATIOITAL BANK IITDEX, B. Bakes and Baneebs (see National Banks) : page not to use the word " National " in title of firm 701 Bonds Deposited with TEBiAstrBEB: deposit of, before commencing business 642 what kind of, to be deposited 642 increase or decrease of 642 registered to be issued for coupon 643 transfer of 643 examination of transfers 644 annual examination of 643, 644 custody of, etc 644, 645 comptroller to have access to 644 interest on, how collected 644 limitation of withdrawal of 645 may be sold for failure to withdraw circulation 649 description of, by national gold banks 652 interest on, when withheld 667 when reassigned 682 forfeiture of 683 cancellation of 694 sale of 685 Bonds, Official: of receiver 686 Bonds, United States: defined 642 Business, Regulation of: location of 654 reserve prescribed 655 deposit with redemption agencies 656 shall receive each other's notes at par 657 rate of interest 657 penalty for taking unlawful interest 659 dividends , 662 By-Laws : of associations 616 c. Capital: amount of, to be stated in organization certificate 614 minimum amount of 623 NAIIOSAL BAN£ INDEX. 797 Capital — continued. paok how paid in , 627 failure to pay instalment of 627 increase of 628 reduction of 629 increase of, by use of notes prohibited 683 impairment of 666 tax upon 674 of bank at dissolution, assumed to be its capital 703 of converted state banks, minimum amount of 633 Cabds: in imitation of circulating notes, penalty for issuing 653 Cashjeb: appointed by board of directors 616 oath of, required to payment of instalments of capital stock 627 as to report of dividends /673 penalty for embezzlement by, 669 Central Resebve Cities: cities having 200,000 people may be 655 Checks : penalty for certifying beyond amount of deposit 669 certifying, is warranty that there are funds to pay 669 Cdwjuit Cotjbts op United States : may grant injunction in case of national banks in hands of receivers . . 693 CiBcrutATiNG Notes: for what receivable 647, 650 not at par not to be paid out by banks 663 printing denominations, etc 646 control of plates, etc 647 examination of plates, etc 647, 648 limit of amount of small notes 643 how signed, etc 650 to be received by all banks 657 restriction upon use of 652 issue of other notes prohibited 651 destroying and replacing, mode of 651 redemption of t 653 issuing of, to unauthorized associations 652 printing, etc., in imitation of 652 mutilating, etc 651 issuing of gold notes 652 798 NATIONAL BANK INDEX. COMPTBOUiEB OF CUEEENCT : PAGE title of bank subject to approval of 614 payments of instalments of capital to be certified to 627 banks not to begin business until authorized by 645, 648 increase and decrease of stock approved by 628 oaths of directors of banks to be sent to 631 to determine as to capital, etc., liability of stockholders 632 to receipt for bonds deposited by banks 643 to countersign assignment or transfer 643 to keep a register of bonds transferred. 643 to notify banks of transfers, etc 643 to have access to books of treasurer 644 bonds of banks to be annually compared with books of 644 duties as to interest on bonds, etc 644 to see to correctness of organization, etc 645 permission to banks to commence business 64o to cause notes to be engraved, etc 646 examination of plates, dies, etc., by 647, 648 plates and dies to be procured by 647 to have custody of plates, etc 647 to replace worn out notes 651 when to issue gold notes to banks 652 to notify banks to make up reserve 65.5 when may appoint receivers i 655 to approve selection of redemption agencies 1 656 list of shareholders to be received semi-annually by 672 reports to 673 dividends, reports sent to 673 may fine for failure to make reports 673 vote of bank to go into liquidation to be certified to 681 duties of, in relation to banks redeeming circulation 682 on failure to redeem notes 683 special agent may be appointed by 684 dividends .to creditors of banks 692 may be enjoined in proceedings against banks 693 forfeiture of franchises at suit of 694 may appoint occasional examiners 696 authorized to add reserve cities 733 to compel banks to close 632 to cause annual examinations of plates, etc 646 decides on sufficiency of evidence as to organization 646 his certificate is proof of incorporation of bank 646 ■ to allow receiver to use