QJornpll ICam ^rlynnl Sjtbratg Myhderse Yah Clip 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/cu31924022794824 BANKING LAW OF NE^W YORK Chapter 2 of Consolidated Laws Chapter 369, Laws of 1914 WITH NOTES, ANNOTATIONS AND REFERENCES GEORGE WILSON MORGAN OF THE NEW YORK BAR AMASA J. PARKER, Jr. OF THE ALBANY BAR THE BANKS LAW PUBLISHING CO. 23 PARK PLACE NEW YORK 1914 iQf^U^ Copyright, 1914 BY THE BANKS LAW PUBLISHING CO. GEOEGE C. VAN TUYL, Je. A. BAETOIT HEPBUKISr, TO WHOM THE STATE OF NEW YOEK IS INDEBTED FOR THEIK FORESIGHT AND ENERGY IN CONCEIVING AND EXECUTING THE PRESENT REVISION OF THE BANKING LAWS. [iii] PREFACE. The present Banking Law (chapter 369 of the Laws of 1914) was submitted to the Legislature by the \"an Tuyl-Hepburn Bank- ing Commission on February 25, 1914, introduced as a legislative bill by Senator Henry V\'. Pollock and Assemblyman Simon L. Adler on February 2(5th, unanimously passed, with slight modi- fications, by a Democratic Senate and a Republican Assembly on March 25th, and signed by Governor Martin H. Glynn on April 16th. This law represents the results of the work of the Commission to Revise the Banking Law, appointed by Superintendent of Banks George C. Van Tuyl, Jr., pursuant to chapter 705 of the Laws of 1913, as amended by chapter 3 of the Laws of 1914. The Commission was composed largely of men of wide banking ex- perience, who wisely selected as Chairman, Mr. A. Barton Hep- burn. Under Mr. Hepburn's leadership, criticisms of the old law and suggestions for the revision were invited from all who were subject to the provisions of the then existing banking stat- iites, and from many students of financial problems. Valuable assistance was rendered to the Commission by the various State banking associations, by the State Savings and Loan Association, and by public spirited citizens who had made a special stvidy of the problems relating to small loans. Many of the changes both of form and substance were suggested by Mr. George I. Skinner, First Deputy Superintendent of Banks, who was associated with the writer as counsel to the Commission. Mr. Skinner's ex- haustive knowledge of the practical workings of ovir banking laws gained through an experience in the Banking Department extend- ing over a period of seventeen years was invaluable to the Com- mission, and contributed largely to the united support given to the bill by the banking community of the State. ,, ■ vi Bakkikg Law. The substantive changes in the present revision are noted under the text where such changes occur. j\Iany changes largely formal have been made for the purpose of unifying the arrangement of the various articles. The powers and duties of the Superintendent of Banks have been gathered together in article II. By unifying the manner of organizing corporations under the Banking Law, of supervising them and the individuals within its provisions, and of reporting to the Superintendent, departmental administration has been greatly simplified. Each article, so far as it relates to beginning business and continuing as a going concern, is com- plete in itself. The advantage of this arrangement to the banker or person engaged in the business and subject to the provisions of the Banking Law, is obvious. The manner of voluntarily dis- continuing business and the merger of this class of corporations is contained in article XII. For the first time, certain classes of private bankers have been brought under the supervision of the Superintendent of Banks (article IV), and a beginning has been made toward protecting small savings accounts received by individuals (see note to §' 150). The making of small loans by individuals at interest in excess of six per centum per annum has also been brought under super- vision by provisions contained in article IX. Sections 375 to 438 of article X provide for the incorporation by savings and loan associations of a land bank, patterned after the German landschaften. It is hoped that the securities to be issued by this corporation will help to solve the problem of mobilizing rural credits. The scholarly work of Mr. Edward A. Craighill, Jr., and ]\rr. Hiram Thomas of Breed, Abbott & Morgan, has contributed materially both to the revision of the Banking Law and to whatever virtues this book may possess. GEORGE WILSOX MORGAX. 32 Liberty Street, Xew York City. May 12, ]914. BANKING LAW CHAPTER 369 OF 1914. KN ACT in relation to banking corporations, and individuals, partnerships, unincorporated associations and corporations under the supervision of the banking department, constituting chapter two of the consolidated laws. Approved by the Governor April 16, 1914. Passed, three-fifths being present. The People of the State of New York, represented in Senate and Assertibly, do enact as follows: ChAPTEE 2 OF THE CONSOLIDATED LaWS. BANKIl^G LAW. Article I. Short title; definitions (§§ 1-3). 11. Banking department; powers and duties of superintendent and other officers (§§ 10-83). III. Banks (§§ 100-148). IV. Private bankers (§§ 150^-172). V. Trust companies (§§ 180-223). VI. Savings banks (§§ 230-281). VII. Investment companies (§§ 290-309). VIII. Safe deposit companies (§§ 315-331). IX. Personal loan companies and personal loan brokers (§§ 340-371). X. Savings and loan associations; land bank of the state of New York (§§ 375-438). XI. Credit unions (§§ 450-479). XII. Forfeiture of corporate existence by non-user; voluntary dissolution and merger of corporations (§§ 485-496). XIII. Laws repealed; construction; when to take effect (§§ 500-502). ARTICLE I. Short title and definitions. Section 1. Short title. 2. Definitions of persons. 3. Definitions of terms used. § 1. Short title. This chapter shall be known as the " banking law," and shall be applicable to all corporations and individuals defined in the 2 Banking Law. § 2. next section and to such other corporations and individuals as shall subject themselves to special provisions thereof, or who shall, by violating any of its provisions, become subject to the penalties provided therein. Source. — Former § 1. Jurisdiction specifically broadened by amendment so as to include others than those enumerated in § 2 ; i. e., those who shall " subject themselves to special provisions thereof " and those " subject to the penalties provided therein." § 2. Definitions of persons to whom chapter is applicable. Bank. The term, " bank," when used in this chapter, unless a different meaning appears from the context, means any domestic moneyed corporation, other than a trust company, authorized to discount and negotiate promissory notes, drafts, bills of exchange and other evidences of debt; to receive deposits of money and commercial paper; to lend money on real or personal security; and to buy and sell gold and silver bullion, foreign coins or bills of exchange. Individual hanker. The term, " individual banker," when used in this chapter, means any individual, partnership or unincor- porated association, heretofore authorized by the superintendent of banks co engage in the business of banking pursuant to the banking law. Private hanker. The term, " private banker," when used in this chapter, means an individual, other than an, individual banker, who, by himself, or as a member of a partnership or un- incorporated association other than an unincorporated express company having a, contract with a railroad company or railroad companies for the operation of an express service upon the lines thereof, is engaged in the business of receiving deposits subject to check or for repayment upon the presentation of a pass book, certificate of deposit or other evidence of debt, or upon the re- quest of the depositor, or in the discretion of such individual, partnership or unincorporated association ; of receiving money for transmission: of discounting or negotiating promissory notes, drafts, bills of exchange or other evidences of debt; of buying or selling exchange, coin or bullion ; or is engaged in the business of transacting any part of such business. The term, " private banker," when so used, shall include the executor or administrator § 2. SiioET Titi.e; Definitions. 3 of a deceased private banker and a partnership or unincorporated association of private bankers. Trust company. The term, " trust company," when used in this chapter, means any domestic corporation formed for the pur- pose of taking, accepting and executing such trusts as may be lavyfully committed to it, acting as trustee in the cases prescribed by lav7, receiving deposits of money and other personal property, and issuing its obligations therefor, and lending money on real or personal securities. Savings hank. The term, " savings bank," when used in this chapter, means a corporation authorized by the laws of this state only to receive money on deposit in such sums, to invest the same in such securities, obligations and property, and to declare, credit and pay from its earnings such dividends, as may be prescribed by law. Investment company. The term, " investment company," when, used in this chapter, means any corporation other than an insur- ance corporation formed under the laws of this state or of any other state, and doing business in this state for the purpose of selling, offering for sale, or negotiating to individuals other than bankers bonds or notes secured by deed of trust or mortgages on real property or choses in action, owned, issued, negotiated or guaranteed by it, or for the purpose of receiving any money or property, either from its ovra members or from other persons, and entering into any contract, engagement or undertaking with them for the withdrawal of such money or property at any time with any increase thereof, or for the payment to them or to any per- son of any sum of money at any time, either fixed or uncertain. Safe deposit company. The terra, " safe deposit company," vyhen used in this chapter, means every domestic corporation formed for the purpose of taking and receiving as bailee for safe- keeping and storage, jewelry, plate, money, specie, bullion, stocks, bonds, securities and valuable papers of any kind and other valu- able personal property, on deposit and guaranteeing their safety upon such terms and for such compensation as may be agreed upon by the company and the respective bailors thereof, and to rent vaults and safes and other receptacles for the purpose of such safe-keeping and storage. Personal loan company. The term, " personal loan company," when used in this chapter, means any corporation organized under 4 Banking Law. § 2. chapter tliree hundred twenty-six of the laws of eighteen hundred ninety-five, as amended by chapter seven hundred six of the law8 of eighteen hundred ninety-five, chapter two hundred six of the laws of eighteen hundred ninety-six, chapter seventy-eight of the laws of nineteen hundred two, and chapter three hundred thirty- three of the laws of nineteen hundred five, article ten of chapter six hundred eighty-nine of the laws of nineteen hundred nine, or article nine of this chapter, and authorized by the superintendent of banks to engage in the business of making small loans to needy borrowers not exceeding two hundred dollars to any individual at any one time at interest exceeding the rate of six per centum per annum, pursuant to the provisions of this chapter. Personal loan broker. The term, " personal loan broker," when used in this chapter, means any individual, who, by himself, or as a member of a partnership or unincorporated association, is authorized by the superintendent of banks to engage in the busi- ness of making small loans to needy borrowers not exceeding two hundred dollars to any individual at any one time at interest ex- ceeding the rate of six per centum per annum, pursuant to the pro- visions of this chapter. The term, " personal loan broker," when so used, includes any partnership or unincorporated association of personal loan brokers. Savings and loan association. The term, " savings and loan association," when used in this chapter, means a domestic moneyed but non-stock corporation formed for the purpose of encouraging industry, frugality, home-building, the saving of money by its members, the accumulation of savings, the lending of such accumu- lations to its members, and the repayment to each member of his savings when they have accumulateu to a certain sum, or at any time when he shall desire the same, or the association shall desire to repay the same. The term, " savings and loan association," shall include every corporation, company or association doing busi- Qess in this state and having for a part of its title or name the words "building association," "building and loan association," " building and mutual loan association," " savings and loan asso- ciation," "savings association," " co-operative loan association," or " co-operative bank," and every corporation, company or associa- tion whose shares are wholly or in part payable by a cumulative fund in regular or periodical instalments, or which is doing busi- § 2. Short Title; Definitions. 5 ness in the form and of a character similar to that authorized by this chapter organized or incorporated in this state. Land hank of the state of New York. The term " land bank of the state of New York," when used in this chapter, means a domestic moneyed but non-stock co-operative corporation for sav- ings, the membership of which is composed of " savings and loan associations," doing business in pursuance of the provisions of ar- ticle ten of this chapter, for the purpose of issuing and redeeming debenture bonds secured by first mortgages pledged by its members, and for otherwise promoting their interests. Credit union. The term, " credit union," when used in this chapter, means a domestic moneyed but non-stock corporation or- ganized under article eleven of chapter six hundred eighty-nine of the laws of nineteen hundred nine, as amended by chapter five hundred eighty-two of the laws of nineteen hundred thirteen, or article eleven of this chapter, for the purpose of promoting thrift among its members and of making loans to its members at reason- able rates with or without security. Source. — Former § 2 with alterations and additions. BANIC. — Much of the altered language of this definition was taken from subdivision 1 of former § 66 relating to the powers of banks. The words " real or " are new. The power to issue circulation has been omitted owing to the federal tax on state bank circulation, and to the currency features of the federal reserve act — of which member state banks may take advantage. INDIVIDUAL BANKER. — The present law makes no provision for indi- vidual bankers not already engaged in business; but the rights of those en- gaged in business at the time the act took effect are preserved by § 143. At that time only one individual banker was engaged in business in the state. Under the former law the term meant a person who had complied with the requirements of law and was authorized by the banking department to en- gage in the business of banking, and was subject to the banking law and the supervision of the superintendent of banks. People v. Doty, 80 N. Y. 225; Perkins v. Smith, 116 N. Y. 441; People v. Young, 207 N. Y. 522, 528; Hall v. Baker, 66 App. Div. 131. This is the meaning of the term as used in § 14 of the Tax Law. Atty.- Gen. Rep. (1910) 670. PRIVATE BANKER.— This definition is new. Until the passage of the present law no private bankers were subject to the supervision of the super- intendent of banks. See note to § 150. Previous to that time the term had a well-recognized meaning, viz., a per- son or firm engaged in the banking business without authority from the , 6 Banking Law. § 2. banking department and not subject to the banking law or the supervision of the superintendent of banks. People v. Doty, 80 N. Y. 225. Perkins v. Smith, 116 N. Y. 441; People v. Young, 207 N. Y. 522, 528; Hall v. Baker, 66 App. Div. 131. TRUST COMPAKY. — This definition is identical with that contained in former § 2. SAVINGS BANK. — Former deiinition revised so as to negative more clearly- implied powers. " Dividends " has been substituted for " interest " in refer- ring to earnings credited to depositors. INVESTMENT COMPANY.— This definition differs from that of "Mort- gage, Loan, or Investment Corporation" contained in former § 2 in that the words " to individuals other than bankers " have been inserted. The purpose of the insertion was to exclude from the operation of the act corporations which do not sell to the public. The clause defining foreign associations and individuals as foreign corporations has been omitted because the purpose of its inclusion was in confiict with the federal constitution. Opinion that a corporation which receives money, accumulates and agrees to pay back is under the supervision of the banking department. Atty.-Gen. Kep. (1896) 208.. A corporation organized under the Business Corporation Law has no power to receive deposits. Where such a corporation received annual pay- ments of money for which it agreed to repay the holder a specified sum at the expiration of ten years, it was held to be transacting business in violation of the Banking Law. Jacobs v. Monaton Realty Inv. Corp., 80 Misc. 649, aff'd 160 App. Div. 449. SAFE DEPOSIT COMPANY.— Identical with the definition in former § 2. PERSONAL LOAN COMPANY.— This differs slightly in language from the definition of "Personal Loan Association" in former § 2. The amendment expresses the special power possessed by such corporations to charge interest in excess of six per centum per annum. PERSONAL LOAN BROKER.— New. Such brokers were not regulated under the former Banking Law. See note under § 359. SAVINGS AND LOAN ASSOCIATION.— The first sentence of this defi- nition varies but slightly from that contained in former § 2, the principal change being the insertion of -the words " domestic moneyed but non-stock." The second sentence is identical in substance with former § 238, except no provision is made for foreign corporations or associations not already engaged in business in the state when the present law took effect. LAND BANK OF THE STATE OF NEW YORK.— New. See note to § 450. CREDIT UNION.— Practically the same as the definition in former § 2. Words " domestic moneyed but non-stock " inserted. § 3. Shoet Title; Definitions. 7 § 3. Definitions of terms used in chapter. Guaranty fund. The term " guaranty fund," when used in this chapter, means a fund created by a mutual non-stock corpo- ration to which this chapter is applicable and pursuant to its pro- visions, from its earnings or from contributions, which is not avail- able for the payment of expenses, so long as such corporation has any undivided profits, or for the payment of dividends, and against which losses upon its investments, whether resulting from deprecia- tion in the value of its securities or otherwise, may be charged, vnthout encroaching upon its undivided profits or net earnings, until such guaranty fund is exhausted. Surplus. The term, " surplus," when used in this chapter, means the excess of assets over liabilities including liability to stockholders. Surplus fund. The term, " surplus fund," when used in this chapter, means a fund created pursuant to the provisions of article three or five of this chapter by a bank or trust company from its net earnings or undivided profits, which to the amount specified in such articles is not available for the payment of dividends and cannot be used for the payment of expenses or losses so long as any such corporation has undivided profits. Total profits. The term, " total profits," when used in this chapter, means the total amount of undistributed net earnings of any corporation to which this chapter is applicable from the date of its organization, including such portions of its surplus fund or guaranty fund as have been derived from net earnings or from undivided profits. Undivided profits. The term, " undivided profits," when used in this chapter, means the credit balance of the profit and loss ac- count of any corporation to which this chapter is applicable. Net earnings. The term, " net earnings," when used in this chapter, means the excess of the gross earnings of any corporation to which this chapter is applicable over expenses and losses charge- able against such earnings during any dividend period. Dividend period. The term, " dividend period," when used in this chapter, means the period from the date as of which the last dividend of any corporation to which this chapter is applicable was declared to the date selected for the declaration of the next 8 Banking Law. § 3. dividend; or the period from the date when its corporate existence began to the date as of which the first dividend is declared. Time deposiis. The term, " time deposits/' when used in this chapter, means all deposits the payment of which cannot legally be required within thirty days. Demand deposits. The term, " demand deposits," when used in this chapter, means deposits payment of which can legally be re- quired within thirty days. Aggregate demrnid deposits. The term " aggregate demand de- posits," when used in this chapter, means the deposits against which reserves must be maintained, by banks, trust companies and pri- vate and individual bankers and includes total deposits, all amounts due to banks, bankers, trust companies and savings banks, the amounts due on certified and cashiers' checks, and for unpaid divi- dends, less the following items: Total time deposits: Deposits secured by the deposit of outstanding unmatured stocks, bonds or other obligations of the state or city of New York; Deposits to an amount not exceeding either the market or par value of outstanding unmatured stocks, bonds or other obligations of the state or city of New York owned and held by such .corpora- tion or banker; The amounts due it on demand from banks, bankers and trust companies other than its reserve depositaries, including foreign ex- change balances credited to it and subject to draft; The excess due it from reserve depositaries over the amount re- quired to maintain its total reserves. Reserves on hand. The term, " reserves on hand," when used in this chapter, means the reserves against deposits kept in the vault of any individual or corporation pursuant to the provisions of this chapter. Reserves on deposit. The term, " reserves on deposit," when used in this chapter, means the reserves against deposits maintained by any individual or corporation pursuant to this chapter in re- serve depositaries, or in a federal reserve bank of which such corporation is a member, and not in excess of the amount author- ized by this chapter. Total reserves. The term, " total reserves," when used in this chapter, means the aggregate of reserves on hand and reserves on deposit maintained pursuant to the provisions of this chapter. § 3. Short Title; Definitions. '9 Reserve depositary. The term, "reserve depositary," when used in this chapter, means a bank, trust company or banking corpora- tion designated by the superintendent of banks as a depositary for reserves on deposit. Stockholder. The term, " stockholder," when used in this chap- ter, unless otherwise qualified, means a person who appears by the books of a stock corporation to be the owner and holder of one or more shares of the stock of such corporation. Shareholder. The term, " shareholder," when used in this chap- ter, means a member of a savings and loan association, land bank or credit union. Population. The term, " population," when used in this chap- ter, means population as determined by the last state or federal enumeration; or when used in connection with the words "unin- corporated village," as determined by the superintendent of banks from the best available sources of information. Source. — ^New. None of these terms was defined in the former law except " stockholder." AGGREGATE DEMAND DEPOSITS.— The amount of deposits against which reserves were required to be carried under the former law (Banks, § 67 ; Trust Companies, § 198 ) excluded " an amount equal to the market value, but not exceeding the par value" of obligations of the State oil City of New York owned by such institution, but held by public officers in trust for such institution. This provision has been eliminated in the new law by the definition of aggregate demand deposits, and only the value of such items may be excluded as are owned and held by such institution. Bank credits receivable on demand in excess of the amount of its total reserves maintained as reserves on deposit may also be excluded. STOCKHOLDER.— The definition in former § 2 included not only holders of record but all other legal and equitable owners, with the exception of certain pledgees. Such definition has formed originally part of a section fixing the liability of stockholders to creditors of the corporation and should have been left there. As to who are liable under the present law as stockliolders of banks, see § 120; of trust companies, see § 206; of safe deposit companies, see § 322. The term "stockholder" as used in former § 38 (new § 496) meant the actual owner of the stock. Matter of Rogers, 102 App. Div. 466. Under the present definition, the proceeding provided for by that section can only be taken by the holder of record. SHAREHOLDER. — Members of these corporations are not "stockholders" in the ordinary sense. Their status is more nearly analogous to that of de- positors in savings banks. Atty.-6en. Rep. (1910), 841. J.0 Banking Law. ARTICLE 11. Banking department; powers and duties of superintendent. Section 10. Banking department; superintendent. 11. Official seal of superintendent. 12. Offices and furniture. 13. Deputies, clerks, examiners, special agents and other employees. 14. Bond of deputy acting as superintendent. 15. Restrictions on examiners. 16. Retirement of deputies, clerks and examiners. 17. How expenses of department defrayed. 18. Fees for copies and certifications. 19. Reimbursement of state treasury. 20. Notice of intention to organize. 21. Superintendent shall refuse to file defective certificate. 22. Filing certificate for examination. 23. Investigation of applicant. 24. Authorization certificate. 25. Investigation of private banker's affidavit. 26. Revocation of acceptance of private banker's affidavit. 87. Licenses to foreign corporations. 28. Superintendent as attorney to accept service of process. 29. Revocation of authorization certificate or license in certain cases. 30. Assessments for encroachments on reserves. 31. Proceedings for violations of chapter. 32. Assessments, penalties and forfeitures entitled to priority. 33. Securities deposited with superintendent. 34. Application of interest or proceeds to assessments or penalties. 35. Exchange of securities. 36. Examination and comparison of securities. 37. Return of securities. 38. Designation of reserve depositaries. 39. Examinations and special investigations. 40. Result of examination of savings bank to be certified on records. 41. Examiners' and special agents' reports. 42. Reports from corporations, bankers and brokers. 43. Publication of summary of reports. 44. Superintendent's powers as trustee for creditors and depositors. 45. Unclaimed deposits, dividends and interest. 46. Publication of unclaimed sums. 47. Index of persons entitled to unclaimed sums. 48. Discretion of superintendent. 49. Extension of time by superintendent. 50. Change of location. 51. Branch offices. § 10. PowEES AND Duties of Supekintendent. 11 Section 52. List of legal investments for savings banks. 53. Estimated market value of bonds. 54. Valuation of securities in arrears of interest. 55. Requiring sale of securities by savings bank. 56. Orders of superintendent. 57. When superintendent may take possession. 58. When possession may terminate. 59. May report delinquencies to attorney-general. 60. Relief against superintendent's action. 61. Resumption of business. 62. Special duties, assistants, counsel and other employees. 63. Payment of expenses. 64. Procedure where attorneys' liens asserted. 65. Notice to persons holding assets. 66. Inventory of assets. 67. Property held by delinquent as bailee. 68. Effect of notice on bailment contract. 69. Liquidation and conservation of assets. 70. Beposit of moneys collected. 71. Superintendent's powers to act for delinquent. 72. Notice to creditors. 73. Listing claims. 74. Objections to claims. 75. Acceptance or rejection of claims. 76. Effect of acceptance. 77. Judgments against delinquent not liens. 78. Dividends to creditors. 79. Stockholders' meeting. 80. Enforcement of stockholders' liability. 81. Actions against directors, trustees or officers. 82. Public information as to department. 83. Annual report of superintendent. § 10. Banking department; superintendent; appointment; term of office; qualifications; compensation; oath; bond. There shall continue to be a banking department charged with the execution of the laws relating to the individuals, partnerships, unincorporated associations and corporations to which this chapter is applicable. The chief officer of such department shall continue to be known as the superintendent of banks. He shall have supervision of every such individual, partnership, unincorpo- rated association and corporation, and shall exercise such pow- ers and perform such duties as are conferred and imposed upon him by this chapter or by any law of this state. 12 Banking Law. § H- The superintendent of banks shall be appointed by the governor, by and with the advice and consent of the senate, and after the termination of the term of office of the incmnbent at the time this act takes effect shall hold his office for the term of three years, beginning on the first day of July succeeding his appointment and ending on the first day of July in the third calendar year there- after, provided that the term of office of the superintendent ap- pointed to succeed the superintendent who was in office on the first day of January, nineteen hundred and fourteen, shall con- tinue until the first day of July, nineteen hundred and seventeen, and that a vacancy in such office shall be filled only for the balance of the unexpired term. The superintendent shall not, either directly or indirectly, be interested in any co(rporation to which this chapter is applicable, or engage in business as a private banker or personal loan broker. After the termination of the term of office of the incumbent at the time this act takes effect, the superintendent of banks shall receive an annual salary of ten thousand dollars, to be paid monthly. The superintendent shall, within fifteen days from the time of notice of his appoint- ment, take and subscribe the constitutional oath of office and file the same in the office of the secretary of state, and execute to the people of the state a bond in the sum of fifty thousand dollars, with two or more sureties to be approved by the comptroller and treasurer of the state, conditioned for the faithful discharge of the duties of his office. Source. — Former § 3.. Oath of office, set Constitution, Art. 13, § 1. Official bonds, see Pub. Off. Law, §§11, 12. Disqualification of superintendent to serve on jury, see Judiciary Law, § 503. AFPOIJvTMENT TO FILL VACANCY.— One appointed to fill the vacancy created by the resignation of the Superintendent of Banks hold office for the balance of the unexpired term. Atty.-Gen. Eep. (1896) 86. AN ASSIGNMENT FOR THE BENEFIT OF CEEDITOES' by a corporation organized under the banking law does not limit or interfere with the superin- tendent's powers over such corporation. Atty.-Gen. Eep. (1901) 265. § 11. Official seal of superintendent; sealed instruments to be received in evidence and recorded. The secretary of state shall provide the superintendent of banks with an official seal. Every paper executed by him as such supers §§ 12, 13. Powers and Duties of Superintendent. 13 intendent in pursuance of any authority conferred on him by law, and sealed with his seal of office, shall be received in evidence, and may be recorded in the proper recording offices in the same manner and with the same effect as a deed regularly acknowledged. Source. — Former § 4. Form of seal, see State Law, §§ 70-74; Pub. Off. Law, § 40. Sealed documents as evidence, see Code Civ. Proc, § 933. § 12. Offices and furniture. The trustees or other officers having by law the custody of the public buildings at the state capital, shall assign to the superintend- ent suitable rooms therein for conducting the business of the bank- ing department. The superintendent shall, from time to time, fur- nish the necessary furniture, stationery, fuel, lights and other nroper conveniences fOr the transaction of such business. Source. — Former § 6. § 13. Deputies, clerks, examiners, special agents and other employees; appointment; compensation; oath of office. The superintendent may appoint a first, a second, a third, and a fourth deputy, and shall employ from time to time such clerks, examiners, special agents and other employees as he may need to discharge in a proper manner the duties imposed upon him by law. They shall perform such duties as the superintendent shall assign to them and their compensa=tion shall be fixed by him and paid monthly. The fourth deputy shall, under the direction of the superintendent, have immediate charge of the supervision of the individuals and corporations to which article nine of this chapter is applica:ble. Every deputy shall, within fifteen days after notice of his appointment, take and subscribe the constitutional oath of office, and file the same in the office of the secrotary of state. Every examiner shall, before entering upon his duties as such examiner, take and subscribe the constitutional oath of office and file the same in th« office of the clerk of the county where he resides. Source. — Former § 5. The provision as to the examiner's oath of office is taken from former § 11. The provisions for the appointment of a fourth deputy and of special agents are new. 14 Bankisg Law. §§ 14, 15, Appointment of special deputies to assist in liquidation, see § 62. Bonds of deputies, see Pub. Off. Law, §§11, 12. Misconduct by officers of Banking Department, see Penal Law, § 300. COMPENSATION OF SPECIAL EXAMINER. — Where a special examiner did not apply to tlie superintendent for a certificate until nearly ten years after the completion of the services, it was held that the Superintendent properly refused on the ground that the claim was barred by lapse of time; also that mandamus did not lie to compel the granting of such certificate, the remedy, if any, being by certiorari. People v. FVeston, 62 Hun 185, afl'd 131 N. Y. 644. § 14. Bond of deputy acting as superintendent, when required. In case of a vacancy in the office of superintendenit, or in case of his absence or inability to act, for thirty successive days, none of his deputies shall thereafter act as superintendent, until the first deputy, or if there be a vacancy in the office of first deputy, or he be absent or unable to act, the second deputy or, if there bo a va- cancy in the office of second deputy, or he be absent or unable to act, the third deputy, or if there be a vacancy in the office of third deputy, or he be absent or unable to act, the fourth deputy, shall have executed to the people of the state a bond in the penalty of fifty thousand dollars, with two sureties to be approved by the comptroller and treasurer of the state, conditioned for the faithful discharge of the duties of the office of superintendent while such deputy acts as such superintendent. Souices — 'Former §, 5. § 15. Restrictions on examiners; penalty. No examiner shall be appointed receiver of any corporation or private or individual banker or personal loan broker whose books, papers and affairs he shall have examined pursuant to a commission from the superintendent, but he may be appointed by the superintendent a special deputy to assist in the liquidation of any such corporation, banker or broker under section sixty^wo of this article. 'No examiner shall obtain a loan from any individual, partnership, unincorporated association or corporation to which this chapter is applicable, or receive, either directly or indirectly, from any such individual, partnership, unincorporated association or corporattion, or from any officer or employee thereof, any sum of §§ 16, 17. Powers and Duties of Superintendent. 15 money or other valuable thing by way of gift, credit or otherwise. A violation of the provisions of this section by any examiner shall constitute sufficient grounds for his removal by the superintendent. Source. — The first clause is taken from former § 11. The rest of the sec- tion is new. Appointment of special deputies, see § 62. Compensation of examiners acting as special deputies, see § 63. § 16. Retirement of deputies, clerks and examiners. The superintendent may, in his discretion, retire any deputy, clerk or examiner who shall have served in the department for a period of twenty years and who shall have become physically or mentally incapacitated for the further performance of the duties of his position. A person retired from service pursuant to this section shall be paid out of the funds appropriated to the bank- ing department an annual sum, in equal monthly instalments, equal to one-half of the average amount of his annual or per diem salary for the period of two fiscal years preceding the time of such retirement. Source. — Former § 5a. § 17. How expenses of department defrayed; assessments. All the expenses incurred in and about the conduct of the busi- ness of the banking department, including the compensation of the superintendent, his deputies, clerks, examiners, special agents and other employees, shall be paid in the first instance out of the state treasury on the certificate of the superintendent and the warrant of the comptroller. All general expenses incurred in connection with the supervision of the corporations and private and individual bankers and per- sonal loan brokers required by section forty-two of this chapter to report to the superintendent shall be charged to and paid by such corporations, bankers and brokers in such proportions as the superintendent shall deem just and reasonable. The expenses incurred and services performed on account of any such corporation, banker or broker, or on account of any foreign corporation or its agency to which this chapter is applica- ble, shall be charged to and paid by the corporation, banker or broker for whom they were incurred or performed. 16 Banking Law. §§ 18, 19. If any such corporation, banker or broker shall not, after due aotice, pay any such charges, the superintendent may applv thereto the proceeds of the sale of or the interest on any stocks or bonds in his hands, as provided in section thirty-four of this arti- cle, or an action may be brought to recover such charges, as pro- vided in section thirty-one of this article. Source. — ^Part former § 7. The provision for payment in the first instance out of the state treasury is taken from former § 5. Proceedings to enforce assessments, see § 31 Assessments entitled to priority, see § 32. Application of interest on or proceeds of securities in payment of assess- ments, see § 34. Assessment as liability of bank, see § 135; of trust company, see § 220; of savings bank, see § 277 ; of investment company, see § 299 ; of safe deposit company, see § 330; of personal loan company, § 366. AFTER A CORPORATION^ HAS GONE INTO THE HANDS OF RE- CEIVERS the superintendent cannot make any assessment against it for services thereafter rendered. Atty.-Gen. Rep. (1903) 361. THE CLAIM OF THE STATE FOR REIMBURSEMENT of expenses in- curred, as pi-ovided in this section (formerly § 7) does not constitute a preferred claim. Atty.-Gen. Rep. April 4, 1911. § 18. Fees for copies and certifications. For every copy of any paper filed in the banking department and for the certification thereof, except where such copy or certi- fication is made for the benefit of a corporation or private or in- dividual banker or personal loan broker to which this chapter is applicable, the superintendent may charge ten cents per folio, and for affixing his official seal on such copy and certifying the same, one dollar. Source. — New. § 19. All moneys received to be paid into state treasury to reimburse state. To reimburse the state for advances made by it for the expenses of the banking department the superintendent shall pay into the state treasury monthly all moneys received by him from corpora- tions, private or individual bankers or personal loan brokers, in payment of his charges or assessments against them or of any § 20. PowEEs AND Duties of SupEaiNTEUDENT. 17 penalties or forfeitures incurred by them; all moneys applied by him to the payment of such charges, assessments, penalties or for- feitures from the proceeds of the sale of or the interest on any stocks or bonds in his hands deposited by such corporation, banker or broker which has failed, after due notice, to pay such charges, assessments, penalties or forfeitures; all moneys recovered in actions brought by the attorney-general under section thirty-one of this article; and all fees, perquisites and money received by the banking department, or any salaried officer or employee thereof, from any source whatever, on account of services rendered by the department, or by any such officer or employee in an official ca- pacity. The superintendent shall annually, on or before the close of the fiscal year and before levying an assessment upon such corr porations, bankers and brokers to reimburse the state for such advances, pay into the state treasury such interest as shall have accrued upon the balances held by him as trustee for the owners of unclaimed deposits, dividends or interest. Source. — . Part former § 7. Revision eliminates all exceptions and re- quires all monies to be paid into treasury of state. § 20. Notice of intention to organize bank, trust company or savings bank; designation of newspaper. Upon receipt by the superintendent of a notice of intention to organize a banlc, trust company or savings bank, executed in the manner prescribed by this chapter, he shall forthwith designate for the publication of such notice a newspaper published in the village, borough or city, if in a city not divided into boroughs, specified in such notice as the place where the business of the proposed corporation is to be transacted; or if no newspaper is published therein, a newspaper published in the county in which such place is located ; or if none is published in such county, then a newspaper published in an adjoining county. Source. — Part former §§ 61, 131, 181. As to the notice of intention required to be given in the case of a bank, see § 101; of a trust company, see § 181; of a savings bank, see § 231. 2 18 Banking Law. §§ 21, 22. § 21. Superintendent shall refuse to file defective certificate. Fpon receipt by the superintendent of any organization certifi- cate of a corporation proposed to be organized under this chapter, or any private banker's certificate submitted pursuant to section one hundred fifty-one of this chapter, or any personal loan broker's certificate submitted pursuant to section three hundred fifty-nine of this chapter, if such certificate fails to comply in form or sub- stance with the requirements of this chapter or is not accom- panied by such by-laws, affidavits or other documents as are re- quired by this chapter to be attached thereto or filed therewith, or if such by-laws, affidavits or other documents are not in con- formity with the requirements of this chapter, the superintendent shall forthwith return such certificate, together with such by-laws, affidavits or other documents, to the proposed incorporators or the private banker or personal loan broker from whom it was received, calling attention to the defect or defects therein, and shall refuse to file such certificate for examination until such defect or defects shall have been remedied and such certificate, by-laws, affidavits or other documents shall have been made to comply in all respects with the requirements of this chapter. Source.— From former §§ 62, 132, 182. CROSS-EEF'ERENCES.— For organization certificate of bank, see § 100; of trust company, see § 180; of savings bank, see § 230; of investment company, see § 290; of safe deposit company, see § 315; of personal loan company, see § 340 ; of savings and loan association, see § 375 ; of land bank, see § 421 ; of credit union, see § 450. NAMES OF INCORPORATORS.— If the organization certificate contain names of proposed incorporators which were not in the notice of intention, the Superintendent should refuse to file it. Atty.-Gen. Rep. (1909) 716. § 22. When superintendent shall endovie certificate "filed for ex- amination." If such organization certificate or private banker's certificate, and such by-laws, affidavits or other documents as are required to be attached thereto or filed therewith, comply, or shall have been BO amended as to comply in all respects with the requirements of this chapter, the superintendent shall forthwith endorse upon each § 23. Powers and Duties of Superintendent. 19 of tte duplicates of such certificate over his official signature the words " filed for examination " with the date of such endorse- ment. Source.— Part former §§ 62, 132, 182. § 23. Investigation by superintendent of proposed corporation, pri- vate banker or personal loan broker; refusal or approval; filing certificate. When any such certificate shall have been filed for examination, the superintendent shall thereupon ascertain from the best sources of information at his command, and by such investigation as he may deem necessary, whether the character, responsibility and gen- eral fitness of the person or persons named in such certificate are such as to command confidence and warrant belief that the business of the proposed corporation, private banker or personal loan broker will be honestly and efficiently conducted in accordance with the intent and purpose of this chapter, and whether the public con- venience and advantage will be promoted by allowing such pro- posed corporation, private banker or personal loan broker to engage or continue in business. In the case of a private banker who has not submitted with his certificate the affidavit specified in section one hundred and sixty of this chapter or whose affidavit has been refused by the superin- tendent as provided in section twenty-five of this article, the super- intendent shall also ascertain in like manner whether the facts stated in such certificate are true. In the case of a proposed savings bank the superintendent shall also ascertain in like manner whether greater convenience of access to a savings bank will be afforded to any considerable number of depositors by opening a savings bank in the place designated in the certificate, whether the density of the population in the neighbor- hood of such place and in the surrounding country affords a reason- able promise of adequate support for the proposed savings bank, and whether the contributions to the initial guaranty fund and ex- pense fund have been paid in cash. After the superintendent shall have satisfied himself by such investigation whether it is expedient and desirable to permit such, 20 Banking Law. § 24. proposed corporation, private banker or personal loan broker to engage or continue in business, he shall within sixty days after the date of the filing of such certificate for examination, endorse upon each of the duplicates thereof over his official signature the word " approved " or the word " refused," with the date of such endorse- ment. In case of refusal he shall forthwith return one of the dupli- cates, so endorsed, to the proposed incorporators, private banker or personal loan broker from whom such certificate was received. In case of approval he shall forthwith give notice thereof to the pro- posed incorporators, private banker or personal loan broker and file one of the duplicate certificates in his own office and the other in the office of the clerk of the county in which is located the place of business of such proposed corporation, private banker or per- sonal loan broker. Source.— Part former §§ 63, 133, 134, 182, 212, 281, 300, 310, 331. The paragraph relating to private bankers is new. § 24. Authorization certificate; when and to whom issued; contents; filing and recording. Before authorizing any corporation, private banker or personal loan broker to begin or continue business the superintendent shall be satisfied that such corporation, banker or broker has in good faith complied with all the requirements of law and fulfilled all the conditions precedent to commencing business imposed by this chapter. In the case of every stock corporation, he shall examine or cause an examination to be made in order to ascertain whether all of its capital stock has been fully paid in cash. In the case of every personal loan broker and of every private banker subject to all the provisions of article four of this chapter, he shall ex- amine or cause an examination to be made in order to ascertain whether there has been invested in such business, or deposited in cash to be invested therein, the amount of permanent capital stated in the certificate of such banker or broker. If satisfied that such corporation, banker or broker has in good faith complied with all the requirements of law and fulfilled all the conditions precedent to commencing business imposed by this § 25. PowEES AND Duties ok Superintendent. 21 chapter, the superintendent shall, -within six months after the date on which such organization certificate or private banker's or per- sonal loan broker's certificate was filed by hina for examination, but in no case after the expiration of that period, issue under his hand and official seal, in triplicate, an authorization certificate to the person or persons named in such organization certificate or pri- vate banker's or personal loan broker's certificate. Such authoriza- tion certificate shall state that the corporation, private banker or personal loan broker named therein has complied with the pro- visions of this chapter and with all the requirements of law, that it is authorized to transact within this state the business specified therein, and that such business can safely be intrusted to it. One of the triplicate authorization certificates shall be transmitted by the superintendent to the corporation, private banker or personal loan broker, thereby authorized to commence or continue business, another shall be filed in the ofiice of the superintendent, and the third shall be filed by the superintendent in the county clerk's ofiice wherein the organization certificate of such corporation or the private banker's or personal loan broker's certificate has been filed by him. The superintendent and said county clerk shall respec- tively attkch such authorization certificate to such organization certificate or private banker's or personal loan broker's certificate previously filed in his ofiice and shall record both such certificates in the book of records of incorporation therein. Source.— Part former §§ 12, 32. CERTIFICATE.— The Superintendent of Banks has discretion to refuse a certificate of authorization for a state bank of discount. Atty.-Gen. Rep. (1904) 403. § 25. Affidavit of private banker; investigation; refusal or accept- ance. Upon receipt by the superintendent of an affidavit submitted by a private- banker pursuant to section one hundred and sixty of this chapter, if such affidavit fails to comply in form or substance with the requirements of such section, he shall refuse to file it for examination until the defect or defects therein shall have been 22 Banking Law. § ^6. remedied. If such affidavit complies, or shall have been so amended as to comply in all respects v^ith the requirements of such section, he shall forthwith endorse upon each of the dupli- cates thereof over his official signature the words "filed for ex- amination" with the date of such endorsement. Thereupon he shall, by such investigation as he may deem necessary, satisfy himself whether the facts stated in such affidavit are true. If from such investigation it shall appear to him that any of such statements are untrue, he shall, within thirty days after the date on which such affidavit was endorsed " filed for examination," endorse on each duplicate thereof over his official signature the word " refused " with the date of such endorsement and return one of such duplicates, so endorsed, to the private banker from whom it was received. If the superintendent shall be satisfied that the facts stated in such affidavit are true, he shall, within the time above specified, endorse on each duplicate thereof over his official signature the word " accepted " with the date of such en- dorsement, and shall forthwith give notice thereof to such private banker and file one of such duplicates in his own office and the other in the office of the clerk of the county in which the certificate of such private banker has been filed. Souice. — 1 New. § 26. When acceptance of private banker's affidavit may be revoked; notice of revocation. If at any time the superintendent shall have reason to believe that any private banker whose affidavit the superintendent has accepted as provided in the last preceding section is not keeping permanently invested in this state in his banking business the amount of capital specified in such affidavit, or, if such banker is engaged in such business in a city of the first class, that such banker is paying or crediting or advertising to pay or credit any interest, or is paying, crediting or giving any bonus or gratuity whatever or anything of value, on deposits of less than the amount stated in such affidavit, or that any material statement in such affidavit was in fact untrue, the superintendent shall forthwith in- § 27. PowEKs AND Duties of Superintendent. 23 stitute such investigation as he shall deem necessary to ascertain the truth of such facts and may examine or cause an examination to be made into the books, papers and affairs of such private banker so far as may be necessary for such purposes. If from such in- vestigation or otherwise the superintendent shall be satisfied that such banker is not keeping such capital so invested, or, if such banker is engaged in such business in a city of the first class, that such banker is paying or crediting or advertising to pay or credit any interest, or is paying, crediting or giving any bonus or gratuity whatever or anything of value, on deposits of less than the amount stated in such affidavit, or that any material statement in such affidavit was in fact untrue, the superintendent may, over his official signature, notify such private banker that the acceptance of such affidavit is revoked. Such notice shall be executed in tripli- cate and the superintendent shall transmit one copy to such private banker, attach another to the duplicate of such affidavit on file in his own office and file the third copy thereof in the county clerk's office in which the other duplicate of such affidavit has been filed. Source. — i New. § 27. licenses to foreign corporations; renewal. Upon receipt by the superintendent from any foreign corpora- tion of an application in proper form for leave to do business in this state under the provisions of this chapter, he shall, by such investigation as he may deem necessary, satisfy himself whether the applicant may safely be permitted to do business in this state. If from such investigation he shall be satisfied that it is safe and expedient to grant such application and it shall have been shovm to his satisfaction that such applicant may be authorized to en- gage in business in this state pursuant to the provisions of this chapter and has complied with all the requirements of this chap- ter, he shall issue a license under his hand and official seal author- izing such applicant to carry on such business at the place desig- nated in the license and, if such license is for a limited time, specifying the date upon which it shall expire. Such license shall be executed in triplicate and the superintendent shall 24 Banking Law. §§ 28, 29. transmit one copy to the applicant, file another in his own office and file the third in the oiEce of the clerk of the county in which is located the place designated in such license. Whenever any such license is issued for one year or less, the superintendent may, at the expiration thereof, renew such license for one year. Source.— Former §§ 33b, 283, 284, 285. CROS'S'-IIEFEEENCES.— As to licensing of foreign banks, see §§ 144-147; of foreign investment companies, see §§ 303-308. Extent to which foreign trust company may transact business in state, see § 223. § 28. Superintendent as attorney to accept service of process. Whenever pursuant to any provision of this chapter, the super- intendent shall have heen duly appointed attorney to receive serv- ice of process for any foreign corporation, he shall forthwith forward by mail, postage prepaid, a copy of every process served upon him directed to the president or secretary of such corpora- tion, 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 part of his taxable dis- bursements if he succeeds in his suit or proceeding. The term process, when used in this section, includes any writ, summons, petition or order whereby any suit, action or proceeding shall be commenced. Source. — Part former §§ 34, 288. CROSS-REFERENCES. — Appointment of superintendent as attorney to accept service of process on foreign bank, see § 145; on foreign trust com- pany acting as executor or trustee in this state, see § 223; on foreign invest- ment company, see § 304. § 29. Bevocation of authorization certificate or license in certain cases. If at any time the superintendent shall be satisfied that any private banker, personal loan company, personal loan brokei" or foreign corporation to which he has issued an authorization cer- § 30. Powers and Duties of Superintendent. 25 tificate or license, is violating any of the provisions of this chap- ter, or is conducting its business in an unauthorized or unsafe manner, or is in an unsound or unsafe condition to transact its business, or cannot with safety and expediency continue business, the superintendent may, over his official signature and seal of office, notify the holder of such authorization certificate or license that the same is revoked. Such notice shall be executed in tripli- cate and the superintendent shall forthwith transmit one copy to the holder of such authorization certificate or license, file another in his own office and file the third in the office of the clerk of the county in which such authorization certificate or license has been filed. The superintendent may, in his discretion, publish a copy of such notice, with such other facts as he may deem proper, for six successive days, in the state paper published at Albany. Source. — Former §§ 33b, 287. CROSS-REFERENCES.— Effect of revocation of license to foreign bank, see § 146; of authorization certificate to private banker, see § 158; of license to foreign investment company, see § 308; of authorization certificate to per- sonal loan company, see § 351. § 30. Assessments for encroachments on reserves against deposits. If any bank, trust company or private or individual banker to which this chapter is applicable shall not maintain the total reserves required by this chapter, the superintendent shall levy an assessment upon it during such period as any encroachment upon its total reserves amounting to one per centum or more of its aggregate demand deposits shall continue, at the following rates : 1. At the rate of six per centum per annum upon any such encroachment not exceeding two per centum of such deposits. 2. At the rate of eight per centum per annum upon any ad- ditional encroachment in excess of two and not exceeding three per centum of such deposits. 3. At the rate of ten per centum per annum upon any additional encroachment in excess of three and not exceeding four per centum of such deposits. 26 Banking Law. § 31. 4. At the rate of twelve per centum per annum upon any ad- ditional encroachment thereon. Source. — New. CROSS-REFERENCES. — As to designation of reserve depositaries, see § 38. As to orders by superintendent to make good encroachment on reserves, see § 56. As to reserves required to be carried by banks and individual bankers, see §§ 112, 143; by private bankers, see § 166; by trust companies, see § 197. As to proceedings to enforce assessments, see § 31. Assessments entitled to priority of payment, see § 32. Application of interest on or proceeds of securities in payment of assess- ments, see § 34. Assessment as liability of bank, see § 135; of trust company, see § 220. § 31. Proceedings in name of superintendent for violations of this chapter. If any corporation or private or individual banker or personal loan broker to which this chapter is applicable shall refuse or fail, after due notice, to pay any assessment lawfully imposed upon it by the superintendent under section seventeen or section thirty of this article; or if any such corporation, banker or broker or any officer, director, trustee, agent or employee of any such corpo- ration, shall refuse or fail, after due notice, to pay any penalty or forfeiture incurred under any provision of this chapter by such corporation, banker, broker, officer, director, trustee, agent or em- ployee, or if any other person or corporation shall violate any of the prohibitions contained in this chapter ; the superintendent may, in his discretion, report the facts to the attorney-general, who shall thereupon, in the name of the superintendent, institute such action or proceeding as the facts may warrant against such per- son, corporation, banker, broker, officer, director, trustee, agent or employee. Source.— Part former §§7, 76, 333. CROSS-REFERENCES.— Priority of assessments, penalties and forfeitures, see § 32. Application of interest on, or proceeds of securities in payment of assess- ments, penalties and forfeitures, see § 34. §§ 32, 33. Powers and Duties of Supeeintendent. 27 § 32. Assessments, penalties and forfeitures entitled to priority. In case of the insolvency or voluntary or involuntary liquidation of any corporation, private or individual banker or personal loan broker to which this chapter is applicable, all unpaid charges law- fully assessed againat it by the superintendent and all unpaid pen- alties and forfeitures incurred by it under any section of this chapter shall be entitled to priority of payment from the assets of such corporation, banker or broker on an equality with any other priority given by this chapter. Source. — New. CROSS-REFERENCES.— As to priorities generally, see § 78, and annota- tions thereto. § 33. Securities deposited with superintendent; how held; interest thereon; lien on deposit of foreign corporation. All stocks and bonds deposited by any corporation or private or individual banker with the superintendent pursuant to any re- quirement of this chapter shall be registered in the name of office of the superintendent in trust under and pursuant to this chapter. So long as such corporation or banker shall continue solvent and comply with the laws of the state, the superintendent shall pay over to it, or permit it to collect the interest paid on such stocks or bonds. In case of the insolvency or voluntary or involuntary dissolution of any foreign corporation which shall have been licensed by the superintendent to do business in this state, the superintendent shall have a lien on any securities deposited with him by such corporation in favor of its creditors and stockholders residing in this state. Source. — Former §§ 14, 35, 76. This and the four next succeeding sections contain all the powers and duties of the superintendent with regard to se- curities deposited with him. The last sentence of this section is a substitute for former § 35. CROSS-REFERENCES. — Application of interest or proceeds in payment of assessments or penalties, see § 34. Exchange of securities and withdrawal of excess, see § 35. Examination and comparison of securities, see § 36. 28 Banking Law. §§ 34, £5. Return of securities, see § 37. Deposit of securities with superintendent by bank, see § 105; by individual banker, see § 143; by private banker, see § 161; by trust company, see § 184; by domestic investment company, see § 292; by foreign investment company, see § 306. PREFERENCE OF DOMESTIC CREDITORS NOT UNCONSTITUTIONAL. — The giving of a preference to domestic creditors and stockholders in the securities deposited with the superintendent by a foreign corporation is not a violation of the provision of the Federal Constitution guaranteeing to the citizens of each state the privileges and immunities of citizens in other states. See People v. Granite State Assoc, 161 N. Y. 492, aff'g 41 App. Div. 257. § 34. When interest or proceeds may be applied in payment of assess- ments or penalties. If any such corporation or banker shall not, after due notice, pay to the superintendent any charge assessed against it pursuant to section seventeen or section thirty of this article or any penalty or forfeiture incurred by it under any section of this chapter, the superintendent may apply in payment thereof, with interest at the legal rate, so much as may be necessary of the interest accruing on any stocks or bonds deposited with him by such corporation or banker pursuant to any requirement of this chapter, or in the ease of securities deposited pursuant to sections one hundred five and two hundred ninety-two of this chapter may sell so much of such stocks or bonds as may be necessary for that purpose and apply the proceeds in payment of such assessment, penalty or for- feiture with interest at the. legal rate. Source.— Part former §§ 7, 76. See annotations, to § 33. § 35. Exchange of securities; withdrawal of excess. Any corporation or private or individual banker which shall have deposited with the superintendent in trust any stocks or bonds in pursuance of any requirement of this chapter, may be permitted by the superintendent, so long as it shall continue solv- § 36. PowEES AND Duties of Supeeintendent. 29 ent and comply with the laws of the state, from time to time to withdraw any of such stocks or bonds upon depositing with the superintendent other stocks or bonds of the kind it is required by this chapter to keep on deposit with him, the market value of which shall be not less than the market value of those withdrawn, except that, if the market value of the stocks or bonds so held by the superintendent exceeds the amount which such corporation or banker is required by this chapter to keep so deposited, the stocks or bonds in excess of such amount may be withdrawn without de- positing others in exchange therefor, or the securities so substi- tuted may be of less market value than those withdrawn, provided there shall at all times be on deposit with the superintendent the amount required by this chaipter. Source. — Part former §§ 14, 15. CROSS-BEFEEENCES.— See annotations to § 33. § 36. Examination and comparison of securities; receipt to super- intendent. Any corporation or private or individual banker which shall have deposited with the superintendent in trust any stocks or bonds in pursuance of any requirement of this chapter, may once or oftener during each fiscal year, and at such time during ordinary business hours as it may select, examine and compare such securi- ties so deposited by.it with the books of the banking department, and, if found correct, execute to the superintendent a receipt stat- ing the different kinds of" such securities and the amounts thereof, and that they are in the custody and possession of the superin- tendent at the date of the receipt. In the case of a corporation such examination may be made by the president, cashier, secretary or treasurer thereof or by an agent duly authorized thereto in writing under the seal of the corporation. In the case of a private or individual banker such examination may be made by such banker personally, or if a partnership or unincorporated associa- tion by a member of such partnership or one of the principal officers of such association, or it may be made by an agent of such banker 30 Banking Law. § 37. duly authorized in writing. If made by an agent of such corpora- tion or banker, so authorized, the receipt of such agent shall have the same force and effect as if executed by the corporation or banker. If any such corporation or banker shall neglect to make any such examination during any fiscal year, the comptroller and su- perintendent shall appoint some suitable and discreet person as agent for such corporation or banker, who shall make such exami- nation, and if the securities so held by the superintendent shall be found to agree with the books of the department, such agent shall execute the receipt above mentioned and transmit a copy thereof to the corporation or banker in whose behalf it is made, and such receipt shall be of like force and effect as if executed by such corporation or banker. The superintendent shall pay to the person so appointed and making such examination, as a general expense of the department, such compensation for his services and expenses in making such examination as the superintendent shall deem just and reasonable. Source. — Former ? 9. CROSS-REFERENCES.— See annotations to § 33. § 37. Return of securities. Whenever any banker or corporation which shall have on deposit with the superintendent in trust any stocks or bonds pursuant to any requirement of this chapter, shall have paid in full all assess- ments imposed on and penalties incurred by it under any of the provisions of this chapter and shall have shown to the satisfaction of the superintendent that it has ceased transacting business and has complied with all the provisions of this chapter, the superin- tendent shall, upon its being shown to his satisfaction that such corporation or banker is solvent and that the interests of its creditors are fully protected, return such securities to such cor- poration or banker. Source. — New. CROSS-REFERENCES.— See annotations to § 33. § 38. PowEiiS AND Duties of Superintendent. 31 § 38. Sesig^nation of reserve depositaries. The superintendent shall, in his discretion, upon the nomina- tion of any bank, trust company or private or individual banker, designate a depositary or depositaries for the reserves on deposit of such corporation or banker provided for by this chapter. Ex- cept as otherwise provided in this section, such depositary shall be a bank, trust company or national banking association located in this state. But no bank, trust company or national banking association shall hereafter be designated as a depositary of any such reserves unless it shall have a combined capital and surplus of at least 1. One million dollars, if located in a borough of a city which borough has a population of two million two hundred thousand or over ; 2. Seven hundred and fifty thousand dollars, if located iji a borough of a city which borough has a population of one million or over and less than two million two hundred thou- sand or in a city which has a population of four hundred thou- sand or over; 3. Five hundred thousand dollars, if located elsewhere in the state. 'No such corporation, if located in a borough having a population of two million two hundred thousand or over, shall be designated as a reserve depositary for any bank, trust company or private or individual banker having a combined capital and surplus greater than its own, unless the combined capital and surplus of such de- positary exceeds two million dollars. Such depositary may also be a banking corporation with a capital and surplus of two million dollars or more, located in the cities of Chicago, Illinois, Boston, Massachusetts, or Philadelphia, Pennsyl- vania, provided any such banking corporation shall make such re- ports as the superintendent may prescribe, and submit to such examinations as he may deem necessary. Source. — Part former §§ 67, 198. The provisions of former § 67 and § 198 permitted reserve deposits to be made in institutions approved generally by the superintendent as reserve depositaries. Under the present law the depositing institution nominates its depositaries to the superintendent, who thereupon designates from such nominees the depositaries for such institu- 32 Bankik-g Law. § 39. tion. The capital and surplus requirements of reserve depositaries have been raised considerably, and unless the capital and surplus of the depositary exceeds two million dollars, the superintendent cannot designate as a reserve depositary an institution with a smaller capital and surplus than the depos- iting institution. The provision permitting the selection of reserve deposi- taries in certain cities outside the state is also new. CROSS-EEFEEEXCES. — Assessments for encroachments on reserves, see § 30. As to reserves required to be carried by banks and individual bankers, see §§ 112, 143; by private bankers, see § 166; by trust companies, see § 197. A TRUST COMPANY INCORPORATED BY SPECIAL ACT may be desig- nated by the superintendent as a depositary of lawful money reserve. Atty.- Gen. Rep. (1900) 165. § 39. Examinations of corporations, bankers, brokers and agencies. The superintendent shall, either personally or by his deputies or examiners, at least twice in each year visit and examine every bank, trust company and individual banker, and every private banker subject to the provisions of article four of this chapter, except such as shall have duly obtained certain exemptions pur- suant to section one hundred sixty of this chapter; and he shall also in like manner visit and examine at least once in each year every other corporation to which this chapter is applicable, and every personal loan broker. He shall have power in like manner to examine every corporation to which this chapter is applicable, at any ■time prior to its dissolution, and every such private and individual banker and personal loan broker, whenever, in his judgment, such examination is necessary or ex- pedient. He shall have power in like manner to examine every agency located in this state of ajiy foreign banking corporation for the purpose of ascertaining whether it has violated any law of the state and for such other purposes and as to such other matters as the superintendent may prescribe. On every such examination inquiry shall be made as to the con- dition and resources of such corporation, banker or broker, the mode of conducting and managing its affairs, the actions of its directors or trustees if a corporation, the investment of its funds, the safety and prudence of its management, the security afforded to those by whom its engagements are held, and whether the requirements of its charter and of law have been complied with in § 40. PowEEs AND Duties of Superintendent. 33 the administration of its affairs ; and as to such other matters aa the superintendent may prescribe. The superintendent may also make such special investigations as he shall deem necessary to determine whether any individual or corporation has violated any of the provisions of this chapter. The superintendent and every such examiner shall have power to administer an oath to any person whose testimony may be re- quired on the examination or investigation of any such individual, corporation, banker, broker or agency, and to compel the appear- ance and attendance of any such person for the purpose of any such examination. Such examination may be made and such inquiry instituted or continued in the discretion of the superintendent after he has takea possession of the property and business of any such corporation, banker or broker under the provisions of section fifty-seven of this article until it shall resume business or its affairs shall be finally liquidated in accordance with 'the provisions of this article. If the examination shall be made by the superintendent, or by one or more deputies or examiners who are compensated by salary only, no charge shall be made except for necessary traveling and other actual expenses. Source. — Part former § 8. Compelling attendance and testimony of witnesses, see Code Civ. Proc, §§ 854-859. POWER TO EiMPLOY APPRAISERS OF REAL ESTATE.— Where it is necessary to ascertain the value of real estate held by a corporation under examination, the superintendent has povper to instruct the examiner to em- ploy expert appraisers and pay them out of the fund appropriated for the payment of examiners. Atty.-Gen. Rep. (1903) 234. POWER TO CONDUCT INVESTIGATION AFTER CLOSING BANK.— Prior to tlie amendment of 1912 authorizing examinations by the superin- tendent of banks closed by him under former § 19, it was held that the superintendent had no power to conduct a quasi-judicial investigation of a closed bank for the purpose of determining how the bank had been brought to disaster. Matter of Union Bank, 204 N. Y. 313, reversing 147 App. Div. 593, which affirmed 73 Misc. 404. § 40. Result of examination of savings bank to be certified on records. The result of every examination of a savings bank made pur- suant to the provisions of the last preceding section shall be certi- 3 34 Banking Law. §§ 41, 42. fied by tlie examiners, or one of them, upon the records of the corporation examined. Source. — ^Part former § 8. § 41. Examiners' and special agents' reports of confidential nature; publication by superintendent. Every examiner, duly appointed and sworn, shall, when commis- sioned by the superintendent, forthwith examine fully the booka and papers and investigate the business and affairs of any corpora- tion, private or individual banker or personal loan broker desig- nated in his commission, and make written report on oath to the superintendent of the result of such examination. All reports of examiners and special agents shall be confidential communications and shall not be made public unless, in the judgment of the superintendent, the ends of justice or the public advantage will be subserved by the publication thereof, in which event he may publish a copy of any such report or any part thereof in at least one daily newspaper published in the city of New York and in one newspaper published in the county where the principal place of business of such corporation or banker is located, or in such other manner as he may deem proper. Source. — Former §§ 11, 16. The provision regarding the confide.itial character of the reports is new. EXAMINER. — The compensation of an examiner is paid by the bank which is examined upon the certificate of the superintendent of banks. The refusal of the superintendent to act should be reviewed by certiorari and not by mandamus; the examiner's right to demand compensation begins when he has completed his work. People ex rel. Best v. Preston, 62 Hun 185; aff'd 131 N. Y. 644. § 42. Reports from corporations, bankers and brokers. It shall be the duty of the superintendent to require all corpora- tions to which this chapter is applicable, all individual bankers and personal loan brokersi and all private bankers to whom article four of this chapter is applicable to make to him the regular periodical reports of their condition prescribed by this chapter and he shall prescribe the form and contents of all such reports. In addition to such regular repents he may require any such corpora- tion, banker or broker to make special reports to him at such times § 43. Powers and Duties of Supeeintendent. 35 and in sucli form as he may prescribe, and may direct that such special reports be verified and prescribe the form of the verifi- cation. He shall at least once in every three months, designate some day therein in respeet to Avhich every siich bank, trust company and individual banker, and every such private banker except such as shall have duly obtained certain exemptions pursuant to section one hundred sixty of this chapter, shall report to him, and he shall serve a notice designating such day. Such notice may be sei-ved by delivering the same to such private or individual banker or, in the case of a corporation, by delivering the saane at its place of business to some officer therein, or it may be served in any case by deposit- ing it in the post-office enclosed in a post-paid wr^per directed to such corporation or banker at its principal place of business. Source.— Former § 21. The provision authorizing the superintendent to require special reports is new. CEOSS-EEFERENTCES.— Reports by banks and individual bankers, see §§ 133, 143; by private bankers, see § 170; by trust companies, see § 218; by savings banks, see § 273; by investment companies, see § 298; by safe deposit companies, see § 329 ; by personal loan companies and personal loan brokers, see § 365; by savings and loan associations, see § 413; of credit unions, see § 477. CANKOT REQUIRE REPORT FROM BANK IN LIQUIDATION.— The superintendent's power to require reports extends only to " going " concerns. He cannot require a report from a bank in process of voluntary liquidation. Atty.-Gen. Rep. (1906) 499. FALSE REPORT — SUPERINTENDENT'S POWERS.— If a false report is made to the banking department it must be investigated through the judicial branch of the government which has jurisdiction over such matters. The superintendent is not invested with judicial powers and cannot decide whether a person is or is not guilty of a crime. Matter of Union Bank, 204 N. Y. 313, 322. § 43. Summary of reports of banks, trust companies and private and individual bankers to be published. Within thirty days after the receipt of any quarterly report of any bank, trust company or private or individual banker, the superintendent shall publish a summary thereof in a newspaper at Albany in which notices by state officers are required by law to be published, arranging the reports of individual bankers and pri- vate bankers in separate classes, and specifying the names and 36 Banking Law. §§ 44, 45, places of business of each, and if partnerships or unincorporated associations, the names and residences of the members thereof. Source. — Former § 24. § 44. Superintendent's powers as trustee for creditors and depositors. The superintendent shall have power to act in his name of office as trustee for the creditors and depositors of any corpora- tion, private or individual banker or personal loan broker to which this chapter is applicable. As such trustee he may take and hold stocks, bonds or other securities deposited with him for the benefit and protection of such creditors and depositors, may enter into agreements with any such corporation, banker or broker, or with the officers, directors or trustees of such corpora- tion, for the benefit of its creditors and depositors, and may in his name of office maintain any action or proceeding necessary to enforce such agreements. Source. — New. § 45. TJnclaimed deposits, dividends and interest; deposit by super- intendent in trust; preference. The superintendent may take and hold as trustee for the owners thereof any sums which remain due to and unclaimed by any creditor, depositor, stockholder or shareholder of any corporation or private or individual hanker, to which this chapter is ap- plicable, after the completion of the voluntary or involuntary liquidation of the business and affairs of such corporation or banker. Whenever such sums are received by the superintendent and he is not in possession of the business and affairs of such cor- poration or banker, he shall give his receipt for such moneys and shall forthwith deposit them in one or more solvent state banks, trust companies or savings banks, to the credit of the superin- tendent of banks in trust for the persons entitled thereto. At the completion of a liquidation by the superintendent, he shall in like manner deposit such moneys at the expiration of six months after the order for final distribution. All such deposits by the superintendent shall be entitled to priority of payment in case of the insolvency or voluntary or in- § 46. Powers and Duties of Superintendent. 37 voluntary liquidation of the depositary on an equality with any other priority given by this chapter. Source. — New, except the sentence relating to liquidations by the superin- tendent which is taken from former § 19. This and the two succeeding sec- tions gather together all the powers and duties of the superintendent with regard to unclaimed deposits, dividends and interest. CROSS-REFERENCES.— Publication by superintendent of unclaimed sums, see § 46. Index to be kept by superintendent, and payment to persons entitled, see § 47. Disposition of unclaimed dividends on liquidation by superintendent, see § 78. Annual report by superintendent as to unclaimed suras, see § 83. Annual report of unclaimed sums by banks and individual bankers, see S§ 134, 143; by private bankers, see § 157; by trust companies, see § 219; by savings banks, see § 274. § 46. Superintendent must publish list of unclaimed deposits, divi- dends and interest every five years. On the second Wednesday in January, nineteen hundred and sixteen, and on the second Wednesday in January in each fifth year thereafter the superintendent shall cause to be published in a paper in Albany in which notices by state officers are required by law to be published, and in at least one daily newspaper pub- lished in each city of the first or second class within the state, a list containing the names of the banks, trust companies, private and individual bankers and savings banks which, according to their last reports to him, held unclaimed deposits, dividends or interest, and the names of the liquidated corporations and private and individual bankers for the benefit of whose unlocated de- positors, creditors, stockholders or shareholders, the superintend- ent holds deposits, dividends or interest as trustee, together with the full names of the persons entitled to receive such unclaimed deposits, dividends or interest from each of said coi*porations and bankers or from the superintendent. Source. — New. CROSS-REFERENCES.— See annotations to § 45. 38 Banking Law. §§ 47, 48. § 47. Index of persons entitled to unclaimed sums; pajrment to persons entitled. The superintendent shall keep in his office an index of the names of all persons for whom he holds in trust any unclaimed deposits, dividends or interest and of the names of all persons reported to him by any corporation or private or individual banker as entitled to any such unclaimed deposits, dividends or interest held by such corporation or banker. Whenever any per- son shall show by evidence satisfactory to the superintendent that he is lawfully entitled to receive any such money, the superin- tendent shall indicate to him the corporation or banker by which it is held, or, if the superintendent holds such money in trust, he may pay it over to such person. In cases of doubt or conflicting claims, he may require of the claimant an order of the supreme court authorizing and directing the payment thereof, but for any payment made by him in good faith, by check or order payable to the creditor, depositor, stockholder or shareholder appearing from the records in his office to be entitled thereto, he shall be held harmless and shall not be liable to any subsequent claimant. Source. — The first sentence is taken from former § 30. The provision aa to payment over to the persons entitled, so far as it relates to unclaimed dividends on liquidations by the superintendent, is taken from former § 19. The provision protecting the superintendent against subsequent claimants is new. See annotations to § 45. § 48. Approval of superintendent ; filing. In any case in which this chapter makes the approval of the superintendent a condition precedent to the doing of any act, it shall lie within his sound discretion to grant or refuse his ap- proval. Such approval, if granted, shall be in writing and a copy thereof shall be filed in the office of the superintendent. Source.^ — • Neve APPROVAL NUNC PRO TUNC— It seems that the superintendent's ap- proval may be given nunc pro tunc where an act has been done in good faith and in ignorance of the statutory requiremient. Atty.-Gen. Rep. (1896) 193. APPROVAL OF CHANGE OF CORPORATE NAME.— Under Gen. Corp. Law, § 60, an application by a corporation organized under the Banking Law for leave to change its name must be first approved by the superintendent. Atty.-Gen. Rep. (1900) 255; Atty.-Gen. Rep. (1902) 186. § 49. Powers and Duties of Supekintenbent. 39 REDUCTIOX OF CAr-TTAL.— A reduction of the capital of a corporation organized under the Banking Law may not be effected without the written consent of the superintendent. Atty.-Gen. Eep. (1909) 738. § 49. Extensions of time by superintendent. For satisfactory cause to him shown, the superintendent may grant extensions of time to corporations or private or individual bankers or personal loan brokers to which this chapter is ap- plicable, as follows: 1. Ho may extend for not more than one year the time within which any such corporation may commence business. Siich exten- sion shall only be made by an order under his hand and official seal which shall be executed in triplicate and one copy thereof shall be filed in the superintendent's office, one in the office of the clerk of the county in which the organization certificate of such corporation has been filed, and the third shall be transmitted to such corporation. 2. He may extend for not exceeding ten da.js in the case of a bank, trust company, private banker or individual banker, and for not exceeding twenty days in the case of any other corporation to which this chapter is applicable or of a personal loan broker, the time within which any such corporation, banker or broker is required to make and file any report to the superintendent. 3. He may extend for such period as he may deem proper the time within which any corporation or private or individual banker is required by this chapter to dispose of real estate held by it. Source. — Subdivision 1 is adapted from former § 136, relating to savings banks. Subdivision 2 was suggested by former § 21. Subdivision 3 is new. CROSS-REFERENCES.— Forfeiture of corporate rights by failure to begin business, see § 485. Time within which reports must be made by banks and individual bankers, see §§ 133, 134, 143; by foreign banks, see § 147; by private bankers, see §§ 157, 170; by trust companies, see §§ 218, 219: by savings banks, see §§ 273, 274; by investment companies, see § 298; by safe deposit com- panies, see § 329; by personal loan companies and brokers, see § 365; by savings and loan associations, see § 413; by credit unions, see § 477. Time within which real estate must be disposed of by banks, see § 107; by private bankers, see § 163; by trust companies, see § 189; by savings banks, see § 240. 40 Banking Law. § °^" ADMINISTRATIVE DISCRETION OF SUPERINTENDENT.— Under for- mer § 211 (now § 410) requiring a copy of amendments to the by-laws of a savings and loan association to be filed in the oflice of th^ superintendent within thirty days after the adoption thereof, the Attorney-General was of the opinion that it was within the administrative discretion of the superin- tendent to receive such amendments for filing after the statutory period had elapsed. Atty.-Gen. Rep. (1912) 183. § 50. Change of location; approval or refusal; certificate. Upon receipt by the superintendent of a written application from any corporation or private or individual banker or personal loan broker to which this chapter is applicable for leave to change its place of business to another place in the same county and within the limits of the village, borough or city, if in a city not divided into boroughs, in which its principal place of business is then located, the superintendent shall, if he shall be satisfied that there is no reasonable objection to such change of location, give his written approval of the proposed change. If the proposed place of business is without such limits, the superintendent shall designate for the publication of the notice of intention to make such application a newspaper published in the county in which such place of business is located. Upon receipt by the superin- tendent of evidence satisfactory to him of due publication of such notice, he shall, if satisfied that there is no reasonable objection to such change of location, make a certificate in triplicate under his hand and official seal authorizing such change and specifying the date en or after which, and the place to which such change may be made, and shall file one thereof in his own office, one in the office of the clerk of such county, and shall transmit the other to such applicant. If the superintendent shall be satisfied in any case that such change is undesirable or inexpedient, he shall refuse such application and notify such corporation or banker of his de- termination. Source.— Former §§ 31, 147. CROSS-REFERENCES.— Change of location by banks, see § 119; by pri- vate bankers, see § 159; by trust companies, see § 205; by savings banks, see S 259; by investment companies, see § 296; by safe deposit companies, see I 321; by personal loan companies, see § 352; by savings and loan asso- ciations, see § 403; by credit unions, see § 460. As to branches, see § 51 and annotations. §§ 51, 52. Powers and Duties op Supekintendent. 41 § 51. Branch offices; approval or refusal; certificate. Upon receipt by the superintendent of a written application for leave to open a branch office from a corporation authorized by this chapter to open branch offices, he shall make such investiga- tion as he may deem necessary to ascertain whether the public con- venience and advantage will be promoted by the opening of such branch office and whether such corporation has the amount of act- ually paid in capital required by this chapter. If satisfied that the granting of such application is expedient and desirable, he shall make a certificate in triplicate under his hand and official seal authorizing the opening and occupation of such branch office and specifying the date on or after which and the conditions under which it may be opened and the place where it shall be located, and shall file one triplicate in his own office, one in the office of the clerk of the county wherein the principal place of business of such corporation is located, and shall transmit the other to such appli- cant. If the superintendent shall be satisfied that the opening of such branch office is undesirable or inexpedient or that such cor- poration has not the requisite amount of capital actually paid in, he shall refuse such application and notify such corporation of his determination. Source.— Former §§ 109, 186, subd. 11. CROSS-REFERENCES.— Branch offices of banks, see § 110; of trust com- panies, see § 195; of savings banks, see § 245; of investment companies, see g 293, subd. 5; of safe deposit companies, see § 318; of personal loan com- panies, see § 349. § 52. Superintendent must furnish savings banks list of legal in- vestments. On or before the first day of January, nineteen hundred and fifteen, and on or before the first day of January in each and every year thereafter, the superintendent of banks shall mail to each savings bank in the state a list containing the names of states and municipalities, the bonds of Vhich, in his judgment, if legallv issued and properly executed, conform to the requirements of sec- tion two hundred and thirty-nine of this chapter, and also as com- plete a list as is practicable of railroad bonds which, in his judg- ment, if legally issued and properly executed, conform to the pro- visions of said section. 42 Banking Law. §§ 53, 54. In the preparation of such list he may employ such expert as- sistants as he deems proper and apportion the expense thereof among the savings banks of the state, or he may rely upon infor- mation contained in publications which he may deem authoritative in reference to such matters. He shall be in no way liable for the omission from such list of the name of any state or munici- pality the bonds of which conform to the provisions of said sec- tion, or of any railroad bond which conforms to the provisions of said section, nor for the inclusion in such list of the name of any state or municipality the bonds of which do not conform to the provisions of said section, or of any railroad bond which does not conform to the provisions of said section. Source. — New. CROSS-REFERENCES.— Investments of savings banks, see § 239. § 53. Superintendent must furnish savings banks estimated market value of bonds. On or before the first day of June and the first day of December in each year the superintendent shall furnish to each savings bank a list giving with such detail as he may deem necessary the esti- mated market values, either specifically or by classes, at which the bonds held by it, which are legal investments for savings banks| shall be reported at the date of its next semi-annual report. In making such valuations the superintendent shall be governed so far as is practicable by actual sales of such bonds las ascertained by him, or as reported by the various stock exchanges and financial papers during the preceding five months, and by general business conditions. Source. — New. Semi-annual reports of savings banks, see § 273. § 54. Must determine valuation of securities in arrears of interest. The superintendent, upon application by any savings bank or savings and loan association, shall determine and report to it the valuation of such stocks or bonds, or bonds and mortgages as are in arrears of interest for six months or more, and of all other in- vestments not enumerated in section two hundred fifty-seven of this chapter, from the best information he can obtain ; and he may §§ 55, 56. PowEES AND Duties of Superintendent. 43 change the valuation thereof from time to time as he may obtain other and further information. Source. — Former § 154. CRTOS-REFEEENCES. — How per centum of par value surplus determined, see § 257. § 55. When superintendent may require savings bank to sell securi- ties. "Wherever any securities purchased by any savings bank pursu- ant to the provisions of section two hundred thirty-nine of this chapter shall have, either before or since the time such purchase was made, ceased to be an authorized investment for the moneys of savings banks, the superintendent may, in his discretion, require such savings bank to sell such securities. Source. — Former § 146, subd. 5, broadened. POWiER UNDER FORMER LAW.— The Attorney-General was of the opinion that the superintendent had power, under former §§ 8 and 17, to require a savings bank to dispose of an investment which, though legal when made, had become illegal by reason of the changed condition and character of the security. But the power should be so exercised as to prevent loss and embarrassment in the business of the bank. Atty.-Gen. Rep. (1908) 371. § 56. Orders of superintendent. 1. To discontinue unlawful or .unsafe practices. Whenever it shall appear to the superintendent that any corporation to vsrhich this chapter is applicable, or any individual banker, or any private banker to which article four of this chapter is applicable, or any personal loan broker or any foreign corporation licensed by the superintendent to do business under this chapter, has violated its charter or any law, or is conducting its business in an unauthorized or unsafe manner, he may issue an order directing the discontinu- ance of such unauthorized or unsafe practices and requiring the delinquent to appear before him, at a time and place fixed in said order, to present any explanation in defense of the practices directed in said order to be discontinued. 2, To make good impairment of capital. Whenever it shall ap- pear to the superintendent that the capital stock of any such cor- poration has been reduced in value below the requirements, of law or of its certificate of incorporation or of its articles of association, 44 Bankikg Law. § 56. or that the capital of any such private or individual banker or per- sonal loan broker has been reduced in amount below the require- ments of law, he may issue an order directing that such corpora- tion, banker or broker make good such deficiency forthwith or within a time specified in such order. 3. To make good encroachments on reserves. Whenever it shall appear to the superintendent that either the total reserves or re- serves on hand of any such corporation or private or individual banker required by this chapter to maintain such reserves are be- low the amount required by law to be maintained, or that such cor- poration or banker is not keeping its reserves on hand as required by this chapter, he may issue an order directing that such corpora- tion or banlter make good such reserves forthwith or within a time specified in such order, or that it keep its reserves on hand as re- quired by this chapter. 4. To keep books and accounts as prescribed. Whenever it shall appear to the superintendent that any corporation to which this chapter is applicable or any individual banker or personal loan broker or any private banker subject to the provisions of article four of this chapter except such as shall have duly obtained certain exemptions pursuant to section one hundred sixty of this chapter, does not keep its books and accounts in such manner as to enable him readily to ascertain its true condition, he may issue an order requiring such corporation, banker or broker, or the ofiicers thereof or any of them, to open and keep such books or accounts as he may, in his discretion, determine and prescribe for the purpose of keep- ing accurate and convenient records of the transactions and axj- counts of such corporation, banker or broker. 5. To reduce charges of personal loan company or broker. Whenever it shall appear to the superintendent that the net earn- ings of any personal loan company during its preceding fiscal year, as determined by section three hundred and fifty of this chapter, or the profits of any personal loan broker during the preceding cal- endar year, as determined by section three hundred and sixty-four of this chapter, shall have exceeded twelve per centum of the capi- tal stock or permanent capital of such company or broker, he may issue an order requiring such company or broker to reduce interest rates and charges, so that its annual net earnings or profits, as so § ,57. Powers and Duties of Superintendent. 45 determined, shall not exceed twelve per centum of its capital stock or permanent capital. Source. — Subdivisions 1 and 2 are adapted from former § 17 ; subdivision 3 from former §§ 67, 198; subdivision 4 from former § 8; subdivision 5 from former § 313. Former section 17 empowered tiie superintendent to require an impairment of capital to be made good within sixty days; the revision makes provision for ordering such deficiency to be made good " forthwith " or within a stated time. Former §§67 and 198 allowed thirty days within which to make the reserve good. CROSS-REFERENCES.— Disobedience of order as ground for taking pos- session, see § 57. Assessment of stockholders to make good impairment of capital of bank, see § 121; of trust company, see § 207; of safe deposit company, see § 323. Assessments by superintendent for encroachments on reserves, see § 30. Reserves required to be carried by banks and individual bankers, see §§ 112, 143; by private bankers, see § 166; by trust companies, see § 197. Requirements as to methods of keeping books of banks, see § 109; of private bankers, see § 165; of trust companies, see § 194; of savings banks, see § 246; of investment companies, see § 295; of safe deposit companies, see § 320; of personal loan companies and brokers, see § 367; of savings and loan associations, see § 391. Limitation upon profits of personal loan company, see § 350; of personal loan broker, see § 364. § 57. When superintendent may take possession of delinquent cor- poration, banker or personal loan broker. The superintendent may forthwith take possession of the busi- ness and property of any corporation to which this chapter is ap- plicable, or any individual banker or personal loan broker, or any private banker to which article four of this chapter is applicable wheneve]* it shall appear that such corporation or banker : 1. Has violated its charter or any law; 2. Is conducting its business in an unauthorized or unsafe manner ; 3. Is in an unsound or unsafe condition to transact its business ; 4. Cannot with safety and expediency continue business; 5. Has an impairment of its capital ; 6. Has suspended payment of its obligations; 7. Has neglected or refused to comply with the terms of a duly issued order of the superintendent; 46 BAjfKiNG Law. § 57. 