Gt Gl li^alifei^Fma jmiMMi 1919 "AMENDMENTS r•^;•'«■«5•«,<'-^<•f%■''^. ' *'^ *^ c^ '* ^< ^. :r ;V. ings in schools, j^g among the children of the schools of this state, a bank may, with the written consent of and under regulations approved by the superintendent of banks and, in case of public schools, by the board of education or board of school trustees of the city or district in which the school is situated, arrange for the collection of savings from the school children by the principal or teachers of such schools or by collectors. The principal, teacher or per- son authorized by the bank to make collections from the school children shall be deemed to be the agent of the bank and the bank shall be liable to the pupil for all de- posits made with such principal, teacher or other person, the same as if the deposits were made by the pupil Penalty for violation directly with the bank. Every bank and every such officer of section. . i . i • • r i • • in or director violatmg the provisions or this section shall forfeit to the people of the state the sum of one hundred dollars for every day during which any branch office hereafter opened shall be maintained without such w^rit- ten approval. [Note by Publishers, re Section 9, amended 1917: BRANCH BANKS: Under the law as it stood previous to this amendment of 1917, a branch office could be opened with a capital of but $25,000 in excess of the amount otherwise required for the conduct of the business of the bank in the locality where the principal business of the bank was located. The amendment of 1917 requires that where a bank opens a branch office in any place in this State other than the place where the principal business of such bank is transacted, the capital of such bank, actually paid in, in cash, shall exceed the amount re- quired by the act in the sum required by the act for every bank organized after [20] BLYTH, WITTER & CO. §10-11 said amendment in the place where each branch office is to be opened. For instance, a bank not having a trust department and having its principal place of business in San Francisco, is required to have $300,000 capital. Such an institu- tion under authority of the law without this amendment might have opened a branch office in Los Angeles with an additional $25,000, while a new bank in Los Angeles would have to have $300,000 capital, the same as in San Francisco. This amendment requires that the San Francisco bank must have a capital of not less than $600,000, to open a branch office in Los Angeles. An additional change made by this amendment, is that no branch, once it is opened, shall be closed without the approval of the Superintendent of Banks. The purpose of that is, of course, to prevent a bank from opening a branch in some place to control business and then subsequently closing the branch and trans- ferring the business of its depositors to some other place, leaving the community without any banking facilities.] Section 1 0. No person shall be eligible for election as Directors. director of a bank having a capital stock unless he is a stockholder of the bank, owning, in his own right, shares thereof of the par value of at least five hundred dollars; and every person elected to be director who, after such Birector after eiec- ,. Ill II •!• •!/• *'°" ceasing to own, election, shall cease to be the owner m his own right or or pledging, quaiify- the amount of such stock aforesaid, or shall hypothecate supt., etc. or in any way pledge such stock as security for any loan or debt shall immediately notify the superintendent of banks in w^riting of such sale or hypothecation and such director may be removed from the office of director by the superintendent of banks; provided, however, that any Executor or adminis- ... , . . . trator when eligible executor or executrix, administrator or administratrix as director. holding shares of a bank of the par value of five hundred dollars, in his or her representative capacity shall be eligible for election as a director thereof. If a bank be organized without capital stock, no person shall be eli- gible as a director thereof unless be is both a member and a depositor of such bank. Section 1 1 . The board of directors of a bank organized Directors' Meetings _ to be held at least under the laws of this state must hold a meeting in its once a month. banking premises at least once a month. Each such director, when appointed or elected, shall take an oath oath of directors. that he will, as far as the duty devolves on him, diligently and honestly administer the affairs of such bank, and will not knowingly violate or willfully permit to be violated any of the provisions 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 par value required by section ten of this act, [21] § 11.12 BLYTH, WITTER & CO. subscribed by him or standing in his name on the books of the bank, and that the same to an amount equal to the par value of at least five hundred dollars, are not hypoth- ecated or in any way pledged as security for any loan or debt. Such oath shall be subscribed by the director making it, certified by the officer before whom it is taken, and immediately transmitted to the superintendent of banks and filed and preserved in his office; provided, the Oath required of managers or agents residing in this state, of a foreign Resident Managers " . . i i • i • • l • or Agents, corporation transacting any banking business m this state, shall take an oath that they will, as far as the duty de- volves on them, diligently and honestly administer the affairs of such bank, and will not knowingly violate or wilfully permit to be violated any of the provisions of law applicable to such bank. Such oath shall be sub- scribed by the managers or agents taking it, certified by the officer before whom it is taken, and immediately transmitted to the superintendent of banks and