(Jnrnpll ICam ^rl^nol Bjibtary KFN5250S3l9'ir«"y Ubrary DATE DUE /^fitm » QAYLOriP PRINTED IN U.SA Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924022794691 THE LAWS OF THE STATE OF NEW YORK BBLATINQ TO BANKS, BANKING, TRUST COMPANIES, LOAN, MORTGAGE AND SAFE DEPOSIT CORPORATIONS TOGETHER WITH THE ACTS AFFECTING MONEYED CORPORA- TIONS GENERALLY, INCLUDING THE STOCK CORPORATION LAW, THE GENERAL CORPORATION LAW, THE NEGO- TIABLE INSTRUMENTS LAW, AND THAT PART OF THE TAX LAW APPLICABLE THERETO. AIiSO THE NATIONAL BANK ACT AND COGNATE UNITED STATES STATUTES. A.:N^^OT^TEr>. WILLIS S. P^INE, LL.D., Author of "Paine's Building and Loan Associations," "Summary of Failed Savings Banks," etc. FIFTH EDITION. ROCHESTER. N. Y. THE LAWYERS' CO-OPBEATIVE PUBLISHING CO. 1903 B7^7^^ Entered accordlogr to Act of Congress, In the year 1885, by WILLIS S. PAINE, In the OfBoe of the Librarian of Congress, at Washington. Entered according to Act of Cougress, 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 Oflce 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. 9 lO.rr) LIB^*: 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 Ibavs affecting banks, banking and trust companies, as follows : — "Suction 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 coroniissionerB 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, vi^ith 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. "I 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 Cott, of Brooklyn, and the author, commis- IV PEEFACE. siouors for the purposes 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 comnussioners from the funds at that time in the State Treas- ury. This 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 coi'porations are now paid." Mr. Sloan during the meantime having resigned, William Dowd, of the city of Il^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 Revision. 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 Eevision 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 Eevision, 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 without 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 tlie explanatory decisions, without tlie aid of which mis- take is almost unavoidable. In conclusion, it is hoped that this work PEEFACB. V 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. Banking Depabtment, Albany, N. Y., December 22, IS8i. PREFACE TO THIRD EDITIOIT. This work has met with much gi-eater success than was anticipated, and an effort has been made in revising this edition to make it still more acceptable. While it contains much new matter, the number of pages, by reason of the omis^on of old material and through the use of smaller type, has not been very materially increased. W. S. P. Banking Department, Albant, N. Y., March 1, 1SS9. PREFACE TO FOURTH EDITION. Pursuant to chapter 289 of the Laws of 1889, Commissioners of Statutorj^ Eevision were appoiuted by the Governor. In their report to the legislature the sueeeeding 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 far 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 devisers 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 tlie 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. Collin, 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 tlie 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 the banking department to all moneyed corporations except insurance corporations, and an in- crease of its powers. 2. The provisions of chapter S of the act of 1882, sections 179 to 188, have been made applicable to all corporations under the super- viii PEEFACB TO FOURTH EDITION. vision of the superintendent of banks. It had been held that these 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 105 inclusive. These 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 sfoels: corporations. These provisions relate mainly to the conduct of elections, the increase or reduction of capital stock, and the liabil- ity of stocldiolders. 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 State banks had ceased to issufe 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 within banks having a cap- ital of less than that amount, and if a director shall cease to ovm the requisite number of shares, he tliereby (ipso facto) ceases to be a director. Vacancies in the board shall be filled by election of the stocldiolders, 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 individual banker, to keep a "lavyful money reserve," which, in cities having a population of eight hundred thousand or over, has been fixed PREFACE TO FOURTH EDITION. IX at fifteen per cent., and elsewhere througliout 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 honds, and, by a special act (ch. 70(j, 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. 3(1 Wall Street, New Yokk, Decemler 18, 1S93, PEEFAOE TO FIFTH EDITION. Te:^ years have elapsed since the last edition of this work. Several revisions of the statutes affecting banking and many changes in. the law 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 Broadway, New Yoek, October 1, 1903. CONTENTS. PAGE Prefaces iii Table oi" Casks _ xxxvii HISTORICAL SKETCH. ARTICLE L Banks, Banking Associations and Individual Bankers. Bank of North America 5 First, and Second Banks of the United States 8 Bank of New York 10 Restraining Act of 1804 13 Restraining Act of 1813 15 Restraining Act of 1818 17 Bank charters prior to 1825 19 First legislative specification of banking powers 23 Conspiracy trials of 1826 and 1827 23 Statute regulations of 1827 25 Safety fund system 28 Office of bank commissioners 32 General banking act 32 Constitutionality of the general banking law 33 Prominent provisions of the general banking act 34 Individual bankers 35 Responsibility of stockholders , 37 Office of superintendent of the banking department 38 Superintendents 30 Increase of banking capital 40 Redemption of bank-notes 40 Taxation 41 Amendments 47 XU CONTENTS. ARTICLE II. Savings Institutions. PAGE Savings banlcs benevolent, not charitable "" Trustees a,nd other officers ^' Investments "^ Dividends ^^ Surplus moneys ■ "' Pay of trustees ^^ Unclaimed deposits '0 Taxation ^^ ARTICLE IIL Moneyed Coeporations othee than Banks, Banking Associations and Sav- ings Institutions. Trust companies 74 Mortgage companies 79 Safe deposit companies 79 Building associations 81 THE BANKING lAW. An Act (Chapter 689, Laws of 1892) in relation to Banking Corpora- tions, being Chapter XXXVII. of the General Laws. ARTICLE I. Geneeax Peovisions. Seoiion 1. Short title 86 2. Definitions gg 3. The banking department ; superintendent 88 4. Official seal of superintendent of banks 88 6. Deputy clerks and examiners of the bank department 89 6. Rooms and furniture 90 7. Expenses, hovir defrayed 90 8. Powers of superintendent 91 9. Examination of securities deposited 92 10. Unclaimed balances 93 11. Examiners 93 12. Examination and certificate as to payment of capital 93 CONTENTS. Xin PAGE 13. Affidavit to be made before commencing business 94 14. Deposit of bonds or mortgages with superintendent 94 15. Exchange of securities 106 16. Publication of report of examiners 107 17. Impairment of capital 107 18. Proceedings against delinquent corporations 108 19. Examination by order of court Ill 20. Reports 112 21. Penalties for failure to report 115 22. Publication of reports 116 23. Annual report of superintendent 116 24. Reports presumptive evidence 117 25. Restrictions 117 26. Calculation of profits 121 27. Losses in excess of profits 122 28. Publication of unclaimed dividends and deposits 123 29. Change of location 124 30. Approval and certificate of superintendent upon incorporation. . 128 31. Permission and certificate of superintendent in case of foreign corporations 126 32. Appointment of superintendent as attorney for service of process 126 33. Appointment of receiver 127 34. Merger 128 35. Submission of merger agreement to stoclcholders 128 36. Rights of dissenting stoclcholders 129 37. Effect of merger 130 38. Rights of creditors and others having relations with merged corporations 130 ARTICLE IL Banks. Section 40. Incorporation 133 41. Amended certificate of incorporation. 134 42. Certificate of individual banker 134 43. General powers 134 44. Lawful money reserve 143 45-48. Repealed. 49. Payment of capital stock 144 50. Directors 144 51. Oath of directors 146 52. Individual liability of stockholders 146 53. Limitation of liability of stockholders 155 54. Powers of president and vice-president 156 55. Rate of interest 159 XIV CONTENTS. PAGE 56. Rate of interest on loans on warehouse receipts 160 57. Deposit of banks and individual bankers with superintendent 161 58. Prohibition against sale of business of individual banker 162 59. Change from state to national bank 162 60. When deemed to have surrendered its charter 163 61. Reduction of capital stock in such cases 164 62. Certificate of change 164 63. National bank may become state bank 165 64. Circulating notes ; plates 165 65. Circulating notes of individual bankers 16S 6(i. When bank may receive interest or dividends upon securities deposited 169 67. Redemption agencies 170 68. Destruction of bank-notes 171 69. Destruction of plates and counterfeit notes 171 70. E.xchange of mutilated notes 172 71. Redemption in notes of other banks 172 72. Protest of notes and proceedings thereon 172 73. Appointment of agent by new corporation 175 74. Revocation of appointment 175 75. Distribution of funds of insolvent banks 176 76. Distribution of residue 176 77. Publication of notices 176 78. Redemption of notes held by banks and individual bankers 177 79. Banks closing business 178 79a. Terminating corporate existence of bank 179 80. Proportionate amount of securities to be returned when notes are destroyed 180 81 Deposit of cash for redemption of notes 180 82. Circulation of foreign bank-notes prohibited 180 ' 83. Notes not receivable at par not to be paid out 182 84. Bills or notes must be payable on demand 182 85. When bills of exchange to he without grace 191 86. Transfers of securities by superintendent to be countersigned by treasurer 191 87. Unauthorized banking prohibited 192 88. Restrictions as to foreign corporations 196 89. Restrictions as to banks and their officers 196 90. Bills payable otherwise than in money prohibited 197 91. Certain bills declared to be promissory notes 197 92. Use of sign indicating bank by unauthorized persons prohibited. 197 ARTICLE III. Savings Banks. Section 100. Incorporation 19^ 101. Notice of intention to organize 200> CONTENTS. XV FACE 102. Piling of certificate by superintendent 200 103. Examination by superintendent 201 104. Certificate of authorization 201 105. When persons named in a certificate become a corporation 202 106. Must begin business within one year 206 107. Trustees and their powers 206 108. By-laws 209 109. Meeting of trustees ; quorum 209 110. Vacancies 210 111 . Security may be required and salaries fixed 210 112. Dividends, compensation and loans to trustees prohibited 211 113. Repayment of deposits; regulations; limitation 215 114. Deposits of minors, and trust deposits 222 115. Wife witness against husband; claimants may be interpleaded. 224 116. In what securities deposits may be invested 226 117. Limitation as to real property 237 118. Available fund for current expenses; how loaned 239 119. Temporary deposits 246 120. Personal security prohibited; loans on bond and mortgage. . . . 247 121. Mortgaged property to be insured 247 122. Eestrictions on methods of doing business 248 123. Hate of interest ; extra dividends 250 124. Per cent, of surplus, how determined 253 125. Compensation of officers 253 126. No other report or inspection required 254 127. Proceedings against delinquent corporations 254 128. Examination of vouchers and assets by trustees 255 129. Expenses to be paid 256 130. Debts due savings banks from insolvent banks preferred 256 131. Advertisements of unauthorized savings banks prohibited 257 132. Charters to be conformed to this chapter 259 133. Savings banks voluntarily closed 259 134. When dissolution effected 260 135. Deposit of unclaimed moneys 260 ARTICLE IV. Tetjst Companies. Bection 150. Incorporation 262 151. Previous notice of intention to be given 263 152. When superintendent shall file certificate 263 153. Examination by and certificate of superintendent 264 154. Capital must be paid in cash 264 155. List of stockholders to be furnished to superintendent 265 156. Powers of corporation 265 157. May be administrator, guardian or trustee 267 XVI CONTENTS. PAGE 158. No security required; trust fund debts preferred 268 159. Investments of capital and deposits 268 160. Interest and accumulations """ 161. Directors 269 162. Liability of stockholders and directors 270 163. Powers of specially chartered trust companies 271 AETICLE V. Co-OPEBATIVE Savings and Loan Cokpoeations. Section 170. Incorporation 272 171. Object and purpose 272 172. Mode of incorporation 273 173. Officers and by-laws 273 174. Capital stock ' 274 175. Dues, fines and entrance fees 274 176. Withdrawal of free shares 275 177. Payment of matured shares 276 178. Loans, how made; premium plans 276 179. Security for loans 278 180. Forfeiture for nonpayment of dues 281 181. Same 281 182. May purchase at foreclosure 281 > 183. Loans 282 i 184. Profits and losses 282 185. Transfer 282 ■, 186. Attorney at law 283 . 187. Qualifications of members 283 '188. Keport 283 . 189. Same 284 190. Visitation 284 191. Statement of financial condition 285 192. Laws repealed 285 193. Reincorporation of existing associations 286 194. Assessment 287 • 195. Reference 287 !l95a. Investments of deposits and income 288 195b. Payment of expenses 288 ARTICLE VI. Incorporation op Building and Lot Associations. Bection 196. Incorporation 290 196a. Powers 291 CONTENTS. XVll PAGE 196b. Borro-wing money 291 196e. Dividends 291 196d. Monthly payments 291 196e. Liability 292 196f. Exemption of shares from sale and execution 292 196g. Reports 292 196h. Supervision and examinaton 292 ARTICLE VII. MOKTGAGE, LoAUr AND INVESTMENT COBPOBATIONS ; SUPERVISION. Section 197. Incorporation 294 198. Deposit required; authorization certificate 295 199. General powers 295 200. License 295 201. Verified statement to be furnished 296 202. Issue of license 297 203. Unlicensed companies prohibited 297 204. Revocation of license 297 205. Designation of Superintendent as attorney 298 ARTICLE VIII. Sate Deposit Companies. Section 210. Incorporation 299 211. Directors 300 212. Officers and by-laws 300 213. Liability of stockholders 301 214. Remedy for nonpayment of rent for safe 301 215. Laws repealed 302 216. When to take effect 302 THE STOCK CORPORATION LAW. An Act (Chapter 688, laws of 1892) to amend the Stock Corporation Law, being Chapter XXXVI. of the General Laws. As amended 1903. Abticle 1. General powers; reorganization (§§ 1-7). 2. Directors and officers; their election, duties and liabilities (§§ 20-32). 3. Stock; stockholders, their rights and liabilities (§§ 40-55). XVUl CONTENTS. ARTICLE I. General Powebs; Eeoeganization. PAOB Section 1. Short title and application of chapter 307 2. Power to borrow money and mortgage property 307 3. Reorganization upon sale of corporate property and franchises. . 308 4. Contents of plan or agreement 309 6. Sale of property; possession of receiver and suits against him. . 310 6. Assent of stockholders to plan of readjustment 310 7. Combinations prohibited 311 8. Execution of mortgage 312 ARTICLE II. DiEECTOES AND OfPICBES ; THEIK ELECTION, DUTIES AND LIABILITIES. Section 20. Directors 314 21. Change of number of directors 315 22. When acts of directors void 315 23. Liability of directors for making unauthorized dividends 316 24. Liability of directors for contracting unauthorized debts and over-issue of bonds 317 25. Liability of directors for loans to stockholders 317 2fi. Transfers of stock by stockholders indebted to corporation .... 318 27. Officers 318 28. Inspectors and their oath 320 29. Boolcs to be kept 321 30. Annual report 323 31. Liability of officers for false certificates, reports or public notices 325 32. Alteration or extension of business 325 33. Sale of franchise and property 326 34. Excessive indebtedness; liability of officer or director 327 ARTICLE III. Stock; Stockholdebs, tiibib Rights and Liabilities. Section 40. Issue and transfers of stock 329 41 . Subscriptions to stock 331 42. Consideration for issue of stock and bonds 331 43. Time of payment of subscriptions to stock 332 44. Increase or reduction of capital stock 333 45. Notice of meeting to increase or reduce capital stock 333 CONTENTS. xra PAGE 46. Conduct of such meeting; certificate of increase or reduction.. 334 47. Preferred and common stock 335 48. Prohibited transfers to officers or stockholders 336 49. Payment by stockholders of mortgage debt pending foreclosure. . 342 50. Application to court to order issue of new in place of lost cer- tificate of stock 342 51. Order of court upon such application 343 52. Financial statement to stockholders 343 53. Exhibition of books by transfer agent of foreign corporation. . . 344 54. Liabilities of stockholders 345 55. Limitation of stockholder's liability 347 56. Increase or reduction of number of shares 347 57. Voluntary dissolution 348 58. Merger 350 59. Change of place of business 350 60. Liabilities of officers, directors and stockholders of foreign cor- porations 351 62. Partly paid stock 351 THE GENERAL CORPORATION lAW. An Act (Chapter 687, laws of 1892) to amend the General Corporation law, being Chapter XXXV. of the General laws. As amended 1903. Section 1. Short title 358 2. Classification of corporations 358 3. Definitions 359 4. Qualifications of incorporators 360 5. Filing and recording certificates of incorporation 360 6. Corporations of the same name prohibited 360 7. Amended and supplemental certificates 361 8. Lost or destroyed certificates 362 9. Certificate and other papers as evidence 362 10. Prohibitions of other than statutory powers 362 11. Grant of general powers 363 12. Limitation of amount of property of a nonstock corporation. . . . 364 13. Acquisition of additional real property 365 14. Acquisition of property in other states 365 15. Certificate of authority of a foreign corporation 365 16. Proof to be filed before granting certificate 366 17. Acquisition of real property in this state by certain foreign cor- porations 367 18. Acquisition by foreign corporations of real property in this state upon judicial sale 367 19. Prohibition of banking powers 368 20. Qualification of members as voters 368 XX CONTEN'IS. PAOB 21. Proxies ^7* 22. Challenges ^^* 23. Effect of failure to elect directors 371 24. Mode of calling special election of directors 371 25. Mode of conducting special election of directors 372 26. Qualification of voters and canvass of votes at special elections. . 372 27. Powers of supreme court respecting elections 372 28. Stay of proceedings in actions collusively brought 373 29. Quorum of directors and power of majority 374 30. Directors as trustees in case of dissolution 375 31. Forfeiture for nonuser 376 32. Extension, of corporate existence 376 33. Conflicting corporate laws 378 34. Laws repealed 378 35. Saving clause 378 36. Construction 379 37. Law revived 379 38. When notice or lapse of time unnecessary 373 39. As to acts of directors 379 40. Alteration and repeal of charter 380 The Tax Law (Laws of 1896, Chapter 908) in so far as it directly relates to Corporations formed under or subject to the Banking Law. Section 4. Exemption from taxation 395 11. Place of taxation of property of corporations 395 12. Taxation of corporate stock 396 13. Stockholders of bank taxable on shares 396 14. Place of taxation of individual bank capital 396 23. Banks to make report 396 24. Bank shares, how assessed 39T 25. Individual banker, how assessed 397 26. Notice of assessment to bank or banking association 401 27. Reports of corporations 401 28. Penalty for omission to make statement 402 72. Collection of taxes assessed against stocks in banks and bank- ing associations 403 180. Organization tax 403 181. License tax on foreign corporations 404 182. Franchise tax on corporations 404 183. Certain corporations exempt from tax on capital stock 406 187a. Franchise tax on trust companies 406 187b. Franchise tax on savings banks 407 188. Tax upon foreign bankers 407 189. Reports of corporations 407 190. Value of stock to be appraised 409 191. Further requirements as to reports of corporations 410 192. Powers of comptroller to examine into affairs of corporation. . . 410 193. Notice of statement of tax; interest 41) CONTENTS. XXI PAGE 194. Payment of tax and penalty for failure 411 195. Revision and readjustment of accounts by comptroller 412 19G. Review of determination of comptroller by certiorari 413 197. Regulations as to such writ of certiorari 413 198. Warrant for collection of taxes 413 199. Information of delinquents 414 200. Action for recovery of taxes; forfeiture of chai-ter of delin- quent corporation 415 202. Exemption from other state taxation 415 228. Liability of certain corporations to tax 415 CONSTITUTIONAL PROVISIONS, GENERAL STATUTES, ETC. ARTICLE I. Cbeation of Corpobations. 1894 — Extract from the Constitution of the state of New York.— Article VIII. Sectio:s^ 1. Ciorporations, how created 419 2. Debts of corporations 420 3. "Corporations" defined 420 4. Charters for savings banks and banking purposes 421 5. Specie payments 422 6. Registry of bills or notes 422 7. Individual responsibility of stockholders 422 8. Insolvency of banks, preferences 423 General statutes. Laws of 1850, Chapter 172 — corporations not to interpose defense of usury: Sec. 1. Defense of usury not to be interposed 423 2. Definition of term "corporation" 423 Laws of 1877, Chapter 311 — corporations and companies of other states, etc.: Sec. 1. Evidence of corporate existence 424 Laws of 1882, Chapter 237 — ^money advanced on warehouse receipts, hills of lading, etc.: Sec. 1. Interest fixed on loans on warehouse receipts, etc 424 Revised Statutes, Part II.: Sec. 1. Of the interest of money 424 Laws of 1888, Chapter 277 — ^moneyed coi-porations : XXn CONTENTS. PAGH Sec. 1. Certain corporations may file affidavit of payment of capital stock; duty of county clerk ^^" 2. Effect on pending actions or proceedings on account of failure to file 425 Laws of 1888, Chapter 326— public moneys to be deposited in solvent banks; such banks to execute and give bonds as security: Sec. 1. Deposit of public moneys by State officer, etc.; duty of Comp- troller -.425 2. Banks to execute bond to State; how approved and filed; rate of interest 426 3. Approval of bond by attorney-general 426 4. Application of act 426 Laws of 1893, Chapter 337. (As amended, 1901, ch. 443.) Enabling certain trust companies to examine and insure titles, and do a safe de- posit business 427 Laws of 1895, Chapter 352. An act providing for the assessment and collec- tion of certain appropriations made for the superintendent of banks 426 Laws of 1896, Chapter 851. Enabling certain trust companies to insure titles and do a safe deposit business 428 Laws of 1899, Chapter 451. (As amended, 1901, ch. 171.) An act to enable persons who have deposited money in a bank and have lost the certificate, or the same has been destroyed, to draw the money due thereon, etc 428-432 ARTICLE IL Fbatoulent Insolvencies by Corpoeations, and othee Frauds iit their Management. 1892, Penal Code, Title XV. Chapter XI. — Fraudulent Insolvencies by Corporations and other Frauds in their Management. As Amended, 1903. Section 590. Frauds in the organization of corporations 433 591. Fraudulent issue of stock, scrip, etc 433 592. Frauds in procuring organization of corporation, or increase of capital 434 593. Acting for foreign corporations not authorized to do business in this State 434 594. Misconduct of directors of stock corporations 434 595. Misconduct of directors of banking corporations 436 596. Loans made in violation of last section, not invalid 436 597. Sale or hypothecation of bank-notes by officer, etc 436 598. Officer of bank putting excessive number of its notes in circula- tion 437 CONTENTS. XXlil PAGE 599. Officer or agpiit of banking corporation, making guaranty or indorsement, in its behalf, in certain cases 437 600. Banlv officer overdrawing his account 437 601. Receiving deposits in insolvent bank 437 602. Unlawful investments by officers of savings banks 438 603. Misconduct by directors of moneyed corporations 438 604. Misconduct by banks and bankers 438 605. Unlawful discount of bills of foreign banks 439 606. Misconduct by olfioers of banking department 439 607. Using dies and plates of extinct state bank 440 609. Private banker using sign 440 610. Misconduct of officers and directors of stock corporations.... 440 611. Misconduct of officers and employees of corporations 441 612. Misconduct of officers and agents of pipe-line corporations .... 441 613. Misconduct at corporate elections 441 614. Presumption of laiowledge of corporate condition and business, and of assent thereto by directors ; definitions 442 THE NEGOTIABLE INSTRUMENTS LAW. Laws of New York, 1897, ch. 612; As Amended by Laws of 1898, ch. 336. (No other amendments to January, 1904.) Chaptfer 50 of tlie General Laws. ARTICLE I. Genebal Pkovisioks. Section 1. Short title 444 2. Definitions and meaning of terms 444 3. Person primarily liable on instrument 444 4. Reasonable time, what constitutes 444 5. Time, how computed, when last day falls on holiday 444 6. Application of chapter 444 7. Law merchant; when governs 445 ARTICLE II. FoEM AND Interpretation. 20. Form of negotiable instrument 445 21. Certainty as to sum ; what constitutes 446 jUaV CONTKNTS. PAGE 22. When promise is unconditional 23. Determinable future time; what constitutes 446 24. Additional provisions not affecting negotiability 4*7 25. Omissions; seal; particular money 26. When payable on demand 27. When payable to order 28. When payable to bearer 448 29. Terms, when sufficient *48 30. Date, presumption as to 449 31. Ante-dated and post-dated 449 32. When date may be inserted 449 33. Blanks; when may be filled 449 34. Incomplete instrument not delivered 449 35. Delivery: when effectual; when presumed 450 36. Construction where instrument is ambiguous 450 37. Liability of i)erson signing in trade or assumed name 451 38. Signature by agent ; authority; how shown 451 39. Liability of person signing as agent, etc 451 40. Signature by procuration ; effect of 451 41. Effect of indorsement by infant or corporation 451 42. Forged signature; effect of 451 ARTICLE III. Consideration of Negotiable Instruments. 60. Presumption of consideration 452 51. Consideration, what constitutes 452 52. What constitutes holder for value 452 53. When lien on instrument constitutes holder for value 452 54. Effect of want of consideration 452 55. Liability of accommodation party 453 ARTICLE IV. Negotiation. 60. What constitutes negotiation 453 61. Indorsement; how made 454 62. Indorsement must he of entire instrument 454 63. Kinds of indorsement 454 64. Special indorsement ; indorsement in blank 454 65. Blank indorsement; how changed to special indorsement 454 66. When indorsement restrictive 454 67. Effect of restrictive indorsement; rights of indorsee 455 68. Qualified indorsement 455 COMTICNXS. XXV C9. Conditional indorsement 455 70. Indorsement of instrument payable to bearer 455 71. Indorsement where payable to two or more persons 455 72. Effect of instrument drawn or indorsed to a person as cashier . . 456 73. Indorsement, where name is misspelled, etc 456 74. Indorsement in representative capacity 456 75. Time of indorsement ; presumption 456 76. Place of indorsement; presumption 456 77. Continuation of negotiable character 450 78. Striking out indorsement 456 79. Transfer without indorsement; effect of 456 80. When prior party may negotiate instrument 457 ARTICLE V. Eights of Holdee. ■flO. Right of holder to sue ; payment 457 ■91. What constitutes holder in due course 457 92. When person not deemed holder in due course 458 93. Notice before full amount paid 458 94. When title defective 458 95. What constitutes notice of defect 458 96. Eights of holder in due course 458 97. When subject to original defenses 458 SS. Who deemed holder in due course 459 ARTICLE VI. LiABiLiTT OF Parties. 110. Liability of maker 459 111. Liability of drawer 459 112. Liability of acceptor 460 113. When person deemed indorser 460 114. Liability of irregular indorser 460 115. Warranty where negotiation by delivery, etc 460 116. Liability of general indorser 461 117. Liability of indorser where paper negotiable by delivery 461 118. Order in which indorsers are liable 461 119. Liability of agent or broker 461 , ARTICLE VII. Pkesentment foe Payment. 130. Effect of want of demand on principal debtor 462 XXVI CONTENTS. PAGB 131. Presentment where instrument is not payable on demand 462 132. Wliat coQstitutes u, sufficient presentment 463 1S3. Place of presentment *"* 134. Instrument must be exhibited *8* 135. Presentment where instrument is payable at banl; 463 136. Presentment where principal debtor is dead 463 137. Presentment to persons liable as partners 464 138. Presentment to joint debtors 464 139. When presentment not required to charge the drawer 464 140. When' presentment not required to charge the indorser 464 141. When delay in making presentment is excused 464 142. When presentment may be dispensed with 464 143. When instrument dishonored by nonpayment 464 144. Liability of person secondarily liable, when instrument dis- honored 465 145. Time of maturity 465 146. Time ; how computed 465 147. Rule where instrument payable at bank 465 148. What constitutes payment in due course 465 ARTICLE VIII. Notice of Disuonoe. 160. To whom notice of dishonor must be given 466 161. By whom given 466 162. Notice given by agent 466 163. Effect of notice given on behalf of holder 466 164. Effect where notice is given by pai'ty entitled thertto 467 165. When agent may give notice 467 166. When notice sufficient 467 167. Form of notice 467 168. To whom notice may be given 467 109. Notice, where party is dead 467 170. Notice to partners 467 171. Notice to persons jointly liable 467 172. Notice to bankrupt 468 173. Time within which notice must be given 468 174. Where parties reside in same place 468 175. Where parties reside in different places 468 176. When sender deemed to have given due notice 468 177. Deposit in postoffice; what constitutes 468 178. Notice to subsequent party; time of 469 179. Where notice must be sent 489 180. Waiver of notice 4g9 181. Whom affected by waiver 4g9 182. Waiver of protest , 469 CONTENTS. XXVU PAGE 183. When notice is dispensed with 469 184. Delay in giving notice ; how excused 469 185. When notice need not be given to drawer 470 186. When notice need not be given to indoraer 470 187. Notice of nonpayment, where acceptance refused 470 188. Effect of omission to give notice of nonacceptance 470 189. When protest need not be made; when must be made 470 ARTICLE IX. DiSCHAKGE OF NeGOTIABUS INSTRUMENTS. 200. Instrument ; how discharged 47 1 201. When persons seconda,rily liable on discharged 471 202. Right of party who discharges instrument 472 203. Renunciation by holder 472 204. Cancellation ; unintentional ; burden of proof 472 205. Alteration of instrument; effect of 472 200. What constitutes a material alteration 472 ARTICLE X. Bills of Exchange; Fobm and Intekpeetation. 210. Bill of exchange defined 473 211. Bill not an assignment of funds in hajids of drawee 473 212. Bills addressed to more than one drawee 473 213. Inland and foreign bills of exchange 473 214. W"hen bill may be treated as promissory note 473 215. Referee in ease of need 474 ARTICLE XI. Acceptance of Bills or Exchange. 220. Acceptance ; how made, etc 474 221. Holder entitled to aeceptiince on face of bill 474 222. Acceptance by separate instrument 474 223. Promise to accept; when equivalent to acceptance 474 224. Time allowed drawee to accept 475 225. Liability of drawer retaining or destroying bill 475 226. Acceptance of incomplete bill 475 227. Kinds of acceptance 475 228. What constitutes a general acceptance 475 XXVIU CONTENTS. PACH 229. Qualified acceptance 475 230. Rights of parties as to qualified acceptance 476 ARTICLE XII. Presentment of Bills of Exchange fob Acceptance. 240. When presentment for acceptance must be made 476 241. When failure to present releases drawer and indorser 476 242. Presentment ; how made 477 243. On what days presentment may be made 477 244. Presentment when time is insufficient 477 245. Where presentment is excused 477 246. When discharged by nonaeceptance 478 247. Duty of holder where bill not accepted 478 248. Rights of holder where bill not accepted 478 ARTICLE XIII. Pbotest of Bills of Exchange. 200. In what cases protest necessary 478 261. Protest; how made 479 262. Protest; by whom made 479 263. Protest; when to be made 479 264. Protest; where made 479 265. Protest both for nonaeceptance and nonpayment 479 266. Protest before maturity where acceptor insolvent 479 267. When protest dispensed with 479 268. Protest where bill is lost, etc 480 ARTICLE XrV. Acceptance of Brrxs of Exchange foe Honob. 280. When bill may be accepted for honor 480 281. Acceptance for honor; how made 480 282. When deemed to be an acceptance for honor of the drawer. ... 480 283. Liability of acceptor for honor 481 284. Agreement of acceptor for honor 481 285. Maturity of bill payable after sight, accepted for honor 481 286. Protest of bill accepted for honor, etc 481 287. Presentment for payment to acceptor for honor; how made 481 CONTENTS. XXIX PAGE 288. When delay in making presentment is excused 481 289. Dishonor of bill by acceptor for honor 481 ARTICLE XV. Payment of Bills or Exchange fob Honor. 300. Who may make payment for honor 482 301. Payment for honor ; how made 482 302. Declaration before payment for honor 482 303. Preference of parties offering to pay for honor 482 304. Effect on subsequent parties where bill is paid for honor 482 305. Where holder refuses to receive payment supra protest 482 306. nights of payer for honor 483 ARTICLE XVI. BiLi.s IN A Set. 310. Bills in sets constitute one bill 483 311. Rights of holders where different parts are negotiated 483 312. Liability of holder who indorses two or more parts of a set to different persons 483 313. Acceptance of bills drawn in sets 483 314. Payment by acceptor of bills drawn in sets 484 315. Effect of discharging one of a set 484 ARTICLE XVII. Pkomissoey Notes and Checks. 320. Promissory note defined 484 321. Check defined 484 322. Within what time a check must be presented 484 323. Certification of check ; effect of 484 324. Effect where the holder of check procures it to be certified 485 325. When check operates as an assigrtment 485 ARTICLE XVIIL ■Notes Given for Patent Rights and fob a Speculative Consideration. 330. Negotiable instruments given for patent rights 485 XXX CONTENTS. PAOK 331. Negotiable instruments for a speculative consideration 485 332. How negotiable bonds are made non-negotiable 486 ARTICLE XIX. Law Repealed; When to Take Effect. 340. Laws repealed ^86 341. When to take effect 486 Schedule of laws repealed 486 Penal Code Provisions as to Negotiable Instruments Law. 384m. Notes given for patent rights 487 384n. Notes given for a speculative consideration 487 NATIONAL BANK ACT AND COGNATE UNITED STATES STATUTES. Introduction 491 Treasury notes 492 National bank act 495 National gold banks 497 Amendments 497 Certification of checks 499 National banking system 500 Revised Statutes of the Uuited States. Title IXII.— National Banks. CHAPTER I. Organization and Po\vees. Section 513.3. Formation of national banking associations 507 5134. Requisites of organization certificate 508 5135. How certificate shall be acknowledged and filed 509 5136. Corporate powers of associations 509 5137. Power to hold rea,l property 516 5138. Requisite amount of capital 517 5139. Shares of stock and transfers 518 5140. How payment of capital stcck must be made and proved 521 5141. Proceedings if shareholder fails to pay instalments 521 CONTENTS. XXXI PAGE 5142. Increase of capital stock 522 5143. Reduction of capital stock 523 5144. Eight of shareholders to vote 523 5145. Election of directors 524 5146. Requisite qualifications of directors 524 5147. Oath required from directors 525 5148. Filling vacancies 525 5149. Proceedings when no election was held on the proper day. . . . 525 5150. Election of president of the board 525 5151. Individual liability of shareholders 526 5152. Executors, trustees, etc., not personally liable 529 5153. Duties and liabilities when designated as depositaries of pub- lic moneys 530 5154. Organization of State banks as national banking associations 531 5155. State banks having branches 533 5156. Reservation of rights of associations organized under act of 1863 533 CHAPTER lU. Obtaining and Issuing CiRCtn,ATiNQ Notes. Section 5157. What associations are governed by chapters 2, 3 and 4 534 5158. Registered bc:nds intended by the term "United States bonds" 335 5159. Deposit of bonds required before issue of circulating notes. . . 535 5 ICO. Increase or reduction of deposits to correspond with capital. . 535 5101. Exchange of coupon for registered bonds 536 5102. Manner of making transfers of bonds 536 5163. Registry of transfers 536 5164. Notice of transfer to be given to associations interested 536 5105. Examination of registry and bonds 537 5106. Annual examination of bonds by associations 537 5167. Custody of bonds, collection of interest, etc 537 5108. Comptroller to detei-miiie if association can commence business 538 5169. Certificate of authority to commence banking to be issued. . . 539 5170. Publication of certificate 539 5172. Printing, denominations and form of the circulating notes. . . . 539 5173. Plates and dies to be under control of the comptroller 540 5174. Annual examination of plates, dies, etc 540 5175. Limit to issue of notes under five dollars 540 5178. Apportionment of aggregate amount of circulating notes.... 541 5179. Equalizing the apportionment of circulating notes 541 5180. How tlie necessary amount of notes shall be withdrawn 542 6181. Removal of association to another State 542 5182. For what demands national bank-notes may be received 543 5183. Issue of other notes prohibited 543 5184. Destroying ajid replacing worn out and mutilated notes 543 XXXii CONTENTS. VAOB 6185. Organization of associations to issue gold notes authorized. .. 544 5186. Their lawful money reserve, and duty of receiving notes of other associations ^^ 5187. Penalty for issuing circulating notes to unauthorized associa- tions 544 5188. Penalty for imitating national bank-notes, etc 545 6189. Penalty for defacing, etc., national bank-notes 545 CHAPTER III. REGtHLATIONS OF THE BANKING BUSINESS. Section 5190. Place of business of banking associations 546 5191. "Lawful money reserve" prescribed 547 5192. What may be counted toward the "lawful money reserve". . . . 548 5194. Limitation on the power to issue certiiieates 548 5195. Place for redemption of circulating notes to be designated ... 548 5196. National banks to receive notes of other national banks 549 5197. Limitation upon rate of interest which may be taken 549 5198. Consequences of taking usurious interest 551 6199. Dividends 554 5200. Limit to liabilities which may be incurred by any one per- son, etc 554 5201. Associations not to loan on or purchase their own stock 555 5202. Limit upon indebtedness to be incurred 557 6203. Restriction upon use of circulating notes 558 5204. Prohibition upon withdrawal of capital 558 5205. Enforcing payment of deficiency in capital stock 558 5206. Restriction upon use of notes of other banks 559 5207. United States notes not to be held as collateral, etc.; penalty 559 6208. Penalty for falsely certifying checks 560 5209. Embezzlement ; penalty 561 5210. List of shareholders, etc., to be kept 663 5211. Reports to comptroller of the eun-ency 564 5212. Report as to dividends 564 6213. Penalty for failure to make reports 564 5214. Duties payable to the United States 565 5215. Half-yearly return of circulation; deposit and capital stock.. 565 5216. Penalty for failure to make return 565 5217. Penalty for failure to pay duties 565 5218. Refunding excessive duties 566 5219. State taxation 566 CHAPTER IV. Dissolution and Receivership. iSkotion 5220. Voluntary dissolution of associations 571 CONTENTS. iXXlll PAGE 5221. Notice of intent to dissolve 571 5222. Deposit of lawful money to redeem outstanding circulation . . 572 5223. Exemption as to an association consolidating with another. . . 572 5224. Reassignment of bonds; redemption of notes, etc 572 5225. Destruction of redeemed notes 573 5226. Mode of protesting notes 573 5227. Examination by special agent , 573 5228. Continuing business after default 574 5229. Notice to holders; redemption at treasury; cunocllation of bonds 574 5230. Sale of bonds at auction 574 5231. Sale of bonds at private sale 575 5232. Disposal of protested notes 575 5233. Cancellation of national bank-notes 575 6234. Appointment of receivers 575 5235. Notice to present claims 581 5236. Dividends 581 5237. Injunction upon receivership 583 5238. Fees and expenses 583 5239. Penalty for violation of this title 584 5240. Appointment of occasional examiners 585 5241. Limit of visitorial powers 586 6242. Transfers, when void 587 6243. Use of the title "national" 589 Title XXXV.— Internal Eevenue. CHAPTER VIII. Banks and Bankers. Section 3407. Definition of the words "bank," "banker" 591 3410. Capital of banks expired or converted into national banks. . . . 591 3411. Circulation, when exempted from tax 592 3412. Tax on notes of persons or State banks used as circulation, etc. 592 3413. Tax on notes of town, city or municipal corporations paid out by banks, etc 592 3414. Banks and bankers' monthly returns 593 3415. In default of returns, commissioner to estimate it, etc 593 3416. State banks converted into national banks; returns, how made. 593 3417. Provisions for bank tax and returns not to apply to national banks 594 Amendments and Additional Acts, to November 1, 1903. Act op Jttnb 20, 1874. Section 1. "The National Bank Act" 597 XXxiv COKTENTS. PAOI 2. Reserves on deposit . , 597 3. Five per cent, on circulation to be deposited in treasury for re- demption 597 4. Withdrawal of circulation, etc 598 5. Charter numbers printed on national bank-notes 599 6. Limit to amount of outstanding notes' 599 7. Withdrawal of currency to secure equitable distiibution 599 8. Duty of Comptroller and Treasurer upon the failure of national banks to comply with requisitions 599 9. Redistribution of currency, etc 600 Act of Januaky 14, 1875. PoE Resumption of Specie Payments. BEOTioiiT 1. Resumption of specie payments 601 2. No charge for convei'ting gold bullion into coin 601 3. Circulation of national banks not restricted 601 Act of January 19, 1875. Limit to circulation of gold banks removed 602 Act of Febeuaby 8, 1873. Section 19. Tax on circulation of other than national banks 603 20. Tax on circulation of other than national banks paid out, etc. ... 603 21. Returns of ainount of circulation other than national banks 603 Act of June 30, 1876. Section 1. Appointment of receivers of national banks 603 2. Individual liability of stockholders, how enforced 604 3. Meeting of shareholders after payment of debts and expenses of receivership 604 4. Sale of stock of shareholders refusing to pay assessments 607 5. Fraudulent notes to be stamped as "counterfeit" 607 6. Reports to Comptroller by savings banks, etc 607 Act of Maech 1, 1879; Bxteaot feom. Abating semi-annual duty of insolvent banks 608 Act of Febeuaky 14, 1880. Conversion of national gold banks 608 CONTENTS. XXXV Act of February 26, 1881. Verification of returns of national banks 609 Act of July 12, 1882. To Extend Corporate Existence of National Banki.\g Associ.vtioxs. PAGE Section 1. National banking associations authorized to extend corporate existence 609 2. Consent of shareholders to amendment of articles of association. 610 3. Comptroller to make examination and issue certificate 610 4. Eights, privileges, etc., preserved 610 5. Shareholders not assenting to amendments may withdraw 611 6. Redemption and destruction of certain circulating notes, etc. ... 61? 7. Closing of banking associations not accepting provisions of this act 612 8. Bonds for security of circulation, etc 613 9. Withdrawal of circulation and deposit of lawful money 613 10. Associations to receive circulating notes upon deposit of bonds. . 614 11. Three per cent, registered bonds issued in exchange for three and one-half per cent, bonds 614 12. Gold certificates issued in exchange for gold coin 615 13. Penalty for falsely certifying checlcs 615 14. Eight of Congress to repeal, etc 615 Act of March 3, 1883. Repeal of internal revenue and stamp tax 616 Act of March 29, 1886. Section 1. Receiver to certify to Comptroller of equity of bank in property to be sold 616 2. Approval of Secretary of Treasury to be filed 617 3. Purchase; approval of payments by Comptroller 617 Act of May 1, 188G. Section 1. Increase of capital stock 617 2. Change of name and location 618 3. Liabilities 618 4. Id., not released 618 Act of July 30, 1386. Gcnera.1 Incorporation acts amended 619 XXXvi CONTENTS. Act of Makch 3, 1887. PAOI Section 1 . Reserve cities 619 2. Central reserve cities 620 3. Redemption oi notes at San Fraaicisco, Cal 620 Act of August 13, 1888. National banks deemed citizens of State in which located 620 Act of Mat 2, 1890 ; Extract fkom. As to Oklahoma banks 621 Act op July 14, 1890; Extbact from. As to deposits to pay circulating notes 621 Act of July 28, 1892. Amending National Bank Act as to redemption of bank-notes . . , 622 Act of August 13, 1894. As to taxation of legal tender Notes and National Bank Notes 622 CnEEENCY Act of March 14, 1900. Defining and fixing standard of value, etc 623-630 Act of March 3, 1903 ; Extract from. Cities to be added to Reserve Lis* 630 TABLE OF CASES. Abbott V. Amer. Hard Kubber Co., 435 Abbott V. Petersburg Granite Qu. Co., 333 Abernethy, Beveridge v., 347 Adams, Casey v., 553 Adams v. First Nat'l Bank, 141 Adams, Nashville v., 568 Adams, Parker v., 155 Adams, Pelham v., 187 Adderly v. Storm, 149 Adkins, Braham v., 512 Adler v. BVay Bank of B'klyn, 140 Agnew V. TJ. S., 563 A. L. & T. Co., Bean «., 311 Albany Sav. Bank, Mills t'., 220 Albany Sav. Bk., Riley, Admr. v., 218 Albany Supervisors, Williams v., 569 Aldrich v. Chem. Natl. Bank, 510 A. Life Ins. Co. v. Dobbin, 194 Allen, First Nat'l Bank v., 141 Allen V. Williamsburgh Sav. Bk., 216 Ailing, Waldron v., 580 Alten, Hagmayer v., 154 Am. Coal Co., Smith v., 153 Am. Hard Rubber Co., Abbott v., 435 Am. Life Ins. & Trust Co., Mumford v., 364 Am. Life Ins. Co., Strong v., 194 Am. Linen Thread Co., DeGrofT v., 229 Amer. Surety Co. r. Pauly, 526 Am. Zylmite Co., Campbell v., 154, 323, 336 Anderson, G. E. R. Co. v., 422 Anderson V. Gill, 140 Anderson v. Line, 579 Anderson, Nat'l Bank v., 515 Anderson v. Philadelphia Warehouse Co., 519 Anderson, Smith v., 320 Anthony, WycoflF v., 140 Armstrong, In re, 589 Armstrong v. Chemical Nat. Bk., 141, 581, 589 Armstrong v. Second Nat. Bk., 547 Armstrong, Winter v., 522, 523 Arnold, Barnes v., 155 Aapinwall v. Butler, 523, 529 Aspinwall v. Meyer, 340 Assessors, People v., 42 Assessors, Van Allen v., 45, 506 Atkinson v. Rochester Printing Co., 340, 438 Atlantic State Bank v. Savery, 137, 550 Atlas Nat. Bank v. Savery, 513 Attorney-General v. Life & Fire Ins. Co., 106, 179, 444 Attorney-General v. Utica Ins. Co., 195, 196 Auburn Sav. Bk. v. Brinkerhoff, 230 Austin V. Daniels, 137 Auten V. V. S. Bank, 515 Avery, Eaton, Cole & Burnham Co. v., 436 B. B. & A. R. R. Co., People v., 420 Bailey, Chemical Nat. Bank v., 578, 582 Bailey v. Hollister, 149 Bailey v. Sawyer, 579 Baker, Cadle v., 576, 583 Baker, Hall v., 438 Balch V. Wilson, 587 Baldwin, Matter of, 143 Baldwin, Farmers & Meoh. Bk. v., 513 Bank, Bullard v., 511, 518, 556 Bank, Case v., 580 Bank v. Kennedy, 576 Bank v. Lanier, 514, 518, 519, 556 Bank, Maynard v., 532 Bank, Potter v., 195 Bank Com'rs v. Bk. of Buffalo, 120, 317 Bank Com'rs v. James' Bank, 171 Bank Com'rs v. St. L. Bank, 34, 136, 167 Bank of Attica v. Manuf'rs & Traders' Bank, 364 Bank of Attica, Robinson v., 340 Bank of Augusta v. Earl, 99, 105 Bank of Bethel v. Pahquioque Bk., 582 Bank of British North America v. Mer- chants' Bank, 140, 171 Bank of Buffalo, Bank Com'rs v., 120, 317 Bank of Buffalo v. Kortright, 322 Bank of Central New York. Ferry v., 148, 430. 434 Bank of Chenango v. Brown, 420 Bank of Chilicothe v. Dodge. 105 Bank of Columbia v. Patterson, 364 Bank of Commerce v. Union Bank, 139 Bank of Commerce's Appeal, 520 xxxvii XXX via TABLE OF OASES. Bank of Havana v. Magee, 115, 306, 364 Bank of Ithaca, Potter v., 114, 136 Bank of New York, Livingston v., 149 Bank of Orleans v. Morell, 193, 543 Bank of Redemption v. Boston, 569 Bank of Sparta, Canterbury v., 141 Bank State N. Y. v. Shipman, 139 Bank of Utiea v. City of Utiea, 42 Bank of Utiea v. Smalley, 322 Bank of Vergennes v. Warren, 339 Bard v. Poole, 194 Barker, Bristol v., 194 Barnes v. Arnold, 155 Barnes v. Ontario Bank, 156 Barnes, Rochester v., 420 Barnett v. National Bank, 551, 578 Barnmn, Paine v., 238 Barry, Commonwealth v., 562 Barry v. Merchants' Exchange Co., 105, 363 Barry, U. S. v., 524 Barton, People v., 195 Bassett, Holbrook v., 340 Beach, Piatt, Receiver, v., 548 Bean v. A. L. & T. Co., 311 Beardsley, Hayes v., 589 Beardsley v. Johnson, 315 Beebe, N. Y. Life Ins. & Trust Co. v., 105 Beebee, Piatt v., 576 Beers v. Bridgeport Spring Co., 554 Beers, Swift v., 105, 183 Beers, Warner v., 34, 42 Beers, Warner v., 183 Belmont Branch Bank v. Hoge, 423 Bennett, United States v., 540 Bennington, First Nat. Bank v., 513 Bentley, Piatt, Receiver, v., 578 Bergstrasser v. Lodewick, 141 Bernhard, Mahoney v., 155 Berry v. Brett, 578 Best, Sistare v., 248 Best V. Thiel, 211 Best, Zugner v., 208 Beveredg_e v. N. Y. E. R. Co., 122, 146, tjl7, 3/4 Beveridge v. Abernethy, 347 Biglin V. Friendship Ass'n, 343 Billings V. Robinson, 156 Bingham, Goshen Natl. Bk. v., 139 Bingham f. V/eiderwax, 364 Binghampton Tract Co., People v., 258 IJ , P^,- Seaman's Sav'gs Bank, 223 Blake, Third Nat. Bank v., 514 Blatchford, Leavitt v., 137, 186 Blye, Corn Ex. Bk. v., 588 Bogert, De Caumont v., 323 Bonaffe v. Fowler, 149 Bontel, Germania Bank v., 139 Boone v. Citizens' Sav. Bank, 216 Bopp, Hirschfeld v., 154, 155 Borst, Dayton v., 152 Boston, Bk. of Redemption v., 569 Bostwiek, Brinkerhoff v., 684 Bostwick, Fishkill Sav. Institution « 203 Bowden v. Johnson, 527 Bowery Bank, In re, 340 Bowery Sav'gs Bank, Gearns v., 221 Bowery Sav. Bank, Israel v., 217 Bowery Sav. Bk., Schlater «., 223 Brady v. Mayor of Brooklyn, 364 Brady, U. S. Trust Co. v., 420, 422 Braham ■;;. Adkins, 512 Branch v. United States, 531 Brauer v. First Nat'l Bank, 141 Brett, Berry v., 578 Brewster, People v., 194, 195 Bridge Co. v. Silk Co., 195 Bridgeport Spring Co., Beers v., 554 Brigg V. Cromwell, 154, 346 Briggs V. Spaulding, 524 Bringhurst, Commonwealth v., 524 Brinkerhoff, Auburn Sav. Bk. v., 230 Brinkerhoff v. Bostwick, 584 Brinkham, St. Louis Nat. Bank v., 553 Brisbane, De Witt v., 195 Bristol V. Barker, 194 Britton, United States v., 562 B'way Bk. of B'klyn, Adler v., 140 Brooklyn Sav. Bk., Smith v., 225 B'klyn Sav'gs Bank, Williams v., 224 Brooks, Scallan v., 224 Brower, Cotheal v., 322 Brown, Bk. of Chenango v., 420 Brown, Finn v., 525 Brown v. Harbeck, 341, 342 . j Brown v. Lamb, 582 ''=1 Brown v. Marion Nat'l Bank, 553 ^ Brown v. Merchants & Traders' Bk"., 320 Bruce v. Fulton Nat. Bank, 230 Bruce v. Piatt, 423 Bruen, Taylor v., 196 Buckley v. Whitcomb, 346 Buffalo City Bank v. Codd, 182, 183 Buffalo Ger. Ins. Co. v. Third Natl Bank, 557 Bullard v. Bank, 511, 518, 556 Bundy v. Cocke, 580 Bunnell, Ontario Bank v., 42 Burley, Burton v., 509, 547 Burley, Laing v., 520, 527 Burroughs, Peckham v., 587 Burt, Second Nat. Bank v., 138, 158 Burton v. Burley, 509, 547 Bush, Johnson v., 341 Bushnell v. Chautauqua County Nat Bank, 514 Butler, Aspinwall v., 523, 529 Butler, Delano v., 528 . Baker, 576, 583 Cadle V. Tracy, 552 Caldwell, U. Ins. Co. v., 194 Calef, Hawthorne v., 530 California Nat. Bank, In re, 580 Caiman, Leinkauf v., 156 Campbell v. Am. Zylmite Co., 154, 323, 336 Campbell, Gillett v., 156, 339 Campbell v. Upton, 142 Canterbury v. Bank of Sparta, 141 Capitol Bank, Pape v., 513 Carll, Olean Nat. Bank v., 559 Carroll, Farmers' L. & T. Co. v., 364 Carthage v. Carthage Nat. Bank, 568 Gary, Hun v., 212, 245 Case V. Bank, 580 Case V. Citizens' Bank, 587 Case, Nat. Bank v., 514, 519, 527, 579 Case V. Terrell, 578 Casey v. Adams, 553 Casey v. Galli, 532, 539, 559, 577 Casey v. La Societe de Credit Mobilier, 588 Cassidy v. Uhlmann, 146 Central Bank, Haseltine v., 554 Central Bank, People v., 149 Central Nat. Bank, Ordway v., 571 Central Nat. Bank, Ouderkirk v.. 136 Chapman, First Nat'l Bank v., 570 Charleston v. Peoples Nat. Bank, 522 Chase v. Lord, 147 Chatham Nat. Bank, Sheridan Electric L. Co. v., 374 Chautauqua County Nat. Bank, Bush- nell v., 514 Chem. Nat'l Bank, Aldrieh v., 510 Chemical Nat. Bank v. Armstrong, 141. 581 Chemical Nat. Bank v. Bailey, 578, 582 Chem. Nat'l Bank, Critten v., 142, 143 Chemical Bank v. Hartford Dep. Co., 590 Chemical Nat. Bank v. Kohner, 157, 158 Chemical Nat'l Bank, McDonald v., 590 Chenango M. Ins. Co., In re, 321 Chenango Valley Sav'gs Bank v. Dunn, 246 Chenango Valley Sav'gs Bank, Kelley v., 220 Chesapeake Bank v. First Nat. Bank. 508 Chetwood, In re, 581 Chicago & R. I. R. Co., Kennedy v., 345 Chipman, McClellan v., 510 Christian Jensen Co., Matter of, 128 Christiansen v. Colby, 346 Christiansen v. Eno, 121, 154, 330, 346, 364 Churchill, City of Utica v., 45 Citizens' Bank, Case, Receiver v., 589 Citizens' Nat. Bank v. Importers and Traders' Nat. Bank, 140 Citizens' Nat. Bank, Moores v., 521 , Citizens' Savings Bank, Boone v., 216 City Nat. Bank v. Nat. Park Bk., 146 City National Bank v. Phelps, 162, 163. 533 City of Brooklyn, People v., 101 City of Elmira, National Bank of Che- mung v., 400 City of Newark, State v., 568 City of Richmond, First Nat. Bank i;., 569 City of Utica, Bank of Utica v., 42 City of Utica v. Churchill, 45 Claflin V. F. & C. Bank, 163 Claggett V. Metropolitan Nat. Bank, 163 Clark, First Nat'l Bank, 143 Clark, Marcy v., 519 Clark V. Merchants' Nat. Bk., 138, ]i58 Clark V. Metropolitan Bank, 182 Clark V. Nat'l Shoe etc. Bank, 141 Clements, Marine Bank v., 338 Clements, People v., 437 Clinton Nat'l Bank v. Nat'l Park Bank, 141 Clothier, Yardley v., 589 Coats V. Donnell, 138, 140, 157, 319, 342 Cochran v. U. S., 563 Cocke, Bundy v., 580 Codd, Buffalo City Bank v., 182, 183 Codd V. Rathbone, 158, 182, 183 Codd, Sacketts Harbor Bank v., 182 Coffey V. National Bank, 532 Coffin V. U. S., 563 Coit, Brie Co. Sav. Bank v., 240 Colby, Christiansen v., 346 Colby, National Bank v., 578, 584, 588 Cole V. Millerton Iron Co., 337 Coleman, People v., 331 Coleman, Price v., 588 Coleman v. Second Ave. R. R. Co., 435 Colonial Bank, Rankin v., 140 Commercial Bank v. Kortright, 339 Commercial Bank, Trenholme v., 585 Commercial Bank v. Varnum, 191 Commercial Warehouse Co., Merchants' Exchange Bank v., 423 Commissioners, People v., 43, 44, 45, 46, ' 401, 567, 568 Commonwealth v. Barry, 562 Commonwealth v. Bringhurst, 524 Commonwealth v. Jurkin, 141 Commonwealth, Nat. Bank v., 568 Comstock V. Willoughby, 137. Concord Bank v. Hawkins, 515, 529 xl TABLE OF CASES. Conklin v. Furman, 148 Conway, Earle v., 590 Cook, Mitchell v., 166, 167 Cook County Nat. Bank v. United States, 578, 582 Cooke V. State Nat. Bank, 509, 547 Copeland v. Johnson Mfg. Co., 374 Cornell v. Em. Ind. Sav. Bank, 219 Cornell v. Roach, 324 Corn Ex. Bank v. Blye, 588 Cosgri'tf V. Hudson City Sav'gs Bank, 225 Cotheal v. Brower, 322 Cottle V. Marine Bk. Buffalo, 143 Courtney, Fidelity Co. v., 515 Cowell V. Springs Co., 365 Cowles V. Cromwell, 153, 156 Cox, Saylis v., 141 Cragie v. Sadley, 138 Cragie v. Smith, 589 Craig Medicine Co. v. Merchants Bank, 315, 319, 370, 374 Crandall, Valk v., 157 Crawford v. West Side Bank, 139 • Critten v. Chem. Nat'l Bank, 142, 143 Crocker v. Whitney, 135 Crome Steel Co., Paulding v., 338 Cromwell, Briggs v., 154, 346, 364 Cromwell, Cowles v., 153, 156 Crooke, Eno v., 339 Cruikshank v. Fourth Nat. Bank, 552 Cunningham v. M. S. & F. C. R. Co. Af. 138 N. Y. 614, 320, 362, 374 Curtis, Farmers Loan and Trust Co. v., 363 Curtis r. Leavltt, 104, 136, 148, 183, 192, 339, 340, 423 Gushing, Matter of, 402 Cutting V. Damerel, 153 Cuykendall v. Douglas, 335 Daggs f. Phoenix Nat'l Bank, 554 Dairs, Elmira Sav'gs Bank v., 246, 257, 586 Dakin, Thomas v., 33, 42 Damerel, Cutting v., 153 Danforth v. Nat. St. Bk., 551, 553 Daniels, Austin v., 137, 425 Davenport Bk. v. Davenport Board of Equalization, 569 Daviess Co. v. Dickinson, 557 Davis V. Essex Baptist Society, 519, 527, 530, 577 Davis V. Standard Nat'l Bank, 142 Davis, State of Tennessee v., 157 Davis V. Stevens, 519, 526, 527, 579 Davis, Syracuse City Bank v., 419 Davis V. Weed, 527, 529, 579 Dayton v. Borst, 152 Dearing, Farmers' Nat. Bank P., 608. 551 DeCaumont v. Bogert, 323 Decker v. Union Dime Sav'gs Inst., 223 DeGroff v. Am. Linen Thread Co., 229 DeGroot v. Van Duzer, 191, 195, 196 Delafield v. Kinney, 134 Delano V. Butler, Receiver, 528 Dent, Matteson v., 580 De Puy V. Stevens, 223 Desdoity, Ex parte, 311, 370 Deweese, Scott v., 508 De Witt V. Brisbane, 195 Dickinson, Daviess Co. v., 557 Dickson v. Mayer, 338 Diven v. Duncan, 149 Diven v. Lee, 153 Dobbin, Am. Life Ins. Co. v., 194 Dodge, Bank of Chilicothe v., 105, 179, 182 Dodge, Elwell v., 339 Dodge, Halstead v., 330 Dolan, People v., 41, 373, 401 Donnell, Coats v., 138, 140, 157, 319, 342 Doty, People v., 258 Douglas, Cuykendall v., 335 Douglass County, First Nat. Bk. v., 552 Dover, Stafford Nat. Bank v., 568 Downer, McHenry i\, 44 Driseoll v. W. Bradley & C. M. Co., 364 Dry Dock Savings Bk., Schrauth v., 222 Dry Dock Sav'gs Inst., Kopf v., 220 Dubois, Sagory v., 147 Duncan, Diven, Receiver v., 149 Dunn, Chenango Valley Sav'gs Bank v., 240 Dunn V. O'Connor, 140 Dutcher, Assignee, v. Importers & Trad- ers' Nat. Bank, 340, 342 Dykman v. Keeney, 122 Eagle Fire Co., Scott v., 122, 316 Earl, Bank of Augusta v., 99, 105 Earle v. Conway, 590 Eastern Township Bk. v. Nat. Bank, 514 Eaton, Butler v., 523 Eaton, Pratt v., 80, 193, 300 Eaton, Cole & Burnham Co. v. Avery,' 436 Eighth Ward Bank, Smith v., 140 ; Elder v. Franklin Nat'l Bank, 141 Ellis, Lyceum v., 332 Elmira Sav'gs Bank v. Davis, 246, 257, 586 Elwell V. Dodge, 339 } Ely, N. Y. Fire Ins. Co. v., 18, 194 Emigrant Sav';jrs Bank, Ficken v., 220 Em. Ind. Sav. Bk., Cornell v., 219 TABLE OF CASES. xU Em. Ind. Sav. Bank, Kelly v., 215 Em. Ind. Sa». Bank, Mulcahy v., 218 Em. Ind. Sav. Bk., Wall v., 217 Empire City Bank, In re, 37, 147, 149, 153, 421, 422 Em. Sav. Bk., Weaver v., 219 Eno, Christiansen v., 121, 154, 330, 346 Bno. V. Crooke, 339 Erie Co. Sav. Bk. v. Coit, 240 Erman, Schaffner v., 140 Erwin, Paine, Receiver, v., 212 Essex Baptist Society,, Davis v., 519, 527, 530, 577 Eureka Mower Co., Mather v., 319 Exchange Bank v. Sutton Bank, 142 F. & C. Bank, Claflin v., 163 Farmers & Mechanics' Bank v. Baldwin, 513 Farmers' Bank, Mosford v., 186 Farmers' L. & T. Co. v. Carroll, 364 Farmers' L. & T. Co. v. Curtis, 363 Farmers' L. & T. Co. v. Mayor, 42 Farmers' Nat. Bank v. Bearing, 508, 551 Feeny v. People's' Fire Ins. Co., 364 Fenno, Veazie Bank v., 508, 592 Fera v. Wickham, 141 Ferry v. Bank of Central N. Y., 148 Ficken v. Era. Sav'gs Bank, 220 Fidelity Bank v. Courtney, 515 Fifth Ave. Bk. v. Forty Second St. R. R. Co., 136, 320 Fifth Nat. Bank v. Pittsburgh R. R. Co., 514 Finn v. Brown, 525 First Nat'l Bank, Adams v., 141 First Nat'l Bank v. Allen, 141 First Nat. Bank v. Bennington, 513 First Nat'l Bank, Bruner v., 141 First Nat'l Bank v. Chapman, 570 First Nat. Bank, Chesapeake Bk. v., 508 First Nat. Bk. v. City of Richmond, 569 First Nat'l Bank v. Clark, 143 First Nat. Bank v. Douglass County, 552 First Nat. Bank, Graham v., 122 First Nat. Bank v. Haire, 517 First Nat. Bank v. Harris, 514 First Nat. Bank v. Hughes, 586 First Nat. Bk., Kingsley v., 338 First Nat. Bank v. Nat. Exchange Bank, 513 First Nat. Bank v. Peterborough, 568 First Nat. Bank v. Pierson, 513, 514 First Nat. Bk. v. Port Jervis, 137 First Nat. Bank v. Rex, 512 First Nat. Bank, Spofford v., 514 First Nat. Bank v. StaufiFer, 552 First Nat. Bank, Van Leuven v., 513 First Nat. Bank, Weckler v., 513 First Nat. Bank, Wright v., 552 First Nat'l Bank of Charlotte v. Mor- gan, 553 Fish, Pardee v., 423 Fisher, United States v., 562 Fishkill Sav. Inst. v. Bostwick, Receiv- er, 203 Fitzgerald, Hirschfeld v., 154, 155 Flagg V. Munger, 166, 175 Fleckner v. V. 8. Bank, 514, 515 Follett, Stephens v., 529 Folsom V. U. S., 563 Fortier v. Nat. Bk., 516 Forty Second St. R. Co. v. Fifth Ave. Bk., 136, 320 Fourth Nat. Bank, Cruikrfhank, v., 552 Fourth Nat'l Bank, Nashville Tr. Co. v., 142 Fowler, BonafFe v., 149 Franklin Nat'l Bank, Elder v., 141 Friendship Ass'n, Biglin v., 343 Fuller, State v., 562 Fulton Bank v. N. Y. & S. Canal Co., 137 Fulton Nat. Bank, Bruce v., 230 Funk, Martin v., 216 Furman, Conklin v., 148 Furniss v. Sherwood, 341 G. Galli, Carey v., 532 Galli, Casey v., 532, 539, 559, 577 Gamble v. Queens Co. W. Co., 369, 371 Gansberg v. Sagemohe, 224 Gardiner, Persons v., 155 Gardner, Paine v., 104, 582 Garth, Glenn v., 154, 323, 346 Gartter, New Amsterdam Bank v., 217, 578 Gas Consumers Benefit Co., Hawes v., 323 Gate City B. & L. Ass'n v. National Bank of Commerce, 138 Gearns v. Bowery Sav'gs Bank, 221 Gelster v. Syracuse Sav. Bank, 218 G. E. R. Co. V. Anderson, 422 German-Amer. Bank of Tona. v. Schwinger, 143 German-Am. Mutual Warehousing Co., Nat. Park. Bk. v., 362 German Sav'gs Bank, Maas v., 221 Germania Bank v. Boutelle, 139 Germania Sav. Bk., Kuramel v., 217 Gibson, Kennedy v., 526, 552, 576, 581 Gill, Anderson v., 140 Gillett V. Campbell, 156, 339 Gillett V. Moody, 119, 147, 306 Gillett V. Phillips, 339, 340 Glenn v. Garth, 154, 323, 346, 365 xlii TABLE OF CASES. Goggiii, State Board v., 44 Gold Mining Co. v., National Bank, 555 Goshen Nat'l Bk. v. Bingham, 139 Gould, Hobart v., 577 Grafing v. Irving Sav'gs Inst., 221 Graham v. First National Bank, 122 Graham, National Bank v., 512, 574 Grant, O'Brien v., Ill Graves v. Labanon Nat. Bank, 510 Graves v. V. S., 563 Graves, Welles v., 555, 558, 585 Gray v. Merriam, 136 Gray v. Oxnard Bros., 312 Gridley, People's Bank v., 520 Guild V. Wheeler, 138 Gimton, Zautzingers v., 517 H. Hackettsto-wn Nat. Bank v. Kea, 195 Hade v. McVay, 578 Hadley v. Craigie, 138 Hagar v. Union Nat. Bank, 554, 557 Hagmayer v. Alten, 154 Ilaire, First Nat. Bank v., 517 Hale V. Seaman's Sav'gs Bank, 221 Hall V. Baker, 438 Hallett V. Harrov^er, 158 Halstead v. Dodge, 330 Hamilton Avenue, Matter of, 421 Hanna v. People's Bank, 280 Harbeck, Brouwer v., 341, 342 Harpeuding v. Munson, 338 Harris, First Nat. Bank v., 514 narrower, Hallett v., 158 Hart, Varnum v., 337 Hartford Dep. Co., Chemical Bank v., 590 Haseltine v. Central Bank, 554 Hatch Lithographing Co., Throop v., 338 Havfes v. Gas Cons. Benefit Co., 323 Hawkins, Concord Bank v., 515, 529 Hawthorne v. Calef, 530 Hayden, Stuart v., 530 Hayes v. Beardsley, 589 Hayes V. Shoemaker, 521 Helmer, N. Y. T. & L. Co. v., 99, 194, 220 Hepburn v. School Directors, 568 Heroy v. Kerr, 340 Hicks, Moot v., 364 Hill, Roberts v., 515 Hir.schfeld v. Bopp, 154, 155 Hirschfeld v. Fitzgerald, 154, 155 Hirschfeld v. Kursheedt, 154 Hitz V. Jenks, 580 Hitz, Keyser v., 527, 532, 539, 579, 5B0 Hoag, Sawyer v., 519, 577 Hobart v. Gould, 577 Hoge, Belmont Branch Bank v., 423 Holbrook v. Bassett, 340 Holden v. N. Y. & N. E. Bank, 137 Holland Med. Co., Woodward «., 429 Hollins V. St. P. & M. R. R., 311 HoUister, Bailey v., 149 Hollister v. HoUister Bank, 147, 423 Hollister Bank, In re, 147, 422 Holmes, Ex parte, 311, 373, 376 Holmes & Griggs Mfg. Co. v. Holmes & Wessell Metal Co., 331 Holmes & Wessell Metal Co., Holmes & Griggs Mfg. Co. v., 331 Home Bank, Martin v., 143 Home Sav. Bk., Mitchell v., 218 Horton Ice Cream Co. v. Merritt, 320 Houghton V. McAuliffe, 341 Hoyt, Reed v., 332 Hoyt V. Thompson, 339, 434 H. R. R. R. Co., Johnson v., 420 Hubbell, Nat'l Butchers' etc. Bank v., 140 Hudson City Sav'gs Bank, Cosgriff v., 225 Hughes, First Nat. Bank v., 586 Hulburd, Van Antwerp v., 535, 579 Hun V. Carey, 212 Hun V. Salter, 212 Hun V. Van Dyck, 212 Hurd V. Kelly, 211, 212 Hutton, Taylor v., 508, 511 Imp. er cent, of such capital, excepting the amount held by the State, had been thus contributed. The "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 oapital 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 note* 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 T^few York city. October 1, 1833, pur- suant to the order of President Jadtson, 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 Eepublic stood creditor in account with the commercial world; UISTOEICAL, SKETCH. 31 wlien 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 payment in xsTew York city, which was partly due to excessive foreign trade. The 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 that the 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 ex- isting banks. The banking system of 1829 lost all public confidence; the "Bank Fund" became banlirupt; May 10, 1837, all the New 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 proceed- ings 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 !N"ew 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 5ie several States to resume specie payments on the first •Such an act, at the present time, would be unconstitutional. Art. VIII., sec- tion 5, N. y. Const. 1846, provides, "the legislature shall have no power to pass any lav/ sanctioning in any manner, directly or indirectly, the suspension of spe- cie payments by any person, association or corporation issuing bank-notes of any description. 32 HISTORICAL SKETCH. 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. Office ov Bank Gommissionees. The previously mentioned law of 1829 directed the appointment of three Bank Commissioners, whose duty it was to visit the banljs 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 tlie 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 banlcs, 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 tlie Commissioners. The appointment of a fourth Bank Commissioner was provided for by an act passed May 14, 1840, and banks organized under the General Banlting 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. Geneeal 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 otlier 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, *Sueh method of appointraent would probably be considered unconstitutional at the present time. Goodnow's Adm. Law. HISTOllICAl- SKETCH. 33 liinited only to the statutory amount. The General Banking Law of 1838 swept them away on the instant. It wisely separated the issu- ance 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. 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 insolveoit banks, exclusive of capital stock, was limited to a stated amount. CoNSTITtrTIOSTAUTY OF THE GeNEEAL BaISTKING 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 ISTew York, of 1821, it was or- dained 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 creating, continuing, altering or renewing any body politic or cor- porate." The question as fo 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) •Thomas v. Dakin, 22 Wend. 9. 3 34 HISTOKICAL SKETCH. thnt tie law entitled "An act to authorize the husiness of banking," passed April 18, 1838, was valid and constitutionally passed, al- though it may not laave received the assent of two-thirds of the mem- bers elected to each branch of the legislature; and held (2) that the associations organized in conformity with the provisions of the act entitled "An act to authorize the business of banking," were not bod- ies politic or corporate within the spirit and meaning of the constitu- tion, and this court reversed the judgments of the upreme Court in these cases, f In October, 1852, the Court of Appeals reversed the judgment of the Supreme Court, and held that every association organized under the General Banking Law was a moneyed corporation, within the meaning of the statutes of this State relating to moneyed corporations; and was botmd and affected by those statutes, excepting only so far as sucli statutes are inconsistent with the provisions of the act to au- thorize the business of banking or of the acts 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.:j: Peomikent PEOVisiojsrs or the Gbinteeal Banking Act. Under the system of 1838, the Superintendent of the Banldng De- partment must be in a,ctual 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 provided 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 Genera] 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 tWarner v. Beers and Bolander v. Stevens, 23 Wend. 103, 100. tTalmage v. Pell, 7 K. Y. 328 ; Bank Comm'rs v. St. Lawrence Bank, id. 513, IXISTOEIOAL, hKETCH. 35 Banking Act, and subject to all general enactments applicable to mon- eyed 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 "Se- cured 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. Kepudiation 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 banlis failed, and the legislature partially retrieved its error May 14, 1840 (ch. 363), by excluding all stocks except those issued by this State, and required those to be 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 re- demption of a circulation, amounting to $1,197,559, showed a loss of $600,000. The stocks of the State of Eew 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-hold- ers thereby sustained a loss of $300,000. Individuai, Bankees. 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 the 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 should appear from such report that any other person is so interested with said banker, and in case two successive reports of said 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 re- 36 HISTOEICAL SKETCH. ports as aforesaid, to be sued for and recovered by the Attorney-Gen- eral in the name oi 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, 1S54 (eh. 242), when a law was passed providing that the law above quoted be made applicable to all individ- ual bankers who may hereafter do business under the General Bank- ing 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 indi- rectly, 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 and advantages thereof, the said Superintendent 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 interested as afore- said, and duly ackaowledgcd by him, stating that such person is inter- ested with such individual banker in the circulating notes obtained, or to be obtained, by him, and in the benefits and advantages of circulat- ing 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 obligations created or made by him in the said business. By section 8 of the same act it 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 I/aws 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 of the securities deposited, the same should be conducted only in tho 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.* •The provisions affecting individual bankers are scattered throughout the prea- iiistokical sketch. 87 Eesponsieility of Stockholdees. The Convention of 1846 inserted a clause in tlie 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. Ee- vised 1846, art. VIII., § 7.)*f 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 redemption of the same in specie." It was also provided that "In case of the in- solvency 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 legislature 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 stockliolders 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 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 State 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 ent codification herein published, and can be ascertained by reference to the fol- lowing sections: Numbers 2, 7, 8, 17, 20, 21, 25, 42, 55, 58, 65, 67, 69, 78, 79, 102, 174, and 213, all of which should be consulted. The notes to these and other sec- tions will show the laws upon which they are based. As to constitutionality of statute prohibiting private banking, see editorial note to State V. Scougal, 15 L. R. A. 477. tSee N. Y. Const. Revised 1894, art. VIII., § 7, post. *Empire City Bank, 18 N. Y. 199; 17 How. Pr. 323; 15 N. Y. 9; 21 id. 9; 22 id. 9. 38 HISTOEICAL SKETCH. on the circulation of State banks, has resulted in driving such circula- tion out of existen(!e. 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 wh6n the above mentioned Convention as- sembled a practice had grown up under the General Banking Law, of establishing banl<:s 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 Isew 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 OAvn 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 cashier should, in every report made to the Comptroller, state that their business had been 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 of Supeeintendbnt of the Bankiitg Depaetment. 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: .11I8T0KICAL SKETCH. 89 sion of individual tankers operating under the banking laws. Eeports 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 supervision. Trust, loan, mortgage, guaranty and indemnity companies or associa- tions Avere required to report to him semi-annually by chapter 324 of the Laws of 18T4. Ey an act (ch. 613, Laws of 1875), passed June 21, 1875, corporations for the safe-keeping and guaranteeing personal property were also placed under his supervision. The institutions over which he has supervisory powers are regularly examined, savings banks biennially, all others at least once each year, and may also bo 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 interested as an individ- ual banker. He makes digests of the reports of the various institu- tions, which are incorporated in his two annual reports to the legisla- ture. 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 espe- cial province is the supervision of building and lot associations and of mortgage, loan, or investment corporations. The superintendent receives his appointment from the Governor and Senate, and holds of- fice for three years. Those who have been appointed to the office are : SUPERINTENDENTS. KAMES. Daniel B. St. John. . Marius Sohoonmaker. James M. Cook Henry H. Van Dyck. , Edward Hand George W. Scliuyler. . Daniel C. Howell De Witt C. Ellis A. Barton Hepburn . . Willis S. Paina Charles M. Preston.. Frederick D. Kilburn EESTDENCES. Albany Albany Ballston Spa Albany Calskill Ithaca Bath Rochester. . . Colton New York. .. Kingston . . . Malone APPOINTE», April April January April August January February February April April December January 15, 1851 4, 1854 30, 1856 16, 1861 9, 1865 3, 1866 3, 1870 19, 1873 13, 1880 27, 1883 23, 1889 8, 1896 40 HISTOBICAl. SKKXCH. Increase of Banking Capital. The rapidity -with which banks imiltiplied from 1848 to 1853 is shown by the remarkable increase of banking capital, as compared with previous years. Fiom 1843 to 1848, the increase was $735,- 512, while from 1848 co 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, wiih isvly a single exception, satisfied the demands of their bill-holders, without resort to the securities deposited with the Banking Department. Kedemption of Bank Notes. By the act for the Eedemption of Bank ISTotes (eh. 202, Laws of 1840), each bank was to appoint an agent in Albany or New 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 redeem them at one-half 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 m.ade 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. Thas 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. No 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 twen- tieth 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 (ch. 203), that it should be the duty of every corporation, banking association and individual banker outside of the cities of New 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 New York, Albany HISTORICAL SKETCH. 41 or Troy, at a rate of discount not exceeding one-quarter of one per cent. The provision to be found in section 1 of tlie act of 1838, that to secure the payment of one-half of tlie whole amount of circulation bonds and mor1:gages 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 (eh. 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 cir- culation 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 cent am in stocks of this State ; both stocks to be equal to or be made equal to stocks yielding interest at the rate of six per centum per annum ; and the securities then held by the Bank- ing Department, so far as the same consist of United States stocks and stocks of this State, might be adjusted on the application 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. Taxation. 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 capi- tal 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 ease 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 Hunt 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 Eevised Statutes in 1828. *People V. Dolan, 36 N. Y. 59. 42 HISTOBICAL SKETCH. "Ro decisions of eases arising under tliis act have been reported. The Eevised Statutes provided that the capital stock of all moneyed or stock corporations, deriving any income from their capital or othei> 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 cliaritable institutions. The first reported decision arising under this act was that of On- tario Bank v. Bunnell,! in which it was decided that a banking corpo- rauon 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 freeholders and inhabitants 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 mean- ing of the act. In 1838 the General Banking Law hereinbefore mentioned was en- acted. Ch. 260. Associations formed under it were held to be cor- porations, and as such liable, like other moneyed institutions, to taxa- tion on their capital. .{; Other decisions with respect to the method of assessment were also rendered, it being hold 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 es- tate of the company, and such portions of the stock as were exempt from taxation.* Jso 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 tlO Wendell, 186, Sup. Ct. 1833. JThomas v. Dakin, 22 Wend. 9; Warner v. Beers, 23 id. 103; People v. AsaessorB of Watertown, 25 id. 686. 'Bank of Utica v. City 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. IBank of Utica v. City of Utica, supra. HISTOBICAL SKETCH. 43 could not he taxed on their surplus profits remaining on hand and un- divided, 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. Ch. 65, Laws of 1S53. Under this stat- ute 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. 430), the third section of which subsequently gave rise to much conflicting litigation respecting the right of the State to directly or indirectly tax securities of the United States 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, ■stall 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 tke 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.f 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 I^ational banks by taxing the portion of capital stock they represent- ed having thus failed, it was next attempted to reach these securities by taxing the banks on a valuation equal to the amount of their cap- ital stock; the law of 18G3 (ch. 240), passed for this purpose, de- clared that, "All banks, banking associations and other moneyed cor- porations and associations should be liable to taxation on a valuation equal to the amount of their capital stock paid in or secured to be paid {Acts 1861-62, 346. •People V. Com. of Taxes, 23 N. Y. 192; S. C. 34 Barb. 509. tPeople V. Com. of Taxes, 26 N. Y. 163. - §2 Black, 620, 17 L. ed. 451. See also editorial note to State B'd of Equalization v. People em rel. Goggin, 58 L. E.. A. 513,-568, on taxation of capital stock of corporations, where the cases bearing on this phase of the question are presented. 44 HISTOEICAI- SKETCH. in ._, and their surplus earnings (less ten per cent, of such surplus), in the manner now provided by law, deducting the value of the real es- tate held by any such corporation or association, and taxable as real es- tate." The State courts upheld the validity of this act, § but were again reversed by the U. S. Sapreme Court. || "The effect of these decisions of the Eederal court," says Mr. Jus- tice Marvin, in the People v. Board of Education, 46 Barb. 594, "is nothing more and nothing less than that the State cannot by any sys- tem 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 K'ational bank shares held by any person or corpora- tion in the valuation of the personal property of such person or corpo- ration, 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 as- sessed upon other moneyed ca])ital 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 asso- ciation is located ; provided, also, that nothing in this act should ex- empt the real estate of associations from either State, county or municipal taxes, to the same extent, according to its value, as other real estate is taxed."* In view of this amendment, the legislaturfe the following year passed an act (ch. 97, Laws of 1865), providing that the shares in all State and iNational banks held by any person or corporation should be included in the valuation of the personal prop- erty 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 iN'ational bank shares by including them in the valuation of the per- sonal property of the holder and owner also proved abortive, for while the Court of Appeals held that the shares in a !N"ational bank could be §People 1). Com. of Taxes, 40 Barb. 334. 1 1 People V. Com. of Ta.Mes, 2 Wall, 200, 17 L. ed. 793. *Act of 1864, § 41. For an exhaustive presentation of the authorities bearing on the subject of state taxation of national banks, see editorial note to McHeniy V. Downer, 45 L. R. A. 737. HISTOBICAL SKETCH. 45 assessed under this law,f 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 their capital.:}: The legislature now abandoned the taxation of the capital of both State and National banks by enacting the following year (1866), that no tax shoiild hereafter be assessed upon the capital of any banli: or banlfing 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 banliing 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, mujiic- ipal and other taxation to the same extent and rate and in the same manner as other real estate is taxed. § 1, ch. 761, Laws of 1866. This act was subsequently upheld 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 finally secured by which a tax on bank shares and bearing indi- rectly 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 banlc, whether its cap- ital be invested in U. S. bondb or other securities, are subject to taxa- tion and assessment under State law at the place where the bank is located and not elsewhere, but not at a greater rate than that imposed tCity of Utica v. Churchill, 33 N. Y. 171; overruling People v. Barton, 44 Barb. 148. tVan Allen v. The Assessors, etc., 3 Wall. 573, 18 L. ed. 229; People v. Com. of Taxes, 4 Otto, 415. 24 L. ed. 164. •35 N. Y. 423. §S. C. 4 Wall. 244, 18 L. ed. 344. 46 HISTOniCAL SKETCH. on shares in State banlca located at the same place, or upon other mon-; eyed capital in the hands of individual citizens of the State imposing- the tax. With respect to this last condition it has been held:}: that thu l^rovision of the ISTational Banking Act, §that tlie taxation of the shares of National banks "shall not be at a greater rate than is as- sessed iipon other moneyed capital in the hands of individual citi- zens," refers to the rate of taxation exclusively and not to the as- sessed 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 compli- ance with both the act of Congress authorizing the shares to be "in- eluded 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. 1 1 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 tised in the act, refers to the actual value of the stock, not its nominal amount. Speaking of this system of taxing bank shares. Judge Eaet. re- marks in People v. Com. of Taxes,f that it "is in entire harmony with that of taxing other personal property. The Kevised Statutes pro- vide that aJl personal estate 'shall be estimated and assessed by the as- sessors at its full and true value as they would appraise the same in payment of a just debt from a solvent debtor.' This provision re- quires 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 which will in all cases give the true value, to wit : "What the same would he tWilliams v. Weaver, 75 N. Y. 30. §U. S. R. S. § 5219, U. S. Comp. Stat. 1901, p. 3502. J|See, also, Tappan v. Merchants' National Bank, 19 Wall. 490, 22 L. ed. 189. *PeopIe V. Com. of Taxes, 09 N. Y. 91; S. C. 9 Hun, 650. t67 N. Y. 520. HISTOEICAL SltETClU 47 worth in payment of a just debt to a creditor entitled to and able to procure the cash, for Ms debt." Amendments. During the great panic of 1857, the banking laws received no mate- rial amendment, the State of JSTew York presenting the best banking system and the best ciirrency of any State. In 18(31 came the civil war, and with it the demand of the govern- ment for millions of dollars when thousands had heretofore an- swered. Bank suspension and panic became inevitable, and vsdth the application by Congress of the ISiew 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 National bank currency took its place.:]: In the year 1882 a compilation and revision of the statutes relating to banks and cognate institutions was enacted.§ Ten years there- after another compilation and revision was adopted by the legislature as a part of the general revision of all the laws.|[ The extension of the liability of stocldiolders and also of the enlargement of the juris- diction of the banking department to all moneyed corporations, except insurance corporations, and the increase of its powers have previous- ly been mentioned. The restrictions specified in sections 179 to 188 inclusive and 190, 191 of cliapter 409 of the I^aws of 1882, which did not seem to be ap- plicable 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- fifth ihe capital stock actually paid, and surplus of the bank or banker making the same, was materially amended (ch. 606) by the legisla- ture of 1893. It was then enacted that such restriction shall not ap- ply 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 ex- JSee introduction to National Bank Act, post. §See preface to first edition. ill See preface to fourth edition. 48 IllSTOniCAL SKETCH. isting 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 hankers, or of commercial or business paper actually owned by the person negotiating the same. This per- centage 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 are as follows: Loans to any person, eom-pany, corporation or firm, or on paper up- on which any such person, company, corporation or firm may be lia- ble, 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 Lhe cities of Brooklyn or E"ew 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 o-wm 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 direct- or 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 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, is transferred to those general laws respect- ively, while all penal provisions have been transferred to the Penal Code. 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. In previous editions of this work a number of special statutes di- rectly affecting the daily business of banking institutions had been HISTOKICAL SKETCH. 49 carefully collated. During the past ten years many of tliese statutes have been transferred to the new revisions designated "General Laws." The statutes affecting the taxation of banking institutions have been embodied in the Tax Law, and many enactments directly affecting banking organizations and bankers have been made part of the ISTego- tiable Instruments Law. The latter general law has been adopted almost in its entirety by more than eighteen States, and is destined to become the code of negotiable paper. In a volume intended for ready examination by bankers and by members of the bar, these laws seemed a necessary part of this work and have been collated 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 sound 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, whose men and whose principles have given a currency the actual value of which is the same as its nominal value, in two hemispheres. Bakks, 4 50 HISTOIUCAL SKETCH. AETICLE 11. Savijn-&s InSTITUTIOS'S. A savings institution is tlius defined by the Supreme Court of the United States : "It is not a commercial partnership, nor is it an arti- ficial being, the members of which have property interests in it. Nor is it strictly eleemosynary. Its purpose is rather to furnish a safe depository for the money of those members of the community dis- posed 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 med- ical science, or the Society of Antiquaries for the advancement of the study of antiquities. Its purpose is a public advantage, without any interest in its members." Judicial decisions in Pennsylvania, JSIew 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 "quasi 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 Ben- tham in 1797; whether or not he knew of the savings banks already established does not appear. The conclusion of the eighteenth centuryf witnessed the first at- tempt in England at establishing a savings bank, when Rev. Joseph Smith of Wendover, in conjunction with two of his parishioners, of- *Scratchley's Treatise on Savings Banks, 36. t''In this country [Great Britain], tlie first proposals for a bank of savinga were made in 1798." Lewin's Hist, of Savings Banks, 19. HISTORICAL SliOSTCII. 51 fered to receive from any inliabitant of his parish suras 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 frugal- ity. If the money was paid back before Christmas, no bonus was al- lowed. There can be no doubt that the Eev. 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 note in the city of London did not be- gin operations until the end of January, ISlC.f 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 Prance 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 Provident Institution for Savings in the town of Boston, Massachu- setts," 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 *We are warranted on the Whole to conclude, that though some institutions, similar both in their principles and details, had been formed before the Parish Bank of Euthwell, yet it was the first of the kind which was regularly and mi- nutely 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 fair- ness entitled to the appellation of the parent society. London Quarterly Review, Vol. XVI. 102. tLondon Quarterly Review, Vol. XVI. 103. JTlie preamble of this, the first act, begins as follows: "Whereas certain provi- dent 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 estab- lished thereby, etc." Acf57, George in.ch. 130, 1817. 62 HISTOEIOAL, SKETCH. savings bank was held in the assembly room of the City Hotel, ITew York City, on Friday evening, jSTovember 29, 1816. The organiza- tion of tlie institution then initiated was due to the efforts of Thomas Eddy, who had been for many years a correspondent of Mr. Patrick Colquhoun, a magistrate of London, and connected with many of the benevolent institutions of that city. Mr. Colquhoun advised Mr. Eddy, April 19, ISIO, of the savings institutions then existing and being organized in Great Britain 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 "Kesolved, 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 Col- lege), 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 se- cure 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 follomng, 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 fur- ther seems to have been done in the way of conducting 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 Eng- land, he says : "A plan was formed, and a number of our most re- spectable citizens agreed to undertake the management of it ; but wo found that we could not go into operation without an act of incorpo- ration, for wliich w6 made an application to the legislature, and the result is not yet known."-}- The records of the legislature show that on February 3, 1817, the memorial of Robert Browne and others, of New York City, was presented to the legislature :- — ^the memorial de- claring "'Robert Browne, and others, inhabitants of the city of New York, have formed an establishment in said city for the purpose of tKnapp's Life of Eddy, 266. HISTOEICAL SKETCH. 53 receiving on deposit such sums of money from persons belonging to tke laboring classes of the community as they are able to save from their earnings, and to allow them an interest thereon." And the me- morial further prays the legislature to gxant them an act of incorpo- ration as an association to be known as "The Savings Bank of the City of ISTew York." This memorial was read and referred to a se- lect committee, consisting of Mr. Eussell, Mr. Sharpe, and Mr. Em- mott. On the 11th of March foUovsdng, this committee put forth the opinion : "However desirable 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 vrisdom, the committee further gravely declare "The expense necessarily attendant in such an estab- lishment will lessen, if not defeat, the benevolent views of the peti- tioners." Still the committee mag-nanimously add, "We are unwill- ing to preclude, 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. Russell leave to bring in his bill, which was entitled "An act to in- corporate the Savings Bank of the City of ]S!"ew 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 bill was reached in committee of the whole, and the Monday following, the 31st, desig- nated as the 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 imusual 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 ISTew York," to "An act to incorporate an association by the name of The Savings Corporation of the City of ITew York." This bill was again referred 54 HISTOEICAL SKETCH. 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 banlcs of deposit and discount. It is possible, also, that the legisla- ture did not care to give 'the name "Bank" to a mere institution of de- posit. It should be stated in this connection that, on the 10th of March, the petition of M. Willett and many others, praying to be in- corporated as a "ISTew York Interest Bank" — having in view the gen- eral purposes of a savings bank — was referred to a select committee, and three days later sent to the committee 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 'Hew York City did not pass the legislature and receive the necessary approval of the Council of Eevi?ion until March 20, 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 measur- ably discouraged. After the repeated 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 projectors deter- mined to nominally change the object. Instead of a bill for a savings institution, they endeavored to secure the same object under a differ- ent name ; they applied for an act of incorporation for the relief and permanent benefit of the working classes, and it proved the entering v/edge for a savings bank. But this was the outcome of many devel- oping attempts. It was at the New York Hospital, on Friday the 16th December, 181T, that a number of gentlemen met to consider the subject of pauperism. General Matthew Clarkson was appointed chairman, and Divie Bethune secretary. It was then and there "Re- solved, that the citizens present, with those who may hereafter imite in the measure, be constituted a Society for the Prevention of Pauper- ism." It was also resolved to appoint a committee to prepare a con- stitution and report suggestions 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 commit- tee consisted of John Griscom, Brockholst Livingston, Garrett N. •Keyes' Hist, of Savings Banks, 318. HISTOKICAi. SKiETCH. 55 Bleecker, Thomas Eddy, James Eastburn, Eer. Cave Jones, Zacha- riah Lewis and Divie Bethune. Eebruary 6, 1818, a meeting of tkc society was held, at which the committee's report was presented; among various recommendations by the committee the first proposi- tion is the establishment of savings banks or benefit societies, life insurance, etc. At that meedng a motion was made by Mr. John Griscom, who was a philanthropic gentleman, much interested in edu- cational and scientific objects,* that a savings bank be organized, which motion was adopted. Subsequent meetings continued to bo held, and soon after the name of the Eev. Dr. John M. Mason appears as among its promoters. It was, however, too late to accomplish any- thing 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," hereinbefore mentioned, and which had failed in the legis- lature the preceding 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 char- acter. The conviction that an inslitution for savings was a desirable and 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 181Y. 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 difiiculties in the path of the laboring class, while yet he regarded with no leniency the evils arising from inconsiderate alms-giving. A portion of the message 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 aliment 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 *It is interesting to note that out of this "Society for the Prevention of Pau- perism," and especially owing to the efforts of the same John Griscom, the "So- ciety for the Care of Juvenile Delinquents or House of Refuge" came into exist- ence, being the first organization of its kind in the world. Ch. 126, Laws of 1824. 56 IIISTOBICAI. SKETCH. deserving public patronage "all such institutions as your Excellency tas enumerated whicLi are so obviously calculated to alleviate the evils of pauperism by inspiring industry, dispensing employment and inculcating ecojiumy." 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 apppears 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 incorporation of a savings bank in New York 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 Mon- day 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., ISToah Bro-wn, William Few, Brockholst Livingston, Cadwallader D. Golden, George Arcularious, Thomas Buckley, Duncan B. Gamp- bell, Benjamin Glark, James Eastburn, Henry Eckford, Thomas Eddy, Philip Hone, John E. Hyde, Peter A. Jay, Zachariah Lewis, Dennis McGarthy, Andrew Morris, James Palmer, John Pintard, Abraham Eussell, Jacob Sh erred, Joseph Smith, Wajah Taylor, Jere- miah Thompson, William Wilson and Samuel Wood" were "consti- tuted a body corporate and politic by the name of 'The Bank for Sav- ings 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 witliout further amendment. The Assembly thereupon ordered "that the clerk deliver the same to the Honorable, the Council of Revision," from whom the Assembly received a message on Fri- day, March 26, returning the bill "approved." And thus the "Bank for Savings in the City of New York"* became an established fact in 'This, tlie first savings batik established in the State of New York, eomraeneecl business on July 3, 1819, in the basement of a building on Chambers Street, which was destroyed by fire in 18.57, 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 IIISTOIMCAL SICKTCH. 57 the legislative history of the State of New York. "From the begin- ning what great results were to flow ? And who shall undertake to measure the sum of the good wrought by the savings hanks since their first establishment seventy-five years ago? Who will undertake to state how much poverishment has been prevented and how much com- fort 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 legisla- ture in the \vinter of 1820. Its success was assured. An accumula- tion of "more than $150,000" was reported as having been received from 1527 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 of the institution the trustees ap- pointed three of their number in rotation to attend at the bank for one month as a committee "to receive deposits, to see that the entries were duly made, and to make inquiries as to the situation of the de- positors, 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 busi- ness of the bank, and with the condition of its affairs. This 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 invest 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 institution led to the establishment of others. The second savings bank established was on a charter gTanted to Eev. William James and other citizens of xVlbany. The petition of Mr. James and others was presented in the Assembly on January 28, 1820, and re- ferred to a select committee consisting of Messrs. James, McKown, Irving and Sharpe. There was no delay as formerly. February 4th this committee reported favorably on the petition asking leave to bring in a bill. Leave was griinted. On the 18th of March the bill erected another banking house on the same street. The march of improvement and the convenience of depositors, however, induced the tmstees to also sell that property, and the bank is now located at 280 Fourth Avenue. 58 HISTOEICAL SKETCH. establishing the Albany Savings Banks passed the Assembly; five days later it passed the Senate. The bill was returned from the Coun- cil of Kevision 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 Utica 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. Savings Banks Benevolent, not Chaeitable. 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 surplus earnings of domestic servants," were in the beginning wholly philan- thropic, yet the whole character of the institutions which followed these so-called banks has changed. The use of an expression which savors, however remotely, of the giving of alms, must needs be pecu- liarly oft'ensive to the thousands of our citizens whose self-denial is represented by the deposits of over a billion dollars held by the sav- ings banks of this State. HIKTOKICAL SKETCH. 59 The reports of the savings banks January 1, 1903, show an increase over any preceding year in the items of resoui-ces and liabilities, the increase in deposits alone being nearly $63,000,000, a sxim in excess of any previous year. 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 manage- ment 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 vi^hich are the pride of the State. Teustees aitd Otheb Officees. We may first treat of changes of the laws relative to the officers of savings banks. 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 1875 (§ 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 jS'ew 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 New Tork and Kings counties — indeed it was intended for the cities of New 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 60 i-xrsTOiacAi. sketch. S a S 2 s o " !, -I 1 « >> f-Ji 3 tu P «S ■s^ 00 ■a a .® a m o OQ GO t-- f- CT O C- "^ •**< Co" O CO OO '^* CC" CO ■^' aocDOc>f(M03003 r-aoo t- TT oa cooo CO -H :o T-H TO C0"'^TjJ"'*jriO l> OD -rjf l0"l0"U5 tH ■'jf lO l6 iO lO *0 CO OS OS w » OS CT ^ CO CO o ^ o ■y» CD i-H W 5 «o OS o w » co'i>'os^*c T-H C5 CD *0 T-lT-H C» « o 9 pq A o J3 o & s o •g .g ^ 5 a V -9 ■s O tt-n H *^ n a « bo a> Qjia ► (1 o o a » 2 .a ■^ H +J OD bO a I QQ THTO00(Ni-TjiO0SOC0C0t-10-^C-Q0-<*i-l i>'^OlOOOCDGOtOOSi-lO»*efr-lOCQi-iiM^iO 00005lC«CD*Ot-»OC-Oi>00505'^CO*Oa>CO ■^'to cD^mTc^ ^ t> 00 ic i^"cD"aro o» OS o o « co'co i-HOS^OaOCD'^aOCDOCO^CO'^TOOOSQOOiC MCD0»*i3O0Jir3C0£:'t>TP-^(DOl>Wt— OSTt*OS TtToo co'os o(© lo'o o'lff i-H irf"G<> CO CO OS c» c-"os cT O'Qt-OOOCOCDOOOOO'^CDoaOSGOt-OOSCDOO i-ii-ti-li-t(M0«G*l«C0C0«C0CCCQTj<10C0t-0SO ■^ JO CD ■^ OS-** coco t- eo ^ CD CD i-H^CN^ co'— '"-^ C-CO(M iO CD CO o" t-Tto' OS O OS ^00 -H O 00*0 5D01 O — t iO TO TO OQO CD"i-rco" ososc<> Oi -T-t 09 CD^Oa 30^ o'os"?©' CO O OS i-Tio'T-H *> OS t- C4C4 0) — «i>ioos TO OS »0 1-1 !D^ OS 00 CD ^C^^'CD ^ OOS CO ^ Tli CD t- OOQOOO W 09 0) 02 CO oj ts>o Qor* *>OOTO O"^ OS rH OS ^' TO lO -^sT— «"CD (sT OOOi-Hi-H TO ■^ CO O CO OS lO Co'o'r-TcD 1/; CO 00 W CO TO TO TO ^ CO i-;CDTO ■^ OS TO CC Tjt>CD' •Tti e» TO (M_OS iO Os" »o TfT OS O CO TJH ic iO b-i-tCO CD U? OS 30f^ i> co'x'os' OO IC oo 0> -^t 00^ coos W lO lO CO SOCD-^ « GO OS TO CD lO TO CO CD (N 40 00 iO OS 00 OS rt< Tji t-"»i3 CO -tt CD i> 1-1 CDCDCO t* 00 00 O ^ OSOO -H m ic tf^'cO*Q0" TOCO I> -t*' io'to" omoo co-<#co «D (W 00^ to'i-h'o" i> »o oj »-* c- ■^ i-t CD CQ ODQOOS OS CD-* CO OS -H CT t- OS OS -^ I> O r-H CD C» « O lO CO o'cd''^'^" O CD TO OS moScoaScditiro;Sceo3c3dtia3cacc!cdg3c333 cadnaflSQcacaaaaanaaa ,w_o3 rooSeartrtoagjecitirt^qSegegcgaeefli ^" in' co' ^•* oo' OS* o i-T « to" TtT UD cd' t^ 00 of o' i-^' « TO OOX)OOOOCOOOOSOSOSC?OSOSOSOSOSCt^^^i^ ODOOOOOOOOOOOOOOOOOOOOXOOOOODOOOSOsS® IS llIhTOBICAL SKETCH, 61 State, and removal from the State by a trustee after his election or appointment vacates his office. By the revision of 1882 and subse- quent amendments, the minimum board of trustees was fixed at thir- teen, and tvro-thirds of the board must be residents of the county ■where the bank is located, and the insolvency of a trustee vacates his ofiice. There have been bat two exceptions to the usual mode of consti- tuting the boards of trustees. The first may be found in the charter ■of the Institution for tlie Savings of Merchants' Clerks, which was obtained April 12, 1848 (ch. 324). Section 2 of that charter 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 the Chamber 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 the Mercantile Library Association of the city of Kew York should always be ex-officio man- agers, and the nine members elected by the said Chamber of Com- merce, together with six ex-officio managers, should elect the remain- ing nine managers. The second exception is in connection with the hybrid concern char- tered May 14, 1868 (ch. 816), known as the People's Safe Deposit and Savings Institution of the State of ISTew York. Section 2 there- of provided that after the persons named in the charter should serve as directors for one year, the directors were to be elected by the stock- holders. Investments. 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 establish- ment 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 Y'ork 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 62 HISTOKICAL SKETCH. the legislature, witli 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 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, ITew York, Pennsylvania, Ohio, and the city of E"ew York. In 1830 (ch. 90) the Bank for Savings in the City of New Y'ork 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 vsdthout 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; during this time the fact remains to be emphasized, that there was a constant diminution of the United States public debt, until 1835, when it was almost nothing, being but $37,500. 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 avail- able 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 proportion- able to capital or deposits as in the national banking system, but was fixed at an arbitrary amount not to be varied whether the deposits were a him.dred thousand or a million of dollars, and a peculiar fea- ture of the law was that this reserve was not necessarily to be in gold, HISTOKICAL SKETCH. 63 silver or baiJi-notes, or even negotiable securities, but "in such avail- able form as the trustees may direct." In February of the same year, applications having been made for charters for savings banks at Buffalo and Eochester, the Assembly 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 liigh character and standing of these several boards of trustees," and declare "the way is open for defaulters and swind- lers 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 recom- mend that securities be not changed without the consent of two-thirds of the trustees, that the banks should be subjected to the supervision 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, rhey say, "where men get nothing for their services they are siire 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 Eoch- ester, and also refused to pass a general law for the incorporation of savings banks. The legislature of 184Y (ch. -156) 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 moneys 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 with 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 (cL 179) investments were allowed in tlae stocks of any city in this State; in 1853 (ch. 257) the legislature allowed the savings banks of ISTew 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 legislature 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 imposition of a 64 HISTOKICAL MKE TCIC, tax. There was no change in the general legislation of the State relative to savings banks until the year 1875 (ch. 371), when a gen- eral law was passed. The amended constitution of the State, ratified by popular vote in 1874, 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 legislatiire 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. Contrary to general expectation, a conclusion was reached, and a bill agreed upon, substantially that of the Assembly, with some of the Senate's modifications incorporated. The bill not only con- tained the customary repealing clause, but also a provision repealing all charters and parts thereof inconsistent with the act. By its pass- age every savings bank in the State was brought under the provisions of one fundamental law, containing uniform powers, limits and safe- guards for all. Briefly epitomized, the bill provided for the organi- zation of savings banks through the office of the Bank Superintend- ent; limited individual deposits to $5,000; limited dividends to six per cent, per anniim 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 divi- dends declared and credited in excess of earnings ; protected deposits of minors and females ; prohibited the banks from pleading the stat- ute of limitations in defence of actions brought to recover deposits ; and authorized investments in the following 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, HISTOJIICAL, SKETCH. b5 within ten years previous to the investment, defaulted in principal 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 banking purposes but under careful restrictions as to the amount. Investment in other securities was made a misde- meanor. An available fimd, in the form of cash on hand or deposited, was provided for, a flexible amount 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 boms by the banks. This, in brief, is a summary of the salient features of the general law of ISTS, which admirably served its purpose, and the substantial provisions of which were retained in the law of 1582 (ch. 409), and are included in the present law (L. 1892, eh. C09). 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 Dis- trict of Columbia, commonly known as the 3-65 bonds, and any inter- est-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 18T9 (ch. 4.37), and for the latter by chapter 134 of the Laws of 1880, both of which laws were repealed by and their provisions included in the Laws of 1882 fch. 409). By chapter 524, Laws of 1887, interest- bearing obligations of other States, and like obligations issued by any city or county in this State, were added to the list of investments; and by chapter 373, Laws of 1888, the list was increased so as to in- clude school-district bonds and "union free school-district bonds is- sued for school purposes." The present banking law (1892, ch. 689), which supersedes the Law of 1882 and said laws passed subse- quent thereto, in addition to the foregoing securities includes all the bonds of the District of Columbia and warrants of the city of Buffalo. The legislature of 1893 enacted a statute (ch. 440) whereby tiustees 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 Banks, 5 66 HXSTOKICAIi SKKTCH. exceed seven per cent, of its valuation for the purpose of taxation, its bonds and stocks shall thereafter cease to be an authorized invest- ment for the moneys of savings banks, but the Bank Superintendent may, in his discretion, require any savings bank to sell or retain such bonds or stocks of these cities as may have been brought before this indebtedness." Tliis enlarged scope of investment has been further extended by subsequent amendments to include bonds and stocks of other named cities, and the first-mortgage bonds of certain classified railroads in this State, and certain named railroads of other States. The last enactment of this nature took effect May 21, 1903. While the deposits in these institutions annually increase at a rapid rate, the range of investments tends constantly to diminish be- cause of the maturity and payment of Federal, State and municipal bonds, and it will presumably become necessary from time to time to enlarge the classes of securities in which these banks and institu- tions may invest their funds. DiVIDBIiJDS. An investigation of the subject of dividends to depositors is of interest. A customary provision in the charters granted by tlie 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 shall receive as nearly as may be, a ratable proportion of all the profits of the corporation after de- ducting the necessary expenses." An act passed April 23, 1831 (ch. 154), entitled "An act concern- ing the Bank for Savings in the City of New York," authorized the board of trustees of that bank to regulate from time to time the in- terest to depositors, so that the 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 others. 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 (ch. 257), provided that "No such savings bank or institution for savings hereafter to be incorporated shall re- ceive from any individual depositor a larger sum than $1,000, or a larger amoant than $3,000,000 in the aggregate amount of deposits, exclusive of its banking-house ; and the rate of interest on all deposits of $500 and under, shall be one per cent, per annum greater than shall be allowed on any sum exceeding $500." The steady growth HISTORICAL SKKTCH. n( of these institutions is shown in the schedule below.* The present law may be found in Section 123 of the Banking Law, post, SuEPLus Moneys. Another source of legislative discussion was the surplus moneys January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 January 1 , 1858. , 1859. , 1860. , 1861. , 1863. , 1863. , 1864. , 1865. , 1866. , 1867 , 1868. , 1869. , 1870. , 1871. , 1873 . , 1873. , 1874. , 1875. , 1876. , 1877. , 1878. , 1879. , 1880. , 1881. , 1883- , 18H3. , 1884. , 1885. , 1886. , 1887. , 1888- , 1889. , 1890. , 1891. , 1893. , 1893. , 1894. , 1895. , 1896. , 1897. , 1898- . 1899. , 1900. , 1901. . 