8. Has refused, upon proper demand, to submit its records and affairs for inspection to an examiner of the banking department; 9. Has refused to be examined upon oath regarding its affairs. The superintendent may also forthwith take possession of the business and property of any savings and loan association which for two years after due demand or notice of withdrawal has been filed with it by any shareholder, has failed to pay matured shares or withdrawals or any part thereof as provided in section three hundred ninety-eight of this chapter. Source. — Former § 19. Last paragraph taken from former § 229. Sections 57-81 are substituted for the matter contained in former § 19. CROSS-REFERENCES.— As to voluntary dissolution, see § 486. As to proceedings to dissolve corporations generally and for voluntary dissolution, see Gen. Corp. Law, §§ 100-221. REASONS FOR ENACTMENT OF FORMER § 19.— The reason for the enactment of former § 19 giving the superintendent the right to take charge of a bank in unsound condition, was because during the financial depression of 1907 there were a series of receiverships in which the demand for com- missions and counsel fees were so extravagant as to arouse an instant popu- lar demand for reform. Matter of Union Bank, 204 N. Y. 313, 316. A SPECIALLY CHARTERED TRUST COMPANY is subject to this section by reason of § 187 (formei- § 197). Atty.-Gen. Rep. (1910) 832. SUPERINTENDENT ACTS BY VIRTUE OF STATUTE.— In taking pos- session of a bank under this section the superintendent acts as such by virtue of statutory authority and not as a result of any proceeding in court, though his administration is, in certain respects, subject to the action of the State Supreme Court. In re Bologh, 185 Fed. 825. EFFECT OF ASSIGNMENT FOR CREDITORS.— The powers of the superintendent over a corporation organized under the Banking Law are not limited or interfered with by an assignment for the benefit of creditors. Atty.-Gen. Rep. (1901) 265. NECESSITY FOR EXAMINATION.— " The plain theory of the statute is that the superintendent shall not take possession of a bank for purposes of liquidation until after he has made an examination from which it appears that the conditions warrant the exercise of the power." Matter of Union Bank, 204 N. Y. 313, 317. EFFECT OF TAKING POSSESSION.— The legal existence of an incor- porated bank does not cease when the superintendent takes it over. Matter of Union Bank, 147 App. Div. 593. The superintendent on taking possession merely becomes a custodian and liquidator. The corporation is not extinguished and still retains title to its assets. Lafayette Trust Co. v. Higginbotham, 136 App. Div. 747. §§ 58-, 59. Powers and Duties of Supekintendj£>"t. 47 Rights of creditors are fixed as of the time the superintendent takes possession of the bank. People v. Bank of Staten Island, 70 Misc. 634. After the superintendent has taken possession, the directors have no power to begin proceedings for voluntary dissolution, flatter of Murray Hill Bank, 153 N. y. 199. § 58. Circumstances under which possession of superintendent may terminate. When the superintendent shall have duly taken possession of such corporation, private or individual banker or personal loan broker, he may hold such possession until its affairs are finally liquidated by him, unless : 1. He shall have permitted such corporation or banker to re- sume business pursuant to the provisions of section sixty-one of this article; 2. The superintendent shall have been directed by order of the supreme court to surrender such possession, pursuant to the pro- visions of section sixty of this article ; 3. The stockholders of such corporation, at a meeting called by the superintendent pursuant to the provisions of section seventy- nine of this article, shall have duly determined to appoint, and shall have appointed, an agent or agents to continue the liquida- tion of such corporation, and such agent or agents shall have qualified to take possession of its remaining assets as provided in section seventy-nine of this article; 4. The depositors and other creditors of such banker or broker and the expenses of such liquidation shall have been paid in full. Source. — Former § 10. The language of the section is all new, but all the material is collected from former § 19. § 59. Superintendent may report delinquencies to attorney-general to procure judgment of dissolution; reports presumptive evidence. Whenever the superintendent is entitled to take possession of any such corporation for any reason set forth in section fifty- seven of this article, he may report to the attorney-general and specify in such report the delinquencies of such corporation ; and the attorney-general may institute an action to procure a judg- 48 Banking Law. § 60. ment dissolving such corporation. Every such report and every report of a duly instituted examination of such corporation, when duly verified, shall be presumptive evidence of the facts therein stated in any action or proceeding against such corporation in- stituted by the attorney-general. Source.— Former §| 18 and 26. As to actions by Attorney-General to dissolve corporations, see Gen. Corp. Law, § 101, et seq. NO EELATOR NECESSARY. — Upon receiving the report of the superin- tendent, the Attorney-General may bring an action in the name of the peo- ple of the state to dissolve the corporation, without waiting for a relator to set him in motion. People v. Mercantile Co-op. Bank, 53 App. Div. 295. SUFFICIENCY OF COIIPLAINT.— In People v. Manhattan Real Estate, etc., Co., 175 N. Y. 133, it was held that in an action brought by the Attorney- General to dissolve a corporation organized under the Banking Law, the com- plaint was demurrable unless it contained a traversable allegation that the corporation was insolvent or unable to pay its debts, or that it had violated some specified law. But under the section as it now stands it would seem suflicient to allege the existence of any of the grounds enumerated in § 57. For complaint held sufficient in action by Attorney-General to procure dis- solution of corporation, see People v. Republic Sav. & L. Assoc, 53 App. Div. 384. AN ACTION TO DISSOLVE A SAVINGS AND LOAN ASSOCIATION could be maintained by the Attorney-General under former § 18. People v. Republic Savings & Loan Assoc, 53 App. Div. 384. REPORT PRESUTMPTIVE EVIDENCE.— An examiner's report showing that a corporation was insolvent on a certain date, is prima facie evidence thereof. People v.- Empire Loan & Ins. Co., 15 App. Div. 69. § 60. Manner and time within which action of superintendent in taking possession may be tested. At any time within ten days after the superintendent has taken possession of the property and business of any such corporation, banker or broker, such corporation, banker or broker may apply to the supreme court, in the judicial district in which the princi- pal office of such corporation, banker or broker is located, for an order requiring the superintendent to show cause why he should not be enjoined from continuing such possession. The court may, upon good cause shown, direct the superintendent to refrain from further proceedings and to surrender such pos- session. Source. — Former § 19, §§ 61, 62. Powers and Duties of Supeei.\tenbent. 49 § 61. Superintendent may permit resumption of business. The superintendent may, upon such conditions as may be ap- proved by him, surrender possession for the purpose of permitting such corporation, banker or broker to resume business; but the superintendent shall not authorize any reduction of capital stock or capital as one of the terms of such resumption. Source. — Former § 19. The prohibition against reduction of capital ia new and is intended to prevent any diminution of the stocliholders' liability. SCALING DOWN DEPOSITS OF SAVINGS BANK.— In People v. Ulster County Sav. Bank, 64 Hun 434, affd 133 N. Y. 689, it was held that, under Laws of 1882, c. 400, § 278 (repealed by the former Banking Law), the court had power to permit an insolvent savings bank to resume business upon scaling down its deposits sufficiently to render the bank solvent; and it seems that such power resides in the court independently of statute. By § 280 of the present law express provision is made for reduction of liability to depositors of an insolvent savings bank. § 62, Special deputies; assistants; counsel and other employees. The superintendent may, by certificate, under his hand and official seal, appoint one or more special deputy superintendents as agent or agents to assist him in liquidating the business and affairs of any corporation or private or individual banker or per- sonal loan broker in his possession. The superintendent shall file such certificate in his office and shall cause a certified copy thereof to be filed in the office of the clerk of the county in which the principal office of such corporation, banker or broker is located. He may, from time to time, delegate such special deputy superintendents to perform such duties connected with such liqui- dation as he may deem proper. He may employ such expert assi.stants and counsel and may retain such of the officers or employees of such corporation, banker or broker as he may deem necessary in the liquidation and distribution of the assets of such corporation, banker or broker. He shall require such security as he may deem proper from his agents and assistants appointed pursuant to the provisions of this section. Source. — Former § 19, in part, without material change. CROSS-REFERENCES. — Eligibility of examiner to appointment as spe- cial deputy, see § 15. Compensation of special deputies, assistants, counsel and other employees, see § 03. 4 60 Banking Law. §§ 63, 64. § 63. Payment by superintendent of expenses of liquidation. The superintendent shall pay out of the funds in his hands, of such corporation or private or individual banker or personal loan broker, all expenses of liquidation, subject to the approval of the supreme court in the judicial district in which the principal office of such corporation, banker or broker is located, and upon notice of the application for such approval to such corporation, banker or broker. He shall, in like manner, fix and pay the com- pensation of special deputy superintendents, assistants, counsel and other employees appointed to assist him in such liquidation pursuant to the provisions of thia article. But a special deputy who, as examiner acting under commission from the superin- tendent, has previously examined the books, papers and affairs of such corporation, banker or broker, shall not receive compen- sation as such special deputy which exceeds by more than five dollars a day the per diem compensation received by him as ex- aminer at the time of making such examination. Source. — Former § 19. The last sentence is new. CROSS-REFERENCES.— Eligibility of examiner to appointment as spe- cial deputy, see § 15. Appointment of special deputies and employment of counsel and assistants, see § 62. § 64. Procedure of superintendent to obtain possession of pleadings, et cetera, in actions against which attorneys' liens are asserted. When the superintendent is in possession of the business and property of any such corporation or private or individual banker or perse ,. xl loan broker, and attorneys' liens are asserted by attor- neys of such corporation, banker or broker against any causes of action to which such corporation, banker or broker is a party, or against pleadings or other papers in the possession of such attor- neys relating to such causes of action, or if such liens are asserted against any evidences of title to any assets or against any of the assets of such corporation, banker or broker then in the possession of such attorneys, the superintendent may institute special pro- ceedings and petition the court to fix and determine the amount of said liens. Such proceedings shall be instituted in the county in which the principal office of such corporation, banker or broker §§ 65, 66. PowKES AND Duties of Supeeintendei^t. 51 is located. Upon application of the superintendent and upon notice to such attorneys to be prescribed by the court, the court may by order prior to final order in such proceeding direct such attorneys to deliver to the superintendent all property of such corporation, banker or broker, against which such liens are asserted, together with such consents to substitution of attorneys as the court may direct, upon the superintendent furnishing security to such attorneys in the manner and to an amount to be fixed by the court. Source. — New. The purpose of the section is to prevent delays in liquida- tion by controversies over counsel fees. Enforcement of attorney's lien, see Judiciary Law, § 475. The procedure to enforce an attorney's lien. Matter of King, 168 X. Y. 53. § 65. On taking possession, superintendent shall notify those holding assets; effect of notification. When the superintendent shall have taken possession of the property and business of any such corporation or private or in- dividual banker, or personal loan broker, he shall forthwith give notice of such fact to any and all banks, trust companies, assoeia' tions and individuals holding any assets of such corporation, banker or broker. No corporation, association or individual hav- ing notice or knowledge that the superintendent has taken posses- sion of such corporation, banker or broker, shall have a lien or *broker, for any payment, advance or clearance thereafter made, charge against any of the assets of such corporation, banker or or liability thereafter incurred. Source. — Former § 19, in part, without material change. § 66. Inventory of assets and where filed. After the superintendent shall have taken possession of the property and business of such corporation or private or individual * The present banking law passed the legislature under an emergency mes- sage. Senate print 1530 was amended and passed in both houses on the 27th day of March, 1914. In the reprint of the bill as amended, after its passage, two lines were transposed by the printer. The last clause in this section as passed by both houses read as follows : " Shall have a lien or charge against any of the assets of such corporation, banker or broker, for any payment, advance or clearance thereafter made, or liability thereafter incurred." 52 Banking Law. § 67. banker, or personal loan broker, be sball make in duplicate an inventory of tbe assets of sucb corporation, banker or broker. He shall file one copy of such inventory in his office and shall cause one copy to be filed in the office of the clerk of the county in which the principal office of such corporation, banker or broker is located. Source. — Former § 19, in part, without material change. § 67. Disposition by superintendent of property held by delinquent as bailee, or depositary for hire. The superintendent may, after he has taken possession of any such corporation or private or individual banker or personal loan broker, cause to be mailed to all persons claiming to be, or appear- ing upon the books of such corporation, banker or broker to be, the owner or owners of any personal property theretofore left in the possession of such corporation, banker or broker as bailee or de- positary for hire, or the lessee of any safe, vault or box, a notice in writing in a securely closed, post-paid, registered letter directed to each of such persons at his post-office address as recorded upon its books, or, if his name is not recorded in said books, at his last known post-office address, notifying . such person to remove all such personal property within a period stated in said notice, and not less than sixty days from the date thereof. If such property shall not have been removed within the time fixed by such notice, the superintendent may apply to the supreme court in the judicial district in which such property is located for an order directing him as to the disposition of such property ; and he may cause any safe, vault or box held by, or on the premises of, such corporation, banker or broker to be thereafter opened in his presence or in the presence of one of the special deputy superintendents, and of a notary public, not an officer or in the employ of the corporation, banker or broker or of the superintendent, and the contents, if any, to be sealed and distinctly marked by such notary public, with the name and address of the person in whose name such safe, vault or box stands upon the books of the corporation, banker or broker, aijd a list and description of the property therein to be attached thereto. Such package so sealed and addressed together with the list and description of the property therein, may be kept by the superintendent in one of the general safes or boxes of the corpora- §§ 68, 69. Powers and Duties of Supeeintendent. 53 tion, banker or broker until delivered to the person wbose name appears thereon or until otherwise disposed of as directed by the court. Source.— Former § 19, in part. A SPECIAL DEPOSIT OF MONEY with a trust company to the credit of a pending action and subject to the order of the court creates a bailment. Such money does not become the property of the trust company and does not pass to the Superintendent upon his taking possession. Van Wagoner v. Buclcley, 148 App. Div. 808. DEPOSITS RECEIVED WHILE INSOLVENT.— One depositing drafts with a bank which is then insolvent to the knowledge of its officers is entitled to reclaim them from the receiver. The fraud of the bank in holding itself out as solvent entitles the depositor to rescind the contract implied from such de- posit. Cragie v. Hadley, 99 N. Y. 131. § 68. Effect of superintendent's notice to remove upon contract of bailment or of deposit for hire. After the superintendent shall have duly mailed a notice in writing, as provided in section sixty-seven of this article, the con- tract of bailment or of deposit for hire, or lease of safe, vault or box, if any, between the person duly notified and the corporation or private or individual banker or personal loan broker shall cease and determine upon the date for removal fixed in such no- tice, and the amount of the unearned rent or charges, if any, paid by such person shall become a debt of the corporation, banker or broker to said person. Source. — Former § 19 in part. § 69. Liquidation and conservation of assets; compounding debts and compromising certain claims. The superintendent is authorized, upon taking possession of the property and business of such corporation or private or individual banker or personal loan broker, to liquidate the ailairs thereof and to do all acts and to make such expenditures as in his judgment are necessary to conserve its assets and business. He shall pro- ceed to collect the debts due. He may upon an order of the su- preme court, sell or compound all bad or doubtful debts held by, and compromise claims against such corporation, banker or broker, other than deposit claims, and, upon such terms as the court shall 54 Banking Law. §§ 70, 71 direct, may sell or otherwise dispose of all or any of the real and personal property of such corporation, banker or broker. In case any of the real property so sold is located in a county other than the county in which the application to the court for leave to sell the same is made, the superintendent shall cause a certified copy of said order to be filed in the office of the clerk of the county in which such real property is located. Source. — Part former § 19. Power to compromise claims added. Power to sue, defend, execute instruments, etc., see § 71. POWER TO EXPEND BANK'S FUNDS.— When the Superintendent deems it necessary and proper to expend some of the funds of the bank in order" to conserve its assets, he may do so without an application to the Supreme Court, and is not liable for any loss occasioned thereby, unless he has fkiled to exercise honestly his beat judgment and discretion. Atty.-Gen. Rep. (1912), vol. 2, p. 55. SALE OF REAL PROPERTY.— Where, on petition by the Superintendent, the Supreme Court made an order approving and confirming a private sale of land belonging to an insolvent trust company, it was held that un-ler the circumstances of the case the court thereafter had no power to revoke its first order and make a new one directing that the sale must be at public auction and at a greater price. Matter of Superintendent of Banks, 207 N. Y. 11. On an application by the Superintendent to the Supreme Court for permis- sion to sell real estate belonging to a bank in his possession, it is notneees-i sary that notice be given to the Attorney-General under Gen. Corp. Law, § 312. Atty.-Gen. Rep., Sept. 29, 1913. § 70. Deposit of moneys collected ; preference. The moneys collected by the superintendent shall be from time to time deposited in one or more state banks, savings banks or trust companies and, in case of the insolvency or voluntary or in- voluntary liquidation of the depositary, such deposits shall be en- titled to priority of payment on an equality with any other priority given by this chapter. Source. — Former § 19, in part, without material change. As to priorities in general, see § 78, and annotations thereto. § 71. Superintendent's power to sue, execute instruments, et cetera, for delinquent; actions and proceedings preferred; exemp- tion from filing fees. For the purpose of executing any of the powers and performing any of the duties hereby conferred upon him, the superintendent § 71. Powers and Duties of Supeeintendent. 55 may, in the name of the delinquent corporation or private or indi- vidual banker or personal loan broker, prosecute and defend any and all actions and legal proceedings. Any such action or proceed- ing, upon application of the superintendent, shall be entitled to the same preference to which an action or proceeding by of against a receiver appointed by the court is entitled in any court of the state. He may, in the name of the delinquent corporation, banker or broker, execute, acknovyledge and deliver any and all deeds, assign- ments, bills of sale, releases, extensions, satisfactions and other instruments necessary and proper to effectuate any sale, lease or transfer of real or personal property or to carry into effect any povyer conferred or duty imposed upon him by this article or by order of the supreme court. Any instrument executed pursuant to the authority hereby given shall be as valid and effectual for all purposes as though the same had been executed by the officers of the delinquent corporation by authority of its board of directors; or by the private or individual banker or personal loan broker per- sonally. The superintendent shall not be required to pay any fee to any public officer for filing or recording any pape^- or instrument executed in pursuance of any power conferred on him by this section. Source. — Part former § 19. The last sentence is new, as is also the pro- vision for preferring causes upon application of the superintendent. ACTION PROPERLY BROUGHT IN NAME OF CORPORATION.— An action on a note held by a delinquent corporation is properly brought in its name. Lafayette Trust Co. v. Higginbotham, 139 App. Div. 747. Any action with respect to the property or business of the bank should be brought by or against the corporation, which still retains its corporate exist- ence, as if still managed by its board of directors. Richardson v. Cheney, 146 App. Div. 686, 690, affirmed 208 N. Y. 541. MAY SUE AND BE SUED AS RECEIVER.— The superintendent when in possession for purposes of liquidation may sue and be sued in effect as a re- ceiver. In re Carnegie Trust Co., 161 App. Div. 280. ENFORCEMENT OF MORTGAGE BY SUPERINTENDENT.— The superin- tendent may maintain an action to enforce a bond and mortgage held by the bank, but the action muat be brought in the name of the corporation. If brought in the name of the superintendent the summons and complaint may be amended, but not nunc pro tunc. There is no power to amend the Us pendens so as to make it operate against intervening rights, but a new notice of lis pendens may be filed. It is not necessary to plead the provisions of the Banking Law in the complaint. Van Tuyl v. N. Y. Real Estate Sec. Co., 153 App. Div. 409. 56 Banking Law. § Y2. SET-OFF AND COUNTERCLAIM.— In an action by the superintendent against an endorser of a note held by the bank, the endorser cannot offset his deposit in the bank against the amount due on the note, if the maker is sol- vent. Borough Bank v. Mulqueen 70 Misc. 137. An endorser of a note made for his accommodation may set-off his deposit against his liability on such note when sued thereon by the superintendent. Building & Engineering Co. v. Northern Bank, 206 N. Y. 400, affirraing 151 App. Div. 942. Where in an action against the maker of a note held by the bank, the de- fendant counterclaims his deposit in the bank, this constitutes a sufficient de- mand to start interest running on the deposit from that time. Sickles v. Harold, 149 N. Y. 332. Where the holder of a demand note made by a bank demanded payment less than an hour before the closing of the bank, it was held that in an action by the receiver against the holder of the note on a debt due from him to the bank, the defendant was entitled to set off the note. Fisher v. Hanover Nat. Bank, 64 Fed. 832. . POWER TO VERIFY REPLY TO COUNTERCLAIM.— The superintendent or one of his special deputies has power to verify and interpose a reply to a counterclaim in an action brought by him in pursuance of his duties in liqui- dating the affairs of a bank. Union Bank v. Kanturk Realty Corp. 72 Misc. 96. § 72. Notice to creditors to make proof of claims. Wlien the superintendent shall have taken possession of such cor- poration or private or individual banker or personal loan broker, and shall have determined to liquidate its affairs he shall notify all persons vrho may have claims against such corporations, banker or broker, to present the same to him and make proper proof thereof within four months from the date of said notice and at a place specified therein, and shall specify in said notice the last date for presenting said proofs. He shall cause said notice to be mailed to all persons whose names appear as creditors upon the books of the corporation, banker or broker. He shall also cause said notice to be inserted weekly in such newspapers as he may direct for three consecutive months, the first insertion thereof to be published more than ninety daysi before the last day fixed in said notice for presenting proof of claims. After the date; specified in such notice as the last date for presenting proofs of claims the superintendent shall have no power to accept any claim. Source. — Part former § 19. The time for presenting and making proof of claims cannot be later than four months from the date of notice to creditors; and after this period has expired, the superintendent cannot receive any further claims. These provisions are new. §§ 73, 74, 75. Powers axd Duties of SurEEixTENDENT. 57 § 73. Superintendent to list claims duly presented; when and where filed. The superintendent shall make in duplicate a complete list of all claims duly presented, and shall specify therein the name of the claimant, the nature of the claim, and the amount thereof. Within ten days after the last date fixed in said notice to creditors to present and make proof of claims, the superintendent shall file one copy of said list in his office, and cause one copy to be filed in the office of the clerk of the county in which the principal office of such corporation or private or individual banker or personal loan broker is located. Source. — Part former § 19. The provision as to the time within which list must be filed by superintendent is new. § 74. Objections to claims presented may be filed with superintendent within certain time; procedure upon claim under objection. Within thirty days after the last date fixed in said notice to creditors to present and make proof of claims, objections to any claim duly presented may be made by any party interested, by filing with the superintendent such objections in writing, signed by the objector and duly verified. Unless the superintendent rejects any claim to which objections have been duly filed with him, he shall, within thirty days after the time to file such objections has ex- pired, apply to the supreme court, upon notice to the objector, for an order directing the superintendent as to the disposition of said claim. The court may thereupon dispose of said objections or may order a reference for that purpose. Source. — Part former § 19. The procedure in liquidation has been modi- fied by this section. Objections to the allowance of claims must be made within thirty days from the last day for making proofs. This gives objectors not less than twenty days to examine the list of claims filed by the Super- intendent under the provisions of section 74. Tliis provision, and the require- ment that the superintendent must act upon objections promptly, were inserted for the purpose of expediting liquidations. § 75. Superintendent may accept or reject claims; list of claims accepted to be filed. The superintendent shall, not later than thirty days after the time has expired to file objections to claims duly presented, accept 58 Banking Law. § 76. or reject every duly filed claim except claims as to whicli objections are still pending undetermined by the court. Every claim accepted by bim, be shall endorse " accepted " and file so endorsed in his of- fice. If he doubts the justice or validity of any claim, he shall reject such claim and shall endorse the same " rejected " and file said claim so endorsed in his office. He shall cause notice of such re- jection to be served upon the claimant either personally or by mail. The superintendent shall not determine priorities, in accepting or rejecting claims; but accepted claims shall be presented to the supreme court pursuant t:; section seventy-eight of this article for determination as to their priority of payment. Within thirty days after the superintendent has accepted or rejected all claims duly filed, he shall list all claims accepted and all rejected by him and file one copy of said list in his office and one copy in the office of the clerk of the county in which the principal office of such cor- poration or private or individual banker or personal loan broker is located. Source. — Part former § 19. The limitation on the time within which claims must be acted upon and the requirement as to listing claims are new, as is al^o the provision prohibiting the superintendent from determining priorities. Determination of priorities, see § 78. COURT CANNOT ORDER PAYMENT OF DEPOSIT.— The Supreme Court has no power or jurisdiction to order the superintendent, on an application by a depositor of a bank in tlie superintendent's possession, to pay over to such depositor the amount of his deposit. Matter of Peters, 78 Misc. 453. COSTS IN ACTION ON REJECTED CLAIM.— Where a claim is rejected and an action is brought thereon, tlie plaintiff, is successful, is entitled to his costs in full out of the assets of the insolvent with interest thereon from the date of judgment to the time of payment. In re Carnegie Trust Co., 161 App. Div. 280. INTEREST ON DIVIDEND WHERE CLAIM ESTABLISHED BY ACTION. — 'Where a rejected claim is established by action, the creditor is entitled to interest on his dividend from the time such dividend was paid to other creditors. In re Carnegie Trust Co., 161 App. Div. 280. § 76. Effect of accepting claims; statute of limitations for actions upon claims not accepted; necessary allegations. When the superintendent has accepted a duly filed claim and has filed the same endorsed " accepted " in his office, the claimant. § 77. PowEKS AND Duties of Superintendent. 59 unless such claim is entitled by law to priority of payment, shall be entitled to share ratably with other general creditors in the dis- tribution of the assets of such corporation or private or individual banker or personal loan broker as such assets are distributed pur- suant to section seventy-eight of this article. When the time within which the superintendent is required to accept or reject claims has expired and at any time within six months thereafter, a claimant whose claim has been duly filed and has not been accepted by the superintendent may institute and maintain an action thereon against such corporation, banker or broker. 1^0 action shall be maintained against such corporation, banker or broker while the superintendent is in possession of its affairs and business unless brought within the period of limitation specified in this section. In all actions or proceedings instituted against such corporation, banker or broker while the superintendent is in possession of its property and business, the plaintiff shall be re- quired to allege and prove that the claim upon which the action is instituted was duly filed and that sixty days have elapsed since the expiration of time for filing said claim and that said claim has not been accepted. Source. — Practically new. The six months statute of limitations was con- tained in former § 19. FAILURE TO FILE CLAIM.— Depositors who do not prove their claims forfeit their right to share in the distribution. People v. German Bank, 136 N. Y. Supp. 311. ACTION" DOES NOT LIE AGAINST SUPERINTENDENT.— An action to enforce a claim against a corporation in the hands of the superintendent must be brought against the corporation and not against the superintendent. Richardson v. Cheney, 146 App. Div. 686, affirmed 208 N. Y. 541. " It seems to be well settled in this state than an action cannot be main- tained against the Superintendent of Banks upon a demand existing against a bank which he is liquidating. The Superintendent of banks is merely a custodian, liquidator and conservator of the bank and for the purposes of an action against the bank, the latter is the real party in interest." Van Tuyl V. Schwab, 85 Misc. 172-. {Law Journal, April 1, 1914.) § 77. Judgments recovered after superintendent takes possession shall not be liens. A lien shall not attach to any of the property or assets of such corporation or private or individual banker or personal loan broker 60 Banking Law. § 78. by reason of the entry of any judgment recovered against such cor- poration, banker or broker after the superintendent has taken pos- session of its property and business and so long as such possession continues. Source. — New. The section embodies the rule laid down in Northern Bank V. Drury, 152 App. Div. 64. JUDGMENT NOT ENTITLED TO PREFERENCE.— A judgment obtained by a general creditor of a savings bank against its receiver in an action that was pending when the receiver was appointed, was held not entitled to a preference over depositors. People v. Mechanics' and Traders' Sav. Inst., 92 N. Y. 7, reversing 28 Hun 375. § 78. Dividends to creditors; priorities; disposition of unclaimed dividends. At any time after the date fixed by the superintendent for the presentation of claims, the supreme court may by order authorize the superintendent upon his application to declare out of the funds remaining in his hands after the payment of expenses, one or more dividends. Such order shall specify what claims, if any, are en- titled to priority of payment, and shall direct the superintendent regarding the manner of payment of such prior claims. At any time after the expiration of eight months from said date fixed for the presentation of such claims, he may by like order declare a final dividend. Such dividends shall be paid to such persons, in such amounts, and upon such notice, as the supreme court in the judicial district in which the principal office of such corporation or private or individual banker or personal loan broker is located, may by order direct. Dividends remaining unclaimed or unpaid iii the hands of the superintendent for six months after the order for final distribution, shall be deposited by him as provided in sec- tion forty-five of this article. Source. — Fart former § 19. The provision for determination of priorities ie new. Under the limitations of time within which claims must be presented, actions upon claims instituted, and liquidating officials perform their duties, it is possible to complete the liquidation of an institution within twelve months. CROSS-REFERENCES.— Priority of assessment and penalties, see § 32. Priority of unclaimed sums deposited by superintendent, see § 45. Priority of funds deposited by superintendent acting as liquidators, see § 70. § 78. PowEES AND Duties of Superintendent. 61 Prohibition against determination of priorities by superintendent, see § 75. Preference of depositors in case of insolvency or suspension of private banker, see § 156. Priority of debts due from trust company in fiduciary capacity, see § 188, subd. 8. Priority of deposits made by savings bank, see § 278; by savings and loan associations, see § 414; by the land bank, see § 437; by credit unions, see § 456. Priority of debts due the United States, see U. S. Rev. Stat., § 3466; 2 Fed. Stat. Ann., p. 45. STATE FUNDS are entitled to preference by virtue of Const. 1894, art. 1, § 16. Matter of Carnegie Trust Co., 206 N. Y. 390; United States Fidelity and Guaranty Co. v. Carnegie Trust Co., 161 App. Div. 429. SUBROGATION OF SURETY TO PREFERENCE.— A surety on a bond given by a trust company to secure a deposit which is entitled to priority of payment upon paying the amount to the depositor becomes subrogated to the right to preferential payment. United States Fidelity & Guaranty Co. v. Carnegie Trust Co., 161 App. Div. 429; Same v. Same, 161 App. Div. 435. FAILURE TO DEMAND A PREFERENCE at the time of filing a claim against the insolvent does not constitute a waiver of the right to such prefer- ence in the absence of elements creating an estoppel. United States Fidelity & Guaranty Co. v. Carnegie Trust Co., 161 App. Div. 429. AGREEMENT NOT TO DRAW OUT DEPOSIT.— A bank discounted notes aggregating $6,000 for a, depositor upon the latter's agreement not to draw out $2,000 of the amount credited to him until the notes were paid. Accord- ingly he delivered to the bank his check for $2,000 payable to its order. The bank accepted the check payable at another bank, and subsequently collected the same and credited the amount back to the depositor's account but with- out his knowledge. Thereafter the superintendent took possession of the bank and the depositor sued him to recover the $2,000. It was held that the depositor was not entitled to priority, but must file his claim and share with the other creditors. Richardson v. Cheney, 146 App. Div. 686, affirmed 208 N. Y. 541. CREDITOR OBTAINING IMPROPER PREFERENCE.— Where a depositor has checks outstanding at the time the bank is closed and the same are paid through the clearing house subsequent to such closing, the depositor is not entitled to any dividend xmtil all other creditors have been paid a pro- portion of their claims equal to the proportion of such depositors' claim that has been paid by the payment of the checks. People v. Bank of Staten Island, 70 Misc. 634. INTEREST. — Interest during the period of administration may be allowed against the corporation if the assets are sufficient for that purpose, but no interest can be allowed upon a preferred claim to the detriment of unpre- ferred creditors. People v. American Loan & Trust Co., 172 N. Y. 371, affirm- 62 Banking Law. § 79. ing 70 App. Div. 579; United States Fidelity & Guaranty Co. v. Carnegie Trust Co., 161 App. Div. 429; Same v. Same, 161 App. Div. 435. APPEAL BY SUPERINTENDENT.— An application by the superintendent to the Supreme Court for a determination of conflicting claims to the bank's assets is a special proceeding and the superintendent, as the representative of the creditors generally, is entitled to appeal from the court's decision giving a preference to a particular creditor. Matter of Carnegie Trust Co., 206 N. Y. 390. DISTRIBUTION AS OF DATE OF CLOSING.— Distribution of the assets of an insolvent bank or trust company should be made as of the date when they pass into the custody of the \a,w by the appointment of a receiver or otherwise. People v. American Loan & Trust Co., 172 N. Y. 371, aff'g 70 App. Div. 579. DEPOSITORS AND CREDITORS OF SAVINGS BANK SHARE RATABLY. — Upon the insolvency of a savings bank the assets of the corporation be- come a. trust fund for its creditors. Depositors stand upon the same basis as other creditors, and share ratably with them and with each other in re- ceiving payment from the insolvent estate. People v. Mechanics' & Traders' Sav. Inst., 92 N. Y. 7, reversing 28 Hun, 375; People v. Ulster County Sav. Bank, 64 Hun, 434, aff'd 133 N. Y. 689. § 79. Superintendent shall call stockholders' meeting after creditors are paid in full; proceedings at such meeting. Whenever the superintendent shall have paid to each creditor of any stock corporation whose claim has been duly proved the full amount of such claim, and shall have made proper provision for claims in litigation and not finally determined, and shall have paid all the expenses of liquidation, and shall have returned to stock- holders who have paid to him the amounts demanded pursuant to section eighty of this article, their pro rata share of any such amounts not finally necessary to pay creditors in full, he shall call a meeting of the stockholders of such corporation by causing notice of the time and place of such meeting to be published at least once a week for three successive weeks in one or more newspapers selected by him and published in the county where the principal office of such corporation is located. At such meeting, the stock- holders shall determine whether the superintendent shall continue as liquidator to wind up the affairs of such corporation, or whether the stockholders themselves shall elect an agent or agents for that purpose. In determining these matters, the stockholders shall vote by ballot in person or by proxy. Each share of stock shall be enti- tled to one vote and the vote of a majority of the issued stock shall be necessarv to a determination. In case it is determined to con- § 79. PowEES AND Duties of Supeeintendent. 63 tinue the liquidation under the superintendent, he shall continue the liquidation of the affairs of such corporation and after paying the expenses thereof, shall distribute the proceeds among the stock- holders in proportion to the several holdings of stock and in such manner and upon such notice as may be directed by order of the su- preme court. Upon a petition by the superintendent showing that all the assets of such corporation have been duly distributed and that unclaimed sums have been duly deposited by him as provided in section forty-five of this article and that more than one year has elapsed since the last required publication of notice to creditors to present their claims, and upon such notice as the court may pre- scribe, the supreme court may, on such terms as justice requires, make an order affirming such disposition of such unclaimed sums and declaring such corporation dissolved and the corporate existence thereof terminated. Upon the filing of a certified copy of such order in the office of the superintendent, the existence of such cor- poration shall cease and determine. In case the stockholders shall determine to appoint an agent or agents to continue such liquidation, they shall thereupon select by ballot such agent or agents. A majority of the stock present and voting in person or by proxy shall be necessary to determine such question. If such agent or agents shall be duly elected by the stockholders, the superintendent may require such agent or agents to execute and deliver to him a bond to the people of the state, in such amount, with such sureties, and in such form as shall be approved by him, conditioned upon the performance of all the duties of his or their trust; and thereupon the superintendent shall transfer and deliver to such agent or agents all the assets of such corporation then remaining in, his hands. Upon such transfer and delivery, the superintendent shall be discharged from any and all further liability to such corporation and its creditors. Upon the transfer and delivery of said assets by the superintendent, he shall file a certified copy of the proceedings of said meeting in his office and cause a certified copy to be filed in the office of the clerk of the county in which the principal office of such corporation was located. No banking powers shall be exercised by such corporation after the superintendent has filed such certified copy in his office. Source. — Part former § 19. The new section expressly applies to stock corporations only, and consequently there can be no question whether it is 64 Bak-kixg Law. § 80, applicable in the liquidation of a savings and loan association, as was the case under the former law. See Atty.-Gen. Rep. (1910) 841. § 80. Superintendent may enforce payment of statutory liability of stockholders; notice thereof, and effect of failure to pay at time fixed. Whenever a liability of stockholders for the amount of their respective shares of any such corporation exists, and the superin- tendent has duly taken possession of the property and business of such corporation, and has duly notified creditors to present and make proof of their respective claims and the last day to present such claims has expired, and he has determined from his examina- tion of its affairs that the reasonable value of the assets of such corporation is not sufficient to pay its creditors in full, he may enforce the individual liability of such stockholders in whole or in part. In case he determines to enforce such liability, he shall make demand in writing upon such stockholders by causing such demand to be enclosed in sealed envelopes addressed and mailed, postage prepaid, to said respective stockholders at their last known places of address as the same appear upon the stock ledger of such corporation or at their last known address if no address appears in said ledger. Such demand shall state the total amount assessed by the superintendent against the stockholders and the equal and pro rata share assessed against each stockholder for each share of stock, and the total amount of such assessment for all the shares of stock of such stockholder. Such demand shall also fix a date, not earlier than thirty days from the date of such notice, upon which such stockholders shall be required to pay such assessment to the superintendent. In case any such stockholder shall fail or neglect to pay such assessment within the time fixed in said notice, the superintendent shall have a cause of action, in his own name as superintendent of banks, against such stockholder either sever- ally or jointly with other stockholders of such corporation, for the amount of such unpaid assessment or assessments, together ,witb interest thereon from the date when such assessment was, by the terms of said notice, due and payable. In any such action, the written statement of the superintendent, under his hand and seal of office, reciting his determination to enforce the individual lia- bility, or any part thereof, of such stockholders, and setting forth § 80. PowEES AND Duties of Supeeintendent. 65 the value of the assets of such corporation and the liabilities thereof, as determined by him after examination and investigation, shall be presumptive evidence of such facts as therein stated. Source. — Part former § 19, -yvhicli merely provided that the superintendent might, " if necessary to pay the debts of such corporation, enforce the indi- vidual liability of the stockholders." CROSS-REFERENCES.— As to liability of stockholders of banks, see § 120; of trust companies, see § 206; of safe-deposit companies, see § 322. SUPERINTENDENT'S POWER TO ENFORCE.— Under the former law it was held that the superintendent had authority, if necessary, to institute an action in his official capacity to enforce the statutory liability of stockholders, unhampered by any of the limitations contained in the Stock Corporation Law, and notwithstanding that the charter of the company has not been dissolved by judgment. Van Tuyl v. Scharmann, 208 N. Y. 53; Hosier Safe Co. v. Guardian Trust Co., 208 N. Y. 524; Van Tuyl v. Robin, 80 Misc. 360, a£F'd 160 App. Div. 41 ; Cheney v. Scharmann, 145 App. Div. 456. The present law expressly excludes the limitations contained in the Stock Corporation Law. See §§ 120, 206, 322. NO ABSOLUTE DUTY TO SUE.— Since this section does not impose an absolute duty on the superintendent to proceed against stockholders, it would seem clear that he could not be held liable for the amount which ha might have recovered, had he proceeded against a solvent stockholder within the time limited by statute. See People v. Staten Island Bank, 146 App. Div. 378. CORPORATION NOT NECESSARY PARTY.— In an action by the super- intendent to enforce the stockholders' liability, the corporation, while a proper, is a not a necessary party. Van Tuyl v. Scharmann, 208 N. Y. 53. STATUTE OF LIMITATIONS.— Under the former Banking Law such ac- tions could be brought within ten years after the accrual of the cause of action. See Richards v. Gill, 138 App. Div. 75. The present law expressly provides that the action must be brought within six years. See §§ 120, 206, 322. EXHAUSTION OF ASSETS NOT PREREQUISITE.— It is not necessary to exhaust all the assets of the corporation before bringing the action. Van Tuyl V. Robin, 80 Misc. 360, aff'd 160 App. Div. 41. Persons v. Gardner, 26 Misc. 663, 42 App. Div. 490; Barnes v. Arnold, 23 Misc. 201. FORM OF ACTION.— In Cheney v. Scharmann, 145 App. Div. 456, it was held that, under former § 19, the superintendent could only enforce the liability in an action in equity against all the stockholders. The present section allows him to sue the stockholders either severally or jointly, thus enabling him to bring separate actions at law where the full amount of the liability is required, as is done under the national bank act. See Casey v. Galli, 94 U. S. 673. 5 66 Banking Law. §§ 81, 82. SUFFICIENCY OF COMPLAINT.— In Cheney v. Scharmann, 145 App. Div. 456, it was held that a, mere allegation that the superintendent deemed it necessary to enforce the stockholders' liability, was not sufficient, and that no presumption of the existence of such necessity arose from the fact that the superintendent had taken possession. For complaints held sufficient under the former Banking Law, see Van Tuyl V. Scharmann, 208 N. Y. 53; Van Tuyl v. Robin, 80 Misc. 360, aff'd 160 App. Div. 41. COUNTERCLAIM. — In maintaining an action against stockholders, the superintendent represents the creditors, and consequently no claim against the corporation can be asserted as a counterclaim against the plaintiff in such action. To permit such a counterclaim would give such defendant a preference over other creditors. Van Tuyl v. Schwab, 85 Misc. 172 (Law Journal, April 1, 1914) ; Matter-of Empire City Bank, 18 N. Y. 199. INTEREST ON LIABILITY.— In Mahoney v. Bernhard, 45 App. Div. 499, affirmed 169 N. Y. 589, it was held under the former law that the stock- holders' liability could not be extended by allowing interest thereon from the commencement of the action. The present section makes express provision for interest, the purpose of which is to discourage dilatory tactics on the part of stockholders. CREDITOR'S RIGHT TO SUE STOCKHOLDERS.— In Hosier Safe Co. v. Guardian Trust Co., 208 N. Y. 524, it was held that, if the superintendent refused to bring the action, a creditor might do so. The present law ex- pressly so provides. See §§ 120, 206, 322. § 81. Superintendent may maintain action against directors, trustees, managers or officers for violation of their official duties. At any time while the superintendent is in possession of the property and business of any such corporation, he may within six years after the cause of action has accrued institute and maintain in his name as superintendent of banks against its directors, trus- tees, managers or officers, or fmy of them, any action or proceed- ing which is vested in such corporation or in the stockholders or creditors thereof. Source. — New. See Gen. Corp. Law, §§ 90-92. § 82. Official acts of superintendent and details of department busi- ness to be made public. The superintendent shall keep in his office, in a place accessible to the general public, a bulletin board upon which he shall cause to be posted at noon on Friday, of each week a detailed statement, signed by him or, in case of his absence from Albany or inability § 82. Powers and Duties of Supeeintendent. 67 to act, by the deputy superintendent in charge, giving the follow- ing items of general information with regard to the work of the de- partment since the preceding statement : 1. The name of every corporation and private and individual banker and personal loan broker whose certificate has been filed for examination in the office of the superintendent, its location and the date of filing of such certificate. 2. The name and location of every corporation and private and individual banker and personal loan broker authorized by the superintendent to commence or continue business, its capital, surplus and the date of authorization. 3. The name of every proposed corporation and private and individual banker and personal loan broker which a certificate of authorization has been refused by the superintendent, and the date of notice of refusal. 4. The name and location of every private banker whose affi- davit executed pursuant to section one hundred sixty of this chap- ter has been filed for examination in the offi-ce of the superin- tendent, and the date of such filing. 5. The name and location of every private banker whose affi- davit executed pursuant to section one hundred sixty of this chap- ter has been accepted or refused by the superintendent, and the date of such acceptance or refusal. 6. The name and location of every private banker, the accept- ance of whose affidavit executed pursuant to section one hundred sixty of this chapter has been revoked by the superintendent, and the date of such revocation. 7. The name and location of every private banker, personal loan broker, personal loan company and foreign corporation, whose authorization certificate or license has been revoked by the super- intendent, and the date of such revocation. 8. The name of every corporation and private and individual banker and personal loan broker that has been authorized by the superintendent to change its place of business, and the date when and the places from and to which the change is authorized to be made. 9. The name of every corporation that has applied to the super- intendent for permission to open a branch office, the date of such application and the location of the proposed branch. 68 Banking Law. § 82. 10. The name of every corporation that has been authorized by the superintendent to open a branch office, the date of ap- proval and the location of such branch office. 11. The name and location of every corporation and private banker and personal loan broker authorized by the superintendent to increase or reduce its capital stock or permanent capital, the date of such authorization and the amount of the increase or re- duction. 12. The names and locations of all corporations that have merged pursuant to the provisions of this chapter and the dates of such mergers. 13. The name and residence of every person appointed by the superintendent as a deputy, examiner or employee in the banking department, the title of the office to which appointed, the com- pensation paid and the date of appointment. li. The date on which a call for a quarterly report by banks, trust companies or private or individual bankers was issued by the superintendent and the day designated as the day with reference to which such report should be made. 15. The name and location of every corporation and private and individual banker and personal loan broker of whose property and business the superintendent shall have taken possession and the date of taking possession, and the name and residence of every person appointed by the superintendent as a special deputy super- intendent of banks. 16. The name and location of every corporation and private and individual banker and personal loan broker which shall have been authorized by the superintendent to resume business, and the date of resumption. 17. The name and location of every corporation whose creditors or depositors have been paid in full by the superintendent and a meeting of whose stockholders shall have been called, together with date of notice of meeting and date of meeting. 18. The name and location of every corporation subject to the banking law whose affairs and business shall have been finally liquidated and the corporation dissolved. 19. The name and location of every private and individual banker and personal loan broker whose affairs have been liquidated and business discontinued. § 83. Powers akd Duties of Supekintendent. 69 20. The name and location of every corporation whicli has ap- plied for approval of a change of name, and the name proposed. Every such statement, after having been so posted for one Aveek, shall be placed on file and kept in the office of the superintendent. All such statements shall be public documents and at all reason- able times shall be open to public inspection. Source. — Former § 43 with additions. § 83. Annual report of superintendent. The superintendent shall report annually to the legislature as follows : 1. A summary of the state and condition of every corporation and private and individual banker and personal loan broker re- quired to report to him and from which reports have been received during the preceding year, at the several dates to which such re- ports refer, with an abstract of the wliole amount of capital re- ported by them, the whole amount of their debts and liabilities and the total amount of their resources, specifying in the case of banks, trust companies and private or individual bankers the amount of lawful money held by them at the times of their sev- eral reports, and such other information m relation to such corpo- rations and bankers as, in his judgment, may be useful. Such corporations shall be divided into classes so as to correspond with the designations thereof in section two of this chapter. 2. A statement of all corporations and private and individual bankers and personal loan brokers authorized by him to do busi- ness during the previous year, with their names and locations and the dates on which their certificates were endorsed " approved " by him and on which their respective authorization certificates were issued, particularly designating such as have commenced business during the year. 3. A statement of the corporations and private and individual bankers and personal loan brokers whose business has been closed either voluntarily or involuntarily, during the year, with the amount of their resources and of their deposits and other liabili- ties as last reported by them and the amount of unclaimed and unpaid deposits, dividends and interest held by him on account of each. 70 Banking Law. § 83. 4. A statement of the amount of interest earned upon all un- claimed deposits, dividends and interest held by him pursuant to the requirements of this chapter. 5. Any amendments to this chapter, which, in his judgment, may be desirable. 6. The names and compensation of the deputies, clerks, ex- aminers, special agents and other employees employed by him, and the whole amount of the expenses of the department during the preceding fiscal year, the amounts appropriated by the legis- lature for the expenses of the department during such year, and the amount, if any, for which the treasury of the state shall not have been reimbursed at the date of such report. The first part of such report shall be made on or before the last day of the year, and shall contain all matters herein specified other than the reports of corporations and individuals subject to the provisions of articles five to eleven of this chapter; and the usual number of copies for the use of the legislature shall be printed and in readiness for distribution by the printer employed to print legislative documents, and one thousand copies shall be printed for the use of the department, the expense of which shall be charged to the general expenses of the department. The other parts of such report may be made on or before the fifteenth day of March in each year. Source. — Former § 25 with additions. CROSS-EEFEEENCES.— As to printing the reports, see State Printing Law, §§ 10, 11. Banks. 71 ARTICLE in. Banks. Section 100. Incarporation ; organization certificate. 101. Notice of intention to organize. 102. Submitting organizatiooi certificate. 103. When corporate existence begins; conditions precedent to com- mencing business. 104. National bank may become state bank. 105. Deposit of securities with superintendent. 106. General powers. 107. Restrictions on taking and holding real estate. 108. Restrictions on loans, purchases of securities and, total lia- bilities. 109. Restrictions as to entries in books; amortization of securities. 110. Restriction on branch offices. 111. Restrictions on deposit of bank's funds. 112. Reserves against deposits. 113. Interpleader in certain actions; costs. 114. Rate of interest. 115. Interest on collateral demand loans of not less than five thou- sand dollars. 116. Calculation of earnings for dividend period. 117. Surplus fund. 118. Dividends. 119. Change of location. 120. Rights and liabilities of stockholders. 121. Assessment of stockholders when capital impaired. 122. Annual meeting of stockholders. 123. Qualifications of directors. 124. Oath of directors. 125. Tenure of office of directors. 126. Vacancies in board of directors. 127. Change of number of directors. 128. Annual meeting of directors. 129. Monthly meetings of directors. 130. Examinations by directors. 131. Report of directors' examinations. 132. Communications from banking department. 133. Reports to superintendent. 134. Annual report of unclaimed deposits, dividends and interest. 135.. Bank to pay expenses incurred in its behalf by superintendent. 136. Preservation of records. 137. Change from state to national bank. 138. Change from state bank to trust company. 72 Banking Law. § 100. Section 139. Restrictions on officers, directors and employees. 140. Prohibition against encroachments upon certain powers of banks. 141. Prohibition against use of sign or words indicating bank. 142. Bills payable otherwise than in money prohibited. 143. Rights of existing individual bankers preserved. 144. Conditions to be complied with by foreign banks applying for license. 145. When foreign bank may transact business in state. 146. Rights and privileges under license. 147. Reports of foreign banks. 148. Deposits of minors and trust deposits and deposits in the names of more than one person. § 100. Incorporation; organization certificate; amount of capital stock. When authorized by the superintendent of banks as provided by section twenty-three of this chapter, five or more persons may form a corporation to be known as a bank. Such persons shall subscribe and acknowledge an organization certificate in duplicate, which shall specifically state: 1. The name by which the bank is to 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 such capital stock shall be divided, which capital stock shall amount to not less than : (a) Twenty-five thousand dollars, if the place where its busi- ness is to be transacted is an incorporated or unincorporated village the population of which does not exceed two thousand ; (b) Fifty thousand dollars, if the place where its business is to be transacted is an incorporated or unincorporated village or a city the population of which exceeds two thousand but does not exceed thirty thousand; (c) One hundred thousand dollars, if the place where its busi- ness is to be transacted is a city the population of which exceeds thirty thousand. 4. The names and places of residences of the incorporators and the number of shares subscribed for by each. 5. The term of its existence which may be perpetual. 6. The number of directors of the bank, which shall'not be less than five nor more than thirty, and the names of the incorporators who shall be its directors until the first annual meeting of stock- § 100. Banks. 73 holders. The incorporators named as directors must possess the qualifications of directors as to citizenship and residence specified in section one hundred and twenty-three of this article; and the certificate shall recite that such qualifications are possessed hy such incorporators. Such certificate may provide for the manner in which the stock of the corporation may be transferred and for the number of directors necessary to constitute a quorum. Source. — Former § 60. CONSTITUTIONAL PROVISIONS AFFECTING BANKS.— Article 8, § 4. Special charters prohibited; § 5. Suspension of specie payment prohibited; § 6. Registration of circulating notes — security for redemption in specie; § 7. Liability of stockholders; § 8. Billholders preferred in case of insolvency. OTHER STATUTES AFFECTING BANKS.— Banks are subject to all pro- visions of the General Corporation Law and the Stock Corporation Law, except such as are made inapplicable either expressly or by necessary impli- cation. See Gen. Corp. Law, § 321. Executive Law, § 82. Publication of notices, etc., in Albany paper; § 101. Appointment of notaries for banks; § 105-a. Notaries who are officers, stock- holders, etc. Tax Law, § 13. Taxation of bank stock; § 14. Place of taxation of indi- vidual bank capital; § 23. Banks to make report; § 24. Bank shares, how assessed; § 25. Individual banker, how assessed; § 26. Notice of assessment; § 27. Reports of corporations; § 72. Collection of taxes assessed against stocks in banks; § 182. Franchise tax; § 183. Exemption from tax on capital stock; § 191. Tax on foreign bankers; § 192. Reports to Comptroller; § 197. Time for payment of tax; § 205. Exemption from other State taxes; § 227. Pro- hibition against transfer of decedents assets; § 241. Deposit of taxes by Comptroller. Penal Law, §§ 290-305, 660-668. CROSS-REFERENCES.— Definition of "bank," see § 2; of " oopulation," see § 3. Directors, see §§ 122-131. Similar provisions in case of trust company, see § 180; of savings bank, see § 230; of investment company, see § 290; of safe deposit company, see § 315; of personal loan company, see § 340; of savings and loan association, see § 375; of land bank, see § 421; of credit union, see § 450. As to qualifications of incorporators, see Gen. Corp. Law, § 4. As to corporate names, see Gen. Corp. Law, § 6. As to amended and supplemental certificates, see Gen. Corp. Law, § 7. As to extension of corporate existence, see Gen. Corp. Law, § 37. T4 Banking Law. § 101. Transfer of stock, see Stock Corp. Law, § 50 et seq. STATUTE MUST BE COMPLIED WITH.— To effect a valid organization all the substantial requirements of the act must be complied with. Valk v. Crandall, I Sandf. Ch. 179. THE NAMES OF THE PROPOSED INCORPORATORS must be the same as those stated in the notice of intention required by § 101. Atty.-Gen. Rep. (1909) 716. CERTIFICATE CANNOT PROVIDE FOR PREFERRED STOCK.— Opinion that certificate of incorporation of State bank cannot provide for the creation of preferred stock. Atty.-Gen. Rep. (1902) 251. EFFECT OF EXPIRATION OF CORPORATE EXISTENCE.— There is no provision of law permitting the revival of the corporate existence of a bank whose corporate existence has expired. In such case the bank must reincor- porate or seek legislative relief. Atty.-Gen. Rep. (1911) vol. 2, p. 3. PROOF OF CORPORATE EXISTENCE.— In an action by a banking cor- poration its corporate existence is sufficiently established by proof of due filing of the certificate in the county clerk's oilice and of its user of corporate powers under color of incorporation. Leonardsville Bank v. Willard, 25 N. Y. 574. TRANSFER WHERE STOCKHOLDER INDEBTED TO BANK.— This question is controlled by section 51 of the Stock Corporation Law. Cases dealing with bank stock in this connection are Gibbs v. Long Island Bank, 83 Hun 92, aff'd 151 N. Y. 657; Leggett v. Bank of Sing Sing, 24 N. Y. 283; Bank of Attica V. Manufacturers', etc.. Bank, 20 N. Y. 501; Reynolds v. Bank of Mt. Vernon, 6 App. Div. 62, aflP'd 158 N. Y. 740. CHANGE OF NAME.— Under Gen. Corp. Law, § 60, an application by a banking corporation for leave to change its name must be approved by the superintendent. Atty.-Gen. Rep. (1900) 225; Atty.-Gen. Rep. (1902) 186. § 101. Notice of intention to organize; filing, publication and serv- ice upon existing banks and trust companies. At the time of executing such organization certificate, the pro- posed incorporators shall sign a notice of intention to organize such bank which shall specify their names, the name of the pro- posed corporation, the amount of its capital stock and its location as set forth in the organization certificate. The original of such notice shall be filed in the office of the superintendent of banks within sixty days after the date of its execution and a copy thereof shall be published at least once a week for four successive weeks in a newspaper designated by the superintendent as provided in section twenty of this chapter, such publication to be commenced within thirty days after such designation. A copy of such notice § 102. Banks. 75 shall, at least fifteen days before the organization certificate is filed with the superintendent for examination, be served upon each state bank and trust company organized and doing business in the village, borough or city, if in a city not divided into boroughs, specified as the location of the proposed bank, by mail- ing such copy, postage prepaid, to said banks and trust companies. Source. — Former § 01. Filing original notice within sixty days after its execution, and serving copy of notice upon trust companies, are new. CROSS-REFERENCES.— Duties of superintendent upon receipt of notice of intention, see § 20. Similar provision as to trust companies, see § 181; as to savings banks, see § 231. NAMES OF PROPOSED INCORPORATORS.— A notice of intention was published containing five names as proposed incorporators. The organization certificate filed thereafter with the superintendent contained the same five names and five additional names. The Attorney-General was of the opinion that this was not a compliance with the statutory requirements; that the names in the certificate must be identical with those in the notice of intention. Atty.-Gen. Rep. (1909) 716. § 102. Submitting organization certificate to superintendent; proof of publication and service of notice of intention. After the lapse of at least twenty-eight days from the date of the first due publication of the notice of intention to organ- ize and within ten days after the date of the last publication thereof, the organization certificate, executed in duplicate, shall be submitted to the superintendent of banks at his office to- gether with affidavits or other evidence satisfactory to him showing due publication and service of the notice of intention to organize prescribed in section one hundred and one of this article. Source. — Former §§ 60, 62. The language is new. CROSS-REFERENCES.— Superintendent prohibited from filing defective certificate, see § 21. Filing certificate " for examination," see § 22. Investigation of proposed bank and refusal or approval by superintendent, see § 23. . Issuance of authorization certificate, see § 24. Similar provisions as to trust companies, see § 182; as to savings banks, see § 232; as to investment companies, see § 290; as to safe deposit com- panies, see § 315; as to personal loan companies, see § 340; as to savings and loan associations, see § 375; as to land bank, see § 421; as to credit imions, see § 450. 76 Banking Law. §§ 103, 104. § 103. When corporate existence begins; conditions precedent to commencing business. When the superintendent shall have endorsed his approval on the organization certificate as provided by section twenty-three of this chapter, the corporate existence of the bank shall begin, and it shall then have povcer to elect officers and transact such other business as relates to its organization. But the bank shall transact no other business until : 1. All of its capital stock shall have been fully paid in cash and an affidavit stating that it has been so paid, subscribed and sworn to by its two principal officers, shall have been filed in the clerk's office of the county in which its principal office is located, and a certified copy thereof in tbe office of the superintendent; 2. It shall have made the deposit with the superintendent re- quired by section one hundred five of this article; 3. The superintendent shall have duly issued to it the author- ization certificate specified in section twenty-four of this chapter. Source. — The provision as to when corporate existence shall begin is new. The requirement that the capital stock shall have been fully paid in cash is taken from former § 68. The requirement of an affidavit that it has been so paid comes from former § 13. The requirement as to the deposit with the superintendent is derived from former § 76. The requirement as to the au- thorization certificate comes from former § 32. CROSS-REFERENCES. — Similar provision as to trust companies, see § 183; as to savings banks, see § 233; as to investment companies, see § 291; as to safe deposit companies, see § 316; as to personal loan companies, see § 341; as to savings and loan associations, see § 377; as to land bank, see § 423; as to credit unions, see § 452. Conditions precedent to transacting business as private banker, see § 152; as personal loan broker, see § 361. Forfeiture of corporate rights by not commencing business, see § 485. PROOF OP CORPORATE EXISTENCE.— A deposit of securities with the banking department need not be proved to show corporate existence in an action by the bank. Leonardsville Bank v. Willard, 25 N. Y. 574. § 104. National bank may become state bank; procedure and effect tliereof. Any banking corporation organized under the laws of the United States and doing business in this state may become an in- corporated bank of this state with all the powers and subject to all § 104. Banks. 77 the obligations and duties of banks organized under the provisions of this article, provided such banking corporation has authority by virtue of any law of the United States, to dissolve its organiza- tion as a national banking corporation. A national banking cor- poration desiring to become such an incorporated bank of this state shall proceed in the following manner : 1. It shall take such action, in the manner prescribed or au- thorized by the laws of the United States, as shall make its dissolu- tion as a national banking corporation effective at a future date certain. 2. A majority of its directors shall thereafter and before the time when its dissolution becomes effective, subscribe and acknowl- edge in duplicaite upon the authority in writing of the owners of at least two- the power to derive revenue from the office building is new. Subdivision 7 is new. CROSS-REFERENCES.— Powers of trust companies, see § 195, subd. 11. Powers of corporations in general, see Gen. Corp. Law, §§ 10, 11; acqtiisi- tion of real property, id. §§ 13, 14. SUBDIVISION I. "TO EXERCISE BY ITS BOARD OF DIRECTORS."— The powers thus conferred relate exclusively to the conduct of the affairs of the bank as a " going concern." No authority appears to be given to the board to wind up the affairs of the bank, or to determine when it shall go into liquidation. Assets Realization Co. v. Howard, 70 Misc. 651, 673. " BY DISCOUNTING." — The purchase of a promissory note for a sum less than its face is a " discount " within the meaning of this section. Atlantic State Bank v. Savery, 82 N. Y. 291. Held that under this a bank had authority to receive from depositors and dealers uncurrent bank notes or bills of other banks at a discount equal to the current rate of exchange. People v. Metropolitan Bank, 7 How. Pr. 144. EFFECT OF LOAN ON UNAUTHORIZED SECURITY.— The fact that a bank has lent money on a kind of security which it is not authorized to receive will not entitle the borrower to recover the proceeds of such collateral after it has been sold by the bank upon non-payment of the loan. National Bank V. Stewart, 107 U. S. 676. INCIDENTAL POWERS.— The power to receive special deposits is inci- dental to the business of banking. The term " special deposits " includes money, securities and other valuables delivered to banks, to be specially kept and redelivered. Pattison v. Syracuse Nat. Bank, 80 N. Y. 82. § 106. Banks. 81 An agreement by a bank to procure a release of a mortgage held by a third person, although not primarily an agreement relating to banking, if made to secure the payment of a debt due to the bank, is not ultra vires. McCraith V. Nat. Mohawk Val. Bank, 104 N. Y. 414. POWER TO TAKE TITLE TO SECURITIES.— A banking corporation neces- sarily has power to take title to such securities as it is allowed to transfer to the superintendent. Comstock v. Willoughby, Lalor, 271. THE POWER TO BORROW MONEY is incidental to the banking business, as is the power to issue the obligations of the bank payable at a future day to secure the loan. Curtis v. Leavitt, 15 N. Y. 9. A bank can borrow money for such purposes only as relate to the ordinary business of a bank. Leavitt v. Yates, 4 Edw. Ch. 134. The cashier of a. bank has, as incident to his office, implied authority to borrow money for it and, in the absence of any statutory restraint, to pledge its property or funds as security for the loan. Coats v. Donnell, 94 N. Y. 168. POWERS EXCLUDED. — ^A banking corporation has no power to subscribe for the stock of a railroad corporation. " The language employed in the act defines their powers and duties, and excludes by necessary implication a capacity to carry on any other business than that of banking, and the adop- tion of any other methods for the prosecution of such business than those specifically pointed out by the statute." Nassau Bank v. Jones, 95 N. Y. 115. It is no part of the general business of a bank to act as an agent in select- ing attorneys and compromising claims for outside parties. Ryan v. Manu- facturers, etc.. Bank, 9 Daly 308. A bank has no power to make an accommodation endorsement of a note, which it does not own and in which it has no interest. Morford v. Farmers' Bank, 26 Barb. 568. SUBDIVISION 2. The power granted by this subdivision to deal in acceptances is much broader than the acceptance provisions of the federal reserve act, which reads as fol- lows (section 13) : "Any member bank may accept drafts or bills of exchange drawn upon it and growing out of transactions involving the importation or exportation of goods having not more than six months sight to run; but no hank shall accept such bills to an am,ount equal at any time in the aggregate to more than one-half its paid-up capital stock and surplus." SUBDIVISION 3. PURCHASE OF STOCKS OF OTHER STATES.— A bank has no power to deal in stocks of other States, except to take them as security for loans or in payment of loans or debts: Talmage v. Pell, 7 N. Y. 328 ; Bank Commissioners V. St. Lawrence Bank, 7 N. Y. 513; Austin v. Daniels, 4 Denio 299. Notes payable with interest at a future date, given by a bank in payment for the stocks of another State, held void. Bank Commissioners v. St. Law- rence Bank, 7 N. Y. 513. 82 Banking Law. § 107. COLLATERAL. — A bank lent money upon the security of a certificate of stock. The loan not being paid, the bank undertook to sell the collateral but it turned out that the certificate had been fraudulently issued, and the purchaser refused to take it. The bank having sued the corporation to com- pel a transfer to it of the stock on the latter's books, it was held that de- fendant could not set up that the stock was not a security which the bank was empowered to take and hold. " That question could only be raised by the State authorities." Fifth Ave. Bank v. Forty-Second St., etc., R. Co., 17 N. Y. Supp. 826, aff'd 137 N. Y. 231. SUBDIVISION 4. See §§112 and 197, regarding reserve requirements of banks and trust com- panies joining federal reserve system. The purpose of the revisers in incorpo- rating these provisions was to encourage support of the federal experiment represented by the federal reserve bank plan. SUBDIVISION 6. POWER TO ASSIGN OR CONVEY PROPERTY.— A bank may assign or con- vey any property held by it and may enter into the common covenants of guaranty or warranty, on making such assignment or conveyance. Talman v. Rochester City Bank, 18 Barb. 123. SUBDIVISION 7. Where, upon payment of a loan, the bank, instead of returning the col- lateral, gives the owner a receipt stating that it retains such collateral for use as security for loans that may be thereafter made, or for safekeeping, subject to the owner's order, the bailment is one for mutual benefit and the bank is liable for failure to exercise ordinary and reasonable care and diligence in the safe-keeping of such collateral. Onderdirk v. Central Nat. Bank, 119 N. Y. 263. Note. — The special remedies given by § 331 apply exclusively to safe deposit companies and consequently these matters should be covered by contract. § 107. Restrictions on taking and holding real estate. All real estate purchased by any bank or taken by it in settle- ment of debts due it, shall be conveyed to it directly by name and the conveyance immediately recorded, in the office of the proper recording officer of the county in vyhich such real estate is located. Every parcel of real estate purchased or acquired by any bank shall be sold by it within five years of the date on which it shall have been acquired unless : 1. There shall be a building thereon occupied by it as an office; or § 108. Banks. 83 2. The superintendent of banks, on application of its board of directors, shall have extended the time within which such sale shall be made. Source. — ^The provision requiring conveyances to the corporation by name is taken from former § 66. The rest of the section- is new. The require- ment that real estate shall be sold within five years is similar to the provision contained in subdivision 2 of former section 148 (now § 240) re- lating to savings banks. CROSS-REFERENCES. — Similar provisions as to private bankers, see § 163; as to trust companies, see § 789; as to savings banks, see § 240; as to savings and loan associations, see § 387. RIGHT TO HAVE DEED RECORDED.— If a bank offers a deed for regis- tration, the register is not entitled to refuse to record it unless the bank will give him an affidavit stating whether such deed is absolute or intended as a mortgage. Matter of Mechanics' Bank, 156 App. Div. 346. § 108. Restrictions on loans, purchases of securities and total lia- bilities to bank of any one person. A bank subject to the provisions of this article 1. Shall not directly or indirectly lend to any individual, part- nership, unincorporated association, corporation, or body politic, an amount which, including therein any extension of credit to such individual, partnership, unincorporated association, corpo- ration or body politic, by means of letters of credit or by accept- ance of drafts for, or the discount or purchase of the notes, bills of exchange or other obligations of, such individual, partnership, unincorporated association, corporation or body politic, will ex- ceed one-tenth part of the capital stock and surplus of such bank, with the following exceptions : (a) The restrictions in this subdivision shall not apply to loans to, or investments in the interest bearing obligations of, the United States, this state or any city, county, town or village of this state. (b) If such bank is located in a borough having a population of two millions or over, the total liability to such bank, of any state other than the state of K^ew York, or of any foreign nation, or of a municipal or railroad corporation, or of a corporation sub- ject to the jurisdiction of a public service commission of this state, may equal but not exceed twenty-five per centum of the capital and surplus of such bank ; and the total liabilities to such bank of any 84 Banking Law. § 108. individual, partnership, unincorporated association, or of any other corporation or body politic, may equal but not exceed twenty-live per centum of the capital and surplus of such bank, provided such liabilities are upon drafts or bills of exchange drawn in good faith against actually existing values, or upon commercial or business paper actually owned by the person negotiating the same to such bank, and are endorsed by such person without limitation, or pro- vided such liabilities in excess of ten per centum of such capital and surplus, and not in excess of an additional fifteen per centum of such capital and surplus, are secured by collateral having an ascertained market value of at least fifteen per centum more than the amount of the liabilities so secured. (c) If such bank is located elsewhere in the state, the total liability to such bank of any state other than the state of New York, or of any foreign nation, or of a municipal or railroad cor- poration, or of a corporation suibject to the jurisdiction of a pub- lic service commission of this state, may equal but not exceed forty per centum of the capital and surplus of such bank ; and the total liabilities to such bank of any individual, partnership, un- incorporated association, or of any other corporation or body poli- tic, may equal hut not exceed forty per centum of the capital and surplus of such bank, provided such liabilities are upon drafts or bills of exchange drawn in good faith against actually existing values, or upon commercial or business paper actually owned by the person negotiating the same to such bank, and are endorsed by such person without limitation, or provided such liabilities in excess of ten per centum of such capital and surplus, and not in excess of an additional thirty per centum of such capital and surplus, are secured by collateral having an ascertained market value of at least fifteen per centum more than the amount of the liabilities so secured. (d) In computing the total liabilities of any individual to a bank there shall be included all liabilities to the bank of any part- nership or unincorporated association of which he is a member, and any loans made for his benefit or for the benefit of such part- nership or association ; of any partnership or incorporated associa- tion to a bank there shall be included all liabilities of its individ- ual memlbers and all loans made for the benefit of such partner- ship or unincorporated association or any member thereof ; and of § 108. Banks. 85 any corporation to a bank there shall be included all loans made for the benefit of the corporation. 2. Shall not take or hold at any one time, more than ten per centum of the total capital stock of another moneyed corporation as collateral security for loans. 3. Shall not make any loan upon the securities of one or more corporations the payment of which loan is undertaken in whole or in part severally, but not jointly, by two or more individuals, firms or corporations: (a) If the prospective borrowers or underwriters be obligated absolutely or contingently to purchase the securities, or any of them, collateral to the proposed loan, unless they shall have paid on account of the purchase of such securities an amount in cash or its equivalent equal to at least twenty-five per centum of the several amounts for which they remain oibligated in .complet- ing the purchase; (b) If the bank considering the making of the loan be liable directly, indirectly or contingently, for the repayment of the pro posed loan or any part thereof; (c) If th« term of the proposed loan, including any renewal thereof, by agreement, express or implied, exceeds the period of one year; (d) If the amount, under any circumstances, exceeds twenty- five per centum of the capital and surplus of the bank. 4. Shall not make a loan, directly or indirectly, upon the secur- ity of real estate if (a) Such real estate is subject to a prior mortgage, lien or in- cumbrance, and the amount unpaid upon such prior mortgage, lien or incumbrance, or the aggregate amount unpaid upon all prior mortgages, liens and incumbrances exceeds ten per centum of the capital and surplus of such bank, or if the amount so secured, in- cluding all prior mortgages, liens and incumbrances exceeds two- thirds of the appraised value of such real estate as found by a committee of the directors of such bank; (b) The bank has its principal place of business in a borough of any city in the state which borough has a population of two millions or more, and the total direct and indirect loans by the bank upon real estate security exceed, or by the making of such loan, will exceed fifteen per centum of the total assets of the bank; 86 Banking Law. § 108. (c) The bank has its principal place of business in a village which has a population of not more than fifteen hundred, and in which there is no savings bank, and the total loans by the bank upon real estate security exceed, or by the making of such loan will exceed, forty per centum of its total assets ; (d) The bank has its principal place of business elsewhere in the state, and its total direct and indirect loans upon real estate security exceed, or by the making of such loans will exceed, twenty- five per centum of its total assets. The limitations and restrictions contained in this subdivision shall not prevent the acceptance of any real estate securities to secure the payment of a debt previously contracted in good faith, but every mortgage and every assignment of a mortgage taken or held by such bank shall immediately be recorded in the office of the clerk or the proper recording officer of the county in which the real estate described in the mortgage is located. 5. Shall not, nor shall any of its directors, officers, agents or servants, directly or indirectly, purchase or be interested in the purchase of any promissory note or other evidence of debt issued by it, for less than its face value. Every bank or person violating the provisions of this subdivision shall forfeit to the people of the state three times the face value of the note or other evidence of debt so purchased. 6. Shall not make any loan or discount on the security of the shares of its own capital stock, or be the purchaser or holder of any such shares, unless such security or purchase shall be neces- sary to prevent loss upon a debt previously contracted in good faith, and stock so purchased or acquired shall be sold at public or private sale, or otherwise disposed of, within six months from the time of its purchase or acquisition. Any bank violating any of the provisions of this subdivision shall forfeit to the people of the state twice the amount of the loan or purchase. Y. Shall not knowingly lend, directly or indirectly, any money or property for the purpose of enabling any person to pay for or hold shares of its stock, unless the loan is made upon security having an ascertained or market value of at least fifteen per centum more than the amount of the loan. Any bank violating the provisions of this subdivision shall forfeit to the people of the state twice the amount of the loan. § 108. Banks. 87 8. Shall not, nor shall any officer thereof, lend directly or in- directly any sum of money to any officer, director, clerk or em- ployee of the bank without the written approval of a majority of the board of directors thereof, filed in the office of the bank or embodied in a resolution adopted by a majority vote of such board exclusive of the director to whom the loan is made, or in any e^rent to any officer thereof, if such bank is located in a city of the first class ; and if any such officer, director, clerk or employee shall own or control a majority of the stock of any other corpora- tion a loan to that corporation shall be considered for the purpose of this subdivision as a loan to him. Every bank or officer thereof violating this provision shall, for each offense, forfeit to the people of the state twice the amount lent. Source. — Former § 27 rewritten. CROSS REFERENCES. — Restrictions on officers, directors and employees, see § 139. Similar provisions as to trust companies, see § 190. SUBDIVISION L. mCLUDES MUNICIPAL CORPORATIONS.— The word "corporation" in- cludes municipal corporations, and a. bank cannot loan a greater amount to a municipal corporation than to any other corporation. Atty.-Gen. Rep. (1907) 471. LIMITATION NOT TO BE EVADED.— The limitation on the amount that may be loaned to a single corporation cannot be avaded by taking the notes of individual officers or directors of corporations and crediting the proceeds to the corporations. Atty.-Gen. Rep. (1908) 399. EFFECT OF MAKING EXCESSIVE LOAN.— Where the president of a bank, through an abuse of his official position, became indebted to the bank for an amount in excess of that which the bank was authorized to loan to a single person, it was held that a, mortgage given by him to the bank to secure such indebtedness was not on that account invalid. Dunn v. O'Connor, 25 App. Div. 73. In an action by the bank to recover money loaned the debtor cannot set up in defense that the amount was in excess of that which the bank had authority to lend. Gold-Mining Co. v. National Bank, 96 U. S. 640. MORTGAGE PROM PRESIDENT OF BANK.— A mortgage taken by a bank from its president to secure » debt which he has incurred to it by an abuse of his official position is not invalid under this section, although the amount of the debt thereby secured is in excess of the amount which the bank may properly loan to one person under the latter section. Dunn v. O'Connor, 25 App. Div. 73. 88 Ba:^king Law. § 108. WHAT SECURITY REQUIRED.— Loans not exceeding one-tenth of capital and surplus are not required to be upon security; and in the case of larger loans only the excess above said one-tenth need be secured by collateral worth at least 15 per cent, more than the amount secured thereby. Atty.-Gen. Rep. (1900) 167. PRESIDENT'S LIABILITY FOR TAKING INSUFFICIENT COLLATERAL. — Where collateral not worth 15 per cent, more than the amount of the loan is negligently accepted by the president, the bank may recover of him its damages resulting from such negligence; and the board of directors cannot deprive the bank of its right of action by ratifying the president's act. Sev- enteenth Ward Bank v. Smith, 51 App. Div. 259. "BILLS OF EXCHANGE DRAWN IN GOOD FAITH," ETC.— Under U. S. Rev. Stat., § 5200, which uses the same language, it was held that drafts drawn- by P. & Co., consignors of lumber upon W. & Co., consignees, both of which firms were composed of the same members, though their business was separate and distinct, were " bills of exchange drawn in good faith against actually existing values." Second Nat. Bank v. Burt, 93 •N. Y. 233. "COMMERCIAL OR BUSINESS PAPER ACTUALLY OWNED."— Opinion that this means paper actually issued irf due course of business and duly en- dorsed by the person who negotiates it. Mere accommodation paper and notes placed in the hands of a note broker for sale upon the advance by the note broker of the difference between the face value of the notes and the agreed commission or discount are not within the meaning of this language. Atty.- Gen. Rep. (1911), vol. 2, p. 511. Commercial or business paper actually owned by the person negotiating the same may lawfully be discounted to the extent of 25 per cent, of capital and surplus, even though it bear an accommodation endorsement, but accommoda- tion paper may be discounted only to the extent of one-tenth of capital and surplus. Atty.-Gen. Rep. (1904) 220. FOR ANT INDICTMENT OF A DIRECTOR for violation of this subdivision, see People v. Knapp, 106 N. Y. 374. SUBDIVISION 4. A MORTGAGE GIVEN TO THE CASHIER to secure an indebtedness to the bank was held to be a valid security in favor of the bank. Lawrence- ville Cement Co. v. Parker, 39 N. Y. St. Rep. 864, aff'd" 133 N. Y. 622. SUBDIVISION 6. LIEN ON STOCK FOR STOCKHOLDER'S DEBT TO BANK.— This provi- sion relates to security taken and held upon which the bank obtains a lien which it may enforce in the event of a default by the debtor. It has no appli- cation in a case where a bank, pursuant to Stock Corp. Law, § 51, refuses to allow the transfer of the debtor's stock until the indebtedness is discharged. Strahmann v. Yorkville Bank, 148 App. Div. 8. Note. — An exception exists in § 496 which permits a corporation to purchase the stock of dissenting stockholders in case of merger. § 109. Banks. 89 SUBDIVISION 8. EFFECT OF VIOLATION.— Violation of this provision does not render void a note given by the officer to the bank. The bank may recover thereon against the maker and endorser. People's Trust Co. v. Pabst, 113 App. Div. 375. LOAX TO PRESIDENT.— In Reynolds v. Bank of Jit. Vernon, 6 App. Div. 62, affirmed 158 N. Y. 740, it was held that the directors could authorize the president to make loans to himself. But under the present language no loans at all may be made to officers of a bank located in a city of the first class. § 109. Restrictions as to entries in books; amortization of securities. 1. No bank shall by any system of accounting or any device of bookkeeping, directly or indirectly enter any of its assets upon its books in the name of any other individual, partnership, unin- corporated association or corporation, or under any title or desig- nation that is not truly descriptive thereof. 2. The stocks, bonds and other interest-bearing corporate securities purchased by a bank shall be entered on its books at the actual cost thereof, and for the purpose of calculating the undivided profits applicable to the payment of dividends, such stocks and securities shall not be estimated at a valua- tion exceeding their present cost as determined by amortiza- tion, that is, by deducting from the cost of any such stock or security purchased for a sum in excess of the amount pay- able thereon at maturity, and charging to profit and loss, a sufficient sum to bring it to par at maturity, or adding to the cost of any such stock or security purchased at less than the amount payable thereon at maturity, and crediting to profit and loss, a sufficient sum to bring it to par at maturity; but nothing herein contained shall prevent a bank from carrying such stocks, bonds and other interest-bearing corporate securities on its books at their market value. 3. 'No bank shall, except with the written approval of the superintendent, enter or at any time carry on its books the real estate and the building or buildings thereon, used by it as its place or places of business, at a valuation exceeding their actual cost to such bank. 4. Every bank shall conform its methods of keeping its books and records to such orders in respect thereto as shall have been made and promulgated by the superintendent pursuant to section 90 Ba:^-king Law. § 110. fifty-six of this chapter. Any bank that refuses or neglects to obey such order shall be subject to a penalty of one hundred dollars for each day it so refuses or neglects. 5. Every bank holding any funds or money paid into court shall keep a book or books in which it shall make an exact ac- count thereof. Such book or books shall state the name of the court, the title of the case, the date of receipt, from whom re- ceived, the amount of money, if any, and a description of the securities or other property received, if any, and each addition of interest; also the date and description of each order for pay- ment and the dates and amounts of payments thereunder and to whom paid; also an account of each change of investment if any. Source. — Subdivisions 1, 2 and 3 are new. Subdivision i is derived from former § 8, and subdivision 5 from former § 45. Note. — The purpose of the amortization requirement in subdivision 2 is to prevent the payment of dividends out of paper profits. CROSS-REFERENCES. — For similar restrictions on private bankers, see § 165; on trust companies, see § 194; on savings banks, see § 246; on invest- ment companies, see § 295 ; on safe deposit companies, see § 320 ; on personal loan companies and personal loan brokers, see § 367 ; on savings and loan asso- ciations, see § 391. § 110. Bestriction on branch offices; penalty for violation. No bank, or any officer or director thereof, shall transact its usual business of banking at any place other than its principal place of business except that a bank in a city which has a popu- lation of more than one million, may open and occupy in sucii city one or more branch offices for the receipt and payment of deposits and for making loans and discounts to customers of such respective branch offices only, provided that before any such branch or branches shall be opened or occupied: 1. The superintendent shall have given his written approval, as provided in section fifty-one of this chapter; 2. The actual paid in capital of such bank shall exceed by the sum of one hundred thousand dollars the amount required by section one hundred of this article for each branch opened since the twenty-seventh day of April, nineteen hundred and eight; and by the sum of fifty thousand dollars for each branch opened previous to said date and hereafter maintained. § 111,112. Banks. 91 Any bank having a combined capital and surplus of one million dollars or over, may with the written approval of the superin- tendent open and occupy a branch office or branch offices in one or more places located without the state of New York, either in the United States of America or in foreign countries. Every bank and every such officer violating the provisions of this section shall forfeit to the people of the state the sum of one thousand dollars for every week during which any branch office shall hereafter be open or occupied in violation of this section. Source. — Former § 109. The provision for foreign branches is new. CROSS-REFERENCES. — Powers and duties of superintendent in regard to branch offices, see § 51. Change of location, see § 119. Application of this section to individual bankers, see § 143. Similar provision as to trust companies, see § 195; as to savings banks, see § 245; as to safe deposit companies, see § 318; as to personal loan companies, see § 349. § 111. Restrictions on deposit of bank's funds. 'No bank shall deposit any of its funds with any other moneyed corporation unless the latter has been designated as a depositary for the bank's funds by a vote of a majority of the directors of the bank exclusive of any director who is an officer, director or trustee of the depositary so designated. Source. — Former § 27, subd. 5. CROSS-REFERENCES. — Similar provision as to trust companies, see § 196; as to savings banks, see § 244; as to investment companies, see § 294. § 112. Reserves against deposits. Every banlc shall maintain total reserves against its aggregate demand deposits, as follows: 1. Eighteen per centtmi of such deposits if such bank has an office in a borough having a population of two millions or over: and at least twelve per centum of such deposits shall be main- tained as reserves on hand, except as otherwise provided in this section. 92 Banking Law. § 112. 