filed and preserved in his office. Person, firm, cor- Section 1 2. No person, firm, company, copartnership poration, etc., not subject to super- or Corporation, either domestic or foreign, not subject to vision of Supt., and unauthorized under the Supervision of the superintendent of banks, and not Act — shall not ad- vertise acceptance of required, by the provisions of this act, to report to him, money or savings, or . . ._ ii- do acts inducing be- and w^hich has not received a certihcate to do a banking lief that place or , . ^ , . , r i i i ii i office is that of bank business trom the superintendent or banks, shall adver- or trust company. . i i - • • • tise that he or it is receiving or accepting money or sav- ings, and issuing notes or certificates of deposit therefor, or shall make use of any office sign, at the place where such business is transacted, having thereon any artificial or corporate name, or other w^ords indicating that such place or office is the place or office of a bank or trust company, that deposits are received there or payments Shall not use station- made on check, or any other form of banking business ery, name or words . , i i ii i r indicating place or transacted, nor shall any such person or persons, hrm, office is that of bank . i • •.• j •.• £ or trust company, Company, Copartnership or corporation, domestic or ror- ^ °" eign, make use of or circulate any letterheads, billheads, blank notes, blank receipts, certificates or circulars, or any [22] GENERAL PROVISIONS §J2 written or printed, or partly written and partly printed, paper, whatever, having thereon any artificial or cor- porate name or other word or words indicating that such business is the business of a bank, savings bank or trust company; nor shall any such person, firm, company, copartnership or corporation, or any agent of a foreign corporation not having an established place of business in this state, solicit or receive deposits or transact business in the way or manner of a bank, savings bank or trust company, or in such a way or manner as to lead the pub- lic to believe that its business is that of a bank, savings bank or trust company. Nor shall any person, firm, company, copartnership or corporation, domestic or foreign, not subject to the supervision of the superintendent of banks, and not required by the provisions of this act to report to him, and which has not received from the superintendent of banks a certificate to do a banking business, hereafter transact business under any name or title w^hich contains the word "bank," or "banker," or "banking," or "sav- ings bank," or "savings" or "trust" or "trustee" or "trust company"; provided, that this section shall not apply to Section shall not ap- I f 1 •! !• 11 • • ply to name of exist- the corporate name of any building and loan association ing Bidg. & Loan now or heretofore doing business in this state; and pro- vided, further, that any such association having in its Nature of business I I 1 • 1- • 1 °^ Bldg. & Loan corporate name words not clearly indicating the nature Assn. must be shown, r • 1 • 1 11 11 • 1 1 1 11 . by its title or or its business shall, on all signs, letterheads and advertis- advertising. ing matter, state "This is a building and loan association" or words to that effect; and provided, further, that any building and loan association may borrow money, issue investment certificates or evidences of indebtedness, stat- ing the rate of interest and terms and conditions of repay- ment, and do such other business as may be authorized by the laws of the state relating to building and loan as- sociations; and provided, further, that no such associa- No Bidg. & Loan Assn. shall hold itself tion shall advertise or hold itself out to the public as a out as savings bank. savings bank. Any person, firm, company, copartner- ship or corporation, domestic or foreign, violating any [23] § 12.12a BLYTH. WITTER & CO. provision of this section shall forfeit to the state one hundred dollars a day for every day or part thereof during which such violation continues. Upon action brought by the superintendent of banks the court may issue an injunction restraining any such person, firm, com- pany, copartnership or corporation from further using such words in violation of the provisions of this section or from further transacting business in such a way or manner as to lead the public to believe that its business is that of a bank, savings bank or trust company during the pendency of such action and for all time and may make such other order or decree as equity and justice may require. Every person, firm, Section 1 2a. Every person, firm, company, copart- corporation, etc., do- _ . c . ■, . , mestic or foreign— nership or corporation, domestic or foreign, advertising that he or it is receiving or accepting money or savings. Advertising transac- and issuing notes or certificates of deposit therefor, or savings bank"or advertising that he or it is transacting the business of a *™eL!