certain money 730 empowered to draw trust fund from treasury 730 approval of, necessary to change name or location 731 C!OMPTBOU.EE OF TEEASTJKY: duties as to refund of taxes paid by national banks in excess of what Is due 676 NATIONAL BANK INDEX, m COUNTEKFEIT: PAGE to be stamped on fraudulent United States notes 720 CuBBENOY Act of 1900 , 737-744 CUBEENOy, BUBEAU OF NATIONAI,: expenses of, to be paid out of taxes on national bank circulation 648 (See National Banks.) D. Defacing Notes, etc. ; ot national banks, penalty 653 Depositabies of Public Moneys : national banks may be designated as 63? Deposits : national banks may receive 614 proportion of reserve to be kept on 655 not to certify checks in excess of , 669 to pay duty or tax on 673 to make return to treasurer 673 duty or tax on, how assessed and collected in default of return, and pay- ment 673 refunding of excessive duties i 676 for circulating notes 735 DiBECTOES : when may sell shares of delinquent stockholders 637 shall hold oflSce for one year 630 powers of, to convert state bank into national 640 appointment or election of 630 powers of 631 number of 630 qualifications of r 631 vacancies in board of 631 president elected from and by 632 penalty for violations of law by 632 Dissolution: voluntary 681 notice of intended 681 deposit to redeem circulation 682 redemption of notes, etc 682 destruction of redeemed notes 683 manner of protesting notes 683 800 NATIONAL BANK INDEX. JDissoLUTioN — contwmed. page failure to pay notes, proceedings on 683 business, after failure to pay notes, imlawful 684 notice to holders of notes, sale of bonds, etc 684 disposal of redeemed notes 685 cancellation at treasury 68-5 notice of appointment of receivers 693 notice to creditors to present claims 691 dividends to creditors 692 when receiver may be enjoined 693 fees and expenses of receivers 694 transfers after act of insolvency void 698 deposit not required where intent is consolidation 682 reassignment of bonds 682 examination by special agent 684 sale of bonds at auction 685 sale of bonds at private sale 685 Dividends (see National Banks) : deficiency in surplus, stockholders to receive no 632t while reserve is below minimum none can be made 655 may be declared, when 662 not counted as », debt of the bank, when 666 shall not exceed net profits 666 reported to comptroller, when and how 673 penalty for failure to report 673 in hands of receiver 692 .Dues; to United States, circulating notes receivable for 650 Duties (see Taxes) -. on imports, not payable in national bank notes 650 E. Embezzlement : of funds by president, cashier, agent 669 Examinees : appointment, duties, etc 696 in case of failure to redeem notes 683 EXBCUTOES : holding bank stock not liable 636 (See Quardians.) NATIONAL BANK INDEX. 801 Expense: page of special examinations 723 of reappraisal of stock ! 724 of redemption of notes covered by deposit of lawful money 726 of transportation of notes 726 of plates 724 of bureau of the currency 647 of destroying plates and dies 643 of sale of bonds of closed banks 682 of examination and receivership 693 of redeeming notes, and of new plates 709 F. FOKPEITUEE: of interest in case of usury 659 of bonds for failure to redeem circulating notes 683 of corporate franchise 694 Fbanchise: of expiring associations extended 71X limit of extension of 711 Q. Gold Bai^ks: organized to issue notes 652 reserve of, redemption by 652 of San Francisco, not required to redeem notes in New York 656 limit of circulation of, removed , 652 may be converted into currency banks 721 powers and privileges of, converted 721 GrOU) Cebuficates : what receivable for 728 to be counted as reserve 728 may be reissued 728 cannot be security for loans 728 cannot be withheld from circulation 728 denominations of 723 when not to be issued 728 GoiB Coin: may be deposited 728 shall be retained in treasury 728 Gttaedians : holding stock not personally liable 658 51 802 NATIONAL BANK INDEX. H. Hand Bills : page penalty for issuing, in Imitation of circulating notes 653 HyPOTHECATION : of circulating notes, when unlawful 666 I. IMPATBMBNT OF CAFITAIi: to be made good, or receiver appointed 667 INCBEASE OF CAPITAL: how made 623 INDEBTEDNESS : limit of 666 Insolvent Banks: certain acts of, void 693 Intebest : on bonds deposited, how collected 644 rate of, which may be taken 657 usurious, consequence of taking : 659 on bonds deposited, withheld 666 may be retained on failure to report 673 INTEBNAL KCVENUE TAX: repealed on capital and deposits 729 r '■■", ,. t J. Judgments : in state courts to be final before attachment issue 693 purchase of real estate at sales under 621 I. liAWFUL Monet : meaning of term in case of gold banks 652 liAwnji. Monet Eeserve: prescribed 655 what may be counted toward 658 one-half may be deposited in New York 656 NATIONAL BANK INDEX. 