1903. , 1903. Deposits. $41,432,673 48,194.847 58,178,160 67,440,897 64,08J,119 76,538,183 93,786,884 111,737,763 115,472,566 131.769,074 151,127.563 169,808,678 194,360,317 230,749,408 267,905,836 285,386,631 285,530,085 303,935.649 819,260,203 316,677,385 312,823,058 299.074.639 819,258,501 353,639,657 387,833,893 413,147,213» 431,080,010 437,107,501 457,050.250 483,486,730 505,017,751 523,677,515 550,066,6.57 574,669,972 588,435,420 639.358,273 617,089,448 643,873.574 691,764,503 718,176,888 766,684,916 816,144,867 887,480,6.50 947,139 688 ,014,30.5,857 ,077,383,743 Interest paid Number of Average of to open each depositors. accounts. account. $2,070,851 203.804 $203 24 2,197,787 230,074 309 47 3,610,913 273,697 208 91 3,834,349 300,693 224 38 8 088,931 800,511 313 21 8,079,302 347,184 3^0 45 3,760,524 400,194 234 35 4,593.901 456,403 244 83 5,647,505 465,001 248 33 5,678,453 488,501 270 10 7,400,110 537,466 281 18 8,666,874 588,556 288 51 10.320,207 651,474 296 80 12,148,985 713,109 324 08 13,744,144 776,700 334 93 14,977,618 833,643 346 79 16.153,997 839,473 340 13 16,139,949 873,498 348 35 16,990,284 859,788 371 00 16,457,847 849,638 373 73 14,936,868 844,550 870 40 13,139.690 810,017 369 28 13,462,081 864,470 869 52 13,650,977 9.58,707 870 79 18,673,308 1,0H6,106 374 33 14,153,005 1,098,971 876 05 14,734,663 1,147,588 875 64 15,038,236 1,165,174 375 14 15,151,979 1.208,073 378 33 15,777,033 1,264,585 381 65 16,731,303 1,835,063 381 13 17,395,919 1,363,8.53 384 35 18,397,998 1,430, 9t.7 387 10 19,S35,506 1,477,819 388 30 20.089,789 1,516,289 388 00 21,379,956 1,593,804 394 87 22 249,637 1,585,155 890 50 23,736,140 1,615,178 398 63 24,338,416 1,695,787 407 93 25,414,559 1,736,968 413 46 26,551,733 1,805,280 434 69 27.907,811 l,865,6.'i3 437 45 29,539,688 1,981,371 447 91 31,339.820 2,072,190 457 06 38,620,994 3,174,511 466 45 34,911,413 2,275.383 473 49 68 HISTOEICAL SKETCH. which had accumulated in the several savings banks. Chapter 254 of the Laws of 1831, passed April 23, entitled "An act concerning the Bank for Savings in the City of New York," provided for the ac- cumulation of a surplus fund as follows: "The board of trustees of the I'.ank for Savings in the City of JS'ew 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 case 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 tbe 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 banlc, below the par value there- of, any loss to the depositors by reason of such reduction may be pre- vented 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 aiithorized by the act incorporating said banks, a sur- plus fund not exceeding ten per cent, on the amount of deposits 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. And no such corporation shall have any capital stock, nor shall the trustees thereof, or any of them, have any interest whatever, direct 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 01" 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 UISTORICAI, SKETCH. 69 any special charter for banking purj)oses; but corporations or asso- ciations may be formed for such purposes under general laws." § 4 of Art. VIII. 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 ISTT, 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 niai-ket value if below par. All the foregoing pro- visions are retained in the present law (Sections 123 and 124). Pay of Teustees. The first savings bank charter in this State said : "The trustees or managers of said institution shall not, directly or indirectly, receive 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 en- acted : "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 corporation, 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 the law was changed, making it lawful for trustees of institutions for savings in the counties of ISfew York and Kings, and in the city of Buffalo, "to pay to their respective presidents such compensation for their serv- ices as shall, in the opinion of such trustees, be reasonable." Ch. 136. In 1863 (ch. 476) 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. The law now provides that no trustee of a savings bank shall have any interest whatever, direct or indirect, in the gains or profits there- 70 HISTOKICAl, SKETCH. of, nor as such, directly or indirectly receive any pay or emolumenta for his services, except as thereinafter provided. Another section provides that it shall be lawful for trustees of such corporation, act- ing as officers of the same, whose duties require and receive their regu- lar and faithful attendance at the institution, to receive such com- pensation 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 appointed, 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 125, Banking Law. post.) Bonds to guarantee the fidelity of the officers and clerks may be accepted from approved surety companies, and the premiums may bo paid by the bank, and will be allowed as a necessary disbursement LTnclaimed 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 imclaimed 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 respect- ive counties the moneys of all depositors whose accounts had not been added to by new deposits or diminished by drafts during the preced- ing twenty years. This bill failed to become a law. 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 intro- duced in the Assembly, having for its object the confiscation of these so-called unclaimed deposits. A conomittee 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 fruitfxil 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 HISTOBICAL SKETCH. 71 the legislature proposing to transfer these unclaimed moneys to the 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 many have confounded the surplus moneys of our sav- ings banks v^^ith the unclaimed, and to tliis 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 drawn to the subject of un- 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 by the several banks to be $854,844.72, of Avhich 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 ag- gregate 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 28, Banking Law, post.) 72 HISTOKICAL SKl'/rCK. 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 individ\ial members of the legislature to impose upon these institutions the burdens of taxation. With few exceptions these ef- forts 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 exempts deposits in savings banks absolutely from taxation. He further states that a depositor cannot, tlierefore, 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 wa.s amended by ex- empting 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 legislative discussion, as it has been on several occasions since that date, notably in 1 880, 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 Bari^aiid gave an opinion at Spe- cial Term of the Supreme Court of New York that under the 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- •See note to section 5219 U. S. E. S. (U. S. Comp. Stat. 1901, p. 3502) post. HISTOKICAL SKETCH. 73 ijioiisly reported an act "to provide revenue for the State ty 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,- f/00 ■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. 4, 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, § 187b, 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 great educators; and while the State exempts from taxation all school 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 would reduce the surplus, lessen dividends, discourage deposits and impair the usefulness of these institutions, thus injuring the public far be- yond the measure of the tax received. 74 HXBTOillCAL SKETCH. AKTICLE III. Moneyed Coepokatioi^s^ other thait Banks^ Banking Associa- tions^ Individual Bankees 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 cor- porations, mentioned in the heading of this article, beginning with 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 ob- tained 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 ttis chapter. Tbust 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 cha/acter as they deem advisable, while the former must have a large capital, which, with their trust funds, should be invested in the best sec irities. There must be unquestionable security to depositors, and the interest that may be paid them is wholly of secondary considera- tio]i. 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 •It nay not be altogether out of place to state that the author and his asso- riates n ade, at the request of the then Superintendent of the Banking Depart- ment, ti^ ^X ^jT^l ing,' contains provisions similar in their nature to tlie section of the Revised Stat- utes. For example, section 297 provides that 'uo person unauthorized by law shall subscribe to, or become a member of, or be in any way interested in any associa- tion, institution or company formed, or to be formed for the purpose of issuing notes or other evidences of debt, to be loaned or pat in circulation as money; nor shall any person unauthorized by law subscribe to or become in any way inter- ested in any bank or fund created or to be created for like purposes, or either of them.' "This provision applies to one of the attributes of a bank, viz., the issuing of notes, etc. "Again, section 299 provides that 'no incorporated company, without being au- thorized by law, shall employ any part of its effects, or be in any way interested in any fund that shall be employed for the purpose of receiving deposits, making discounts or issuing notes or other evidences of debt to be loaned or put in circu- lation as money.' "A comparison of these provisions with section 4 {supra) shows that they are substantially the same, with this exception. The section of the Revised Statutes forbids any and all corporations 'except those formed for banking purposes' from exercising the prohibited powers, and the provisions of the act of 1882 qualify this provision in so far that it prohibits the exercise of these powers by corpora- tions 'not being authorized by law' to exercise them. Thus creating the inference that the powers may be exercised by corporations authorized to exercise them, even though such corporations were not formed for 'banking; purposes.' "While the distinction may not be material concerning corporations formed under the laws of this State, as the legislature in providing for the creation of such corporations has ample power to limit the effect of section 4 so far as it refers to them, and the authorization to exercise one of those powers would ipso facto he a modification of said section, still, the distinction becomes very material to the question in determining the rights of corporations formed under other States. To illustrate: Under section 4 a corporation formed under the laws of another State could exercise no one of the powers mentioned, unless 'expressly incorporated for banking purposes.' Such a corporation would have to be a bank as recognized vmder the law of this State. But a corporation, although formed under the statutes of another State, which was expressly authorized by the law of its creation to receive deposits might satisfy the requirements of the act of 1882. § 299. Such a corporation, although not one 'expressly incorporated for banking purposes,' would, nevertheless, be a corporation 'authorized by law' to receive deposits. "The provisions of the act of 1880 {supra) show plainly, I think, that the gen- eral intention was to revise and compile all the laws in reference to banking in one act. The result of such revision and compilation was chapter 409 {supra), which was adopted and passed by the legislature as containing all the laws in force up to that time on the subject; and while there is authority for holding that the act of 1882 would have the effect of annulling all previous laws relating to the same subject, even though such laws are not inconsistent therewith and are neither by name nor in substance contained in the new act. Ellis v. Paige, 1 Pick. 4.3; Lyon v. Smith, 11 Barb. 124; Matter of Southworth, 5 Hun, 55. "It can be stated without fear of contradiction that a statute which is intended to revise the whole subject treated of in a former statute and to be a substitute therefor, containing substantially the same provisions as the former statute, is a 102 I'UE BANKIIfG LAW. repeal -G LAW. attending the management of its affairs and transaction of its busi- ness. 2. The interest paid, or then due and accrued, or debts owing by it. 3. All losses sustained by it. In the computation of such losses, 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 recov- ered that shall have remained for more than two years unsatisfied, and on which no interest shall have been paid during that period. R. S., 1554, L. 1882, ch. 409, §§ 180, 181; amended L. 1893, ch. 696. 1. All surplus funds are liable for debts, and must be used in payment thereof, before breaking into the capital. Scott w. 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 r. 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 di- rectors or trustees, and will not be controlled by the courts. Beveredge v. N. Y. E. R,. Co., 112 N. Y. 1, 2 L. E. 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 § 26 of banking law to determina surplus for payment of dividends are liable, under § 23 of stock corporation law, which is in the nature of an Indemnity, and not a, penalty such as § 25 of banldng law. Dykman v. Keeney, 10 App. Div. 610, 42 N. Y. Supp. 488. § 27. Losses in excess of profits.— AH losses sustained by any cor- poration or banter 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 good, either by the recovery of the moneys charged as loss, or from the subsequently accruing profits of the corporation. E. S., 1554. L. 1882, ch. 409, §§ 182, 183. THE BANKING LAW. 123 § 28. Publication of unclaimed dividends and deposits. — Every baiilf and individual banker doing business under any law of the state shall annually, on or before September first, cause to be published for six successive w^eeks 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 author- ized to receive the same for five years then next preceding. The ex- penses 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 resi- dence, 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 amount, 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 declared 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 the banking department, verified by the oath of tlie two principal ofiicers of the institution, con- cerning 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 ; thr t is, accounts which have not been In- creased nor diminished by deposits or withdrawals, exclusive of in- terest credits. The accounts of depositors whose pass-books have been presented at the bank for the entry of interest earned, within the period of twenty-two years, shall not be deemed dormant accounts within the meaning of this act. 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 bank show to have five dollars or more to their credit, 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, pa- 124 'I'jlE J.WNiailiG I,A\\-. rents' name if known, and the date when the bank discontinued the crediting of interest on each account, together with any additional data which may aid in determining the ownership of such dormant account. All subsequent reports, in addition to dormant accounts not previously reported, shall contain 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 ac- counts 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 hxuidred dollars per day for every day such report or state- ment 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 sufficient cause, extend the time for making such report or statement not ex- ceeding 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 enti- tled to any such dividends, interest or deposit, and whenever any in- quiry 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 dividends, inter- ests or deposits are held. R. S., 1520, L. 1882, ch. 409, | 25. Id., 1521, L. 1882, ch. 409, § 20. Id., 1584, L. 1835, ch. 202. L. 1889, ch. 414, §§ 1, 2, 3, 4. § 29. 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 lim- its of the town, village or city in which the business is carried on, such change may be made upon the wiitten approval of the superintend- ent ; if beyond such limits, notice of intention to make such applica- tion, signed by the two principal officers of the corporation or individ- ual banker, shall be published once a week for two weeks in a news- THE BAxYKJNG LAW. 125 paper published in the city of Albany, and in a newspaper publlsbed in the county in which such place of business is located, to be desig- nated by the superintendent of banlis. The application 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 case of corporations enumerated in articles five and six of this chapter and by chapter one hundred and twenty-two of the laws of eighteen hun- dred and fifty-one and by chapter seven hundred and five of the laws of eighteen hundred and ninety-four) be accompanied by the written assent thereto of at least two-thirds in amount of the stocldiolders of the corporation, or by the banker. If the superintendent shall be satisfied that there is no reasonable objection to such change of loca- tion, 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 pub- lished once in each week for two successive weeks in the newspapers in which the notice of application was published. When the require- ments of this section shall have been fully complied with, the corpora- tion or banker may, upon or after the day specified in the certificate, remove its property and effects to the location designated in the cer- tificate, 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 any liability of the corporation or banker incurred or existing at the time such change was made. R. S., 1583, L. 1887, oh. 517. Amended L. 1895, ch. 39. The question, whether a change of location within a city or town requires con- formity to the former aet (ch. 517, L. 1887) was ruled upon by the attorney-gen- er.al in an opinion filed in the banking department, March 28, 1888, as follows: — "The word 'location' as used in the aet is one of narrower meaning than the word 'place;' and while it might be plausibly maintained that the word 'location,' 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 in the S'lme 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 126 THE BANKING LAW. to be im 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 gi'eat annoyance and prejudice of at least a portion of the public." As to locality of corporations, see note in 12 Abb. N. C. 226. § 30. Approval and certificate of superintendent upon incorporation. — JSTo corporation to which this chapter is applicable shall he incorpo- rated hereunder, or transact any business in this state other than such as relates to its formation, witliout the written approval of the super- intendent of banks and withoTit his written certificate statin'^' that it has complied with the provisions of this chapter and with all the re- quirements of law, and that it is authorized to transact within this slate the business specified therein, and that such business can be safely intrusted to it; which certificate shall be recorded in the 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. New. § 31. Permission and certificate of superintendent in ease of foreign corporations. — JsTo foreign corporation incorporated for the purpose of carrying on the business specified in articles five, six and seven of this chapter shall transact business in this state without the written per- mission of the superintendent of banks and a written certificate from him stating that such corporation has complied with all of the provi- sions 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 that 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 superiiLtendent 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 safe- ly intrusted to it. New. § 32. Appointment of superintendent as attorney for service of pro- cess. — ^0 foreign corporation, company or association, to which this chapter is applicable, shall transact any business in this state until it THE BANICIiSG LAW. 127 has executed and filed witli the superintendent of banks a written in- strument appointing suck superintendent its true and lawful attor- ney, upon whom all process in any action or proceeding by any resi- dent of the state against it may be served with the same effect as if it existed in this state and had been lawfully served with process there- in. 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, prepared* and directed to the secretary of such cor- poration, 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 psLvt of his taxable dis- bursements if he succeeds in the suit or proceeding. The term proc- ess in this section includes any writ, summons, petition or order whereby any suit, action or proceeding shall be commenced by a resi- dent of the state. § 33. Appointment of receiver.— If it is made to appear upon ap- plication of any creditor or shareholder in any such corporation, com- jDany or association, residing in tlds state that the funds on deposit with the superintendent of bunks are insufficient to pay in full the creditors and shareholders residing in thisstate, or that it is insolvent, or has suspended business, or that insolvency or bankruptcy proceed- ings have been taken against it either voluntarily or involuntarily, the supreme court may, upon due notice to the attorney-general, and up- on-«such notice to the corporation, company or association as the court shall prescribe, appoint a receiver of such funds; and pending such application, the court or any judge thereof may enjoin the commence- ment or prosecution of any other action or proceeding 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 jiands less any charges which he may have against the same, and the receiver shall distribute s^^ch funds among the cred- itors and shareholders of the corporation, company or association re- siding in this state in the manner prescribed by law for the payment of creditors in the case of voluntary dissolution of a corporation. 1. "From the entry of an order appointing a receiver, the property of the corpo- ration vests in him and is in constructive possession of the court, although not * So in original. 128 THE BANKlJNG iAW. actually in the receiver's possession, and the court has power to prevent any inter- ference with it thereafter by any creditor in any court, state or national. Matter of Schuyler Tow-boat Co., 04 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 litigation affecting its indebt- edness and being bound by any adjudication therein. Del Valle v. Navarro, 21 Abb. N. C. 136. (Sections 34 to 38 were added by L. 1895, ch. 382.) § 34. Merger. — Any two or more corporations, other than savings hanks organized under any one article of this chapter, or organized under the laws of this State for the purposes, or either of them, 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 hoards of directors of such corporations may enter into and make an agreement, under their respective corpo- rate seals, for the merger of one or more of said corporations into an- other of them, prescribing the terms and conditions thereof and the mode of carrying the same into effect, which agreement shall be sub- ject to the approval of the superintendent of banks, and may provide that such corporation upon and after such merger shall have the name of any one of the corporations merged, to be specified in said agree- ment, and may name the persons, not less than thirteen nor more than twenty-four, who shall constitute the board of directors of such corpo- Tation 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 meai, while as shall be agreed upon; and said directors so named or elected, after qualifying shall divide themselves into classes in man- ner and with effect as provided in section one hundred and sixty-one of the banking law of New York, and may adopt new by-laws for said corporation. Am'd V,y ch. 199 of 1900. *So in original. As to light of corporations in general to consolidate see editorial note to Wood V. Seattle, 52 L. R. A. 369, presenting in full the authoritdea on that question, § 35. Submission of merger agreement to stockholders. — Such agree- ment shall be submitted to the stockholders of each of such corpora- tions 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 postoffice, postage prepaid, and published for at least two successive THE BANKISG I,AW. 129 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 r>t each of such meetings of the respective stocldiolders separately by the vote or bal- lot of the stocldiolders 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, re- spectively, 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 which the principal place of business of the corporation into which such corporation or corporations shall be merged is located and there- upon such corporations shall be merged as specified in such agree- ment, and the corporation into which the other, or others are merged, shall thereafter have the new name, if any, specified in such agree- ment pursuant to the provisions of section thirty-four of this act, and the provisions of such agreement shall 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 cer- tificate of stock held by each stockholder in each or either of the com- panies, and in lieu thereof to issue new certificates for such number of shares of its own stock as under the agTeement of merger the said stocldiolder may be entitled to receive, Am'd by ch. 199 of 1900. § 36. Rights of dissenting stockholders,— If any stockholder not voting in favor of such agreement of merger shall, at such meeting or within twenty days thereafter, object to such merger and demand pay- ment for his stock, or in the case of building and mutual loan associa- tions or co-operative loan associations, if such stockholder be a hoT- rower, 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 busi- ness, upon at least eight days' notice to said corporation, for the ap- pointment 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, Banks, 9 130 THE BANKIKG LAW. ■with such directions in regard to their proceedings as shall he 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 vacancies in the board of appraisers occurring by refusal or neg- lect to hold such office. The appraisers shall meet at the time and place designated and after being duly sworn shall honestly and faith- fully 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 stockholder be a bor- rower as aforesaid when he shall have paid the amount of his indebt- edness 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 cor- porate property, and such stock may be held and disposed of by the corporation for its own benefit ; and if such stockholder 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. § 37. 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 be- longing shall be deemed to be transferred to and vested in such cor- poration into which it has been merged, without any other deed or transfer, and said last named corporation shall hold and enjoy 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. § 38. 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 THE BANKING lAW. 131 thereof, he in any manner released or impaired, and all the rights, obligations and relations of all the parties, creditors, depositors, trus- tees and beneficiaries of trusts shall remain unimpaired by the mer- ger, but such corporation into which the other or others shall be merged shall succeed to all such relations, obligations, trusts and lia- bilities and be held liable to pay and discharge all such debts and lia- bilities, and to perform all such trusts of the merged corporation in the same manner as if such corporation into which the other shall be- come merged had itself incurred the obligation or liability or assumed the relation or trust, and the stockliolders of the respective corpora- tions so entering into such agreement shall continue subject to all tho liabilities, claims and demands existing against them as such at or be- fore such merger, and no suit, action or other proceeding then pend- ing before any court or tribunal in which any corporation that may bt liicrged is a party shall be deemed to have abated or discontinued by reason of any such merger, but the same may be prosecuted to final judgment in the same manner as if the said corporation had not en- tered 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. Am'd by ch. 199 of 1900. 132 THE BANKING LAW. 'AETICLE IL Banks. Sec. 40. Incorporation. 41. Amended certificate of incorporation. 42. Certificate of individual banker. 43. General powers. 44. Lawful money reserve. (§§ 45-48 repealed.) 40. Payment of capital stock. 50. Directors. 51. Oath of directors. 52. Individual liability of stockholders. 53. Limitation of liability of stockholders. 54. Powers of president and vice-president. 55. Rate of interest. 50. Rate of interest on loans on warehouse receipts. 57. Deposit of banks and individual bankers with superintendent, 58. Prohibition .against sale of business of individual banker. 59. Change from state to national bank. 60. When deemed to have surrendered its charter. HI. Reduction of capital stock in such cases. e2. Certificate of change. 63. National bank may become state bank. 64. Circulating notes; plates. 65. Circulating notes of individual bankers. 66. When bank may receive interest or dividends upon securities deposited. 67. Redemption agencies. 68. Destruction of bank-notes. 69. Destruction of plates and counterfeit notes. 70. Exchange of mutilated notes. 71. Redemption in notes of other banks. 72. Protest of notes and proceedings thereon. 73. Appointment of agent by new corporation. 74. Revocation of appointment. 75. Distribution of funds of insolvent banks. 76. Distribution of residue. 77. Publication of notices. 78. Redemption of notes held by banks and individual bankers. 79. Banks closing business. 80. Proportionate amount of secm-ities to be returned when notes are de. stroyed. 81. Deposit of cash for redemption of notes. 82. Circulation of foreign bank-notes prohibited. 83. Notes not receivable at par not to be paid out. 84. Bills or notes must be payable on demand. THE BATSTKING LAW. 133 85. When bills of exchange to be without grace. 86. Transfers of securities by superintendent to be countersigned by treasurer. 87. Unauthorized banliing prohibited. 88. Restrictions as to foreign corporations. 89. Kestrictions as to banks and their ollicers. DO. Bills payable otherwise than in money prohibited. 91. Certain bills declared to be promissory notes. 92. Use of sign indicating bank by unauthorized persons prohibited. § 40. Incorporation. — Five or more persons may become a bank by making, acknowledging and filing in the office of the clerk of the coun- ty where such bank is to be established and in the office of the superin- tendent 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 dis- count 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 unincor- porated, whose population does not exceed two thousand, and not less than fifty thousand dollars in any city, village or town whose popula- tion exceeds two thousand but does not exceed thirty thousand, and not less than one hundred thousand dollars elsewhere, the population 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. 0. The dates at which such corporation shall commence and termi- nate. 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. Every such certificate, when filed, shall be recorded by the county clerk in the books kept for the record of certificates of incorporation, and by the superintendent of banks in a book to be kept by him for that purpose. Such certificate may provide for an increase of the capital stock and of the number of per- sons forming the corporation, from time to time, as the stockholders may deem proper, and for the manner in which the stock of the cor- poration may be transferred, and for the number of directors neces- 134 THE BANKINa I>A\V. sary to constitute a quorum, and for the time when the annual elec- tion of directors shall he held. Amended L. 1893, eh. 408. See section 4 general corporation law, and sections 44-46 stock corporation law. E. S., 1522, L. 1882, ch. 409, §§ 29, 30. Td., 1524, L. 1882, ch. 409, § 39. Id., 1.526, L. 1882, ch. 409, § 58. 1. Blank forms for the organization of banking associations may be obtained from the superintendent of the banking department. 2. Any association so formed may sue or be sued in its corporate name, or in the name of its president as president of such corporation. Delafield v. Kinney, President, 24 Wend. 345. § 41. Amended certificate of incorporation. — Whenever any bank shall, by virtue of the provisions of its certificate of incorporation or other lawful authority, make any diange 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 president and cashier under its corporate seal, shall have been filed and record- ed in tlie same manner as the certificate of incorporation is by law re- quired to be filed and recorded, R. S., 1523, L. 1882, ch. 409, § 34. § 42. Certificate of individual banker. — Every individual banl^er shall file in the office of the superintendent of banks a certificate stat- ing the town, city or village in which he resides, l^o 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. R. S., 1523, L. 1882, ch. 409, §§ 32, 33. § 43. 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 sach incidental powers as shall be neces- THE BANKIjSTG LAW. 135 sary to carry on the business of banking; by discounting and nego- tiating promissory notes, drafts, bills of exchange and other evidences of debt ; by receiving deposits ; by buying and selling exchange, coin and bullion; by loaning money on personal security; and by obtain- ing, issuing and circulating notes according to the provisions of this chapter. 2. To take and become the owner of any stocks or bonds or inter- est-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 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 Bk. of Buflalo, 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 nature of deposit tickets issued by bank, see editorial note to First Nat. 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 exclianges through New York Clearing House may sue » 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- pliance. Natl. Revere Bank v. Natl. Bank of Republic, 172 N. Y. 102, 64 N. E. 799 ; Aff'g S. C. 54 App. Div. 342, 66 N. Y. Supp. 662. 69. Although a bank's ordina,ry liability on certifying a check is as to sig- nature, amount, and availability of funds, yet when it has information, not know»' 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. § 44. Lawful money reserve. — Every bank or individual banker- 144 THE BANKING lAW. shall at all times have on hand in lawful money of the United States an amount equal to at least fifteen per cent, of the aggregate amount of its deposits, if its principal place of business is located in any city of the state having a population of eight hundred thousand and over ; and an amount equal to at least ten per cent, of the aggregate amount of its deposits, 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. One-half of such lawful money reserve 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 and ap- proved by the superintendent of banks as a depository of lawful money reserve. If the lawful money reserve of any bank or indi- vidual banker shall be less than the amount required by this section, such bank or banker shall not increase its liabilities by making any new loans or discount otherwise than by discounting bills of exchange payable on sight, or making any dividends or profits until the full amount of its lawful money reserve has been restored. The super- intendent 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 mon- eyed corporation. New. (Sec. 45 to Sec. 48 repealed by L. 1895, ch. 382.) § 49. Payment of capital stock.— AH of the capital stock of every bank sh.all be paid in before it shall commence business. E. S., 1518, L. 1882, ch. 409, § 18. Amended L. 1895, ch. 929. N. B. A., § 5140, see post. See sec. 41 stock corporation law. § 50. 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, lifotice 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 capi- tal of fifty thousand dollars or over unless he is a stocldiolder of the corporation owning in his o^vn right an amount equal to at least one thousand dollars in value, nor of a bank having a capital of less than THE BANKING JJLW. 145 fifty thousand dollars, unless he is a stockholder in his own right to an amount equal to at least five hundred dollars ; and every person elected to be a director, who after such election shall 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 directors shall hold office 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 resi- dents of this state at the time of their election and during their con- tinuance in ofiice. All vacancies in the office of director shall be filled 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 ofiice, 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 ma- jority of all the votes of the stockholders of such bank fix or change by resolution the number of directors, not less than five nor more than a certain number to be named in said resolution, which such bank may have; which number, when so fixed, shall be the lawful number of directors of such bank until again changed. Certified copies of all resolutions fixing or changing the number of directors under this section shall be immediately filed in the banking depart- ment. One of the directors to be chosen by the board, shall be the president of the board ; and if the certificate of incorporation or the by-laws do not prescribe the number of directors necessary to consti- tute a quorum, and makes no provision for determining the same, the directors may fix the number necessary to constitute a quorum for the transaction of business, which shall not be less than five, with the same effect as if such number was prescribed in the certificate of in- corporation. Whenever the articles of association of any bank or- ganized prior to the first day of January, eighteen hundred and nine- ty-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 di- rectors may be changed so as to comiply with the provisions of this section in the manner prescribed for a change of the number of di- rectors under section twenty-one of the stock corporation law. Am'd by ch. 240 of 1900. Am'd by ch. 145 of 1902. A1.S0 amended by ch. 89 of 1900. Banks, 10 146 THE BANKING LAW. 1. All powers conferred upon a corporation, unless otherwise expressly pre- scribi'd, 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. E. R., 112 N. Y. 1, 2 L. R. A. 648, 19 N. E. 489. 2. When the directors of a bank vutually 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 charge- able with notice of the fraud, and the bank is liable to the extent that it is bene- fited. City ISiatl. Bank v. Natl. Park Bank, 32 Hun, 105. A director of state bank, knowing its insolvency and who participates in direct- ing subsequent receipt of deposits wliich are checked out and paid to favored de- positors 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, Aflf'g 54 App. Div. 205. § 51. 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 corporation, 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 owTier in good faith and in his own right, of the number of shares of stock required by this chapter, subscribed by him or stand- ing 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. Such oath shall be subscribed by the director making it, and certified by the officer before whom it is taken, and shall be im- mediately transmitted to the superintendent of banks, and filed and preserved in his olhce. New. § 52. Individual liability of stockholders. — Except as prescribed in the stock corporation law, the stockholders of every such corporation shall be individually responsible, equally and ratably, and not 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 bo appointed, all actions or proceedings to enforce the liability of stockholders under this section shall be taken and prosecuted only in the name and in behalf of such receiver or receivers, unless such re- ceiver or receivers shall refuse to take such action or proceeding upon THE BAN-KING I^AW. 147 proper request in tliat behalf made by any creditor, and in that event such action or proceeding may be taken by any creditor of the corpo- ration. The term "stockholder," when used in this chapter, shall apply not only to such persons as appear by the books of the corpora- tion to be stockholders, but also to every owner of stock, legal or equi- table, although the same may be on such books in the name of another person, but not to a person who may hold the stock as collateral for security for the payment of a debt. R. S., 1542, L. 1882, ch. 409, § 125. Id., 1543, L. 1882, ch. 409, § 126. ^\mended L. 1897, ch. 441. See sec. 54, stock corporation law. 1. In 1844, Assistant Vice-Chancellor Sanford, in Boisgerard v. New York Bank- ing Company (an association under the general banking law), 2 Sandf. Ch. 23, held that banking associations under the general banking law of 1838, were with- in the provisions of the Revised Statutes, entitled, "Of proceedings against corpo- rations in equity." This case was afterward affirmed upon appeal by the chan- cellor. 4 Ch. Sent. 20. See, also, Sagory v. Dubois, 3 Sandf. Ch. 466; Gillet v. Moody, 3 N. Y. 479, and Talraage o. Pell, 7 N. Y. 328 ; Cleveland's Banking Law, 59. 2. This act was passed to give elTect 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 Janu- ary, one thousand eight hundred and fifty." It was held to apply to all banks, as well those organized before, as after 1840, 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 statvite which imposes upon the stockholders of a corporation a personal liability for the corporate debts must be construed strictly. It is in derogation of i.he common law, and cannot be extunded 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. Deo. 292, approved Hollister v. Hollister B'k, 2 Abb. Ct. App. 367. 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. oil. 6. In an action against stockholders of a corporation brought by a creditor to charge them individually with a debt, the recovery of a judgment for the debt is suificient evidence of its indebtedness to charge them, unless obtained by fraud 148 THE BAWKINa LAW. and collusion. Although the statute prohibits judgment against the stockhold- ers, until judgment has been recovered against the corporation and remains un- paid, they may be sued together with the corporation, and a judgment against the corporation authorizes a judgment against them also. Conklin 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 stockholders in case of in- solvency. The leading features of the bill are 1st. To declare the liability 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, Koosevelt, Davies, 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 Re- vised Statutes. 2 E. S. 464, §§39 and 47. Accordingly no creditor of a bank who may have relief under that act, can have it under 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 expedient 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 oificers are acting in good faith, no re- ceiver 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 injimction or not. That discretion is controlled by legal rules, and the injunction should never be granted if the bank is clearly solvent. An em 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 co"v of these opinions to each of the justices of the supreme court of the other dioi,»,cts, with a request that they re- THE BANKIjSTQ LAW. 149 spectively commttnicate to him tlieir 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. BonafFe 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, Eec'r Yates C. B'k, v. Duncan et al., 41 Barb. 520. 12. The provisions of the Revised Statutes (2 R. S. 464-465), entitled "Of pro- ceedings against corporations in equity," are not repealed by this act, at least as far as actions by attorney-general for people arc 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 in- dorsement 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 & Sper^-er, 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 ei 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 Banlc, 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 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 be come at for collection, liable to assessment beyond the proportional amount above described, by reason of the insolvency or inaccessibility of others of 130 TilE BANKING LAW. the shareholders. Those who are solvent and accessible, have not the burden of paying ofl 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 ea.ch 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. cd. 216, and cases there cited. 18. The following correspondence between the then superintendent of the bank- ing department and the attorney-general, and filed in that department September 3, 1884, is of sufficient importance to justify its publication in full: I. "I shall be glad to have your opinion as to the proper interpretation of section 125 of the revision of the Banking Laws in the following connection: That sec- tion is, with slight changes, section 1, chapter 226 of the Laws of 1849. This first section provided that stockholders of 'any corporation or joint-stock association for banking purposes, issuing bank notes or any kind of paper credits to circu- late as money, after the 1st day of Januaiy, 1850,' should be individually respon- sible, equally and ratably to the extent of their shares of stock, for any debt or liability contracted by such corporation or association after January 1, 1850. As nearly eveiy State bank issued circulating notes when this act was passed, its pro- visions afforded a valuable safeguard for the protection of the creditors of State banking institutions. But congressional legislation in the year 1866, imposing a tax of 10 per centum on the circulation of State banks, has resulted in driving such circulaton out of existence. Does the provision of the act, the language of which made the responsibility of stockholders depend upon circulation, longer afford any practical benefit to such creditors!" II. "Your communication, requesting my opinion as to the liability of stockholders of State banks, not issuing bank-note or paper credits to circulate as money, to the creditors of such banks, has been received. I have examined the question in- volved, and my conclusions in regard to the same are as follows : "At common law, stockholders of a corporation are not liable for its debts. The first general enactment of this State, imposing a liability for corporate debts upon bank .stockholders, is to be found in section 7, article 8 of the 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 indi- vidually responsible to the amount of their respective 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.' "The section remains unchanged by revision or amendment. Section 1 of chap- ter 226, Laws of 1849, entitled, 'An act to enforce the responsibility of stockhold- ers in certain banking corporations and associations, as prescribed by the consti- THE BANKING LAW. 151 tution, and to provide for the prompt payment of demands against such corpora- tions and associations,' reiterated the rule laid down in the constitution, and pointed out the proceedings to be taken to enforce the liability. In the case of the United States Trust Company of New York, Receiver, etc., against the United States Fire Insurance Company, also cited as Matter of Empire City Bank (18 N. Y. 199) , it was heM that the constitution and statute of 1849 defined a liability on the part of a stockholder of the banking associatioDS therein mentioned not satisfied with the absorption of his capital stock, but requiring in addition thereto a contribution for the paj'ment of debts to an amount equal to suqh stock. Chap- ter 226, Laws of 1849, was repealed by chapter 402, Laws of 1882, simultaneously with the enactment of chapter 409, Laws of 1882, entitled 'An act to revise the statutes of this State relating to banks, banking and trust companies.' Section 125 of the last-named statute is a re-enactment of the rule of liability as contained in the statute of 1849. "Prior to the adoption of the constitution of 1846, there were in operation in this State two kinds of banks ; namely, those incorporated by special statutes, and those organized under the Banking Act of 1838. Under neither system were the stockholders responsible for the debts or liabilities of their respective corpora- tions, except in rare cases, where the special statute incorporating an institution of the one class, or the articles of incorporation of one of the other class, pro- vided for the stockholders' liability in express terms. Those institutions were, almost without exception, banks of issue. The currrency issued by banks of the first class was practically unsecured. In 1829, the legislature passed an act pro- viding for a safety fund. Such fund never became adequate to its purpose. The enactment of the general banking law of 1838 was a long step toward a secured currency. So long, however, as the banks incorporated by special statute re- mained in existence, no consistent and efficient and general banking system could , be built up. The State was flooded with notes of doubtful value issued by numer- ous insignificant banks. Failures were frequent among such institutions. Many of the evils of irredeemable paper currency were experienced. The policy and intent of the constitutional provision to which I have above referred were, I think, directed solely to the curing of such evils, and were threefold: First, to give to bank-paper issued to circulate as money, the support of the personal responsibility of stockholders; secondly, by the imposition of such liability, to drive out of cir- culation the issues of unreliable banks; and, third, to assist in bringing about a. uniform State banking system. I think that these views are sustained by that provision of the section referred to, which postponed the accruing of the liability until the first day of January, 1850. The banks were thus given upward of three years in which to call in their issues of paper circulating as money, if they saw fit to do so, and thus relieve their stockholders from personal liability. "So far, therefore, as the conditions and surroundings of the State banking sys- tem prior to 1850 may properly be considered in making the inquiry as to the intent of the constitutional and legislative declarations of 1846 and 1849, as a matter of history, they seem to point to the conclusion that the framcrs of the constitution and the legislature had in view the imposition of a personal liability upon stockholders, only in those cases where the banking corporation issued bank- notes or paper credits intended to circulate as money. Aside from the historical probabilities as to the intent of the framers of the constitutional regulation, there is a legal intent in these enactments. STich intent may be ascertained by resort to a well-established rule of statutory construction. As I have already said, at 152 THE BANKING LAW. common law no stockliolder is responsible for a corporate debt. A constitutional or legislative declaration imposing a liability not known to the common law, must be strictly construed, and must not be extended by intendment. Applying this clear rule to the present question, I have no hesitation in saying that the mere power in the corporation to issue bank-notes or paper credits is not sufficient to bring the stockholder within the rule of liability. Unless that power be exercised in an actual issue of bank-notes or other paper credits intended to circulate as money, the stockholder is not responsible for the debts of the corporation. I do not think that the certification of checks, or the making and delivery of certifl- cat°s of deposit, is 'an issuance of paper credits intended to circulate as money.' Vide Curtis v. I^avitt, 15 N. Y. 9, at pp. 222, 225. "For my views upon the general question, I have the warrant of various dicta of the judges and decisions of the courts. Although there are no reported cases which may be cited a;s direct and conclusive precedents, the question has been sev- eral times incidentally considered by the courts, and uniformly the judges have expressed the view that the stockholder is not liable unless the bank actually issues bank-notes. Vide Matter of Empire City Bank, 6 Abb. Pr. 385, 414; S. C. 18 N. Y. 199, 209; Matter of Oliver Lee & Co.'s Bank, 21 id. 9; Matter of Reci- procity Bank, 22 id. 9. "Moreover, I have now before me the manuscript opinion of Mr. Justice Mee- WIN, in an unreported case in the Matter of the Merchants' Bank of Watertown, Special Term, November, 1882. The proceeding was instituted under the statute of 1849, for the purpose of fixing and enforcing the liability of stockholders. The bank was organized under the State banking law, had never issued bank-notes, and was insolvent. The opinion is an exhaustive one. The learned justice looks at the question from various standpoints; inquires whether the clause 'issuing bank-notes or any kind of paper credits to circulate as money" is one of extension or limitation ; reviews all the utterances of the courts upon the question, and unhesitatingly arrives at the conclusion that the stockholders are not liable. "In this case it will be seen that the precise question under consideration was involved and decided after a very careful examination, and although the amount involved was large, no appeal was taken from the decision. An examination of the history and policy of the banking system of this State, of the adjudged cases to which I have referred, and the application of well-settled principles of statu- tory construction must, 1 think, lead to the conclusion that the stockholders of State banks, not issuing bank-notes or paper credits intended to circulate as money, are not liable to the creditors of those institutions." 19. 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 en- forced to an extent necessary to liquidate its debts. Dayton v. Borst, 31 N. Y. 435. 20. 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. 21. Pevfons 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 holdel THE BANKING LAW. 15S is merely the nominal owner like a trustee, and lias no beneficial interest. In re Empire Bank, 18 N. Y. 226. 22. 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. 23. 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. 24. 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- 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. 25. 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 powers, privileges and liabilities of corporations. 1 R. S. 599, § 1, et seq. He sold said stock to B. & Co., a firm of which the president of said cor- poration 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 bylaws 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 Hub, 339. 26. It is a defence, 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 defence 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 154: THE BANKING LAW. he did not know that the representations were false until after the insolvency of the corporation. Briggs v. Cromwell, 9 Daly, 436. 27. The liability of a shareholder to pay for his shares does not arise out of the relation, but upon his contract, express or implied, or upon statute; and in the absence of either of these grounds a person to whom shares have been issued gratuitously (bonus stock) is not liable to pay the par value as upon a subscrip- tion. The unissued shares of a corporation are not assets. Christensen v. Eno, 106 N. Y. 97, 60 Am. Kep. 429, 12 N. E. 648. See section 42 stock corporation law, post. 28. Where a, bank has 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 sufficient. Merchants' Natl. Bank v. Pendleton, 29 State E. 891, 9 N. Y. Supp. 46. 29. 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 registered shareholder and the corporation, which is not within such powers. Campbell v. Am. Zylonite Co., 122 N. Y. 455, 11 L. K. A. 596, 25 N. E. 853. 30. 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. See note to section 29, stock corporation law. 31. In Hirscbfeld 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 af- firmed in Hirsehfeld r. Bopp, 145 N. Y. 84, 39 N. E. 817. On this subject see Hirscbfeld v. Fitzgerald, 157 N. Y. 1C6, 46 L. R. A. 839, 51 N. E. 997, which, in part, reverses Hirsehfeld 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. 32. The provisions of section 52 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 became 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. 59(7, 41 N. E. 570. 33. 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 payment to depositor by various dividends of full amount of principal and contractual interest. THE BANKING LAW. 155 Creditor of insolvent bank need not demand payment from bank before suing stockholder. Parker v. Adams, 38 Misc. 325, 77 N. Y. Supp. 861. 34. Section 52 controls a banking association organized under L. 1838, ch. 2G0; it is a moneyed corporation; such liability applies now to banks not of issue. Hirschfeld «. Bopp, 27 App. Div. 180, 50 N. Y. Supp. 676. Reversed on other grounds, 157 N. Y. 160, 46 L. R. A. 839, 51 N. E. 997. 35. 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 1!. Bopp, 39 App. Div. 613, 57 N. Y. Supp. 699. 36. The requirement that receiver shall bring suit applies when permanent re- ceiver had been appointed before enactment of section 52. Persons v. Gardner, 42 App. Div. 490, 56 N. Y. Supp. 822, 59 N. Y. Supp. 463. 37. Laws 1897, ch. 441, amending section 52, that all actions against stock- holders to enforce their personal liability must be brought by receiver, does not apply to actions pending at lime of amendment. 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. 38. Section 52 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. 39. A plaintiff creditor suing for himself and others under section 52 is not a trustee for other creditors, and ni.ay stop when his claim is settled. Hirschfeld V. Fitzgerald, 157 N. Y. 166, 46 L. R. A. 839, 51 N. B. 997. 40. 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. R. A. 737. § 53. Limitation of liability of stockholders. — No person who 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 sol- vent 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 non-payment 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 corpora- tion contracted such debt or liability. R. S., 1543, L. 1882, ch. 409, § 127. See section 55, stock corporation law. 1. A transfer to the bank itself will not relieve former stockholder. It must, to have that effect, be to some one who takes a personal liability, distinct from the bank. In re Reciprocity Bank, 22 N. Y. 18. 156 THE BANK.IKG ULW, 2. A transfer by a subscriber of his subscription, and the acceptance of the as- signee 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, trans- ferrer, 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, tlie 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 sufficiently 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. § 54. Powers of president and vice-president. — All contracts made by any sneh corporation, and all notes and bills by it issued and put in circulation as money, shall be signed by the president or vice-presi- dent and cashier thereof. R. S., 1527, L. 1882, ch. 409, § 59. See sections 27 and 40, stock corporation law. 1. A certificate of deposit does not require the signature of the president or vice-president, in addition to that of the cashier, in order to bind a bank organ- ized undei' the General Law (chap. 260, Laws of 1838), within this section (i 21). This section insomuch is permissive — ^it does not prohibit the corporation from appointing other agents to contract in its behalf. Barnes v. Ontario Bank, 19 N. Y. 152-157, following 4 Hill, 424. 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. All instruments or contracts signed by the proper officers of the bank are presumed to be made with authority, until the contrary is shown. Gillett v. Campbell, 1 Denio, 520. 4. A promise or agreement of a corporation within the scope of its legitimate purposes, through its officers, 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. Leinkauf v. Caiman, 110 N. Y. 50, 17 N. E. 389. 5. It seems that a contract, or bill, or note, not void on its face, 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. 6. 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 hajok cannot be held liable for such transactions of its president when he had no spe- THE BAISTKING LAW. 157 cial authority, and the bank has been in no way benefited thereby. Eyan v. Man- ufacturers and Merchants' Bank, 9 Daly, 308. 7. 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. 8. The president of a bank is the proper officer to assign its mortgages, and he may use his own seal. Valk v. Crandall et al., 1 Sandf. Ch. 179. 9. 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 conchule the bank. Coats v. Donnell, 94 N. Y. 168. 10. 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. 11. A cashier is the business olficer 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 wliich are discretionary, semi-official and solely within the prerogative of the directors, though done in good faith, under color of authority, and afl'ecting an innocent dealer. An enumeration of the general 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. 12. 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 se- curities 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. 13. K., defendant's intestate, being indebted to plaintiff'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 plaintiff's cashier to secure the specified percentage on its claim by a note with G., as indorser. The cashier thereupon, after consultation with plaintiff'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 effect that plaintiff 158 THE BANKING LAW- 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 plaintilt's bank. The compromisie 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 different. Chejnlcal Nat. Bank v. Kohner, 85 N. Y. 189. 14. 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 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 oBficers systematically absent themselves from the performance of their duties. Second Nat. Bank of Oswego v. Burt, u ^ (Endorsed) Geo. W. Gantz. Ontario Bank «. Schermerhorn, 10 Paige, 109. Talmage v. Pell (.assignment to secure post-certificates of deposit), 7 N. Y. 328. N. Y. Life Insurance and Trust Company v, Beebe (post-certificate of deposit), 7 N. Y. 364. Tracy v. Talmage (in the matter of the claim of the State of Indiana) (post- certificates of deposit), 14 N. Y. 162, 67 Am. Dec. 132. 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. Dec. 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 circulation thereby intended to be prohibited was that of bank-notes proper, or of notes 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 prohibi- tion, must not only be on time or interest, but in similitude of banlcnotes, or adapted to circulate as money. Id. 311; Leavitt u. Blatchford, 17 N. Y. 521; 6 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. Fanners' Bank, of S., THJS BANKING LAW. 187 26 Barb. 568. For a full presentation of the authorities on this question, see ed- itorial note to Flannagan v. California Nat. Bank, 23 L. E. A. 836. 10. This section is not confined in its intei-pretation to bills and notes capable of circulating as money. Applied to negotiable promissoiy 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 tliis 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 «. Palmer, 3 N. Y. 19, 51 Am. Dec. 333, the paper declared void was a promise to pay to order of W. R. C, twelve months after date, with interest, for value re- ceived, 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 Safford v. WyckoflF, 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 issued for circulation. But in this case the certificate of deposit was merely given as a convenient evidence of debt. Pelham v. Adams, 17 Barb. 386. 12. Section 117, as amended, is not applicable to private bankers. See opinion of attorney-general, filed April 30, 1886. 13. The following opinion was given to the bank supeiip it by the attorney- general, March 30, 1885, and prior to the last amendment, , i response to the in- quiry as to whether a certificate of deposit issued by a State bank and payable at a specified time after date with interest, is a violation of section 117, chapter 409, Laws of 1882. Section 4 of chapter 36S, Laws of 1840, was as follows: "No banking associa- tion or individual banker, as such, shall issue or put in circulation any bill or note of said association or individual banker, unless the same shall be made pay- able on demand and without interest, and every violation of this section by any officer or member of a banldng association, or by any indiividual banker, shall be deemed and adjudged a misdemeanor, punishable by fine or imprisonment, or both, in the discretion of the court." That section was amended by section 251 of Laws 1850, so as to except bills of exchange on foreign countries, or places beyond the limit or the jurisdiction of the United States, which bills might be made payable at or within the customary usance, or at or within ninety days' sight. The act of 1850 was repealed by chapter 402 of the Laws of 1882, and the re- pealing act thus repealed the act of 1840, but the General Banking Law, chapter 409, Laws of 1882, was immediately enacted, and section 117 of that act is the same as the section of the act of 1840, as amended in 1850, originally was. Under the act of 1840, the question presented by you was passed upon by the courts, and in numerous cases the certificate of deposit was held to be a promis- soiy note, and when issued in the form suggested to have been in violation of the 188 '-THE BANJCIKG LAW. statute. Bank of Orleans v. Merrill, 2 Hill, 295; Leavitt v. Palmer, 3 N. Y. 19, 51 Am. Dec. 333, and numerous cases cited in Paine's Banking Law, 166, and pages following. An examination of the authorities and a fair construction of the statute (§ 117 ) lead to the conclusion that a certificate of deposit in the form presented, is- sued by a banking association., is in violation of that provision of the Banking Law. FORM. (Of post-bill in Bank of Chillicothe v. Dodge, 8 Barb. 233). "Farmers' Bank of Seneca County. "$5,000." "Three months after date pay to the order of R. D. Dodge five thousand dollars, and charge this institution. RoMULtrs, Sept. 30, 1839. (Signed) "G. P. Hosmeb, A. Cash. "To Waltee Mead, Esq., Cash. "New York." (Endorsed) "Pay D. B. Dodge order." "Rbubbn D. Dodge." "D. B. Dodge." FORM. (Of post-note and guaranty in Swift v. Beers, 3 Denio, 70). New York, 30th June, 1841. "Sixty days after date. The North American Trust and Banking Compant promise to pay to the order of Messrs. Switt & Co., thirty-seven hundred dollar* for value received, with interest; having deposited with them as collateral secur- ity, seven bonds of this Company, secured under the Yates Trust — three for one thousand dollars \^giving the amounts and numbers of the honds], (Signed) "Thomas G. Talmage, Prest." (Guaranty.) 'Tor value received I guarantee the payment of the above note. (Signed) J. D. Beers." THE BANXINtJ LAW. 189 FORM. <0f post-certificates of deposit in Leavitt v. Palmer, 3 N. Y. 19, 51 Am. Dec. 333; 5 Barb. 9). £1,000 St'g. No. I New York, Nov. 30, 1840. ^ "Twelve months after date, the North Amebican Trust and Bank- < ING CoMrANY promise to pay to the order of William E,. Cooke, for P value received, the sum of one thousand pounds sterling, with interest § thereon, at the rate of seven per centum per annum, payable at the H . ±5anldng House of Messrs. Palmers, Mackillop, Dent & Co., London. g ^ "Thos. G. Talmage, President. tH a "Walteb Mead, Cashier." 3 ° 3 "^ [Endorsed William R. Cooke.] 3 "Tills note is issued in pursuance of a deed of trust executed between S the Company and Richaud M. Blatchfokd and James B. Murray, Trus- ^ tees, and the payment of the same is guaranteed by the securities there- by transferred." FORM. (Of post-notes in Bank Commissioners v. St. Lawrence Bank, 7 N. Y. 513; 8 Barb. 436). "$3,000. "St. Lawrence Bank, Ogdensburg, April 21, 1841. "Ten months after date, the St. Lawrence Bank promises to pay to the order of George W. Siiepard, at the Albany City Bank, three thousand dollars, mth interest, value received. (Signed) "H. Van Rensselaer, President. "E. N. Fairchild, Cashier." FORJI. (Of post-certificates of deposit in New York Life Insurance and Trust Co. v. Beebe et al., 7 N. Y. 364). "New York Life Insurance a^b Trust Compant Principal, .$2,250. Certificate of De- Pebiod, 20 years. posit on Interest. Rate of Interest, [Vignette.] 4J per cent. No. 1908. These may certify, that Prime, Ward & King, of New York, have deposited with the New York Life Insurance and Trust Company, the sum of twenty-two hundred and fifty dollars, for the period of twenty years, commencing on the 5th August, 1836, and ending on the 5th August, 1856, and irredeemable far that pe- riod ; interest to be paid thereon by the said Company half yearly, at their oiEce in the city of New York, at the rate of 4J per cent, annually, to the said Prime, Ward & King, or their special attorney or legal representatives. At the end of the time of deposit, the said principal sum, with the interest then due, to be paid 190 THE BANiai«G LAVT, to the said Prime, Ward & King, or tlieir special attorney, representatives and assigns. This certificate is assignable on the books of the Company. In witness whebeof, the said company have caused this Certifi- cate of Trust to be attested in their behalf, by their President j L EAi, OF 1 ^^j Secretary, this 5th day of August, in the year one thousand \ COMPAKY. ^ gjgj^^ hundred and thirty-six. (Signed) Wm. Bard, (Signed) E. A. Nicholi, President. Secretary." FORM. (Of the post-certificate of deposit in Talmage u. Pell et al., and State of Ohio v. Pell et al, 7 N. Y. 328). [Vignette.] "Nob'th America Trust & Banking Co., City of New York, Nov. 22, 1839. No. 74G. Samuel T. McCracken, Daniel Kilgore and Joseph S. Lake, Commissioners, . have deposited in this bank thirteen thousand eight hundred and thirty-three § 88-100 dollars, payable to their order, on the return of this certificate — on de- 2 mand after 5th August, 1840. Capital S (§10,000,000). t ($13,833 88-lOOths.) £ WAI.TEP, Mead, Cashier. g (Signed) J. D. Beebs, Pres't. (Endorsed) Samoel F. McCracken, Daniel KiLGOKE, Joseph S. Lake, Commissioners of the Ohio Canal Fund." FOKM. (Of post-notes in Leavitt v. Yates, 4 Edw. Ch. R. 139; and Tylee c. Yates et al., 3 Barb. 222). "$500. No. New Yobk, December 15, 1840. Q Thirteen months after date, the North American TBtlST and Bank- S ING Company promise to pay at their Banking House, to the order of m f^ . • Elam H. Gibbs, for value received, the siun of five hundred dollars, with ^ S £ interest thereon at the rate of seven per centum per annum. (Ij g ^ Thos. G. Talmage, Pres't. S ^^ D. E. Tylee, Cash. C % 8 (Endorsed) g ^ C5 Elam H. Gibbs G O The payment of this obligation, with others, amounting in the aggre- tj gate to $600,000, is guaranteed by the transfer of securities estimated b» at $800,000, under a Deed of Trust executed between the Company and ja Henry Yates, Thomas G. Talmage and William Curtis Noyes, Trustees, bearing even date herewith.'' THE BANKING LAW. 191 § 85. When bills of exchange to be without grace. — AU checks, bills of exchange or drafts appearing on their face to have been drawn upon any bank or individual banker carrying on banking business un- der 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. E. S., 1541, L. 1882, cli. 409, § 120. 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 specie fied — and does not apply to bills drawn for months or years on, their face. Com- mercial Bank of Ky. v. Varnum, 49 N. Y. 278. Such bills are due on the day following, not that preceding a public holiday. Id. 279. § 86. Transfers of securities by superintendent to be countersigned by treasurer. — 'i^o transfer of securities now held or hereafter re- ceived by the superintendent to secure circulation shall be valid or of binding force or efTect unless countersigned by the treasurer of the state, or in his absence or inability to perform the duties of his ofiice, 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 entering 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 an- nual report to the legislature, the total amount of such transfers or assignments countersigned by him. The treasurer shall at all times during office hours have access to the books of the superintendent of banks for the purpose of ascertain- ing the correctness of the transfer or assig-nment presented to him to 192 THE BANKING LAW. countersign; and the siiperlntendent sliall have access to the book above mentioned kept by the treasurer during office hours to ascertain the correctness of the entries upon the same. R. S., 1541, L. 1882, ch. 409, §§ 121, 122, 123. IJ., 1542, L. 1882, ch. 409, § 124. § 87. TTnauthorized banking prohibited. — JSTo person unauthorized by law shall subscribe to or become a member of, or be in any way in- terested 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 cre- ated or to be created for the like purposes or either of them. 'No cor- poration, 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 istsuing notes or other evidences of debt to be loaned or put into circu- lation 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 section, shall be void. JSTo person, association of persons or c(jrporation, 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 evi- dences of debt as private bankers, for the purpose of loaning them or putting them in circulation as money, unless thereto specially author- ized by law. Every person, and every corporation, director, agent, officer or member thereof, who shall violate any provision of this section, direct- ly or indirectly, or assent to such violation, shall forfeit one thousand dollars to the people of the state. R. S., 1578, L. 1882, ch. 409, §§ 297, 298, 299, 300, 301, 302, 303. 1. The prohibitions against unauthorized banldng are still iu force, but banks organized under the general banking law are authorized to issue notes on condi- tion 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 ciiculate 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 associa- tion organized under the general banking law, though without the sanction of the THE BANKING LAW. 193 superintendent, will bind the association in favor of a hona fide holder, even if signed by the cashier only. Otherwise, however, as between the association and one who is not a bona 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 spe- cial cases, 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. Wyc- koff, etc., 4 Hill, 442. 3. A certificate of deposit payable six months after date with interest is in ef- fect a negotiable promissory note. Baiik of Orleans v. Morell, etc., 2 Hill, 295. 4. "The policy of this whole statute was to restrain private banking, and to give to the chartered banks, and those regulated by law, the exclusive privilege of circulating bank-notes. Bonds not issued to loan or put in circulation as money are not prohibited." 1 Sandf. Ch. 313. 5. 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. Legislature did not intend money loaned on prohibited security should be lost. Pratt et al. v. Short et al., 79 N. Y. 437, 3.5 Am. Rep. 531. 6. Mortgage 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 Cm-tis v. Leavitt, 15 N. Y. 97; to same effect, Pratt et al. v. Eaton, 79 id. 449. The history of the Restraining Act is given in the above cases, with the authorities. The cases known as the Utica In- surance cases ( 19 Johns. 1 ) decided the law that the securities taken on such dis- counts 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, whenever 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. 290 ; 4 id. 652. It has been criticised and not overi-uled in 25 id. 64, 35 Am. Dee. 653; Tracy v. Talmage, 14 N,. Y. 189, 67 Am. Dec. 1 32, and Curtis v. Leavitt. 15 id. 97 ; 1 Wend. 56, 555. 7. 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 criminis, 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. Eaton, 18 Hun, 294 (June, 1879). 8. A corporation whose charter allows it to receive deposits, Which is a bank- iv 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- 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. EatoJi, id. 449, reversing 18 Hun, 294; 84 N. Y. 190. Banks. 13 194 THE IBAITIvING LAW. 9. The principal attributes of a bank are the rights to issue negotiable notes, discount notes and receive 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 check 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. 10. This act is penal, and must be strictly construed. A. Life Ins. Co. v. Dob- bin, 1 H. & D. 259. 11. llioans made by issuing checks to circulate as bank-notes are invalid, and notes given for such loans are void. U. Ins. Co. v. Cadwell, etc., 3 Wend. 296. 12. 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. Eep. 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. 13. The Restraining Acts prohibited corporations not expressly authorized from engaging in the business of banlcing. Corporations formed before the pas- sage of these acts are not prohibited thereby, and may carry on banking business. The People b. The President, etc., 9 Wend. 351. 14. It seems that a company has a right to take interest in advance upon a note given for a, lawful debt. This cannot properly be called the business of "dis- counting," which it seems was alone intended by the words "making discoimts" in the Restraining Act. N. Y. F. Ins. Co. v. Sturges, 2 Cow. 604. 15. Taking interest on negotiable paper by a corporation without banking pow ers, or by an individual, is not usurious. All have a general right to discount in the ordinary course of business. N. Y. F. Ins. Co. v. Ely, 2 Cow. 678. 16. 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. 17. See note 8 to section 302; 6 Hun, 73, post. It would seem from this case that "authorized by law" means New York State law. 18. 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. 19. 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. 20. At common law any individual may issue notes, receive deposits and make discounts. Bristol v. Barker, AntJion's Nisi Prius, 235. 21. The legislature intended to prohibit the issuing of any bills or promissory notes by anj' individual or corporations as private bankers, and the prohibition THE BANKING LAW. 195 becoraei5 absolute and unqualified. People v. Brewster, 4 Wend. 500; see notes to section 24)9. 22. A foreign bank may Iceep 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. 23. 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. 24. 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 se- curity. Held, a violation of this statute, and that bank could not recover on the mortgage, since the violation of this statute was a defence to mortgagor. De- Witt V. Brisbane, 16 N. Y. 508. 25. To keep an office of deposit for the purpose of discounting notes is a spe- cific violation of the statute. People v. Barton, 6 Cow. 290. 26. It is not necessary that they should have been Capable of circulating as money; it is enough to constitute an ollence 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. Schermerhom v. Tolman, 14 N. Y. 93. 27. It seems that a single act does not constitute a violation of the statute, unless it appears that it was intended to evade the prohibition. Potter v. Bank, 5 Hill, 491. There are several cases to the same effect. 28. A National bank, located in Massachusetts, and having a New York office, cannot recover on a promissory note discounted at New York office, unless it can show that it is authorized to discount by New York law. National Bank v. Phoe- nix Warehousing Co., 6 Hun, 73. 29. 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. Bea, 64 Barb. 175. 30. 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, an injunction will not lie. Attorney-General v. Utica Ins. Co., 2 Johns. Ch. 375. 31. 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. 32. Section 6 ( 302 ) applies to foreign corporations as well as those organized in this State, and foreign corporations are still prohibited ( 1847 ) from keeping any office in this State for the purpose of receiving deposits, or for discounting notes or bills, and where such a, corporation authorizes one of its officers to attend in this State from time to time at a fixed place for that purpose, such officer offends 196 THE BAISTKING LAW. against this statute, and is personally liable to its penalties. Taylor v. Bruen, 2 Barb. Ch. 303. 33. A foreign moneyed corporation eanie by its officers within this State and purchased a mortgage, giving a draft on New York in payment. Keeping an office \\'ithin this State is necessary to a violation of the law, and a single trans action is not sneh a keeping. Held, that statute was not violated thereby. West Reserve Bank v. Potter, Clarke's Ch. 432. 34. This act "incorporated into the revision of 1830 (1 E. S. 712) is still in force, and, for aught I see, is applicable to all banking associations and individual bankers, except so far as it is modified by the provisions of the general banking law, allowing the issue of bills for circulation as money countersigned by the comptroller.'' ilcCouK", J. It is not the mere issue of notes, therefore, that is prohibited, for individuals and corporations may issue any number that their con- venience or lawful business may require, but it is the issue to be loaned out as money, or to be put in circulation as sueh so as to form part of the circulating jnedium, like bank-notes, that the statute has prohibited as mischievous. Leavitt ■0. Yates, 4 Ed. Ch. 170 (1843). 3.5. DeGroot v. Van Duzer, 17 Wend. 173, holds this act prohibits two things: one keeping an office for a particular purpose; the other, doing a particular act, whether an ofliee is kept or not. An agreement to redeem the bills of u. foreign bank at an office in this State would not be either against the spirit or letter of the act, though it miglit tend to give them a wider circulation and better credit. It is not unlawful to circulate foreign bank bills unless under five dollars. 36. N". H. & Delaware Bridge Co. v. Poughkeepsie Silk Co., 25 Wend. 048, held, that a foreign corporation having an office in this State for receiving deposits and discounting notes could not maintain an action here, neither for money lent, nor on the notes so taken. Action must be brought for penalty. Equitable proceedings will not lie. Attor- ney-General V. Utica Ins. Co., 2 Johns. Ch. 375. § 88. Eestrictions as to foreign corporations. — l^o foreign corpora- tion, other than a national bank, shall keep any office for the pur- pose 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. R. S., 1578, L. 1882, ch. 409, ? 304. § 89. Restrictions as to banks and their officers. — No banli 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, ac- cording to the last state or federal enumeration, and whose certificate of incorporation shall so provide, may open and keep one or more branch oflices in such city for the receipt and payment of deposits and for making loans and discounts to the customers of such branch ofiices only; provided, however, that before opening any branch office the THE BANKING LAW. 197 approval in -writing of the superintendent of banks shall be first ob- tained, and no loans or discounts shall be made except such as may have been previously authorized by the board of directors. 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 such violation. E. S., 1578, L. 1882, eh. 409, § 305. Araended L. 1808, ch. 410. § 90. Bills payable otherwise than in money prohibited. — ISTo 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 indi- vidual 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 evidence of debt so given, paid, received, circulated or offered, to any person who will sue for the same within sixty days after the commission of the offence. R. S., 1579, L. 1882, ch. 409, §§ 308, 309. § 91. Certain bills declared to be promissory notes. — All 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 instrument, 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. E. S., ]579, L. 1882, oh. 409, § 310. § 92. Use of sign indicating bank by unauthorized persons prohib- ited. — ISTo 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 where such business is transacted, having thereon any artificial or corporate name, or other words indicating that such place or office is the 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 writ- ten or printed or partly written and partly printed paper what- 198 THE BA3SKIi!<-G LAW. 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 1, 1392. R. S., 1579, L. 1882, ch. 409, § 311. L. 1885, ch. 32». THE BANKING LAW. 199 AETICLE III. Savings Banks, Section 100. Incorporation. 101. Notice of intention to organize. 102. Filing of certificate by superintendent. 103. E,x:aroination by superintendent. 104. Certificate of authorization. 105. When persona named in certificate become a corporation. 106. Must begin business within one year. 107. Trustees and their powers. 108. By-laws. 109. Meeting of trustees; quorum. 110. Vacancies. 111. Security may be required and salaries fixed. 112. Dividends, compensation and loans to trustees prohibited. 113. Repayment of deposits; regulations; limitation. 114. Deposits of minors, and trust deposits. 115. Wife witness against husband; claimants may be interpleaded. 116. In what securities deposits may be invested. 117. Limitation as to real property. 118. Available fund for current expenses; how loaned. 119. Temporary deposits. 120. Personal security prohibited; loans on bond and mortgage. 121. Mortgaged property to be insured. 122. llestrictions on methods of doing business. 123. Rate of interest; extra dividends. 124. Per cent, of surplus, how determined. 123. Compensation of officers. 126. No other report or inspection required. 127. Proceedings against delinquent corporations. 128. Examination of vouchers and assets by trustees. 129. Expenses to be paid. 130. Debts due savings banks from insolvent banks preferred. 131. Advertisements of unauthorized savings banks prohibited. 132. Charters to be conformed to this chapter. 133. Savings bank voluntarily closed. 134. When dissolution effected. 135. Deposit of imclaimed moneys. § 100. Incorporation. — Thirteen or more persons, two-thirds vi whom shall be residents of the county where the proposed bank shalJ be located, may become a savings bank by executing under their hands and seals and acknowledging a certificate in duplicate, one of which shall be filed in the office of the clerk of such county, and the other in 200 THE JJANKING LAW. 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 autliorized according to the provisions of law. R. S., 1563, L. 1882, ch. 409, § 236. Id.,' 1564, L. 1882, ch. 409, §§ 237, 238. Blank forms for the organization of savings institutions may be obtained from the superintendent of the banking department. § 101. 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 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 doin.s;; business in such county, a copy of such notice shall also be sent to every such savings bank so organized and doing business, at least fifteen days before the filing of such certificate. R. S., 1654, L. 1882, oh. 409, § 239. § 102. 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 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 in conformity 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 accompanied by evidence satisfactory to the superintendent of the proper publication and service in good faith of such notice, he shall TilE BANKING hAW. 201 forthwith indorse the same over his official signature "filed for exami- nation," with the date of such indorsement. R. S., 1564, L. 1882, ch. 409, §§ 240, 241. § 103. 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 hank will be afforded to any considerable number of depositors by opening a sav- ings bank in the place desigiiated in the certificate. 2. Whether the density of the population in the neighborhood des- ignated 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 th(i 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. R. S., 1864, L. 1882, eh. 409, § 242. § 104. 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 organ- ization 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 certificate shall in writing approve, which shall authorize the persons named therein to open an office for the deposit of savings as designated in the certifi- cate, subject to the provisions of this chapter. IsTo person shall be named in such certificate of authorization, who shall not have made and duly acknowledged the declaration prescribed in subdivision iowr of section one hundred 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 incor- poration 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 ■302 THE BANKING LAW. of a savings bank as proposed in any certificate filed by bim is expedi- ent 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 forthwith be filed by the county clerk vi^ith the certificate of incorporation of such savings bank. R. S., 1565, L. 1882, cli. 400, §§ 243, 244, 245. § 105. When persons named in certificate become a corporation; powers. — Upon the filing of any certificate of authorization of a sav- ings 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 con- ferred and imposed by law upon savings banks; and in addition to the powers conferred by the general corporation law, every such cor- poration shall have power to receive on deposit any sum of money that may be offered for that purpose by any person, or by any corpo- ration or society, and to invest the same, and to declare, credit and pay dividends thereon, and further, to transact the business of a savings bank as hereinafter provided and not otherwise, l^o such corporation shall receive deposits until it shall have transmitted to the superin- tendent of banks the name, residence and post-office address of each of the officers of such savings bank. R. S., 1563, L. 1882, ch. 409, § 235. Id., 1565, L. 1882, cli. 409, §§ 246, 247. Id., 1557, L. 1882, ch. 409, § 256. 1. A aavings institution and a national bank entered into an agreement, where- by all of the business of the two corporations was to be done in the same ofiBco 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 coiTesponding credits were to take the place of actual payments by the bank. Tlie 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 t}ie biink 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 lier credit. B. received the money, entered it in C's pass-book, as deposited witli the institution, and, as he testified, placed it in tlie 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 insti- tution, B. received the money as its treasurer, as between the bank and the insti- tution at the same instant he received it as cashier, it became the money of the XHK BANKING LAW. 20>i tank, and the bank was liable to the institution therefor ; also, that this was eo, 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, Rect^iN'er, 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 occu- jjying adjoining rooms, the national bank agreed with the savings bank — 3. To pay five per cent, interest per annimi on deposits in said institution, to be computed and paid in accordance with the rules of said institution with its ■depositor's. 4. 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. 5. 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 se- curities, 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 premi- ums which should hereafter be paid by said institution for bonds, stocks, mort- gages or other securities, should be charged to and deducted from such surplus fund. 6. The national bank to pay all drafts made on it by the savings bank, either to pay depositors, or for investments. 7. The national bank to be responsible for the safe-keeping of the bonds or ■other securities, and the moneys of the savings bank. 8. The savings bank to bear all losses sustained on account of bad debts, depre- ciations and otherwise, and all expenses of litigation. 9. The contract to take eilect 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. "Tlie 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 de- posit 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 oflicers in the discharge of their trust. Being creatures of the statute, as well as trustees, the oflicers of 204 THE BATSTKING LAW. 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 inve.'?tment as trustees, but not personally, if acting prudently and in good faith. Section 33 (267) says that the depositors shall receive 'as nearly as may be all the profits of such corporation after deducting necessary expenses, and reserving such amount as the trustees may deem expedient as a surplus fund for the security of depositors.' "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 wMch must be pursued by them strictly, and whether a contract of tMs 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 perm.itted in any manner to speculate with these trust funds. "If the facts in this case 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 ari'angement as is set forth in this contract, whereby the trustees should serfc, 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. "Section 21 (255) provides that the trustees of a savings bank shall not have any interest whatever, direct or indirect, in the gains or profits thereon, nor directly or indirectly receive any pay or emoluments for their services, except as provided for in the act. "Any arrangement, therefore, by which they should seek, directly or indirectly, to make money for themselves out of the deposits, ajid thereby deprive the de- positors of the surplus wliich might accrue if they carried out strictly the pro- visioirs 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 be illegal or a violation of the provisions of the Savings Bank Act, but if an arrangement is made by which a delegation of power to exercise judgment or discretion is conferred it would be illegal." 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 de- partment, August 25, 1886, held as follows: "To both of these questions 1 am constrained to return a negative answer, for the following reasons: THE BANKING LAW. 205 "Savings banks are vested with certain well-rlefined powers, principal among wliieh 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 exer- cise any corporate powers necessary to the exercise of the main powers. Section 233, chap. 409, Laws of 1882. I'urther than this they may not go. They do not possess, nor can they exercise, any corporate powers, except such as are neces- sary to the exercise of their main powers. 1 R. S. 600, § 3. While they may pay solaries 1o their orTicers and employees, they cannot make gratuities to them." 10. 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 45(5 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.'' Section 4 of chapter 456, Laws of 1857, refeiTed to by the attorney-general, is an amendment of the fifteenth section of the fourth title of the thirteenth chapter of the first part of the Revised Statutes, entitled "Regulations concern- ing the assessment of taxes on incorporated companies, and the commutation or collection thereof." Such section is as follows: "§ 4. The deposits in any bank for savings which are due to depositors, and the accumulations in any life insurance company organized under the laws of this State, so far as the said accumulations are held for the exclusive benefit of the assured, shall not be liable to taxation, other than the real estate and stocks which may be owned by such bank or company, and which are now liable to taxation under the laws of the State." 11. The authorities of the rouglikeepsie Savings Bank applied to the supreme court lor a writ of certiorari to review their assessments, and Mr. Justice Baen- ard'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 afl'ord 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 450, Laws of 1857, ordered that these deposits should not be taxable. "By chapter 761, Laws of 1807, 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 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 amount greater than the entire sur- 206 THE BANKING LAW. 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 tlie act of 1875, or to be tliereafter incoi-porated. "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 Che assessors for the surplus earned is illegal, and must be set aside without cost.'' § 106. Must begin business within one year. — Every such corpo- ration whicli shall not organize and commence business within one year after the certificate of authorization has been 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 vsdth its certificate of incor- poration and certificate of authorization. E. S., 1565, L. 1882, ch. 409, § 248. § 107. Trustees and tlieir powers. — There shall be a board of not less than thirteen 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 president and two vice-presi- dents, and such other oflicers as they may deem fit. The person* nsLTopd in the certificate of authorization shall be the first trustees. A vacancy in the board shall be filled by the board, as soon as practi- cable, at a regular meeting after the vacancy occurs. From and after the passage of this act, no person vsrho 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 vsrho hereafter takes the benefit of any law of bankruptcy or insolvency, or who makes a general assignment for the benefit of THE BANKING LAW. 207 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 their by-laws, a copy of which shall also be filed Avith the super- intendent 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 act. Such reduction to be effected gradiially 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 trus- tees 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 sav- ings bank to belong to the board of directors of any one bank or national banking association. Where a majority of the board of trus- tees of any savings bank now are members of the board of directors of any one bank or national banking association, the offices of such trus- tees of any savings bank shall, from and after the expiration of ninety days from the time of the taking effect of this act, be and become vacant ; and they shall, at the expiration of such ninety days, cease to be such trustees, and the vacancies so to occur in any board of trus- tees of any savings bank shall before the expiration of such ninety days, be filled in accordance with the provisions of the general law relating to savings banks in such wise that a majority of trustees of such savings bank shall not be members of the board of directors or trustees of any one bank or national banking association ; and when- ever hereafter any trustee of a savings bank shall by becoming a director of a bank or national banking association, 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 sav- ings bank shall thereupon end. Any savings bank knowingly violating this provision shall forfeit all its rights, privileges and franchises. Such violation shall be determined in the same manner as a violation of subdivision six of section twenty-five of article one of the banking law. Amended L. 1890, ch. 453. 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 13lace and retain in position. Trustees are legally chargeable with, notice of the 208 THE BAKICIiya LAW. 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. Zuguer 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 fur- ther question, "Can the superintendent of the banking department lawfully ap- prove 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 Gen- eral 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 corporation 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 savings 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 designated in a resolution for tliat purpose, where reasons therefor are shown to the satisfaction of the superintendent, and his consent in writing ob- tained thereto." He fui-ther 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 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 orgariized imder its provisions, also recognized the fact that other savings banks existed under charters previously jjranted, 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. "T 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 THE BANKlJS'a LAW. 209 <-or.'!ent of the superintendent, and that he may lawfully approve of and consent to the same, if the reasons therefor appear to hira satisfaetoiy." 5. 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. § 108. By-laws. — The board of trustees of any such 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 appointment 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. K. S., 1566, L. 1882, eh. 409, § 251. 1. A by-law may be part valid and part void. Imposing same penalties for •offences, imposed by statute, does not make same void. Rogers v. Jones, etc., 1 Wend. 237, 19 Am. Dec. 493. 2. The following portion of an opinion of the attorney-general dated May 12, 1879, on file in the banking department, will be found pertinent: "By section 17 (251) of the act of 1875 (chapter 371), boards of trustees have pover, among other things, 'for the appointment and duties of committees.' Section 19 (253) declares, that the office becomes vacant upon the failure of a trustee 'to perform any of the duties devolved upon him as such trustee for six •Buecessive months, without having first been excused by the board for such failure.' "Committee dvity is a duty devolved upon a trustee, as such, hy the board, and in pursuance of law. If a trustee attends no meetings, or performs no committee duties, for six successive months, his office becomes ipso facto vacant. Neglect to perform duties is equivalent to a refusal to serve, and a, continuance of such neglect for six months is, in the purview of the statute, a permanent refusal to serve. "The law requires active fidelity in the execution of such trusts, and does not tolerate passive indifference." See note to next section. § 109. Meeting of trustees; quorum. — Regular meetings of the board of trustees shall be held as often as once a month for the purpose 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 shall be one, except when prevented from attending by sick- ness or other unavoidable detention, when he may be represented in Banes, 14 210 THE BANKING LAW. forming a quorum by the vice-president, who, in case of Iiis 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. R. S., 1566, L. 1882, ch. 409, § 252. In an opinion by the attorney -general, filed in the banking department under date of April 12, 1884, that officer 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 suflieient 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. § 110. Vacancies. — Whenever a trustee of any savings bank shall become a trustee, officer, clerk 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 a loan made by such savings bank, or when he shall fail to attend the regular rceetings of the board, or perform any of the duties devolved upon him as such trus- tee, for six successive months, without having been previously ex- cused 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. E,. S., 1566, L. 1882, eh. 409, § 253. § 111. Security may be required 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- tendent of the banking department, and the premiums paid therefor may be paid by and shall be allowed to said corporation as a neces- sary disbursement. R. S., 1565, L. 1882, ch. 409, § 254. In reply to an inquiry made by the superintendent of the banking department, the following opinion was rendered by the attorney -general, December 8, 1886 1 "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 THE EANIiIJ!^G LAW. 211 bank that individual bondsmen ns siii'eties for the fidelity of oiBcers and employees should not hereafter be accepted, but that the bonds of the corporations which make t\, business of insuring or guaranteeing the fidelity of employees should be required; and that the institution should pay as a regular expense the premi- ums on such bonds o-r 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 of the Banking Act (page 262; Paine's Banking Laws), authorizes the trustees of savings banlcs 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 guaranty corporations to guarantee the fidelity of the officers and employees." § 112. Dividends, compensation and loans to trustees prohibited. — ISTo trustee of any sucIl corporation shall have any interest, direct or indirect, in the gains or profits thereof, nor as such, directly or indi- rectly, receive any pay or emolument for his services, except as here- inafter 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. R. S., 1566, L. 1882, ch. 409, § 255. 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 ou strength of it, bank was allowed to continue business. Best v. Thiel et al., 79 N. Y. 16. 2. Neither the foregoing defence, nor an allegation that obligor was deceived by the other trustees as to the real condition of the bank, is a defence to action on a bond given to be used as an asset of bank. Hurd v. Kelly, 78 N. Y. 588, 34 Am. Rep. 507. 3. Vice-President Bowling Green Savings Bank took checks signed by presi- dent and secretary, and used them in individual stock speculations. These cheeks 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. Knapp, 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 banlc by reason of the illegal purchase of North Carolina bonds, which, except under certain circumstances not 213 THE BANKING LAW. 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 the 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 Dyck et al., 26 Hun, 567 ; affirmed, 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 €o 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 oi common prudence ordinarily exercise in their own aflfairs. When loss is occa- sioned 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 al., 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 ^.''■'e. not worth twice the value of the mortgages, such transaction is ultra vives. Paine, Receiver, v. Erwin et al., 59 How. Pr. 316. 7. The cases of Hurd v. Green, 17 Hun, 327, and Hurd v. Kelly, id. note, affirmed in 78 N. Y. 588, 34 Am. Rep. 567, holding savings bank trustees liable on a bond conditioned to make good any deficiency 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, f. Meade, 59 How. Pr. 318. 10. In reply to an inquiry from the superintendent of the banking depart- ment, 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 THE BANKlXa LAW. 213 is held by the hank, or as obligoi- upon any kind of instrument securing a loan by a banlc, 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. '"llie policy of the statute is, to exclude absolutely from the management of the savings bank trusts all persons 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." II. 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? "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 the fire insurance company, which contracts to pay loss occasioned by fire to the bank as mortgagee? "Tliird. 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 "i" . . . In an opiiuon 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- 214 TilE BANKING LAW. ineuts as are authorized by the board of trustees; nor shall any trustee or officer 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 the 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 corpo- ration 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 per- formed 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 be<'oining indorser or surety by a trustee, or an obligor for moneys loaned by or borrowed of such bank. "Second question. A person owning 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 design,ated by the bank. The profits derived by the insurance company do not come from the bank but from the owner of the 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 responsibilities 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 Vayne v. Gardiner, 29 N. Y. 146. "I think the word 'borrowing,' as used in the section, was intended to be em- ployed 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 eaimot be said to l)e u borrower; and the fact of TKE BANKING LAW. 215 one of tlie directors bring a trustee does not, tlierefore, bring it within tlio pro- hibition of section 255. "Foiu-th question. A trustee may act as counsel in investigating and certify- ing the validity of titles to real property upon which the banlc 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." § 113. Repayment of deposits; regulations; limitation, — Tlie sums deposited with any savings bank, together with any dividends or iiir tereet credited thereto, shall be repaid to such depositors respectively, or to their legal representatives, after demand, in such manner and at such times, and after such previous notice, and under such regu- lations, 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 by it, and shall be evi- dence 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 expedi- ent to receive, and may, in its discretion, 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 17, 1875, or pursuant to an order of a court of record. R. L., 1567, L. 1882, ch. 409, § 257. Id., 1576, L. 1882, ch. 409, § 290. L. 1885, ch. 477. Id., 1586, L. 1878, ch. 347, § 2. 1. A payment to one who produces pass-book and forged order exonerates bank, the depositor having been negligent in delaying notice of 1 oss 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 hirii 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. Bk., 2 Daly, 229. 2. S. deposited with defendant, a savings bank, a certain sum of money, receiv- 216 THE BANKING LAW. ing a pass-book which stated that the account was with her, in. trust for Chris- topher 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 effectual 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 demanci and receive the fund devolved upon her administrator, and upon his demand de- fendant was bound to pay it over; 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; reversing same case, 21 Hun, 235. 3. The defendant, the plaintiff's father, deposited in a savings bank a sitm of money, upt>n 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 in- tending 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 plain- tiff; and upon an agreement with the bank that the money, or any part of it,, should be withfJ/tiwn from the bank without the production of the bank-book, which he retained in his own possession. He afterwards withdrew a part of the sum deposited. .Held, that the circiunstanccs 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 "Richard or Kate Wai-d" (his wife). She never had possession of bank-book during his life. Held, presumptively his property exclusively. In re Estate Richard W^ard, 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 Bk., 57 N. Y. 418. To same effect, Appleby t). Erie Co. Sav. Bk., 62 id. 12. For a full presentation of authorities on this question, see editorial note to McCaskill v. Connecticut Sav. Bank, 13 L. E. 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.. Bk., 69 JSr. Y. 314; aflTirming 2 Abb. N. C. 342. 8. Where one who had given his bond and mortgage to a sa-vings bank was also a depositor therein, and the bank became insolvent and a receiver was ap- THE BANKIHG LAW. 217 pointed, held, that the mortgagor wag 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. Bk. V. Tartter (1877), 4 Abb. N. 0. 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 wheu 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, ac- cording 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 prop- erty of the corporation, as in the case of other corporations, is a trust fund for the payment of creditors, and depositors stand as other creditors, having no greater, but equal rights to be paid ratably out of the insolvent estate. Ct. App. 1883, People v. Mechanics' and Traders' Sav. Inst., 92 N. Y. 7; reversing 28 Hun, 375. 10. A creditor of a savings bank, who recovers a judgment in an action brought before, and pending at the time of, the appointment of a receiver, and dissolu- tion of the corporation, is not entitled to a preference over depositors. Id. 11. 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 lattear cannot recover, in an action for his deposit, which the bank hag 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. Bk., 9 Daly, 507. 12. 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 man- ner 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, notwithstanding 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 oflicers in making the payment were chargeable with negligence. Kum- mel V. Germania Sav. Bk., 127 N. Y. 488, 13 L. R. A. 786, 28 N. E. 398. 13. Where a depositor fmnishes such information to a siranger as enables him to perpetrate a fraud on the bank and draw the depositor's money, the de- positor may thereby be guilty of such contributory negligence as will oar 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. Bk., 64 Hun, 249, 19 N. Y. Supp. 194. 14. 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 plaintiff, after notice by plaintiff not to pay, held, not to discharge th» 218 THE BANKING UlW. bank from liability to the plaintiff for tho amourtt 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, provided that payment to any one presenting it should discharge the bank. Cit- ing Blake v. Sanborn, 8 Gray, 154: "The case Avas a proper one for an inter- pleader, in which tlie rights of the parties could be judicially ascertained." An- drews. C. J., Mulcahcy u. Em. Ind. Sav. Bk., 89 N. Y. 435; reversing 62 How. Pr. 403. 15. Upon insolvency of the eoi-poration the depositors stand as other creditors, having no greater, but equal rights to be paid ratably out of the insolvent estate. Accordingly held, where a creditor of a savings bank obtained a judgment against a reeei^'er thereof, in an action brought against the bank before the appointmetnt of the receiver, in which action the receiver was substituted as de- fendant, that the plaintilt was not entitled to a preference over depositors in the payment of his judgment. Id. 16. 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. Bk., 17 Week. Dig. 138. As to rights of joint depositors, see full presentation of au- thorities in editorial note to Metropolitan Savings Bank v. Murphy, 31 L. R. A. 454. 17. Depositors in a sayings 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. Bk., reversing same case, 15 Week. Dig. 524; 16 id. 374. 18. 