°i^any^forrai bank, savings bank or trust company, or making use of ^^^' any office sign at the place where such business is trans- Must have proper acted, having thereon any artificial or corporate name, or capital paid in and , i • i- • i i i ad • t-l. set aside and have other words indicating that such place or ornce is the received certificate , /r-rii l il_tJ from supt. place or office of a bank, or trust company, or that de- posits are received there or payments made on check, or that interest is paid on deposits, or that certificates of deposit, either with or without interest are being issued, or that any other form of banking business is transacted, and every person, firm, company, copartnership or cor- poration, domestic or foreign, making use of or circulat- ing any letterheads, billheads, blank notes, blank receipts, certificates or circulars, or any written or printed, or partly written and partly printed, paper, whatever, hav- ing thereon any artificial or corporate name, or adver- tising that such business is the business of a bank, savings bank or trust company, must have the proper capital Penalty, stock paid in and set aside for the purpose of transacting such business, and must have received from the superin- [24] GENERAL PROVISIONS § \2i tendent of banks, as provided for in this act, a certificate to do a banking business. Any person, firm, company, co- partnership or corporation, domestic or foreign, violating any provision of this section shall forfeit to the state one hundred dollars a day for every day or part thereof dur- ing which such violation continues. Upon action brought by the superintendent of banks the court may issue an injunction restraining any such person, firm, company, copartnership or corporation from further violating any provision of this section, and may make such further order or decree as equity and justice may require. Every Every person, firm, , . . corporation, etc., person, firm, company, copartnership or corporation transacting any busi- , , . . £ L U • "^^^ defined in Sec. doing any of the things or transacting any or the business must do so under Bank Act. defined in this section, must transact such business ac- cording to the provisions of the bank act, and the super- intendent of banks or his deputy or examiners shall have authority to examine the accounts, books and papers of every such person, firm, company, copartnership or cor- poration, domestic or foreign, in order to ascertain whether such person, firm, company, copartnership or corporation has violated or is violating any provisions of this section; provided, that this section shall not apply to Section not applicable _ _ . . to corporate name of the corporate name of any building and loan association existing Bidg. & . I . . 1 . 1 Loan Assn. nov/ or heretofore doing business in this state; and pro- vided, further, that any such association having in its corporate name words not clearly indicating the nature of its business shall, on all signs, letterheads and adver- tising matter, state: "This is a building and loan associa- tion" or words to that effect; and provided, further, that Any Bidg. & Loan Assn. may borrow any building and loan association may borrow money, money, etc. issue investment certificates or evidences of indebtedness, stating the rate of interest and terms and conditions of repayment, and do such other business as may be author- ized by the laws of the state relating to building and loan associations; and provided, further, that no such No Bidg. & Loan ... A«.sn. shall hold itself association shall advertise or hold itself out to the public out as savings bank. as a savings bank. [25] § 1 2b- 1 2c BLYTH. WITTER & CO. Right of foreign cor- Section 12b. Nothing in this act shall be construed or poration chartered as life insurance and held to apply to any corporation organized under the lav/s trust company to use ^ ^ ^ .^ » -■ corporate title, of any Other state which is authorized by its charter or articles of incorporation to transact the business of life insurance and also to be known as and to transact busi- ness as a trust company and which shall have complied with the laws of the state affecting the transaction in this state of the business of life insurance by a foreign cor- poration and which shall have heretofore engaged in such business of life insurance in this state, in such man- ner as to forbid or prevent its making use of its corporate title in its life insurance business in this state in any such way and to any such extent as it might have made use of the same if this act had not been passed. Foreign corporation Section 1 2c. Any Corporation organized under the complying with laws of California not en- laws of anv country or state other than this state which gaged in banking may maintain has Complied with all of the laws of this state pertaining state offices to lend . . . . . . money, buy or sell to foreign Corporations and is not engaged in the business of banking or receiving money on deposit in this state may lend money or buy and sell bonds in this state, and for that purpose, may maintain offices in this state, and sue and be sued in this state under its proper corporate name, notwithstanding any prohibitions contained in this act as to the use of any words in the name, signs or adver- tising matter of corporations not under the supervision of Representative of the Superintendent of banks; provided, that nothing in foreigrn banking or , . , ,, , , i -i • trust company not tiiis act Shall be construcd to prohibit any representative prohibited from £ f • i i • • r ... maintaining as such ot any toreign banking corporation rrom maintaining an office in this state as the office of a representative and not the place of business of a bank or trust company, nor to prohibit such representative from making use of any office sign at the place where such representative's office is maintained having thereon words indicating that such office is the place of business of a representative of a for- Such representative • i i i • i i r i i may use foreign eign bank or trust company; and provided, further, that hank's printed mat- . r f • i i ... _, ter in transacting any representative or a foreign bank maintaining an office business as repre- ..... . - ir-ii» sentative. Within this state may make use or such toreign bank s [26] GENERAL PROVISIONS § 12c- 1 3 letterheads, circulars and other printed matter in the transaction of business as such representative; and pro- vided, further, every representative of any foreign bank Such representative ' * ' -' ^ ^ ^ must first obtain or trust company before opening an office as a repre- license from supt. ^ -^ ir ^ _ to open