803 IiEOAi, Tender Notes: page may be redeemed at San Francisco 734 Ltabtt.tties : of converted state banks 638 of associations organized before June 4, 1864 640 limitation of, for money borrowed 663 not to exceed capital stock, exceptions 666 on circulating notes of closed banks 682 of shareholders 632 of directors 631 LlEN: of United States on assets of closed bank, paramount 685 LiQTTiDATiON (see Dissolution). Loans and Discounts : not to be made when reserve is reduced, except 655 rate of interest on 657 banks not to loan on, or purchase their own stock 682 loans on personal security 614 limit of, to any one person , 663 M. Mutilated Notes: of national banks replaced, etc 651 National Bank Act (the titled 709 effect of 640 National Banking System ( sketch of) 595 National Banks: what associations subject to laws relating to 64i title " national " not to be used by other banks 701 may change from state bank to 638 articles of association of 612 contents of organization certificate, etc 614 comptroller to examine articles of association of 645 ' may give or withhold certificate 645 804 ITATIOlfAL BANK INDEX. National Banks — crnitinued. page powers of 614 minimum capital of 623 paying in of capital stock of 627 increase of capital of 628 reduction of capital of . . 629 rights of shareholders to vote 630 individual liability of shareholders 632 executors, etc., holding stock, not personally liable 636 designated as public depositaries 637 for issue of gold notes 652 state banks to become 640 rights of, organized under former act 640 deposit not required when intent is consolidation 682 examination of, by special agent 684 sale of bonds at auction ; at private sale 685 voluntary dissolution of 681 notice of intended dissolution of 681 failure of, to pay notes, proceedings on 683 business of, after failure to pay notes, unlawful 684 appointment of receivers of 686 transfers by, after act of insolvency, void 698 deemed citizens of state 734 location of business of 654 may change name and location 731 reserve of, prescribed 655 shall receive each other's notes at par 657 interest to be taken by 657 cannot loan or purchase their own stock 664 limit as to indebtedness of 666 not to pledge their own notes 666 restriction on use of notes of other banks by 668 not to receive United States notes as collateral 668 list of shareholders of 672 reports by 673 citizens of state where located may increase capital stock 731 may change name or location 731 failure of, to make reports 673 tax on failure of, to make returns 674 tax on certain circulation to be paid by 703 number of persons necessary to form a bank 612 may hold real estate 621 no oflScer or clerk of, can act as proxy 630 shareholder of, in default, cannot vote 630 certain taxes on, repealed 729 National Gold Banks 601 NATIONAL BANK INDEX. 805 Notes (see Circulating Notes) : page of state banks paid out, tax on 703- of town, city or municipal corporation, tax on 703 not at par not to be paid out 668 fraudulent, to be stamped 720 redemption of lost or stolen 736 NOTICE: by national banks, of liquidation 681 after receiver is appointed to present claims 691 0. Oath: as to certificate of payment of stock 627 required, before authorized to commence business 645 required of directors 631 to list of stockholders filed semi-annually 672 required upon reports of condition, dividends, etc 673 must be taken before duly authorized officer 722 Ofpicees : appointment of 632 certificate of 645 unlawful certification of cheeks by 669 cannot be appointed to examine their own bank 696 penalty for violation of act by 69-4 penalty for issuing notes to unauthorized banks 652 penalty for embezzlement by 669 must stamp counterfeit notes 720 ( Oeganization Ceetificatb: what to contain 614, 646 to be acknowledged and