2. Fifteen per centum of such deposits, if such bank is located in a borough having a population of one million or over and less than two millions, and has not an office in a borough specified in subdivision one of this section; and at least ten per centum of such deposits shall be maintained as reserves on hand. 3. Twelve per centum of such deposits if such bank is located elsewhere in the state; and at least four per centum of such deposits shall be maintained as reserves on hand. At least one half of the reserves on hand shall consist of gold, gold bullion, gold coin. United States gold certificates or United States notes; and the remainder shall consist of any form of currency, other than federal reserve notes, authorized by the laws of the United States. If any bank shall have become a member of a federal reserve bank, it may maintain as reserves on deposit with such federal reserve bank such portion of its total reserves as shall be required of members of such federal reserve bank; and if such bank has an office in a borough having a population of two millions or over, the remainder of its total reserves shall be carried as reserves on hand. If any bank shall fail to maintain its total reserves in the man- ner authorized by this section, it shall be liable to, and shall pay the assessment or assessments provided for in section thirty of this chapter. Source. — Former § 67. Both the language and the substance of this sec- tion are practically new. The term " lawful money reserve " used in the former law has been discarded as misleading, inasmuch as it included deposit credits and other items which could not be classed as " lawful money." In place thereof the revisers substituted " total reserves " which includes " re- serves on hand " and " reserves on deposit." The changes from the reserve requirements of the former law were made to meet the provisions of the federal reserve act. The cities described by population in subdivisions 1, 2, and 3 of the present section correspond so far as such general language can make them with the terms central reserve cities, reserve cities, and those outside of reserve cities, used in the federal reserve act. The reserves on hand in the larger cities are higher under the state law than the requirements of the federal reserve act. See Federal Reserve Act, § 19. See also, am,te, note to § 106, subd. 4. § 113. Banks. 93 The following table shows the changes in the percentages of aggregate demand deposits which must be retained as total reserves and reserves on hand: Old Law. New Law. Total On Total On reserves. hand. reserves. hand. Manhattan 25 15 18 12 Brooklyn 20 10 15 10 Other Boroughs 15 ly^ 12 4 Elsewhere 15 6 12 4 Brooklyn banks that have branches in Manhattan are subject to the same requirements as Manhattan banks. See also note to § lf)7. CROSS-REFERENCES.— Definitions of "aggregate demand deposits," ''re- serves on hand,'' " reserves on deposit," " total reserves," " reserve deposi- tary " and " population," see § 3. Assessments for encroachments on reserves, see § 30. Designation of reserve depositaries, see § 38. Application of this section to individual bankers, see § 143. Similar provision as to private bankers, see § 166; as to trust companies, see § 197. § 113. Interpleader in certain actions ; costs. 1. In all actions against any bank to recover for moneys on de- posit therewith, if there be any person or persons, not parties to the action, ■who claim the same fund, the court in ■which the action is pending, may, on the petition of such bank, and upon eight days' notice to the plaintiff and such claimants, and without proof as to the merits of the claim, make an order amending the pro- ceedings in the action by making such claimants- parties defendant thereto; and the court shall thereupon proceed to determine the rights and interests of the several parties to the action in and to such funds. The remedy provided in this section shall be in addi- tion to and not exclusive of that provided in section eight hundred and twenty of the code of civil procedure. 2. The funds on deposit which are the subject of such an action may remain with such bank to the credit of the action until final judgment therein, and be entitled to the same interest as other deposits of the same class, and shall be paid by such bank in ac- cordance with the final judgment of the court; or the deposit in controversy may be paid into court to await the final determina- tion of the action, and when the deposit is so paid into court such 94 Banking Law. § 114. bank shall be struck out as a party to tbe action, and its liability for such deposit shall cease. 3. The costs in all actions against a bank to recover deposits shall be in the discretion of the court, and may be charged upon the fund affected by the action. Source. — Former § 145, relating to savings banks. The new law extends this provision to banks and trust companies. CROSS-REFERENCES.— Similar provision as to trust companies, see § 199; as to savings banks, see § 250. For decisions construing former § 145, see the notes to § 250. § 114. Rate of interest; effect of usury. Every bank and every private and individual banker may take, receive, reserve and charge on every loan and discount made, or upon any note, bill of exchange or other evidence of debt, interest at the rate of six per centum per annum ; and such interest may be taken in advance, reckoning the days for -which the note, bill or evidence of debt has to run. The knowingly taking, receiving, re- serving or charging a greater rate of interest shall be held and ad- judged a forfeiture of the entire interest which the note, bill of exchange or other evidence of debt carries with it, or which has been agreed to be paid thereon. If a greater rate of interest has been paid, the person paying the same or his legal representatives may recover twice the entire amount of the interest thus paid from the bank or banker taking or receiving the same, if such action is brought within two years from the time the excess of interest is taken. The purchase, discount or sale of a bona fide bill of ex- change, note or other evidence of debt payable at another place than the place of such purchase, discount or sale at not more than the current rate of exchange for sight draft, or a reasonable charge for the collection of the same, in addition to the interest, shall not be considered as taking or receiving a greater rate of interest than six per centum per annum. The true intent and meaning of this section is to place and continue such banks and bankers on an equality in the particulars herein referred to with the national banks organized under the act of congress entitled " An act to provide a national currency, secured by pledges of United States § 114, Banks. 95 bonds, and to provide for the circulation and redemption thereof," approved June the third, eighteen hundred and sixty-four. Source. — Former § 74. The only change is the insertion of the word " en- tire " before the word " amount." The former section was modeled upon U. S. Rev. Stat. |§ 5197, 5198. CROSS-REFERENCES.— Similar provision as to trust companies, see § 200. Penalty for taking security for usurious loans, see Penal Law, § 2400. PRIVATE BANI^ERS INCLUDED.— The use of the words "private and individual banker " brings within the operation of this section persons and firms engaged in the banking business without authority under the Banking Law. Perkins v. Smith, 116 N. Y. 441, aff'g 41 Hun 47; Carley v. Tod, 83 Hun 53: Spaulding v. Kelly, 43 Hun 301. That one. is a private banker and within the protection of this section ia sufficiently established, prima facie, by testimony of his clerk that he is a private banker, that he is so described on his office door, that he issued a pass book so describing him, and that he was also so described on the checks drawn upon him. Matter of Thornburgh, 72 Misc. 619. In an action by a private banker, his own testimony that his business was "blinking, private banker," was held sufficient to show that he was entitled to the protection of this section. Hessberg v. Matter, 64 Misc. 97. WHO ARE BANKERS. — Note brokers, who make loans to their customers on the security of the notes held for sale, are bankers within the meaning of this section. In re Wilde's Sons, 133 Fed. 562. This section does not protect the members of an unincorporated association whose sole business is that of loaning money upon assignments of wages, and upon chattel mortgages. Such association is not a banker. People v. Young, 207 N. Y. 522. HOW FAR GENERAL USURY LAW SUPERSEDED —As to banks and pri- vate and individual bankers, this section, within its limits, supersedes the general statutes dealing with usury (Gen. Bus. Law, §§ 370-382). There ia no forfeiture of principal. People v. Young, 153 App. Div. 567, aff'd 207 N. Y. 522; Schlesinger v. Kelly, 114 App. Div. 546; Hessberg v Matter, 64 Mi?c. 97; Matter of Thornburgh, 72 Misc. 619; Spaulding v. Kelly, 43 Hun 301; Bank of Monroe v. Findlay, 6 Hun 584. Farmers Bank v. Hall, 15 Abb. Pr., N. S., 276 ; Farmers', etc., Bank v. Deering, 91 U. S. 29; In re Wilde's Sons, 133 Fed. 562. " The effect of this legislation, as is well known, was and is, to place State banks and private and individual bankers within the State on the same foot- ing as National banks in respect to usurious loans or discounts; so that only double the amount of the interest is recoverable in such cases, but the entire loan is not rendered void by reason of the usury." People v. Young, 207 N. Y. 522, 528. NOTE VOID BETWEEN ORIGINAL PARTIES.— A promissory note, void for usury as between the original parties, is valid and enforcible when dis- 96 Banking Law. § 114. counted by a bank for value, before maturity, in due course of business, and without notice of Its usurious inception. Sclilesinger v. Gilhooly, 189 N. Y. 1, aff'g 116 App. Div. 914; Schlesinger v. Kelly, 114 App. Div. 546. Where a note, void in the hands of the holder, because of usury, is pur- chased by the bank with knowledge of the usury, it is also void in the hands of the bank, notwithstanding this section. Schlesinger v. Lehmaier, 191 N. Y. 69, rev'g 117 App. Div. 428. WHERE THE USURIOUS INTEREST HAS NOT BEEN PAID, the defend- ant may obtain the benefit of the forfeiture by setting it up as a partial defense in an action on the note. Carnegie Trust Co. v. Chapman, 153 App. Div. 783. WHERE THE DSUHIOUS INTEREST HAS BEEN PAID, the amount cannot be offset or counterclaimed in an action on the note. The only remedy is by way of an independent action for the penalty. Barnet v. National Bank, 98 U. S. 555; Caponigri v. Altieri, 165 N. Y. 255, aff'g 29 App. Div. 304; Carnegie Trust Co. v. Chapman, 153 App. Div. 783; Metropolitan Trust Co. V. Truax, 67 Mise, 588; Hessberg v. Matter, 64 Misc. 97. AMOUNT OF PENALTY.— Under the former law it was somewhat doubt- ful whether the penalty recoverable was twice the amount of the entire in- terest or merely twice the amount of the excess. In Marine Bank v. Fiske, 9 Hun 363, there is a dictum to the effect that only twice the amount of the eiDcess is recoverable. This judgment was affirmed by the Court of Appeals (71 N. Y. 353). In Hintermeister v. First Nat. Bank, 64 N. Y. 212, the Court construed the National banking law as imposing a penalty of twice the amount of the excess, but the United States Supreme Court reversed the' judgment (First Nat. Bank v. Watt, 184 U. S. 151), holding that twice the amount of the entire interest could be recovered. In the present law all doubt on this point has been removed by the insertion of the word " entire " before the word " amount." CUMULATIVE PENALTIES are recoverable in a single action under this statute. Mackey v. Royal Bank, 75 Misc. 630. Each violation of the section gives a separate cause of action. Several such causes of action may be joined in the Municipal Court. Mackey v. Royal Bank, 78 Misc. 145. The party entitled to maintain the action for the penalty can recover twice the amount which he has paid for usury within two years prior to the com- mencement of the action, whether the amount has been paid in one or several payments. Hintermeister v. First Nat. Bank, 64 N. Y. 212. WHAT IS A DISCOUNT.— The purchase of a note at less than its face is a discount. Atlantic State Bank v. Savery, 82 N. Y. 291. DISCOUNT AS PAYMENT.— The deduction of a greater amount than the legal rate and the credit of the balance to the borrower constitutes n payment of usury. Nash v. White's Bank, 68 N. Y. 396. DISCOUNT OF BUSINESS PAPER — The provisions of the National Bank- ing Act limiting the amount of interest to be taken by National banks on § 115. Banks. 97 loans and discounts apply as well to discounts of business paper as of accom- modation paper. Johnson v. Nat. Bank, 74 N. Y. 329. WHAT NOT PAYMENT OF USURY.— The defense of usury in an action by a bank is not established by showing that in addition to the legal rate of interest paid to the bank, the borrower paid a certain sum to an officer of the bank for obtaining the loan, it not appearing that he was acting for the bank in obtaining the loan or that the bank knew of the borrower's agreement to pay him for securing it. Terminal Bank v. Dubroff, 66 Misc. 100. § 115. Interest on collateral demand loans of not less than five thousand dollars. Upon advances of money repayable on demand to an amount not less than five thousand dollarsi made upon warehouse receipts, bills of lading, certificates of stock, certificates of deposit, bills of exchange, bonds or other negotiable instruments, pledged as col- lateral security for such repayment, any bank may receive or con- tract to receive and collect as compensation for making such ad- vances any sum which may be agreed upon by the parties to such transaction. Source — Former § 75. The only change is the omission of the words " in writing " after the words " agreed upon." CEOSS-KEFERENCES. — Application of section to individual bankers, see § 143. Similar provision as to trust companies, see § 201. Restrictions as to dividends of savings banks, see § 256. SECTION SUPERSEDES GENERAL USURY LAWS.— Hawley v. Kountze, 6 App. Div. 217. EFFECT OF ORAL AGREEMENT.— The only importance of an agreement in writing under the former law was to enable the lender to collect more than the legal rate or interest. The loan was not usurious, although there was no written agreement. Hawley v. Kountze, 6 App. Div. 217; In re Wilde's Sons, 133 Fed. 562, aflf'd 144 Fed. 972. USURY. — The retention of a fixed amount under the name of exchange, may constitute usury. Perkins v. Smith, 41 Hun 47; aff'd 116 N. Y. 449. Statutes, state or national, upon the subject of banking, and usury, collated. Perkins v. Smith, 110 N. Y. 441. In order to permit recovery for charging more than the legal rate of interest it is not necessary that the payment of interest be made in money. Nash v. White's Bank of Buffalo, 68 N. Y 396. The effect of the Banking Act, ch. 567 of 1880, was to repeal the penalties imposed by the amendment of ch. 163 of 1870 upon banks taking illegal in- terest. Nash v. White's Bank of Buffalo, 140 N. Y. 243. 7 98 Banking Law. § 116. § 116. Calculation of earnings for dividend period. To determine the amount of gross earnings of a bank for any dividend period the following items may be included : 1. All earnings actually received during such period, less inter- est accrued and unpaid included in the last previous calculation of earnings; 2. Interest accrued and unpaid upon debts owing to it secured by collateral as authorized by this article upon which no default of more than one year exists and upon corporate stocks, bonds, or other interest-bearing obligations owned by it upon which no de- fault exists; 3. The sums added to the cost of securities purchased for less than par as a result of amortization, provided the market value of such securities is at least equal to their present cost aa de- termined by amortization; 4. Any profits actually received during such period from the sale of securities, real estate or other property owned by it ; 5. Sums recovered on items previously charged off, and any amounts allowed by the superintendent on account of assets pre- viously disallowed and charged off; 6. Provided the superintendent of banks shall have approved, and only to the extent of such approval, any increase in the book value of an office building owned by it, which building or a portion thereof is used by it as a place of business. To determine the amount of net earnings for such dividend period the following items shall be deducted from gross earnings: 1. All expenses paid or incurred, both ordinary and extraordi- nary, in the transaction of its business, the collection of its debts, and the management of its affairs, less expenses inciirred and in- terest accrued upon its debts deducted at the last previous calcu- lation of net earnings for dividend purposes ; 2. Interest paid or accrued and unpaid upon debts owing by it ; 3. The amounts deducted through amortization from the cost of corporate stocks, bonds or other interest-bearing obligations purchased above par in order to bring them to par at maturity ; 4. All losses sustained by it. In the computation of such losses all debts owing it shall be included upon which no interest shall have been paid for more than two years or on which a judgment has been recovered which shall have remained unsatisiled for two §'§ 117, 118. Banks. 99 years ; and such other assets as shall have been disallowed by the superintendent of banks, or by its board of directors. The balance thus obtained shall constitute the net earnings of such bank for such period. Source. — Former § 28. The language is for the most part new. CROSS-REFERENCES.— Definitions of "net earnings" and "dividend period,"' see § 3. Similar provision as to trust companies, see § 202. RENEWAL NOTES.— Where a note held by a bank is taken up by giving a note of another person bearing a different endorsement, such transaction creates a new contract, and the indebtedness is not one that the bank must treat as a loss on the ground that it has remained due without prosecution and without payment of interest for more than one year. Dykman v. Keeney, 10 App. Div. 610. An unmatured renewal note is not to be counted as a loss if taken in the ordinary course of business, although it includes the accrued interest on the previous note and the debt has been continued beyond a year. Dykman v. Keeney, 16 App. Div. 131, aflf'd 160 N. Y. 677. Where it appears that notes held by the bank are renewals which include the interest due on the previous notes, it is for the jury to say whether such renewal notes were taken in due course of business, and whether the amount of accrued interest included in the renewals represented loans such as would have been made apart from any prior relation of the parties, or were taken merely to cover defaulted debts. Dykman v. Keeney, 34 App. Div. 45. § 117. Surplus fund; of what composed, and for what purposes used. Every bank shall create a fund to be known as a surplus fund. Such fund may be created or increased by contributions, by trans- fers from undivided profits, or from net earnings. Such fund up to twenty per centum of the capital of the bank shall be used only for the payment of losses in excess of undivided profits. Source. — Former § 27, subd. 10. CROSS-REFERENCES.— Definitions of " surplus fund," " undivided profits " and " net earnings," see § 3. Similar provision as to trust companies, see § 203. § 118. How net earnings credited for dividend purposes; credits to surplus fund and to undivided profits; dividends to stock- holders. When the net earnings of a bank have been determined at the close of a dividend period as provided in section one hundred 100 Banking Law. § H®* sixteen of this article, if its surplus fund does not equal twenty per centum of the bank's capital, onententh of such net earnings shall be credited to the surplus fund or so much thereof, less than one-tenth, as will make such fund equal twenty per centum of such capital. The balance of such net earnings, or the entire amount thereof if such fund equals such twenty per centum, may be credited to the bank's profit and loss account; or, if its ex- penses and losses for such dividend period exceed its gross earn- ings, such excess shall be charged to its profit and loss account The credit balance of such account shall constitute the undivided profits at the close of such dividend period, and shall be available for dividends. The directors of any bank may annually, semi-annually or quarterly, but not more frequently, declare such dividends as they shall judge expedient from such undivided profits. No bank shall declare, credit or pay any dividend to its stockholders until it shall have made good any existing impairment of its capital and any existing encroachment on its reserves required to be maintained against deposits. Source. — ^Former § 27, subd. 10. The prohibition against payment of divi- dends until any impairment of capital shall have been made good is taken from former § 29, and that against payment of dividends during the existence of an encroachment on reserves comes from former § 67. CKOSS-KEFERElSfCES.— Definitions of " surplus fund," " undivided profits,'* " net earnings " and " dividend period," see § 3. Similar provision as to trust companies, see § 204. Directors' liability for declaring unauthorized dividends, see Stock Corp. Law, § 28. Criminal liability for paying dividends out of capital, see Penal Law, § 664. CAUSE OF ACTION AGAINST DIRECTORS BELONGS TO CREDITORS.— The cause of action against directors for improperly declaring a dividend while the bank was insolvent belongs to the creditors, and the receiver cannot enforce it for the benefit of the stockholders. Butterworth v. O'Brien, 39 Barb. 192. § 119. Change of location. Any bank may make a written application to the superintendent of banks for leave to change its place of business to another place in the same county. The application shall state the reasons for such proposed change, and shall be signed and acknowledged by a majority of its board of directors and accompanied by the writ- § 119. Banks. ten assent thereto of stockholders owning at least two-thirds"" amount of its stock. If the proposed place of business is within the limits of the village, borough or city if in a city not divided into boroughs, in which the principal place of business of the bank is located, such change may be made upon the written approval of the superintendent; if beyond such limits, notice of intention to make such application, signed by the president and cashier of the bank shall be published once a week for two successive weeks immediately preceding such application in a newspaper published in the city of Albany in which notices by state officers are re- quired by law to be published, and in a newspaper to be desig- nated by the superintendent, published in the county in which the place of business of such bank is located. If the superintend- ent shall grant his certificate authorizing the change of location, as provided in section fifty of this chapter, the bank shall cause such certificate to be published once in each week for two suc- cessive weeks in the newspapers in which the notice of application was published. When the requirements of this section shall have been fully complied with, the bank may, upon or after the day specified in the certificate, remove its property and eifects to the location designated therein, and thereafter its principal place of business shall be the location so specified; and it shall have all the rights and powers in such new location which it possessed at its former location. Source. — Former § 31. — The old law provided for a change to another place " in the same or another county." The language ot the old law, " and there- after its sole business location shall be the location so specified " has been changed to " thereafter its principal place of business shall be the location so specified." The Attorney-General was of the opinion that the use of the phrase " sole business location " constituted a prohibition against branch of- fices. Atty.-Gen. Rep. (1900) 248, 255. CROSS-REFERENCES.— Powers and duties of superintendent in regard to change of location, see § 50. Similar provision as to private bankers, see § 159; as to trust companies, see § 205; as to savings banks, see § 250; as to investment companies, see § 296; as to safe deposit companies, see § 321. as to personal loan companies, see § 352; as to savings and loan associations, see § 403; as to credit unions, see § 460. APPLICATION SAME IN EITHER CASE.— Whether the change of loca- tion is within the limits of the same city or town or outside such limits, the application must state the reasons for the proposed change, be signed by th<^ 102 BANKiifG Law. § 120. majority of the board o£ directors, and be accompanied by the written assent of two-thirds of the stockholders. Atty.-Gen. Rep. (1909) 710. § 120. Rights and liabilities of stockholders; who liable as stock- holders; who may enforce liability; within what time action must be commenced. The rights, powers and duties of stockholders of banks shall be as prescribed in the general corporation law and the stock cor- poration law; but the individual liability of such stockholders for the contracts, debts, and engagements of the bank and the time within which an action may be instituted to enforce such liability shall be governed exclusively by the prpvisions of this section and section eighty of this chapter. The stockholders of every bank shall be individually responsi- ble, equally and ratably and not one for another, for all contracts, debts and engagements of the bank, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares. An action to enforce such lia- bility must be brought within six years after the cause of action has accrued. The term " stockholder " as used in this section shall apply to : 1. Such persons as appear by the books of the bank to be stock- holders ; I 2. Every owner of stock, legal or equitable, although the same may be on such books in the name of another person, provided, however, that such term shall not apply to a person holding stock as collateral security for the payment of a debt and not appearing by the books of the bank to be the owner and holder thereof in his own right, or to a person holding stock in a bona fide fiduciary capacity and not appearing by the books of the bank to be the owner and holder thereof in his own right unless such fiduciary shall have invested the funds in his care in violation of law or of the terms under which said fimds are held by him, in which case he shall be personally liable as a stockholder. No person who has in good faith, and without any intent to evade his liability as a stockholder, caused his stock to be trans- ferred on the books of the bank when such bank is solvent to any resident of this state of full age previous to any default in the payment of any debt or liability of the bank, shall be subject to an;^7, § 120. Banks. 103 personial liability for any contraats, debts or engagements of the bank. In case the superintendent of banks shall have taken possession of the property and business of the bank pursuant to section fifty- seven of this chapter or a permanent receiver of such bank shall have been appointed, all actions or proceedings to enforce the lia- bility of stockholders under this section shall be taken and prose- cuted only in the name of the superintendent or the receiver, as the case may be, unless the superintendent or receiver shall refuse to take such action or proceeding upon proper request in writing made by any creditor, or shall have failed or neglected to commence such action or proceeding within sixty days after the receipt of such request, and in that event such action or proceeding may be taken by any creditor of the bank. But no such action shall be brought by a creditor until a judgment shall have been recovered by him against the bank and an execution thereon shall have been returned unsatisfied in whole or in part. Source. — Tlie first paragraph is new. The first sentence of the second paragraph comes from former § 71. The six-year limitation is new. The definition of " stockholder " comes from former § 2, except the part relating to persons holding in a fiduciary capacity, which comes from Stock Corp. Law, § 58. The paragraph providing for transfer on the books of the bank is taken from former § 72. The last paragraph comes from former § 71, except the last sentence which is derived from Stock Corp. Law, § 59. CROSS-EEFEEENCKS.— Enforcement of stockholders' liability by super- intendent, see § 80. Similar provision as to trust companies, see § 206; of safe deposit com- panies, see § 322. Actions to enforce liability, see Gen. Corp. Law, §§ 100-115. Actions to dissolve corporations, see Gen. Corp. Law, §§ 150-161. CONSTITUTIONAL PEOVISION.— Art. VIII, § 7, provides that stock- holders of banks shall be liable for all its debts to the amount of their respective shares. The provision first appeared in the Constitution of 1846, being then applicable to banks of issue only. It was extended to banks not of issue by the Constitution of 1S04. For a discussion of the reasons for applying the constitutional provisions to banks not of issue, see Barnes v. Arnold, 23 Misc. 197, 205. Art. VIII, § 7, of the Constitution of 1846 held to apply to banks then ex- isting as well as those thereafter organized. Matter of Lee's Bank, 21 N. Y. 9. 104 Banking Law. § 120. The constitutional provision applies to specially chartered banks. Matter of Reciprocity Bank, 22 N. Y. 9. CONSTITUTIONALITY OF SECTION.— The courts have repeatedly up- held the constitutionality of former § 71, part of which is now in this sec- tion. Van Tuyl v. Robin, 80 Misc. 330, aff'd 160 App. Div. 41; Barnes v. Arnold, 169 N. Y. 611, aff'g 45 App. Div. 314; Persons v. Gardner, 42 App. Div. HQO ; Matter of Lee's Bank, 21 N. Y. 9 ; Matter of Empire City Bank, 18 N. Y. 199; Matter of Reciprocity Bank, 22 N. Y. 9; Diven v. Duncan, 41 Barb. 520. SECTION TO BE STRICTLY CONSTRUED.— Chase v. Lord, 77 N. Y. 1; Barnes v. Arnold, 23 Misc. 197, aff'd 45 App. Div. 314, 169 N. Y. 611. APPLICATION OF STOCK CORPORATION LAW.— This section now pro- vides that the liability of stockholders of banks shall be governed exclusively by the Banking Law. Under former § 71 there was great diflBculty in deter- mining how far the provisions of §§ 58, 59 of the Stock Corporation Law applied. See Van Tuyl v. Robin, 80 Misc. 360, aff'd 160 App. Div. 41; Van Tuyl V. Scharmann, 208 N. Y. 53; Hirshfeld v. Bopp, 145 N. Y. 84; Mosler Safe Co. V. Guardian Trust Co., 208 N. Y. 524; Assets Realization Co. v. Howard, 70 Misc. 651. NATURE OF LIABILITY.— The liability of a bank stockholder is several, and is not affected by the failure of any other stockholder to pay the amount assessed against him. Mosler Safe Co. v. Guardian Trust Co., 208 N. Y. 524, aff'g 153 App. Div. 117; Terry v. Little, 101 U. S. 216; U. S. v. Knox, 102 U. S. 422. LIABLE DIRECTLY TQ CREDITORS.— The liability of stockholders is directly to creditors and not one to supply a deficiency in capital, but is in addition thereto. Mosler Safe Co. v. Guardian Trust Co., 208 N. Y. 524, aff'g 153 App. Div. 117. FOR WHAT DEBTS LIABLE.— Deposits in the ordinary course of busi- ness, or upon certificates of deposit made by their terms payable upon the return thereof, are obligations for which the stockholders are liable under this section. Barnes v. Arnold, 169 N. Y. 611, aff'g 45 App.- Div. 314. The stockholders are not liable for ultra vires obligations of the bank. Thus, an indebtedness arising out of a contract made by the directors for the vol- untary liquidation of the bank is not one for which the stockholders can be held liable. Assets Realization Co. v. Howard, 70 Misc. 651. INTEREST ON LIABILITY.— In Mahoney v. Bernhard, 45 App. Div. 499, affirmed 169 N. Y. 589, it was held that the liability could not be extended by allowing interest thereon. But express provision is now made by § 80 for interest where the liability is enforced by the Superintendent of Banks. APPLIES TO EXISTING STOCKHOLDERS.— This section applies to stock- holders who became such prior to its enactment. Barnes v. Arnold, 169 N. Y. 611, aff'g 45 App. Div. 314. TRANSFER ON BOOKS NECESSARY TO TERMINATE LIABILITY.— A stockholder of record who has assigned his stock but failed to have it trans- § 120. Banks. 105 ferred on the books of the bank is liable. Van Tuyl v. Robin, 80 Misc. 360, aff'd 160 App. Div. 41; Wheeler v. Werner, 140 App. Div. 695; Shellington v. Rowland, 53 N. Y. 371. BOTH ASSIGNOR AND ASSIGNEE LIABLE.— An assignment without a transfer on the books renders the assignee liable, but the assignor also re- mains liable. Wheeler v. Werner, 140 App. Div. 695. An unregistered transferee from an executor of bank stock standing on the books in the name of the decedent is liable as a stockholder. Mahoney v. Bernhard, 45 App. Div. 499, 502, aff'd 160 N. Y. 589. TRANSFER WHILE BANK INSOLVENT.— A stockholder who transfers his shares when the bank is insolvent remains liable whether or not he acted in good faith and without knowledge of the insolvency. Persons v. Gardner, 113 App. Div. 597. A TRANSFER TO THE BANK ITSELF does not satisfy the requirements of this section. Matter of Reciprocity Bank, 22 N. Y. 9. PLEDGEES. — Under the present section a pledgee of bank stock who ap- pears by the books of the bank to- be the unqualified owner ' and holder of the stock is undoubtedly liable as a stockholder. Under the former law there was some doubt on this point, but the Appellate Division, First Department, held that such a pledgee must be deemed a " stockholder." Van Tuyl v. Robin, 160 app. Div. 41, rev'g 80 Misc. 360. See also Matter of Empire City Bank, 18 N. Y. 199, 224; Adderly v. Storm, 6 Hill 624. EXECUTORS. — Executors of a person who appears as a stockholder on the books of the bank are chargeable, in their representative capacity, as stock- holders. Diven v. Duncan, 41 Barb. 520. Executors of a decedent, joined as defendants because of stock standing in their decedent's name, remain liable as such after the settlement of their accounts by the Surrogate. Mahoney v. Bernhard, 45 App. Div. 499, aff'd 169 N. Y. 689. Where a defendant in a stockholder's action dies and his executor is substi- tuted, a judgment recovered against the decedent does not bind his devisee. Upon the rendition of such judgment and the return of an execution unsatis- fied, a cause of action arises against the devisee enforceable within ten years thereafter upon proof of all the facts upon which the judgment against the decedent's estate was rendered. Richards v. Gill, 138 App. Div. 76. When executors, without authority from the testator and without authority of law, invest funds of the estate in bank stock, they and not the estate are responsible as stockholders. Diven v. Lee, 36 N. Y. 302. ENFORCEMENT BY RECEIVER.— The provision as to enforcement of the liability by a receiver was incorporated into the section by chapter 441 of the Laws of 1897. This amendment was held to apply to a bank which prior to its enactment had been dissolved and of which a permanent receiver had been appointed. Persons v. Gardner, 42 App. Div. 490, aff'g 26 Misc. 663. The amendment of 1897 was held not to apply to an action begun before its passage, even as to defendants who had not then been served with process. Mahoney v. Bernhard, 45 App. Div. 499, aff'd 169 N. Y. 589. 106 Banking Law. § 120, This section does not put on the permanent receiver an absolute duty to proceed against stockholders, and a receiver's account should not be surcharged with the amount which he might have recovered had he proceeded against a solvent stockholder within the time limited by statute. People v. Staten Island Bank, 146 App. Div. 378. ENFORCEMENT BY CREDITOR.— Prior to the amendment of 1897 (Laws 1897, ch. 441) an action could only be brought by creditors. Persons v. Gard- ner, 26 Misc. 663, aff'd 42 App. Div. 490. Previous to that amendment it was held that a creditor could maintain an action in equity, in behalf of himself and all others similarly situated, to en- force the stockholders' liability. Pfohl v. Simpson, 50 How. Pr. 341. Where the action is brought by a creditor, the recovery of judgment against the bank is a condition precedent and must be alleged in the complaint. Hirshfeld v. Bopp, 145 N. Y. 84; Hirshfeld v. Kursheedt, 81 Hun, 555. A judgment against the bank does not establish, as against the stockholders, that the debt on which it is based is one for which the stockholders can be held liable. Assets Realization Co. v. Howard, 70 Misc. 651. Complaint in action by creditor held sufficient. Hagmayer v. Farley, 23 App. Div. 426. Where the action is brought by a creditor on behalf of himself and all other creditors, the plaintiff does not become a trustee for the other creditor? to the extent that he must carry on the litigation for their interests in oppo- sition to his own, or after he has settled his claim. Until another creditor has procured an order making liim a party, or until an interlocutory judgment has been rendered, he has entire control of the action. If in such case the plain- tiff discontinues the action, the receivers of the bank are not entitled to con- tinue it. Hirshfeld v. Fitzgerald, 157 N. Y. 166. After the above decision in Hirshfeld v. Fitzgerald, certain creditors of the Harlem River Bank, moved to be joined in a creditors' action against the stock- holders of that bank which had been pending for more than three years and was at issue as to all the answering defendants, but had not been noticed for trial. It was held that, under the circumstances, the motion was not made too late and should be granted. Hagmayer v. Alten, 41 App. Div. 487. Where after the appointment of a receiver in an action for the dissolution of an insolvent bank, a creditors' action is brought and judgment recovered against the stockholders, a creditor who did not join in the creditors' action may entitled himself to share in the distribution by paying his share of the expense of the action and presenting a satisfactory excuse for not proving his claim within the prescribed period. Matter of Ziegler, 98 App. Div. 117. FORM OF ACTION.— Under the former law the only permissible form of action was one in equity against all the stockholders. Cheney v. Seharmann, 145 App. Div. 456; Hirshfeld v. Bopp, 145 N. Y. 84. Under the present law (§ 80) the superintendent is given power to sue the stockholders either separately or jointly. § 121. Banks. 107 EXHAUSTION OF ASSETS NOT ESSENTIAL.— That not all the assets of the insolvent bank have been exhausted does not constitute a defense to an action to enforce the stockholders' liability. Barnes v. Arnold, 23 Misc. 201; Persons v. Gardner, 26 Misc. 663, aflf'd 42 App. Div. 490; Van Tuyl v. Robin, 80 Misc. 360, aff'd 160 App. Div. 41. SET-OFF. — A stockholder cannot set off a claim against the bank in an action to enforce his liability. Matter of Empire City Bank, 18 N. Y. 199. But where the superintendent makes an assessment upon stockholders to enable the corporation to resume business, if business is not resumed and the fund raised by the assessment is distributed ratably among the creditors, stock- holders who have paid the assessment are entitled in equity to set off the amount against their statutory liability. Mosler Safe Co. v. Guardian Trust Co., 208 N. Y. 524, aff'g 153 App. Div. 117. STOCKHOLDERS PAID LAST.— Nothing is to be repaid to stockholders until after payment in full of all the debts of the bank. HoUister v. HoUister Bank, 2 Abb. Dec. 367; Pruyn v. Van Allen, 39 Barb. 354. § 121. Assessment of stockholders to make good impairment of capital; sale of stock. Wihenever the superintendent of banks shall have made requisi- tion upon any bank pursuant to section fifty-six of this chapter to make good the amount of an impairment of its capital, the direct- ors of the bank shall immediately give notice of such requisition to each stockholder and of the amount of the assessment which he must pay for the purpose of making good such deficiency, by a vsrritten or printed notice mailed to such stockholder at his place of residence, or served personally upon him. If any stockholder shall refuse or neglect to pay the assessment specified in such notice within sixty days from the date thereof, the directors of such bank shall have the right to sell to the highest bidder at public auction the stock of such stockholder, after giving previous notice of such sale for two weeks in a newspaper of general circulation published in the county where the principal ofiice of such bank is located ; or such stock may be sold at private sale, and without such published notice, provided, however, that before making a private sale thereof an offer in writing to purchase such stock shall first be obtained, and a cC'py thereof served upon the owner of record of the stock sought to be sold either personally or by mailing a copy of such offer to such ovsmer at his place of residence or the address fur- nished by him to the bank; and if, after service of such offer, such owner shall still refuse or neglect to pay such assessment 108 Banking Law. § 121. within two weeks from the time of service of such oifer, the said directors may accept such oifer and sell such stock to the person or persons making such offer, or to any other person or persons mak- ing a larger offer than the amount named in the offer submitted to such stockholder; but said stock shall in no event be sold for a smaller sum than the valuation put on it by the superintendent in his determination and certificate, which valuation shall not be less than the amount of the assessment called for and the necessary costs of sale. Out of the avails of the stock sold the directors ^all pay the necessary costs of sale and the amount of the assess- ment called for thereon. The balance, if any, shall be paid to thf; person or persons whose stock has been thus sold. A sale of stock as herein provided shall effect an absohite cancellation of the outstanding certificate or certificates evidencing the stock so sold, and shall render the same null and void and a new certificate or certificates shall bo issued to the purchaser or purchasers of said stock. Source. — Former § 17. CROSS-REFERENCES.— Order of superintendent requiring impairment of capital to be made good, see § 56. Similar provision as to trust companies, see § 207; as to safe deposit com- panies, see § 323. PURPOSE OF ASSESSMENT.— The assessment provided for in this section is for the purpose of enabling the corporation to resume business. Such assess- ment can doubtless be made, even though the superintendent has taken posses- sion, but it cannot be made for the purpose of swelling the assets to be dis- tributed on a liquidation, ilosler Safe Co. v. Guardian Trust Co., 153 App. Div. 117, 126. This section does not apply to the case of a bank which has suspended pay- ments and closed its doors. Atty.-Gen. Rep. (1908) 379. FOR WHAT AMOUNT STOCK TO BE SOLD.— Under this section, in its present form, it is contemplated that the stock may be sold for the amount of the assessment plus the costs of the sale. Atty.-Gen. Rep. (1910) 854. But prior to the amendment of 1905, the purchaser was deemed to be enti- tled to receive the new certificate only upon paying the amount of his bid and also the par value of the stock, less the value thereof as fixed by the superin- tendent. Atty.-Gen. Rep. (1903) 266. " THE VALUATION PUT ON IT BY THE SUPERINTENDENT." — Opinion that the " valuation " to be put on the stock is such amount as in the good judgment of the superintendent represents its actual value at the time he makes his certificate. Atty.-Gen. Rep. (1901) 158. §§ 122, 123. Banks. 109 SALE ANNULS CERTIFICATE — The sale of a stockholder's shares under this section operates to annul his certificate whether or not it is surrendered by him. Atty.-Gen. Rep. (1900) 228. § 122. Annual meeting of stockholders; notice. The stockholders of every bank shall hold an annual meeting for the election of directors on the second Tuesday in January or within ten days thereafter. Notice of such meeting shall be given as required by the stock corporation law. Source. — Former § 69. CROSS-REFERENCES.— Similar provision as to trust companies, see § 209; as to safe deposit companies, see. § 324; as to personal loan companies, see § 353. General provisions regarding election of corporate directors, see Gen. Corp. Law, §§ 2a-32. General provisions regarding directors of stock corporations, see Stock Corp. Law, §§ 25-35. Misconduct of directors, see Penal Law, §§ 290, 297, 664, 665, 668. AN ADJOURNMENT OF AN ANNUAL MEETING for the election of directors cannot be taken to a day later than ten days after the second Tues- day in January. Atty.-Gen. Rep. (1909) 739. FAILURE TO PUBLISH NOTICE; WAIVER.— Where the requirement of publication of notice was disregarded, but the notice was served on all the stockholders either personally or by mail, and the meeting and election were in every other respect regular, the Attorney-General was of the opinion that the election should be rendered valid and legal by a waiver signed by each stockholder, as provided in § 42 of the Gen. Corp. Law. Atty.-Gen. Rep. (1910) 823. DIRECTOR CANNOT ACT AS PROXY.— Gen. Corp. Law, § 26, which for- bids officers of corporations formed under the Banking Law to serve as proxies for stockholders, applies to directors. Atty.-Gen. Rep. (1912) vol. 2, p. 285. § 123. Qualifications and disqualifications of directors. Each director must be a citizen of the United States, and at least three-fourths of the directors must be residents of this state at the time of their election and during their continuance in office. If at a time when not more than three-fourths of the directors are residents of this state, any director shall cease to be a resident of this state, he shall forthwith cease to be a director of the bank and his office shall be vacant. Every director of a bank having a capital of fifty thousand dollars or over shall be a stockholder of the bank owning in his own right an amount equal to at least one 110 Banking Law. § 124. tiousand dollars in value, and of a bank having a capital of less than fifty thousand dollars, a stockholder in his own right in an amount equal to at least five hundred dollars in value ; and every person elected to he a director who, after such election, shall hypothecate, pledge or cease to be the owner in his own right of the amount of stock aforesaid, shall cease to be a director of the bank and his office shall be vacant, and he shall not be eligible for re-election as a director for a period of one year from the date of the next succeeding annual meeting. Source. — Former § 69. The provisions as to vacating the office by removal from the state and as to the ineligibility for re-election of a director who has parted with his qualifying stock are new. CROSS-REFERENCES.— Similar provisions as to trust companies, see f 210; as to savings banks, see §§ 260, 268; as to safe deposit companies, see § 325; as to personal loan companies, see § 354; as to savings and loan associations, see § 405; as to land bank, see § 430; as to credit unions, see § 465. HYPOTHECATION OF QUALIFYING STOCK.— The law Intends that the director shall be the owner of unincumbered stock to the amount specified. If the stock is hypothecated the office is to be deemed vacant. Atty.-Ge.^. Rep. (1896) 203. VICE-PRESIDENT MUST BE DIRECTOR.— Stock Corp. Law, § 30, pro- vides that the president must be a director. There Is no such requirement as to other officers, but since the vice-president succeeds to the president's duties, it is considered that at least one vice-president should be a director. (See White on Corporations, 7th ed., p. 261.) The Attorney-General was of the opinion that, in consequence, an alien could not be elected vice-president, as Banking Law, former § 69, provided that " each director must be a citizen of the United States." Atty.-Gen. Rep. (1909) 737. § 124. 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 the bank, and will not know- ingly violate, or willingly permit to be violated, any of the pro- visions of law applicable to such bank, and that he is the owner in good faith and in his own right, of shares of stock of the value required by this article, subscribed by him or standing in his name on the books of the bank and that the same is not hypothecated, or in any way pledged as security for any loan or debt, and, in case of re-election or reappointment, that such stock was not hypothe- cated, or in any way pledged as security for any loan or debt §§ 125, 126. Banks. Ill during his previous term. Such oath shall be subscribed by the director making it, and certified by an officer authorized by law to administer oaths, and immediately transmitted to the superin- tendent of banks. Source. — Former § 70. CROSS-REFERENCES. — Similar provision as to trust companies, see § 211; as to savings bankSj see § 261; as to safe deposit companies, see § 326; as to personal loan companies, see § 355, as to savings and loan associations, see § 406; as to land bank, see § 431; as to credit unions, see § 466. SECTION DOES NOT IMPOSE DUTIES.— This section does not amount to a statutory requirement that the directors shall diligently and honestly ad- minister the affairs of the bank, so as to authorize an indictment under Penal Law, § 297, which provides that a director shall be guilty of a misdemeanor if he " wholly omits to perform any duty imposed upon him as such director by law." People v. Knapp, 206 N. Y. 373, aff'g 147 App. Div. 436. LIABILITY OF DIRECTORS.— These questions are governed by common law principles and by the provisions of the General Corporation Law and the Stock Corporation Law. As to liability of bank directors tor negligence, see O'Brien v. Kursheedt, 79 Hun 615. As to liability for receiving deposits when bank is insolvent, see Cassidy v. Uhlman, 27 App. Div. 80, rev'd 163 N. Y. 380; Same v. Same, 54 App. Div. 205, aff'd 170 N. Y. 505 § 126. Tenure of office of directors. The directors shall, unless sooner removed or disqualified, hold office until the next annual meeting of stockholders, and until their successors are elected and have qualified. Source. — Former § 69. CROSS-REFERENCES.— Similar provisions as to trust companies, see § 208; as to safe deposit companies, see § 327; as to personal loan companies, see § 356; as to credit unions, see § 467. § 126. Vacancies in board of directors. All vacancies in the office of director shall be filled by election by the stockholders except as hereinafter provided. Vacancies not exceeding one-third of the whole number of the board may be filled by the affirmative vote of a. majority of the directors then in office, and the directors so elected may hold office until such vacan- cies are filled by the stockholders at a special or annual meeting; or when the number of directors required is nine or more, two vacancies may, with the consent of the superintendent, be left 112 Banking Law. §§ 127, 128. unfilled until the next annual election, and when the number of directors required is more than five and less than nine, one vacancy may, with the superintendent's consent, be left unfilled until the next annual election. Source. — Former § 69. The provision for leaving vacancies unfilled until the next annual election is new. CROSS-REFERENCES.— Similar provision as to trust companies, see § 212; as to savings banks, see § 269; as to savings and loan associations, see § 407; is to land bank, see § 432. § 127. Change of number of directors. The stockholders at any annual meeting, provided notice of the proposed change be given in the notice of such meeting, may, by a majority of all the votes of the stockholders of such bank, change by resolution the number of its directors to such number not less than five as they may decide, but such change shall not become effective until approved by the superintendent ; or such bank may change the number of its directors in the manner prescribed in section twenty-six of the stock corporation law. A certified copy of every resolution changing the number of directors at an annual meeting shall be immediately filed in the office of the superintend- ent together with proof by affidavit of the publication of said no- tice of the annual meeting. Source. — Former § 09. CROSS-REFERENCES.— Similar provision as to savings banks, see § 266; as to savings and loan associations, see § 408; as to land bank, see § 433. § 128. Annual meeting of directors; election of officers. Within fifteen days after the date on which the annual meet- ing of stockholders is held the directors elected at such meet- ing shall, after their due qualification, hold a meeting at which they shall elect a president from their own number, a vice-presi- dent, and such other officers as are required by the by-laws to be elected annually. Source. — New. CROSS REFERENCES.— Similar provision as to trust companies, see § 213. § 129. Banks. 113 § 129. Monthly meetings of directors; quorum; statement to di- rectors. The directors of every bank shall hold a regular meeting at least once in each month. If the number of directors necessary to constitute a quorum is not prescribed in the certificate of incorpo- ration or organization certificate, or in the by-laws, and no pro- vision is made therein for determining the same, the directors may fix such number, which shall not be less than five, with the same effect as if such number were prescribed in the certificate of in- corporation or organization certificate. The board of directors shall, by resolution duly recorded in the minutes, designate an ofiicer or officers whose duty it shall be to prepare and submit to each director at each regular meeting of the board, or to an executive committee of not less than five members of such board, a written statement of all the purchases and sales of securities, and of every discount, loan or other advance, including over-draft." and renewals made since the last regular meeting of the board, describing the collateral to such indebtedness as of the date of meeting at which such statement is submitted ; but such officer or officers may omit from such statement discounts, loans or advances including over-drafts and renewals of less than one thousand dol- lars except as hereinafter provided. Such statement shall also contain a list giving the aggregate of loans, discounts and ad- vances including over-drafts to each individual partnership, un- incorporated association, corporation or person whose liability to the bank has been increased one thousand dollars or more since the last regular meeting of the board, together with a description of the collateral to such indebtedness held by the bank at the date of the meeting at which such statement is submitted. A copy of such statement, together with a list of the directors present at such meeting, verified by the affidavit of the officer or officers charged with the duty of preparing and submitting such statement shall be filed with the records of the bank within one day after such meeting, and be presumptive evidence of the matters therein stated. Source. — Former § 42, except the second sentence which is from former § 69. Renewals are included for the first time. CEOSS-REFEEENCES. — Similar provision as to trust companies, see § 214; as to savings banks, see § 264; as to personal loan associations, see § 357. 8 114 Banking Law. §§ 130, 131. "SUBMIT TO EACH DIRECTOR."— Opinion that separate copies of the financial statement need not be presented to each director or member of the executive . committee. It is sufficient if the same copy be submitted to each of them. Atty.-Gen. Rep. (1909) 715. DIRECTORS NOT ON EXECUTIVE COMMITTEE.— The necessary infer- ence from this section is that directors who are not upon the executive com- mittee are not chargeable ' with knowledge of detail management, where there is an executive committee. Kavanaugh v. Gould, 147 App. Div. 281. § 130. Examinations by directors into affairs of banks; may employ assistants. It shall be the duty of the board of directors of every bank during the months of March or April and during the months of September or October in each year to examine, or to cause a com- mittee of at least three of its members to examine, fully the books, papers and affairs of the bank, and the loans and discounts thereof, and particularly the loans or discounts made directly or indirectly to its officers or directors, or for the benefit of such officers or directors, or for the benefit of other corporations of which such officers or directors are also officers or directors, or in which they have a beneficial interest as stockholders, creditors, or otherwise, with the special view of ascertaining their safety and present value, and the value of the collateral security, if any, held in connection therewith, and into such other matters as the superintendent of banks may require. Such directors shall have the power to em- ploy such assistance in making such examination as they may deem necessary. Source. — Former § 23. "April and October " in former law has been changed to " March or April " and " September or October." CROSS-REFERENCES. Similar provision as to trust companies, see § 215. § 131. Reports of directors' examinations; penalty for failure to make or file. On or before the fifteenth day of the month of May or !N"ovem- ber succeeding any examination made pursuant to the require- ments of the last section, a report in writing thereof, sworn to by the directors making the same, shall be made to the board of di- rectors of such bank, and placed on file in said bank, and a dupli- cate thereof filed in the office of the superintendent of banks. Such report shall particularly contain a statement of the assets § 132. Banks. 115 and liabilities of the bank examined, as sihown by the books, to- gether with such deductions from the assets, and the addition of such liabilities, direct, indirect, contingent or otherwise as such directors or committee, after such examination, may find necesr sary in order to determine the true condition of the bank. It shall also contain a statement showing in detail every known lia- bility to such bank, direct, indirect, contingent, or otherwise, of every officer or director thereof and of every corporation in which any such officer or director owns stock to the amount of twenty- five per centum of the total outstanding stock, or of which any such officer or director is also an officer or director. It shall also contain a statement, in detail, of loans, if any, which in their opinion are doubtful or worthless, together with their reasons for so regarding them; also a statement of loans made on collateral security which in their opinion are insufficiently secured, giving in each case the amount of the loan, the name and market value of the collateral, if it has any market value, and, if not, a state- ment of that fact, and its actual value as nearly as possible. Such report shall also contain a statement of overdrafts, of the names and amounts of such as they consider worthless or doubtful, and a full statement of such other matters as affect the solvency and soundness of the institution. If the directors of any bank shall fail to make, or to cause to be made, or to file such report of ex- amination in the manner, and within the time, specified, such bank shall forfeit to the people of the state one hundred dollars for every day such report shall be delayed. Source. — Former § 23. CROSS-REFERENCES.— Similar provision as to trust companies, see § 216. HOW LOSSES TO BE ENTERED.— The authorization to the directors to make such deductions from the assets or additions to the liabilities as con- ditions may warrant, contemplates the charging off or marking down of bad loans or securities, the value of which had been impaired, and does not give the directors authority to establish a " Guarantee Fund " to take care of such losses. Atty.-Gen. Rep. (1908) 400. § 132. Communications from banking department must be submitted to directors and noted in minutes. Each official communication directed by the superintendent of banks or one of his deputies to a bank or to any officer thereof, 116 Banking Law. § 133. relating to an examination or investigation conducted by the banking department or containing suggestions or recommendations as to the conduct of the business of the bank, shall be submitted, by the officer receiving it, to the board of directors at the next meeting of such board, and duly noted in the minutes of the meet- ings of such board. Source.— Former § 41. The provision for noting in the minutes of the board is new. CROSS-KEFERENCES. — For similar provision as to trust companies, see § 217; as to savings banks, see § 276; as to investment companies, see § 297; as to safe deposit companies, see § 328; as to personal loan companies, see § 358; as to savings and loan associations, see § 412; as to credit unions, see § 476. § 133. Reports to superintendent; penalty for failure to make. Within ten days after service upon it of the notice provided for by section forty-two of this chapter, every bank shall make a written report to the superintendent, which report shall be in the form and shall contain the matters prescribed by the superin- tendent and shall specifically state the items of capital, deposits, specie and cash items, public securities and private securities, real estate and real estate securities, and such other items as may be necessary to inform the public as to the financial condition and solvency of the bank, or which the superintendent may deem proper to include therein, and shall also state the amount of de- posits the payment of which, in case of insolvency, is preferred by law or otherwise over other deposits. Every such report shaU be verified by the oaths' of the president or vice-president and cashier, or assistant cashier, and such verification shall state that the report is true and correct in all respects to the best of the knowledge and belief of the persons verifying it, and that the usual business of the bank has been transacted at the location re- quired by this article and not elsewhere. Every such report ex- clusive of the verification, shall within thirty days after it shall have been filed with the superintendent, be published by the bank in one newspaper of the place where its principal place of business is located, or if no newspaper is published there, in the newspaper published nearest to such place. § 133. Banks. 117 Every such bank shall also make such other special reports to the superintendent as he may from time to time require, in such form and at such date as may be prescribed by him and such re- port shall, if required by him, be verified in such manner as he may prescribe. Every such bank, within ten days after declaring a dividend, shall make a written report to the superintendent stating the amount of such dividend, the amount of its net earnings in excess thereof and the amount carried to the surplus fund. Such report shall be verified by the oath of the president or vice-president and cashier, or assistant cashier of the bank. If any such bank shall fail to make any report required by this section on or before the day designated for the making thereof, or shall fail to include therein any matter required by the superin- tendent, such bank shall forfeit to the people of the state the sum of one hundred dollars for every day that such report shall be de- layed or withheld, and for every day that it shall fail to report any such omitted matter, unless the time therefor shall have been extended by the superintendent as provided by section forty-nine of this chapter. The moneys forfeited by this section, when re- covered, shall be paid into the state treasury to reimburse the state for the sums advanced by it for the expenses of the department. Source. — ^The greater part of the section is derived from former § 21. The provision specifying the contents of the report and that requiring publi- cation by the bank come from former § 24. The provision as to special reports is new. The provision requiring reports in regard to dividends comes from former § 27, subd. 10. The penalty for failure to report is taken from former § 22. CROSS-REFERENCES.— Powers and duties of superintendent in regard to reports, see §§ 42, 43. Application of section to individual bankers, see § 143. Annual report of unclaimed deposits, see § 134. Reports of foreign banks, see § 147 ; of private bankers, see § 170 ; of trust companies, see § 218; of savings banks, see § 273; of investment companies, see § 298; of safe deposit companies, see § 329; of personal loan companies and personal loan brokers, see § 365; of savings and loan associations, see § 413; of credit unions, see § 477. IF A BANK FAILS TO MAKE THE REQUIRED REPORT, it is subject to the forfeitures specified in this section, or the superintendent may proceed under § 57. Atty.-Gen. Rep. (1908) 400. 118 Banking Law. § 134. MUST REPORT IN PRESCRIBED FORM.— A bank has no authority to change the form of report prescribed by the superintendent. If the prescribed form fails to cover all the actual facts, it is competent for the bank to sup- plement the report by incorporating therein a statement of such facts. Atty.- Gen. Rep. (1908) 400. A bank has no authority to report as " due on cashiers' checks " a sub- stantial amount avowedly set aside arbitrarily as a " guarantee fund, as an offset to possible loans, failures, defalcations and other unfortunate condi- tions.' Atty.-Gen. Rep. (1908) 400. CANNOT WITHHOLD PART OF EARNINGS OR SURPLUS.— A bank can- not withhold a substantial portion of its earnings or surplus and not report the same to the superintendent. Atty.-Gen. Rep. (1908) 400. PREFERRED DEPOSITS.— The report of a bank, trust company, or indi- vidual banker should state separately under the head of " preferred deposits " the deposits the payment of which, in case of insolvency, is preferred by law, or otherwise over other deposits. Atty.-Gen. Rep. (1905) 431. PERJURY. — ^An officer who verifies a report knowing it to be false is guilty of perjury. People v. Ostrander, 64 Hun 335, aflf'd 135 N. Y. 639. An officer of a savings bank, having been indicted for perjury for verifying a false report, demurred to the indictment on the ground that he was merely an assistant treasurer and not one of the " two principal officers " and con- sequently was incompetent to take the oath. It was held that, he having assumed to be the proper person to make the verification, could not be allowed to set up that he was not. People v. Trumpbour, 64 Hun 346, afl''d 135 N. Y. 638. DAMAGE CAUSED BY FALSE REPORT.— A person who has suffered loss because of a false report may recover damages from the officers who verified the report knowing it to be false. Morse v. Swits, 19 How. Pr. 275. ,§ 134. Annual report of unclaimed deposits, dividends and interest; publication; penalty for non-compliance. In the month of September in each year, and on or before the temth day thereof, every bank shall make a written report to the snperintendenit of banks, verified by the oaths of the president or vice-president and cashier or assistant cashier, which report shall contain a true and accurate statement of all deposits made with the bank and all dividends declared and interest accrued upon any of its stock or other evidences of indebtedness, which on the first day of August preceding such report amounted to fifty doUara or over and had remained unclaimed by any person or persons au- thorized to receive the same for five years then next preceding. Such statement shall set forth the date of each such deposit, its § 134. Banks. 119 amount and the name and last known place of residence or post- office address of the person making it, the name of each person in whose favor and the time when any such dividend may have been declared or any such interesit may have accrued, its amount, and upon what number of shares or upon what amount of stock or other evidences of indebtedness of such bank, it was declared or accrued. In case any such bank shall at said date have held no such unclaimed deposits, dividends or interest, it shall at the time above speciiied make a written report to the superintendent so stating, which report shall be verified as herein above provided No deposits, dividends or interest shall be deemed imclaimed within the meaning of this section if it appears from the books of the bank or from other written evidence on file with the bank that the person or persons authorized to receive them have knowl- edge thereof. Every such bank which reports any unclaimed deposits, divi- dends or interest under the provisions of this section shall cause to be published once in each week for two successive weeks in a newspaper designated by the superintendent published in the county and in the village or city in which such bank is located, if there be a newspaper published therein, and at least once in a newspaper published at Albany in which notices by stnte officers are required to be published, a true copy of such report, and shall file with the superintendent of banks on or before the first day of October in each year proof by affidavit of such publication. The expense of such publication shall be paid by the bank, but if, on or before the first day of August in that year, the bank shall have mailed, postage prepaid, to each person authorized to receive any such unclaimed deposit, dividend or interest, at his last known place of residence or post-office address, a statement showing the amount to which such person is entitled and requesting written ac- knowledgment thereof, the bank may reimburse itself for such expense by deducting the amount thereof from the sums due any such person or persons who shall not have made written acknowl- edgment before the filing of such report with the superintendent, in the proportion that each such sum bears to the aggregate thereof. Any such bank failing to make any report or to file any affidavit of publication required by this section shall forfeit to 120 Banking Law. §§ 135, 136. the people of the state the sum of one hundred dollars for each day such report or the filing of such affidavit of puhlication shall be so delayed or withheld, unless the time therefor shall have been extended by the superintendent as provided by section forty-nine of this chapter. Soutce. — Former § 30. CROSS-REFERENCES.— Powers and duties of superintendent with regard to unclaimed deposits, etc., see §§ 45-47. Application of section to individual bankers, see § 143. Similar provision as to private bankers, see § 157; as to trust companies, see § 219; as to savings banks, see § 274. PRESENTMENT OF BANK BOOK WITHIN FIVE YEARS.— Where the depositor has within five years presented his bank book or pass-book to the bank for the purpose of having his interest or dividends credited, such deposit need not be included. Atty.-Gen. Rep. (1906) 510. § 135. Liability of bank for assessments by superintendent. When the superintendent, pursuant to the powers conferred on him by article two of this chapter shall have levied any assessment upon any bank and shall have duly notified silch bank of the amount thereof, the amount so assessed shall become a liability of and shall be paid by such bank to the superintendent. Source. — New. CROSS-REFERENCES. — ^Assessments to defray expenses of banking de- partment, see § 17 and cross-references there given. Assessments for incroachments on reserves, see § 30 and cross-references there given. Application of section to individual bankers, see § 143. Similar provision as to trust companies, see § 220; as to savings banks, see § 277; as to investment companies, see § 299; as to safe deposit com- panies, see § 330; as to personal loan companies and brokers, see § 366. § 136. Preservation of books and records of bank. Every bank shall preserve all its records of final entry, includ- ing cards used under the card system and deposit tickets, for a period of at least six years from the date of making the same or from the date of the last entry thereon. Source. — New. CROSS-REFERENCES.— Application of section to individual bankers, see § 143. § 137. Banks. 121 Similar provision as to private bankers, see § 165; as to trust companies, see § 221; as to investment companies, see § 300; as to personal loan com- panies and brokers, see § 367. § 137. Change from state to national bank. Whenever any tank shall have become a corporation for carry- ing on the business of banking under the laws of the United States, it shall notify the superintendent of banks of this state of such fact, and shall file with him a copy of its authorization as a national banking association certified by the comptroller of the currency. It shall thereupon cease to be a corporation under the laws of this state, except that for the term of three years there- after, its corporate existence shall be deemed to continue for the purpose of prosecuting or defending suits by or against it, and of enabling it to close its concerns, and to dispose of and convey its property. Such change from a state to a national bank shall not release any such bank from its obligations to pay and discharge all the liabilities created by law or incurred by it before becoming a national banking association, or any tax imposed by the laws of this state up to the date of its becoming such national banking association in proportion to the time which has. elapsed since the next preceding payment therefor, or any assessment, penalty or forfeiture imposed or incurred under the laws of this state up to the date of its becoming a national banking association. Source. — Former §§ 78-81 rewritten and matter relating to the conduct of the bank after becoming a national banking association has been eliminated for obvious reasons. CROSS-REFERENCES.— Change from national to state bank, see § 104. Change from state bank to trust company, see § 138. Laws of United States avithorizing change, see U. S. Rev. Stat., §§ 5154, 5155. FEDERAL STATUTE SUFFICIENT AUTHORITY.— No authority other than that conferred by Congress is required to enable a bank existing under a general or special state law to become a national bank. The certificate of the Comptroller is conclusive as to the completeness of the organization. Casey v. Galli, 94 U. S. 673. EFFECT ON CLAIMS OF STATE BANK.— Debts due to the state bank pass to and are enforceable by the national bank. City Nat. Bank v. Phelps, 86 N. Y. 484. 122 Banking Law. § 138. The national bank is but a continuance of the same body under a changed jurisdiction, and between it and those who have contracted with it, it retains its identity and may, as a national bank, enforce contracts made with it as a state bank. City Nat. Bank v. Phelps, 97 N. Y. 44. " DEFENDING SUITS."— The taking of an appeal in the name of the state bank from a judgment rendered against it is a defense of a suit within the meaning of this section, and if taken within three years after the change to a national bank, is proper. Claflin v. Farmers', etc., Bank, 54 Barb. 228." TAXATION OF NATIONAL BANK SHARES.— The legislature may prop- erly provide that the shares of the national bank shall be assessed for taxa- tion at their actual value. People v. Commissioners, 67 N. Y. 516. VOLUNTARY DISSOLUTION.— A state bank was converted into a na- tional bank. It did business as such for about ten years, when it voluntarily dissolved. Many years thereafter an action wasi brought against both the state bank and the national bank. Held, that service of summons on the former cashier of the bank was of no effect, and should be set aside. Hayden V. Bank of Syracuse, 15 N. Y. Supp. 48. § 138. Change from state bank to trust company. Any bank may become a trust company with all the powers and subject to all the obligations and duties of trust companies organized under the provisions of article five of this chapter. A bank desiring to become a trust company shall proceed in the following manner : 1. It shall call a meeting of its stockholders upon not less than twenty days' written notice to each stockholder, which notice shall be served personally or by mail, postage prepaid, directed to each stockholder at his last known post-office address, and shall contain a statement of the purpose for which such meeting is called. Proof by affidavit of the due service of such notice shall be filed in the ofiice of the bank at or before the time of such meeting. 2. At the meeting so called the stockholders of such bank may, by a vote of at least two-thirds of the entire capital stock, direct that such bank shall be transformed into a trust company. In the event that such action is taken by the prescribed vote, a resolution may be adopted directing not less than thirteen nor more than thirty of the stockholders of such bank, who shall be designated by name in such resolution, to execute an organization certificate in the form and manner required by section one hundred and eighty of this chapter. The proceedings of such meeting shall be entered in the minutes of the bank. § 139. Bai^ks. 123 3. The persons named in such resolution shall thereafter sub- scribe and acknowledge in duplicate said organization certificate and attach thereto copies of the minutes of such meeting, duly verified by the president and secretary of the meeting, and dupli- cates of the affidavits of service of the notice of such meeting, and shall submit both of such duplicate certificates to the superintendent at his office. 4. When the superintendent shall have endorsed his approval on the organization certificate as provided by section twenty-three of this chapter, such bank shall be held and regarded as a trust company subject to the provisions of article five of this chapter but shall transact no business as such trust company other than that relating to its organization until it shall have complied with the conditions precedent to commencing business prescribed by sec- tion one hundred and eighty-three of this chapter. At the time when the corporate existence of such trust company begins all the property of such bank shall immediately by act of law and without any conveyance or transfer be vested in and become the property of such trust company. The persons named in such organization certificate shall be the directors of such trust com- pany until the first annual election of directors thereafter, and shall have power to take all necessary measures to perfect its or- ganization and to adopt such regulations concerning its business and management as may be proper and not inconsistent with law. Source. — New. CROSS-REFERENCES.— Change from national to state bank, see § 104. Change from state to national bank, see § 137. Reincorporation of investment companies, see § 309. Change from personal loan association to personal loan company, see § 343. § 139. Restrictions on officers, directors and employees. No officer, director, clerk or other employee of any bank, and no person in any way interested or concerned in the management of its affairs, shall as individuals discount, or directly or indirectly, make any loan upon any note or other evidence of debt, which he shall know to have been offered for discount to such corporation, and to have been refused. Every person violating the provisions of this subdivision, shall, for each offense, forfeit to the people of the state twice the amount of the loan which he shall have made. 124 Banking Law. § 140. 'No offieer, director, clerk or other employee of any bank shall borrow, directly or indirectly, from the bank with which he is connected any sum of money without the written approval of a majority of the board of directors thereof filed in the office of the bank or embodied in a resolution adopted by a majority vote of such board exclusive of the director to whom the loan is made; and in no event shall any officer of a- bank located in a city of the first class borrow any sum of money from such bank. If an officer, director, clerk or other employee of any bank shall own or control a majority of the stock of any other corporation a loan to that corporation shall be considered for the purpose of this subdivision as a loan to such officer, director, clerk or other em- ployee. Every person knowingly violating this provision shall, for each offense, forfeit to the people of the state twice the amount which he shall have borrowed. Source. — The first paragraph is from former § 27, subd. 6. The second paragraph is from former § 27, subd. 7. The prohibition against borrowing by any officer of a bank located in a city of the first class is new. CROSS-REFERENCES.— Prohibition against loans by bank to officers, etc., see § 108, subd. 8. Similar provision as to trust companies, see § 222. § 140. Prohibitions against encroachments upon certain powers of bankSi. 1^0 person unauthorized by law shall subscribe to or become a member of, or be in any way interested in any association, institu- tion 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 persons subscribe to or become in any way interested in any bank or fund created or to be created for the like purposes or either of them. IJTo corporation, domestic or foreign, other than a national bank or a federal reserve bank, unless expressly authorized by the laws of this state, shall employ any part of its property, or be in any way interested in any fund which shall be employed for the purpose of receiving deposits, making discounts, or issuing notes or other evidences of debt to be loaned or put into circulation as money. All notes and other securities for the payment of any money or the delivery of any § 140. Banks. 125 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. No person, association of persons or corporation, unless ex- pressly authorized by law, shall keep any office for the purpose of issuing any evidences of debt, to be loaned or put in circulation as money; nor shall they issue any bills or promissory notes or other evidences of debt for the purpose of loaning them or putting them in circulation as money, unless thereto specially authorized by law. Every person, and every corporation, director, agent, officer or member thereof, who shall violate any provision of this section, directly or indirectly or assent to such violation, shall forfeit one thousand dollars to the people of the state. Source.— ' Former §§ 107, 108. CROSS-REFERENCES. — Prohibition against granting of special charters to banking corporations, see Const., art. 8, § 4. Prohibition against exercise by corporations of powers not given by law, see Gen. Corp. Law, § 10. Use of words " bank " and " banking " in name of foreign corporation, see Gen. Corp. Law, § 15. Prohibition against exercise of banking powers by corporations not or- ganized under the Banking Law, see Gen. Corp. Law, § 22. FOR HISTORY OF " RESTRAINING ACT " AND " FREE BANKING," see Tracy v. Talmadge, 18 Barb. 456; Pratt v. Short, 79 N. Y. 437. BUSINESS CORPORATIONS EXERCISING BANKING POWERS.— Cor- porations organized under the Business Corporations Law violate this section if they accept weekly deposits to be returned upon the happening of a con- tingency with interest after they amount to $100; or if they deduct interest at the time loans are made upon leases of personal property. Atty.-Gen. Rep. (1913) 188; Atty.-Gen. Rep. (1913) 194. A proposed corporation, one of whose objects is " to receive from customers, for safe-keeping only, moneys or other property, said moneys not being sub- ject to be drawn upon by check or draft, but solely on demand, and not sub- ject to the payment of interest thereon," is not entitled to incorporate under the Business Corporations Law. Atty.-Gen. Rep. (1910) 419. Where a corporation organized under the Business Corporations Law re- ceived annual payments of money for which it issued a certificate by which it agreed to repay the holder a, specified sum at the expiration of ten years, it was held to be transacting business in violation of the Banking Law. Jacobs V. Monaton Realty Inv. Corp., 80 Misc. 649, aff'd 160 App. Div. 449. 126 Banking Law. § 140. DEPARTMENT STORE BANKS.— Opinion that this section and section 22 of Gen. Corp. Law are violated by the " Department Store bank " — that is, an arrangement by a business corporation whereby money is deposited with it, at interest, which deposit may be used in payment of purchases or may be withdrawn in cash at any time. Atty.-Gen. Rep. (1912) 185. EFFECT OF VIOLATION.— A note discounted in violation of this section is void. New York State L. & T. Co. v. Helmer, 77 N. Y. 64; New York Fire- men Ins. Co. V. Ely, 2 Cow. 678; Utica Ins. Co. v. Scott, 19 Johns. 1. RECOVERY ON ORIGINAL CONSIDERATION.— Notwithstanding a note be void under this section, recovery may be had on the original consideration. Duncomb v. New York, etc., R. Co., 84 N. Y. 190; Pratt v. Short, 79 N. Y. 437; Pratt V. Eaton, 79 N. Y. 449; Utica Ins. Co. v. Caldwell, 3 Wend. 296; Utica Ins. Co. V. Hunt, 1 Wend. 56; Utica Ins. Co. v. Kip, 8 Cow. 20. It seems that a promissory note which is void because discounted in viola- tion of this section, is nevertheless competent evidence in an action to re- cover the money loaned. Utica Ins. Co. v. Bloodgood, 4 Wend. 652. WHAT NOT A VIOLATION. — Collecting in advance the interest on a single note taken to secure a pre-existing debt is not a violation of the section. New York Firemen. Ins. Co. v. Sturges, 2 Cow. 664. "This is a penal act and is to be constructed strictly. It was not intended to prohibit individuals or corporations from lending their own proper funds upon promissory notes by way of discount or otherwise." People v. Brewster, 4 Wend. 498. This does not prohibit the issuance of non-negotiable bonds for the pur- pose of borrowing money. Barry v. Merchants' Exeh. Co., 1 Sandf. Ch. 280, 313. The issuance of an interest-bearing certificate of deposit for money actually deposited by a corporation having authority to receive deposits of money is not a " discounting " within the intent of this section. Pardee v. Fish, 60 N. Y. 265. UNAUTHORIZED BANKING IS NOT A NUISANCE.— Atty.-Gen. v. Bank of Niagara, 1 Hopk. 354. FOREIGN CORPORATION S.— By this section a national bank, organized and doing business in another state, is prohibited from keeping an office of discount or deposit in this state, and cannot maintain an action upon any note discounted by it at such office. National Bank v. Phoenix Warehousing Co., 6 Hun 71; New Hope, etc., Bridge Co. v. Poughkeepsie Silk Co., 25 Wend. 648. Where a foreign corporation, maintaining an office in violation of this sec- tion, made a contract with a New York broker to receive of him all its notes which he should procure in his business as a broker, and pay him the amount thereof in cash, less a discount of % of 1 per cent., it was held that such con- tract was void. De Groot v. Van Duzer, 20 Wend. 390, reversing 17 Wend. 170. § 141. Banks. 127 WHAT CONSTITUTES KEEPING AN OFFICE.— Where a foreign corpora- tion authorizes one of its officers to attend from time to time at certain places in this State for the purpose of receiving deposits or of discounting paper with the funds of the corporation, such places of attendance are to be con- sidered as offices of discount and deposit. Taylor v. Bruen, 2 Barb. Ch. 301. MAY ACT AS TRUSTEE UNDER A MORTGAGE.— This section does not prevent a foreign trust company from acting as trustee under a mortgage given to secure an issue of bonds of a domestic corporation without procur- ing a license from the State. Atty.-Gen. Rep. (1902) 255. MAY PURCHASE PROMISSORY NOTES.— A foreign corporation is not prohibited from purchasing promissory notes. American Life Ins. Co. v. Dob- bin, Lalor 252. Section not violated by foreign corporation sending ah agent into the State to secure a doubtful debt and, while here, doing a single act of drawing a bill of exchange and paying out its own circulating notes in pursuance of its lead- ing object. Western Reserve Bank v. Potter, Clarke's Ch. 439. LOAN ON MORTGAGE. — The fact that a foreign corporation was main- taining an office here in violation of the statute was held not to invalidate a loan made in this State by the corporation, secured by a mortgage on land situated here, it not being shown that the loan or security was part of or in any way in aid of the illegal business or necessarily connected with it. Bard V. Poole, 12 N. Y. 495. § 141. Tlse of sign, or words indicating bank by unauthorized per- sons prohibited. No person, except a national bank, a federal reserve bank, an individual banker or a corporation duly authorized by the super- intendent of banks to transact business in this state, shall make use of any office sign at the place where such business is trans- acted 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 any such person or persons make use of or circulate any letterheads, bill-heads, blank forms, notes, receipts, certificates, circulars, or any written or printed or partly written and partly printed paper whatever, 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 provisioh shall forfeit the sum of one thousand dollars, but this section shall not apply to any indi- vidual, partnership or unincorporated association engaged in the 128 Banking Law. §§ 142, 143. business of banking prior to May twenty-seventh, eighteen hun- dred and eighty-five. Source. — Former § 112. GROSS-REFERENCES. — ^ Penal provisions as to unauthorized use of words " bank," " banker " etc., see Penal Law, § § 302, 666. EFFECT ON PRIVATE BANKERS.— Since the word " bank " is defined in § 2 as meaning a corporation, it would soem clear that private bankers, whether or not subject to the supervision of the superintendent, are not pro- hibited by this section from using the words " banker," " banking, * etc., on their stationery provided they do not give the impression that the business is that of an incorporated bank. See Atty.-Gen. Rep. (1899) 381; Atty.-Gen. Rep. (1901) 219; Atty.-Gen. Rep. (1905) 423. AJSr "INDIVIDUAL" BAOTCER can properly advertise himself as "transacting a general banking business." Atty.-Gen. Rep. (1905) 423. EXEMPTION OF CERTAIN PRIVATE BANKERS.— The exception made in this section and in Sec. 302 of the Penal Law in favor of persons engaged in banking prior to May 27, 1885, is a personal privilege. One who subse- quent to that date purchased the business of a private banker did not thereby obtain the right to continue the use of a name containing prohibited words. Such right is not transferable. Atty.-Gen. Rep (1912) 255. The exemption is a personal privilege and does not pass to a purchaser or survive death. Atty.-Gen. Rep. (1912) 491. § 142. Bills payable otherwise than in money prohibited. 'No person 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, individual banker or private 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 offense. Source. — Former § 110, with insertion of words "or private banker." § 143. Rights of existing individual bankers preserved. Every individual, partnership or unincorporated association which on the date on which this act takes effect is lawfully en- gaged in the business of a bank of discount and deposit under § 144. Banks. 129^ due authorization from the superintendent of banks is hereby authorized to continue in such business subject to sections one hun- dred five, one hundred ten, one hundred twelve, one hundred four- teen, one hundred fifteen, one hundred thirty-three, one hundred thirty-four, one hundred thirty-five and one hundred thirty-six of this article and to the sections of article two of this chapter relating to individual bankers. Source. — ' New. Under the present law no provision is made for the author- ization in future of individual bankers. At the time the act became effective only one individual banker was transacting business in the state. CROSS-REFERENCES.— Definition of " individual banker," see § 2. LIABILITY OF PARTNER OF INDIVIDUAL BANKER.— One who has filed a certificate of partnership with the superintendent is not relieved from lia- bility for deposits made after he has retired from the firm by one who had been a depositor before such retirement, if the depositor had no actual notice of the retirement. And this is true even though the depositor never knew that the retiring partner was a member of the firm. Howell v. Adams, 68 N. Y. 314. PLACE OF RESIDENCE FOR TAXATION.— For the purpose of taxing his banking capital, the residence of an individual banker is in the town or ward specified in the certificate as the location of his banking oflfice. Miner v. Fre- donia, 27 N. Y. 155. RETURN OF DEPOSIT ON CLOSE OF BUSINESS.— Upon discontinuance of business by an individual banker, if the superintendent is satisfied that he has incurred no penalties and has discharged all his obligation, the $1,000 deposit should be returned to him. Atty.-Gen. Rep. (1889) 316. § 144. Conditions to be complied with by foreign banking corpora- tions applying for license. Every foreign banking corporation before being licensed by the superintendent of banks to transact in this state the business of buying, selling, paying or collecting bills of exchange, or of issu- ing letters of credit or of receiving money for transmission or transmitting the same by draft, check, cable or otherwise, or of making sterling or other loans, or any part of such business, or before maintaining in this state any agency for carrying on such business or any part thereof, shall subscribe and acknowledge and submit to the superintendent of banks at his office, a separate ap- plication certificate in duplicate for each agency which such for- eign corporation proposes to establish in this state, which shall specifically state: 9 130 Banking Law. § 145. 1. The name of such foreign banking corporation. 2. The place where its business is to be transacted in this state; and the name of the agent or agents through whom such business is to be transacted. 3. The amount of its capital actually paid in cash and the amount subscribed for and unpaid. 4. The actual value of the assets of such corporation, which must be at least two hundred and fifty thousand dollars in excess of its liabilities; and a complete and detailed statement of its financial condition as of a date within sixty days prior to the date of such application. At the time such application certificate is submitted to the superintendent, such corporation shall also submit a duly exempli- fied copy of its charter and a verified copy of its by-laws, or the equivalent thereof. Source. — Former |§ 33-a, 33-b, rewritten. The requirement of a etatement of the applicant's financial condition as of u, date within sixty days prior to the date of the application, is new. CROSS-REFERENCES.— Powers and duties of superintendent with regard to licensing of foreign corporations, see §§ 27-29. Similar provision as to foreign investment companies, see § 303. § 145. When foreign banking corporation may transact business in this state. No foreign banking corporation, other than a bank organized under the laws of the United States, shall transact in this state the business of buying, selling or collecting bills of exchange, or of issuing letters of credit or of receiving money for transmission or transmitting the same by draft, check, cable or otherwise, or of making sterling or other loans or transacting any part of such business, or raaintaining in this state any agency for carrying on such business, or any part thereof, unless such corporation shall have: 1. Been authorized by its charter to carry on such business and shall have complied with the laws of the state or country under which it is incorporated; 2. Eurnish to the superintendent such proof as to the nature and character of its business and as to its financial condition as he may require; f 146. Banks. 131 3. Designated the superintendent of banks by a duly executed instrument in writing, 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 domestic corporation and had been lawfully served with process within the state ; 4. Paid to the superintendent of banks a license fee of two hun- dred and fifty dollars ; 5. Received a license duly issued to it by the superintendent as provided in section twenty-seven of this chapter. This section shall not be construed to prohibit foreign banking corporations which do not maintain an office in this state for the transaction of business from making loans in this state secured by mortgages on real property, nor from accepting assignments of mortgages covering real property situated in this state, nor from making loans through correspondents which are engaged in the business of banking in this state under the laws of the state. Source.— Former §§ 33-a, 33-b, 34. CROSS-REFERENCES. — Similar provision as to foreign investment com- panies, see § 304. As to service of process on foreign corporations, see Code Civ. Proc, § 432. LOANS ON REAL ESTATE.— Previous to the amendment of former § 33-a by ell. 484 of Laws of 1913, a bank situated in another state could not make even an isolated loan on real estate located in this state without securing a license from the superintendent. Atty.-Gen. Rep. (1912) vol. 2, p. 495. § 146. Bights and privileges of foreign banking corporation under license; effect of revocation. When the superintendent shall have issued a license to any such banking corporation, it may engage in the business specified in the immediately preceding section of this article at the location specified in such license for a period of one year from the date of such license; and such license may, in the discretion of the superintendent, be re-issued from year to year upon the payment by such foreign banking corporation of the sum of two hundred and fifty dollars upon each date that such license is re-issued. No such license shall be transferable or assignable and shall be at all times conspicuously displayed in the place of business specified therein. In the event that such license shall 132 Banking Law. §§ 147, 148. have been revoked by the superintendent, as provided in section twenty-nine of this chapter, it shall be surrendered to the super- intendent within twenty-four hours after such corporation has received written notice of such revocation. Whenever the superintendent shall have revoked any such license and shall have taken the action to make such revocation effective specified in section twenty-nine of this chapter, all the rights and privileges of such foreign corporation to transact busi- ness in this state shall forthwith cease and determine. Source. — Former § 33-b. CROSS-REFERENCES. — Similar provisions as to foreign investment com- panies, see §§ SOS, 308. § 147. Reports of foreign banking corporations; penalties. Every foreign banking corporation licensed by the superintend- ent to engage in business in this state, shall at such times and in such form as the superintendent shall prescribe, make written reports to the superintendent under the oath of one of its officers, managers or agents transacting business in this state, showing the amount of its assets and liabilities and containing such other mat- ters as the superintendent shall prescribe. If any such corpora- tion shall fail to make any such report as directed by the super- intendent, it shall be subject to the penalties prescribed by sec- tion one hundred and thirty-three of this article, and any false statement contained in any such report or in any other sworn statement made to the. superintendent of banks by such corpora- tion in pursuance of the provisions of this article shall constitute perjury. Nothing herein contained shall be deemed to modify the prohibition of section one hundred and forty of this chapter. Source. — Former § 33-b. CROSS-REFERENCES.— Reports required of other persona, see § 133 and annotations thereto. § 148. Deposits of minors and trust deposits and deposits in the names of more than one person. When any deposit shall be made by or in the name of any minor, the same shall be held for the exclusive right and benefit of such minor, and free from the control or lien of all other § 148. Banks. 133 persons, except creditors, and shall be paid, together with the interest thereon t-o the person in whose name the deposit shall have been made, and the receipt or acquittance of such minor shall be a valid and sufficient release and discharge for such deposit or any part thereof to the bank. When any deposit shall bo made by any person describing himself in making such de- posit as trustee for another and no other or further notice of the existence and terms of a legal and valid trust than such descrip- tion shall have been given in writing to the bank in the event of the death of the person so described as trustee, such deposit or any part thereof, together with the dividends or interest thereon, may be paid to the person for whom the deposit was thus stated to have been made. When a deposit shall have been made by any person in the name of such depositor and another person and in form to be paid to either, or the survivor of them, such de- posit thereupon and any additions thereto made, by either of such persons, upon the making thereof, shall become the property of such persons as joint tenants, and the same, together with all interest thereon, shall be held for the exclusive use of the persons so named, and may be paid to either during the life time of both, or to the survivor after the death of one of them; and such pay- ment and the receipt or acquittance of the one to whom such payment is made, shall be a valid and sufficient release and dis- charge to said bank, for all pajinents made on account of such deposit prior to the receipt by said bank of notice in writing signed by any one of such joint tenants, not to pay such deposit in accordance with the terms thereof. Source. — This section is an adaptation of former § 144 relating to savings banks. CROSS-REFERENCES.— Similar provision as to trust companies, see § 198; as to sayings banks, see § 249. See the annotations to the last cited section. 134 Banking Law. § 150. ARTICLE IV. Private Bankers. Section 150. Scope of article. 151. Verified certificate to be submitted by private banker. 152. Conditions precedent to transacting business. 153. Eights of private banker under authorization certificate. 154. Permanent capital; increase or decrease. 155. Segregation of investments; how title to be taken. 156. Depositors preferred in case of insolvency. 157. Annual report of unclaimed deposits. 158. Effect of revocation. 159. Change of location. 160. Conditions entitling private banker to certain exemptions. 161. Deposit of securities with superintendent; termination of surety company's liability. 162. Investment of permanent capital and deposits; proliibitions. 163. When real estate and certain- securities to be sold. 164. Restriction on purchases of and loans on real estate. 165. Books and records. 166. Reserves against deposits. 167. Regulations as to transmission of money to foreign covmtries. 168. Receipts for money received for transmission. 169. Monthly meetings and reports. 170. Reports to superintendent. 171. Restrictions as to place of business. 172. Violations of article prohibited. § 150. Scope of article. The provisions of this article, except as hereinafter further lim- ited, shall apply to every private banker engaged in the business of private banking in any city of the state, 1. Who makes use of any office sign bearing thereon the word " bank ", " banter ", " banking ", or any derivative or compound of the word " bank ", or any words in a foreign language having the same or similar meanings, or who makes use of any exterior sign bearing thereon any such word or words or any words what- ever to indicate to the general public that such person is engaged in the business of a private banker; or 2. Who pays or credits interest, or pays, credits or gives any bonus or gratuity or anything of value, except on certificates of deposit actually outstanding at the time this act takes effect, to any depositor on a deposit balance of (a) less than five hundred § 150. Peivate Bankers. 