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 banJj 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. Bk. of Brockport (1881), 23 Hun, 420 : and Tn re Ward, 2 Eedf . Sur. 253. 19. For an article of interest as to stolen books (citing cases), see Albany Law Journal, Vol. I. 406. 20. 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 pei'sons, the banlc will not be responsible for any loss arising from said special agreement or its breach of it. /* seems that if a savings bank on receiving a deposit 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 im- plication, 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 othei-s. Eiloy Admrx. v. Albany Savings Bank, 36 Hun, 513. 21. 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 suck lost book, is a reasonable one. Mitchell c Home Savings Bank, 38 Hun, 255. ZZ. A deposit in a. savings bank in the name of A. "in trust for" or "for his. THE JiAiN'Ki;\'G LAW. 219 daughter" shows an intention to convey title to the fund to A. as trustee for the daughter. The retention of the pass-boolc 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. 23. 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 com- pared favorably with the original signature, and that the original or seemingly original pass-book had been in V.'s possession. 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, oc- casioned the erroneous paj'ment, if such it were. Tlie People v. Third Ave. Sav- ings Bank, 98 N. Y. 661. 24. When u, deposit is made in a savings bank in the joint name of the hus- band 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, Wortmau v. Robinson, 44 Hun, 357. 25. Notwithstanding a by-law of savings bank providing that a pass-hook 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 tlie defence was payment to one producing the pass-book, it was decided that the bank w&.s 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 r,. Williamsburgh Sav. Bk., G9 N. Y. 314, and other oases.) 1887, Cornell v. Emigrant Industrial Sav. Bk., 9 N. Y. State Rep. 72. 26. During the month of May, 1882, the superintendent of the banking de- partment addressed the following questions to the attorney-general: "1. Does not the section quoted (§ 2, chap. 347, Laws of 1878) limit the ag- gregate 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 officer 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 amouiii 220 THE BANKING LAW. of deposits that may l)e received by any savings bank from any one depositor, except in eases 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. 1 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 barfi has violated the provisions of the law by receiving deposits in excess of the sum allowed, 1 express no opinion. That is a question of private rights which does not come within my province to de- cide." 3. "Trust funds" as here contemplated mean funds directed to be deposited by a court or judicial officer. Personal trusts are not excepted in above sec- tion. Opinion of attorney-general filed September 30, 1884, in the banking depart- ment. 27. An opinion by the attorney-general, dated Sept. 24, 1892, was filed in the banking department, in which he states that section 9, chapter 399, Laws of 3892, provides: "JSTo 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 transferred to the representatives of the deceased until the required notice is given to the county treasurer and the comptroller. ' 28. A bari whose paying teller knowing the depositor by name, pays out without inquiry enlire account to a stranger who has the book is liable for neg- ligence. Geitelsohni). Citizens Sav'gs Bank, 20 Misc. 84, 45 N. Y. Supp. 90. 29. Code § 1917, requiring indemnity on lost instruments, dees 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. Sav'gs Bank, 28 Misc. 251, 59 N. Y. Supp. 149. 30. 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 banlc being a question of fact. Rosen v. State Bank, 32 Misc. 231, 65 N. Y. Supp. 666. 31. 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 IST. Y. Supp. 364. 32. 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 thai deposits were properly payable to holder of the book. Ficken v. Em. Ind. Sav'gs Banlt, 33 Misc. 92, 67 N. Y. Supp. 143. 33. Where the snrae person was treasurer of savings bank and cashier of ft na- tional bank occipying same offices, took up savings bank books of depositors get THE BANKING LAW. 221 ting their receipts to tlie savings bank, and returned pass-books purporting to •be of national bank. Held: tlie savings bank was not liable for these moneys which were actually stolen by the treasurer. Kelley v. Chenango Valley Sav'gs Bank, 22 App. Div. 202, 47 N. Y. Supp. 1041. 34. Payment; peculiar facts surrounding a special payment on production of book. Hale v. Seamen's Bk. for Sav'gs, 28 App. Div. 407, 51 N. Y. Supp. 140. 35. 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 deatli, and that then payment to holder of book must rest on a legal title to book by the person producing it. Podmore v. South B'klyn Sav'gs Inst., 48 App. Div. 218, C2 N. Y. Supp. 901. 36. 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 husbaB merchandise or commodities what- ever, 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 or exchange gold or silver, or collect or protest promissory notes or time bills of exchange ; but savings banks may sell gold or silver received in pay- ment of interest or principal of obligations ovs^ned by them, or from depositors in the regular course of business, and may pay regular depositors when requested by them by draft upon deposite to the credit of the bank in the city of New York, and charge current rates of exchange for such drafts. 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 cannot be produced without loss or serious incon- venience 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. K. S., 1570, L. 1882, ch. 409, § 266. 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 ac- tion against the bank for damages for non-delivery, that it w^as 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 hanking department, upon the proposition whether it is within the corporate pow- THE BANKING- LAW. 249 ers of a savings bank to receive special deposits of .valuables for hire, under tlio 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, saj's: "They are corporations formed for a special and limited purpose, and cannot engage in the common and ordinary business which a bank- ing 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 exchan'^c gold or silver, collect or protest promissoiy notes or time bills, or issue certilie.ites of deposit (§ 266, chap. 409, Laws 1882). Their business is to receive money on de- posit, 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 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. Eev. Kec. 382, Fed. Gas. 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 » 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 vires and unauthorized." 2. In December, 1887, the superintendent of the banking department submitted 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 206, chap. 409, Laws of 1882 (above), speaks of de- claring 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 officers 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 expenses 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 depositors who withdraw 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 pavm.ent 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). "1 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 250 THE BANKING LAW. 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 pur- pose of increasing the dividends, except when such surplus exceeds the amount authorized 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." § 123. Kate of interest ; extra dividends. — The trustees of every such corporation shall regulate the rate of interest or dividends not to exceed five per cent, per annum upon the deposits therewith, in such manner that depositore shall receive as nearly as may be, all the profits of such corporation, after deducting necessary expenses and re- serving such amounts as the trustees may deem expedient as a surplus fund for the security of the depositors, which, to the amount of fif- teen 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 reg- ulate the interest or dividends allowed in such manner that each de- positor shall receive the same ratable portion of interest or dividends as all others of his class. The trustees 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 day of the month, commencing any semi-annual interest period, or the third day of any month, or withdrawn upon one of the last three 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. jSTo 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 dividends . . . 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, 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 BANKING XATV. 251 The trustees of any such corporation whose surplus amounts to fifteen per centum of its deposits, at least once in three years, shall divide equitably the accumulation beyond such authorized surplus as an extra dividend to depositors, in excess of the regular dividends authorized. A notice posted conspicuously in a bank of a change in the rate of interest shall be equivalent to a personal notice. R. S., 1570, L. 1S82, cli. 409, § 267. L. 1S84, ch. 48. 1. The provisions of said section (§ 33), 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 tlie 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 inter- est 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, Receiver, v. McQuade, 86 N. Y. 54. 2. Whenever a dividend is declared and credited to a depositor, it becomes hia 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, can- not avoid liability because the manner of voting and of recording the vote pre- scribed 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 case, 50. The Y. Savings Bank, of which defendant was a trustee, in pursuance of the requirements of its charter (§ 6, ch. 338, Laws of 1860), 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 plaintilT, who was appointed receiver of said bank in Juljj 1877, to recover the interest so paid, the referee found that the interest received from in- vestments of the fimds 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 defendant. Held, that defend- ant was not liable; that the order of payment of the debts of the bank, and what portion of its profits tlie 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 coriTOon-law liability was incurred, nor was there any injury to the corpora- tion, so that in the liglit of the common law there was no rule by which damages could be assessed; that no liability was imposed under the chapter of the Re- vised 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 pro- hibition In said chapter against paying dividends to stockholders save from "surplus profits" has no application, the interest payable to depositors of sav- 252 THE BANKING LAW. lugs banks not being dividends within the meani'ng of the statute, and as said statute prescribes 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 at- tached under 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 eases, see 23 Moak's Eng. 39. 5. An opinion of the attorney-general, filed in the banking department July 3, 1S78, contains his interpretation of a portion of this section: "lu 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 June 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 back, 1 think the same rule does not apply, and that a with- drawal of the deposit before the end of the quarterly 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 with- drawal of deposits on the last three days have reference solely to such semi- annual payments. "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 de- posits. I think payment of interest in such cases is plainly and clearly pro- hibited by the statute, and that the prohibition is 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-men- tioned chapter 48 of the Lavra 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 pro- priety, 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 .illow interest on any deposit for a longer period than the same has been deposited.' " THE BANKING LAW. 2u<3 § 124. Per cent, of surplus, liow determined. — In determining the per cent, 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 belov? 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 her'^in enumerated, from the best information he can ob- tain, and he may change the valuation thereof from time to time as he may obtain other and further information. R. S., 1571, L. 1882, ch. 409, § 268. § 125. Compensation of offtcers. — The trustees of such corporation acting as ofScers of the same, vyhose 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 pursu- ant to section one hundred and twenty-eight of this chapter, or to per- form the duties required by subdivision 5 of section 116 of this chap- ter, 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. R. S., 1571, L. 1882, eh. 409, § 209. "The relation existing between the corporation and its trustees is mainly that of principal and agent, and the relation between the trustees and depos- itors 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 lia- bility. If thsy 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 corpora- tion, thus divesting himself of the immediate control of his property, he ex- pects, and has the right to expect, that the trustees or directors, who are chosen to take his 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 exer- cise in their own affairs. Wlien one voluntarily takes the position of trustee or director of a corporation, good faith, exact justice and public policy unite 254 THE BANKING LAW. in requiring of him such degree of care and prudence, and it is a gross breach of duty, crassa negligentia, not to bestow them." (Authorities cited.) "As 1 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 exer- cise proper care and diligence, but ordinary skill and judgment. As he is bound to exercise ordinary skill and judgment, he camiot set up that he did not pos- sess them. When damage is caused by his want of judgment, he cannot excuse himself by alleging his gross ignorance. One who voluntarily takes the posi- tion 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 ordinai-y knowledge and skill, and that he will bring them to bear in the dis- charge of his duties. Such is the rule applicable to public officers, to profes- sional men .and to mechanics; and such is the rule which must be applicable to every person who undertakes to act for another in a situation or employment requiring skill and knowledge, and it matters not that the service is to be ren- dered 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 Hvm, Receiver, v. Gary et al , 59 How. Pr. 441 (affirming same case, id. 462). 2. The "majority" as here contemplated is a majority of the full board of tnistees 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. § 126. No other report or inspection required. — JSTo such corpor- ratioB 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 hoard 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 officer or board, in any manner apper- taining to its business or dealings. R. S., 1572, L. 1882, ch. 409, § 275. § 127. Proceedings against delinquent corporations. — When it shall appear to the superintendent from an examination made by or re- ported to him, or from a report made by any such corporation pursu- ant to the provisions of this chapter, that it has committed any vio- lation of its charter or of law, or is conducting its business and affairs in an unsafe or unauthorized manner, he shall, by an order under his hand and official seal, direct a discontinuance of such illegal and unsafe or unauthorized practices, and strict conformity with the re- quirements of the law, and with safety and security in its trans- TilE BANKING LAW. 255 actions. If any such corporation shall refuse or neglect to make any report required by law, or to comply with any such order, or if it shall appear to the superintendent that it is unsafe or inexpedient for it to continue to transact business, or that any trustee or officer thereof has abused his trust or been guilty of misconduct or malver- sation in his official position injurious to the bank or to its depositors, the superintendent shall report the facts in writing to the attorney- general. The attorney-general may thereupon bring an action or in- stitute proceeding for the dissolution of the corporation or for the removal of one or more of its trustees, or for the removal of its cor- porate powers to other persons, or for the consolidation and merger of the corporation with any other savings banli that may be willing to accept of the trust, or for such other or further relief or correction as the facts reported to him may seem to require. The court before which any such action or proceeding shall be instituted shall hav(? power to grant such orders, and in its discretion from time to time to modify or revoke the same, and to grant such relief and render such judgment as the facts or evidence of the case or the situation of the parties and the interests involved shall seem to require. If in sucli proceedings an order shall be granted upon notice or without notico restraining such corporation and its officers from paying out or dis- posing of any moneys or property of or held by it, the superintendent may, and, if directed by the court, shall take temporary possession of all the assets, property and rights of or held by such corporation, and hold possession thereof until the further order of the court. If from any such examination or report, the superintendent shall conclude that any such savings bank is insolvent, and in an unsafe condition to transact business, he may forthwith take possession of its property and business and retain such possession until the termination of the action or proceeding instituted by the attorney-general. R. S., 1573, L. 1882, ch. 409, § 278. Amended by chap. 930 of 1895. Under this section che court is authorized to permit a savings bank to resume its business upon scaling the deposits down to a point which would render the bank solvent. It has been the policy of the State to allow when practicable institutions of this character to resume business on a, solvent basis. People v. Ulster Co. Savings Inst., 64 Hun, 434, 18 N. Y. Supp. 960; affirmed, without opinion, 133 N. Y. 689, 31 N. E. 738. § 128. Examination of vouchers and assets by trustees.— The trus- tees of every savings bank, by a committee of not less than three of 256 THE BANKING LAW. their number, on or before the first days of January and July in each year, shall thoroughly examine the books, vouchers and assets of sudi savings bank, and its affairs generally. The statement or schedule of assets and liabilities reported to the superintendent of banks for the first of January and July in each year shall be based upon such ex- amination, 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 bal- ance, and the amount so due as shown by the general ledger. Pv. S.. 1573, L. ]882, ch. 409, § 279. § 129. Expenses to be paid. — For the purpose of defraying the ex- penses 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 allotted 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. R. S., 1574, L. 1882, ch. 409, § 281. * § 130. Debts due savings banks from insolvent banks preferred. — All the property of any bank or trust company which shall become insolvent, shall, after providing for the payment of its circulating notes, if it has any, be applied by the trustees, assignees or receiver thereof in the first place, to the payment in full of any siun or sums of money deposited therewith by any savings bank, but not to an amount exceeding that authorized to be so deposited by the provisions THE BANKING LAW. 257 of this chapter, and subject to any other preference provided for in the charter of any such trust company. R. S., 1574, L. 1882, ch. 409, § 282. 1. This section only applies to deposits made in the ordinary course of busi- ness, and subject to the draft of the depositors to an amount not exceeding that authorized by section 27 (261) of this act. 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. Eosenback v. Manufacturers and Trad- ers' Bank, 69 N. Y. 358; affirming 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 de- posits 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 corpo- ration, and at the end pi 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 de- posit 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. Banlc was not thereby relieved from paying its debts. Matter of Patterson, Receiver, etc., 18 Hun, 223-224 ; affirmed 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 banivs, with respect to such preference, and contravenes § 5236 U. S. R. S. U. S. Comp. Stat. 1901, p. 3508, N. B. A. (post), which requires ratable dividends. Davis v. Elmira Savings Bank, 161 U. S. 290, 40 L. ed. 703, 16 Sup. Ct. Rep. 502. § 131. Advertisements of unauthorized savings banks prohibited. — jSTo bank, banking association, individual banker, firm, association, corporation, person or persons shall advertise or put forth a sign as a savings banlc, or in any way solicit or receive deposits as a savings bank. Any bank, banking association, individual banker, firm, asso- ciation, corporation, person or persons violating this provision shall forfei^to the people of the state for every offence the sum of one hundred dollars for every day such offence shall be continued. R. S., 1574, L. 1882, ch. 409, § 283. 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 busi- ness 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. Banks, 17 258 THE BANKIHG LAW. "L. Doty's Savings Bank.'') The term "individual banker" is used throughout the statutes to distinguish one person doing business in the way those acts authorize, fiom 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 tljat the society is n, 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 ) , provides that 'It shall not be lawful for any bank, banking association 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 per- sons, which shall oiTend against these provisions, shall forfeit and pay for every such offence the s.uni of $100 for every day such offence shall be continued. . . ' "This prohibition is against advertising or receiving or soliciting deposits 'oS o savwcjs bank.' It does not interfere with the common-law right of one person, or two or more persons acting together, taking money for the pui-pose of keeping it safely for an individual. "If this association in any way whatever advertises itself as » 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 baTik, 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 their hands for safe- lieeping.'' 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 pro^'isionB of the Banking Act of 1882 (§ 283, ch. 409) only required that a trust company, in soliciting and receiving deposits, sliould 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 dts 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 pupil's TTIE BANKING LAW. 259 account, interest being allowed under both phases of the account, the Attorney (Jeneral in an opinion dated Oct. 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 gen- eral purpose of such law, which provides for the general supervision and control of all savings banks and banking institutions by the State Banking Department. While the scheme may be commendable in many respects, it will unquestionably be subject to many abuses were it allowable and proper to constitute 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." § 132. Charters to be conformed to this chapter. — The powers, priv- ileges 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 liabilities, conferred and imposed by this chapter, notwith- standing anything 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 re- demption of the securities so invested in, in such manner as to pre- vent loss or embarrassment in the business of such savings bank, or unnecessary loss or injury to the borrowers on such securities. R. S., 1575, L. 1882, eh. 409, § 286. § 133. Savings bank voluntarily closed. — If the directors 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 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 rnd noes, and the resolution and the vote thereon shall be record- 260 THE BANKING LAW, ed in the mimites of the board of trustees. A copy of the record of such proceeding certified by the president and secretary of the corpo- ration shall be filed in the banking department. The trustees shall thereupon give notice to all the depositors and creditors of the adop- tion of such resolution by publication thereof in a newspaper or news- papers most likely to give the same proper publicity, and by written or printed notice personally served upon or mailed to every depositor and creditor of such savings bank at their last known residences, postage prepaid. E. S., 1576, L. 1S82, ch. 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 definitely and effectually terminated." Opinion of attorney-general, filed in the banking department, December 31, 1886. § 134. When dissolution effected. — When the trustees of any such savings bank shall have paid the sums due respectively to all the de- positors 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 their credit or due them, and of the sums due them respectively, and shall file sucli transcript in the banking department, and pay over and transfer all such unclaimed and unpaid deposits, credits and moneys to the super- intendent of banks. The trustees shall then report their proceedings duly verified to the supreme court, and upon such report and the pe- tition of the trustees and upon notice to the attorney-general and the superintendent, and such other notice as tiie court may deem neces- sary, the court shall adjudge the franchise surrendered and the exis- tence of the corporation terminated. R. S., 1576, L. 1882, ch. 409, § 294. § 135. Deposit of unclaimed moneys.— The superintendent shall re- ceive the moneys so deposited with him by the trustees of any solvent savings bank voluntarily closing its business, and all moneys which 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 superintend- ent of banks in his name of ofiice, in trust for the depositors and creditors of the closed savings bank from which they were received. THE BANKING LAW. 261 The superintendent shall report to the legislature annually in his report the names of such closed savings banks and the sums of un- claimed and unpaid deposits to the credit of each of them respectively. The siiperintendent may pay over to the persons respectively en- titled thereto the moneys so held by him upon being furnished with 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 divi- dends 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 imclaimed dividends. E. S., 1577, L. 1882, ch. 409, § 296. L. 1883, ch. 439. L. 1884, ch. 504. The following opinion of the attorney-general was filed in the banking depart- ment July 8, 1887: 'Tour 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 1SS2, the person to whom the money belonged having 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 an- cillary letters here." 262 THE BANKING LAW. AETICLE IV. Teust Companies. Section 150. Incorporation. 151. Previous notice of intention to be given. 152. When superintendent shall file certificate. 153. Examination by and certificate of superintendent. 154. Capital must be paid in cash. 155. List of stockholders to be furnished to superintendent. 156 Powers of corporation. 157. May be administrator, guardian or trustee. 158. No security required; trust fund debts preferred. 159. Investments of capital and deposits. 160. Interest and accumulations. 161. Directors. 162. Liability of stockholders and directors. 163. Powers of specially chartered trust companies. § 150. Incorporation. — Thirteen or more persons may form a cor- poration to be known as a trust company. Such persons shall under their hands and seals execute and acknowledge an organization cer- tificate 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 will 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 acknowledgement, be filed, one in the office of the county clerk of tho county wherein such trust company is proposed to be located, and one in the office of the superintendent of banks of the state. The capital stock of any such corporation must be at least five hundred thousand dollars; provided, however, that a corporation with a capi- tal of not less than two hundred thousand dollars may be organized in any city containing more than one hundred thousand inhabitants THE BAXKlNti LAW. 263 and less than two hundred and fifty thousand inhabitants, and a cor- poration may be organized with a capital of not less than one hun- dred 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 or town the population of which does not exceed tAventy-five thousand, the number of inhabitants in each case to be ascertained or determined by the last federal or state enumeration. Amended, L. 1893, eh. 314. R. S., 159G, L. J887, cli. 546, §§ 1, 2. Id., 1597, L. 1887, ch. 546, § 3. Id., 1599, L. 1887, ch. 546, § 19. See see. 34, ch. 540, L. 1887, at the end of thi.s article, as to change of name <5f trust company. The section (34) was not repealed. § 151. 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 corpo- rators, the name of the proposed corporation and the location of the same as set forth in such organization certificate. If thei'e is any trust company oi' trust companies organized and doing business in such city, a copy of such notice shall also be sent to each trust com- pany so organized and doing business at least fifteen days before the filing of the organization certificate. Amended, L. 1893, ch. 313. R. S., 1597, L. 1887, oh. 546, § 4. § 152. 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 acknow- ledged, as required by this article, or shall not be accompanied by «vidence 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 in con- formity to the provisions of this article. If such certificate is in due form and duly executed Jlccording to the provisions of this article, and is accompanied by evidence satisfactory to the superintendent of the proper publication and service in good faith of such notice, he 264 THE BANKING LAW. shall forthwith indorse the same over his ofBcial signature, "filed for examination," with the date of such indorsement. R. S., 1507, L. 1887, cli. 546, §§ 5, 6. § 153. 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 such 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 ad- vantage 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 with 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 fifty. The superintendent shall transmit such certificate of author- ization 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, 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 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. R. S., 1597, L. 1887, ch. 546, §§ 7, 8. Id., 1598, L. 1887, ch. 546, §§ 9, 10. § 154. Capital must be paid in cash. — The superintendent of bank^ shall, before issuing a certificate of authorization to any such corpo- THE BANKING LAW. 265 ration, examine, or cause an examination to be made, in order to as- certain 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 authorization shall not be granted ; and no such corporation shall commence business un- til such certificate of authorization has been granted. R. S., 1598, L. 1887, ch. 546, § 12. § 155. List of stockholders to be furnished to superintendent. — Before 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, and which shall be verified by the two principal officers of the corporation. R. S., 1598, L. 1887, ch. 546, § 13. § 156. 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 corpo- ration and in addition to the powers conferred by the general and stock corporation laws, 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- burse money, and transfer, register and countersign certificates of stock, bonds or other evidences of indebtedness. 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 property necessary in the transaction of its business, or which the purposes of the corporation may require, or which 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 bond 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 266 THE BANKING L.VW. management of sueli 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, the annual income of which shall not be less than one hundred dollars, and as depository of any moneys paid into court, 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 persona], 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 author- ity ; and it shall be accountable to all parties in interest for the faith- ful 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- triii^ted or committed to it by any person or persons, or any body politic, corporation or other authority, by grant, assignment, trans- fer, devise, bequest or otherwise, or which may be intrusted or com- milied or transferred to it or vested in it by order of any court of record, or any surrogate, and to receive and take and hold any prop- erty or estate, real or personal, which may be the subject of any such tru3t. )). To purchase, invest in, and sell stocks, bills of exchange, bonds ami mortgages and other securities ; and when moneys, or securities fo] moneys, are borrowed or received on deposit, or for investment, thtj bonds or obligations of the company may be given therefor, but it wliall have no right to issue bills to circulate as money. H 0. To be appointed and to accept the appointment of executor of or trustee under the last will and testament or administrator with or wilhout 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 fifty-five and fifty-six of this act, subject to the restrictions contained in said sections. 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 lawful for any individual to make, accept or execute. No loan ex- ceeding one tenth of its capital stock, shall be made by any such THE BAisriaNa law. 267 corporation, (directly or indirectly) to any director or ofEcer thereof and such loan to such director or officer shall not be made without the consent of a majority of the directors. ISTo 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 transacted. Amended by ch. 600 of 1901. R. S., 1598, L. 1887, ch. 546, § 11. Td., 1600, L. 1887, ch. 546, § 21. Id., 1602, L. 1887, ch. 546, § 28. Id., 1603, L. 1887, ch. 546, § 35. 1. See L. 1893, ch. 337, L. 1896, ch. 851, enabling certain trust companies to transact safe deposit and title insurance business. See Special Statutes, post. 2. § 156 (L. 1893, ch. 696), authorizing trust companies to exercise banking powers merely placed trust companies on an equality with banlcs as to interest, and did not give trust companies power to discount or purchase paper. Jenkins 1!. Neff, 186 U. S. 234, 46 L. ed. 1141, 22 Sup. Ct. Kep. 905. § 157. May be administrator, guardian oi trustee.— When any such corporation is appointed executor in any last will or testament, the court or officer authorized to grant letters testamentary, in this state shall, upon the proper application, grant letters testamentary thereon to such corporation. When application is made to any court or officer haYi*ig authority to grant letters of administration with the will an- nexed 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 adminis- tration with the will annexed, to any such corporation. Any court or officer having authority to grant letters of guardianship of any in- fant, may upon the same application as is required by law for the appointment of a guardian of such infant, appoint any such corpo- ration as guardian of the estate of such 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 cO'rporation to be such trustee, guardian, receiver or committee or to act in any other fiduci- ary capacity. Every court into which moneys may be paid by parties, or be brought by order or judgment, may, by order direct the same to be deposited with any such corporation. Am'd by ch. 552 of 1900. E. S., 1600, L. 1S87, ch. 546, § 22. Id., 1601, L. 1887, ch. 546, § 23. Id., 1603, L. 1885, ch. 425, § 1. 2t)S THE BANKING LAW. § 158. No security required; trust fund debts preferred. — No bond or other security, except as hereinafter provided, shall be required from any such corporation for or in respect to any trust, nor when 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 abso- lutely liable. Unless the investments are such as the courts recognize as proper when made by an individual acting as trustee, executor, ad- ministrator, 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 ap- plication, 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 to re- move such corporation from and to revoke such appointment. Such court or officer may make orders respecting such trusts and require the corporation to render all accounts which such court or ofiicer might lawfully require if such executor, administrator, guardian, trustee, receiver, committee or depositary were a natural person. Amended, L. 1898, ch. 98. Amended, L. 1893, eh. (i96. R. S., 1601, L. 1887, ch. 546, § 26. Id., 1603, L. 1885, ch. 425, §§ 1, 3. § 159. Investments of capital and deposits. — The capital of every such corporation shall be invested in bonds and mortgages on unin- cumbered real property in this state to the extent of sixty per centum of the value thereof, or in the stocks or bonds of this state, or of the United States, or of any county or incorporated city of this state duly authorized by law to be issued. The moneys received by any such corporation in trust may be in- vested in its discretion in the securities of the kind in which its capi^ tal 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. ITo such corporation shall hold stock in any private TIIE JiANKIiSG LAW. 269 corporation to an amount in excess of ten per centum of the capital of the corporation holding such stock. Am'd by ch. ICO of 1903. E. S., 1599, L. 1887, ch. 546, § 20. Id., 1601, L. 1887, ch. 546, § 27. L. 1890, ch. 439, § 1. § 160. 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 deposi- tary of moneys paid into court, interest shall be allowed by such cor- poration not less than the rate of two per cent, per annum imtil the moneys so received shall be duly expended or distributed. If such interest moneys, or any part thereof, shall not annually be expended or distributed pursuant to the terms or provisions of the trust 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. X. S., 1601, L. 1887, ch. 546, §§ 24, 25. § 161. 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. ISTo person can be director who is not the holder of at least ten shares of the capital stock of the corporation. The persons named in the organization cer- tificate, or such of them respectively as shall become holders of at least ten shares of such stock, shall constitute the first board of direct- ors, and may add to their number not exceeding 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 Wed- nesday 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 270 THE BANlilKG LAW. 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 expire who shall hold their officer for three years or until their successors are elected. Such election shall be held at the office of the corporation and at such time and xipon such public notice not less than ten days, by advertisement in at least one newspaper approved by the superintendent of banks published iE the city where such corporation is located, as shall be prescribed in the by-laws. In ease 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 niimber 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 election shall be filled by the board. 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 corporation and will not know- ingly violate, or willingly 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 re- quired by this section, 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. Such oath shall be subscribed by the director making it, and certified by tho officer before whom it is taken, and shall be immediately transmitted to the superintendent of banks and filed and preserved in his office. Amended by eh. 510 of 1901. R. S., 1.598, L. 1887, eh. 546, § 14. Id., 1599, L. 1887, ch. 546, § 15. § 162. liability of stockholders and directors. — If default shall be made in the payment of any debt or liability contracted by any sucti corporation, the stockholders thereof shall be individually responsi- ble, equally and ratably, for the then existing debts of the corpor- ation, but no stockholder shall be liable for the debts of the corpor- ation to any amount exceeding the par value of the respective share^ 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 THE ilANKlJSIG LAW. 271 and to the same extent that directors are now responsible in law or equity. R. S., 1602, L. 1887, ch. 546, §§ 29, 30. L. 188S), cli. 558. § 163. 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 subject to such provioions of this chapter as are not inconsistent with the special laws relating to such specially chartered company. Section 34 of chapter 546 of Laws 1887, relating to change of name of trust companies is still in force, and is as follows: § 34. Whenever two-thirds majority of all the trustees of any such corpora- tion sihall, by a resolution to be entered upon their mimites, express a desire and purpose to change the name of such corporation, the same may be effected in the manner following, to wit: Notice of intention to apply to the superin- tendent of the banking department for leave to change the name of such cor- poration, specifying the n.ame thereof, and the name to which it is proposed to- change the same, shall be published as required in section four of this act. After such publication application may be made to the superintendent to change the name of such corporation to such name as has been agreed upon in such resolution, and published in such notice, evidence of which resolution and publi- cation must be made satisfactorily to the superintendent, together with such application. If it shall appear to the superintendent that it is expedient and proper that such change of names be made, he shall, by an order under his liand and seal of office direct and authori;:e such change of corporate name to be made,. and designate some day in the future, not to exceed thirty days from the date of such order, when the said change shall take effect. Such order shall be exe- cuted in triplicate; one copy shall be transmitted and filed in the office of the county clerk of the county in which such corporation is located; one copy shall be transmitted to the corporation afTected thereby, and one copy shall be fled in the office of the superintendent of the banking department. Thereupon from the date designated in such order for such change of name to take effect, such corporation shall be known and described by the name designated in such order, and by such name shall have all the rights and powers to which it would be entitled if such change had not been made; but no such change shall in any manner lessen or impair any liability of such corporation incurred or existing at the time suoh change of name shall be made. 2*72 THE BANICINa LAW, AETICLE V. Co-opEEATivE Savings and Loan Assooiatioits. Section 170. Incorporation. 171. Object and purpose. 172. Mode of incorporation. 173. Officers and by-laws. 174. Capital stock. 175. Dues, fines and entrance fees. 176. Withdrawal of free shares. 177. Payment of matured shares. 178. Loans, how made; premium plans. 179. Security for loans. 180. Forfeiture for non-payment of dues. 181. Same. 182. May purchase at foreclosure sale. 183. Loans. 184. Profits and losses. 185. Transfer. 186. Attorney at law. 187. Qualification of members. 188. Report. 180. Same. 190. Visitation. 191. Statement of financial condition. 192. Laws repealed. 193. Reincorporation of existing associations. 194. Assessments. 195. Reference. 195a. Investments of deposits and income. 195b. Payment of expenses. This title was substituted for former titles V and VI, by chap. 705 of 1894. § 170. Incorporation. — Any fifteen or more persons of full age and residents of the state of New York, may form an association as pro- vided in this act. All associations formed under the provisions hereof shall be kno^vn as co-operative savings and loan associations ; and the name of every association so formed shall contain as a part thereof the words "co-operative savings and loan association." § 171. Object and purpose. — The object and purpose of such as- sociations 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 THE BANKING LAW. 273 eacli 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. § 172. Mode of incorporation.— Said association shall become in- corporated by the said fifteen or more persons making, signing and acknowledging, in the manner and form prescribed for the acknowl- edgment of deeds 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 act ; 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 superin- tendent of banks, and upon said certificate being so filed and record- ed, the superintendent of banks shall upon the payment 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 fil- ing and recording tliereof in his oflice, and which 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 corporate body with power to adopt by-laws relating to the manner of conducting their business not inconsistent with the provisions of this act. A copy of which by-laws and all subsequent amendments thereof shall be filed -with, the super- intendent of banks within thirty days of their adoption. § 173. Officers and by-laws. — The officers of the association shall consist of a board of directors of not less than thirteen members, in- cluding 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 peri- odical meetings of the officers and shareholders, the manner of calling special meetings and the manner of voting, shall be determined by the by-laws, except that the board of directors shall fix each year the compensation of the secretary and treasurer, unless otherwise deter- mined by the by-laws; and provided, further, that no officer, agent Banks, 18 274 THE BANKING LAW. 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 act shall hold office im- til their successors are duly elected and assume the duties of their offices. No association shall expire from neglect to elect officers at the time prescribed in its by-laws. § 174, Capital stock. — 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 dol- lars nor more thai?, 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. ISTo shares of a prior series shall be issued after the issuing of shares in a new series when issued upon the serial plan, except additional shares to a borrowing member to complete a loan. Shares which have not been pledged as a security for tlie payment of a loan shall be called "free shares." Shares that have been so pledged shall be called "pledged shares." Each asso- ciation shall determine by its by-laws the number of shares that may be held by one person. § 175. Dues, fines and entrance fees. — Eegular payments made to the association 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 com- mittee 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 pre- miums when due, in such sums and in such manner as its by-laws de- termine. The association shall also have power to charge an en- trance fee upon each share issued, not exceeding 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 ad- vance, but no association shall allow interest on such advance pay- THE BANKING LAW. 275 ments at a greater rate than six per centum per annum, nor for a longer period than one year. As to fines in building and loan associations, see editorial note to Dupuy t). Eastern Bldg. & L. Asso. 35 L. K. A. 215, collating the authorities on that ques- tion. § 176. Withdrawal of free shares.— The accumulations upon free shares may be withdrawn, and the shares canceled, after one month's written notice of such intention, filed with the secretary at 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 determined under the by-laws at the last distribution of profits before the notice of withdrawal, together with all dues paid since such distribution, 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 and a proportionate share of any unadjusted loss; provided, that at no time shall more than one-half the receipts of the association, and when the association is indebted upon matured shares no more than one-third, shall be ap- plicable to the payment of withdrawing shareholders, without the consent of the board of directors ; and when the demands of the with- drawing 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 may, at their discretion, under rules made by them, retire the free shares nt any time after four years from the date of their issue, by enforcing with- drawals of the same ; provided that the shareholders, whose shares are to be retired, shall be determined by lot ; and that they shall be paid the full value of their shares, less all fines and proportionate part of any unadjusted loss. 'No corporation incorporated under the provi- sions of this article or under the provisions of the repealed acts here- after enumerated in section one hundred and ninety-two of this chap- ter shall hereafter pay to a withdrawing shareholder any sum in ex- cess of the dues or stock payments credited to him upon its books, together with such dividends as have been duly apportioned and cred- ited thereon, and such interest on the value of the shares at the time of the last distribution of profits before the notice of withdrawal was filed and on the dues thereafter paid, as its articles of association, cer- 276 THE BANKING LAW. tificate of incorporation or by-laws shall determine, but less all un- paid fines, all deductions for expenses authorized by its articles of association, certificate of incorporation or by-laws, and a proportion- ate share of any unadjusted loss. Amended by eh. 328 of 1901. See note to Englehardt v. Fifth Ward Permanent Dime Sav. & L. Asso. 35 L. E. A. 289, presenting the authorities on the subject of withdrawals from building and loan associations. § 177. Payment of matured shares. — ^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 the 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. § 178. loans, how made; premium plans.— At each stated meeting 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 members of the association desiring to borrow all accumulations applicable to that purpose; the same shall be loaned m sums corresponding with the value of a matured part thereof, or the 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 deter- mine for itself by its by-laws, namely : 1. The "gross plan," with or without "rebates," as the by-laws shall determine ; that is, the premium shall be bid in the form of a certain sum per share, which shall be paid in cash or deducted from the loan made to the successful bidder. 2. The "installment plan," that is, the premium shall be bid in the form of a certain sum per share, which the successful bidder will pay at each regular payment of interest, in addition to the interest 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 shall determine the minimum rat« of interest at which the bid- THE BANKING LAW. 277 ding shall begin. But such minimum rate shall not exceed the legal rate of interest. In all these plana the member bidding the highest premium shall be entitled to the loan upon giving the security re- quired therefor, including the interest and premium ; the interest and premium shall be payable from the date of bidding off the loan, un- less otherwise ordered by the by-laws, and in case the sale takes place at an adjourned or special meeting, the same shall be payable from the last preceding regular meeting for the loaning of money unless the by-laws otherwise provide. Requiring and receiving svich inter- est and premiums or any other moneys which the association may re- quire under the provisions of this act, shall not be deemed a violation of the usury law. JSTo member or members shall borrow a larger sum 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 their principal office for the transaction of their business. A borrowing member for each share or fractional part thereof borrowed 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 acquittances 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 installment 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 suc- cessful 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 minimum rate shall not exceed six per centum per annum. On such stock a defi- nite 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 in- 278 THE BAITKINQ LAW. stallments, exclusive of any expense fund or other deductions which are authorized by the articles of association or the by-laws, as wiU, when taken together with the dividend hereinbefore mentioned, equal the matured value thereof at the end of the maximum period during which payment upon such stock may be required. In consideration of such fixed rate of dividend as above provided, the borrowing mem- ber 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 the borrowing member the fixed rate agreed upon in the contract with him, there shall be apportioned to the installment 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 apportioned to the stock of the borrowing members, there shall also then be apportioned to the stock of said borrowing members an additional profit, which shall amount to one-half of the difference between the rate first ap- portioned to such borrowing members' stock and the rate apportioned to the installment stock, and the other half of said difference shall be credited to and shall constitute a permanent contingent fund for the payment of losses lawfully chargeable to the profit and loss account of such association, and for no other purpose ; and in consideration of such contribution to the contingent fund, such stock shall, as between the members of the association issuing it, be exempt from any further charges or assessments for losses sustained, incurred or paid by such 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 considera- tion of the amount standing to the credit of such stock upon its books, and his agreement to contribute to the contingent fund of the cor- poration, a portion of the profits to which he otherwise might have been entitled as hereinbefore provided, accept the amount standing to his credit upon the books of the association, and the sums so contrib- uted, in full satisfaction of the loan or advance made to him; and the shares so issued shall be canceled and proper surrenders and ac- quittances be made. Amended by eh. 704 of 1899. § 179. Security for loans.— For every loan made, except as herein- after 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 BANKING LAW. 279 the association of tlie 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 ac the time of such borrowing shall exceed the amount borrowed and in- terest 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 security 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 premium, if any, for one month, and all necessary expenses incurred, if any, under the by-laws in ref- erence to the proposed loan. All bonds and mortgages given to the association shall be deemed conditioned upon the performance of the provisions of this act relating to the payment of loans, premiums, in- terest and fines thereon, and the by-laws of the association, althoiigh the same maj^ not be fully expressed therein. A borrower may repay a loan, and all arrears of interest, premium, if any, and fines thereon (or one or more shares thereof), at any stated meeting 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 ap- plication, have the withdrawal or holding value of the shares bor- rowed upon, applied in payment or part payment, as the by-laws shall determine. Should there at any time be money in the treasury not called for by the borrowing or withdrawing members, the board of directors may make temporary loans to members out of the same, at such rate of interest not exceeding six per centum, and under such provisions and restrictions as the by-laws may prescribe. Such tem- porary 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 inter- est 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 se- curities and under the same restrictions as allowed to savings banks by section one hundred and sixteen of this chapter. 'So corporation Incorporated under the provisions of this article or under the provi- 280 THE BANKIKa LAW. sions of the repealed acts hereafter enumerated in section one hun- dred and ninety-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 here- after 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 first mortgage, or purchase real estate securities, or invest any portion of its funds in real estate securities which 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 corporation until all subse- quent mortgages, liens or incumbrances owned by it shall have been fully paid and satisfied. And every 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 shall hereafter continue to make loans upon such second mortgages or liens, shall from and after the passage of this act, invest not less than fifteen per cent, the first year, twenty per cent, the sec- ond year, and thereafter twenty-five per centum of its receipts ap- plicable for loaning purposes in the same securities in which savings banks are by section one hundred and sixteen of this chapter, author- ized 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 under- lying 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 investment in such securi- ties need not exceed five hundred thousand dollars 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 subsequent or secondary liens, shall after the passage of this act make any such loans upon the se- curity of vacant or unimproved real estate. Amended by eh. 328 of 1901. THE BANKING LAW. 281 § 180. Forfeiture for non-payment of dues. — '\Mienever any mem- ber 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 entitled to withdraw the same without interest within one year upon such notice as shall be re- quired of a withdrawing shareholder, and upon failure to so withdraw the same, then, and in that case, it may revert to the association. § 181. Same. — Whenever a borrowing shareholder shall be in ar- rears in the payment of his dues, interest or premium two months, the whole loan shall become due at the option of the board of direct- ors, and they may proceed to enforce collection upon the securities held by the association. The vsdthdrawal value at the time of the commencement of the action of all shares pledged as collateral secur- ity for the loan, shall be applied upon the loan and arrearages of in- terest, premium and fines thereon, and the shares deemed surrendered to the association, § 182. May purchase at foreclosure sale. — Any corporation incor- porated under the provisions of this article or under the provisions of either of the repealed acts hereafter enumerated in section one hun- dred and ninety-two of this chapter may purchase at any sale, public or private, any real estate upon which it may have a mortgage, jiidg- ment 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 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 corpora- tion making such exchange, and no such exchange shall be made upon a basis involving the payment by said corporation of any difference in value unless approved by the superintendent of banks. ~So corpo- ration incorporated under the provisions of this article or under the provisions of either of the repealed acts hereafter enumerated in sec- tion one hundred and ninety-two of this chapter, shall hereafter pur- 282 THE BANKING lAW. chase or exchange real estate except as hereinhefore provided; 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 such association, who shall consent to or participate in the making of any such void, illegal or unauthorized contract for the purchase or ex- change 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. Amended by ch. 328 of 1901. In effect April 11, 1901. § 183. Loans. — Any association organized in pursuance of the pro- visions of this act may borrow money for the purpose of making loans or paying withdrawals, 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 ex- ceeding ten per cent, 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 stock- holders, matured or paid-up stock, may loan the same to another asso- ciation, organized under the provisions of this act, 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, ex- cept 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. § 184. Profits and losses.— Profits and losses shall be ascertained at least annually, 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 periodical distribution of profits, the board of directors may reserve and carry as undivided profits, in the nature of a contingent fund, any sum from the net profits that ia their discretion seems wise. § 185. Transfer.— JSTo transfers of shares shall be binding upon the association until the same have been made upon the books of the as- sociation ; and the transferee thereof shall take the same charged witli 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. THE BANKING LAW. 283 § ISe. Attorney-at-law.— The board of directors shall have the power to appoint and remove, at pleasure, an attorney-at-law for the association. The by-laws of the association may provide for the elec- tion 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 cer- tificate of incorporation are entitled to vote, and each incorporator shall have only one vote. § 1S7. ftualification of members, — 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 association; and for the purpose of giving any mem- ber 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 responsible to said infant for any moneys received by said trustees on account of said shares from the association. All ac- cumulations 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 tax- ation, and shall not be subject to the provisions of chapter one hun- dred and forty-three of the laws of eighteen hundred and eighty-six, nor shall any law passed hereafter, taxing corporations in any form, be deemed to include associations formed under this act, unless they are specifically named in such law. § 188. Report. — Every association organized under the provisions of this act or under the provisions 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 hundred 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 con- dition of such corporation on the thirty-first day of December of the 284 THE BANJilA'G LAW. next preceding year to the superintendent of banks, in such form and by such, officers of the corporation as the said superintendent may des- ignate. 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 sec- tion, 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 m.enibership or share fees, and all other compensa- tion paid to officers or agents by members or persons expecting to be- come members. Such report shall also include all expenditures made by such association, and for what purpose expended. Every associa- tion shall make any further reports which said superintendent of banks shall require, and in siich form and as to such matters relating- to the condition and conducting of the business of the association, as such superintendent shall designate. Any willful ?nd false swear- ing in making and verifying any such report shall be deemed perjury. § 189. Same. — If any such association shall fail to furnish to the superintendent of banks any report required by this act at the time so required, it shall forfeit the sum of ten dollars per day for every day such report shall be delayed or withheld ; 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 report the facts to the attorney-general, who may bring an action for recovery in the name of the people of the state of ISTew York; provided, however, that the superintendent may, for good cause shown, extend the time within which such report 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 act, or under the pro- visions of any act repealed by this act. § 190. Visitation. — AH associations organized under the provisions of this act or under the acts specified in section one hundred and eighty-eight of this article shall at all times be subject to visitation and examination by the superintendent of banks, his deputies or duly authorized agents; and he shall examine each of said associations at least once in each year. It shall also be the duty of said superintend- ent by himself, his deputies or duly authorized agents to make exami- nation of the affairs of any of said associations whenever in the judg- THE BAJflQiXG LAW. 285 ment or discretion of said superintendent the annual or any other re- port made to said department as required in this act shall in any man- ner 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 ISTew York under which it is organized or in an irregu- lar or unsafe manner, and when any association shall fail wholly to make the reports required by the provisions of this act, all expenses incurred in making such examination or investigation herein author- ized shall be paid from the funds provided by section twenty-five of this act, except the annual examination herein provided for and also excepting examinations made by reason of the business being con- ducted in a manner not authorized by articles of association or in violation of laAv 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 employes of his department, except for travelling or other necessary expenses, but when made by some person duly appointed by said su- perintendent 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 and reports of same and in getting to and from place of examination and the actual necessary expenses incurred. § 191. Statement of financial condition. — Each association shall at least annually publish and deliver to each shareholder on application a complete and detailed statement of the financial situation and the business conducted since the issuing of its last prior statement. § 192. Laws repealed. — 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 hundred 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 re- pealed, except as to associations now organized under either of said acts, but such associations shall be subject to the provisions of sec- tions one hundred and eighty-two, one hundred and eighty-eight, one hundred and eighty-nine, one hundred and ninety and one hundred and ninety-four of this chapter and to such provisions of sections one hundred and seventy-six and one 286 THE BANKIKG LAW. hundred and seventy-nine as are expressly made applicable- to them ; and no change, alteration or amendment shall he 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 either of said repealed acts, unless such change, alteration or amendment shall have first been submitted to the superintendent of banks and shall have received his written approval, which may be given or withheld in his 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 no- tice shall contain a true copy of the proposed change, alteration or amendment. Any corporation deeming itself aggrieved by tho refusal of the superintendent of banks to give such written approval may ap- ply to any justice of the supreme court, upon notice to the superintend- ent of banks, for a review of such decision. Such justice shall upon such application being made review the decision of 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. Amended by oh. 328 of 1901. § 193. Reincorporation of existing associations. — Any association now existing and heretofore incorporated under the provisions of chapter one hundred and twenty-two of the laws of eighteen hundred and fifty-one, and of the acts amendatory thereof, or chapteT five hundred and fifty-six of the laws of eighteen hundred and eighty- seven, and 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 act and reincorporate under the pro- visions in the following manner : First. Upon a majority vote of all the directors so requesting the president and secretary of the associa- tion shall call a special meeting of the shareholders to consider and determine the question whether the association shall reincorporate under the provisions of this act. 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. Second. At such meeting a majority vote of those in attendance shall decide all ques- tions considered at the meeting, the vote being by member or by TICE BANKING LAW. 287 shares, according to the rule already existing in the association. The meeting may be adjourned from time to time if deemed advisable. Third. If the shareholders decide not to reincorporate, another meet- ing for siich purpose shall not be called until one year has passed. Fourth. If the shareholders decide to reincorporate, they shall pro- ceed 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 act. Fifth. 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 recorded as provided in tlie third section of this act. Sixth. Upon the said fifteen or more persons complying with the provisions of said section three, and filing said by-laws with the superintendent of banks, the association shall become fully incorporated under this act. 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 all 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. § 194. Assessment. — 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 and articles five and six of chapter six hundred and eighty-nine of the laws of eighteen hundred and ninety-two, for the purpose of defraying the necessary expenses of his department in the supervision of said associations, examination and publication of reports as fol- lows, viz. : Said assessment shall be levied upon said associations in proportion to their assets as shown by the last preceding annual re- port, and said associations shall pay the same within ten days after notice is given by said superintendent ; and in no event shall any por- tion of said expense be borne by the state. § 195. Eeference. — "WTierever reference is made in any of the statutes of the state of New York to article five or six and to articles 288 THE BANKING LAW. five and six of chapter six liundred and eighty-nine of the laws of eighteen hundred and ninety-two the said reference shall be con- strued to mean and refer to this article five substituted in place of said articles five and six. § 2. All acts and parts of acts inconsistent herewith are hereby repealed. § 195a. Investments of deposits and income. — A corporate 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 six- teen of this chapter, authorized to invest their deposits and the in- come derived therefrom. Added by ch. 348 of 1S9S. § 195b. Payment of expenses. — A co-operative savings and loan as- sociation, a building and mutual loan association, a building, mutual loan and accumulating fund association, or a building and lot associa- tion, or any other similar corporation or association, incorporated under and doing business pursuant to the laws of this state, shall not make deductions from stock payments for running expenses. Added by ch. 84 of Laws of 1903. Sections 9 and 12 of chapter 146, Laws 1890, entitled "An Act relating to foreign co-operative loan and building association, and other similar associations doing business in the State of New York, and requiring them to report to the superintendent of the banking department. Approved April 21, 1890," are still in force, and are as follows: § 9. Any agent, publisher or other person, who, in person, by advertisement or otherwise, shall solicit subscriptions to, or who shall sell, or advertise to be sold in this iState the shares of stock of any corporation, company or associa- tion, described in section one of this act, and organized or incorporated without the State of New York, or who shall receive moneys or deposits for the same, or act for the same in any other capacity in this State, unless such corporation, company or association shall at the time have fully complied with the provisions of this act, shall be guilty of a misdemeanor, and upon conviction shall be pun- ishable by a fine not exceeding one thousand dollars, or imprisonment in a county jail not exceeding twelve months, or by both such fine and imprisonment, and shall also be personally liable in case of loss for all subscriptions obtained or moneys paid through his solicitation, advertisement or agency. § 12. The provisions of this act shall not affect nor apply to contracts or pay- ments made or received upon certificates of stock in force at the date of, the passage of this act. The corporations, etc., described in section one, are: THE BANKING LAW. 289 "Every corporation, company or association having for a part of its title or name the words 'building association,' 'building and loan association,' 'savings and loan association,' 'savings association' or 'co-operative bank;' and every cor- poration, company or association whose stock is payable by an accumulating fund Id regular or stated periodical instalments, and every corporation, company or association doing business in a form and character similar to that author- ized to be done in this State by chapter one hundred and twenty-two of the laws of eighteen hundred and fifty-one, and the laws amendatory thereof, and chapter five hundred and fifty-six of the laws of eighteen hundred and eighty-seven." Banks, 19 290 THE BATSTKINU LAW. AKTICLE VI. Incobpoeation of Building and Lot Associations. Section 196. Incorporation. 196a. Towers. 196b. Borrowing money. 196e. Dividends. 196d. Monthly payments. 196e. Liability of stockholders and directors. 19 6f. Exemption of shares from sale and execution. 196g. Keports. 196h. Supervision and examination. This article was added by L. 1898, ch. 193. § 196. Incorporation.— rive or more persons may become a corpo- ration for the purpose of accumulating a fund for the purchase of real property, to pay off encumbrances thereon, to aid its members in ac- quiring a building lot or lots, and making improvements thereon in a manner and form specijfied in the certificate of incorporation, or for all or any of such incorporation setting forth: 1. The name of the corporation. 2. The location of its principal business ofiice. 3. When its regular meetings shall be held and how special meet- ings may be called. 4. What shall be a quorum to transact business at its meetings. 5. How members shall be admitted, and their qualifications. 6. What officers, directors or attorneys of the corporation there shall be and how and when chosen. 7. The duties of such officers, directors or attorneys, and how re- moved or suspended from office. 8. The names of the persons who shall be such officers and direct- ors for its first year and until others ai'e chosen or appointed in their places. 9. The amount of each share and how ascertained. 10. The monthly or weekly dues per share. 11. The fees to be paid on the transfer of shares. 12. The penalties for non-payment of dues or fees, or other vio- lation of the provisions of the certificate. 13. The qualification of voters at its meetings and the mode of voting. THE BANKING LAW. 291 14. The manner of dividing land and selecting or allotting the lots 15. The manner of altering or amending the certificate of incor- poration. 16. Such other provisions not inconsistent with law as shall be necessary for the convenient and effective transaction of its business. Such certificate must be approved by the superintendent of banks and filed in the office of the clerk of the county in which such corpo- ration shall have its principal business office, and a certified copy thereof shall be filed in the office of the superintendent of banks. Thereupon the persons who have subscribed such certificate and such other persons as shall become members of the corporation and their successors shall be a corporation by the name specified in such cer- tificate. § 196a. Powers. — The directors of every such corporation may call in and demand from the members and stockholders thereof all sums of money by them subscribed, at such times and in such payments or instalments as the certificate of incorporation shall prescribe, under the penalty of forfeiting the shares of stock subscribed for and all previoiis payments made thereon, if payment shall not be made by the member or stocldiolder within sixty days aftor a personal demand made or notice requiring such payment shall have been published for six successive weeks in the newspaper nearest to the principal place of business of the corporation. But no corporation organized under this article shall purchase or deal in or take security upon real estate situate more than fifty miles from its principal office for the trans- action of its business. § 196b. Borrowing money. — Every such corporation shall have power to borjow money for temporary purposes not inconsistent with the objects of its organization, but no such loan shall have a longer duration than three years, nor shall its indebtedness for money so borrowed exceed at any one time one-fourth of the aggregate amount of its shares and parts of shares and the income thereof actually paid in and received. § 196c. Dividends. — Dividends declared from the earnings of the corporation shall be payable in such manner as may be provided in the certificate of incorporation. § 196d. Monthly payments. — 'So holder of shares shall be exempt 292 THE BANKIITG lAW. from making tlie monthly or other stated payments provided in the certificate of incorporation on the ground that by reason of losses or otherwise, the corporation has continued longer than was originally anticipated, whereby the payments made on such shares have amount- ed to more than the amount originally intended, with legal inter- est thereon. The imposition of fines for non-payment of dues or fees, or for other violation of the certificate of incorporation, or the mak- ing of any monthly payments required by the certificate of incorpo- ration, shall not be deemed a violation of the provisions of any statuto against usury. § 196e. liability of stockholders and directors. — A stockholder of such corporation shall be liable to the creditors for the amount un- paid on the stock held or subscribed for by him. The directors or other officers of every such corporation shall be personally liable for any fraudulent use, disposition or investment of any moneys or property belonging to it, or for any loss which shall be incurred by any investment made by any such directors or officers other than such as are mentioned in and authorized by this article; but no director or other officer shall be so liable unless he authorized, sanctioned, approved of or made such fraudulent use, disposition or investment. § 196f. Exemption of shares from sale and execution. — The shares held by the members and stockholders of every such corporation shall be exempt from sale on execution for debt to an extent not ex- ceeding six hundred dollars in such shares at their par value. § 196g. Reports. — On the first day of January of each year every such corporation shall make a written report to the superintendent of banks, in such form and containing such matters as he shall prescribe. Such reports shall give the condition of such corporation at the close of business on the thirty-first day of December in each year; and such corporation shall also make reports to the superintendent of banks whenever required by him and as of the day designated by him. § 196h. Supervision and examination. — A corporation organized under this article shall be subject to the inspection and supervision of the superintendent of banks. He shall either personally or by some competent person to be appointed by him visit and examine such corporation at least once in each year and whenever, in his judgment. THE BANKING LAW. 293 ita condition, and management is such as to render an examination of its affairs necessary and expedient. The superintendent, and every such person appointed to make such examination, shall have power to administer an oath to any person whose testimony may be required on such examination, 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 clerks in the banking department, no charge shall be made except for necessary travelling and other actual expenses. When it shall appear to the superintendent from an examination made or reported to him, or from a report made by any such corpo- ration pursuant to the provisions of this article, that it has committed any violation of its charter or of law, or is conducting its business and affairs in an unsafe or unauthorized manner, he shall, by an order under his hand and official seal, direct a discontinuance of such illegal, unsafe or unauthorized practices and strict conformity with the requirements of the law and with safety and security in its trans- actions. If any such corporation shall refuse or neglect to make any report required by law or to comply with any such order, or if it shall appear to the superintendent that it is unsafe or inexpedient for it to continue to transact business, the superintendent shall report the facts in writing to the attorney-general, who may there- upon bring an action or institute proceedings for the dis- solution of the corporation. If from any such exijraination or report the superintendent shall conclude that any such corporation is insolvent because of the value of the assets of said corporation being insufficient to pay and discharge the amount due to the creditors thereof, including the amount paid in by the stockhold- ers thereof for and on account of the purchase of or subscriptions foif the capital stock of such corporation without any scaling thereof, or is in an unsafe condition to transact business, he may forthwith take possession of its property and business and retain such possession until the termination of the action or proceeding instituted by the attorney-generaL - 294 THE liANKIHG LAW. AETICLE VII. MoETGAGE, Loan and Investment Coepoeations ; Supbbvision. Section 197. Incorporation. 198. Depo.?it required; authorization certificate. 199. General powers. 200. License. 201. Verified statement to be furnished. 202. Issue of license. 203. Unlicensed companies prohibited. 204. Revocation of license. 205. Designation of superintendent as attorney. (Art. VII of Banking Law as remodeled by L. 1896, cb. 452.) § 197. Incorporation. — Five or more persons may become a mort- gage, loan or investment corporation hy making, acknowledging and filing in the office of the clerk of the county where such corporation is to be established, and in the office of the superintendent of banks, a certificate in duplicate which shall state : I. The name by which such corporation is to be known. II. The particular city, town or village where its operations are to be carried on. III. The amount of its capital stock, which shall in no case be less than one hundred thousand dollars. IV. The name and places of residence of its stockholders, and the number of shares held by each. V. The date at which said corporation shall commence and termi- nate. VI. The number of directors, which shall not be less than five, and tie names of the stockholders who shall be directors for the first year of its incorporation, accompanied with a declaration that each incorporator will accept the responsibilities and faithfully discharge the duties of a director therein, if elected to act as such. Every such certificate when filed shall be recorded by the county clerk in the books kept for the record of certificates of incorporation, and by the superintendent of banks in a book to be kept by him for that purpose. Such certificate may provide for the increase of capi- tal stock and of the number of persons forming the corporation, and for such other changes not contrary to law, as may be thought proper. THE BANKING LAW. 295 § 198. Deposit required; authorization certificate. — Upon it appear- ing satisfactorily to the superintendent of banks that the capital stock of said corporation has been paid in cash and upon his receiving a deposit to the amount of one thousand dollars to be held by him as a pledge of good faith and a guaranty of compliance with the banking law on the part of such corporation, to be in such securities and assigned in the same manner as specified in section fifty-seven of this chapter in reference to deposits to be made by banks and individual bankers, and that it had otherwise complied with law, he shall issue his authorization certificate as provided in section thirty of this chapter. § 199. General powers. — In addition to the powers conferred by the general and stock corporation laws, a corporation organized as pro- vided in the two preceding sections shall have power to sell, offer for sale or negotiate bonds or notes secured by deed of trust or mort- gages on real property situate in this state or outside of this state, or choses in action owned, issued, negotiated or guaranteed by it, or may receive money or property either from its own stockholders or other persons in instalments or otherwise, and may enter into any con- tract, engagement or undertaking with such persons for the with- drawal of such money or property, at any time, Avith 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, excepting that said cor- poration cannot do a general deposit business vnthout complying with the provisions of section fourteen of this chapter. § 200. license. — The superintendent of banks may issue a license under his hand and official seal, in accordance with the provisions of this article, authorizing mortgage companies organized under the laws of any other state to transact business within the limits of this state ; and the supervisory power granted by this article shall apply to all associations, copartnerships, individuals, joint-stock companies, firms or corporations organized under the laws of any other state, who sell, offer for sale or negotiate bonds or notes, secured by deed or trust, or mortgage of real property or bonds, or obligations payable in in- stalments, or capital stocks, or choses in action, owned issued, ne- gotiated or guaranteed by them; and to all associations, copartner- ships, joint-stock companies or corporations organized as provided in sections one hundred and ninety-seven, one hundred and ninety-eight and one hundred and ninety-nine of this chapter, and the provisions of article one of this chapter shall apply to such. 296 THE BAJTKliSrG LAW. § 201. Verified statement to be furnislied. — Tlie companies, associ- ations, and others described in the preceding sections shall annually make and furnish to the superintendent of banks a true and verified statement of their financial condition in detail on blanks furnished by him for that purpose, which shall show : 1. The amount of capital actually paid in cash. 2. The amount of capital subscribed. 3. The undivided profits or earnings on hand. 4. The total liabilities itemized in such form as may be indicated in the blanks. 5. The total arpount of moneys loaned, invested or guaranteed. 6. The number and amount of all mortgages in arrears of interest for a period exceeding six months prior to the date of the report. 7. The number and amount of mortgages foreclosed during the past year. 8. The present cash value of all real property held or owned by foreclosure, and such other and further information concerning their business affairs and methods as the superintendent shall require. The statement shall be signed by the officers of the association, company or corporation or other person making the same, and in such form as the superintendent shall prescribe. The superintendent may, in his discretion, require a like report, either wholly or in part, as to such particulars as he may prescribe, to be made and submitted to him at any time and within such period as he may designate. No license shall be issued unless the superintendent, either personally or by some competent person or persons appointd by him has visited and examined thoroughly into the condition, business methods and affairs generally of any company, association, corporation, copartnership or individual proposed to be licensed by him; and he may make such examination as often thereafter as he deems necessary, and such ex- amination shall be made at least once in each year. The superin- tendent and every examiner appointed by him shall have power to administer an oath to any person whose testimony may be required in any such examination; and all books and papers which it may be deemed necessary to examine by the superintendent or the examiner shall be produced when demanded in writing by him. On every such examination inquiry shall be made as to the condition and resources generally of the company, corporation, association, copartnership or individual examined, the mode of conducting and managing its af- fairs, the advice of its directors or trustees, the investment of its funds, the safety and prudence of its management, the security af- THE HANKING LAW. 297 forded to those by wliom its engagements are held, and whctliev the reqiTirements of its charter and of law have been complied with in the administration of its affairs. § 202. Issue of license.— If it shall appear to the satisfaction of the superintendent from such examination made, and the statement or report submitted by any such corporation, company, copartnership, firm, association or individual, pursuant to the requirements of the preceding section, that its affairs are being conducted in a safe and lawful manner, he may issue to such company, corporation, copart- nership, firm or association, a license under his hand and seal, per- mitting it to transact business in this state for the term of one year from the date thereof. § 203. TTnlicensed companies prohibited.— No person, association, corporation, company or copartnership, shall, after the passage of this chapter, act in this state as the agent or representative of any company, corporation or others described in section two hundred of this chapter, unless the same has been duly licensed by the superin- tendent of banks as hereinbefore provided. Every such company, corporation, or others, described in section two hundred of this chap- ter, organized under the laws of any other state, shall within thirty days after being authorized to transact business in this state, file in the ofiice of the superintendent of banks, a certificate stating the name and business address of every person, association, corporation, com- pany, firm or others, who act or propose to act in this state as its agent or representative, and in case of any change in any such representa- tive, an amended certificate shall be forthwith filed as herein pro- vided. Whoever shall offend against the provisions of this section shall forfeit to the people of the state the sum of one thousand dollars for every offense. § 204. Revocation of license. — If it shall appear to the superin- tendent from an examination made of, or report submitted by any li- censee organized under the laws of any other state under the provi- sions of this article, or from sufficient information otherwise obtained, that such licensee is conducting its business and affairs in an unsafe or unauthorized manner, he shall, by an order under his hand and official seal, addressed to such licensee, direct it to discontinue such unsafe or illegal practices, and to conform to the requirements of its charter and of law, and to provide for the safety and security of its transac- tions. If such licensee shall neglect or refuse to make any reports 298 THE BANKING LAW. as herein specified, or to comply with such order, or if it shall appear to the superintendent that it is unsafe or inexpedient for any such licensee to continue the transaction of business, he shall forthwith re- voke the license granted to any such licensee, and serve a copy of the order of revocation on the company, association, corporation, copart- nership or individual whose license is revoked, at its principal office for the transaction of business in this state, and also upon each agent or representative thereof within the state, specified in the certificate provided for in section two hundred and three of this chapter, by de- positing the same in the post-office directed to such licensee at such principal place of business, and to each of such agents at his place of business ; and the superintendent may, in his discretion, publish such order, with such other facts as he may deem proper, for six successive days in the state paper published in the city of Albany. § 205. Designation of superintendent as attorney. — Every corpora- tion, company, firm, association or individual, organized under the laws of any other state, thus licensed, shall, before transacting any business within this state, by an instrument in writing duly executed, appoint the superintendent of banks its true and lawful 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 were a do- mestic corporation and had been lawfully served with process in the state. A certificate of such appointment, duly certified and authen- ticated, shall be filed in the office of the superintendent of banks, and copies certified by him or his deputy shall be sufficient . evidence thereof. Service in favor of a resident of this state upon such attor- ney shall be deemed a personal service upon such licensee. When- ever lawful process against such licensee shall be served upon the su- perintendent of banks, he shall forthwith forward a copy of the proc- ess served upon him by mail, prepaid, and directed to the president or secretary of the corporation or association at its last-named 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 part of his taxable disbursements if he succeeds in his suit or proceed- ing. The term, process, when used in this section, includes any writ, summons, petition or order whereby any suit, action or proceeding shall be commenced by a resident of this state. THE fSAXKlXO T.AW. 290 AKTICLE VTII. Safe Deposit Companies. Section 210. Incorporation. 211. Directors. 212. Officers and by-laws. 213. Liability of stockholders. 214. Remedy for non-payment of rent for safe. 215. Laws repealed. 216. Wlien to take effect. § 210. Incorporation. — Five or more persons may become a corpo- ration for the purpose of taking and receiving upon deposit as bailee for safekeeping and storage, jewelry, plate, money, specie, bullion, stocks, bonds, securities and valuable papers of any kind, and other valuable personal property, and guaranteeing their safety upon such terms and for such compensation as may be agreed upon by it and the respective bailors thereof; and to let out vaults, safes and other receptacles for the uses and purposes of such corporation, by making, acknowledging, and filing in the ofiice of the clerk of the county in which its principal place of business is to be located, and a duplicate thereof in the ofiice of the superintendent of banks, a certificate stat- ing its corporate name, the business for which formed, the amount of its capital stock, which shall not exceed one million nor be less than one hundred thousand dollars, except in cities or villages of less than one hundred thousand inhabitants, in which the capital shall not be less than ten thousand dollars, the number of shares of which its stock shall consist, the term of its existence not to exceed fifty years, the number of directors and their names, residences, occupation and post-ofSce addresses, who shall manage its concerns for the first year, and the name of the place in which its operations are to be carried on ; such certificate must be approved before filing by the superintendent of banks. No such corporation shall commence or transact business until the whole amount of its capital stock shall have been paid in; nor make any loan or advance on any property left with it for storage or safe-keeping. R. S., 1604, L. 1875, eh. 613, §§ 1, 2. L. 1877, ch. 10. I;. 1883, eh. 273. 1. A safe of the Mercantile Trust Company, and a tin box containing propeity 300 THE BANKriN'tt LAW. and securities of the defendant on deposit, are not within the protection which the law aJTords to a. debtor "s dwelling-house against an officer acting under civil process, such safe mid box are simply places of deposit and safe-keeping which a sheriff may enter to make the seizure required by law in the execution of a process, otherwise "there would be nothing to prevent a failing or insolvent debtor from turning all his property into valuable securities, or other articles requiring but little space for their custody, and <'--'n placing them in the hands of a safe- deposit company for protection, and defy all the efforts of his creditors to satisfy their debts by resorting to them." Daniels, J. United States v, Graff, 67 Barb. 310; mem. of same case, 4 Hun, 634. 2. j4fter the property of a customer of a safe-deposit company has been taken into the possession of the officers of the law, the company is under no obligation to resist the execution of a search warrant. It is the duty of the owner of the property to begin legal proceedings, for the recovery of the same. The company is not responsible for the loss or misappropriation of the property. (Citing Jones V. Morgan, 90 N. Y. 4, 43 Am. Kep. 131; Bell v. Clapp, 10 Johns. E. 263; United States v. Graff, 67 Barb. 520; Day v. Bach, 87 N. Y. 56; Wliitaker v. Merrill, 28 Barb. 526; Stamford Steamboat Co. v. Gibbons, 9 Wend. 327.) Rob- erts V. Stuyvesant Safe Deposit Co., 1887, 3 N. Y. State Rep. 507. A state deposit and savings institution created by chapter 816, Laws of 1868, "had no power under its charter to loan money on personal security, and was forbidden by the llestraining Act from engaging in the business of discounting notes and other commercial paper, and could not enforce notes discounted in violation of the act." Andbews, J. Pratt v. Eaton, 79 N. Y. 452; In re Jaycox,. 12 Blatchf. C. Ct. 209, Fed. Cas. No. 7,237, 13 id. 70, Fed. Cas. No. 7,238. § 211. Directors. — The affairs of every such corporation shall be managed by not less than five nor more than thirteen directors, who shall be stockholders and a majority of whom shall be citizens of thi* state, and who shall, except for the first year, be annually elected by the stockholders at such time and place as shall be prescribed in the- by-laws of the corporation. Notice of the time and place of holding such election shall be published not less than ten days previous there- to in a newspaper in the tovsm or city in which the operations of such corporation shall be carried on, and the election shall be made by such of the stockholders as shall attend for that purpose either in person, or by proxy. R. S., ie05, L. 1875, ch. 613, § 3. L. 1883, ch. 338. § 212. Officers and by-laws. — There shall be a president of the cor- poration to be designated from the directors, and such subordinate of- ficers as the corporation by its by-laws may designate, who may b& elected or appointed, and required to give such security for the faith- ful performance of the duties of their offices as the corporation by its. by-laws may require. The directors may make such by-la^AS as they THE BANKING LAW. 301 shall deem proper for the management, disposition of the stock, prop- erty and business affairs of the corporation, not inconsistent with law, and prescribing the duties of the officers and persons employed by it, the manner of the appointment and election of all officers, and for carrying on all kinds of business within the objects and purposes of the corporation. E. S., 1605, L. 1S75, ch. 613, §§ 5, 7. § 213. Liability of stockholders. — The stockholders of every such corporation shall be jointly and severally liable for all debts that may be due and owing by it to an amount equal to the par value of their stock in such corporation over and above such stock, to be recovered of the stockholders who are such when the debt is contracted or the loss or damage sustained, or of any subsequent stockholder. Any stock- holder who may have paid any demand against such corporation, either voluntarily or by compulsion, shall have a right to resort to the rest of the stockholders who are liable to contribution ; and the disso- lution of the corporation shall not release or affect the liability of any stockholder which may have been incurred before dissolution. R. S., 1606, L. 1875, ch. 613, § 9. § 214. Remedy for non-payment of rent for safe. — If the amount due for the use of any safe or box in the vaults of any such corpora- tion shall not have been paid for three years, it may, at the expiration thereof, cause to be sent to the person in whose name such safe or box stands on its books a notice in writing in a securely closed post-paid registered letter, directed to such person at his post-office address as recorded upon the books of the corporation, notifying such person that if the amount then due for the use of such safe or box is not paid within sixty days from the date of such notice, the corporation will then cause such safe or box to be opened in the presence of its presi- dent or secretary or treasurer, and of a notary public not an officer or in the employ of the corporation, and the contents thereof, if any, to be sealed up by such notary public in a package, upon which such no- .tary public shall distinctly mark the name and address of the person in whose name such safe or box stands upon the books of the corpo- ration, and the estimated value thereof; and the package so sealed and addressed, when marked for identiiication by such notary public, will be placed by such notary public in one of the general safes or boxes of the corporation. Upon the expiration of sixty days from the date of mailing siTch notice as aforesaid, and the failure of the person in whose name such 302 THK BAJfiaiYG LAW. safe or box stands on the books of the corporation to pay the amount due for the use thereof in full up to the date of such notice, the cor- poration may, in the presence of a notary public and of its president or secretary or treasurer, cause such safe or box to be opened, and the contents thereof, if any, to be removed and sealed up by such notary public in a package, upon which such notary public shall distinctly mark the name of the person in whose name such safe or box and its estimated value stood on the books of the corporation, and when such package has been marked for identification by such notary public, it shall, in presence of the president or secretary or treasurer of the cor- poration, be placed by such notary public in one of the general safes or boxes of the corporation, and the proceedings of such notary public shall be fully set out by him in his own proper handwriting and un- der his official seal, in a book to be kept by the corporation for that purpose. R. S., ]607, L. 1875, ch. 613, § 15. L. 1886, ch. 498. § 215. laws repealed. — Of the laws enumerated in the schedule hereto annexed, that portion specified in the last column is repealed. Such repeal shall not revive a law repealed by any law hereby re- pealed, but shall include all laws amendatory of the laws hereby repealed. New. § 216. When to take effect.— This chapter shall take effect on the thirtieth day after the date of its fijial passage. N"ew. Schedule of Laws Eepealed. Laws of Chapter Sections 1835 262 All. 1842 3 All. 1844 239 All. 1851 122 All. 1875 564 All. 1875 613 ... ; All. 1877 10 All. 1878 96 All. 1878 347 All. 1882 191 AIL THE BANKING LAW. 303 Laws of Chapter Seetiona 1882 409 All except §§ 68, 69, 312-327, both inclu- sive. 1883 273 All. 1883 282 All. 1883 338 All. 1883 439 All. 1884 47 All. 1884 48 All. 1884 504 All. 1885 329 All. 1885 425 All. 1885 477 All. 1886 498 All. 1886 564 All, 1886 569 All. 1887 517 All. 1887 518 All. 1887 524 All. 1887 546 All except § 34. 1887 556 All. 1888 373 All. 1889 177 All. 1889 414 All. 1889 558 All. 1890 146 All except §§ 9, 12. 1890 429 All. 1890 439 All. 1890 506 All except § 12. 1890 525 All. 1891 374 AIL THE STOCK CORPORATION LAW. J^ANKS, 20 THE STOCK CORPORATION LAW. Laws 1892, Chapter 688. (As Amended 1903.) CHAPTEE XXXVI. OF THE GENEEAL LAWS. Abttclb 1. General powers; re-organization (§§ 1-8). 2. Directors and officers; their election, duties and liabilities (§§ 20- 34). 3. Stock; stockholders, their rights and liabilities (§§ 40-62). AETICLE I. General Powers; Eeorganizatioit. Section 1. Short title and application of chapter. 2. Power to borrow money and mortgage property. 3. Reorganization upon sale of corporate property and franchises. 4. Contents of plan or agreement. 5. Sale of property; possession of receiver and suits against him. 6. Assent of stockholders to plan of readjustment. 7. Combinations prohibited. 8. Mortgages, execution of. Section 1. Short title and application of chapter. — This chapter shall be known as the stock corporation law, but article one shall not apply to moneyed coriDorations. Former section 1, amended. (Sections 2 to 8 do not apply to moneyed corporations.) § 2. Power to borrow money and mortgage property. — In addition to the powers conferred by the general corporation law, every stock corporation shall have the power to borrow money and contract debts when necessary for the transaction of its business, or for the exercise of its corporate rights, privileges or franchises, or for any other law- ful purpose of its incorporation; and it may issue and dispose of its obligations for any amount so borrowed, and may mortgage its prop- 307 ,308 THE STOCK COEPOEATION LAW. erty and franchises to secure the payment of such obligations, cr of any debt contracted for said purposes. Every such mortgage, except purchase money mortgages and mortgages authorized by contracts made prior to May first, eighteen hundred and ninety-one, shall be consented to by the holders of not less than two-thirds of the capital stock of the corporation, which consent shall be given either in writ- ing or by vote at a special meeting of the stockholders called for that purpose, upon the same notice as that required for the annual meet- ings of the corporation ; and a certificate under the seal of the corpo- ration that such consent was given by the stockholders in vsrriting, or that it was given by vote at a meeting as aforesaid, shall be subscribed and acknowledged by the president or a vice-president and by the sec- retary or an assistant secretary, of the corporation, and shall be filed and recorded in the ofiice of the clerk or register of the county wherein the corporation has its principal place of business. When authorized by such consent, the directors under such regulations as they may adopt, may confer on the holder of any debt or obligation secured by such mortgage the right to convert the principal thereof, after two and not more than twelve years from the date of the mortgage, into stock of the corporation ; and if the capital stock shall not be sufficient to meet the conversion when made, the stocldiolders shall, in the man- ner herein provided, authorize an increase of capital stock sufiicient for that purpose. Amended by ch. 334 of 1901. § 3. Eeorganization upon sale of corporate property and franchises. — When the property and franchises of any domestic stock corpora- tion shall be sold by virtue of a mortgage or deed of trust, duly exe- cuted by it, or pursuant to the judgment or decree of a court of com- petent jurisdiction, or by virtue of any execution issued thereon, and the purchaser, his assignee or grantee shall have acquired title to the same in the manner prescribed by law, he may associate with him any number of persons, not less than the number required by law for an incorporation for similar purposes at least two-thirds of whom shall be citizens of the United States and one shall be a resident of this state, and they may become a corporation and take and possess the property and franchises thus sold, and which were at the time of the sale pos- sessed by the corporation whose property shall have been so sold, upon making and acknowledging and filing in the ofiices where certificates of incorporation are required by law to be filed ; a certificate in which they shall describe by name and reference to the law under which it THE STOCK COEPOKATION LAW. 309 was organized, the corporation whose property and franchises they have acquired, and the court by whose authority the sale had been made, with the date of the judgment or decree authorizing or direct- ing the same, and a brief description of the property sold, and also the following particulars: 1. The name of the new corporation intended to be formed by the filing of such certificate ; and the place where its principal office is to be located. 2. The maximum amount of its capital stock and the number of share? into which it is to be divided, specifying the classes thereof, whether common or preferred, and the amount of, and rights per- taining to, each class. 3. The number of directors, not less nor more than the number re- quired by law for the old corporation, who shall manage the affairs of the new corporation, and the names and post-office address of the directors for the first year. They may insert in such certificate any provisions relating to the new corporation, or its management, contained in any plan or agree- ment which may have been entered into as provided in section four of this chapter. Such corporation shall be vested with, and be entitled to exercise and enjoy, all the rights, privileges and franchises, which at the time of such sale belong to, or were vested in the corporation, last owning the property sold, or its receiver, and shall be subject to all the provisions, duties and liabilities imposed by law on such cor- porations. Any proceedings heretofore taken in substantial compli- ance with this section as hereby amended and any and all incorpora- tions based thereon are hereby ratified and confirmed. Amended by ch. SO of 1902. § 4. Contents of plan or agreement, — At or previous to the sale the purchasers thereat, or the person for whom the purchase is to be made, may enter into a plan or agreement, for or in anticipation of the re- adjustment of the respective interests therein of any creditors, mort- gagees and stockholders, or any of them, of the corporation owning such property and franchises at the time of sale, and for the represen- tation of such interests in the bonds or stock of the new corporation to be formed, and may therein regulate voting by the holders of the preferred and common stock at any meeting of the stocldiolders, and may provide for, and regulate voting by the holders, and owners of any or all of the bonds of the corporation, foreclosed^ or of the bonds issued or to be issued by the new corporation ; and such right of voting 310 TltE STOCK COEPOEATION LAW. by bondholders shall be exercised in such manner, for such period, and upon such conditions, as shall be therein described. Such plan or agreement must not be inconsistent with the laws of the state and shall be binding upon the corporation, until changed as therein pro- vided, or as otherwise provided by law. The new corporation when duly organized, pursuant to such plan or agreement and to the pro- visions of law, may issue its bonds and stock in conformity with the provisions of such plan or agreement, and may at any time within six months after its organization, compromise, settle or assume the pay- ment of any debt, claim or liability of the former corporation upon such terms as may be lawfully approved by a majority of the agents or trustees intrusted with the carrying out of the plan or agreement of reorganization, and may establish preferences in favor of any portion of its capital stock and may divide its stock into classes ; but the cap- ital stock of the new corporation shall not exceed in the aggregate, the maximum amount of stock mentioned in the certificate of incorpora- tion. Amended by ch. 354 of 1901. § 5. Sale of property; possession of receiver and suits against Mm. — The supreme court may direct a sale of the whole of the property, rights and franchises covered by the mortgage or mortgages, or deeds of trust foreclosed at any one time and place to be named in the judg- ment or order, either in case of the non-payment of interest only, or of both the principal and interest due and unpaid and secured by any such mortgage or mortgages or deeds of trust. ITeither the sale nor the formation of the new corporation shall interfere with the author- ity or possession of any receiver of such property and franchises, but he shall remain liable to be removed or discharged at such time as the court may deem proper. No suit or proceeding shall be commenced against such receiver unless founded on wilful misconduct or fraud in his trust after the expiration of sixty days from the time of his dis- charge; but after the expiration of sixty days the new corporation shall be liiible in any action that )aay be commenced against it, and founded on any act or omission of such receiver for which he may not be sued, and to the same extent as the receiver, but for this section would be or remain liable, or to the same extent that the new corpo- ration would be had it done or omitted the acts complained of. § 6. Municipalities may assent to plan of readjustment. — The com- missioners, corporate authorities or proper officers of any city, town THE STOCK COEPOKATION LAW. 311 or village, who may hold stock in any corporation, the property and franchises whereof, shall be liable to be sold, may assent to any plan or agreement of reorganization which lawfully provides for the for- mation of a new corporation, and the issue of stock therein to the proper authorities or officers of such cities, towns or villages in ex- change for the stock of the old or former corporation by them respec- tively held. And such commissioners, coi"j^)orate authorities or other proper officers may assign, transfer or surrender the stock so held by them in the manner required by such plan, and accept in lieu thereof the stock issued by such new corporation in conformity therewith. Amended by ch. 354 of 1901. Under this section, it is entirely optional with the stockholder whether he will come in under the plan and join the new company. Vatable v. N. Y., L. E. & W. R. R. Co., 96 N. Y. 49. Trust company, appointed on reorganization of railroad, to fix amount to be paid by stockholders for new stock, etc., need not give notice of time and place of hearing. Gernsheim v. Cent. T. Co., 40 N. Y. St. Rep. 907, 16 N. Y. Supp. 127. Stockholder who acquired stock from those who voted for plan of reorganiza- tion, can not insist upon its being ultra vires, or enjoin its accomplishment. Hollins V. St. P. M. & M. R. K. Co., 29 N. Y. St. Rep. 208, 9 N. Y. Supp. 909. Contract construed so that rights of non-assenting parties can not be changed by majority vote of certificate holders, taken after creation of new corporation. Dutenhoffer v. A. R. R. Co., 38 N. Y. St. Rep. 710, 14 N. Y. Supp. 558. Stockholder of former corporation, who did not sign agreement to exchange for stock in new corporation, is not prejudiced by action thereunder. Bean v. A. L. & T. Co., 34 N. Y. St. Rep. 620. § 7. Combinations abolished. — No domestic stock corporation and no foreign corporation doing business in this state shall combine with any other corporation or person for the creation of a monopoly or the unlawful restraint of trade or for the prevention of competition in any necessarj' of life. [Am'd, ch. 384 of 1897.] Former section 7 amended. Combination of corporations to prevent competition and control prices subjects franchises to forfeiture. People «. North R. S. R. Co., 19 N. Y. St. Rep. 853, 3 jST. Y. Supp. 401. Transaction between defendant and central association was held trust and vio- lation of its charter, and failure in performance of its corporate duties, so material and important as to justify judgment of dissolution. People v. N. R. S. R. Co., 121 N. Y. 582, 9 L. R. A. 33, 18 Am. St. Rep. 842, 24 N. E. 834. Any combination, to prevent competition in its broad and general sense, and to control, and thus, at will, enhance prices to the detriment of the public, la a legal monopoly. People v. North R. S. R. Co., 22 Abb. N. C. 164. Receiver of one member of trust can not maintain action for accounting or 312 THE STOCK COKPOEATION LAW. dissolution. Gray v. Oxnard Bros. Co.. 31 N. Y. St. Rep. 968, 11 N. Y. Supp. 118. Receiver of corporation belonging to trust is entitled, as between him and corporation, to assets. Pittsburgh C. Co. v. McMillin, 119 N. Y. 46, 7 L. E. A. 4G, 23 N. E. 530. In this state, there can be no partnership of separate and independent corpo- rations, either directly or indirectly, through medium of trust. People v. N. R. S. a. Co., 121 N. Y. 582, 9 L. E. A. 33, 18 Am. St. Eep. 842, 24 N. E. 834. § 8. Execution of mortgage.