office. sentative shall have received a license from the superin- tendent of banks to open such representative's office. Such license may be issued upon application to the super- intendent of banks and the payment of an annual license fee of fifty dollars and may be refused or revoked by the superintendent of banks at his discretion. [Note by Publishers, re Section 12c, amended 1917: This amendment allows a representative of a foreigm bank to open an office in this State for the purpose of distributing information and assisting in a general way in the conduct of the banking business. Under the law as it stood, it was impossible for a foreign bank to open an office in this State at all, unless it qualified by assigning the required capital and receiving a certificate from this State. It was concluded that this was an unnecessary restriction and that repre- sentatives of foreign banks might properly open offices to assist in the distribu- tion of knowledge and gathering of information that is very helpful not only to themselves but to the banks of this State, and this amendment extended that privilege. ] Section 1 3. No corporation, domestic or foreign, other Power of express company to handle than a corporation formed under or subject to the bank- exchange, etc. ing laws of this state or of the United States, except as permitted by such laws, or other than an express com- pany as hereinafter defined in this section, shall by any implication or construction be deemed to possess the power of carrying on the business of discounting bills, notes or other evidences of debt, of receiving deposits, of buying and selling bills of exchange, or of issuing bills, notes or other evidences of debt for circulation as money, or of engaging in any other form of banking; nor shall any such corporation, except an express company having contracts with railroad companies for the operation of an express service upon the lines of such railroad companies, or a transatlantic steamship company, or a transpacific steamship company, or a telegraph company, or a tele- phone company, possess the power of receiving money for transmission or of transmitting the same, by draft, traveler's check, money order or otherwise. [Note by Publishers, re Section 13, amended in 1917. The purpose of this amendment was to simplify the expression of the section and better to control the activities of express companies and telephone and tele- [271 § 14-15 BLYTH, WITTER & CO. graph companies in the matter of handling exchange. The Bank Act formerly contained a strict prohibition against the exercise of this banking function except by banks. In 1915 the law was amended that transportation and express com- panies might receive a certificate under certain circumstances, but that also was found not quite to meet the case. The State Sanking Department believe that this amendment makes it better and easier for such corporations to perform their service and at the same time not encroach upon the proper field of banking.] Advertisement of Section 1 4. No bank, or officer thereof, shall advertise capital. . 1 !• 1 r I 1 in any manner, or publish any statement or the capital authorized or subscribed, unless it or he advertise and publish in connection therewith, the amount of capital Joint advertising actually paid up. No bank shall publish a statement of condition of two banks, its resources or liabilities in connection with those of any other bank, unless such statement shall show the resources and liabilities of each bank separately; nor shall surplus and undivided profits be advertised as an aggregate. All deposits, un- Section 1 5. All amounts of money heretofore or here- claimed or not with- "^ drawn for 20 years, after deposited with any bank to the credit of depositors to be deposited with State Treasurer, who have not made a deposit on said account or with- after judgment, as provided by law. drawn any part thereof or the interest and v/hich shall have remained unclaimed for more than twenty years after the date of such deposit, or withdrawal of any part or principal or interest, and where neither the depositor or any claimant has filed any notice with such bank show- ing his or her present residence, shall, with the increase and proceeds thereof, be deposited with the state treas- urer after judgment in the manner provided in the Code Court procedure to of Civil Procedure. At the time of issuing the summons be followed in ob- . , . • i i r • • i T7 -? r i i^ i t taining such judg- in the action provided tor in section \Li 5 or the v^ode or ment against bank ^. ., r-j , i i i i ii i • • • i and all claimants, v^ivil rrocedure, the clerk shall also issue a notice signed by him, giving the title and number of said action, and referring to the complaint therein, and directed to all persons, other than those named as defendants therein, claiming any interest in any deposit mentioned in said complaint, and requiring them to appear within sixty days after the first publication of such summons, and show cause, if any they have, why the moneys involved in said action should not be deposited with the state treasurer as in said section provided, and notifying them that if they do not so appear and show cause, the state [281 GENERAL PROVISIONS §_[5 v/ill apply to the court for the rehef demanded in the complaint. A copy of said notice shall be attached to and published with the copy of said summons required to be published by said section, and at the end of the copy of such notice so published there shall be a state- ment of the date of the first publication of said summons and notice. Any person interested may appear in said Any person inter- , . ested may become action and become a party thereto. Upon the completion pai'.y to action. of the publication of the summons and notice, and the service of the summons on the defendant