135 dollars, if such private banker is engaged in business in a city of the first class, or (b) less than three hundred dollars, if such private banker is engaged in business in a city of the second class, or (c) less than two hundred dollars, if such private banker ia engaged in business in a'eity of the third class ; or 3. Who receives money on deposit for safekeeping or for trans- mission to others or for any other purpose in such sums that the average of the separate deposits so received by such private banker since April first, nineteen hundred fourteen, or during any twelve successive months, or for such period, if less than twelve months, that such private banker has been engaged in such busi- ness, exclusive of dividend checks, coupons or other small col- lection items collected by such private banker for customers in the ordinary course of business, is (a) less than five hundred dol- lars, if such private banker is engaged in such business in a city of the first class having a population of over one million, or (b) less than three hundred dollars, if engaged in business in any other city of the first class, or (c) less than two hundred dollars, if engaged in business in any city of the second class, or (d) less than one hundred dollars, if engaged in such business in any city of the third class. Source. — New. Subdivision 4 of § 29d of the General Business Law formed the groundwork of subdivision 3 of this section. The former private banking law was contained in article 3-a of the General Business Law, as added by chapter 348, Laws of 1910, and amended .by chapter 393, Laws of 1911. It was found ineffective, however, as a regulatory measure. By its provisions nominal restrictions were placed upon certain classes of private bankers m cities of the first class; and total exemption from its' provisions could be obtained without any regard to the class of business transacted (Cf. subd. 5, § 29-d, Gen. Bus. Law, as amended by chapter 393, Laws of 1911). The present provisions were designed to give more adequate protection to those who, on account of the inducements offered them of high interest on small accounts, deposit their savings with private bankers. The exemptions of the present law are based upon the class of business transacted. The rec- ommendations of the banking commission as to standards for exemptions were somewhat liberalized before the present law was finally enacted. All private bankers in rniy city of this state are within the scope of the present law, unless they conform their business to certain standards as to balances on which they credit interest, as to the size of average deposits which they accept, and as to the manner in which they hold themselves out to the public. Those meeting slightly lower standards, but not so 136 Banking Law. § 151. low in the larger cities as to permit of competing for savings accounts, are exempted from certain of its provisions. No attempt is made by the present law to regulate private banking conducted outside cities. The United States Supreme Court held that chapter 348, Laws of 1910, was a legitimate exercise of the police power. Engel v. O'Malley, 219 U. S. 128. CROSS-REFERENCES.— Definition of " private banker," see § 2. Definition of "population," see § 3. Prohibition against encroachments on certain powers of banks, see § 140. Prohibition against use of sign with words indicating bank, see § 141. § 151. Verified certificate to be submitted by private banker. Within sixty days after this act takes effect, every private banker to whom this article is applicable, and every other indi- vidual, partnership or unincorporated association thereafter seek- ing to engage in business as such private banker in any city of the state, shall submit to the superintendent of banks at his office in Albany, a verified certifloate in duplicate which shall state : 1. The full name, residence and post office address of such individual or of each member of such partnership or unincor- porated association. 2. The state, or country, of which each individual named in such affidavit is a citizen. 3. The amount of permanent capital such individual, partner^ ship or unincorporated association has kept invested in his busi- ness as a private banker or has deposited in cash to be invested in such business. 4. The place at which such business is to be transacted. 5. If such private! banker is engaged in business as a private banker in a city of the first class, the amount of deposit balance upon which such private banker pays or credits interest or pays, credits or gives any bonus or gratuity or anything of value to a depositor and whether the average of the separate deposits of such private banker since April first, nineteen hundred fourteen, or for a period of twelve months immediately preceding the date of such verified certificate, exclusive of dividend checks, coupons or other small collection items collected by such private banker for customers in the ordinary course of business, has been five hundred dollars or more, if such private banker is engaged in business in such a city with a population of over one million. § 152. Peivate Bankees. 137 or two hundred dollars or more in any other such city; or, if the applicant has not already engaged in such business, said certificate shall state the minimum deposit balance upon which such applicant proposes to pay or credit interest or to pay. credit or give such bonus or gratuity, or thing of value. 6. Whether the applicant is applying for an authorization cer- tificate or claims the right to engage in business as a private banker pursuant to the provisions of section one hundred sixty of this article. Such certificate shall be verified by such individual or by one or more members of a partnership or unincorporated association, in the discretion of the superintendent, upon a form prepared by the superintendent of banks, which shall state that the affiant or affiants have read such certificate and that the facts therein stated are true. Source. — New. Private bankers outside the scope of this article are not required to file any statement whatever with the Superintendent of Banks, and are not subject to any regulation by him. See note to § 172. CROSS-REFERENCES.— Superintendent prohibited from filing defective certificate, see § 21. Filing certificate for examination, see § 22. Investigation of applicant and refusal or approval of superintendent, see § 23. Issuance of authorization certificate, see § 24. Similar provisions as to other persons and corporations engaging in busi- ness under the Banking Law, see § 102 and cross-references there given. § 152. Conditions precedent to transacting business under this article. After the thirty-first day of October, nineteen hundred four- teen, no such private banker shall engage or continue in business as a private banker in any city of the state. 1. Until he has complied with the provisions of section one hun- dred sixty of this article, or 2. Until (a) He shall have invested in his business as such private banker, or deposited in cash to be so invested, the amount of per- manent capital specified in his verified certificate, as required by section one hundred fifty-four of this article; and 138 Banking Law. § 153. (b) He shall have deposited with the superintendent the securi- ties required by section one hundred sixty-one of this article ; and (c) The superintendent of banks shall have issued an author- ization certificate to him and shall have filed such certificate in his office. Provided, however, that a private banker lawfully en- gaged in business at the time this act takes effect may continue in. such business after complying with the provisions of sub- division one, or of paragraphs (a) and (b) of subdivision two, of this section pending the final determination of his rights to engage in such business as provided iu sections twenty-three, twenty-four and twenty-five of this chapter, and for one hundred and twenty days after such determination. Source. — New. The proviso contained at the end of this section was in- serted for the purpose of protecting a private banker against a failure of the superintendent to act upon such banker's certificate or aifidavit. The last clause was inserted for the purpose of permitting such private banker, in case of an adverse decision by the superintendent, to adjust his affairs, or to test the question of whether the decision of the superintendent is reviewable. When introduced into the Legislature the section began "After the thirty- first day of July," but it was amended before passage so as to become effective on November first. See § 502. But in §§ 161 and 172 the corresponding changes were not made. See note to § 161. CROSS-REFERENCES. — For similar provisions as to other persons and corporations engaging in business under the Banking Law, see § 103 and cross-references there given. § 153. Rights and privileges of private banker under authorization certificate. When the superintendent shall have issued an authorization cer- tificate to any such private banker and shall have filed such certi- ficate in his office, such private banker may engage in the business of banking at the location specified in such authorization certi- ficate, subject to all the provisions of this article and of the pro- visions relating to private bankers of article two of this chapter. Source. — New. CROSS-REFERENCES.— Power of superintendent to revoke certificate, z.i'i § 29. Effect of revocation, see § 158. §§ 154, 155, 156. Peivate Bankers. 139 § 154. Permanent capital; increase or decrease thereof. Every such private bauker shall keep unimpaired in his bank- ing business the amount of permanent capital specified in the verified certificate submitted to the superintendent as provided in section one hundred fifty-one of this article. From time to time, with the written approval of the superintendent and apon good cause shown, such permanent capital may be increased or de- creased. The permanent capital of a private banker not engaged in the business of banking at the time the verified certificate of such private banker is filed for examination by the superintendent, must be paid in cash. Source. — New. CROSS-REFERENCES. — Amount of permanent capital required for partial exemption, see § 160. Investments of permanent capital see § 162. Segregation of investments of permanent capital, see § 155. § 155. Segregation of investments of capital and deposits of private banker; title to be taken in descriptive name. All securities, property and the evidences of title thereto, in which the permanent capital of and the deposits with any such private banker have been invested shall be segregated and kept separate and apart from all other property and assets of such pri- vate banker. All deeds, mortgages, assignments and contracts and agree- ments received, taken, or entered into by any such private banker, in connection with such banking business, shall be received, taken, or entered into in the name of such private banker with the addition of the descriptive name " private banker " or " private bankers." Source. — New. The purpose of this section is to make more effective the provisions of § 156 giving to depositors a preferred claim against the assets derived from capital and deposit investments. § 156. Depositors preferred in case of insolvency or suspension. In case of the failure or suspension of any such private banker, the claims of persons for moneys on deposit or delivered for safe keeping or transmission shall be preferred against the proceeds of 140 Banking Law. § 157. any securities deposited by such banker with the superintendent and against such assets as shall be shown by the books of such banker, or by other legal evidence, to have been derived fvojn the investment of such deposits, or from the investment of any per- manent capital segregated and set aside for employment in hia business as such banker. The depositors shall also share pro rata with general creditors in the proceeds of any other assets belonging to such banker. Source. — New. CROSS-REFEKENCES.— For other priorities under the Banking Law, see § 78 and cross-references there given. See § 155 for means of identifying securities derived from capital or deposit investments. § 157. Annual report of unclaimed deposits. In the month of September in each year and on or before thei tenth day thereof, every private banker engaged in business as a private banker under an authorization certificate in any city shall make a verified written report to the superintendent, which shall contain a true and accurate statement of all deposits made with such banker which, on the first day of August pra^eding such report, amounted to fifty dollars or over and which have re- mained unclaimed by any person or persons authorized to receive the same for five years then next preceding. Such statement shall set forth the date of each such deposit, its amount, and the name and last known place of residence or post office address of the person making it. In case any such banker at said date holds no such unclaimed deposits, such banker shall at the time above specified make verified written report to the superintend- ent so stating. No deposit shall be deemed unclaimed within the meaning of this section if it appears from the books of such banker or from other written evidence on file in his ofiice that the person or persons authorized to receive such deposit have knowledge thereof. Every such private banker reporting any unclaimed deposits under the provisions of this section shall cause to be published, once each week for tAvo successive weeks, in a newspaper desig- nated by the superintendent, published in the city in which the business of sudh private banker is located, if there be a newspaper § 158. Peivate Bankers. 141 published therein, and at least once in a newspaper published at Albany in which notices by state officers are required to be pub- lished, a true copy of such report, and shall file with the superin- tendent of banks on or before the first day of October in each year proof by affidavit of such publication. The expense of such publication shall be paid by such private banker, but if, on or be- fore the first day of August in that year, suoh private banker sihall have mailed, postage prepaid, to each person authorized to receive any such unclaimed deposit at his last known place of residence or post office address, a statement showing the amount to which such person is entitled, and requesting written acknowledgment thereof, such private banker may deduct the amount thereof from the si'ms due any such person or persons who shall not have made written acknowledgment before the filing of such report with the superin- tendent, in the proportion that each such sum bears to the aggre- gate thereof. Every such private banker failing to make any report or to file any affidavit of publication required by this section shall forfeit to the people of the state the siim of ons hundred dollars for each day such report or the filing of such affidavit of publication shall be so delayed or withheld, unless the time therefor shall have been extended by the superintendent. Source. — An adaptation of former § 30. CROSS-REFERENCES. — Powers and duties of superintendent with regard to unclaimed deposits, see §§ 45-47. Similar provision as to banks, see § 134; as to trust companies, see § 219; as to savings banks, see § 274. § 158. Effect of revocation by superintendent of authorization or of acceptance of affidavit. Whenever the superintendent shall have revoked his authoriza- tion of any such private banker, or his acceptance of the affidavit of such banker provided for in section one hundred sixty of this anticle, and shall have taken the action to make such revocation effective specified in section twenty-si:!i: of this chapter, all the rights and privileges of such banker, resulting from such preceding authorization or acceptance, shall forthwith cease and determine. Source. — New. CROSS-REFERENCES. — Revocation of acceptance of private banker's affi- davit, see § 26. 142 Banking Law. §§ 159, 160. Revocation of authorization certificate, see § 28. Rights under authorization certificate, see § 153. Rights resulting from acceptance of affidavit, see § 160. § 159. Change of location. Every sucli private banker may make a written application to the superintendent to change his place of business to another place in the same city. The application shall state the reason for such proposed change and sihall be verified by such banker, or if a. partnership or unincorporated association, by each member thereof. Such change may be made upon the written approval of the superintendent. Source. — Former § 31. CROSS-REFERENCES.— See cross-references under § 119. § 160. Conditions entitling private banker to certain exemptions, and extent of such exemptions. Any such private banker who has claimed the right in his veri- fi.ed certificate to engage in business under the provisions of this section, and any such private banker authorized by the superin- tendent to engage in such business, may submit to the superin- tendent an affidavit executed in duplicate and verified in the same manner as such certificate, upon a form to be furnished by the superintendent containing a statement as follows: 1. If such private banker is engaged in business as a private banker in a city of the third class, that such private banker, has permanently invested in this state in his banking business im- mediately preceding the date of such affidavit, a capital of at least twenty-five thousand dollars over and above all his liabili- ties as such private banker; or 2. If such private banker is engaged in businiess as a private banker in a city of the second class, that such private banker has permanently invested in this state in his banking business im- mediately preceding the date of such affidavit, a capital of fifty thousand dollars ovei' and above all his liabilities as such private banker; or 3. If such private banker is engaged in business as a private banker in a city of the first class : § 160. Pbivate Bankeks. 143 (a) That such private banker has pennanently invested in this state in his banking business a capital of at least one hundred thousand dollars over and above all his liabilities as such private banker, if such banker is engaged in business in such a city with a population of over one million ; and at least seventy-five thousand dollars over and above all such liabilities, if such banker is engaged in business in any other such city. (b) That such applicant -will not pay or credit or advertise to pay or credit any interest or pay, credit or give any bonus or gratu- ity whatever or anything of valuei to any depositor on a deposit balance with such private banker of less than five hundred dol- lars, if such applicant is engaged in business in such a city with a population of over one million, or less than three hundred dollars, if engaged in business in any other such city. (c) That the average of the separate deposits received by such private banker, since April first, nineteen hundred and fourteen, or during the twelve months immediately preceding the date of such affidavit, for safe-keeping, for transmission, or for any other purpose, exclusive of dividend checks, coupons or other small collection items collected by such private banker for custom- ers in the ordinary course of business, is three hundred dollars or more, if such applicant is engaged in business in such a city with a population of over a million or two hundred dollars or more if engaged in business in any other such city. Provided, however, that subdivisions b and c of this section shall not apply to certificates of deposit actually outstanding at the time this act takes effect. After the date upon which the superintendent has accepted and filed in his office such affidavit of any private banker, and until the first day of January next succeeding, the subsequent sections of this article shall not apply to such private banker, but siich banker shall be subject to the provisions of the sections of article two of this chapter applicable to such private bankers. Every private banker who has submitted an affidavit which has been duly accepted and filed by the superintendent, and who seeks to continue or to engage in business as a private banker under the provisions of this section after the first day of January succeeding such filing by the superintendent, shall submit to the superintend- ent during the month of [November preceding such first day of 144 Banking Law. § 161. January and annually thereafter during the same month, an affidavit containing a statement as above specified, verified as of a date within such month. In the event of the failure of such private banker so to do, or of the refusal of the superintendent to accept and file said affidavit, such private banker shall cease to transact business as a private banker until the superintendent shall have issued to him and filed in his office an authorizatioai cer- tificate as required by this article. Source. — New. As to the purpose of the section, see note to § 150. CROSS-REFERENCES. — Investigation by superintendent and refusal or acceptance of affidavit, see § 25. Revocation of acceptance, see § 26. Povpers of superintendent over delinquent private bankers, see §§ 56-78. § 161. Deposit of securities with superintendent; manner of ter- minating surety company's liability. Every such private banker, not hereinbefore excepted from the provisions of this section, shall transfer and assign to the superin- tendent of banks, registered stocks or bonds of a kind in which savings banks are required by this chapter to invest their deposits, to an amount in value equal to at least ten per centum of the total deposits held by such private banker, and in any event of the value of at least five thousand dollars, and such banker shall at all times thereafter keep on deposit with the superin- tendent stocks or bonds of such kind to the amount in value of ten per centum of the total deposits with such banker and not less, in any event, than five thousand dollars. Such stocks or bonds shall be registered in the name of the superintendent of banks officially as trustee for the depositors with such private banker, subject to sale and transfer and disposal of the proceeds thereof by the superintendent only upon the order of a court of competent jurisdiction aft^r due notice to such private banker. Until the order of such court authorizing such sale or transfer or other disposition thereof, such private banlser shall be entitled to receive the income from such securi- ties unless he shall be in default to the superintendent in the payment of any assessment, penalty or forfeiture for which such private banker shall have become liable § 161. Private Bankers. 145 under tlie provisions of this chapter. In case such banker shall have deposited with the superintendent securities to an amount in value in excess of the amount at any time required by the pro- visions of this section, upon due proof of such facts, such private banker shall be entitled to receive from the superintendent any such excess. The securities deposited by such banker as required by this section may be exchanged from time to time, with the approval of the superintendent, for other securities of the kind which may be deposited with the superintendent as hereinbefore provided. At any time before the thirty-first day of July,* nineteen hun- dred fourteen, such private banker may deposit, or cause to be deposited, with the superintendent of banks, any securities theretofore deposited by such private banlcer with the comp- troller under the provisions of chapter three hundred forty- eight of the laws of nineteen hundred ten as amended- by chapter three hundred ninety-three of the laws of nineteen hundred eleven, and the comptroller is hereby authorized to transfer such securities to the superintendent of banks, and the superintendent is hereby authorized to receive such securities and to hold them as part of the deposit of securities required by this section for a period of one year after the thirty-first day of July, nineteen hundred four- teen, during which year other securities of the kind which may be deposited with the superintendent as hereinbefore provided shall be substituted therefor. At any time before the thirty-first day of July,* nineteen hundred fourteen, such private banker may cause any surety company, which has received from any such pri- vate banker securities to indemnify itself on account of any bond issued by it on behalf of such banker under the provisions of chap- ter three hundred forty-eight of the laws of nineteen hundred ten, as amended by chapter three hundred ninety-three of the laws * The law, as originally drafted, provided in § 502 for the repeal of the then existing private banking law (Ch. 348, Laws of 1910; Ch. 343, Laws of 1911) to become effective on August first 1914. The legislature by amendment ex- tended the time for such repeal to become effective to November first, but omitted to change July in the present section to October so as to harmonize this section with the amendment in the repealing clause. See § 152, as to legislative intent to permit business to be transacted under the former law until after October 31st. 10 146 Baitking Law, § 161. of nineteen hundred eleven, to assign such securities to the superin- tendent of banks in trust for the depositors with such private banker, and any such surety company is hereby authorized to transfer and assign such securities to the superintendent of banks for such purpose, and in case such securities shall be so assigned and such surety company shall thereafter become liable on such bond, the sums realized from the sale of such securities or from other securities substituted for them, shall be applied in the first instance to the payment of any indebtedness of such private banker to such surety company. Such private banker shall be entitled to have any such securities so transferred by such surety company to the superintendent of banks, received by such super- intendent and held by him as part of the deposit required by this section for a period of one year after the thirty-first day of July,* nineteen hundred fourteen, during which year securities must be substituted therefor in which savings banks are authorized to invest deposits received by them. At any time after this article takes effect any private banker, who has heretofore given a bond to the comptroller pursuant to the provisions of chapter three hundred forty-eight of the laws of nineteen hundred ten, as amended by chapter three hundred ninety-three of the laws of nineteen hundred eleven, may institute a proceeding in the supreme court in the county in which said private banker's place of business is located for an order dis- charging the surety company from any liability under such bond. Such proceedings shall be commenced by filing a verified petition in the ofiice of the clerk of the county in which the principal office of such banker is located, setting forth the facts relating to the giving of such bond, that such banker has complied with the pro- visions of this act, and has assigned, transferred or delivered to the superintendent of banks, the securities or moneys required by this section, and that an authorization certificate has been duly issued to such banker to carry on the business of private banking as herein provided. In case such banker shall i-equest any surety company, which shall have received from any such private * See note at bottom of preceding page. § 161. Peivate Bankees. 147 banker indemnity of any kind as security for the execution of any bond issued by it on behalf of such banker as aforesaid, to assign and transfer any securities given to it, as such indemnity to the superintendent of banks in trust for the depositors of such priv.ate banker, for the persons delivering money for transmission to such private banker, as provided for in this section, or to assign and transfer such securities to said private banker, or his nominee, and such surety company shall refuse to make such assignment or transfer that fact may also be set forth in such petition, together with a description of such securities. Such petition shall also set forth the number of depositors of the private banker. Upon tlie filing of such verified petition, as aforesaid, the court may issue an order requiring the comptroller, the surety company, and the depositors of the private banker as a class, and ten specified depositors of such class, to show cause at a special term of the su- preme court, at a time and place to be fixed by the court, not less than thirty days from the date of granting the order, why the bond referred to in said petition, given by such surety company on behalf of such banker, shall not be canceled and discharged, the surety company relieved from all liability thereunder and any indemnity or securities received and held by siich surety company on account of such bond should not be assigned and transferred to such banker or his nominee, or to the superintendent of banks, aa provided for in this section. Such order shall prescribe the man- ner of giving notice, which shall be by personal service of the petition and order to show cause aforesaid upon the surety com- pany, the comptroller and the aforesaid ten specified depositors of said banker, and by the publication of such order to show cause, once a week, for four successive weeks, in two newspapers of general circulation, published in the county where said banker has his principal place of business. Upon the return day of said order the court shall hear the ap- plication of the petitioner and all persons interested therein, and on such hearing determine any question of fact or law arising thereon or involved therein, and if upon such hearing it shall ap- pear that said private banker has complied with all of the pro- visions of this article, and has received an authorization certificate 148 Banking Law. § 161. permitting such banker to carry on the private banking Business under the provisions of this article and that 'the facts stated in said petition are true, and that proper cause has been shown for granting the prayer of said petitioner, the court shall thereupon enter an order discharging and releasing such surety company from any and all liability on any such bond, and shall direct the comptroller to surrender the same to such surety company upon the assignment and transfer to the superintendent of banks, or to such private banker or his nominee, as the case may be, of any securities held by it as indemnity as aforesaid, and upon the entry of such order and the assignment and transfer of such securities, as provided in said order, such surety company shall be discharged and released from any and all liability on any such bond. Source. — New. Under former article 3-a of the General Business Law (repealed by this act) each applicant for a license to do business generally as a private banker was required to deposit with the state comptroller $10,000 in money or secur- ities approved by the comptroller, and in addition thereto a surety company bond or money or approved securities of not less than $3,000 and equal to twenty per centum of all deposits, but in no event in excess of $50,000. Thus when the deposits of a private banker in Buffalo or Rochester reached $200,- OOO, he could thereby become exempted by reason of the comptroller holding his securities to the amount of $50,000 {subd. 5, § 2i)d, Gen. Bus. Law, supra). Under the present law all private bankers within this section are required to transfer savings tank securities (Cf. § 239) to the Superintendent of Banks equal in value at all times to ten per centum of total deposits and not less in value than $5,000, irrespective of the amount of such deposits. ■ See § 166 regarding total reserves which such private banker must maintain in addition to depositing the above securities with the superintendent. CROSS-REFERENCES.— How securities held by superintendent and right to interest thereon, see § 33. Application of interest in payment of assessments or penalties, see § 34. Exchange of securities and withdrawal of excess, see § 35. Examination and comparison of securities, see § 36. Return of securities, see § 37. Deposit of securities by banks, see § 105; by trust companies, see § 184; by domestic investment companies, see § 292; by foreign investment companies, see § 306. §§ 162, 163. Private Bankers. 149 EFFECT OF TERMINATING SURETY COJIPANY'S LIABILITY.— The termination of the surety company's liability does not affect any liability al- ready incurred. See Gen. Constr. Law, § 93. § 162. Investment of permanent capital and deposits; prohibitions. Every such private banker may, subject to the limitations and restrictions contained in this article, invest his permanent cap- ital and the deposits received by him in such real or personal securities, or real and personal property, consistent with safety and prudence of management as he may deem proper, provided the security afforded depositors is not imperiled by such invest- ments. No such private banker, however, shall appropriate to his own use or lend to any person or persons with whom he is associated as a partner, or invest in any business conducted by a partnership of which such private banker is a member, or lend directly or in- directly to any corporation of which he is the legal or equitable owner to the amount of twenty-five per centum or upwards of the issued capital stock of such corporation, any part of his per- manent capital or of the deposits received by him. Source. — New. The prohibitions of this section were intended to prevent the use of depositors money in personal enterprises of the banker — a prac- tice which has produced disastrous results to the depositors in moat cases where it has been adopted. CROSS-REFERENCES. — Superintendent may take possession if business is conducted in unsafe manner, see §^57; or may order discontinuance of unsafe practices, § 56. § 163. Real estate and certain securities; when to be sold. All real estate which shall hereafter be purchased or otherwise acquired by any such private banker with his permanent capital or with money received by him on deposit or to which such pri- vate banker shall have taken title in connection with his busi- ness as such private banker, except that upon which his office is located, shall be sold within five years after taking title thereto ; and all real estate so purchased or acquired, and held by such private banker at the time when this act takes effect, except that 150 Banking Law. § 164, upon which his office is located, shall he sold within five years after this act takes effect; unless upon his application the super- intendent of banks shall, in either case, have extended the time within which such sale shall be made. All such real estate and all registered securities and mortgages purchased by any such private banker with any part of his permanent capital or with money received by him on deposit, or held by any such private banker on the date when this act takes effect, shall be sold within one year after such date unless prior to the expiration of such year, such real estate or regis- tered securities or mortgages shall have been recorded in the name of such private banker as provided in section one hundred fifty-five of this article. Source. — ^New, but first paragraph adapted from former § 147 relating to savings banks. The purpose of the second paragraph is to force all capital and deposit investments within the provisions of § 155. CROSS-REFERENCES.— Power of superintendent to extend time within which real estate must be disposed of, see § 49. Restrictions on holding real estate in ease of banks, see § 107 ; of trust com- panies, see § 189; of savings banks, see § 240; of savings and loan associa- tions, see § 387. § 164. Restriction on purchases of, and loans on real estate. 'No such private banker shall hereafter purchase with any part of his permanent capital or deposits received by him any real estate which is subject to a mortgage, lien or encumbrance; nor make a loan, directly or indirectly, upon the security of real estate if such real estate is subject to a prior lien or encumbrance and the amount unpaid upon such prior mortgage, lien or encum- brance or the aggregate amount unpaid upon all prior mortgages, liens and encumbrances exceeds ten per centum of the permanent capital of such private banker, and, if the amount so secured, including all prior mortgages, liens and encumbrances, exceeds two-thirds of the value of such real estate. Source. — Adapted from former § 27, subd. 3. The first clause is new. CROSS-REFEREXCES. — For restrictions on real estate loans contained in other articles of banking law, see § 108 and cross-references thereunder. §§ 165, 166. Private Bankebs. 151 § 165. Books and records. Every such private banker shall keep separate and complete books of account in which shall be promptly entered the details of all business transacted by him as such banker including state- ments in detail of the liabilities incurred by him as such banker and of the securities or property in which the permanent capital and the deposits received by him have been invested. Every such private banker shall conform his methods of keep- ing his books and records to such orders in respect thereto as shall have been made and promulgated by the superintendent pursuant to section fifty-six of this chapter. Any such banker that refuses or neglects to obey any such order shall be subject to a penalty of one hundred dollars for each day that such refusal or neglect continues. Every such private banker shall preserve the records of final entry used in such banking business, including cards used in the card system and deposit tickets, for a period of at least six years from the date of making the same or from the date of the last entry thereon, unless the superintendent shall, upon application of such private banker, have otherwise directed. Source. — The first and third paragraphs are new. The second is derived from former § 8. CROSS-EEFERENCES. — -ror similar restrictions upon other persons and corporations subject to the Banking Law, see § 109 and cross-references there given. § 166. Reserves against deposits. Every such private banker shall maintain total reserves against his aggregate demand deposits, as follows : 1. Fifteen per centum of such deposits if such private banker is engaged in business as a private banker in a city of the first class. 2. Ten per centum of such deposits if such private banker is engaged in business as a private banker in any other city. At least one-tenth of such total reserves shall consist of re- serves on hand and the remainder thereof shall consist of reserves on deposit subject to call in any state bank, national banking asso- ciation or trust company. 152 Banking Law. § 16T. If any such private banker shall fail to maintain his total re- serves in the manner required by this section, he shall be liable for, and shall pay, the assessment or assessments provided for in section thirty of this chapter. Source. — New. CROSS-REFERENCES.— Definitions of " aggregate demand deposits," " re- serves on hand," " reserves on deposit " and " total reserves," see § 3. Assessments for encroachments on reserves, see § 30. Reserves of banks, see § 112; of trust companies, see § 197. As to requirement for deposit of securities with superintendent, see § 161. § 167. Regulations as to transmission of money; burden of proof in action based on failure to transmit. Every such private banker shall forward to the person desig- nated to receive the same, all moneys received for transmission •within five days after the receipt thereof, unless otherwise agreed between the parties in writing. In any action against such pri- vate banker to recover money deposited for transmission with such private banker, the burden of proving the transmission to, and receipt of the money by, the person to whom such money was directed to be paid, shall be upon such private banker. In any such action, such private banker may, however, introduce in evidence his duly authenticated affidavit, or such affidavit of his duly authorized agent, setting forth the fact of the trans- mission of such money either to the person to whom the same was to be transmitted or to the agent or correspondent of such private banker to whom such money may have been transmitted for payment, together with a duly authenticated receipt signed by the consignee of such money ; or in lieu of such receipt, together with a duly authenticated affidavit of such agent or correspondent setting forth the fact of payment. The introduction in evidence in any such action of any such documents setting forth such facts, shall constitute sufficient evidence to shift to the plaintiff the burden of proof of the facts stated therein. Source.— Laws 1910, ch. 348, §§ 29-b, 29-c, revised. §§ 168, 169. Private Bankers. 153 § 168. Private banker or agent thereof shall give proper receipt for money received for transmission. Every such private banker and every agent of such private banker shall, whenever money is received for transmission, give to the person delivering or depositing such money for transmis- sion, a receipt for such money or deposit in the name of such private banker with the name and address of such private banker printed thereon ; and such receipt shall state the date when such money is received, the amount thereof, the name and address of the person to whom such money is to be transmitted and the date not later than which such money is to be transmitted by such private banker. Every person violating the provisions of this section shall forfeit the sum of one himdred dollars for each offense. Source. — New. § 169. Monthly meetings and reports. On or before the tenth day of each month every such private banker shall make a written statement in duplicate of all pur- chases and sales of property in connection with his banking busi- ness and of every discount, loan or other advance made by him, in- cluding overdrafts and renewals since the last preceding monthly statement, describing the collateral, if any, to such indebtedness as of the date upon which the statement is made. But such pri- vate banker may omit from such statement discounts, loans or ad- vances, including overdrafts or renewals of less than one hundred dollars unless by reason of such discounts, loans or advances the liability of some individual, partnership, unincorporated associa- tion or corporation shall have been increased one hundred dollars or more since the last preceding monthly statement; such state- ment shall be verified by such private banker, and one duplicate shall be immediately filed in his office and on the same date the other duplicate shall be mailed in a sealed envelope, postage pre- paid, addressed to the superintendent of banks at Albany. The members of any such partnership or unincorporated asso- ciation of private bankers shall on or before the tenth day of each month meet for the purpose of considering the condition and affairs of the banking business conducted by them and of making 154 Banking Law. § 170. such statement, and such statement shall be verified by each mem- ber of every such partnership or unincorporated association of private bankers except in case of disability or unavoidable absence. Source. — New. Adapted from former § 42. CROSS-REFERENCES.— Similar provision as to banks, see § 129; as to trust companies, see § 214; as to savings banks, see § 264; as to personal loan companies, see § 357. § 170. Reports required by superintendent; penalty for failure to make. Within ten days after service upon him of the notice provided for by section forty-two of this article, every such private banker shall make a written report to the superintendent of banks, which report shall be in the form and' shall contain the matters pre- scribed by the superintendent and shall specifically state the items of permanent capital, deposits, specie and cash items, public securities and private securities, real estate and real estate securi- ties and such other items as may be necessary to inform the public as to his financial condition and solvency or which the superintend- ent may deem proper to include therein, and shall also state the amount of deposits with him, the payment of which in case of in- solvency is preferred by law or otherwise over other depositors. It shall state in detail the particular assets in which the perma- nent capital of such private banker is invested. Every such report shall be verified by the oath of such private banker and of each member of a partnership or an unincorporated association of pri- vate bankers to the effect that the report is true and correct in all respects to the best of the knowledge and belief of such banker or bankers and that the usual business of such banker has been trans- acted at the location stated in the certificate required by section one hundred fifty-one of this article, and not elsewhere. In case of the disability or unavoidaible absence of a member of a part- nership or unincorporated association, such report may be verified by the other members; but the verification shall contain a state- ment of the reason for the failure of any member to sign and verify such report. After the thirty-first day of December nine- teen hundred and eighteen, every such report shall within thirty days after it shall have been filed with the superintendent be §§ 171, 172. Private Bankers. 155 published by such private banker in one newspaper of the place where such private banker is engaged in business or if no newst- paper is published there, in the newspaper published nearest to such placet Every such private banker shall also make such other special re- ports to the superintendent as he may from time to time require in such form and on such dates as may be prescribed by the super- intendent, which reports shall if required by the superintendent be verified in such form as he may prescribe. If any such private banker shall fail to make any report re- quired by this section on or before the date designated for the making thereof or shall fail to include therein any matter re- quired by the superintendent, such private banker shall forfeit to the people of the state the sum of one hundred dollars for every day that such report shall be delayed or withheld and for every day that it shall fail to report any such omitted matter, unless the time therefor shall have been extended by the superintendent, as provided by section forty-nine of this chapter. Source.— Adapted from former §§ 21, 22 and 24. CROSS-REFEEE'NCES.— Powers and duties of superintendent witk regard to reports, see §§ 42, 43. Similar provisions as to other persons and corporations doing business imder the Banking Law, see § 133 and cross-references there given. § 171. Restrictions as to place of business. A private banker shall not do business, or be located in the same room with, or in a room connecting with any bank, trust company, savings bank, or national banking association. Source. — New. The purpose of this section is to prevent a repetition of conditions revealed by the suspension of Bischoffs private bank which was engaged in business in the same quarters with an incorporated bank. Restrictions as to place of business and branch offi;res of savings bank, see § 245. § 172. Violations of this article prohibited; penalty imposed, 'No individual, partnership or unincorporated association to which ^this^iapie* is applicable shall, after the thirty-first day of July,* nineteen hundred and fourteen, engage in or continue in business * See note to § 161. 156 Banking Law. § 172. in any city as a private banker unless the superintendent of banks shall have issued an authorization certificate to him or them and shall have filed such certificate in his office, or shall have accepted and filed in his office the affidavit submitted by such private banker or bankers under the provisions of section one hundred and sixty of this article. Any individual, partnership or unincorporated association violat- ing the provisions of this section shall forfeit to the people of the state the sum of two hundred dollars for every day after the afore- said date that such individual, partnership or unincorporated as- sociation shall engage in or continue in business as such private banker or bankers. Souice. — New. Note. — The word " chapter " in the second line should read " article." The mistake came about through the fact that the definition of " private banker " in section 2 as originally drafted included the limitation now contained in § 150. When the definition was broadened to cover all private bankers the word " chapter " in § 172 should have been changed to " article." Teust Companies. 157 ARTICLF V. Trust Companies. Section 180. Incorporation; organization certificate. 181. Notice of intention to organize. 182. Submitting organization certificate for examination. 183. Wiien corporate existence begins; conditions precedent to com- mencing business. 184. Deposit of securities with superintendent. 185. General powers. 186. Additional powers of certain trust companies. 187. Powers of specially chartered trust companies. 188. Appointment in fiduciary capacities; exercise of fiduciary powers. 189. Restrictions on taking and holding real estate. 190. Restrictions on liabilities of one person and on loans and pur- chases of securities. 191. Restrictions- on power to contract or to accept or execute trusts. 192. Restrictions on power to receive deposits of funds paid into court. 193. Restrictions on investments of capital. 194. Restrictions as to entries in books. 195. Restrictions on branch offices. 196. Restrictions on deposit of trust company's funds. 197. Reserves against deposits. 198. Deposits of minors and trust deposits and deposits in the names of more than one person. 199. Interpleader in certain actions; costs. 200. Rate of interest. 201. Interest on collateral demand loans of not less than five thou- sand dollars. 202. Calculation of earnings for dividend period. 203. Surplus fund. 204. Dividends. 205. Change of location. 206. Rights and liabilities of stockholders. 207. Assessment of stockholders when capital impaired. 208. Number of directors; classification; tenure. 209. Annual meeting of stockholders. 210. Qualifications of directors. 211. Oath of directors. 212. Failure to elect; vacancies. 213. Annual meeting of directors. 214. Monthly meetings of directors. 215. Examinations by directors. 216. Reports of directors' examinations. 217. Communications from banking department. 218. Reports to superintendent. 158 Banking Law. § 180. Section 219. Annual report of unclaimed deposits, dividends and interest. 220. Trust company to pay expenses incurred in its behalf by super- intendent. 221. Preservation of books and records. 222. Restrictions on officers, directors and employees. 223. Prohibition against encroachments on powers. § 180. Incorporation; oi^anization certificate; amount of capital stock. When authorized by the superintendent of banks as provided by section twenty-three of this chapter, seven or more persons may form a corporation to be known as a trust company. Such persons shall subscribe and acknowledge an organization certi- ficate in duplicate, which shall specifically state: 1. The name by which the trust company is to 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 such capital stock shall be divided, which capital stock shall amount to not less than: (a) One hundred thousand dollars, if the place where its busi- ness is to be transacted is an incorporated or unincorporated village or city the population of which does not exceed twenty-five thou- sand. (b) One hundred and fifty thousand dollars, if the place where its business is to be transacted is a city the population of which exceeds twenty-five thousand but does not exceed one hundred thousand. (c) Two hundred thousand dollars, if the place where its busi- ness is to be transacted is a city the population of which exceeds one hundred thousand but does not exceed two hundred and fifty thousand. (d) Five hundred thousand dollars, if the place where its business is to be transacted is a city the population of which exceeds two hundred and fifty thousand. 4. The names and places of residence of the incorporators. 5. The term of its existence, which may be perpetual. 6. A declaration that each incorporator will accept the responsi- bilities and faithfully discharge the duties of a director therein if elected to act as such when authorized by the provisions of this chapter. § 181. Teust Companies. 169 Such certificate may provide for the manner in which the stock of the corporation may be transferred and for the number of directors necessary to constitute a quorum. Source. — Former § 180. The minimum number of incorporators has been reduced from thirteen to seven for the purpose of providing against embar- rassment in conducting trust company business that may arise from possible federal legislation against interlocking directors. OTHER STATUTES AFFECTING TRUST COMPANIES.— Trust com- panies are subject to all provisions of the General Corporation Law and the Stock Corporation Law, except such as are made inapplicable expressly or by necessary implication. Tax Law, § 27. — Reports of corporations. 183. — Exemption from tax on capital stock. 188. — Franchise tax. 190. — -Credit on purchase of State bonds. Penal Law, §§ 290, 294, 297, 298, 299, 303, 304, 305, 660, 661, 662, 664, 665, 666, 688. CROSS-REFERENCES.— Definition of "trust company," see § 2; of " population," see § 3. Directors, see §§ 208-216. Similar requirements in cape of other persons and corporations engaging in business under the Banking Law, see § 100 and cross-references there given. As to qualifications of incorporators, seo Gen. Corp. Law., § 4; corporate names, id. § 6; amended and supplemental certificates, id. § 7; extension of corporate existence, id. § 37. Transfer of stock, see Stock Corp. Law, § 40 et seq. APPROVAL OF CHANGE OF NAME.— This is governed by Gen. Corp. Law, § 60, which provides that in case of a banking corporation, the appli- cation for the change must bo approved by the superintendent. This applies not only to banks, but to all corporations organized under the Banking Law. Atty.-Gen. Rep. (1900) 255; Atty.-Gen. Rep. (1902) 186. § 181. Notice of intention to organize; filing, publication and service upon existing banks and trust companies. At the time of executing such organization certificate, the pro- posed incorporators shall sign a notice of intention to . organize such trust company vrhich shall specify their names, the name of the proposed corporation, the amount of its capital stock, and its 160 Banking Law. § 182. location as set forth in the organization certificate. The original of such notice shall be filed in the office of the superintendent of banks within sixty days after the date of execution, and a copy thereof shall be published at least once a week for four successive weeks in a newspaper designated by the superintendent as pro- vided in section twenty of this chapter, such publication to be ' commenced within thirty days after such designation. A copy of such notice shall, at least fifteen days before the organization certificate is filed with the superintendent for examination, be served upon each state bank and trust company organized and doing business in the village, borough or city, if in a city not divided into boroughs, specified as the location of the proposed trust company by mailing such copy, postage prepaid, to said banks and trust companies. Source. — Former § 181 revised. Time within which publication of notice of intention must be begun after Superintendent designates newspaper, is new, as is also the limitation of time after organization certificate is filed for examination within which notice of intention must be served upon banks and trust companies. The requirement that banks in the same territory shall also be served with notice is new. CROSS-REFERENCES.— Dutes of superintendent upon receipt of notice of intention, see § 20. Similar provision as to banks, see § 101 ; as to savings banks, see § 231. § 182. Submitting organization certificate to superintendent; proof of publication and service of notice of intention. After the lapse of at least twenty-eight days from the date of the first due piiblication of the notice of intention to organize and within ten days after the date of the last publication thereof, the organization certificate, executed in duplicate, shall be submitted to the superintendent of banks at his office together with affidavits or other evidence satisfactory to him showing due publication and service of the notice of intention to organize prescribed in section one hundred eighty-one of this article. Source. — Former §§ 180, 182, rewritten. The requirement of the lapse of at least twenty-eight days is new, the purpose being to require a publication covering four full weeks. CROSS-REFERENCES.— Spe cross-references given under § 102, which is identical with this section. §§ 183, 184. Teust Companies. 161 § 183. When corporate existence begins; conditions precedent to commencing business. When the superintendent shall have endorsed his approval on the organization certificate, as provided by section twenty-three of this chapter, the corporate existence of the trust company shall begin, and it shall then have power to elect officers and transact such other business as relates to its organization. But the trust company shall transact no other business until : 1. All of its capital stock shall have been fully paid in cash and an affidavit stating that it has been so paid, subscribed and sworn to by its two principal officers shall have been filed in the clerk's office of the county in which its principal office is located and a certified copy thereof in the office of the superintendent ; 2. It shall have filed in the office of the superintendent a list of its stockholders, verified by two of its principal officers, giving the name, residence, post-office address and number of shares of stock held by each stockholder ; 3. It shall have made the deposit with the superintendent required by section one hundred eighty-four of this article; .4. The superintendent shall have duly issued to it the authori- zation certificate specified in section twenty-four of this chapter. Source. — The provision as to when corporate existence shall begin is new. The requirement that the capital stock shall have been fully paid in cash is taken from former § 184. The requirement of an affidavit that it has been so paid comes from former § 13. The requirement as to the list of stockholders is taken from former § 185. That relating to the deposit with the superin- tendent is derived from former § 14. The requirement as to the authorization certificate comes from former § 32. CROSS-REFERENCES.— Similar provisions as to other persons and corpo- rations engaging in business under the Banking Law, see § 103 and cross- references there given. Forfeiture of corporate rights by not commencing business, see § 485. § 184. Deposit of securities with superintendent. Every trust company shall, until an order of the supreme court is obtained declaring the business of the trust company closed, keep on deposit with the superintendent of banks interest bearing stocks or bonds of the United States or of this state, or of any city, county, town, village or free school district in this state, authorized by the legislature to be issued, to the amount in value 11 162 Banking Law. § 184. of ten per centum of its capital stock, but not less in any case than: 1. One hundred thousand dollars, if its principal place of business is located in a city the population of which exceeds five hundred thousand; 2. Pifty thousand dollars, if its principal place of business is located in a city the population of which exceeds one hundred thousand but does not exceed five hundred thousand ; 3. Thirty thousand dollars, if its principal place of business is located in a city the population of which exceeds twenty-five thousand and does not exceed one hundred thousand; 4. Twenty thousand dollars, if its principal place of business is located elsewhere in this state. Such securities shall be registered in the name of the superin- tendent of banks of the state of New York in trust for the creditors of and depositors with such trust company and subject to sale and transfer, and to the disposal of the proceeds thereof by the super- intendent only on the order of a court of competent jurisdiction. The trust company, so long as it shall continue solvent and comply with the laws of the state, may be permitted by the super- intendent to collect the interest on the securities so deposited and from time to time to exchange such securities for others as pro- vided by section thirty-five of this chapter, and may examine and compare such securities as provided by section thirty-six of this chapter. Source. — Former § 14. CROSS-REFERENCES.— Definition of " population," see § 3. How securities held by superintendent and right to interest thereon, see § 33. Application of interest in payment of assessments or penalties, see § 34. Exchange of securities and withdrawal of excess. See § 35. Examination and comparison of securities, see § 36. Return of securities, see § 37. Deposit of securities by other persons and corporations subject to the Bank- ing Law, see § 105 and cross-references there given. EFFECT OF INCREASE OF POPULATION.— Where a trust company has made the deposit required by this section and begun business, the attorney- general has ruled that it cannot thereafter be compelled to make a further deposit on the ground that the population of the city or town has so increased as to put it in a different class. Atty.-Gen. Rep. (1906) 519. § 185. Trust Companies. 163 § 185. General powers. In addition to the powers conferred by the general and stock corporation laws, every trust company shall, subject to the restric- tions and limitations contained in this article, have the following powers : 1. To act as the fiscal or transfer agent of the United States, of any state, municipality, body politic or corporation; and in such capacity to receive and disburse money, to transfer, register and countersign certificates of stock, bonds or other evidences of indebtedness, and to act as attorney in fact or agent of any person or corporation, foreign or domestic, for any lawful purpose. 2. To discount and negotiate promissory notes, drafts, bills of exchange and other evidences of debt; buy and sell exchange, coin and bullion ; lend money on real or personal securities ; and to receive deposits of moneys, securities or other personal property from any person or corporation upon such terms as the company shall prescribe. 3. To lease, hold, purchase and convey any and all real prop- erty necessary in the transaction of its business, or which the purposes of the corporation may require, or which it shall any- where acquire in settlement or partial settlement of debts due the corporation by any of its debtors, or to secure such debts, or through sales under any judgment, decree or mortgage held by it. 4. To act as trustee under any mortgage or bonds issued by any municipality, body politic or corporation, foreign or domestic, and accept and execute any other municipal or corporate trust not prohibited by the laws of this state. 5. To accept trusts from and execute trusts for married women, in respect to their separate property, and to be their agent in the management of such property or to transact any business in rela- tion thereto. 6. To act under the order or appointment of any court of com- petent jurisdiction as guardian, receiver or trustee of the estate of any minor, and as depositary of any moneys paid into court, whether for the benefit of any such minor or other person, cor- poration or party, and in any other fiduciary capacity. To be appointed and to act under the order or appointment of any court of competent jurisdiction as trustee, guardian, receiver or committee of the estate of a lunatic, idiot, person of unsound 164: Banking Law. § 185. mind or habitual drunkard, or as receiver or eonimittee of the property or estate of any person in insolvency or bankruptcy pro- ceedings; to be appointed and to accept the appointment of ex- ecutor of or trustee under the last will and testament, or adminis- trator with or without the will annexed of the estate of any de- ceased person. 7. To take, accept and execute any and all such legal trusts, duties and powers in regard to the holding, management and dis- position of any estate, real or personal, wherever located, and the rents and profits thereof, or the sale thereof, as may be granted or confided to it by any court of competent jurisdiction, or by any person, corporation, municipality or other authority and it shall be accountable to all parties in interest for the faithful discharge of every such trust, duty or power which it may so accept. 8. To take, accept and execute any and all such trusts and pow- ers of whatever nature or description as may be conferred upon or entrusted or committed to it by any person or persons, or any body politic, corporation, domestic or foreign, or other authority by grant, assig-nment, transfer, devise, bequest or otherwise, or which may be entrusted or committed or transferred to it or vested in ic by order of any court of competent jurisdiction, or any surrogate, and to receive, take, manage, hold and dispose of according to the terms of such trust or power any property or estate, real or per- sonal, which may be the subject of any siTch trust or power. 9. To purchase, invest in and sell stocks, bills of exchange, honds and mor'tgages and other securities; and when moneys or securities for moneys are borrowed or received on deposit, or for investment, the bonds or obligations of the company may be given therefor, but it shall have no right to issue bills to circulate as money. 10. To accept for payment at a future date, drafts drawn upon it by its cusitomers and to issue letters of credit authorizing the holders thereof to draw drafts upon it or its correspondents at sight or on time, not exceeding one year. 11. To receive, upon terms and conditions to be prescribed b;^ the company, upon deposit for safe keeping, bonds, mortgages, jewelry, plate, stocks, securities and valuable papers of any kind, and other personal property, for hire, and to let out receptacles for safe deposit of personal property. § 185. Tkust Companies. 165 12. To purchase and hold, for the purpose of becoming a mem- ber of a federal reserve bank, so much of the capital stock there',)f as will qualify it for membership in such reserve bank, pursuant to an act of congress, approved December twenty-three, nineteen hundred and thirteen, entitled the "Federal Reserve Act;" to become a member of such federal reserve bank, and to have and exercise all powers, not in conflict with the laws of this state, which are conferred upon any such member by the federal reserve act. Such trust company and its directors, officers and stockholders shall continue to be subject, however, to all liabilities and duties imposed upon them by any law of this state and to all the provisions of this chapter re- lating to trust companies. Source. — Former § 186, with the following changes: In subdivision 1 the words " attorney in fact or " have been inserted before: " agent." In sub- division 2 the specific power to discount has been added and the powers of trust companies have been more closely assimilated to those conferred on banks by § 106, subd. 2. In subdivisions 3, 4 and 5 there are no substantial changes. In subdivision 6 the phrase " court of competent jurisdiction " has been substituted for " court of record " and the words " and in any other fiduciary capacity" have b'^en added, while the second paragraph of the sub- division contains the substance of former § 186, subd, 10. In subdivision 7 there is no substantial change. In subdivision 8 tlie words " to receive, take, manage, hold and dispose of a,ccording to the terms of such trust or power " have been substituted for the words " to receive and take and hold." In sub- division 9 there is no change. Subdivision 10 is new, being identical with § 106, subd 2, relating to banks. Subdivision 11 is derived from portions of former §§ 187, 188, but the power transferred to this subdivision has been extended to all trust companies. Subdivision 12 is new, being identical with § 106, subd 4, relating to banks, which see. CROSS-EEFERENCES.— Powers of banks, see § 106. Prohibition against encroachments on powers, see § 22,3. Powers of corporations in general, see Gen. Corp. Law, §§ 10, 11 ; acquisition of real property, id., §§ 13, 14. NOW HAVE GENERAL BAMMING POWERS.— In Jenkins v. Neflf, 186 U. S. 230, affirming 163 N. Y. 320, it was held that under the former law trust com- panies were not authorized to do a strictly banking business, and, consequently U. S. Rev. Stat., § 5219, forbidding the taxation of National banks "at a greater rate than is assessed upon other moneyed capital in the hands of indi- vidual citizens of such state " was not violated by the provisions of the Tax Law discriminating between shares of stock of National banks and shares of stock of trust companies. It would now seem that trust companies are au- thorized to do a strictly banking business. 166 Banking Law. § 185. NO POWER TO GUARANTEE.— Trust companies occupy a fiduciary posi- tion and must be coniined not only within the words, but within the spirit of the statutory provision which declares that a corporation sliall not possess or exercise any powers not given by law, and not necessary to the exercise of the powers so given. The power given a trust company to buy and sell stocks and bonds does not include power to guarantee the sale of securities at a spe- cific price within a specified period. Such a guarantee is an ultra vires act. Gause v. Commonwealth Trust Co., 196 N. Y. 134, aff'g 124 App. Div. 438, aff'd 55 Misc. 110. A trust company has no power to represent to a purchaser of bonds issued under a mortgage of which it is trustee that it is a first mortgage, or to in- sure the title to the mortgaged property. Davidge v. Guardian Trust Co., 203 N. Y. 331, rev'g 136 App. Div. 78. CANNOT ISSUE BONDS IN ADMIRALTY PROCEEDINGS.— A trust com- pany cannot issue bonds to be filed in admiralty proceedings, since such a bond is virtually a guarantee and it is held that a trust company has no right to give a guaranty. Atty.-Gen. Rep. (1909) 732. CANNOT BECOME NATIONAL BANK.— The superintendent should not authorize a trust company organized under the Banliing Law to become a National bank. Atty.-Gen. Rep. (1906) 521. ' CANNOT DO INSURANCE BUSINESS.— A trust company can not be per- mitted to take deposits upon an agreement to pay to the depositor's represen- tative, in the event of his death before the expiration of a specified period, 2-'5 per cent, in addition to the principal. This is in the nature of insurance, and can only be done by corporations organized under the insurance laws. Atty.- Gen. Rep. (1899) 157. MAY DO BUSINESS ON PLAN OF SAVINGS BANK.— Section 279, pro- hibiting corporations other than savings banks or savings and loan associations from holding themselves out as savings banks, does not make it unlawful for a trust company to transact its business on the general plan of, or in the man- ner usually adopted by savings banks. People v. Binghamton Trust Co., 139 N. Y. 185, aff'g 65 Hun 384. SUBDIVISION 1. WHO MAY EXERCISE POAVERS.— By § 223 federal reserve banks are al- lowed to exercise the powers conferred by this subdivision, and domestic cor- porations exercising any of such powers at the time this act took effect are authorized to continue the exercise thereof. Under the former law the Attorney-General was of the opinion that no cor- poration not incorporated under the Banking Law could act as transfer agent or registrar. Atty.-Gen. Rep. (1904) 364; Atty.-Gen. Rep. (1912) vol. 2, p. 187. POWER TO ISSUE PROSPECTUS.— Under this subdivision, taken in con- nection with subd. 9, a trust company has power to issue a prospectus adver- tising for sale bonds of a corporation for which the trust company is fiscal § 186. Trust Companies. 167 agent. Kavanaugh v. Gould, 147 App. Div. 281, overruling Kavanaugh v. Commonwealth Trust Co., 64 Misc. 303. SUBDIVISION 2. PROHIBITIONS AGAINST ENCROACHMENTS.— Section 223, prohibiting encroachments on the powers of trust companies, does not apply to this sub- division except as to the power to receive deposits in trust, but restrictions upon powers to discount and receive general deposits are covered by § 140. TAKING UNAUTHORIZED COLLATERAL.— If an unauthorized security be taken, it is enforcible. Davis Sewing Machine Co. v. Best, 30 Hun, 638. SUBDIVISION 3. DOES NOT APPLY TO INVESTMENTS OF CAPITAL.— Section 193 ex- clusively controls investments of capital, and, therefore, a trust company can- not invest part of its capital in a banking house to be used as its place of business. Atty.-6en. Rep. (1912), vol. 2, p. 289 (disapproving contrary opinion of predecessor, Atty.-Gen. Rep. [1897], 159). SUBDIVISION 4. All other corporations are prohibited by § 223 from exercising these powers and those contained in subdivisions 5, 0, 7 and 8. SUBDIVISION 6. " MONEYS PAID INTO COURT." — These words held to include bankruptcy funds deposited by a receiver or trustee in bankruptcy. Morris v. Carnegie Trust Co., 154 App. Div. 596. SUBDIVISION 9. "OR FOR INVESTMENT."— Under this subdivision a trust company has power to receive deposits for investment and issue investment certificates agreeing to repay at a certain date the money, with interest, and to hold, at all times prior to the maturity of the certificate, as security for its payment, the collateral notes in which the money is invested and the collateral by which such notes are secured. Atty.-Gen. Rep. (1902) 232. SUBDIVISION II. Note. — The remedies given by § 331 apply exclusively to safe deposit com- panies and consequently these matters should be covered by contract. § 186. Additional powers of certain trust companies. Every trust company which at the time this act takes effect lawfully possesses and exercises the power, for hire, to examine titles to real estate, to procure and furnish information in relation thereto, and to guarantee or insure the title to real estate to persons 168 Bankiitg Law. §§ 187, 188. interested, in such real estate or in mortgages thereon, against loss, by reason of defective title or other encumbrances of or upon, such real estate, shall continue to possess such power, but no other trust company shall hereafter have or exercise such power. Source. — Former § 187, which gave the power to such trust companies only as had a capital of $500,000, or over, and had their principal place of business in a county of less than 600,000 and over 300,000 inhabitants. The power to insure titles to real estate was not considered a power which trust companies should possess. The business involves highly technical knowledge and the assumption of the liability arising therefrom was not considered in further- ance of the objects for which trust companies generally are created. , § 187. 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 ami dhall be subject to such provisions of this chapter as are not incon- sistent with the special laws relating to such specially chartered company. Source. — Former § 197. NO XEW POWERS were given to trust companies generally by this sec- tion. Jenlcins v. NefF, 186 U. S. 230, aff'g 163 N. Y. 520. DEPOSITARY OP RESERVES.— Under this provision the Superintendent of Banks is entitled to designate as a depositary of reserves a trust company incorporated by a special act. Atty.-Gen. Rep. (1900) 165. MERGER. — By virtue of this section it was held that the Equitable Trust Co. of N. Y. and the Mercantile Trust Company, both incorporated under spe- cial acts, were entitled to merge pursuant to the provisions of former §§36 to 38 (new §§ 487-496). Colby v. Equitable Trust Co., 124 App. Div. 262, afif'd 192 N. Y. 535. SUBJECT TO LIQUIDATION BY SUPERINTENDENT.— A specially char- tered trust company is within the provisions of §§ 57-81, relating to liqui- dations by the superintendent. Atty-Gen. Rep. (1910) 832. § 188. Provisions relating to appointment of and exercise of powers as executor and in other fiduciary capacities, 1. Executor. When any trust company is appointed executor in any last will and testament, the court or officer authorized to grant letters testamentary in this state, shall, upon the proper ap- plication, grant letters testamentary thereon to such corporation or to its successor by merger. § 188. Teust Companies. 169 2. Guardian, trustee or administrator. Any trusit company may he appointed guardian, trustee or administrator, with or without the will annexed, on the application or consent of any per- son acting as such or entitled to such appointment and in the place and stead of such person, or such trust company may be joined with any person so acting or entitled to such appointment; but such appointments shall be made upon such notice, as is required by law, to the persons interested in the estate or fund and on the consent of such of the principal legatees or other persons interested in the estate or fund as the court, surrogate or judge making the appointment shall deem proper. ITo appointment so made shall be deemed to increase the number of persons entitled to full com- pensation beyond the number so entitled under the terms of the will or deed creating the trust or appointing a guardian or au- thorized by law. Whenever a person is joined with such trust com- pany in any appointment as guardian, trustee or administrator with or without the will annexed^ his appointment may be under such limitation of powers and upon such terms and conditions as to deposit of assets by such person, with such trust company, or otherwise, and upon such reduced bond or security to be given by such person, as the court, surrogate or judge, making the appoint- ment, shall prescribe. When application is made to any court or officer having au- thority to grant letters of administration with the will annexed upon the estate of any deceased person, and there is no person entitled to such letters who is qualified, competent, willing and able to accept such administration, such court or officer may at the request of any party interested in the estate, grant such letters of administration with the will annexed, to any such corporation. Any court or officer having authority to grant letters of guard- ianship of any infant may upon the same application as is re- quired by law for the appointment of a guardian for such infant, appoint any such corporation as the guardian of the estate of such infant. 3. Committee of lunatic, et cetera. Any court having juris- diction to appoint a trustee, guardian, receiver or committee of the estate of a lunatic, idiot or habitual drunkard, or to make any fiduciary appointment, may appoint any such corporation to be such trustee, guardian, receiver or committee, or to act in any other fiduciary capacity. 170 Banking Law. § 188, 4. Receiver, trustee or committee. Any court, having juris- diction to appoint a committee or trustee or a receiver in in- solvency or bankruptcy proceedings or in any other proceeding, or action, under state or federal law, may appoint any such corpora- tion to be such receiver, trustee or committee. 5. Depositary for moneys paid into court. All moneys brought into court by order or judgment of any court of record of this state, or of any other state or of the United States, may be de- posited with any such corporation that has been designated a de- positary by the comptroller of the state of New York, as provided by the code of civil procedure. Whenever any such corporation shall be designated by the comptroller as a depositary for funds and moneys paid into court, it shall give to the people of the state a bond in the form and manner prescribed in this chapter. 6. Bonds. 1:^0 bond or other security, except as hereinafter pro- vided, shall be required from any such corporation for or in re- spect to any trust, nor when appointed executor, administrator, guardian, trustee, receiver, committee or depositary or in any other fiduciary capacity. The court, or officer making such ap- pointment may,_ upon proper application, require any corporation, which shall have been so appointed, to give such security as to the court or officer shall seem proper, or upon failure of such corpora- tion to give security as required, may remove such corporation from and revoke such appointment. 7. Investments. All investments of money received by any such corporation, and by any trust company chartered by special act, prior to May eighteen, eighteen hundred and ninety-two, as executor, administrator, guardian, personal or testamentary trus- tee, receiver, committee or depositary, shall be at its sole risk, and for all losses of such money the capital stock, property and effects of the corporation shall be absolutely liable, unless the investments are such as are proper when made by an individual acting as trustee, executor, administrator, guardian, receiver, committee, depositary, or such as are permitted in and by the instrument or words creating or defining the trust. 8. Preference. If dissolved by the legislature or the court, or otherwise, or liquidated by the superintendent of banks or other- wise, the debts from such corporation as guardian, trustee, executor, administrator, committee or depositary, shall be entitled to priority § 188. Teust Companies. 171 of payment from the assets of such corporation on an equality with any other priority given by this chapter. 9. Court orders, accounts. Such court or officer may make orders respecting such trusts and require any trust company to render all accounts, which sucji court or officer might lawfully re- quire if such executor, administrator, guardian, trustee, receiver, committee, depositary or such trust company acting in any other fiduciary capacity, were a natural person. 10. No official oath required. Upon the appointment of such trust company as such executor, administrator, guardian, trustee, receiver or committee, no official oath shall be required. 11. Interest. On all sums of money not less than one hundred dollars, which shall be collected and received by a trust company acting 'OS executor, ladministrator, guardian, trustee, receiver or committee under the appointment of any court or officer, or in any fiduciary capacity under such appointment, or as a depositary of moneys paid into court, interest shall be allowed by such trust company at not less than the rate of two per centum per annum until 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 trust com- pany 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. Source. — Subdivision 1 is from former § 189. The words "or to its suc- cessor by merger " have beeu added to incorporate the rule laid down in Matter of Bergdorf 206 N Y. 309. The first paragraph or subdivision 2 is from former § 187 and the last two paragraphs are from former § 189. There are no substantial changes. Subdivision 3 is from former § 189 without change. Subdivision 4 is new, its purpose being to supplement § 185, subds. 6, 7 and 8. The first sentence of subdivision 5 is from former § 189. The words "of this state or of any other state or of the United States " are new, as are the words " a depositary " after the word " designated." The second sentence of this subdivision is from former § 190 with the omission of the words " before receiving any such deposit " after the words " paid into court." Subdivision 6 is from former § 190. The words " or in any other fiduciary II 172 Banking Law. § 188. capacity " are new. The word " hereinafter " in the first line should be " in this section,'' as it refers not only to the subsequent matter in this subdivision but also to the matter in subdivision 5, which in former § 190 came after the matter contained in this subdivision. Subdivision 7 is from former § 190. The words " personal or testamentary trustee " have been added. Instead of " such as are proper " the old language was " such as the courts recognize as proper." Subdivision 8 is from former § 190. The words " or liquidated by the superintendent of banks or otherwise " are new. The words " shall be en- titled to priority of payment from the assets of such corporation on an equality with any other priority given by this chapter " have been substituted for the words " shall have the preference." Subdivision 9 is from former § 190. The words " or such trust company acting in any other fiduciary capacity " are new. Subdivision 10 is from former § 191 without substantial change. Subdivision 11 is from former § 194 without substantial change. EXECUTOR. — Power of foreign trust company to act as executor, see § 223. DEPOSITARY FOR MONEYS PAID INTO COURT.— The words "any court of record " include bankruptcy courts. Morris v. Carnegie Trust Co., 154 App. Div. 596. Restriction on power to receive deposits of funds paid into court, see § 192. How accounts of such deposits to be kept, see § 194, subd. 5. Supervision of court funds, see County Law, § 240 ; State Finance Law, § 4. INVESTMENTS. — Authorized investments of savings banks, see § 239. Authorized investments of trust funds generally, see Personal Prop. Law, § 21. It should be noted that the following provision, contained in former § 193, has been omitted : " The moneys received by any such corporation in trust may be invested in its discretion in the securities of the kind in which its capital is required to be invested, or in the stocks or bonds of any state of the United States, or in such real or personal securities as it may deem proper." The trust company incurs no liability for investments authorized by Laws 1902, ch. 295, that is, such investments as savings banks are authorized to make, and bonds and mortgages on unencumbered real estate worth 50 per cent, more than the amount loaned thereon. For investments other than those authorized by the above mentioned statute, and such others as are per- mitted in and by the instrument or words creating or defining the trust, the trust company is contingently liable. Atty.-Gen. Rep. (1905) 442. See also Atty.-Gen. Rep. (1906) 517. PREFERENCE. — As to other priorities under the Banking Law, see § 78 and the cross-references there given. §§ 189, 190. Trust Companies. 173 A deposit by a receiver or trustee in bankruptcy under order of the bank- ruptcy court is entitled to preference under this section. Morris v. Carnegie Trust Co., 154 App. Div. 596. Whether a deposit of bankruptcy funds is entitled to preference is a quesr tion for the state courts and cannot be determined on motion in a bankruptcy court. In re Bologh, 185 Fed. 825. State funds on deposit with an insolvent trust company are entitled to preference. This right arises, not from this section, but from Const. 1894, Art. 1, § 16, by virtue of which the state succeeds to the right which the King had at common law to preference in payment of debts due from an insolvent. Matter of Carnegie Trust Co., 206 N. Y. 390. Where, upon the insolvency of a trust company, a surety on a bond given by the trust company to secure a deposit which is entitled to a preference pays to the Comptroller the amount of the deposit, such surety becomes sub- rogated to the preference given by this subdivision. But such preference does not extend to the accrued interest on the sum so paid. United States Fidelity & Guaranty Co. v. Carnegie Trust Co., 161 App. Div. 429, 146 N. Y. Supp. 801; Same v. Same, 161 App. Div. 435, 146 N. Y. Supp. 804; United States Fidelity & Guaranty Co. v. Borough Bank, 161 App. Div. 479. § 189. Restrictions on taking and holding real estate. All real estate purchased by any trust company or taken by it in settlement of debts due it, shall be conveyed to it directly by name and the conveyance immediately recorded, in the office of the proper recording officer of the county in which such real estate is located. Every parcel of real estate purchased or acquired by any trust company shall be sold by it within five years of the date on which it shall have been acquired unless : 1. There shall be a building thereon occupied by it as an office; or 2. The superintendent of banks, on application of its board of directors, shall have extended the time within which such sale shall be made. Source. — Xew. The section is identical with § 107, relating to banks. See the annotations to that section. § 190. Restrictions on loans, purchases of securities and total lia- bilities to trust company of any one person. A trust company subject to the provisions of this article 1. Shall not directly or indirectly lend to any individual, part- nership, unincorporated association, corporation or body politic, 174 Banking Law. § 190. an amount wliich, including therein any extension of credit to such individual, partnership, unincoiporated association, corporation or body politic, by meams of letters of credit or by acceptances of drafts for, or the disccunt or purchase of the notes, bills of ex- change or other obligations of, such individual, partnership, unin- Qorporated association, corporation or 'body politic, will exceed one- tenth part of the capital stock and surplus of such trust company, with the following exceptions : (a) The restrictions in this subdivision shall not apply to loans to, or investments in the interest bearing obligations of, the United States, this state or any city, county, town or village of this state. (b) If such trust company is located in a borough having a population of two millions or over, the total liability to such trust company, of any state other than the state of New York, or of any foreign nation, or of a municipal or railroad corporation, or of a corporation subject to the jurisdiction of a public service commis- sion of this state, may equal but not exceed twenty-five per centum of the capital and surplus of such trust company; and the total liabilities to such trust company of any individual, partnership, unincorporated association, or of any other corporation or body politic, may equal but not exceed twenty-five per centum of the capital and surplus of such trust company, provided such liabili- ties are upon drafts or bills of exchange drawn in good faith against actually existing values, or upon commercial or business paper actually owned by the person negotiating the same to such trust company, and are endorsed by such person without limita- tion, or provided such liabilities in excess of ten per centum of such capital and surplus, and not in excess of an additional fifteen per centum of such capital and surplus, are secured by collateral having an ascertained market value of at least fifteen per centum more than the amount of the liabilities so secured. (c) If such trust company is located elsewhere in the state, the total liability to such trust company of any state other than the state of New York, or of any foreign nation, or of a municipal or railroad corporation, or of a corporation subject to the jurisdic- tion of a public service commission of this state, may equal but not exceed forty per centum of the capital and surplus of such trust company; and the total liabilities to such trust company of any individual, partnership, unincorporated association, or of any § 190. Teust Companies. 175 other corporation or body politic, may equal but not exceed forty per centum of the capital and surplus of such trust company, pro- vided such liabilities are upon drafts or bills of exchange drawn in good faith against actually existing values or upon commercial or business paper actually owned by the person negotiating the same to such trust company, and are endorsed by such person without limitation, or provided such liabilities in excess of ten per centum of such capital and surplus, and not in excess of an additional thirty per centum of such capital and surplus, are secured by col- lateral having an ascertained market value of at least fifteen per centum more than the amount of the liabilities so secured. (d) In computing the total liabilities of any individual to a trust company there shall be included all liabilities to the trust company of any partnership or unincorporated association of which he is a member, and any loans made for his benefit or for the benefit of such partnership or association; of any partnership or unincorporated association to a trust company there shall be in- cluded all liabilities of its individual members and all loans made for the benefit of such partnership or unincorporated association or any member thereof ; and of any corporation to a trust company there shall be included all loans made for the benefit of the cor- poration. This subdivision shall not be construed to render unlawful the continued holding of any securities heretofore lawfully acquired. 2. Shall not make any loans secured by the stock of another moneyed corporation if by the making of such loan the total stock of such other moneyed corporation owned and held as collateral security by it will exceed ten per centum of the total capital stock of such other moneyed corporation. 3. Shall not make any loan upon the securities of one or more corporations the pajTuent of which loan is undertaken in whole or in part severally, but not jointly, by two or more individuals, firms or corporations: (a) if the prospective borrowers or underwriters be obligated absolutely or contingently to purchase the securities, or any of them, collateral to the proposed loan, unless they shall have paid on account of the purchase of such securities an amount in cash or its equivalent equal to at least twenty-five per centum of the 176 Banking Law. § 190. several amounts for which they remain obligated in completing the purchase; (b) if the trust company considering the making of the loan be liable directly, indirectly or contingently, for the repayment of the proposed loan or any part thereof ; (c) if the term of the proposed loan, including any renewal thereof, by agreement, express or implied, exceeds the period of one year; (d) if the amount, under any circumstances, exceeds twenty- five per centum of the capital and surplus of the trust company. 4. Shall not make a loan, directly or indirectly, upon the se- curity of real estate upon which there is a prior mortgage , lien or incumbrance, if the amount unpaid upon such prior mortgage, lien or incumbrance, or the aggregate amount unpaid upon all prior mortgages, liens and incumbrances exceeds ten per centu m of the capital and surplus of such trust company, or if the amount so se- cured, including all prior mortgages, liens and incumbrances shall ex ceed two-thir ds of the appraised value of such real estate as found by a committee of the directors of such trust company; but this provision shall not prevent the acceptance of any such real estate securities to secure the payment of a debt previously con- tracted in good faith. Every mortgage and every assignment of a mortgage taken or held by such trust company shall immediately be recorded in the office of the clerk or the proper recording officer fif the county in which the real estate described in the mortgage is located. 5. Shall not, nor shall any of its directors, officers, agents or servants, directly or indirectly, purchase or be interested in the purchase of any promissory note or other evidence of debt issued by it, for less than its face value. Every trust company or person violating the provisions of this subdivision shall forfeit to the peo- ple of the state three times the face value of the note or other evidence of debt so purchased. 6. Shall not make any loan or discount on the security of the shares of its own capital stock, or be the purchaser or holder of any such shares, unless such security or purchase shall be nec- essary to prevent loss upon a debt previously contracted in good- faith, and stock so purchased or acquired shall be sold at public or private sale, or otherwise disposed of, within six months from § 190. Teust Companies. 17Y the time of its purchase or acquisition. Any trust company violat- ing any of the provisions of this subdivision shall forfeit to the people of the state twice the amount of the loan or purchase. 7. Shall not knowingly lend, directly or indirectly, any money or property for the purpose of enabling any person to pay for or hold shares of its stock, unless the loan is made upon security hav- ing an ascertained or market value of at least fifteen per centum more than the amount of the loan. Any trust company violating the provisions of this subdivision shall forfeit to the people of the state twice the amount of the loan. 8. Shall not, nor shall any officer thereof, lend directly or in- directly any sum of money to any officer, director, clerk or em- ployee of the trust company without the written approval of a majority of the board of directors thereof filed in the office of the trust company or embodied in a resolution adopted by a majority vote of such board, exclusive of the director to whom the loan is made, or in any event, to any officer thereof, if such trust com- pany is located in a citj' of the first class; and if such officer, director, clerk or employee shall own or control a majority of the stock of any other corporation a loan to that corporation shall be considered for the purpose of this subdivision as a loan to him. Every trust company or officer thereof violating this provision shall, for each offense, forfeit to the people of the state twice the amount lent. 9. Shall not, directly or indirectly, make any loan exceeding in amount one-tenth of its capital stock to any director thereof. 10. Shall not invest or keep invested in the stock of any pri- vate corporation an amount in excess of ten per centum of the capital and surplus of such trust company; nor shall it purchase or continue to hold stock of another moneyed corporation if by such purchase or continued investment the total stock of such other moneyed corporation owned and held by it as collateral will exceed ten per centum of the stock of such other moneyed corporation, provided, however, that this limitation shall not apply to the owner- ship of the capital stock of a safe deposit company the vaults of which are connected with or adjacent to an office of such trust company. Source. — Former § 27, except subdf vision 9 which comes from former § 186, subd. 11, and subdivision 10 which comes from former § 193. With 12 178 Banking Law. § 191- the exception of the last two subdivisions the section is practically identical with § 108 relating to banks. See the annotations to that section. CROSS-REFERENCES.— Restrictions on officers, directors and employees, see § 222. For authorities bearing upon subdivisions 1-8, see annotations to § 108. LOANS TO OFFICERS OR DIRECTORS. — The prohibition against loans of more than one-tenth of capital to any director or officer " directly or indirectly," is not limited to a director or officer borrowing in his own name. It includes loans to a partnership of which a director is a member. The prohibition extends to the board of directors and to each director, separately or individually. People v. Knapp, 206 N. Y. 373 (afif'g 147 App. Div. 436; Atty.-Gen. Rep (1898) 256. A loan to a firm of which a director is a member in excess of 1/10 of capital is a violation notwithstanding the loan is amply^secured and the said director had nothing whatever to do with it, and that it was made in regular course of business without reference to the director of the trust company who was a member of the firm. Atty.-Gen. Rep (1906) 498. The prohibition applies to the purchase from an officer or director (or his firm) of notes of third persons; endorsed icith recourse by such officer or director or firm ; otherwise, if the endorsement be " without recourse." Atty.- Gen. Rep. (1909) 724. The purchase of a note, the maker of which receives the benefit, not re- garded as a loan to a director merely because director liable as accomoda- tion endorser, or as accommodation surety or guarantor. Atty.-Gen. Rep. (1909) 724. Opinion that loan of more than 10 per cent, of capital to firm of which director a member is not invalid merely on that account. Atty.-Gen. Rep. (1906) 518. , ^-- POWER TO HOLD STOCK OF-PSIVATE^ORPORATION.— Opinion that "market value" of the stock held is immaterial; that the restriction is against the investment of more than 10 per cent, of the trust company's capital in the stock of a particular corporation, no matter what the market value of the stock invested in. Atty.-Gen. Rep. (1903) 410. PURCHASES OF OWN STOCK.— An exception to the restriction con- tained in subdivision 6 exists in § 496 which permits a corporation to pur- chase the stock of dissenting stockholders in case of merger. § 191. Restrictions on power to contract or to accept or execute trusts. 'No trust company shall have any right or power to make any contract, or to accept or execute any trust whatever, which it would not be lawful for any individual to make, accept or execute. Source. — Former § 186, subd. 11. §§ 192,193. Trust Companies. 179 § 192. Bestriction on power to receive deposits of funds paid into court. No trust company shall receive funds and moneys paid or brought into a court of the state of New York except it be desig- nated by the comptroller of the state of New York a depositary of moneys paid into court. Nothing in this chapter contained shall, however, be deem€d to preclude the deposit, in any trust company organized under the laws of this state, of any funds pursuant to the order or direction of a court of any other state or of the United States making such trust company a depositary of such funds. Source.— Former § 186, subd. 11. CROSS-REFERENCES.— Power to receive deposits of funds paid into court, see § 188, subd. 5. How accounts of such deposits to be kept, see § 194, subd. 5. § 193. Restrictions on investments of capital; how valued. The capital of every trust company shall be invested in bonds and mortgages on real property in this state otherwise unencum- bered, not exceeding sixty per centum of the value thereof, or in the stocks, bonds or other obligations 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. Stocks or bonds constituting a part of the lawful investment of capital of any such corporation shall not be valued upon its books or entered in its reports to the superintendent of banks at a higher price or value than their investment value as determined by amorti- zation, after providing in a manner approved by the superintendent of banks for the gradual extinction of premiums or discounts on all such securities so as to bring them to par at maturity. Source.-^ Former § 193. CROSS-REFERENCE.— General power to invest, see § 185. CANNOT INVEST CAPITAL IN REAL ESTATE.— Opinion tha.t this sec- tion exclusively controls investments of capital, and consequently a trust com- pany cannot invest part of its capital in banking house to be used as its place of business. (Disapproving Atty.-Gen. Rep. [1897], 159.); Atty.-Gen. Rep. (1912) vol. 2, p. 289. MAY NOT HYPOTHECATE CAPITAL SECURITIES.— Opinion that trust company may not hypothecate securities representing capital investment, but must retain physical possession thereof. Atty.-Gen. Rep. (1907) 481. 180 Banking Law. § 194. § 194, Restrictions as to entries in books; amortization of securities. 1. 'So trust company sliall by any system of accounting or any device of bookkeeping, directly or indirectly enter any of its assets upon its books in the name of any other individual, partnership, unincorporated association or corporation, or under any title or designation that is not truly descriptive thereof. 2. The stocks, bonds and other interest-bearing corporate se- curities purchased by a trust company shall be entered on its books at the actual cost thereof, and for the purpose of calculat- ing the undivided profits applicable to the payment of dividends, such stocks and securities shall not be estimated at a valuation exceeding their present cost as determined by amortization, that is, by deducting from the cost of any such stock or security purchased for a sum in excess of the amount payable thereon at maturity, and charging to profit and loss, a sufficient sum to bring it to par at maturity, or adding to the cost of any such stock or security purchased at less than the amount payable thereon at maturity, and crediting to profit and loss, a sufficient sum to bring it to par at maturity ; but nothing herein contained shall prevent a trust company from carrying such stocks, bonds and other interest-bearing corporate securities on its books at their market value. 3. So trust company shall, except with the written approval of the superintendent, enter or at any time carry on its books the real estate and the building or buildings thereon, used by it as its place or places of business, at a valuation exceeding their actual cost to such trust company. 