— Whenever any mortgage affecting property or franchises within this state heretofore or hereafter exe- cuted by authority of the board of directors in behalf of any stock cor- poration, domestic or foreign, of any description, recites or represents in substance or effect that the execution of such mortgage has been duly consented to, or authorized by stoclcholders, such recital or rep- resentation in any such mortgage, after public record thereof within this state, shall be presumptive evidence that the execution of such mortgage has been duly and sufficiently consented to, and authorized by stockholders as required by any provision of law. After any such mortgage heretofore or hereafter .shall have been publicly recorded for more than one year in one or more of the counties of this state containing the mortgaged premises or any part thereof, and the corpo- ration shall have received value for bonds actually issued under and secured by such mortgage, and interest shall have been paid on any of such bonds according to the terms thereof, such recital or repre- sentation of such mortgage so recorded shall be conclusive evidence that the execution of such mortgage has been duly and sufficiently consented to, and authorized by stockholders as repuired by any pro- vision of law, and its validity shall not be impaired by reason of any defect or insufficiency of consent or authority of stockholders or in filing or recording such consent or authority, and such mortgage shall be valid and binding upon the corporation, and those claiming under it, as security for all valid bonds issued or to be issued thereunder, unless such mortgage shall be adjudged invalid in an action begun as hereinafter, in this section, provided. Notwithstanding the foregoing provisions of this section, the invalidity of any siich mortgage hereto- fore recorded because of insufficiency of consent by stocldiolders may be adjudged in any action for such purpose begun before the first day of April, nineteen hundred and two, and the invalidity of any such mortgage hereafter recorded, because of insufficiency of consent by stockholders, may be adjudged in any action for such purpose begim, within one year after the earliest record of such mortgage in any THE STOCK COEPOBATION LAW. 313 county in this state, provided in either case that such action shall have been so begun by or in behalf of the corporation by direction of the board of directors acting in their own discretion, or upon the written request of the holders of not less than one-third of the capital stock of the corporation; and in any such action so begun by or in behalf of the corporation, the recitals or representations of the mortgage shall be presumptive evidence only as first above provided. "Whenever hereafter, in compliance with any law of this state, the officers of any corporation shall have made and filed and recorded a certificate that the execution of a mortgage hereafter made by the corporation has been duly consented to by stockholders, such certificate shall be con- clusive evidence as to the truth tliereof , in favor of any and all persons who in good faith shall receive or purchase, for value, any bond or obligation purporting to be secured by such mortgage, at any time when said certificate shall remain of record and uncancelled. Noth- ing in this section contained shall affect any right or any remedy in respect of any such right of any creditor accrued before this enacts ment nor shall it dispense with the necessity of obtaining the consent of the board of railroad commissioners to any mortgage by a railroad corporation. Added by chap. 354 of 1901. 314 TILE STOCK COKPOBATIOK LAW. ARTICLE 11. DiEECTOKS AND OfFICEES ; ThEIE EJECTION, DUTIES AND Liabilities. Section 20. Directors. 21. Change of number of directors. 22. When acts of director.s void. 23. Liability of directors for making xinauthorized dividends. 24. (Repealed.) 25. Liability of directors for loans to stockholders. 26. Transfers of stock by stockholders indebted to corporation. 27. Officers. 28. Inspectors and their oath. 29. Books to be kept. 30. Annual report. 31. Liability of oflicers for false certificates, reports or public notices. 32. Alteration or extension of business. 33. Sale of franchise and property. 34. Excessive indebtedness, lialjility of ofiicer or dirtcfcor. § 20. Directors. — The directors of every stock corporation shall be chosen at the time and^ place fixed by the by-laws of the corporation by a plurality of the votes at such election. Each director shall be a stockholder unless otherwise provided in the certificate, or in a by- law adopted by a stocldiolders' meeting. Vacancies in the board of directors shall be filled in the manner prescribed in the by-laws. ITotice of the time and place of holding any election of directors shall be given by publication thereof, at least once in each week for two suc- cessive weeks immediately preceeding such election, in a newspaper published in the county where such election is to be held, and in such other manner as may be prescribed in the by-laws. Policy holders of an insurance corporation shall be eligible to election as directors. At least one-fourth in number of the directors of every stock corporation shall be elected annually. Amended by ch. 354 of 1901. Former section 20 amended. See sections 10, 26, chap. Gil of 1875, section 1, chap. 422 of 1881, section 1, chap. 232 of 1883, and section 2, chap. 23 of 1890, now repealed. The powers vested in a corporation aggregate, which has a board of trustees, reside, for all purposes of practical administration, in the board as a governing body. People's Bank "j. St. Anthony's R. C. Church, 109 N. Y. 512, 17 N. E. 408. Provisions in statutes and by-laws requiring the election of directors to be THE STOCK COKPORA.TION LAW. 315 held on a specified day, are regarded as directory. Tlie election, if not then, held, may be held on a later day, and the directors then chosen will, if there be no other irregularity or infirmity in their title, be directoi's de jure. Beardsley et al. V. Johnson et al, 121 N. Y. 224, 24 N. E. 380. As to liability of directors to corporation, see editorial note to Bosworth v. Allen, 55 L. R. A. 751, presenting the authorities on that subject. § 21. Change of number of directors. — The number of directors of any stock corportion may be increased or reduced, but not below the minimum number prescribed by law, when the stocldiolders owning a majority of the stock of the corporation shall so determine, at a meeting to be held at the usual place of meeting of the directors, on two weeks' notice in writing to each stockholder of record. Such no- lice shall be ser^'ed personally or by mail, directed to each stockholder at his last known post-ofiice address. Proof of the service of such notice shall be filed in the office of the corporation at or before the time of such meeting. The proceedings of such meeting shall be entered in the minutes of the corporation and a transcript thereof, verified by the president and secretary of the meeting shall be filed in the offices where the original certificates of incorporation were filed. If a corporation formed under or subject to the banking law, the con- sent of tlie superintendent of banks, and if an insurance corporation, tlie consent of the superintendent of insurance, shall be first obtained to such increase or reduction of the number of directors. This section shall apply to any stock corporation whether organized under a gen- eral or special law, and the number of directors may be increased as hereby provided notwithstanding the maximum number of directors now prescribed by law. Amended by ch. 320 of 1903. Former section 21, amended. The fact that a corporation has less than the number of directoi-s required by law does not enable it to avoid liability for an act of its officers authorized by its trustees (directors) who were at the time owners of all its capital stock. The resolution authorizing the act if not valid as an act of the board is equiva- lent to an assent by the stockholders, and a previous assent is as effective as a subsequent ratification of the official acts. Martin v. Niagara Falls Paper Mfg. Co., 44 Hun, 130. § 22. When acts of directors void. — When the directors of any cor- poration for the first year of its corporate existence shall hold over and continue to be directors after the first year, because of their neg- lect or refusal to adopt the by-laws required to enable the stockholders to hold the annual election for directors, all their acts and proceedings 316 XIIE STOCK COEPOEATIOlir LAW. while so holding over, done for and in the name of the corporation, desig-ned to charge upon it any liability or obligation for the services of any such director, or any officer or attorney or counsel appointed by them, and every such liability or obligation shall be held to be fraudulent and void. Former section 22, without change. § 23. liability of directors for making unauthorized dividends. — The directors of a stock corporation shall not make dividends, except from the surplus profits arising from the business of such corpo- ration ; nor divide, v^ithdraw or in any vray pay to the stockholders, or any of them, any part of the capital of such corporation, or reduce its capital stock, except as authorized by law. In case of any violation of the provisions of this section, the directors vmder whose adminis- tration the same may have happened, except those who may have caused their dissent therefrom to be entered at large upon the min- utes of such directors at the time, or were not present when the same happened, shall jointly and severally be liable to such corporation and to the creditors thereof to the full amount of any loss sustained ty such corporation or its creditors respectively by reason of such withdrawal, division or reduction. But this section shall not prevent a division and distribution of the assets of any such corporation re- maining after the payment of all its debts and liabilities upon the dissolution of such corporation or the expiration of its charter; nor shall it prevent a corporation from accepting shares of its capital stock in complete or partial settlement of a debt owing to the corporation, which by the board of directors shall be deemed to be bad or doubtful. Amended by ch. 354 of 1901. 1. 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 hut the capital to satisify probable losses from risks assumed by the company, it seems they will be personally liable to tlie creditors if the company becomes insolvent. Scott V. Eagle Fire Ins. Co., 7 Paige, 199. 2. The excess of property of a corporation above the amount limited by its charter is to be regarded as sui-plus profits from which a, dividend may be de- clared. Williams v. Western Union Tel. Co., 93 N. Y. 162. 3. Stock dividends not diminishing or interfering with the property of a cor- poration are not within the purview of the section. Such a dividend does not distribute property but simply dilutes the shares as they existed before, such a dividend can therefore be declared vrithout violating the letter or spirit of the section. lb. 4. The declaration of a dividend is within the discretionary powers of the THE STOCK COEPORATIOW LAW. 317 •directors or trustees and will not be controlled by the courts. Beveredge v. N. Y. E. U. Co., 112 N. y. 1, 2 L. K. A. 648, 19 N. E. 489. 5. Loans and discounts will be presumed to be made by the authority of the board of directors, unless it is shown that such funds were misapplied by the officers of a bank, so as to render them, or any of them, liable for fraud or em- bezzlement. 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 officers or directors to keep themselves informed of the amounts of loans and discounts made to or upon the security of directors, will not ex- cuse 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 cor- poration 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 con- nected 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 m-ake loans without the sanction of the board. Bank Com- missioners V. Bank of Buffalo, 6 Paige, 497. 6. Dividends improperly declared may be recovered by creditors only, and cannot be recovered by the receiver for benefit of stockholders. Butterworth v. •O'Brien, 39 Barb. 192. When a stockholder brings an action for damages for violations of the pro visions of preceding sections of this article, he need not join all the directors who participated, but may proceed against thera separately. And in a suit against one of the director.^ for an act that could not be done by him alone, plaintiff must show that the board participated in it, and must show some loss. The act complained of should be alleged to have been done by them, and not that they caused, procured, avithorized or permitted it to be done. But an allega- tiim that they did the act will be sustained by evidence that they caused or pro- cured it to be done. Gaffney v. Colville et al., 6 Hill, 567. Receipt of dividend from capital does not stop stockholder from suing under this act, if he had no knowledge of the facts rendering dividend illegal. Directors are not liable merely for receiving notes or other evidences of debt, with illegal intent mentioned in section 1, subdivision 4 (section 179), but only for receiving and discounting them. Same case. 7. The mere fact that a person is a director or stockholder of a corporation does not make him chargeable with actual knowledge of its business trans- actions or of entries made in its books. Rudd v. Robinson, 126 N. Y. 113, 12 L. R. A. 473, 22 Am. St. Rep. 816, 26 N. B. 1046. See section 614 Penal Code, as amended Laws 1892, chapter 692. § 24. Liability of directors for unauthorized debts and over-issue of bonds. — (Repealed by L. 1901, ch. 354.) § 25. liability of directors for loans to stockholders. — JSTo loan of moneys shall be made by any stock corporation, except a moneyed coi^ poration, or by any officer thereof out of its funds to any stockholder therein, nor shall any such corporation or officer discount any note 318 THE STOCK COEPOBATIOIT LAW. or other evidence of debt, or receive the same in payment of any in- stallment or any part thereof due or to become due on any stock in such corporation, or receive or discount any note, or other evidence of debt, to enable any stockholder to withdraw any part of the money paid in by him on his stock. In case of the violation of any provision of this section, the officers or directors making such loan, or assenting thereto, or receiving or discounting such notes or other evidence of debt, shall, jointly and severally, be personally liable to the extent of such loan and interest, for all the debts of the corporation contracted before the repayment of the sum loaned, and to the full amount of the notes or other evidences of debt so received or discounted, with inter- est from the time such liability accrued. Former section 25, amended. § 26. Transfer of stock by stockholder indebted to corporation. — If a stockholder shall be indebted to the corporation, the directors may refuse to consent to a transfer of his stock until such indebted- ness is paid, provided a copy of this section is written or printed upon the certificate of stock. Former section 20, without change. 1. A provision by by-law that debts due to bank shall be a preferred claim against stock, is invalid. The corporation has no authority to interfere with the disposition which a shareholder may make of his shares, except so far as sucli authority is conferred by the act itself (under which it is organized), or by some general law. If any such prohibition may be made, at any rate it must be contained in the articles of incoi-poration, and not by by-law. Bank of Attica V. Manufacturers and Traders' Bank, 20 N. Y. 505. The provision of the by-law was, that no transfer of stock should be made unless all debts due bank by share- holders had been first discharged. To same effect 59 N. Y. 96; Rosenback v. Salt Springs National Bank, 53 Barb. 504. § 27. Officers. — The directors of a stock corporation may appoint from their number a president, and may appoint a secretary, treas- urer and other officers, agents and employes, who shall respectively have such powers and perform such duties in the management of the property and affairs of the corporation, subject to the control of the directors, as may be prescribed by them or in the by-laws. The direct- ors may require any such officer, agent or employe to give security for the faithful performance of his duties, and may remove him at pleas- ure. The policy holders of an insurance corporation shall be eligible to election or appointment as its officers. 1. "An officer of a corporation may, by the conduct and action of its directors THE STOCK COEPOEATION LAW. 319 and managers, bo invested with capacity to bind the corporation by acts beyond the powers inherent to his oiiice; his authority may be inferred from the manner in which he has been permitted to transact such business. In such case the oilicer's authority does not depend so much upon his official title or on the theo- retical nature of his office as upon the duties that are assigned to him and which he is in the habit of performing. Second K«tl. Bank of Allentown v. Pettier & Stymus Mfg. Co. 56 Supr. 216, 2 N. Y. Supp. 644. (Citing Natl. Park Bank v. German-Am. Mutual Warehousing Co., 53 Supr. 367, and Fifth Ward Savings Bank v. The First Natl. Banli, 48 N. J. Law R. 513, 5 Atl. 318. 2. j-Mthough a person is presumed to know the extent of an officer's powers to bind a corporation, yet where a corporate contract made by him is on its face of such a character as he might ordinarily execute in the performance of his oificial duties, but is really without his authority to make because of some extrinsic fact as the purpose or object for which the contract is made, such contract is binding on the corporation, the person with whom the contract is made is not bound to inquire as to such extrinsic fact. Second Natl. Bank of Allentown v. Pottier & Stymus Co., supra. { Citing Farmers and Mechanics' Bank '0. Butchers and Drovers' Banlt, 16 N. Y. 129, 130, &i Am. Dec. 678.) 3. In the absence of a legally authorized treasurer of a Corporation any per- son who has general management of its business or any director has power to indorse the corporation's name for the purpose of collecting commercial paper made payable to its order. Craig Medicine Co. v. Merchants' Bank, 59 Hun, 561, 14 N. Y. Supp. 16. 4. The cashier of a bank has authority incident to his ofliee to secure a loan to the bank by pledge of its property or funds; especially where there is a by- law giving him charge and s\ipervision of the bank, its loans, discounts and other active business, and the right to exercise his own Judgment as to such mat- ters when not otherwise directed. Coats v. Donnell, 94 N. Y. 168. 5. It is no part of the business of a corporation 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 special authority, and the bank has in no way been benefitted thereby. Ryan v. Manufacturers and Merchants' Bank, 9 Daly, 308. 6. A director owes services to the corporation for which reason all services rendered by him are presumed to be rendered as director — ^there is no implied promise to pay therefor. It is only whei-e the services are not within his duties as director, and an express promise or an expectation on the part of the corpora- tion to pay is shown, that the corporation is under any liability therefor. Gill v. N. Y. Cab Co., 48 Hun, 524, 1 N. Y. Supp. 202. (Citing Smith v. Long Island R. R. Co., 102 N. r. 190, 6 N. E. 397.) 7. "The same reason may not exist for the application of the rule to a stock- holder not a director who has become an officer of the corpoi-ation. But he has a pecuniary interest in its management and business. And where he assumes the duties of the office and performs them without some agreement or provision for compensation the presumption in view of his relation and interest may prop- erly arise that he performs the official services gratuitously. This proposition cannot be made dependent on the proportionate amount of stock held by him." Mather v. The Eureka Mower Co., 118 N. Y. 629, 23 N. E. 993. 8. Where services are rendered a corporation under a contract with one assum- ing to act as its agent to the knowledge of its officers and without dissent of 320 THE STOCK COEPOEATION' LAW. the corporation, it will be hold to have ratified the contract and to be liable there- under. Cunningham v. M. S. & F. 0. R. R. Co., 63 Hun, 439, 18 N. Y. Supp. 600. 9. Where the president of a corporation was in fact and was permitted to hold himself out as being the general manager and director of its business, the cor- poration cannot set up its by-laws as countervailing the authority thus publicly conferred. Marine Natl. Bank of Buiialo v. Butler Colliery Co., 23 State Rep. 318, 5 N. Y. Supp. 291. 10. A resolution of the board of directors is not necessary to authorize the president of a corporation to make a sale of its goods in the line of its business. The Horton lee Cream Co. v. Merritt, 43 N. Y. State Rep. 416, 17 N. Y. Supp. 718. S. C. 63 Hun, 628. 11. A corporation is liable upon the representations of one who is its secretaiy, treasurer and transfer agent with power to countersign and issue stock, made iTi respect to the genuineness of certain certificates of shares of its stock as to which inquiries are made previous to loaning thereupon. Fifth Ave. Bank v. Forty-second St. R. R. Co., 44 N. Y. State Rep. 379, 17 N. Y. Supp. 826, S. C. 63 Hun, 629. 12. "Wheni the president of a bank receives funds which he deposits with the bank, the bank is chargeable with all the knowledge possessed by its president in respect thereto; and in case the president having thus deposited the money to himself as the attorney for the real owner subsequently withdraws the money from the bank and misappropriates it, the bank is liable to the owner of the fund for its conversion by the president." Smith v. Anderson, as Receiver, 57 Hun, 72, 10 N. Y. Supp. 278. 13. The directors of a corporation have constructive notice of the management of its business and the conduct and acts of the president in respect thereto from the record thereof in its books. Brown v. The Mechanics and Traders' Natl. Bank, 35 N. Y. State Rep. 665, 12 N. Y. Supp. 861. § 28. Inspectors and their oath.— The inspectors of election of every stock corporation shall be appointed in the manner prescribed in the by-laws, but the inspectors of the first election of directors and of all previous meetings of the stockholders shall be appointed by the board of directors named in the certificate of incorporation. 'No di- rector or officer of a moneyed corporation shall be eligible to election or appointment as inspector. Each inspector shall be entitled to a rea- sonable compensation for his services, to be paid by the corporation, and if any inspector shall refuse to serve, or neglect to attend at the election, or his office become vacant, the meeting may appoint an in- spector in his place unless the by-laws otherwise provide. The in- spectors appointed to act at any meeting of the stockholders shall, before entering upon the discharge of their duties, be sworn to faith- fully execute the duties of inspectors at such meeting with strict impartiality, and according to the best of their ability, and the oath so taken shall be subscribed by them, and immediately filed in the THE STOCK COEPOEaVTION LAW. 321 office of the clerk of the county in M'hich such election or meeting shall be held, with a certificate of the result of the vote taken thereat. Former section 28, amended. Neg'lect to administer oath in the form described by statute, or of any oath whatever, will not be grounds on which to set aside an election, if the inspectors were duly appointed and entered upon the duties of their office in good faith. In re Mohawk, etc., R. R. Co., 19 Wend. 130 ; In re Chenango II. Ins. Co., id. 635. § 29. Books to be kept. — Every stock corporation shall keep at its office, correct books of account of all its business and transactions, and a book to be known as the stock-book, containing the names, alphabetically arranged, of all the persons who are stockholders of the corporation, showing their places of residence, the number of shares of stock held by them respectively, the time when they respec- tively became the owners thereof, and the amount paid thereon. The stock-book of every such corporation shall be open daily, during at least' three business hours for the inspection of its stockholders and judgment creditors, who may make extracts therefrom. No transfer of stocks shall be valid as against the corporation, its stockholders and creditors for any purpose except to render the transferee liable for the debts of the corporation to the extent provided for in this chapter, until it shall have been entered in such book as required by this sec- tion, by an entry showing from and. to whom transferred. The stock- book of every such corporation and the books of account of every bank shall be presumptive evidence of the facts therein so -stated in favor of the plaintiff, in any action or proceeding against such corporation or any of its officers, directors or stockholders. Every corporation thai shall neglect or refuse to keep or cause to be kept such books, or to keep any book open for inspection as herein required, shall forfeit to the people the sum of fifty dollars for every day it shall so neglect or refuse. If any officer or agent of any such corporation shall wil- fully neglect or refuse to make any proper entry in such book or books, or shall neglect or refuse to exhibit the same, or to allow them to be inspected and extracts taken therefrom as provided in this sec- tion, the corporation and such officer or agent shall each forfeit and pay to the party injured a penalty of fifty dollars for every such neglect or refusal, and all damages resulting to him therefrom. Amended by ch. 354 of 1901. 1. A refusal to permit a transfer of stock on its books renders corporation liable for damages, and the measure of damages is the highest price of the stock at any time between the refusal and commencement of suit. A blank trans- Banks, 21 322 THE STOCK COEPOKATION LAVf. fer signed and sealed by holder is valid, and the transferee is authorized to fill up by writing a transfer and power of attorney above the signature. Bank of Buffalo V. Kortright, 22 Wend. 348, 34 Am. Dec. 317, approved 55 N. Y. 46, 14 Am. Rep. 173. 2. Dividends are to be paid to those who appear as owners on the transfer book, regardless of any secret transfer. Bank of Utica u. Smalley, etc., 2 Cow. 770, 14 Am. Dec. 526, S. C. 8 id. 398. 3. The object of the statute is to enable the stockholders at all reasonable times, ai\d for tliirty days before an election, to examine the books containing transfer of stocks and names of stockholders, to enable them to see who are qualified voters and to confer with them in relation to the election, and mem- oranda may be taken from the books. The statute, though penal toward those who violate it, is in the main highly beneficial and should be equitably construed. Cotlieal V. Brouwer, 5 l^^. Y. 567. 4. This does not cut off the right of stockholders of corporations to examine its transfer books for the proper purpose, and on proper occasions, at other times ; and court may interfere by mandamus whenever a proper case is shown, and compel an exhibition (if the books. People ex rel. Hatch v. 1j. S. & M. S. R. R. Co., 11 Hun, 5 and 6. 5. Richmond v. P. M. S. S. Co., 50 Barb. 281, it was held (same case) 3 Abb. (N. S.) 364, that a stockholder cannot be deprived of !iis right to inspect the books of the company because they are kept in a particular way, or because they contain along with the information to which he is entitled, other infonna- tion which he has no right to demand. The company cannot defeat the object of the statute by omitting to keep the books prescribed. If the right books are not kept, inspection of such as they do keep must be allowed, and may be en- forced by mandamus. 0. The assignee of the stock of a domestic corporation may require an entry of the transfer on its books, though his title be derived from a foreign executor. Middlebrook v. Mercliants' Bank, 3 Abb. App. 295 (1806). 7. Where a peremptory mandamus was granted allowing an inspection of the transfer book of a, corporation upon the relator's affidavit that she held stock of the company in certificates issued to lier deceased husband. The appli- cation to the corporation not having been made within the time required by law, viz., thirty days of the election of directors (L. 1882, oh. 409, sec. 199), but the applicant believed herself to be within such time, information as to the date of such election having been refused by the corporation. Held, that while not made within the period during which the statute gives the stockholder an abso- lute right of examination, it was still within the discretion of the court to grant the application and upon the facts its discretion had been properly exercised by the court below. People ex rel. Stobo v. Eadie, 63 Hun, 320, 18 N. Y. Supp. 53, affirmed, without opinion, 133 N. Y. 557, 30 N. E. 1147. 8. Where a corporation seeks to prevent such an examination by denying that the applicant is a stockholder the denial must be positive and not evasive. Mat- ter of Martin, 62 Hun, 557, 17 N. Y. Supp. 133. 9. The fact that the applicant made his demand upon the treasurer Avhen the by-laws put the book in the custody of the secretary is not a ground for refusing relief when the treasurer did not refuse on that ground or refer the applicant to the proper custodian of the book. lb. 10. It seems that the obligation to exhibit the stock-book to a stockholder. THE STOCK CORPORATION LAW. 323 upon request, is terminated by its suspension for reasons which warrant its dis- solution. ( 1887 ) Kelsey v. Pfaudler Process Fermentation Co., 45 Hun, 10, citing 80 Is. Y. 379. 11. A statutory provision under which a corporation is organized, or in its by- laws requiring transfers of its stock to be made upon its books, is for its benefit, and where the o\\'ner of stock has assigned, for a. valuable consideration, the certificate issued to him and the corporation, when requested to make the trans- fer, without a valid reason refuses to do so, this amounts to a waiver of the re- quirements; the transfer is complete and the corporation is bound to recognize the title of the assignee precisely the same as if it had done its duty and made the proper entries upon its books. Robinson v. Natl. Bank of New Berne, 95 N. Y. 637. 12. Upon the presentation of a stoeic certificate duly assigned and aceonipanierl with authority for the holder to transfer, the corporation, if it have no notice of any defect in the holder's title, is legally bound to transfer the stock upon its hooks and cannot thereafter be held liable by a third person claiming title. Hawes V. Gas Consumers' Benefit Co., 36 State Rep. 48, 12 N. Y. Svipp. 924. 13. When a subscriber has paid for his stock but has not received his certifi- cate therefor, he can notwithstanding, make a gift of the stock, and a formal transfer or even possession of the certificate is unnecessary to make the gift cff'ectual. De Caumont v. Bogert, 36 Hun, 382. 14. The mere fact 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 confci-red upon the company or its share- holders collectively; and an assignee of shares having possession of a certificate, although holding under an unregistered transfer, is not bound by a contract be- tween the registered holder and the corporaLion which is not within such powers. Campbell v. Am. Zylonite Co., 122 N. Y. 455, 11 L. R. A. 596, 25 N. E. 853. 15. 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. 16. The liability of a shareholder for calls made on account of unpaid stock can only be forced in an action in the nature of assumpsit and necessarily rests upon a promise to pay, express or implied; such promise must be proved by competent evidence. When, therefore, no express promise is claimed, and it appears that the person sought to be charged as shareholder never accepted that relation, that it was put upon him by another without authority and against his will, and upon being advised thereof he repudiated it, no promise can be implied and he cannot be held liable. lb. § 30. Annual report. — Every domestic stock corporation and every foreign stock corporation doing business witliin this state, except moneyed and railroad corporations, sliall, annually, during the montli of January, or, if doing business without the United States, before lhe first day of May, may make a report as of the first day of Janu- ary, which will state: 324r IBM STOCK COEPOEATlON' LAW, 1. The amount of its capital stock, and the proportion actuall;y issued. 2. The amount of its debts or an amount which they do not exceed. 3. The amount of its assets or an amount which its assets at least equal. Such report shall be made by the president or vice-president or the treasurer or a secretary of the corporation and shall be filed in the ofSce of the secretary of state. If such report be not so made and filed, any such officer who shall thereafter neglect or refuse to make and to file such report, within ten days after written request so to do shall have been made by a creditor or by a stockholder of the corpo- ration, shall forfeit to the people the sum of fifty dollars for every daj he shall so neglect or refuse. Amended by eh. 334 of 1901. Formei- section .30, as amended by laws 1892, eliap. 2, further amended. As to annual report, under this section, see N. Y. Law Review, No. 1, vol. 1, pp. 12-14. The object of this section, is stated in Cincinnati Cooperage Co. v. O'Keefe, 44 Hun, 64. The purpose for which the annual reports are required, stated. Pier v. Hanmoro, 36 N. Y. 101; Walton u. Godwin, 58 Hun, 91, 33 N. Y. St. Rep. 886, 11 N. Y. Supp. 391 ; Torbett v. Godwin, 41 N. Y. St. Rep. 323. As soon as a director parts with all beneficial interest in, and control over, the stock which the statute, section 2, chap. 567 of 1890, requires him to hold, and requests the officers of the corporation to malce a proper transfer of such stock on the books of the company, he ceases to be a director, and is not liable to creditors by reason of any subsequent failure to file the report under this section. Chemical Nat. Bank v. Colwell, 43 N. Y. St. Rep. 876. A corporation is not liable for the acts of its trustees, done prior to the filing of the articles of incorporation and not ratified by it. Berridge ». Abernethy, 24 W. Dig. 513. The filing of the certificate in the county clerk's office, immediately followed by iiser, renders the company a corporation de faoto, and imposes upon it the duty of making and publishing a report. Meridan Tool Co. v. Morgan, 1 Abb. N. 0. 125n. The duty, imposed by this section, of making and filing an annual report, is a corporate duty. Cornell v. Roach, 101 N. Y. 373, 5 N. E. 52. This duty is not cast upon the trustees, either as such or in their individual capacity. Id. The provisions of this section, as to time of making and filing the report, is not complied with by doing so within twenty days before the first of January, though it is regular in other respects. Cincinnati C. Co. v. O'Keefe, 120 N. Y. 603, 24 N. B. 993. Good faith on the part of the directors is making and filing the report prema- turely is no defense to the liability imposed upon them for non-compliance with this provision. Cincinnati C. Co. v. O'Keefe, 120 N. Y. 603, 24 N. E. 993. See S. I. M. R. R. Co. v. Hinchclifl-e, 170 N. Y. 473, 63 N. E. 545; Sheppard v. Fulton, 171 N. Y. 184, 63 N. E. 906. TKB STOCK COHPOKATION LAW. 325 § 31. Liability of officers for false certificates, reports or public no- tices. — If any certificate or report made or public notice given by the officers or directors of a stock corporation shall be false in any ma- terial representation, the officers and directors signing the same shall jointly and severally be personally liable to any person who has be- come a creditor or stockholder of the corporation upon the faith of any such certificate, report, notice or any material representation therein to the amount of the debt contracted upon the faith thereof if not paid when due, or of the damage sustained by any pui'chaser of or subscriber to its stock upon the faith thereof. The liability im- posed by this section shall exist in all cases where the contents of any such certificate, report or notice or of any material representation therein shall have been communicated either directly or indirectly to the person so becoming a creditor or stockholder and he became such creditor or stockholder upon the faith thereof. ~So action can be maintained for a cause of action created by this section unless brought within two years from the time the certificate, report or public notice shall have been made or given by the officers or directors of such corporation. Former section 31 araeiided. As to liability under this section, see N. Y. Law Review, No. 1, vol. 1, pp. 14, 15. This section must be strictly construed. Torbett v. Godwin, 02 Ilun, 407, 17 N. Y. Supp. 46, 27 Abb. N. C. 444, The liabilities imposed upon trustees for making false reports, and allowing the indebtedness of the corporation to exceed its capital stock, are in their nature penal, and each act of this character enters into and becomes a separate cause of action. Anderson v. Speers, 8 Abb. N. C. 382. A trustee, who has not signed the report, is not liable under this section. Bon- nell V. Wheeler, 3 T. & C. 5-57. An action under this section is local and must be tried in the county where the cause of action, or some part thereof, arose. Veeder v. Baker, 83 N. Y. 156. § 32. Alterations or extension of business. — Any stock corporation heretofore or hereafter organized under any general or special law of this state may alter its certificate of incorporation so as to include therein any purposes, powers or provisions which at the time of such alteration may apply to corporations engaged in a business of the same general character, or which might be included in the certificate of incorporation of a corporation organized under any general law of this State for a business of the same general character, by filing in the manner provided for the original certificate of incorpo- 326 TilE STOCK COEPOBATIOJ!! LAW. ration an amended certificate, executed by a majority of its di- rectors, stating the alteration proposed, and that the same has been dnly authorized by a vote of stockholders representing at least three-fifths of the capital stock, at a meeting of the stock- holders called for the purpose in the manner provided in section forty-five of this chapter, and a copy of the proceedings of such meet- ing, verified by the affidavit of one of the directors present thereat, shall be filed with such amended certificate. Amended by oh. 354 of 1901. § 33. Sale of franchise and property. — A stock corporation, except a railroad corporation and except as otherwise provided by law, with the consent of two-thirds of its stock, may sell and convey its prop- erty, rights, privileges and franchises, or any interest therein or any part thereof to a domestic corporation, engaged in a business of the same general character, or which might be included in the certificate of incorporation of a corporation organizing iinder any general law of this state for a business of the same general character, and a do- mestic corporation the principal business of which is carried on in, and the principal tangible property of which is located within a state adjoining the state of New York, may with the consent of the holders of ninety-five per centum of its capital stock, sell and convey it.^ property situate without the state of Ifew York, not including its franchises to a corporation organized under the laws of such adjoin- ing state, and such sale and conveyance shall, in case of a sale to a domestic corporation, vest the rights, property and franchises thereby transferred, and in case of a sale to a foreign corporation the property sold in the corporation to which they are conveyed for the term of its coi-porate existence, subject to the provisions and restrictions appli- cable to the corporation conveying them. Before such sale or convey- ance shall be made such consent shall be obtained at a meeting of the stockholders called upon like notice as that required for an annual meeting. If any stockliolder not voting in favor of such proposed sale or conveyance shall at such meeting, or within twenty days there- after object to such sale, and demand payment for his stock, he may, within sixty days after such meeting, apply to the su.preme court at any special term thereof held in the district in which the principal place of business of such corporation is situated, upon eight days' notice to the corporation, for the appointment of three persons to ap- THE STOCK COEPOEATION LAW. 327 praise the value of suck stock, and the court shall appoint three such ■appraisers, and designate the time and place of their proceedings as shall be deemed proper, and also direct the manner in which payment for such stock shall be made to such stockholders. The court may fill any vacancy in the board of appraisers occurring by refusal or neglect to serve or otherwise. The appraisers shall meet at the time and place designated, and they or any two of them, after being duly sworn hon- ■estly and faithfully to discharge their duties, shall estimate and cer- tify the value of such stock at the time of such dissent, and deliver one ■copy to such corporation, and another to such stockholder, if de- manded ; the charges and expenses of the appraisers shall be paid by the corporation. When the corporation shall have paid the amount '^f such appraisal, as directed by the court, such stockholders shall cease to have any interest in such stock and in the corporate property ■of such corporation and such stock may be held or disposed of by such corporation. Amended by ch, 130 of 1901. § 34. Excessive indebtedness, liability of officer or director. — JSTo di- rector or officer of any stock co^rporation shall be liable to any creditor of the corporation, because of the creation of any excessive indebted- ness, or because of any failure to make or to file an annual report, whether heretofore or hereafter occurring; (1) In case of any debt, as to which personal liability of directors or officers may be or shall have been waived by such creditor, or by anyone imder whom he claims; or by any provision of any instru- ment creating or securing such debt: or (2) Unless within three years after the occurrence of the act or the default in respect of which it shall be sought to charge the director or officer, such creditor shall have served upon such director or officer written notice of his intention to hold him personally liable for his claim ; provided, nevertheless, that any such liability, because of any such default now existing and not waived as above provided, may be enforced by action begun at any time within the year eighteen hundred and ninety-nine or by action begun thereafter, if within such year written notice of intention to enforce such liability shall have been given as above provided. Any director or officer, who, because of any such existing or future liability, shall pay any debt of the corporation, shall be subrogated to all rights of the creditor in respect thereof against the corporate property, but not against the stockholders of the corporation; and 328 THE STOCK COKPOEATION LAW. also shall "be entitled to contribution from all other directors and officers of the corporation similarly liable for the same debt, and the personal representatives of any such director or officer who shall have died before making such contribution. Added by eh. 354 of 1899. THE STOCK COEPORATiOK LAW. 329 AETICLE III. Stock; Stockhoi,dees, Theie Eights axd Liabilities. Section 40. Issue and transfers of stock. 41. Subscriptions to stock. 42. Consideration for issue of stock and bonds. 43. Time of payment of subscriptions to stock. 44. Increase or reduction of capital stock. 45. Notice of ineetiug to increase or reduce capital stock. 46. Conduct of such meeting; certificate of increase or reduction, 47. Pieferred and common stock. 48. Prohibited transfers to oflieers or stockliolders. 49. (Repealed.) 50. Application to court to order issue of new in place of lost certificate of stock. 51. Order of court upon such application. 52. Financial statement to stockholders. 53. E.thibition of books by transfer agent of foreign corporation. 54. Liabilities of stockholders. 55. Limitation of stockholder's liability. 56. Increase or reduction of number of shares. 57. Voluntary dissolution. 58. Merger. 59. Change of place of business. 60. Liability of oflieers, directors and stockholders of foreign corpora- tions. 62. Partly paid stock. § 40. Issue and transfers of stock. — The stock of every stock corpo- ration shall be represented by certificates prepared by the directors and signed by the president or Yice-president and secretary or treas- urer and sealed with the seal of the corporation, and shall be trans- ferable in the maxuier prescribed in this chapter and in the by-laws. No share shall be transferable until all previous calls thereon shall have been fully paid in. Any stock corporation, domestic or foreign, now existing or here- after organized, except moneyed coi-porations, may purchase, acquire, hold and dispose of the stocks, bonds and other evidences of indebted- ness of any corporation, domestic or foreign, and issue- in exchange therefor its stocl\, bonds or other ol)ligations if authorized so to do by a provision in the certificate of incorporation of such stock corporation, or in any certificate amendatory thereof or 330 TI!E STOCK COEPOEATION LAW. supplementary thereto, filed in purauance of law, or if the cor- poration whose stock is so purchased, acquired, held or disposed of, is engaged in a business similar to that of such stock cor- poration, or engaged in the manufacture, use or sale of the property, or in the construction or operation of works necessary or useful in the business of such stock corporation, or in which or in connection with which the manufactured articles, product or property of such stock corporation are or may be used, or is a corporation with which such stock corporation is or may be authorized to consolidate. When any such corporation shall be a stockholder in any other corporation, as herein provided, its president or other officers shall be eligible to the office of director of such corporation, the same as if they were in- dividually stockholders therein and the corporation holding such stock shall possess and exercise in respect thereof, all the rights, pow- ers and privileges of individual owners or holders of such stock. Any stock corporation may, in pursuance of a unanimous vote of its stocldiolders voting at a special meeting called for that purpose by notice in writing signed by a majority of the directors of such corpo- ration stating the time and place and object of the meeting, and served upon each stockholder appearing as such upon the books of the corporation, personally or by mail at his last known post-office address at least sixty days prior to such meeting, guarantee the bonds of any other domestic corporation engaged in the same general line of busi- ness; and any stock corporation owning the entire capital stock of any other domestic stock corporation engaged in the same general line of business may in pursuance of a two-thirds vote of its stockholders voting at a special meeting called for that purpose by notice in vsTit- ing signed by a majority of the directors of such corporation, stating the time and place and object of the meeting and served upon each stockholder appearing as such upon the books of the corporation per- sonally, or hy mail, at his last known post-office, at least sixty days prior to such meeting, guarantee the bonds of such other corporation. Former section 40 amended. Amended by eh. 601 of 1902. 1. The capital stock is the money contributed by the corporators to the capital, and is usually represented by shares issued to the subscribers to the stock on the initiation of the corporate enterprise. Christensen o. Eno, 106 N. Y. 97, 60 Am. Rep. 429, 12 N. E. 648; Burrall v. Bushwick R. E. Co., 75 N. Y. 211. 2. Where a certificate is filled out and signed by the president and secretary it constitutes the person named in it a holder of the shares specified therein, al- though the corporate seal is not affi.'ced and it is not detached from the ceretifi- , cate book. Halstead v. Dodge, 51 Superior Ct. 169; aff'd 103 N. Y. 636. THE STOCK COIiPOKATIOK- LAW. 331 3. Wliilo a oorpoiatiou may not purchase or deal in the stock of other cor- porations, unless expressly authorized by law so to do, it may take title to such ^tock in payment of a debt owing to it. The Holmes and Griggs Mfg. Co. v. The Holmes & Wessell Metal Co., 127 N. Y. 252, 24 Am. St. Rep. 448, 27 N. E. 831. 4. An agreement of a State bank to subscribe for the stock of a railroad is not authorized by statute and is against public policy; and so long as it is executory the bank cannot enforce it. Nassau Bank v. Jones, 95 N. Y. 11-5, 47 Am. Rep. 14. 5. "The property of every stock company consists of three things, its capital ■existing in money or property, its surplus if any, and its franchise. These, which are several in the ownership of the eonipa.ny, are united in the ownership of the stockholders, and the share stock or capital stock as owned by the share- holders covers all three." People ex rel. U. S. Trust Co. v. Coleman et al., 126 N. Y. 433, 12 L. R. A. 702, 27 N. E. 818. § 41. Subscriptions to stock. — If the whole capital stock shall not have been subscribed at the time of filing the certificate of incorpo- ration, the directors named in the certificate may open books of sub- scription to fill up the capital stock in such places, and after giving such notices as they may deem expedient, and may continue to re- ceive subscriptions until the whole capital stock is subscribed. At the time of subscribing, every subscriber, whose subscription is pay- able in money, shall pay to the directors ten per centum upon the amount subscribed by him in cash, and no such subscription shall be received or taken without such payment. Former section 41 amended. § 42. Consideration for issue of stock and bonds, — ISTo corporation shall issue either stock or bonds except for money, labor done or property a.ctually received for the use and lawful purposes of sucli corporation. Any corporation may purchase any property aiithorized by its certificate of incorporation, or necessary for the use and lawful purposes of such corporation, and may issue stock to the amount of ■ the value thereof in payment therefor, and the stock so issued shall be full paid stock and not liable to any further call, neither shall the holder thereof be liable for any further payment under any of the provisions of this act ; and in the absence of fraud in the transaction the judgment of the directors as to the value of the property pur- chased shall be conclusive ; and in all statements and reports of the corporation, by law required to be published or filed, this stock shall not be stated or reported as being issued for cash paid to the corpo- ration, but shall be reported as issued for property purchased. Amended by ch. 354 of 1901. 1. When the president of a corporation had received no salary for his services and in addition to the services had advanced monej', — Held that the satisfaction 332 THE f?TOCK COEPOBATION LAW. of these debts was u. good coiisideiation for the transfer of some of its stocks hy the corporation to tlie president. Reed ■!'. Hoyt, 51 Superior Ct. 121 ; aff'd 109 N. Y. C59, 17 N. E. 418. 2. "A corporation cannot avoid its bonds on the ground that they were issued at less than their face to persons who were its trustees when the act has re- ceived the acquiescence and ratification of the stockholders." Lyceum v. Ellis, 57 Superior Ct. 532, 8 N. Y. Supp. 867. 3. See note on liability for illegal or exaggerated stock. 14 Abb. N. C. 441. 4. See note to Van Cleve v. Berkey, 42 L. R. A. 593, presenting the authorities on the question as to how far payment for stock by transfer of property will pro- tect the shareholder against creditors of the company. § 43. Time of payment of subscriptions to stock. — Subscriptions to the capital stock of a corporation shall be paid at such times and in such installments as the board of directors may by resolution require. If default shall be made in the payment of any installment as re- quired by such resolution, the board may declare the stock and all previous payments thereon forfeited for the use of the corporation, after the expiration of sixty days from the service on the defaulting stockholder, personally or by mail directed to him at his last known post-office address, of a written notice requiring him to make pay- ment within sixty days from the service of the notice at a place speci- fied therein, and stating that, in case of failure to do so, his stock and all previous payments thereon will be forfeited for the use of the corporation. Such stock, if forfeited, may be reissued or subscriptions therefor may be received as in the case of stock not issued or subscribed for. If not sold for its par value or subscribed for within six months after such forfeiture, it shall be canceled and deducted from the amount of the capital stock. If by such cancellation the amount of the capital stock is reduced below the minimum required by law, the capital stock shall be increased to the required amount within three months thereafter or an action may be brought or proceedings instituted to close up the business of the corporation as in the case of an insolvent corporaton. If a receiver of the assets of the corporation has been ap- pointed, all unpaid subscriptions to the stock shall be paid at such times and in such installments as the receiver or court may direct. Former section 43, amended. 1. "The general rule is well settled in this state, that in the absencs of a con- tract to make payments in future installments, subscriptions become due and payable at once and no call or demand before action therefor is necessary. Wil- ii.iins r,. Meyer, 41 Hun, 545. 2. It is competent for a subscriber to enter into a contract whereby he cannot THE STOCK C0EP014ATI0N LAW. 333 be called upon to pay at the time of subscribing, but at future periods con- tinuing for more than six years, lb. 3. But it seems the court has power to disregard in its discretion the terms of the contract and hold tlie price of the shares payable at once. lb. Per Dan- iels, J. 4. As to effect of transfer of shares of stock upon liability for unpaid subscrip- tion, see editorial note to Rochester & Kettle Falls Land Co. -v. Raymond, 47 L. R. A. 246, presenting the authorities on that question. § 44. Increase or reduction of capital stock. — Any domestic corpo- ration may increase or reduce its capital stock in the manner herein provided, but not above the maximum or below the minimum, if any, prescribed by general law governing corporations formed for similar purposes. If increased, the holders of the additional stock issued shall be subject to the same liabilities with respect thereto as are pro- vided by law in relation to the original capital; if reduced, the amount of its debts and liabilities shall not exceed the amount of its reduced capital, unless an insurance corporation, in which case the amount of its debts and liabilities shall not exceed the amount of its reduced capital and other assets. The owner of any stock shall not be relieved from any liability existing prior to the reduction of the capi- tal stock of any stock corporation. If a banking corporation, whether the capital be increased or reduced, its assets shall at least be equal to its debts and liabilities and the capital stock, as increased or reduced. A domestic railroad corporation may increase or reduce its capital stock in the manner herein provided, notwithstanding any provision contained herein, or in any general or special law fixing or limiting the amount of capital stock which may be issued by it. Amended by ch. 354 of 1901. 1. A corporation has no implied authority to increase or diminish its capital stock, and can only legally do so when and in the manner authorized by statute. Sutherland v. Olcott, !i.5 N. Y. 93. 2. An agreement with a stockholder as to the exchange of his stock for a re- duced amount nuide liy the officers of the company in proceedings to reduce the capital stock is binding upon the company. Abbott v. The Petersburg Granite Quarrying Co., 43 N". Y. State Rep. 23.5, 17 N. Y. Supp. 140, S. C. 62 Hun, 622. § 45. Wotice of meeting to increase or reduce capital stock. — Every such increase or reduction must be authorized either by the unani- mous consent of the stockholders, expressed in writing and filed in the office of the secretary of state and in the office of the clerk of the county in which the principal business office of the corporation is located, or by a vote of the stockholders owning at least a majority of the stock of the corporation, taken at a meeting of the stockholders 334 THE STOCK COHPOE.A.TION LAW. specially called for that purpose in the manner provided hy law or by the by-laws. ISTotice of the meeting, stating the time, place and ob- ject, and the amount of the increase or reduction proposed, signed by the president or a vice president and the secretary, shall be published once a week, for at least two successive weeks, in a newspaper in the county Avhere its principal business office is located, if any is pub- lished therein, and a copy of such notice shall be duly mailed to each stockholder or member at his last known post-office address at least two weeks before the meeting or shall be personally served on him at least five days before the meeting. Amended by eh. 354 of 1901. In the absence of evidence that due and suiHcient notice of the meeting was not given to the stockholders, the books of minutes of the company and the certificate shov\ ing that more tlian two-thirds of the stockholders appeared in person or by proxy, and voted for the increase of the stock, establishes, in an action to enforce an assessment upon stoclc, that the stock was increased at a regularly assembled meeting of the stockholders. Cuykendall v. Douglas, 19 Hun, 577. § 46. Conduct of such meeting; certificate of increase or reduction. — If, at the time and place specified in the notice, the stockholders shall appear in person or by proxy in numbers representing at least a ma- jority of all the shares of stock, they shall organize by choosing from their number a chairman and secretary, and take a vote of those' present in person or by proxy, and if a sufficient number of votes shall be given in favor of such increase or reduction, or if the same shall have been authorized by the unanimous consent of stockholders ex- pressed in writing signed by them or their duly authorized proxies,. a certificate of the proceedings showing a compliance vrith the pro- visions of this chapter, the amoimt of capital theretofore authorized, and the proportion thereof actually issued, and the amount of the increased or reduced capital stock, and in case of the reduction of capital stock the whole amou.nt of the ascertained debts and liabilities of the corporation shall be made, signed, verified and acknowledged by the chairman and secretary of the meeting, and filed in the office of the clerk of the county where its principal place of business shall be located, and a duplicate thereof in the office of the secretary of state. In case of a reduction of the capital stock, except of a rail- road coqjoration or a moneyed corporation, such certificate shall have indorsed thereon the approval of the comptroller, to the effect that the reduced capital is sufficient for the proper pnrjwses of the corpo- ration, and is in excess of its ascertained debts and liabilities; and in case of the increase or reduction of the capital stock of a railroad THE STOCK. COKPOBATION LAW. 335 corporation or a moneyed corporation, the certificate sliall ha\'e in- dorsed tliereon the approval of the board of railroad commissioners, if a railroad corporation ; of the superintendent of banks, if a corpo- ration formed under or subject to the banking law, and of the super- intendent of insurance, if an insurance corporation. When the cer- tificate herein provided for has been filed, the capital stock of such corporation shall be increased or reduced, as the case may be, to the amount specified in such certificate. The proceedings of the meet- ing at which such increase or reduction is voted, or, if such increase or reduction shall have been authorized by unanimo'us consent with- out a meeting, then a copy of such consent shall be entered upon the minutes of the corporation. If Ihe capital stock is reduced, the amount of capital over and above the amount of the reduced capital shall, if the meeting or consents so determine or provide, be returned to the stockholders pro rala, at such times and in such manner as the directors shall determine, except in the case of the reduction of the capital stock of an insurance corporation, as an alternative to make good an existing impairment. Amended by eh. 286 of 1902. 1. A person who was named as one of the trustees in the articles of association luid had acted as such at a prior meeting, was held to be qualified to act as chair- man at a meeting called under this section. Cuykendall v. Douglas, 19 Hun, 577.. 2. The object of this provision in the statute was to provide a mode of proof of the instrument, to establish its genuine character. Id. Where the signature of the chairman is in the presence of the justice, and the latter has witnessed and certified it, the object of the statute is answered. Id. A certificate of acknowledg- ment is only required to be in "substantial compliance" with the statute. Id.; Thurman v. Cameron, 24 Wend. 87: West P. I. Co. v. Reymert, 45 N. Y. 703; Can.. Acad. V. McKechnie, 19 Hun, 63. 3. The amount of the capital may be reduced before it has been actually paid in.. Strong V. Brooklyn C.-T. E.. R. Co. 93 N. Y. 426. The reduced amount may still exceed the sum which has been actually paid in, and in that case, the stockhold- ers must pay it in after the reduction. Id. In such case, there can be no surplus for distribution. Id. The reduced amount becomes the amount which the com- pany is bound by law to provide as capital. Id. See Sullivan v. Parkes, 69 App. Div. 221, 74 N. Y. Supp. 787. § 47. Preferred and common stock. — Every domestic stock corpo- ration may issue preferred stock and common stock and different classes of preferred stock, if the certificate of incorporation so pro- vides, or by the consent of the holders of record of two-thirds of the capital stock, given at a meeting called for that purpose upon notice such as is required for the annual meeting of the corporation. A certificate of the proceedings of such meeting, signed and sworn to by 336 THE STOCK COEPOKATIOJSr LAW. the president or a vice-i3resident, and by the secretary or assistant secretary, of the corporation, shall be filed and recorded in the offices where the original certificate of incorporation of such corporation was filed and recorded; and the corporation may, upon the written re- quest of the holders of any preferred stock, by a two-thirds vote of its directors, exchange the same for common stock, and issue certifi- cates for common stock therefor, upon such valuation as may have been agreed upon in the certificate of organization of such corpo- ration, or the issue of such preferred stock, or share for share but the total amount of such capital stock shall not be increased thereby. Amended by eh,. 354 of 1901. 1. There is no power in a corporate body, nor in a majority of the stockholders, to provide by a by-law for the creation of a preferred stock, so as to bind a mi- nority of the stockholders not assenting thereto. Kent v. Quicksilver M. Co. 78 N. Y. 159. 2. A corporation may begin its corporate action by classifying the shares in its capital stock, with peculiar privileges to one share over another, and thus offer its stock to the public for subscriptions thereto. Id. 3. The right of every shareholder to his proportion of the profits of a corpora- tion is a vested individual right, and, in the absence of some power conferred by statute, or by the articles of association, to change the relative value of shares by giving some a preference over others as to dividends, the power can- not be implied, and no such change may be made without the consent of all the shareholders. Campbell v. Am. Zylonite Co., 122 N. Y. 455, 11 L. E. A. 596, 25 N. E. 853. § 48. Prohibited transfers to officers or stockholders. — No corpora- tion which shall have refused to pay any of its notes or other obli- gations, when due, in lawful money of the United States, nor any of its ofiicers or directors, shall transfer any of its property to any of its ofiicers, directors or stockholders, directly or indirectly, for the pay- ment of any debt, or upon any other consideration than the full value of the property paid in cash. Wo conveyance, assignment or transfer of any property of any such corporation by it or by any officer, di- rector or stockholder thereof, nor any payment made, judgment suf- fered, lien created or security given by it or by any officer, director or stockholder when the corporation is insolvent or its insolvency is imminent, vsdth the intent of giving a preference to any particular creditor over other creditors of the corporation shall be valid, except that laborers' wages for services shall be preferred claims and be en- titled to payment before any other creditors out of the corporation assets in excess of valid prior liens or incumbrances. ISTo corporation formed under or subject to the banking, insurance or railroad law shall THE STOCK C0I4P0KATI01T LAW. 337 make any assignment in contemplation of insolvency. Every person receiving by means of any sucli prohibited act or deed any property of the corporation shall be bound to account therefor to its creditors or stockholders or other trustees. No stockholder of any such corpo- ration shall make any transfer or assignment of his stock therein to any person in contemplation of its insolvency. Every transfer or assignment or other act done in violation of the foregoing provisions of this section shall be void. IsTo conveyance, assignment or transfer of any property of a corporation formed under or subject to the banking Iom, exceeding in value one thousand dollars, shall be made by such corporation, or by any officer or director thereof, unless au- thorized by previous resolution of its board of directors, except prom- issory notes or other evidences of debt issued or received by the offi- cers of the corporation in the transaction of its ordinary business and except payments in specie or other current money or in bank billr- made by such officers. ~No such conveyance, assignment or transfer shall be void in the hands of a purchaser for a valuable consideration without notice. Every director or officer of a corporation who shall violate or be concerned in violating any provisions of this section, shall be personally liable to the creditors and stockholders of the cor- poration of which he shall be director or an officer to the full extent of any loss they may respectively sustain by such violation. Amended by ah. 354 of 1901. 1. Tlie prohibition of the statute against a transfer is not limited to cases where payment of some obligation of the corporation has previously been refused. Cole V. The Millerton Iron Co., 133 N. Y. 164, 28 Am. St. Eep. 615, 30 N. E. 847. 2. A trajisfer by a corporation of all its property and effects the eflfect of which is to make it unable to pay its debts, is made in contemplation of insol- vency and illegal, lb. 3. The directors of an insolvent corporation have no right to secure equality of distribution for all the creditors by means other than thase pointed out by statute and which, apart from the object sought, would be irregular and fraudulent. Natl. Broadway Bank v. Wessel's Metal Co., 59 Hun, 470, 13 N. Y. Supp. 744. 4. The purpose of the statute is simply to restrain the corporation or its officers, by their affirmative action, from giving preferences. They are under no legal duty in case of its insolvency to procure u, disposition of its property with- out preferences. Silence or omission to act on their part is therefore not !»■ violation of the statute even to allowing judgments to be obtained against it by default, knowing that the creditor designs to obtain and will thereby obtain a preference. Varnum v. Hart, 119 N. Y. 101, 23 N. B. 183. 5. The statute places no restraints upon creditors, and they are permitted to pursue their legal remedies and obtain judgments by default against the corpora- tion, the effect of which is to give the judgment creditor a preference. lb. 6. An assignment of corporate assets may be made by a corporation under Banks, 22 338 TKE STOCIC COEPOEATION LAW. guise of a judgraont, and an attachment lien acquired by the plaintiff with the aid an! connivance of the insolvent corporation is an assignment or transfer of the eorpciatB assets within the statute. Throop v. The Hatch Lithographing Co., 125 N. Y. 530, 26 N. E. 742. 7. The statute disables u, director or other officer of an insolvent corporation from acquiring a prefeiential lien on the coi-porate assets. Hence, where a director of an insolvent corporation which had executed mortgages and given, offers of judgments to various creditors with a view of giving preferences, in an action against the corporation on a valid claim for money loaned, obtained an attachment and levy upon the corporate property in hostility to the board of directors and other officers of the corporation, — Held, affirming an order vacating the attachment, that it (attachment) was a step in a proceeding which had for its ultimate object the transfer of the title through a sale on an execution upon the judgment which might be obtained in the action, and to enable the plaintiff thereby to realize iiis debt, whicli was equivalent to procuring an assignment or transfer by the voluntary net of the corporation, lb. See also Kingsley u. First Natl! Bank of Bath, 31 Hun, 329. 8. While it is not unlawful for an insolvent corporation to permit its creditors to obtain preferences among themselves by diligence in legal proceedings tending to secure their claims, and may permit judgment to be taken by default, yet when the creditor, who is also a stockholder and director of the corporation, un- dertakes to obtain a preference by legal proceedijigs with the co-operation of his associates in the board of trustees, the case is within the statutory prohibition against preferences by way of assignment in contemplation of insolvency. King v. The Union Iron Co., 33 State Rep. 545, 11 N. Y. Supp. 003; Dickson v. Mayer, 22 Abb. N. C. 257. 9. The president of a corporation with a knowledge of, or in contemplation of, its insolvency is not authorized to provide for the payment of a debt to his wife out of the assets of the corporation to tlie exclusion of other creditors, and such preference will not be permitted to be carried out. West v. The West, Bradley & Casy Mfg. Co., 9 N. Y. State Kep. 255. 10. A director may legally obtain possession of corporate property as collateral security for a present or precedent debt justly due him from the corporation, and may acquire absolute title by foreclosure. Dunconib v. N. Y. H. & N. R. R. Co., 8-1 N. Y. 101; Harpending v. Munson, 91 N. Y. (iuO. 11. Proof that at the time of a transfer or assignment by a corporation it was in fact insolvent, was held not to be conclusive evidence that the transfer or assignment was made in "contemplation of the insolvency of such company" under the correspondirig provisions of the revised statutes (1 R. S. 603, § 4). To come within the prohibition of the statiite the act must have been done because of existing or contemplated insolvency. Paulding v. Chrome Steel Co., 94 N. Y. Z3i. 12. The preference must be given to one to whom the company is indebted — an existing creditor — and who is unjustly preferrred over others to whom it owes the same duty. It does not apply to one who becomes a creditor by the very act of transfer, and for which ample consideration was paid at the time. (Citing Curtis V. Leavitt, 15 N. Y. 112, 142, 175) ; Marine Bank of N. Y. v. Clements, 31 id. 45. 13. Taking for a precedent debt does not make holder a purchaser for valuable THE STOCK CORPORATIO]N- I-AW. 339 consiaeration, but taking mortgage and parting with valiiB does. Curtis v. Leavitt, 15 N. y. 178. 14. That directors may confirm an act done without their authority, four judges — that they cannot, so as to render the act valid, three judges. Id. 48, 137, 174, 189, 249. 15. A transfer of a note of over $1,000 not authorized by previous resolution of directors is void, unless to a purchaser for value and vt'ithout notice. GilleLt v. Phillips, 13 N. Y. 118. 16. Bank having claim against surety and principal, collected judgment against surety. Held, that bank had no beneficial interest in judgment after surety had paid same, and its assignment was not within statute. An assignment can only be attacked for this reason, by the corporation, its stockholders, or creditor,3. Eno V. Crooke, 10 N. Y. 60. 17. The authority of an ofTicer will be presumed until the contrai-y is shown. Com. Bank v. Kortright, 22 Wend. 348, 34 Am. Deo. 317; Lovet v. S. S. Mill, Paige, 54. It would seem that a purchaser would not be defeated, if the officer making sale had been forbidden to do so by directors, if the purchaser had no notice thereof. Bank of Vergennes v. Warren, etc., 7 Hill, 93. 18. Where the oificer of a bank purchased property and gave notes in the cor- porate name for the purchase-money, and the corporation claimed the property and converted it to its own use, held, that they ratified the transaction ; and even if the notes were originally given without authority, the corporation was liable upon them. Moss t. Lead Mining Co., 5 Hill, 137. 19. And the fact that the company has allowed judgment to be taken by default is adflitional evidence of such ratification. Id. 20. Where the management of the afl'airs of a corporation is intrusted by its charter to a board of directors, the president and cashier, unless specially au- thorized, have no authority or power to assign its choses in action to a creditor of the corporation as security for a precedent debt. Such an assignment is not voidable merely, but is absolutely void. Hoyt v. Thompson, 5 N. Y. 320. 21. An assignment by a banking corporation of a security for more than $1,000 is not within the prohibition of this section. Gillett v. Campbell, 1 Denio, 520. 22. This statute was designed to protect the corporation against its officers. A transfer in violation thereof is not void, but only voidable at suit of corpora- tion, or one claiming under it. The debtor cannot avail himself of it as a defense. Elwell V. Dodge, 33 Barb. 336. 23. Action was brought by tlie receiver of the City Bank of Rochester, to re- cover the value of certain drafts, amounting in the aggregate to the sum of $3,- 180.32, transferred to the defendant in violation of sections 186 and 187 of chap- ter 409 of 1882, and with an intent of giving it a preference over other creditors of the bank. It appeared that the defendant made deposits in the bank on the 16th, 17th, 18th and 19th days of December, 1882, and that, at the close of busi- ness, on the 19th, there was a balance due to it of $3,004.22; that during these days the bank was insolvent, and that this fact was known to its financial offi- cers; that at a meeting of the directors on the evening of the 19th, it was re- solved to discontinue business and apply for the appointment of a receiver; that on the morning (20th), the cashier, knowing of Che insolvency of the bank and of the action of the directors, telephoned for an officer of the defendant, and when he arrived gp.ve him certain drafts belonging to the bank, no one of which amount- 340 THE STOCK COBPOEATION LAW. ed to $1,000, but which amounted in all to $3,180.32, and took the defendant's cheek therefor, dated JJeeeraber 19. The bank was not again opened for business. All the drafts so transferred were paid to the defendant, but one, upon which an action was brought by tJie defendant. Held, that the total amount of the transactions brought the subject-matter within sections 186 and 187, although the amount of each draft was less than one thousand dollars. Atkinson, Receiver, v. Rochester Printing Co., 43 Hun, 167; afl'd 114 N. Y. 168, 21 N. E. 178. 24. Payment of check of depositor wholly ignorant of insolvency of bank is not within the statute. An act done by corporation in the ordinary and usual course of its busings, uninfluenced by its financial condition, cannot be said to be done in contemplation of insolvency. Robinson v. Bk. of Attica, 21 N. Y. 406; Brouwer v. Harbeck, 5 Seld. 589, distinguished; Duteher, Assignee, v. Importers & Traders' Nat. Bk., 59 N. Y. 5 ; reversing S. C. 1 T. & C. 400. 25. A transfer is in contemplation of insolvency, as well where the insolvency actually exists, as where it is anticipated. Haytun v. Brace, 3 Wend. 17, disap- proved as to this point. Robinson v. Bk. of Attica, 21 N. Y. 409 et seq. 26. This section is not violated, unless assignment is made to give a preference to some particular creditor over others. The intent is a fundamental fact to be proved. Curtis v. Leavitt, 15 N. Y. 109. 27. Where a corporation is insolvent in such a sense that all its debts cannot probably be discharged from its assets, the payment of any one creditor in full is a preference within the meaning of the statute. Gillett v. Phillips, 13 N. Y. 119. 28. A general assignment without preference is valid. In re Bowery Bank, 16 How. Pr. 58 ; 5 Abb. Pr. 417. 29. A transfer by ii moneyed corporation of negotiable notes, as collatenil se- curity to secure a present loan to be used in the course of its business, ia not a transfer with intent to give preference to one creditor over others, within this act. Nelson et al v. Wellington, 5 Bosw. 178-186; Holbrook v. Bassett et al., id. 148. 30. A person who loans money to a company in good faith, on transfer to him as collateral security of subscription notes given for premiums in advance, amounting to over $1,000, and without due notice that there had been no previ- ous resolution of the board of directors authorizing the transaction, is entitled to recover thereon against the makers, although no such resolution had been passed. Scott ei al v. Johnson, 5 Bosw. 223. 31. "Except to a purchaser for valuable consideration and without notice," in ' section 8 (186) the notice must be of the fact that there had been no previous resolution. The fact must be positively proven, or necessarily inferred from what is proven. Ogden v. Raymond, 5 Bosw. 26. 32. "Contemplation of insolvency" must also mean something more than mere expectation of its occurrence; it must include provisions against its results, so far as the transferee is concerned ; and that can only be applicable where he is al- ready a creditor, and the object is to take his debt out of the equal ratable dis- tribution of the assets of the company when insolvent. Heroy et al v. Kerr, 8 Bosw. 200. 33. It was the design of this statute to guard against collusive transfers of the effects of corporations. It was not meant to interfere with honest transfers made in order to pay their just debts. Aspinwall v. Meyer, 2 Sandf. Sup. Ct. 180. 34. Every person who, for any consideration that the law judges to be valuable, has acquired, directly or indirectly, a legal or equitable title or interest by an as- THE STOCK CORPOJIATION LAW, 341 signment or transfex- from a monej'ed corporation is to be deemed a purcliaser within the meaning of section 8 (180). Palmer v. Yates, 3 Sandf. Sup. Ct. 138. 35. A transfer of a note by an insolvent moneyed corporation further to secure a loan made previous to its insolvency, on an understanding or verbal agreement with its president, that the lender should, at all times, be kept adequately secured by collaterals, is in violation of this statute, and cannot be sustained. Company was insolvent before transfer. Furniss v. Sherwood, 3 Sandf. Sup. Ct. 523. 36. A special resolution is necessary to authorize each particular transfer by an incorporation of over $1,000 of its effects, where the transfer is made in and according to the ordinary course of business, and to pay just claims (citing 3 N. y. 290), 1 Duer, 126. 37. Statute has no application to a case of transfer to a hona fide holder for value. Ogden v. Raymond, 1 Keyes (Ct. of App.), 42. 38. Transferee of note for over $1,000 must prove he took it in good faith and for value. Houghton o. McAuliffe, 2 Abb. App. 410. 39. An insolvent banking corporation organized under the general law, after proceedings against it had been instituted, and a receiver ordered, assigned prop- erty to a former stockholder to secure him and other stockholders for liabilities incurred for bank. Held, assignment was invalid by eighth and ninth sections (sections 186 and 187), and property must be restored. Leavitt v. Tylee and others, 1 Sandf. Ch. 207. 40. It cannot be objected to an action on a single note for less than $1,000, that it was one of many which, in the aggregate, exceeded $1,000, and therefore it is void by section 8 (186). Ogden v. Raymond, 3 Abb. App. 396. 41. Proofs by subscribing witness that assignment was by authority of board of directors, and that seal was corporate seal and so affixed before commissioner of deeds is prima facie evidence of the facts therein recited. Johnson v. Bush, 3 Barb. Ch. 207. 42. The revisers say that the principal object sought to be obtained by this section was, "in the event of insolvency to secure an equal distribution of the ef- fects of a company among all its creditors." i 43. Upon insolvency, either actual or contemplated, every creditor acquires a right under the statute to a pro rata share of its assets, aud any creditor paid in full must refund, whether ignorant or not of insolvency. Such creditor has parted with nothing he had a right to receive, and upon repayment loses nothing he had a right to retain. His debt I'evives, and he again becomes a creditor and shares equally with the others. Brouwer v. Harbeck, 9 N. Y. 593. See note 14. 44. The cashier of the Mastiu Bank arranged with defendants to accept four drafts amounting to $35,000 drawn on them in the firm name of John J. Mastin & Co., payable to the Mastin Bank, upon an agreement made by him on behalf of the bank as a condition of acceptance, that the bank should keep a corresponding balance to its credit with the defendants, which the defendants should hold and have a lien on as a security for their liability as acceptors, and that defendants be kept informed of the condition of the bank, and should have the right at any time to charge the bank with the amount of the bills so accepted, and take, appro- priate or apply the said deposits of the bank, or so mach thereof as was neces- sary to the payment of the liability of the bank because of such acceptance. Held, that the cashier had power to make the agi-eement. The facts that the bank was dn need of funds, and its officers were making efforts to keep its credit unim- paired and to meet all future calls on it, it not being supposed to be insolvent. 342 THE STOCK COKPOEATION LAW. and all claims on it liaving been paid as tliey were presented, do not bring the above agreement within the operation of the statute against transfers in con- templation of insolvency. Coates v. Donnell, 16 J. & S. 52. 45. It was held in Jirouwer t. Harbeck, 9 N. Y. 589, that a payment made by an insoh'ent corporation, or one made in contemplation of insolvency, when tha intention of the corporation was to give preference to a particular creditor, was void irrespective of the questions, whether the insolvency was open and notori- ous, and whether the party receiving the payment knew of the insolvency, or the particular motive of the corporation in making the payment. A payment made with a view of giving a preference to a particular creditor is one rarely, if ever, made in the usual course of business. In the case of Robinson v. Bank of Attica, 21 IST. Y. 406, the creditor was sought out by the debtor, and payment made by an unusual transfer of assets. An act done by a corporation in the ordinary and usual course of its business, uninfluenced by the condition of its affairs, cannot be said to have been done in contemplation of insolvency. Dutcher v. I. and T. Nat. Bk., 59 N. Y. 11. § 49. Payment by stockholders of mortgage debt pending foreclosure. (Repealed by L. 1001, eh. 354.) § 50. Application to court to order issue of new in place of lost cer- tificate of stock. — The owBer of a lost or destroyed certificate of stool!:, if the corporation shall refuse to issue a new certificate in place there- of, may apply to the supreme court, at any special term held in the district where he resides, or in which the principal business office of the corporation is located, for an order requiring the corporation to show cause why it should not be required to issue a new certificate in place of the one lost or destroyed. The application shall be by peti- tion, duly verified by the owner, stating the name of the corporation, the number and date of the certificate, if known, or if it can be ascer- tained by the petitioner; the number of shares named therein, to whom issued, and as pai-ticular a statement of the circumstances at- tending such loss or destruction as the petitioner can give. Upon the presentation of the petition the court shall make an order requiring the corporation to show cause, at a time and place therein mentioned, why it should not issue a new certificate of stock in place of the one described in the petition. A copy of the petition and order shall be served on the president or other head of the corporation, or on the sec- retary or treasurer thereof, personally, at least ten days before the lime for showing cause. Former section 50, amended. 1. Under the corresponding provisions of Laws 1873, chapter 151, to confer jn- risJiction on the court, the petitioner must prove that he is owner and that the TilE STOCK COEPOKATION LAW. 343 shares have been dcstioyed or lost and cannot, after due diligence, be found. Big- lin V. The Friendship jVss'n, 40 Hun, 223. 2. Where it appears that the shares which the petitioner claims to own were issued to two persons as trustees and that a portion of said shares are in peti- tioner's possession unindorsed, and the remaining shares are held by the trustees, who refuse to surrender them because the cestui que trust refuse to consent, the application will be denied. lb. 3. See Brisbane «. D. L. &, W. K. 11. 25 Hun, 438 ; aff'd 94 N. Y. 204. § 51. Order of court upon such application.— Upon the return of the order, with proof of due service thereof, the court shall, in a summary manner, and in sxich mode as it may deem advisable, inquire into the truth of the facts stated in the petition, and hear the proofs and alle- gations of the parties in regard thereto, and if satisfied that the peti- tioner is the lawful owner of the number of shares, or any part thereof, described in the petition, and that the certificate therefor has been lost or destroyed, and cannot after due diligence be found, and that no sufficient cause has been sho"\vn why a new certificate should not be issued, it shall make an order requiring the corporation, within such time as shall be therein designated, to issue and deliver to the pe- titioner a new certificate for the number of shares specified in the or- der, upon depositing such security, or filing a bond in such form and with such sureties as to the court shall appear sufficient to indemnify any person other than the petitioner who shall thereafter be found to be the lawful owner of the certificate lost or destroyed; and the court, may direct the publication of such notice, either before or after mak- ing such order as it shall deem proper. Any person claiming any rights under the certificates alleged to have been lost or destroyed shall have recourse to such indemnity, and the corporation shall be discharged from all liability to such person upon compliance with such order ; and obedience to the order may be enforced by attachment against the officer or oJicers of the corporation on proof of his or their refusal to comply with it. Former section .51, without change. See Matter of Speir, 69 App. Uiv. 149, 74 N. Y. Supp. 555. Matter of Coats, 75 App. Div. 469, 78 N. Y. Supp. 425. § 52. Financial statement to stockholders. — Stockholders owning five per centum of the capital stock of any corporation other than a moneyed corporation, not exceeding one himdred thousand dollars, or three per centum where it exceeds one hundred thousand dollars, may make a written request to the treasurer or chief fiscal officer thereof, 344 THE STOCK COKPOKATION LAW. for a statement of its affairs, under oath, embracing a particular ac- count of all its assets and liabilities, and the treasurer shall make such statement and deliver it to the person presenting the request witliin thii-ty days thereafter, and keep on file for twelve months thereafter a copy of such statement, which shall at all times during business hours be exhibited to any stockholder demanding an examination thereof; but the treasurer or such chief fiscal oflicer shall not be required to deliver more than one such statement in any one year. The supreme court, or any justice thereof, may upon application, for good cause shown, extend the time for making and delivering such certificate. Tor every neglect or refusal of the treasurer or other chief fiscal officer thereof to comply with the provisions of this section he shall forfeit and pay to the person making such request the sum of fifty dollars, and the further sum of ten dollars for every twenty-four hours thereafter until such statement shall be furnished. Former section 52, amended. Application to be by stockholder of record. Pray v. Todd, 71 App. Div. 391, 75 N. Y. Supp. 947. As to right of stockholder to inspect books of corporation, see editorial note to Weihenmayer v. Bitner, 45 L. K. A. 446, presenting the authorities on that ques- tion. § 53. Stock books of foreign corporations. — Every foreign stock cor- .poration having an office for the transaction of business in this state, except moneyed and railroad corporations, shall keep therein a book to be known as a stock book, containing the names, alphabetically arranged, of all persons who are stockholders of the corporation, showing their places of residence, the number of shares of stodi held by them respectively, the time when they respectively became the owners thereof, and the amount paid thereon. Such stock book shall be open daily, during business hours, for the inspection of its stock- holders and judgment creditors, and any officer of the state author- ized by law to investigate the affairs of any such corporation. If any such foreign stock corporation has in this state a transfer agent, whether such agent shall be a corporation or a natural person ; such stock book may be deposited in the office of such agent and shall be open to inspection at all times during the usual hours of transacting business to any stockholder, judgment creditor or officer of the state authorized by law to investigate the affairs of such corporation. For any refusal to allow such book to be inspected, such corporation and the officer or agent so refusing shall each forfeit the sum of two THE STOCK COEPORATION LAW, 345 huTiclrecl and fifty dollars to be recovered by the person to whom such refusal was made. Am'd, eh. 384 of 1897. 1. Under Laws 1842, chapter 165, corresponding to the foregoing section, held to be the absolute duty of a transfer agent in this State of a foreign corporation, moneyed or otherwise, to exhibit at all reasonable times during the usual hours of transacting business to any stoclcholder when required, the transfer book and a list of the stockholders, if in his power to do so. (1884) Kennedy v. The Chi- cago & Kock Island R. R. Co., 14 Abb. N. C. 326. A demand for the exhibition of the stock-book is not sufficient as a demand for the transfer-book. lb. 2. A mandarrms will be granted against the agent of a foreign corporation com- pelling him to allow tlie transfer-book to be inspected by a stockholder tliereof regardless of the agent's motives or reasons for refusing an inspection. People esc rel. Han-iman v. Paton, 20 Abb. N. C. 195. § 54. Liabilities of stockholders. — Every holder of capital stock not fully paid, in any stock corporation, shall be personally liable to its creditors, to an amount equal to the amount unpaid on the stock held by him for debts of the corporation contracted while such stock was held by him. As to existing corporations the liability imposed by this section shall be in lieu of the liability imposed upon stock- holders of any existing corporation, under any general or special law, (excepting laws relating to moneyed corporations, and corporations and associations for banking purposes,) on account of any indebted- ness hereafter contracted or any stock hereafter issued ; but nothing in this- section contained shall create or increase any liability of stock- holders of any existing corporation under any general or special law. The stookholders of every stock corporation shall jointly and severally be personally liable for all debts due and owing to any of its laborers,, servants or employees other than contractors, for services performed by them for such corporation. Before such laborer, servant or em- ploye shall charge such stockholder for such services, he shall give- him notice in writing, within thirty days after the termination of such services, that he intends to hold him liable, and shall commence an action therefor within thirty days after the return of an execu- tion unsatisfied against the corporation upon a judgment recovered against it for services. 'No person holding stock in any corporation as collateral security, or as executor, administrator, guardian or trustee, unless he shall have voluntarily invested the trust funds in such stock, shall be personally subject to liability as a stocldiolder ; but the person pledging such stock shall be considered the holder thereof and shall be liable as stocldiolder, and the estates and funds in 346 THE STOCK CORPOEATiOiS" LAW. the hands of such executor, administrator, guardian or trustee shall be liable in the like manner and to the same extent as the testator or intestate, or the ward or person interested in such trust fund would have been, if he had been living and competent to act and held the same stock in his own name, unless it appears that such executor, ad- ministrator, guardian or trustee voluntarily invested the trust funds in such stocks, in which case he shall be personally liable as a stock- holder. Amended by ch. 354 of 1901. 1. It is a defense, and a stockliolder may show in his exoneration, that his name was placed on the books of the corporation without his consent, but when 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 differerce that he did not kn'iw that the representations were false until after the insolvency of the corporation. Briggs v. Cromwell, 9 Daly, 436. 2. If a stockholder, sued for the indebtedness of the corporation, can show in his defense that he has paid on account of its debts or has become an honest creditor thereof in a sum equal to the liability which the statute has imposed upon him, he will be entitled to judgment; but such a defense being of an equit- able character, it is essential to show that the defendant and creditor stand on an equality. Hence, where the defendant stockholder set up as a defense the pur- chase by him of two judgments against the corporation, but it did not appear that he had paid for such judgments the full amounts thereof, — ^Held, that he therefore did not bring himself within the rule of law permitting in such action ii. defense of equitable olfset. Buckley v. Whitcomb, 49 Hun, 290, 1 N. Y. Supp. 748. 3. When a single stockholder or his representative is sued as such by a cred- itor of a corporation, to charge him with a debt of the corporation, he may set off a claim against the latter of a greater amount of wliioh he is owner. Chris- tiansen V. Colby, 43 Hud, 302. 4. The liahility of a shareholder to pay for his shares does not arise out of the relation, but upon his contract, express or implied, or upon statute; and in the absence of either of these grounds a person to whom shares have been issued gratuitously (bonus stock) is not liable to pay the par value as upon a subscrip- tion. Christiansen v. Eno, 106 N. Y. 97, 60 Am. Rep. 429, 12 N. E. 648. 5. So, also, where bonds of a corporation have been issued by it gratuitously to a stockholder, but no portion of its property or assets has been applied in pay- ment thereof, the stockholder is not liable to account to creditors for the pro- ceeds of the sale of said bonds by him. lb. See section 42 Stock Corporation Law, ante. 6. As creditors of an insolvent corporation, seeking to recover of a holder of its stock an unpaid balance on his subscription, simply claim through the cor- poration, they have no greater rights than it. Glenn v. Garth, 133 N, Y. 18, 30 ST. E. 649, 31 N. E. 344. 7. In an action against a stockholder to recover a debt due from the corpora- THE STOCK COEPOBATION LAW. 347 tion, a judgment against the corporation furnishes no evidence of the debt, but plaintiff must prove its (debt's) existence. Beveridge v. Abernethy, 24 Weekly Dig. 513. 8. See N. T. W. Co. v. GiULllian, 124 N. Y. 302, 2G N. E. 538. 9. As to right to enforce .stockholder's liability outside of state of incorpora- tion, see editorial note to Gushing v. Perot, 34 L. R. A. 737, presenting the au- thorities on that question. § 55. limitation of stockholder's liability. — ISTo action shall be brought against a stockliolder for any debt of the corporation until judgment therefor has been recovered against the corporation, and an execution thereon has been returned unsatisfied in whole or in part, and the amount due on such execution shall be the amount recover- able, with costs against the stockholder. IsTo stockholder shall be pei> sonally liable for any debt of the corporation not payable within two yeara from the time it is contracted, nor unless an action for its col- lection shall be brought against the corporation within two years after its debt becomes due; and no action shall be broug'ht against a stockholder after he shall have ceased to be a stockholder, for any debt of the corporation, unless brought within two years from the time he shall have ceased to be a stockholder. Former section 58. 1. A suit for the collection of the debt must be brought against the corporation within two years after it becomes due, in order to such liability, unless some cause intervenes before the expiration of such period sufficient to excuse uuch action. Hardman v. Sage, 47 Him, 230; Kincaid v. Dwindle, 59 N. Y. 548; Cuykendall v. Corning, 88 id., 129. 2. Where the time of the payment of a debt is extended by the taking of a promissory note, which is sued within two years from the date of its maturity, but more than two years after the debt becomes due, the claim of the creditor against the stockholders is lost and they can not be charged with the payment of the debt. Hardman v. Sage, 124 N. Y., 25, 26 N. E. 354. 3. In Fisher v. MarA'in, 47 Barb., 159, it was held that the debt was contracted when the renewal note was given, but this case was overniled on this point by Jagger Iron Co. v. Walker, 76 N. Y., 521. 4. As to conflict of laws as to limitation of action against stockholders, see editorial note to Brunswick Terminal Co. v. Nat. Bank of Baltimore, 48 L. E. A. 637, presenting the authorities on that question. § 56. Increase or reduction of number of shares. — The number of shares into which the capital stock of any stock coi-poration is divided may be increased or reduced by a two-thirds vote of all stock duly represented at a meeting held and conducted in like manner, and upon filing a like certificate, as required for the increase or reduction of its capital stock. If such increase or reduction of the number of shares 348 THE STOCK COKPOBATION LAW. be so authorized, the corporation shall issue to each stockholder cer- tificates for as many shares of the new stock as equal in par value the shares of the old stock held by him, upon surrender and cancellation of such old stock. This section does not authorize the increase or reduction of the capital stock of such corporation. Amended by ch. 354 of 1901. § 57. Voluntary dissolution. — Any stock corporation, except a mon- eyed or a railroad corporation, may be dissolved before the expira- tion of the time limited in its certificate of incorporation or in its charter as follows: The board of directors of any such corporation may at a meeting called for that purpose upon, at least, three days' notice to each director, by a vote of a majority of the whole board,, adopt a resolution that it is in their opinion advisable to dissolve such corporation f orthvyith, and thereupon shall call a meeting of the stock- holders for the purpose of voting upon a proposition that such corpo- ration be forthwith dissolved. Such meeting of the stockholders shall be held, not less than thirty nor more than sixty days after the adoption of such resolution, and the notice of the time and place of such meeting so called by the directors shall be published in one or more newspapers published and circulating in the county wherein such corporation has its principal oflice, at least once a week for three weeks successively next preceding the time appointed for holding such meeting, and on or before the day of the first publication of such notice, a copy thereof shall be served personally on each stockholder, or mailed to him at his last known post-office address. Such meeting shall be held in the city, town or village in which the last preceding annual meeting of the corporation was held, and said meeting may, on the day so appointed, by the consent of a majority in interest of the stockholders present, be adjourned from time to time, and notice of such adjournment shall be published in the newspapers in which the notice of the meeting is published. If at any such meeting the holders of two-thirds in amount of the stock of the corporation, then outstanding, shall, in person or by attorney, consent that such disso- lution shall take place and signify such consent, in writing, then, such corporation shall file such consent, attested by its secretary or treas- urer, and its president or vice president, together Avith the powera of attorney signed by such stockholders executing such consent by attor- ney, Avith a statement of the names and residences of the then existing board and directors of said corporation, and the names and residences of its ofiicers duly verified by the secretary or treasurer or president of THE STOCK COKPORATIOH- LAW. 349 said corporation, in tke oifice of the secretary of state. The secretary of state shall thereupon issue to such corporation, in duplicate, a certificate of the filing of such papers and that it appears therefrom that such corporation has complied with this section in order to be ■dissolved, and one of such duplicate certificates shall be filed by such corporation in the office of the clerk of the county in whidi such corporation has its principal office; and thereupon such cor- poration shall be dissolved and shall cease to carry on busi- ness, except for the purpose of adjusting and winding up its business. The board of directors shall cause a copy of such certificate to be publislied at least once a week for two weeks in one or more newspapers published and circulating in the county in which the principal office of such corporation is located, and at the expiration of such publication, the said corporation by its board of directors shall proceed to adjust and wind up its business and affairs with power to carry out its contracts and to sell its assets at public or private sale, and to apply the same in discharge of debts and obligations of such corporation, and, after paying and adequately providing for the pay- ment of such debts and obligations, to distribute the balance of assets among the stockholders of said corporation, according to their respec- tive rights and interest. Said corporation shall nevertheless continue in existence for the purpose of paying, satisfying and discharging anj existing debts or obligations, collecting and distributing its assets and doing all other acts required in order to adjust and wind up its busi- ness and affairs, and may sue and be sued for the pui-pose of enforcing such debts or obligations, until its business and affairs are fully adjusted and wound up. After paying or adequately providing for the debts and obligations of the corporation the directors may, with the written consent of the holders of two-thirds in amount of the capital stock, seU the remaining assests or any part thereof to a corporation organized under the laws of this or any other state, and engaged in a business of the same general character, and take in pay- ment therefor the stock or bonds or both of such corporation and dis- tribute them among the stockholders, in lieu of money, in proportion to their interest therein ; but no such sale shall be valid as against any stocldholder, who, within sixty days after the mailing of notice to him of such sale shall apply to the supreme court in the manner provided by section thirty-three of this act, for an appraisal of the value of his interest in the assets so sold ; unless within thirty days after such ap- praisal the stockholders consenting to such sale, or some of them, shall pay to such objecting stockholder or deposit for his account, in the 350 THE STOCK COEPOEATION LAW. manner directed by the court, the amount of such appraisal and upon such payment or deposit the interest of such objecting stockholder shall vest in the person or persons making such payment or deposit. Added by chap. 932 o; 1808. Amended by chap. 700 of 1900. § 58. Merger. — Any domestic stock corporation and any foreign stock coiporation authorized to do business in this state lawfully own- ing all the stock of any other stock corporation organized for, or engaged in business similar or incidental to that of the possessor cor- poration may file in the office of the secretary of state, under its com- mon seal, a certificate of such ownership, and of the resolution of its board of directors to merge such other corporation, and the)'?upon it shall acquire and become, and be possessed of all the estate property, rights, privileges and franchises of such other corporation, and they shall vest in and be held and enjoyed by it as fully and entirely and without change or diminution as the same were before held and en- joyed by such other corporation and be managed and controlled by the board of directors of such possessor corporation, and in its name, but witliout prejudice to any liabilities of such other corporation or the rights of any creditors thereof. Any bridge corporation may be merged under this section with any railroad corporation which shall have acquired the right by contract to run its cars over the bridge of such bridge corporation. Added by chap. All of section 6 to and including the word "trustees" in line 7. 1853 . 502. All. THE STOCK COEPOEATIOX LAW. 353 Laws of Chapter Sections 1854 232 . 3, 5, 6, 8, 10, 11, 12, 13, 14, 15. 16, 17, 18, 19, 20, 21, 22, 24, 25, 27, 28. 1855 425 First and last sentences of section 5. . 3, 5, 6, 8 and 11 to 20 both in- 1857 546 clusive. 1857 776 . 7. 1860 269 . All. 1861 149 . 2, 5, 6, 7, 9. 1863 134 . All. 1864 517 . 2. 1866 73 . All. 1867 419 . 2. 1867 480 . All. 1867 971 . First two sentences of 5, and 6, 7, 8. 4 to 11 both inclusive. 1867 974 1868 290 . All. 1870 773 . All. 1872 248 3, last three sentences of 4, and 7, 8, 9, 10. 1872 146 . All. 1872 611 . All. 1872 820 . 4, 9, 10, 13, 14, 15. 1873 151 . All. 1873 469 All but section 5. 1873 737 . 7,8. 1874 143 . 3, 5, 6, 8, 10, 11, 13, 14, 17. 1874 288 . 4. 1874 430 . All. 1875 4 . All. 1875 343 . 9. 1875 606 10 to 15 both inclusive. 1875 611 . 5, 10, 11, 12, 13 to 26 both inclu- sive and 28, 29. 1877 228 . 3,4,5. 1878 163 . 1. 1878 203 . 4, 5, 6, 7, 8, 9, 10, 11, 12, 39, 43, 44. Banks, 23 354 TTJE STOCK COEPOKATlOIf LAW. Laws of 1878 1879 1879 1879 1880 1880 1880 1880 1881 1881 599 1. 1884 252 19. 1884 397 All. 1885 141 All. 1885 171 All. 1885 489 All except section 2. 1886 586 All. 1888 293 3. 1888 462 3, 4, 5. Chapter Sections 264 . All. 393 . All. 395 . All. 413 . All. 155 . All. 182 . 1. 225 . All. 510 . All. 468 . 4,7, 8, 10, 11, 12. THE GENERAL CORPORATION LAW. THE GENERAL COEPOEATION LAW. Chaptee 687, Laws of 1892. (As Amended 1903.) CHAPTEE XXXV OF THE GEl^EEAL LAWS. The Gewehal Coepoeation Law. Section 1. Short title. 2. Classifleation of corporations. 3. Definitions. 4. Qualifications of incorporators. 5. Filing and recording certificates of incorporation. 6. Corporations of the same name prohibited. 7. Amended and supplemental certificates. 8. Lost or destroyed certificates. 9. Certificate and other papers as evidence. 10. Prohibitions of other than statutory powers. 11. Grant of general powers. 12. I/imitation of amount of property of a non-stock corporation. 13. Acquisition of additional real property. 14. Acquisition of property in other states. 15. Certificate of authority of a foreign corporation. IG. Proof to be filed before granting certificate. 17. Acquisition of real property in this state by certain foreign corpora- tions. 18. Acquisition by foreign corporations of real property in this state upon judicial sales. 19. Prohibition of banking powers. 20. Qualification of members as voters. 21. Proxies. 22. Challenges. 23. Effect of failure to elect directors. 24. Mode of calling special election of directors. 25. Mode of conducting special election of directors. 2d. Qualification of voters and canvass of votes at special elections. 357 358 THE GSNEBAL COEPOEATION LAW, Section 27. Powers of supreme court respecting elections. 28. Stay of proceedings in actions collusively brought. 29. Quorum of directors and power of majority. 30. Directors as trustees in case of dissolution. 31. Forfeiture for uou-user. 32. Extension of corporate existence. 33. Conflicting corporate laws. 34. Laws repealed. 35. Saving clause. 36. Construction. 37. Law revived. 38. When notice, or lapse of time, necessary. 39. As to acts of directors. 40. Alteration and repeal of charter. Section 1. Short title. — This chapter shall be known as the gen- eral corporation law. § 2. Classification of corporations. — A corporation shall be either, 1. A municipal corporation 2. A stock corporation, 3. A non-stock corporation, or 4. A mixed corporation. A stock corporation shall be either, 1. A moneyed corporation, 2. A transportation corporation, or 3. A business corporation. A non-stock corporation shall be either, 1. A religious corporation, or 2. A membership corporation. A mixed corporation shall be either, 1. A cemetery corporation, 2. A library corporation, 3. A co-operative corporation, 4. A board of trade corporation, or 5. An agricultural and horticultural corporation. A transportation corporation shall be either, 1. A railroad corporation, or 2. A transportation corporation other than a railroad corporation. A membership corporation shall include benevolent orders and fire and soldiers' monument corporations. A reference in a general law to a class of corporations described in accordance with this classification shall include all corporations theretofore formed belonging to such class. New. THE GENTIEAL OORrOEATION LAW. 359 § 3. Definitions. — 1. A inunicipal corporation includes a county, town, school district, village and city, and any other territorial divi- sion of the State established by law with powers of local goverDuiont. 2. A stock corporation is a corporation having a capital stock di- vided into shares, and which is authorized by law to distribute to the holders thereof dividends or shares of the surplus profits of the ccr- poration. A corporation is not a stock corporation because of having issued certificates called certificates of stock, but which are in fact merely certificates of membership and which is not authorized by law to distribute to its members any dividends or share of profits aris- ing from the operations of the corporation. 3. The term non-stock corporation includes every corporation gther than a stock corporation. 