bank, or banks, as in said section 12 73 of the Code of Civil Procedure provided, the court shall have full and complete jurisdic- tion over the state, and the said deposits and of the per- son of every one having or claiming any interest in the said deposits, or any of them, and shall have full and complete jurisdiction to hear and determine the issues therein, and render the appropriate judgment thereon. The president or managing officer of every bank must, President or manag- within fifteen days after the first day of January of every must annually return . . f 1 1 11 sworn statement year, return to the superintendent of banks and to the showing matters set state controller a sw^orn statement showing the names of depositors known to be dead, or who have not made fur- ther deposits, or withdrawn any moneys during the pre- ceding twenty years. Such statement shall show in detail the following matters, viz. : First — ^The name and last known place of residence or postoffice address of the person making such deposit; Second — The amount and date of such deposit and whether the same are in moneys or securities, and if the latter, the nature of the same; Third — The interest due on such deposit, if any, and the amount thereof; Fourth — The sum total of such deposit, together with the interest added thereto due from such bank on account of such deposit or deposits and the interest thereon to [29] forth in section. § 15 BLYTH, WITTER & CO. such depositor, but nothing contained herein shall require any corporation or person renting lock boxes or safes in vaults for storage purposes to open or report concerning Aforesaid reports property Stored therein. Such reports itemized as afore- shall be sworn to. • i i ii i • 11.^1 1 • .1 i said shall be signed by the person making the same and shall be sworn to before a person competent to adminis- ter oaths as a full, complete and truthful statement of each of the items therein contained. Bank must return The president or managing officer of every bank must, biennial statement . , . r of depositors de- within fifteen days after the first day of January of every ceased or not making or withdrawing de- odd numbered year, return to the superintendent of banks posits during preced- 1 • 1 r i • ing 10 years, a sw^orn Statement showing the names of depositors known to be dead, or who have not made further de- posits, or withdrawn any moneys during the preceding What such state- ten years. Such statements shall show the amount of ments shall show. 1 1 • • 1 1 the account, the depositor s last know^n place of residence or post-office address, and the fact of death, if known to such president or managing officer. Such president or Notice of deposits to managing officer must give notice of these deposits in one be published. & t> fc. ^ ^ f or more new^spapers published in or nearest to the town or city where such bank has its principal place of busi- ness, at least once a w^eek for four consecutive weeks, the cost of such publication to be paid pro rata out of such Section not appiic- unclaimed deposits. This section does not apply to any able to deposit by or,.,, ., - , , in name of person deposit made by or m the name of a person know^n to the known to officer to . •, . _~ 1 i- • t-i be living, president or managing omcer to be living. 1 he superin- tendent of banks must incorporate in his subsequent re- port such returns made to him as provided in this sec- Penaities. tion. If any president or managing officer of any bank neglects or refuses to make the sworn statements required by this section such bank shall forfeit to the State of California the sum of one hundred dollars a day for each day such default shall continue. Any president or manag- ing officer of any bank w^ho violates any of the provisions of this section shall forfeit to the State of California the Date of receipt of sum of One hundred dollars a day for each and every deposits transferred i i-i.- iii •• i-.i r from another bank. Clay such Violation shall concmue. ror the purposes or [30] under Section not thereafter liable. GENERAL PROVISIONS § 15-17 this section all deposits received by any bank under the provisions of section thirty-one or section thirty-one-a of this act shall be deemed to have been deposited with such bank at the time the deposit was made with the bank from w^hich the deposit was transferred ; provided, Bank making deposit , 111-1111 1 1 ••11 with State Treasurer that any bank which shall make any deposit with the state treasurer in conformity with the provisions of this section shall not thereafter be liable to any person for the same and any action which may be brought by any person against any bank for moneys so deposited with the state treasurer shall be defended by the attorney general with- out cost to such bank, [Note by Publishers, re Section 15, as amended 1915: A copy of Section 1273, Code of Civil Procedure, which section is referred to in the above section is set forth in Appendix at the end of this Act.] (Section 16. Repealed 1919.) [Note by Publishers, re Section 16, repealed 1919: The first paragraph of Sec. 16 is simply declarative of the right of Savings Banks to indulge a joint deposit with right of survivorship. It was not deemed necessary to retain that part of the section. (See Crowley vs. Union Savings Bank and Trust Co., 30 Cal., App. 144, and McCarty vs. Holland, 30 Cal., App. 495.) The second and last paragraphs of Section 16 of the Bank Act and Section 1454 of the Code of Civil Procedure were substantially the same. Both related to a privilege granted to certain surviving heirs of a deceased depositor in a bank to withdraw from that bank any sum not greater than $1,000 if that sum is the aggregate of all moneys deposited in banks of this State by the deceased deposi- tor. There was pending before the Legislature at the 1919 