forwarded to comptroller 614 of converted state bank 638 business conducted at place specified in 654 to be published 646 P. Penalties : for issuing notes to unauthorized banks 652 for imitating, etc., notes i 653 for defacing, etc., notes 653 for falsely certifying checks 669 for failure to make reports 673 for failure to pay duties 675 806 NATIONAL BANK INDEX. Penalties — continued. paoe for withholding notes from use 668 for violation of banking law 694 for use of word "national" 701 for crimes at common law; state courts have jurisdiction 669 PiACE OP Business: must be as specified in organization certificate 654 PowEB or Banks , 614-617 to adopt and use a seal 614 to exist for twenty years 614 to make contracts , 614 to sue and be sued 614 to appoint directors, etc 614 to make by-laws 614 to conduct a banking business 614 cannot transact business until authorized by comptroller 614 to purchase, hold and convey estate for certain purposes 621 Pbofits : disposition of net 662 dividends limited to amount of 666 semi-annual report of 673 Peotest : of national bank-notes 683 PCBUCATIG IT : of sale of stock of delinquent shareholders 627 of certificate of authority to commence business 648 of notice of deferred election of directors 636 of notice of sale of bonds for failure to withdraw circulation 649 of names of redemption agents 54S of reports of associations 673 of notice to creditors 681 of notice of sale of delinquent stock 720 PtTECHASE: of real estate 621 of bills of exchange 657 of shares of its own stock, how restricted 664 a. Qttaijfications ; of directors of national banks 631 NATIONAL BANK INDEX. 807 Seal Estate: paob when national banks may purchase ' 621 necessary for its accommodation 621 mortgage for previous debt 621 conveyed in satisfaction of debt 621 purchased to secure debts 621 ■when, cannot be held more than five years 621 act does not render loan on, void 621 the government only can enforce forfeiture 621 debtor and his creditors estopped 621 Eeassignment: of bonds, on return of circulating notes 642 of bonds, in sums not less than $1,000 644 of bonds on deposit of lawful money 682 ■ i Eeoeitees : may be appointed on failure to make capital equal to legal minimum . . . 627 when reserve is not made good 655 on failure to redeem notes 685 on failure of banks to select or redeem notes may appoint 656 when bank continues to own its own stock 664 on refusal to make good impaired capital ' 666 when creditor shall have obtained judgment 716 duties of 686 fees and expenses of 694 suits to enjoin 693 must give bond 686 take possession of books, etc 686 collect or sell assets 691 enforce liability of stockholders 686 pay moneys over to comptroller 686 report to comptroller 686 to certify equity of bank in property to be sold 730 Kedemption : of notes of national banks 656 proceedings on failure to provide for 656 when at treasury of United States 682 of banks in liquidation, account to be kept 682 protest on failure of 683 proceedings on notice of failure of 684 agencies of national banks to be selected for 653 banks cannot do business after failure to redeem 684 of lost or stolen notes 736 808 watioital bank index. Bemotai,: page of bank to another state 649 Repoets ; to comptroller, by savings banks 720 to comptroller of currency 673 as to dividends 673 penalty for failure to make 673 Keskbve Cities: cities having 50,000 people may be 733 Keseeved Funds; amoimt, etc 655 what, may consist of 658 when half of, may be kept in New York 656 issuing gold notes 652 SALE: of stock of delinquent shareholder 627 of bills of exchange 657 of stock taken for debt 664 of bonds, for failure to deposit legal tender 682 of bonds under protest 685 of assets, by receiver 686 of bonds, for failure to withdraw circulation 712 of appraised stock of extended associations 724 Savings Banks: not to use " national " in title except 701 Secretaet of the Tebiasttet: may approve organization of banks with capital of $50,000 623 may designate depositaries of public money 637 may exchange coupon for registered bonds deposited 643 to prescribe terms for exchange of bonds deposited 644 to have direction of the engraving of plates and dies 646 to approve regulations for destruction of printing material 64S to supervise statement showing circulation to be withdrawn 649 to approve rules for removal of banks from states in certain cases .... 