4. Every trust company shall conform its methods of keeping its books and records to such orders in respect thereto as shall have been made and promulgated by the superintendent pursuant to section fifty-six of this chapter. Any trust company that refuses or neglects to obey such order shall be subject to a penalty of one hundred dollars for each day it so refuses or neglects. 5. Every trust company holding any funds or money paid into court shall keep a book or books in which it shall make an exact account thereof. Such book or books shall state the name of the court, the title of the ease, the date of receipt, from whom re- ceived, the amount of money, if any, and a description of the securities or other property received, if any, and each addition §§ 195, 196. Trust Compajties. 181 of interest; also the date and description of each order for pay- ment and the dates and amounts of payments thereunder and to whom paid ; also an account of each change of investment, if any. Source. — This section is identical with § 109 relating to banks, see the anno- tations to the latter section. CROSS-REFERENCES.— Power to receive deposits of funds paid into court, see § 188, subd. 5. Restriction on power to receive such funds, see § 192. § 195. Restrictions on branch offices; penalty for violation. N'o trust company or any ofScer or director thereof, shall trans- act its usual business at any place other than its princi]ial place of " business, except that a trust company may open and occupy in ) the cit;;^in which its principal place of business is located one or more Branch offices, provided that before any such branch or branches shall be opened or occupied: 1. The superintendent shall have given his written approval, as provided in section fifty-one of this chapter; 2. The actual paid in capital of such trust company shall ex- ceed by the sum of one hundred thousand dollars the amount re- quired by section one hundred and eighty of this article for each branch opened. Any trust company having a combined capital and surplus of one million dollars or over may with the written approval of the superintendent open an'd occupy a branch office or branch offices in one or more places located without the state of New York, either in the United States of America or in foreign countries. Source. — Former § 186, subd. 11. This section is substantially identical with § 110, relating to banks. See the annotations to that section. CROSS-REFERENCES.— Powers of duties of superintendent with regard to branch offices, see § 51. Similar provisions as to other corporations subject to the Banking Law, see § 110 and cross-references there given. § 196. Restrictions on deposit of trust company's funds. No trust company shall deposit any of its funds with any other moneyed corporation unless the latter has been designated as a depositary for the trust company's funds by vote of a majority of the directors of the trust company exclusive of any director who is an officer, director or trustee of the depositary so designated. Source. — Former § 27, subd. 5. The section is identical with § 111 relating to banks. See the annotations to that section. 182 Banking Law. § 197. § 197. Reserves against deposits. Every trust company shall maintain total reserves against aggre- gate demand deposits, as follows: 1. Fifteen per centum of such deposits if such trust company has an office in a borough having a population of two millions or over; and at least ten per centum of such deposits shall be maintained as reserves on hand. 2. Thirteen per centum of such deposits, if such trust company is located in a borough having a population of one million or over and less than two millions, and has not an office in a borough specified in subdivision one of this section ; and at least eight per centum of such deposits shall be maintained as reserves on hand. 3. Ten per centum of such deposits, if such trust company is located elsewhere in the state. Trust companies located in cities of the first and second class but not falling within subdivisions one or two of this section, shall maintain at least four per centum of such deposits as reserves on hand ; and trust companies located in cities of the third class and in incorporated and unincorporated villages, shall maintain at least three per centum of such deposits as reserves on hand. At least one-half of the reserves on hand shall consist of gold, gold bullion, gold coin, United States, gold certificates or United States notes; and the remainder shall consist of any form of currency, other than federal reserve notes, authorized by the laws of the United States. If any trust company shall have become a member of a federal reserve bank, it may maintain as reserves on deposit with such federal reserve bank such portion of its total reserves as shall be required of members of such federal reserve bank. If any trust company shall fail to maintain its total reserves in the manner authorized by this section, it shall be liable to, and shall pay the assessment or assessments provided for in section thirty of this chapter. Source. — Former § 1!)8. The language is new and the reserve requirements have been somewhat reduced. The argument which influenced the Commission in consenting to such reductions was that the deposit of securities wdth the superintendent, required by § 184, gave additional protection to depositors. The following table shows the changes in the percentages of aggregate de- mand deposits which must be retained as total reserves and reserves on hand: Old Law New Law Total reserves On haad Total reserves On hand 15 15 15 10 15 10 13 8 15 10 10 4 10 5 10 4 10 5 10 4 10 3 10 3 198. Trust Companies. 183 Manhattan Brooklyn Other boroughs Other first class cities Second class cities Elsewhere Brooklyn trust companies that have branches in Manhattan are subject to the same requirements as Manhattan trust companies. Aggregate demand deposits are not arrived at by exactly the same calcu- lation as under the old law. See § 3, note on definition of " aggregate demand deposits." It should be noted that under the old law the reserves on hand could con- sist of silver certificates or National bank notes, whereas the new law requires at least one-half of the reserves on hand to consist of " gold, gold bullion, gold coin. United States gold certificates or United States notes." CROSS-RErEEE]S'CPJS.— Definitions of " aggregate demand deposits," " re- serves on hand," " reserves on deposit,'' " total reserves," " reserve depositary " and " population," see § 3. Assessments for encroachments on reserves, see § 30. Designation of reserve depositaries, see § 38. Similar provision as to banks, see § 112, as to private bankers, see § 166. § 198. Deposits of minors and trust deposits and deposits in the names of more than one person. When any deposit shall be made by or in the name of any minor, the same shall be held for the exclusive right and benefit of such minor, and free from the control or lien of all other per- sons, except creditors, and shall be paid, together with the interest thereon to the person in whose name the deposit shall have been made, and the receipt or acquittance of such minor shall be a valid and sufficient release and discharge for such deposit or any part thereof to the corporation. When any deposit shall be made by any person describing himself in making such deposit as trustee for another and no other or further notice of the existence and terms of a legal and valid trust than such description shall have been given in writing to the company in the event of the death of the person so described as trustee, such deposit or any part thereof, together with the dividends or interest thereon, may be 184 Banking Law. § 199. paid to the person for whom the deposit was thus stated to have been made. When a deposit shall have been made by any person in the name of such depositor and another person and in form to be paid to either, or the survivor of them, such deposit there- upon and any additions thereto made, by either of such persons, upon the making thereof, shall become the property of such per- sons as joint tenants, and the same, together with all interest thereon, shall be held for the exclusive use of the persons so named, and may be paid to either during the life time of both, or to the survivor after the death of one of them ; and such pay- ment and the receipt or acquittance of the one to whom such payment is made, shall be a valid and sufficient release and dis- charge to said company, for all payments made on account of such deposit prio r to the receipt by said company of notice_Jn writing signed by any one of such joint tenants, not to pay such deposit in accordance with the terms thereof. Source.— The first two sentences are from former § 192. The remainder is taken from former § 144, relating to savings banks. CROSS-REFERENCES.— Similar provision aa to banks, see § 148; as to sav- inge banks, see § 249. See the annotations to last cited section. § 199. Interpleader in certain actions; costs. 1. In all actions against any trust company to recover for moneys on deposit therewith, if there be any person or persons, not parties to the action, who claim the same fund, the court in which the action is pending, may, on the petition of such trust company, and upon eight days' notice to the plaintiff and such claimants, and without proof as to the merits of the claim, make an order amending the proceedings in the action by making such claimants parties defendant thereto ; and the court shall thereupon proceed to determine the rights and interests of the several par- ties to the action iji and to such funds. The remedy provided in this section shall be in addition to and not exclusive of that pro- vided in section eight hundred and t\Fenty of the code of civil procedure. 2. The funds on deposit which are the subject of such action may remain with such trust company to the credit of the action until final judgment therein, and be entitled to the same interest as other deposits of the same class, and shall be paid by such trust § 200. Teust Companies. 185 company in accordance with the final judgment of the court; or the deposit in controversy may be paid into court to await the final determination of the action ; and when the deposit is so paid into court the trust company shall be struck out as a party to the action, and its liability for such deposit shall cease. 3. The costs in all actions against a trust company to recover deposits shall be in the discretion of the court, and may be charged upon the fund affected by the action. Source. — ' This section is taken from former § 145 relating to savings banks. CEOSS-EEFERENCES.— Similar provision as to banks, see § 113; as to sav- ings banks, see § 250. See the annotations to last cited section. § 200. Rate of interest; effect of usury. Every trust company may take, receive, reserve and charge on every loan and discount made, or upon any note, bill of exchange or other evidence of debt, interest at the rate of six per centum per annum ; and such interest may be taken in advance, reckoning the days for which the note, bill or evidence of debt has to run. The knowingly taking, receiving, reserving or charging a greater rate of interest shall be held and adjudged a forfeiture of the en- tire interest which the note, bill of exchange or other evidence of debt cari'ies with it, or which has been agreed to be paid thereon. If a greater rate of interest has been paid, the person paying the same or his legal representatives may recover twice the entire amount of the interest thus paid from the trust company taking or receiving the same, if such action is brought within two years from the time the excess of interest is taken. The purchase, dis- count or sale of a bona fide bill of exchange,»note or other evidence of debt payable at another place than the place of such purchase, discount or sale at not more than the current rate of exchange for sight draft, or a reasonable charge for the collection of the same, in addition to the interest, shall not be considered as taking or receiving a greater rate of interest than six per centum per annum. The true intent and meaning of this section is to place and con- tinue such trust companies on an equality in the particulars herein referred tb with the national banks organized under the act of congress entitled "An act to provide a national currency, secured by pledges of United States bonds, and to provide for the circula- 186 Banking Law. §§ 201, 202. tion and redemption thereof," approved June the third, eighteen hundred and sixty-four. Source. — Former § 74 relating to banks, applied to trust companies by former § 186, aubd. 11. CROSS-REFERENCES.— For identical section relating to banks, see § 114 and the annotations thereto. § 201. Interest on collateral demand loans of not less than five thousand dollars. Upon advances of money repayable on demand to an amount not less than five thousand dollars made upon warehouse receipts, bills of lading, certificates of stock, certificates of deposit, bills of exchange, bonds or other negotiable instruments, pledged as col- lateral security for such repayment, any trust company may receive or contract to receive and collect as compensation for making such advances any sum which may be agreed upon by the parties to svich transaction. Source. — Former § 75 relating to banks, applied to trust companies by former § 186, subd. 11. CROSS-REFERENCES.— For identical section relating to banks, see § 11.5 and the annotations thereto. § 202. Calculation of earnings for dividend period. To determine the amount of gross earnings of a trust company for any dividend period the following items may be included: 1. All earnings actually received during such period, less in- terest accrued and unpaid included in the last previous calcu- lation of earnings; 2. Interest accrued and unpaid upon debts owing to it secured by collateral as authorized by this article upon which no default of more than one year exists and upon corporate stocks, bonds, or other interest-bearing obligations owned by it upon which no default exists; 3. The sums added to the cost of securities purchased for less than par as a result of amortization, provided the market value of such securities is at least equal to their present cost as determined by amortization ; 4. Any profits actually received during such period from the sale of securities, real estate or other property owned by it; § 203. Trust Companies. 187 5. Stuns recovered on items previously charged off, and any amounts allowed by the superintendent on account of assets previously disallowed and charged off. 6. Provided the superintendent of banks shall have approved, and only to the extent of such approval, any increase in the book value of an office building owned by it, which building or a portion thereof is used by it as a place of business. To determine the amount of net earnings for such dividend period the following items shall be deducted from gross earnings : 1. All expenses paid or incurred, both ordinary and extraor- dinary, in the transaction of its business, the collection of its debts, and the management of its affairs, less expenses incurred and interest accrued upon its debts deducted at the last previous calculation of net earnings for dividend purposes; 2. Interest paid, or accrued and unpaid, xipon debts owing by it; 3. The amounts deducted through amortization from the cost of corporate stocks, bonds or other interest-bearing obligations purchased above par in order to bring them to par at maturity ; 4. All losses sustained by it. In the computation of such losses all debts owing to it shall be included upon which no interest shall have been paid for more than two years or on which a judgment has been recovered which shall have remained unsatisfied for two years ; and such other assets as shall have been disallowed by the superintendent of banks, or by its board of directors. The balance thus obtained shall constitute the net earnings of such trust company for such period. Source. — Former § 28. The section is identical with § 116»relating to banks. See the annotations to the latter section. § 203. Surplus fund; of what composed, and for what purposes ased. Every trust company shall create a fund to be known as a sur- plus fund. Such fund may be created or increased by contri- butions, by transfers from undivided profits, or from net earnings. Such fimd shall up to twenty per centum of the capital of the trust company be used only for the payment of losses in excess of undivided profits. Source.— ' Former § 27, subd. 10. The section is identical with § 117 relat- ing to banks. See the annotations to the latter section. 188 Bankikg Law. §§ 204, 205. § 204. How net earnings credited for dividend purposes; credits to surplus fund and to undivided profits; dividends to stock- holders. When the net earnings of a triist company have been determined at the close of a dividend period as provided in section two hun- dred two of this article, if its surplus fund does not equal twenty per centum of the trust company's capital, one-tenth of such net earnings shall he credited to the surplus fund or so much thereof, less than one-tenth, as will make such fund equal twenty per cen- tum of such capital. The balance of such net earnings, or the entire amount thereof if such fund equals such twenty per cen- tum, may be credited to the trust company's profit and loss ac- count; or, if its expenses and losses for such dividend period ex- ceed its gross earnings, such excess shall be charged to its profit and loss account. The credit balance of such account shall consti- tute the undivided profits at the close of such dividend period, and shall be available for dividends. The directors of any trust company may annually, semi-anually or quarterly, but not more frequently, declare such dividends as they shall judge expedient from such undivided profits. No trust company shall declare, credit or pay any dividends to its stock- holders until it shall have made good any existing impairment of its capital and any existing encroachment on its reserves required to be maintained against deposits. Source. — Former § 27, subd. 10. The section is identical withi § 118 relating to banks. See the annotations to the latter section. § 205. Change of location. Any trust company may make a written application to tho superintendent of banks for leave to change its place of business to another place in the same county. The application shall state the reasons for such proposed change, and shall be signed and acknowledged by a majority of its board of directors and accom- panied by the written assent thereto of stockholders owning at least two-thirds in amount of its stock. If the proposed place of business is within the limits of the village, borough or city, if in a city not divided into boroughs, in which the principal place of business of the trust company is located, such change may be made § 206. Teust Companies. 189 • upon the written approval of the superintendent ; if beyond such limits, notice of intention to make such application, signed by the president and another principal officer of the trust company shall be published once a week for two successive weeks immediately preceding such application in a newspaper published in the city of Albany in which notices by state officers are required by law to be published, and in a newspaper to be designated by the superin- tendent, published in the coimty in which the place of business of such trust company is located. If the superintendent shall grant his certificate authorizing the change of location, as provided in section fifty of this chapter, the trust company shall cause such certificate to be published once in each week for two successive weeks in the newspaper in which the notice of application was published. When the requirements of this section shall have been fully complied with, the trust company may, upon or after the day specified in the certificate, remove its property and effects to the location designated therein, and thereafter its principal place of business shall be the location so specified ; and it shall have all the rights and powers in such new location which it possessed at its former location. Source. — Former § 31. The section is identical with § 119 relating to banks. See the annotations to tlie latter section. § 206. Rights and liabilities of stockholders; who liable as stock- holders; who may enforce liability; within what time action must be commenced. The rights, powers and duties of stockholders of trust com- panies shall be as prescribed in the general corporation law and the stock corporation law; but the individual liability of such stock- holders for the contracts, debts, and engagements of the trust com- pany and the time within which an action may be instituted to enforce such liability shall be governed exclusively by the pro- visions of this section and section eighty of this chapter. The stockholders of every trust company shall be individually responsible, equally and ratably and not one for another, for. all contracts, debts and engagements of the trust company, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares. An action to enforce such liability must be brought within six years 190 Banking Law. § 206. after the cause of action has accrued. The term " stockholder " as used in this section shall apply to: 1. Such persons as appear by the hooks of the trust company to be stockholders; 2. Every owner of stock legal or equitable although the same may be on such books in the name of another person, provided^ however, that such term shall not apply to a person holding stock as collateral security for the payment of a debt and not appearing by the books of the trust company to be the owner and holder thereof in his own right, or to a person holding stock in a bona fide fiduciary capacity and not appearing by the books of the trust company to be the owner and holder thereof in his own right unless such fiduciary shall have invested the funds in his care in violation of law or of the terms under which said funds are held by him, in which case he shall be personally liable as a stockholder. JSTo person who has in good faith, and without any intent to evade his liability as a stockholder, caused his stock to be trans- ferred on the books of the trust company when such trust company is solvent to any resident of this state of full age previous to any default in the payment of any debt or liability of the trust com- pany, shall be subject to any personal liability for any contracts, debts or engagements of the trust company. In ease the superintendent of banks shall have taken possession of the property and business of the trust company pursuant to section fifty-seven of this chapter or a permanent receiver of such trust company shall have been appointed, all actions or proceedings to enforce the liability of stockholders under this section shall be taken and prosecuted only in the name of the superintendent or the receiver, as the case may be, unless the superintendent or re- ceiver shall refuse to take such action or proceeding upon proper request in writing made by any creditor, or shall have failed or neglected to commence such action or proceeding within sixty days after the receipt of such request, and in that event such action or proceeding may be taken by any creditor of the trust company. But' no such action shall be brought by a creditor until a judgment shall have been recovered by him against the trust company and an execution thereon shall have been returned unsatisfied in whole or in part. Source. — This section is identical with § 120 relating to stockholders of banks. See the annotations to that section. § 207. Trust Companies. 191 § 207. Assessment of stockholder to make good impairment of capital; sale of stock. Whenever the superintendent of banks shall have majie re- quisition upon any trust company pursuant to section fifty-six of this chapter to make good the amount of an impairment of its capital, the directors of the trust company shall immediately give notice of such requisition to each stockholder and of the amount of the assessment which he must pay for the purpose of making good such deficiency, by a written or printed notice mailed to such stockholder at his place of residence, or served personally upon him. If any stockholder shall refuse or neglect to pay the assessment specified in such notice within sixty days from the date thereof, the directors of such trust company shall have the right to sell to the highest bidder at public auction the stock of such stockholder, after giving previous notice of such sale for two weeks in a newspaper of general circulation published in the county where the principal office of such trust company is located ; or such stock may be sold at private sale, and without such pub- lished notice, provided, however, that before making a private sale thereof an offer in writing to purchase such stock shall first be obtained, and a copy thereof served upon the owner of record of the stock sought to be sold either personally or by mailing g copy of such offer to such owner at his place of residence or the address furnished by him to the trust company; and if, after service of such offer, such owner shall still refuse or neglect to pay such assessment within two weeks from the time of service of such offer, the said directors may accept such offer and sell such stock to the person or persons making such offer, or to any other person or persons making a larger offer than the amount named in the offer submitted to such stockholder ; but said stock shall in no event be sold for a smaller sum than the valuation put on it by the superintendent in his determination and certificate, which valuation shall not be less than the amount of the assessment called for and the necessary costs of sale. Out of the avails of the stock sold the directors shall pay the necessary costs of sale .and the amount of the assessment called for thereon. The balance, if any, shall be paid to the person or persons whose stock has been thus sold. A sale of stock as herein provided shall effect an absolute cancellation of the outstanding certificate or certificates evidencing 192 Banking Law. § 208. the stock so sold, and shall render the same null and void and a new certificate or certificates shall be issued to the purchaser or purchasers of said stock. Source. — Former § 17. The section is identical with § 121 relating to banks. See the annotations to tlie latter section. § 208. Number of directors; classification; tenure of office of original directors. The affairs of every such trust company shall be managed and its corporate powers exercised by a board of directors of such number, not less than seven nor more than thirty, as shall from time to time be prescribed in its by-laws. The persons named in the organization certificate, or such of them respectively, as shall become holders of at least ten shares of such stock, shall constitute the first board of directors, and may add to their number not exceeding the limit of thirty, and shall severally continue in office until others are elected to fill their re- spective places. Within six months from the time when such trust company shall commence business, the first board of directors shall classify themselves by lot into three classes as nearly equal as may be. The term of office of the first class shall expire on the third Wednesday of Januaiy 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; provided that all directors whose term of office shall expire as heretofore provided shall none the less continue in office until their successors are elected as hereinafter provided. Source. — Former § 195. Under the old law the number of directors was " not less than thirteen.'' As to reason for reduction of minimum number to seven, see note to § 180. CROSS-REFERENCES.— Directors of banks, see §§ 122-131; of safe deposit companies, see §§ 324-327; of personal loan companies, see §§ 353-357; of sav- ings and loan associations, see §§ 405-409; of land bank, see §§ 430-433; of credit unions, see §§ 464^69. General provisions as to corporate directors, see Gen. Corp. Law, §§ 23-35, 43, 90-92, 109-111, 114; as to directors of stock corporations, see Stock Corp. Law, §§ 25-35. Offenses by directors, see Penal Law, §§ 290, 297, 064, 665, 668. CHANGE IN NUMBER OF DIRECTORS of trust company governed by both this section and Stock Corp. Law, § 26. Atty.-Gen. Rep. (1907) 470. §§ 209, 210. Tkust Companies. 193 NEGLIGENCE OF DIRECTORS.— Duties of directors and their liability to stockholders for losses caused by their negligence, discussed at length. Kavan- augh V. Gould, 147 App. Div. 281; Kavanaugh v. Commonwealth Trust Co., 64 Misc. 303. § 209. Annual meeting of stockholders; notice. At or before tlie expiration of the term of the first class, and annually thereafter, a number of directors shall be elected by the stockholders equal to the number of directors whose term will then expire who shall hold their offices for three years or until their successors are elected, and at such election, the stockholders may fill for the balance of the unexpired term any vacancy which has occurred in the office of any other director and v,'hich vacancy has not been filled by the directors of the company. Such election shall be held at the principal place of business of the company. iN'otice of the time and place of holding the stockholders' meeting for the election of directors and for action upon such other matters as may be brought before such meeting, shall be given by publication thereof at least once in each week for two successive weeks im- mediately preceding such election, in a newspaper published in the coimty, approved by the superintendent of banks, where such election is to be held, and in such other manner as may be pre- scribed in the by-laws. Source. — Former § 195. CROSS-REFERENCES.— Similar provision as to banks, see § 122 and anno- tations thereto. § 210. Qualifications and disqualifications of directors. Every director of a trust company shall be a stockholder of the trust company owning in his own right at least ten shares of its capital stock ; and every person elected to be a director who, after such election, shall hypothecate, pledge or cease to be the owner in his own right of the amount of stock aforesaid, shall cease to be a director of the trust company and his office shall be vacant, and he shall not be eligible for re-election as a director for a period of one year from the date of the next succeeding annual meeting. Source. — Former § 195. The last clause is new. CROSS-REFERENCES. — For similar provisions as to other corporations sub- ject to the Banking Law, see § 123 and cross-references there given. 13 194 Banking Law. §§ 211, 212, 213. ALIEN MAY BE DIRECTOR of trust company, provided that at least one director is a citizen of the State. Atty.-Gen. Rep. (19il2.) vol. 2, p. 20. See also Atty.-Gen. Rep. (1897) 318. § 211. 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 the trust company, and will not knowingly violate, or willingly permit to be violated, any of the provisions of law applicable to such trust company, and that he is the owner in good faith and in his own right, of the number of shares of stock required by thie article, subscribed by him or standing in his name on the books of the tnist company and that the same is not hypothecated, or in any way pledged as security for any loan or debt, and, in case of re-election or reappointment, that such stock was not hypothecated, or in any way pledged as security for any loan or debt during his previous term. Such oath shall be subscribed by the director making it, and certified by an officer authorized by law to administer oaths, and im- mediately transmitted to the superintendent of banks. Source. — Former § 195. CROSS-REFERENCES.— Identical provision as to banks, see § 124 and anno- tations thereto. § 212. Failure to elect ; when vacancies filled by board. In case of failure to elect any director on the day named, the directors whose terms of office do not that year expire may proceed to elect a number of directors equal to the number in the class whose term that year expires or such number as may have failed of re-election. The persons so elected, together with the directoi-s whose terms of office shall not that year expire shall oonsititute the board until another election shall be held according to law. Vacan- cies occurring in the intervals of election shall be filled by the board of directors for the balance of the unexpired term. Source. — ' Former § 195. The words at the end of the section " for the bal- ance of the unexpired term " are new. § 213. Annual meeting of directors; election of officers. Within fifteen days after the date on which the annual meet- ing of stockholders is held its directors shall, after their due qualifi- § 214. Trust Cojepa.xies. 195 cation, hold a meeting at which they shall elect a president from their own number, a vice-president, and such other officers as are required by the by-laws to be elected annually. Source. — New. CROSS-EEFERENCES.— Similar provision as to banks, see § 128. § 214. Monthly meetings of directors; quorum; statement to di- rectors. The directors of every trust company shall hold a regular meet- ing at least once in each month. If the number of directors neces- sary to constitute a quorum is not prescribed in the certificate of incorporation or organization certificate, or in the by-laws, and no provision is made therein for determining the same, the directors may fix such number, which shall not be less than one-third of all the directors and in no case less than five, with the same effect as if such numiber were prescribed in the certificate of incorporation or organization certificate. The board of directors shall by reso- lution duly recorded in the minutes, designate an ofiicer or officers whose duty it shall be to prepare and submit to each director at each regular meeting of the board, or to an executive committee of not less than five members of such board, a written statement of all the purchases and sales of securities, and of every discount, loan or other advance, including over-drafts and renewals made since the last regular meeting of the board, describing the collateral to such indebtedness as of the date of meeting at which such state- ment is submitted ; but such oificer or officers may omit from such statement discounts, loans or advances including overdrafts and renewals of less than one thousand dollars except as hereinafter provided. Such statement shall also contain a list giving the ag- gregate of loans, discoimts and advances including overdrafts to each individual partnership, unincorporated association, corpora- tion or person whose liability to the trust company has been in- creased one thousand dollars or more since the last regular meeting of the board, together with a descripton of the collateral to such indebtedness held by the trust company at the date of the meeting at which siich statement is submitted. A cop^y of such statement, together with a list of the directors present at such meeting, veri- fied by the affidavit of the officer or officers charged with the duty of preparing and submitting such statement shall be filed with the 196 Banking Law. §§ 215, 216 records of the trust company within one day after such meeting, and be presumptive evidence of the matters therein stated. Source. — Former § 42, except the second sentence which is from former § 195. Renewals are included for the first time. The minimum number of directors necessary to constitute a quorum has been changed from seven to five. CROSS-REFERJJNCES.— Identical provision as to banks, see § 129 and annotations thereto. § 215. Examinations by directors into affairs of trust company; may employ assistants. It shall be the duty of the board of directors of every trust company during the months of March or April and during the months of September or October in each year to examine, or to cause a committee of at least three of its members to examine, fully the books, papers and affairs of the trust company, and the loans and discounts thereof, and particularly the loans or dis- counts made directly or indirectly to its officers or directors, or for tlie benefit of such officers or directors or for the benefit of other corporations of which such officers or directors are also officers or directors, or in which they have a beneficial interest as stockholders, creditors, or otherwise, with the special view of ascertaining their safety and present value, and the value of the collateral security, if any, held in connection therewith, and into such other matters as the superintendent of banks may require. Such directors shall have the power to employ such assistance in making such examination as they may deem necessary. Source. — Former § 23. The section is identical with § 130 relating to banks. See the annotations to the latter section. § 216. Reports of directors' examinations; penalty for failure to make or file. On or before the fifteenth day of the month of May or Novem- ber succeeding any examination made pursuant to the require- ments of the last section, a report in writing thereof, sworn to by the directors making the same, shall be made to the board of directors of such trust company, and placed on file in said trust company, and a duplicate thereof filed in the office of the super- intendent of banl<:s. Such report shall particularly contain a statement of the assets and liabilities of the trust company exam- § 217. Tkust Companies. 197 ined, as shown by the books, together with such deductions from the assets, and the addition of such liabilities, direct, indirect, contingent or otherwise as such directors or committee, after such examination, may find necessary in order to determine the true condition of the trust company. It shall also contain a statement showing in detail every known liability to such trust company, direct, indirect, contingent, or otherwise, of every officer or director thereof and of every corporation in which any such officer or director owns stock to the amount of twenty-five per centum of the total outstanding stock, or of which any such officer or director is also an officer or director. It shall also contain a statement, in detail, of loans, if any, which in their opinion are doubtful or worthless, together with their reasons for so regard- ing them; also a statement of loans made on collateral security which in their opinion are insufficiently secured, giving in each case the amount of the loan, the name and market value of the collateral, if it has any market value, and, if not, a statement of that fact, and its actual value as nearly as possible. Such report shall also contain a statement of overdrafts, of the names and amounts of such as they consider worthless or doubtful, and a full statement of such other matters as affect the solvency and sound- ness of the institution. If the directors of any trust company shall fail to make, or to cause to be made, or to file such report of examination in the manner, and within the time specified, such trust company shall forfeit to the people of the state one hundred dollars for every day such report shall be delayed. Source. — Former § 23. The section is identical with § 131 relating to banks. See the annotations to the latter section. § 217. Communications from banking department must be submitted to directors and noted in minutes. Each official communication directed by the superintendent of banks or one of his deputies to a trust company or to any officer thereof, relating to an examination or investigation conducted by the banking department or containing suggestions or recommenda- tions as to the conduct of the business of the trust company, shall be submitted, by the officer receiving it, to the board of directors at the next meeting of such board, and duly noted in the book con- taining the minutes of the meetings of such board. Source. — Former § 41. The section is identical with § 132 relating to banks. See the annotations to the latter section. 198 Banking Law. § 218. § 218. Reports to superintendent; penalty for failure to make. Within ten days after service upon it af tte notice provided for by section forty-tvifo of this chapter, every trust company shall make a written report to the superintendent, which report shall be in the form and shall contain the matters prescribed by the super- intendent and shall specifically state the items of capital, deposits, specie and cash items, public securities and private securities, real estate and real estate securities, and such other items as may be necessary to inform the public as to the financial condition and solvency of the trust company, or which the superintendent may deem proper to include therein, and shall also state the amount of deposits the payment of which, in case of insolvency, is preferred by law or otherwise over other deposits. Every such report shall be verified by the oaths of the president or vice-president and another principal officer of the trust company and such verification shall state that the report is true and correct in all respects to the best of the knowledge and belief of the persons verifying it, and that the usual business of the trust company has been transacted at the location required by this article and not elsewhere. Every such report exclusive of the verification shall, within thirty days after it shall have beea filed with the superintendent, be published by the trust company in one newspaper of the place where its princi- pal place of business is located, if there be one; if not, then in the newspaper published, nearest where such trust company is located. Every such trust company shall also make such other special re- ports to the superintendent as he may from time to time require, in such form and at such date as may be prescribed .by him, and such report shall, if required by him, be verified in such manner as he may prescribe. Every such trust company, within ten days after declaring a divi- dend, shall make a written report to the superintendent stating the amount of such dividend, the amount of its net earnings in excess thereof and the amount carried to the surplus fund. Such report shall be verified by the oath of the president or vice-president and another principal officer of the trust company. If any such trust company shall fail to make any report re- quired by this section on or before the day designated for the making thereof, or shall fail to include therein any matter re- § 219. Tetjst Companies. 199^ quired by the superintendent, such trust company shall forfeit to the people of the state the sum of one hundred dollars for every day that such report shall be delayed or withheld, and for every day that it shall fail to report any such omitted matter, .unless the time therefor shall have been extended by the superintendent as provided by section forty-nine of this chapter. The moneys forfeited by this section, when recovered, shall be paid into the state treasury to reimburse the state for the sums advanced by it for the expenses of the department. Source. — This section is identical witli § 133 relating to banks. See state- ment as to source in the annotations to that section. § 219. Annual report of unclaimed deposits, dividends and interest; publication; penalty for non-compliance. In the month of September in each year, and on or before the tenth day thereof , every trust company shall make a written re- port to the superintendent of banks, verified by the oaths of the president or vice-president and one other principal oflacer of the trust company, which report shall contain a true and accurate statement of all deposits made with the trust company and all dividends declared and interest accrued upon any of its stock or other evidences of indebtedness, which on the first day of August preceding such report amounted to fifty dollars or over and had remained unclaimed by any person or persons authorized to re- ceive the same for five years then next preceding. Such state- ment shall set forth the date of each such deposit, it s amount and the name and last known place of residence or post-office address of the person making it, the name of each person in whose favor and the time when any such dividend may have been declared or any such interest may have accrued, its amount, and upon what number of shares or upon what amount of stock or other evidences of indebtedness of such trust company it was declared or accrued. In case any such trust company shall at said date have held no such unclaimed deposits, dividends or interest, it shall at the time above specified make a written report to the superintendent so stating, which report shall be verified as hereinabove provided. No deposits, dividends or interest shall be deemed unclaimed 200 Banking Law. § 220. within the meaning of this section if it appears from the books of the trust company or from other written evidence on file with the trust company that the person or persons authorized to receive them have knowledge thereof. Every such trust company which reports any unclaimed dg; posits, dividends or interest under the provisions of this section shall cause to be published once in each week for two s uccessive weeks in a newspaper designated by the superintendent published in the county and in the village or city in which such trust com- pany is located, if there be a newspaper published therein, and at least once in a newspaper published at Albanj^ in which notices by state officers are required to be published, a true c^y of such report , and shall file with the superintendent of banks on or before t he firs t day of October in each year proof by affid avit of such publication. "^The expense of such publication shall be paid by the trust~company, but if, on or before the first day of August in that year, the trust company shall have mailed, postage pre- paid, to each person authorized to receive any such unclaimed deposit, dividend or interest, at his last known place of residence or post-office address, a statement showing the amount to which such person is entitled and requesting written acknowledgment thereof, the trust company may reimburse itself for such expense by deducting the amount thereof from the sums due any such person or persons who shall not have made written acknowledg- ment before the filing of such report with the superintendent, in the proportion that each such sum bears to the aggregate thereof. Any such trust company failing to make any report or to file any affidavit of publication required by this section shall forfeit to the people of the state the sum of one hundred dollars for each day such report or the filing of such affidavit of publication shall be so delayed or withheld, unless the time therefor shall have been extended by the superintendent as provided by section forty-nine of this chapter. Source. — Former § 30. The section is identical with § 134 relating to banks. See the annotations to the latter section. § 220. Liability of trust company for assessments by superintendent. When the superintendent, pursuant to the powers conferred on him by article two of this chapter, shall have levied any assess- §§ 221, 222. Tkust Companies. 201 ment upon any trust company and shall have duly notified such trust company of the amount thereof, the amount so assessed shall become a liability of and shall be paid by such trust company to the superintendent. Soutce. — New. The section is identical with § 135 relating to banks. See the annotations to the latter section. § 221. Preservation of books and records of trust company. Every trust company shall preserve all its records of final entry including cards used under the card system, and deposit tickets, for a period of at least six years from the date of making the same or from the date of the last entry thereon. Sources. — New. The section is identical with § 136 relating to banks. See the annotations to the latter section. .§ 222. Bestrictions on officers, directors and employees. No ofiicer, director, clerk or other employee of any trust com- pany, and no person in any way interested or concerned in the management of its affairs, shall as individuals discount, or directly or indirectly, make any loan upon any note or other evidence of debt, which he shall know to have been offered for discount to such trust company and to have been refused. Every person violating the provisions of this subdivision shall, for each offense, forfeit to the people of the state twice the amount of the loan which he shall have made. ISTo officer, director, clerk or other employee of any trust com- pany shall borrow, directly or indirectly, from the trust company with which he is connected any sum of money without the written approval of a majority of the board of directors thereof filed in the office of the trust company or embodied in a resolution adopted by a majority of such board exclusive of the director to whom the loan is made; and in no event shall any officer of a trust com- pany located in a city of the first class borrow any sum of money from such trust company. If an officer, director, clerk or other employee of any trust company shall own or control a majority of the stock of any other corporation a loan to that cor- poration shall be considered for the purpose of this subdivision as a loan to such officer, director, clerk or other employee. Every 202 EaxMvikg Law. § 223. person knowingly violating this provision shall, for each offense, forfeit to the people of the state twice the amount which he shall have borrowed. Source. — Former § 27, subd. 6 and 7. The section is identical with § 139 relating to banks. See the annotations to the latter section. § 223. Prohibition against encroachments upon powers of trust com- panies. ISTo corporation other than a trust company organized under the laws of this state shall have or exercise in this state the power to receive deposits of money, securities or other personal property from any person or corporation in trust, or have or exercise in this state any of the powers specified in subdivisions one, four, five, six, seven and eight of section one hundred eighty-five of this article, nor have or maintain an office in this state for the transaction of, or transact, directly or indirectly, any such or similar business, except that a federal reserve bank may exercise- the powers conferred by subdivision one of such section if author- ized so to do by the laws of the United States and any domestic corporation legally exercising any of the powers conferred by such subdivision at the time this act takes effect may continue to exercise such powers, and a trust company incorporated in another state may be appointed and may accept appointment and may act as executor of, or trustee under, the last will and testa- ment of any deceased person in this state, provided trust com- panies of this state are permitted to act as such executor or trustee in the state where such foreign corporation has his domi- cile, and such foreign corporation shall have executed and filed in the office of the superintendent of banks a written instru- ment appointing such superintendent in his name of office, its true and lawful attorney upon whom all process in any action or proceeding against such executor or trustee, affecting or relating to the estate represented or held by such executor or trustee or the acts or defaults of such corporation in reference to such estate, with the same effect as if it existed in this state and had been law- fully served with process therein, and shall also have filed in the office of the superintendent a fopy of its charter by its secretary under its corporate seal, together with the post office address of its principal office. § 223. Teust Companies. 203 No foreigr corporation, having authority to act as executor of or trustee under the last will and testament of any deceased per- son, shall establish or maintain directly or indirectly any branch office or agency in this state or shall in any way solicit directly or indirectly any business as executor or trustee therein. If any such foreign corporation violates this provision, such foreign cor- poration shall not thereafter be appointed or act as executor or trustee in this state. The validity of any mortgage heretofore given by a foreign corporation to a trust company doing business within the foreign domicile of such mortgagor to secure the pay- ment of an issue of bonds shall not be affected by any of the pro- visions of this section and such mortgage shall be enforcible in accordance with the laws of this state against any property covered thereby within the state of iN'ew York. Source. — 'Former § 186, subd. 11. The exceptions in favor of federal reserve banks and domestic corporations exercising powers conferred by § 185, subd. 1, are new. CROSS-REFERENCES. — Superintendent as attorney to accept service of process, see i 28. Prohibition against encroachments upon certain banking powers, see § 140. NO OTHER REQUIREMENTS OF FOREIGN TRUST COMPANIES.— Under the former law the Attorney-General was of the opinion that a foreign trust company could not exercise in this state any of the powers conferred on domestic trust companies without complying with the provisions of former §§ 14, 33-a, 33-b and 34. Atty-Gen. Rep. (1912) vol. 2, p. 530; Atty.-Gen. Rep. (1905) 422. Under the present law compliance with this section is all that is required of a foreign trust company. FOREIGN TRUST COMPANIES MAY LEND MONEY directly upon bonds and mortgages in this state. Atty.-Gen. Rep. (1905) 435. CANNOT BE TRUSTEE UNDER NEW YORK MORTGAGE.— A foreign trust company is forbidden by this section to exercise the powers conferred by § 185, subd. 4, and is therefore excluded from the right to act as trustee for the bondholders under a mortgage by a New York corporation on lands in this state. Atty.-Gen. Rep. (1907) 477. FOREIGN TRUST COMPANY AS EXECUTOR.— In the absence of the ex- press authorization contained in this section it seems that a foreign trust company would not act as executor in this state by reason of the prohibition in Code Civ. Proc, § 2612, against granting letters testamentary to " an alien not an inhabitant of this State." See Matter of Avery, 45 Misc. 529. 204 Banking Law. ARTICLE VI. Savings Banks. Section 230. Incorporation; qualifications of incorporators; certificate of organization. 231. Notice of intention to organize; filing, publication and service. 232. Submitting organization certificate to superintendent. 233. When corporate existence begins; conditions precedent. 234. Initial guaranty fund; agreement and bond of incorporators. 235. Expense fund; agreement and bond of incorporators. 236. Return of initial guaranty fund and expense fund. 237. Return of previous contributions. 238. General powers. ■239. Investment and restrictions thereon. 240. Restrictions on taking, holding and conveying real estate. 241. Requirements as to mortgage loans. 242. Restrictions on dealing in commodities, exchange, gold and silver. 243. Restrictions on borrowing money, pledging securities and issu- ing certificates of deposit. 244. Restrictions on deposit of funds. 245. Restrictions as to place of busines®; branch offices. 246. Restrictions as to book-entries; amortization of securities. 247. Restrictions on amount of deposits; refusal or return of de- posits. 248. Regulations and restrictions as to repayment of deposits; pass- books. 249. Repayment of deposits of minors; trust and joint deposits. 250. Actions to recover deposits regulated. 251. Available fund. 252. Guaranty fund. 253. Amount of guaranty fund; how determined. 254. Calculation of earnings for dividend period. 255. Deductions from net earnings for guaranty fund. 256. Dividends; accumulation of guaranty fund and undivided profits. 257. Percentum of par value surplus; how determined. 258. Advertisements of surplus or guaranty fund. 259. Change of location. 260. Board of trustees. 261. Oath and declaration of trustee. 262. By-laws. 263. Officers. 264. Meetings of trustees; reports of officers. 265. Compensation of trustees, officers and attorneys. 266. Increase or reduction of number of trustees. § 230. Savibtgs Banks. 205 Section 267. Reatrictiona on trustees and officers. 268. Removal and forfeiture of office of trustee. 269. Filling vacancies in board of trustees. 270. Security from officers and employees. 271. Pensions. 272. Examination of vouchers and assets by trustees. 273. Reports to superintendent. 274. Reports of dormant accounts. 275. No other report or supervision required. 276. Communications from bank department. 277. Liability of savings banks for assessments by superintendent. 278. Preference of deposits made by savings bank. 279. Advertisements of unauthorized savings banks; use of word "saving;" school savings. 280. Reduction of liability to depositors. 281. Charters of all savings banks to be conformed to this article. § 230. Incorporation; qualifications of incorporators; certificate of organization. When authorized by the superintendent of banks as provided by section twenty-three of this chapter, not less than nine or more than thirty persons may form a corporation to be known as a savings bank. Such persons must be citizens of the United States at least four-fifths of them must be residents of this state, and at least two-thirds of them must be residents of the county where the business of the savings bank is to be transacted. They shall subscribe and acknowledge an organization certificate in dupli- cate, which shall specifically state: 1. The name by which the savings bank is to be known. 2. The place where its business is to be transacted. 3. The name, occupation, residence and post-ofiice address of each incorporator. 4. The sums which each incorporator will contribute in cash to the initial guaranty fund and to the expense fund respectively, as provided in sections two hundred thirty-four and two hundred thirty-five of this article. 5. A declaration that each incorporator will accept the respon- sibilities and faithfully discharge the duties of a trustee of the savings bank, and is free from all the disqualifications specified in section two hundred sixty of this article. Source. — Former § 130. Minimum number of incorporators reduced from 13 to 9; for reason, see note on reduction of minimum number of trust com- 206 Banking Law. § 231. pany incorporators, § 180. Maximum number has also been limited so as to prevent scattering of responsibility. Qualification of residence in state comes from former § 137 defining qualifications as to residence of trustees; qualification of residence in county is new, as is also qualification as to citizenship. Subdivision 4 and the last clause of subdivision S are new. OTHER STATUTES AFFECTING SAVINGS BANIvS.— Saving banks are subject to all provisions of the General Corporation Law, except such as are made inapplicable either expressly or by necessary implication. (See Gen. Corp. L., § 321.) But as they have no capital stock (Const. Art VIII, § 4), they are not subject to the provisions of the Stock Corporation Law. Exemption of deposits from taxation, see Tax Law, § 4. Franchise tax, see id. § 189. Credit on purchase of State bonds, see id. § 190. Recording tax on mortgages, see id. §§ 252, 253. CONSTITUTIONAL PROVISION.— Art. VIII, § 4, requires the Legisla- ture to make uniform all charters of savings banks and institutions for sav- ings ; provides that no such corporation shall have any capital stock, that the trustees shall have no interest in the profits, or in any loan or use of money or property of the corporation. CROSS-REFERENCES.— Definition of "savings bank," see § 2. Trustees, see §§ 260-269. Similar requirements in regard to other corporations seeking to engage in business under the Banking Law, see § 100 and cross-references there given. Qualifications of incorporators, see Gen. Corp. Law, § 4. Name of corporation, see Gen. Corp. Law, § 6. Change of name, see Gen. -Corp. Law, §§ 60-65. Amended and supplemental certificates of incorporation, tsee Gen. Corp. Law, § 7. Lost or destroyed certificates, see Gen. Corp. Law, § 8. Certificate as evidence, see Gen. Corp. Law, § 9. Extension and revival of corporate- existence, see Gen. Corp. Law, §§ 37- 39, 41. False statements or rumors as to banking institutions, see Penal Law, § 303. § 231. Notice of intention to organize; filing, publication and ser- vice upon existing savings banks. At the time of executing the organization certificate, the pro- posed incorporators shall sign a notice of intention to organize § 232. Savings Banks. 20T the savings bank, which shall specify their names, the name of the proposed corporation and its location as set forth in the or- ganization certificate. The original of such notice shall be filed in the office of the superintendent of banks within sixty days after the date of its execution and a copy thereof shall be published at least once a week for four successive weeks in a newspaper desig- nated by the superintendent as provided in section twenty of this chapter, the publication to be commenced within thirty days after such designation. At least fifteen days before the organization certificate is submitted to the superintendent for examination as provided in the section next following, a copy of such notice shall be served upon each savings bank organized and doing business in the village, borough or city, if in a city not divided into bor- oughs, specified as the location of the proposed savings bank, by mailing such copy, postage prepaid, to said savings bank. Source. — Former § 131, revised. Limitation of time within which original notice must be filed with superintendent, designation of newspaper by super- intendent, time within which publication must be commenced after designa- tion, the savings banks to be served with notice (formerly those organized and doing business in the county) and the manner or service of notice, are new. CROSS-REFERENCES.— Duties of Superintendent upon receipt of notice of intention, see § 20. Similar provision as to banks, see § 101; as to trust companies, see § 181. § 232. Submitting organization certificate to superintendent; proof of publication and service of notice of intention. After the lapse of at least twenty-eight days from the date of the first due publication of the notice of intention to organize and within ten days after the date of the last publication thereof, the organization certificate, executed in duplicate, shall be submitted for examination to the superintendent of banks at his office in Albany, with affidavits showing due publication and service of the notice of intention to organize prescribed in section two hun- dred thirty-one of this article. Source. — New. A substitute for former § 132. CROSS-REFERENCES.— See the cross-references given under § 102 which is identical with this section. 208 Banking Law. §§ 233, 234. § 233. When corporate existence begins; conditions precedent to commencing business. When the superintendent shall have approved the organization certificate, as provided in section twenty-three of this chapter, the corporate existence of the savings bank shall begin, and it may exercise all the powers necessary to the completion of its organi- zation. But the savings bank shall transact no business other than that relating to the completion of its organization until: 1. The incorporators shall have made the deposit of the initial guaranty fund required by section two hundred and thirty-four of this article, and if the superintendent shall so require, shall have entered into the agreement or undertaking with the superin- tendent and shall have filed the surety bond securing the same, as prescribed in said section. 2. The incorporators shall have made the deposit of the expense fund required by section two hundred and thirty-five of this article, and if the superintendent shall so require, shall have entered into the agreement or undertaking with the superintend- ent and shall have filed the surety bond securing the same, as prescribed in said section. 3. It shall have transmitted to the superintendent of banks the name, residence and post-office address of each ofiicer of the cor- poration. 4. The superintendent shall have duly issued to it the authori- zation certificate specified in section twenty-four of this chapter. Source. — Former §§ 32 and 135. Subdivisions 1 and 2 are new; sub- division 3 is based on former § 135, and subd. 4 on former § 32. CROSS-REFERENCES. — For similar provisions as to other persons and corporations engaging in business under tlie Banlcing Law, see § 103 and cross-references there given. Forfeiture of corporate rights by not commencing business, see § 485. § 234. Initial guaranty fund; agreement of incorporators to con- tribute; bond. Before any savings bank hereafter organized shall be author- ized to do business in this state, its incorporators shall create a guaranty fund for the protection of its depositors against losses upon its investments whether arising from depreciation in the market value of its securities or otherwise. § 234. Savings Banks. 209 ♦ 1. Such guaranty fund shall consist of payments in cash made by the original incorporators and of sums credited thereto from the earnings of the savings bank as hereinafter required. 2. The incorporators shall deposit to the credit of such savings bank in cash as an initial guaranty fund at least five thousand dollars. They shall also enter into such agreement or under- taking with the superintendent of banks as trustee for the de- positors with the savings bank as he may require, to make such further contributions in cash to the guaranty fund of such savings bank as may be necessary to maintain the solvency of the savings bank and to render it safe for it to continue business. Such agreement or undertaking to an amount approved by the superin- tendent of banks shall be secured by a surety bond executed by a domestic or foreign corporation authorized by the superintendent of insurance to transact within this state the business of surety, and shall be filed in the banking department. Such agreement or undertaking and such surety bond need not be made or fur- nished unless the superintendent of banks shall require the same. 3. Prior to the liquidation of any such savings bank, such guaranty fund shall not be in any manner encroached upon, except for losses and the repayment of contributions made by incorpo- rators or trustees as hereinafter provided, until it exceeds twenty- five per centum of the amount due depositors. 4. The amounts contributed to such guaranty fund by the in- corporators or trustees shall not constitute a liability of the savings bank, except as hereinafter provided, and any losses sus- tained by the savings bank in excess of that portion of the guar- anty fund created from earnings may be charged against such contributions pro rata. Source. — New. CROSS-REFERENCES.— Definition of guaranty fund, see § 3. Return of contributions to initial guaranty fund, see § 236, subd. 2. Return of contributions heretofore made, see § 237. Establishment of guaranty fund of existing savings banks, see § 252. Transferable certificates representing amounts contributed, see § 238, subd. 2. Right to dividends thereon, see § 256, subd. 3. Under the former law, no statutory provision was made to meet the ex- penses of a. new savings bank until it secured deposits from which it could create earnings, nor was there any fund against which expenses and losses 14 210 Banking Law. § 235, could be charged in the first instance so that dividends might he paid 06 initio to depositors. This and the following section providing for an expense fund were incorporated for the purpose of providing a method of instituting a savings bank, under which the liability for such advances was subordinated to deposit liabilities, and the future necessity of resorting to questionable expedients was obviated. § 235. Expense fund; agreement of incorporators to contribnte; bond. Before any savings bank hereafter organized shall be authorized to do business in this state, its incorporators shall create an ex- pense fund from which the expense of organizing such savings bank and its operating expenses may be paid until such time as its earnings are sufficient to pay its operating expenses in addition to such dividends as may be declared and credited to its deposit- ors from its earnings. The incorporators shall deposit to the credit of such savings bank in cash as an expense fund the sum of five thousand dollars. They shall also enter into such an agreement or undertaking with the superintendent of banks as trustee for the depositors with the savings bank as he may require, to make such further contribu- tions in cash to the expense fund of such savings bank as may be necessary to pay its operating expenses until such time as it can pay them from its earnings in addition to such dividends as may be declared and credited to its depositors. Such agreement or undertaking, to an amount approved by the superintendent of banks, shall be secured by a surety bond executed by a domestic or foreign corporation authorized by the superintendent of insur- ance to transact within this state the business of surety, and shall be filed in the banking department. Such agreement or undertaking and such surety bond need not be made or furnished unless the superintendent of banks shall require the same. The amounts contributed to the expense fund of such savings bank by the incorporators or trustees shall not constitute a liabil- ity of such savings bank, except as hereinafter provided. Source. — New. CROSS-REFERENCES.— How expense fund may be returned, see § 236, subd. 1. Transferable certificates representing amount contributed, see § 238, subd. 2. Right to dividends thereon, see § 256, subd. 3. For purpose of section see note to § 234. §§ 236, 237. Savings Banks. 211 § 236. Return of initial guaranty fund and expense fund. 1. Contributions made by the incorporators or trustees to the expense fund may be repaid pro rata to the contributors from that portion of the guaranty fund created from earnings, when- ever such payments will not reduce the guaranty fund below five per centum of the total amount due depositors. In case of the liquidation of the savings banli before such contributions to the expense fund have been repaid, any contributions to the expense fund remaining unexpended after the payment of the expenses of liquidation may be repaid to the contributors pro rata. 2. Whenever the contributions of the incorporators or trustees to the expense fund of such savings bank have been returned to them, the contributions made to the guaranty fund by incor- porators or trustees may be returned to them pro rata, from that portion of the guaranty fund created from the earnings of the savings bank, provided that such repayments will not reduce the earned portion of the guaranty fund of such savings banli below five per centum of the amount due depositors. In case of the liquidation of the savings bank before such contributions to the guaranty fund have been repaid, any portion of such contribu- tions not needed for the payment of the expenses of liquidation and the payment of depositors in full and the repayment of contributions to the expense fund may be repaid to the con- tributors pro rata. Source. — New. CROSS-REFERENCES.— Initial quaranty fund, see § 234. Expense fund, see § 236. Transferable certificates representing contributions, see § 238, subd. 2. Return of contributions heretofore made, soe § 237. See note to § 234. § 237. Return of contributions heretofore made. Contributions heretofore made by th^ incorporators or trustees of any savings bank to pay its expenses or to maintain its sol- vency, under an agreement with the superintendent of banks that such contributions may be returned whenever such return will not affect the solvency of such savings bank or render it unsafe for it to continue business, may be returned in accordance with the provisions of such agreement. 212 Banking Law. § 238. Source. — New. This section was inserted so that extra-legal expedients heretofore adopted to protect depositors of new institutions might be legalized, and both the savings bank and contributors to the funds might be protected in the return of the money. See note to § 234. § 238. General powers. In addition to the powers conferred by the general corporation law, every savings bank shall have, subject to the restrictions and limitations contained in this article, the following powers: 1. To receive deposits of money, to invest the same in the property and securities prescribed in section two hundred and thirty-nine of this article, to declare dividends in the manner pre- scribed in sections two hundred and fifty-four to two hundred and fifty-six of this article, and to exercise by its board of trus- tees or duly authorized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of a savings bank. 2. To issue transferable certificates showing the amounts here- tofore or hereafter contributed by any incorporator or trustee for the purpose of maintaining the solvency of such savings bank, or for the purpose of paying its expenses. Such certificate shall show that it does not constitute a liability of such savings bank, except as hereinbefore provided. 3. To purchase, hold and convey real property as prescribed in sections two hundred and thirty-nine and two hundred and forty of this article. 4. To pay depositors as hereinafter provided and, when re- quested by them, by drafts upon deposits to the credit of the savings bank in the city of New York or in foreign exchange, and to charge current rates of exchange for such drafts. 5. To borrow money in an emergency for the purpose of re- paying depositors and to pledge or hypothecate securities as col- lateral for loans so obtained. 6. To collect or protest promissory notes or bills of exchange and remit the proceeds of the collections by drafts upon deposits to the credit of the savings bank in the city of New York, and to charge the usual rates or fees for such collection and remittance or such protest. 7. To sell gold or silver received in payment of interest or § 239. Savings Banks. 213 principal of obligations owned by the savings bank, or from de- positors in the regular course of business. 8. To do all other acts authorized by this article. Source. — Subdivision 1 is from former § 135 rewritten; subd. 2 is new; subd. 3 is a power transferred from former § 147; subd. 4 comes from former § 152; Bubd. 5 is adapted from former § 152, but the power to borrow is limited to the purpose stated, and the requirements of the previous approval of the superintendent of banks and the resolution of the trustees liave been transferred to § 243; subd. 6, in so far as it provides for the manner of payment of proceeds of collections is adapted from former § 152, but the power to collect and protest notes and time bills is not only new but was expressly withheld from savings banks by former § 152; subd. 7 is from former § 152 ; subd. 8 is new. CROSS-REFERENCES.— Powers of corporations generally, see Gen. Corp. Law, §§ 10, 11; acquisition of real property, id., § 13, 14. See note to definition of savings bank, § 2. Power to make by-laws, see § 262. Restrictions on power to borrow money, hypothecate securities or issue certificates of deposit, see § 243. Limitation on amount of deposits, see § 247. Regulations as to repayment of deposits, see §| 248, 249. Investments and loans, see §§ 239, 240, 241 and notes thereto. Regulations and restrictions as to dividends, see § 256. MAY NOT ACT AS TRUSTEE.— The Banking Law does not authorize a savings bank to act as trustee. Atty.-Gen. Rep. (1910) 853. § 239. Investment of deposits and guaranty fund and restrictions thereon. A savings bank may invest the moneys deposited therein, the sums credited to the guaranty fund thereof and the income de- rived therefrom, in the following property and securities and no others, and subject to the following restrictions : 1. The stocks or bonds or interest-bearing notes or obligations of the United States, or those for which the faith of the United States is pledged to provide for the payment of the interest and principal, including the bonds of the District of Columbia. 2. The stocks or bonds or interest-bearing obligations of this state, issued pursuant to the authority of any law of the state. 3. The stocks, bonds or interest-bearing obligations of any state of the United States, upon which there is no default and upon which there has been no default for more than ninety days ; pro- 214: Baitking Law. § 239. vided that within ten years immediately preceding the invest- ment such state has not been in default for more than ninety days in the payment of any part of principal or interest of any debt duly authorized by the legislature of such state to be contracted by such state since the first day of January, eighteen hundred and seventy-eight. 4. The stocks, bonds, interest-bearing obligations, or revenue notes sold at a discount, of any city, county, town, village, school district, union free school district or poor district in this state, provided that they were issued pursuant to law and that the faith and credit of the municipality or district that issued them are pledged for their payment. 5. The stocks or bonds of any incorporated city situated in one of the states of the United States which was admitted to statehood prior to January first, eighteen hundred and ninety-six, and which since January first, eighteen hundred and sixty-one, has not repu- diated or defaulted in the payment of any part of the principal or interest of any debt authorized by the legislature of any such state to be contracted, provided said city has a population, as shown by the federal census next preceding said investment, of not less than forty-five thousand inhabitants, and was incorporated as a city at least twenty-five years prior to the making of said investment, and has not, since January first, eighteen hundred and seventy-eight, defaulted for more than ninety days in the payment of any part either of principal or interest of any bond, note or other evidence of indebtedness, or effected any compromise of any kind with the holders thereof. But if, after such default on the part of any such state or city, the debt or security, in the payment of the principal or interest of which such default oc- curred, has been fully paid, refunded or compromised by the issue of new securities then the date of the first failure to pay principal or interest, when due, upon such debt or security, shall be taken to be the date of such default, within the provisions of this sub- division, and subsequent failures to pay installments of principal or interest upon such debt or security, prior to the refunding or final payment of the same, shall not be held to continue said de- fault or to fix the time thereof, within the meaning of this sub- division, at a date later than the date of said first failure in pay- ment. If at any time the indebtedness of any such city, together § 239, Savings Baa-ks. 21 with the indebtedness of any district, or other municipal cor- poration or subdivision except a county, which is wholly or in part included within the bounds or linaits of said city, less its water debt and sinking funds, shall exceed seven per centum of the valuation of said city for purposes of taxation, its bonds and stocks shall thereafter, and until such indebtedness shall be reduced to seven per centum of the valuation for the purposes of taxation, cease to be an authorized investment for the moneys of savings banks. 6. Bonds and mortgages on unincumbered real property situ- ated in this state, to the extent of sixty per centum of the ap- praised value thereof. Not more than sixty-five per centum of the whole amount of deposits and guaranty fund shall be so loaned or invested. If the loan is on unimproved and unproductive real property, the amount loaned thereon shall not be more than f ortv per centum of its appraised value. No investment in any bonds and mortgages shall be made by any savings bank except upon the r.eport of a committe e of its trustees charged with the duty of investigating the same, ^^io. sha ll^ertif y to the value of the prem- ises mortgaged or to be mortgaged, according to their judgment, and such report shall be filed and preserved among the records of the corporation. 7. The following bonds of railroad corporations: (a) The first mortgage bonds of any railroad corporation of this state, the principal part of whose railroad is located within this state, or of any railroad corporation of this or any other state or states connecting with and controlled and operated as a part of the system of any such railroad corporation of this state, and of which connecting railroad at least a majority of its capital stock is owned by such a railroad corporation of this state, or in the mort- gage bonds of any such railroad corporation of an issue to retire all prior mortgage debt of such railroad companies respectively; provided that at no time within five years next preceding the date of any such investment, such railroad corporation of this state or such connecting railroad corporation respectively shall have failed regularly and punctually to pay the matured principal and inter- est of all its mortgage indebtedness, and in addition thereto regu- larly and punctually to have paid in dividends to its stockholders during each of said five years an amount at least equal to four 216 Banking- Law. § 239. per centum upon all its outstanding capital stock ; and provided, further, that at the date of every such dividend the outstanding capital stock of such railroad corporation, or such connecting rail- road company respectively shall have been equal to at least one- third of the total mortgage indebtedness of such railroad cor- porations respectively, including all bonds issued or to be issued under any mortgage securing any bonds in which such investment shall be made. (b) The mortgage bonds of the following railroad corporations : The Chicago and Northwestern Eailroad Company ; Chicago, Bur- lington and Quiney Eailroad Company, Michigan Central Rail- road Company, Illinois Central Railroad Company, Pennsylvania Railroad Company, Delaware and Hudson Company, Delaware, Lackawanna and Western Railroad Company, New York, New Haven and Hartford Railroad Company, Boston and Maine Railroad Company, Maine Central Railroad Company, the Chicago and Alton Railroad Company, Morris and Essex Railroad Company, Central Railroad of New Jersey, United New Jersey Railroad and Canal Company, also in the mortgage bonds of railroad companies whose lines are leased or operated or controlled by any railroad company specified in this paragraph if said bonds be guaranteed both as to principal and interest by the railroad company to which said lines are leas.ed or by which they are operated or controlled. Provided that at the time of making investments authorized by this paragraph the said railroad corporations issuing such bonds shall have earned and paid regular dividends of not less than four per centum per annum in cash on all their issues of capital stock for the ten years next pre- ceding such investment, and provided the capital stock of any said railroad corporations shall equal or exceed in amount one-third of the par value of all its bonded indebtedness; and further provided that all bonds authorized for investment by this paragraph shall be secured by a mortgage which is a first mortgage on either the whole or some part of the railroad and railroad property of the company issuing such bonds, or that such bonds shall be mortgage bonds of an issue to retire all prior mortgage debts of such railroad company; provided, further, that the mortgage which secures the bonds au- thorized by this paragraph is dated, executed and recorded prior to January first, nineteen hundred and five. § 239. Savings Banks. 217 (c) The mortgage bonds of tte Chicago, Milwaukee and Saint Paul Railway Company, and the Chicago, Eock Island and Pacific Kailway Company, so long as they shall continue to earn and pay at least four per centum dividends per annum on their outstanding capital stock, and provided their capital stock shall equal or exceed in amount one-third of the par value of all their bonded indebted- ness, and further provided that all bonds of either of said com- panies hereby authorized for investment shall be secured by a mortgage which is a first mortgage on either the whole or some part of the railroad or railroad property actually in the possession of and operated by said company, or that such bonds shall be mort- gage bonds of an issue to retire all prior debts of said railroad com- pany; provided, further, that the mortgage which secures the bonds authorized by this paragraph is dated, executed and recorded prior to January first, nineteen hundred and five. (d) The first mortgage bonds of the Ponda, Johnstown and Gloversville Railroad Company, or in the mortgage bonds of said railroad company of an issue to retire all prior mortgage debts of said railroad company and provided the capital stock of said railroad company shall equal or exceed in amount one-third of the par value of all its bonded indebtedness and provided also that such railroad be the standard gauge of four feet eight and one-half inches, and in the mortgage bonds of the Buffalo Creek Railroad Company of an issue to retire all prior mortgage debts of said rail- road company, provided that the bonds authorized by this para- graph are secured by a mortgage dated, executed and recorded prior to January first, nineteen hundred and five. (e) The mortgage bonds of any railroad corporation incorporated under the laws of any of the United States, which actually owns in fee not less than five hundred miles of standard gauge railway exclusive of sidings, within the United States, provided that at no time within five years next preceding the date of any such invest- ment such railroad corporation shall have failed regularly and punc- tually to pay the matured principal and interest of all its mortgage indebtedness and in addition thereto regularly and punctually to have paid in dividends to its stockholders during each of said five years an amount at least equal to four per centum upon all its out- standing capital stock; and provided further that during said five years the gross earnings in each year from the operations of said 218 Banking Law. § 239. company, including therein tlie gross earnings of all railroads leased and operated or controlled and operated by said company, and also including in said earnings the amount received directly or indirectly by said company from the sale of coal from mines owned or con- trolled by it, shall not have been less in amount than five times the amount necessary to pay the interest payable during that year upon its entire outstanding indebtedness, and the rentals for said year of all leased lines, and further provided that all bonds authorized for investment by this paragraph shall be secured by a mortgage which is at the time of making said investment or was at the date of the execution of said mortgage (one) a first mortgage upon not less than seventy-five per centum of the railway owned in fee by the company issuing said bonds exclusive of sidings at the date of said mortgage or (two) a refunding mortgage issued to retire all prior lien mortgage debts of said company outstanding at the time of said investment and covering at least seventy-five per centum of the railway owned in fee by said company at the date of said mortgage. But no one of the bonds so secured shall be a legal investment in case the mortgage securing the same shall authorize a total issue of bonds which together with all outstanding prior debts of said company, after deducting therefrom in case of a refunding mort- gage, the bonds reserved under the provisions of said mortgage to retire prior debts at maturity, shall exceed three times the out- standing capital stock of said company at the time of making said investment. And no mortgage is to be regarded as a refunding mortgage, under the provisions of this paragraph, unless the bonds which it secures mature at a later date than" any bond which it is given to refund, nor unless it covers a mileage at least twenty-five per centum greater than is covered by any one of the prior mort- gages so to be refunded. (f) Any railway mortgage bonds which would be a legal in- vestment under the provisions of paragraph (e) of this sub- division, except for the fact that the railroad corporation issuing said bonds actually owns in fee less than five hundred miles of road, provided that during five years next preceding the date of any such investment the gross earnings in each year from the operations of said corporation, including the gross earnings of all lines leased and operated or controlled and operated by it, shall not have been less than ten million dollars. § 239. Savings Banks, 219 (g) The mortgage bonds of a railroad corporation described in the foregoing paragraph (e) or (f) or the mortgage bonds of a railroad owned by such corporation, assumed or guaranteed by it by endorsement on said bonds, provided said bonds are prior to and are to be refunded by a general mortgage of said corpo- ration the bonds secured by which are made a legal investment under the provisions of said paragraph (e) or (f) ; and provided, further, that said general mortgage covers all the real property upon which the mortgage securing said underlying bonds is a lien. (h) Any railway mortgage bonds which would be a legal in- vestment under the provisions of paragraph (e) or (g) of this subdivision except for the fact that the railroad corporation issuing said bonds actually owns in fee less than five hundred miles of road, provided the payment of principal and interest of said bonds is guaranteed by endorsement thereon by, or pro- vided said bonds have been assumed by, a corporation whose first mortgage is, or refunding mortgage bonds are, a legal investment under the provisions of paragraph (e) or (f ) of this subdivision. But no one of the bonds so guaranteed or assumed shall be a legal inviestment in case the mortgage securing the same shall authorize a total issue of bonds which, together with all the outstanding prior debts of the corporation making said guarantee or so assuming said bonds, including therein the authorized amount of all previously guaranteed or assumed bond issues, shall exceed three times the capital stock of said corporation, at the time of making said investment. (i) The first mortgage bonds of a railroad the entire capital stock of which, except shares necessary to qualify directors, is owned by, and which is operated by a railroad whose last issued refunding bonds are a legal investment under the provisions of paragraph (a), (e), or (f) of this subdivision, provided the payment of principal and interest of said bonds is guaranteed by endorsement thereon by the company so owning and operating said road, and further provided the mortgage securing said bonds does not authorize an issue of more than twenty thousand dollars in bonds for each mile of road covered thereby. But no one of the bonds so guaranteed shall be a legal investment in case the mort- gage securing the same shall authorize a total issue of bonds 220 Banking Law. § 239. whicli together with all the outstanding prior debts of the com- pany making said guarantee, including therein the authorized amount of all previously guaranteed bond issues, shall exceed three times the capital stock of said company, at the time of making said investment. Bonds which have been or shall become legal investments for savings banks under any of the provisions of this section shall not be rendered illegal as investments, though the property upon which they are secured has been or shall b© conveyed to another corporation, and though the railroad corporation which issued or assumed said bond has been or shall be consolidated with another railroad corporation, if the consolidated or purchasing corporation shall assume the payment of said bonds and shall continue to pay regularly interest or dividends or both upon the securities issued against, in exchange for or to acquire the stock of the company consolidated or the property purchased or upon securities subsequently issued in exchange or substitution there- for, to an amiaunt at least equal to four per centum per annum upon the capital stock outstanding at the time of such consolida- tion or purchase of said corporation which has issued or assumed such bonds. Not more than twenty-five per centimi of the assets of any savings bank shall be loaned or invested in railroad bonds, and not more than ten per centum, of the assets of any savings bank shall be invested in the bonds of any one railroad corporation described in paragraph (a) of this subdivision, and not more than five per centum of such assets in the bonds of any other railroad corporation. In determining the amount of the assets of any savings bank under the provisions of this subdivision its securities shall be estimated in the manner prescribed for determining the per centum of par value surplus by section two hundred and fifty-seven of this article. Street railroad corporations shall not be considered railroad corporation? within the meaning of this subdivision. 8. Promissory notes payable to the order of the savings bank upon demand, secured by the pledge and assignment, if necessary, of the stocks or bonds or any of them enumerated in subdivisions one, two, three, four and five of this section or by the railroad bonds or any of them mentioned and described in subdivision § 239. Savings Banks. 221 seven of this section, but no such loan shall exceed ninety per centum of the cash market value of such securities so pledged. Should any of the securities so held in pledge depreciate in value after the making of such loan, the savings bank shall require an immediate payment of such loan or of a part thereof or addi- tional security therefor, so that the amount loaned thereon shall at no time exceed ninety per centum of the market value of the securities so pledged for such loan. 9. Real estate as follows: (a) A plot whereon there is or may be erected a building or buildings suitable for the convenient transaction of the business of the savings bank, from portions of which not required for its own use a revenue may be derived. (T>) Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its business. (c) Such as it shall purchase at sales under judgments, de- crees or mortgages held by it. The trustees of a savings bank shall not be held liable for in- vesting in state or municipal bonds named in the last list fur- nished by the superintendent of banks pursuant to section fifty- two of article two of this chapter, or in any railroad bonds men- tioned in such list, which have been legally issued and properly executed, unless such savings bank shall have been notified by the superintendent of banks that, in his judgment, such bonds do not conform or have ceased to conform to the provisions of this section. Source.— Former §§ 146, 147, 150. The language of the first sentence is based upon the first sentence of former § 146, with the addition of the words " the sums credited to the guaranty fund thereof," and " in the following property and securities and no others; and subject to the following restrictions." This sentence and subdivision 8 supersede the first sentence of former § 150 relating to loans on personal security. Subdivisions 1 and 2 are subdivisions 1 and 2 of former § 146, adopted without change. Subdivision 3 supersedes former § 146, subd. 3, the provisions of which are materially amended and condensed. The former subdivision was the result of legislation designed to include certain specific issues of state bonda among the investments authorized. The present subdivision makes all state bonds subject to the same requirements. The present proviso that the state 222 Banking Law. § 239. shall not have been in default on any debt authorized by the legislature to be contracted by the state since January 1st, 1878, is designed to make available as investments the bonds of southern states which may have defaulted in the payment of debts contracted during the " reconstruction period " after the Civil War. Subdivision 4 is former § 146, subdiv. 4, amended so as to include revenue notes sold at a discount. Subdivision 5 is former § 146, subdiv. 5, adopted without change, except that the clause at the end " but the superintendent of banks may, in his discretion, require any savings bank to sell such bonds or stocks of said city, as may have been purchased prior to said increase of debt," has been transferred to § 55. Subdivision 6 includes the first four sentences of former § 146, subdiv. 6, without substantial change, except the addition of the words " and guaranty fund " in the second sentence. Subdivision 7 includes all of subdivision 6 of former § 146 except the first four sentences, the intention being merely to place in a separate sub- division the provisions relating to railroad bonds. No substantial change is made in the text. Subdivision 8 is adopted from former § 148 which permitted such loans from the available fund. See note to § 251. Subdivision 9 supersedes subdivision 7 of former § 146 and adopts parts of former § 147 without substantial change. The last paragraph of the section is new. CEOSS-REFEEENCES.— Duty of superintendent to furnish list of legal investments, see § 52; to furnish estimated market value of bonds, see § 53; to determine valuation of securities in arrears of interest, see § 54. When superintendent may require sale of securities, see § 55. Duty of trustees to make investments, see § 251. Restrictions on taking and holding real estate, see § 240. Requirements as to mortgage loans, insurance of buildings and recording of mortgages, see § 241. Method of carrying investments on books, see § 246. Amortization of securities, see § 246. Criminal liability of trustees for unlawful investments, see Penal Law, § 296. General Corporation Law §§ 13 and 14, relating to the acquisition of real property, are excluded by this section from application to savings banks. LIABILITY OF TRUSTEES.— Trustees of a savings bank are under a positive duty to see to it that the funds of the bank are not invested con- trary to law, and a disregard of that obligation renders the trustees per- sonally liable. Paine v. Barnum, 59 How. Pr. 303; Paine v. Mead, 59 How. Pr. 318; Hun v. Gary, 82 N. Y. 65. § 239. Savings Banks. 223 This rule is now qualified by the last paragraph of § 239. When a loss sustained hy a saving bank through the illegal purchase by the trustees of certain bonds of a foreign state has been made good by third persons who gave their obligations to the bank in compliance with a requirement imposed by the superintendent as a condition of permitting the bank to continue in business, the trustees are released from liability to the bank. Hun v. Van Dyck, 26 Hun 567, aff'd 92 N. Y. 660. DEPRECIATION OF SECURITY.— A savings bank cannot legally retain and continue an investment which though legal when made has become illegal by reason of the changed condition and character of the security. In such a case the superintendent of banks had power, under the former Banking Law, to require the bank to dispose of the security. The manner of making the change of investment rests in his sound discretion, but the power should be so exercised as to prevent loss or embarrassment in the business of the bank. Atty.-Gen. Rep. (1908) 371. This is now covered by § 55. UNAUTHORIZED SECURITY ACCEPTED AS PAYMENT.— A savings bank may accept in payment of a debt securities not authorized by statute as investments. Rome Savings Bank v. Krug, 102 N. Y. 331. SUBDIVISION 3 To fulfill the requirements of the statute the bonds or obligations must not only be issued by a State, but must be obligations of the State for which the credit of the State is pledged. Atty.-Gen. Rep. (1909) 730. The bonds of the Board of Commissioners of the Port of New Orleans are not legal investments for savings banks. Atty.-Gen. Rep. (1909) 730; Atty.- Gen. Rep. (1911) vol. 2, p. 611. A State's resistance of the payment of its bonds on the ground that the Constitution did not authorize the creation of the debt is not a default in payment within the meaning of the statute. Atty.-Gen. Rep. (1892) 64. That ten years have not elapsed since the admission of a State to the Union does not prevent its bonds from being authorized investments, if since becoming a State it has never defaulted in the payment of any of its obligations. Atty.-Gen. Rep. (1909) 728. In 1891 the Attorney- General gave his opinion that the bonds of the State of Minnesota would not be legal investments for savings banks until all of the bonds issued in 1858 and known as " Minnesota State Railroad Bonds " had been cancelled or the State had been released from liability thereon. Atty.- Gen. Rep. (1891) 260. The following State bonds, according to the rulings of the Attorney-Gen- eral, are legal investments for savings banks in this State: Bonds of the State of Colorado, Atty.-Gen. Rep. (1892), 64; bonds of the State of Okla- homa, Atty.-Gen. Rep. (1909), 728; bonds of the State of New Mexico issued pursuant to an act of the legislature approved June I, 1912. Atty.-Gen. 224 BankixXG Law. § 239. Rep. (1913), vol. 2, p. 391; the refunding bonda of the State of Tennessee issued pursuant to the act of the General Assembly approved February 21st, 1913, Atty.-6en. Rep. (1913), vol. 2, p. 158., Bonds or certificates of indebtedness of the Ohio State University, if issued in conformity to the statutes of Ohio, are " interest bearing obligations " of that State, and are legal investments for savings banks. Atty.-Gen. Rep. (1892) 265. In 1912 the Attorney-General gave his opinion that the bonds of the State of Louisiana were not legal investments for savings banks, because that State had defaulted in the payment of certain of its obligations known as "baby bonds." Atty.-Gen. Rep. (1912), 346. But later, upon a fuller pres- entation of the facts, the Attorney-General ruled that the " baby bonds " were not obligations for which the credit of the State was pledged, and therefore that the State was not in default; and that bonds about to be issued by the State pursuant to constitutional and statutory authority to refund certain bonds known as " Consolidated Bonds " authorized by the legislature of 1892, issued in 1895, and constituting legal investments for savings banks in New York, were likewise legal investments. SUBDIVISION 4. See General Municipal Law, § 7, making municipal bonds a charge upon the municipality and providing for their payment. The fact that the inhabitants of a village or school district do not own the fee of the land on which they reside, as where the land in the village or district is held on long leases, does not prevent the bonds of the village or school district from being authorized investments under this subdivision. Atty.-Gen. Rep. (1899) 275. Warrants issued hy the City of Buffalo pursuant to Laws of 1889, ch. 323, as amended by Laws of 1890, ch. 383, are " interest bearing obligations " of said city within the meaning of this subdivision, and are legal Investments for savings banks. Atty.-Gen. Rep. .(1891) 213. The village and school bonds of the village of Salamanca are legal invest- ments for savings banks. Atty.-Gen. Rep. (1899) 275. The bonds of the City of Cohoes, issued under Laws of 1904, ch. 471, are legal investments for savings banks. Atty.-Gen. Rep. (1909) 736. A JUDGMENT AGAINST A CITY is not an obligation of the kind de- scribed in the statute as an authorized investment. Atty.-Gen., Rep. (1903) 362. SUBDIVISION 5. The trustees of a savings bank should not allow bonds of a city to remain past due in their hands, nor should they enter into an agreement with the city to extend the time of payment of the bonds while other bonds of the same issue would be paid. Atty.-Gen. Rep. (1911) vol. 2, p. 196: The words "the valuation of said city for purposes of taxation," as used § 239. Savings Banks. 