Session just closed an amendment to said Section 1454 to permit, under similar conditions, the addi- tional right of receiving personal property on deposit or iu safe deposit boxes in an amount not to exceed $500. In order not to provoke a conflict as between that Section and Section 16 of the Bank Act, Section 16 was repealed. The amendment to Section 1454, however, failed of passage, and the subject is therefore governed by Section 1454 in its existing form. For a copy of said Section, see Appendix.] Section 17. Every bank now in existence or here- ^ank^haii keep ac- -' cessible list of stock- after organized shall keep in its offices, in a place access- ible to the stockholders, depositors, and creditors thereof, and for their use, a book containing a list of stockholders in such corporation, and the number of shares of stock held by each ; and every such bank shall keep posted in Bank shall post in _~ . . . .11 1 1 T office accessible to its office, in a conspicuous place, accessible to the public putuc a list of di- , , , . 1 rectors and their generally, a notice signed by the president or secretary, share holdings. showing: 1 . The names of the directors of such bank. 2. The number and the par value of the shares of stock held by each director. [31] holders and their holdings. § 17-19 BLYTH. WITTER & CO. Entries on such The entries on such book and such notice shall be made bock and notice to •be posted within 24 ^^d posted within twentv-four hours after any transfer hours after stock ^ transfer, of stock, and shall be prima facie evidence against each director and stockholder of the number of shares of stock held by each. (Section 18. Repealed 1913.) Percentage of paid- Section 19. The aggregate of paid-up capital together up capital and sur- . t i i r -ill 1 plus to deposits. With the surplus, or every commercial bank, must equal ten per centum of its deposit liabilities. The aggregate Percentage of paid- of paid-up Capital and surplus of every savings bank up capital and sur- i- -iltl itL £1£ plus of savings bank having a Capital stocK, and the reserve fund or every a^nd^e'seive^funTof saviugs bank without a capital stock, must equal the fol- iavings bank wit! out capital stocl savings an ui^^- jgy^jj^g percentages of its deposit liabilities: (a) Ten per centum of any amount up to and includ- ing two million dollars. (b) Seven and one-half per centum of any amount in excess of two million dollars up to and including five million dollars. (c) Five per centum of any amount in excess of five million dollars up to and including fifteen million dollars. (d) Two and one-half per centum of any amount in excess of fifteen million dollars up to and including forty million dollars. (e) One per centum of any amount in excess of forty million dollars. Restriction on in- The deposits shall not be increased if such proportion crease of deposits. r • t • i i i r i i • or paid-up capital and surplus or reserve fund to deposit liabilities is not maintained, and in no event shall said paid-up capital be less than the minimum paid-up capital provided by this act; provided, that such deposit liabilities Deposit liabilities ,,,, ,. ¥t-o to be exclusive of shall be exclusive of United States and postal savings de- governmental de- . . ric r r> i-r posits, posits and deposits of the State of California and of any [32] GENERAL PROVISIONS § 19-20 county and municipality in the State of California which are secured as required by law. [Note by Publishers, re Section 19, amended 1919: This amendment releases deposits of the United States and deposits of the State of California and of any county and municipality in the State of California which are secured as required by law from the aggregate of deposit liability against which capital must be maintained in the commercial and savings banks of this State. The fact that these public deposits are secured makes it unnecessary to require a double security by adding to the collateral pledged by the bank for the deposits an increase in capital of the bank. The purpose of the amendment is to relieve State banks, without in any sense lessening their responsibility in capital, from a burden which the national laws do not require from National banking associations.] Section 20. Every commercial bank shall maintain commercial bank to , . . 1 • 1 • f ™a-intain total re- total reserves against its aggregate deposits, exclusive of serves against ag- rr.ic? 1 1 . 1 . 11 . r gregate deposits as United otates and postal savings deposits and deposits or specified. the State of California and of any county and municipality in the State of California, which are secured as required by law, as follows: 1 . Eighteen per centum of such deposits if such bank has its principal place of business in a city having a popu- lation of one hundred thousand or over. 2. Fifteen per centum of such deposits, if such bank is located in a city having a population of fifty thousand or over and less than one hundred thousand. 3. Twelve per centum of such deposits if such bank is located elsewhere in the State. At least one-half of the total reserves shall be main- Total reserves; how 1 111111 r 1 1 1 1 maintained and con- tained as reserves on hand and shall consist of gold bul- stituted. lion or any form of money or currency authorized by the laws of the United States, and the remainder of the total reserves required by the provisions of this section shall be maintained as reserves on deposit or as reserves on hand; such reserves on hand to consist of gold bullion or any form of money or currency authorized by the laws of the United States; provided, however, that all or any ah or part of re- _„_. £ j.l_ 1 1 • 1 1 . 