650 to appoint witness to burning of mutilated notes 651 to concur in appointment of receiver for deficient reserve 655 to approve appointment of bank examiner 696 to concur in appointment of agent to examine bank under protest 684 to direct manner of notice to bill-holders of closed banks 684 to regulate the disposition of redeemed circulating notes 685 NATIONAL BAKE INDEX. 809 SHABEBOLDEBS : PAGE stock shall be paid for, how 627 payment to be certified to comptroller 627 may be sold out for failure to pay for stock 627 one vote for each share of stock , 630 vote may bfe by proxy 630 names of original 614 shares of 623 rights and liabilities of succession 623 failure of, to pay instalments 627 may reduce capital , 629 directors elected by 630 may fix day for election of directors 636 individual liability of 632 assessed to make good capital, etc 667 list of, open to inspection, etc i 672 Two-thirds of, can vote bank into liquidation 681 discharge from liability 682 surplus paid to 692 right of, to vote , 630 in default, cannot vote 630 executors, etc., holding stock not individually liable 636 when creditor's bill may be filed against 716 when liability of, may be enforced by creditor's bill 716, 717 when may elect agent in place of receiver 717 to whom remaining assets shall be turned over 717 Shakes of Stock: how divided, and how transferable 623 payment for, how made 627 each payment on, to be certified to comptroller 627 if shareholder fails to pay for, may be sold out 627 how such stock shall be disposed of 627 how stock may be increased 628 must be approved by comptroller , 628 shareholder entitled to one vote on each 630 SHiVeb Certificates (see Gold Certificates) . Special Agents : to examine national bank 684 expenses of, how paid , 694 Stamp Tax: on bank checks, etc., repealed 729 State: national banks, citizens of, where located 734 810 WATIOWAL BANK IITDBX. SxATB Bain^es: page not to use " national " in the name of 701 internal revenue tax on circulation of 703 how may become national banks 638 capital in, on conversion, what amount to be 702 liabilities of shareholders on becoming such 638 may keep in operation any branches it had before change 640 Stock op National Banes (see Shares). Suits : by or against associations 614 for usury, limitation of 659 to enjoin comptroller 693 against directors ■. 694 change of name not to affect liability 731 Stjbplus Fund: what part of profits to be carried to 653 T. TAXES: on notes of persens and state banks 703 remitted in certain cases 704 not to apply to national banks 705 on notes of towns, etc., paid out, is constitutional 703 on circulation and deposits of banks 674 how assessed on default of return 675 on notes, etc i 703 monthly returns of such notes 704 on circulation and deposits r 674 returns on circulation, for 675 failing to make returns or pay duty 675 exemption from tax on circulation, when 703 repeal of 729 how collected on default in payment 675 excess of payment, how refunded 676 states authorized to levy 676 internal revenue on capital and deposits, repealed 729 stamps on bank checks, repealed 729 legal tender notes and bank notes 736 TtatEITOBlES : not to grant private charters to banks 732 NATIONAL BANK INDEX. 811 TBAITSIfEBS : PAGE when void 643 state court has jurisdiction 688 Tbeasubeb of United States: bonds transferred to 642 amount of funds to be deposited with , 642 may retain interest on bonds for failure to make reports 673 tax on bank to be paid to 674 report to, as basis of semi-annual tax 675 may assess tax without report 675 may reserve tax out of interest on bonds 675 to certify claim of bank for return of duty 676 deposit with, to redeem 682 when to redeem national bank-notes ,. . . . 682 when to destroy national bank-notes 683 receivers of national banks to pay money collected to 686 Trustees : holding national bank stock, not personally liable 636 United States Notes: not to be received by banks as collateral 668 UstJBT: penalty for 659 suits for recovery of , 659 limit to right of action for recovery of 659 when the purchase of bills of exchange, etc., shall not be considered as. . 657 V. Vaoancies : in board of directors, how filled 631 ViSITOBIAI, POWEES: limitation of 697 [Whole Nttmbeb op Pages, 854.]