225 in the third sentence of this subdivision, mean the sum at which the property is assessed. Atty.-Gen. Rep. (1911) vol. 2, p. 686. Said valuation includes personal property as well as real estate. Atty.-Gen. Rep. (1911) vol. 2, p. 133. In computing the indebtedness of a city to determine whether it exceeds seven per cent, of the " valuation of said city for purposes of taxation," tax certificates of the city should be added to the city's general indebtedness only when the faith and credit of the municipality are pledged for their pay- ment so that the obligation created is general ; and even then they should not be so added until there is a failure of the special fund devoted to their redemption. Atty.-Gen. Rep. (1896) 249. The amount of securities in the city's sinking fund should be deducted from its indebtedness. Atty.-Gen. Rep. (1895) 309. Within the meaning of this subdivision debts incurred by a state during a period when it had no legal state government recognized by the United States, as was the situation in Texas from 1861 to 1869, arc not debts "authorized by the legislature of * * * such state to be contracted;" and the failure of a state to pay its indebtedness incurred in aid of the rebellion against the United States, which it was forbidden to pay by the Fourteenth Amendment to the United States Constitution, is not a repudia- tion or a default in payment. Atty.-Gen. Rep. (1912) vol. 2, p. 442. The following municipal bonds, according to the opinion of the Attorney- General, are legal investments for savings banks in this State: Bonds of the city of Dallas, Texas, Atty.-Gen. Rep. (1912) vol. 2, p. 442; bonds ot the city of Seattle, Washington, Atty.-Gen. Rep. (1910) p. 830; bonds of Kansas City, Kansas, Atty.-Gen. Rep. (1910) p. 827; the improvement bonds of the city of Portland, Oregon, issued pursuant to § 383-a of the Portland charter, Atty.-Gen. Rep. (1913) vol. 2, p. 288. Bonds of the city of Omaha, Nebraska, are not legal investments for savings banks. Atty.-Gen. Rep. (1911) vol. 2, p. 686. SUBDIVISION 6. A twenty-one year lease with a privilege of two renewals of twenty-one years each is not an incumbrance which will prevent a savings bank from taking a mortgage of the fee. Atty.-Gen. Rep. (1896) 171. A savings bank may take a mortgage upon an undivided interest in real estate held by tenants in common, provided that the mortgaged share is of the prescribed value. The fact that others than the mortgagor have interests in common with him does not constitute an incumbrance. Atty.-Gen. Rep. (1896) 271. A savings bank may invest in a second mortgage when it holds the first mortgage on the same property. The intent of the section with respect to " unincumbered " real property is to secure to the bank a first lien. The same result may be accomplished by discharging the first mortgage and taking a new one for the entire loan. Atty.-Gen. Rep. (1909) 723. 15 226 Banking Law. § 239. RESTRICTIVE COVENANT AS AN INCUMBRANCE — If a restrictive covenant affecting the use of real estate is not in the nature of a condition, and no forfeiture or disturbance of title can result from its breach, and the value of the property will not be reduced in consequence thereof, it is not an incumbrance within the meaning of this subdivision; but the effect of the restriction should be considered by the trustees of the bank in estimating the value of the property. Atty.-Geu. Rep. (1891) 51. A MORTGAGE OF A LEASEHOLD ESTATE, though the term of the lease is ninety-nine years, is not an authorized investment. Atty.-Gen. Rep. (1899) 275. BONDS SECURED BY TRUST MORTGAGE.— Bonds secured by a mort- gage executed by a corporation to a trustee are not legal investments for savings banks except in so far as the statute (see subd. 7) expressly author- izes investment in such securities. The mortgages contemplated by subdi- vision 6 are such as vest in the bank, directly or by assignment, title to the mortgage as well as to the bond and the right to foreclose without the intervention of a trustee. Atty.-Gen. Rep. (1892) 299; Atty.-Gen. Rep. (1902) 245. In the case of a trust mortgage it makes no difference that the savings bank takes all the bonds. Atty.-Gen. Rep. (1892) 299. A loan made by a savings bank to individuals, but for the benefit of a foreign corporation, with collateral security of the foreign corporation's notes secured by trust deeds upon unimproved vacant land in a foreign state, the value of the land being not more than one-fifth of the amount of the loan, is illegal and renders the trustees personally liable. Paine v. Barnum, 59 How. Pr. 303. See also Paine v. Irwin, 59 How. Pr. 316; Paine v. Mead, 59 How. Pr. 318. PARTICIPATION MORTGAGE NOT AUTHORIZED.— Real estate upon which a savings bank would have been authorized to loan $65,000 was mort- gaged to the extent of $74,000. A proposal was made that the mortgagee assign his mortgage to the bank so that the latter would become the absolute owner thereof to the extent of $65,000, with the right to collect that sum with interest before any money was payable to the mortgagee; that if more should be collected the bank should pay it over to the mortgagee, who should have the right to an accounting of all such excess moneys received by the bank. Attorney-General O'Malley gave his opinion that while the proposed plan would not violate the statutory prohibition against lending more than sixty per cent, of the value of the land, it placed the bank in the position of a trustee, and that the Banking Law did not permit a savings bank to enter transactions of that character. Atty.-Gen. Rep. (1910) 853. BUILDING LOAN. — Real estate upon which a building is in the process of construction must, until completion of the building, be deemed "' unpro- ductive " within the meaning of this subdivision. Its prospective value cannot be considered. Hence a " building loan " or loan for the purpose of constructing a building cannot exceed forty per cent, of the value of the land at the time when the loan is authorized and the value of the land certified by the trustees. Atty.-Gen. Rep. (1912) vol. 2, p. 318. § 239. Savings Banks. 227 AMOUNT OF SURPLUS THAT MAY BE INVESTED ON MORTGAGE.— Under the language of this subdivision as it formerly stood, the limitation that> " not more than sixty-five per eeatum of. the whole amount of deposits shall be so loaned or invested " applied to deposits only and had no reference to surplus. Atty.-Gen. Rep. (1906) 501. But now the surplus constitutes the guaranty fund (§ 252) and the present subdivision prohibits the investment of more than sixty-five per centum of the deposits " and guaranty fund " on mortgage. VIOLATION NOT AVAILABLE TO DEBTOR.— That a loan upon bond and mortgage was made by the savings bank in violation of the provisions of this subdivision, the mortgage not being a first lien and the value of the mortgaged property not being certified, is not available as a defense to the debtor. Auburn Savings Bank v. BrinkerhofF, 44 Hun 142. SUBDIVISION 7 (a). In mentioning the bonds of a^ railroad company the statute has reference to bonds of which the company is the maker or obligor and for the payment of which it is directly liable in an action on the bonds. Atty.-Gen. Rep. (1904) 365. The Manhattan Elevated Railway Company was held by the Attorney- General to be a " railroad corporation " within the meaning of this paragraph. Atty.-Gen. Rep. (1899) 183; Atty.-Gen. Rep. (1902) 217. A CHANGE OF MOTIVE POWER from steam to electricity, as authorized by law, does not affect the legality of investments in the company's bonds. Atty.-Gen. Rep. (1902) 217. SUBDIVISION 7 (b). The refunding bonds of the Chicago & Alton Railroad Company are legal investments for savings banks. Atty.-Gen. Rep. (1900) 192. The bonds of the Burlington, Cedar Rapids and Northern Railway Company are not legal investments for savings banks, because the property of that company was conveyed to the Chicago, Rock Island and Pacific Railroad Company, which is not mentioned in paragraph (b), and the subsidiary com- panies of which are not mentioned in paragraph (c). The fact that the lat- ter company executed a mortgage providing for the payment of the bonds of the former company does not affect the situation, as that mortgage is only a collateral undertaking. Atty.-Gen. Rep. (1904) 338; Atty.-Gen. Rep. (1904) 365. SUBDIVISION 7 (e). The proviso of this paragraph with respect to dividends means payment of dividends in cash; a stock dividend will not suffice. Atty.-Gen. Rep. (1908) 371. The statute does not require that the railroad issuing the bonds shall have owned five hundred miles of track for five years preceding the date of the 228 Banking Law. § 239. investment by the savings bank. It is enough that the railroad "^^^ amount of track when the investment is made. Atty.-Gen. B.ep. \ , , ' In computing the gross earnings of the railroad company, tUe "■ the year of " all leased lines " must be included, but not rentals for track, yards, terminals, office or facilities or properties other than leased lines. Atty.-Gen. Rep. (1909) 740. It seems that the bonds secured by the Xorthern Division mortgage of the Eastern Hallway Company of Minnesota (a company which has been absorbed by the Great Northern Railway Company) are legal investments for savings banks. Atty.-Gen. Rep. (1909) 712. In January, 1908, the bonds of the Missouri Pacific Railway Company ceased to be legal investments for savings banks. Atty.-Gen. Rep. (1908) 371. SUBDIVISION 8. See note to § 251. Though the investments which a savings bank is authorized to make do not include commercial paper, and a •promissory note discounted by such a bank may be void, the bank may nevertheless recover the money lent thereon. Pratt V. Short, 79 N. Y. 437 ; Rome Savings Bank v. Krug, 102 N. Y. 331. A savings bank having discounted promissory notes may accept in satisfac- tion of the debt the notes of other persons and may recover thereon. Rome Savings Bank v. Krug, 102 N. Y. 331. Where money is lent by a savings bank by way of discount of promissory notes, but upon the security of a bond and mortgage as well, the mortgage is valid and may be enforced. Pratt v. Eaton, 79 N. Y. 449. See also Auburn Savings Bank v. Brinkerhoflf, 44 Hun 142. SALE OF PLEDGED STOCK ON STOCK EXCHANGE.— A savings bank holding corporate stock pledged as security for a loan may sell the stock through a broker on the New York Stock Exchange, and a contract with a broker for that purpose is binding upon the bank. The loan on the security of the stock is not void, and even if it were voidable, the fact does not affect the rights of the broker, who is under no duty to inquire as to the bank's title to the stock. Sistare v. Best, 88 N. Y. 527, aff'g 24 Hun 384. SUBDIVISION 9. BANIC BUILDING. — The purchase of an unnecessarily expensive property as a home for the bank is not justified even though it is for a fair value and the motive of the trustees is to advertise the bank. Hun v Gary 82 N. Y. 65. ERECTING BUILDINGS AS AN INVESTMENT.- The erection of houses by a savings bank upon land purchased by it is an unauthorized invest- ment, although the land was bought at foreclosure of a mortgage owned by the bank. Atty.-Gen. Rep. (1908) 378. § 240. Savings Banks. 229 § 240. Bestrictions on taking^ and holding real estate. The cost of the plot and building or buildings for the trans- action of the business of a savings bank shall in no case exceed twenty-five per centum of the guaranty fund of such savings bank, except with the approval of the superintendent of banks; and before the purchase of such property is made or the erection of a building or buildings is commenced the estimate of the cost thereof and plans of the building or buildings shall be submitted to the superintendent for such approval. All real estate purchased by any savings bank or taken by it in satisfaction of debts due it, shall be conveyed to it directly by name and the conveyance shall be immediately recorded in the office of the proper recording officer of the county in which such real estate is located. Every parcel of real estate purchased or acquired by any savings bank shall be sold by it within five years from the date on which it shall -have been acquired unless : 1. There shall be a building thereon occupied by the savings bank as an office; or 2. The superintendent of banks, on application of its board of trustees, shall have extended the time within which such sale shall be made. Source. — The first paragraph is from former § 147 ; " net surplus " has been changed to " guaranty fund." The second paragraph is new and is adapted from former § 27, subd. 3, relating to the recording of mortgages taken to secure loans. The second and third paragraphs are identical with § 107, relating to banks, and § 189, relating to trust companies. The last paragraph is taken from former § 147, subd. 2, second sentence. CROSS-REFERENCES. — Purposes for which real estate may be acquired, see § 239, subd. 9. Recording mortgages and assignments thereof, see § 241. Restrictions on taking and holding real estate by other corporations and individuals under this chapter, see cross-references under § 107. For extension of time to dispose of real estate, see § 49, subd. 3. For investment in real estate, see § 239, subd. 9. The approval of the Superintendent of Banks, as required by this section may be given nunc pro tunc, when the trustees have proceeded in good faith and in ignorance of the statutory requirement. Atty.-Gen. Rep. (1896) 193. 230 Bakking Law. § 241. § 241. Requirements as to mortgage loans; abstract of title or title policy; insurance of buildings; recording. 1. In all cases of loans upon real property, a bond secured by a mortgage of the real estate upon which the loan is made, to- gether with a complete abstract of title to such real estate, signed by the person or corporation furnishing such abstract of title, or a policy of title insurance of a title company authorized to in- sure titles to real estate in the state of New York, shall be re- quired of the borrower. 2. Whenever buildings are included in the valuation of any real property upon which a loan shall be made by a savings bank, they shall be insured by the mortgagor in such company or com- panies as the savings bank shall direct, and the policy of insur- ance shall be duly assigned to the saving3 bank, or the loss made payable to the savings bank, as its interest may appear; and any such savings bank may renew such policy of insurance in the same or such other company or companies as it may elect, from year to year, or for a longer or shorter term, in case the mortgagor shall neglect to do so, and may charge the amount paid to the mortgagor. All the necessary charges and expenses paid by the savings bank for such renewal or renewals shall be paid by the mortgagor to the savings bank and shall be a lien upon the prop- erty mortg,aged, recoverable with interest from the time of pay- ment as part of the moneys secured to be paid by the mortgage. 3. Every mortgage and every assignment of a mortgage taken or held by a savings bank shall immediately be recorded in the office of the proper recording officer of the county in which the real property described in the mortgage is located. Source.— Former §§ 150, 151, 27 aubd. 3. Subdivision 1 is taken from the second sentence of former § 150; the pro- visions as to abstract of title and policy of title insurance are new. Subdivision 2 is taken from former § 151 vrithout substantial change. Subdivision 3 is taken from former § 27, subd. 3, without substantial change. The provisions of former § 150 that " all expenses of searches, examinations and certificates of title, and of drawing, perfecting and recording papers, shall be paid by the borrower," have been omitted from the present section because subd. 1 now requires the borrower to furnish an abstract of title or policy of title insurance, and § 265, subd. 3, authorizes the savings bank to require the borrower to pay " all expenses of searches, examinations and cer- §§ 242, 243. Savixgs Bai^ks. 231 tificateg of title, including the drawing, perfecting and recording of papers," and empowers the attorney for the savings bank to collect of the borrower and retain for his own use the usual fees for such services. CROSS-REFERENCES.— Recording deeds, see § 240. Attorney's fees and expenses connected with mortgage loans, see § 265, subd. 3, and note. INSURANCE. — While a savings bank making a loan upon mortgage ha8 the right to insist, by virtue of this section, that the mortgagor cancel his existing insurance policies upon the property and procure insurance in a company designated by the bank's directors, the right may be waived. The right having been waived, the bank cannot thereafter procure additional insurance at the mortgagor's expense in the absence of any new reason therefor. Heal v. Richmond County Sav. Bank, 127 App. Div. 428, aff'd in 196 N. Y. 549. MORTGAGE TAX.— The tax on mortgages (Tax T.aw, Art. II) is not a part of the " expenses * * * of recording papers " which former section 150 imposed upon the borrower. The mortgagee, even though a savings bank, is primarily liable to pay the tax. Atty.-Gen. Rep. (1906) 504; Atty.-Gen. Rep. (1906) 507. § 242. Restrictions on dealing in commodities or in exchange, gold or silver. 1. A savings bank shall not purchase, deal or trade in any goods, wares, merchandise or commodities whatever, except such personal property as may be necessary for the transaction of its authorized business. 2. A savings bank shall not, nor shall any officer thereof in his regular attendance upon the business of the savings bank, in any manner buy or sell exchange, gold or silver, except as authorized by subdivision seven of section two hundred thirty-eight of this article. Source.— Former § 152. § 243. Restrictions on borrowing money, pledging securities and issuing certificates of deposit. A savings bank shall not 1. Borrow money, or pledge or hypothecate any of its securities as collateral for the repayment of money borrowed, except with the written approval of the superintendent of banks and in pursu- ance of a resolution adopted by a vote of a majority of its board of trustees duly entered upon their minutes, whereon shall be re- corded by ayes and nays the vote of each trustee. 232 Banking Law. §§ 244, 245. 2. Make or issue any certificate of deposit payable either on de^ mand or at a fixed day. Source. — Former § 152, second and third sentences. CROSS REFERENCE.— For power to borrow money and pledge securities, see § 238, subd. 5. PLEDGE TO SECURE DEPOSITS.— The pledge of securities by a savings bank to secure deposits made by a postal savings bank or deposits of court funds would amount to a preference of the deposits to the amount of the securities. Such a pledge is contrary to the spirit of Article VI (former Art. rV) of the Banking Law and is not within the exception of the prohi- bition against borrowing money or pledging or hypothecating securities, except with the written approval of the Superintendent of Banks, etc. Atty.- Gen. Rep. (1912) vol 2, p. 500. § 244. Bestrictions on deposit of savings bank's funds. 'No savings bank shall deposit any of its funds with any other moneyed corporation unless the latter has been designated as a de- positary for the savings bank's funds by vote of a majority of the trustees of the savings bank exclusive of any trustee who is an offi- cer, director or trustee of the depositary so designated. Source. — Former § 27, subd. 5. Further restrictions on deposits are found in § 261 relating to the " avail- able fund." In designating a depositary under § 244 the trustees should strictly conform to the provisions of § 251. CROSS-REFERENCES.— Deposit of available fund, see § 251; preference of deposits, see § 278. Similar provision as to banks, see § 111; as to trust companies, see § 196; as to investment companies, see § 294. § 245. Restrictions as to place of business; branch ofices. 1. A savings bank shall not do business or be located in the same room with or in a room connecting with any bank, trust company or national banking association ; unless it be a savings bank law- fully so doing business or lawfully so located when this act takes effect. 2. No savings bank, or any officer or director thereof, shall transact its usual business at any place other than its principal place of business, except that it may, providing the merger agree- ment so provides, continue to occupy and maintain as a branch office, the place of business occupied and maintained at the time of merger by any savings bank which it has received into itself by merger pursuant to article twelve of this ohapter. § 246. Savixgs Banks. 233 Source. — Former § 27, subd. 11, is the source of subd. 1. The provisions of subd. 2 are new. The prohibitions of subd. 1 ( former § 27, subd. 1 1 ) were doubtless intended to prevent confusion of the business of banking institutions thus closely connected and to preclude access by the officers and employees of, one insti- tution to the moneys of the other. Thus where a bank and a savings bank did business in the same room and received money over the same counter, and the cashier of the bank, who was the treasurer of the savings bank, misappropriated money delivered to him for the savings bank, the bank was held liable. Fishkill Savings Inst. v. Bostwick, 92 N. Y. 564. See also Kelley v. Chenango Valley Sav. Bank, 22 App. Div. 202. 'CROSS-REFEEKNCE. — ■ Wubdivision 1. — Similar provisions relating to private bankers, see § 171, and note thereunder. § 246. Restrictions as to entries in books; amortization of securities. 1. No saving bank shall by any system of accounting or any device of bookkeeping, directly or indirectly enter any of its assets upon its books in the name of any other individual, partnership, unincorporated association or corporation, or under any title or designation that is not truly descriptive thereof. 2. The stocks, bonds, promissory notes or other interest-bearing obligations purchased by a savings bank shall not be entered on its books at more than the actual cost thereof, and shall not thereafter be carried upon the books for a longer period than until the next declaration of dividends, or in any event for more than one year, at a valuation exceeding their present cost as determined by amor- tization, that is, by deducting from the cost of any such stock or security purchased for a sum in excess of the amount payable thereon at maturity, and charging to profit and loss, a sufficient sum to bring it to par at maturity, or adding to the cost of any such stock or security purchased at less than the amount payable thereon at maturity, and crediting to profit and loss, a sufficient sum tO' bring it to par at maturity. 3. No savings bank shall enter or at any time carry on its books the real estate and the building or buildings thereon, .used by it as its place of business, at a valuation exceeding their actual cost to such savings bank. 4. Every savings bank shall, moreover, conform its methods of keeping its books and records to such orders in respect thereto as shall have been made and promulgated by the superintendent of banks pursuant to section fifty-six of this chapter. Any sav- 234 Banking Law. § 24Y. ings bank that refuses or neglects to obey any such order shall be subject to a penalty of one hundred dpllars for each day it so refuses or neglects. Source. — Subdivisions 1, 2 and 3 are new. Subdivision 4 is derived from former § 8. CROSS-REFERENCES. — For similar restrictions on other corporations doing business under the Banking Law, see § 109, relating to banks, and the cross-references there given. § 247. Eestrictions on amount of deposits; refusal or return of de- posits. 1. The aggregate amount of deposits to the credit of any indi- vidual at any time, including in such aggregate all deposits cred- ited to him as trustee or beneficiary of a voluntary and revokable trust and all deposits credited to him and another or others in either joint or several form, shall not exceed three thousand dol- lars, exclusive of dividends, and exclusive also of deposits arising from judicial sales or~trust funds standing in his name as executor, administrator or trustee named in a will ot appointed by a court of competent jurisdiction, provided a certified copy of the will, judgment, order or decree of the court authorizing such deposits or appointing such executor, administrator or trustee is filed with the savings bank; and exclusive, also, of trust funds and deposits credited to an individual and another or others in either joint or several form, received and credited by. the savings bank prior to July first, nineteen hundred thirteen. Additional accounts may, however, be maintained in the name of a parent as trustee for a dependent or minor child and in the name of a child as trustee for a dependent parent, provided, however, that not more than two hundred and fifty dollars shall be deposited to any such account during any six months period. 2. The aggregate amount of deposits to the credit of any society or corporation at any time, shall not exceed five thousand dollars, exclusive of dividends, .unless such deposit has been made pur- suant to a judgment, order or decree of a court of record and a certified copy of the judgment, order or decree is filed with the savings bank. 3. Every savings bank may further limit the aggregate amount which an individual or any corporation or society may deposit, to § 248. Savings Banks. 235 such sum as it may deem expedient to receive ; and may, in its dis- cretion, refuse to receive a deposit or at any time return all or any part of any deposit. Source.— Former § 143. The provisions of subd. 1, making the $3,000 limitation include trust de- posits and joint deposits, are new; they are confirmatory of opinions of the Attorney-General (Atty.-Gen. Rep. [1912] Vpl. 2, p. 555; Atty.-Gen. Rep. [1913] p. 35). The words " exclusive of dividends " are new. All of subd. 1 beginning with the words " standing in his name as executor," and the requirement of subd. 2, that a certified copy of the judgment, etc., be filed, are new. The exception in former § 143 of deposits made prior to May 17, 1875, is omitted. Subdivision 3 is taken from the third sentence of former § 143. CROSS-REFERENCES. — ^ General powers as to receiving and repaying deposits, see §§2, 238. Repayment of deposits regulated, see §§ 248, 249. CONTRACT NOT VOID.— An individual whose deposit exceeds $3,000 may recover from the bank the full amount of the deposit. The contraot between the bank and the depositor is not made void by the statute. Taylor V. Empire State Sav. Bank, 66 Hun 538. INTEREST ON EXCESS.--; Under former statutes imposing a, limitation upon deposits (Laws of 1882, Ch. 409, § 290, as amended by Laws of 1885, Ch. 477), if the deposit exceeded the maximum amount no interest thereon could be allowed or recovered. Taylor v. Empire State Sav. Bank, 66 Hun 538. INCLUDES TRUST DEPOSITS.— This limitation includes deposits made by an individual in trust for another, as long as the trustee has the power to withdraw the money; and it makes no difference that the trust accounts are made in alternation, as "A in trust for B " and " B in trust for A.'' If, however, it is made to appear that the trust has become irrevocable by de- livery of the pass-book to the beneficiary or by notice to him, he, and not the trustee, is chargeable with the deposit. Atty.-Gen. Rep. (1913) 35. This conclusion remains unaffected by the new provisions of subd. 1. § 248. Regulations and restrictions as to repayment of deposits; pass- books. 1. The sums deposited with any savings bank, together with any dividends credited thereto, shall be repaid to the depositors tJiereof respectively, or to their legal representatives, after demand, in such manner and at such times, and under such regulations, as the board of trustees shall prescribe, subject to the provisions ol this and the next following section. Such regulations shall be 236 Banking Law. § 248. posted in a conspicuous place in the room where the business of such savings bank shall be transacted, and shall be printed in the passbooks or other evidences of deposit furnished by it, and shall be evidence between such savings bank and the depositors holding the same, of the terms upon which the deposits therein acknowledged are made. The savings bank may at any time by a resolution of its board of trustees require a notice of sixty days before repaying deposits, in which event no deposit shall be due or payable until sixty days after notice of intention to withdraw the same shall have teen personally given by the depositor. Nothing herein contained, however, shall be construed as im- pairing contracts heretofore made between savings banks and their depositors as to notice of withdrawal, or as prohibiting any sav- ings bank from making payments of deposits before the expiration of said sixty day notice. But no savings bank shall hereafter agree with its depositors in advance to waive said sixty days' notice nor shall it in the case of deposits hereafter made require a longer notice than the sixty days aforesaid. 2. Except as provided in subdivision three of this section, a savings bank shall not pay any dividend or deposit, or portion of a deposit, or any check drawn upon it by a depositor, unless the pass-book of the depositor be produced, and the proper entry be made therein at the time of the payment. 3. The board of trustees of any savings bank may by its by-laws, provide for making payments in cases of loss of pass-book, or other exceptional cases where the pass-books cannot be produced without loss or serious inconvenience to depositors, the right to make such payments to cease when so directed by the superintendent of banks, upon his being satisfied that such right is being improperly exercised by such savings bank ; but payments may be made upon the judgment or order of a court. 4. If any person shall die leaving in a savings bank an account on which the balance due him shall not exceed two hundred and fifty dollars, and no executor of his last will and testament or no administrator of his estate shall be appointed, the savings bank may in its discretion pay the balance of his account to his widow (or if the decedent was a married woman, to her surviving § 248. Savings Banks. 237 Husband), next of kin, funeral director or other creditor who may appear to be entitled thereto. As a condition of such payment the savings banlc may require proof by affidavit as to the parties in interest, the filing of proper waivers, the execution of a bond of indemnity, with sureties, by the person to whom the payment is to be made, and a proper receipt and acquittance for such pay- ment. For any such payment made pursuant to this subdivision the savings bank shall not be held liable to the decedent's executor or administrator thereafter appointed, unless the payment shall have been made within one year after the decedent's death ard an action to recover the amount shall have been commenced within one year after the date of payment. Source. — Former §§ 143, 152. The second, third and fourth paragraphs of subdiv. 1 and all of subdiv. 4 are new. CROSS-REFERE^^CES.— Repayment of deposits of minors, trust deposits and joint deposits, see § 249. General power to receive deposits, see §§2, 238. Restrictions on amount of deposits, see § 247. Power to enact by-laws as to repayment of deposits, see § 262. Deposits as assets of deceased depositor's estate, see Code Civ. Proc, § 2712. DEPOSITORS ARE CREDITORS.— The relation of a depositor in a sav- ings bank to the corporation is that of a creditor. People v. Mechanics' & Traders' Sav. Inst., 92 N. Y. 7, rev'g 28 Hun 375; Mierke v. Jefferson County Sav. Bank, 208 N. Y. 347. DEPOSITORS AND OTHER CREDITORS SHARE RATABLY UPON IN- SOLVENCY. — Upon the insolvency of a savings bank the assets of the cor- poration become a trust fund for its creditors. Depositors stand upon the same basis as other creditors, and share ratably with them and with each other in receiving payment from the insolvent estate. People v. Mechanics' & Traders' Sav. Inst., 92 N. Y. 7, rev'g 28 Hun 375; People v. Ulster County Savings Bank, 64 Hun 434, aflf'd in 133 N. Y. 689, on opinion below. A judgment obtained by a general creditor of a savings bank against its receiver in an action that was pending when the receiver was appointed, is not entitled to a preference over depositors. People v. Mechanics' & Traders' Sav. Inst., 92 N. Y. 7, rev'g 28 Hun 375. DEPOSIT IN NAME OTHER THAN DEPOSITOR'S.— A person may deposit his money in the names of others or in the names of fictitious persons, with- out impairing his title to the deposits. Washington v. Bank for Savings, 171 N. Y. 166, aflf'g 65 App. Div. 338; Roughan v. Chenango Valley Sav. Bank, 158 App. Div. 786. Deposits of depositor's own money in the names of third persons without their knowledge, the intent being that they should take only if they should 238 Banking Law. § 248. survive the depositor, no notice being given to them and the depositor retain- ing the pass-books; held, after the death of said third persons, to belong to the depositor. Held also that the depositor need not administer the estates of said persons in order to recover the deposits. Roughan v. Chenango Valley Sav. Bank, 158 App. Div. 786. RUIiES OF BANK. — In the absence of any rules or regulations assented to by its customers, a savings bank is governed by the same legal principles that apply to other moneyed institutions vrith respect to payment of de- posits. Allen V. Williamsburgh Sav. Bank, 69 N. Y. 314. Questions involving the relations of a savings bank to its depositors and arising outside of the rules and regulations adopted by the bank pursuant to the statute must be determined by " broad and comprehensive legal rules of general application." Kelley v. Buffalo Sav. Bank, 180 N. Y. 171, 177, rev'g 88 App. Div. 374. The court will not, unless for substantial reasons, interfere with reasonable rules made by a savings bank, pursuant to statute, for the regulation of its business. Rosenthal v. Dollar Sav. Bank, 61 Misc. 244. See "Effect of By-Laws and Rules" (infra). DEATH OF DEPOSITOR.— The following decisions under the former law should be read in connection with subdiv. 4 of the present section. Upon the death of a depositor the savings bank remains indebted to his estate in the amount of his deposit, and is bound to make payment to his executor or administrator. Boone v. Citizens' Sav. Bank, 84 N. Y. 83; Mierke V. Jefferson County Sav. Bank, 208 N. Y. 347. When a depositor in a savings bank has died but the bank has no notice of his death, and a. third person presents the depositor's pass-book and a draft purporting to bear his signature, the bank does not act at its peril in paying out money to that person, but its duty is to use ordinary care accord- ing to the special circumstances of the case. Kelley v. Buffalo Sav. Bank, 180 N. Y. 171, rev'g 88 App. Div. 374. See also Hayden v. Brooklyn Sav. Bank, 15 Abb. Pr. N. S. 297. It has been said that a by-law of a savings bank providing (as in former § 143, now subd. 1 of § 248) that upon the death of a depositor his deposit shall be paid to his legal representatives, puts upon the bank the duty of ascertaining at its peril who is entitled to the money upon the depositor's death. Farmer v. Manhattan Sav. Inst., 60 Hun 462, 465; Podmore v. South Brooklyn Sav. Inst., 48 App. Div. 218; Mahon v. South Brooklyn Sav. Inst., 175 N. Y. 69. That rule, however, is too broad and is not one of general applicatiou. Kelley v. Buffalo Sav. Bank, 180 N. Y. 171. A by-law of a savings bank providing that upon a depositor's death his deposit shall be paid to his legal representatives, is designed for the protec- tion of the depositor who can no longer protect himself. A by-law provid- ing that although the bank will endeavor to prevent frauds all payments made to persons producing the pass-book shall be valid payments to discharge § 248. Savings Banks. 239 the bank, is designed for the protection of the bank. These t>vo by-laws must be read together. Hence, when the bank has notice of a depositor's death it acts at its peril in paying the deposit to a person who claims the money under an alleged gift causa mortis. Mahon v. South Brooklyn Sav. Inst., 175 N. Y. 69 (as limited by Kelley v. Buffalo Sav. Bank, ISO N. Y. 171). If the bank has no notice of the depositor's death, its duty, under such rules, in paying out money to a third person who presents the decedent's pass-book and a draft purporting to bear his signature, is measured by the rule of ordinary care, to be applied according to the circumstances of the particular case. Kelley v. Buffalo Sav. Bank, 180 N. Y. 171, rev'g 88 App. Div. 374, and limiting Mahon v. South Brooklyn Sav. Inst., 175 N. Y. 69. When a depositor makes a valid parol gift of his deposit and then dies, the donee becomes his " legal representative " within the meaning of a, by-law of the bank providing that upon the death of a depositor the deposit shall be paid to his or her legal representatives upon presentation of the pass-book, and the donee may recover the deposit from the bank without having an administrator of the donor appointed. Casgriff v. Hudson City Sav. Inst., 24 Misc. 4. PAYMENT TO FOREIGN ADMNISTKATOR.— A savings bank is pro- tected in paying in good faith a deposit of a non-resident to the latter's administrator appointed in the state of the deceased depositor's domicile; the fact that an administrator had been appointed in this state before the pay- ment does not affect the validity of the payment if the bank had no actual notice of the appointment; sufficient notice thereof is not afforded by the record of the appointment in the surrogate's office. Maas v. German Sav. Bank, 176 N. Y. 377, aff'g 73 App. Div. 524. PASS-BOOKS. — The pass-book issued by a savings bank to a depositor is not a negotiable instrument, and mere possession thereof does not constitute proof of the right of the holder to draw money thereon. Allen v. Williams- burgh Sav. Bank, 69 N. Y. 314, 319; Smith v. Brooklyn Sav. Bank, 101 N. Y. 58; Kummel V. Germania Sav. Bank, 127 N. Y. 488. See also Wall v. Emi- grant Industrial Sav. Bank, 64 Hun 249, 254. To protect a, savings bank in paying a deposit to a third person on mere presentation of a pass-book, there must be a contract between the depositor and the bank clearly authorizing such payment, and the power will not be inferred from loose or doubtful language in a rule or by-law of the bank. Smith V. Brooklyn Sav. Bank, 101 N. Y. 58. Attorney -General Jackson advised the Superintendent of Banks that he might properly decline to approve a by-law of a savings bank making the unqualified provision that "All payments made to persons producing the pass- book of a depositor issued by this bank shall be valid payments to discharge the bank of all liability." In his opinion it would be contrary to public policy to protect a bank in paying a deposit to a person whose cnly evidence of right to the deposit is the possession of a pass-book which might have been obtained by theft or fraud. Atty.-Gen. Rep. (1908) 395. A depositor may assign and transfer his interest in his deposit without the 240 Bajvkikg Law. § 248. delivery of his pass-book; and the assignment becomes effective when it is accepted and acted upon by the bank. A rule or regulation of the bank re- quiring the assignee to present the pass-book is waived when the bank gives effect to the assignment and notifies the parties that presentation of the pass- book is unnecessary. Augsbury v. ShurtlifF, 114 App. Div. 626, afTd in 190 N. Y. 507. EFFECT OF BY-LAWS AND RULES.— By-laws or rules of a savings bank printed in the pass-book accepted and used by a depositor constitute a con- tract between the depositor and the bank, binding upon both. Warhus > . Bowery Sav. Bank, 21 N. Y. 543; Appleby v. Erie County Sav. Bank, 62 N. Y. 12; Allen v. Williamsburgh Sav. Bank, 69 N. Y. 314; Mitchell v. Home Sav. Bank, 38 Hun 255; Wilcox v. Onondaga County Sav. Bank, 40 Hun 297; Kel- ley V. Chenango Valley Sav. Bank, 22 App. Div. 202; Winter v. Williamsburgh Sav. Bank, 68 App. Div. 193; Rosenthal v. Dollar Sav. Bank, 61 Misc. 244; Israel v. Bowery Sav. Bank, 9 Daly 507. See also Schoenwald v. Metropol- itan Sav. Bank, 57 N. Y. 418; Boone v. Citizens Sav. Bank, 84 N. Y. 83; Riley V. Albany Sav. Bank, 36 Hun 513, aflf'd in 103 N. Y. 669; Campbell v. Schenec- tady Sav. Bank, 114 App. Div. 337. But a provision in such by-laws printed in the pass-book and designed to protect the bank against liability for paying out a deposit on presentation of the pass-book by the wrong person, does not absolve the officers of the bank from the duty to exercise care and diligence to protect the depositor against fraud, or relieve the bank from liability for their negligence. Kum- mel V. Germania Sav. Bank, 127 N. Y. 488; Gearns v. Bowery Sav. Bank, 13.') N. Y. 557; Kelley v. Buffalo Sav. Bank, 180 N. Y. 171; Campbell v. Schenec- tady Sav. Bank, 114 App. Div. 337. See also Smith v. Brooklyn Sav. Bank, 101 N. Y. 58; Wall v. Emigrant Industrial Sav. Bank, 64 Hun 249; Abramo- witz V. Citizens Sav. Bank, 17 Misc. 297. A by-law printed in the pass-book that although the bank will endeavor to prevent frauds upon its depositors, yet all payments to persons producing pass-books issued by the bank shall be valid payments to discharge the bank, is in effect an undertaking by the bank to use ordinary care not to pay to others than the depositor, but saving itself harmless in case the pass-book is produced by some one not the owner and payment is made to him without negligence. Schoenwald v. Metropolitan Sav. Bank, 57 N. Y. 418; Appleby v. Brie County Sav. Bank, 62 N. Y. 12; AVilcox v. Onondaga County Sav. Bank, 40 Hun 297; Hayden v. Brooklyn Sav. Bank, 15 Abb. Pr. N. S. 297; Kelley v. Buffalo Sav. Bank, 180 N. Y. 171; Campbell v. Schenectady Sav. Bank, 114 App. Div. 337. When such a by-law provides that the bank " will use its best efforts to prevent fraud," the duty of the bank officers with respect to paying a deposit to the right person is not limited by ordinary care and diligence. Allen v. Williamsburgh Sav. Bank, 69 N. Y. 314. A clerk of a savings bank whose duties are to receive deposits, give pass- books therefor and enter the money to the credit of the depositors, has no implied or apparent authority to make any agreement with respect to with- § 249. Savings Banks. 241 drawal of a deposit, in addition to, or in conflict with, the regulations printed in the pass-book. Riley v. Albany Sav. Bank, 36 Hun 513, aff'd in 103 N. Y. 669. A by-law providing that deposits can be withdrawn at certain dates upon one month's previous notice, is waived when the bank unqualifiedly refuses to pay and bases its refusal on other grounds. Riley v. Albany Sav. Bank, 36 Hun, 513, aff'd in 103 N. Y. 669. See also Abramowitz v. Citizens' Sav. Bank, 17 Misc. 297. LOSS OF PASS-BOOK.— A by-law providing that when a pass-book is lost the bank will decide as to the person to whom payment shall be made, does not justify the bank in refusing to make payment to the depositor when for several years the bank has had knowledge of the loss of the pass-book and no third person has made any claim to the deposit. Mills v. Albany Exchange Sav. Bank, 28 Misc. 251. When the pass-book is not produced, an action to recover the deposit can- not be maintained without evidence that the book is lost, if objection is made on that ground. Warhus v. Bowery Sav. Bank, 21 N. Y. 543. By-laws of a savings bank providing that no money can be withdrawn except on production of the pass-book, and that if the pass-book be lost imme- diate notice in writing shall be given to the bank, are waived when the bank is promptly and repeatedly informed of the loss of a pass-book, but does not intimate any desire for written notice and bases its refusal to pay upon other grounds. Mierke v. JeflFerson County Sav. Bank, 208 N. Y. 347. See also Kenny v. Harlem Sav. Bank, 65 Misc. 466, rev'g 61 Misc. 144. INDEMNITY WHEN PASS-BOOK IS LOST.— In the absence of an appro- priate by-law, a savings bank cannot lawfully require a bond of indemnity from a depositor as a condition of paying a deposit when the pass-book has been lost; and the depositor's failure to furnish such a bond is no defense to an action to recover the deposit. Mierke v. Jefferson County Sav. Bank, 208 N. Y. 347; Mills v. Albany Exchange Sav. Bank, 28 Misc. 251; Roughan v. Chenango Valley Sav. Bank, 158 App. Div. 786. § 249. Repayment of deposits of minors, trust deposits and joint de- posits. 1. When any deposit shall be made by or in the name of any minor, the same shall be held for the exclusive right and benefit of such minor, and free from the control or lien of all other per- sons, except creditors, and shall be paid, together with the divi- dends thereon, to the person in whose name the deposit shall have been made, and the receipt or acquittance of such minor shall be a valid and sufficient release and discharge to such savings bank for such deposit or any part thereof. 2. When any deposit shall be made by any person in trust for 16 J 42 Banking Law. § 249. another, and no other or further notice of the existence and terma of a legal and valid trust shall have been given in writing to such savings bank, in the event of the death of the trustee, the deposit or any part thereof, together with the dividends thereon, may be paid to the person for whom the deposit was made. 3. When a deposit shall be made by any person in the names of such depositor and another person and in form to be paid to either or the survivor of them, such deposit and any additions thereto made by either of such persons after the making thereof, shall become the property of such persons as joint tenants, and the same together with all dividends thereon shall be held for the exclusive use of such persons and may be paid to either during the lifetime of both or to the survivor after the death of one of them, and such payment and the receipt or acquittance of the one to whom such payment is made shall be a valid and sufficient release and discharge to such savings bank for all payments made on account of such deposit prior to the receipt by such savings bank of notice in^rijing not jto pay such deposit in accordance with the terms thereof. The making of the deposit in such form shall, in the absence of fraud or undue influence, be conclusive evidence, in any action or proceeding to which either such savings bank or the surviving depositor is a party, of the intention of both depositors to vest title to such deposit and the additions thereto in such survivor. Source. — Former § 144. The last sentence of subdiv. 3 is new. CROSS-REFERENCES.— Similar provision as to banks, see § 148; as to trust companies, see § 198. Restrictions on amount of trust deposits and joint deposits, see § 247, subd. 1. Power to enact by-laws as to repayment of deposits, see § 262. DEPOSITS IN TRUST.— The provisions now embraced in subdiv. 2 with respect to deposits in trust were apparently intended to relieve the bank from the consequences of the uncertainty resulting from decisions that the form of the deposit alone was not conclusive as to the intent of the depositor to create a trust. See Cunningham v. Davenport, 147 N. Y. 43; Matter of Totten, 179 N. Y. 112, 119; Garvey v. Clifford, 144 App. Div. 193. When a person deposits his own money in trust for another, thus constitut- ing himself a trustee, the beneficiary cannot compel the bank to pay the deposit to him if the trustee is alive and does not consent and is not a party to the action; and it makes no difference that the trustee has disappeared. Hemmerich v. Union Dime Savings Bank, 144 App. Div. 413. § 249. SAvmGS Banks. 243 "Although the facts may show an absolute gift or irrevocable trust as be- tween donor and donee, we think that a bank, in which the moneys involved are deposited, should not be bound thereby until it has proper notice of the termination of the trust by the death of the donee or the donor or by some direct notice by the donor during his or her lifetime. Until the happening of some such event the bank should not be required to recognize the right of any one to exercise dominion over or withdraw the deposit except the person with whom it made the contract of deposit." Hemmerich v. Union Dime Sav. Inst., 144 App. Div. 413, 418. The provisions of subdiv. 2 apparently settle a disputed question. It was formerly held that when a deposit was made in trust for another and the trustee died, the bank was bound to make payment to the trustee's adminis- trator upon production of his letters and the pass-book, and was protected in making payment to him unless the beneficiary asserted a right to receive the deposit — that until the beneficiary made such claim the bank owed no duty to him and had no right to inquire into the character of the trust. Boone v. Citizens' Sav. Bank, 84 N. Y. 83. On the other hand, it was held that after the death of both trustee and beneficiary the bank was protected, in the absence of demand by the trustee's administrator, in paying the de- posit to the administrator of the beneficiary — a decision in harmony with the present statute. Bishop v. Seaman's Bank for Savings, 33 App. Div. 181. When a person creates an irrevocaWe trust in a deposit and the bene- ficiary dies leaving a will bequeathing the deposit and appointing the legatee executor, the latter is entitled to recover the deposit from the bank, the trustee being made a party to the action. Whitfield v. Greenwich Sav. Bank, 4 Month. L Bull. 69 (Super. Ct). DEPOSITS IN TRUST FOR FICITTOUS PERSONS belong to the depositor. Washington v. Bank for Savings, 171 X. Y. 166, aff'g 65 App. Div. 388. JOINT DEPOSITS.— The provisions of subd. 3 (except the last sentence which is new) were added to the statute by chapter 247 of the Laws of 1907. The subdivision does not govern accounts opened before its provisions were enacted. Berg v. Keber, 78 Misc. 468, 472; Bonnette v. Molloy, 153 App. Div. 73, modified on a point of practice in 209 N. Y. 167. The language of subd. 3 was intended to do away with the uncertainty attendant upon the rule that a deposit in joint form was not conclusive as to the depositor's intent, and to protect the bank in making payment to either person named or the survivor. See Clary v Fitzgerald, 155 App. Div. 659; Schneider v. Schneider (No. 1), 122 App. Div. 774; Kelly v. Beers, 194 N. Y. 49, 55 ; Bonnette v. Molloy, 153 App. Div. 73, 75-6, modified on a point of practice in 209 N. Y. 167 ; Berg v. Keber, 78 Misc. 468 ; West v. McCullough, 123 App. Div. 846, aif'd in 194 N. Y. 518; Bradt v. Bradt, 143 App. Div. 863. Even before the last sentence of subd. 3 was added it was held that the effect of these provisions is not merely to protect the bank, and that the single fact, unexplained by other competent evidence, that a deposit is made in the form mentioned in the statute " fixes the respective rights of the de- 244 Banking Law. § 249. positors named as joint owners of the property with all the incidents attach- ing to such ownership." Clary v. Fitzgerald, 155 App. Div. 659, 663-664. The fact that the deposit is entered in form to the credit of A "or" B with words of survivorship, does not change the eflfect of the deposit as being in the names of both. A deposit in that form is within the meaning of the statute, and presumptively, at least, the deposit becomes the property of the persons named, as joint owners. Clary v. Fitzgerald, 155 App. Div. 659. It was held, however, that the statute did not preclude the depositors or their representatives, as between themselvs, from showing by other com- petent evidence that title as joint owners was not intended or established. Clary v. Fitzgerald, 155 App. Div. 659 ; Anson v. Savings Bank of Utica, 155 App. Div. 939. This rule is now changed by the last sentence of subd. 3. The provisions of subd. 3 apparently do not extend to a case wliere a deposit is made in the name of the depositor " or " another without words of survivorship, the money deposited belonging solely to the depositor. A deposit in that form does not give rise to any inference of a transfer or gift by the depositor to the other person named (Matter of Bolin, 136 N. Y. 177; Grating v. Irving Sav. Inst., 69 App. Div. 566, 570) ; it does not create a trust or constitute the parties joint owners of the deposit (Grafing v. Irving Sav. Inst., supra), and upon the death of the depositor the bank is pro- tected in making payment to his executor who produces the pass book, in the absence of any demand by the other party (Graiing v. Irving Sav. Inst., supra). So where the deposit thus entered is made up of contributions by each, and the form of deposit was used so that each should have the right to draw the money, the interests of the parties as between themselves are several, not joint, and upon the death of one the bank is not justified in paying the entire deposit to his executor or administrator against the pro- test and claim of the survivor, but is liable to pay to the survivor the amount which as between the parties belongs to him«; and this is true al- though the decedent's executor or administrator presents the pass-book and the rules of the bank provide that all payments to persons producing pass- books shall be valid payments to discharge the bank (Mulcahey v. Emigrant Industrial Sav. Bank, 89 N. Y. 435). JOINT DEPOSIT BY MERGER OF AOCOITSTTS.— When a husband and wife, having separate deposits in a savings bank, join in an instrument direct- ing that their accounts be merged so as to run to either depositor " or the survivor of them," the instrument is an order which remains executory and revocable until it is presented to and acted upon by the bank. (Augsbury v. Shurtliff, 180 N. Y. 138.) But when the order is delivered to the bank and acted upon by it, before the death of either depositor, the transfer la effectual to vest in the survivor the title to the whole of the merged de- posits. (Augsbury v. Shurtliff, 114 App. Div. 626, aff'd in 190 N. Y. 507.) In such a case it seems that presentation of the pass-books to the bank is not essential to complete the assignment or transfer of the funds into the joint account; at least, a rule or regulation which would require such presentation § 250. Savings Banks. 245 may be waived by the bank in so far as it is made for the bank's protection. (Augsbury v. Shurtliff, 114 App. Div. 626, aff'd in 190 N. Y. 507.) § 250. Actions to recover deposits; interpleader; costs; statute of limitations. 1. In all actions against any savings bank to recover for moneys on deposit therewith, if there be any person or persons, not parties to the action, who claim the same fund, the court in which the action is pending, may, on the petition of such savings bank, and upon eight days' notice to the plaintiff and such claimants, and without proof as to the merits of the claim, make an order amend- ing the proceedings in the action by making such claimants parties defendant thereto; and the court shall thereupon proceed to determine the rights and interests of the several parties to the action in and to such funds. The remedy provided in this section shall be in addition to and not exchisive of that provided in section eight hundred twenty of the code of civil procedure. 2. The funds on deposit which are the subject of such an ac- tion may remain with such savings bank to the credit of the action until final judgment therein, and be entitled to the same dividends as other deposits of the same class, and shall be paid by such savings bank in accordance with the final judgment of the court; or the deposit in controversy may be paid into court to await the final determination of the action, and when the deposit is so paid into court such savings bank shall be struck out as a party to the action, and its liability for such deposit shall cease. 3. The costs in all actions against a savings bank to recover deposits shall be in the discretion of the court, and may be charged upon the fund affected by the action. 4. When a savings bank shall have paid a deposit balance to any person and shall have closed such account on its books, any action against the savings bank to recover such deposit balance must be commenced within twenty years after the date of such payment. Except as otherwise provided in this section and in sub- division four of section two hundred and forty-eight of this article, the statutes limiting the time within which actions may be com- menced shall have no application to actions brought by depositors, their representatives or assigns against savings banks for deposits made therein. 246 Banking Law. § 250. Source. — Former § 145. In subdivision 1 the words " and without proof as to the merits of the claim," and all of the last sentence, are new. The first sentence of subdivision 4 and the exceptions in the second sentence, are new. The first sentence of former | 145, relating to the competency of a wife as a witness in an action by her husband, has been omitted as unnecessary. CROSS-REFERENCES.— Provisions similar to subdivisions 1, 2 and 3, as to banks, see § 113; as to trust companies, see § 199. Interpleader by order, see Code Civ. Proc, § 820. Interpleader by suit of debtor, see Code Civ. Proc, § 820-a. ■Statutes of limitation made inapplicable by this section, see Code Civ. Proc, § 382, Subd. 1; § 410. INTERPLEADER.— " The object of this statute is to relieve these savings banks from two or more litigations over the same deposit, with all the expenses attending to same, and danger of having to pay the deposit to two or more different persons. A recovery by one claimant would be no bUr to a recovery of the same deposit by as many others as might severally claim the same." McGuire v. Auburn Sav. Bank, 78 App. Div. 22, 26. See also Gifford V. Oneida Sav. Bank, 99 App. Div. 25, 27. When a deposit is made in the names of two persons jointly and one of them sues the bank to recover the deposit, the bank may require the other to be made a party defendant. McKeown v. Bank for Savings, 26 Misc. 824. The amendments embraced in subdivision 1 to the effect that the court may make an order amending the proceedings by making the claimants parties defendant " without proof as to the merits of the claim," and that this remedy shall be in addition to that provided in Code Civ. Proc, § 820, were made to do away with conflicting and unsatisfactory decisions on the ques- tion whether the technical rules applicable to a proceeding under said section of the Code were applicable to a proceeding under this section (formerly § 145) of the Banking Law See Steiner v. East River Sav. Inst., 60 App. Div. 232, 235; McGuire v. Auburn Sav. Bank, 78 App. Div. 22; Mahro v. Greenwich Sav. Bank, 16 Misc. 537, 40 N. Y. Supp. 29 (reversing 16 Misc. 275, 38 N. Y. Supp. 126. An application made under § 820 of the Code of Civil Procedure is gov- erned, of course, by the rules applicable to that section. Mars v. Albany Sav. Bank, 64 Hun 424 ; Steiner v. East River Sav. Inst., 60 App. Div. 232. The provisions of the Banking Law do not apply to an action brought by the drawee of an unaccepted draft upon a. savings bank. The statute is limited by its terms to actions for the recovery of money on deposit, and the drawing of a draft does not operate as an assignment of the funds in the hands of the drawee. Master v. Bowery Sav. Bank, 31 Misc. 178. When a depositor in a, savings bank gives by his will a life estate in all his real and personal property, with remainders over, and appoints the life tenant as executor, the remaindermen have only a future interest in the moneys of the estate and a claim by them against the bank is not such a § 250. Savings Banks. 247 claim as is contemplated by this section. Gifford v. Oneida Sav. Bank, 99 App. Div. 25. The fact that the defendant savings bank makes answer, merely to escape default, denying that the amount of the deposit claimed by plaintiflf was the amount in its possession, does not aflfect the right of the bank to have a claimant brought in as a party defendant. Quinn v. Bank for Savings, 86 N. Y. Supp. 285. In an action against a savings bank to recover the amount of a. deposit standing in the name of a decedent, plaintiff claiming the deposit under an alleged gift, it is proper for the court to grant the bank's application to join as a party defendant the depositor's administrator who had previously made claim to the fund. Quinn v. Bank for Savings, 86 N. Y. Supp. 285. An order adding a claimant as a party defendant or granting an inter- pleader under this section may properly require the pass-book to be sur- rendered to the clerk of the court pending the determination of the action. Faivre v. Union Dime Sav. Inst., 49 Super Ct. (27 J. & S.) 558, 13 N. Y. Supp. 423; Quinn v. Bank for Savings, 86 N. Y. Supp. 285. The statute provides that the deposit v/hioh is the subject of the action may remain with tha savings bank " to the credit of the action ; " or in the alternative that it may be paid into court to await the final determina- tion of the action. But see McKeown v. Bank of Savings, 26 Misc. 824. The order of interpleader should not provide for the opening by defendant bank of a new account to the credit of the action. Faivre v. Union Dime Sav. Inst., 59 Super. Ct. (27 J. & S.) 558, 13 N. Y. Supp. 423. To justify an order adding parties defendant under this section it must appear that one or more persons other than plaintiff actually claim the deposit. It is not enough that other persons may claim it. So when the donee of a deceased depositor sues to recover the deposit, and the heirs and next of kin of the decedent are living and make no claim, the bank is not entitled to an order directing them to be made parties or requiring that an administrator be appointed. Cogsriff v. Hudson City Sav. Inst., 24 Misc. 4. But an order of interpleader may be granted although the third party claims only part of the deposit. Progressive Handlanger Union v. German Sav. Bank, 23 Abb. N. C. 42. When a deposit was made by A in the form "A in trust for B," and upon A^a death his administrator sues the bank to recover the deposit, alleging that to the knowledge of the bank the name of B was fictitious and the money belonged solely to A, the bank is not entitled to an order making B, his next of kin, etc., parties defendant. Unless plaintiff can prove said alle- gations he must fail, for otherwise upon the death of the trustee the bene- ficiary might be entitled to the deposit; while if plaintiff does prove the alle- gations the bank will not require the relief asked. Washington v. Seaman's Bank for Savings, 29 Misc. 492. 248 Banking Law. § 251, § 251. Available fund and purposes for which created. The trustees of every savings bank shall as soon as practicable invest the moneys deposited with them in the securities described in section two hundred and thirty-nine of this article, except as hereinafter provided. For the purpose of paying withdrawals in excess of receipts and meeting current expenses, or for the purpose of awaiting a more favorable opportunity for judicious investment, any savings bank may keep on hand or on deposit in any bank in this state organized under any law of this state or of the United States, or with a trust company incorporated under any law of this state, an available fund not exceeding twenty per centum of the aggregate amount credited to its depos- itors, but the sum deposited by any savings bank in any one bank or trust company shall not exceed twenty-five per centum of the paid up capital and surplus of such bank or trust company, and no more than five per centum of the aggregate amount credited to the depositors of any savings bank shall be deposited in a bank or trust company of which a trustee of such savings bank is a director. Source. — Former §§ 148, 149. The maximum amount of the fund is raised from ten to twenty per centum of the deposits and the provisions of former § 148 authorizing the loan of the fund and relating to the securities pledged for such a loan have been broadened and transferred to § 239, subd. 8. The increase in the percentage of amounts credited to depositors ■which may be carried in the available fund is more apparent than real; for formerly the available fund did not include excess of receipts over payments and funds awaiting judicious investment, which were treated by former § 149 as " tem- porary deposits." The five per cent, limitation at the end of the section is new. CROSS-REFERENCES.— Necessity for designating depositary, see § 244, and note; preference of deposits, see § 278 and note. AMOUNT OF DEPOSIT.— It has been held that a savings bank might de- posit in one bank and in a single account a portion of its available fund, for current expenses, and a portion of its accumulated funds the temporary deposit of which was authorized by former § 149, notwithstanding that the aggregate amount of the two funds deposited would exceed the percentage of the available fund which might be deposited in one bank under former § 148. Chenango Valley Sav. Bank v. Dunn, 40 App. Div. 552. This rule would seem to obtain no longer under the amended section. UNAUTHORIZED DEPOSIT NOT A LOAN.— The fact that a savings bank making an authorized deposit with another bank secures from the latter § 252. Savings Banks. 249 an agreement to pay interest thereon, does not convert the deposit into an unauthorized loan. Erie County Sav. Bank v. Coit, 104 N. Y. 532; Matter of Patterson, 18 Hun 221, aff'd 78 N. Y. 608, on opinion below. Upton v. N. Y. & Erie Bank, 13 Hun 269. LOANS OF AVAILABLE FUND.— The following opinions were rendered under the provisions of former § 148 authorizing and regulating loans of the available fund — provisions now embraced in § 239, subd. 8. The twenty-five per cent, limitation with respect to deposits had no appli- cation to loans made under former § 148. Atty.-Gen. Rep. (1909) 735. The available fund might be loaned upon the pledge of any of the first mortgage bonds of a railroad which could be purchased as an investment under subdivision 6 of former § 146 (now § 239, subdiv. 7), except bonds issued to retire all prior mortgage indebtedness of the railroad when such indebtedness had not actually been retired so as to make the refunding mort- gage a, first mortgage. Atty.-Gen. Rep. (1911) vol. 2, p. 371. SECURITIES MAY NOT BE LOANED.— The securities in which the funds of a savings bank are invested were no part of its available fund which might be loaned under former § 148. Lender no circumstances may the bank lend such securities. It may not lend them to national banks for deposit in the treasury department as security for additional circulation. Atty.-Gen. Rep. (1906) 516; Atty.-Gen. Rep. (1909) 720. This rule cannot be evaded by an agreement which provides in substance for a sale of the securities to a national bank and a resale by the latter to the savings bank at the same price, but which creates no contingency under which title may vest absolutely in the national bank. Such a transaction is in effect a loan. Atty.-Gen. Rep. (1909) 720. § 252. Guaranty fund. The surplus of every savings bank, at the time this act takes effect, the contributions of its incorporators or trustees under the provisions of section two hundred and thirty-four of this article, and, the sums credited thereto from its net earnings under the provisions of section two hundred and fifty-five of this article, shall constitute a guaranty fund for the security of its depositors and shall be held to meet any contingency or loss in its business from depreciation of its securities or otherwise, and for no other purpose except as provided in section two hundred and thirty-six and subdivision five of section two hundred and fifty-six of this article. Source.— New. Former § 153 provided for the optional accumulation of it fund from net profits to the amount of fifteen per cent, of the deposit lia- bilities. 250 Bain-ki&'g Law. § 253. The guaranty fund provisions of the present law represent compromises between the widely divergent views of experienced savings bankers. While all savings bank surpluses now become the guaranty funds of the respective banks, and while gradually increasing percentages of net earnings must be credited to this fund "until it equals ten per centum of deposit liabilities, the entire amount of these percentages need not be so credited if by so doing dividends will be reduced below 3% per cent.; and so long as there remain any unreturned contributions to the initial guaranty or expense funds only the same percentage is credited to the guaranty fund as is declared in divi- dends. Moreover, provision has been made also for an undivided profits ac- count for use in equalizing dividends throughout loan periods. These changes undoubtedly tend to strengthen the security of savings insti- tutions; and the prohibition against using any part of the guaranty fund for dividends, except such portion as, when added to undivided profits, exceeds 25% of deposit liabilities, supplies the institution with a fund which serves as a partial substitute for capital. See §§ 253, 255, 256. CROSS-REFERENCES.— Definitions of "guaranty fund," "surplus" and " net earnings," see § 3. Guaranty fund of savings and loan association, see § 392; of land bank, see § 427 ; of credit union, see § 457. Determination of amount of guaranty tund, see § 253. OWNERSHIP OF SURPLUS.— The surplus of a savings bank is the prop- erty of the depositors, not of the bank or of its trustees. People ex rel. Newburgh Savings Bank v. Peck, 157 N. Y. 51. SURPLUS EXEMPT FROM LOCAL TAXATION.— Under Tax Law, § 4, subd. 14, exempting from taxation " the deposits in any bank for savings which are due depositors," the surplus of a savings bank is exempt. People ex rel. Newburgh Savings Bank v. Peck, 157 N. Y. 51. But see Tax Law, § 189, imposing a, franchise tax of one per centum on the par value of its surplus and undivided earnings. § 253. Amount of guaranty fund ; how determined. 1. To determine the amount of the guaranty fimd of a savings bank its total liabilities due and accrued, its undivided profits and its net earnings since the last declaration of dividends shall be subtracted from its total assets. The value of its assets for the purpose of this calculation shall be stated as follows: (a) Its interest bearing stocks, bonds, or other obligations shall not be valued above the estimated market value thereof as last de- termined by the superintendent of banks. (b) The value of its real estate shall not in any event be esti- mated above cost, and if such real estate has been acquired by foreclosure, judgment or decree the value of such real estate so § 253. Savings Banks. 251 acquired shall not be estimated above its actual cash value as de- termined by written appraisal signed by at least three trustees of such savings bank and filed with it. (c) Such assets shall be excluded as have been disallowed by the superintendent of banks or its trustees, and also any debts owing to it which shall have remained due without prosecution and upon which no interest shall have been paid for more than one year, or on which a judgment has been recovered which shall have remained unsatisfied for more than two years, unless the superintendent of banks, upon application by such savings bank, shall have fixed a valuation at which such debts may be carried as an asset, or unless such debts are secured by first mortgage upon real estate, in which latter case they may be carried at the actual cash value of such real estate as determined by written ap- praisal signed by at least three trustees of such savings bank and filed with it. 2. The amount of the guaranty fund of a savings bank at the close of any dividend period may be determined by adding to the guaranty fund at the beginning of such period any appreciation in the estimated market value of its securities resulting from a revaluation thereof by the superintendent of banks, the sums re- covered on items previously charged to it and any amounts al- lowed by the superintendent of banks on account of assets previ- ously disallowed and charged to it, and deducting therefrom all losses sustained by the savings bank during such period. In the computation of losses all items shall be included which shall have been disallowed by its board of trustees or by the superintendent of banks, together with any depreciation in the value of its securi- ties below their estimated market value as last fixed by the super- intendent of banks, and all debts owing to it upon which no inter- est shall have been paid for one year or on which a judgment has been recovered which shall have remained unsatisfied for two years, unless the superintendent of banks upon the application of the savings bank shall have fixed a value at which such debts maj be allowed or unless such debts are secured by first mortgage upon real estate, in either of which events only the amount by which such debts exceed the value allowed by the superintendent of banks or the cash value of the real estate securing them as determined 252 Banking Law. § 254. by written appraisal signed by at least three trustees of such sav- ings bank and filed with it, need be so deducted. Source. — New. CROSS-REFEEBNCES.— Definitions of "guaranty fund," "surplus," "net earnings," "' undivided profits " and " dividend period," see § 3. Similar provision as to savings and loan associations, see § 393. See note to § 252. § 254. Calculation of earnings for dividend period. 1. Gross earnings. To determine the amount of gross earnings of a savings bank during any dividend period the following items may be included: (a) All earnings actually received during such period, less in- terest accrued and unpaid included in the last previous calcula- tion of earnings; (b) Interest accrued and unpaid upon debts owing to it secured by collateral as authorized by this article, upon which there has been no default for more than one year, and upon cor- porate stocks, bonds, or other interest-bearing obligations owned by it upon which there is no default; (c) The sums added to the cost of securities purchased for less than par as a result of amortization. (d) Any profits actuality received during such period from the f ale of securities, real estate or other property owned by it. 2. Net earnings. To determine the amount of its net earnings for such dividend period the following items shall be deducted from gross earnings: (a) All expenses paid or incurred, both ordinary and extra- ordinary, in the transaction of its business, the collection of its debts and the management of its affairs, less expenses incurred and interest accrued upon its debts deducted at the last previous cal- culation of net earnings for dividend purposes; (b) Interest paid or accrued and unpaid upon debts owing by it; (c) The amoimts deducted through amortization from the cost of corporate stocks, bonds or other interest-bearing obligations pur- chased above par in order to bring them to par at maturity ; (d) Any losses that may have been sustained by it in excess of its guaranty fund and undivided profits. § 2,55. Savings Baaks. 253 The balance thus obtained shall constitute the net earnings of such savings bank for such period. Source. — Former § 28. The language is for the most part new. One important purpose of this method of calculating net earnings is to prevent the declaration of a dividend based on paper profits. In calculating earnings for dividend purposes securities must be carried at amortised cost until sold. This provision was contained in much less definite language in former § 153. CROSS-REFERENCES.— Definitions of "guaranty fund," "net earnings," " undivided profits " and " dividend period," see § 3. Similar provision as to banks, see § 116; as to trust companies, see § 202. General powers as to dividends, see §§2 (definition) 233, subd. 1. § 255. Deductions from net earnings for guaranty fund. If at the close of any dividend period the guaranty fund of any savings bank be less than ten per centum of the amount due to depositors, there shall be deducted from its net earnings for such period and credited to its guaranty fund five per centum of its net earnings during the year nineteen hundred and fourteen; six per centum during the year nineteen hundred and fifteen; seven per centum during the year nineteen hundred and sixteen ; eight per centum during the year nineteen hundred and seventeen ; nine per centum during the year nineteen hundred and eighteen; ten per centum during the year nineteen hundred and nineteen, and ten per centum during any year thereafter in which a dividend shall be declared or so much of such percentages as will not compel it to reduce its dividends to depositors below the rate of three and one-half per centum per annum. The amount of net earnings remaining after such deduction for the guaranty fund and its imdivided profits shall be available for the declara- tion of dividends for such period. While the trustees of a savings bank are paying its expenses or any portion thereof, the amounts to be credited to its guaranty fund shall be computed at the same percentages upon the total dividends credited to its depositors instead of upon its net earnings. Source. — New. CROSS-REFERENCES.— Definitions of "guaranty fund," "dividend pe- riod," " undivided profits " and " net earnings," see § 3. 254 Banking Law. § 256. Similar provisions as to banks, see § 118; as to trust companies, see § 204; as to savings and loan associations, see § 395; as to credit unions, see § 459. See note to § 252. § 256. Regulations and restrictions as to dividends; accumulation of guaranty fund and undivided profits; liability of trustees; extra dividends. 1. Every savings bank shall regulate the rate of dividend not to exceed five per centum per annum upon the deposits therewith, in such manner that depositors shall receive as nearly as may be all the earnings of the savings bank after transferring the amount required by section two hundred and fifty-five of this article, and such further amounts as its trustees may deem it expedient and for the security of the depositors to transfer, to the guaranty fund which to the amount of ten per centum of the amount due its de- positors the trustees shall gradually accumulate and hold. Such trustees may also deduct from its net earnings, and carry as undivided profits for the purpose of maintaining its rate of dividends, such additional sums as they may deem wise. 2. Every savings bank may classify its depositors according to the character, amount or duration of their dealings with the sav- ings bank, and may regulate the dividends in such manner that each depositor shall receive the same ratable portion of dividends as all others of his class. 3. Unimpaired contributions to the initial guaranty fund and to the expense fund, made by the incorporators or trustees of such savings bank, shall be entitled to have dividends apportioned thereon, which may be credited and paid to such incorporators or trustees. Whenever the guaranty fund of any such savings bank is sufficiently large to permit the return of such contribu- tions, the contributors may receive dividends thereon not thereto- fore credited or paid at the same rate paid to depositors. 4. A savings bank shall not (a) Declare, credit or pay any dividend on any deposit except as authorized by a vote of a majority of the board of trustees duly entered upon their minutes, whereon shall be recorded the ayes and nays upon each vote. (b) Pay any dividend other than the regular quarterly or semi- annual dividend, or the extra dividend prescribed in subdivision six of this section. § 2,56. Savings Banks. 255 (c) Declare, credit or pay dividends on any deposit for a longer period than the same has been deposited; provided, how- ever, that deposits made not later than the tenth business day of the month commencing any semi-annual dividend period or the third business day of any month, or withdrawn upon one of the last three business days of the month ending any quarterly or semi-annual dividend period, may have dividends declared upon them for the whole of the period or month when they were so de- posited or withdrawn ; and provided further that, if the by-laws so provide, accounts closed between dividend periods may be credited with dividends at the rate of the last dividend, computing from the last dividend period to the date when closed. 5. Whenever any dividend shall, except as provided in sub- division six of this section, be declared and credited in excess of profits earned and appearing to the credit of the savings bank since the last declaration of dividends, after making the deduction for expenses, for amortization and for the guaranty fund as pro- vided in sections two hundred and forty-six, two hundred and fifty-four and two hundred and fifty-five of this article, the trus- tees voting for such dividend shall be jointly and severally liable to such savings bank for the amount of such excess so declared and credited. 6. The trustees of any savings bank whose undivided profits and guaranty fund, determined in the manner prescribed in sec- tion two hundred and fifty-three of this article, amount to more than twenty-five per centum of the amount due its depositors, shall at least once in three years divide equitably the accumula- tion beyond such twenty-five per centum as an extra dividend to depositors in excess of the regular dividend authorized. A notice posted conspicuously in a savings bank of a change in the rate of dividends shall be equivalent to a personal notice. Source.— Former §§ 152, 153. Subdivision 1 is based upon former § 153. The ten per cent, guaranty fund provided by subdivision 1 takes the place of the optional fifteen per cent. " surplus " fund provided by former § 153. The creation of the undivided profits account (subd. 1) is new. Subdivision 2 is taken from former § 153 without substantial change. Subdivision 3 is new. Subdivision 4 (a) is taken from former § 153. 256 BaxXkixg Law. § 256. The provisions of subdivision 4(b) are taken from former § 152, except the reference to the extra dividend, that being new. Subdivision 4(c) is taken from former § 153, with the exception of the last proviso which is new. Subdivision 5 is taken from former § 153, with modifications as to amor- tization and the guaranty fund. Subdivision 6 is adapted from the last two sentences of former § 153. An extra dividend now depends upon an accumulation of the guaranty fund and undivided profits exceeding twenty-five per cent, of the deposits, instead of a surplus exceeding fifteen per cent, of the deposits as provided in former § 153. CROSS-REFERENCES.— Definitions of "guaranty fund," "net earnings," " undivided profits " and " dividend period," see § 3. General powers as to dividends, see §§ 2 (definition) 238, subd. 1. Criminal liability of trustees for declaring illegal dividend, see Penal Law, § 297. SUBDIVISION 1. CONTRACT FOR FIXED RATES.— A savings bank cannot contract to pay future dividends or interest to depositors at a fixed rate. Atty.-Gen. Rep. (1908) 397. This rule applies even though rate fixed is leas than the rate usually paid; and it makes no difference that the deposit is made by a postal savings bank or under order of court. Atty.-Gcn. R»p. (1912) vol. 2, 500. SUBDIVISION 2. BY-LAW CLOSING INACTIVE ACCOUNTS.— A savings bank has no power to enact a by-law providing that all accounts shall be closed and shall cease to draw interest at the expiration of ten years from the time of the last deposit or draft. Atty.-Gen. Rep. (1905) 441. SUBDIVISION 4(c). COMPUTATION OF DIVIDEND PERIOD.— The provision that the trus- tees shall not declare or allow interest (dividends) on any deposit for a longer period than the same has been deposited, with exceptions as to de- posits made not later than the tenth "business day " of the month, etc. (now subd. 4[c]) formerly did not contain the word "business." The word was in- serted in former § 153 for the apparent purpose of avoiding a ruling of the Attorney-General that the provision referred to calendar days and that holi- days could not be excluded. Atty.-Gen. Rep. (1908) 384. SUBDIVISION 5. DIVIDENDS IN EXCESS OP EARNINGS.— The provisions of the Act of 1875 (Ch. 371, § 33) relating to the declaration of interest and dividends did not require that expenses be deducted from earned interest or profits of the bank before ascertaining whether a given rate of interest or dividend could § 257, 258. Savings Banks. 257 lawfully be declared; and it did not require that the interest or profits earned should actually have -been received. Van Dyck v. ilcQuade, 86 N. Y. 38. LIABILITY OF TRUSTEES.— The provisions making the trustees person- ally liable for interest or dividends unlawfully declared and paid are penal in their character and must be strictly construed. A trustee cannot be lield liable for the amount of a dividend declared and paid in violation of the statute, unless he voted for it. Approving the dividend after it has been de- clared is not enough to make him liable. " Van Dyck v. McQuade, 86 X. Y. 38. § 257. Per centum of par value surplus; how determined. In determining the per centum of par value surplus held by any savings bank, its interest-bearing 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. But the value of such stocks or bonds, or bonds and mortgages, as are in arrears of interest for six months or more, and of all other invest- ments not herein enumerated, shall be estimated according to the valuation placed thereon by the superintendent of banks, as pro- vided in section fifty-four of this chapter. Source. — Former § 154. The main purpose of this section is to provide a method for computing the franchise tax of one per centum on the par value of the surplus and undivided earnings of savings banks. See Tax Law, § 189. § 258. Advertisements of surplus or guaranty fund. ISTo savings bank shall hereafter put forth any sign or notice or publish or circulate any advertisement or advertising literature upon which or in which it shall be stated that such savings bank has a surplus or guaranty fund in excess of its market value surplus or guaranty fund as determined under the provisions of this article, unless the nature of the same be clearly made to appear. Source. — New. CROSS-REFERENCES.— Valuation of securities, see §§ 53, 54, 257. Determination of amount of guaranty fund, see § 253. 17 258 Banking Law. § 259 § 259. Change of location. Any savings bank may make a written application to the su- perintendent of banks for leave to change its place of business to another place in the same county. The application shall state the reasons for such proposed change, and shall be signed and acknowledged by a majority of its board of trustees. If the pro- posed place of business is within the limits of the town, village, borough or city, if in a city not divided into boroughs, in which the present place of business of the savings bank is located, such change may be made upon the written approval of the superin- tendent; if beyond such limits, notice of intention to make such application, signed by two principal officers of the savings bank shall be published once a week for two successive weeks immedi- ately preceding such application in a newspaper published in the city of Albany in which notices by state officers are required by law to be published, and in a newspaper to be designated by the superintendent, published in the county in which the present place of business of such savings bank is located. If the superintendent shall grant his certificate authorizing the change of location, as provided in section fifty of this chapter, the savings bank shall cause such certificate to be published once in each week for two successive weeks in the newspapers in which the notice of applica- tion was published. When the requirements of this section shall have been fully complied with, the savings bank may, upon or after the day specified in the certificate, remove its property and effects to the location designated therein, and thereafter its prin- cipal place of business shall be the location so specified; and it shall have all the rights and powers in such new location which it possessed at its former location. Source.— Former §§ 31, 147. CROSS-REFERENCES. — For similar provisions as to other corporations doing business under the Banking Law, see | 119 and the annotations to that section. Duties of superintendent on application for change of location, see § 50. § 260.. Savings Banks. 259 § 260. Board of trustees; number and qualifications. 1. There shall be a board of trustees who shall have the entire management and control of the affairs of the savings bank. The persons named in the certificate of authorization shall be the first trustees. The board shall consist of not less than nine members, nor, except as provided in section tvro hundred and sixty-six of this article, more than thirty members. 2. A person shall not be a trustee of a savings bank, if he (a) Is not a resident of this state; provided, however, that one- fifth of the trustees of any savings bank in the city of New York may be residents of a state which adjoins said city. (b) Has been adjudicated a bankrupt or has taken the benefit of any insolvency law, or has made a general assignment for the benefit of creditors. (c) Has suffered a judgment recovered against him for a sum of money to remain unsatisfied of record or unsecured on appeal for a period of more than three months. (d) Is a trustee, officer, clerk or other employee of any other savings bank. 3. ISTor shall a person be a trustee of a savings bank solely by reason of his holding a public office. Source. — Former §§ 137, 140. Subdivision 3 is new; it is designed to meet provisions in old charters making mayors of cities ex officio members of boards of trustees of savings banks. Formerly there was no limit upon the number of trustees except that there should not be less than thirteen (former § 137.) CROSS-EEFEEENCES. — Increase or reduction of number of trustees, see § 266. For purpose of reduction of minimum number and placing a limit on maxi- mum number, see note to § 230. Liability of trustees for declaring unlawful dividend, see § 256, subd. 5, and annotations. Duty of trustees to make investments, see § 251. Liability of trustees for unlawful investments, see note to § 239. When trustees not liable for investing in unauthorized securities, see § 2S9 (last paragraph). Criminal liability of director for fraud or violation of law, see Penal Law, § 297. Criminal liability of officer, etc., for receiving deposits in insolvent savings bank, see Penal Law, § 295. 260 Banking Law. § 261. Falsification of books, reports or statements by trustee, officer, etc., see Penal Law, § 304. BORROWER NOT ELIGIBLE AS TRUSTEE.— A man who has borrowed a large sum of money from a savings bank is not eligible as trustee of the bank. The prohibition against a trustee's borrowing money from the savings bank (former § 142, now § 267, subd. 2[e]) should be construed not only to prevent a trustee from becoming a debtor to the bank, but to prevent a debtor to the bank from becoming a trustee. Atty.-Gen. Rep. (1905) 441. NUMBER OF TRUSTEES.— By force of the section (now § 281) by which the charters of all savings banks are conformed to the present law, and which applies to savings banks incorporated before its enactment in 1892, the num- ber of trustees of such a savings bank is restricted by the present law to the prescribed minimum; the number must be definitely fixed and can be changed only as provided by the existing statute (now § 266), notwithstanding that a by-law adopted before these statutes were enacted provides for a variable number. Atty.-Gen. Rep. (1907) 475. STATUS AND DUTIES OF TRUSTEES.— The relation existing between a savings bank and its trustees is mainly that of principal and agent, and the relation between the trustees and the depositors is similar to that of trustee and cestui que trust. The trustees are bound to observe the limits placed upon their powers in the charter, and if they transcend those limits and cause damage they are liable. They are bound also to use in the execution of the trust such care and judgment as men of ordinary skill and prudence commonly exercise' in the conduct of their own affairs; and when a loss occurs by their failure in this respect they are liable and cannot excuse themselves on the ground that they did not possess the skill and judgment requisite for the performance of their duties. Hun v. Gary, 82 N. Y. 65. See also Atty.-Gen. Rep. (1906) 516. § 261. Oath and declaration of trustee. 1. Each trustee, whether named in the certificate of authoriza- tion or elected to fill a vacancy, shall, when such certificate of au- thorization has been issued, or when notified of such election, take an oath that he will, so far as it devolves on him, diligently and honestly administer the affairs of the savings bank, and will not knowingly violate, or willingly permit to be violated any of the provisions of law applicable to such savings bank. Such oath shall be subscribed by the trustee making it and certified by the officer before whom it is taken, and shall be immediately trans- mitted to the superintendent of banks and filed and preserved in his office. 2. Prior to the first day of March in each year, every trustee of every savings bank shall subscribe a declaration to the effect §§ 262, 263. Savings Banks. 261 that he is, at the date thereof, a trustee of the savings bank, and that he has not resigned, become ineligible, or in any other man- ner vacated his office as such trustee. Such declaration shall be acknowledged in like manner as a deed to be entitled to record and shall be transmitted to the superintendent of banks and filed in his office prior to the tenth day of March in each year. Source. — Former § 137. CROSS-REFERENCES.— Forfeiture of office for failure to comply with this section, see § 268, subdiv. 2 (a) and subdiv. 3 (a). As to oaths of directors of other corporations doing business under the Banking Law, see § 124 and cross-references there given. § 262. By-laws. The board of trustees of a savings bank may from time to time make by-laws, rules and regulations, not inconsistent with law, for the election of officers and for their respective powers and duties and the manner of discharging the same; for the appoint- ment of committees and with reference to their duties; for the increase or reduction of the number of trustees, subject to the pro- visions of section two hundred and sixty-six of this article; for the repayment of deposits, subject to the provisions of sections two hundred and forty-eight and two hundred and forty-nine of this article, and generally for transacting, managing and directing the affairs of the savings bank. A copy of the same shall be trans- mitted to the superintendent of banks, who shall be notified of any amendment or change therein. Source.— Former § 138, amplified. CROSS-REFERENCES.— See annotations to §§ 248, 249, 256, 260. Power to make by-laws as to dividends, see § 256, subd. 4(c). General power of corporation to make by-laws, see Gen. Corp. Law, § 11, subd. 5. § 263. Officers. The board of trustees shall elect from their number or other- wise, a president and two vice-presidents and such other officers as they may deem fit. Source.— Former § 137. 262 Banking Law. § 264. § 264. lileetings of trustees; quorum; reports of officers. 1. Regular meetings of the board of trustees shall be held at least once a month. 2. A quorum at any regular or special or adjourned meeting shall consist of not less than five, of whom the president shall be one, except when he is prevented from attending by sickness or other unavoidable detention, when he may be represented in forming a quorum by the first vice-president, or in case of his absence for like cause, by the second vice-president; but less than a quorum shall have power to adjourn from time to time until the next regular meeting. 3. The board of trustees shall, by resolution duly recorded in the minutes, designate an officer or officers whose duty it shall be to prepare and submit to each trustee at each regular meeting of the board, or to an executive committee of not less than five members of such board, a .written stateme nt of all the purchases and sales of securities, and of every loan, made since the last regular meeting of the board, describing the collateral to such in- debtedness as of the date of meeting at which such statement is submitted; but such officer or officers may omit from such state- ment loans of less than one thousand dollars, except as hereinafter provided. Such statement shall also contain a list giving the aggregate of loans to each individual, partnership, unincorporated association or corporation whose liability to the savings bank has been increased one thousand dollars or more since the last regular meeting of the board, together with a description of the collateral to such indebtedness held by the savings bank at the date of the meeting at which such statement is submitted. A copy of such statement, together with a list of the trustees present at such meeting, verified by the affidavit of the officer or officers charged with the duty of preparing and submitting such atatemrait shall be filed with the records of the savings bank within one day after such meeting, and shall be presumptive evidence of the matters therein stated. Source.— Former §§ 42, 139. Subdivisions 1 and 3 are adapted from former § 42. Subdivision 2 is taken from former § 139; it changes the quorum from seven (former § 139) to five. For reason of change, see note to § 230. § 265. Savii^gs Banks. 263 CROSS-REFERENCES. — Similar provision as to banks, see § 129; as to trust companies, see § 214; as to personal loan associations, see § 357. Quorum of directors and powers of majority, see Gen. Corp. Law, § 34. This section (formerly § 42), providing that the trustees may by resolu- tion require the detail information of the bank's business to be given to the executive committee composed of at least five members of the board leads necessarily to the inference that the trustees who are not members of the executive committee are not to be charged with knowledge of the detail management, which need only be reported to the executive committee. Kav- anaugli v. Gould, 147 App. Div. 281. § 265. Compensation of trustees, officers and attorneys. 1. A trustee of a savings bank shall not directly or indirectly re- ceive any pay or emoliiment for his attendance at meetings of the board, or for any other services as trustee, except as provided in this section. 2. Trustees acting as officers of the savings bank, whose duties require and receive their regular and faithful attendance at the institution, and the trustees appointed as a committee to examine the vouchers and assets pursuant to section»two hundred and sev- enty-two of this article, to perform the duties required by subdi- vision six of section two hundred and thirty-nine or subdivision three of section two hundred and sixty-four of this article, or to render other special services as members of committees provided for in the by-laws, may receive such compensation as in the opinion of a jnajority 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. 3. An attorney for a savings bank, although he be a trustee thereof, may receive a reasonable compensation for his profes- sional services, including examinations and certificates of title to real property on which mortgage loans are made by the savings bank ; or if the savings bank requires the borrowers to pay all ex- penses of searches, examinations and certificates of title, including the drawing, perfecting and recording of papers, such attorney may collect of the borrower and retain for his own use the usual fees for such services, excepting any commissions as broker or on account of placing or accepting such mortgage loans. 4. If an officer or attorney of a savings bank shall receive, on any loan made by the savings bank, any commission which he is 264 Banking Law. § 266. not authorized by this section to retain- for his own use, he shall immediately pay the same over to the savings bank. Source.— Former §§ 141, 142, 155. Subdivision 1 is based upon former § 142 and the last sentence of former § 155. Subdivision 2 is based upon the last part of former § 141 and the first sentence of former § 155. Subdivision 3 is based upon the second sentence of former § 150 in so far as concerns the liability of the borrower to pay the expenses of searches, examinations and certificates of title, etc. The rest of the subdivision is new. The savings bank may pay its attorney for the services mentioned and may charge the sum to the mortgagor, or the attorney may collect his fees from the mortgagor if the savings bank so directs. One purpose of subdivi- sion 3 is to supply an omission in the former Banking Law with respect to compensation of trustees for services as attorneys. Subdivision 4 is new. ATTORNEY AS TRUSTEE.— A savings bank was not authorized by former § 155 to pay for the services of one of its trustees in acting as secretary to the Board of Trustees and keeping the minutes of its monthly meetings, although said trustee was an attorney without whose advice it might have been necessary occasionally to employ counsel. Atty.-Gen. Rep. (1910) 840. Subdivision 3 apparently modifies this rule. EXPENSES OP TRUSTEES' ATTENDING MEETINGS.— A savings bank has no right to pay the actual and necessary expenses incurred by trustees attending meetings of the board. Atty.-Gen. Rep. (1905) 444. MAJORITY VOTING FOR COMPENSATION.— The majority required to vote compensation to a trustee means a majority of the full board excluding both the particular trustee whose compensation is in question and all other tritstees to ichom compensation is paid.. This applies to a proposed inoreas? of salary. Atty.-Gen. Rep. (1899) 121. § 266. Increase or reduction of number of trustees. The board of trustees of every savings bank may, hj resolution incorporated in its by-laws, increase or reduce the number of trustees named in the original charter or certificate of au- thorization. 1. The number may be increased to a number designated in the resolution and not exceeding thirty, provided that reasons there- for are shown to the satisfaction of the superintendent of banks and his written consent thereto is first obtained. 2. The number may be reduced to a number designated in the resolution but not more than thirty or less than nine. The re- § 267. Savings Banks. 265 duction shall be effected by omissions to fill vacancies occurring in the board. 3. Where a savings bank now has more than thirty trustees, vacancies in the board shall not be filled until the total number of trustees shall have been reduced to thirty. Source. — Former § 137. The limitation as to the maximum number is new. The minimum number is reduced from thirteen to nine; for reason of change, see note to § 230. Subdivision 3 is new. CROSS-REFERENCES.— See § 260 and notes. Change of number of directors of bank, see § 127; of .savings and loan association, see § 408; of land bank, see § 433. § 267. Bestrictions upon trustees and officers. 1. A trustee of a savings bank shall not (a) Have any interest, direct or indirect, in the gains or profits of the savings bank, except to receive dividends upon the amounts contributed by him to the guaranty fund and the expense fund of the savings bank as provided in sections two hundred and thirty-four and two hundred and thirty-five of this article. (b) Become a member of the board of directors of a bank, trust company or national banking association of which board enough other trustees of the savings bank are members to constitute with him a majority of the board of trustees. 