4. A moneyed corporation is a corporation formed under or subject to the banking or the insurance law. 5. A domestic corporation is a corporation incorporated by nr un- der the laws of the State or colony of ITew York. Every corporation which is not a domestic corporation is a foreign corporation, except as provided by the code of civil procedure for the purpose of constru- ing such code. 6. The term directors, when used in relation to corporations, shall include trustees or other persons, by whatever name known, duly ap- pointed or designated to manage the affairs of the corporation. 7. The term, certificate of incor|3oration, shall include articles of association or any other written instruments required by law to be filed, to effect the incorporation of a corporation, including a certified copy of an original certificate of incorporation filed for such purpose in pursuance of law. 8. The term, member of a corporation, shall include every person having a right to vote at a meeting of the corporation for the elec- tion of directors, other than a person having a right to vote only upon a proxy. 9. The term, office of a corporation, means its principal office with- in the State or principal place of business within the State, if it has no principal office therein. 10. The term, business of a corporation, when used with reference to a non-stock corporation, includes the operations for the conduct of which it is incorporated. 11. The term, corporate law or laws, when used in any law form- ing a part of the revision of the general laws of the State of which 360 TilE GENEBAL COBPOEATIOK LAW. this chapter is a part, means the general laws of this State relating to corporations included in such revision. Am'd by chap. 672 of 1895. Former section 2 amended. The right to be a corporation is a distinct, Independent franchise, having no necessary connection with other distinct franchises, which are the subjects of leg- islative grants. Southern P. R. Co. v. Orton, 6 Sawy. 157, 185, 32 Fed. Rep. 457. § 4. ftualiflcations of incorporators. — A certificate of incorporation must be executed by natural persons, who must be of full age, and at least two-thirds of them must be citizens of the United States and one of them a resident of this State. This section shall not apply to a corporation formed by the reincorporation or consolidation of exist- ing corporations, or to the reorganization of a corporation upon the sale of the property and franchises of a previously existing corpora- tion or otherwise. Aiu'd by chap. 672 of 1895. § 5, riling and recording certificates of incorporation. — Every cer- tificate of incorporation including the corporate name or title and everjr amended or supplemental certificate, and every certificate which alters the provisions of any certificate of incorporation or any amended or supplemental certificate, hereafter executed shall be in the English language, and except of a religious, cemetery, moneyed, mimicipal or fire department corporation, shall be filed in the office of the secretary of state, and shall be by him duly recorded and indexed in books specially provided therefor; and a certified copy of such certificate or amended or supplemental certificate with a certificate of the secretary of state of such filing and record, or a duplicate orig- inal of such certificate or amended or supplemental certificate shall be filed and similarly recorded and indexed in the ofiice of the clerk of the county in which the ofiice of the corporation is to be located, or, if it be a non-stock corporation, and such county be not determined upon at the time of executing the certificate of incorporation, in such county clerk's office as the judge approving the certificate shall direct. All taxes required by law to be paid before or upon incorporation and the fees for filing and recording such certificate must be paid before filing. ISTo corporation shall exercise any corporate powers or privi- leges until such taxes and fees have been paid. Am'd by ch. 672 of 1895. Am'd by ch. 285 of 1902. § 6. Corporate names.- JSTo certificate of incorporation of a pro- THE GEI^EBAL COEPOEATION LAW. 361 posed corporation having the same name as a corporaton authorized to do business under the laws of this state, or a name so nearly re- sembling it as to be calculated to deceive, shall be filed or recorded in any office for the purpose of effecting its incorporation, or of au- thorizing it to do business in this state. A corporation formed by the reincorporation, reorganization or consolidation of other corpo- rations or upon the sale of the property or franchises of a corporation, may have the same name as the corporation or one of tlie corporations to whose franchises it has succeeded. ISTo corporation shall be here- after organized under the laws of this state, with the word trust, bank, banking, insurance, assurance, indemnity, guarantee, guaranty, savings, investment, loan or benefit as a part of its name, except a cor- poration formed under the banking law or the insurance law. Am'd by ehap. 704 of 1900. Am'd by chap. 9 of 1902. § 7. Amended and supplemental certificates. — If in the original or amended certificate of incorporation of any corporation, or if in a supplemental certificate of any corporation any informality exist, or if any such certificate contain any matter not authorized by law to be stated therein, or if the proof or acknowledgment thereof shall be defective, the corporators or directors of the corporation may make and file an amended certificate correcting such informality or defect or striking out such unauthorized matter ; and the certificate amend- ed shall be deemed to be amended accordingly as of the date such amended certificate was filed, and upon the filing of such an amended certificate of incorporation, the corporation shall then for all purposes be deemed to be a corporation from the time of filing the original cer- tificate. The supreme court may, upon due cause shown, and proof made, and upon notice to the Attorney-General, and to such other persons as the court may direct, and upon such ternis and conditions as it may impose, amend any certificate of incorporation wliich fails to express the true object and purpose of the corporation, so as to truly set forth such object and purpose. When an amended or supplemental certificate is filed, an entry shall be made upon the margin of the index and record of the original certificate of the date and place of record of every such amended certificate. The amendment of a certificate under this section shall be without prejudice to any pending action or proceeding, or to any rights pre- viously accrued. Former section 5 amended. 362 THE GEJSTKEAL OOKl'ORATION LAW. § 8. Lost or destroyed certificates. — If either of the certificates of incorporation shall be lost or destroyed after filing, a certified copy of the other certificate may be filed in the place of the one. so lost or destroyed and as of the date of its original filing, and such certified copy shall have the same force and effect as the original certificate had when filed. Former section 6 without change. § 9. Certificate and other papers as evidence. — The certificate of in- corporation of any corporation duly filed shall be presumptive evi- dence of its incorporation, and any amended certificate or other paper duly filed or recorded relating to the incorporation of any corporation, or its existence or m.anagement, and containing facts required or authorized by law to. be stated therein, shall be presumptive evidence of the existence of such facts. Am'd by chap. 672 of 1895. § 10. Limitation of powers. — No corporation shall possess or exer- cise any corporate powers not given by law, or not necessary to the ex- ercise of the powers so given. The certificate of incorporation of any corporation may contain any provision for the regulation of the busi- ness and the conduct of the affairs of the corporation, and any limi- tation upon its powers, or upon the powers of its directors and stock- holders, which does not exempt them from the performance of any obligation or the performance of any duty imposed by law. Am'd by chap. 672 of 1895. 1. A corporation has no other powers than those conferred by the act of incor- poration, and such as are necessary to carry these powers into effect. The New York >'iremen's Ins. Co. v. Sturges, 2 Cow. 664. (Citing 15 Johns. 383; Halstead V. The Mayor, etc., of New York, 3 N. Y. 430.) 2. A State bank cannot enforce an executory contract which it was not au- thorized by its. charter to make. Nassau Bank v. Jones, 95 N. Y. 115, 47 Am. Eep. 14. 3. Where a contract has been fully performed by one of the parties and the corporation has had the benefit thereof, it is estopped to set up the plea of ultra vires as a defence to a suit to recover for services rendered under the contract. Cunningham v. M. S. & F. C. E,. R. Co. 03 Hun, 439, 18 N. Y. Supp. 600. 4. Where a contract with a corporation has been executed although ultra vires the plea thereof is not available as a defence. Schurr v. The N. Y. & Brooklyn Suburban Investment Co., 45 State Rep. 645, 18 N. Y. Supp. 454. 5. Although ineffectual to bind a corporation when made because ultra vires, a contract may subsequently become obligatory on the corporation if adopted and confirmed by the board of directors. lb. 6. A manufacturing corporation cannot be an accommodation indorser. Nat'l Park Bank v. G. A. M. Co. 116 N. Y. 281, 5 L. R. A. 673, 22 N. E. 567. 7. Sec Martin r. N. F. & Co. 122 N. Y. 105, 25 N. E. 303. THE GENERAL COEPOEATION LAW. 363 § 11. Grant of general powers.— Every corporation as siacli lias power, though not specified in the law under which it is incorporated : 1. To have succession for the period specified in this certificate of in<3orporation or by law, and perpetually when no period is specified. 2. To have a common seal, and alter the same at pleasure. 3. To acquire by grant, gift, purchase, devise or bequest, to hold and to dispose of such property as the purposes of the corporation shall require, subject to such limitations as may be prescribed by law. 4. To appoint such officers and agents as its business shall require, and to fix their compensation, and 5. To make by-laws, not inconsistent with any existing law, for the management of its property, the regulations of its affairs, and the transfer of its stock, if it has any, and the calling of meetings of its members. Such by-laws may also fix the amount of stock, which must be represented at meetings of the stocldiolders in order to consti- tute a quorum, unless otherwise provided by law. By-laws duly adopted at a meeting of the members of the corporation shall control the action of its directors. No by-law adopted by the board of direct- ors regulating the election of directors or officers shall be valid unless published for at least once a week for two successive weeks in a news- paper in the county where the election is to be held, and at least thirty days before such election. Subdivisions four and five of this section shall not apply to municipal corporations. Am"(l by chap. 672 of 1895. Former section 8 amended. 1. Within the limitations prescribed in its charter, or an express provision of law, every corporation as such, for the purpose of eflecting the objects of its in- corporation, has the capacity to take and grant property and to contract obliga- tions, and in so doing may deal precisely as an individual. Barry v. Merchants' Exchange Company, 1 Sandf. Ch. 280. 2. The capital stock of a corporation does not limit the amount of property it may own, or liabilities it may acquire. Id. 3. A mere authorization in the charter of a corporation to divide its profits among its stockholders, does not take away the right of retaining and accumulat- ing the profits as a surplus, if its prefers that course to dividing them. Id. 4. It will be presumed that a corporation acted within the scope of its lawful powers in taking or transferring real estate in any instance, although not au- thorized under all circumstances and for every purpose to do so. Farmers' Loan and Trust Company v. Curtis, 7 N. Y. 466. 5. A corporation authorized to take and hold land, may take the title thereto in fee, though itself created for a limited period. Nicoll v. The New York and Erie R. R. Co., 12 N. Y. 121. 6. The title to land held by a corporation will, in case of the dissolution of the latter, revert to the grantor, unless there be some provision in the charter of the 364 TJIE GENERAL CORrOEATIOM' LAW. corporation or statute to avert that consequence. Bingham v. Weiderwax, 1 N. Y. 513; 2 Kent's Com. 305; Angell & Ames on Corporations, 128, 129. But see Owen V. Smith, 31 Barb. 641. 7. The General Banking Act invests the stock or shareholders of banks formed under it, with the unconditional right of transferring their stock. This right cannot be interfered with by a by-law or by any act of the directors, except the same be authorized or provided for in the articles of association. The Bank of Attica V. The Manufacturers and Ti-aders' Bank, 20 N. Y. 501; Driscoll v. West Bradley C. & M. Co. et al., 59 id. 9t). 8. A corporation cannot be bound by the acts of its agents, when sue'i acts are without the power conferred upon it by its charter. Such contracts, boing ultra vires, cannot be made valid by subsequent ratification of the directors or trustees. McCullough V. Moss, 5 Denio, 5()7. (Overruling Moss v. Rossie Lead Mining Co., 5 Hill, 137; Boom v. City of Utica, 2 Barb. 104.) 9. Corporations may arbitrate, and a simple resolution to that effect at a meeting of the corporation is sufTieient. The form of submission is » matter of indifference, and need not be under seal. Brady v. Mayor of Brooklyn, 1 Barb. 584. (Citing the Mayor, etc., of New York v. Butler, 1 Barb. 325.) 10. Associations formed under the general banking act, are corporations by virtue of certain corporate attributes conferred on them by that act. Private bankers, however, possess none of the powers peculiar to corporations, but are only relieved from certain provisions of the Restraining Acts. Bank of Havana V. Magee, 20 N. Y. 355. (Citing Codd v. Eathbone, 19 N. Y. 37.) 11. This section does not establish any rule inconsistent with the presumption that a corporation, being an artificial person, is capable of making eveiy contract a natural person could make. (Feeny v. People's Fire Ins. Co., 2 Robt. 599.) 12. Corporations may enter into contracts in the same manner as individuals, and within the restrictions imposed by their charter or necessary implication, have ilie same powers with respect thereto. Brady v. Mayor of Brooklyn, 1 Barb. 584; Bank of Columbia v. Patterson, 7 Cranch, 209, 3 L. ed. 351; Mott v. Kicks, 1 Cow. 519, 13 Am. Dec. 550. 13. "Where a, corporation relies upon a grant of power from the legislature. for authority to do an act, it is as much restricted to the mode prescribed by the statute for its exercise, as to the thing allowed to be done." Wblies, J. Farm- ers' Loan and Trust Co. v. Carroll, 5 Barb. 649. 14. "Corporations created in one State may transact such business as their charters authorize, in another State, provided the transaction of such business is not contrary to the known policy of that State, and is not injurious to its pub- lic interests; and contracts growing out of such Ijansactions may be enforced, if not otherwise unlawful." Mumford v. American Life and Trust Co., 4 N". Y. 482. (Citing 13 Peters, 520, 10 L. ed. 274; 4 How. 16, 11 L. ed. 855.) 15. Associations formed under the act of 1828, ''to authonze the business of banking," are moneyed corporations, and as corporations are such to all intents and purposes. "Such associations are subject to all general laws relating to mon- eyed corporations, not in conflict with the one under which they were created." Gardiner, J. Talmage v. Pell, 7 N. Y. 340, 341. (Citing Gillet v. Moody, 3 id. 485.) § 12. Enlargement of limitations upon the amount of the property of non-stock corporations. — If any general or special law lieretofore THE GENERAL COEPOEATION LAW. 365 passed, or any certificate of incorporation, shall limit the amount of property a corporation other than a stock corporation may take or hold, such corporation may take and hold property of the value of three million dollars or less, or the yearly income derived from which shall be five hundred thousand dollars or less, notwithstanding any such limitations. In computing the value of such property, no in- crease in value arising otherwise than from improvements made there- on shall be taken into account. Am'd by chap. 400 of 1894. § 13. Acquisition of additional real property. — When any corpora- tion shall have sold or conveyed any part of its real property, the su- preme court may, notwithstanding any restriction of a general or special law, authorize it to purchase and hold from time to time other real property, upon satisfactory proof that the value of the property so purchased does not exceed the value of the property so sold and conveyed vpithin the three years next preceding the application. Former section 10, amended. § 14. Acquisition of property without the state. — Any domestic cor- poration transacting business in other states or foreign countries may acquire and dispose of such property as shall be requisite for such corporation in the convenient transaction of its business. Any do- mestic corporation establishing or maintaining a charitable, philan- thropic or educational institution within this state may also carry on its work and establish or maintain one or more branches of such in- stitution or an additional institution or additional institutions in any other state, the District of Columbia or in any of the territories or dependencies of the United States of America or in any foreign coun- try and for either of said purposes may take by devise or bequest, hold, purchase, mortgage, sell and convey or otherwise dispose of such real and personal property without this state as may be requisite therefor. But nothing in this section contained shall be construed as exempting from taxation property to any additional amount than is now allowed to such corporation under existing laws. Former section 11 amended. Am'd by clu 178 L. 1903. If such other state does not permit the corporation to acqnire or hold real prop- erty, it can not be inferred, but must be expressed in some affirmative way. Cow- ell V. Springs Co., 100 U. S. 55, 25 L. ed. 547. § 15. Certificate of authority of a foreign corporation.— No foreign stock corporation other than a moneyed corporation, shall do business 366 THE GBNEEAL COHPOEATIOJST LAW. in tM,s state without having first procured from the Secretary of State a certificate that it has complied with all the requirements of law, to authorize it to do business in this state, and that the business of the corporation to be carried on in this state is such as may be lawfully carried on by a corporation incorporated under the laws of this state for such or similar business, or, if more than one kind of business, by two or more corporations so incorporated for such kinds of business respectively. The Secretary of State shall deliver such certificate to every such corporation so complying with the require- ments of law. 'No such corporation now doing business in this state shall do business herein after December thirty-first, eighteen hundred and ninety-two, without having procured such certificate from the Secretary of State, but any lawful contract previously made by the corporation may be performed and enforced within the state subsequent to such date. No foreign stock corporation doing business in this state shall maintain any action in this state upon any contract made by it in this state unless prior to the making of such contract it shall have procured such certificate. This prohibition shall also apply to any as- signee of such foreign stock corporation and to any person claiming under such assignee or such foreign stock corporation or under either of them. JSTo certificate of authority shall be granted to any foreign corporation having the same name as an existing domestic corpo- ration, or a name so nearly resembling it as to be calculated to deceive. Amended by cli. 538 of 1901. This section was also amended by ch. 90 of 1901. § 16. Proof to be filed before granting certificate. — Before granting such certificate the secretary of state shall require every such foreign corporation to file in his ofiice a sworn copy in the English language of its charter or certificate of incorporation, and a statement under its corporate seal particularly setting forth the business or objects of the corporation which it is engaged in carrying on or ■which it pro- poses to carry on within the State and a place within the State which is to be its principal place of business, and designating in the manner prescribed in the code of civil procedure a person upon whom process against the corporation may be served within the State. The person so designated must have an office or place of business at the place where such corporation is to have its principal place of business within the State. Such designation shall continue in force until revoked by an instrument in writing designating in like manner some THE GEKEEAL CORPORATION LAW. 367 other person on whom process against the corporation may be served in this State. If the person so designated dies or removes from the place where the corporation has its principal place of business within the State, and the corporation does not vsdthin thirty days after such death or removal designate in likd manner another person upon whom process against it may be served within the State, the secretary of state may revoke the authority of the corporation to do business with- in the State and process against the corporation in an action upon any liability incurred within this State before such revocation, may, after such deatli or removal, and before another desig-nation is made, be served upon the secretary of state. At the time of such service the plaintiff shall pay to the secretary of state two dollars, to be included in his taxable costs and disbursements, and the secretary of state shall forthwith mail a copy of such notice to such corporation if its ad- dress, or the address of any officer thereof, is known to him. Am'd by chap. 672 of 1895. § 17. Acquisition of real property in this state by certain foreign corporations. — Any foreign corporation created under the laws of the United States, or of any state or territory thereof, and doing business in this state, may acquire such real property in this state as may bo necessary for its corporate purposes in the transaction of its business in this state, and convey the same by deed or otherwise in the same manner as a domestic corporation. Former section 12 amended. 1. The policy of a state may exclude foreign corporations from acting within its jurisdiction, and such policy may be clearly established by a reference to its gen- eral legislation. Demarest v. Flack, 128 N. Y., 205, 13 L. E. A. 854, 28 N. E.. 645. 2. Section 1780 of Code does not -violate section 2, art. 4, of Federal Constitu- tion. Robinson v. Ocenn S. N. Co., 20 N. Y. St. Eep., 741. As to right of foreign corporations to own real estate, see editorial note to Lan- caster V, Amsterdam Improv. Co. 24 L. R. A. 322. § 18. Acquisition by foreign corporation of real property in this state. — Any foreign corporation may purchase at a sale upon the fore- closure of any mortgage held by it, or, upon any judgment or decree for debts due it, or, upon any settlement to secure such debts, any real property within this state covered by or subject to such mortgage, judgment, decree or settlement, and may take by devise any real prop- erty situated within this state, and hold the same for not exceeding five years from the date of such purchase, or from the time when the a68 THE GENEEAL COEPOEATION LAW. right to the possession thereof vests in such devisee, and convey it by 'deed or otherwise in the same manner as a domestic corporation. Amd by chap. 136 of 1894. § 19. Prohibition of banking' powers. — No corporation except a corporation formed under or subject to the banking laws, shall by any implication or construction be deemed to possess the power of carry- ing on the business of discounting bills, notes or other evidences of debt, of receiving deposits, of buying gold or silver bullion or foreign coins, or buying and selling bills of exchange, or shall issue bills, notes or other evidences of debt for circulation as money. Former section 14. § 20. Qualification of members as voters. — Unless otherwise provid- ed in the certificate of incorporation, every stoclcholder of record of a stock corporation shall be entitled at every meeting of the corpora- tion to one vote for every share of stock standing in his name on the books of the corporation ; and at every meeting of a non-stock corpora- tion, every member, unless disqualified by the by-laws, shall be enti- tled to one vote. The stocklaolders of a stock corporation, by a by-law adopted by vote at any annual meeting, or at any special meeting duly called for such purpose, may prescribe a period, not exceeding forty days prior to meetings of the stockholders, during which no transfer of stock on the books of the corporation may be made. Except in cases of express trust, or in which other provision shall have been made by written agreement between the parties, the record holder of stock which shall be held by him as security, or which shall actually belong to another, upon demand therefor and payment of necessarv expenses thereof, shall issue to such pledger or to such actual owner of such stock, a proxy to vote thereon. The certificate of incorporation of any stock corporation may provide that at all elections of directors of such corporation, each stockholder shall be entitled to as many-votes as shall equal the number of his shares of stock multiplied by the num- ber of directors to be elected, and that he may cast all of such votes for a single director or may distribute them among the number to be voted for, or any two or more of them as he may see fit, which right, when exercised, shall be termed cumiilative voting. The stocldiold- ers of a corporation heretofore formed, who by the provisions of laws existing on April thirty, eighteen hundred and ninety-one, were enti- tled to the exercise of such right, may hereafter exercise such right according to the provision of this section. A stockholder may, by THE GENERAL OOKPOKATION LAW. 369 agreement in writing, transfer his stock to any person or persons for the purpose of vesting in him or them the right to vote thereon for a time not exceeding five years upon terms and conditions stated pur- suant to which such person or persons shall act ; every other stock- holder, upon his request therefor may, by a like agreement in writing also transfer his stock to the same person or persons and thereupon may participate in the terms, conditions and privileges of such agree- ment; the certificates of stock so transferred shall be surrendered and cancelled and certificates therefor issued to such transferee or trans- ferees in which it shall appear that they are issued pursuant to such agreement and in the entry of such transferee or transferees as own- ers of such stock in the proper books of said corporation that fact shall also be noted and thereupon he or they may vote upon the stock so transferred during the time in such agreement specified; a duplicate of every such agreement shall be filed in the office of the corporation where its principal business is transacted and be open to the inspec- tion of any stockholder, daily, during business hours. ~No member of a corporation shall sell his vote or issue a proxy to vote to any per- son for any sum of money or any thing of value. The books and papers containing the record of membership of the corporation shall be produced at any meeting of its members upon the request of any member. If the right to vote at any such meeting shall be challenged, the inspectors of election, or other persons presiding thereat, shall re- quire such books, if they can be had, to be produced as evidence of the right of the person challenged to vote at such meeting, and all persons who may appear from such books to be members of the corporation may vote at such meeting in person or by proxy, subject to the provi- sions of this chapter. Amended by ch. 355 of 1901. Part of section 54 of stock corporation law amended. 1. A sliareholder has a legal rigiit at a regular meeting of the shsreholders of a corporation to vote upon a measure even though he has a personal interest therein separate from the other shareholders. In such a, meeting each sharehold- er represents himself and his own interest solely and in no sense acts as a trustee or representative of others. Gamble v. Queens County W. Co., 12.3 N. Y. 91, 9 L. E. A. 527, 25 N. E. 201. 2. Trustees or guardians may vote on stoclc held for the benefit of others. 6 Weijd. 509. 3. Where on transfer-book, stock stands in name of a cashier as trustee, his successor cannot vote upon same, or give proxy; and votes on such stock by suc- cessor may properly be refused. In re Mohawk, etc., E. E. Co., 19 Wend. 135. 4. Ri^ht to vote at election must be determined by transfer-book; inspectors cannot look beyond it. In L. I. R. E. Co., 19 Wend. 30, 32 Am. Dec. 429. Banks, 24 370 THE GENICEAL COltPOEATION LAW. 5. Mxecutors and administrators lioldiiig stock as such are entitled to vote, al- though the stock appears on the corporate boolcs in the name of the person they represent. Matter of U. S. S. I. Ferry Co., 63 Barb. 571. 6. Electicu of directors by vote on stock owned by ccnpany will be set aside, and those having a majority of the outstanding stock declared elected. Ew parte Desdoity, 1 Wend. 08. 7. A company cannot so hold stock, that it may be voted upon by its officers or trustees. 5 Wend. 434; Ex parte Holmes, 5 Cow. 426. 8. By section 1, clmpter 321, Laws of 185 1, married woman may vote if stock- holder in any bank, insurance company (other than mutual insuiance company), manufaeturir-g company, or any institution incorporated under the laws of this State, by proxy or otherwise. § 21. Proxies. — Every member of a corporation, except a religious corporation, entitled to vote at any meeting thereof may so vote by proxy. No officer, clerk, teller or bookkeeper of a corporation formed un- der or subject to the banking law shall act as proxy for any stock- holder at any meeting of any such corporation. Every proxy must be executed in writing by the member himself, or by his duly authorized attorney. Is'o proxy hereafter made shall be valid after the expiration of eleven months from the date of its execution unless the member executing it shall have specified therein the length of time it is to continue in force, which shall be for some limited period. Every proxy shall be revocable at the pleasure of the person executing it; but a corporation having no capital stock may prescribe it its by-laws the persons who may act as proxies for members, and the length of time for which proxies may be executed. Part of section 54 of stock corporation law amended. 1. When the right of a stockholder to vote by proxy is not restricted by stat- ute, the right cannot be restricted in any way by the by-laws so that a by-law that the proxies must be in the hands of a stockholder to be voted upon, is void. Matter of Lighthall Mfg. Co., 47 Hun, 258. 2. An alien stockholder cannot vote by proxy where, by the terms of the char- ter, citizens only have the right to vote. 6 Wend. 509 ; 19 id. 635. 3. No director or trustee of a corporation can vote at a meeting of a board of directors or trustees by proxy. Craig Medicine Co. v. Merchants' Bank, 59 Hun, 561, 14 N. Y. Supp. 16. As to right to vote by proxy, see editorial note to People's Home Sav. Bank v. Superior Court of San Francisco, 29 L. R. A. 844. § 22. Challenges. — Every member of a corporation offering to vote at any election or meeting of the corporation shall, if required by an inspector of election or other officer presiding at such election or meeting, or by any other member present, take and subscribe the fol- THE GENERAL COKPOIJATION LAW. 371 lowing oath: "I do solemnly swear that in voting at this election I have not, either directly, indirectly or impliedly, received any prom- ise or any sum of money or anything of value to influence the giving of my vote or votes at this meeting or as a consideration therefor." Any person offering to vote as proxy for any other person shall pre- sent his proxy and, if so required, take and subscribe the following- oath: "I do solenmly swear that I have not, either directly, indi- rectly or impliedly, given any promise or any sum of money or any- thing of value to induce the giving of a prosy to me to vote at this election, or received any promise or any sum of money or anj'thing of value to influence tlv giving of my vote at this meeting, or as a consideration ther-efor." The inspectors or persons presiding at the election may administer such oath, and all such oaths and proxies shall be filed in the ofiice of the corporation. Amended by ch. 3.55 of 1901. Part of section 54 of stock corporation law amended. Election of directors will not be set aside because illegal votes were given, un- less they are challenged at election; nor although challenged, if after deducting the illegal votes cast, the persons declared elected have a clear majority of all the votes. In re Ins. Co., 19 Wend. 635. § 23. Effect of failure to elect directors. — If the directors shall not be elected on the day designated in the by-laws, or by-law, the corpo- ration shall not for that reason be dissolved ; but every director shall continue to hold his office and discharge his duties until his sticcessor has been elected. Former section 18. § 24. Mode of calling special election of directors. — If the election has not been held on the day so designated, the directors shall forth- with call a meeting of the members of the corporation for the purpose of electing directors, of which meeting notice shall be given in the same manner as of tlie annual meeting for the election of directors. If such meeting shall not be so called within one month, or, if held, shall result in a failure to elect directors, any member of the corpora- tion m.ay call a meeting for the purpose of electing directors by pub- lishing a notice of the time and place of holding such meeting at least once in each week for two su.ccessive weeks immediately preceding the election, in a newspaper published in the county where the election is to be held and in such other, manner as may be prescribed in the by- laws for the publication of notice of the annual meeting, and by serv- ing upon each meniber, either personally or by mail, directed to him 372 TTIE GENEKAL COEPOEATION LAW. at his last known post-office address, a copy of such notice at least two weeks before the meeting. From stock corporation, law, sections 53, 54 and 55. § 25. Mode of conducting special elections of directors. — Such meet- ing shall be held at the office of the corporation, or if it has none, at the place in this state where its principal business has been trans- acted, or if access to sxicli office or place is denied or can not be had, at some other place in the city, village or town where such office or place is or was located. At such meeting the members attending shall constitute a quorum. They may elect inspectors of election and directors and adopt by-laws providing for future annual meetings and election of directors, if the corporation has no such by-laws, and transact any other business which may be transacted at an annual meeting of the members of the corporation. Id. § 26. ftualifioation of voters and canvass of votes at special elections. — In the absence at such meeting of the books of the corporation showing who are members thereof, each person, before voting, shall present his sworn statement sotting forth that he is a member of the corporation ; and if a stock corporation, the number of shares of stock owned by him and standing in his name on the books of the corpora- tion, and, if known to him, the whole number of shares of stock of the corporation outstanding. On filing' such statement, he may vote as a member of the corporation ; and if a stock corporation, he may vote on the sliares of stock appearing in such statement to be owned by him and standing in his name on the books of the corporation. The inspectors shall return and file such statements, with a certifi- cate of the result of the election, verified by them, in the office of the clerk of the county in which such election is held, and the persons so elected shall be the directors of the corporation. Id. § 27. Powers of supreme court respecting elections.— The supreme court shall, upon the application of any person or corporation ag- grieved by or complainiiig of any election of any corporation, or any proceeding, act or matter touching the -same, upon notice thereof to the adverse party, or to those to be affected thereby, forthwith and in a summary way hear the affidavits, proofs and allegations of the THE GENEEAL CORPORATION LAW. 373 parties, or otherwise inquire into the matters or causes of complaint, and establish the election, or order a new election, or make such order and give such relief as right and justice may require. Former section 15. 1. hlx parte Desdi.ity, 1 Wend. 98. See note to section 200. Where votes were improperly rejected by inspectors, if such ^otes would have been cast for and elected a certain ticlcet, supreme court cannot declare such ticket elected but must order a new election. In re R. 11. Company, 19 Wend. 36, 32 Am. Dee. 429. 2. Court will not declare directors elected on application for such declaration, if they hold their oflices and no attempt is made to oust them. 32 Wend. 592. 3. To set aside an election it must appear affirmatively that so many illegal votes were cast for the successful ticket, as to give it a majority which it would not otherwise have. The mere circumstance that improper votes were cast will not vitiate an election. Ex parte Murphy, 7 Cow. 153. 4. Notice of application to directors claimed to be illegally elected is suflieient. Ex parte Holmes, 5 Cow. 428. 5. The court will not ecjoin the directors declared elected. M. v. R. C. Bank, 11 Paige, 119, 42 Am. Dec. 103. 6. This is the only method of review. Court of equity has no jurisdiction. Thompson v. Tammany Society, 17 Hun, 312-315. 7. Where an application is so made to settle contests growing out of a disputed election, the court may go behind the transfer books of the company, and deter- mine whether a transfer appearing thereon was a sale, or only a pledge of shares, and whether the pledgor or pledgee was entitled to vote thereon. In re James C. Strong V. Smith, 15 Hun, 222. 8. Notice to parties claiming to be elected, and to corporation, sufficient. It is not necessary that all stockholders have notice. 12 Abb. Pr. (N. S.) 395; Scho- harie Valley E,. K. case. § 28. Stay of proceedings in actions collusively brought. — If an ac- tion is brought against a corporation by the procurement or default of its directors, or any of them, to enforce any claim or obligation declared void by law, or to which the corporation has a valid defense, and such action is in the interest or for the benefit of any director, and the corporation has by its connivance made default in such action, or consented to the validity of such claim or obligation, any member of the corporation may apply to the supreme court, upon affidavit, setting forth the facts, for a stay of proceedings in such action; and on proof of the facts iu such further manner and upon such notice as the court may direct, it may stay such proceedings or set aside and vacate the same, or grant such other relief as may seem proper, and which will not injuriously affect an innocent party, who, without notice of such wrongdoing and for a valuable consideration, has ac- quired rights undei' such proceedings. Former section 16, amended. 374 THE GKNEBAL CORPOEATION LAW. § 29. duorum of directors and powers of majority. — The affairs of every corporation shall be managed by its board of directors, at least one of whom shall be a resident of this state. Unless otherwise pro- vided bj law a majority of the hoard of directoi-s of a corporation at a meeting duly assembled shall be necessary to constitute a quorum for the transaction of basinesti, and the act of a majority of the di- rectors present at a meeting at which a quorum is present shall be the act of the board of directors. Subject to the by-laws, if any adopted by the members; of a corporation, the directors may make necessary by-laws of the corporation. Amended by cb. 214 of 1901. 1. All powers conferred upon a corporation unless otherwise expressly pre- scribed must be exercised by its directors who are constituted by the law as the agency for that purpose, and the consent of, or ratification by, the stockholders is not necessary to the validity of a. corporate act unless expressly required by statute or the by-laws. Beveredge v. N. Y. E. R. 11., 112 N. Y. 1, 2 L. R. A. 648, 19 N. E. 4S9. 2. Contracts therefore can in general be made by the directors without the consent or ratification of tlie stoclvholders, and in the absence of fravid or collu- sion they are binding on the corporation. lb. 3. It is a general rule in regard to all corporations that a quorum must be present to transact business and unless a statute otherwise directs, this consista of a, majority of the whole board. Craig Medicine Co. v. Merchants' Bank, 59 Hun, 501, 14 N. Y. Supp. 16. 4. No director or trustee of a corjjoration can vote at a meeting of the board by proxy. lb. 5. A corporation may become bound by contracts express or implied, under the same circumstances as an individual. To make a corporation liable it is not necessary to sliow an express resolution of the board of directors. Cunningham V. M. S. & F. C. R. R. Co., 63 Hun, 439, 18 jST. Y. Supp. 600. 6. Under the corresponding provision of the Revised Statutes (1 R. S. 600, see. 1, sub-div. 5) the board of trustees of a manufacturing corporation could appoint an executive committee of its members and invest it with power to transact the business of the company during the interval between the meetings of its board of trustees. Such committee may delegate to one of its number merely ministerial acts, such as indorsing checks payable to the order of the corporation and receiv- ing the proceeds thereof. The Sheridan Electric Light Co. v. The Chatham Natl. Banli, 127 N. Y. 517, 28 N. E. 467. 7. A contract entered into by a trustee of a corporation for his services to be rendered to it at a meeting of the trustees where his presence was necessary to constitute a majority of the trustees and his assent necessary to secure corporate action upon the contract. Held, illegal in the absemce of approval by the stock- holders and no action can be maintained thereon as on contract. In such case an action upon a quantum meruit is the only means of recovery. Copeland v. John- son Mfg. Co., 47 Hun, 235. 8. The director of a corporation occupies a fiduciary position and so is within the rule prohibiting a trustee from dealing in his own behalf with the matters THE GENEEAL COKPOEATION LAW. 375 involved in the trust. The voidability of such dealings does not depend upon the bona fides of the transaction at all, but upon public policy and the hazard "of allowing aiiy sort of collision between the personal interests of the individual and his duties as trustee in his fiduciary character." Duncomb v. N. Y. H. & N. R. Co., 84 N. Y. 191. 9. The rule wliich invalidates all contracts made by a trustee or fiduciary in which he is personally interested at the election of the party he represents, reiter- ated in ease of a contract entered into by the directors of a corporation in its be- half, in which one or more of the directors had a private interest. In such case it is not necessary to show that the contract is unfair to the corporation, or that the influence of the director or directors having the private interest determined the action of the board. The disclosure of the relation is sufficient. Munson v. The S. G. & C. K. R. Co., 103 N. Y. 58, 8 N. E. 355. 10. But in the absence of bad faith an act of a director in violation of the rule will not be avoided without his consideration, if any, to the corporation being re- stored. Duncomb v. N. Y. H. & N. R. R. Co., supra. 11. When a director or other trustee of a corporation obtains possession of its property as collateral security for a debt honestly due or a liability justly in- curred, the above rule has no application, since the payment of the debt and the discharge of the liability is an essential prerequisite of the avoidance. It makes no difference whether the debt is present or precedent. The equities equally exist. The transaction in either case is valid, lb. Citing Smith v. Lansing, 22 N. Y. 520. 12. A dirctor may sell property to the eoi-poration of which he is director, so long as he does not, while acting in his own interest on the one side, also act on the other in his capacity of trustee or representative, so that his interest and duty may conflict. Gamble v. Queens County W. Co., 123 N. Y. 91, 9 L. R. A. 527, 25 N. E. 201. 13. In the absence of express authority so to do, the action of the board of di- rectors of a corporation in voting salaries to officers, is not binding upon the com- pany, when the directors in whose favor the salary is voted are present participat- ing in the proceeding. Kelsey v. Sargent, 40 Hun, 150; McNaughton v. Osgood et al., 41 Hun, 109. "14. Directors of a corporation have no authority to vote interest-bearing bonds to themselves as a gratuity, and such an act is void. Stockholders may hy- pothecate the property to pay debts or raise money for its corporate purposes, but can do nothing further. Virginia Tide Water Co. v. Mercantile Trust Co., 35 N. Y. State Rep. 141, 12 N. Y. Supp. 529. "15. A corporate mortgage is not invalidated by the fact that the resolution authorizing it was voted for by some of the persons to be secured where the in- debtedness is a valid one and the rate of interest thereon is reduced by the mort- gage." Rittenhouse v. Winch, 32 State Rep. 506, 11 N. Y. Supp. 122. § 30. Directors as trustees in case of dissolution. — Upon the dissolu- tion of any corporation, its directors, unless other persons shall be appointed by the legislature, or by some court of competent juris- diction, shall be the trustees of its ci-editors, stockholders or mem- bers, and shall have full power to settle its affairs, collect and pay outstanding- debts and divide among the persons entitled thereto the 376 THE GENEKAL COKPOBATION LA"W. money and other property remaining after payment of debts and neeessarv expenses. Such trustees shall have .iuthority to sue for and recover the debts and property of the corporation, by their name as such trustees, and shall jointly and severally be personally liable to its creditors, stock- holders or members, to the extent of its property and effects that shall come into their hands. Former sections ]9 and 20 consolidated. § 31. Forfeiture for non-user. — If any corporation, except a rail- road, turnpike, ])lank-road or bridge corpora iion, shall not organize and commence the transaction of its business or undertake the dis- charge of its corporate duties within two years from the date of its incorporation, its corporate powers shall cease. Former section 21. § 32. Extension of corporate existence. — Any domestic corporation at any time before the expiration thereof, may extend the term of its existence beyond the tiiae specified in its original certificate of in- corporation, or by law, or in any certificate of extension of corporate existence, by the consent of the stockholders owning two-thirds in amount of its capital stock, or if not a stock corporation, by the con- sent of two-thirds of its members, which consent shall be given either in writing or by vote at a special meeting of the stockholders called for that purpose, upon the same notice as that required for the an- nual meetings of the corporation; and a certificate under the seal of the corporation that such consent was given by the stockholders in writing, or that it was given by vote at a meeting as aforesaid, shall be subscribed and acknowledged by the president or a vice-president, and by the secretary or an assistant secretary of the corporation, and shall be filed in the oflice of the secretary of state, and shall by him be duly recorded and indexed in a book specially provided therefor, and a certified copy of such certificate, with a certificate of the secre- tary of state of such filing and record, or a duplicate original of such certificate, shall bo filed and similarly recorded and indexed in the office of the clerk of the county wherein the corporation has its prin- cipal place of business, and shall be noted in the margin of the record of the original certificates of such corporation, if any, in such offices, and thereafter the term of the existence of such corporation shall be extended as designated in such certificate. If the tei-m of existence of any domestic corporation shall have expired and it shall be made THE GENERAL COKPOBATION LAW. 377 satisfactorily to appear to the supreme court that such corporation- was legally orgamf-,(jd, pursuant to any law of this state, and that it shall have issued its bonds payable at a date beyond the date fixed in its charter or certificate of incorporation for the expiration of its corporate existence, and such bonds shall be unmatured and unpaid, the supreme court may, upon the application of any person interested and upon such notice to such other parties as the court may require, by order, authorize the filing and recording of a certificate reviving the existence of such corporation upon such conditions and with such limitations as such order shall specify, and extending such corporate existence for a term not exceediiig the term for which it was origi- nally incorporated. Dpon filing and recording such certificate in the same manner as certificates of extension of corporate existence duly issued before the expiration of the existence of a domestic corpora- tion is authorized by law to be filed and recorded, such corporate ex- istence shall be revived and extended in pursuance of the terms of such order, but such revival and extension shall not affect any liti- gation commenced after such expiration and pending at the time of such revival. If a corporation formed under or subject to the banking law, such certificate shall not be filed or recorded unless it shall have indorsed thereon the written approval of the superintendent of banks ; or, if an insurance corporation, unless it shall have indorsed thereon the written approval of the superintendent of insurance ; and, if a turn- pike or bridge corporation, it shall not be filed unless it shall have indorsed thereon or annexed thereto a certified copy of a resolution of the board of supervisors of each county in which such turnpike or bridge is located, approving of and authorizing such extension. If all the stock of a corporation other than a corporation formed under or subject to the banking law, or an insurance corporation, or a turn- pike, plank-road or bridge corporation shall be lawfully owned by another stock coi*poration emitled by law to take a surrender and merger thereof, the corporate existence of such corporation whose stock is so owned may be extended at any time for the term of the corporate existence of the possessor corporation, by filing in the office or offices in which the original certificate or certificates of incorpora- tion of the first mentioned corporation were filed a certificate of such extension executed by its president and secretary and by such corpo- ration owning all the shares of its capital stock. Every corporation extending its corporate existence under this chapter or under any general law of the state shall thereafter be subject to the provisions of 378 THE GKNEEAL COEPOEATIOlsr LAW. this chapter and of such general law, notwithstanding any special provisions in its charter, and shall thereafter be deemed to be incor- porated Tinder the general laws of the state relating to the incorpora- tion of a corporation, for the purpose of carrying on the business in which it is engaged, and shall be subject to the provisions of such law. Amended by eh. 355 of 1901. § 33. Conflicting corporate laws. — If in any corporate law there is or shall be any provision in conflict with any provisions of this chap- ter or of tlie stock corporation law, the provisions so conflicting shall prevail, and the provision of this chapter or of the stock corporation law with which it conflicts shall not apply in such, a case. If in any such law there is or shall be a provision relating to a raatter embraced in this chapter or in tJie stock corporation law, but not in conflict with it, such provision in such other law sliall be deemed to be in addition to the provision in this chapter or in the stock corporation law relating to the same subject-matter, and both provisions shall, in such case, be applicable. New. § 34. Laws repealed. — Of the laws enumerated in the schedule hereto annexed, that portion specified in the last column is repealed. Such repeal shall not revive a law repealed by any law hereby re- pealed, b\it shall include all laws amendatory of the laws hereby repealed. Former section 23. People V. O'Brien, 111 N. Y., 1, 2 L. R. A. 255, 7 Am. St. Rep. 684, 18 N. E. 692. § 35. Saving clause.— The repeal of a law or any part of it speci- fied in the amiexed schedule shall not affect or impair any act done, or right accruing, accrued or acquired, or liability, penalty, forfeiture or punishment incurred prior to May 1, 1891, under or by virtue of any law so repealed, but the same m.ay be asserted, enforced, prose- cuted or inflicted, as fully and to the same extent as if such law had not been repealed. All actions and proceedings, civil or criminal, commenced iinder or by virtue of the laws so repealed, and pending on April 30, 1891, may be prosecuted and defended to final effect in the same manner as they might under the laws then existing, unless it shall be otherwise specially provided by law. Former section 24. THE GENI'JKAL COEPOEATIOlSr LAW. 379 § 36. Construction. — I'he provisions of this chapter, and of the stock corporation law, the railroad law, the transportation corpora- tions law, and ihe business corporations law, so far as they are sub- stantially the same as those of laws existing on April 30, 1891, shall be constnied as a conrimiation of such laAvs modified or amended ac- cording to the language employed in this chapter, or in the stock corporation law, the railroad law, the transportation corporations law, or the business corporations law, and not as new enactments. Eeferences in laws not repealed to provisions of laws incorporated into the general laws hereinbefore enumerated and repealed, shall be construed as applying to the provisions so ineoj'^orated. ISlothing in tliis chapter or in the other general laws hereinbefore specified shall be constr^ied to amend or repeal any provision of the Criminal or Penal Code or to impair any right or liability which any existing corporation, its officers, directors, stockholders or cred- itors may have or be subject to or which any such corporation, other than a railroad corporation, had or was subject to on April 30, 1891, by virtiie of any special act of the legislature creating such corpora- tion or creating or defining any such right or liability, unless such special act is repealed by this chapter. Former section 25 amended. § 37. Law revived. — Chapter three hundred of the laws of eighteen hundred and fifty-five, entitled "An act to incorporate the Baptist Historical Society of the city of New York," which was inadvertently repealed by the transportation cx)rporations law, is revived and re- enacted, and shall be of the same force and effect as if it had not been repealed. § 38. When notice or lapse of time unnecessary. — Whenever under the provisions of any of the corporate laws a corporation is author- ized to take any action after notice to its members or after the lapse of a prescribed period of time, such action may be taken without notice and without the lapse of any period of time, if such action be authorijced or approved, and such requirements be waived in writing by every member of such corporation, or by his attorney thereunto authorized. Added by ch. 672 of 1895. § 39. As to acts of directors. — Whenever, under the provisions of any of the corporate laws, a corporation is authorized to take any ac- tion by the agreement or action of its directors, managers or trustees, 380 TKE GENEBAL COEPOEATION LAW. such agreement or action may be taken by sucli directors, regularly convened as a board, and acting by a majority of a quorum, except when otherwise expressly required by law or the by-laws of the eorpo- ation and any such agreement shall be executed in behalf of the cor- poration sy such officers as shall be designated by the board of direct- ors, managers or trustees. At any meeting at which every member of the board of directors shall be present, though held without notice, any business may be transacted which might have been transacted if the meeting had been duly called. Except when otherwise required by law or the by-laws of the corporation, special meetings of the mem- bers of the corporation may be called in the same manner as the annual meeting thereof. Amended by cli. 355 of 1901. § 40. Alteration and repeal of charter. — The charter of every corpo- ration shall be subject to alteration, suspension and repeal, in the dis- ■iretion of the legislature. Added by ch. 672 of 1895. S( DHEBUI.E OF Laws IIei'ealed. REVISED STATUTES, Part I , chapter 18. All. Laws of Chapter SECTIONS 3811. . . 67... 47.... All 1815.. . All. 1815. . . 202... 58... 223 . . . 67... All 1816. . . All 1817. .. All 1818... All. 1819... 102... All. 1821. .. 14... All. 1822... 213... All. 1836... 284... All. 1836... 31 G. . . All. 1838... 160... All. 1838... 161... All. 1838. .. 2G2... . All. 1839. .. 218. . . All 1842 165... 155. . . All 1846... All. 1846..., 215... 17. 18. THE GENERAL CORPOEATION LAW. 381 SCHEDUI -E OF Laws Eepealed — (Continued.) REVISED STATUTES. Parti , chapter 18. All. Laws of Chapter SECTI05 ]84'7 100. . , 3 4. 184Y 210. . , All. 1847 222... All. 1847 270... All. 1847 272. . . All. 1847 287. . . All. 1847 398 All 1847 404. . . All. ;] 847 405... All. 37... 40... 45... All. 1848 All 1848 All. 1848 259. . . All. 1848 265... All. 1 , furnish such statements within thirty days after the time above pro- vided, the company so neglecting shall forfeit to the people of this state for each statement so omitted to be furnished, the sum of two hundred and fifty dollars, and it shall be the duty of the attorney-gen- eral to prosecute for such penalty upon information which shall be furnished him by the comptroller. Upon such statement being fur- nished and the costs of the suit being paid, the comptroller, if he shall be satisfied that such omission was not willful, may, in his discretion, discontinue such suit. THE TAX LAWS illiLATI-NCi TO J\AXKS^ ETC. 403 § 72. Collection of taxes assessed against stocks in banks and bank- ing associations. — Every bank or banking association shal^ retain any dividend until the delivery to the collector of the tax-roll and warrant of the current year, and within ten days after such delivery, shall pay to such collector so much of such dividend as may be necessary to pay any unpaid taxes assessed on the stock upon which such dividend is declared. In case the o^vner of such stock resides in a place other than w^here the bank or banking association is located, the same power may be exercised in collecting the tax so assessed as is given in case a person has renioved from a tax district in which the assessment was made. The tax so assessed shall be and remain a lien on the shares of stock against Avhieh it is assessed till the payment of such tax, and if the stock is transferred it shall be subject to such lien. The col- lector or county treasurer may foreclose such lien in any court of record, and collect from the avails of the sale of the stock the tax assessed against the same. In addition thereto, the same remedy may be had for the collection of the tax on such shares as is now provided by law for enforcing payment of personal tax against residents. § 180. Organization tax. — Every stock corporation incorporated under any law of the state shall pay to the state treasurer a tax of one-twentieth of one per centum upon the amount of capital stock Avhioh the corporation is authorized to have, and a like tax upon any subsequent increase. Provided that in no case shall such tax be less than one dollar. Such tax shall be due and payable upon the incor- poration of such corporation or upon the increase of its capital stock. Except in the case of a railroad corporation neither the secretary of state nor county clerk shall file any certificate of incorporation or arti- cle of association or give any certificate to any such corporation or association until he is furnished a receipt for such tax from the state treasurer, and no stock corporation shall have or exercise any corporate franchise or powers, or carry on business in this state until such tax shall have been paid. In case of the consolidation of existing corporations into a corporation, such new corporation shall be required to pay the tax hereinbefore provided for only upon the amount of its capital stock in excess of the aggregate amount of capital stock of said corporations. This section shall not apply to state and national banks or to building, mutual loan, accumulating fund and co-operative asso- ciations. A railroad corporation need not pay such tax at the time of filing its certificate of incorporation, but shall pay the same before the railroad com-missioners shall grant a certificate, as required by the railroad law authorizing the coijistruction of the road as proposed in 40-1: THE TAX LAWS JIELATIHG TO BANKS^ ETC. its articles of association, and sucli certificate shall not be granted by the hoard of railroad eominissionors until it is furnished with a re- ceipt for such tax from the state treasurer. Amended by ch. 448 or 1901. § 181. License tax on foreign corporations. — Every foreign corpora- tion, except banking' corporations, fire, marine, casualty and life in- surance companies, co-operative fraternal insurance companies and building and loan associations, authorized to do business under the general corporation law, shall pay to the state treasurer, for the use of the state, a license fee of one-eighth of one per centum for the privilege of exercising its corporate franchises or carrying on its busi- ness in such corporate or organized capacity in this state, to be com- puted upon the basis of the capital stock employed by it within this state, during the first year of carrying on its business in this state; and if any year thereafter any such corporation shall employ an in- creased amount of its capital stock within this state, the same license fee shall be due and payable upon any such increase. The tax im- posed by this section on a corporation not heretofore subject to its provisions shall be paid on the first day of December, nineteen hun- dred and one ; to be computed upon the basis of the amount of capital stock employed by it within the state during the year preceding such date, unless on such date such corporation shall not have employed capital within the state for a period of thirteen months in which case it shall be paid within the time othei-wise provided by this section. IsTo action shall be inaintained or recovery had in any of the courts in this state by such foreign corporation without obtaining a receipt for the license fee hereby imposed within thirteen months after be- ginning such business within the state, or if at the time this section takes efiect such a corporation has been engaged in business within this state for more than twelve months, without obtaining such re- ceipt within thirty days after such tax is due. Amended by ch. 558 of 1901. § 182. Franchise tax on corporations.— Every corporation, joint stock company or association incorporated, organized or formed under, by or pursuant to law in this state, shall pay to the state treas- urer anniially an annual tax to be computed upon the basis of the amount of its capital stock employed within this state, and upon each dollar of such amount, at the rate of one-quarter of a mill for each one per centum of dividends made and declared upon its capital stock THE TAX I>AWS EELATING TO BANKS^ ETC. 405 during each year, ending with the thirty-first day of October, if the dividends amount to six or more tiian six per centum upon the par value of such capital stock. If such dvidend or dividends amount to less than six per centum on the par value of the capital stock, the tax shall be at the rate of one and one-half mills upon such portion of the capital stock at par as the amount of capital employed within this state bears to the entire capital of the corporation. If no divi- dend is made or declared, the tax shall be at the rate of one and one-half mills upon each dollar of the appraised capital em- ployed within this state. If such corporation, joint stock company or association shall have more than one kind of capital stock, and upon one of such kinds of stock a dividend or dividends amounting to six or more than six per centmu upon the par value thereof, has been made or declared, and upon the other no dividend has been made or declared, or the dividend or dividends made or declared thereon amoimt to less than six per centum upon the par value thereof, then the tax shall be at the rate of one-qtiarter of a mill for each one per centum of dividciids made or declared upon the capital stock upon the par value of "which the dividend or dividends made or declared amount to six or more than six per centum, and in addition thereto, r. tax shall be charged at the rate of one and one-half mills upon every dollar of the valuation made in accordance with the provi ions of thin act of the capital stock upon which no divideud was made or declared, or upon the par value of which the dividend or dividends made or de- clared, did not amount to six per centum; provided, however, that a street surface railroad corporation or a steam railroad corporation, OAvning in a city a street surface railroad not operated by steam, in cases Avhere the street surface roads of said owning corporations are operated by another street surface railroad corporation under a lease or otherwise, in so far as the dividends made and declared upon the cap- ital stock of the said owning corporations shall be paid from the gross earnings of ihe said operating corporation in the form of rent or otherwise shall only be required under this section to pay a tax of three per centum, upon the dividends declared and paid from the jnoneys received in the form of rent or otherwise from the op- erating company in excess of four per centum upon the amount of its capital stock, provided, however, that nothing in this sec- tion shall relieve the said operating company of any of the lia- bilities imposed by section one himdred and eighty-five of this chapter. Every corporation, joint stock company or association or- ganized, incorporated, or formed under the laws of any other state or 406 T£1E TAX LAWS BEXATISG TO BANKS, ETC. country shall pay a like tax for the privilege of exercising its corpo- rate franchises or carrying on its business in such corporate or organ- ized capacity in this stat(;, to he computed upon the basis of the capital employed by it within this state. Amended by ch. 558 of 1901. See also elaborate editorial note to State B'd of Equalization c. People em rel. Goggin, 58 L. R. A. 513, presenting the authorities on Taxation of Corporate Franchises in the United States. § 183. Certain corporations exempt from tax on capital stock. — Banks, savings banks, institutions for savings, title guaranty, insur- ance or surety corporations, every trust company incorporated, organ- ized or formed, under, by or pursuant to a law of this state, and any company authorized to do a trust company business solely or in con- nection with any other business, under a general or special law of this state, laundry corporations, manufacturing corporations to the extent only of the capital actually employed in this state in manufacturing, and in the sale of the product of such manufacturing, mining corpora- tions, wholly engaged in mining ores within this state, agricultural and horticultural societies or associations, and corporations, joint stock compunies or associations operating elevated railroads or sur- face railroads not operated by steam, or formed for supplying water or gas for electric or steam heating, lighting or power purposes, and liable to a tax under sections one hundred and eighty-five and one hundred and eighty-six of this chapter, shall be exempt from the pay- ment of the taxes prescribed, by section one hundred and eighty-two of this chapter. Eut such a laundrying, manufacturing or mining corporation shall not be exempted from the payment of such tax, un- less at least forty per centum of the capital stock oi such corporation is invested in property in this state and used by it iu. its laundrying manufacturing or mining business in *"his state. Amended by ch. 558 of 1901. § 187a. Franchise tax on trust companies. — Every first company incorporated, organized or formed under, by or pursuant to a law of this state, and any company authorized to do a trust company's busi- ness solely or in coimection with any other business, under a general or special law of this state, sliall pay to the state annually for the privilege of exercising its corporate franchise or carrying on its busi- ness in such corporate or organized capacity, an annual tax which shall be equal to one per centum on the amount of its capital stock, surplus, and undivided profits. Any corporation taxed under this THi; TAX LAWS EEJ.ATTITG TO BANKS, ETC. 407 seetion for the year endiDg June thirtieth, nineteen hundred and one, shall be credited by the comptroller with one-third of the amount of taxes paid by it into the state treasury under the provisions of seetion one hundred and eighty-two of the tax law for the year ending Octo- ber thirty-first, nineteen hundred. Added by ch. 132 of 1901, and amended by ch. 535 of 1901. § 187b. Franchise tax on savings banks. — Every savings banlc in- corporated, organized or formed tmder, by or pursuant to a law of this state, shall pay to the state annually for the privilege of exercis- ing its corporate franchise or can-ying on its business in stioh corpo- rate or organized capacity, an annual tax which shall be equal to one per centum on the par vakie of its surplus, and undivided earnings. Added by ch. 117 of 1901. § 188. Tax upon foreign bankers.— Every foreign banker doing business in this state, shall annually pay to the treasurer a tax of five per centum on the amount of interest or compensation of any kind earned and collected by him on money loaned, used or employed in this state by such banker. The term, doing a banking business, as used in this section, means doing such business as a corporation may be created to do under article two of the banking law, or doing any business which a corporation is authorized by such article to do. The term, foreign banker doing a banking biisiness in this state, as used in this section, includes : 1. Every foreign corporation doing a banking business in this state, except a national bank. 2. Every unincorporated company, partnership or association of two or more individuals, organized under or pursuant to the laws of another state or country, doing a banking business in this state. 3. Every other unincorporated company, partnership or associa- tion, of two or more individuals, doing a banking business in this state, if the members thereof, ovniing more than a majority interest therein, or entitled to more than one-half of the profits thereof, or who would, if it were dissolved, be entitled to more than one-half of the net assets thereof, are not residents of this state. 4. Every nonresident of this state, doing a banking business in this state, in his own name and right only. Am'd by Chap. 500 of 1900. § 189. Reports of corporations. — Corporations liable to pay a tax under this article shall report as follows : 408 Tin; TAX LAWS BELATIJSTG TO BANKS^ ETC. 1. Corporations paying franchise tax. — Every corporation, associa- tion or joint-stock company liable to pay a tax under section one hun- dred and eighty-two of this chapter shall, on or before IsTovember fif- teenth in each year^ make a written report to the comptroller of its condition at the close of its business on October thirty-first preceding. statina; the amouiit of its authorized capital stock, the amount of stock paid in, the date and rate per centum of each dividend declared by it during the year ending with such day, the entire amount of the cap- ital of such corporation, and the capital employed by it in this stste during such year. 2. Transportation and transmission corporations. — Every transpor- tation or transmission corporation, joint-stock company or association liable to pay an additional tax under section one hundred and eighty- four of thh chapter, shall also, on or before August first in each year, make a written report to the comptroller of its condition at. the close of its business on June thirtieth preceding, stating the amount of its gross earnings from all sources and the amount of its gross earnings from its transportation or transmission business originating and ter- minating within this state. 3. Elevated and surface railroad corporations. — Every corporation, joint-stock company or association liable to pay a tax under section one hundred and eighty-five of this chapter, shall, on or before August first of each year, make a wi'itten report to the comptroller of its con- dition at the close of its biisiness on June thirtieth preceding, stating the amount of its gross earnings from business done in this state, the amount of dividends of every nature declared or paid during the year ending June thirtieth, the authorized capital of the company and the amount of capital stock actually issued and outstanditig-. 4. Water-works, gas, electric, steam heating, lighting and power cor- porations. — Every corporation, joint-stock company or association liable to pay a tax under section one hundred and eighty-six of this chapter, shall, on or before December first of each year, make a writ- ten report to the comptroller of its condition at the close of its business on October thirty-first preceding, stating the amount of its gross earn- ings from business done in this state, the amount of dividends of every nature declared or paid during the year ending with October thirty-first, the authorized capital of the company and the amount of capital stock actually issued and outstanding. THE TAX LAWS REI.ATINfi TO BANKS, ETC. 40!) 5. Insurance corporations. — Every insurance corporation liable to pay a tax iinder section one hundred and eighty-seven of this chapter, shall, on or before March first in each year, make a written report to the comptroller of its condition at the close of its business on Decem- ber thirty-first preceding, stating the entire amoimt of premiums re- ceived on business done thereby in this state during the year ending Avith such day, whether the premiums were in money or in the form of notes, credits or other substitutes for money. Amended by eh. 118 of 1901. 6. Foreign bankers. — Every foreign banker liable to pay a tax un- der section one hiindred and eighty-eight of this chapter shall, on or before February first in each year, make a written report to the comp- troller of the condition of his business on December thirty-first pre- ceding, stating the amount of tax for which he is liable under this ar- ticle, and giving in detail the facts required by the last preceding sec- tion for the purpose of ascertaining and computing the same. 7. Trust companies. — Every company liable to pay a tax under sec- tion one hundred and eighty-seven-a of this chapter shall, on or before August first in each year, make a written report to the comptroller of its condition at the close of business oa June thirtieth preceding, separately stating the amount of its capital stock, the amount of its surplusi, and the amount of its undivided profits, and containing such other data, information or matter as the comptroller may require. Added by ch. 132 of 1901. This subdivision was inadvertently repealed by chap. 535 of 1901, and revived and re-enacted by ch. 172 of 1902, and deemed to have continued in force since the date it originally took eflect. 8. Savings banks. — Every savings bank liable to pay a tax under section one hundred and eighty-seven-b of this chapter, shall on or be- fore August first in each year make a written report to the comptrol- ler of its condition, at the close of bxisiness on June thirtieth preced- ing, stating the par value of its surplus, and undivided earnings and containing such other data, information or matter as the comptroller may require. Added by ch. 117 of 1901. Amended by ch. 132 of 1901. § 190. Value of stock to be appraised. — In case no dividend has been declared, by a corporation, association or joint-slod: company liable to pay a tax under section one hundred and eighty-two of this chapter, the treasurer or secretary of the company, shall, under oath. 4:10 THE TAX LAWS BEI-ATI]!fG TO BANKS, ETC. betAveen the fir&t and fifteenth day of IN'ovember in each year, estimate and appraise the capital stock of such company upon which no divi- dend has been declared, or upon which the dividend amounted to less than six per centum at its actual value in cash, not less, however, than the average price which said stock sold for during said year, and shall forward the same to the comptroller with the report provided for in the last section. If the comptroller is not satisfied Avith the valua- tion so made and returned he is authorized and empowered to make a valuation thereof, and settle an account upon the valuation so made by him, and the taxes, penalties and interest to be paid the state. § 191. Further requirements as to report of corporations. — Every re- port required by this article shall have annexed thereto, the afiidavit of the president, vice-president, secretary or treasurer of the corpora- tion, association or joint-stock company or of the person or one of the persons, or the members of the partnership making the same, to the effect that the statements contained therein are true. Such reports shall contain any other data, information or matter which the comp- troller may require to be included therein, and he may prescribe the form in which such reports shall be made and the fonn of oath there- to. When so prescribed such form shall be used in making the re- port. The comptroller may require at any time a further or supple- mental report under this article, which shall contain information and data upon such matters as the comptroller may specify. § 192, Powers of comptroller to examine into aff lirs of corporation. — In case any report required by any of the preceding sections of this article shall be unsatisfactory to the comptroller, or if any such report is not made as herein required, the comptroller is authorized to make an estimate of the dividends paid by such corporation and the value of the capital stock employed by it, from any such report or from any other data, and to order and state an account according to the estimate and value so made by him for the taxes, percentage and interest due the state from such corporation, association, joint-stock company, per- son or partnership. The comptroller shall also have power to exam- ine or cause to be examined in case of a failure to report or in case the report is unsatisfactory to him, the books and records of any such corporation, joint-stock association, company, foreign banker, person or partnership, and may hear testimony and take proofs material for his infoi-mation, either personally or he may appoint a commissioner by a written appointment under his hand and ofiicial seal for that pur- THE TA.X /-AW.S KELAriNG TO BAKKS^ ETC. 411 pose. Every commissioner so appointed shall be anthorized to make such examination and take such testimony and hear such proofs and report the proofs and testimony so taken and the result of his exami- nation so made and the facts found by him to the comptroller. The oomptroUer shall, therefrom, or from any other data which shall be satisfactory to him, order and state an account for the tax due the state, together with the expenses of such examination and the taking of such testimony and proofs. Such expenses shall be fixed and ad- justed by the comptroller. § 193. Notice of statement of tax ; interest. — Upon auditing and stating every accoxmt for taxes or other charges under this article, the comptroller shall forthwith send notice thereof in writing to the per- son, partnership, company, association or corporation against whom the same is made, which notice may be mailed to the post-ofEce ad- dress of such person, partnership, association, company or corpora- tion. All accounts so audited and stated shall bear interest upon the total amount found due thereon to the state, for taxes, percentage, in- terest and other charges, from the expiration of thirty days after sending such notice until payment thereof shall be made. § 194. Payment of tax and penalty for failure. — A tax imposed by sections one hundred and eighty-two or one hundred and eighty-six of this chapter, shall be due and payable into the state treasury on or be- fore the fifteenth day of January in each year. A tax imposed by section one hundred and eighty-four of this chapter on a transporta- tion or transmission corporation, or by section one hundred and eighty-five, on elevated railroads or surface railroads not operated by steam, shall be due and payable into the state treasury on or before the first day of August in each year. A tax imposed by section one himdred and eighty-seven of this chapter on an insurance corporation shall be due and payable into the state treasury on or before the first day of June in each year. A tax imposed by section one hundred and eighty-seven-a or one hundred and eighty-seven-b shall be due and payable into the state treasury on or before the first day of September in each year. A tax imposed by section one hundred and eighty-eight of this chapter on a foreign banker shall be due and payable into the state treasury on or before Febriiary first in each year. If such tax in any case is not paid within thirty days after the same becomes due, jr if the report of any such corporation is not made within the time required by this article, the corporation, association, joint-stock com- 412 THE TAX LAWS DELATING TO BAKICS^ ETC. pany, person or partnership, liable to pay the tax, shall pay into tlie state treasury in addition to the amount of such tax, a sum equal to iive per centum thereof, and one per centum additional for each month the tax remains unpaid, which sum shall be added to the tax and paid or collected therewith. Every corporation, association,. joint stock company, person or partnership failing to make the annual report required by this article, or failing to make any special report required by the comptroller, within any reasonable time to be speci- fied by him, shall forfeit to the people of the state the sum of one hundred dollars for every such failure, and the additional sum of ten dollars for each day that such failure continvies. Such tax shall be a lien upon and bind all the real and personal property of the corpora- tion, joint-stock companjr or association liable to pay the same front the time when it is payable until the same is paid in full. Amended by ch. 558 of 1901. This section was also amended by chs. 118 and 132 of 1901. § 195. Revision and readjustment of accounts by comptroller. — The comptroller may, at any time within one year from the time any such account shall have been audited and stated, and notice thereof sent to the person, partnership, company, association or corporation against whom it is stated, revise and readjust such account upon application therefor by the party against whom the account is stated or by the at- torney-general, and if it shall be made to appear upon any such appli- cation by evidence submitted to him or otherwise, that any such ac- count included taxes or other charges which could not have been law- fully demanded, or that payment has been legally made or exacted of any such account, he shall resettle the same according to law and the facts, and charge or credit, as the case may require, the difference, if any, resulting from such revision or resettlement upon the accounts for taxes of or against any such person, partnership, company, asso- ciation or corporation. Such credit, whether allowed before or after the passage of this act, may be, by the person, partnership, company,, association or corporation in whose favor it is allowed, assigned to a person, partnership, com.pany, association or corporation liable to pay taxes under article nine of this act and the assigTvee of the whole or any part of such credit on filing with the comptrolloi> such assignment shall thereupon be entitled to credit on the books of the comptroller for the amount thereof on the current aceo^mt for taxes of such as- signee in the same way and with the same effect as though the credit had oi'iginally been allowed in favor of such assignee. The comp- THE TAX LAWS REF-ATING TO BANKS, ETO. 413 troller sliall forthwith send written notice of his determination upon such application to the applicant, and to the attorney-general, which notice may be sent by mail to his post-office address. Am'd by oh. 642 of 1903. § 196. Eeview of determination of comptroller by certiorari. — The determination of the comptroller upon any application made to him by any person, partnership, company, association or corporation for a revision and resettlement of any account, as prescribed in this arti- cle, may be reviewed both upoii the law and the facts, upon certiorari by the supreme court at the instance of any person, partnership, com- pany, association or corporation affected thereby, and in the name and -on behalf of the people of the state. For the purpose of such review the comptroller shall return, on such certiorari, the accounts and all the evidence before him on such application, and all the papers and proofs upon the original statement of such account and all proceed- ings thereon. If the original or resettled accounts shall be found erroneous or illegal, either in point of law or of fact, by the su.prerae <;ourt, upon any such review, the accounts reviewed shall then be cor- rected and restated, and from any detennination of the supreme court upon any such review, an appeal to the court of appeals may be taken by either party. § 197. Regulations as to such writ of certiorari. — ISTo certiorari to review any audit and statement of an account or any determination by the comptroller under this article, shall be granted unless notice of application therefor is made within thirty d.ays after the service of the notice of such determination. Eight days' notice shall be given to the comptroller of the application for such writ. The full amount of the taxes, percentage, interest and other charges, audited and stat- ed in such account must be deposited with the state treasurer before making the application and an undertaking iiled with the comptroller in such amount and with such sureties as a justice of the supreme court shall approve to the effect that if such writ is dismissed or the determination of the comptroller affirmed, the applicant for the writ will pay all costs and charges which may accrue against him, or if in the prosecution of the writ, including costs of all appeals. § 198, Warrant for the collection of taxes. — ^After the expiration of thirty days from the sending by the comptroller of a notice of a set- tlement of an account as provided in this article, unless the amount of 414 THE TAX I.AWS EELATIXG TO BANKS^ ETC. sneh account shall have been paid or deposited with the stale treas- urer, if an appeal or other proceedings have been taken to re\iew the same, and the undertaking given as provided in this article, the comp- troller may issue a warrant under his hand and official seal, directed to the slieriff of any county of the state, commanding him to levy up- on and sell the real and personal property of the person, partnership, company, association or corporation against which such account is stated, found within his county for the payment of the amount thereof with interest thereon and costs of executing the warrant, and to return such warrant to the comptroller and pay to the state treasiirer the money collected by virtue thereof, by a time to be therein specified, not less than sixty days from the date of the warrant. Such warranv shall be a lien upon and shall bind the real and personal property of the person, partnership, company, association or corporation against which it is issued, from ihe time an actual le%'y shall be made by vir- tue thereof. The sherilf to whom any such warrant shall be directed shall proceed upon the same in all respects, with like effect, and in the same manner as prescribed by law in respect to executions issued against property upon judgments of a court of record, and shall be entitled to the same fees for his services in executing the warrant, to be collected in the same manner. § 199. Information of delinquents. — It shall bo the duty of any per- son having knowledge of the evasion of taxation under this article by any corporation, association, joint-stock company, partnershijD or per- son liable to taxation thereunder, for any omission on their part to make the reports required by this article, to make a written report thereof to the comptroller of the state, with such information as may be in his possession as may lead to the recovery of any taxes due the state therefrom. If, in his opinion, the interests of tha state require it, the comptroller may employ such person to assist in the collection and preparation of evidence and in the prosecution and trial of ac- tions for such taxes, and so much of the same, not exceeding ten per centum thereof, as may be collected from any such delinquent corpo- ration, association, company, partnership or person, by reason of such report and such services, as shall have been agreed upon between such person and the comptroller or attorney-general as a compensation therefor, shall be paid to such person, and nothing shall be paid to such person for such report or services unless there shall be a recovery of taxes by reason thereof. TIFE TAX LAWS BKLATING TO BANKS, ETC. 415 § 200. Action for recovery of taxes; forfeiture of charter of delin- quent corporation. — An action may be brought by the attorney-gen- eral, at the instance of the comptroller, in the name of the state, to re- cover the amount of any account audited and stated by the comptrol- ler under the provisions of this article. If any such account shall re- main unpaid at the expiration of one year after notice of the state- ment thereof has been sent as required by this article, and the comp- troller is satisfied that the failure to pay the same is intentional, he shall so report to the attorney- general, who shall immediately bring an action, in the name of the people of the state, for the forfeiture of the franchise of any corporation, joint-stock company or association failing to make such payment, and if it is found that such failure was intentionnl, judgment shall be rendered in such action for the for- feiture of its franchise and for its dissolution, and thereafter such franchise shall be annulled. § 202. Exemptions from other state taxation. — The personal prop- erty of every corporation, company, association or partnership, tax- able under this article, other than for an organization tax, shall be ex- empt from, assessm.ent and taxation upon its personal property for state purposes, and tlie personal property of every corporation taxable imder section one hundred and eighty-seven-a of this article, other than for an organization tax, and as provided in chapter thirty-seven of the general laws, shall be exempt from assessment and taxation for all other purposes, if all taxes due and payable under this article have been paid thereby. The personal property of a private or indi- vidual banker, actually employed in his business as such baiiker, shall be exempt from taxation for state purposes, if such private or individ- ual banker shall have paid all taxes due and payable under this arti- cle. Such corporation and private or individual banker shall in no other respect be relieved from assessment and taxation by reason of the provisions of this article. The owner and holder of stock in an incorporated trust company liable to taxation under the provisions of this act shall not be taxed as an individual for such stock. The amendment of ch. 132 of 1901 was inadvertently repealed by chap. 535 of 1901 and revived and re-enacted by ch. 172 of 1902 and deemed to have continued in force since the date it originally took effect. § 228. liability of certain corporations to tax. — If a foreig-n execu- tor, administrator or trustee shall assign or transfer any stock or obli- gations in this state standing in the name of a decedent, or in trust for a decedent, liable to any such tax,* the tax shall be paid to the treas- •The Transfer Tax. 416 THE TAX LAWS EELATlJSiG TO BANICS^ ETC. urer of the proper county or tlie state comptroller on the transfer thereof. No safe deposit company, trust company, corporation, bank or other institution, person or persons having in posses- sion or under control securities, deposits, or other assets of a decedent, including the shares of the capital stock of, or other interests in, the safe deposit company, trust company, corpo- ration, bank or other institution making the delivery or trans- fer herein provided, shall deliver or transfer the same to the executors, administrators or legal representatives of said dece- dent, or upon their order or request, unless notice of the time and place of such intended delivery or transfer be served upon the state comptroller at least ten days prior to said delivery or transfer; nor shall any such safe deposit company, trust company, corporation, bank or other institiition, person or persons deliver or transfer any securities, deposits or other assets of the estate of a non-resident dece- dent including the shares of the capital stock of, or other interests in, the safe deposit company, trust company, corporation, bank or other institution, making the delivery or transfer, without retaining a suffi- cient portion or amotmt thereof to pay any tax and penalty which may thereafter be assessed on account of the delivery or transfer of such securities, deposits, or other assets including the shares of the capital stock of, or other interests in, the safe deposit company, trust com- pany, corporation, bank or other institution making the delivery or transfer, under the provisions of this article, unless the state comp- troller consents thereto in writing. And it shall be lawful for the said state comptroller, personally, or by representative, to examine said securities, deposits or assets at the time of such delivery or trans- fer. Failure to serve such notice and to allow such exami- nation, and to retain a suiFicient portion or amount to pay such tax and penalty as herein provided, shall render said safe deposit company, trust company, corporation, bank or other institution, person or persons liable to the payment of three times the amount of the tax and penalty due or thereafter to become due upon said securities, deposits or other assets, including the shares of the capital stock of, or other interests in, the safe deposit company, trust company, corporation, bank or other institution, mak- ing the deliveiy or transfer; and the payments as herein provided shall be enforced in an action brought in accordance with the provi- sions of section two hundred and thirty-five of this chapter. Amended by oh. 173 of 1001. Amended by eli. 101 of 1902. CONSTITUTIONAL PROVISIONS, SPECIAL STATUTES AND PENAL CODE SECTIONS. Banks, 27. CONSTITUTIONAL PROVISIONS, SPECIAL STATUTES A:NrD PENAL CODE SECTIOIstS. AETICLE L CEEATtON Oir COKPORATIONS. Extract from the Eevised Constitution of the State of New York.- Article VIII. Adopted, Novembek, 1894. Section 1. Corporations, how created. 2. Debts of corporations. 3. "Corporations" defined. 4. Chart.ers for savings banks and banlcing purposes. 5. Specie payments. 6. Eegi.stry of bills or notes. 7. Individual responsibility of stockholders. 8. Insolvency of banks, preference. Section 1. Corporations may be formed under general laws ; but shall not be created by special act, except for municipal purposes and in cases where, in the judgment of the legislature, the objects of the corporation cannot be attained under general laws. All general laws and special acts, passed pursuant to this section, may be altered from lime to time, or repealed. 1. A statute which does not profess to create a banking coi-poration, but merely remedies defects in the organization of one already created, is not a violation of the constitutional prohibition against special charters for banking purposes. Remedial statutes are valid which enable corporations to enforce acquired rights, where by reason of defects in organization or irregularities in practice they were previously unable to do so; such "statutes are entitled to be most liberally con- strued for the advancement of the public welfare and the protection of individ- ual rights." Gridley, J. Syracuse City Bank v. DaA'is, 16 Barb. 188, 193. 419 420 GENEEAI. STATUTES^ ETC. 2. The legislature is given, by the constitution, the entire discretion of creating other coi"porations than banks, by special charter, and courts cannot re^'iew the action of the legislature when that discretion has been exercised. United States Trust Co., Receiver, v. Brady, 20 Barb. 121. 3. The constitution of 1846 "plainly designed to abolish the former mode or system of creating corporations, and to adopt an entire new system, under which, by general and uniform rules, the individual liability of corporations for all the debts of their respective corporations should be regulated and prescribed." John- son, J. Eochester ei al. v. Barnes et al., 26 Barb. 660. 4. The language of the constitution that "corporations may be formed under general laws," is not mandatory but permissive, and hence it is a matter for the discretion of the legislature, where in their judgment the object of the corpora- tion cannot be attained under general laws. In re Tax Payers of Kingston, 40 How. 444. To the same effect. People v. Bowen ei al., 21 N. Y. 517; affirming 30 Barb. 24; followed 13 Otto (U. S.) 42G, 26 L. ed. 578. 5. This provision of the constitution is merely a direction for the exercise of authority, which had been restricted by former constitutions, and is not a grant of power. B.ank of Chenango v. Brown, 26 N. Y. 470. 6. "By the constitution of 1846, as well as to place all corporations of the same chai-aeter upon the same general footing, with unifonn powers, privileges and du- ties, as to obviate the necessity of much special legislation, corporations were au- thorized to be formed under general laws, and the creation of any, except for municipal purposes, and in cases where the objects of the corporation could not, in the judgment of the legislature, be approved under the general laws, was pro- hibited. One design was, that all that desired to transact business in a coi-porate capacity might do so upon an equality, and with equal privileges and liabilities, with uniform powers and under uniform restraints. Equality between corpora- tions themselves, as well as equality between corporations and individual citizens, so far as the matter was practicable, was in the miuds of the convention in fram- ing this part of the constitution." Allen, J. Johnson v. H. R. R. R. Co., 49 N. y.. 458. 7. Corporations which hold their property and exercise their functions for the public benefit, are subject to legislative control, and the legislature which has cre- ated them may regulate the mode in which they shall transact their business. "Such legislation violates no contract, takes away no property, and interferes with no vested right." Eabl, J. People ex rel. Kimball v. B. & A. R. R. Co., 70 N. Y. 571. § 2. Dues from corporations shall be secured by such individual liability of the corporators, and other means, as may be prescribed by law. § 3. The teiTu corporations, as used in this article, shall be con- strued to include all associations and joint-stock companies having any of the powers or privileges of corporations not possessed by indi- viduals or partnerships. And all corporations shall have the right to sue and shall be subject to be sued in all courts in like cases as natural persons. GEJ^EKAT. STATUTES, ETC. 421 1. This provision subjecting corporations to be sued like natural persons is an enabling, and not a restrictive one. It does not require that they should be pro- ceeded against only by regular action, but leaves them to summary proceedings at the discretion of the legislature. In re Empire City Bank, 18 N. Y. 217. 2. A grant by the legislature to n corporation without any restriction of the power of that body to grant a similar pri\alege to others, would not deprive a fu- ture legislature of the power to give a like privilege. 0. F. B. Co. v. Fish, 1 Barb. Oh. 54i). (Citing 11 I'eters, 420, 9 L. ed. 773.) But grants of exclusive privi- leges, "being in derogation of public rights belonging to the State, or its citizens generally, must be construed strictly, and with reference to the intent and par- ticular objects of the grant." Chancellor, M. B. Co. i). U. and S. R. E. Co., 6 Paige, 565. 3. It is right that new grants should be made when the public good calls for them, although they may become rivals to pre-existing establishments made un- der legislative authority. A franchise may be said to be "taken," within the meaning of the section of the State constitution, prohibiting the taking of private property for public use, without just compensation, when the owner is deprived of the power or means of exercising it. But it is not taken when its emoluments are merely diminisihed by an improvement, which does not destroy or impair such power or means. "The philological interpretations of the verb 'to take' are very numerous, but none of them indicate that an indirect reduction of the profits of a, thing constitute a seizure of it, so long as its substance, whether physical or moral, remains intact. The damage from a loss of profits may be equally great, whether it results from a deprivation of their substantial emolument, or from other and indirect causes, but the remedies may be different, and, in many cases where the means are indirect, the law gives no redress.'' Strong, J. Matter of Hamilton Ave., Brooklyn, 14 Barb. 411; id. 559. § 4. The legislature shall, by general law, conform all charters of savings banks, or institutions for savings, to a uniformity of pow- ers, rights and liabilities, and all charters hereafter granted for such corporations shall be made to conform to sudi general law, and to such amendments as may be made thereto. And no such corporation shall have any capital stock, nor shall the trustees thereof, or any of them, have any interest whatever, direct 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 savings. The legislature shall have no power to pass any act granting any special charter for banking purposes; hut corporations or associations may be formed for such purposes un- der general laws. 1. This section was amended by vote of the people November 3, 1874. Went into effect January 1, 1875. 2. "The charter of the United States Trust Company is not unconstitutional. It is a corporation created for banking purposes within the meaning of section 4 of the Constitution. Banking is there used in its still familiar and proper sense, that business which might be carried on by banking associations under the law 422 OENEKAI- STATUTES, ETC. to authorize the business of banking passed April 18, 1838. That law has been amended and reference made each time to its title authorizirg 'the business of banking' before the constitution was adopted in 1840, chapter 363, in 1841, chap- ters 26 and 319, in 1844, chapters 41 and 281, and the meaning of the word had thus become fixed by legislative use also." Mitohexl, J. United States Trust Co., Receiver, v. Brady, 20 Barb. 121. "The legislature is the sole and final judge in respect to the cases in, and the purposes for which corporations should be created by special laws, rather than under general laws, and may, by special act, grant a charter for any lawful pur- pose other than a bank or a village." Allen, J. G. E. R. Co. v. Anderson, 3 Abb. N. C. 454. § 5. The legislature shall have no power to pass any law sanc- tioning in any manner, directly or indirectly, the suspension of specie payments, by auy person, association or corporation issuing bank- notes of any description. § 6. 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. § 7. The stockholders in every corporation and joint-stock asso- ciation for banking purposes shall be individually responsible to the amount of their respective share or shares of stock in any such corpo- ration or association, for all its debts and liabilities of every kind. 1. See section 125 of the Revision and notes (Amended by Convention 1894). 2. "These constitutional provisions manifest a decided intention to protect at all events the creditors of the bank as against the bank, to the extent of its abil- ity to pay, and as against the stockholders in addition to the extent of their stock." HOQEBOOM, J. Pruyn v. "Van Allen, Receiver, Bank of Albany, 39 Barb. 356 : Matter of Empire City Bank, 18 jST. Y. 199 ; Matter of Reciprocity Bank, 22 id. 9. 3. It was not the intention of the constitution that stockholders should be re- imbursed any part of their contributions, until the debts of the corporation were extinguished; but on the contrary, it was designed to make the stockholders liable to the creditors to the full extent of their stock, until the debts are fully paid. Id. 4. The liability imposed "upon the stockholders of banking associations is a several liability for a ratable and equal share of the debts, in proportion to the whole debts and the whole capital stock, and not a liability to each creditor until he is paid, limited only by the amount of stock held by stockholders, and the stat- ute gives no authority or jurisdiction to make more than one judgment, the first apportionment and judgment remaining unreversed." Emott, J. Matter of Hol- lister Bank, 2" N. Y. 400, 84 Am. Dec. 292. 5. The stockholders of a bank organized under the laws of this State which becomes insolvent, are not entitled to receive or have divided among themselves any of its assets, until its debts are paid in full. In this case, upon an applica- tion by the receiver to the court for an order to divide the residue of the assets GENlinAI. STATUTES, ETC. 423 in his hands pro rata among the creditors, certain of the stoekliolders who had paid their ratable proportion of the apportionment made upon them as aforesaid, claimed that by virtue of -such payment they had become creditors of the bank, and were entitled, with other creditors, to be included in such pro rata distribu- tion. Held, that such stockholders must remain debtors to the corporation, un- til the creditors are paid the amount of the apportionment. Hollister ei al. v. Hollister Bank of Buffalo, 2 Keyes, 245. 6. A safe deposit company had authority under its charter ( § 5, chapter 816, Laws of 1868), to issue certificates for moneys deposited. Held, the grant of this power was not in conflict with the constitutional prohibition against the granting of a special charter for banking purposes. Pardee v. Fish, 60 N. Y. 271 ; same case, 19 Am. Hep. 176, affirming 67 Barb. 407. 7. Authorities collated upon the question as to when, so far as the liability of trustees and stockholders of a. corporation is concerned, it may be deemed to be dissolved. Bruce et al. v. Piatt et al., 80 N. Y. 379. § 8. In case of the insolvency of any bank or banking associa- tion, the bill-holders thereof shall be entitled to preference in pay- ment, over all other creditors of such bank or association. Laws of 1850, chapter 172. — An act to prohibit corporations from inter- posing the defense of usury in any action. SECTioisr 1. 1^0 corporation shall hereafter interpose the defense of usury in any action. 1. The proliibition contained in this section is retrospective. Curtis v. Leavitt, 15 N. Y. 151. 2. It is not only retrospective, but applies to foreign corporations litigating in the courts of this State. Southern Life and Trust Co. v. Packer, 17 N. Y. 51. 3. It deprives a, corporation of the right to recover back money paid by it in excess of legal interest. Butterworth v. O'Brien, 23 N. Y. 275. 4. The provisions of this act operate pro tanto as a repeal of the statute pro- hibiting usury, so far as they were applicable to stipulations for a rate of inter- est exceeding seven per cent, where a corporation is the borrower. Belmont Branch Banlc v. Hoge, 35 N. Y. 65. 5. This act only prevents the avoidance of its own contracts by a corporation on the ground of usury; it does not apply to a, case where the corporation suc- ceeds to the rights of the party who might avail himself of the provisions of the usury laws. Merchants' Exchange Bank v. Commercial Warehouse Co., 49 N. Y. 635. 6. A corporation may avail itself of the plea of usury against a note made by it for the accommodation of an iiidorser, who indorsed and delivered it to the plaintiff for usurious consideration. Strong v. N. Y. L. M. Co., 37 N. Y. Sup. Ct. 279. § 2. The term corporation, as used in this act, shall be construed to include all associations and joint-stock companies having any of the powers and privileges of corporations not possessed by individuals or partnerships. 4:24: GENEUA.1. STATUTES, ETC. Laws of 1877, chapter 311. — An act in relation to certificates of incor- poration of corporations or joint-stock companies of other States, territories, or dominion of Canada. Section 1. 'WTienever by the laws of any other State or territory, or the dominion of Canada, a copy of the oertillcate of organization or incorporation, or any other certificate, certified or exemplified by any officer or officers in such State or territory or dominion, is or shall be prima facie evidence of the due formation, creation, existence, or- ganization or capacity of any corporation or joint-stock company, cre- ated, orgajiized or located in such State, territory or dominion, or claiming so to be, such cei'tificate or certificates, duly exemplified, or a duly exemplified copy thereof, shall be received in all actions and proceedings in this State, in ov before all courts and officers, with the same force and effect in all respects as prima facie evidence as afore- said, as in such other State, territory or dominion. Chapter 237, laws of 1882. — An act in relation to advances of money upon warehouse receipts, bills of lading, certificates of stocks, cer- tificates of deposit and other negotiable instruments. Sectioh" 1. In any case hereafter in which advances of money, re- payable on demand, to an amount not less than five thousand dollars, are made upon warehouse receipts, bills of lading, certificates of stock, certificates of deposit, bills of exchange, bonds or other negotia- ble instruments pledged as collateral security for such repayment, it shall be lawful to receive or to contract to receive and collect, as cjava.- pensation for making such advances, any sum to be agreed upon, in writing, by the parties to such transaction. § 2. All acts or parts of acts inconsistent herewith are hereby re- pealed. § 3. This act shall take effect immediately. EE VISED STATITTES, PART II. Of the interest of money.— Section 1. The rate of interest upon the loan of forebearance of any money, goods, or things in action shall be six dollars upon one hundred dollars, for one year, and after that rate, for a greater or less sum, or for a longer or shorter time. But nothing herein contained shall be so construed as to in any way affect any contract or obligation made before the passage of this act. GEl^EKAL STATUTES, ETO. 425 Chapter 277, Laws of 1888. — An act in relation to moneyed corpora- tions, as to filing proof of payment of capital stock. Section 1. Every corporation organized under the provisions of chapter four hundred and nine of the laws of eighteen hundred and eighty-two, entitled "An act to revise the statutes of this State relat- ing- to banks, b;mking and trust companies," or organized or doing business under any special law of this State, formed for the purpose of transacting business as a savings bank, trust, loan, mortgage, secur- ity, guaranty or indemnity company or association, whose president and cashier, or treasurer, or secretary, or its two principal officers by whatsoever name they may be described, shall have failed to make and subscribe an affidavit stating that the wliole of the capital stock of such coi-poration, or such portion thereof as by its charter sball be re- quired to be j)aid or secured before the commencement of its opera- tions, has been actually paid or secured to be paid, according to the provisions of its charter, and shall have neglected to make and file within the time limited by law such affida^•it in the clerk's office of the city and county or of the county in which it shall be taken, and said corporation having complied with the law in other respects within the time required by law, the person or persons designated by law to make such affidavit may make such affidavit Avithin ninety days from the passage of this act, and the clerk of the county with whom such affi- davit should have been filed by law is hereby authorised and directed to file such affidavit in his office as of a date within the time when such affidavit should have been filed, provided such affidavit be presented for filing within ninety days after the passage of tliis act, and the same shall be of full force and eft'ect as if so filed within the time required. § 2. Nothing in this act contained shall be so construed a-' to in any way affect any action or proceeding now pending in the cmrts of this State for or on account of the failure to make and file such affi- davit. (See L. 1900, ch. 164.) Chapter 326, laws of 1888.