11 serves may be de- part or the reserves may be deposited, subject to call, posited with Federal with a federal reserve bank in the district in which such bank is located. [331 § 20 BLYTH. WITTER & CO. Bank becoming mem- jf a^v bank shall have bccome a member of a federal ber of Federal Re- ,,.,,, i • i i serve Bank to com- reserve bank, It shall comply with the reserve require- ply with require- i r i i l • 1 J ments of Federal rnents of the federal reserve act and its amendments, and its compliance therewith shall be in lieu of, and shall relieve such bank from compliance with, the provisions of this section. Penalties for not Jf a^y bank shall not maintain the total reserves re- maintaining total 1 r 1 1 • 1 reserves required, quired the Superintendent of banks may impose a penalty upon it, based upon the length of time such encroachment upon its total reserves amounting to one per centum or more of its aggregate deposits shall continue, at the fol- lowing 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 additional 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 ex- ceeding four per centum of such deposits. 4. At the rate of twelve per centum per annum upon any additional encroachment in excess of four per cen- tum of such deposits. Designation by Supt. The Superintendent of banks shall, in his discretion, of depositary for , . . , U 1 J • .. J reserves on deposit, upon the nomination or any bank, designate a depositary or depositaries for the reserves on deposit of such bank provided for by this act. Except as otherwise provided in this section, such depositary shall be a bank or na- tional banking association located in this state. Every Total-reserve require- reserve depositary, which has its principal place of busi- ™^° ^depoTitlr^! ncss in a judicial township or in a city located in this state in which the population is less than fifty thousand, shall have at all times as its total reserves an amount equal to 134] GENERAL PROVISIONS § 20 the total reserves required by the provisions of this sec- tion for every bank which has its principal place of busi- ness in a city having a population of fifty thousand or over and less than one hundred thousand. But no bank Requirements of bank 111- • • 1111 r 1 1 . ""■ ^**'' I'an^ins or national banking association shall hereafter be desig- Assn. to be desig- I , . - , , 111 °*t6 i^ priority of security any such bank are a security to depositors and stock- over stockholders. holders, depositors having the priority of security over stockholders. [371 §2 la BLYTH, WITTER & CO. Preference to depos- Section 2 1 a. No bank, banker, or bank officer, shall itor or creditor pro- hibited, except as give Dcrference to any depositor or creditor except as otherwise author- => ^^ i i i • i i i ized; otherwise authorized by law; provided, that any commer- cial bank or commercial department of a departmental Provided, commer- bank, is authorized and empowered for temporary pur- cial bank may bor- row money and poses, to borrow money, or to borrov/ money and pledge pledge assets, with- in amount and upon or hypothecate as collateral security therefor, its assets conditions specified. i r r • f l not exceeding fifty per centum in excess of the amount borrowed, but only to the extent and upon terms and con- ditions as follows: Not exceeding cap- ( ] ) Any amount up to, but not exceeding the amount ital and surplus; provisos as to ex- of its Capital and surplus, w^ithout consent of the superin- cess loans. tendent of banks; provided, however, that any amount borrowed, except as otherwise provided in this section, in excess of the amount of its capital and surplus, at such time actually paid in and remaining undiminished by losses or otherwise, must first be approved in writing by the superintendent of banks; provided, also, that no ex- cess loan made to any such bank shall be invalid or illegal as to the lender, even though made without the consent Rediscounting, notes, of the superintendent of banks; provided, also, that the loans, etc., with Federal Reserve rediscounting with or without guarantee or endorsement bank not borrowed . i r i i i i r i r i -ii r money, w^ith a tederal reserve bank, or notes, drarts, bills or ex- change and loans secured by obligations of the United States, is hereby authorized and shall not be limited by the terms of this act, and shall not be considered as bor- rowed money within the meaning of this section. Public moneys or (2) Any amount of California, state, county, city, funds of State and ^ _ ^ its subdivisions, city and county funds, or any other public money, in the manner it is or may be authorized by law to borrow and receive such public money on deposit without the approval of the superintendent of banks. u. s. moneys and (3) Any amount of the United States moneys and postal savings and ^ ^ j j pledge of securities, postal savings moneys of the United States, and receive under U. S. laws. •■ ^ •> such moneys on deposit, and pledge or hypothecate such of its securities and upon such terms as may be required [38] GENERAL PROVISIONS §2 la by the laws of the United States or the rules and regula- tions of the secretary of the treasury of the United States, without the approval of the superintendent of banks. (4) Any amount, in addition to the amounts author- Buying from v. s. ized to be borrowed in this section, for the purpose of u. s. obligations. buying from the United States, United States bonds, United States treasury certificates, or notes or obligations of the United States. (5) To rediscount with and sell to a federal reserve Rediscounting with bank any and all such notes, drafts, bills of exchange, bank notes, etc., as acceptances and any other securities, with no other re- *^^°' ® strictions, and as fully, and to the same extent as this privilege is given to national bank members under the terms of the federal reserve act, or by regulations of the federal reserve board made pursuant thereto. (6) No bank shall make partial payments upon any