2. Neither a trustee nor an officer of a savings bank shall (a) For himself or as agent or partner of another, directly or indirectly use any of the funds or deposits held by the savings bank, except to make such current and necessary payments as are authorized by the board of trustees. (b) Receive directly or indirectly and retain for his own use any coonmission on or benefit from any loan made by the savings bank, or any pay or emolument for services rendered to any bor- rower from the savings bank in connection with such loan, ex- cept as authorized by section two hundred and sixty-five of this article. (c) Direct or require a borrower of the savings bank on mort- gage to negotiate any policy of insurance on the mortgaged prop- erty through any particular insurance broker or brokers, or at- tempt to divert to any particular insurance broker or brokers the patronage of borrowers from the savings bank, or refuse to accept 266 Bankixg Law. § 267. any such insurance policy because it was not negotiated through a particular insurance broker or brokers. (d) Become an indorser, surety or guarantor, or in any manner an obligor, for any loan made by the savings bank. (e) For himself or as agent or partner of another, directly or in- directly borrow any of the funds or deposits held by the savings bank, or become the owner of real property upon which the sav- ings bank holds a mortgage. A loan to or a purchase by a corpo- ration in which he is a stockholder to the amount of fifteen per centum of the total outstanding stock, or in which he and other trustees of the savings bank hold stock to the amount of twenty-five per centum of the total outstanding stock, shall be deemed a loan to or a purchase by such trustee within the meaning of this section; except when the loan to or purchase by such corporation shall have occurred without his knowledge or against his protest. A deposit in a bank shall not be deemed a loan within the meaning of this section. This section shall not be construed to prohibit a savings bank from making a loan to a religious corporation, club, or other mem- bership corporation of which one or more trustees of such savings bank may be members or officers but in which they have no finan- cial interest, nor shall it be construed to prohibit a savings bank from making loans to or purchasing guaranteed mortgages from any stock corporation, provided no trustee owns more than fifteen per centum of the capital stock of such corporation, and the total amount of such stock owned by all the trustees of such savings bank is less than twenty-five per centum of such capital stock. Source.— Former §§ 137, 140, 142, rewritten. Subdivision 2(c), and all of subd. 2(e) after the words " held by the savings bank " in the iirst sentence, are new. Const., Art. VIII, § 4, provides that no trustee of a savings bank or in- stitution for savings shall have any interest, direct or indirect, in the profits of the corporation, and that no director or trustee thereof shall be interested in any loan or use of any of its money or property. See § 260 and notes; also § 263 as to officers. Overdrafts by, or commissions and gratuities to officer, director, etc., see Penal Law, § 294. SUBDIVISION I (a). This section does not forbid a trustee of a savings bank from depositing his own money therein. There can be no " gains or profits " of the bank un- § 268, Savings Banks. 267 til the fixed charges have been paid and interest credited on the deposits. Atty.-Gten. Rep. (1906) 515. SUBDIVISION 2(a). The prohibition against a trustee's becoming an indorser, surety, etc., is not violated when a trustee gives a mortgage to make up a deficiency in the savings bank's assets caused by a loss upon a loan previously made. Best v. Thiel, 79 N. Y. 15. SUBDIVISION 2(e). A loan upon the security of land of a corporation in which one of the trustees is a large stockholder is illegal and renders the trustees personally liable. Paine v. Barnum, 59 How. Pr. 303. The provisions of the second sentence of subd. 2(e) is based upon this decision. The prohibition against a trustee's or officer's borrowing, directly or in- directly, any funds or deposits of the bank, is not avoided by purchasing mortgages from him. Buying mortgages violates the prohibition as much as lending money and taking mortgages for security. Paine v. Irwin, 59 How. Pr. 316. Such prohibition is violated when an officer takes checks upon the bank, signed by its secretary and president, and uses them for stock speculation on his own account, the checks being paid by other checks upon banks where the savings bank keeps its funds on deposit. Knapp v. Roche, 62 N. Y. 614. Borrower not eligible as trustee, see annotations to § 260. THE LAST PARAGRAPH OF THE SECTION is designed to abrogate a ruling of the Attorney-General that a trustee of a savings bank has such an interest in a loan by the bank to a religious corporation of which he is a member and a trustee, that the loan violates the statute and forfeits his office. Atty.-Gen. Rep. (1912), Vol. 2, page 318. § 268. Removal and forfeiture of office of trustee. 1. Whenever, in the judgment of three-fourths of the trustees, the conduct and habits of a trustee of any savings bank are of such a character as to be injurious to such savings bank, or he has been guilty of acts that are detrimental or hostile to the interests of such savings bank, he may be removed from office, at any regular meet- ing of the trustees, by the affirmative vote of three-fourths of the total number thereof; provided, however, that a written copy of the charges made against him shall have been served upon him personally at least two weeks before such meeting, that the vote of such trustees by ayes and nays shall be entered in the record of the minutes of such meeting, and that such removal shall receive the written approval of the superintendent of banks, which shall be 268 Banking Law. § 268. attached to the mimites of such meeting and form a part of the record. 2. The office of a trustee of a savings bank shall immediately become vacant whenever he (a) Shall fail to comply with any of the provisions of section two hundred and sixty-one of this article relating to his official oath and declaration. (b) Shall become disqualified for any of the reasons specified in subdivision two of section two hundred and sixty of this article. (c) Shall have failed to attend the regular meetings of the board of trustees, or to perform any of his duties as trustee, for a period of six successive months, unless excused by the board for such failure. (d) Shall violate any of the provisions of section two himdred and sixty-seven of this article imposing restrictions upon trustees and officers, except paragraph (c) of subdivision two thereof. But a trustee shall not be held to have forfeited or vacated his office by reason of any loan made by the savings bank to a corporation of which he was a member or stockholder, or by reason of the pur- chase of any guaranteed mortgage by the savings bank from such corporation, or by reason of the purchase by such corporation of real estate subject to a mortgage held by the savings bank, if such loan or purchase was made before this chapter takes effect. 3. A trustee who has forfeited or vacated his office shall not be eligible to re-election, except when the forfeiture or vacancy oc- curred solely by reason of his (a) Failure to comply with the provisions of section two hun- dred and sixty-one of this article, relating to his official oath and declaration; or (b) Neglect of his official duties as prescribed in paragraph (c) of subdivision two of this section ; or (c) Disqualification through becoming a non-resident, or be- coming a trustee, officer, clerk or other employee of another sav- ings bank, or becoming a director of a bank, trust company or national banking association under the circumstances specified in paragraph (b) of subdivision one of section two hundred and sixty-seven of this article; and such disqualification shall have been removed. §§ 269, 270, 271. Savings Banks. 269 Source.— Former §§ 137, 140, 140-a. Subdivision 1 is taken from former § 140-a. Subdivisions 2 and 3 are adapted from former §§ 137 and 140, rearranged and rewritten. The second sentence of subdivision 2(d) is new. The first clause of that sentence is designed to abrogate an opinion of the Attorney-General. See last paragraph of annotation to § 267. CEOSS-REFERENCE.— Discretion of superintendent in approving removal of trustee under subd. 1, see § 48. § 269. Filling vacancies in board of trustees. A vacancy in the board of trustees shall be fiUed by the board as soon as practicable, at a regular meeting thereof, except as other- wise provided in section two hundred and sixty-six of this article with respect to the reduction of the number of trustees. Source. — Former § 137. The exception is new. § 270. Security may be required from officers and employees; pre- miums on fidelity bonds. The trustees of every savings bank shall have power to require from the officers, clerks and agents thereof such security for their fidelity and the faithful performance of their duties as the trustees shall deem necessary. Such security may be accepted from any company authorized to furnish fidelity bonds and doing business under authority of the ITew York insurance department, and the premiums therefor may be paid as a necessary expense of said savings bank. Source. — Former § 141. The last sentence is new. § 271. Pensions. A savings bank may, in the discretion of its board of trustees, retire any officer, clerk or other employee who shall have served the bank for a period of thirty years or more, or who shall have served the bank for a period of twenty years or more and shall have become physically or mentally incapacitated for his position, or who shall have served the bank for a period of twenty years 270 Banking Law. §§ 272, 273. or more and shall have attained the age of sixty years. Any per- son retired from service pursuant to this section may be paid in equal monthly instalments at the rate of not exceeding tv70 per centum of his average annual salary for the three years immedi- ately preceding his retirement, for each year of service in the bank, but the maximum annual amount paid shall in no case ex- ceed sixty per centum of such average annual salary. Source. — New. § 272. Examination of vouchers and assets by trustees. The trustees of every savings bank, by a committee of not less than three of their number, on or before the first days of January and July in each year, shall thoroughly examine the books, vouchers and assets of such savings bank, and its affairs gen- erally. The statement or schedule of assets and liabilities re- ported to the superintendent of banks for the first of January and July in each year, as provided in the section next following, shall be based upon such examinations, 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 said semi-annual report to the superintendent they shall state the fact that such balance has been taken, and the discrepancies, if any, existing be- tween the amount due depositors, as shown by such balance, and the amount so due as shown by the general ledger. Source. — Former § 157. § 273. Reports to superintendent; penalty for failure to make. 1. Semi-annual report. On or before the first day of Febru- ary and the first day of August in each year every savings bank shall make written report to the superintendent of banks, which report shall be in the form prescribed by the superintendent and shall contain a statement of its condition on the morning of the first day of January and of the first day of July in the said year, respectively. 2. Contents of report. Every such report shall state the amount § 273. Savings Banks. 271 loaned upon bond and mortgage, and a list of all bonds and mort- gages upon which money has been loaned that have not been previously reported, which list shall show the location of the mortgaged premises. It shall contain a list of all bonds and mort- gages previously reported that since have been paid wholly or in part or have been foreclosed, and the amounts of such payments and the proceeds of such foreclosures. It shall state the original cost, date of purchase, date of maturity, stated rate of interest, the present cost after amortization, par value, and estimated market value, of all stock or bond investments, designating each particular kind of stock or bond ; the amounts loaned upon prom- issory notes, upon the pledge of the different classes of securities authorized by this article, with a statement of the amount of the securities held as collateral for such loans; the amount invested in real estate, giving the cost of the same, and, in the case of real estate purchased at judicial sale or taken in satisfaction of debts due the savings bank, the actual cash value thereof as ap- praised by its trustees; the amount of cash on hand, and on de- posit in banks or trust companies and the amount deposited in each. The present cost of stock and bond investments shall be de- termined by amortization as provided in section two hundred and forty-six of this article. The estimated market value of the stock or bond investments shall be determined according to the list of securities furnished by the superintendent of bauks pursuant to section fifty-three of article two of this chapter. Such report shall state all the liabilities of the savings bank, the amount due to depositors, which shall include any dividend to be credited to them for the six months ending on the day. as to which such report is made, and all other debts and claims against the savings bank which are or may be a charge tipon its assets. Such report shall state the amount deposited and the amount withdrawn during the twelve months immediately preceding; the whole amount of profits or interest received or earned and the whole amount of dividends credited to depositors, together with the amount of each dividend and the rate at which it was de- clared, the number of accounts opened or reopened, the number closed during the preceding six months, the number of open ac- 272 Banking Law. § 273. counts at the end of the period for which said report is made, and such other information as may be required by the superin- tendent. 3. Verification. Every such report shall be verified by the oaths of the two principal officers in charge of the affairs of the savings bank at the time of such verification, which shall state that the report is true and correct in all respects to the best of the knowledge and belief of the persons verifying it, and that the usual business of the savings bank has been transacted at the location required by this article and not elsewhere. 4. Special reports. Every savings bank shall also make such other special reports to the superintendent as he may from time to time require, which shall be in such form and filed at such date as may be prescribed by the superintendent and shall, if required by him, be verified in such manner as he may prescribe. 5. Penalty. If any savings bank shall fail to make any report mentioned by this section, on or before the day designated for the making thereof, or shall fail to include therein any m.atter re- quired by the superintendent to be stated, such savings bank shall forfeit to the people of the st^te the sum of one himdred dollars for every day that such report shall be delayed or withheld, and for every day that it shall fail to report any such omitted matter, unless the time therefor shall have been extended by the superin- tendent as provided by section forty-nine of this chapter. Source.— Former §§ 21, 22. Subdivisions 1 and 3 are taken from former § 21. Subdivision 2 is taken from former § 21 with modifications to make its provisions harmonious with other provisions of the present law. The refei- ences to amortization, the provisions as to real estate purchased at judicial sale or taken in satisfaction of debts, and the six months period (formerly twelve months) fixed by the last sentence of the subdivision, are new. Subdivision 4 is new. Subdivision 5 is taken from former § 22. CROSS-REFERENCES. — Powers and duties of superintendent with regard to reports, see § 42; duty to furnish savings banks with estimated market value of bonds, see § 53. Reports of other persons and corporations subject to the Banking Law, see § 133 and cross-references there given. § 274. Savings Banks. 273 PERJURY may me predicated upon a verification of a false semi-annual report. People v. Ostrander, 63 Hun 335, aff'g in 135 N. Y. 639, on opinion below. § 274. Reports of dormant accounts; publication; penalty for failure to make. On or before the first day of September in eacb year, every savings bank shall make a report in writing to the superintendent of banks, verified by the oath of the two pri ncipaLofficers of the institution, concerning such accounts of depositors of amounts of ten dolla rs or more as shall have been dormant for twenty yea rs or more on the greceding first day of August ; that is, accounts which have not been increased or diminished by deposits or with- drawals, exclusive of dividend credits ; or a report verified in like manner that on the preceding first day of August such sav- ings bank held no such accounjte. The accounts of depositors whose pass-books have been presented at the bank for the entry of dividends within such period of twenty years, shall not be deemed dormant accounts within the meaning of this article. The report of each savings bank in the year nineteen hundred and fourteen shall accurately state the full names of all depositors which the books of the savings bank show to have had ten dollara or more to their credit respectively, whose accounts have been dormant for twenty years or over; such report shall also state the date on which the original d^osit was made, the last known place of residence of the depositor, his or her occupation, date of birth, nationality, parents' names if known, and the date when the savings bank discontinued the crediting of dividends on the account, together with any additional data which may aid in de- termining the ownership of such dormant account. All subse- quen t reports shall state the same details with reference to' such dormant accounts as have not been previou sly reported and shall contain a list of such previously reported accounts as have either been paid or shall have become active accounts since the last report, through partial payments, or the presentation of pass- books for the entry of dividends. The^ums to the credit of such dormant accounts are not required to be stated in the report. 274 Baitking Law. § 275. EvCTj^^avingsJbank which shall after September first, nineteen hundred and fourteen , report additional jJofmant accounts shall cause to be published once in each week for two successive weeks in a newspaper published in the village, borough or city (if in a city not divided into boroughs) in which such savings bank is located, if there be a newspaper published there, and once in a newspaper at Albany in which notices by state officers are required by law to be published, a list con taining the full names of the depositors of such dorma nt_acgount5 not_previousIy reported, and their last known places of residence, and shall file proof by affidavit of such publication in the banking department on or before Octob er first in each year. Any such savings bank failing to make any report or to file any affidavit of publication required by this section shall forfeit to the people of the state the sum of one hundred dollars for each day such report or the filing of such affidavit of publication shall be so delayed or withheld, unless the time therefor shall have been extended by the superintendent as provided by section forty-nine of this chapter. Source. — Former § 30, amended. Time limit for making report changed from June first to September first, and beginning of report changed from preceding May first to preceding August first. Length of dormancy of accounts reduced from twenty-two years to twenty, but amount increased from five dollars to ten. Report " in the year nineteen hundred and fourteen " substituted for " the first report." The third paragraph is new. CROSS-REFERENCES.— Powers and duties of superintendent with re- gard to unclaimed deposits, see §§ 45-47. Similar provision as to banks, see § 134; as to private bankers, see § 157; as to trust companies, see § 219. § 275. No other report or supervision required. No savings bank shall hereafter be required to make any annual or other report to the legislature, to the mayor or commonalty of any city, to the board of supervisors of any county or to any other officer or authority except as provided in this article; nor shall it be subject to the inspection or supervision or interference of any local officer or board, in any manner appertaining to ita business or dealings. Source. — Former § 156. §§ 276, 277, 278. Savings Banks. 275 § 276. Communications from banking department must be sub- mitted to trustees and noted in minutes. Each official communication directed by the superintendent of banks or one of bis deputies to a savings bank or to any officer thereof, relating to an investigation or examination conducted by the banking department or containing suggestions or recommenda- tions as to the conduct of the business of the savings bank, shall be submitted by the officer receiving it to the board of trustees at the next meeting of such board, and duly noted in the minutes of the meetings of such board. Source. — Former § 41. The last clause, "and duly noted in the minutes" etc., is new. The section is identical with § 132 relating to banks. See the annotations to that section. § 277. Liability of savings bank for assessments by superintendent. When the superintendent, pursuant to the powers conferred on h'.m by article two of this chapter shall have levied any assess- ment upon any savings bank and shall have duly notified such pavings bank of the amount thereof, the amount so assessed shall become a liability of and shall be paid by such savings bank to the superintendent. Source. — New. The section is identical with § 135, relating to banks. See the annotations to that section. § 278. Preference of deposits made by savings bank. All the property of any bank or trust company which shall become insolvent, shall be applied by the trustees, assignees or re- ceivers thereof, or by the superintendent of banks if such insolvent bank or trust company is being liquidated by him under the pro- visions of section fifty-seven of this chapter, in the first place ratably and proportionately to the payment in full of any sum or sums of money deposited therewith by any savings bank, savings and loan association or credit union, but not to an amount exceeding that authorized to be so deposited by the provision of this chapter, and subject to any other preference provided for in the charter of any such bank or trust company. 276 Banking Law. § 278. Source.— Former § 159. Words " or credit union " are new. CROSS-REFERENCES. — For other priorities under the Banking Law see the annotations to § 78. Similar provisions as to deposits by savings and loan associations, see § 414; by the land bank, see § 437; by credit unions, see § 456. Designation of depositary of savings bank's funds, see § 244. Deposit of available fund of savings banks, see § 251 and note. ALL DEPOSITS INCLUDED. — Deposits made by a savings bank before the statute (originally Laws of 1875, ch. 371, Sec. 28) was passed are en- titled to a preference as well as those made afterward. Upton v. N. Y. & Erie Bank, 13 Hun 26S. The statute apparently gives a preference to all deposits made by a savings bank whether they are part of the " available fund " or a part of surplus funds temporarily deposited or wliether they are composed of both. Chenango Valley Bank v. Dunn, 40 App Div. 552. See § 251 and note. DOES NOT INCLUDE LOANS. — On the other hand the statute does not give a preference to debts of every character which may be due from a bank to a savings institution, but applies only to such as are due for money deposited in the usual course of business and subject to the drafts of the depositor. A loan is not the subject of a preference, and cannot be treated as a deposit merely because in making it tlie managers or trustees of the savings bank acted without authority or in violation of law. Rosenback v. Manufacturers' & Builders' Bank, 69 N. Y. 358. WHEN PREFERENCE BECOMES EFFECTIVE.— Distribution of the assets of an insolvent bank or trust company sliould be made as of the date when they pass into the custody of the law by the appointment of a receiver or otherwise; and the rule applies to the preference provided in this section. People V. American Loan & Trust Co., 172 N. Y. 371, aff'd 70 App. Div. 579. INTEREST. — While interest during the period of administration may be allowed against the insolvent corporation itself if the assets are sufficient for that purpose, no interest for that period can be allowed upon a preferred deposit to the detriment of unpreferred creditors. People v. American Loan & Trust Co., 172 N. Y. 371, aff'g 70 App. Div. 579. An agreement between a savings bank and several other banks that the savings bank should deposit its moneys ratably with them, that they should pay interest tliereon and should pay no interest on the deposits of others, . does not prevent the deposits of the savings bank from being preferred imder the statute. Matter of Patterson, 18 Hun 221, affd 78 N. Y. 608 on opinion below. See also Upton v. N. Y. & Erie Bank, 13 Hun 269. DEPOSIT IN NATIONAL BANK.— This section as applied to a deposit by a savings bank in a national bank is in conflict with U. S. Rev. Stats. § 279. Savings Banks. 277 § 5236 requiring ratable dividends to be made from the moneys of an in- solvent national bank, and is therefore inoperative in such a case. Davis v. Elmira Sav. Bank, 161 U. S. 275, rev'g 142 N. Y. 590. § 279. Advertisements of unauthorized savings banks and the use of the word "savings" prohibited; exception as to school savings. 1. No bank, national banking association, trust company, in- dividual, partnership, unincorporated association or corporation other than a savings bank or a savings and loan association shall make use of the word " saving " or " savings " or its equivalent, in its banking business, or advertise or put forth any advertising literature or sign containing the word " saving " or " savings," or its equivalent, nor shall any individual or corporation other than a savings bank in any way solicit or receive deposits as a savings bank. Any bank, national banking association, trust company, individual, partnership, unincorporated association or corporation violating this provision shall forfeit to the people of the state for every offense the sum of one hundred dollars for every day such offense shall be continued. 2. The principal or superintendent of any public school in the state of ISTew York or any person designated for that purpose by the board of education or other school authority imder which such school shall be, may collect from time to time small amounts of savings from the pupils of said school, and deposit the same on the day of collection in some savings bank in the state or, in villages and cities in which there is no regularly established sav- ings bank, in any savings and loan association, trust company, state or national bank located in the state and having an interest de- partment, and upon the subsequent establishment of a savings bank in such village or city the deposit of such moneys or the continu- ance of deposits in any savings and loan association, trust com- pany, state or national bank previously used as a depositary of school savings shall not be deemed a violation of the provisions of this section. The money so collected shall be placed to the credit of the respective pupils from whom the money shall be collected, or if the amount collected at any one time shall be deemed insuffi- cient for the opening of individual accounts, it shall be deposited in the names of said principal or superintendent or designated 278 Bakkikg Law. § 279. person, in trust to be by him eventually transferred to the credit of the respective pupils to whom the same belongs. In the mean- time, said principal or superintendent or designated person shall furnish to the bank a list giving the names, signatures, addresses, ages, places of birth, parents' names and such other data concern- ing the respective pupils as the savings bank may require, and it shall be lawful to use the words " system of school savings banks " or " school savings banks " in circulars, reports and other printed or written matter used in connection with the purposes of this section. Source. — Former § 160. CEOSS-REFEEENCES.— Unauthorized use of ward " savings," etc., in con- nection with corporate name, see JPenal Law, §§ 302, 666; Gen. Corp. Law, § 6, subd. 1 ; the same, by foreign corporation, see Gen. Corp. Law, § 15. THE OBJECT OF THE STATUTE is to prevent corporations, individuals and associations from advertising themselves as savings banks. The statute is not violated unless there be a soliciting of deposits in the character of, or under the pretense of being, a savings bank, or unless there be an advertis- ing of business in such manner as to deceive "persons into believing it to be that of a savings bank. People v. Binghamton Trust Co., 139 N. Y. 185, 190; Atty.-Gen. Rep. (1998) 265. WHAT CONSTITUTES A VIOLATION.— The statute is not violated by the issuance of a small metal box inscribed with directions " for savings in the bank," or by the issuance of an account book bearing the statements " interest department of the bank " and " interest at the rate of three per cent, per annuum will be paid January first and July first, computed in the same manner as' in savings banks." Atty.-Gen. Eep. (1902) 314. In determining whether a corporation has violated this section, it is im- material whether it has violated any provision of its' charter or has exceeded its corporate powers in other respects. People v. Bingliamton Trust Co., 139 N. Y., 185, 191, aff'g 65 Hun 384. INDIVIDUAL BANKER.— Under the act of 1875 (Laws of 1875, ch. 371, § 49 ) , an individual might advertise and do business as a saving bank unless he were an " individual banker '' wlio had availed himself of the statutes so as to be authorized to do a banking business. People v. Doty, 80 N. Y. .225. TEUST COMPANY. — This section does not prevent a trust company from transacting its business on the general plan of a savings bank, so long as it does not hold itself out as a savings bank so as to deceive the public. People V. Binghamton Trust Co., 139 N. Y. 135, aff'g 65 Hun 384. §§ 280, 281. Savings Banks. 279 KATIOXAL BAXKS. — Opinions that the prohibitions of this section apply to national banks doing business in the state. Atty.-Gen. Rep. (1907) 473; Atty.-Gen. Rep. (1908) 382. SCHOOL SAVIXGS BANIvS.— The provisions of this section relating to the system of school savings banks were added after an opinion of the Attorney-General that such a system was illegal. Atty.-Gen. Rep. (1903) 462. § 280. Keduction of liability to depositors. Whenever the losses of any savings bank resulting from a de- preciation in the value of its securities or otherwise exceeds its undivided earnings and guaranty fund so that the estimated value of its assets is less than the total amoimt due its depositors, the supreme court may upon the petition of the savings bank, ap- proved by the superintendent of banks, order a reduction of the liability to each depositor therein so as to divide the loss equitably among its depositors. If thereafter the savings bank shall realize from such assets a greater amount than was fixed in the order of reduction, such excess shall be divided among the depositors whose accounts were reduced, but to the extent of such reduction only. Source. — New. The section is based on the case of People v. Ulster County Sav. Bank, 64 Hun 434, affirmed in 133 N. Y. 689, on opinion below, and upon Laws of 1882, ch. 409, § 278, since repealed. CROSS-REFERENCES. — For similar provision as to savings and loan associations, see § 404; as to credit unions, see § 462. § 281. Charters of all savings banks conformed to this article. The powers, privileges and duties, and all restrictions, hereto- fore or hereafter 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 article and to such amendments thereof as may be hereafter made. Every such, savings bank shall possess the powers, rights and privi- leges, and be subject to the duties, restrictions and liabilities, con- ferred and imposed by this article, notwithstanding anything to the contrary in their respective charters or acts of incorporation. 280 Banking Law. § 281. The legality of investments heretofore made, or of transactions heretofore had, by any such savings bank, shall not be affected by the provisions of this article, nor shall the provisions of this chapter require the change of investments for thos« named in this article, except as the same can be done gradually by the sale or redemption of securities in such manner as to prevent loss or embarrassment in the business of such savings bank, or un- necessary loss or injury to the borrowers on such securities. Source.— Former § 161. Const. Art. VIII, § 4, requires that the legislature shall by general law conform all charters of saving banks, or institutions for savings, to a uni- formity of powers, rights and liabilities. 290. Investjiei^t Companies. 281 AKTICLE VII. Investment Companies. Section 290. Incorporation; organization certificate. 291. When corporate existence begins; conditions precedent to com- mencing business. 292. Deposit of securities with superintendent. 293. General powers. 294. Eestrictions on powers. 29.5. Eestrictions as to entries in books. 296. Change of location. 297. Communications from banking department. 298. Reports to superintendent. 299. Liability for assessments by superintendent. 300. Preservation of records. 301. Eestrictions on officers, directors and employees. 302. Prohibition against encroachments on powers. 303. Conditions to be complied with by foreign corporations. 304. When foreign corporation may transact business in state. 305. Eights and privileges under license. 306. Deposit of securities by foreign corporation. 307. Foreign corporations to submit names of agents in state. 308. Effect of revocation of license. 309. Reincorporation of certain business corporations. § 290. Incorporation; organization certificate; amount of capital stock. When authorized by the superintendent of banks, as provided by section twenty-three of this chapter, five or more persons may form a corporation to be known as an investment company. Such persons shall subscribe and acknowledge and submit to the super- intendent of banks at his oflSce an organization certificate in dupli- cate which shall specifically state : 1. The name by which the investment company is to 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 such capital stock shall be divided, which capital stock shall amount to not less than one hundred thousand dollars. 4. The full name, residence and post-oiBce address of each of the incorporators and the number of shares subscribed for by each. 5. The term of its existence, which may be perpetual. 282 Banking Law. § 291. 6. The number of its directors, whicli shall not be lees than five, and the names and addresses of the incorporators who shall be its directors until the first annual meeting of stockholders. Such certificate may provide for the manner in which the stock of the corporation may be transferred and for the number of direc- tors necessary to constitute a quorum. Source. — Former § 280. This article has been revised as to form so as to conform in general arrangement to the other articles of this chapter, but few substantive changes have been inserted. The commission deemed it ad- visable not to recommend revisions of substance until the Court of Appeals should have rendered its decision in the case of Jacobs v. Monaton Kealty Inv. Corp. (80 Misc. 649, 160 App. Div. 449), determining the extent to which certain corporations heretofore formed under the Business Corporations Law are infringing upon the powers granted to corporations under this article. CROSS-REFERENCES.— Definition of "investment company,'' see § 2. Powers and duties of superintendent with respect to incorporation, see §§ 21-24. Similar provisions as to other persons and corporations seeking to engage in business under- the Banking Law, see § 100 and cross-references there given. As to qualifications of incorporators, see Gen. Corp. Law, § 4; corporate names, id., •§ 6 ; amended and supplemental certificates, id., § 7 ; extension of corporate existence, id., § 37. As to transfer of stock, see Stock Corp. Law, § 50 et seq. § 291. When corporate existence begins; conditions precedent to commencing business. When the superintendent shall have endorsed his approval on the organization certificate, as provided by section twenty-three of this chapter, the corporate existence of the investment company shall begin and it shall then have power to elect officers and transact such other business as relates to its organization. But it shall trans- act no other business until: 1. All of its capital stock shall have been fully paid in cash and an affidavit stating that it has been so paid, subscribed and sworn to by its two principal officers, shall have been filed in the clerk's office of the county in which its place of business is located, and a certified copy thereof in the office of the superintendent; 2. It shall have made the deposit with the superintendent re- quired by section two hundred and ninety-two of this article; §§ 292, 293. Investment Companies. 283 3. The superintendent shall have duly issued to it the authoriza- tion certificate specified in section twenty-four of this chapter. Source. — The provision as to when corporate existence shall begin is new. The requirement that the capital stock shall have been fully paid in cash comes from former § 281. The requirement of an affidavit that it has been so paid is derived from former § 13. The requirement as to the deposit of securities with the superintendent is derived from former § 281. That relating to the authorization certificate comes from former § 32. CROSS-REFERENCES. — Similar, provisions as to other persons and cor- porations engaging in business under the Banking Law, see § 103 and cross- references there given. Forefeiture of corporate rights by not commencing business, see § 485. § 292. Deposit of securities with the superintendent. Every investment company shall, until an order of the supreme court is obtained declaring its business closed, keep on deposit with the superintendent of banks as a pledge of good faith and as a guaranty of compliance with the provisions of this chapter, interest bearing stocks or bonds of this state or of the United States to the amount of one thousand dollars, which shall be registered in the name of the superintendent of banks of the state of New York in trust for such investment company. The investment company, so long as it shall continue solvent and comply with the laws of the state, may be permitted by the superintendent to collect the interest on the securities so deposited, and from time to time to exchange such securities for others as provided by section thirty-five of this chapter, and may examine and compare such securities as provided by section thirty-six of this chapter. Source. — Former § 281. CROSS-REFERENCES.— Powers and duties of superintendent with regard to securities deposited with him, see §§ 33-37. Deposit of securities by other persons and corporations subject to the Banking Law, see § 105 and cross-references there given. § 293. General powers. In addition to the powers conferred by the general and stock corporation laws, an investment company shall, subject to the restrictions and limitations contained in this article, have the fol- lowing powers: 284 Bajstking Law. § 293. 1. To sell, offer for sale or negotiate bonds or notes secured by deed of trust or mortgages on real property situated in this state or outside of this state, or choses in action owned, issued, negotiated or guaranteed by it. 2. To receive money or property in instalments or otherwise from any person or persons, with or without an allowance of interest upon such instalments; to enter into any contract or under- taking with such persons for the withdrawal of such money or property, at any time, with any increase thereof, or for the pay- ment to them or to any person of any sum of money at any time, either fixed or uncertain, 3. To engage in the business of receiving deposits, provided it shall have first made such deposit of securities with the superin- tendent of banks as is required of trust companies by section one hundred and eighty-four of this chapter. 4. To deduct interest in advance on loans at the rate of six per centum per annum provided such loans are secured by assign- ments of choses in action or other evidences of indebtedness issued by it and to be paid for in uniform monthly or weekly instalments. 5. To establish branches pursuant to section fifty-one of this chapter. Source. — Former § 282. The substance of subdivisions 3 and 4 was added as a new paragraph to former § 283 by chapter 628, Laws of 1913, for the purpose of legalizing the Morris general plan of industrial savings and loans Subdivision 5 is new, and was inserted for the purpose of permitting branches to he established under the Morris plan. CROSS-REFEEENCES. — Powers of other corporations organized under the Banking Law, see § 106 and cross-references there given. Prohibition against encroachments on powers, see § 302. General powers of corporation, see Gen. Corp. Law, §§ 10, 11; as to acquisi- tion of real property, id., §§ 13, 14. CORPORATIONS NOT ORGANIZED UNDER BANKING LAW.— A real estate company organized under the Business Corporations Law cannot exer- cise the powers conferred by this section. Atty.-Gen. Rep. (1906) 513. A corporation organized under the Business Corporations Law cannot en- gage in the business of issuing collateral trust income bonds secured by real property the title of which is in a, trustee under a, trust agreement. Atty.- Gen. Rep. (1912) vol. 2, p. 188. A corporation organized under the General Corporation Law or the Stock Corporation Law cannot exercise the powers of &n investment company. Atty.-Gen. Rep. (1^10) 851. § 294. Investment Companies. 285 An investment corporation incorporated under the Business Corporations Law and not incorporated under the Banking Law has no power to receive deposits. Where such a corporation received annual payments of money for which it issued a certificate by which it agreed to repay the holder a specified sum at the expiration of ten years, it was held to be transacting business as a loan and investment corporation, and its receiving deposits in violation of the Banking Law was held to be ultra vires. Jacobs v. Monaton Realty Inv. Corp., 80 Misc. 649, aflf'd 160 App. Div. 449. DISCRETION TO REFUSE CERTIFICATE.— Opinion that the superin- tendent has discretion to refuse an authorization certificate where there is an avowed purpose on the part of the corporation to do a second mortgage busi- ness. Atty.-Gen. Rep. (1910) 851. § 294. Restrictions on powers of investment companies. An investment company shall not 1. Exercise the powers conferred by both subdivisions three and four of section two hundred and ninety-three of this article; but may exercise separately the powers conferred by either of such subdivisions. 2. Hold at one time the obligations of one person for more than five thousand dollars, secured by assignments of choses in action or other evidences of indebtedness issued by it and to be paid for in uniform monthly or weekly instalments. 3. Make any loan under the provisions of subdivision four of section two hundred and ninety-three of this article for a longer period than one year from the date thereof. 4. Deposit any of its funds with any other moneyed corporation unless such other corporation has been designated as such de- positary by a vote of a majority of the directors of the investment company, exclusive of any director who is an officer, director or trustee of the depositary so designated. 5. Be the holder of any shares of its own capital stock unleaa such stock shall have been taken to prevent loss upon a debt previously contracted in good faith, and stock so acquired shall, within six months from the time of its acquisition, be sold or disposed of at public or private sale; nor shall it, either directly ar indirectly, make any discount to any person for the purpose of enabling him to pay for or hold shares of its sto<'k either subscribed for or purchased by him. Any investment company making any such discount shall forfeit to the people of the state twice the amount of such discount. 286 Banking Law. §§ 295, 296. Source. — Subdivisions 1, 2 and 3 are derived from former § 282. Sub- division 4 is from former § 27, subd. 5. Subdivision 5 is from former § 27, subd. 8. CROSS-REFERENCES. — Similar provisions as to deposit of funds of other corporations subject to the Banking l4iw, see § 111 and cross-references there given. Similar provisions as to acquisition by other corporations of their own stock, see |§ 108, 190. LIEN ON STOCK FOR STOCKHOLDER'S INDEBTEDNESS.— Subdivi- sion 5 of this section does not affect the right of the corporation under Stock Corp. Law, § 51, to refuse to allow a transfer of stock by a stockholder indebted to the corporation. Strahmann v. Yorkville Bank, 148 App. Div. 8. PURCHASE OF OWN -STOCK.— Under § 496 the corporation can purchase the stock of dissenting stockholders in case of merger. § 295. Restrictions as to entries in books. 1. No investment company shall by any system of accounting or any device of bookkeeping, directly or indirectly enter any of its assets upon its books in the name of any other individual, partnership, unincorporated association or corporation, or under any title or designation that is not truly descriptive thereof. 2. Every investment company shall conform its methods of keeping its books and records to such orders in respect thereto as shall have been made and promulgated by the superintendent pursuant to section fifty-six of this chapter. Any investment company that refuses or neglects to obey such order shall be sub- ject to a penalty of one hundred dollars for each day it so re- fuses or neglects. Source. — Subdivision 1 is new. Subdivision 2 comes from former § 8. CROSS-REFERENCES. — Similar provisions as to other corporations sub- ject to the Banking Law, see § 109 and cross-references there given. § 296. Change of location. Any investment company may make a written application t.y a coi*poratioii located elsewhere than in the city and county of New York, notice of the presentation thereof shall be published once in each week for three siiccessive weeks in a newspaper of every coiinty in which such corporation shall have a business office, or if it has no business office, of the county in which its p'rincipal corporate property is situated, or in which its operations are or theretofore have been principally con- ducted, which newspaper, if it be a banking corp(»ration, shall be designated by the superintendent of banks, if an insurance corpora- tion, by the superintendent of insurance, or of a railroad cor- poration, by the public service commission. In the city and county of New York such notice shall be published once in each week for three successive weeks in two daily newspapers published in such county. If the petition being made by a domestic corpora- tion organized under or subject to the religious or membership xjorporations law the court may dispense with the publication of the notice of the presentation of such petition or require notice of such presentation to be given to such person and in such man- ner as the court thinks proper. A copy of the petition and notice of motion shall be filed with the secretary of state, and the proposed name shall thereupon be reserved for said corporation until three weeks after the date of such motion, and .until three weeks after the date of any adjourn- ment of such motion if notice of such adjournment shall be filed with the secretary of state, and no certificate of incorporation of a proposed coTporation, having the same name as the name pro- posed in such petition, or a name so nearly resembling it as to bo calculated to deceive, shall be filed in any office for the purpose of effecting its incorporation, and no corporation formed without the state of New York having the same name or a name so nearly resembling it as to be calculated to deceive shall be g'i-\-en authority to do business in this state. Amended by cbap. 296 of iniO. 428 Geneeal Statutes. § 63. Order authorizing change. If the court to which the petition is presented is satisfied thereby, or by the aiSdavit and certificate presented therewith, that the peti- tion is tr;ue, and that there is no reasonable objection to the change of name proposed and that the petition has been duly authorized and that noticfe of the presentation of the petition, if required by law, has been made, the court shall make an order authorizing the petitioner to assume the name proposed on a day specified therein, not less than thirty days after the entry of the order. The order shall be directed to be entered and the papers on which it was granted to be filed within ten days thereafter in the office of the clerk of the county in which its certificate of incorporation, if any, shall be filed, or if there be none filed, in which its principal office shall be located, or if it has no business office in the county in which its principal property is situated, or in which its operations are ov theretofore have been principally conducted, or in the office of thfe clerk of the county in which the special term granting the order is held; and that a certified copy of such order shall, within ten days after the entry thereof, be filed in the office of the secretary of state; and also, if it be a banking corporation, in the office of the superintendent of banks, or if it be an insurance corporation, in the office of the superintendent of insurance, gt if it be a rail- road corporation, in the offices of the piiblic service commissions. Such order shall also direct the publication, within ten days after the entry thereof of a copy thereof, in a designated newspaper, in the county in which the order is directed to be entered, once in each week for four successive weeks. The court may dispense with the publication of a copy of S;Uch order and require notice to be given to such persons and in such manner as it thinks proper if the petition be made by a domestic corporation organized under or subject to the religious or membership' corporations law. Amended by chap. 206 of 1010. § 64. When change to take effect. If the order shall be fully complied with, and within forty days after the making of the order, an affidavit of the publication thereof shall be filed and recorded in the office in which the order is en- Geneeal Cokpoeation Law. 429 -tered, and in each office in whicli certified copies thereof are re- -quired to be filed, if any, the petitioner shall, on and after the day specified f ot that purpose in the order, be known by the name which is hereby authorized to be ass,unied, and by no other name. No proceedings had prior to April fourth, eighteen hundred and ninety-four, under sections two thousand four hundred and four- teen and two thousand four hundred and fifteen of the code of civil procedure for the change of the name of a corporation, shall be invalid by reason of the non-filing of an affidavit of the publication of the order changing such name within twenty da}'s from the date thereof. And no proceedings heretofore had under the provisions of article three, chapter twenty-three, consolidated laws, for the change of the name of a. corporation, shall be invalid by reason of the non-filing and recording of such affidavit of the publication of the order changing such name within forty days from the making of such order. Amended by L. 1913, chap. 721. In effect May 24, 1913. § 65. Substitution of new name in pending action or proceeding. An action or special proceeding, civil or criminal, commenced by or against a corporation whose name is so changed shall not abate, nor shall any relief, recovery or other proceeding therein be "pre- vented, impeded or impaired in consequence of such change of name. The plaintiff in the action or the party instituting the special proceeding, or the people, as the case requires, may at any time, obtain an order amending any of the papers or proceedings therein, by the substitution of the new name, without costs and without prejudice to the action or proceeding. § 90. Action against officers of corporation for misconduct. An action may be maintained against one or more trustees, directors, managers, or other officers of a corporation, to procure a judgment for the following purposes, or so much thereof as the case requires : 1. Compelling the defendants to account for their official con- duct, including any neglect of or failure to perform their duties, in the management and disposition of the funds and property, committed to their charge. 430 Gexeeal Statutes. 2. Compelling them to pay to the corporation, which they rep- resent, or to its creditors, any money, and the value of any prop^ erty, which they have acquired to themselves, or transferred tO others, cr lost, or wasted, by or through any neglect of or failure to perform or by other violation of their duties. 3. Suspending a defendant from exorcising his oiE.ce, where it appears that he has abused his trust. 4. Removing a defendant from his office, upon proof or con- viction of misconduct, and directing a new election to be held by the bcdy or board duly authorized to hold the same, in order to supply the vacancy created by the removal ; or, where there is no such body or board, or where all the members thereof are removed, directing the removal to be reported to the governor, who may, with the advice and consent of the senate, fill the vacancies. 6. Setting aside an alienation of property, made by one or more trustees, directors, mar.agcrs or other officers of a corporation, contrary to a provision of law, or for a purpose foreign to the lawful business and objects of the corporation, where the alienee knew the purpose of the alienation. 6. Restraining and preventing such an alienation, where it is threatened, or where there is good reason to apprehend that it will be made. 7. The court must, :upcn the application of either party, make an order directing the trial by a jury of the issue of neglect or failure of defendants to perform their duties; and for that pur- pose the qiiestions to be tried must be prepared and settled as pre- scribed in section nine hundred and seventy of the code of civil procedure. As to any litigation pending prior to September one, nineteen hundred and seven, the provisions of this section as they existed prior to that date shall apply. § 91. Who may bring such an action. An action may l)e brO;Ught, as prescribed in the last section, by the attorney-general in behalf of the people of the state, or, except where the action is brought for the purpose specified in subdivision, third or fourth of that section, liy a creditor of the corporation, or by a trustee, director, manager, or other officer of the corporation, having a general superintendence of its concerns. Stock Cokpoeatiox Law. 431 § 91a. Actions against oificers by corporation, or receiver or trustee. The supreme court shall also have and exercise jurisdio- tion m equitj^, at the suit of a corporation, or of a receiver, or trustee in bankruptcy thereof, to compel one or more trustees, directors, managers or (;ther officers of the corporation to account for injury to or losses of the funds, assets or property of the cor- poration, caused liy or through any neglect or failure of the de- fendants to perform, or for violation of, their duties. The court must, upon the application of either party, make an order direct- ing the trial hy jury of the issue of negligence, and for that pur- pose the questions to be tried must be prepared and settled as prescribed in section nine hundred and seventy of the code of civil procedure. Added liy L. 1U13. eliap. (i3:j. § 92. Visitatorial power over corporation not affected by this article. This article docs not divest or impair any visitatorial power over a corporation, which is vested by statute in a corporate body, or a public officer. STOCK CORPORATION LAW. § 16. Voluntary sale of franchise and property. A stock coi-poration, except a railroad coi-poration and except as otherwise provided by law, with the consent of two-thirds of its stock, may sell and convey its property, rights, privileges and fran- chises, or any interest therein or any part thereof to a domestio corporation, engaged in a business of the same general character, or which might be included in the certificate of incorporation of a corporation organizing under any general law of this state for a business of the same general character, and a domestic corporation the principal business of which is carries on in, and the principal tangible property of Avhich 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 its property situate without the state of New York, not including its franchises, to a corporation organized under the laws of such adjoining state, and such sale and conveyance shall, in case of a sale to a domestio corporation, vest the rights, property and franchises thereby trans- 432 General Statutes. ferred, and in case of a sale to a foreign corporation the property sold, in the corpoTation to which they are conveyed for the term of its corporate existence, subject to the provisions and restrictionis applicable to the corporation conveying them. Before such sale or conveyance 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. § 17. Eights of non-consenting stockholders on voluntary sale of franchise and property. If any stockholder not voting in favor of such proposed sale or conveyance shall at such meeting, oir within twenty days thereafter, object to such sale, and demand payment for his stock, he may, within sixty days after such meeting, apply to the supreme 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 appraise the value of such stock, and the court shall appoint three of 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 honestly and faithfully to discharge their duties, shall estimate and certify tlie val,ue of such stock at the time of such dissent, 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 eorpoTation. When the corporation shall have paid the amount of such appraisal, as directed by the court, such stock- holders shall cease to have any interest in such stock and in tke corporate property of svich corporation and such stock may he held or disposed of by such corporation. § 18. Alterations or extension of business. Any stock corpoTation heretofore or hereafter organized lUnder any general or special law of this state may alter its certificate of Stock Coepokation Law. 433 incorporation so as to inehide therein any purposes, pi>wers or provisions which at the time of such alteration may apply to cor- porations 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 incorporation an amended certificate, executed by the president and secretary, stating the altei-ation proposed, and that the same has been duly authorized by a vote of a majority of the directors and also by a vote of stock- holders representing at least threc'-fifths of the capital stock, at a meeting of the stockholders called for the purpose in the man- ner provided in section sixty-three of this chapter, and a copy of the proceedings of such meeting, verified by the afiidavit of one of the directors present thereat, shall be filed with such amended certificate. § 25. 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 plural- ity of the votes at such election. Each director shall be a stock- holder unless otherwise provided in the certificate, or in a by-law adopted by a stockholders' meeting. Vacancies in the board of directorsi shall be filled in the manner prescribed in the by-laws. ISTotice 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 successive weeks immediately preceding 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. Policyholders of an insurance corporation shall be eligible to election as directors, whether or not they be stockholders. At least one-fourth in niumber of the directors of every stock corpora- tion shall be elected annually. § 26. Change of number of directors. The number of directors of any stock corporation may be increased or reduced, but not below the minimum number pre- 28 434 General Statutes. scribed ty law, when the stockholders owning a majority of the stock of the cc^rporation shall so detemiine, at a meeting to be held at the iisnal place cf meeting of the directors, on two weeks' notice in writing to each stocldiplder of record. Such notice shall be served personally or by mail, directed to each stockholder at his last known post-office address. Proof of the service of siich notice shall be filed in the office of the corporation at or befo're 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. Such increase or reduction may also be effected by unani- mous consent without a meeting, in which case there shall be filed in the offices herein specified the unanimous consent of the stock- holders in writing, signed by them, or their duly authorized proxies, but no such consent shall be valid unless there is annexed thereto an affidavit of the custodian of the stock book of such cor- poration stating that the persons who have signed such consent, either in person or by proxy, are the holders of record of the entire capital stock of said corporation issued and outstanding. If a corporation formed imder or subject to the banking law, the consent of the Siuperintendent of banks, and if an insurance cor- poration, the 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 general or special law, and the num- ber of directors may be increased as hereby provided notwithstand- ing the maximum number of directors now prescribed by law. If the number of directors be increased, the additional directors aiUthorized by such increase shall be elected by the votes of a majority of the directors in office at the time of the increase. If the original or an amended certificate of incorporation of the corporation shall provide that the directors shall be divided into two or more classes, whose terms i>f office shall respectively expire at different times, the additional directors shall be divided among such classes as nearly as practicable in proportion to the respective numbers of directors constituting each class prior to such increase. Amended by L. 1009, chap. 421. Stock Coepoeation Law. 435 § 27. When acts of directors void. When the directors of any corporation for the first year of its corporate existence shall hold over and continue to be directors after the first year, because of their neglect or refusal to adopt the by-laws required to enable the stoclvholders to hold the annual election for directors, all their acts and proceedings while so hold- ing over, done for and in the name of the corporation, desigmed 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. § 28. liability of directors for making unauthorized dividends. The directors of a stock corporation shall not make dividends, except from the surplus profits arieing from the business of such co'rporation, nor divide, withdraw or in any way pay to the stock- holders or any of them, any part of the capital of such coi-poration, or reduce its capital stock, except as authorized by law. In case of any violation of the provisions of this section, the directors under whose administration the same may have happened, except those who may have caused their dissent therefrom to be entered at large upon the minutes 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 l)y such corporation or its creditors respectively by reason of STich withdrawal, division or reduction. But this section shall not prevent a division and dis- tribution of the assets of any such corporation remaining after the payment of all its debts and liabilities lUpon 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. § 30. Officers. The directors of a stock corporation may appoint from their number a president, and may appoint a secretary, treasurer, and other officers, agents and employees, who shall respectively have 436 Gexeual Statu'J'Es. such powers aud perform siicli duties in the management of the property and affairs cf the corporation, subject to the control of the directors, as may bo prescribed by them or in the by-laws. The directors may require any such officer, agent or employee to gi've security for the faithful performance of his duties, and may remove him at pleasiirc. The policyholders of an insurance cor- poration shall be eligible to election or appointment as its officers. § 31. 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 inspec- tors of the first election of directors aud of all previous meetings of the stockholders shall be appointed by the board of directors named in the certificate of incorporation. No director or officer of a moneyed corporation shall be eligible to election or appoint- ment as inspector. Each inspector shall be entitled to a reason- able 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 inspector in his place unless the by-laws otherwdse provide. The inspectors appointed to act at any meeting cf the stockholders shall, before entering upon the discharge of their duties, be sworn to faithfully execute the duties of inspector 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 office of the clerk of the county in which such election or meeting shall be held, with a certificate of the result of the vote taken thereat. § 35. liability of officers for false certificates, reports or public notices. If any certificate or report made or public notice given- by the officers or directors of a stock corporation shall be false in any material representation, the officers and directors signing the same shall jointly and severally be personally liable to ^any person who has become a creditor or stockholder of the corporation upon the faith of any such certificate, report, notice or any material repre- sentation therein to the amount of the debt contracted upon the Stock Coupokatiox Law. 437 faith thereof if not paid when d^ue, or the damage sustained by any purchaser of or subscriber to its stock upon the faith thereof. The liability imposed 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. Xoi 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 ma.de or given by the officers or directors of such corporation. § 50. Issue and transfers of stock. The stock of every stock corporation shall be represented by certificates prepared by the directors and signed by the president or vice-president and secretary or treasairer and sealed with the seal (:f the coporation, and shall be transferable in the manner prescribed in this chapter and in the by-laws. ISTo share shall be transferable until all previous calls thereon shall have been fully paid in. § 51. Transfers of stock by stockholder indebted to corporation. If a stockholder shall be indebted to- the corporation, the direc- tors may refuse to consent to a transfer of his stock until such indebtedness is paid, provided a copy of this section is written or printed upon the certificate of stock. § 62. Increase or reduction of capital stock. Any domestic corporation may increase or reduce its capital stock in the manner laerein 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 provided 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 corpoi-ation, 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 438 Gkxekal Statutjss. relieved from any liability existing prior to tHe reduction of the capital 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 co^rporation may in- crease or reduce its capital stock in the mamier 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. TAX LAW. § 4, Exemption from taxation. The following property shall be exempt from taxation: 14. The deposits in any bank for savings which are due de- positors, the accumulations in any domestic life insurance corpo^ ration, held for the exclusive benefit of the insured, other than real •estate and stocks, now liable for taxation; the accumulations of any incorporated co-operative loan association upon the shares^ of such association held by any person ; and personal property of any corporation, person, company or association transacting the busi- ness of fire, casualty, or surety insurance in this state equal in value to the unearned premiums required by the laws of this state, or the regulations of its insurance department, to be charged as a liability. § 13. Stockholders of bank taxable on shares. The stockholders of every bank or banking association organ- ized under the authority of this state, or of the United States, shall be assessed and taxed on the value of their shares of stock therein ; said shares shall be included in the valuation of the pei^ sonal property of saich stocldiolders in the assessment of taxes in the tax district where such bank or banking association is located, and not elsev^here, vs^hether the said stockholders reside in said tax district or not. § 14. Place of taxation of individual bank capital. Every individual banker shall be taxable upon the amount of capital invested in his banking business in the tax district v?here the place of such business is located and shall, for that purpose, be deemed a resident of such tax district. Tax Law. 439 § 23. Banks to make report. llie chief fiscal officer of every bank or banking association organized under the authority of this state, or of the United ytatts, shall, on or before the first day of July, in each year, furnish the assessors of the tax district in which its principal office is located a statement under oath of the condition of such bank or banking association on the first day of June next pre- ceding, stating the amount of its authorized capital stock, the numiier of shares and the par value of the shares thereof, tfie amount of stock paid in, the amount of its surplus and of its undi- vided profits, if any, .a complete list of the names and residences of its stockholders and the number of shares held by each. In case of neglect or refusal on the part of any bank or hanking association to report as herein prescribed, or to make other or further reports as may be required, such bank or banking associa- tion shall forfeit the sum of one hundred dollars for each failure, and the additional sum of ten dollars for each day such failure continues, and an action therefor shall be prosecuted by the county treasurer of the county in which such bank or banking association so neglecting or refusing to report is located, and in the city of 'New York by the receiver of taxes thereof. There shall, in addi- tion to such report, be kept in the office of every such bank or banking association a full and correct list of the names and resi- dences of all stockholders therein, and of the number of shares held by each, and such lists shall be subject to the inspection of the assessors at all times. The list of stockholders furnished by such bank or banking association shall be deemed to contain the names of the owners of such shares as are set opposite them, respectively, for the purpose of assessment and taxation. § 24. Bank shares, how assessed. In assessing the shares of stock of banks or banking associations organized under the authority of this state or the United States, the assessment and taxation shall not he at a greater rate than is made or assessed upon other moneyed capital in the hands of individual citizens of this state. The value of each share of stock of each bank and banking association, except such as are in liqui- dation, shall be ascertained and fixed by adding together the 440 General Statutes. amount of the capital stock, surplus and undivided profits of such bank or banking association and by dividing the result by the number of outstanding shares of such bank or banking asso- ciation. The value of each share of stock in each bank or banking- association in liquidation shall be ascertained and fixed bv divid- ing the actual assets of such bank or banking association b;*-- the number of o\itstanding shares of such bank or banking asso- ciation. The rate of tax upon the shares of stock of banlcs and banking associatiors shall be one per centum upon the value thereof, as ascertained and fixed in the manner hereinbefore pro- vided, and the owners of the stock of banks and banking associa- tions shall be entitled to no dediiction from the taxable value of their shares because of the personal indebtedness of such ovs^ners, or for any other reason whatsoever. Complaints in rela- tion to the assessments of the shares of stock of banks and bank- ing associations made undeT the provisions of this article shall be heard and determined as provided in section thirty-seven of this chapter. The said tax shall be in lieu of all other taxes whatsoever for state, county or local purposes upon the said shares of stock, and mortgages', judgments and other choses in action and personal property held or owned by banks or banking asso- ciations the value of which enters into the value of said shares of stock shall also be exempt from all other state, county or local taxation. The tax herein imposed shall be levied in the follow- ing manner : The board of supervisors of the several counties shall, on or before the fifteenth day of Decerhber in each year, ascertain from an inspection of the assessment-rolls in their r;espective counties, the number of shares of stock of banks and banking associations in each town, city, village, school and other tax district, in their several counties, respectively, in which such shares of stock are taxable, the names of the banks issuing the same, respectively, and the assessed value of such shares, as ascer- tained in the manner provided in this article and entered upon the said assessment-rolls, and shall forthwith mail to the president or cashier of each of said banks or banking associations a state- ment setting forth the amount of its capital stock, surplus and undivided profits, the number of outstanding shares thereof, the value of each share of stock taxable in said county, as ascer- tained in the manner herein provided, and the aggregate amount Tax Law. 441 of tax to be collected and paid by s.uch bank and banking asso ciation, under the provisions of this article. A certified copy of each of said statements shall be sent to the county treasurer. It shall be tlie duty of every bank or banking association to collect the tax due upon its shares of stock from the several own- ers of such shares, and to pay the same to the treasurer of the count}' wherein said bank or banking association is located, and in the city of A'ew York to the receiver of taxes thereof on or before the thirty-first day of December in said year and any bank or banking association failing to pay the said tax as herein provided shall ]>e liable by way of penalty for the gross amount of the taxes due from all the o-^vners of the shares of stock, and for an additional amrunt of one hundred dollars for every day of delay in the payment of said tax. Every bank or banking association so paying the taxes due upon the shares of its stock shall have a lien on the shares of stock, and on all property of the several share owners in its hands, or which may at any time come into' his hands, for reimbursement of the taxes so paid on account of the several shareholders, with legal interest; and such lien may be e'^foreod in any apprrpriate manner. The tax hereby imposed shall be distributed in the following manner: The board of supervisors of the several counties shall ascertain the tax rate of each of the several to\vn, city, village, school and other tax districts in their counties, respectively, in which the shares of stock of banks and banking associations shall be taxable, which tax rates shall include the proportion of state and county taxes levied in such districts, respectively, for the year for which the tax is im- posed, and the proportion of the tax on bank stock to which each of said districts shall be respectively entitled shall be ascertained by taking such proportion of the tax upon the shares of stock of banks and banking associations, taxable in such districts, respectively, under the provisiors of this chapter as the tax rate of such tax district shall bear to the aggregate tax rates of all the tax districts in which said shares of stock shall be taxable. The clerks of the several cities, villages and school districts to which any portion of the tax on shares of stock of banks and banking associations is to be distributed under this section shall, in writing and imder oath, annually re- port to the board of supervisors of their respective counties, 442 General Statutes. during the first week of the annual session of such board, the tax rate of such city, village and school district for the year prior to the meeting of each such board. The said board of supervisors shall issue their warrant or order to the county treasurer on or before the fifteenth day of December in each year, setting forth the number of shares of bank stock taxable in each town, city, village, school and other tax district in said county, in which said shares of stock shall be taxable, the tax rate of each of said tax districts for said year, the proportion of the tax imposed by this chapter to which each of said tax districts is entitled, under the provisions hereof, and commanding him to collect same, and to pay to the proper ofiicer in each of such districts the proportion of such tax to which it is entitled under the provisions of this chapter. The said county treasurer shall have the same powers to enforce the collection and payment of said tax as are possessed by the officers now charged by law with the collection of taxes, and the said county treasurer shall be entitled to a commission of one per centum for collecting and paying out said moneys, which commission shall be deducted from the gross amount of said tax before the same is distributed. In issuing their warrants to the collectors of taxes, the board of supervisors shall omit therefrom assessments of and taxes upon the shares of stock of banks and banking associations. Provided, that, in the city of New York the statement of the bank assessment and tax herein provided for shall be made by the board of tax co^mmissioners of said city, on or before the fifteenth day of December in each year, and by them forthwith mailed to the respective banks and banking asso- ciations located in said city, and a certified copy thereof sent to the receiver of taxes of said city. The tax shall be paid by the respective banks in said city to the said receiver of taxes on or ■before the thirty-first day of December in said year, and said tax shall be collected by the said receiver of taxes and shall bei by him paid into the treasury of said city to the credit of the general fund thereof. This section is not to be construed as an exemption of the real estate of banks or banking associations from taxation. No shares of stock of such banks and banking associations, by whomsoever held, shall be exempt from the tax hereby imposed. Tax Law. 443 § Z.5. Individual banker, how assessed. Every individual banker doing business under the laws of this state must report before the fifteenth day of June ,\inder oath to the assessors of the tax district in which any of the capital in- vested in such banking business is taxable, the amount of capital invested in such hanking business in such tax district on the first day of June preceding. Such capital shall be assessed as personal property to tire hanker in whose name such business is carried on. § 26. Notice of assessment to bank or banking association. The assessors of every tax district shall, within ten days after they have completed the assessment of the stock of a bank or banking association, give written notice to such bank or banking association of such assessment of the shares of its respective share- holders and no personal or other notice to such shareholders of such assessment is required. § 27. Reports of corporations. The president or other proper officer of every moneyed or stock corporation deriving an income or profit from its capital or other- wise shall, on or before June fifteenth, deliver to one of the assess- ors of the tax district in which the company is liable to be taxed and, if such tax district is in a county embracing a portion of the forest preserve, to the comptroller of the state, a written statement specifying : 1. The real property, if any, owned by such company, the tax district in which the same is situated and, unless a railroad cor- poration, the sums actually paid therefor. 2. The capital stock actually paid in and secured to be paid in, excepting therefrom the sums paid for real property and the amount of suich capital stock held by the state and by any incor- porated literary or charitable institution, and 3. The tax district in which the principal office of the company is situated or in case it has no principal office, the tax district in which its operations are carried on. 'Such statement shall be verified by the officer making the same to the effect that it is in all respects ji^st and tnie. If such statement is not made within twenty days after the fifteenth day of June, or is insufficient, evasive or defective, the assessors may compel the corporation to make a proper statement by mandamus. 444 Geaeeal Statdtes. § 72. Collection of taxes assessed against stocks in banks and banking associations. Every bank or banking association shall retain any dividend .until the deliA'ery to the collector of the tax-roll and warrant of tlie cnrrent year, and within ten days after such deliveiy shall pay to such collector so much of such dividend as may be neces- sarly to pay an,y unpaid taxes assessed on the stock upon which such dividend is declared. In case the owner of such stock re- sides in a place other than where 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 removed 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 which it is assessed till the payment of such tax, and if the stock is transferred it shall be subject to such lien. The collector or CQunty 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 this ptate shall pay to the state treasurer a tax of one-twentieth of one per centum upon the amount of capital stock which the corporation is authorized to have, and a like tax upon any subsequent in- crease. Provided that in no case shall such tax be less than five dollars. Such tax shall he due and payable upon the incorpora- tion 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 article of association, or give any certificate to any such cor- poration 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. And in case of a decrease of capital stock, upon which the tax ref|uired by law has been paid, and a subse<]uent inc.-ease thereof, a tax shall be paid Tax Law. 445 only upon so mncli of sneli increase as exceeds the amount of capital stock upon which a tax has heen hofore 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 pirblic service commission shall grant a certificate as required by the railroad law, authorizing the construction of the road as proposed in its articles of association, and such cer- tificate shall not be granted by the pTiblic service commission imtil it is furnished with a receipt for such tax from the state treas- urer. If the board of railroad commissioners or public service commission shall have heretofore granted, or the public service commission shall hereafter grant, such certificate and tipon an appeal from the determination of such board of railroad commis- sioners or public service commission, such certificate has been or may hereafter be denied the comptroller shall refund the amount of tax so paid to the railroad corporation or corporations by which such tax was paid, upon proof of pa^anent being pre- sented and appropriation being made therefor. Amended l.y cli. 472 of 19] 0, and cli. 01 of 1911. § 182. Franchise tax on corporations. For the privilege of doing business or exercising its corporate franchises in this state every corporation, joint-stock company or association, doing business in this state, shall pay to the state treasurer annually, in advance, an annual tax to be computed tipon the basis of the amount of its capital stock, employed dur- ing the preceding year within this state, and upon each dollar of such amount. The measure of the amount of capital stock em- ployed in this state shall be siich a portion of the issued capital stock as the gross assets employed in any business within this state bear to the gross assets wherever employed in business. For purposes of taxation, the capital of a corporation invested in the 446 General Statutes. stock of another corporation shall be deemed to be assets located where the physical property represented by such stock is located. If the dividends upon the capital stock amount to six, or more than six per centum upon the par value of the capital stock, during any year ending vi^ith the thirty-first day of October, the tax shall be at the rate of one-quarter of a mill for each one ]ier centum of dividends made or declared upon the par value of the capital stock during said year. If such dividend or dividends amount to less than six per centum on the par value of the capital stock, and (1) The assets do not exceed the liabilities, exclusive of capital stock, or (2) The average price at which such stock sold during said year did not equal or exceed its par value, or (3) If no dividend was declared. Then each dollar of the amount of capital stock employed in this state, detei-mined as hereinbefore provided, shall be taxed at the rate of three-fourths of one mill. If such dividend or divi- dends amount to less than six per centum on the par value of the capital stock, and (1) The assets exceed the liabilities, exclusive of capital stock, by an amount equal to or greater than the par value of the capital stock, or (2) The average price at which such stock sold during said year is equal to or greater than the par value, Then the amount of capital stock, determined as hereinbefore provided to be employed in this state shall be taxed at the rate of one and one-half mills on each dollar of the valuation of the capital stock employed in this state, but such valuation shall not be less than (1) The par value of such stock, (2) The difference between the assets and liabilities, exclusive of capital stock, (3) The average price at -which such stock sold during said year. 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 peT centum upon the par value thereof, has been made Tax Law. 447 or declared, and upon the other no dividend Las been made or declared, or the dividend or dividends made or declared thereon amount to less than six per centnm npon the par value thereof, then the tax shall be at the rate of one^quarter of a mill for each one per centum of dividends 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 a tax shall be charged upon the capital stock (1) Upon which no dividend was made ox declared, or (2) Upon which the dividend or dividends made or declared did not amount to six per centum upon the par value, At the rate as hereinbefore provided for the taxation of capital stock upon which no dividend was made or declared, or ,tipon which the dividend or dividends made or declared did not amount to six per centum on the par value. All corporations not taxable under the preceding paragraphs of this section shall be taxed in an amount not less than would be produced by an assessment of one and one-half mills on each one dollar of the actual value of its capital stock, determined to be employed in this state as hereinbefore provided, or one and one- half mills upon each dollar of such capital stock at the average price at which said stock sold during the said year. § 183. Certain corporations exempt from tax on capital stock. Banks, savings banks, institutions for savings, title guaranty, insurance or surety corporations, every trust company incorpo- rated, organized or formed, under, by or pursuant to a law of this state, and any company authorized to do a trust company busi- ness, solely or in connection with any other business, under a general or special law of this state, laundering corporations, manu- facturing 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 corporations, wholly en- gaged in mining ores within this state, agricultural and horticul- tural societies or associations, and corporations, joint-stock com- panies OT associations owning or operating elevated railroads or surface railroads not operated by steam or formed for supply- 448 Gexeeal Statutes. ing water or gas for electrif or steam lic;itiiiii', lighting or power puriDOses, and liable to a tax under sections one hnndred and eighty-five and one hnndred and eighty-six of this' chapter, shall be exempt from the payment of the taxes proscribed by section one hnndred and eighty-two of this chapter. IJnt such a launder- ing, manufacturing or mining corporation shall not be exempted from the payment of such tax, unless at least forty per centum of the capital stock of such corporation is invested in property in this state and iised by it in its laundering, manufacturing or mining business in this state. Amended by eli. 785 of lSn7, cli. 558 of 1901, and cli. 474 of 1906. § 188. Franchise tax on trust companies. Every trust 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 business solely or in connection with any other business, under a general or special law of this state, shall pay to the state annually for the privilege of exercising its corpo- rate franchise or carrying on its business 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 un- divided profits. Amended by ch. oS.i of 1901. § 189. Franchise tax on savings banks. Every savings bank incorporated, organized or formed under, by or pursuant to a law of this state, shall pay to the state annu- ally for the privilege of exercising its corporate fi'anchise or carry- ing on its business in such corporate or organized capacity, an annual tax which shall be equal to one per centum on the par value of its surplus, and undivided earnings. Added by cb. 117 of 1901. § 190. Purchase of state bonds; credit to be given. Every corporation, company or association required by section one hundred and eighty-seven, one hundred and eighty-eight, or one hundred and eighty-nine of this chapter, to pay to the state Tax Law. 449 an annual tax equal to a percentage of its gross premiums, capital stock, surplus, undivided profits or imdivided earnings, or one or more, for the privilege of exercising its corporate franchise or carrying on its business in such corporate or organized capacity, Avhich shall own any of the bonds of the state of Xew York, shall Jiave credited to it annually to apply upon or in lieu of the pay- ment of such tax an amount equal to one and one-half per centum of the par value of all such bonds of the state, bearing interest at a rate not exceeding three per centum per annum, and an amount equal to one-half of one! per centum of the par value of all such bonds of the state, bearing interest at a rate exceeding three per centum per annum but not exceeding four per centum per annum, owned by such corporation, company or association, and registered in its name or registered in the name of a public department, a public officer or officers of this state, or of any other state, or of the United States, in trust for such corporation, company or association, on the thirtieth day of June prior to the date when such tax shall become due and payable ; provided, how- ever, that there shall in no case be credited to any such corpora- tion, company or association an amount in excess of the amount due to the state from such corporation, company or association for taxes payable to the state under this chapter for the fiscal year for which such credit is given ; and further provided that any such credit so allowed under this section shall not bear interest. Amended by eh. 357 of 1913. § 191. Tax upon foreign bankers. Every foreign banker doing business in this state, shall annu- ally pay to the treasurer a tax of five per centum on the amount of interest or compensation of any kind earned and collected by liim on money loaned, used or employed in this state by such banker. The term, doing a banking business, as used in this sec- tion, means doing such business as a corporation may be created to do under article three 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 business in this state, as used in this section, includes: 29 450 Gejnekal Statutes. 1. Everv foreign coi-poraticu doing a banking business in this state, except a national bank. 2. Every imincorporated 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, owning more than a majority inter- est 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 non-resident of this state doing a banking business in this state, in liis own name and right only. Amended l>,v ch. 500 of 1900. § 192. Eeports of corporations. Corporations liable to pay a tax under this article shall report as follov;s : 1. Corporations paying franchise tax. Every corporation, asso- ciation or joint-stock eompany liable to pay a tax under section one hundred and eighty-two of this chapter shall, on or before Xovem- ber fifteenth in each year, make a written report to the comptroller of its condition at the close of its business on October thirty-first preceding, stating the amount 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 capital of such corporation, and the capital employed by it in this state during such year. 2. Transportation and transmission corporations. Every trans- portation or transmission corporation, joint-stock company or association liable to pay an additional tax under section one hun- dred and eighty-four of this chapter, shall also, on or before Au- gust first in each year, make a written report to the comptroller of its condition at the close of its business on .Tune thirtieth pre- ceding, 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 terminating within this state. Tax Laav. 451 ;]. Elevated and surface railroad corporations. Every cor- poration, joint-stock company or association liable to paj- a tax Tinder section one hundred and eiglity-five of this chapter, shall, on or before August first of each year, make a written report to the comptroller of its condition at the close of its businc ■.- on June thirtieth i^receding, 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 j'car ending June thirtieth, the authorized capital of the company and the amount of capital stock actually issued and outstanding. 4. Water-works, gas, electric, steam-heating, lighting and power corporations. Every corporation, joint-stock company or associa- tion 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 written report to the comptroller of its condition at the close of its biisiness on October thirty-first 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 with October thirty-first, the authorized capital of the company and the amount of capital stock actually issued and oiitstanding. 5. Insurance corporations. Every insurance corporation liable to pay a tax under section one hundred and eighty-seven of this chapter, shall, on or before ilarch first in each year, make a written report to the comptroller of its condition at the close of its business on December thirty-first preceding, stating the gToss amount of all premiums referred to in section one hundred and eighty-seven of this chapter, received during the preceding cal- endar year on business done thereby in this state during the year ending with such day and at all times prior thereto, whether the premiums were in money or in the form of notes, credits or other substitutes for money. 6. Foreign bankers. Every foreign hanker liable to pay a tax under section one hundred and ninety-one of this chapter shall, on or before February first in each year, make a written report to the comptroller of the condition of his business on December thirty-first preceding, stating the amount of tax for which he is liable under this article, and giving in detail the facts required 452 Geneeai, Statutes. by the last preceding section for the purpose of ascertaining and computing the same. 7. Trust companies. Every company liable to pay a tax under section one hundred and eighty-eight 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 on June thirtieth preceding, separately stating the amount of its capital stock, the amount of its surplus, and the amount of its undivided profits, and containing such other data, information or matter as the comptroller may require. 