— An act to require pTiblic officials and other persons receiving and disbursing moneys of the people of the State of New York, 'to deposit the same in solvent banks, and to require banks receiving such moneys on deposit to execute and give bonds as security therefor. Section 1. All officials of the State of Xew York, and other per- 426 &ENEKAI. STATUTKSj E'J-C. sons receiving and disbursing moneys belonging to the people of said State for public purposes, shall be and are required to deposit, and keep, all such moneys received by them, deposited to their official credit in some responsible bank, or banks or banking house, to be designated by the comptroller of said State, until said moneys shall be paid out and disbursed according to law. § 2. Every bank or banking house that has received or shall receive on deposit any moneys belonging to the people of the State of JSTew York shall, when so required to do by the comptroller, execute, deliver and file in the oflice of the comptroller of said State at the city of Al- bany, a bond or undertaking to the people of said State, in such sum and with such sufficient guaranty and sureties as shall be required and approved by said comptroller, for the safe keeping and prompt payment upon legal demand therefor, of all such moneys held by or on deposit in such bank, with interest thereon upon daily or monthly balances, and at such rate as the said comptroller shall fix and ap- prove. § 3. All bonds, undertakings, guaranties and covenants or agree- ments of sureties, hereafter executed or given by or in behalf of any bank or banking house to the people of the State of New York, shall be approved as to form by the attorney-general indorsed thereon or annexed thereto. § 4. The foregoing provisions of this act are in addition to and ■shall not be construed as in conflict with, or to change, any special or other general laws requiring bonds to be given by any public officials of this State, or any banks receiving on deposit moneys belonging to the people of this State, nor shall it apply to the treasurer of said State. § 5. This act shall take effect immediately. Chapter 352 of 1895. — An act providing for the assessment and collec- tion of certain appropriations made for the superintendent of banks. Section 1- The appropriations made for the banking department in chapter six hundred and fifty-four of the laws of eighteen hundred and ninety-four, entitled "An act making appropriations for the sup- port of the government," for carrying out the provisions of chapter six hundred and eighty-nine of the laws of eighteen hundred and nine- QJCNKEAl STATUTES, ETC. 427 ty-two, for the supervision of mortgage companies, organized under the laws of other States, and concerning building, mutual loan and ac- cumulating fund associations and foreign co-operative loan and build- ing and similar associationij, shall he assessed against and collected of said corporations in the manner, and as provided in sections seven and ■one hundred and ninety-four of the banking law, chapter six hundred and eighty-nine of the laws of eighteen hundred and ninety-two. § 2. Tliis act shall take effect immediately. Chapter 337, Laws of 1893 — (As amended 1901, ch. 443) .—Enabling certain trust companies to examine and insure titles and do a safe deposit business, etc. Section 1. Each trust company organized under the banking law of tliis state, and having its principal place of business within a coun- ty containing less than six hundred thousand and over three hundred thousand inhabitants, as appears by the last state or federal enume- ration of its inhabitants, and having a capital of five hundred thou- sand, dollars or upwards, and each trust company organized under said law, and having its principal place of business within a county containing less than three hundred thousand and over sixty-five thou- sand inhabitants, as appears by the last state or federal enumeration of its inhabitants, and having a capital of two hundred thousand dol- lars or upwards, may possess and exercise, in addition to the powers conferred upon it by the banking law of the state, the power, upon terms and conditions to be prescribed by its by-laws, to receive upon deposit for safe keeping, bonds, mortgages, jewelry, plate, stocks, se- . Citizens' Bank & Trust Co., 35 L. E. A. 678, presenting the authorities on that question. § 28. When payable to bearer.— The instrument is payable to bearer : 1. When it is expressed to be so payable ; or 2. When it is payable to a person named therein or bearer ; or 8. When it is payable to the order of a fictitious or non-existing person, and such fact was known to the person making it so payable ; or 4. When the name of the payee does not purport to be the name of any person ; or 5. When the only or last indorsement is an indorsement in blank. Shipman v. Bank of N. Y., 126 N. Y. 318, 12 L. R. A. 791, 22 Am. St. Rep. 821, 27 N. E. 371. § 29. Terms when sufficient.— The instrument need not follow the language of this act, but any terms are sufficient which clearly indi- cate an intention to conform to the requirements hereof. THE ITEGOTIABLE HTSTEUMENTS LAW. 449 § 30. Date, presumption as to.— "Where the instrument or an ac- ceptance or any indorsement thereon is dated, such date is deemed prima facie to be the true date of the making, drawing, acceptance or indorsement, as the case may be. § 31. Ante-dated and post-dated. — The instrument is not invalid for the reason only that it is ante-dated or post-dated, provided this is not done for an illegal or fraudtilent purpose. The person to whom an instrument so dated is delivered acquires the title thereto as of the date of delivery. § 32. When date may be inserted. — Where an instrument expressed to be payable at a fixed period after date is issued imdated, or where the acceptance of .an instrument payable at a fixed period after sight is undated, any holder may insert tberein the true date of issue or acceptance, and the instrument shall be payable accordingly. The insertion of a wrong date does not avoid the instrument in the hands of a subsequent holder in due course ; but as to him, the date so in- serted is to be regarded as the true date. § 33. Blanks; when may be filled. — Where the instrument is want- ing in any material particular, the person in possession thereof has a prima facie authority to complete it by filling up the blanks therein. And a signatxire on a blank paper delivered by the person making the signature in order that the paper may be converted into a nego- tiable instrument operates as a prima facie authority to fill it up as such for any amount. In order, however, that any such instrument, when completed, may be enforced against any person who became a party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a reasonable time. But if any .such instrument, after completion, is negotiated to a holder in due course, it is valid and effectual for all purposes in his hands, and he may enforce it as if it had been filled up strictly in accordance with the authority given and within a reasonable time. Weyerhauser v. Dunn, 100 N. Y. 150, 2 N. E. 274. § 34. Incomplete Instrument not delivered. — Where an incomplete instrument has not been delivered it will not, if completed and negoti- ated, without authority, be a valid contract in the hands of any holder, as against any person whose signature was placed thereon before delivery. Banks, 29 4-50 THE If:BGOTIA.BI.E I^STSTEUMEITTS LAW. § 35. Delivery; when effectual; when presumed. — Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As be- tween immediate parties, and as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting or indorsing, as the case may be ; and in such case the de- livery may be shovv^n to have been conditional, or for a special pur- pose only, and not for the purpose of transferring the property in the instrument. But where the instrument is in the hands of a holder in due course, a valid delivery thereof by all parties prior to him so as to make tliem liable to him is conclusively presumed. And where the instrument is no longer in the possession of a party whose signa- ture appears thereon, a valid and intentional delivery by him is pre- sumed until the contrary is proved. Effect of agreement for other signatures before delivery, see editorial note to Benton County Sav. Banlc v. Boddicker, 45 L. R. A. 343. § 36. Construction where instrument is ambiguous. — Where the lan- guage of the instrument is ambiguous, or there are omissions therein, the following mles of construction apply : 1. Where the sum payable is expressed in words and also in figures and there is a discrepancy between the two, the sum denoted by the words is the sum payable; but if the words are ambiguous or uncer- tain, references may be had to the figures to fix the amount ; 2. Where the instmment provides for the payment of interest, without specifying the date from which interest is to run, the interest runs from the date of the instrument, and if the instrument is un- dated, from the issue thereof; 3. Where the instrument is not dated, it will be considered to be dated as of the time it was issued ; 4. Where there is a conflict between the written and printed pro- visions of the instrument, the written provisions prevail ; 5. Where the instrument is so ambiguous that there is doubt whether it is a bill or note, the holder may treat it as either at his election ; 6. Where a signature is so placed upon the instrument that it is not clear in what capacity the person making the same intended to sign, he is to be deemed an indorser ; 7. Where an instrument containing the words "I promise to pay" is signed by two or more persons they are deemed to be jointly and severally liable thereon. THE NEGOTIABLE INSTRUMENTS LAW. 451 § 37. Liability of person signing in trade or assumed name. — No person is liable on the instrument wkose signature does not appear thereon, except as herein otherwise expressly provided. But one who signs in a trade or assumed name will be liable to the same extent as if he had signed in his own name. Briggs V. Partridge, 64 N. Y. 363, 21 Am. Eep. 617 ; M'fr's Bank v. Love, 13 App. Div. 561, 43 N. Y. Supp. 812. § 38. Signature by agent; authority; how shown. — The signature of any party may be made by a duly authorized agent. JSTo particular form of appointment is necessary for this purpose ; and the authority of the agent may be established as in other cases of agency. § 39. Liability of person signing as agent, etc. — "Where the instru- ment contains or a person adds to his signature words indicating that he signs for or on behaK of a principal, or in a representative capa(> ity, he is not liable on the instrument if he was duly authorized ; but the mere addition of words describing him as an agent, or as filling a representative character, without disclosing his principal, does not exempt him from personal liability. § 40. Signature by procuration ; effect of. — A signature by "pro- curation" operates as notice that the agent has but a limited authority to sign, and the principal is bound only in case the agent in so sign- ing acted writhin the actual limits of his authority. § 41. Effect of indorsement by infant or corporation. — The indorse- ment or assigTiment of the instrument by a corporation or by an in- fant passes the property therein, notwithstanding that from want of capacity the corporation or infant may incur no liability thereoru § 42. Forged signature ; effect of. — Where a signature is forged or made without authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is pre- cluded from setting up the forgery or want of authority. 452 THE NEGOTIABLE INSTEUME-J^TS LAW. AllTIOLE TIL OoNSIDERATIOJr OF l^EaOTlABLE IlTSTEUMENTS. Section 50. Presumption of consideration. .51. What constitutes consideration. 52. Wliat constitutes liolder for value. 53. 'When lien on instrument constitutes holder for value. 54. Effect of want of consideration. 55. Liability of accommodation party. Section 50. Presumption of consideration. — Every negotiable in- strument is deemed prima facie to have been issued for a valuable con- sideration ; and every person whose signature appears thereon to have become a party thereto for value. § 51. Consideration, what constitutes. — Value is any consideration sufficient to support a simple contract. An antecedent or pre-existing debt constitutes value ; and is deemed such whether the instrument is payable on demand or at a future time. Brewster v. Shrader, 26 Misc. 480, 57 N. Y. Supp. 606; R. R. Co. v. Nat'l Bank, 102 U. S. 14, 26 L. ed. 61 ; Comstock v. Hies, 73 N. Y. 269, 29 Am. Rep. 142; Strickland v. Henry, 175 N. Y. 372, 67 N. E. 611. § 52. What constitutes holder for value. — Where value has at any time been given for the instrument, the holder is deemed a holder for value in respect to all parties who became such prior to that time. Heuertemotte v. Morris, 101 N. Y. 70, 54 Am. Rep. 657, 4 N. E. 1. § 53. When lien on instrument constitutes holder for value. — Where the holder has a lien on the instrument, arising either from contract or by implication of law, he is deemed a holder for value to the extent of his lien. Cont. Nafl Bank v. Bell, 125 N. Y. 38, 25 N. E. 1070. § 54. Effect of want of consideration.— Absence or failure of consid- eration is matter of defense as against any person not a holder in due course; and partial failure of consideration is a defense pro tanto, whether the failure is an ascertained and. liquidated amount or other- wise. TJIE I^EGOTIAELE INSTEUMENTS LAW. 453 § 55. Liability of accommodation party. — An accommodation party is one who has signed tlie instrument as maker, drawer, acceptor or in- dorser, without receiving value therefor, and for the purpose of lend- ing his name to some other person. Such a person is liable on the in- strument to a holder for value, notwithstanding such holder at the time of taking the instinunent kne\v him to be only an accommodation party. Eice V. Grange, 131 N. Y. 149, 30 N. E. 46; Park Bank v. G. A. Co., 116 N. Y. 281, 5 L. R. A. 673, 22 N. E. 507; Fox v. Rural Home Co., 90 Hun, 365, 35 N. Y. Supp. 896; Benjamin v. Rogers, 126 N. Y. 60, 26 K E. 970. AETICLE IV. Negotiation. Section 60. What constitutes negotiation. 61. Indorsement; how made. 62. Indorseitient must be of entire instrument. 03. Kinds of indorsement. 64. Special indorsement; indorsement, in blank. 65. Blank indorsement; how changed to special indorsement. 66. When indorsement restrictive. 67. Effect of restrictive indorsement; rights of indorsee. 68. Qualified indorsement. 60. Conditional indorsement. 70. Indorsement of instrument payable to bearer. 71. Indorsement where payable to two or more persons. 72. Effect of instrument drawn or indorsed to a person as cashier. 73. Indorsement where name is misspelled, et cetera. 74. Indorsement in representative capacity. 75. Time of indorsement; presumption. 76. Place of indorsement; presumption. 77. Continuation of negotiable character. 78. Striking out indorsement. 79. Transfer without indorsement; effect of. 80. When prior party may negotiate instrument. Section 60. What constitutes negotiation.— An instrument is ne- o'otiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof. If payable to bearer it is negotiated by delivery ; if payable to order it is negoti- ated by the indorsement of the holder completed by delivery. Higgins V. Ridgway, 153 N. Y. 130, 47 N. E. 32; Simmons v. Thompson, 29 App. Uiv. 559, 51 N. Y. Supp. 1018; Persons v. Hawkins, 41 App. Div. 171, 58 N. y. Supp. 831. 4:54 THE JSIEGOTIABLE IK'STEUMEN'TS LAW. As to transfer of title to note by indorsement in form of guaranty, see editorial note to Dunham v. Peterson, 36 L. E. A. 232, collating the cases on that subject. § 61. Indorsement; how made. — The indorsement must be written on tte instrument itself or upon a paper attached thereto. The signa- ture of the indorser, without additional words, is a sufficient indorse- ment. As to power of agents to indorse negotiable paper, see editorial note to Gate City Bldg. & L. Asso. v. Nat. Bank of Commerce, 27 L. R. A. 401, presenting the authorities on that question. § 62. Indorsement must be of entire instrument. — The indorsement must be an indorsement of the entire instrument. An indorsement, which purports to transfer to the indorsee a part only of the amount payable, or which purports to transfer the instrument to two or more indorsees severally, does not operate as a negotiation of the instru- ment. But where the instrument has been paid in part, it may be indorsed as to the residue. § 63. Kinds of indorsement. — An indorsement may be either special or in blank ; and it may also be either restrictive or qualified, or con- ditional. § 64. Special indorsement; indorsement in blank. — A special in- dorsement specifies the person to whom, or to whose order the instru- ment is to be payable ; and the indorsement of such indorsee is neces- sary to the further negotiation of the instrument. An indorsement in blank specifies no indorsee, and an instrument so indorsed is pay-, able to bearer, and may be negotiated by delivery. § 65. Blank indorsement; how changed to special indorsement. — The holder may convert a bank indorsement into a special indorsement by writing over the signature of the indorser in blank any contract consistent with the character of the indorsement. § 66. When indorsement restrictive.— An indorsement is restrictive, which either: i. Prohibits the further negotiation of the instrument ; or 2. Constitutes the indorsee the agent of the indorser; or 3. Vests the title in the indorsee in trust for or to the use of some other person. But the mere absence of words implying power to negotiate does not m.ake an indorsement restrictive. THE NEGOTIABLE INSTKL'MENTS LAW. 455 § 67. Effect of restrictive indorsement; rights of indorsee. — A re- strictive indorsement confers upon the indorsee tlie right : 1. To receive payment of the instrument ; 2. To bring any action thereon that the indorser could bring ; 3. To transfer his rights as such indorsee ; where the form of the indorsement authorizes him to do so. Eut all subsequent indorsees acquire only the title of the iirst in- dorsee under the restrictive indorsement. Nat'l Butchers &, Dro. Bank v. Hubbell, 117 N. Y. 384, 7 L. K. A. 852, 15 Am. St. Rep. 515, 22 N. E. 1031; Com. Nat'l Banlc v. Armstrong, 148 U. S. 50, 37 L. ed. 363, 13 Sup. Ct. Rep. 533. § 68. aualifled indorsement. — A qualified indorsement constitutes the indorser a mere assignor of the title to the instrument. It may be made by adding to the indorser's signature the words "without re- course" or any words of similar import. Such an indorsement does not impair the negotiable character of the instrument. As to liability as indorser of assignor of promissory note, see editorial note to Markey v. Corey, 36 L. E.. A. 117, presenting the cases on that question. § 69. Conditional indorsement.— Where an indorsement is condi- tional, a party required to pay the instrument may disi'egard the con- dition and make payment to the indorsee or his transferee, whether the condition has been fulfilled or not. But any person to whom an instrument so indorsed is negotiated will hold the same, or the pro- ceeds thereof, subject to the rights of the person indorsing condition- ally. Mad. Sq. Bank v. Heree, 137 N. Y. 444, 20 L. R. A. 335, 33 Am. St. Rep. 751, 33 N. E. 557. § 70. Indorsement of instrument payable to bearer. — Where an In- strument, payable to bearer, is indorsed specially, it may nevertheless be further negotiated by delivery : but the person indorsing specially is liable as indorser to only such holders as make title through his in- dorsement. § 71. Indorsement where payable to two or more persons. — Where an instrument is payable to the order of two or more payees or in- dorsees who are not partners, all must indorse, unless the one indors- ing has authority to indorse for the others. 456 TilE NEGOTLiBI.E II^STEUMENTS LAW. § 72. Effect of instrument drawn or indorsed to a person as cashier. — "Wliere an instrument is drawn or indorsed to a person as "cashier" or other fiscal officer of a banlc or corporation, it is deemed prima facie to he payable to the bank or corporation of which he is. such officer; and may be negotiated by either the indorsement of the bank or cor- poration, or the indorsement of the officer. § 73. Indorsement where name is misspelled, et cetera.— Where the name of a payee or indorsee is wrongly designated or misspelled, he may indorse the instrument as therein described, adding, if he think fit, his proper signature. § 74. Indorsement in representative capacity. — Where any person is under obligation to indorse in a representative capacity, he may in- dorse in such terms as to negative personal liability. Sehinittler v. Simon, 101 N. Y. 554, 54 Am. Eep. 737, 5 N. E. 452. § 75. Time of indorsement; presumption. — Except where an indorse- ment bears date after the maturity of the instrument, every negotia- tion is deemed prima facie to have been effected before the instrument was overdue. § 76. Place of indorsement; presumption.- Except where the con- trary appears every indoi-sement is presumed prima facie to have been made at the place where the instrument is dated. § 77. Continuation of negotiable character.— An instrument nego- tiable in its origin continues to be negotiable until it has been restrict- ively indorsed or discharged by payment or otherwise. § 78. Striking out indorsement.— The holder may at any time strike out any indorsement which is not necessary to his title. The in- dorser whose indorsement is struck out, and all indorsers subsequent to him, are thereby relieved from liability on the instrument. § 79. Transfer without indorsement; effect of. — Where the holder of an instrument payable to his order transfers it for value without in- dorsing it, the transfer vests in the transferee such title as the trans- ferrer had therein, and the transferee acquires, in addition, the right to have the indorsement of the transferrer. But for the purpose of de- termining whether the transferee is a holder in due course, the nego- THE NEGOTIABLE INSTEIjMENTS LAW. 457 tiation take* effect as of the time wlien tlie indorsement is actually made. Goshen Nat'l Banlc v. Bingham, 118 N. Y. 349, 7 L. R. A. 595, 16 Am. St. Rep. 765, 23 N. E. 180. § 80. When prior party may negotiate instrument. — Where an in- strument is negotiated back to a prior party, such party may, subject to the provisions of this act, reissue and further negotiate the same. But he is not entitled to enforce payment thereof against any inter- vening party to whom he was personally liable. AETICLE V. Rights on' Hoi-dee. Section 90. Right of holder to sue; payment. 91. What constitutes a holder in due course. !)2. When person not deemed holder in due course. 'J 3. Notice before full amount paid. 94. When title defective. 95. What constitutes notice of defect. 96. Rights of holder in due course. 97. When subject to original defenses. 98. Wlio deemed holder in due course. Section 90. Right of holder to sue; payment.— The holder of a negotiable instrument may sue thereon in his own name; and pay- ment to him in due course discharges the instrument. Newcomb v. Fox, 1 App. Div. 389, 37 N. Y. Supp. 294. § 91. What constitutes a holder in due course.— A holder in due course is a holder who has taken the instrument under the following conditions : 1. That it is complete and regular upon its face; 2. That he became the holder of it before it was overdue, and with- out notice that it had been previously dishonored, if such were the fact ; .3. That he took it in good faith and for value ; 4. That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. 4:58 THE NEGOTIABLE lASTEUMEHTS LAW. § 92. When person not deemed holder in due course. — Wliere an in- strument payable on demand is negotiated an unreasonable length of time after its issue, the holder is not deemed a holder in due course. § 93. Notice before full amount paid. — Where the transferee re- ceives notice of any infirmity in the instrument or defect in the title of the person negotiating the same before he has paid the full amount agreed to be paid therefor, he will be deemed a holder in due course only to the extent of the amount theretofore paid by him. § 94. When title defective.— The title of a person who negotiates an instrument is defective within the meaning of this act when he obtain- ed the instniment, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud. § 95. What constitutes notice of defect. — To constitute notice of an infirmity in the instrument or defect in the title of the person negoti- ating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith. Am. Exch. Nat'l Bank t. N. Y. Belting Co., 148 N. Y. 698, 705, 43 N. E. 168; Cheever v. Pittsburgh &o. R. E. Co., 150 N. Y. 59, 33 L. R. A. 69, 55 Am. St. Rep. 646, 44 N. E. 701 ; Knox v. Eden Musee Co., 148 N. Y. 454, 31 L. R. A. 779, 51 Am. St. Rep. 700, 42 N. E. 988; Canajoharie Bank v. Diefendorf, 123 ■NT. Y. 191, 202, 10 L. R. A. 676, 25 N. E. 402; Jarvis i;. Man. Beach Co., 148 N. Y. 652, 31 L. R. A. 776, 51 Am. St. Rep. 727, 43 N. E. 68. § 96. Rights of holder in due course.— A. holder in the course holds the instrument free from any defect of title of prior parties and free from defenses available to prior parties among themselves, and may enforce payment of the instrviment for the full amount thereof against all parties liable thereon. Cromwell v. Co. of Sac, 96 U. S. 60, 24 L. ed. 687. As to rights of holder of negotiable paper transferred after maturity, see editorial note to Y. M. C. A. Gym- nasium Co. V. Rockford Nat. Bank, 46 L. R. A. 753, presenting the authorities on that question. § 97. When subject to original defenses.— In the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were non-negotiable. But a holder who derives his title through a holder in due course, and who is not THE NEGOTTAELE INSTBUMENTS LAW. 459 liimself a party to any fraud or illegality affecting the instrument, has all the rights of such former holder in respect of all parties prior to the latter. 1st Nat'l Bank of Cbamplain v. Wood, 128 N. Y. 35, 27 N. B. 1020. § 98. Who deemed holder in due course.— Every holder is deemed prima facie to be a holder in due course ; but when it is shoAvn that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as a holder in due course. But the last-mentioned rule does not apply in favor of a party who became lound on the instrument prior to the acquisition of such defective title. Joy V. Diefendorf, 130 N. Y. 6, 27 Am. St. Eep. 484, 28 N. E. 602; M. Groh's Sons V. Schneider, 34 Misc. 195, 68 N. Y. Supp. 862. As to effect as against bona fide holder of fraud in obtaining execution of note, see editorial note tb Green v. Wilkie, 36 L. R. A. 434, presenting the authorities on tlmt question. As to effect on bona fide holders of prior alteration of note, see editorial note to •Citizens' Nat. Bank of Baltimore v. Williams, 35 L. R. A. 464, presenting the Authorities on that question. AKTICLE VL LiABiLiriEs OF Paeties. Section 110. Liability of maker. 111. I/iability of drawer. 112. Liability of acceptor. 113. When person deemed indorser. 114. Liability of irregular indorser. 115. Warranty; where negotiation by doHvery, et cetera, 116. Liability of general indorsers. 117. Liability of indorser where paper negotiable by delivery. 118. Order in which indorsers are liable. 119. Liability of agent or broker. Section 110. Liability of maker. — The maker of a negotiable in- strument by making it engages that he will pay it according to its tenor : and admits the existence of the payee and his then capacity to indorse. §111. Liability of drawer.— The drawer by drawing the instrument admits the existence of the payee and his then capacity to indorse; 460 THE KX5G0TIABI.E INSTEUMENTS LAW. and engages tliat on due presentment the instrument will be accepted and* paid, or both, according to its tenor, and that if it be dishonored and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it. But the drawer may insert in the in- strument an express stipulation negativing or limiting his own lia- bility to the holder. § 112. Liability of acceptor. — The acceptor by accepting th? instru- ment engages that he will pay it according to the tenor of his accept- ance; and admits: 1. The existence of the drawer, the genuineness of liis signature, and his capacity and authority to draw the instrument ; and 2. The existence of the payee and his then capacity to indorse. Cont. Nat'l Bank v. Tradesman's Bank, 30 App. Div. 112, 55 N. Y. Supp. 545. § 113. When person deemed indorser.— A person placing his signa- ture upon an instrument otherwise than as maker, drawer or ac- ceptor is deemed to be an indorser, unless he clearly indicates by ap- propriate words his intention to be bound in some other capacity. §114. Liability of irregular indorser. — Where a person, not other- wise a party to an instrument, places thereon his signature in blank before delivery, he is liable as indorser in accordance with the follow- ing rules : 1. If the instrument is payable to the order of a third person, he is liable to the payee and to all subsequent parties. 2. If the instrument is payable to the order of the maker or drawer, or is payable to bearer, he is liable to all parties subsequent to the maker or drawer. 3. If he signs for the accommodation of the payee he is liable to all parties subsequent to tlie payee. Good V. Martin, 95 U. S. 93, 24 L. ed. 341; Kohn v. Consol. Butter Co., 30 Misc. 725, 63 N. Y, Supp. 205. As to liability of stranger who indorses commercial paper before delivery, see editorial note to FuUerton v. Hill, 18 L. E.. A. 33. § 115. Warranty where negotiation by delivery, et cetera. — ^Every person negotiating an instrument by delivery or by a qualified in- dorsement, warrants : 1. That the instrument is genuine and in all respects what it pui^ ports to be ; "Error in engrossing. The word in the Commissioner's draft is "or." The mistake was not corrected by Laws N. Y. 1898, c. 33(). THE NEGOTIABLE INSTEUJMENTS LAW. 461 2. That lie lias a good title to it ; 3. That all prior parties had capacity to contract ; 4. That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless. But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee. The pro- visions of sub-djvision three of this section do not apply to persons negotiating public or corporate securities, other than bills and notes. Meyer v. Eicliards, 163 U. S. 385, 41 L. ed. 199, 16 Sup. Ct. Rep. 1148; Meriden Nat'l Banlc v. Gallandet, 120 N. Y. 298, 24 N. E. 994. As to implied warranty of genuineness on sale of negotiable paper, see also editorial note to Nas^hville Lumber Co. ■;;. Fourth Nat. Bank of Nashville, 27 L. R. A. .519. § 116. liability of general indorser.— Every indorser who indorses without qualification, warrants to all subsequent holders in due course : 1. The matter and things mentioned in subdivisions one, two and three of the next preceding section ; and 2. That the instrument is at the time of his indorsement valid and subsisting. And, in addition, he engages that on due presentment, it shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it. Nat'l Park Bank v. Seaboard Nat'l Bank, 114 N. Y. 28, 11 Am. St. Rep. 612, 20 N. E. 632. U. S. i>. Amer. Exch. Nat'l Baiilc, 70 Ted. 232. § 117. Liability of indorser where paper negotiable by delivery. — Wliere a person places his indorsement on an instrument negotiable by delivery he incurs all the liabilities of an indorser. § 118. Order in which indorsers are liable. — As respects one an- other, indorsers are liable prima facie in the order in which they in- dorse ; but evidence is admissible to show that as between or among themselves tliey have agreed otherwise. Joint payees or joint in- dorsees who indorse are deemed to indorse jointly and severally. § 119. Liability of agent or broker. — Where a broker or other agent negotiates an instrument without indorsement, he incurs all the liabil- 462 THE NEOOTIABLE INSTEUMENTS LAW. ities prescribed by Beetion one hundred and fifteen of this act, unless he discloses the name of his principal, and the fact that he is acting only as agent. AKTICLE VII. Peesentmuitt foe Pay MEM'. Section 130. Effect of want of demand on principal debtor. 131. Presentment where instrument Is not payable on demand. 132. What constitutes a sufficient presentment. 133. Place of presentment. 134. Instrument must be exhibited. 135. Presentment where instrument payable at bank. 136. Presentment where principal debtor is dead. 137. Presentment to persons liable as partners. 138. Presentment to joint debtors. 139. When presentment not required to charge the drawer. 140. When presentment not required to charge the indorser. 141. When delay in making presentment is e.xcused. 142. When presentment may be dispensed with. 143. When. Instrument dishonored by nonpayment. 144. Liability of person secondarily liable, when instniment dishonored. 145. Time of maturity. 146. Time; how computed. 147. Rule where instrument payable at bank. 148. What constitutes payment in due course. Section 130. Effect of want of demand on principal debtor. — Pre- sentment for payment is not necessary in order to charge the person primarily liable on tlie instrument; but if the instrument is, by its terms, payable at a special place, and he is able and willing to pay it there at maturity and has funds there available for that purpose, such ability and willingness are equivalent to a tender of payment upon his part. But except as herein otherwise provided, presentment for pay- ment is necessary in order to charge the drawer and indorsers. Sylvester v. Crohan, 138 N. Y. 494, 34 N. E. 273. § 131. Presentment where Instrument is not payable on demand. — AVhere the instrument is not payable on demand, presentment must be made on the day it falls due. Whei*e it is payable on demand, pre- THE iSJ3G0TTABI.E IKSTEUMENTS LAAV. 463 sentment must be made within a reasonable time after its issue, except that m case of a bill of exchange, p]-esentment for payment will be sufficient if made within a reasonable time after the last negotiation thereof. § 132. What constitutes a sufficient presentment.— Presentment for payment, to be sufficient, must be made : 1.^ By the holder, or by some person authorized to receive payment on his behalf ; 2. At a reasonable hour on a business day ; 3. At a proper place as herein defined; 4. To the person primarily liable on the instrument, or if he is absent or inaccessible, to any person found at the place where the presentment is made. § 133. Place of presentment. —Presentment for payment is made at the proper place. 1. Where a place of payment is specified in the instrument and it is there presented ; 2. Where no place of payment is specified, but the address of the person to make payment is given in the instrument and it is there presented ; 3. Wliere no place of payment is specified and no address is given and the instrument is presented at the usual place of business or resi- dence of the person to make payment. 4. In any other case if presented to the person to make payment wherever he can be found, or if presented at his last known place of business or residence. § 134. Instrument must be exhibited.— The instrument must be ex- hibited to the person from whom payment is demanded, and when it is paid must be delivered up to the party paying it. § 135. Presentment where instrument payable at bank. — Where the instrument is payable at a banlc, presentment for payment must be made di'-rin^ banking hours, unless the poreon to make payment has no funds there to meet it at any time during the day, in which case presentm.ent at any hour before the bank is closed on that day is suf- ficient. § 136. Presentment where principal debtor is dead. — Where the per- son primarily liable on the instrument is dead, and no place of pay- 464 'i'HE JlfEGOTIABLE IjSTSTKUMENTS LAW. ment is specified, presentment for payment m^ust be made to his per- sonal representative, if such there he, and if with the exercise of reasonable diligence, he can be found. § 137. Presentment to persons liable as partners. — Where the per- sons primarily liable on the instrument are liable as partners, and no place of payment is specified, presentment for payment may be made to any one of them, even though there has been a dissolution of the firm. § 138. Presentment to joint debtors. — Where there are several per- sons not partners, primarily liable on the instrument, and no place of paym.ent is specified, presentment must be made to them all. As to presentation to joint makers to hold Indorsers of note, see also note to Benedict v. Schmieg, 36 L. R. A. 703. § 139. When presentment not required to charge the drawer. — Pre- sentment for payment is not required in order to charge the drawer where he has no right to expect or require that the drawee or acceptor will pay the instrument. § 140. When presentment not required to charge the indorser. — Pre- sentment for payment is not required in order to diarge an indorser where the instrument was made or accepted for his accommodation, and he has no reason to expect that the instrument will be paid if presented. § 141. When delay in making presentment is excused. — Delay in making presentment for payment is excused when the delay is caused by circumstances beyond the control of the holder and not imputable to his default, misconduct, or negligence. When the cause of delay ceases to operate, presentment must be made with reasonable dili- gence. § 142. When presentment may be dispensed with. — Presentment for payment is dispensed with : 1. Where, after tlie exercise of reasonable diligence presentment as required by this act cannot be made ; 2. Where the drawee is a fictitious person; 3. By waiver of presentment express or implied. Moore v. Alexander, 63 App. Div. 100, 71 N. Y. Supp. 420. § 143. When instrument dishonored by non-payment. — The instru- ment is dishonored by non-payment when : THE NEGOTIAUI.IO INSTKUMKNTS LAW. 465 1. It is duly presented for payment and payment is refused or can- not be obtained ; or 2. Presentment is excused and the instrument is overdue and un^ paid. § 144. liability of person secondarily liable, when instrument dis- honored. — Subject to the provisions of this act, when the instrument is dishonored by non-payment, an immediate right of recourse to all parties secondarily liable thereon, accrues to the holder. § 145. Time of maturity. — Every negotiable instrument is payable at the time fixed therein without grace. When the day of maturity falls upon Sunday or a holiday, the instrument is payable on the next succeeding business day. Instruments falling due or becoming pay- able on Saturday are to be presented for payment on the next suc- ceeding business day, except that instruments payable on demand may, at the option of the holder, be presented for payment before twelve o'clock noon on Satu.rday when the entire day is not a holiday. § 146. Time; how computed. — Where the instrument is payable at a fixed period after date, after sight, or after the happening of a specified event, the time of payment is determined by excluding the day from which the time is to begin to run, and by including the date of payment. (See Statutory Construction Law, §§ 26, 27.) § 147. Rule where instrument payable at bank. — Where the instru- ment is made payable at a bank it is equivalent to an order to the bank to pay the same for the account of the principal debtor thereon. § 148. What constitutes payment in due course. — Payment is made in due course when it is made at or after the maturity of the instru- ment to the holder thereof in good faith and without notice that his title is defective. AETICLE VIII. KOTIC-E OF DiSHONOE. Section 160. To whom notiue of dishonor must be given. 161. By whom given. 162. Notice given by agent. Banks, 30 466 THE NEGOTIABXE INSTEUMENTS LAW. Section 163. Effect of notice given on behalf of liolder. 164. EU'ect where notice is given by party entitled thereto. 16.5. When agent may give notice. 1G6. When notice sufficient. 167. Form of notice. 168. To whom notice may be given. 169. Notice where party is dead. 170. Notice to partners. 171. Notice to persons jointly liable. 172. Notice to bankrupt. 173. Time within which notice must be given. 174. Where parties reside in same place. 175. Where parties reside in different places. 176. When sender deemed to have given due notice. 177. Deposit in post-olfice, what constitutes. 178. Notice to subsequent parties, time of. 179. Where notice must be sent. 180. Waiver of notice. 181. Whom affected by waiver. 182. Waiver of protest. 183. When notice dispensed with. 184. Delay in giving notice; how excused. 185. When notice need not be given to drawer. 186. When notice need not be given to indorser. 187. Notice of non-payment where acceptance refused. 188. Effect of omission to give notice of non-acceptance, 189. When protest need not be made; when must be made. Section 160. To whom notice of dishonor must be given. — Except as herein other^vise provided, when a negotiable instrument has been dishonored by non-acceptance or non-payment, notice of dishonor must be given to the drawer and to each indorser, and any drawer or indorser to whom such notice is not given is discharged. § 161. By whom given. — The notice may be given by or on behalf of the holder, or by or on behalf of any party to the instrument, who might be compelled to pay it to the holder, and who, upon taking it up, would have a right to reimbursement from the party to whom the notice is given. § 162. Notice given by agent.— Kotice of dishonor may be given by an agent either in his own name or in the name of any party enti- tled to gave notice, whether that party be his principal or not. § 163. Effect of notice given on behalf of holder. — Where notice is given by or on behalf of the holder, it enures for the beneiit of all sub- THE NEGOTIABLE INSTRUMENTS LAW. 467 sequent holders and all prior parties who have a right of recourse against the party to whom it is given. § 164. Effect where notice is given by party entitled thereto. — Where notice is given by or on behalf of a party entitled to give no- tice, it enures for the benefit of the holder and all parties subsequent to the party to whom notice is given. § 165. When agent may give notice. — Where the instrument has been dishonored in the hands of an agent, he may either himself give notice to the parties liable thereon, or he may give notice to his prin- cipal. If he give notice to his principal, he must do so within the same time as if he were the holder, and the principal, upon the re- ceipt of such notice, has himself the same time for giving notice as if the agent had been an independent holder. § 166. When notice sufficient. — A written notice need not be signed, and an insufficient written notice may be supplemented and validated by verbal communication. A misdescription of the instru- ment does not vitiate the notice unless the party to whom the notice is given is in fact misled thereby. § 167. Form of notice. — The notice may be in writing or merely oral, and may be given in any terms which sufficiently identify the instrument, and indicate that it has been dishonored by non-accept- ance or non-payment. It may in all cases be given by delivering it personally or through the mails. § 168. To whom notice may be given. — JSTotice of dishonor may be given either to the party himself or to his agent in that behalf. § 169. Notice where party is dead. — When any party is dead, and his death is known to the party giving notice, the notice must be given to a personal representative, if there be one, and if with reasonable diligence he can be found. If there be no personal representative, notice may be sent to the last residence or last place of business of the deceased. § 170. Notice to partners. — Where the parties to be notified are partners, notice to any one partner is notice to the firm, even though there has been a dissolution. § 171. Notice to persons jointly liable.— Notice to joint parties 468 THE NEGOTIABLE INSTEUMENTS LAW. who are not partners must be given to each of them, unless one of them has authority to receive such notice for the others. § 172. Notice to bankrupt. — "Where a party has been adjudged a bankrupt or an insolvent, or has made an assignment for the benefit of creditors, notice may be given either to the party himself or to his trustee or assignee. § 173. Time within which notice must be given. — Notice may be given as soon as the instrument is dishonored; and unless delay is ex- cused as hereinafter provided, must be given within the times fixed by this act. § 174. Where parties reside in same place. — Where the person giv- ing and the person to receive notice reside in the same place, notice must be given within the following times : 1. If given at the place of business of the person to receive notice, it must be given before the close of business hours on the day follow- ing; 2. If given at his residence, it must be given before the usual hours of rest on the day following; 3. If sent by mail, it must be deposited in the post-office in time to reach him in usual course on the day following. § 175. Where parties resifie in ditferent places.— Where the person giving and the person to receive notice reside in different places, the notice mu st be given -svithin the following times : 1. If sent by mail, it must be deposited in the post-office in time to go by mail the day following the day of dishonor, or if there be no mail at a convenient hour on that day, by the next mail thereafter. 2. If given otherwise than through the post-office, then within the time that notice would have been received in due course of mail, if it had been deposited in the post-office within the time specified in the last subdivision. § 176. When sender deemed to have given due notice. — Where no- tice of dishonor is duly addressed and deposited in the post-office, the sender is deemed to have given due notice, notwithstanding any mis- can-iage in the mails. § 177. Deposit in post-office; what constitutes. — Notice is deemed to have been deposited in the post-office when deposited in any branch THE NEGOTIABLE INSTEUilENTS LAW. 469 post-office or in any letter-box under the control of the Post-Office De- partment. § 178. Notice to subsequent party ; time of . — Where a party re- ceives notice of dishonor, he has, after the receipt of such notice, the same time for giving notice to antecedent parties that the holder has after the dishonor. § 179. Where notice must be sent. — Where a party has added an address to his signatiire, notice of dishonor must be sent to that ad- dress; but if he has not given such address, then the notice must be sent as follows : 1. Either to the post-office nearest to his place of residence, or to the post-office where he is accustomed to receive his letters ; or 2. If he live in one place, and have his place of business in an- other, notice may be sent to either place ; or •3. If he is sojoviming in another place, notice may be sent to the place where he is so sojourning. But where the notice is actually received by the party within the time specified in this act, it will be sufficient, though not sent in ac- cordance with the requirements of this section. § 180. Waiver of notice. — I^Totice of dishonor may be waived, either before the time of giving notice has arrived or after the omis- sion to give due notice, and the waiver may be express or implied. § 181. Whom affected by waiver. — Where the waiver is embodied in the instrument itself, it is binding upon all parties ; but where it is written above the signature of an indorser, it binds him only. § 182. Waiver of protest,— A waiver of protest, whether in the case of a foreign bill of exchange or other negotiable instrument, is deemed to be a waiver not only of a formal protest, but also of presentment and notice of dishonor. § 183. When notice is dispensed with. — ISiotice of dishonor is dis- pensed with when, after the exercise of reasonable diligence, it can- not be given to or does not reach the parties sought to be charged. § 184. Delay in giving notice ; how excused. — Delay in giving no- tice of dishonor is excused when the delay is caused by circumstances beyond the control of the holder and not imputable to his default, mis- 470 THE NEOOTIABI-K ISfSTEUMENl'S LAW. conduct or negligence. When tlie cause of delay ceases to operate, notice must be given with reasonable diligence. § 185. When notice need not be given to drawer. — l^otice of dis- honor is not required to be given to the drawer in either of the follow- ing cases : 1. Where the drawer and drawee are the same person ; 2. Where the drawee is a fictitious person or a person not having capacity to contract; 3. Where the drawer is the person to whom the instrument is pre- sented for payment ; 4. Where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument ; 5. Where the drawer has countermanded payment. Bacon v. Hanna, 137 N. Y. 379, 20 L. E. A. 495, 33 N. E. 303; Mohlman Co. V. Kane, 60 App. Div. 540, 69 N. Y. Supp. 1040. § 186. When notice need not be given to indorser. — Notice of dis- honor is not required to be given to an indorser in either of the fol- lowing cases : 1. Where the drawee is a fictitious person or a person not having capacity to contract, and the indorser was aware of the fact at the time he indorsed the instrument ; 2. Where the indorser is the person to whom the instrument is pre- sented for payment ; 3. Where the instrument was made or accepted for his accommo- dation. § 187. Notice of non-payment where acceptance refused. — Where due notice of dishonor by non-acceptance has been given, notice of a subsequent dishonor by non-payment is not necessary, unless in the meantime the instrument has been accepted. § 188. Effect of omission to give notice of non-acceptance. — An omission to give notice of dishonor by non-acceptance does not preju- dice the rights of a holder in due course subsequent to the omission. § 189, When protest need not be made; when must be made. — ^Where any negotiable instrument has been dishonored it may be protested for non-acceptance or non-payment, as the case may be ; but protest is not required, except in the case of foreign bills of exchange. THE NEGOTrAEI.E INSTKU1IENT8 LAW. 471 'AliTICLE IX. DiSCKAEGE OF jSTeQOTIABI.E Ti^STRUMENTS. Section 200. Instrument; how disclia/rged. 201. When person secondarily liable on, discharged. 202. Right of party who discharges instrument. 203. Renunciation by holder. 204. Cancellation; unintentional; burden of proof. 205. Alteration of instrument; effect of. 206. What constitutes a material alteration. Section 200. Instrument; how discharged. — A negotiable instru- ment is discharged: 1. By payment in due course by or on behalf of the principal debt- or; 2. By paj.Tnent in due course by the party accommodated, where the instrument is made or accepted for accommodation ; 3. By the intentional cancellation thereof by the holder; 4. By any other act which will discharge a simple contract for the payment of money ; 5. When the principal debtor becomes the holder of the instrument at or after maturity in his own right. Mad. Sq. Banlc u. Pierce, 137 N. Y. 444, 20 L. R. A. 335, 33 Am. St. Rep. 751, 33 N. E. 557. § 201. When persons secondarily liable on, discharged. — ^A person secondarily liable on the instrument is discharged : 1. By any act which disicha.rges the insti-ument ; 2. By the intentional cancellation of his signature by the holder; 3. By the discharge of a prior party : 4. By a valid tender of payment made by a prior party ; 5. By a release of the principal debtor, unless the holder's right of recourse against the party secondarily liable is expressly reserved ; 6. By any agTeement binding upon the holder to extend the time of payment or to postpone the holder's right to enforce the instru- mentjf unless the right of recoui'se against such party is expre^ly re- served. fBy an error in engrossing, the words "unless made with the assent of the party secondarily liable, or" after the word "instrument" are omitted. They were not supplied by Laws 1898, Chap. 336. 4Y2 THE NEGOTIAm-li; INSTEUMIilS'TS LAW. § 202. Right of party who discharges instrument. — Wliere tlie in- strument is paid by a party secondarily liable thereon, it is not dis- charged ; but the party so paying it is remitted to his former rights as regards all prior parties, and he may strike out his own and all sub- sequent indorsements, and again negotiate the instrument, except: 1. Where it is payable to the order of a third person, and has been paid by the drawer ; and 2. Wliere it was made or accepted for accommodation, and has been paid by the party accommodated. § 203. Renunciation by holder. — The holder may expressly re- nounce his rights against any party to the instrument, before, at or after its maturity. An absolute and unconditional renunciation of his rights against the principal debtor made at or after the maturity of the instrument, discharges the instrument. But a renunciation does not affect the rights of a holder in due course without notice. A renunciation must be in writing, unless the instrument is delivered up to the person primarily liable thereon. § 204. Cancellation; unintentional; burden of proof. — A cancella- tion made unintentionally, or under a mistake, or without the author- ity of the holder, is inoperative ; but where an instrument or any sig- nature thereon appears to have been canceled the burden of proof lies on the party who alleges that the cancellation was made unintention- ally, or under a mistake or without authority. § 205. Alteration of instrument; effect of.— Wliere a negotiable in- strument is materially altered without the assent of all parties liable thereon, it is avoided, except as against a party who has himself made, authorized or assented to the alteration and subsequent indorsers. But when an instrument has been materially altered and is in the hands of a holder in due course, not a party to the alteration, he may enforce payment thereof according to its original tenor. § 206. What constitutes a material alteration. — ^Any alteration which changes: 1. The date; 2. The sum payable, either for principal or interest; *3. The time or place of payment ; 4. The number or the relations of the parties ; 5, The medium or ouri-ency in which payment is to be made ; TJia NEGOTIABLE INSTEUMENTS LAW. 473; Or whicTi adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect, is a material alteration. AETICLE X. Bills of Exchange; Form and Iktekpketation. Section 210. Bill of exchange defined. 211. Bill not an assignment of funds in hands of drawee. 212. Bill addressed to more than one drawee. 213. Inland and foreign bills of exchange. 214. When bill may be treated as promissory note. 215. Eeferee in ease of need. Section 210. Bill of exchange defined.— A bill of exchange is an unconditional order in writing addressed by one person to another, . signed by the person giving it, requiring the person to whom it is ad- dressed to pay on demand or at a fixed or determinable future time- a sum certain in money to order or to bearer. § 211. Bill not an assignment of funds in hands of drawee. — A bill of itself does not operate as an assignment of the funds in the hands of the drawee available for the payment thereof, and the drawee is not liable on the bill unless and until he accepts the same. § 212. Bill addressed to more than one drawee. — A bill may be ad- dressed to two or more drawees jointly, whether they are partners or not ; but not to two or more drawees in the alternative or in succession. § 213. Inland and foreign bills of exchange. — An inland bill of ex- change is a bill which is, or on its face purports to be, both drawn and payable within the State. Any other bill is a foreign bill. Unless the contrary appears on the face of the bill, the holder may treat it as an inland bill. § 214. When bill may be treated as promissory note. — Where in a bill the drawer and drawee are the same person, or where the drawee is a fictitious person, or a person not having capacity to contract, the holder may treat the instrument, at his option, either as a bill of ex- change or a promissory note. 474 THE 2SEGOTIABT.E ITSTSTEUMENTS LAAV. § 215. Eeferee in case of need. — The drawer of a bill and any in- dorser may insert thereon the name of a person to whom the holder may resort in case of need, that is to say, in case the bill is dishonored by non-acceptance or non-payment. Such person is called the referee in case of need. It is in the option of the holder to resort to the referee in case of need or not, as he may see fit. AETICLE XL AcOBPTANCE OF BltJ.S OF ExCUANQE. Section 220. Acceptance, how made, et cetera. 221. Holder entitled to acceptance on face of bill. 222. Acceptance by separate instrument. 223. Promise to accept; when equivalent to acceptance. 224. Time allowed drawee to accept. 225. Liability of drawee retaining or destroying bill. 226. Acceptance of incomplete bill. 227. Kinds of acceptances. 228. What constitutes a general acceptance. 229. Qualified acceptance. 230. Rights of parties as to qualified acceptance. Section 220. Acceptance ; how made, et cetera. — The acceptance of a bill is the signification by the drawee of his assent to the order of the drawer. The acceptance must be in writing and signed by the drawee. It must not express that the drawee will perform his prom- ise by any other means than the payment of money. Validity of oral promise to accept, see editorial note to Allen v. Leavens, 26 L. R. A. 620. § 221. Holder entitled to acceptance on face of bill. — The holder of a bill presenting the same for acceptance may require that the accept- ance be written on the bill, and if sxich request is refused, may treat the bill as dishonored. § 223. Acceptance by separate instrument. — Where an acceptance is written on a paper other than the bill itself, it does not bind the ac- ceptor, except in favor of a person to whom it was shown and who, on the faith thereof, receives the bill for value. § 223. Promise to accept ; when equivalent to acceptance. — An un- THB NEGOTJABLi; INSTKUMENTS LAW. 475 conditional promise in writing to accept a bill before it is drawn is deemed an actual acceptance in favor of every person who, upon the faith thereof, receives the bill for value, § 224. Time allowed drawee to accept.— The drawee is allowed twenty-four hoiirs after presentment in which to decide whether or not he will accept the bill ; but the acceptance if given dates as of the day of presentation. § 225. liability of drawee retaining or destroying bill. — Where a drawee to whom a bill is delivered for acceptance destroys the same, or refuses within twenty-four hours after such delivery, or within such other period as the holder may allow, to return the bill accepted or non-accepted to the holder, he will be deemed to have accepted the same. § 226. Acceptance of incomplete bill.— A bill may be accepted be- fore it has been signed by the drawer, or while otherwise incomplete, or when it is overdue, or after it has been dishonored by a previous re- fusal to accept, or by non-payment. But when a bill payable after sight is dishonored by non-acceptance and the drawee subsequently ac- cepts it, the holder, in the absence of any diilerent agreement, is enti- tled to have the bill accepted as of the date of the first presentment. § 227. Kinds of acceptances. — An acceptance is either general or qualified. A general acceptance assents without qualification to the order of the drawer. A qualified acceptance in express terms varies the efi'ect of the bill as drawn. § 228. What constitutes a general acceptance. — An acceptance to ]iay at a particular place is a general acceptance unless it expressly atates that the bill is to be paid there only and not elsewhere. § 229. ftualified acceptance. — An acceptance is qualified which is : 1. Conditional, that is to say, which makes payment by the accept- or dependent on the fulfillment of a condition tlierein stated ; 2. Partial, that is to say, an acceptance to pay part only of the amount for which the biU is drawn ; 3. Local, that is to say, an acceptance to pay only at a particular place; 4. Qualified as to time ; 476 THE :!TEGOTIABI.E INSTKUJIENTS LAW. 5. The aeceptiinee of some one or more of the drawees, hut not of all. § 230. Rights of parties as to qualified acceptance. — The holder may refuse to take a qualified acceptance, and if he does not obtain an unqualified acceptance, he may treat the bill as dishonored by non-ac- ceptance. Where .1 qualified acceptance is taken, the drawer and in- dorsers are discharged from liability on the bill, unless they have ex- pressly or impliedly authorized the holder to take a qualiiied accept- ance, or subseqiiently assent thereto. When the drawer or an indors- er receives notice of a qualified acceptance, he must within a reason- able time express his dissent to the holder, or he will be deemed to have assented thereto. ARTICLE XII. Presentment of Bills of Exchange foe Acceptance. Section 240. When presentment for acceptance must be made. 241. When, failure to present releases drawer and indorser. 242. Presentment; how made. 243. On what days presentment may be made. 244. Presentment; where time is insufficient. 245. When presentment is excused. 246. When dishonored by non-acceptance. 247. Duty of holder where bill not accepted. 248. Rights of holder where bill not accepted. Section 240. When presentment for acceptance must be made. — Presentment for acceptance must be made : 1. Where the bill is payable after sight or in any other case where presentment for acceptance is necessary in order to fix the maturity of the instrument ; or 2. Where the bill expressly stipulates that it shall be presented for acceptance; or 3. Where the bill is drawn payable elsewhere than at the residence or place of business of the drawee. In no other case is presentment iox acceptance necessary in order to render any party to the bill liable. § 241. When failure to present releases drawer and indorser.— Except as herein otherwise provided, the holder of a bill which is re- THE JITJSQOTIAELF. INSTEUMMNTS LAW, 477 quired by the n&y.i preceding section to be presented for acceptance must either present it for acceptance or negotiate it within a reason- able time. If he fails to do so, the drawer and all indorsers are dis- •diarged. § 242. Presentment; how made.— Presentment for acceptance must he made by or on behalf of the holder at u reasonable hour, on a busi- ness day, and before the bill is overdue, to the drawee or some person authorized to accept or refuse acceptujice on his behalf ; and 1. Where a bill is addressed to two or more drawees who are not partners, presentment must be made to them all, unless one has au- thority to accept or refuse acceptance for all, in which case present- ment may be made to him only ; 2. Wliere the drawee is dead, presentment may be made to his per- sonal representative ; 3. "Where the drawee has been adjudged a bankrupt or an insol- vent, or has made an assignment for the benefit of creditors, present- ment may be made to him or to his trustee or assignee. § 243. On what days presentment may be made. — A bill may be presented for acceptance on any day on which negotiable instruments may be presented for payment under the provisions of sections one hundred and thirty-two and one hundred and forty-five of this act. When Saturday is not otherwise a holiday, presentment for accept- ance may be made before twelve o'clock noon on that day. § 244. Presentment when time is insufficient. — Where the holder of a bill drawn payable elsewhere than at the place of business or the residence of the drawee has not time mth the exercise of reasonable ■diligence to present the bill for acceptance before presenting it for payment on the day that it falls due, the delay caused by presenting the bill for acceptance before presenting it for payment is excused and ■does not discharge the drawers and indorsers. § 245. Where presentment is excused. — Presentment for accept- ance is excused and a bill may be treated as dishonored by non-accept- ance in either of the following cases : 1. Where the drawee is dead or has absconded, or is a fictitious per- son or a person not having capacity to contract by bill ; 2. Where after the exercise of reasonable diligence, presentment cannot be made ; 478 THE J>fEQOTlABT.E I^TSTEUMEWTS LAW. 3. AATliere, although presentment has been irregular, acceptance has been refused on some other ground. § 246, When discharged by non-acceptance. — A bill is dishonored by non-aoceptance : 1. When it is duly presented for acceptance, and such an accept- ance as is prescribed by this act is refused or canuot be obtained ; or 2. When presentment for acceptance is excused and the bill is not accepted. § 247. Duty of holder where bill not accepted. — Where a bill is duly presented for acceptance and is not accepted •within, the pre- scribed time, the person presenting it must treat the bill as di honored by non-acceptance or he loses the right of recourse against th'e drawer and indorsers. § 248. Eights of holder where bill not accepted. — When a bill is dishonored by non-acceptance, an immediate right of recourse against the drawers and indorsers accrues to the holder, and no presentment for payment is necessary. AETICLE XITI. Protest of Bii.i.s of Exchange. Section 260. In what cases protest necessary. 261. Protest; how made. 262. Protest; by whom made. 263. Protest; when to be made. 264. Protest; where made. 265. Protest both for non-acceptance and non-payment. 266. Protest before maturity where acceptor insolvent. 267. When protest dispensed with. 268. Protest; where bill is lost, et cetera. Section 260. In what cases protest necessary. — Where a foreign bill appearing on its face to be such is dishonored by non-acceptance, it muiit be duly protested for non-acceptance, and where such a bill which has not previously been dishonored by non-acceptance is dis- honored by non-payment, it must be duly protested for non-payment. If it is not so pi'otested, the drawer and indorsers are discharged. Where a bill does not appear on its face to be a foreign bill, protest thereof in case of dishonor is unnecessary. THK KEOOTIAliLE INSTEUMEKTS LAW. 479 § 261. Protest; how made.— The protest must be annexed to tlie bill, or must contain a copy thereof, and must be under the hand and seal of the notary making it, and must specify : 1. The time and place of presentment ; 2. The fact that presentment was made and the manner thereof ; 3. The cause or reason for protesting the bill ; 4. The demand made and the answer given, if any, or the fact that Ihe drawee or acceptor could not be found. § 262. Protest; by whom made. — Protest may be made by: 1. A notary public ; or 2. By any respectable resident of the place where the bill is dis- honored, in the presence of two or more creditable witnesses. § 263. Protest; when to be made.— When a bill is protested, such protest must be made on the day of its dishonor, unless delay is ex- cused as herein provided. When a bill has been duly noted, the pro- test may be subsequently extended as of the date of the noting. § 264. Protest ; where made.— A bill must be protested at the place where it is dishonored, except that when a bill drawn payable at the place of business or residence of some person other than the drawee, has been dishonored by non-acceptance, it must be protested for non- payment at the place where it is expressed to be payable, and no fur- ther presentment for payment to, or demand on, the drawee is neces- sary. § 265. Protest both for non-acceptance and non-payment. — A bill which has been protested for non-acceptance may be subsequently pro- tested for non-payment. § 266. Protest before maturity where acceptor insolvent. — Where the acceptor has been adju.dged a bankrupt or an insolvent, or has made an assigmuent for the beneiit of creditors, before the bill ma- tures, the holder may cause the bill to be protested for better security against the drawer and indorsers. § 267. When protest dispensed with. — Protest is dispensed with by a.nj circumstances wliich would dispense with notice of dishonor. Delay in noting or protesting is excused when delay is caused by cir- cumstances beyond the control of the holder and not imputable to his default, misconduct, or negligence. When the cause of delay ceases 480 THE NEGOTIABLE INSTEUMENTS LAW. to operate, the bill must be noted or protested with reasonable diH- gence. § 268. Protest where bill is lost, et cetera. — Where a bill is lost or destroyed, or is wrongly detained from the person entitled to hold it, protest m.ay be made on a copy or written particulars thereof. ARTICLE XIV. AcCEPTAJSrCE OF ElI.LS OF EXCHANGE FOR HoNOE, Section 280. When bill may be accepted for honor. 281. Acceptance for honor; how made. 282. When deemed to be an acceptance for honor of the drawer. 283. Liability of acceptor for honor. 284. Agreement of acceptor for honor. 285. Maturity of bill payable after sight; accepted for honor. 286. Protest of bill accepted for honor, et cetera. 287. Presentment for payment to acceptor for honor; how made. 288. Whon delay in making presentment is excused. 289. Dishonor of bill by acceptor for honor. Section 280. When bill may be accepted for honor. — Where a bill of exchange has been protested for dishonor by non-acceptance or pro- tested for better security and is not overdue, any person not being a party already liable thereon may, with the consent of the holder, in- ten'ene and accept the bill supra protest for the honor of any party liable thereon or for the honor of the person for whose account the bill is drawn. The acceptance for honor may be for part only of tho sum for which the bill is drawn ; and where there has been an accept- ance for honor for one party, there may be a further acceptance by a ■diiferent person for the honor of another party. § 2S1. Acceptance for honor; how made. — An acceptance for honor supra protest must be in writing and indicate that it is an acceptance for honor, and must be signed by the acceptor for honor. § 282. When deemed to be an acceptance for honor of the drawer. — Where an acceptance for honor does not expressly state for whose honor it is made, it is deemed to be an acceptance for the honor of the drawer. THJS NEGOTIAB-LE INSTEUMEWTS LAW. 481 § 283. liability of acceptor for honor.— The acceptor for honcr is liable to the holder and to all parties to the bill subsequent to the par- ty for -whose honor he has accepted. § 284, Agreement of acceptor for honor. — The acceptor for honor by such acceptance engages that he ■will on due presentment pay the bill according to the terms of his acceptance, provided it shall not have been paid by the drawee, and provided also that it shall have been duly presented for payment and protested for non-payment and no- tice of dishonor given to him. e'^ § 285. Maturity of bill payable after sight; accepted for honor. — Where a bill payable after sight is accepted for honor, its maturity is calculated from the date of Ihe noting for non-acceptance and not from the date of the acceptance for honor. § 286. Protest of bill accepted for honor, et cetera. — Where a dis- honored bill has been accepted for honor supra protest or contains a reference in ease of need, it must be protested for non-payment before it is presented for payment to the acceptor for honor or referee in case of need. § 287. Presentment for payment to acceptor for honor; how made. — Presentment for payment to the acceptor for honor must be made as follows : 1. If it is to be presented in the place where the protest for non- payment was made, it must be presented not later than the day follow- ing its maturity ; 2. If it is to be presented in some other place than the place where it was protested, then it must be forwarded within the time specified in section one hundred and seventy-five. § 288. When delay in making presentment is excused. — The provi- sions of section one hundred and forty-one apply where there is de- lay in making presentment to the acceptor for honor or referee in case of need. § 289. Dishonor of bill by acceptor for honor. — When the bill is dis- honored by the acceptor for honor it must be protested for non-pay- ment by him. Banks, 31 482 THE JSTEGOTlABIiE INSTBUMEIfTS LAW. AETIOLE XV. Payment of Bills of Exciiajstge foe Honor. Section 300. Who may make payment for honor. 301. Payment for honor; how made. 302. Declaration before payment for honor. 303. Preference of parties offering to pay for honor. 304. Effect on subsequent jjarties where bill is paid for honor.. 305. Where holder refuses to receive payment supra protest. 306. Eights of payer for honor. Section 300. Who may make payment for honor.— Where a bill has been protested for non-payment, any person may intervene and pay its supra protest for the honor of any person liable thereon or for the honor of the person for whose account it was di'awn. § 301. Payment for honor; how made. — The payment for honor snpra protest in order to opei'ate as such and not as a mere voluntary payment must be attested by a notarial act of honor, which may be appended to the protest or form an extension to it. § 302. Declaration before payment for honor. — The notarial act of honor must be founded on a declaration made by the payer for honor, or by Ms agent in that behalf declaring his intention to pay the bill for honor and for whose honor he pays. § 303. Preference of parties offering to pay for honor. — Where two or more persons ofFer to pay a bill for the honor of different parties, the person whose payment will discharge most parties to the bill is to be given the preference. § 304. Effect on subsequent parties where bill is paid for honor. — Where a bill has been paid for honor all parties subsequent to the par- ty for whose honor it is paid are discharged, but the payer for honor is subrogated for, and succeeds to, both the rights and duties of the holder as regards the party for whose honor he pays and all parties liable to the latter. § 305. Where holder refuses to receive payment supra protest.— Where the holder of a bill refuses to receive payment supra protest, THE KEGOTJABLE INSTRUMENTS LAW. 483 be loses his right of recourse against any party who would have been discharged by such payment. § 306. Eights of payer for honor.— The payer for honor, on paying to the holder the amount of the bill and the notarial expenses inciden- tal to its dishonor, is entitled to receive both the bill itself and the pro- test. AETICLE XVI. Bills in a Set. Section 310. Bills in sets constitute one bill. 311. Rights of holders where different parts are negotiated. 312. Liability of holder wlio indorses two or more parts of a set to dif- ferent persons. 313. Acceptance of bills drawn in sets. 314. Payment by acceptor of bills drawn in sets. 315. Effect of discharging one of a set. Section 310. Bills in sets constitute one bill. — ^Where a bill is drawn in a set, each part of the set being numbered and containing a reference to the other parts, the whole of the parts constitute one bill. § 311, Rights of holders where different parts are negotiated. — Where two or more parts of a set are negotiated to different holders in due course, the holder whose title first accrues is as between such hold- ers the true owner of the bill. But nothing in this section affects the rights of a person who in due course accepts or pays the part first pre- sented to him. § 312. Liability of holder who indorses two or more parts of a set to different persons. — Where the holder of a set indorses two or more parts to different persons he is liable on every such part, and every indorser subsequent to him is liable on the part he has himself in- dorsed, as if such parts were separate bills. § 313, Acceptance of bills drawn in sets. — The acceptance may be written on any part, and it must be written on one part only. If the drawee accepts more than one part, and such accepted parts are nego- tiated to different holders in due course, he is liable on every such part as if it were a separate bill. 484 TKB NEGOTIABLE irTSTEUMENTS LAW. § 314. Payment by acceptor of bills drawn in sets. — When the ac- ceptor of a bill dra-wn in a set pays it without requiring the part bear- ing his acceptance to be delivered up to him, and that part at matu- rity is outstanding in the hands of a holder in due course, he is liable to the holder thereon. § 315. Effect of discharging one of a set. — Except as herein other- wise provided, where any one part of a bill drawn in a set is dis- charged by payment or othei-wise the whole bill is discharged. AKTICLE XVII. PrOJIISSOEY IfOTES AND CheCKS. SECTlorr 320. Promissory note defined. 321. Check defined. 322. Within what time a check must be presented. 323. Certification of check; effect of. 324. Effect where holder of check procures it to be certified. 325. When check operates as an assignment. Section 320. Promissory note defined. — A negotiable promissory note within the meaning of this act is an unconditional promise in Avriting made by one person to another, signed by the maker, enga- ging to pay on demand or at a iixed or determinable future time a sum certain in money to order or to bearer. Where a note is drawn to tie maker's own order, it is not complete until indorsed by him. § 321. Check defined. — A check is a bill of exchange drawn on a bank, payable on demand. Except as herein otherwise provided the provisions of this act applicable to a bill of exchange payable on de- mand apply to a check. § 322. Within what time a check must be presented. — A check must be presented for payment within a reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay. § 323. Certification of check; effect of,— Where a check is certified by the bank on which it is drawn the certification is equivalent to an acceptance. THE NEGOTIABT.E INSTETJMENTS LAW. 485 § 324. Effect where the holder of check procures it to be certified. — "Where the holder of a check procures it to be accepted or certified the drawer and all indorsers are discharged from liability thereon. § 325. When check operates as an assignment. — A check of itself does not operate as an assignment of any part of the funds to the cred- it of the drawer with the bank, and the bank is not liable to the holder, unless and until it accepts or certifies the check. AUTICLE XVIII. ]!fOTES GlVElT FOE pATEJN'T lilGIITS AND FOE A SPECULATIVE OoN- SIDEEATION. Section 330. Negotiable instruments given for patent rights. 331. Negotiable instruments given for a speculative consideration. 332. How negotiable bonds are made non-negotiable. Section 330. Negotiable instruments given for patent rights. — A promissory note or other negotiable instrument, the coiis.ideration of which consists wholly or partly of the right to make, use or sell any invention claimed or represented by the vendor at the time of sale to be patented, must con+ain the words "given for a patent right" promi- nently and legibly written or printed on the face of such note or in- strument above the signature thereto ; and such note or instrument in the hands of any purchaser or holder is subject to the same defenses as in the hands of the original holder ; but this section does not apply to a negotiable instrument given solely for the purchase price or the use of a patented article. As to validity ot notes given for patent-rights, see also editorial note to First Nat. Bank of Chattanooga v. Stockell, 20 L. R. A. 605. § 331. Negotiable instruments for a speculative consideration. — If the consideration of a promissory note or other negotiable instru- ment consists in whole or in part of the purchase price of any farm product, at a price greater by at least four times than the fair market value of the same product at the time, in the locality, or of the mem- bership and rights in an association, company or combination to pro- 486 TTTE NEC-lOTIABT.E INSTRUMENTS I-AW. duce or sell any farm product at a fictitioiis rate, or of a contract or bond to purchase or sell any farm product at a price greater by four times than the market vahie of the same product at the time in the lo- cality, the words, "given for a speculative consideration," or other words clearly showing the nature of the consideration, must be promi- nently and legibly written or printed on the face of such note or in- strument above the signature thereof ; and such note or instrument, in the ha.nds of any pui'chaser or holder, is subject to the same defenses as in the hands of the original owner or holder. § 332. How negotiable bonds are made non-negotiable. — The own- er or holder of any corporate or municipal bond or obligation (except sucli as are designated to circulate as money, payable to bearer), here- tofore or hereafter issued in and payable in this State, but not regis- tered in pursuance of any State law, may make such bond or obliga- tion, or the interest coupon accompanying the same, non-negotiable, by subscribing his name to a statement indorsed thereon that such bond, obligation or coupon is his property; and thereon the principal sum therein mentioned is payable only to such owner or holder, or his legal representatives or assigns, unless such bond, obligation or coupon be transferred by indorsement in blank, or payable to bearer, or to order, with the addition of the assignor's place of residence. [A-ETICLE XIX. Laws Repealed; When to Take Ei-fect. Section 340. Laws repealed. S41. When to take effect. Section 340. Laws repealed. — The laws or parts thereof specified in the schedule hereto annexed are hereby repealed. § 341. When to take effect.— This chapter shall take effect on the first day of October, eighteen hundred and ninety-seven. SOHEDXILE OF LiAWS REPEALED. Revised Statutes. Sections. Subject matter. R. S., pt. 31., ch. 4, tit. II All Bills and notes. Laws of — Chap. Sections. Subject matter. 1835 141 All Notice of protest; how given. 1857 416 All Coimnercial paper. NEtJOTfABLE INSTRUMENTS MISDEMEANORS. 487 Sections. Subject matter. All Protest of foreign bills, etc. All Negotiability of corporate bonds; how limited. All Negotiable bonxisj how made non-ne- gotiable. All Negotiable bonds ; how made negotia- ble. 1, 3 Negotiable instruments given for pa- tent rights. All Etf ect of holidays upon payment of commercial paper. All One hundredth anniversary of the in- auguration of George Washington. I Negotiable instruments given for a speculative consideration. All Days of grace abolished. Revised Statutes. 1865 . 309 1870 , 438 1871 .., . 84 1873 . 595 1877 . 65 1887 , 461 1888 . 229 1891 , . 262 1894 607 LAWS OF iNEW YORK, 1897, CHAPTER 613. AN" ACT to amend the Penal Code, relative to violation of the nego- tiable instruments law. The People of the State of Nevj Yorlc, represented in Senate and Assembly, do enact as folloivs: Section 1. The penal code is hereby amended by inserting at the end of title twelve the following new sections : § 384ra. Notes given for patent rights.— A person who takes, sells or transfers a promissory note or other negotiable instrument, know- ing the consideration of such note or instrument to consist in whole or in part of the right to make, use or sell any patent invention or inven- tions, or any invention claimed or represented to be patented, without having the words '"'given for a patent right" written or printed legibly and prominently on the face of such note or instrument above the sig- nature thereto, is guilty of a misdemeanor. § 384n. Notes given for a speculative consideration. — ^A person who takes, sells or transfers a promissory note or other negotiable in- strument, knowing the consideration of such note or instrument to consist in whole or in part of the purchase price of any farm product at a price greater by four or more times than the fair market value of the same product at the time in the locality, or in which the consider- 488 iVEGOTIABLE IKSTIlUMEIfTS MISUEMEANOES. ation shall be in whole or in part niemberehip of and rights in an association, company or combination to produce or sell any farm prod- uct at a fictitious rate, or of a contract or bond to purchase or sell any farm product at such rate, without having the words "given for a speculative consideration," or other words clearly showing the nature of the consideration prominently and legibly written, or printed on the face of such note or instrument above the signature thereof is guilty of a misdemeanor. § 2. Section two of chapter sixty-five of the laws of eighteen hun- dred and seventy-seven, and section two of chapter two hundred and sixty-two of the laws of eighteen hundred and ninety-one, are hereby repealed. § 3. This act shall take effect the first day of October, eighteen hundred and ninety-seven. NATIONAL BANK ACT AND COGNATE UNITED STATES STATUTES. (Annotated.) NATIONAL BANK ACT AND COGNATE UNITED STATES STATUTES. (Annotated) Iis"TEOD[JCTIOX. It will be seen by reference to the preceding biatorical sketch* that tlie first Bank of the United States was chartered in 1791. After an existence of twenty years, the bill to re-charter the same was defeated in each house of Congress by a single vote. Five years afterward a second United States Banlc was created, which likewise continued in existence twenty years. This last-mentioned bank had a capital of $35,000,000. If a sim- ilar institution were to be established to-day, bearing a like propoi'^ tion to the wealth of the country, it would require a capital of more than $600,000,000, many fold larger than the combined wealth of the Bank of England and the Bank of France. The contemplation of such an enormous power placed in the hands of any body of men, gives a just appreciation of the conduct and motives of President Jackson in his contest with this institution. His judgment was correct. He saw that such a corporation, increasing with the growth of the country, would surely tend to cornxption, while its unlimited power might be directed to interfere with the independence of Con- gress, and with the liberty of the people, f After the downfall of the second United States Bank, several un- *See title "First and Second Banks of the United States," Historical Sketch, ante, p. 8. fBIaine's Twenty Years of Congress, vol. i., p. 418. 491 492 NATIOI'TAI. BATSriaNG LAW. successful attempts were made to establish a itfational Bank. Dur- ing the administration of President Tyler, Congress passed a bill cre- ating such a bank. This bill was vetoed by him because of certain features wliich he alleged were objectionable ; yet notwithstanding the removal by Congress of the objectionable features from the bill, he vetoed it a 'second time. The Treasury^ Department was established September 2, 1789. The 7ernment began its existence by assuming debts amounting in the aggregate to $72,775,895, of which $12,556,874 was foreign, and $40,256,802 was domestic debt of the Confederation, and $19,962,- 219 was debt of the States. From 1833, when the renewal of the bank charter was refused, to :1836, the note circulation of the country increased from $94,000,000 to $149,000,000. The public debt was paid in full in 1835. In the year 1836 the Government found itself in the possession of a large sui-pliis revenue, amounting to over $40,000,000, resiilting chiefly from the sale of public lands. All such surplus, except the sum of $5,000,000, was distiibuted among the States, on the basis of their respective Congressional representation. January 1, 1849, the public debt was $63,000,000. The greater part of this sum was incurred by reason of the Mexican war. It was increased $5,000,000 in 1850 by the payment of the Texan Indem- nity. January 1, 1851, the debt amounted to $68,304,796, and Jan- uary 1, 1857, it amounted to but $28,699,831. In 1846, Congress established the Independent Treasury. From that time the Government has collected and disbursed its revenues, without the interventon of the banks. Its receipts and payments were thereafter in specie alone. This was the system in vogue at the beginning of the civil war in 1861. At that time the debt of the Government was $90,580,873. The increase was due to the expenses of several Indian wars, and to some small loans made in anticipation of internal difficulties. Teeasuey Notes. Prior to the civil war, no bank of issue had ever been created by the Government of the United States. At that time the amount of paper money in circulation by State banks was about $200,000,000, three- fourths of which had been issiied by the banks located in the Northern States. July 17, 1861, Congress aiithorized the issuing of Treasury notes payable on demand, to the amount of $250,000,000, or so much KATIONAI. BANKING LAW. 493 thereof as the Secretary of the Treasury might deem necessary for the public service. This law did not make such notes a legal tender. Statutes were enacted during the year 1862 by the national legis- lature, on February 25, and July 11, authorizing the issue of Treasury notes to the amount of $300,000,000, of which sum $50,000,000 were in lieu of the notes issued in pursuance of the act first mentioned. This last issue was made a legal tender except in payment of duties on imports, and of interest on the national debt. By the act of March 3, 1863, an additional issue of $150,000,000 of Treasury notes was authorized. Jime 30, 1864, an act was passed providing that the total of legal tenders should not exceed $400,000,000, and such addi- tional svjn not exceeding $50,000,000, as might be "temporarily re- quired for the redemption of temporary loans." The highest point which the government debt ever reached was $2,- 84-1,649,626, August 31, 1865, when the annual interest charge was $150,977,697. The largest amount of legal tenders in circulation was during this year, and aggregated $432,687,966. April 12, 1866, a statute was enacted to fund the legal tender notes, under which more than $72,000,000 were retired; but February 4, 1868, an act became a law without the approval of the President, whereby any further re- duction was prohibited, thus leaving the volume of legal tenders out^- standing at $356,000,000. During the year 1866, many of the State banks changed to the national system because of a law passed March 3, 1865, imposing a tax of ten per centum on the amount of notes of any State bank or banking association paid out after July 1, 1866. The law of March 18, 1869, declared the faith of the United States to be solemnly pledged to the payment, in coin or its equivalent, of all its obligations, not bearing interest, known as United States notes, and of all its obligations bearing interest, except in cases where the law authorizing the issue of any such obligations has expressly provid- ed that the same might be paid in lawful money, or other currency than gold or silver. The maxiinum amount of Treasury notes was fixed at $382,000,- 000 by section 6 of the act of June 20, 1874. A statute, entitled "An act to provide for the resumption of specie payments," was enacted January 14, 1875, whereby Congress re- pealed section 5177 of the Kevised Statutes,* limiting the aggregate *In June, 1866, Congress directed the revision and consolidation of all the general and permanent statutes of the United States (ch. 140). Such revision, embracing the laws in force December 1, 1873, was approved June 20, 1874, and was entitled the "Revised Statutes of the United States" (ch. 338). 494 NATIONAL BANKING LAW, amount of circulating notes of national banking associations, and en- acted that wlienever and so often as circulating notes should be issued to such associations, it should be the duty of the Secretary of the- Treasury to redeem legal tender notes to the amount of eighty per centum of the national bank-notes so issued, and to continue such re- demption until there should be outstanding the sum of $300,000,000 of such legal tender notes and no more ; and that on and after the 1st day of Januarj', 1879, that oiScer should redeem in coin the United >States legal tender notes then outstanding', upon their presentation for redemption at the oiiice of the assistant Treasurer of the United States, in the city of New York, when presented in sums of not less than $50. The act of June 20, 1874, previously mentioned, authorized banks to deposit with the Treasurer lawful money for the redemption of their circulation, and to withdraw from deposit a proportionate amount of bonds. Many banks, induced by the high premiums upon their government bonds and by the low rates of profit to be gained by issuing circulating notes, availed themselves of this authorization, and withdrew their circulation in whole or in part ; hence the effect of the law under discussion, although it removed all bounds to the in- crease of notes to be issued by the banks both as to amount and geo- graphical limits, was not to augment, but on the contrary, for a con- siderable period, to decidedly diminish the volume of circulation.^ To enable that officer "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 appropri- ated, and to issue, sell and dispose of, at not less than par in coin," any of the five, four and a half and four per cent, bonds authorized by the law of July 14, 1870. The unlimited power thus given to the Secretary of the Treasury by this law, enabled him to deter by the sale of bonds, any transfer of coin to foreign countries, which transfer might have hazarded the redemption of the legal tender notes. May 31, 1878, a statute was enacted, entitled "An act to forbid the further retirement of United States legal tender notes." This law was to the effect, that it should be unlavpful for the Secretary of the Treasury, to cancel or retire any more legal tender notes, but when any of the same are redeemed or received into the Treasury under anj law, they should not be retired or destroyed, but should be re- issued, and kept in circulation. This statute in terms repealed all laws in conflict therewitL It is evident that the intention of this act is, that NATIONAL BANKING LAW. 495. notes re-issued should retain their original quality of legal tender^ A decision of the Supreme Court of the United States in connection with this statute declares, that Congress has the constitutional power to direct, at any time in its discretion, unlimited issues of Treasuiy notes with all the legal attributes of coin. In otlier words, the Na- tional Legislature may make any kind of paper currency a legal ten- der in payment of private debts, and this power may be exercised whenever a condition of affairs obtains which that body shall consider to be an exigency.* ISTational Bank Act. The Secretary of the Treasury, in his annual report for 1861, sub- mitted two plans for obtaining the necessary means for prosecuting the war : First, to substitute government notes payable in coin on demand, for those already issued by private corporations. Second, to gradually issue national bank-notes secured by the pledge of government bonds, to take the place of the then existing State bank-notes issued pursuant to authority derived from the stat- utes of the several States, f That officer in his report urged the adoption of the second of these •This decision was gi^wen in JiiiUaxd v. Greenman, 110 U. S. 421, 28 L. ed. 204, 4 Sup. Ct. Rep. 122. fSee report of Millard Fillmore, Comptroller of this State, December 30, 1848 (pp. 56, 57), suggesting that circulating notes issued by State banks be secm-ed by United States stocks, the same "to be received for public dues to the national treasury; this would give to such notes a universal credit, co-extensive with the United States, and leave nothing further to be desired in the shape of a national paper currency." An article written by John J. Knox, formerly Comptroller of the Currency, may be found in Hunt's Merchant's Magazine of Jamiary, 1862, advocating the passage by Congress of a National Bank Law of a like character to the Free Banking Act of this State. During the month of August, 1861, Orlando B. Potter, a member of the bar of the city of New York, and recently a member of Congress from that city, sub- mitted to President Lincoln and to Secretary Chase a plan for a national cur- rency secured by government stocks. This plan was to permit banks and bankers,, duly authorized, in the loyal States, to secure their bills by depositing, with a superintendent appointed by the government, government stocks at their par value,, in the same way that the banks and bankers in New York then secured their cir- culation, by depo.siting stocks of the State of New York or of the United States with the State Banking Department, thus making the stocks of the United States 496 JSrATIOlSTA.!. BAN.TaiiG LAW. plans. A bill* to establish national banks having been introduced in Congress, it was urged that the proposed system would prove of great benefit in furnishing a permanent market for the large issuej of bonds, which it was then evident must be made to meet the expendi- tures of a great war. The bill met vdth strong opposition ; but after spirited and able debate, it passed both branches of the National Legis- lature by an exceedingly small majoirity, and became a law February 25, 1863 (ch. 68). The statute creating this system of national banks is dissimilar in many essential respects from the previously men- tioned laws incorporating the two Banks of the United States. This act is entitled "An act to provide a national currency secured by a pledge of United States bonds, and to provide for the circulation and redemption thereof," and is based iipon the Free Banldng Act (ch. 260, Laws of 1838) of the State of Now York.f The satisfactory experience of the people of this State in connection with the practi- a basis of banking on which alone a national circulation can be secured. To do this, he stated, "it is necessary only for the government to authorize and ap- point a superintendent connected with the treasury, whose duty it shall be to receive from duly aiTthorized banks and bankers within loyal States, United States stocks in sums of not less than, say, $200,000 from one party, and hold the same as security for an equal amouTit of bUls to be properly stamped and signed by such superintendent, and delivered to the depositing bank or banker. This mark or stamp and signature of such superintendemt to guarantee to the holder of the bills issued, that the same are secured by United States stocks de- posited with and held by the government; and that in ease the same shall fail to be redeemed by the bank or banker issuing them, then on due demand and pro- test, such superintendent will sell, after proper notice to the bank or banker, and apply to the redemption of said bills, the stocks held to secure the same. "This money might properly be designated United States currency, as distin- guishing it from the bills issued in the several States, and not thus secured; and should be so plainly and unmistakably designated as to be readily distin- guishable eveiywhere at sight. It might be received and paid out by the gov- emmeint in cases where it is not otherwise agreed or provided, but this is not at all essential to the plan, and might encounter the prejudices of those who think specie more reliable than the faith and covenant of the government under which they live." He further stated that tlie foregoing plan would be fully un- derstood, by an examination of the statutes of this State regulating the securing of their circulations by our banks, by deposit with the State. It will be noticed that this is the plan substantially adopted by Congress, February 23, 1863, with the exception that national banks were created subject to the supervision of the general government. 'This bill was introduced by Elbridge G. Spaulding, formerly Treasurer of the State of New York, and then representing the Second Congressional District of that State. tSee Historical Sketch, ante, 45, 46. ITATIONAT. BANKING LAW. 497 cal working of the General Banking I.aw of 1838, doubtless led to the adoption, by the jSTational Legislature, of its leading features ; and it is a remarkable fact, that experience has demonstrated, that only in a few instances have either the State or the national act required any change in order to improve them. Prior to IN'ovember 28, 1863, 134 national banking associations had organized, under this law, having a total capital of $7,184,715. The bonds deposited with the Treas- urer amounted to $3,925,275. The act of 1803 was repealed during the-first session of the Thirty- eighth- Congress, by the law of June 3, 1864 ; the latter being a substi- tuted act containing similar provisions. The few amendments and additional acts which have been passed by Congress, from time to time, are hereafter mentioned in the notes, and are printed in full. An act of June 20, 18 T4, declares this law shall thereafter be known as "the JSTational Bank Act." On October 1, 1865, there were in existence 1,513 national banking associations Avith a capital of $395,729,597.83, and having bonds de- posited with the Treasurer to the amount of $276,219,950. IsTatioisai- Gold Banks. July 20, 1870, an act was passed, aiithorizing the organization of national gold banl<;s. These banks are permitted to re<;eive from the Treasurer of the United Stales, upon government bonds deposited with him, eighty per centum thereof in circulating notes. Such notes are payable in gold at the office of issue, and are a legal tender in pay- ment of debts to any other national gold bank, provided the associa- tion by which they were issued is still redeeming its notes. These banks are obliged to maintain a reserve in gold and silver coin of an amount equal to one-quarter of their circulation; and, except as to circulation, are subject to the same regulations as other national banks. An act of Congress passed February 14, 1880, authorized the conversion of national gold banks into currency banks, with the same powers and privileges granted by law to the latter associations. Amendments. An important statute became a law July 12, 1882, and is entitled "An act to enable national banking associations to extend their corpo- rate existence, and for other purposes." It permitted such banks to Banks, 32 498 NATIOirA.L BANKING LAW. extend tlie period of succession for not more than twenty years, by an ameudment to their articles of association. A further act of April 12, 1902 (post) extends this period to twenty years further addition- al. The law also provided, that "the jurisdiction for suits brought subsequent to its enactment in connection with any of such associa- tions, except suits between them and the United States, or its officers or agents, shall be the same as, and not other than, the jurisdiction for suits by or against banks not organized under the United States Stat- utes, which do or might do banking business where such national banking associations may be doing business, when such suits may be begun." Section 12 of this act authorized and directed the Secretary of the Treasury to receiA'^e deposits of gold coin, and to issue certifi- cates for the same ; such certificates, as well as silver certificates, to be counted as part of the lawful reserve of banks. The object of this amendment is to make the use of specie more available, by saving the expense of transporting it from place to place. By the original law national banks were required to pay their own notes at their counter, and also to redeem them through the agency of a like bank located in one of eighteen enumerated cities, called re- demption cities ; but by section 3 of the act just quoted, they were re- quired to redeem their notes at the Treasury of the United States. Banks carrying on business in these cities are required to appoint a redemption agent in the city of New York. Sixteen of the cities are now termed reserve cities* in the statute. But, by an act passed March 3, 1903, it was provided that upon the request of three-fourths of the national banks in any city having a population of twenty-five thousand, such city may be added to the list of reserve cities. March 3, 1883, the capital and deposits of banks, bankers and national bank- ing associatioos were excepted from taxation by the act passed to reduce internal revenue taxation; and it may be added, the law im- posing the stamp tax on bank checks was repealed by the same act. May 1, 1886, a law was passed which provided that any national bank may, with the approval of the Comptroller of the Currency, by the vote of shareholders owning two-thirds of its stock, increase its capital in accordance with existing laws, to any sum approved by that officer, notwathstanding the limit fixed in its original articles of association and determined by him; and no increase of capital either within or beyond the limit fixed in its original articles of association may be made except in this manner. •See § 5192, U. S. R. S., U. S. Comp. Stat. 1901, p. 3487, post. KATIOKAL BANKING LAW. 499 Any national bank 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 CuiTency, by the vote of share- holders owning two-thirds of the stock. A duly authenticated notice of the vote and of the now name or location selected should be sent to that officer; but no change of name or location is valid until he has issued his certificate of approval of the same. All debts, liabilities, and powers under its old name devolve upon and inure to the association under its new name. A statute passed August 13, 1888, provides that in all litigations aifecting national banks they shall be deemed citizens of the States in which they are respectively located, and in such cases the United States courts do not have jurisdiction other than such as they would have in litigations between individual citizens of the same State. It should be noted that the act of August 13, 1894, declares that circulating notes and legal tender notes and certificates, and coin, shall be deemed taxable as money on hand or on deposit; and that the act of March 2, 1897, made substantial changes in section 3 of the act of June 30, 1876, and more specifically regulates the distribution of the assets of insolvent banks. Ceetiiication of Checks. The last section but one (13) of the statute of July 12, 1882, pro- vided that certified checks are not to be issued contrary to the pro- visions of the act of March 3, 18G9 ; the same being section 5208 of the United States lievised Statutes, and prescribed a penalty for such illegal issue, and that conviction therefor should result in the imposi- tion of a fine of not more than $5,000, or imprisonment for not more than five years, or both, in the discretion of the court. The act just mentioned was the first legislative notice taken of the certification of checks. The last mentioned section provided that it should be unlawful for any officer, clerk, or agent of any national bank, to certify any check drawn upon said banlc, unless the drawer should, at the time such check is certified, have on deposit in said bank an amount of money equal to the amount of such check, which was, nevertheless, if cer^ tificd, to be a good and valid obligation against the bank. The only penalty, previous to this enactment, for such illegal certification, was the appointment by the Comptroller of a receiver of the offending institution. 500 NATIONAL BANKJ-TSTG LAW. It may not be irrelevant to add that tlie custom of certifying checks on credit originated with the banks of the State of ITew York and was time-honored long before the present national banking system came into existence : and experience does not indicate that such loans of credit have been a source of disaster to either the banks of this State or the national banks. It is as proper for a bank to loan its credit when secured as to loan its money. !N'atio:?ai. Banking System. December 1, 1902, there were in existence 4,337 national banking associations, which is the largest number in operation at any time. Since the establishment of the system, 6,074 have been organized. The act known as the Currency Act of 1900, passed March 14th, 1900, contained an amendment which empowered the Comptroller of the Currency to authorize the organization of banks with a mini- mum capital of $2.5,000 in places having a population not exceeding three thousand. Under this law, eight liundred and five associations, with a capital of less than $50,000 and generally with a capital of $25,000, have been organized. At the present time seven hundred and ninety-one of these banks are in active operation. One of these has been placed in the hands of a Receiver and thirteen have gone into voluntary liquidation. It is to be noted that the same act repealed section 5193, U. S. Comp. Stat. 1901, p. 3491, of the I^ational Bank Act. National banks were established for the purpose in part of provid- ing a currency for the whole country, and in part to create a market for the bonds of the general government ; it could not have been in- tended, therefore, to expose them to the hazard of unfriendly legisla- tion by the States, or to ruinous competition with State banks. On the contrary, much has been done to insure their taking tho place of State banks. The incorporation or continuance of the latter has been discouraged by the imposition of a tax upon their issues so large as to compel a withdrawal of all issues from circulation.* National banks are instruments designed to be used to aid the government in the administration of an important branch of the public service ; they are means appropriate to that end. Of the necessity which existed for creating them. Congress is the sole judge. The States, as such. "Tiffany v. National Bank of Missouri, 18 Wall. 409, 21 L. ed. 862; First Na- tional bank of Clarion v. Gruber, 87 Penn. St. 4^77, 30 Am. Rep. 378. S' NATIONAL BANKING LAW. 501 can exercise no control over them, nor in any wise affect their opera- tion, except in so far as Congress may see proper to permit. To at- tempt to do tliis is "an abuse, because it is the usurpation of power which a single State cannot give." "The States, have no power, by taxation or otherwise, to burthen, or in any manner control, the opera- tion of the constitutional laws enacted by Congress to carry into exe- cution'the powers vested in the general government."-}- Our present financial system is a mosaic of emergency legislation. It came into being by reason of the civil war, at a time when the na- tion had to adopt expedients to avert possible destruction. If it is to be reformed it should be done at the present time, when no emer- gency exists. Its weakness is not so apparent in good times, but evi- dently enough its weakness is one of the causes of bad times and the frequent pledges wlxich have been made of financial reform should be brought into fulfillment. The National bank act should not be disturbed. It has existed thirty-nine years ; hundreds of judicial decisions have been rendered as to the meaning of its various portions. It has been approved by successive CongTcsses, and it has the complete confidence of the na- tion. It is to-day as nearly a perfect statute as a general law can be made. In view of the remarkable prosperity of the West and South, it is evident that a much greater demand for currency has to be met than ever before in our history. If prosperity is to continue, we must have more currency, and this can be done in a way which will not call for the repeal of existing laws. tTpon general principles, it is unwise to discourage the issue of circulating notes by banks. Without them, the eun-ency would consist of gold certificates and coin, which are the most desirable currency in point of stability, provided enough were in circul alien to supply the needs of trade, of silver certificates and coin, which are uncertain in value, and of legal-tender notes, which are also uncertain and may become redeemable in silver. It is evident that without the circulating notes of banks the currency of the country may be unsteady through changes in relative values, as well as by congressional action. tFarraers, etc., National Bank v. Bearing, 91 U. S. (1 Otto) 29, 23 L. ed. 196, citing Weston el al. v. Charleston, 2 Pet. 400, 7 L. ed. 487 ; McCuUoch v. Maiy- land, 4 Whea-i. 316, 4 L. ed. 579; Osborn v. Bank of United States, 9 Wheat. 708, 6 L. ed. 204; Brown v. Maryland, 12 Wheat, 419, 6 L. ed. 678; Veazie Banlc v. Pen'no, 8 Wall. 533, 19 L. ed. 482. 502 KAT1035iAL BANKING LAW. The Suffolk system of the daily coin redemption of notes made a banking- sys.tem which was practically perfect, except that it lacked the element of insurance to protect the holders of circulating notes. Had a proper guarantee fund been created, the notes would have been commercially perfect. Reference might well be had to the operations of the Bank of England during its two centuries of existence, especially during what is known as the "registration period" ; its fiduciary notes (including the amount authorized by order in Council of last August to be is- sued) have increased to £18,175,000. As an abstract proposition. State banks should not be debarred froon the privilege of issuing circulating notes. A bank ought to possess three functions: First, it should be permitted to receive money on deposit and hold it subject to draft, or under an agreement as to the time of its return ; secondly, it should have the right to loan money ; thirdly, it should possess the privilege, subject to restrictions, of paying out its own notes. The safety fimd system* of the State of 'New York, as it was gen- erally termed, would have proved successful had the banks of the State been siibject to other conditions. While by law each bank was forbidden to issue circulating notes to a greater amount than twice its capital, yet no provision of law existed whereby a supervision could be exercised like that which obtains at present. A number of insti- tutions violated the statute, and the fund which was intended to se- cure the payment of a bank's deposits, as well as its currency, was found to be too small. Iso bank was compelled to contribute to the fund beyond one-half of 1 per cen{. annually on its capital for six years, because the law provided that when 3 per cent, of its capital had been paid its contributioils should cease. The State of New York enacted April 13, 1838, a general banking law which has as its main feature a secured currency. It is the basis of the !N"ational Bank Act. That Commonwealth has carefully pre- served, by re-enactment and revision, its laws for the issue of circu- lating notes by banlis and bankers. An epitome of the same is as fol- lows : They provide that any bank or individual banker may deposit with and transfer to the Superintendent of Banks, any interest-bear- ing stocks or bonds of the United States or of the State of Now York or any county or incorporated city of that State authorized to be is- sued by the Legislature, or bonds and mortgages on improved unin- ♦gee Historical Sketch, ante, 28. NATIONAL BANKING LAW. 503 cumbered real property of ^the State of ISTew York wortli seventy-five per cent, more than the amount thereon loaned, but no such stocks or bonds shall be received by the superintendent at a rate above their 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 various denominations, which shall be registered in the books to be kept for that purpose in the office of the superintendent under his direction, by such person as he shall appoint for that purpose, so that each denomination of such circulating notes shall bear the uni- form signature of such register. The aggregate amount of notes thus issued to any bank or individ- ual banker shall not exceed ninety per cent, of the market value of the stocks and bonds of other securities so deposited with and trans- ferred to the superintendent by such bank or bankers. Every bank or banker issuing circulating notes, except those whose place of business is in certain cities which have not already made such an appointment, shall forthwith appoint in writing an agent who shall keep an office in designated cities for the redemption of all circulating notes issued by it or him, which shall be presented to such agent for payment or redemption. Any bank or individual banker or other person may be such agent, and in case of the neglect or omission of any such bank or banker to appoint such agent, the superintendent shall appoint him, and any bank or banker who shall refuse to redeem its notes on demand, such bank or banker shall pay to the pei-son making such demand interest on such notes at the rate of twenty per cent, per annum, and if such redemption is not made 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 with the like effect, as though insolvent. The superintendent may also give notice in a State paper that all the circulating notes issued by such bank or bankers will be redeemed out of the trust funds in his hands for that purpose, and he is authorized to apply such funds to the pay- ment, pro rata, of all circulating notes put in circulation by said bank or bankers. A plan may be suggested whereby even if the affairs of a bank were manao'ed injudiciously, or the supervision exercised by the authori- ties of the State wherein it was located was inefficient, its currency would be so absolutely secure that it would be taken as freely at one end of the Union as the otlier. By reason of its elasticity, it would 504 NATIONAL BANiaNG LAW. prove an important factor in accelerating business transactions and developing the resources of the currency. "Under the old system, pub- lications known as bank-note detectors were a necessity to protect busi- ness men from worthless notes. The engraving and printing by the Government of circulating notes is now so well done, that counter- feiting of its currency has almost ceased. It is reasonable to believe that the people of this country will not sanction a return to the old custom, vvhereby we had nearly as many systems of currency as there v/ere States. Iso currency bill ought to be considered by Congress which is not based upon the thought so well expressed in the charter of the Bank of France. "The essential interests of the country imperiously de- mand that everj' bfmk bill be declared to be lawful money and shall be able to circulate equally in all parts of the land." It may be urged that securities, like those mentioned could not be promptly converted into cash in case of an emergency ; that the public must be sure, not only that they will be ultimately available, but that the money can be had immediately, and that if there were but the shadow of doubt, although a mistaken one, a panic as to such notes could not be averted ; and even the remote possibility of such a lack of confidence would destroy the usefulness of currency based on such securities. If this statement is met with the answer that the Government would be ready to redeem this currency because fully protected by reason of holding those securities, it may be replied that the Govern- ment should not be compelled to maintain a reserve to meet these notes if presented for payment, and that Congress, representing the people, would not permit the Government to go into the business of keeping money at hand to meet such emergencies. In answer to the foregoing, it may be shown that the currency con- templated can be made more secure than the present ISTational bank currency, and without the necessity for maintaining a reserve. The circulation of each State bank could fte made a preferred lien upon the assets of each institution, to be paid before any other lia- bility is met. The stocldiolders should be individually liable pre- cisely as the law of the State of New York coaitemplates. Assurance would be doubly sure if a yearly revenue tax of one-half of one per cent, collected upon the amount of circulation of each bank, was to be placed in the Treasury as a safety fund for the redemption of all circulating notes in any case where the security mentioned might be inadequate. When the accumulation of a safety fund, as herein sug- NATIOiSrAl BANKING LAW. 505 gested, exceeded a certain percentage of tlie amount represented by the circulating notes, it could be disposed of in various ways. For example : It would be equitable to refund to each bank the sum which it had contributed above a certain ratio to its liability for its currency. Such notes should be printed by the Government under the super- vision of the Compti'oUer of the Currency. With an efficient force this plan would not prove cumbersome. It is no objection to the plan to say that it will strengthen the credit of one State and impair that of another. The Legislature of the State of JSTew York has made a like discrimination concerning the securities in which its Savings in- stitutions are authorized to invest and such a distinction is practically made everywhere in connection with all classes of securities. Cer- tainly, when State Legislatures countenance theft, for successful re- pudiation has in many cases been nothing less, the natural and neces- sary result must be endured ; while those who have displayed a decent regard for the rights of otliers should meet with encouragement. Some plan similar to the one suggested would go far toward bind- ing together the people of the whole nation in a community of inter- est, and would place a premium on honest administration of State and local governments, which experience has shown to have been needed. Circulating notes should be issued by banks in response to the de- mands of the trade, provided such notes are absolutely secure. The needs of busiiness must necessarily control. 'No bank can afford to pay a tax iipon such notes when the demand for the same ceases. No one will deny that before the civil war notes issued by some State banks were in a number of cases disreputable, but there existed as honestjy managed banks then as at the present time. Their circu- lating notes were literally as good as gold, because they were paid in gold. It may be added, without a stable currency we cannot hope for commercial supremacy, while with it we may rest assured as to our future prestige. Such a currency is the chief bulwark of national power. REVISED STATUTES OF THE UNITED STATES. TITLE LXII. NATIONAL BANKS. CHAPTER I. OEaANIZATIOK' AND POWEES. Sectiok 5133. Formation »f national banking associations. 5134. Requisites of organization certificate. 5135. How certificate shall be acknowledged and filed. 5136. Corporate powers of associations. 5137. Power to hold real property. 5138. Requisite amount of capital. 5139. Shares of stock and transfers. 5140. How payment of capital stock must be made and proved. 5141. Proceedings if shareholder fails to pay instalments. 5142. Increase of capital stock. 5143. Reduction of capital stock. 5144. Right of shareholders to vote. 5145. Election of directors. 5146. Requisite qualifications of directors. 5147. Oath required from directors. 5148. Filling vacancies. 6149, Proceedings where no election was held on the proper day. 6150. Election of president of the board. 5151. Individual liability of shareholders. 6152. Executors, trustees, etc., not personally liable. 6153. Duties and liabilities when designated as depositaries of public moneys. 6154. Organization of State banks as national banking associations. 5155. State banks having branches. 5156. Reservation of rights of associations organized under act of 1863. SECTioiq- 5133. [U. S. Comp. Stat. 1901, p. 3454.] Associations for carrying on the business of banking under this title may be 507 508 NATIOITAI, BAKKIIfG LAW. fanned by any number of natural persons, not less in any case tihaQ five. They shall enter into articles of association, -which shall specify in general terms the object for which the association is formed, and may contain any other provisions, not inconsistent with law, which the association may see fit to adopt for the regulation of its business and the conduct of its affairs. These articles shall be signed by the persons uniting to form the association, and a copy of them shall be forwarded to the Comptroller of the Currency, to be filed and pre- served in his orfice. See Act of Febmary 14, 1880, post. 1. The articles of association of a national banking corporation, when ap- proved by the Comptroller, are in the natui-e of a charter. Thus, where one of the articles of association of a bank organized under the National Banking Act. and approved by tho Comptroller of the Currency, provided that its president should hold office for a term fixed, "unless he should become disqualified or sooner removed by a, two-thirds vote of the board" of directors. Held, that the right of removal was complete, independent of any by-law on the subject. Taylor v. Hutton, 18 Abb. Pr. 16; S. C. 43 Barb. 195. 2. National banks were established for the purpose in part of providing a currency for the whole country, and in part to create a Market for the loans of the general government. Tiffany v. National Bank of Missouri, 18 Wall. 413, 21 L. ed. 862. 3. Being brought into existence for this purpose by Congress, which is the sole judge of the necessity for their creation, the State can exercise no control over them, nor in any wise affect their operation, except in so far as Congress may see fit to permit. Farmers', etc., National Bank v. Bearing, 91 U. S. (1 Otto) 29, 23 L. ed. 196. 4. The constitutionality of the ''National Banking Act" is unquestioned. It rests on the same principle as the act creating the second bank of the United States. Id. 5. Congress has power to create national banks, and to make any provisions which tend to promote their efficiency, and to protect them, not only against State legislation, but also against suits or proceedings in State courts by which that efficiency would be impaired. Chesapeake Bank v. First National Bank, 40 Md. 269, 17 Am. Rep. 601. 6. Congress having legally undertaken to provide a currency for the whole country may secure the benefit of it to the people by appropriate legislation. Veazie Bank v. Fenno, 8 Wall. 533, 19 L. ed. 482. 7. All are bound by constructive notice of the statutes r^ulating national banks. Scott v. Deweese, 181 U. S. 218, 45 L. ed. 830, 21 Sup. Ct. Rep. 591. § 5134. [U. S. Comp. Stat. 1901, p. 3454. J The persons uniting to form such an association shall, under their hands, make an organi- zation certificate, whidi shall specifically state : Pirst. The name assumed by such association, which name shall be subject to the approval of the Comptroller of the Currency. WATlONilX BANKING LAW. 509 Second. The place where its operations of discount and deposit are to be carried on, designating- the State, Territory or District, and the particular county and city, town or village. Third. The amount of capital stock and the number of shares into which the same is to be divided. I'ourth. The names and places of residence of the shareholders and the number of shares held by each of them. T^'ifth. The fact that the certificate is made to enable such persons to avail themselves of the advantages of this title. See Act of May 1, 1886 post. 1. "The general business of an officer of a national bank is to be transacted at its regular place of business. At the same time we know that in the course •of business between banks, occasionally the officers do give instructions away from the place of business of the bank." If the bank doing such business sends a, statement of the same to the other bank, and it, through its proper officer, recognizes the validity of the same, it is bound by such recognition. Drum- M0^D, J., in Burton v. Burley, 12 Chic. Leg. News, 178. 2. A national bank is a citizen of the State where, by law, it is located within the meaning of the constitution. The designation of its place of business in the certificate of organization determines its locality, and it can have no other. In tliis case, the authorities upon the subject of the citizenship of corporations are collected and discussed. Cooke v. State National Bank, 52 N. Y. 96, 11 Am. Rep. 667. 3. A national banlc organized and doing business in another State is pro- hibited by the Revised Statutes of the State of New York from keeping an office of discount or deposit in the State of New York, and cannot maintain an action upon any note discounted by it at such office. National Bank of Fairliaven v. The Phoenix W. Company, 6 Hun, 71, 73. § 5135. [U. S. Comp. Stat. 1901, p. 3455.J The organization cer- tificate shall be acknowledged before a judge of some court of record or notary public; and shall be, together with the acknowledgment thereof, authenticated by the seal of such court or notary, transmitted to the Comptroller of the Currency, who shall record and carefully preserve the same in his oiHce. § 5136. [U. S. Comp. Stat. 1901, p. 3455.] Upon duly making and filing articles of association and an organization certificate, the association shall become, as from the date of the execution of its or- ganization certificate, a body corporate, and as such, and in the name •designated in the organization certificate, it shall have power — I'irst. To adopt and use a corporate seal. Second. To have succession for the period of twenty years from its organization, unless it is sooner dissolved according to the provisions 510 NATIONAL BANKING LAW. of its articles of association, or by the act of its shareholders owning two-thirds of its stock, or unless its franchise becomes forfeited by some violation of law. See act of July 12, 1882, post. See act of April 12, 1902, post. Third. To make contracts. 1. National banks are governed as to contracts, acquisition of property, collec- tion of, and suit for debt, by State laws, except where such laws conflict with Federal laws. McClellan v. Chipman, 164 U. S. 357, 41 L. ed. 461, 17 Sup. Ct. Rep. 85. 2. A lease of premises for banking executed before authorization by Comptroller of the Currency to commence business, is void; and nothing can be recovered by lessor of such lease except actual value received by the bank lessee. It cannot be made good by estoppel. McCormick v. Market Bank, 165 U. S. 553, 41 L.ed. 817, 17 Sup. Ct. Rep. 433. 3. A national bank having obtained by its officers a loan from another national bank is estopped from repudiating agency of its officer, and cannot claim ultra vires. Aldrich v. Chemical Natl. Bank, 176 U. S. 636, 44 L. ed. 618, 20 Sup. Ct. Rep. 498. Fourth. To sue and be sued, complain and defend, in any court of law and equity, as fully as natural persons. Fifth. To elect or appoint directors, and by its board of directors to appoint a president, vice-president, cashier, and other oiRoers, de- fine their duties, require bonds of them, and fix the penalty thereof, dismiss such officers or any of them at pleasure, and appoint others to fill their places. 1. It is not necessary that the directors of a national bank shall signify their acceptance of the official bonds of their cashier, by entering a memorandum to that effect in their journal or minute book. The retention of the bond by the directory, after being submitted for approval, and the entering upon and con- tinuation in office of the cashier, create a presumption of acceptance, which may also be proved by oral evidence. Graves v. Lebanon National Bank, 10 Bush (Ky.) 23, 19 Am. Rep. 50, 12 Wheat. 64, 6 L. ed. 552. 2. Where the directors of a national bank published a statement of the con- dition of the bank, showing tliat its affairs were being prudently and honestly administered, by reason of which statement persons subsequently became sureties for the cashier on his bond, he having, previously to the publication of the state- ment, given none, but at the time was guilty of fraud and eralbezzlement of the funds of the bank, — Held, in an action to enforce the liability of the sureties, for embezzlements by the cashier subsequent to the execution of the bond, that they (sureties) had a right to believe that the directors, before publishing the state- ment, made some investigation of the condition of the bank, and being misled and deceived by the misrepresentations of the statement, were released. Id. 3. A surety upon the bond of a cashier of a bank is not discharged by the NATIONAL BANKING LAW. 511 mere fact that the cashier was, at the time the bond was given, a defaulter. Nor will the neglect of the bank to ascertain that fact discharge him. The books of the bank, and the statements of the bank sent to the Comptroller of the Cur- rency, under the National Banking Law, are not admissible in evidence to prove the negligence of the bank officers, nor as tending to establish the fact of knowl- edge on the part of the bank of the existence of the defalcation. Tapley v. Martin, 116 Mass. 275; Wayne v. Commonwealth National Bank, 52 Penn. St. 343; Atlas Bank «. Brownell, 9 R. I. 168, 11 Am. Eep. 231. But see Graves v. Lebanon Natl. Bank, 10 Bush (Ky.), 22, 19 Am. Eep. 50, where it was held that sureties on the bond of a cashier are released by the negligence of the directors. Sixth. To prescribe, by its board of directors, by-laws not incon- sistent with law, regulating the manner in which its stock shall be transferred, its directors elected or appointed, its officers appointed, its property transferred, its general business conducted, and the privi- leges gTanted to it by law exercised and enjoyed. 1. It is not necessary that any by-laws should be adopted before a president may be chosen, or removed, or another appointed in his place. Taylor v. Hutton, 43 Abb. Pr. 195. 2. A national bank, organized under and controlled by the act of 1864, cannot acquire a valid lien upon the shares of its stockholders by the articles of associa- tion or by-laws. BuUard v. Bank, 18 Wall. 597, 21 L. ed. 927, citing Bank v. Lanier, 11 Wall. 369, 20 L. ed. 172. And speaking of the latter case the court (in Bullard v. Bank) said, "This court held that after the passage of the latter act (1864), a by-law giving a lien upon a debtor's stock was inconsistent with its provisions and invalid. Of course if the act destroyed an existing by-law, it must prevent the adoption of a new one to the same effect. See, also, Johnson v. Laflin, 103 U. S. 803, 26 L. ed. 534. The cases cited in this note overrule Young v. Vough, 23 N. J. Eq. 325. 3. Whatever power the directors of a national bank possess to regulate transfers of its stock, they derive not from section 5133, U. 8. Comp. Stat. 1901, p. 3454, or the articles of association, but from this section (5136 U. S. Comp. Stat. 1901, p. 3455) and section 5139, U. S. Comp. Stat. 1901, p. 3461, by express and direct grant. Bullard v. Bank, see above. Seventh. To exercise hy its board of directors, or duly authorized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of banking ; by discounting and negotiating promissory notes, drafts, bills of exchange, and other evi- dences of debt; by receiving deposits; by buying and selling ex- change, coin and l3ullion; by loaning money on personal security; and by obtaining, issuing and circulating notes according to the pro- visions of this title. But no assooiation shall transact any business except such as is in- cidental and necessarily preliminary to its organization, until it has 512 NATIOSAIi BANKING LAW been authorized by the Comptroller of tbe Currency to commence the business of banking. (See sections 5168, 5169, TJ. S. Comp. Stat. 1901, p. 3474.) 1. Under this section (sub. 7) national banks may, for the purpose of securing an indebtedness to themselves, hand over, with an indorsement and guaranty, promissory notes, drawn payable to maker, and indorsed by him to third parties. People's Bank v. National Bank, 101 U. S. 181, 25 L. ed. 907. 2. It was held in National Bank v. Matthews, 98 U. S. 621, 25 L. ed. 188, that the clauses contained in this and section 5137, U. S. Comp. Stat. 1901, p. 3456, pro- hibiting loans by national banks on real estate security, will not vitiate such securities when taken by these banks. That a disregard of the prohibition only lays the association open to proceedings by the government for a judgment of ouster and dissolution. 3. As to the liability of the directors, see section 5239, U. S. Comp. Stat. 1901, p. 3461. 4. A national bank has power to lend money upon the notes, or other per- sonal obligations of the borrower, secured by a pledge of stock of a corporation as collateral security. Shoemaker v. National Mechanics' Bank, 2 Abb. (U. S.) 416, Fed. Gas. No. 12,801. 5. This subdivision contains five distinct grants of power, and no one grant is a limitation upon any other. Id. 6. The enumeration in this section ( sub. 7 ) of the powers which may be exer- cised by a national bank is not of the incidental, but of the principal powers, and to them are superadded all incidental powers, of which the power of receiving special deposits is one. Pattison v. Syracuse National Bank, 80 N. Y. 82, 36 Am. Rep. 582, and cases cited. 7. National banks, therefore, have power to receive special deposits, gratui- tously or otherwise, and when received gratuitously, they are liable for their loss by gross n^ligence only. Id.; and First National Bank v. Rex, 89 Penn. 308, 33 Am. Rep. 767. 8. The term "special deposits" includes money, securities and other valua- bles delivered to banks, to be specifically kept and re-delivered; it is not con- fined to securities held by the banks as collateral to loans. Id. ; National Bank v. Graham, 100 U. S. 699, 25 L. ed. 750. But see {confra) Wiley v. First National Bank, 47 Vt. 546, 19 Am. Rep. 122; First National Bank of Lyons v. Ocean Na- tional Bank, 60 N. Y. 278, 19 Am. Rep. 181; Weckler v. First National Bank of Hoglestown, 42 Md. 581, 20 Am. Rep. 95. See also section 5228 and note. 9. A deposit is general, unless the depositor makes it special, or deposits e.K- pressly in some particular capacity. Braham et al v. Adkins, 77 111. 263. 10. Under this section, a bank having coin in pledge may sell its special prop- erty, in which case the assignee will acquire the legal right of the assignor. Merchants' National Bank v. State National Bank, 10 Wall. 604, 19 L. ed. 1008. 11. National banks have the power to certify checks, and this power may be exercised by the cashier without any special authorization. The directors can limit this power, but such limitation will be no defense as to parties having no notice. Id. See also section 5208, U. S. Comp. Stat. p. 3496, and act of Congress, approved July 12, 1882. 12. A national bank is not authorized by its charter to act as a broker or agent in the purcha,se or sale of bonds and stocks. Bank of Allentown v. Hoch, 89 Penn. NATIOITAL BANKING LAW. 513 327, 33 Am. Eep. 700, citing 2 Otto, 122, 23 L. ed. G79, note 15 below; 22 P. F. Smith, 462, 13 Am. Rep. 699. See also Weckler v. First National Bank, 42 Md. S93, 20 Am. Eep. 95, and compare Yerkes v. National Bank (note 14 below). 13. It was held in the First National Bank of North Bennington v. The Town of Bennington, 16 Blatch. 53, Fed. Cas. No. 4,807, that interest coupons from bonds issued by the defendant, in aid of a railroad company, were promissory notes within the statute 3 and 4 Anne, chapter 9, and of this section. 14. National banks can properly deal in government securities, and an agree- ment by one with a customer to exchange for the latter, for sufficient considera- tion, non-registered for registered United States bonds, is binding on the bank; and where it neglects to fulfil the agreement, and is robbed meantime and the bonds stolen, it will be hMd liable for the damages thereby occasioned the owner. Yerkes v. National Banlc, 69 N. Y. 382, 25 Am. Kep. 208 ; Van Leuven v. The First National Bank, 54 N. Y. 671. But as to first proposition see following note. 15. A national bank organized under the National Banking Act may, in a fair and bona fide compromise of a contested claim against it, growing out of a legitimate banking transaction, pay a larger saim than would have been exacted in satisfaction of the demand, so as to obtain a transfer of certain stocks in rail- road and other corporations ; it being honestly believed, at the time, that by turn- ing the stocks into money, under more favorable circumstances than then existed, a loss which would otherwise accrue from the transaction might be averted or diminished. Such a transaction would not amount to a dealing in stocks. First National Bank v. National Exchange Bank, 92 U. S. (2 Otto) 128, 23 L. ed. 682, citing Fleckner v. U. S. Bank, 8 Wheat. 351, 5 L. ed. 634. Note 20 below. 16. Compromises to avoid or reduce losses arising in the course of a, legiti- mate banking business, come within the general scope of the powers committed to the board of directors and the officers and agents of the bank, and are sub- mitted to their judgment and discretion, except to the extent that they are re- strained by the charter or by-laws. Baaiks may do in this behalf, whatever nat- ural persons could do under like circumstances. Id. 17. In an action at law, the fact was found that the note in question was a purchase, and not a discount, or the lending of money on the credit of it. Held, that a national bank has no right to traffic in promissory notes as a species of personal property, or to acquire any title to such paper by a, purchase, made ad- mittedly not in the way of discount or by lending money on it. The word "ne- gotiating" gives no implied authority to speculate or trailio in paper of the charac- ter of the note in question, or in financial securities of any description. First National Bank of Rochester v. Pierson, 24 Minn. 140, 31 Am. Rep. 341; Farmers and Mechanics' Bank ix Baldwin, 23 Minn. 198, 23 Am. Rep. 683. But see note 21 below. 18. A national banking association has the right to purchase commercial paper in the market in the usual course of business, and if there be any fraud in the making of such notes, it must be brought to the knowledge of the bank in order to bind it. Atlas National Bank v. Savery, 127 MaSs. 75; to same effect see Smith V. Exchange Banlc, 26 Ohio St. 141. But see note 21 below. 19. A bank having power under its organic act to discount negotiable notes, has also power to purchase such notes. Pape v. Capitol Bank, 20 Kana. 440, 27 Am. Rep. 183. But see note 21 below. 20. The prohibition against dealing in stocks, etc., is implied from the failure Banks, 33 514 HATIONAL EAJSTKIKG LAW. to grant the power (First National Bank v. National Exchange Bank, note 15 above) , but a prohibition against trading and dealing is nothing more than a prohibition against engaging in the ordinary business of buying and selling for profit, and does not include purchases resulting from ordinary banking trans- actions. Hence, the acceptance by a national bank of an indorsed note in pay- ment of a debt due was held not to be a "dealing" in notes. Fleckner v. U. S. Bank, 8 Wheat. 351, o L. ed. 634. 21. Whether the purchase of a promissory note by a national bank for pmely speculative purposes comes within the provisions of this section, or is ultra vires, is a question upon which the decisions are in conflict. That such purchase is ultra vires, see First National Bank v. Fierson, 16 Alb. L. J. 319; S. C. 24 Minn. UO, 31 Am. Rep. 341; Farmers and Mechanics' Bank v. Baldwin, 23 Minn. 198, 23 Am. Rep. 683. That such purchase is valid, see Smith v. Exchange Bank, 26 Ohio St. 141; Pape v. Capitol Bank of Topeka, 20 Kans. 440, 27 Am. Rep. 183; Atlas National Banlc v. Savery, 127 Mass, 75. 22. A national bank may hold collateral for the performance of contracts be- tween third parties, and it will be estopped to say that such act was ultra vires. Bushnell v. Chautauqua County National Bank, 10 Hun, 378. 23. Granting of power to national banks to discount and negotiate promissory notes and other evidences of indebtedness gives express authority to buy the checks of individuals drawn upon other banks, whether payable to bearer or to order. First National Bank v. Harris, 108 Mass. 514. 24. A national bank is not prohibited from loaning money on the ohares of another national bank, causing the shares so taken as pledge or collateral security to be transferred to it (or one of its officers). And if it were, it could not set up its own illegal act to escape the responsibility existing therefrom. National Bank V. Case, 99 U. S. 628, 25 L. ed. 448. 25. The placing by one bank of its funds on permanent deposit with another bank is a loan within the spirit of this section. Bank v. Lanier, 11 Wall. 369. 26. A chattel mortgage taken by a national bank to secure a pre-existing debt is valid, and will be enforced. Spofford v. First National Bank, 37 Iowa, 181, 18 Am. Rep. 6. 27. An indorsement of a promissory note by a married woman, whereby she charges her separate and personal estate with the payment of the note, is to be treated as personal security within the meaning of the National Banliing Act. Such indorsement is not a mortgage in any sense. Third National Bank «. Blake, 73 N. Y. 260. 28. Shareholders have no standing in court to interfere for the protection of their company, until tlie board of directors has neglected or refused to take the proper steps to protect the interests of the company. Fifth National Bank «. Pittsburgh, etc., R. R. Co., 1 Fed. Rep. 190. 29. A., the president of a national bank, asked a banking corporation, B., for a loan of $50,000 on his railroad, which loan had been previously refused by A.'s bank. B. agreed to deposit this amount in A.'g bank to draw interest at six per cent. A.'s bank failed ajid its receiver rejected B.'s claim. Held, that such agreement was binding on A.'s bank when ratified by the majority of the directors, and B. was entitled to share ratably wifh the creditors of A.'s bank. Eastern Townships Bank v. Natl. Bank, 22 Fed. Rep. 186, 22 Blatchf. 498. 30. Where officers of a rational bank, for the purpose of averting insolvency, agree to keep out of the general assets of the bank a certain deposit if the deposi- NATIONAL BANKING LAW. 5 15 tor will allow the bank to use his money, the fund will be considered a ple. Fourth National Bank, above cited. Thus it would seem that every action by or against a national bank, in a. State court, may be removed at the option of the bank into the Federal courts. 14. "The acceptor of a draft purchased by way of discount by a national bank at a greater reduction than lawful interest may defend against the recovery of interest thereon by the bank under this section, for the section destroys the in- terest bearing power of the instrument." Danforth v. Natl. Bank of Elizabeth, 17 L. R. A. 022, 1 U. S. Circuit Ct. of Aps. R. 62, 3 U. S. App. 7, 48 Fed. 271. 15. A suit against a national bank to recover back twice the amount of interest illegally taken by it is a suit to recover a penalty incurred under a law of the United States. First Natl. Bank of Charlotte v. Morgan, 132 U. S. 141, 33 L. ed. 282, 13 Sup. Ct. Rep. 37. See First Natl. Bank of Springfield v. Haulenbeek, 65 Hun, 54, 19 N. Y. Supp. 567. 16. The effect of Kentucky usury law on national bark loans examined.- Brown ■y. Marion Nat'l Bank, 169 U. S. 418, 42 L. ed. 802, 18 Sup. Ct. Rep. 390. 17. T^e interest that may be recovered by debtor who has paid usurious inter- est is twice the entire amount of interest, and not twice the excess over lawful interest. Lake Benton Nat'l Bank v. Watt, 184 U. S. 151, 46 L. ed. 475, 22 Sup. a. Rep. 457. 18. State laws regulate the charging of interest by national banks. Union Nat'l Banlc v. Louisville R. R. Co., 103 U. S. 331, 41 L. ed. 178, 16 Sup. Ct. Rep. 1039. 19. Excessive interest whether deducted by a court or surrendered before liti- gation is not excessive interest paid within R. S. § 5198, U. S. Comp. Stat. 1901, 554 I^ATIONAL BANKING LAW. p. 3493. Talbot v. 1st Nat'l Bank, 185 Q. S. 180, 46 L. ed. 861, 22 Sup. Ct. Eep, 612. 20. Where territorial law allows more than seven per cent, interest under E, S. 5197, 5198, U. S. Conip. Stat. 1901, p. 3493, under special agreement it is permissible. Daggs v. Phoenix Nat'l Bank, 177 U. S. 549, 44 L. ed. 882, 20 Sup. Ct. Rep. 732. 21. The remedies and penalties in § 5198, U. S. Comp. Stat. 1901, p. 3493, are exclusive, and there can be no set off by maker of note for usurious interest pre^ viously paid for renewals. Haseltine v. Cemtral Bank, 183 U. S. 136, 46 L. ed. 120, 22 Sup. Ct. Kep. 50. 22. See also editorial note to Citizens' Nat. Bank v. Gentry, 56 L. R. A. 673, on forfeiture or other eiTeet of taking and reserving illegal interest by national bank, containing a full presentation of the authorities on that question. § 5199. [IT. S. Comp. Stat. 1901, p. 3494.] The directors of any association may, semi-annually, declare a dividend of so much of the net profits of the association as they shall judge expedient; hut each association shall, before the declaration of a dividend, carry one-teath part of its net profits of the preceding half-year to its surplus fund, imtil the same shall amount to twenty per centum of its capital stock. 1. When a dividend has once been declared, the directors cannot afterward refuse to pay it, because they have determined to establish a surplus fund with a view to benefit the corporation and its stockholders. The dividend, when de- clared, becomes a debt, and cannot thenceforth be disposed of without the con- sent of him who is entitled to it. Beers v. Bridgeport Spring Company, 2 N. Y. Week. Dig. In connection with this last statement, see also Seeley v. New York National Exchange Bank, 4 Abb N. C. 66. 2. A national bank has the right to hold a cash dividend as pledged for the indebtment of the share holder to the bank. It may also attach the shares of a stockholder therein for his debt due the bank. Hagar v. Union National Bank, 63 Me. 509. § 5200. [U. S. Comp. Stat. 1901, p. 3494.] The total liabilities to any association, of any person or of any company, corporation, or firm, for money borrowed, including, in the liabilities of a company or firm, the liabilities of the several members thereof, shall at no time exceed 'one-tenth part of the amount of the capital stock of such associ- ation actually paid in. But the discount of bills of exchange drawn in good faith against actually existing values, and the discount of com- mercial or business paper actually owned by the person negotiating the same, shall not be considered as money borrowed. 1. A loan made by a national bank in excess of the restriction imposed by this section is not void on that account. "When a statute prohibits an act, or an- nexes (as in this case) a penalty for its commission, it does not follow that the urii&wfulness of the act v/as meant to avoid a contract made in contravention of NATIONAL BANKIKG XAW. 555 St." Hunt, J. Even though the loan were voidable, it seems the borrower, after •obtaining and holding to his own use the money, cannot be allowed to interpose the plea that the banlc had no right to loan the money. Gold Mining Company V. National Bank, 96 U. S. 640, 24 L. ed. 648. 2. Where a national bank loans money in excess of the restriction contained in this section and takes collateral security therefor, the contract being executed, the bank acquires an absolute or qualified title to the securities, and the bor- rower cannot recover the latter without returning the loan, even though the contract were illegal and void. Shoemaker v. National Mechanics' Bank, 31 Md. 396, 100 Am. Dec. 73. 3. In a suit by a national bank against an indorsee on notes discounted for the drawer's accommodation, where the defense set up was, that, at the time of the discount, the drawer was indebted to the bank for money lent in excess of ■one-tenth of its capital, and that the loan was, therefore, void under this section. In holding to the contrary, the court said, "that the fact of the excess of indebt- edness, and the bank's knowledge of the fact, was only collateral to the contract •of discount and not presumed to be within the knowledge of the borrower, and the note was not intended by both parties to be the instrument of committing a fraud upon the law." The court further said, the section "was intended as a :general rule for conducting the business of the bank.'' O'Hare v. Second National BarJi, 77 Pa. 102. 4. Directors who assent to a loan to one person of an amount exceeding one- i;enth of the capital stock of the bank are personally liable for all loss sustained thereby. But where the borrower is in the case of such excessive loan also a ■director he is liable only as an ordinary debtor to the bank. Wittea-s, Receivea-, ■«. Sowles et al., 31 Fed. Eep. 1. 5. Where a national bank lends an amount in excess of that aDowed by above -section, the borrower cannot avail himself of the statute as a defense to the note. The penalty can only be enforced by the United States. Such a loan is not void. Wyman v. National Banlt, 29 Fed. Rep. 734. 6. By virtue of section 5239 in ease of an excessive loan the Comptroller may, if he thinks proper, proceed to have the charter revoked, and whether he does so •or not a director who knowingly participates in or assents to the loan may he compelled to make good whatever damage results to the bank from making the same. Stephens v. Overstoltz, 43 Federal R. 771. See Natl. Exch. Bank v. Pet- •ers, 44 Federal R. 13. 7. The action to recover against a director may be at law; there is no necessity ■of resorting to equity. Id. See also Natl. Exch. Bank v. Peters, 44 Federal R. 13. The action does not abate with the death of the director, but survives against 'his personal representatives. Id. 8. The personal liability of a director under this section cannot be enforced in an action at law. Welles v. Graves, 41 Fed. R. 459. § 5201. [U. S. Comp. Stat. 1901, p. 3494.] No 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 «uch security or purchase shall be necessary to prevent loss upon a ■debt previously contracted in good faith ; and stock so purchased or 556 NATIONAL BAJSTKING LAW. acquired shall, within six months from the time of its purchase, be sold or disposed of at public or private sale ; or, in default thereof, a receiver m.ay be appointed to close up the biisiness of the association, according to section fifty-two hundred and thirty-four. 1. A deposit by one bank with another is a loan ; and where, at the time of making the deposit, the depositor takes a pledge of its own. shares as security for the deposit then made, and for future deposits, the transaction, as to national banks, is illegal, as coming within the prohibition of this section. Bank v. Lanier (citing Bridgeport Bank v. Schuyler, 34 N. Y. 30) 11 Wall. 360, 20 L. ed. 172. 2. Loans by national banks to their stockholders do not give a lien to the former on the stock of the latter. Id. 3. A national bank issued two certificates of stock to C, wherein it was de- clared that he was entitled to 1.50 shares of the institution, and that tliese shares were transferable on the books of the bank, in person or by attorney, only on the surrender of the certificate. L. & H. purchased 138 of these shares of C. for value, and received the certificate regularly assigned. The bank refused to transfer the stock on the books, on the ground that the shares had been pledged to it by 0. as security for deposits made by it with him, and had already sold and transferred to other parties vmder a power of attorney from C. before the banli had notice of L. and H.'s purchase. L. and H. sued to obtain damages. Held, that the action would lie, and that the pledge of the stock by C. to the bank being illegal, the previous transfer was no defense. Id. 4. National banks camiot acquire u, valid lien upon the shares of their stock- holders by virtue of the articles of association or by-laws, even when constructed and adopted for the express purpose. Congress intended, by leaving out of the act of 1864 section 36 of the act of 1863 (restricting a shareholder from trans- ferring his stock so long as he owed the bank ) , to relieve shareholders from the restriction imposed by that section. The policy on the subject was changed, and banlcs were thereafter required to deal with their shareholders as they dealt with other people. Bullard v. Bank, 18 Wall, 589, 21 L. ed. 923. This decision overrules Dunkerson's Case, 4 Biss. 227, Fed. Cas. No. 4,156, and Kniglit v. Bank of Providence, 4 Am. Law T. 240, Fed. Cas. No. 7,885. 5. "Inasmuch as this act in express terms prohibits a national bank from thus becoming a ' purchaser of the shares of its own capital stock' (E. S. § 5201, U. S. Comp. Stat. 191, p. 3494,) if L. had made a contract to sell his shares to the bank, or to its president for the bank, it is plain that such a contract would have been ecotra vires and illegal, both as respects creditors and other shareholders, and the transaction could have been impeached by the bank in its corporate capacity, or by its other shareholders, even if the bank were still sol- vent and going on, or by the receiver as the oflTieer appointed to wind up its af- fairs. Be London, etc.. Exchange Bank, Law Rep. 5 Ch. App. 149; Currier v. Lebanon Slate Co., 56 N. H. 262. And although L. did not contract to sell his shares directly to the bank, or to the president for the bank, still, if, before the transaction was completed as to him, he had notice, actual or constructive, that the purchase was in fact a purchase for the bank, and paid for by the money of the bank, the transaction cannot stand, and the receiver may compel him to pay back the money thus received, and have him declared still to be a share- NATIONAL BANKIKG LAW. 557 holder." Dillon, J., Johnson v. Ltiflin, 17 Alb. Law J. U6, Fed. Cas. No. 7, 39:5, affirmed 103 U. S. 803, 26 L. ed. 534. 6. This section implies a "restriction on the shareholder from selling his own shares to the bank itself, or to a known trustee of the bank. And a share- holder cannot transfer his shares colorably, and thereby cease to be a share- bolder as respects creditors and other shareholders who would be injured by such transfer. There may also be an implied prohibition against the right to transfer shares to an infant or person not capable in law of assuming the liabilities, as well as enjoying the rights of the transfer, or the shares in respect thereto, but we have no occasion to determine this point. Rev. Stat., sec. 5139, U. S. Comp. Stat. 1901, p. 3461, compare id., sec. 5152, U. S. Comp. Stat. 1901, p. 3465. Weston's Case, Law. Eep. 5 Ch. App. 614, 621. And on general principles, there may also be an implied prohibition against the transfer of shares to a pauper, or man of straw, or insolvent person, for the fraudulent purpose of escaping liabil- ity, bijt this is a matter that need not be now considered." Id. 7. The provisions of this section do not forbid the attachment by a national bank of any of its shares, "unless it shall be necessary to prevent loss," etc. The attachment or sale on execution of shares does not imply a purchasing or holding on the part of the creditor. Hagar v. Union Nat. Bank, 63 Me. 509. 8. The prohibition in Act of 1864 against loans by national bank on its own capital stock is violated by a by-law creating a lien on shares of all stockholders owing the bank and forbidding transfer of such stock without consent of direc- tors. Such a by-law even if printed on stock certificate cannot legally prevent a transfer of stock to a purchaser for value in good faith. Buffalo German Ins. Co. V. 3rd Nat'l. Bk. of Buffalo, 162 N. Y. 163, 48 L. R. A. 107, 56 N. E. 521. § 5202. [U. S. Comp. Stat. 1901, p. 3494.] ISTo association shall at any time be indebted, or in any way liable, to an amount exceeding the amount of its capital stock at such time actually paid in and re- maining undiminished by losses, or otherwise, except on account of demands of the nature following : First. Notes of circulation. Second. Moneys deposited with or collected by the association. Third. Bill of exchange or drafts drawn against money actually on deposit to the credit of the association, or due thereto. Fourth. Liabilities to the stockholders of the association for divi- dends and reserve profits. 1. In fixing the limitation of a nationa,l bank's indebtedness hereunder, it was not intended to exclude from the amount of said indebtedness, liabilities upon circulating notes, accounts for deposits and for moneys collected, bills of ex- change drawn against actual credit and surplus accumulations belonging to stockholders, and to authorize the incurring of liabilities for other purposes equal to the entire capital. Weber v. Spokane Natl. Bank, 50 Federal R. 735. 2. Contracts of corporations creating debts in excess of limitations fixed by their charters are void, and such debts are not collectible by law (Crampton v. Zabriskie, 101 U. S. 601, 25 L. ed. 1070. Daviess Co. v. Dickinson, 117 U. S. 657, 29 L. ed. 1026, 6 Sup. Ct. Rep. 897) ; and where a national bank gave its notes 558 NATIOIfAIi BANKING LAW. at a lime when its aggregate indebtedness exceeded the amount of its capital stock, held in an action against a receiver of the banlc that the foregoing defense- was available. Id, § 5203. [U. S. Comp. Stat. 1901, p. 3i95.] ;N'o association shall, either directly or indirectly, pledge or hypothecate any oi its notes of circulation, for the purpose of procuring money to be paid in on its capital stock, or to be used in its banking operations, or otherwise;. nor shall any association use its circulating notes, or any part thereof,. in any manner or form to create or increase its capital stock. § 5204. [U. S. Comp. Stat. 1901, p. 3495.J 'No association, or any member thereof, shall, during the time it shall continue its banking, opera ti&ns, withdraw, or permit to be withdrawn, either in the form of dividends or otherwise, any portion of its capital. If losses have at any time been sustained by any such association, equal to or exceeding its undivided profits then on hand, no dividend shall be made; and no dividend shall ever be made by any association, while it continues its banking operations, to an amount greater than its net profits then on hand, deducting therefrom its losses and bad debts. All debts due to any associations on wliich interest is past due and unpaid for a period of six months, unless the same are well secured, and in process of collection, shall be considered bad debts within the meaning of this section. But nothing in this section shall prevent the reduction of the capital stock of the association under section fifty-one hundred and forty-three. See, in this connection, Johnson, Receiver v. Laflin, 17 Alb. L. J. 146, Fed. Cas. No. 7,393, aff'd 103 U. S. 803, 26 L. ed. 534. Directors are not personally liable for money paid out as dividends in viola- tion of above section, where the "bad debts" at the time of paying such divi- dends were supposed to be collectible. Bad judgment in this respect if not joined with bad faith will not make such directors personally liable. Witters, Receiver v. Sowles et al., 31 Fed. Rep. 1. The personal liability of a director under this section cannot be enforced in an action at law. Welles v. Graves, 41 Fed. Rep. 459. § 5205. [TJ. S. Comp. Stat. 1901, p. 34-93.] Every association which shall have failed to pay up its capital stock, as required by law, and every association whose capital stock shall have become im- paired by losses or othervdse, shall, within three months after receiv- ing notice thereof from the Comptroller of the Currency, pay the deficiency in the capital stock, by assessment upon the shareholders pro rata for the amount of capital stock held by each ; and the Treas- ( NATIOITAL BANKING LAW. 55{> iirer of the ITjiited States shall withhold the interest upon all honds held by him in trust for any such association, upon notification from the Comptroller of the Currency, until otherwise notified by him. If any such association shall fail to pay up its capital stock, and shall refuse to go into liquidation, as provided by law, for three months after receiving notice from the Comptroller, a receiver may be ap- pointed to close up the business of the association, according to the proA-isions of section fifty-two hundred and thirty-four. [And pro- vided. That if any shareholder or shareholders of such bank biiall 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 direct- ors to cause a sufficient amount of the capital stock of such share- holder 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.] Matter in. brackets added by act June 30, 1876, section 4, post. When sued by the receiver upon an assessment made by the Comptroller, the stockholder cannot deny the validity of the creation of the bank, nor question the decision of the Comptroller as to a deficiency of assets, nor show that the proceedings prior to the making of the assessment were irregular. Casey v. Galli, 94 U. S. 673, 24 L. ed. 168; Olean National Bank v. Carll, 7 Hun, 237. See notes to section 5151, U. S. Comp. Stat. 1901, p. 3465. § 5206. [IT. S. Comp. Stat. 1901, p. 3496.J No association shall at any time pay out on loans or discounts, or in purchasing drafts or bills of exchange, or in payment of deposits, or in any other mode pay or put in circulation, the notes of any bank or banking association which are not, at any such time, receivable, at par, on deposit, and in payment of debts by the association so paying out or circulating such notes ; nor shall any association knowingly pay out or put in circula- tion any notes issued by any bank or banking association which at the time of such paying out or putting in circulation is not redeeming its- circulation notes in lawful money of the United States. § 5207. [U. S. Comp. Stat. 1901, p. 3496.] ITo association shall hereafter offer or receive United States notes or national bank-notes as security or as collateral security for any loan of money, or for a consideration agree to withhold the same from use, or offer or receive the custodv or promise of custody of such notes as security, or aa 560 WATIOIfAl, BANKING LAW, collateral security or consideration for any loan of money. Any asso- ciation offending against tlie provisions of this section shall be deemed guilty of a misdemeanor, and shall be fined not more than one thou- sand dollars and a further sum equal to one-third of the money so loaned. The officer or officers of any association who shall make any such loan shall be liable for a further sum equal to one-quarter of the money loaned ; and any fine or penalty incurred by a violation of this sectioji shall be recoverable for the benefit of the party bringing such suit, § 5208. [U. S. Comp. Stat. 1901, p. 3497.] It shall be unlawful for any officer, clerk, or agent of any national banking association to certify any check drawn upon the association unless the person or company drawing the check has on deposit with the association, at the time such check is certified, an amount of money equal to the amount specified in siich check. Any check so certified by duly authorized officers shall be a good and valid obKgation against the association; but the act of any officer, clerk, or agent of any association, in viola- tion of this section, shall subject such bank to the liabilities and pro- ceedings on the part of the Comptroller as provided for in section fifty-two hundred and thirty-four. See act of July 12, 1882, section 13, post. 1. This section does not invalidate a promise on the part of a national bank to pay a, check, when the drawer shall have funds for the purpose in its pos- session; e.g., whenever a draft left with it for collection by the drawer, and Bulficient in amount for the purpose, shall have been paid. National Bank v. National Bank, 7 W. Va. 549. 2. A violation of § 5208 [U. S. Comp. Stat. 1901, p. 3497], by a national bank by over-certifying cheeks does not preclude the bank from enforcing its claim out of collateral pledged to secure the indebtedness of the drawer of the check. Thompson et al. v. National Bank, 47 Hun, 621. 3. Xhe fact that a, national bank which agreed to pay certain checks of a customer upon receiving collateral security, subsequently certified such checks for the holders thereof, although in excess of the amount held on deposit for such customer in violation of this section, will not authorize the owners of such collaterals to repudiate the advances and recover the securities unaffected by the lien. Thompson v. The St. Nicholas Nat. Bank, 113 N. Y. .325, 21 N. E. 57; aff'g 47 Hun. 621. 4. Where a national bank certifies a check for a depositor on the faith of bonds left with it as collateral security for loans notwithstanding the drawer has not sufficient funds on deposit to equal the amount of the check, the check so certified is a good and valid obligation against the bank, and the title of the bank to the bonds is not impaired although the certification was unlawful. Thompson v. St. Nicholas Bank, 146 U. S. Reports, 240, 36 h. ed. 956, 13 Sup. Ct. Rep. 66. NATIONAL BANKIKG LAW. 561 5. When the provisions of the National Banking Act prohibit certain acts by lianlis or their officers, without imposing any penalty or forfeiture applicable to particular transactions which have been executed, their validity can be questioned only by the United States and not by private parties. Id. 0. Wrongful intent must be shown to obtain conviction. Spurr v. U. S., 174 U. S. 734, 43 L. ed. 1152, 19 Sup. Ct. Eep. 812. § 5209. [U. S. Comp. Stat. 1901, p. 3497.] Every president, director, cashier, teller, clerk, or agent of any association, who em- bezzles, abstracts or wilfully misapplies any of the moneys, funds, or credits of the association ; or who, without authority from the direct- ors, issues or puts in circulation any of the notes of the association ; or who, without such authority, issues or puts forth any certificate of deposit, draws any order or bill of exchange, makes any acceptance, assigns any note, bond, draft, bill of exchange, mortgage, judgment, or decree ; or who makes any false entry in any book, report, or state- ment of the association, with intent, in either cascj to injure ot de- fraud the association or any other company, body politic or corporate, or any individual person or to deceive any officer of the association, or any agent appointed to examine the affairs of any such associa- tion ; and everj' person who with like intent aids or abets any officer, <5lerk or agent in any violation of this section, shall be deemed guilty of a misdemeanor, and shall be imprisoned not less than five years nor more than ten. 1. Where a president of a bank, charged as a. trustee with the administration of the funds of the bank in his hands, converts them to his own use, he embezzles and abstracts them within this section, unless he shows authority for so doing. In the Matter of Van Canipen, 2 Bon. 423, Fed. Cas. No. 16,835. 2. Where false entries are made by a clerk in. accordance with directions of the president of a bank, this is sufficient to make the president a principal in the offense, and to constitute a making of the entries by him. Id. 3. It was intended in this section, by the use of the word "misapply,'" to cover <;ases of unlawful dealing with the funds of a bank by its officers, although with- out corrupt motive — the word "embezzle" and perhaps the word "abstract" re- ferring to acts done for the actor's benefit as against the bank. Nor do the words "with intent to injure or defraud," coupled with the former, defeat this intention, for while the word "defraud" may be limited to a malicious dealing with property for the personal advantage of the doer, the word "injure" is not of such limited application, and was doubtless inserted to cover cases of misappli- cation, causing injury to the associ.ation, without benefit to the offender. Hence the guilty intent, required by the section, would be shown by proof of general guilty intent involved in the act knowingly committed, and this though it be admitted that no personal pecuniary benefit was anticipated by the actor. Proof of the latter fact may, therefore, be properly rejected. United States v. Taintor, 11 Blatohf. 377, Fed. Cas. No. 16,428, concurred in by Woodeufp, Blatchfom and Benedict, JJ., but see following note. Banks, 36 562 NATIOls-AL BJiiSTKIBTG LAW, 4. The willful misapplication, made an offense by this section, does not mean acts of official maladministration referred to in section 5239, U. S. Comp. Stat. 1901, p. 3515. "It must be a willful misapplication for the use or benefit of the party charged or of some person or company other than the association, with intent to injure and defraud the association, or some other body corporate or some other natural person." Woous, J., 055, 27 L. ed. 520, 2 Sup. Ct. Eep. 512. Hence the purchase by a bank of its own shares, when not necessary to prevent a loss on a debt due it, is not a criminal misapplication of its funds. United States V. Britton, 107 U.'S. 668, 27 L. ed. 525, 2 Sup. Ct. Kep. 512. 5. The purchase of stock in violation of section 5201, U. S. R. S., U. S. Comp. Stat. 1901, p. 3494, though made with intent to defraud, and by one or more of the officers of the bank named in this section, is not a crime under this sec- tion. 107 U. S. 660, 27 L. ed. 520, 2 Sup. Ct. Eep. 512. 6. It is not an oflfense under this section where an insolvent officer of a national bank procures the directors to discount his note, with an insolvent indoiser as security, they knowing the facts, and he using the proceeds of the discount for his own purposes. United States v. Britton, 108 U. S. 193, 27 L. ed. 701, 2 Sup. Ct. Rep. 526. 7. Nor would it constitute a criminal misapplication of the funds of a national bank for the president, even though specially charged by the directors with the duty of looking after tlie deposits of debtors of the bank, and of applying their deposits to the payment of their debts, to allow a depositor, while indebted to the association, to withdraw and assign to another bank his deposit in the first. Id. 8. The directors of a national bank, while they may be subject to a personal liability for damages, are not rendered liable to a criminal prosecution, where they declare a dividend by the association when there are no net profits to pay it. 108 U. S. 199, 27 L. ed. 698, 2 Sup. Ct. Eep. 531. 9. It is competent for a State to protect, by penal enactments, its citizens in their business dealings, whatever they may be, with a national bank, located within its limits. Such an enactment is not predicted on, and has no relation to any law of Congress or offense created thereby, of which State eourle have no jurisdiction. State v. Tuller, 34 Conn. 280. 10. Hence a penal statute of a State relating to embezzlement by the officers of a bank, applies to officers of a national bank who purloin a, special deposit made by one of its customers, but it is inoperative in respect to the embezzle- ment of the property of the bank by its agents, for which the act of Congress provides a, remedy. Id. 11. The fact that an officer of a national bank is subject to punishment imder this section for a breach of trust does not relieve him from liability to punish- ment for the same act as a larceny at common law, or under State statutes.^ There is no identity in the character of the two offenses. Exclusive jurisdiction of the one does not exclude jurisdiction of the other. Commonwealth v. Barry,. 116 Mass. 6. 12. An officer of a national bank who makes false credits in favor of a firm of which he is a member and allows the money represented by such false credits to be drawn out by his partner in pursuance of an agreement with him to that effect, is guilty of a violation of above section. As to the guilt under this section there is no distinction between a loan made for fraudulent purposes, and an ap- plication with like fraudulent intent in a form other than a loan. U. S. v. Fish,, 24 Fed. Rep. 585. HATIONAX BANKING LAW. 563 13. Allowing partners to overdraw account with intent to defraud is within the meaning of above section. Id. 14. In an indictment under § 5209, XJ. S. Comp. Stat. 1901, p. 3497, for willfully misapplying funds of a national bank it is not necessary to charge that the funds misapplied have been previously intrusted to defendent. A willful and criminal misapplication may be made by an officer or agent without having previously re- ceived them into his manual possession. U. S. v. Northway, 120 U. S. 327, 30 L. ed. 664, 7 Sup. Ct. Rep. 580. 15. Directors of a national bank are officers thereof within the meaning of this section. It depends on the circumstances connected with the bank itself whether the teller is an officer or only an employe or clerk. United States v. Means, 42 Federal K. 599. 16. It makes no difl'erence whether one or all of the officers of the bank were deceived or were intended to be deceived as to liability under thds section. Id. 17. Making actual entry of an actual transaction, however fraudulent the trans- action was, is not a false entry under this section "Aiders and abettors" defined. President's duties. Coffin v. U. S., 156 U. S. 463, 39 L. ed. 494, 15 Sup. Ct. Rep. 394. 18.' The penalty applies to any bank agent making a false entry in a report even if unverified. Cochran v. V. S., 157 U. S. 293, 39 L. ed. 706, 15 Sup. Ct. Rep. 628. 19. Violation of this section held to be an "infamous crime." Folsom v. U. S., 160 U. S. 122, 40 L. ed. 363, 16 Sup. Ct. Rep. 222. 20. Violation includes false entry made by direction with intent to defraud or deceive and includes false deposit slip. Agnew v. U. S., 165 U. S. 52, 41 L. ed. 639, 17 Sup. Ct. Rep. 235. 21. Entries in reports as loans and discounts of overdrafts of customers do not violate this section. Graves v. U. S., 165 U. S. 329, 41 L. ed. 734, 17 Sup. Ct. Rep. 393. § 5210. [U. S. Comp. Stat. 1901, p. 3i98.] The president and cashier of every national banking association shall cause to be kept at all times a full and correct list of the names and residences of all the shareholders in the association, and the number of shares held bv each, in the office where its business is transacted. Such list shall be subject to the inspection of all the shareholders and creditors of the association, and the officers authorized to assess taxes under State au- thority, during business hours of each day in which business may be legally transacted. A copy of such list, on the first Monday of July of each year, verified by the oath of such pr'esident or cashier, shall be transmitted to the Comptroller of the Currency. See in this connection, Johnson, Receiver, v. Latlin, 17 Alb. L. J. 146, Fed. Cas. No. 7393. 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 Ass'n, 165 U. S. G21, 41 L. ed. 850, 17 Sup. Ct. Rep. 465. 564 NATIOJSi'AL BANKING LAW. § 5211. [U. S. Comp. Stat. 1901, p. 3498. J Every association shall make to the Comptroller of the Currency not less than five reports during each year, according to the form v?hich may be pre- .«cribed by him, verified by the oath or aifirmation 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 lieads, 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 therefor from him, 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 saine 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 reports 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 20, 1881, post. See act of Jiuie 30, 1876, post. § 5212. [C. S. Comp. Stat. 1901, p. 3499.] In addition to the reports required by the preceding section, each association shall report to the Comptroller of the Currency, within ten days after declaring any dividend, the amount of such dividend, and the amount of net earnings in excess of such dividend. Such report shall be attested by iho oath of the president or cashier of the association. § 5213. [U. S. Comp. Stat. 1901, p. 3499.J 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 hundred dollars for each day after the periods, respectively, therein mentioned, that it delays to make and transmit its report. Whenever any asso- ciation delays or refuses to pay the penalty herein imposed, after it has been assessed by the Comptroller of the Currency, the amount thereof may be retained by the Treasurer of the United States, upon the order of the Comptroller of the CuiTency, out of the interest, as it jnay become due to the association on the bonds deposited with him to secure circulation. All sums of money collected for penalties under this section shall be paid in to the Treasury of the United States. IfATIONAI. BANKmC4 LAW. 565 § 5214. [U. S. Comp. Stat. 3 901, p. 3500.] In lieu of all existing taxes, every association shall pay to the Treasurer of the United States, in the months of January and July, a duty of one-half of one per centum each half-year upon the average amount of its notes in circulation, and a duty of one-quarter of one per centum each half- year upon the average amount of its deposits, and a duty of one-quar- ter of one per centum each half-year on the average amoimt of its capital stock, beyond the amount invested in United States bonds. See act of March 3, 1883, and notes to section 5219, U. S. Comp. Stat. 1901, p. 3502. See See. 13, act of March 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 January 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 pi'escribe, of the average amount of its notes in circu- lation, and of the average amount of its deposits, and of the average amount of its capital stock, beyond the amount invested 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 hundred dollars, to be collected either out of the interest as it may become due such associa- tion 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. 3501.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 amoimt of notes delivered to such association by the Comptroller of the Ciirrency, 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.J Whenever an associa- tion fails to pay the duties imposed by the three preceding sections, the sums due may be collected in the manner provided for the collec- tion 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. 666 I^ATIOKAL BANKING LAW. The obligations and penalties imposed on national banks by §§ 5214-5217, U. S. Comp. Stat. 1901, pp. 3500-3501, relate to solvent banlcs 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.J 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 Stales and found correct by the first Comptroller of the Treasury, shall be refunded in the ordinary manner by warrant on the Treasury. § 5219. [U. 8. Comp. Stat. 1901, p. 3502.J Nothing 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 detemiine 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 individual 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 elsewhere. Nothing herein shall be construed to exempt the real property of associations from either State, coimty or municipal taxes, to the same extent, ac- cording 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 held by him in a national bank are left subject to State taxation, which the State has a sovereign right and con- current power with Congress to impose (but from the exercise of which Con. gross, by reason of its paramount authority, may exclude the State) , although the capital of such bank be wholly invested in securities of the United States. Van Allen v. Assessors, 3 Wall. 573, 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 should be levied, than upon other moneyed taxable capital in the hands of the citizens. Id. 3. Tlie 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 bal- NATIOlSrAL BANKING LAW. 567 ance of tlicir capital and surplus profits, liable to taxation, after deducting there- from 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 Buoh 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, 2.5 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 is 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, Cnmmings v. Merchants' National Bank, 101 U. S. 153, 25 L. ed. 903; Pollard v. Zuber, 65 Ala. 635; Miller v. Heilbrun, 58 Cal. 133. 7. But where by a State statute the citizen may have the amount of his in- debtedness deducted from the total value of his personal property, thus ascer- taining the amount of Ms 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 where 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 shares, where there are no debts to deduct, are valid. Even in eases of assessments where debts exist, which should bfc 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 is axceeded by the market value, if sucih 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. 568 IfAT10i\AL BANKIIfG LAW. 9. The light 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 munic- ipalities, and a, fee therefor cannot be exacted. Carthage v. Carthage National Banlc, 71 Mo. 508, 36 Am. Rep. 494; National Bank v. Titusville, 13 Fed. Rep. 429. 10. By a statute of Pennsylvania, it was enacted that "all mortgages, judg- ments, recognizances and money owing Ujpon articles of agreement for the sale of real estate shall be exempt from taxation, except for State purposes.'' It was 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- bum V. School Directors, 23 Wall. 480, 23 L. ed. 112. See Adams v. Nashville, 95 U. S. (5 Otto) 19, 24 L. ed. 309. 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 tnxible (First National Bank v. Peterborough, 56 N. H. 38, 22 Am. Rep. 410), and, when the State laws so pro- vide, may be taxed against the 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 stockholders, it is not taxable separately. State, etc., v. City of Newark, 10 Vroom, 380; reversed, 11 id. 539, 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 re- serve from its net profits is not excluded in the valuation of its shares for taxation. Strafford National Bank ■;;. Dover, 58 N. H. 316; First National Bank ■V. Peterborough, 56 id. 38, 22 Am. Rep. 410; Thomp. N. B. Cases, 658; National Bank v. Commonwealth, 9 Wall. 353, 19 L. ed. 701; Thomp. N. B. Cases, 34 j People V. Commissioners, 67 N. Y. 516; same case, 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, U. S. Comp. Stat. 1901, p. 3507, is exempt from taxation under State laws. Such property in legal contemplation still be- longs 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 receiver. Its corporate capacity continues until its affairs are finally wound up and its assets distributed. If the shares have any value, they are taxablo in the hands of the holders or owners under this section; but the property held by the receiver ia 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, 18S3, and it is a question how far the same is retroactive. The tax of one half of one percentum each half year on notes in circulation 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 na- tional banks was to prevent the States from creating unfriendly competition by 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 indi- viduals in the business of making profit by the use of moneyed capital as money IL 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 invest.-- NATIONAL BAJSriaNG LAW. &Gd capital in securities payable in money. Savings banks deposits are exempted from taxation in New York for just reasons, and such exemption does not dis- criminate unjustly against national bank invesinients. Mercantile Bank v. New York, 121 U. S. 138, 30 L. ed. 895, 7 Sup. Gt. Eep. 826, followed in 125 U. S. 60, 31 L. ed. 689, 8 Sup. Ct. Eep. 772. 16. Section 5219, U. S. C'omp. Stat. 1901, p. 3502, does not require perfect uni- formity of taxation bet-ween 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 face intended to dis- criminate as above, in the absence of proof that it works an actual and un- just 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 ctock 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 board 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. Comp. Stat. 1901, p. 3502. Whitbeek v. Mercantile Nat. Bank, 127 U. S. 193, 32 L. ed. 118, 8 Sup. Ct> Rep. 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. Tlie 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. 1 54, 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 sharej, i. c, individual property of the shareholders, and of resident shareholders only. First National Bank v. City of Richmond, 39 Federal R. 309. 21. Capital of national and State banks invested in U. S. 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 of their par value, with- out 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. Eep. 324. 22. "Under acts permitting the deduction of debts from the value of all a, per- son's taxable property, such deductions must be permitted from the value of such shares ; but a statute is not void because it does not provide for a deduction ; nor is the assessment void if the deductions are not made but voidable only.'" Id. 570 NATIONAL BANKING LAW. 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. Id. 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, 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 § 5219, XJ. S. Comp. Stat. 1901, p. 3502. Jenkins v. Neff, 163 N. Y. 320, 57 N. E. 408. 27. The deduction of debts from credits allowed in personal assessments, not allowed to national bank stock is not illegal diswimination. First National Bank of Wellington v. Chapman, 173 U. S. 205, 43 L. ed. 669, 19 Sup. Ct. Kep. 407. 28. As to state taxation of national banks, see editorial note to Mcllenry v. Downer, 45 L, K. 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. natioj^al banking law. 571 CHAPTER IV. Dissolution a-jd Eeceivership. Section 5220. Voluntary dissolution of associations. 5221. Votice of intent to dissolve. 5222. Deposit of lawful money to redeem outstanding circulation. 5223. Exemption us to an association consolidating with 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. 5230. 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 sharebolders owning two-thirds of its stock. It was not intended by this section that, upon simply resolving to go into liqui- dation, 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. Eep. 455. § 5221. [U. S. Comp. Stat. 1901, p. 3503.J Whenever a vote is taken to go into liquidation it shall be the duty of the board of direc- tors to cause notice of this fact to be certitied, 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 572 NATIONAL BANKING LAW. in a newspaper published iji the citj of Sew 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 noti- fying the holder of its notes and other creditors to present the notes and other claims against the association for payment. See sections 6 and 7, act of July 12, 1882, post. § 5222. [U. S. Comp. Stat. 1001, 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' TJnited States sufficient to redeem all its outstanding circulation. The Treasurer shall execute duplicate receipts for money thus deposited, and deliver one to the association and the other to the Comptroller 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 asso- ciation upon redemption account. See sections 6 and 7, act of July 12, 1882, post, § 5223. [U. S. Comp. Stat. 1901, p. 3504.] 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.] 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 seciire payment of its notes shall be re- assigned to it, in the manner prescribed by section fifty-one hundred and sixty-two. And thereafter the association and its shareholders 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 such 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 bonds pledged for the circulation of said bank, at public auction in New York city, and, after providing for the redemption and cancellation ITATIOIfAL BANKING LAW, 573 ■of said circulation and tlie necessary expenses of the sale, to pay over .any balance remaining to the bank or its legal representative. See sections 6 and 7, act of July 12, 1882, post. § 5225. [V S. Comp. Stat. 1901, p. 3504.] Whenever the treas- urer has redeemed any of the notes of an association v^hich has com- menced to close its affairs xmder the six [five] preceding sections, he shall cause the notes to be mutilated and charged to the redemption account 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. See act of June 23, 1874, post. See sections 6 and 7, act of July 12, 1882, pest. § 5226. [IT. S. Comp. Stat. 1901, p. 3505.] Whenever any na- tional banldng association fails to redeem in the lawful money of the United States any of its circulating notes, upon demand of payment jmp. Stat. 1901, p. 3508.J Wherever an associa- tion against wliich proceedings have been instituted, on acconat 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 seo' tion fifty-two hundred and twenty-seven, apply to the nearest circuit, «r district, or territorial court of the United States, to enjoin further proceedings in the premises; and such court, after citing the Comp- troller 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 circulating 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 ac- count of such alleged refusal. See, in this connection, note 6 to section 5133 [U. S. Comp. Stat. 1901, p. 3454], iinte. The action of the Comptroller, in the appointment of a receiver of the bank, cannot be questioned 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 appointa 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.] All fees for protesting 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 associa- tion shall be applied to tlie payment of such fees. All expenses of any preliminary or other examinations into the condition of any asso- ciation shall be paid by such association. All expenses of any re- ceivership shall be paid out of the assets of such association before dis- tribution of the proceeds thereof. See act of June 30, 1876, post. 584 NATIOKAL BASKING LAW. § 5239. [U. S. Oomp. Stat. 19t)l, p. 3515.] If the directora of any national banking asscKjiation shall knowingly violate, or knowingly permit any of the otiieers, agents, or servants of the association to vio- late any of the provisions of this Title, all the rights, privileges and francliises of the association shall be thereby forfeited. Such viola- tion 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 any other person shall have sustained in consequence of such violation. 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 pujrpose. National Bank v. Colby, 21 Wall. 609, 22 L. ed. 687. 2. The Comptroller is the only person who can bring a suit to have the char- ter 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 ef- fect, Union, etc., v. Eocky 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 th& corporation is still under the control of those who must be made defendants. In the latter case a demand upon the corporation ia imnecessary. If, owing to insol- vency, the coi-poration be in the hands of a receiver, so that it cannot sue, the re- ceiver 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 sue, 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 corporations 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. Brinckerhoff 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, Receiver, v. Sowles et al., 31 Fed. Rep. 1, NATIOjVAL E-VNKIHU LAW. 585 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. Movius, 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. ]iirectors are not liable for the secret illegal transactions of one of the di- rectors. Id. 9. To show ground for forfeiting its charter it must be shown that in carrying 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 Federal Reporter, 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 aots 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 lias 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 Federal R. 459. 11. The right to recover under this section, of a bank director, the damages sus- tained in consequence of an excessive loan under section 5200 is in no wise affect- ed by the fact that the Comptroller has or has not procured a forfeiture of the charter. Stephens v. Overstoltz, 43 Federal R. 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 di- rectors, 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'l Exch. Bank v. Peters, 43 Federal R. 13. § 5240. [U. S. Comp. Stat. 1901, p. 3516.] The Comptroller of the Currency, with titie approval of the Secretary of the Treasury, shall, as often as shall be deemed necessary or proper, appoint a suit- able person or persons to make an examination of the affairs of every banking association, who shall have power to make a thorough exami- nation into all the affairs of the association, and, in doing so, to exam- ine 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 banlis not located in the redemption cities specified in section five 386 NATIONAL BANKING LAW. thousand one liundi-ed and ninety-two of the Kevised Statutes of tlie United States, or in any one of the States of Oregon, California, and Nevada, or in the Territories, shall receive compensation for such ex- amination as follows : For examining national hanks having a cap- ital less than one hundred thousand dollars, twenty dollars; those having a capital of one hundred thousand doUars, and less than three hundred thousand dollars, twenty-five dollars ; those having a capital of three hundred thousand dollars and less than four hundred thou- sand dollars, tliirty-five dollars ; those having a capital of four hun- dred 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 hav- ing a capital of six hundred thousand dollars and over, seventy-five dollars; which amount shall be assessed hy the Comptroller of the Currency upon, and paid by, the respective associations so examined, and shall be in lieu of the compensation and mileage heretofore al- lowed for making said examinations ; and persons appointed to make examination of national banks in the cities named in section five thou- sand one hundred and ninety-two of the lievised Statutes of the United States, or in any one of the States of Oregon, California, and ISTevada, or in the Territories, shall receive such compensation as may be fixed by the Secretary of the Treasury upon the recommendaton 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. See act of July 12, 1882, section 3, post. § 5241. [U. S. Comp. Stat. 1901, p. 3517.] jSTo 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 offidah 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 ]?anlc V. Hughes, Browne's N. B. Cas. 176, Fed. Cas. No. 4811. 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'l Bank of Platts.burgh, 170 N. Y. 9, 62 N. E. 761 ; aff'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 wher- ever conflicting with Federal law. Davis i;. Elmira Sav'gs Bank, 161 U. S. 283, 40 L. ed. 701, 16 Sup. Ct. Rep. 502. NATIONAL BANKINU LAW. 587 § 5242. [U. S. Comp. Stat. 1901, p. 3517.] All transfers of the notes, bonds, bills of exchange, or other evidences of debt owing to an,y national banking association, or of deposits to its credit; all assign- ments of mortgages, sureties on real estate, or of judgments or decrees in its favor; all deposits of money, bullion, or other valuable 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 commission of an act of insolvency, or in contemplation thereof, made with a view to pre- vent the application of its assets in the manner prescribed by this chapter, or with a view to the preference of one creditor to another, except in payment of its circulating notes, shall be utterly nuU and void, and no attachment, injunction, or execution shall 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 re- ceiver. Irons V. Manufacturers' National Bank, 6 Biss. 301, 27 Fed. Kcp. 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, Receiver, 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 cred- itors and debtors became ilxed when its insolvency occurred, and it passed into the hands of the receiver ap90inted 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 defi- ciency 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. Baloh v. Wilson, 25 Minn. 299, 33 Am. Rep. 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, Receiver, v. Citizens' Bank, 2 Woods, 23, Fed. Cas. No. 2,489. 5. The provisions of this section prohibiting the issuing of an attachment, etc., against 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. Robinson v. National Bank of New Berne, SI 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. R. 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 ac- cuisition by the bank of further capital. Raynor et al. v. Pacific National Bank, S3 N. y. 373. 5 00 WATIOITAL BANKING LAW. 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 avoid the attachment, 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, providing that the jurisdiction for suits thereafter brought against national banks shall be the same as for suits against State banks, and repealing laws inconsistent there- with. This section is not inconsistent with such provision. Id. 9. The property of a national bank, attached, at the suit of an individual cred- itor, 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 subsquently ap- pointed. National Bank c. 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 looii of mon- ey, 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 ereditoi's 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 port- folio, that cannot be fairly construed as giving him a preference over other cred- itors. Other creditors are not injured by such a transaction; for the seeuritira 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 SocietS de Credit Mobilier de Paris et al., 2 Woods, 77, Fed. Cas. No. 2,496. 11. A return of nulla liona upon an execution against the baiik is ample evi- dence of its insolvency. Wheelock «. 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. Ot. 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 § 5242 does not prohibit the issuing of a requisition to the sheriff to take possession of the prop- erty 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 its property and began suit to dissolve the same ; the president and a director be- came suretieo 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 be- come 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 contem- plation thereof, or to prevent the application of assets as prescribed by the bank- ing act. Price, Receiver, v. Coleman, et al., 22 Fed. Rep. 694. 13. The transfer of the assets of a bank to a creditor whereby he secures a pref- ^TATIOITAT. BA.\KII>(.; LAW. 589 erence over the otlier creditors, if made after a vote of the directors to go into liquidation, will be presumed to be made with fraudulent intent. National Se- curity Ba-nk v. Price, Keceivcr, 22 Fed. E^p. 607. 16. The general policy of the banking law, which forbids any kind of prefer- ence in case of insolvency and requires the entire assets to be presei-ved for equit- able distribution, does not affect a depositor's right to rescind for fraud. A de- positor who deposits a draft in ignorance of the insolvency of a national bank, may rescind and pursue the collection of the draft, if the proceeds have not been mingled with the general assets of the insolvent bank. Cragie v. Smith, 14 Abb. N. C. 409. 17. "In order to uphold an action under this section, there should be some sat- isfactory evidence that the cashier or other officer actually paid the money of the br.nk 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. State R. 744, 17 N. Y. Supp. 404. 18. In the above cited case (Hayes v. Beardsley cupra), the insolvency of the bank was so concealed by the cashier that none of its directors had any suspi- cion thereof, and it was not discovered by the bank exa,miner. Held, that under the circumstances the fact tliat 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 wrong-doing or of the bank's insolvency, payments made to him were to be tested under said pro- visions like payments snade 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 fol- lowing day the drawer fails, and on 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 apply 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- eral R. 384 ; see also, Armstrong v. Chemical Nat'l Bank, 41 Federal R. 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 oflf against the note the amount of his deposits in the bank at the time of its failure. The allowance of such set-ofF does not violate section 5242. Yardley V. Clothier, 17 L. R. A. 642, 2 U. S. Ct. of Aps. R. 349, 3 U. S. App. 207, 51 Fed. 606. 21. The provision of U. S. Rev. Stat. § 5242, U. S. Comp. Stat. 1901, p. 3517, against attachment or other provisional remedy or execution, except after linal judgment, against national banks applies to solvent as well as insolvent banlcs. 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 t.-e 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'l Bank 173 N. Y. 314, 60 N. E. 16; aff'g 67 App. Div. 75, 73 N. Y. Supp. 514. 590 U'ATIONAI. BANiaNG LAW. 22. After insolvency is declared, a national bank cannot do further business, but its corporate existence continues for certain purposes. Chemical Bank «. Hartford Deposit Co. 101 U. S. 7, 40 I-, 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 Nafl Bank, 174 U. S. 018, 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 iigainst national bank as garnishee is not an attachment wibh- in § 5242 against the bank. Earle v. Conway, 178 U. S. 456, 44 L. ed. 1149, 20 Sup. Ct. Rep. 918. 26. Where dividends wer^e 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. § 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 bankea:^, brokers, or savings institutions, except savings banks auth- orized by Congress to iise the word "national" as a part of their cor- porate name, are prohibited from using the word "national" as a por- tion of the name or title of such bank corporation, firm, or partner- ship ; 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. IZSTEKjNAI, KEV]£HUE. 591 TITJ.E XXXV. INTERNAL REVENUE. CIIAPTEE VEIL 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 estimatp:, etc. 3410. State banks converted into national banks; returns, how made. 3417. Provisions for bank tax and returns not to apply to national banks. § 3407. [IT. S. Comp. Stat. 1901, p. 2246.] Every incorporated or otlier hank, and every person, nrm or company having a place of husi- ness where credits are opened hy the deposit or collection of money or curronej', subject to he 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 or 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 wliich has ceased or shall cease to exist or wliich has been or shall be converted into a national bank, shall be assumed t-o be the capital as it existed immediately before- such bank ceased to exist or was converted as aforesaid. See act of March 3, 1883, section 1, post. 593 INTEENAL BJiiVEM"UJi;. § 3411. [U. S. Comp. Stat. 1901, p. 2248.] Whenever tlie 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. is- sued, 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 Stattjs, in lawful money, the amount of its outstanding circulation, to be redeemed at par, under such reg'jlations as the Secret.ary of the Treasury shall prescribe, it shall be exempt from any tax upon such circulation. See act of July 12, 1882, sections 6 and 8, post. This section does not lay a direct tax. Congress having undertnken, in the ex- ercise 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 enactments, the circulation of any notes not issued imder its authority. Veazie Bank v. Penno, 8 Wall. 53.3, 19 L. ed. 482. § 3412. [U. S. Comp. Stat. 1901, p. 2249.] Every national banlc- ing association. State bank or State banking association shall pay a tax of ten per centum on the amount of notes of any person, or of any State bank or State banking association used for circulation and paid out by them. See act of February 8, 1875, sections 19 and 20, post. § 3413. [U. S. Comp. Stat. 1901, p. 2249. ] Every national hank- 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 municipal corporation paid out by them. See act of February 8, 1875, sections 19 and 20, posi. ■■'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 im- posed 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 Con- gress 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. 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). INTEENAI. REVENUE. 591) ■"The tax tluis 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 medi- um. Such a use is against the policy of the United States. Therefore the banker ■who helps to keep up the use by paying 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 t. United States, 101 U. S. 1, 25 L. ed. 979. § 3414, [U. S. Comp. Stat. 1901, p. 2250.] A true and complete return of the monthly amount of circulation, of deposits, and of capi- tal, as afoi-esaid, and of the monthly amount of notes of persons, town, city, or municipal corporations, State banks, or State banking asso- ciations 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, corporations, companies, or persons, with a declaration annexed thereto, under the oath of such person, or of the president or cashier of such bank, asso- ciation, 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 subject to tax, as aforesaid ; and one copy shall be transmitted to the collector of the district in which any such bank, association, corporation, or company is situated, or in which such person has his place of business, and one copy to the Commissioner of Internal Kevenue. See act of February 8, 1875, section 21, post. § 3415. [U. S. Comp. Stat. 1901, p. 2250.J In default of the re- turns 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 Keve- nue, upon the best information he can obtain. And for any refusal or neo-leot to make return and payment, any such bank, association, corporation, company, or person so in default shall pay a penalty of two hundred dollars, besides the additional penalty and forfeitures provided in other cases. § 3416. [U. S. Comp. Stat. 1901, p. 2251.] Whenever any State bank or banking association has been converted into a national bank- Banks, 38 594 lJ>fTJKE.iSrAL KEVEJSrUE. ing .i9f!ociation, 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 retTim and payment on the circulation outstanding, so long as such circulation shall exceed five per centum of the capital before such con- version of such State bank or banking association. § 3417. [U. S. Comp. Stat. 1901, p. 2251.] The provisions of this chapter, relating to the tax on the deposits, capital and circulation 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, and 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 "ISTational Banks." 1. United States securities are exempted from local taxation by the followir.g^ section of Title XIJI. U. S, R. S., entitled "The Public Debt:" § 3701 [U. S. Comp. Stat. 1901, p. 2480]. All stocks, bonds, treasvuy notes, and other obligations of the United States shall be exempt from taxation by or under State or muni'^ips.} or local authoritjr. AMENDMENTS AND ADDITIONAL ACTS, TO AND INCLUDING THE SECOND SESSION OF THE FIFTY-SEVENTH CONGEESS. 1874-1903. NATIONAL BAKKIXQ LAW AMESDJIENTS. 597 AMENDMENTS AND ADDITIONAL ACTS. Act of June, 20, 1874. An act fixing tlie amount of the United States notes, providing for a redistribution of the national bank currency, and for other pur- poses. Be it enacted hy the Senate and Rouse of Bepresentaiives of the United States of America in Congress assembled. That 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 ISTational Bank xict." § 2. That section thirty-one* of "the National 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 what- 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 redemp- tion of such circulation ; wliicli 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, *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. Kev. Stat, were enacted 1874, and embraced the laws in force Dec. 1, 1873. 598 NATIONAL BA:!fKINO LAW ^AMENDMEITTS. 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 asso- ciations issuing the same, and he shall notify them severally, on the first day of each month, or of tener, at his discretion, of the amount of such redemptions; and whenever such redemptions for any associa- tion shall amount to the sum of iive hundred dollars, such association so notified sliall forthv^ith deposit with 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, de- faced, mutilated, or otherwise unfit for circulation, shall, when re- ceived 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 1'reasury 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 further, 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 thoiisand dollars, take up the bonds which said association has on de- posit with the Treasurer for the security of such circulating notes, which bonds shall be assigned to the bank in the manner specified in *See note to section 2, anto. NATIONAL BANKISTG LAW AMENDMENTS. 599 the nineteenth section of the ISTational Bank Act ; and the outstanding notes of said association, to an amount equal to the legal-tender notes deposited, shall be redeemed at the Treasuiy of the United States, and destroyed as now provided by law : Frovided, 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 "Au 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 circulation shall be withdrawn under the provisions of section six of said act, until after the 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 auth- orized 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 Avithdrawn from them or, in lieu thereof, to deposit ia the Treas- ury of the United States lawful money sufiicient to redeem such cir- culation ; and upon the return of the circulation required, or the de- posit of lawful money, as herein provided, a proportionate amount 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 requi- sition for circulation shall be made, or of any of them, to return the amount required, or to deposit in the Treasury lawful money to re- 600 ITATIOITAL BAJSTJilNG LAW ^.^MENKMENTS. deem the circulation required, within thirty days, the Comptroller of the CiuTency shall at once sell, as provided in section forty-nine of the ]N"ational Curi'ency 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 as- sooiatiou or associations shall be redeemed as will 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 Cur- rency of such associations as shall fail to return circulation as required, to assort and retiirn 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 mnding up their affairs, and of such as shall here- after so fail or go into liquidation. § 9. Ihat from and after the passage of this act it shall be law- ivl 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 lifty-hve 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 population and of wealth, as shovra by the returns of the census of eighteen hundred and seventy ; and every as- sociation 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 ISTational 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 nec- essary to supply the circulation previously issued to the banks in those NATIONA-L BAXKI.XG 1.AW AMENDMEA^TS. 601 States kaving less than tlieir apportionment: And provided further. That not more than thirty million dollars shall be withdrawn and re- deemed as herein contemplated during the fiscal year ending June thirtieth, eighteen hundred and seventy-five. Approved June 20, 1 S74-. See act of July 12, 1882, post. See act of July 14, 1890, post. See act of Mch. 14, 1900, post. Act of Jaituaey 14, 18 To. An act to provide for the resumption of specie payments. Be it enacted hy the Senate and House of Representatives of the United States of America in 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 stand- ard value, and to issue them in redemption of an equal number and amount of fractional cuiTency of similar denominations, or, at his discretion, he may issue such silver coins through the mints, the sub- treasuries, public depositaries, and post-ofiices 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 twen- ty-four of the Kevised 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. § 3. That section five thousand one hundred and seventy-seven of the .Eevised 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 increase its circulating notes in accordance 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 redistributioji of national bank currency among the several States and Territories are l302 NATIONAL BANKIHG LAW ^AMENDMEjSTS. hereby refpealed. And whenever, and so often, as circulating notes shall be issued to any such banking association, so increasing its capi- tal 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 sum of national bank notes so issued to any such banking association as aforesaid, and to con- tinue such redemption as such circulating notes are issued until there shall be outstanding the sum of three hundred 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 legal-tender notes then outstanding, 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 other- wise appropriated, and to issue, sell, and dispose of, at not less than par, in coin, either of the descriptions 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 this act are hereby repealed. Approved January 14, 18T5. See act of Mch. 3, 1887. Act of Jaituaet 19, 1873. An act to remove the limitation restricting the circulation of banldng associations issuing notes payable in gold. Be it enacted by the Senate 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 Revised Statutes of the United States as limits the circulation of banking asso- ciations organized for the purpose of issuing notes payable in gold, severally to one million dollars, be and the same is hereby repealed; NAllOJfAL BANKING I-AW AMENUiiENTS. 603 and each of such existing banking associations may increase its circu- lating notes, and new banking associations may be organized in ac- cordance with existing law, without respect to such limitation. Approved January 19, 1875. Act of Pjebeuaey 8, 1875. extkacts peom An act to amend existing customs and international laws and for other purposes. Be it enacted hy the Senate and House of Representatives of the United States of America m Congress asseinhled, * * * § 19. That every person, firm, association other than national bank associations, and every corporation. State bank or State banking as- sociation, 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 banlc or State banking association, and also every national banking Eissociation, 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 circu- lation and paid out by them. § 21. That the amount of such circulating note^ and of the tax due thereon, shall be returned, and the tax paid at the same time, and in the same manner, and with 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, 1875. Act ok- June 30, 1876. An act authorizing' the appointment of receivers of national banks, and for other purposes. Bb it enacted hy the Senate and House of Representatives of the 604 NATIOlirAL BANKING LAW ^AMENDMENTS. United Stales 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 association, 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 hun- dred and twenty of said statutes, the individual liability of the share- holders 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 such creditor on behalf of himself and of all other creditors of the association,, against tlie shareholders thereof, in any court of the United States having original jurisdiction in equity for the district in which siich association may have been located or established. "§ 3 — That whenever any association shall have been or shall be placed iu the hands of a receiver, as provided in section fifty-two hun- dred and tliirty-four and other sections of the lievised Statutes of the United States, and when, as provided in section fifty-two hundred and thirty-sdx thereof, the Comptroller of the Currency shall have paid to each and every creditor of such association, not including 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 Cur- rency 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 car- NATIONAL BANXING LAW ^AMENDMENTS. 605 Tied on, or if no newspaper is there publislied, in the newspaper published nearest thereto. At such meeting the shareholders shall determine whether the receiver shall be continued 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 major- ity of the stock in value and number of shares shall be neces- sary to detennine whether the said receiver shall be continued, or Avhether an agent shall be elected. In case such majority shall deter- mine that the said receiver shall be continued, the said receiver shall thereupon proceed with the execution of his trust, and shall sell, dis- pose 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 ap- pointment 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, the said meeting shall thereupon proceed 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 sliaU 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 Carrency, 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 receiver shall thereupon transfer and deliver to such agent all the undivided ■or uncollected or other assets of such association +hen remaining in the hands or subject to the order and control of said Comptroller and said receiver, or either of them; and for this purpose said Comptroller and said receiver are hereby severally empowered and directed to exe- cute any deed, assignment, transfer, or other instrument in writing that may be necessary and proper ; and upon the execution and deliv- ■erv of such instrument to the said ag-ent the said Comptroller and the said receiver shall by virtue of this act be discharged from any and all liabilities to such association and to each and all the creditors and shareholders thereof. Upon receiving such deed, assignment, trans- 606 NATIONAL BANKING LAW ^AMENDMENTS. fer, or other instrumeiit tlie person elected sucli agent shall hold, con- trol, and dispose of the assets and property of such association which he may receive under the terms hereof for the benefit of the sharehold- ers 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, compromise, or compound the debts due to such association, with the consent and approval of the circuit or dis- trict 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 accounts and discharge said agent and the sureties upon said bond. And in case any such agent so elected shall refuse to sei-ve, or die, resign, or be removed, any shareholder may call a meeting of tlie shareholders of such asso- ciation in the town, city, or village where the business of the said asso- ciation 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 meeting, with two sureties, to be approved by a judge of a court of record, and file said bond in the ofiice of the derk of a court of record in the county where the business of said association was car- ried on, he shall have all the rights, powers, and duties of the agent first elected as hereinbefore provided. At any meeting held as here- inbefore provided administrators or executors of deceased sharehold- ers 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 distributed 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 NATIONAL BASKING LAW AMENDMENTS. 607 in by any sKareliolder or sliareholders of sucli association npon and by reason of any and all assessments, made upon the stock of such as- sociation by the order of the Comptroller of the Currency in accord- ance with the provisions of the Statutes of the United States ; and, "Third. The balance ratably among such stocldiolders, in propor- tion to the number of shares held and owned 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. § 4. That the last clause 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 tliree 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 bal- ance, if any, shall be returned to such delinquent shareholder or shareholders." (Incorporated in text of § 5205, U. S. Comp. Stat. 1901, p. 3496.) § 5. That all United States officers charged with the receipt or dis- bursement 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 Currency, and publish, all the reports which national banking associations are required to make and publish under the provisions of sections fifty-two hundred 608 NATIONAL BANKII^G LAW AME^STDMJDNTS. and eleven, fifty-two hundred and twelve and fifty-two liimdred and thirteen of the Revised Statutes, and shall be subject to the same pen- alties for failure to make or publish such reports as are therein pro- vided; which penalties may be collected by suit before any court of the United States in the district in which said savings banks or sav- ings and trust companies may be located. And all savings or other banks now organized, or wliich shall hereafter be organized, in the District of Columbia, under any act of Congress, which shall have capital stock paid up in whole or in part, shall be subject to all tlio provisions of the Revised Statutes, and of all acts of Congress appli- cable to national banking associations so far as the same may be ap- plicable to such savings or otlier banks, provided that such savings banks now established shall not be required to have a paid-in capita] exceeding one hundred thousand dollars. Approved June 30, 187G. Extract fkom 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 banlc, 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 E«venue, 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 Johnston v. U. S. 17 Crt. of Clms. R. Act of Febeuaey I'l, 1880. An act authorizing the conversion of national gold banks. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled. That any national gold bank organized under the provisions of the laws of the United KATIOJS'AL BACKING LAW — AMEN-DMENTS. 609 States may, in the manner 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 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 Fbbeuaey 26, 1881. An act defining the verification of returns of national banks. Be it enacted hy the Senate and Hoiise of Representatives of the United States of America in Congress assembled. That the oath or affirmation required by section fifty-two hundred and eleven of the Eevised 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 offi.cer of the bank. Approved February 26, 1881. Act of Jultt 12, 1882. An act to enable national banking associations to extend their cor- porat:e existence, and for other purposes. Be it enacted by the Senate and House of Representalives of the United States of America in Congress assembled. That any national banking association organized imder the acts of February twenty- fifth, eighteen himdred and sixty-three, June third, eighteen hundred Banks, 39 610 ■ ITATIONAL BAKKIJfG LAW AME^'ra^E^rTS. and aixty-four, and February fourteenth, eighteen hundred and eighty, or under sections fifty -one himdred 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 Kevised 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- 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 o'\\Tiing 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 Apr. 12, 1902, following. § 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 arti- cles of association. § 3. That upon the receipt of the application and certificate of the association provided for in the pi'eceding 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 condi- tion of said association is not satisfactory, he shall withhold such cer- tificate of approval. § 4. That any association so extending the period of its succession KATIOKAL BAIfKING LAW— AMENDMENTS. 611 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, hoivc.ver. That the jurisdiction for suits hereafter brought by or against any association established under any law providing for national banking associations, except suits between thoni and the United States, or its oificers and agents, shall be the same as, and not other than, the juris- diction for suits by or against banks not organized under any law of the United States which do or might do banking business where such national banlcing 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 bo, 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 certiiicate 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 approval, of his desire to withdraw from said association, in wliich 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 direc- tors, 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, lo 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: Pruvided, 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- 612 NATIONAL BAN-KING LAW ^AMENDMENTS. ment of the shares of the new association in proportion to the numher 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 sucli extension shall be redeemed at the Treasury of the United States, as provided in section three of the act of June 20th, eighteen hun- dred and seventy-four, entitled "An act fixing the amount of United States notes, providing for redistribution of national bank currency; and for other purposes," and such notes when redeemed shall be for- warded to the Comptroller of the Currency, and destroyed, 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 with the Treasurer of the United States sufficient to redeem the remainder of the circulation which was outstanding at the date of its extension, as provided in sections fifty- two hundred and twenty-two, fifty-two hundred and twenty-four, and fifty-two hundred and twenty-five of the Eevised Statutes; and any gain that may arise from the failure to present such circulating notes for redejnption shall inure to the benefit of the United States; and from time to time, as such notes are redeemed or lawful money de- posited 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 dis- tinguishable from the circulating notes heretofore issued: Provided, however. That each banking association which shall obtain the bene- fit of this act shall reimburse to the Treasury 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 with the provisions of sections fifty-two hundred and twenty-one and fifty- two hundred and twenty-two of the Eevised 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 the Revised Statutes ; and the provisions of section fifty-two hundred and twenty- four and fifty-two hundred and twenty-five of the Eevised Statutes shall also be applicable to such associations, except as modified by this act ; and the franchise of such associations is hereby extended for the KATIO^TAX JiANKUSTG I.AW— AMJSNDMENTS. 