8. Savings banks. Every saving bank liable to pay a tax under section one hundred and eighty-nine of this chapter, shall on or before Augaist first in each year, make a written report to the comptroller of its condition at the close of business on June thirtieth preceding, stating the par value of its surplus, and undivided earnings and containing such other data, informa- tion or matter as the comptroller may require. (Former sec. 189 without change of substance.) PENAL LAW. § 290. Misconduct of officers, directors, trustees or employees of banking corporations. A director of a corporation, organized under the laws of this state, having banking powers, who concurs in any vote or act of the directors of such corporation, or any of them, by which it is intended to make a loan or discount to any director of such cor- poration, or upon paper upon which any such director is liable or responsible to an amoimt exceeding the amount allowed by statute; or Any director, trustee, ofiicer or employee of any corporation to which the banking law is applicable who makes or maintains, or attempts to make or maintain, a deposit of such corporation's funds with any other corporation on condition, or with the under- standing, express or implied, that the corporation receiving such, deposit make a loan or advance, directly or indirectly, to any director, trustee, officer or employee of the corporation so making or maintaining or attempting to make or maintain such deposit ; or Any officer or employee of any corporation to which the bank- Penal Law. 453 ing law is applicable who intentionally conceals from the directors or tr,ustees of such corporation any discounts or loans made by it between the regular meetings of its bo^ard of directors or trustees, or the purchase of any securities or the sale of any of its securities during the same period, or knowingly fails to report to its board of directors or trustees when required to do so by law, all dis- counts or loans made by it and all securities purchased or sold by it between the regular meetings of its board of directors or trus- tees ; or Any director, officer or employee of a bank or trust company who makes any agreement, express or implied, before or at the time of issuing a certificate of deposit, by which its holder may demand or receive payment thereof in advance of its maturity. Is guilty of a misdemeanor. J^othing in this section shall render any loan made by the directors of any such corporation, in violation thereof, invalid. Amended by L., 1910, cli. 398. § 291. Sale or hypothecation of bank notes by oificer. An officer or agent of any corporation having banking powers, who sells, or causes or permits to be sold, any bank notes of such corporation, or pledges or hypothecates, or causes or permits to be pledg,ed or hypothecated, with any other corporation, association or individual, any such notes, as a security for a loan or for any liability of such corporation, is punishable by imprisonment in a county jail not exceeding one year, or liy a fine not exceeding five thousand dollars, or both. § 292. Officer of bank putting excessive number of its notes in circulation. An officer or agent of any corporation having banking powers, who issues or puts in circulation, or causes or permits to be issued or put in circulation, the bank notes of such corporation in an amount, which, together with previous issues, leaves in circulation or outstanding a greater amount of notes than such corporation is allowed by law to issue and circulate, is punishable by imprisonment in a county jail not exceeding one year, or by a fine not exceeding five thousand dollars, or both. ; 45-i Gexeeal Statutes. § 283. Officer or agent of banking corporation making guaranty or indorsement, in its behalf, beyond the legal limit. An officer or agent of any banking corporation, who makes or delivers any guaranty or indorsement on behalf of auch corpo- ration, whereby it may become liable upon any of its discounted notes, bill or obligations, in a sum l)eyc'nd the amoimt of loansi and disconnts which snch corporation may legally make, is guilty of a misdemeanor. § 294. Bank officer overdrawing his account or asking for or re- ceiving commissions or gratuities from persons procuring loans 01 making overdrafts of their accounts. An officer, director, agent, teller, clerk or employee of any bank, banking association, savings bank or ti'nst company, who, either, 1. Knowingly overdraws his account with such bank, banking association, savings bank or trust company, and thereby obtains the money, notes or funds of any such bank, banking association, savings bank or trust company ; or 2. ^Vsks or recei ves, or consents or agrees to receive, any commis- _si^cn, emolument, gratuity or reward, or any promise of any cO'm- mission, emolument, gratuity or reward, or any money, property or thing of value or of personal advantage for procuring or endeav- oring to procure for any person, firm or corporation, any loan froan, or the purchase or discount of any paper, note, draft, check or bill of exchange by any such bank, banking association, savings bank or trust company, or for permitting any person, firm or cor- poration to overdraw any accQiTut with such bank, banking associa- tion, savings bank or trust company, is guilty of a misdemeanor. Amended by eh. 248 of 1905. § 295. Receiving deposits in insolvent bank. An officer, agent, teller or clerk of any bank, banking associa- tion or savings bank, and every individual banker or agent, and every private banker or agent and any teller or clerk of an indi- vidual banker, or of a pri^-ate banker who receives any deposit, knowing that such bank or association or banker is insolvent, is guilty of a misdemeanor, if the amount or value of such deposit Pe^'al Law. ^55 be less than twenty-five dollars; if the amoaint or valne of such deposit be twenty-five dollars or over, such person shall be guilty of a felony, punishable by imprisonment for not less than one nor more than five years, or by a -fine of not less than five hundred nor more than three thousand dollars, or by both. § 296. Tlnlawful investments by officers of saving banks. Any officer or trustee of a savings bank authorizing or making any investment of the funds of the bank in securities, not author- , ized liy law, is giuilty of a misdemeanor. i § 297. Misconduct by directors of monied corporations. Every director of a monied corporation who : 1. In case of the fraudulent insolvency of such corporation, shall have participated in such fra.nd; or 2. Willfully does any act as such director which is expressly forbidden by law, or willfully omits to perform any duty imposed upon him as such director by law. Is guilty of a misdemeanor, if no other punishment is pre- scribed therefor by law. The insolvency of a monied corporation is deemed fraudulent imless its affairs appear upon investigation to have been adminis- tered fairly, legally and with the same care and diligence that agents receiving a compensation for their services are bound, by law, to observe. § 298. Misconduct by banks and bankers. Any moneyed coTporation or individual baidcer authorized to carry on the business of banking under the laws of this state who : 1. Receives, pays out, gives or offers in payment as money to circulate, or who attempts to circulate as money, any bill, note or other evidence of debt issued or purporting to have been issued by any coa-poration or individual, situated or residing without this state, and which bill, note or other evidence of debt shall, upon any part thereof, purport to be payable or redeemable at any place or by any corporation or individual within this state; or, 3. Issues, utters or circulates as money, or in any way, directly or indirectly, aids or assists in the issuing, uttering or circulating as money within this state, of any bank bill, note or other evidence 456 'General Statutes. of debt in the similitude of a bank note issued or purpoi-ting to have been issued by any corporation or individual situated or residing without this state ; or procures or receives, in any manner ■whatever, any such bank bill, note or other evidence of debt with intent to issue, utter or circulate, or with intent to aid in issuing, uttering or circulating the same as money within this state ; or 3. Directly or indirectly lends or pays out for paper discounted or purchased any bank bill, note or other evidence of debt, which is not received at par by such corporation or banker for debts due such corporation or banker ; or, 4. Issues or puts in circulation any bank bill or note of any such corporation or banker, unless the same shall be made payable on demand and without interest, except bills of exchange on foreign countries or places beyond the limits or j;urisdiction of the United States, and except certificates of deposit payable on pre- sentation, with or without interest, to bearer or to the order of a person named therein, or certificates of deposit payable, with or without interest, to the order of a person named therein showing the amount of the deposit, the date of issue and the date when due ; but such certificates shall not be issued except as representing money actually on deposit. Is guilty of a misdemeanor. Nothing in this section contained shall be construed to prohibit any such corporation or banker from receiving and paying out such foreign hank bills as they shall receive at par in the ordinary course of their business, or to pro- hibit such corporation or banker from receiving foreign notes from their dealers and customers in the regular and usual course of their business, at a rate of discount not exceeding that which is or shall be at the time fixed by law, for the redemption of the bills of the banks of this state at their agencies, or from obtaining from the corporations, associations or individuals by which such foreign notes are made, the payment or redemption thereof. Amended by cli. 692 of 1892. Subd. 4 amended by chap. 398 of 1910. § 299. Unlawful discount of bills of foreign banks. Any person, association or corporation within the state who, di- rectly or indirectly, on any pretense whatever, procures or receives Penal Law. 457 or offers to receive from any corporation or person any bank bill or note or other evidence of debt in the similitude of a bank note issued or purporting to have been issued by any corporation or individual, situated or residing without this state, at a greater rate of discount than is or shall be at the time fixed by law for the redemption of the bills of the banks of this state at their agencies, is guilty of a misdemeanor. Amended by ch. 692 of 1892. § 300. Misconduct by officers of banking department. The superintendent of banks, or any officer in the banking de- partment who countersigns bills or notes for any person or corpo- ration exceeding the value of the interest-bearing stocks of the state of New York or of the United States, or other securities deposited with such superintendent by such person or corporation on account thereof, is guilty of a felony, punishable by a fine of not less than five thousand dollars or by imprisonment for not less than five years, or by both. Amended by ch. 692 of 1892. § 301. Using dies and plates of extinct state bank. Any person who uses the dies and plates of a state bank in the manufacture of notes and bills, after such bank has become a national bank in pursuance of law, is guilty of a misdemeanor. Original section repealed by ch. 377 of 1884. This section added by ch. 692 of 1892. § 302. Unauthorized use of the term " bank." Any person engaged in banking in this state, not subject to the supervision of the superintendent of banks, and not required by law to report to such superintendent, who was not engaged in such banking before May 23, 1885, who 1. Uses an office sign at the place where such business is trans- acted, having thereon any arti:ficial or corporate name, or other words, indicating that such place or office is the place or office of a bank ; or, 2. Uses or circulates any letter-heads, bill-heads, blank notes, blank receipts, certificates, cir<5ular or any written or printed 458 Ge:s-ei!.vl Statutes. paper whatever, having' thereon any artiiicial or corporate name, or other word or words indicating that snch business is the busi- ness of a bank ; Is guilty of a misdemeanor. § 303. False statements or rumors as to banking institutions. Any person who wilfully and knowingly makes, circulates or transmits to another or others any statement or rumor, written, printed or by word of mouth, which is untrue in fact and is directly or )jy inference derogatoTv to the financial condition or affects the solvency or financial standing of any bank, savings bank, banking association, building and loan associatioin or trust company doing business in this state, or who knowingly coiunsels, aids, procures or induces another to start, transmit or circulate any such statement or rumor, is gi^ilty of a misdemeanor punish- able by a fine of not more than one thousand dollars or by im- prisonment for not more than one year, or both. Added by L. 1012, ch. 211. In effect September 1, 1912. § 304. Falsification of books, reports or statements of corporations subject to the banking law, by an officer, director, trustee, employee or agent thereof. Any officer, director, trustee, employee or agent of any corpora- tion to which the banking law is applicable who makes a false entry in any book, report or statement of such corporation with intent to deceive any officer, director or trustee thereof, or any agent or examiner lawfully appointed to examine into its con- dition or into any of its affairs, or any public officer, office or board to which such corporation is required by law to report, or which has authority by law to examine into its condition or into any of its affairs, or who, with like intent, willfully omits to make a true entry of any material particular pertaining to the business of such corporation in any book, report or statement of such corporation made, written or kept by him or under his direction, is guilty of a felony. Added by L. 1!)12, ch. 208. In effect September 1, 15)12. Pea-al Law. 459 § 3C5. Abstraction or misappropriation of money, funds or property, or misapplication of credit of corporations to which the banking law is applicable, by an oificer, director, trustee, employee or agent thereof. Any officer, director, trustee, employee or agent of tmy corpora- tion toi which the baiikini;' law is applicalilo, who abstracts or willfully misapplies any of the money, fiinds or property of such corporation, or willf\illy misapplies its credit, is guilty of a felony. Nothing in this section shall be deemed or construed to repeal, amend or impair any existing provision of law prescribing a pun- ishment for any such offense. Addtd by L. 1013, ch. 102. In effect September 1, 1913. § 660. Frauds in the organization of corporations. A person who : 1. Without authority subscribes the name of another to or inserts the name of another in any prospectus, circular or other advertisement or announcement of any corporation or joint-stock association existing or intended to be formed with intent to per- mit the same to be published, and thereby to lead persons to believe that the person whose name is so subscribed is an officer, agent, member or promoter of such corporation or association ; or, 2. Signs the name of a fictitious person to any subscription for or agreement to fake stock in any corporation, existing or pro- posed ; or, 3. Signs to any such subscription or agreement the name of any person, knowing that such person does not intend in good faith to comply with the terms thereof, or under any understand- ing or agreement, that the terms of such subscription or agree- ment are not to be complied with or enforced. Is guilty of a misdemeanor. § 661. Frauds in procuring organization of corporations. An oflficer, agent or clerk of a corporation, or of persons pro- posing to organize a corporation, or to increase the capital stock of a corporation, who knowingly exhibits a false, forged or altered book, paper, voucher, security or other instrument of evidence to any public officer or board authorized by law to examine the organization of such corporation, or to investigate its affairs, or to 460 Geneeal Statutes. allow an increase of its capital, with intent to deceive such officer or board in respect thereto, is punishable by imprisonment in a state prison not exceeding ten years. § 662. Fraudulent issue of stocks and bonds. An officer, agent or other person in the service of any joint-stock company or corporation formed or existing under the laws of this state, or of the United States or of any state or territory thereof, or of any foreign government or country, who willfully and know- ingly, with intent to defraud : 1. Sells, pledges or issues, or causes to be sold, pledged or issued, or signs or executes, or causes to be signed or executed with intent to sell, pledge or issue, or causes to be sold, pledged or issued, any certificate or instrument purporting to be a certifi- cate or evidence of the ownership of any share or shares of such company or corporation, or any bond or evidence of debt, or writing purporting to be a bond or evidence of debt of such com- pany or corporation, without being first thereto duly authorized by such company or corporation, or contrary to the charter or laws under which such corporation or company exists, or in excess of the power of such company or corporation or of the limit imposed by law or otherwise iipon its power to create or issue stock or evi- dences of debt; or, 2. Reissues, sells, pledges or disposes of, or causes to be re- issued, sold, pledged or disposed of, any surrendered or canceled certificates, or other evidence of the transfer or ownership of any such share or shares. Is punishable by imprisonment for a term not exceeding seven years, or by a fine not exceeding three thousand dollars, or by both. § 663. Acting for foreign corporations not authorized to do business in this state. Any person, or corporation, who, 1. Acts as agent or representative of any mortgage, loan or investment corporation or building and mutual loan corporation or association or co-operative savings and loan association organ- ized outside of this state, while such mortgage, loan or investment corporation or building and mutual loan corporation or associa- Pej:al Laav. 461 tion or cooperative savings and loan association shall not be authorized under a license of the superintendent of banks to do business- in this state ; or, 2. Acts as agent or representative in this state of a foreign corporation, other than a moneyed corporation, with the words " trust," " banlf," " banking," " insurance," " assurance," " in- demnity," " guarantee," " guaranty," " savings," " investment," " loan," " benefit," or any other words or terms indicating, repre- entiiig or holding out such company to be a moneyed corporation as a part of its name or corporate title, or who, in connection with such corporation or otherwise, shall put forth any sign containing said name, or who shall advertise or publish the said company as doing business in this state, directly or indirectly, through agents or otherwise, while such company shall not be authorized under a certificate procured from the secretary of state pursuant to section fifteen of the general corporation law to do business in this state, is guilty of a misdemeanor. § 664. Misconduct of officers and directors of stock corporations. A director of a stock corporation, who concurs in any vote or act of the directors of such corporation, or any of them, by which it is intended: 1. To make a dividend, except from the surplus profits arising from the business of the corporation, and in the cases and manner allowed by law; or, 2. To divide, withdraw, or in any manner pay to the stock- holders, or any of them, any part of the capital stock of the cor- poration or to reduce such capital stock without the consent of the legislature ; or, 3. To discount or receive any note or other evidence of debt in payment of an installment of capital stock actually called in, and required to be paid, or with intent to provide the means of making such payment; or, 4. To receive or disco,unt any note or other evidence of debt with intent to enable any stockholder to withdraw any part of the money paid in by him on his stock ; or, 5. To apply any portion of the funds of such corporation, except surplus profits, directly or indirectly, to the purchase of shares of its own stock, Is gTiilty of a misdemeanor. 462 Ge^'ekal Statutes. An officer or director of a stock corporatioai who : • 1. Issues, participates in issuing, or concurs in a vote to issue any increase of its capital stock beyond the amount of the capital stock thereof, duly aiuthorized by or in pursuance of law; or, T. Sells, or agi'ees to sell, or is directly or indirectly inter- ested in the sale of any share of stock of such corporation, or in any agreement to sell the same, unless at the time of such sale OT agreement he is an actual owner of such share. Is guilty of a misdemeanor, punishable by imprisonment for not less than six months, or by a fine not exceeding five thousand dollars, or by both. § 665. Misconduct of directors, officers, agents and employees of corporations. A director, officer, agent or employee of any corporation or joint-stock association who : 1. Knowingly receives or possesses himself of any of its prop- erty otherwise than i)i payment for a just demand, and with intent to defraud, omits to make or to cause or direct to be made a full and true entry thereof in its books and accounts ; or, 2. ]\Iakes or concurs in making any false entry, or concurs in omitting to make any material entry in its books or accounts; or, 3. Knowingly (a), concurs in making or ptiblishing any written report, exhibit or statement of its affairs or pecuniary condition containing any material statement which is false, or (b), omits or concurs in omitting any statement required by law to be con- tained therein ; or, 4. Having the custody or control of its books, willfully refuses or neglects to make any proper entry in the stock book of such corporation as required by law, or to exhibit or allow the same to be inspected, and extracts to be taken therefrom by any person entitled by law to inspect the same, or take extracts therefrom ; or, 5. If a notice of an application for an injunction affecting the property or business of such joint-stock association or corporation is served upon him, omits to disclose the fact of such service and the time and place of such application to the other directors, officers and managers thereof; or. Texal Law. 463 G. EefiTses or neglects to make any report or statement lawfully required by a public officer, Is g'uilty of a misdemeanor. § 666. Unlawful use of certain titles in connection with corporate name. Any persora, association or corporation other than a moneyed corporation, -who shall within this state directly or indirectly, or through agents or representatives transact business under, or in anywise use a, corporate name ot a corporate title with the words " trust," " bank," " banking," " insurance," '' assurance," " in- demnity," " guarantee," " guaranty," '' savings," " investnient," " loan," " benefit," as a part of such name or title, is guilty of a misdemeanor ; provided, however, that any domestic corporation, other than a moneyed corporation, heretofore duly organized and heretofore daily authorized by law to use and on April twenty- ninth, nineteen hundred and four, lawfully using either or any of such words as a part of its lawfid. corporate title, may lawfully continue to use such corporate title, provided and if it, being a cor- poration other than a moneyed corporation, shall, wherever the name shall be printed, written, engTaved or displayed, add, in legible English characters, of substantially the same size and style as the name, directly under the said name or immediately in con- nection therewith, wherever so used, the words " not a moneyed corporation." Former § 608 added l)y cli. 48!) of 1004. § 667. Presumption of knowledge of corporate condition and busi- ness and of assent thereto by directors; definitions. It is no defense to a prosecution for a violation of the provisions of this article and article twenty-six, that the corporation, is a foreign corporation, if it carries on business or keeps an office therefor in this state. The tenu " director " as used in this article and article twenty- six includes any of the persons having, by law, the direction or management of the affairs of a corporation, by whatever name described. A director of a corporation or joint-stock association is deemed 464 Gekeeal Statutes. to ha-ve such a knowledge of the affairs of the corporation or asso- ciation as to enable him to determine whether any act, proceeding or omission of its directors is a violation of this article and arti- cle twenty-six. If present at a meeting of the directors at which any act, proceeding or omission of snch directors in violation of this article and article twenty^six occurs, he must be deemed to have concurred therein, unless he at the time causes or in writing requires his dissent therefrom to be entered on the minutes of the directors. If absent from such meeting, he must be deemed to have concurred in any such violation, if the facts constituting such violation appear on the record or minutes of the proceedings of the board of directors, and he remains a director of the corpora- tion for six months thereafter without causing or in writing requir- ing his dissent from such violation to be entered on such record of minutes. § 668. Misconduct at corporate elections. Any person who : 1. Being entitled to vote at ajiy meeting of the stocldiolders or bondholders or- both of a stock corporation, sells his vote, or who issues a proxy to vote to any person for any sum of money or thing of value, except as expressly authorized by law; or, 2. Acts as an inspector of election at any such meeting and vio- lates an oath taken by him in pursuance of law as such inspector, or violates the provisions of an oath required by law to be taken by him as such inspector, or is guilty of any dishonest or corrupt con- duct as such inspector, Is guilty of a misdemeanor. § 2400. Taking security upon certain property for usurious loans. A person who takes security, upon any household furniture, sewing machines, plate or silverware in actual use, tools or imple- ments of trade, wearing apparel or jewelry, for a loan or forbear- ance of money, or for the use or sale of his personal credit, con- ditioned upon the payment of a greater rate than six per centum per annum or, who as security for such loan, ,use or sale of personal credit as aforesaid, makes a pretended purchase of such property from any person, upon the like condition, and permits the pledger to retain the possession thereof is guilty of a misdemeanor. Peesonal Loan Coimpanies. 405 PERSONAL LOAN COMPANIES. CHAP. 518 OF 1914. AN ACT to regulate the business of companies and persons en- gaged in the business of making personal loans in amounts of not more than two hundred dollars. Became a law April IS, 1914, with the approval of the Ooveriior. Passed, three-fifths being present. The People of the State of New Yark, represented in Senate and Assembly, do enact as follows: Section. 1. Supervisor of personal loans; salary. 2. Expenses. 3. Duties of supervisor. 4. Organization certificate of personal loan company. 5. Certificate of personal loan broker. 6. Wlien designation of resident agent of personal broker required. 7. Return of defective certificate; filing for examination. 8. Investigation of proposed company or broker; refusal or ap- proval; filing certificate. 9. When corporate existence begins; conditions precedent to com- mencing business. 10. Bond. 11. Authorization certificate. 12. Display of authorization certificate. 13. Revocation of authorization certificate. 14. Genera! powers of personal loan company or broker. 15. Restrictions upon amount of loans, interest and charges. 16. Restrictions on methods of making and paying loans. 17. Restrictions on assignment of wages or salary. 18. Restriction on place of transaction of business. 19. Branch offices. 20. Restriction on payment of dividends by personal loan company. 21. Restriction on profits of personal loan broker. • 22. Change of location. 23. Examinations. 24. Reports of examiners. 25. Reports to supervisor; penalty for failure to make. 26. Orders of supervisor to delinquent personal loan companies or brokers. 30 466 Geneeal Statutes. Section 27. Publications. 28. Priority of assessments, penalties and forfeitures. 29. Communications from supervisor. 30. Investigations by supervisor. 31. Offender a competent witness. 32. Penalty for collection of illegal interest or charges. 33. Penalty for unlawfully engaging in personal loan business. 34. Evidence of violations. 35. Wliat constitutes loans within the state. 36. Personal loan associations heretofore organized. 37. Definitions. 38. Laws repealed. 39. When to take effect. § 1. Supervisor of personal loans; salary. In addition to the three deputies now authorized by law, the superintendent of banks shall appoint a fourth deputy, to be known as supervisor of personal loans. His salary shall be five thousand dollars per annum. § 2. Expenses. The salary and expenses of the supervisor and of bis sub- ordinates shall be charged to personal loan companies and per- sonal loan brokers subject to the provisions of this act in such proportion as the supervisor shall deem just and equitable, and shall be collected and paid in the same manner as are similar ex- penses of the banking department. § 3. Duties of supervisor. The supervisor, subject to the general direction and control of the superintendent, shall exercise the powers confeiTed and per- foTm the duties imposed upon him by this act. He shall, from time to time, prescribe rules and regulations with regard to the conduct of the business of personal loan companies and personal loan brokers. He shall annually, on or before the first Wednesday of January, transmit to the superintendent a report to the legis- lature of his activities, with such recommendations and sugges- tions as he may deem necessary. Peeso:s-al Loax Cojipanies. 467 § 4. Organization certificate of personal loan company. Three or more persons, two of whom shall be citizens of the United States, and at least one of whom shall be a citizen of the state of New York, may form a corporation tO' be known as a " personal loan company." Such persons shall subscribe, acknowl- edge and submit tO' the supervisor at his office an organization certificate in duplicate, which shall specifi.eally state: 1. The name of the coi-poration which shall include the words "personal loan company;" 2. The place where its business is to be transacted ; 3. The amount of its capital stock, which shall not be less than ten thoiusand dollars, if the place where its business is to be transacted is in a city of the first or second class, nor less than five thousand dollars, if the place where its business is to be transacted is in a city of the third class, or a village or town ; 4. The number of shares into which its capital stock is tO' be divided ; 5. The full name, residence and post-office address of the in- corporators and the number of shares subscribed for by each ; 6. The term of its corporate existence, which may be perpetual ; 7. The nvimber of directors of the corporation, which shall not be less than three, and the names and post-office addresses of the directors until its first annual meeting. § 5. Certificate of personal loan broker. A person or persons desiring to transact business as personal loan broker shall make, sig-n, acknowledge and file in the office of the supervisor a certificate which shall state: 1. The full name, residence and pos't^office address of such person, or of each member of a partnership or incorporated asso- ciation; 2. The state of which each person named in the certificate is a citizen ; 3. The amount of permanent capital which such person, part- nership or unincorporated association will deposit in cash and keep permanently invested in such business, which shall not be less than ten thousand dollars, if such business is to be transacted in a city of the first or second class, nor less than five thousand 468 General Statutes. dollars if ^uch business is to be transacted in a city of the third class, or a village or town ; 4. The particular city, town or village in which such business is to be transacted and the location by street and number of the ofEce or place of business therein. § 6. When designation of resident agent of personal loan broker required. A person who is not a resident of this state, or a partnership or unincorporated association, at least one member of which is not a resident of the state, shall not receive an authorization to transact business under this act unless such person, partnership or association shall file with the supervisor of personal loans, in a form approved by him, a designation of a resident agent within the state, upon whom all legal process may be served, in any pro- ceeding arising under the provisions of this act, with the same effect as if served upon such person, partnership or incorporated association. Every such designation shall state the full name of the private and office or business address of the agent. § 7. Return of defective certificate; filing for examination. If a certificate of a personal loan company or personal loan broker fail to comply with the requirements of this act, the super- visor shall forthwith return such certificate for amendment, call- ing attention to defects therein. If such certificate complies, or shall have been so amended as to comply, with the requirements of this act, the supervisor shall forthwith endorse upon each of the duplicates of such certificate over his official signature the words " filed for examination," with the date of such endorsement. § 8. Investigation of proposed company or broker; refusal or ap- proval; filing certificate. If the supervisor be satisfied that the persons named in the cer- tificate filed for examination are of such character, responsibility and general fitness as to command confidence and warrant belief that the business of the proposed corporation or personal loan broker will be honestly and efficiently conducted in accordance with the intent and purposes of this act, and that the public con- Peesoxal Loan Coiipaxies. 4G9 •venience and advantage will be promoted by allowing such pro- posed company or personal loan broker to engage in business, he shall, within thirty days after the filing of such certificate for examination, endorse upon each of the duplicates thereof over his official signature the word " approved," or if he be not so satisfied the word " refused," with the date of such endorsement. In case of refusal he shall forthwith return one of the duplicates so en- dorsed to the proposed incorporators or personal loan broker from whom the certificate was received. In case of approval he shall forthwith give notice thereof to the proposed incorporators or personal loan broker, and file one of the dviplicate certificates in his own office and the other in the office of the clerk of the county in which is located the place of business of such proposed com- pany or personal loan broker. § 9. When corporate existence begins; conditions precedent to com- mencing' business. When the supervisor shall have approved the organization certificate of a personal loan company, its corporate existence shall begin, and it shall have power to elect officers and transact such business as relates to its organization. It shall transact no other business until 1. Not less than one-fifth of its capital stock, and not less in any event than the miniramn amount of capital stock required by sec- tion four of this act shall have been fully paid in in cash, and an affidavit stating that it has been so paid, subscribed and sworn to by the two principal oflSicers shall have been filed in the clerk's office of the county in which its place of business is located, and a certified copy thereof filed in the office of the supervisor; 2. The bond submitted by it to the supervisor as required by this act shall have been approved by him ; 3. The supervisor shall have duly issued to it the authoriza- tion certificate specified in this act. § 10. Bond. Every personal loan company and personal loan broker shall file with the supervisor a bond executed by a surety company authorized to transact business in this state, and in an amount 470 Geneeal Statutes. equal to one-tenth of the capital stock of such company, or one- tenth the pemianent capital of such broker, not less in any case than three thousand dollars, conditioned upon the faithful observance by such company or broker of the provisions of law and of this act and of the regulations made hereunder. Such bond shall be approved by the supervisor, and by its terms con- tinue in full force for two years after such company or broker has ceased to transact business in this state, unless sooner re- leased by the Siupervisor. Any person claiming to be injured by a violation of this act by a personal loan company or broker may, with the written consent of the supervisor, maintain an action upon the bond of such company or broker. § 11. Authorization certificate. If the supendsor be satisfied from examination and investiga- tion made by him that a company or personal loan broker whose ■certificate he has approved and filed has complied with all the conditions precedent to commencing business imposed by this act, he shall, within sixty days after the filing of such certificate for examination, but in no case after the expiration of such period, issue under his hand and official seal in triplicate, an authorization certificate, stating that the company or personal loan broker named in such certificate has complied with the provisions of this act, and is a,uthorized to transact the business specified in such certificate. One of such triplicates shall be transmitted to the company or personal loan broker, one shall be filed in the office of the supervisor and the third shall be filed by the supervisor in the county clerk's office of the county wherein the organization certificate of such company or the certificate of the personal loan broker shall have been filed by him. The supervisor and such coimty clerk shall, respectively, attach such authorization cer- tificate to such organization certificate or personal loan broker's certificate previously filed in his office, and shall record both such certificates in the book of records of incorporation therein. § 12. Display of authorization certificate. Every authorization certificate shall be kept posted at all times in a prominent place in the office of the personal loan company or broker. Peksonal Loax CoArPANiES. 471 § 13. Revocation of authorization certiiieate. If the supervisor he satisfied that a personal loan company or personal loan broker to which he shall have issued an authoriza- tion certificate is violating any of the provisions of this act, or any of the regulations made hereunder, or is conducting its busi- ness in an unauthorized or unsafe manner, or is in an \msqund or imsafe condition to transact its business, the supervisor may, over his official sig-nature and seal of office, notify the holder thereof that the same is revoked. Such notice shall be executed in triplicate, and the supervisor shall forthwith transmit one copy to the holder of such certificate, file one in his office, and file the third in the office of the clerk of the county in which such au- thorization certificate shall have been filed. The supervisor may, in his discretion, publish a copy of such notice, with such other facts as he may deem proper, for six successive days in the paper published at Albany in which public notices of the state are re- quired to be published. § 14. General powers of personal loan company or broker, Every personal loan company shall have the powers conferred by the general corporation law and the business corporations law, including the powers to make loans in its discretion at the legal rate of interest, and every such company and every personal loan broker, subject to the limitations contained in this act, may, when authorized by the supervisor, 1. Act as a pawnbroker Avithout being required to obtain a license or file a bond other than the authorization certificate and bond required by this act; 2. Make small loans to necessitous borrowers upon any of the following securities: (a) Mortgages upon personal property without the actual de- livery of the property, (b) ISTotes of the borrower endorsed or guaranteed by another person, (c) An assignment or order for the payment of salary or wages by the borrower or another person, subject to the provisions of this act. 472 Genekal Statutes. 3. Charge interest upon loans made in accordance with the pro- visions of subdivisions one and two of this section, subject to the conditions and limitations of this act. § 15. Restrictions upon amount of loans, interest and charges. Every personal loan company and personal loan broker shall be subject to the following restrictions upon the making of loans and on charges for interest and services in connection therewith : 1. No loan made vmder subdivisions one and two of section fourteen of this act shall exceed two hundred dollars, nor shall any person owe such company or loan broker more than two hundred dollars for principal at any one time ; 2. Interest on loans made as a paAvnbroker shall not exceed three pea* centum per month, and no charge of any kind shall be made by such company or broker when acting aS a pawnbroker ; 3. Interest on loans made as provided in subdivision two of section fourteen of this act shall not be charged at a rate to ex- ceed two per centum per month ; 4. Interest shall not be charged or collected in advance and shall be computed only on unpaid balances; 5. For a loan exceeding fifty dollars there may be made, ex- cept in case of loan made as pawnbroker, a charge of not more than two dollars for examination or investigation of the property mortgaged or investigation of the character and circumstances of the borrower, endorser or surety, and for all other expenses including the drawing and filing of necessary papers. If the loan be fifty dollars or less such charge shall not be more than one dollar. ~No such charge shall be made on any loan or renewal thereof oftener than once in each period of twelve months. 6. ]^o such charge shall be imposed upon any one borrower for any new or additional loan made within three months after any such charge has been imposed ; 7. No charge whatsoever shall be made unless or until a loan shall have been made as a result of an examination ; 8. ISTo charge shall be made for the collection of debts except the legal costs in actions to enforce the security or upon the entry of judgment. Personal Loajm Companies. 473 § 16. Restrictions on methods of making and paying loans. Every personal loan company and personal loan broker shall : 1. Upon repayment of the loan in full, mark indelibly in the presence of the borrower every paper signed by him with the word " paid " or " canceled " and discharge any mortgages, re- store any pledges, return any notes, and cancel any assignments given by the borrower as security; 2. Furnish the borrower at the time the loan is made a state- ment in the English language showing in clear and distinct terms the amount of the loan, the date of the loan, the security of the loan, the person to whom the loan is made, the name of the lender and the amount and rate of interest charged. Upon such statement there shall be printed in English a copy of sec- tion fifteen of this act; 3. Give to the borrower a plain and complete receipt for all payments made en account of the loan at the time such payments are made, and shall not take any confession of judgment, any power of attorney or any instrimient that does not state the actual amount of the loan in question, the time for which it is made and the rate of interest, or any instrument in which blanks are left to be filled after execution; 4. Take every mortgage, note, assignment, agreement or con- tract, in connection with such business in the name of the com- pany or in the name of the individual broker, with the addition in the case of such individual of the descriptive words " personal loan broker." § 17. Restrictions on assignment of wages or salary. An assignment or order for the payment of future salary or wages given as security for a loan shall be valid for a period not exceeding one year from the making of such assignment or order, and a sum not exceeding ten per centum of the borrower's salary or wages shall be collectible therefrom under such an assignment or order at the time of each payment of salary or wages, if the amount of the loan shall not have been paid. Such assignment or order shall not be subject to the provisions of section forty-two of the personal property law. If such assignment or order be made by a married man or woman living at the time the assign- 474 General Statutes. ment or order is made, or at any time within five months prior thereto, with the wife or husband, as the case may be, the assign- ment or order shall be accompanied by the written assent of the wife or the husband of the assignor, or the assignment or order shall be invalid. § 18, Restriction on place of transacting business. A personal loan company or personal loan broker shall not 1. Transact or solicit business under any other name or at any- other office or place than that designated in the authorization cer- tificate issued to such company or broker, except as provided in section nineteen of this act; 2. Maintain an ofiiee or place of business in the same room in which any other business is transacted or in a room connected with or opening into a room in which any other business is conducted. § 19. Branch offices. A personal loan broker shall not establish any branch office or ofiices. A personal loan company located and doing business in a city of the first or second class may open and occupy one or more branch offices, upon obtaining the approval of the super- visor by certificate filed in his office and in the office of the county clerk of the county in which the certificate of authorization of such company is filed. Every such company shall have a capital of ten thousand dollars for every branch office established, in addition to the capital required by this act. § 20. Restriction on payment of dividends by personal loan company. Every personal loan company may pay a dividend on its capital stock, subject to the following conditions and limitations: 1. In determining net profits no more than a reasonable deduc- tion shall be made for expenses, including salaries; 2. The total dividends declared in any one year shall not amount to more than twelve per centum of the capital ; 3. If the net profits amount to more than twelve per centum of its capital, such personal loan company shall comply with any Petjsoxal Loax Coi;PAXiES. 475 order of the supervisor reducing the rates of interest or charges which may be made by it. § 21. Restriction on profits of personal loan broker. A persona] loan broker shall not in any year pay or take out of his business profits amounting to more than twelve per centum of the capital invested in the business, provided that a reasonable deduction may be made for expenses and salaries, including his own services. The supervisor, u.pon ascertaining that any such broker has during the previous calendar year, made a net profit amounting to more than twelve per centum of his capital, shall have authority, after ten days' notice to such broker, to make an order reducing the interest and charges which such broker may lawfully make to such an extent as will, in his judgment, yield a net annual profit of not more than twelve per centum of the capital. § 22. Change of location. A personal loan company or personal loan broker may, with the approval of the supervisor, change the place of business author- ized in its authorization certificate to another place in the same town, village or borough or city if a city be not divided into boroughs. Authority for such change shall be evidenced by a certificate of the supervisor filed in his office and in the office of the county clerk of the county in which the authorization certifi- cate of such company or broker is filed. § 23. Examinations. The supervisor shall, either personally or by examiners of the banking department, examine every personal loan company and broker at least once each year, and oftener if deemed necessary or expedient. On every such examination inquiry shall be made as to the condition and resources, the mode of conducting and man- aging affairs, the action of its directors, if a corporation, the in- vestment of its funds, the safety and prudence of its management, the security afforded to those by whom its engagements are held, whether the requirements of the authorization certificate and of law have been complied with, and as to such other matters as the 476 Genekal Statutes. supervisor may prescxibe. For the purposes of any such exami- nation the supervisor shall have free access to the vaults, books, securities and papers of the company or broker so examined. The supervisor and every such examiner shall have power to ad- minister an oath to any person vsrhose testimony may be required on the examination of any such company or personal loan broker, whether in any way connected with such company or broker or not, and to compel the appearance and attendance of any such person for the purpose of any such examination. If the examina- tion shall be made by the supervisor, or by one or more examiners who are compensated by salary only, no examination charge shall be made except for necessary traveling and other actual expenses. § 24. Reports of examiners. Every examiner shall make a written report on oath to the supervisor of the result of his examination. Such reports shall be confidential communications and shall not be made public, unless in the judgment of the supervisor, the ends of justice or the public advantage will be served by the publication thereof, in which event he may publish a copy of any such report or any part thereof in at least one daily newspaper published in the covmty where the principal place of business of such company or personal loan broker is located, or in such other manner as he may deem proper. § 25. Reports to supervisors; penalty for failure to make. On or before the first day of February in each year, every per- sonal loan company and broker shall make a written report to the supervisor which shall contain a statement of its condition on the morning of the first day of January in said year, in the form and contain the matters prescribed by the supervisor. Every such report shall be verified by the oaths of the president and secretary of such company, or by such personal loan broker. The verification shall state that the report is true and correct in all respects to the best of the knowledge and belief of the person or persons verifying if, and that the usual business of the com- pany or broker has been transacted at the location required by this act and not elsewhere. Pekso.n'al Loax Companies. 477 Every such company and broker shall also make any other special reports to the supervisor which he may from time to time require, which shall be in such form and filed at such date as may be prescribed by the supervisor and shall, if required by him, be verified in such manner as he may prescribe. Every such company within ten days after declaring a divi- dend, shall make written report to the supervisor stating the amount of such dividend, and the amount of its net earnings in excess thereof. Such report shall be verified by the oath of the president or treasurer of the company. If any such company or broker shall fail to make any report required by this section on or before the day designated for the making thereof, or shall fail to include therein any matter re- quired by the supervisor, it shall forfeit to the people of the state the sum of one hundred dollars for every day that such report shall be delayed or withheld, and for evei-y day that it shall fail to report any such omitted matter, unless the time therefor shall have been extended by the supervisor. § 26. Orders of supervisor to delinquent personal loan companies or brokers. 1. To discontinue unlawful or unsafe practices. ^Yhenever it shall appear to the supervisor that any personal loan company or broker to which this act is applicable has violated the certificate of authorization or any law or regulation or is conducting its busi- ness is an unauthorized or unsafe manner, he may issue an order directing the discontinuance of such unauthorized or unsafe prac- tices and require the delinqiient to appear before him at a time fixed in the order to explain such practices. 2. To make good impairment of capital. Whenever it shall appear to the supervisor that capital stock of any such company or the permanent capital of any such broker has been reduced in value below the requirements of law or of its certificate of authori- zation, he may issue an order directing that such company or broker make good such deficiency within sixty days from the date of such order. 3. To keep books and accounts as prescribed. Whenever it shall appear to the supervisor that any personal loan company or 478 Geseeal Statutes. brolter does not keep its books and accounts in such manner as to enable him readily to ascertain its true condition, he may issue an order requiring such company or broker, or the officers or agents thereof, or any of them, to open and keep' such books or accouiits *as he may, in his discretion, determine and prescribe the mauiicr for keeping accurate and convenient records of the transactiwis and accounts of such company or broker. § 27. Publications. No personal loan company or personal loan broker shall print, publish or distribute, or cause to be printed, published or dis- tributed, any written or printed statement with regard to the rates, terms or conditions for the lending of money which is false or calculated to deceive. Every personal loan company or personal loan broker, authorized by the supervisor to transact business under this act, shall include a statement of such fact as a part of every advertisement of the business of such company or broker. Any person, partnership or company violating this section shall be guilty of a misdemeanor. § 28. Priority of assessments, penalties and forfeitures. In case of the insolvency or voluntary or involuntary liquidation of any company or broker to which this act is applicable, all un- paid charges lawfully assessed by the supervisor, and all unpaid penalties or forfeitures incurred under this act, shall be entitled to priority of payment from the assets of such company or broker. § 29, Communications from supervisor. Every official communication directed by the supervisor to a personal loan company, or to any officer thereof, relating to an in- vestigation or examination conducted by him, or containing sug- gestions or recommendations as to the conduct of the business of such company, shall be submitted by the officer receiving it to the board of directors at its next meeting, and recorded in its books of minutes. * So in original. Peksonal Loan Companies. 479 § 30. Investigations by supervisor. The supervisor shall have power to investigate all violations or alleged violations of this act, that come to his attention, shall make all reasonable efforts to discover the same and shall notify Ihe proper prosecuting officer whenever he has reasonable grounds to believe that a violation has occurred. He shall act as complain- ant in prosecutions under this act and shall otherwise assist in the prosecution of violators thereof. § 31. Offender a competent witness. A person violating any provision of this act is a competent wit- ness against any other person so violating this act, and may be compelled to attend and testify upon any trial, hearing or pro- ceeding, or investigation, in the same manner as any other per- son. But the testimony so given shall not be used in any prosecu- tion or proceeding, civil or criminal, against the person so testify- ing; nor shall a person so testifying be thereafter liable to indict- ment, prosecution or punishment for such violation, and may plead or prove the gi^dng of testimony accordingly, in bar of such indictment or prosecution. § 32. Penalty for collection of illegal interest or charges. No person or corporation other than persons or corporations transacting business pursuant to the provisions of this act, shall directly or indirectly charge or receive any interest, discount or consideration greater than the legal rate of interest upon the loan, use or forbearance of money, goods or things in action of the value of two hundred dollars or less, or upon the loan, use or sale of per- sonal credit in any wise, where there is taken for such loan, use or sale of personal credit any security upon any household furni- ture, apparatus or appliances, sewing machine, plate or silver- ware in actual use, tools or implements of trade, wearing apparel or jewelry. The foregoing prohibition shall apply to any person who, as security for any such loan, use or forbearance of money, or for any such loan, use or sale of personal credit as aforesaid, makes a pretended purchase of property from any person and permits the owner or pledgor to retain the possession thereof, or who, by 480 General Statutes. any device or pretense of charging for his services or otherwise, seeks to obtain a larger compensation in any case hereinbefore provided for. Any person, and the several officers of any corporation, who shall violate the foregoing prohibition, shall be guilty of ^mis- demeanor, and upon proof of such fact the debt shall be dis- charged and the security shall be void. But this section shall not apply to licensed pawnbrokers, making loans vipon the actual and permanent deposit of personal property as security; nor shall this section affect the validity or legality of any loan of money or credit exceeding two hundred dollars in amount. § 33. Penalty for unlawfully engaging in personal loan business. No person or corporation shall, except as authorized by this act, make any loans, endorsements or guarantees, either directly or indirectly, in sums of two hundred dollars or less, for which loans, endorsements or guarantees any charge, interest, discount or consideration is made or taken in excess of six per centum per annum. JSTo individual, partnership, unincorporated association or corporation shall, directly or indirectly, engage or offer to en- gage in the business of negotiating or arranging any transaction herein prohibited, or aiding the borrower or lender either to pro- cure or to make any svich loans. A violation of any of the pro- visions of this section shall be a misdemeanor, whether or not such loans are actually made. Any person or corporation purchasing or discounting such notes or loans of two hundred dollars or less, or endorsing, guarantee- ing or becoming surety for the payment of any such notes or loans for compensation or for value of any kind, or furnishing security therefor or procuring any endorser, guarantor or surety therefor, for compensation or value of any kind, without having been first authorized so to do under the provisions of this act, shall be presumed to have violated the provisions of this section. § 34. Evidence of violations. Violation by an agent shall be prima facie evidence of assent by his principal. Violation by a member of a partnership shall be prima facie evidence of assent by each member of the partner- Personal Loan Companies. 481 ship. Violation by a director, trustee, an officer or agent of a cor- poration shall be prima facie evidence of assent by the corporation. § 35. What constitutes loans within the state. AVhen an application for a loan, or for an endorsement ijr guar- antee, or for the purchase of a note, is made by any person, asso- ciation, partnership or corporation within this state and the money is advanced, or the endorsement or guarantee is made or furnished or the note purchased by any person, association, partnership or corporation situated without this state, the transaction shall be deemed to be a loan made within this state, and such loan and the parties making it, or taking such application, shall be subject to the provisions of this act. § 36. Personal loan associations heretofore organized. A jiersonal loan association heretofore organized and subject to article ten of the banking law, as amended by chapter one hun- dred and twenty-seven of the laws of nineteen hundred and ten, is continued and shall be deemed duly organized under this act, notwithstanding the repeal of such article by this act, and such association, if lawfully engaged in business pursuant to a license duly issued by the superintendent of banks, is hereby authorized to continue in such business until the expiration of such license or until such license shall have been duly cancelled, as though such association had complied with all the provisions of this act, and until such date may exercise the powers conferred by this act upon personal loan companies. Prior to the expiration of such license such association may apply to the supervisor for an authorization certificate under this act, and if the supervisor be satisfied from examination and investigation made by him that such personal loan association has complied with the conditions precedent to commencing business imposed by section nine of this act, he shall, within thirty days after the filing of such applica- tion, issue under his hand and official seal, in triplicate, an author- ization certificate in accordance with section eleven of this act; and thereupon such personal loan association shall become a duly authorized personal loan company. 31 482 Gei^ekal Statutes. § 37. Definitions. As used in this act, the term " superintendent " means the superintendent of banks ; the term " supervisor " means the super- visor of small loans. § 38. Laws repealed. The following laws and parts of laws are hereby repealed: Article ten of the banking law, as amended by chapter one hun- dred and twenty-seven of the laws of nineteen hundred and ten ; article five-a of the general business law, as added by chapter five hundred and seventy-nine of the laws of nineteen hundred and thirteen. § 39. When to take effect. This act shall take effect immediately. GENERAL INDEX. (ReferenccM arc to MectioiiN.) Abstract of Title: mortgage loans by savings banks 241 Acceptance: claims of creditors 75 private banker's affidavit 25 revocation 26, 158 Acceptances: banks 106, 108 trust companies 185, 190 Accounting: by trust company acting as fiduciary '. . 188 Accounts (see Books and Accounts). Actions: by attorney -general in name of superintendent 31 by superintendent, against directors, trustees or officers 81 by superintendent in liquidation, preference 71 by superintendent to enforce agreements 44 by superintendent where attorneys' liens are asserted 64 failure to transmit money 167 interpleader in, to recover deposits (see Interpleader). on unaccepted claims 76 payment of sums recovered into state treasury 19 to enforce stockholders' liability: banks 120 powers of superintendent 80 safe deposit companies 322 trust companies 206 to recover sums due banking department 17 usury ; banks and bankers 114 trust companies 200 Administrators (see also Executors) : included in definition of private banker 2 liability as stockholders : banks 120 safe deposit companies 322 trust companies 206 trust company acting as 185, 188 [4S3] 484 Geneeal Index. I -J (References are to sections.) Affidavits : as to payment of capital: banks 103 investment companies 291 personal loan companies 341 safe deposit companies 316 trust companies 183 as to payment of subscriptions: land bank , 423 of private banliers seeking exemption; contents 160 duties of superintendent 25 revocation of acceptance 26, 158 Agent: of foreign corporation (see Foreign Corporations), of private banker: receipt for money received for transmission 163 to continue liquidation 79 Aggregate Demand Deposits: definition of 3 reserves against (see Reserves). Amendment of By-Laws: credit unions 473 land bank 435 savings and loan associations 410 savings banks 262 Amortization of Securities: banlis 109, 116 savings and loan associations 391, 394 savings banks 246, 254, 273 trust companies 193, 194, 202 Annual Meeting of Directors: banks 128 credit unions 468 trust companies 213 Annual Meeting of Stockholders or Shareholders: banks 122, 127 credit unions 451, 464 land bank 422, 436 personal loan companies 353 safe deposit companies 324 savings and loan associations 376 trust companies 209 General Index. 485 (References are to sections. ► Annual Report of Superintendent 83 Annual Report of Unclaimed Deposits (soc Unclaimed Deposits, Divi- dends and Interest) . Application Certificate: defective, not to be filed for examination 21 filing by superintendent 23 filing " for examination " 22 foreign corporations: banking corporation 144 duties of superintendent 27 investment company 303 personal loan brokers 3.59 private bankers 151 Application of Banking Law: banking department charged with enforcement 10 to whom applicable 1 what private bankers subject 150 Appointment : superintendent of banks 10 deputies, clerks, etc IS Approval: discretion of superintendent 48 Arrears of Interest: valuation of securities by superintendent 54 Artificial Name: prohibition against use of 141 Assessments by Superintendent: application of interest or proceeds of securities 34 effect of change from state to national bank 137 entitled to priority 32 for encroachments on reserves (see Encroachment on Reserves). liability for: banlcs 135 investment companies 299 personal loan companies and brokers 366 safe deposit companies 330 savings banks 277 trust companies 220 of stockholders of insolvent corporation 80 of stockholders when capital impaired (see Impairment of Capital), payment into state treasury 19 486 Geneeal I^'dex. (References are to sections.) Assessments by Superintendent — (Continued) : proceedings in name of superintendent 31 to pay expenses of department 17 Assets : creditors to share ratably 76 insolvency or suspension of private banker 158 inventory of 68 liquidation and conserving of, by superintendent 69 notice to persons holding assets of insolvent 65 priorities (see Priorities). transfer to agent to continue liquidation 79 voluntary dissolution 486 when judgment not lien on 77 Attorney-General : actions to procure dissolution 59 payment of recoveries into state treasury 19 proceedings in name of superintendent 31 voluntary dissolution 486 Attorney s-at-law (see Counsel). Attorney in Fact: power of trust company to act as 185 superintendent as, to accept service of process 28, "145, 223, 304 Attorneys' Liens: determination of, in liquidation 64 Authorization Certificate : conditions precedent to commencing business: banks 103 credit unions 452 investment companies 291 land bank 423 personal loan companies . . ., 341 private bankers 152 safe deposit companies 316 savings banks 233 trust companies 183 issuance, contents, etc 24 revocation by superintendent 29 effect on personal loan company 351 effect on private banker 15S rights and privileges of private bankers under 153 Available Fund: savings banks 251 Geneeal Index. 487 (References are to NectioiiH.) Bailment: disposition of property on liquidation 67, 68 lien of safe deposit company 331 power to receive property for safe keeping: banks 106 safe deposit company 317 trust companies 185 Banking Depaitment: charged with execution of banking law 10 communications from (see Communications from Banking Depart- ment ) . deputies, clerks, etc 13 details of business to be made public 82 fees for copies and certifications 18 how expenses defrayed 17 offices and furniture 12 reimbursement of state treasury 19 Bankruptcy: trust company as receiver in 185, 188 Banks: amortization of securities 109 amount of capital stock required 100 annual meeting of directors 128 annual meeting of stockholders 122 annual report of unclaimed deposits, dividends and interest 134 as depositaries of private bankers' reserves 166 assessments by superintendent: for encroachments on reserves 30 for expenses of banking department 17 liability for 135 assessment of stockholders when capital impaired 121 — branch offices 110 calculation of earnings for dividend period 116 change from state bank to trust company 138 change from state to national bank 137 change of location 119 change of number of directors 127 communications from banking department 132 conditions precedent to commencing business 103 definition of 2 depositary of savings bank funds 251 deposit of securities with superintendent 105 deposits of minors, trust deposits and joint deposits 148 designation as reserve depositaries 38 488 Geneeal Index. (References are to aections.) Banks — (Continued) : dividends to stockholders 118 election of officers 128 examinations : by directors 130 by superintendent .- 39 foreign banks 144-147 forfeiture of corporate rights by non-user 485 general powers 106 incorporation 100 incorporators (See Incorporators). interest chargeable by 114, 115 interpleader in certain actions against 113 liquidation (See Liquidation by Superintendent), merger ( see Merger ) . monthly meeting of directors 129 national bank changing to state bank 104 notice of intention to organize 101 oath of directors 124 organization certificate 100 penalties (See Penalties and Forfeitures). preservation of books and records 136 prohibitions: against bills payable othervpise than in money 142 against encroachments on povpers of 140 qualifications and disqualifications of directors 123 quorum of directors 129 rate of interest; effect of usury 114, 115 reports: of directors' examinations 131 to superintendent 133 reserves against deposits 112 restrictions : as to entries in books 109 on brancli offices 1 10 on deposit of funds Ill on loans lOg on officers, directors and employees 139 on purchases of securities 108 on taking and holding real estate 107 on total liabilities of one person 108 rights and liabilities of stockholders 120 statement to directors 129 surplus fund H^ tenure of office of directors 125 trust deposits 143 Ge^xeeal Index. 489 (References are to seetioiiw.) Banks — ( Continued ) : unauthorized use of sign or words indicating bank 141 usury, effect of 114 vacancies in board of directors 126 voluntary dissolution 486 wlien corporate existence begins 103 Board of Directors (see Directors). Bonds: deposits of, witli superintendent (see Deposits with Superintendent). estimated market value of 53 investments of savings banks 2.39 list of bonds by superintendent 52 official (see Official Bonds), private bankers: termination of liability on 161 to superintendent : personal loan companies 341, 342 savings banks 234, 235 Books and Accounts: orders with respect to 56 preservation of (see Preservation of Books and Records), requirements as to : banks 109 investment companies 295 personal loan companies and brokers 367 private bankers 165 safe deposit companies 320 savings and loan associations 391 savings banks 246 trust companies 194 Borrowing Money (see also Loans) : power to borrow: credit unions 453 savings and loan associations 378, 388 savings banks 238 restrictions on officers, etc.: banks 139 credit unions 454 investment companies 301 savings banks 267 trust companies 222 Boxes: when superintendent may open 67 490 Geneeal Index. (References are to sectiOTiH.> Branch Offices: banks 110 foreign trust company cannot maintain 223 investment companies 293 pe'rsonal loan companies 349 powers and duties of superintendent 51 safe deposit companies 318, 319 trust companies 195 savings banks 245 By-Laws : amendment of ( see Amendment of By-Laws ) . construction of term 419 failure to file with organization certificate 21 filing with organization certificate 22 foreign banking corporation must submit copy to superintendent. . . . 144 requirements as to: credit unions 451 land bank 422 sayings and loan associations 376 savings banks 262 Bulletin Board: weekly statement by superintendent 82 Burden of Proof: failure to transmit money 167 Calculation of Earnings (see Earnings). Capital: branch offices, requirements for: banks 110 investigation by superintendent 51 personal loan companies 349 trust companies 195 examination by superintendent as to payment of 24 impairment of (see Impairment of Capital). investments of (see Investments ) . must be fully paid in cash: banks 103 investment companies 291 personal loan companies 341 safe deposit companies 316 trust companies 183 of personal loan brokers and private bankers (see Permanent Capital) . reduction of (see Reduction of Capital). Gexekal Index. 491 (RefereiieeM are to' Neotlous-.) Capital — (Continued) : requirements as to: banks 100 credit unions 455 foreign banking corporations 144 foreign investment company 313 investment companies 290 personal loan companies 340 safe deposit companies 315 savings and loan associations 379 trust companies 180 Capital and Surplus: amount required of reserve depositary 33 percentage of, that may be loaned: banks 108 trust companies 190 requirements for foreign branches: banks 1 10 trust companies 195 Certificates: application certificate (see Application Certificate). appointment of special deputies 62 authorization certificate (see Authorization Certificate). authorizing change of location 50 authorizing opening of branch offices 51 organization certificate (see Organization Certificate). Certificates of Deposit: restriction on issuance by savings bank 243 Certifications: fees for, to superintendent 18 Change of Location: powers and duties of superintendent 50 requirements as to: banks 119 credit unions 460 investment companies 296 personal loan companies 352 private bankers 159 safe deposit companies 321 savings and loan associations 403 savings banks 259 trust companies 205 492 General Index. (Refei-ences ai-e to sections.) Charters: conforming to banking law: savings banks 281 savings and loan associations 418 foreign banking corporations 144 foreign investment companies 303, 304 foreign trust companies 223 Citizenship: statement in application certificate: personal loan brokers 359 private bankers 151 Claims of Creditors: acceptance or rejection 75 list of, by superintendent 73 notice to creditors to make proof 72 objections to 74 superintendent's power to compromise 69 Classification: depositors of savings bank 256 directors of trust company 208 Clerks of Banking Department: appointment, compensation, etc 13 how compensation paid 17 retirement on pension 16 Collateral Demand Loans: banks and bankers 115 trust companies 201 Collection of Debts: powers of superintendent 69 Commencement of Business: extension of time 49 forfeiture of corporate rights by non-user 485 precedent conditions (see Conditions Precedent to Commencing Busi- ness). Committee of Lunatic: trust company as 185, 188 Communications from Banking Department: banks 132 credit unions 476 investment companies 297 Gexeeal Ixdex. 4'.t3 (References aire to NeetioiiN.) Communications from Banking Department — (Continued) : personal loan companies 359 safe deposit companies 328 savings and loan associations 412 savings banks 276 Comparison: securities deposited with superintendent 36 Compensation: banking department: deputies, clerks and other employees 13 how paid 17 special deputies, etc., assisting in liquidation 63 superintendent of banks 10 credit unions: directors of 468 oflficers of 472 land banlt officers 434 savings bank trustees, officers and attorneys 265 Complaint : in action on unaccepted claim 76 Compounding Debts and Compromising Claims: powers of superintendent 69 Comptroller (see State Comptroller) Conditions Precedent to Commencing Business: banks 103 change from national to state bank 104 change from state bank to trust company 138 credit unions 452 foreign banking corporations 145 foreign investment companies 303, 304 investigation by superintendent as to compliance with 24 investment companies 291 land bank 423 personal loan companies 341 personal loan brokers 361 private bankers 152 reincorporation of investment company 309 reincorporation of personal loan association 343 safe deposit companies 316 savings banks 233 trust companies 183 Construction of Banking Law 501 494 Geis'eeal ]m*ex. (Refereiioe-s «re fo «ei*tloiiM.) Contingent Fund: savings and loan associations 392 Copies : fees for, to superintendent 18 Corporate Existence: change from national to state bank 104 change from state to national bank 137 commencement of: banks 103 crtdit unions 452 investment companies 291 land bank 423 personal loan companies 341 safe deposit companies 316 savings and loan associations 377 savings banks 233 trust companies 183 effect of merger 494 forfeiture by non-user 485 statement of duration in organization certificate: banks 100 credit unions 450 investment companies 290 personal loan companies 340 safe deposit companies 315 trust companies 180 termination after liquidation 79 voluntary dissolution 486 Corporate Name (see also Name) : conveyances to corporations : banks 107 savings and loan associations 387 savings banks 240 trust companies 189 merger of corporations 488 statement in application certificate: foreign banking corporation 144 foreign investment company 303 statement in notice of intention: banks 101 savings banks 231 trust companies 181 General Index. 495 (References are to sectionN.) Corporate Name (see also Name) — (Continued) : statement in organization certificate: banks 100 credit unions 450 investment companies 290 land bank 421 personal loan companies 340 safe deposit companies 315 savings and loan associations 375 savings banks 230 trust companies 180 use of word " savings " prohibited 279 use of words " credit union " prohibited 479 use of words indicating bank prohibited 141 Corporate Powers (see Powers). Costs: actions to recover deposits: banks 113 savings banks 250 trust companies 199 Counsel: employment by superintendent 62 compensation for assiifting in liquidation 63 compensation of, by savings bank 265 County Clerk: filing : affidavits as to capital (see Affidavits). approved merger agreement 492 authorization certificate 24 certificate allowing branch office 51 certificate appointing special deputy 62 certificate authorizing change of location 50 examiners' ofTicial oath 13' inventory of assets 66 license to foreign corporation 27 list of claims 73, 75 notice of revocation 26, 29 order extending time to commence business 49 order for sale of property 69 organization or application certificate 23 private banker'.s affidavit 25 proceedings of stockliolders' meeting 79 496 General Index. (References are to sections.) County Clerk — (Continued) : recording conveyances : to banks 107 to savings and loan associations ._ 387 to savings banks 240 to trust companies 189 recording mortgages: to banks 1'08 to savings and loan associations 386 to savings banks 241 to trust companies 190 Creditors: claims of (see Claims of Creditors). dividends to 78 enforcement of stockholders' liability by : banks 120 safe deposit companies 322 trust companies 206 lien on deposit of foreign corporation 33 notice to prove claims 72 superintendent as trustee for 44 to share ratably in assets 76 voluntary dissolution 486 Credit Unions: amendment of by-la«'s 473 assessments for expenses of banking department 17 calculation of earnings for dividend period 458 capital 455 change of location 460 communications from banking department 476 conditions precedent to commencing business 452 credit committee ; 470 definition of 2 deposit of funds, and priority of deposits 456 dividends to shareholders 459 examinations by superintendent 39 exemptions 461, 474 fiscal year 475 forfeiture of corporate rights by non-user 485 general powers 453 guaranty fund 457 incorporation 450 incorporators (see Incorporators). Gexeual Ixdex. 497 (Relerenees «re to .seet i«>iiM.) Credit Unions — ( Continued ) : individual liability of sbareliolders 4lil liquidation (see Liquidation by feupevintendent). loans to non-members prohibited 478 meetings of shareholders 454 merger ( see Merger ) . oaths of directors, officers and committee men\bers 4(56 officers 472 organization certiflcate 450 pO'Wers and duties of directors 468 priority of deposits by ; 378, 414, 456 proposed by-laws 451 qualifications and disqualifications of directors 465 reduction of liability to shareholders 462 reports to superintendent 477 restrictions on powers 454 special duties of directors 469 supervisory committee 471 term of office of directors 467 unauthorized use of term " credit union " 479 voluntary dissolution 486 when corporate existence begins 452 withdrawal and expulsion of members 463 Debenture Bonds of Land Bank: exemption from taxation 438 investments of savings and loan associations 384 powers of land bank 424, 426 Definitions : aggregate demand deposits ^ . . 3 bank • . • • 2 by-laws 419 credit union 2 demand deposits 3 dividend period 3 dues 379 free shares 383 guaranty fund 3 improved real estate 386 improvements 386 individual banker , 2 investment company 2 land bank of the state of New York 2 net earnings 3 operating expenses 300 32 498 General Index. Expenses — (Continued) : of liquidation (see Liquidation by Superintendent), savings and loan associations: restrictions on payment of 390 Express Company: not a private banker 2 Extensions of Time by Superintendent 49 Federal Reserve Bank: exercise of trust company powers 223 power to become member: banks , 106 trust companies 185 prohibitions against unauthorized banking 140 reserves of members : banks 112 trust companies 197 use of sign or word indicating bank 141 Federal Reserve Notes: excluded from reserves: banks 1 12 trust companies 197 Fee.s: credit unions 453, 457 savings and loan associations 376, 378 superintendent: acceptance of service for foreign corporations 28 copies and certifications 18 exemption of, from filing and recording fees 71 license, for foreign bank 145 payment into state treasury 19 Fidelity Bonds: officers and employees of savings banks 270 Fiduciaries : liability as stockholders: banks 120 safe deposit companies 322 trust companies 206 trust companies as 185, 188 Filing for Examination: defective certificates not to be filed 21 organization or application certificate 22 private banker's affidavit . . 25 time within which authorization certificate must issue 24 506 General Index. (References are to seetlonn.) Fines: credit unions 453, 454 savings and loan associations 378, 389 Fiscal Agent: powers of trust company 185 Foreign Branches: banlcs 110 trust companies , 195 Foreign Corporations: application certificate (see Application Certificate). assessments for expenses of banlcing department . . . ■ , 17 conditions precedent to engaging in business: banking corporations 144, 145 investment companies 303, 304 trust companies 223 deposit of securities vi'ith superintendent: investment companies 33, 306 examinations by superintendent 39 licenses 27 penalties (see Penalties and Forfeitures). power to act as executor or trustee 223 prohibitions: exercise of investment company powers 302 exercise of trust company powers 223 transacting savings and loan business 420 unauthorized banking 140 reports to superintendent: banking corporations 147 investment companies 298 reserve depositaries 38 revocation of license ' 29 effect on banking corporations 146 effect on investment companies 308 riglits and privileges under license: banking corporations 146 foreign investment companies 305 submitting agents' names to superintendent: banking corporations 144 investment companies 307 superintendent as attorney to accept service of process 28 designation by bank 145 designation by trust company 223 designation by investment company 304 Geneeal Ixdex. 507 (References are to seetioiiH.p Forfeitures (see Penalties and Forfeitures) : corporate rights forfeited by non-user 485 Governor: appointment of superintendent 10 Gross Earnings: calculation of (see Earnings). Guaranty Fund: credit unions 457, 459 definition of . . . 3 land bank 427 savings and loan associations 392, 393, 395 savings banks (see also Initial Guaranty Fund) . . 252, 253, 255, 256, 258 Guardian: trust company as 185, 188 Habitual Drunkards: trust company as committee of 185, 138 Immunity: offender testifying as witness 370 Impairment of Capital: as ground for taking possession 57 assessment of stockholders : banks 121 safe deposit companies 323 trust companies 207 effect on right to declare dividends: banks 118 credit unions 459 trust companies 204 order by superintendent to make good 56 Incorporation: powers and duties of superintendent 20-24 requirements in case of: banks 100 credit unions 450 investment companies 290 land bank 421 personal loan companies 340 safe deposit companies 315 savings and loan associations 375 savings banks 230 trust companies 180 508 Generai. Index. (References lire to sectioiiM.) IncoTporatOTS : banks 100, 101 credit unions 450 investigation by superintendent as to fitness 23 investment companies 290 personal loan companies 340 safe deposit companies 315 savings and loan associations 375 savings banks 230, 231 agreement as to expense fund 235 agreement as to initial guaranty fund 234 contributions to guaranty fund ' 252 dividends on contributions 256 initial guaranty fund and expense fund 233 return of contributions 236, 23T trust companies 180, 181 Index: persons entitled to unclaimed dividends, etc 47 Individual Bankers: assessments for expenses of banking department 17 assessments for encroachments on reserves 30 bill payable otherwise than in money prohibited 142 definition of 2 examinations by superintendent 39 liquidation (sec Liquidation by Superintendent). rate of interest, usuiy 114 rights of, preserved 143 use of sign or words indicating bank 141 Infants (see Minors ) . Initial Guaranty Fund of Savings Bank: creation 234 deposit of, as condition precedent 233 dividends to contributors 256 investigation by superintendent 23 return of 236 statement in organization certificate 230 Intention to Organize (see Notice of Intention to Organize). Interest : on securities deposited with superintendent 33 application in payment of assessments 34 banks 105 foreign investment companies 306 investment companies 292 private bankers 161 trust companies 184 Gexeeal Iat>ex. 50/9 (References are to HectioiiM.) Interest — (Continued) : on stockholders' liability 80 on trust funds held by trust company 188 personal loan company or broker : reduction of rate by order of superintendent 56, SoO, 364 private bankers: effect on status of payment on deposits 26, 1.30, lol, 160 prohibition against usury 368 rate chargeable: banks and bankers 114, 115 investment companies 293 personal loan companies : 344 personal loan brokers M2 savings and loan associations 376, 378, 385 trust companies 200, 201 savings bank deposits 256 unclaimed interest (see Unclaimed Deposits, Dividends and Interest). usury (see Usury). valuation of securities in arrears of 54 Interpleader : actions to recover deposits: banks 113 savings banks 250 trust companies 199 Insurance : mortgage loans by savings banks 241 Insolvency: liquidation (see Liquidation by Superintendent), priorities in assets of insolvent (see Priorities), securities deposited by foreign corporation : lien in favor of residents 33 trust company as receiver 185, 188 Inventory: of assets of insolvent 66 Investigations by Superintendent: application for authorization certificate 23 application by foreign corporation for license 27 application to open branch offices 51 examinations (see Examinations by Superintendent). exempted private banl^er 29 private banker's affidavit 25 special investigations 39 510 , General livBEX. (References ure to section**. > Investment Companies: assessments for expenses of banking depaitmcnt 17, 299 branch offices 293 change of location 296 communications from banliing department 297 capital required 290 conditions precedent to commencing business 291 deposit of securities with superintendent 292 definition of 2 encroachments on powers prohibited 302 examination by superintendent 39 foreign investment companies (see also Foreign Corporations).. 302-308 forfeiture of corporate rights by non-user 485 general powers 293 incorporation 290 incorporators (see Incorporators). liquidation (see Liquidation by Superintendent). merger (see Merger). organization certificate 290 preservation of records 300 reincorporation under banking law 309 restrictions : as to entries in books 295 on officers, directors and employees 301 on powers 294 reports to superintendent 298 voluntary dissolution 486 wlien corporate existence begins 291 Investments (see also Restrictions). banks 106, 107, 108 land bank 424, 425 private bankers 155, 162 savings and loan associations 378, 384, 386 savings banks 238 effect of conforming charter 281 estimated market value 53 list to be furnished by superintendent 52 when sale may be required by superintendent 55 trust companies 185, 188, 189, 190, 193 Joint Deposits: banks 148 savings banks 249 trust companies 198 Gexekal Ixdex. 511 (References are to aectiouH.) Judgments: wlien not liens on insolvent's assets 77 Land Bank: amendment of by-laws 435 annual meeting of sliaveholders 436 assessments for expenses of banking department 17 bond of directors 430 change of number of directors 433 commissions and payment of expenses 429 conditions precedent to commencing business 423 debentures (see Debenture Bonds of Land Bank). definition of 2 examinations by superintendent 39 exemptions from taxation 438 forfeiture of corporate rights by non-user 485 general powers 424 guaranty fund 427 incorporation '. 421 incorporators (see Incorporators). individual liability of shareholders 428 liquidation (see Liquidation by Superintendent). membership 428 oath of directors 431 officers 434 organization certificate 421 penalties (see Penalties). preference of creditors 437 proposed by-laws 422 qualifications of directors 430 restrictions on powers 425 savings and loan associations : investment in shares and obligations - 384 powers as to land bank 378 provisions in by-laws of 378 transfer of shares 428 vacancies in board of directors 432 voluntary dissolution 486 when corporate existence begins 423 Laws Repealed 500 Letters of Credit: • banks 106, 108 trust companies 185, 190 Letters Testamentary: granting to trust company 188 512 GEI>rEKAL ISDEX. (RefereiiceM ure to Hcotioiis.) Licenses : foreign corporations (see Foreign Corporations). reincorporation of personal loan associations 343 Liens : against assets of insolvent 65 attorneys' liens (see Attorneys' Liens). of credit unions on siiares and dividends 453 of safe deposit companies on stored property 331 of savings and loan associations on shares 378 securities deposited by foreign corporations 33 when judgments do not constitute 77 Limitations of Actions: actions by s,uperintendent against directors, trustees or officers 81 actions on unaccepted claim 76 actions to recover savings bank deposits 248, 250 stockholders' liability : banks 120 safe deposit companies 322 trust companies 206 Liquidation by Superintendent: acceptance or rejection of claims 75 actions against directors, trustees or officers 81 actions by attorney-general to dissolve 59 appointment of special deputies 15 assessments, penalties and forfeitures entitled to priority 32 assets (see Assets). compounding debts and compromising claims 69 deposit of moneys collected 70 disposition of unclaimed dividends 78 dividends to creditors 78 effect of accepting claims 76 enforcement of stockholders' liability 80 filing list of accepted claims 75 how superintendent's possession may terminate 58 inventory of assets 66 limitation of actions on unaccepted claim 76 liquidating and conserving assets 69 notice to bailor to remove goods 68 notice to creditors to prove claims 72 notice to persons liolding assets 65 objections to claims 74 payment of expenses 63 power to make examination after taking possession 39 preference of actions by superintendent 71 Genekal Index. 513 (References are to Hections.t Liquidation by Superintendent — (Continued) : priorities (see Priorities). procedure wliere attorneys' liens are asserted 64 property held as bailee or depositary 67, 68 resumption of business 61 relief against closing by superintendent 60 special deputies, assistants, counsel etc 62 savings and loan associations: participation of shares in assets 402 savings banks : return of contributions 236 superintendent must list claims 73 stockholders' meeting after payment of creditors 79 superintendents power to sue, execute instruments, etc 71 superintendent exempt from filing and recording fees 71 termination of corporate existence 79 unclaimed deposits, dividends and interest 45 within what time claims may be proved 72 when judgments not liens 77 List: accepted claims 75 claims presented to superintendent 73 estimated market value of bonds 53 legal investments for savings banks 52 stockholders of trust company 183 unclaimed deposits, dividends and interest 46 Loans: collateral demand loans ( see Collateral Demand Loans ) . credit unions: additional security 468 loans to non-members prohibited 478 interest ( see Interest ) . personal loan companies: evidences of indebtedness 346 power to lend (see also Powers) : banks 106 credit unions 453 foreign banks 145 investment companies 293 personal loan companies 344 savings and loan associations 378 trust companies 185 33 514 Generat, Index. (References ai*e to sections. ► Loans — (Continued) : ri'strictions on (sec also Eestrictions) : ))anks 1»»S, 1S!> credit unions -'•"'■tj ^78 investment companies -''-t. ''f 1 personal loan companies 345 ]irivate bankers 164 safe deposit companies 310 savings and loan associations 386 trust companies 1"0, 222 savings and loan associations: repayment 402 usury ( see Usury ) . Location: branch offices ( see Branch Offices ) . change of location (see Change of Ijocation). restrictions as to (see Restrictions). statement in application or organization certificate: banks 100' credit unions 450 foreign banking corporations 144 foreign investment companies 303 investment companies 290 land bank 421 personal loan companies 340 personal loan brokers 350 private bankers 151 safe deposit companies 315 savings and loan associations 375 savings banks 180 trust companies 180 statement in notice of intention to organize: banks 101 savings banks 231 trust companies ; 181 Losses: calculation of net earnings: banks 1 Ui credit unions 458 savings and loan associations :;!14 savings banks 254 trust companies 202 chargeable against guaranty fund: credit unions 457 savings and loan associations 302, 393 savings banks 252. 253 (jENEKAL I-NDEX. 515 (Kefereiices are to NectioiiM.) Losses — (Continued) : payment out of hank's suipluii fund 117 payment out of initial guaranty fund 234 reduction of liability to depositors or shareholders: credit unions 462 savinf Penalties and Forfeitures: application of interest or proceeds of securities 34 bills payable otherwise than in money prohibited 142 disobedience of order as to keeping books: banks 109 investment companies 295 personal loan companies and brokers 367 private bankers 165 safe deposit companies 320 savings and loan associations 391 savings banks 246 trust companies 194 effect of change from state to national bank 137 encroachments on powers of banks 140 enforcement in name of superintendent 31 entitled to priority 32 excessive dividends to savings bank depositors 256 failure of private banker to give receipt 168 failure to report directors' examinations: banks 131 trust companies 216 failure to report to superintendent: banks 133 credit unions 477 foreign banks 147 foreign investment companies 298 investment companies 298 personal loan companies and brokers 365 private bankers 170 safe deposit companies , 329 savings and loan associations 413 savings banks 273 trust companies 218 failure to report unclaimed deposits: banks 134 private bankers 157 savings banks 274 trust companies 219 failure to submit agents' names to superintendent: foreign investment companies 307 forfeiture of corporate rights by non-user 485 liability of personal loan brokers 362 loans to non-members by credit unions 478 payment of recoveries into state treasury 19 prohibitions (see Prohibitions). 522 General Index. fRet'ereuce!* are to sectionw.) Penalties and Forfeitures — ( Continued ) : publishing statements calculated to deceive: personal loan companies and brokers 371 purchasing or loaning on own stock: banks 108 investment companies 294 trust companies 190 purchase of note issued for less than face value: banks 108 trust companies 190 unauthorized borrovfing by officer, director or employee: banks 139 investment companies 301 trust companies 222 unauthorized branch offices: banks 110 personal loan companies 349 unauthorized loans by officers, directors or employees: banks 139 investment companies 301 trust companies 190 unauthorized loans to officers, directors, etc.; banks 108 trust companies 190 unauthorized use of term " credit union " 479 unauthorized use of word " savings " 279 unlawfully engaging in personal loan business 369 use of sign or words indicating bank 141 usury: banks and bankers 114 loans under $200 368 trust companies 200 violation of restrictions by examiner 1.5 violations by foreign trust companies 223 violations of private banking law 172 Pensions: retirement of deputies, clerks and examiners 16 savings bank employees 27 1 Perjury: false report by foreign bank 147 Permanent Capital: conditions precedent to engaging in business: personal loan brokers , 361 private bankers 152 General Inuex. 523 (References are to Mectioiis.) Permanent Capital— (Continued) : €xamination as to payment of 24 examination of private banker 160 investment by private bankers 155, lt)2, 104 net earnings of personal broker 56 requirements as to: personal loan brokers 360 private bankers , 154 revocation of acceptance of affidavit 26 statement of amount in application certificate: personal loan brokers 359 private bankers 151 Personal Loan Associations: change to personal loan companies 343 Personal Loan Brokers: application certificate 359 assessments for expenses of banking department 17 books and records 367 conditions precedent to engaging in business 361 definition of 2 encroachment on powers of 368, 369 examinations by superintendent 39 investigation of applicant 23 liability for assessments by superintendent 366 liquidation (see Liquidation by Superintendent), penalties (see Penalties and Forfeitures). permanent capital 360 powers, duties and liabilities 362 publishing statements calculated to deceive 371 orders to reduce charges 56 reports to superintendent 365 restrictions on profits 364 revocation of authorization certificate 29 supervision of fourth deputy superintendent 13 title to be taken in descriptive name 304 Personal Loan Companies: annual meeting of stockholders 353 assessments for expenses of banking department 17 books and records 367 branch offices 349 capital requirements 340 change of location 362 communications from banking department 358 conditions precedent to commencing business 341 524 General Index. (References are to seetlouM.) Personal Loan Companies — ( Continued ) : definition of 2 encroachments on powers of 368, 369 examinations by sujjerintendent 3!) forfeiture of eorjjorate rights by non-suer 4S5 general powers 344 incorporation 340 incorporators (see Incorporators). liability for assessments by superintendent 366 liquidation (see Liquidation by Superintendent), merger (see Merger). monthly meeting of directors 357 net earnings and dividends 350 oath of directors 355 orders to reduce charges 56 organization certificate 340 publishing statements calculated to deceive 371 qualifications of directors 354 re-incorporation of personal loan associations 343 reports to superintendent 365 restrictions : assignments of wages or salary 347 evidences of indebtedness 346 loans, interest and charges 345 place of transaction of business 348 revocation of authorization certificate 29, 351 supervision of fourth deputy superintendent 13 term of office of directors 356 voluntary dissolution 486 when corporate existence begins 341 Peisonal Property: lien of safe deposit company 331 power to receive for safe keeping: banks 106 safe deposit companies 317 trust companies 185 superintendent's power to dispose of 69 Place of Business (see Location). Pledgees: liability as stockholders: banks 120 safe deposit companies 322 trust companies 206 General Index. 525 (References are to sections.) Population: definition of 3 Powers: banks 106 credit unions 453 encroachments on (see Prohibitions). investment companies 293 land bank 424 personal loan brokers 362 personal loan companies 344 restrictions on {see Restrictions). safe deposit companies 317 savings and loan associations 378 savings banks 238 specially cliartered trust companies 187 trust companies 183, 186 to hold stock of safe deposit company 190 Preference: actions by superintendent 71 priorities in assets (see Priorities). Preservation of Books and Records: banks 136 investment companies 300 personal loan companies and brokers 367 private bankers 16.5 trust companies 221 President: banks 128 trust companies 213 savings banks 263, 264 Presumptive Evidence: agreement for merger 488 documents bearing superintendent's seal 11 reports of superintendent and examiners 59 statements to directors or trustees: banks 129 personal loan companies 357 savings banks 264 trust companies 214 Priorities: assessments, penalties and forfeitures 32 depositors of private bankers 156 526 General Index. (RefeveiiceM are to sections.) Priorities — (Continued) : deposits by credit unions 456 deposits by land bank 437 deposits by savings and loan associations 414 deposits by savings banlcs 278 deposits by superintendent; moneys collected in liquidation 70 unclaimed deposits, etc 45 (leterlnination of priorities 78 superintendent not to determine 75 trust funds lield by trust company 188 Private Bankers: affidavit to obtain exemptions: contents 160 duties of superintendent 25 revocation of acceptance 26, 158 annual report of unclaimed deposits 157 application certificate 151 assessments for encroachments on reserves 30 assessments for expenses of banking department 17 bills payable otberwise tban in money prohibited 142 books and records 165 change of location 159 conditions precedent to transacting business 152 definition of 2 deposits of securities with superintendent 161 examinations by superintendent 39 exemptions 160 increase or decrease of permanent capital 154 investigation of applicant 23 investments of capital and deposits 155, 162 liquidation (see Liquidation by Superintendent). monthly meetings and reports 169 permanent capital 154 preference of deposits in case of insolvency or suspension 156 rate of interest 114 reserves 166 restrictions : as to place of business 171 purchases of and loans on real estate 164 revocation of authorization certificate 29, 158 rights and privileges under authorization certificate 153 sale of real property and securities 163 termination of surety company's liability 161 title to be taken in descriptive name 155 General Index. 527 (Reference** are to seetionM.) Private Bankers — (Continued) : transfer of securities held by comptroller 161 transfer of securities licld by surety company 161 transmission of money by 167, 108 use of sign or words indicating bank 141 usury 114 violations of article prohibited 172 what private bankers subject to banking law 150 Process: service on superintendent (sec Foreign Corporations). Prohibitions: advertisements )iy savings banks of surplus or guaranty fund 238 against encroachments on powers: of banks 140 of investment companies 302 of trust compani<'s 223 relating to interest 368 bills payable otherwise than in money 142 foreign corporations cannot transact savings and loan business 420 investment by private bankers of permanent capital and deposits. . . . 162 loans to non-members of credit unions 478 publishing statements calculated to deceive: personal loan companies and Inokers 371 unauthorized use of word " savings " 279 unlawfully engaging in personal loan business 369 use of sign or words indicating bank 141 use of term " Credit Union " 479 violations of private banking law 172 Proof of Claims (see Claims of Creditors). Publication: annual report of unclaimed deposits, etc.: banks 134 private bankers 157 savings banks 274 trust companies 219 examiners' and special agents' reports 41 list of unclaimed deposits, etc 46 notice of annual meeting of land bank 436 notice of assessment of stockholders: banks 121 safe deposit companies 323 trust companies 207 528 General Index. (References are to sectionN.) Publication — (Continued) : notice of intention to cliange location : banks 119 designation of newspaper by superintendent 50 investment companies 296 savings and loan associations 403 savings banks 259 trust companies 205 notice of intention to organize: banks 101, 102 designation of newspaper b}' superintendent 20 savings banks 231, 232 trust companies 181, 182 notice of meeting of stockholders after payment of creditors 79 notice of revocation of authorization certificate or license 29 notice to creditors to prove claims 72 reports to superintendent: banks 133 summary of reports 43 trust companies 218 Qualifications: directors (see Directors). incorporators (sec Incorporators). superintendent of banks 10 trustees of savings banks 260 Quorum: directors (see Directors). trustees of savings lianks 264 Sailroad Bonds: investments of savings banks 239 Rate of Interest (see Interest). Real Estate: extension of time to dispose of 49 how carried on books; banks 109 savings and loan associations 391 savings banks 246 trust companies 194 powers and restrictions as to: banks 106, 107, 108 land bank 424, 425 private bankers 162, 163, 164 savings and loan associations 384, 386, 387 savings banks 238, 239, 240 trust companies 185, 189, 190 superintendent's power to dispose of 69 Gexeeal Index. 529 (Refei'eiiceM iire to MectloiiN.) Receipt : for money received by private banker for transmission 168 for securities deposited witli superintendent 36 for unclaimed deposits, dividends and interest 45 Receivers: enforcement of stocliholders' liability by : banks 120 safe deposit companies 322 trust companies 206 trust companies as 185, 188 wben examiner sliall not be appointed 15 Recording: autliorization certiiicate 24 conveyances : to banks 107 to savings and loan associations 387 to savings banks 240 to trust companies 189 exemption of superintendent from recording fees 71 instruments sealed by superintendent 11 mortgages : to banks j 08 to savings and loan associations 386 to savings banks 241 to trust companies .' . 190 Records : preservation of (see Preservation of Books and Records). Reduction of Capital: jiot to be authorized on resumption of business 61 private bankers 154 personal loan brokers 360 References: to determine objections to claims 74 Registrar: powers of trust company 85 Avhat corporations may act as 223 Registration : securities deposited with superintendent 33 Re-incorporation : investment companies 309 national changing to state bank 104 34 530 Geneeal Index. (References are to seotioiiK.) Re-incorporation — (Continued) : personal loan associations 343 state bank changing to national 137 state bank changing to trust company -SS Rejection: claims of creditors 75 Removal of Examiner: grounds for 15 Renewal: license to foreign corporations -T, 146 Report of Superintendent 83 Reports to Superintendent: by corporations and persons subject to banking law: banks 133 credit unions 477 extension of time by superintendent 49 foreign banks -47 foreign investment companies 298 foreign reserve depositaries 38 investment companies 298 personal loan companies and brokers 365 powers and duties of superintendent i 42 private bankers 170 publication of (see Publication). safe deposit companies 329 savings and loan associations 413 savings banks 273, 275 trust companies 218 by examiners and special agents 41, 59 of directors examinations: banks 131 trust companies 216 of unclaimed deposits, etc. (see Unclaimed Deposits, Dividends and Interest ) . special reports (see Special Reports to Superintendent). Reserves: banks 112 deposit in federal reserve bank 112 designation of depositaries 38 encroachments on ( see Encroachments on Reserves ) . private bankers 166 reserve depositary defined , 3 reserves on deposit defined 3 reserves on hand defined 3 trust companies 197 General Index. 531 (References ai'e to KeetioiiN.) Restrictions: as to bookkeeping: banks 109 investment companies 295 personal loan companies and brokers 367 safe deposit companies 320 savings and loan associations 391 savings banks 246 as to branch offices (see Branch Offices). as to deposit of funds: banks Ill savings banks 244 trust companies 196 as to place of business: personal loan brokers 362 personal loan companies 348 private bankers 171 savings banks 245 as to purchases of, or loans on stock (see Stock). as to real estate ( see Real Estate ) . on banks (see Banks). on credit unions (see Credit Unions). on examiners 15 on foreign corporations (see Foreign Corporations). on individual bankers (see Individual bankers). on investment companies (see Investment Companies). on land bank (see Land Bank). on officers, directors and employees: banks 139 investment companies 301 savings and loan associations 409 savings banks 267 trust companies 222 on personal loan brokers (see Personal Loan Brokers). on personal loan companies (see Personal Loan Companies). on private bankers (see Private Bankers). on safe deposit companies (see Safe Deposit Companies). on savings and loan associations (see Savings and Loan Associa- tions) . on savings banks (see Savings Banks). on trust companies (see Trust Companies). Resumption of Business: after closing by superintendent 61 Retirement: of deputies, clerks and examiners 16 532 General Izv^dex. (References are to MectioiiM.) Return of Securities: deposits with superintendent 37 Revocation: of acceptance of private banker's affidavit 26, 158 of authorization certificate (see Authorization Certificate), of license (see Foreign Corporations). Safe Deposit Companies: annual meeting of stoelcholders 324 assessments foi- expenses of banlcing department 17 assessment of stockholders when capital Impaired 323 books and records 320 branch offices 318, 319 capital requirements 315 change of location 321 communications from banking department 328 conditions precedent to commencing business 316 definition of 2 disposition of deposited property on liquidation 67, 63 examinations by superintendent 39 forfeiture of corporate rights by non-user 485 general powers 317 incorporation 315 incorporators (see Incorporators). liability for assessments by. superintendent 330 liquidation (see Liquidation by Superintendent), merger ( see Merger ) . oath of directors 326 organization certificate 315 penalties ( see Penalties and Forfeitures ) . power of bank to hold stock 106 power of trust company to liold stock 190 qualifications and disqualifications of directors 325 remedy for nonpayment of box rent 331 reports to superintendent 329 restrictions on powers 319 special remedies applicable to 331 stockholders, rights and liabilities of 322 tenure of office of directors 327 voluntary dissolution 486 when corporate existence begins 316 Salary (see Compensation). "Savings": unauthorized use of word prohibited 279 Gexeeat, Index. 533