613 sole piirpo.se of liquidating their affairs until such affairs are finally closed. § 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: Frovidcd further, That the national banks Avhich 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 redeeming their notes then outstanding, a sum equal to the average cost of the redemp- tion of national bank-notes during the preceding year, and shall there- upon pay such assessment ; and all national banks which have hereto- fore made or shall hereafter make deposits of lawful 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 ap- proved 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 hundred and eighty- one. § 9. That any national banking association now organized, or here- after organized, desiring to withdraw its circulating notes, upon a deposit of lawful money with the Treasurer of the United States, as provided in section four of the act of June twentieth, eighteen hun- dred and seventy-four, entitled "An act fixing the amount of United States notes, providing for a redistribution of national bank currency, and for other purposes," or as provided in this act, is authorized to deposit lawful money and withdraw a proportionate amount of the bonds held as security for its circulating notes in the order of such deposits • and no national bank which makes any deposit of lawful money in order to withdraw its circulating notes shall be entitled to receive any increase cf its circulation for the period of six months 614 NATlOJfAL BANKING X AW ^ii.MENDMENTS. from the time it made such deposit of lawful money for the purpose aforesaid : Provided, That not more than three millions of dollars of lawfiil money shall be deposited during any calendar month for this purpose: And Provided f wilier, That the provisions of this section shall not apply to bonds called for redemption by the Secretary of the Treasury, nor to the withdrawal of circulating notes in consequence thereof. See act of March 14, 1900, post. § 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 Currency 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 sections 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 interest, 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 thousand dollars, of such form as he may prescribe, bearing interest at the rate of three per centum per annum, payable quarterly at the Treasury of the United States. Such bonds shall be exempt from all taxation by or under State authority, and be payable at the pleas- ure of the United States ; Provided, That the bonds herein auth- orized 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 NATIOITAL BANKING I-A-W AMENDMENTS. 615 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 Secretai-y of the Treasury is authorized and directed to receive deposits of gold coin with the Treasurer or assist- ant 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 cer- tificates 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 reissued ; and such certificates, as also silver certificates, when held by any national banking association, shall be counted as part of its lawful 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 : Frovided, That the Secretary of the Treasury shall suspend the issue of such gold certificates when- ever the amount of gold coin and gold bullion in the Treasury re- served for the redemption of United States notes falls below one hun- dred millions of dollars ; and the provisions of section fifty-two hun- dred and seven of the Eevised Statutes shall be applicable to the cer- tificates 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 entitled "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 Revised Statutes of the United 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 regu- larly entered to the credit of the dealer upon the books of the banking association, shall be deemed gTiilty of a misdemeanor, and shall, on conviction thereof in any circuit or district court of the United States, be fined not more tlian 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. 616 WATIOKAL BAlfKII«rG LAW ^AMENDMENTS. See sec. 12, act of March 14, 1900, repealing inconsistent part of foregoing, post. The act of April 12, 1903, 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 pro- vided by, and under the conditions and limitations of the act of July 12, 1S82, to extend for a further period of twenty years the charter of any national banking association extended under said act whidi shall desire to continue its existence after the expiration of its charter. Act of Maech 3, 1883. exteact eegm An act to reduce internal revenue taxation and for other purposes. Be it enacted hy the Senate and House of Representatives of the United States of America in Congress assemhled. 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. ****** Approved March 3, 1883. Act of March 29, 1886. An act 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 by the Senate and House of Representatives 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 NATIONAL BACKING LAW— -AMENDMENTS. 617 all equities that sucli trust may have in any property, real or personal, by reason of any bond, mortgage, assignment, or other proper legal claim 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 re- ceiver 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 him, the request shall be by the Comptroller of the Currency allowed and notice thereof, with copies of the request, certificate of facts, and indorsement of approvals, shall be filed with the Treasurer of the United States. § 3. That whenever any such request shall be allowed as hereinbe- fore provided, the said Comptroller of the Currency shall be, and is, empowered to draw upon and from such funds of any such trust 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 May 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 by the Senate and House of Representatives of the <318 UATIOJNTAL BASTKING LAW AMENDMENTS. United States of America in Congress assembled. That any nation's banking association may, with the approval 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- sta/idiiig- the limit /ixed 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 Hxed in its original articles of association shall be made except in the manner hex-ein 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 Comptroller of the Currency ; but no change of name or location shall be valid until the Comptroller shall have issued his certificate of approval 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. § 4- That nothing in this act contained shall be so construed as in any maim^er 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 of the final clause of the first section, because it de- prives the board of directors of the 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 2d and 3d requirements under sect. 5142, U. S. K S., U. S. Comp. Stat. 1901, p. 3462, "that the whole amount of the proposed 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 certification by the Comp- troller are still required under this act (1886) in order to make the increase of c.i|>iial stock legal. Winters v. Armstrong, 37 Federal Keporter, 508. NATIONAL BANKING I,AW AMENDMENTS. 619 Act or July 30, 1886. EXTEACT FEOM An act to prolubit the passage of local or special laws in the Terri- tories of the United States to limit Territorial indebtedness, or for other purposes. Be it enacted by the Senate and House of Bepresentalives of the United States of America in Congress assenibled, * * * § 5. That section eighteen hundred and eighty-nine, title twenty- three of the Kevised 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 incor- poration 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, libraries, or any other benevolent, charitable, or scientific associa- tion." Approved July 30, 1886. Act or Maech 3, 1887. An act to amend sections 5191 and 5192 of Eevised 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-fourtlis in number of the national banks located in any city of the United States having a population of fifty thousand people, shall make applicatiooi 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 Kevised Statutes, the Comptroller shall have aiethority to grant such request, and every 620 U'ATIOISrAL BA'iSrKI]SrG ^LA^\' — AMENDMENTS. bank located in such city shall at all times thereafter have on. hanc^ 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 oity 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 oity may be a central reserve oity, lik«* the city of New York, in which one-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 Eevised 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- live per centum of its deposits, as provided in section fifty-one hun- dred and ninety-one of the E«vised Statutes. In accordance with the amendment Chicago and St. Louis have beem made cen- tral reserve cities. The application should be made the same as in the case o{ the designation of a reserve city. § 3. That section 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 add- ing, after the words "New York," the words "and the city of San Francisco, California." Approved .March 3, 188T. 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 § 12, Act of June 12, 1882, ante. See Harland v. United Lines Tel. Co. 6 L. R. A. 252, 40 Federal R. 308. Act of August 13, 1888. An act to correct the enrolment of an act approved March 3, ISSY, 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 Senate and House of Representatives of the United States in Congress assemhled, * * * NATIONAL BANKiNa LAW — AMENDMENTS. 621 § 4. That all ISTatioiial 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 hi 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. See First Natl. Bank v. Forest, 40 Federal E. 705. Extract fkom Act of May 2, 1890. National banks in Oklahoma. § 17. That the provisions of title sixty-two of the Eevised Statutes of the United States relating to National banks, and all amendments thereto, shall have the same force and effect in the Territory of Okla- homa as elsewhere in the United States : Frovided, That persons other- wise qualified to act as directors shall not be required to have resided in said Territory for more than three months inmiediately preceding their election as such. Extract seom Act of July 14, 1890. Deposits to pay circulating notes to be covered into treasury. § 6. That upon the passage of this act the balances standing with the Treasurer of the United States to tlie 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 such notes have been received by 622 NATIONAL BAHK3NG LAW ^AMENDMENTS. 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 Treas- ury may prescribe, from an cppropriation hereby created, to be known as ISTational bank notes Eedemption account, but the provisions of this act shall not apply to the deposits received under section three of the act of June twentieth, eighteen hundred and seventy-four, re- quiring every ^National bank to keep in lawful money with the Treas- urer of the United States a sum equal to five per centum of its circula- tion, to be held and used for the redemption of its circulating notes; and the balance remaining of the deposits so covered shall, 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 Meh. 14, 1900, post. Act of July 28, 1892. An act to amend the jSTational Bank Act in providing for the redemp- tion of national bank-notes stolen from or lost by banks of issue. Be it enacted by the Senate and Hovse of Bepresentatives of the United States of America in Congress assembled, That the provisions of the Kevised 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 tke signature or upon (he forged signature of the president or vice-president and cashier. Approved July 28, 1892. Act of August 13, 1894. Taxation of Legal Tender isTotes and National Bank ISTotes. Approved August 13, 1891r. § 1. That circulating notes of lN"ational banking associations and United States legal-tender notes and other notes and certificates of the United States, payable on demand and circulating or in- tended to circulate as currency, and gold, silver, or other coin shall be NATIONAL BANjaNG LAW — AMENDMENTS. 623 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 tliat 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 JSTational banliing associations. (Note — Act of June 13, 1S98, was the War Reveir.ue Act, and its repeal took effect July 1, 1902, pursuant to act of April 12, 1902.) CuBEENCT Act of Maecit 14, 1900. An act to define and fix the stajidard of value, to maintain the parity of all foi-ms of money issued or coined by the United States, to re- fund the public debt, and for other purposes. Be it enacted by the Senate and Rouse of Eepresentaiives of the United States of America in Congress assembled. 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 Kevised Statutes of the United States [I]'. 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 Treasiiry a reserve fund of one hundred and fifty million dollars in gold coin and bullion, which fund shall be used for such redemption pui"poses 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 Treasuiy to use said notes so redeemed to restore and maintain such reserve fund in the manner following, to wit: First bv exchanging the notes so redeemed for any gold coin in the 624 KATIONAI, BANKING LAW ^AMENDMENTS. 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 bv the use of said notes, in accordance with the provisions of section thirty-seven hundred of the Itevised Statutes of the United States. [U. S. Comp. Stat. 1901, p. 2180.] If the Secretary of the Treasuiy 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 sum of one hundred 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 sucb 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 here- inbefore provided, for an equal amount of the notes redeemed and held for exchange, and the Secretary of the Treasury may, in bis dis- cretion, use said notes in exchange for gold, or to purchase or redeem any bonds of the United States, or for any other lawful purpose the public interests may require, except that they shall not be used to meet deneieneiea 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 bullion 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 doUar, or of any other money coined or issued by the United States. § 4. That there be established in the Treasury Department, as a NATIONAL JBAN ICING T.AW AMENDMENTS. 625 part of tlie office of the Treasurer of the United Statea, divisions to be designated and known as the division of issue and the division of re- demption, to which shall he assigned, respectively, under such regula- tions as the Secretaiy 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 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 which 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 cei-tificates 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 is'Sue gold certificates therefor in denominations of not less than twenty dollars, and the coin so deposited shall be re- tained 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 du'^s, and when so re- ceived may be reissued, and when held by any national banking asso- ^ ciation may be counted as a part of its lawful reserve : Provided, That whenever and so long as the gold coin 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 Banks, 40 626 IsATIOI^AL BAJ^KING I-AW ^xiMENDMEKTS. ' authority to issue certifit^ates as herein provided shall be suspended: And provided further. That -whenever and so long as the aggregate amount of United States notes and silver certificates in the general fund of the Treasury shall exceed sixty million dollars the Secretary of the Treasury may, in his discretion, suspend the issue of the cer- tificates 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 certifi- cates 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 [U. S. Comp. Stat. 1901, p. 3491] is hereby repealed. § 7. That hereafter silver certificates shall be issued only of de- iiOTninations of ten dollars and under, 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 de- nominations of twenty dollars, fifty dollars, and one hundred dollars; and silver certificates of higher denomination than ten dollars, except as lierein provided, S'hall, whenever received at the Treasury or re- deemed, be retired and canceled, and certificates of denominations of ten dollars or less shall be substituted therefor, and after such sub- stitution, 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 re- strictions 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 hxindred 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. NATIONAL BANKING T.AW ^AMENDMENTS. 627 § 9. That the Secretary of the Treasury is hereby authorized and directed to cause a]] 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 othei-wise appropriated. § 10. That section fifty-one hundred and thirty-eight of the Ee- vised Statutes is hereby amended so as to read as follows: "Section 5138. [U. S. Comp. Stat. 1901, p. 3461.] No association shall be organized with a less capital than one hundred thousand dol- lars, 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 hanks 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. JSTo association shall be organized in a city the population of which exceeds fifty thoiisand persons with a capital of less than two hundred thousand dollars." Amendment incorporated in text, ante. § 11. That the Secretary of the Treasury is hereby authorized to receive at the Treasury any of the outstanding bonds of the United States bearing interest at five per centum per annum, payable Eeb- ruary first, nineteen hundred and ioiiv, and any bonds of the United States bearing interest at four per centum per annum, payable July first, nineteen hundred and seven, and any bonds of the United States bearing interest at three per centum per annum, payable Augnast first, nineteen hundred and eight, and to issue in exchange therefor an equal amount of coupon or registered bonds of the United States in siich fonn as he may prescribe, in denominations of fifty dollars or any multiple thereof, bearing interest at the rate of two per centum per annum, payable quarterly, such bonds to be payable at the pleas- ure of the United States after thirty years from the date of their is- sue, and said bonds 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 f oi-m by or under State, municipal, or local authority : Pro- 628 NATIONAL BANKING LAW ^AMENDMENTS. vided. That such outstandiBg bonds may be received in exckange of a valuation not greater than their present wortb to yield an income of two and one-quarter per centum per annum ; and in consideration of the reduction of intei-est effected, the Secretary of the Treasury is au- thorized to pay to the holders of the outstanding bonds surrendered for exchange, out of any money in the Treasury not otherwise appro- priated, a sum not greater than the difference between thei? present worth, computed as aforesaid, and their par value, and the payments to be made hereunder shall be held to be payments on account of the sinking fund created by section thirty-six hundred and ninety-four of the Eevised Statutes [U. S. Comp. Stat. 1901, p. 2476] : And ■provided further. That the two per centum bonds to be issued under the provisions of this act shall be issued at not less than par, and they shall be numbered consecutively in the order of their issue, and when payment is made the last numbers issued shall be first paid, and this order shall be followed until all the bonds are paid, and whenever any of the outstanding bonds are called for payment interest thereon shall cease three months after such call ; and there is hereby appropriated out of any money in the Treasury not otherwise appropriated, to effect the exchanges of bonds provided for in this act, a sum not exceeding one-fifteenth of one per centum of the face value of said bonds to pay the expense of preparing and issuing the same and other expenses incident thereto. § 12. That upon the deposit with, the Treasurer of the United States, by any national banking association, of any bonds of the United States in the manner provided by existing law, such associa- tion shall be entitled to receive from the Comptroller of the Cur- rency circulating notes in blank, registered and countersigned as pro- vided by law, equal in amount to the par value of the bonds so de- posited; and any national banking association now having bonds on deposit for the security of circulating notes, and upon which an amount of circulating notes has been issued less than the par value of the bonds, shall be entitled, upon due application to th.e Comptroller of the Currency, to receive additional circulating notes ia blank to an amount which will increase the circulating notes held by such asso- ciation to the par value of the bonds deposited, such additional notes to be held and treated in the same way as circulating notes of national banking associations heretofore issued, and subject to all the provi- sions of law affecting such notes: Provided, That nothing herein contained shall be construed to modify or repeal the provisions of seo- NATIONAL BANKING LAW AMENDMENTS. 629 tion fifty-one hundred and sixty -seven of the Eevised Statutes of the United States [U. S. Comp. Stat. 1901, p. 3471], authorizing the Comptroller of the Currency to requir'e additional deposits of bonds or of lawful money in case the market value of the bonds held to secure the circulating notes shall fall below the par value of the cir- culating notes outstanding for which such bonds may be deposited as security: And provided further. That the circulating notes furnished to national banking associations under the provisions of this act shall be of the denominations prescribed by law, except that, no national banking association shall, after the passage of this act, be entitled to receive from the Comptroller of the Currency, or to issue or reissue or place in circiilation, more than one-tlaird in amount of its circulating notes of the denomination of five dollars : And provided further. That the total amount of such notes issued to any such association may equal at any time but shall not exceed the amount at such time of its capital stock actually paid in: And provided further. That under regulations to be prescribed by the Secretary of the Treas- urj' any national banking association may substitute the two per centum bonds issued under the provisions of this act for any of the bonds deposited with the Treasurer to secure circulation or to secure deposits of public money ; and so much of an act entitled "An act to enable national banking associations to extend their corporate exist- ence, and for other purposes," approved July twelfth, eighteen hun- dred and eighty-two, as prohibits any national bank which makes any deposit of la-wful money in order to withdraw its circulating notes from recei-sdng any increase of its circulation, for the period of six months from the time it made such deposit of lawful money for the purpose aforesaid, is hereby repealed, and all other acts or parts of acts inconsistent with the provisions of this section are hereby re- pealed. § 13. That every national banking association having on deposit, as provided by law, bonds of the United States bearing interest at the rate of two per centum per annum, issued under the provisions of this act, 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 deposit of said two per centum bonds; and such taxes shall be in lieu of existing taxes on its notes in circulation imposed by section fifty-two hundred 6S0 ITATIOIS^AL BAIVKING I-AW ^AMENDMENTS. and fourteen of the Revised Statutes. [U, S. Comp. Stat. 1901, p. 3500.J § 14. That the provisions of tliis act are not intended to preclude the accomjjlishment of international bimetallism vyhenever conditions shall make it expedient and practicable to secure the same by concur- rent action of the leading commercial nations of the vrorld and at a ratio which shall insure permanence of relative value betvsreen gold and silver. Approved March 14, 1900. ■ ExTRACiT FROM AcT OF MakCH 3, 1903. Cities to be added to reserve list. "That whenever three-fourths in number of the national banks lo- cated in any city of the United States, having a population of twenty- five 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 5191 and sections 5192 of the Kevised Statutes [TJ. S. Comp. Stat. 1901, pp. 3486, 3487 J, 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 lawfiil money of the United States, an amount equal to at least twenty-five per centum of its deposits, as pro- vided in sections 5191, 3486 and 5195 of the Kevised Statutes." [[J. S. Comp. Stat. 1901, pp. 3486, 3492.] I NDEX. For convenience of reference, the laws relating to Savings Banks and National Banks are separately indexed. Sayings Banks index ggj National Banks index g7g GEiYERAL ^DEX. A. AcTiOTTS (see Attorney-General; Receiver; Penalties, etc.; Tax Law) , PiGH when to be commenced for false report 325 against stockholdei-s, when commenced 347 collusively brought, stay of proceedings in 373 by attorney-general, for failure to pay charges 90 by attorney-general, for neglect to deposit securities 94 by attorney-general, for impairment of capital 107 by attorney-general, against delinquent corporations 108 against superintendent of banks, as attorney for foreign corporations ... 32 126, 298 against banks for deficiency in lawful money reserve 143 to recover usurious interest 159 by superintendent, for failure to redeem circulating notes 160 by superintendent, on protested circulating notes 173 Acts: Concerning Banking Associations: to incorporate the Bank of North America 5 Restraining of, 1804, 1813, and 1818 13, 15, 17 of 1816, to regulate circulation 17 exempting Manhattan Company, etc 16 to prevent fraudulent bankruptcies 23 631 632 GENEKAL IKDEX. Acts — continued. page to prevent abuses of moneyed corporations 25 the safety fund 28 suspending for a year all proceedings to annul bank charters 31 to appoint bank commissioners 32 to appoint a fourth commissioner 32 general banldng act of 1838 32 to restrict securities deposited for circulation 34 to require individual bankers to report partners' name 35 to make stockholders, etc., liable for circulation 37 to require banks to report place of business 38 to create banking department 38 to allow incorporated banks to reorganize 38 to tax banks 41 relating to the supervision of trust companies 74 amendments to, summary of 47 Concerning Trust Companies: to increase scope of investments 74 relative to increase or decrease of capital stock 78 to receive on deposit bonds, mortgages, jewelry, etc., and to guarantee or insure title to real estate 267 Coilcerning Corporations : to prohibit interposing defense of usury 423 in relation to certificates of foreign incorporation as evidence 424 as to filing proof of payment of capital stock 425 as to public officials depositing public funds in solvent banks 425 as to interest on loans of $5,000 and over 424 Agents, agencies: to examine securities deposited in bank department 92 compensation of, to be paid by corporators 92 deposits with, may be counted as reserve 143 for redemption of circulating notes 170 list of redemption, to be published 170 to witness destruction of circulating notes 171 appointment of, by new corporations 175 revocation of, and new appointments 175 banks may unite in appointing common agent 175 AR'NtTAL Meeting: election of directors of banlcs 144 Annual Report of Superintendent 116 Appeoval by Supeeintendbnt : before corporation commences business 126 Assessments : for expenses of bank department 90 fiKXETiAT- I,M)T:\'. 633 Assessments — continued. PiCB to be paid in state treasury 90 if not paid, how enforced 90 of stockholders for impairment of capital 107 Associations (see Building and Lot; Co-operative ; Mortgage; Loan. etc.). AtTOKNEY for FoKBaON COKPOEATIOKS : Superintendent of Banks may be designated 126 Attokney-Geneeai, : Opinions by. as to scope of quarterly reports 113 as to individual liability of stockholders 150 as to deposit of securities by trust companies organized before 1882. ... 95 as to change of location 125 as to long lease not an incumbrance 120 as to savings bank loan to a trustee holding dual relation., 120 as to bank holding indefinitely its own stock 120 effect as a. re-election 120 as to whether a certificate of deposit issued by a state bank and payable at a specified time after date with interest is a violation of law 187 as to power of superintendent to accept mortgages as securities 96 as to obligation of foreign companies selling mortgages to report to superintendent 115 as to furnishing exemplified copy of entries in banking department boolcs. 161 (See Actions.) B. Bad Debts: description of 121 to be diarged off before dividend 121 Banking: unauthorized prohibited 192 penalty therefor 192 Banking Department: continuation of 88 charged with execution of laws 88 superintendent 88 rooms and furniture 90 expenses of rooms and furniture 90 expenses of, to be charged to corporations 90 moneys received for, to be paid into state treasury 90 failure of corporations to pay charges 90 unclaimed balance to be paid into state treasury 93 misconduct of officers of 439 banking powers, prohibition of 368 Bank Notes: destruction of ■''^ 634 GENEHAL INDEX. Banks : page definition of 86 must report to superintendent 112 penalty for failure to report 115 publication, undivided deposits and dividends 123 change of location 124 incorporation of 133 certificate must be filed 133 name and location 133 amount of capital stock fixed 133 payment of capital stock 144 name and residence of stockliolders 133 number of directors of 133 annual meeting, election 144 dates to commence and terminate 133 certificate to be recorded 133 amended certificate of incorporation 131 general powers 134 authorized to make loans 134 authorized to purchase securities 135 authorized to receive deposits 135 authorized to issue circulating notes 135 authorized to purchase and hold real estate 135 lawful money reserve of 143 deposits with superintendent of banks 161 to receive interest on deposited securities 169 change from state to national 162 when deemed to have surrendered charter 163 certificate of change 164 change from national to state 165 circulating notes of 165 distribution of funds of insolvent 176 bills and notes must be payable on demand 182 checks and drafts on, payable without grace 191 unauthorized, prohibited 192 limitation of stockholder's liability I55 restrictions on loans, etc II7 restrictions as to foreign 196 restricted to usual place of business 196 certain bills declared to be promissory notes I97 use of sign by unauthorized, prohibited I97 deposits of savings banks preferred debt of 256 cannot receive deposits as savings banks 267 corporate existence of, terminating jY9 stockholders' notice j^o notice to superintendent j^g order of court, closing oank j^g QENEEAL INDEX. 635 Banks and Bankers: page misconduct of 438 private, using sign when unauthorized 440 failure to report II5 publication by, of report 116 restrictions, on loans, etc II7 publication, unclaimed deposits and dividends 123 lawful money reserve of 143 payment of capital stock 144 deposit to secure notes 161 closing business, notice of 178 "Bank," Sign of: unauthorized use 197 stationery conveying such meaning 197 penalty 198 Bnxs AND Notes (see Negotiable Instruments Law) : to be signed, by whom 156 Bills of Exchange (see Negotiahle Instruments Laic) : on bank or banker without grace 181 must be payable in lawful money 197 Bonds : acquirement of, by another corporation 329 consideration! for issue of 331 guaranty of, by another corporation 329 issue of 331 Books to be Kept : account books 321 stock books 321 contents of 321 open daily 321 entry of transfer of stock 321 presumptive evidence 321 penalty for not keeping 321 penalty for illegal act in relation to 321 transfer books to be exhibited 344 Boekow, Power to ^^^ Building and Lot Associations 290-293 incorporation of contents of certificate 290 qualifications of members 290 regulations for business 290 ^ . . 291 other provisions approval of certificate ^° powers of 636 GESTEEAL INDEX. Building and Lot AssociatioivS — conlinued. page loan to, limitation on 291 dividends 291 monthly payments 291 stockholders, liability of 292 directors, liability of 292 shares, exempt from execution 292 reports of 112, 292 examination of 292 superintendent's powers 293^ definition of 87 what corporations included under 8T Business of Cokpoeation Defined 359' By-laws : making of 363 control action of directors 363 when to be published 363 directors may make 374 directors of safe deposit companies to make 300 c. Capital Stock: for impairment of, attorney-general to bring action 107 of safe deposit companies 299 must be paid in, in cash 93 examination as to payment 93 must be paid before commencing business 93 affidavit of full payment required 94 affidavit to be filed within one year or corporation shall cease 94 impairment of 107, 122 assessment to make good 107 deficiency, when to be made good 107 can be sold to pay assessment 107 losses in excess of profits to be charged as a reduction of 122 amount of, regulated 133 Increase of 133 manner of transfer of 133 of dissenting stockholders, to be appraised in merger 129 payment of 144 reduction or Increase of, on change to national bank 164 amount, of trust companies 262 Cashiee : to sign contracts, notes, etc 156 Ceetiwcates : as to payment of capital 93 authorizing change of location 124 of supeirintendent on incorporation 126 GENEKAI, INDEX. 637 Certificates — continued. page of superintendent for foreign eorporation 120 of incorpara-tiou of banks, contents and filing of 133 amended, of banks, must be filed 134 of residence of individual banker must be filed 134 penalty for failure to file 134 of change from state to national bank 16 1 of change from national to state bank 165 of destruction of bank notes 171 of organization of trust companies 262 to be filed with superintendent for examination 263 of authorization by superintendent 264 of building and lot associations 290 of co-operative savings and loan associations 272 of mortgage, loan and investment corporations 294 of safe deposit companies 299 alteration or extension of business 325 increase or reduction of capital stock 334 new in place of lost 342 false, liabilities for 325 of foreign corporation 365 proof before granting for extension of corporate existence 376 approved by superintendent, banks 376 "Certificates of iNCOBPOBATioisr ; Cokpoeations in General: defined 359 by whom executed 360 when filed and recorded 360 amended 361 supplemental 361 lost 362 destroyed 362 to be presumptive evidence 362 may provide method of voting 368 ■Cektipication of Checks (see Negotiable Instruments Lam). •Challenges, Oath Required 370 •Change: from state to national bank 165 from national to state bank 165 Change of Location of Business: publication of notice 124 Change of Name of Trust Company 271 Ohabges : if unpaid, attorney-general to bring action 90 for compensation of agents paid by corporation 92 638 GENEKAL INDEX. Chabteb op Cohporations : pagb forfeited for failure to report 115 surrender of 163 Checks (see Negotiable Instruments Law) : must be payable in lawful money 197 payable after date and without grace 191 CiKCTiLATnsrG Notes: to be signed, by whom 156 for failure to redeem, superintendent to bring action 170 plates, dies and materials 165 securities to be deposited with and transferred to superintendent 165 may be issued to banks by superintendent 165 to be registered by superintendent 165 limited to ninety per cent, of value of securities 166 redemption to be provided for 166 may be circulated as money 166 of individual banker 168 to be signed personally 168 to be withheld if bank is unsafe 168 redemption agencies for 170, 175 penalty for failure to redeem 170 destruction of 171 agent must witness the counting and destruction 171 destruction of plates 171 destruction of counterfeit notes 171 exchange of mutilated notes 172 penalty for mutilating 172 redemption in notes of other banks 172 protest of notes and proceedings thereon 173 appointment of agent as to notes 175 revocation of appointment of a^ent 175 distribution of funds of insolvent banks 176 publication of notices 176 redemption of notes held by banks 177 notice of redemption 177 banks closing business can make deposit 178 banks closing business can withdraw securities 180 must be presented within six years 178 securities can be returned when notes are destroyed 180 deposit of cash for redemption of 180 circulation of foreign, prohibited 180 not receivable at par, must not be paid out 182 must be payable on demand 182 state treasurer to countersign transfer of securities 191 must be payable in lawful money 197 forms of, precedents 185, 186 et seq. certain bills declared promissory notes 197 GENEEAL IliTDEX. ggc) Clekks : of banking department, how appointed on duties of °^ OQ compensation of ' Combinations, Prohibited oo5 Commencing Business: time for safe deposit companies 299 authority from superintendent 93 affidavit of payment of capital required 94 omission for one year to file affidavit !..'.'.! 94 certificate and approval of superintendent required 126 COMPTBOLLER, APPROVAL OF CERTIFICATE BY 353 Consolidation (see Merger). Contracts, to be Signed bt Whom 15(5 Co-oPERATivE Savings and Loan Associations : definition 37 272 incorporation of 272 273 certificate to be filed 273 officers and directors of 273 attorney-at-law, of 283 vote of incorporators 283 by-lavrs and regulations of 273 compensation of officers, duties of 273 capital stock 274 manner of issuing shares 274 payment of dues, fines and entrance fees 274 manner of withdrawal of shares 275 object and purpose of , 272 meetings of 273 "free shares" 274 "pledged shares" 274 limits of value of 274 voting, manner of 273 matured shares shall be paid to holders 276 loans to members 276 loans to be secured by bond and mortgage or shares 276, 278 "gross plan" 276 "instalment plan" 276 "premium interest plan" 276 "limited payment plan" 277 forfeiture of shares for nonpayment 281 may purchase real estate 281 may borrow and loan money; limitations 282 distribution of profit and losses 282 qualification of members 283 transfer of shares must be upon its books 282 640 GEJSEEAL INDEX. Co-OPEBATivE Savings akd Loan Associations— co«itn.«ed, page transfer fee can be charged 282 accumulations on shares exempt from execution; limitation 283 exempt from organization and corporation tax 283 investments of deposits 288 investments of income 288 expenses, payment of 288 foreign associations, as to 288 advertising, etc., by foreign associations 288, 28!) financial statement, publication of 285 repealed lavv'S as to 285 existing associations, reincorporation 286 assessment for department expenses 287 references to former statutes, meaning 288 investments of 288 expenses, current 288 advertising or soliciting for foreign 288, 289 must report to superintendent annually 112, 283 contents of report 284 failure to report 284 visitation of 284 taxation of 284 Corporate Laws: definitions of 359 conflicting, which to prevail 378 Corporations (see also Foreign Corporations) : liability of, for acts of receiver 310 acquirement of stocks and bonds of other corporations 329 guaranty of bonds of another corporation 329 loans on its own capital stock, qualified 118 restrictions on business of 117 officer of, director in another corporation 329 of same name prohibited 360 reorganized, may have same name 360 fraudulent issue of stock of 433 misconduct of directors of 434 moneyed, misconduct by director of 438 misconduct of directors and officers of stocks 441 misconduct at election of 44I frauds in organization of 433 434 Courts : may order examination Ill Ceeditobs : may apply to court for examination Ill discretion of court Ill result of examination Ill of merged eorpoiiations 130 GENERAL INDEX. 641 D. Debts : page liability of directors for, unauthorized 316 delinquent corporations to be sued; penalties 108, 115 Definitidjsts 2, 86 Deposit with Supebintendent : examination of securities deposited with superintendent 92 unclaimed, to be paid into state treasury 93 of securities to be made with superintendent 94 amount of, regulated by capital 94 may be made in bonds and mortgages 95 not to commence business until made 94 incidental power of superintendent 95 securities may be exchanged 106 interest on deposited securities 106, 169 mortgages, affidavit as to 106 mortgages, regulations as to 106 lawful money reserve required on 143 unclaimed, to be published 123 can be counted in lawful money reserve 144 of banks and bankers with superintendent 161 with superintendent to release securities 180 of cash for redemption of notes 180 Deputy Superintendent: appointment of 89 DiKEOl'OES : to notify stockholders of assessment 107 prohibited from purchasing promissory notes, etc 118 restrictions on, as to dividends 119 to be not less than five in number in banks 133 quorum of 133, 144 powers of 134 must be stockholders 144 of bank, annual meeting, election 144 to hold office for one year 144 must be a citizen 144 three-fourths of, residents of state of New York 1 14 vacancies, how filled 145 oath of, required on election 146 term defined 359 failure to elect, effect of 371 affairs of corporation to be managed by 359 majority of, a quorum 374 trustees in case of dissolution 375 special election of 371 of safe deposit companies elected annually 300 Banks, 41 642 GENERAL INUEX. Directors — continued. TAan of safe deposit companies, not less than five 300 election of, of safe deposit companies, published 300 appointment of oflScers by 318 how chosen 314 vacancies in board of, how filled 314 notice of election of 314 number annually elected 314 policy holders of insurance corporation, eligible as 314 report signed by 346 when acts void 315 change of number of 315 liability of directors for, unauthorized 316 for loans to stockholders, liability of 317 for unauthorized reduction of capital stock 316 for failure to make annual report 323 Dissenting Stockholdeks : merged corporations, rights of 129 Dividends : unauthorized dividends 316 to be made from surplus profits 121 unclaimed to be published 123 Domestic Coepoeation: defined 359 acquisition of property in foreign states by 365 E. Elections ; time of annual, specified 134 to fill vacancies in board of directors 144 Evidence : when certificate of incorporation to be presumptive 362 when stock books to be presumptive 321 Examinations : to be made at least yearly 91 character of 91 may be made under oath 91 of securities deposited 92 as to payment of capital 93 by order of court Ill on failure to make report 115 Examinees : how appointed 89 duties and powers of 89, 91 compensation, how paid 89 GENEKAI. lA'UEX. 643 Examinees — continued. page shall have power to administer oath 91 to take oath of office 93 cannot be appointed receiver 93 publication of report of 107 Exemption trom Taxation (see Tax Law). Expenses : of banking department, how defrayed 90 to be paid by the corporation 90 proceeding in case of failure to pay 90 of examinations 91 for examining securities 93 of bank department, to be reported annually 116 to be deducted from profits 121 of publishing change of location 134 Extension op BasiNESs 325 F. False Cebtificatbs, Liability of Directors and Officers foe 325 Foreign Bankers : franchise tax 407 (See Tax Lmo.) Foreign Corporations : defined 359 taxation ; license 404 must deposit securities with superintendent 95 failure to deposit, effect of 95 permission by superintendent to transact business 126 process, service of, on superintendent 126 co-operative savings, etc., associations 288, 289 certificate o^ authority, etc. . '. 365, 366 real estate of 367 certificate of authority to do business in this state 365 cannot keep office for banking 196 directors, etc., liability 351 Franchise Tax (see Tax Law). Funds : distribution by receiver 127 after payment of claims to be divided 178 G. General Corpobation Law 358 644: GEiSEEAi INDEX. General Corpobation Law — continued. J"^"^ , classification under ■ 358 definitions under ffi 359 qualifications of incorporators 360 certificates of incorporation 360 I. Incorporation : certificate of approval of 126 of banks 133 certificate of 133 amended certificate 134 of safe deposit companies 299 of co-opeirative savings and loan associations 272, 273 Individual Bankebs: definition of 86 report of 112 failure to report 115 penalty 115 publication by, of report 116 publication of unclaimed dividends and deposits 123 certificate of, to be filed 134 location must be filed 134 notice of change must be published 134 restriction as to loans, etc 117 restricted to location named 134 shall be banks of discount and deposit 134 lawful money reserve required 143 deposits with bank superintendent 161 sale of business prohibited 162 taxation of 401 may issue circulating notes 163 form of circulating notes 168 restrictions on circulating notes 169 distribution of funds of insolvent 176 bills and notes of, payable on demand 182 checks and drafts payable without grace 191 certain bills, declared promissory notes 197 use of sign "bank" by unauthorized person prohibited 197 cannot receive deposits as savings banks 257 Insolvent Bank: distribution of funds 176 distribution of residue 176 publication of notice 176 Inspectors : appointment 320 officers of moneyed corporations not eligible 320 GENERAL INDEX. 645 Inspectors — continued. p^oj, compensation of 0,0 vacancies, how filled 32o o^tli of 320 oath to be filed 32o Inteeest : must be deducted from profits 12i limited to six per cent 159 may be taken in advance I59 current rate of exchange may be charged I59 penalty for taking a greater rate I59 action to recover usurious I59 bajiks and bankers on same footing as national banks as to 159 on demand, loans on certain collateral, of $5,000 or more 160 when may be received by banks on securities 169 on taxes due 411 Investments : of co-operative associations 288 Lawfui. Money Reserve: required on deposits 143 one-half may be deposited with another bank or trust company 143 depository to be approved by superintendent 143 new loans and dividends prohibited when deficient 143 superintendent may notify to make good 143 penalty for failure to make good 143 Laws: repealed 378 conflicting corporate, which to prevail 378 of 1855, chapter 300 revived 379 liTABILITT OF STOCKHOLDERS 146 limitation of 155 License Tax, Foreign Corporation 404 (See Tax Law.) Loans: restrictions on, etc 117 of $5,000 or more, etc 160 Location : change of, may be made 124 notice of intention must be published 124 646 GENEBAL INDEX. Location — continued. paob contents of application 125 to be named in certificate of incorporation 133 certificate must be filed by individual banker 134 certificate of change of individual banker must be published 134 certificate of, to be filed in oiRce of superintendent. 134 Losses : to be charged against profits 121 over-due debts as in excess of profits to be charged as reduction of capital '. 121 in excess of profits, how charged 122 M. Mebgeb: of two or more moneyed corporations 128 savings banks excluded from 128 agreement for 128 approval of 128 name of successor 128 stockholders, submission of agreement to 128 notice, publication .- 128 filing of merger agreement 129 new shares under merger 129 dissenting stockholders, rights of 129 may apply to court 129 notice 129 appraised of their stock 129 payment of appraised value 130 eflfeet of the merger 130 creditors, etc., rights of 130 actions, not to abate 131 of stock corporations 350 Mixed Cokpoeation: classified 358 defined 359 Moneyed Cokporations 359 officers of, not eligible as inspectors 320 shall ce-ase if affidavit of payment of capital be not filed within one year. 94 proceedings against delinquent 108 proceedings for violation of charter 108 certificate and approval of superintendent required 126 permission of superintendent for foreign, required 126 appointment of superintendent as attorney for foreign 126 restrictions as to foreign 196 banking laws applicable to all specified 86 must deposit securities with superintendent 94 GENEKAI, INDEX. 647 Monet Reserve (see Lawful Money Reserve). PAGK Monopolies, Combinations fok Creation or, Pkohibited 311 Mortgage : power of corporations to ^nj consent of stockholders necessary 3qj Mortgage, Loan and Investment Corporations: definition of oj must report to superintendent annually II3 extension of time to report 113 how verified j jo notice to report jj3 failure to report 113 to be licensed by superintendent of banks 295 incorporation of 294 general powers 295 authorization, certificate of 295 deposit required 295 contents of incorporation certificate 294 directors not less than five 294 certificate, filing of 294 corporations included under 295 annual statement to superintendent required 29(i contents of annual statement 296 officers shall sign and verify statement 296 superintendent may require other reports 296 superintendent must examine before issuing license 296 examination shall be made at least yearly 296 examiner may administer oath 296 character of examination 296 when license shall be issued 297 license to continue for one year 297 unlicensed companies prohibited 297 certificate must be filed within thirty days 297 penalty for offending against provisions 297 license shall be revoked for cause 297 notice of revocation shall be mailed or published 297 superintendent shall be appointed attorney for foreign 298 process can be served on superintendent as such attorney 298 notice of process to be mailed to corporation 298 N. Name, Change of: trust company 271 of corporations 360 National Bank: change of state bank to 162 648 GENEEAL IHDEX. Nattonal Bank — continued. ^■^™ consent of stockholders to 162 reduction, etc., capital stock 164 certificate of change 164 change to state bank 165 Negotiable Instecments Law, The: acceptance of bills of exchange 474-476 acceptance for honor 480, 481 alteration of instrument 472 bills of exchange 473 bills in a set 483 checks 484 certification 484 consideration for 452 definitions 444 discharge of 471, 472 dishonor, notice of 465-470 ■ due course 457 form of 445-451 holder for value 452 general provisions as to 443^45 law merchant 445 liabilities of parties to 459-461 notice of dishonor of 468-470 interpretation of 445-451 negotiation of 453-457 notes for patent rights 485 notes for speculative consideration 480 payment for honor, bills of exchange 482 promissory notes 484 presentment for payment 462-465 presentment for acceptance 476-478 protest of bills of exchange 478-480 rights of holder 457 repealed laws 486 Notes, PKOMissoRr (see "Negotiable Instruments Lam) : corporations not to discount or receive im certain cases 317 amount of loans on, to one person restricted 117 restrictions as to .purchase of 118 officers prohibited from loaning on, when refused by bank 118 rate of interest on 159, 160 issued by bank or banker must be payable in lawful money 197 certain bills declared to be 197 Notices : for election of directors 314 of meeting to increase or reduce capital stock 333 to change number of directors 315 to pay charges for expenses 90 OENEEAL INDEX. 649 Notices — continued. p^^^, to stockholders of assessment to make good deficiency in capital 107 designating day for quarterly report 112 of intention to change location: 124 of proceedings to appoint receiver I27 of chajQge of residence of individual banker I34 by superintendent to make reserve good : 143 change from state to national bank 162 to terminate existence of bank I79 in case of protested circulating notes I73 to present circulating notes for redemptioai 176 publication of, by insolvent bank 176 of intention to close business 178 of intention to close business, may be withdrawn 180 as to taxation 401 41 1 (See also Tax Law.) 0. Oaths : of inspectors 320 official, of superintendent 88 official, of deputy superintendent 89 power of superintendent to administer 91 power of examiner to administer 91 oi&cial examiners 93 examiners to report on 93 of full payment of capital to be filed 94 of olficers to report to superintendent 112 of officers to publication of deposits and dividends 123 of directors on election 146 Office of Coepokation: defined 359 location of, of stock corporation 359 OftickBS : appointment of 318 removal of 318 security 318 policy-holders of insurance corporation eligible as 318 of moneyed corporation not eligible as inspectors 320 liability of, for false certificates, reports or public notices 325 must examine securities annually 92 shall file affidavit of full payment of capital 94 shall report to banking department 112 restricted in purchase of promissory notes 118 prohibited from loaning as individuals, etc 118 to execute amended certificate 134 shall have power necessary to carry on business of banking 134 president must be director 144 650 GENERAL INDEX, Officers — continued. ^*™ shall sign contracts and circulating notes 156 restricted to usual place of business 196 to be elected or appointed 300 P. Penal Code Pkovisions, Applicable 432-442 acting for foreign corj^orations, not authorized 434 bank oiiicer overdrawing his account 437 frauds in organizing corporations 433 fraudulent issue of stock, scrip, etc 433 frauds in procuring organization, or increase of capital 434 loans made in violation of law 436 misconduct of directors, stock corporations 434 misconduct of directors, banking corporations 436 misconduct of directors, moneyed corporations 438 misconduct by banks and bankers 436, 438 misconduct by officers of bank department 439 misconduct of officers and directors of stock corporations 440 misconduct of officers and employees of corporations 441 misconduct of officers and agents of pipe-line corporations 441 misconduct at corporate elections 441 presumption of knowledge of condition and business; assent 442 private banker using sign 440 officer of bank issuing excessive circulating notes 437 officer or agent of bank making guaranty in certain cases 437 receiving deposits in insolvent bank 437 unlawful investments by officer of savings banks 438 unlawful discount bill, foreign banks 439 using dies and plates of extinct bank 440 Penalties : for neglect to file annual report 115 for not keeping books of account and stock book 321 for unauthorized banking 192 for failure to report unclaimed deposits, etc 124 for failure of individual banker to file certificate 134 for offense as to circulating notes 181 Person to be Designated by Foreign ConPOUATiON fou Service of Process . 366 Pledgeor of Stock, Deemed Owner for Certain Pobposes 368 president of bank, powers of 156 vice-president 156 POLICT-HOLDERS OP INSURANCE CORPORATION ELIGIBLE AS DIRECTORS 368 eligible as officers 318 power, general, of banks 134 Powers op Coeporations : prohibition of other than statutoiy ^^^2 succession common seal acquisition of property appointment of officers 3g3 of president of , ^„ - . . , loo of vice-president of , .„ . , 156 ''y-laws 3g3 prohibition of banking 3gg Peoceeding (see Actions). Trocess, Person to be Designated by Foreign Corporation- for Serv- ^''^'"' 366 service on superintendent 126 Profits : how calculated 121 dividends to be paid from 12i losses exceeding 122 Protest (see Negotiable Instruments Laic). Proxies : who may vote by 370 to be in writing 370 for how long valid 37O JCBLICATION : reports of examiners 107 summary statement of reports to superintendent 116 by banks, separate reports 116 unclaimed deposits and dividends 123 Q. ■Qualification of Members of Corporation as Voters 368 E. Hate of Interest 159 usurious rate 15" intent and meaning as to national banks 159 on -warehouse receipts, etc. ; collateral 160 on $5,000 loan, etc 161 Beadjustment : assent of stockholders to 310 652 GENEEAL INDEX. Readjdstmekt — eonttnued. pagb time of assent to 310 Epial Estate: banks can purchase and hold 135 restricted to certain purposes 135 must be conveyed directly to corporation 135 when additional may be acquired 365 acquisition of, in this state, by foreign corporations 367 acquisition of, in this state, by foreign corporation upon judicial s;'.Il's. . 367 Receiver : of funds 127 possession of property by, not to be interfered with 310 discharge or removal of 310 suit against, when to be commenced 310 bank examiner cannot be appointed 93 appointment of 127 creditor or shareholder may apply for 127 Record of Membership to be Produced 372 Redemption : of circulating notes 170 agencies 170 designation in writing 170 publication of agencies 170 refusal to redeem 170 Reorganization (see Merger) : upon sale of corporate property and franchises 308 certificate to be filed 308 certificate, what to contain 308 rights and liabilities of corporation upon 308 plan of agreement for 309 voting for, regulated 309 issue of stocks and bonds 309 payment of debts upon 309 dividends, preferences in 309 amount of stock upon 309 amount of bonds upon 309 assent to plan of 310 Repeal (seeLatc«). Repealing Statutes, Limitation of Effect of 37& Reports : when to be made 323 what to contain 323 penalty for neglect to file 323 GENERAL INDEX. 653 Repokts — continued. p^m, to be signed by directors 323 verification, by whom 333 of examinei-s may be published 107 to be made to superintendent 112 form to be prescribed by superintendent 112 time to be designated by superintendent 112 verification of, required 112 notice of day for, to be served by superintendent 112 extension of time for 113 as to taxation 401, 407, 409, 410 penalties for failure to make 115 publication of, required 116 annual, of superintendent to legislature 116 contents of annual report of superintendent 116 presumptive evidence 117 Reserve (see Lawful Money Reserve) . ■ Restraint of Trade, Combinations foe. Prohibited 311 Restrictions : loans limited to one-fifth of capital and surplus 117 officers prohibited from purchasing notes 117 officers prohibited from loaning as individuals 117 as to foreign corporations 196 banks restricted to usual place of business 190 s. Safe Deposit Business of, by Trust Company 267 Safe Deposit Companies: must report to superintendent, semi-annually 112 character of report 112 definition of ^^ must deposit securities with superintendent 94 incorporation of ^"^ not less than five may incorporate 299 may receive goods on storage • ■ • ^99 may receive goods on deposit 299 may let out vaults and safes 299 certificates to be filed with county clerk 299 certificate to be filed with superintendent of banks 299 limit of capital stock 299 contents of certificate of incorporation 299 certificate must be approved and filed 299 capital must be paid in before commencing business 29 J directors to be elected annually - • ■ • 300 shall be not less than five nor more than thirteen 300 654 GENERAL INDEX. Sate Deposit Companies — continued. pagb notice of elections shall be published 30O officers to be elected or appointed 300 may be required to give security SOO directors may make hy-laws 300 liability of stockholders for debts 301 remedy for nonpayment of safe rent 301 Seal: corporation to have 363 Securities : exchange of, with superintendent, can be made 15S examination to be made annually 92 affidavit as to value of 106 to be held by the superintendent in trust 94 excess in deposit may be refunded 94 to be deposited for circulating notes 165 to be held by superintendent for redemption of notes 165 banks may receive interest on 169 may be returned when notes are destroyed 180 transfers to be countersigned by state treasurer 191 if not deposited, attorney -general to bring action 94 in banking department, examined by agents 92: safe deposit companies must deposit with superintendent 94 Sign fok Banking Business, Unabthokized 197 penalty for violation 19S letter-head, etc 197 as savings bank, unauthorized 257 Special Election or Dibectors : notice of, to be given 371 how conducted and when held 372 right to vote at, how determined 372 State Bank: change to national bank 162 consent of stockholders to 162 certificate of change 164 change from national bank 165 circulating notes of such banks 165 Statement op Assets and Liabilities 343 penalty for neglect to make 343 time for making, extended 343 to be exhibited to stockholders 343 State Teeasueeb: moneys received for expenses to be paid to 90 GENERAL INDEX. g55 State Tbeastjrek — continued. PAGH moneys forfeited to be paid to ,, ^ unclaimed balances with superintendent to be paid to '."..... 93 transfer of securities must be countersigned by 191 banks to be advised of transfer by iq, shall report amount of transfers to legislature ...!!! 191 shall have access to books of superintendent 191 Stock (see also Stock Corporations) : lost certificate of 3^2 343 represented by certificates 329 subscriptions to 330 calls on, must be paid before transfer 329 consideration for issue of '. 35I 331 not to be issued for less than par value of 351, 331 subscriptions to, when, how paid 332 taxation on 397-416 forfeiture of 332 reissue of, upon forfeiture 332 cancelation of 332 reduction or increase of, when reduced by cancelation 333 meeting therefor 334 preferred and common 335 exchange of preferred for common 335 capital, increase or reduction of number of shares 347 partly paid stock 351 repealed laws as to 352 taxes to be lien on 371 Stock Cobpoeation Law , 307-354 nonapplication of, to moneyed corporations 307 Stock CoKPOEATioiirs : when may acquire stocks and bonds in other coipoiations 329 when may guarantee bonds of other corporations 329 when officer of, may be director in another 32!l dissolution of, voluntary 350 merger of 350 directors of 314 vacancies in board 314 elections of 314 change of number of directors 315 void acts of directors, when 315 directors' liability for unauthorized dividends 316 directors' liability for loans to stockholders 317 stock, transfer of, by indebted stockholder 318 officers, election, etc 318 security for officers or employees 318 election, inspectors of 320 books of stock corporations 321 656 GENERAL INDEX. Stock Cobpoeatioits — continued. page annual report, contents '. 324 fake certificates, liability for 325 extension of business of 325 sale of franchise 326 liability of officers, waived, limited to 327 transfers to officers, fraudulent 336 Stockiioldees : executor, administrator, etc., not liable as 345 financial statement to, on tbeir demand 343 liability of, general 146, 345 liability of, with respect to increased or reduced capital stock 144 limitation of liability of 155, 345, 347 qualification of, as voters 368 may assent to plan of readjustment of banking corporation 310 may apply to court for examination Ill may apply for receiver 127 of banks, names and residences must be filed 133 of banks, number of shares held by, must be filed i 133 submission to, merger agreement 128 approval of mei'ger, by 129 dissenting as to merger, stock of, to be appraised 129 vacancies in board of directors to be filled by 145 foreign, stock book of 344 definition of 147 SUBSCBIPTIOKS : proportion to be paid 331 Superintendent of Banks: chief officer of department 88 how appointed 88 term of office 88 not to be interested in any banking corporation 88 salary of 88 oath and bond of 83 official seal of 88 deputy 89 bond of deputy 89 vacancy in office of 89 rooms to be assigned to 90 expenses, how provided for 90 duties and powers of 91 examinations to be made by 91 may examine under oath , 91 examination of securities in custody of 92 shall pay unclaimed balances into state treasury 93 corporations must deposit securities with 94 examiners appointed by 93 GENEIJAI, INDEX, (357 Superintendent of Banks — continued. page exairiination as to payment of capital 93 may publish report of examiners jq7 duty when capital is impaired j07 to take possession of unsound bank 107 shall proceed against delinquent corporations 108 reports to be made to 112 publication of reports by Hg annual report of, to legislature 116 duty to suggest amendment of law II7 reports, presumptive evidence II7 approval of certificate upon incorporation 126 certificate of, in ease of foreign corporations 126 to act as attorney for foreign corporation 126 service of process on 126 to approve reserve depositories 144 deposits of banks with, to secure notes 101 deposits of individual bankers with 161 may issue circulating notes to banks 105 may give power of attorney to collect interest 109 to approve redemption agents 170 certificate of savings bank to be filed by 200 to make examination previous to certificate of organization 201 proceeding against delinquent savings banks 254 to receive unclaimed deposits when dissolution is effected 200 shall pay such deposits to persons entitled thereto 260 consent of, to change number of directors 315 incumbents of office, since creation 39 Supreme Couet: may direct sale of property 310 may order issue of new in place of lost certificate of stock 343 T. Tax Law. The 395-416 bank shares 397-400 banks, to report for 396 bank stockholders 396 bank capital 396 corporate stock, taxation 396 corporations paying franchise tax 408 corporations, place of taxation of 395 collection, as to bank stock 403 certiorari, writ of, regulations as to 413 exemption from taxation 395, 406, 415 delinquents, information as to 414 comptroller to examine corporations 410 dividends on bank stock, retained 403 Banks, 42 658 GENEEAL INDEX. Tax Law, The — continued. pagk foreign bankers 409 franchise tax 404-406 francliise tax on savings banks 407 franchise tax on foreign banliers 407 individual banker, assessed 401 insurance companies ^ 409 interest on tax 411 license tax, foreign corporations 404 notice of assessment to banks 401 notice of statement of tax 411 payment of tax 411 penalties 402, 411 place of taxation 395 organization tax 403 railroads, elevated and surfaes 408 reports of corporation 401, 407, 409, 410 revision of accounts for taxes 412 review of comptroller's decision 413 savings banks, franchise tax on 407, 409 savings banks, deposits in, exempt 395 stock, owner of certain, exempt 395 stock, value of, appraised 409 suit for recovery of taxes 415 transfer tax, trust companies and others, duties as to 415 trust companies franchise tax 406, 409 transportation companies 408 water works and miscellaneous companies 408 warrant for collection of taxes 413 Tebminating Cokporate Existence of Bank 179 order of court 179 notices therefor 179 TiaxE Insitbance: business of, by trust company 267 TbANSFEE: of stock by stockholder indebted to corporation 318 must be entered in stock book 321 of property to officers, when prohibited 336 TRtNSFEE Agents: to exhibit books 344 Transfer Tax: duties as to ( see Tax Laic) 415 Trust Companies : definition of 86 GENEEAL INDEX. 659 Trust Companies — continued. pagb must deposit securities with superintendent 94 reports to superintendent 112 failure to report II5 deposits of savings banks preferred 256 incorporation of 262 what organization certificate shall state 262 amount of capital stock 262 certificate to be filed with county clerk and superintendent 262 notice of intention to organize to be published 263 certificate to be filed for examination of superintendent 263 certificate of authorization by superintendent 264 capital must be paid in cash before authorization 264 names and residence of stockholders must be filed 265 address and number of shares must be filed 265 authorized to act as fiscal or transfer agent 265 authorized to receive deposits and to make loans 265 authorized to hold and convey real estate 265 authorized to act as trustee and executor 265, 267 authorized to purchase and sell securities 265 business limited to location named 265 as to receiving on deposit, bonds, mortgages, jewelry, etc 267 may insure titles 267 limitation of powers 265 may exercise powers conferred on individual banks and bankers subject to restrictions 265 not required to give security except as provided 268 must render accounts respecting trusts 268 capital must be invested in certain securities 268 no security required 2C8 taxation of 406, 409 duties of, as to transfer tax 415 trust funds preferred 268 moneys received in trust shall be invested in certain securities 268 change of name of 271 interest on trust funds 269 affairs to be managed by board of directors 269 number and election of directors 269 directors must hold at least ten shares of stock 269 vacancies in board to be filled by directors 270 stockholders liable for debts 270 directors liable for losses 270 powers of specially chartered companies 271 Tbustees : in case of dissolution 375 powers of ^^^ U. Unauthobized Bankihtg Prohibited 192 660 GENEEAL INDEX. PAGE Uncaimed Balances: to be paid by Superintendent into state treasury 93 Unclaimed Dividends and Deposits: banks and bankers must publish annually 123 expenses of publication of 123 savings banks must report to superintendent 123 UsuKT (see Interest). V, Vacancies : inspectors of election 320 directors 314 Vaults : of safe deposit companies 301 Voters : right of, to vote, hov? determined 368 not to sell vote 368 qualification of members as 368 SAVINGS BANKS INBEX. 6.11 SAYINGS BANKS INDEX. A. Adtions ( see Legal Proceedings ) . Advertisinr (see Publications) : vAi>i as a savings bank, by banks, etc., forbidden 2,"»7 penalty for violation 257 Amount op Deposit (see Deposits) . Articles (see Certificates). Assessments (see Expenses) . on banlvS for expenses of banking department 256 Aitoeney-Geneeal (see Legal Proceedings) : to proceed on report of superintendent against bank doing business illegally, or delinquent 254 Opinions of: as to trust funds 220 as to taxing depositors 205 as to the transfer of deposit to representatives of deceased depositor. . . . 220 as to salary of deceased ofDeer 204 as to investing in unincumbered real estate 230 as to power of bank to borrow money or pledge its securities 245 as to right of Charity Organization Society to receive deposits 258 as to collecting savings in schools, etc 258 as to by-law stating times of meeting is notice to all parties 210 as to contributions for public benefit by savings banks 233 as to maximum deposit to be received 219 as to power to receive special deposits of valuables for hire 249 as to notice under transfer tax law 220 as to payment of dividends ou deposits withdrawn before end of period . . 252 as to "interest period" 252 as to proof required by superintendent in paying deposits of closed hanks. 261 as to power of savings banks to make a deposit for fixed time 246 as to borrowing money by pledge, etc 245 as to method of dissolution of bank 260 as to using surplus for payment of dividends 249 as to granting gratuities to officers 204 as to obtaining security for fidelity of employees 210 662 SAVINGS BANKS INDEX. Attoknet General — continued. paq» as to right of savings bank to delegate its powers 203 as to power of banks to hold real estate 238 as to extension of time for sale of real estate 234, 239 as to meaning of "majority" of board 253 as to what is "accumulated surplus" 234 as to number of trustees 208 as to duties of trustees 241 as to who are eligible to office of trustee 209, 212 as to various indirect interests of trustees 213 as to various investments by savings banks. .231, 232, 233, 234, 235, 236, 237 as to trust funds 220 AUTHOBIZATION : certificate of, to be issued within sixty days 201 to whom to be issued 201 to be transmitted to county clerks 206 duplicate to be filed in banking department 201 superintendent may refuse to issue 201 county clerks to be notified of refusal to grant 202 when granted, in whom powers are vested 202 Available Fund: may be deposited in bank or trust company, or loaned 239 limitations on loans of 240 deposits of 239 B. Bank Bdiilmng (see Real Estate) : authority to purchase land for 237 Banking Dbpabtment (see Superintendent) : general expenses of, how paid 256 clerks in, how paid 290 record of resolution to close, to be filed in 259 unclaimed deposits of closed bank and list of depositors to be sent to 260 Banks op Discount: available fund may be deposited in 239 pxcess of daily receipts may be deposited in 246 to give preference to deposits by savings banks in case of insolvency 256 not to advertise as savings banks 257 Beginning of Business: within one year 206 e:xtending time 206 Bonds {see Investments) . Business (see Location) : to be begun within one year after authorization 206 SAVINGS BANKS INDEX. 6(53 Business — continued. PAOfl extending time restrictions on methods of ' By-Laws : ,!;(. trustees empowered to make 4 ] as printed in pass-books, form part of contract with depositor" ..'.'.'.'." 215 :« copy to be transmitted to superintendent 209 c. Certificates : of incorporation contents of ' fi"°g of ...V.V.V.V.V.'.' .'.'.'.' .' [ [ 199 refusal to file „„„ notice of intention „„„ examination by superintendent 200 Of Organization: what to contain oQi to be filed with county clerk 206 to be filed for examination by superintendent 200 Of Authorization: issue of, by superintendent 201 to be transmitted to county clerk 202 refusal of superintendent to issue .». _ 202 Chabtees : of savings bank conformed to this act 259 to be uniform 259 Claimants : to fund, interpleader of 224 Closing Savings Banks (see Insolvent Banks) : provisions for dissolution 259, 260 unclaimed deposits of 260 Committees (see Trustees) : to investigate loans on real estate 226 to examine bank 255 Compensation of Ofpicebs 253 fixed by trustees 253 for special services 253 Contracts : savings banks empowered to make 202 with depositors governed by by-laws 215 664 SAVINGS BANKS INDEX. CORPOEATiows (see Savings Bank). Costs : page in suits for deposits 223 discretionary 225 chargeable upon deposits 225 County Clerk: certificate of organization to be filed with 206 to be notified of authorization or of refusal to authorize 215 extension of time for beginning business to be filed, with 206 Courts (see Legal Proceedings) . Debts 'Dni: SAvmcs Banks: preferred in insolvencies of other banks 256 DBariNITION OF SAVINGS BANKS 286 Delinquent Corporations: proceedings against 254 Depositors : trustees may classify 250 number of, to be reported 254 ledger of, to be balanced 255 Deposits (see Unclaimed Deposits) : of available fund in bank or trust company 239 of excess of daily receipts in bank or trust company 246 savings banks authorized to receive 202 names of oflieers to be filed, before bank receives 202 savings bank may refuse 215 of individuals of more than $3,000 not to be received 215 of co»-poration not to exceed $5,000 215 of trust funds or by order of court, of more than $3,000 allowed 215 no certificate of, to be issued 248 in action to recover, all claimants to be made parties 224 savings banks authorized to invest 202 of savings banks in insolvent bank preferred 256 investment of, by trustees 226 amount of, may be limited 215 statistics of 67 repayment of, trustees to make regulations 215 amount of, to be reported 112 opinion on special, of valuables for hire 249 in trust, what are 222 in trust, when to be paid to beneficiary 222 exempted from taxation 205 BAVINGS BANKS INDEX. ggS Deposit" — continued. VAna temporary deposits by savings banks 246 bad faith in maintaining , . „ unclaimed, of closing banks, to be transferred to department 260 <'i^i^°^^ ;;;;;; 222 Dividends ok Interest: trustees to regulate rate of 250 rai e of, not to exceed five per cent 250 notice to be given of change of rate of 251 extra, payment of, from surplus 251 amount credited, to be reported j 52 E. Evidence : testimony of -wife allowed as in action by husband to recover deposits 224 official report of superintendent to attorney-general to be presumptive. . 117 Examinations: by superintendent, preliminary 201 to be made at least every tvpo years 91 expenses of, how to be paid 90 results of, to be certified by examiner 91 by committee of trustees 255 Examinee : general powers of 91 to certify to results of examination 91 Exemption : from taxation 395 (See Tao) Law.) Expenses (see Salaries) : costs in actions to recover deposits to be determined by court 224 payable from "available fund" 239 compensation of trustees acting as officers 253 salaries to be fixed by trustees 210 certain incidental, allowed and prohibited 253 of examination of title to be paid by borrower 247 of banking department, how paid 256 interest on unclaimed deposits to be applied to, of banking department. . 260 F. Female (see Married Woman). FoEECLOSUKE (see Ileal Estate) ; property acquired by, to be sold 237 666 SAVINGS BANKS INDEX. FORFEITTIEE: rAGB of charters by banks delaying to organize 206 Franchise Tax 407 (See Tax Law.) Fund (see Available Fund). G. Gold: dealing in, by banks, restricted , , 243 H. HiSTOKICAL SkKTCH: of savings banks 60 I. INCOEPOEATIOIT, CeETITICATI!! OF 199 IlTFANT (sec Minors). Insoi-vency of TniTST Company, etc.; savings bank claim preferred 256 as to national bank, no preference 257 Insolvent Savings Banks (see Closing Banks) : provisions for appointment of receivers of 126 receiver to distribute assets 126 inspection, otlier excluded 254- Insurance (see Real Estate) : of mortgaged real estate 247 Inteeest (see Dividends). iNTERPtEADEB : of claimants to fund 224 Investments : authorized, of deposits 226 227 228 229 legality of, made before 1882 25Q remarks on gj I. Legal Peoceedings; against delinquent corporations 254 banks may sue and be sued 202 SAVINGS BANKS INDEX. 667 Legal Proceedings — continued. tagh superintendent may institute in case of failure to report 115 provisions for, against banks to recover deposits 224 interpleader in 224 married women as witnesses 224 no statute of limitations 224 costs in 224 attorney-general may institute, for noninvestment or improper disposi- tion of moneys 246 attorney-general may institute, for removal of trustees, for consolida- tion, etc 254 proceedings for closing of bank 259 superintendent may require an order of court, in case of conflicting claims for deposits 260 Liabilities : list of, to be reported 112 Limitations : no statute of, in actions for deposits 225 Loans: not to be made to trustees 211 securities as collateral 239 not to be made on personal securities 247 expenses of, paid by borrower 247 Location : to be designated in certificate of organization 199 sui>erintendent to investigate fitness of 201 bank may purchase plot of ground for 237 may be changed with approval of superintendent 237 savings bank not to be contiguous to bank of discount 119 Lost Pass-Book ^^* M. Maekied Women (see Deposits): testimony of, allowed, in action by husband 224 members of corporations must accept responsibilities 199 Meetings (see Trustees) : ol trustees lo u<= "•='" ^-jthly quorum MiNOKS : deposits in trust for, to be paid to, directly 222 deposits by . . • 668 SAVINGS BANKS INDEX. Mortgages (see lical Estate) : pagh. investment of deposits in, authoi'ized 22ft property acquired by foreclosure of, to be sold 237 examination of title to 247 property to be insured . . . . , 247 va,lue of, how estimated, in determining surplus 25S N. Name, Coepokate: to be set forth in organization certificate lOft KOTICES : of intention to organize, to be published and served 20O of change of rate of interest 251 of intention to close bank 259 to creditors and depositors of closing bank 259 0. Ofpiceks : name and residences of, to be sent to superinton Jont 202 to be elected by trustees 206 tnistees acting as, compensation of 253 to verify report 112 to give security if required 210 Opinions (see Attorney-General). Organization (see Certificates) : authority for, of savings banks 201 manner of 199 notice of intention to organize 200 filing certificate of superintendent 200 P. Pass-books : by-laws to be printed in 215 by-laws printed in, are part of contract with depositor 215 lost 248 payments to be made only on presentation of 248 trustees may make provisions for loss of 248 Penalties : for failure to report 115, 124 for advertising as savings bank 257 for violation of regulaticai as to trustees 207 Perjury; false swearing in regard to reports, deemed 112 SAVINGS BANKS INUEX, 669 PAGE PERSONAt SeOUEITY PEOTTIBrTED 247 loans not to be on notes, etc 247 Preferences : to be made to savings banks, by insolvent banks 256 Profits ( see Dividends ) . Pkohicitions : against certain persona being named in certificate 201 against trustees being connected witb other savings banks 210 against trustees borrowing the funds of the corporation 210 against trustees having interest in the profits of the corporation 211 against trustees receiving pay for services 211 against receiving deposits from corporations in excess of $5,000 215 against receiving individual deposits in excess of $3,000 215 against deposits in banks exceeding twenty-five per cent, of capital and surplus 239 against loaning on securities more than ninety per cent, of their value. . 239 against cost of banking-house exceeding twenty- five per cent, of surplus . . 237 against permanent noninvestment of funds 246 against holding real estate longer than five years 237 against loaning upon notes or personal securities 247 against trading in real estate, goods or other commodities 248 against dealing in notes, exchanges, etc 248 against issuing certificates of deposit 248 against payment of interest except regular dividends 248 against payment to depositors except on production of pass-book 248 against allowing interest for longer period than moneys are held 250 against payment of dividends except on recorded vote of trustees 250 against trustees receiving pay as such 253 against banks, firms, persons, etc., soliciting savings deposits 257 against investments in securities not authorized 259 Publications (see Notices) : of notice of intention to organize 200 of notice of intention to close bank 259 Q. ■QCOBUM : seven trustees to constitute « 209 Rate of Interest (see Dividends). Beal Estate (see Mortgages) : investment of deposits in, authorized 229 purchase, holding aad conveying of certain, allowed 237 670 SAVINGS BANKS INDEX. Real Estate — continued. '"^"^ acquired by foreclosure, to be sold 238 mortgaged, to be insured 247 dealings in, restricted 237 for banking houses, limitations 237 Receivbk : proceedings for appointment of 127 REGXrt,ATioNS (see By-laios) : residence to be named 199 to be posted in bank 215 to be printed in pass-book 215 as to repaying deposits 215 to be made by trustees 215 other reports, relieved from 254 Eepatment op Deposits 215 EbPOETS by SUPEEINTEKDENT : annual, to legislature, on savings banks 116 to attorney-general, of illegal practices of bank 254 of names of closed banks 116 Reports to Supekiktendekt : banks to make semi-annual 112 vphat to contain 112 to be verified L 113 failure to report 115 reports other than, not required 254 Restrictions on Method of Business 248 not to trade 248 not to issue certificates of deposit 248 s. Salaries (see Expenses) ; of officers and employees to be fixed by trustees 210 trustees to receive no 211 of trustees, acting as officers 253 Savings Banks : definition of 86 definition of, by United States Supreme Court 50 historical sketch of early 60 become incorporated, when 202 must begin business -within a year of issuing of certificate 206 business of, to be managed by trustees 206 may deposit available fund in bank of discount or trust company 239 SAVINGS BANKS INDEX. 671 Satings BANKa— comiidMed. page may deposit excess of daily receipts with bank or trast company 246 charters of, to be uniform 259 consolidation of two or more 254 provisions for closing of 259 method of dissolution of 260 debts due to, by insolvent bank, to have prof(Meiice 256 not to receive deposits in excess of $3,000 215 prohibitions against advertising as 257 cannot grant gratuities to officers 204 thirteen persons may organize a 199 general powers of 202 cannot delegate its powers 203 authorized to receive and invest deposits 202 may refuse deposits 215 may renew insurance, on neglect of mortgagor 247 to report semi-annually 112 not to be located, etc., as to discount banks 119 Becukity foe Loans: not personalty 247 bond with mortgage 247 expenses for examining title 247 to be insured 247 Service: of notice of intention to organize on other savings banks 200 States : inv^estments in stocks of certain, allowed 226 investmens in stocks of certain, prohibited 226 Stocks (see Investments, Deposits), Suits (see Legal Proceedings) : method of procedure in, to recover deposits 224 SUPEBrNTENDENT OF THE BANKING DEPARTMENT; may file or refuse to file organization certificate 200 may extend time within which to begin business 206 to inquire into fitness of organizers 201 issudng of certificate of authorization by 201 refusal of, to authorize 202 to have sole supervision of banks 254 672 SAVINGS BANKS INDEX. Superintendent op the Banking Depabtmeht — continued. tagk to order discontinuance of illegal practices by bank 254 to apply to attorney -general against delinquents 254 to prevent permanent noninvestment of funds 246 to make annual report to legislature 116 to report closed banks 260 to cause examination of banks 9] may employ necessary clerks 89 may sue banks to recover assessments for expenses 90 to put value on stocks in determining surplus 253 may authorize change of location 237 may extend time for sale of propeo-ty acquired by foreclosure 237 to talce temporary possession if officers are enjoined 255 to make payments to depositors of closed banlcs 260 may direct that deposits be not paid 248 SUBPLUS : attorney-general on accumulated 234 per cent, of, how determined 253 accumulation of, authorized 251 ' in excess of fifteen per cent, of deposit.';, to be divided as dividend 251 stocks and bonds, how estimated, in determining surplus 253 remarks on 67 T. Taxation (see Tax Law, General Index) : remarks on 72 savings banks deposits exempt 395 savings banks, franchise tax on 407, 409 savings banks exempt from, opinion on 205 Temporaet Deposits by Savings Banks 246 must be in good faith 246 Testimont (see Evidence; Witness). TnrsT Companies (see Banks of Discount) : available fund may be deposited in 239 excess of daily receipts may be deposited in , 246 Trust Deposits in 222 repayment of 222 (See Deposits.) Trustees and Other Officers: remarks on, of early banks gg meetings of 209 quorum of 209 SAVINGS BANKS INDEX. 673 Irustees and Other Officers — continued. page have power to manage business and elect ofliceis 206 those named in authorization certificate shall act as first 206 only residents of the state eligible as 206 judgments against 206 insolvency of 206 reduction in number of 207 vacancies in board 207 increase in number 207 directors also of discount bank 207 a majority in board 207 penalties 207 not to be officer of two banks 210 not to be a borrower or surety 210 211 must meet monthly , 209 investment of deposits by 226 may keep an available fund 239 to receive no pay 211 may make loans on certain securities 239 may act as counsel, conditions 215 compensation of, acting as officers 253 to make by-laws 209 to make regulations for repayment of deposits 215 may limit amount of deposits 215 may classify depositors 25 1 committee of, to investigate loans on real estate 226 committee of, to examine bank, vouchers, etc 255 to cause balance of depositors' ledger to be taken 255 may examine bank at any time 255 are liable for dividends declared in excess of earnings 251 liability of, lasts ten years 246 are responsible for acts of officers 207 may require security from and fix salaries of employees 210 cannot grant gratuities to officers 204 vacancies in, how filled 200, 210 how office of, may become vacant 206, 210 to regulate dividends 251 must divide surplus in excess of fifteen per cent of deposits 251 may make provisions for loss of pass-books 248 attorney-general may move for removal of 255 two-thirds vote of, may close bank 259 of closed bank, to transfer unclaimed deposits to superintendent 260 to report proceedings for closing to court and superintendent 260 Teust Funds: deposits of, of more than $3,000, allowed 215 u. Unclaimed Deposits, Reports or 123 superintendent to receive 260, 261 Banks, 43 674 SAVINGS BANKS INDEX. Unclaimed Deposits, Repobts of — continued. pagh penalty for failure to report 124 index of 124 V. Visitation: relieved from other 254 w. WlTPfESS : nian'ied woman, against husband 224 Women (see Married Women), NATIOiSrAL BANKS IMDEX. 675 NATIONAL BANKS INDEX. A. Acts, Additional AND Amendatory: j,^g act of June 20, 1874, for a "redistribution of the national bank cur- rency," etc 597 January 14, 1875, to provide "for the resumption of specie pay- ments" 001 January 19, 1875, as to limitation restricting issue of notes payable in gold 602 February 8, 1875 — ten per cent tax on other bank-notes 603 June 30, 1870 — appointment receivers of national banks 603 March 2, 1897 — amending act of June 30, 1876 604 March 1, 1879— extract from, abating semi-annual duty, etc 608 February 14, 1880 — authorizing conversion of national gold banks.. 608 February 26, 1881 — verification of returns of national banks 609 July 12, 1882 — enabling national banking associations to extend their corporate existence, etc 609 March 3, 1883 — extract from, to repeal stamp tax, etc 616 March 29, 1886— additional to that of June 3, 1864 616 May 1, 1886 — enabling national banks to increase capital stock, change name, etc 617 July 30, 1886 — extract from, prohibiting special laws in territories. 619 March 3, 1887— amending §§ 5191, 5192, U. S. Rev. Stat 619 August 13, 1888 — banks deemed citizens in state of location 621 May 2, 1890 — banks in Oklahoma 621 July 14, 1890 — deposits for circulating notes 621 July 28, 1892 — redemption of lost or stolen notes 622 August 13, 1894 — taxation of legal tender and bank notes 622 March 14, 1900— Currency Act of 1900 623 March 3, 1900 — cities to be added to reserve list 630 Amendments : to national bank act 597-630 Association (see National Banks). Attachments (see Transfers). B. Banks and Bankees (see 'National Banks) : not to use the word "National" in title of firm 589 676 NATIONAL BANKS INDEX. Bonds Deposited with Teeasueeb: page deposit of, before commencing business 535 what kind of, to be deposited 535 increase or decrease of 535 registered to be issued for coupon 536 transfer of 536 examination of transfers 537 annual examination of 537 custody of, etc 5S7 withdrawal of 535 comptroller to have access to 537 interest on, how collected 537 limitation of withdrawal of 537 may be sold for failure to withdraw circulation 542 description of, by national gold banks 544 interest on, when withheld 558, 564, 565 when reassigned 572 forfeiture of 573 cancellation of 574 sale of 574, 575 Bonds, Official: of receiver 575 Bonds, United States: defined 535 Business, Regulation of: location of 546 reserve prescribed 547 deposit with redemption agencies 548 shall receive each other's notes at par 549 rate of interest 549 penalty for taking unlawful interest 551 dividends 554 limit of loans, etc 554 cannot loan or purchase their own stock 555 limit as to indeibtedness 557 not to pledge their own notes 558 not to withdraw capital, etc 558 impairment of capital , 553 restriction on use of notes of other banks 559 not to receive United States notes as collateral, etc 559 when officers may certify checks 560 penalty for embezzlement 5gl list of shareJiolders 563 report of assets, etc ■. 564 report of dividends 564 failure to malce reports 564 reports for purposes of taxation 565 NATIONAL BANKS INDEX. 677 BtrsiNESS, REGXJi-ATiOTir OF — continued. tax on failure to make returns. . . . refunding excess of duty shares, etc., liable to taxation . . . , By-Laws ; of associations Capital: PAGB . 565 . 566 . 566 6C9 amount of, to be stated in organization certificate 508 minimum amount of 5J7 how paid in 52j failure to pay instalment of 521 increase of 52i^ 522 reduction of 523 increase of, by use of notes prohibited 558 impairment of 553 tax upon 565 of bank at dissolution, assumed to be its capital 591 of converted state banks, minimum amount of 531 Caeds : in imitation of circulating notes, penalty for issuing 545 Cashieb: appointed by board of directors 509 oath of, required to payment of instalments of capital stock 521 as to report of dividends 564 penalty for embezzlement by 561 after money is deposited no fraud of, can free bank from liability 509 Centeai. Reserve Cities: cities having 200,000 people may be 547, 548, 619, 630 Checks : penalty for certifying beyond amount of deposit 560 bank not liable unless it agrees to pay certifying, is warranty that there are funds to pay 509 560 CnjcuiT Courts of United States : may grant injunction in case of national banks in hands of receivers 583 CiEcuiATiiirG Notes: for what receivable "" not at par not to be paid out by banks printing denominations, etc control of plates, etc examination of plates, etc ^^^ 559 539 540 ,678 KATJONAL BANKS INDKX. CiRCTJi-ATiNG Notes — continued. pagb limit of amount of small notes 540 how signed, etc 543 to be received by all banks 549 restriction upon use of 559 hypothecation of, by association restricted 558 issue of other notes prohibited 543 destroying and replacing, mode of 543 redemption of 548, 571, 573 mode of protesting 573 proceedings on failure to redeem 573, 575 redemption of, at treasury 574 issuing of, to unauthorized associations 544 printing, etc., in imitation of 545 mutilating, etc S45 issu.ing of gold notes 544 Coin; United States notes to be redeemed in 601 silver, to be used in redemption of fractional currency 601 COMPTROIiEB OF CUBEENCY: articles of association of national banks to be sent to 507, 509 title of bank subject to approval of 508 payments of instalments of capital to be certified to 521 banks not to begin business until authorized by 509 increase and decrease of stock approved by 522, 523 oaths of directors of banks to be sent to 525 to deteraiine as to capital, etc., liability of stockholders 526 to receipt for bonds deposited by banlcs 536 to counteisign assignment or transfer 536 to keep a register of bonds transferred 536 to notify banks of transfers, etc 536 to have access to books of treasurer 537 bonds of banks to be annually compared with books of 537 duties as to interest on bonds, etc 537 to see to correctness of organization, etc 538 permission to banks to commence business 539 to cause notes to be engraved, etc 539 examination of plates, dies, etc., by 540 plates and dies to be procured by 540 to have custody of plates, etc 540 to make requisition for return of circulation to equalize apportionment. 542 to prescribe rules for removal of banks from one state to another 542 to replace worn out notes 543' when to issue gold notes to banks 544 to notify banks to make up reserve 547 when may appoint receivers 547, 548, 555, 558, 575 to approve selection of redemption agencies 548 to require banks to make good impaired capital 557 NATIONAL BANKS INDEX. 679 Comptroller of CnuBKisrcY — continued. paok list of shareholders to be received semi-annually by 563 reports to 564 dividends, reports sent to 504 may fine for failure to make reports 564 vote of bank to go into liquidation to be certified to 571 duties of, in relation to banks redeeming circulation 572, 573 on failure to redeem notes 573 special agent may be appointed by 573 dividends to creditors of banks 581 may be enjoined in proceedings against banks 583 forfeiture of franchises at suit of 584 may appoint occasional examinei'S 585 authorized to add reserve cities 619 to compel banks to close 526 to cause annual examination of plates, etc 539 decides on sufficiency of evidence as to organization 539 his certificate is proof of incorporation of bank 539 to allow receiver to use certain money 617 empowered to draw trust fund from treasury 617 approval of, necessary to change name or location 617 COMPTROLT.EE Oi- TREASURY : duties as to refund of taxes paid by national banks in excess of what is due 566 Copies : of books, records and papers in the office of comptroller of currency shall be received in evidence Counterfeit : to be stamped on fraudulent United States notes d07 to be stamped on fraudulent national bank-notes 607 CuKEENCY Act of 1900 623 CuREENCT, Bureau of National: expenses of, to be paid out of taxes on national bank circulation 540 (See National Banks.) D. Defacing Notes, etc.: of national banks, penalty 545 Definitions : of "bank" and "bajiker" in laws relating to taxation 591 of "United States bonds" 5S5 Depositaries of Public Moneys: national banks may be designated as 530 G80 NATIONAL BANKS INDEX. Deposits : page national banks may receive 509 proportion of reserve to be kept on 547 not to certify checks in excess of 560 to pay duty or tax on 565 to make return to treasurer 565 duty or tax on, how assessed and collected in default of return, and pay- ment 565 refunding of excessive duties 566 for circulating notes 621 Directors : when may sell shares of delinquent stockholders 521 shall hold office for one year 524 required to certify to facts in relation to organization 509 powers of, to conveirt state bank into national 531 appointment or election of 509, 524 powers of 509 number of 524 board of, officers, etc 581 votes in election of 523 qualifications of 524 oath of 525 vacancies in board of 525 failure to elect, on proper day 525 president elected from and by 525 dividends to be declared by 554 penalty for embezzlement by 561 reports signed by 664 shall give notice of intent to dissolve 571 ' penalty for violations of law by 584 Dissolution : voluntary 571 notice of intended 571 deposit to redeem circulation 572 redemption of notes, etc 572 destruction of redeemed notes 573 manner of protesting notes 573 failure to pay notes, proceedings on 573 business, after failure to pay notes, unlawful 574 notice to holders of notes, sale of bonds, etc 574, 575 disposal of redeemed notes 575 cancelation at treasury 575 notice of appointment of receivers 581 notice to creditors to present claims 581 dividends to creditors 581 when receiver may be enjoined 583 fees and. expenses of receivers 583 transfers after act of insolvency void 587 NATIONAL BANKS INBEX. 681 Dissolution — continued. page deposit not required where intent is consolidation 572 reassignment of bonds 572 examination by special agent 573 sale of bonds at auction 574 sale of bonds at private sale 575 Dividends (see National Banks) : deficiency in suiplus, stockholders to receive no 526 while reserve is below minimum none can be made 547 may be declared, when 554 not counted as a debt of the bank, when 557 shall not exceed net profits 558 reported to comptroller, when and how 564 penalty for failure to report 564 in hands of receiver 581 DDES: to United States, circulating notes receivable for 543 Duties (see Tasces) : on imports, not payable in national bank notes 543 E. EMBEZZI.EMENT: of funds by president, cashier, agent 561 Equity : United States district court can entertain bill to appoint receiver 575 Examinees : appointment, duties, etc 585 in case of failure to redeem notes 573 EXECUTOKS : holding bank stock not liable 529 (See Guardians.) Expense: of special examinations ■■ 610 of reappraisal of stock 611 of redemption of notes covered by deposit of lawful money 613 of transportation of notes 613 of plates ' ^^^ of bureau of the currency 540 of destroying plates and dies 540 of sale of bonds of closed banks 572 583 of examination and receivership 682 NATIONAL BANKS INDEX. Expense — continued. ^*™ of redeeming notes, and of new plates 697 F. FiNANCiAi, Agents: national banks may be employed as 636 FOEPEITUBB : of interest in case of usury 651 of bonds for failure to redeem circulating notes 573 of corporate franchise 684 Fbanchise: of expiring associations extended 612 limit of extension of 609 G. Gold Banks: organized to issue notes 544 reserve of, redemption by 544 of San Francisco, not required to redeem notes in New York 548 limit of circulation of, removed 544 may be converted into currency banks 608 powers and privileges of, converted 608 Gold Certificates 615 what receivable for 615 to be counted as reserve 615 may be reissued 615 cannot be security for loans 615 cannot be withheld from circulation 615 denominations of 615 when not to be issued 615 Gold Coin: may be deposited ■ 615 shall be retained in treasury 615 Guardians : holding stock not personally liable 629 H. Hand Bills: penalty for issuing, in imitation of circulating notes 645 Hypothecation : of circulating notes, when unlawful 558 NATIONAL BANKS INDKX. 683 I. to be made good, or receiver appointed 558 Impairment op Capital; p^q^ Increase of Capital: how made 522 Indebtedness : limit of ^')Y Injunction : of comptroller ajid receiver by bank undei- protest 583 not to issue from state court before final judgment 587 bank may enjoin appointment of receiver, when 583 'Insolvent Banks: agent of stockholders of 662 certain acts of, void 587 Interest: on bonds deposited, how collected 537 rate of, which may be taken 549 usurious, consequence of taking 551 on bonds deposited, withheld 558 may be retained on failure to report 564 Internal Revenue Tax; repealed on capital and deposits 616 J. Judgments {see Suits) : in state courts to be final before attachments issue 587 purchase of real estate at sales under 515 L. TjAwtul Money: meaning of term in case of gold banks 544 liAwruL Money Beservb: prescribed 547 what may be counted toward 548 one-half may be deposited in New York 548 Legal Tender Notes: may be redeemed at San Francisco 620 LlABttlTIES : of converted state baiiks 531 of associations organized before June 4, 1864 533 684 NATIONAL BANKS INDEX. Liabilities — continued. limitation of, for money borrowed 554 not to exceed capital stock, exceptions 557 on circulating notes of closed banks 672 of shareholders ^^6 of directors ^20 devolve ^1* Liek: of United States on as&ets of closed bank, paramount 574 Liquidation" (see Dissolution). Loans and Discounts: not to be made when reserve is reduced, except 547 rate of interest on ' 549 banks not to loan on, or purchase their own stock 555 loans on personal security 509 limit of, to any one person 554 M. Maximum: of monthly lawful money deposited 613 increase of capital determined by comptroller , 522 of United States notes outstanding 599 Minimum : capital of any association 517 capital of converted state bank 531 amount of bonds deposited by any association 535 amount of bonds which may be transferred to association 537 to which bonds deposited may be reduced by withdrawal 535 Mutilated Notes: of national banks replaced, etc 543 N. National Bank Act 597 National Banking System 500 National Banks: what associations subject to laws relating to 534 title "national" not to be used by other banks 589- may change from state bank to 531 articles of association of 507 contents of organization certificate, etc S08 comptroller to examine articles of association of 53S K-ATIONAL BANICS INDEX. 685 National Banks — concim^ed. pake may give or withhold oertifieate 539 powers of ' gog^ gjg minimum capital of 517 paying in of capital stock of 521 failure to pay instalments on stock of 521 increase of capital of 522 reduction of capital of 523 rights of shareholders to vote 523 individual liability of shareholders 526 executors, etc., holding stock, not personally liable 529 designated as public depositaries 530 for issue of gold notes 544 state banks to become 531, 533 rights of, organized under former act 533 deposit not recjuired when intent is consolidation 572 examination of, by special agent 573 sale of bonds at auction ; at private sale 574 voluntary dissolution of 571 notice of intended dissolution of 571 deposit by, to redeem circulation 572 redemption of notes of 572 destruction of redeemed notes of 573 manner of protesting notes of 573 failure of, to pay notes, proceedings on 573 business of, after failure to pay notes, unlawful 574 disposal of redeemed notes of 575 cancellation at treasury 575 appointment of receivers of 575 receivers to certify facts and the value of property and equity in certain cases 616 dividends to creditors of 581 fees and expenses of receivers of 583 transfers by, after act of insolvency, void 587 deemed citizens of state 620 location of business of 546 may change name and location 618 reserve of, prescribed 547 deposit by, with redemption agencies 543 shall receive each other's notes at par 549 interest to be ta.ken by 549 action may be maintained against, for usury 551 dividends of ^^^ limit of loans, etc 554 cannot loan or purchase their own stock 55o limit as to indebtedness of 557 not to pledge their own notes 558 impairment of capiital of 558 not to witlidraw capital, etc 558 restriction on use of notes of other banks by o-V.i 686 NATIONAL BANKS INDEX. NATiosrAi, Banks — continued. page; not to receive United States notes as collateral 55!) when officers of, may certify checks 560 list of shareholders of 56S reports by 564, 565 citizens of state where located may increase capital stocx 617 may change name or location 618 failure of, to make reports 564 tax on failure of, to make returns 565 refunding excess of duty to 566 shares, etc., liable to taxation 566 tax on certain circulation to be paid by 592 number of persons necessary to form a bank 507 may hold real estate 515 no officer or clerk of, can act as proxy 523 shareholders of, in default, cannot vote 523 shareholders elect directors of 824 taxes on, repealed 616' redemption of notes lost or stolen 622, National Gold Banks 497 Notaries Public: duty of, on protest of national bank-notes 57S No'iES (see Circulating Notes) : of state banks paid out, tax on 592 of town, city or municipal corporation, tax on 592 not at par not to be paid out 559 fraudulent, to be stamped 607 redemption of lost or stolen 622 Notice : by national banks, of liquidation 571 after receiver is appointed to present claims 581 Oath: as to certificate of payment of stock 521 required, before authorized to commence bus^iness 53S required of directors 525 to list of stockholders filed semi-annually 563 required upon reports of condition, dividends, etc 564 must be taken before duly authorized officer 609 Officers : appointment of 509 certificate of 538 unlawful certification of checks by 560 NATEOWAL BANKS INDEX. 687 Ofiicers — continued. page cannot be appointed to examine their own bank 585 penalty for violation of act by 534 penalty for issuing notes to unauthorized banks 544 penalty for embezzlement by 561 must stamp counterfeit notes 607 OEGANIZATION CEETinCATE : what to contain 508 to be acknowledged and forwarded to comptroller 509 of converted state bank 53I business conducted at place specified in 546 P. Penalties ; for issuing notes to unauthorized banks 544 for imitating, etc., notes 545 for defacing, etc., notes 545 for falsely certifying checks 560 for failure to make reports 564 for failure to pay duties 565 for withholding notes from use 559 for violation of banking law 584 for use of word "national" 589 for crimes at common law; state courts have jurlsdictioai 561 Place or Business : « must be as specified in organization certificate 546 PowEB or Banks: r to adopt and use a seal 509 V to exist for twenty years 509 to make contracts 509 to sue and be sued 509 to appoint directors, etc 509 to make by-laws 509 to conduct a banking business 509 cannot transact business until authorized by comptroller 509 to purchase, hold and convey estate for certain purposes 515 Private Sale: of bonds for default in paying notes 575 of stock taken for debt 555 of bonds for failure to withdraw circulation 599 Peofits : disposition of net 554 dividends limited to amount of 558 688 NATIONAL BANKS INDEX. Peofits — continued. tagb semi-annual report of 564 Protests : of national bank-notes 573 Publication : of sale of stock of delinquent shareholders 521 of certificate of authority to commence business 539 of notice of deferred election of directors 525 of notice of sale of bonds for failure to withdraw circulation 542 of names of redemption agents 548 of reports of associations 564 of notice to creditors 571 of notice of sale of delinquent stock 607 Purchase : of real estate 515 of bills of exchange 549 of shares of its own stock, how restricted 555 Qualifications : of directors of national banks 524 K. Real Estate: when national banlcs may purchase 515 necessary for its accommodation 515 mortgage for previous debt 515 conveyed in satisfaction of debt 513 purchased to secure debts 515 when, cannot be held more than five years 515 act does not render loan on, void 515 the government only can enforce forfeiture 515 debtor and his creditors estopped 515 Reassignment : of bonds, on return of circulating notes 535 of bonds, in sums not less than $1,000 537 of bonds on deposit of lawful money 572 Receivers : may be appointed on failure to make capital equal to legal minimum. . . . 521 when reserve is not made good 547 on failure to redeem notes 575 on failure of banks to select or redeem notes may appoint 548 when bank continues to o^vn its own stock 555 IfATIOlTAL BANKS INDEX. 689 Eeceivebs — continued. page on refusal to make good impaired capital 558 when creditor shall have obtained indgment 603 duties of 675 fees and expenses of 583 suits to enjoin 583 must give bond STo take possession of books, etc 575 collect or sell assets 576 enforce liability of stockholders 575 pay moneys over to comptroller 575 report to comptroller 575 to certify equity of bank in property to be sold 616 Eedemption : of notes of national banks 548 proceedings on failure to provide for 548 wlien at treasury of United States 572 of banks, in liquidation, account to kept 572 protest on failure of 573 when notes shall be charged to 572 proceedings on notice of failure of 573 agencies of national banks to be selected for 548 banks cannot do business after failure to redeem 574 of lost or stolen notes 622 Removal: of bank to another state 542 Repokts : to comptroller, by savings banlis 607 to comptroller of currency 564 as to dividends 564 penalty for failure to make 564 Eeseeve Cities: cities having 50,000 people may be 619, 630 Reserved Funds: amount, etc 547 what, may consist of 548 when half of, may be kept in New York 548 issuing gold notes 544 S. Sale: of stock of delinquent shareholder 521 of bills of exchange 549 of stock taken for debt 555 Banks, 44 690 NATIOSTAI, BANKS INDEX. Sale — continued. ^aob of bonds, for failure to deposit legal tender 572 of bonds under protest 575 of assets, by receiver 575 of bonds, for failure to withdraw circulation 599 of appraised stock of extended associations 611 Savings Banks: not to use "nationa,l" in title except 589 Seceetaey of the Tbeastirt: may approve orgajiization of banks with capital of $50,000 517 may designate depositaries of public money 530 may exchange coupon for registered bonds deposited 536 to prescribe terms for exchange of bonds deposited 537 to have direction of the engraving of plates and dies 539 to approve regulations for destruction of printing material 540 to supervise statement showing circulation to be withdrawn 542 to approve rules for removal of banks from states in certain cases 542 to appoint witness to burning of mutilated notes 543 to concur in appointment of receiver for deficient reserve 547 to approve appointment of bank examiner 585 to concur in appointment of agent to examine bank under protest 573 to direct manner of notice to bill-holders of closed banks 574 to regulate the disposition of redeemed circulating notes 575 to prescribe regulations for the redemption of circulating notes 592 may suspend issue of gold certificates 507 may receive deposits of gold coin 507 may issue gold certificates 507 Shaeeholdees : stock shall be paid for, how 521 payment to be certified to comptroller 521 may be sold out for failure to pay for stock 521 one vote for each share of stock 523 vote may be by proxy 523 names of original 508 shares of 518 rights and liabilities of succession 518 failure of, to pay instalments 521 may reduce capital 523 directors elected by 524 may fix day for election of directors 525 individual liability of 526 assessed to make good capital, etc 558 list of, open to inspection, etc 563 two-thirds of, can vote bank into liquidation 571 discharge from liability 572 siirplus paid to 581 right of, to vote 523 NATIONAL BAKKS INDEX. 691 Shakeholdeks — continued. page in default, cannot vote 523 executors, etc., holding stock not individually liable 529 when creditor's bill may be filed against 604 may take assets from possession of receiver 604 when liability of, may be enforced by creditor's bill 604 when may elect agent in place of receiver 604 to whom remaining assets shall be turned over 604 Shares of Stock: how divided, and how transferable 518 payment for, how made 521 each payment on, to be certified to comptroller 521 if shareholder fails to pay for, may be sold out 521 how such stock shall be disposed of 521 how stock may be increased 522 must be approved by comptroller 522 reduction of, and to what extent 523 shareholder entitled to one vote on each 523 I " in person or by written proxy 523 but no officer shall act as proxy 523 Silver Cketificates (see Gold Certificates] . Special Agents : to examine national bank 573 expenses of, how paid 583 Stamp Tax: on bank checks, etc., repealed 616 State: national banks, citizens of where located 621 State Banks: not to use "national" in the name of 589 internal revenue tax on circulation of 592 to apply to evidences of indebtedness 592 how may become national banks 531 capital in, on conversion, what amount to be* 591 liabilities of shareholders on becoming such . 531 may keep in operation any branches it had before change 533 Stock of National Banks (see Shares). SoiTS: by or against associations •. 509 for usuiy, limitation of 551 to enjoin comptroller 583 against directors 584 G92 NATIOITAL BAWKS IBTDEX. Suits — continued. pabe change of name not to affect liability 618 SuEPLTJS Fund; what part of profits to be carried to 554 T. Taxes: on notes of persons and state banks 592 penalty remitted in certain cases 592 not to apply to national banks 594 on notes of towns, etc., paid out, is constitutional 592 on circulation and deposits of banks 565 how assessed on default of return 565 on notes, etc 592, 394 monthly returns of suoh notes 593, 594 on circulation and deposits 565 returns on circulation, for 565 failing to make returns or pay duty 565 exemption from tax on circulation, when 592, 594 repeal of 673 how collected on default in payment 565 excess of payment, how refunded 566 states authorized to levy 566 internal revenue on capital and deposits, repealed 616 stamps on bank checks, repealed 616 legal tender notes and bank notes 622 Tebbitoiues : ' not to grant private charters to banks 619 Transfers : when void 536, 587 state court has jurisdiction 587 Tbeasuree op Uis'jtkd States: bonds tmnsferred to 535 amount of funds to be deposited with 535 may retain interest on bonds for f ailui-e to malce reports 564 tax on bank to be paid to 565 report to, as ba^is of semi-annual tax 565 may assess tax without report 565 may reserve tax out of interest on bonds 565 to certify claim of bank for return of duty 566 deposit with, to redeem 572 when to redeem national bank-notes 572 when to destroy national bank-notes 573 receivers of national banks to pay money collected to 575 national banks index. 693 Trustees : pagb holding national bank stock, not personally liable 529 TJ. United States Notes: not to be received by banks as collateral 559 ■Usuby: penalty for 551 suits for recovery of 551 limit to right of action for recovery of 551 when the purchase of bills of exchange, etc., shall not be considered as . . 549 V. Vacancies : in board of directors, how filled 625 VlSITOBIAL POWEBS: limitation of 586