Partial payments ../~ . r 1 . upon deposit. certmcate or deposit. (7) In no case shall an overdraft of more than ninety go-day overdraft days' standing be allowed as an asset of any bank. (8) Any debt due to any commercial bank, on which Debt due commercial . ^ . , I • 1 f 1 • 1 r bank, when bad interest is past due and unpaid ror the period or one year, debt, unless the same is well secured, and is in process of col- lection, shall be considered a bad debt and shall be charged off to the profit and loss account at the expira- tion of that time. [Note by Publishers, re Section 21a, amended 1919: The purpose of this amendment is to establish the limitations within which commercial banks in the State system may borrow money. It is intended to re- strict this capacity so as to prevent inflation, unwise and unwarranted broadening of activities, and the dangers involved in operating on borrowed money. The amendment maintains all of those restrictions, but enlarges the privilege of com- mercial banks, to rediscount with a Federal Reserve bank such notes, drafts, bills of exchange and loans to the same extent as Is granted by the National law to National bank members of the Federal system. The amendment was deemed necessary to place banks in the State system on a parity of privilege with their competing National bank members. The change is demanded in order that the State banks may meet the obligations of commerce upon a parity with commer- cial banks organized under the laws of the Federal government. There is permitted also the privilege to any State commercial hank to horroAV any amount for the purpose of buying from the United States, United States bonds. United States Treasury Certifi- cates, or notes or obligations of the United States. This is to [391 § 22-23 BLYTH, WITTER & CO. permit our State Banks to play their proper part in the financing of national obligations.] Corporation 80 Section 22. Any corporation authorized by its articles authorized may com- . . . , l • il l • f bine business of of incorporation so to do, may combine the business or commercial and sav- -iii i • ii i.. ings banks and trust a commercial bank and savings bank and trust company, company, e c. ^^ ^^^ ^^^ ^^ more or all of them; provided, that no cor- poration authorized to transact a trust business and w^hich is also organized to engage in the business of title insur- ance, shall engage in or combine the business of a com- mercial bank or savings bank. Prerequisites to Section 23. When a bank desires to do a departmental doing departmental . • i ii r i • i f i business, busmess, it shall hrst obtain the consent or the superin- tendent of banks, and in its application therefor, file a statement making a segregation of its capital and surplus for each department. Such capital and surplus, when so apportioned and approved by the superintendent of banks, shall be considered and treated as the separate capital and surplus of such department as if each depart- ment was a separate bank. Thereafter a bank may, from time to time, with the previous consent and approval of Apportionment and the superintendent of banks and subject to the pro- segrregation of capi- . . . . . r l • l tai and surplus of visions of section nineteen or this act, change any segre- such hfl.iiks gation and apportionment of capital and surplus previ- ously made and make a new segregation and apportion- Paid-up capital stock mcnt of its Capital and surplus. Every bank hereafter requirements. • i i • i i i • i ii i • i organized doing a departmental business shall have paid up, in cash, capital stock as follows: (a) In any locality in which the population does not exceed five thousand persons, not less than twenty-five Where population not thousand dollars if it transacts both a commercial and over 5,000. . , . i , i i i r savings business, or not less than one hundred twenty-hve thousand dollars if it transacts both a commercial and trust business, or not less than one hundred twenty-five thousaid dollars if it transacts both a savings and trust business and not less than one hundred twenty-five thou- sand dollars if it transacts a commercial, savings and trust business. [40] GENERAL PROVISIONS § 23 (b) In any city in which the population is more than where population ^ ^ ^ ^ ir I- g PQQ ^^ 25,000. five thousand persons, but does not exceed twenty-five thousand persons, not less than fifty thousand dollars if it transacts both a commercial and savings business, or not less than one hundred fifty thousand dollars if it transacts both a commercial and trust business, or not less than one hundred fifty thousand dollars if it transacts both a savings and trust business, and not less than one hundred fifty thousand dollars if it transacts a commercial, sav- ings and trust business. (c) In any city in which the population is more than where population ^ ' ■^ -^ 11 25,000 to 100,000. twenty-five thousand persons but does not exceed one hundred thousand persons, not less than one hundred thousand dollars, if it transacts both a commercial and savings business, or not less than two hundred thousand dollars if it transacts both a commercial and trust busi- ness, or not less than two hundred thousand dollars if it transacts both a savings and trust business, and not less than two hundred thousand dollars if it transacts a com- mercial, savings and trust business. (d) In any city in which the population is more than where population ,,,, 11 100,000 to 200,000. one hundred thousand persons but does not exceed two hundred thousand persons, not less than two hundred thousand dollars, if it transacts both a commercial and savings business, or not less than four hundred thousand dollars if it transacts both a commercial and trust busi- ness, or not less than four hundred thousand dollars if it transacts both a savings and trust business, and not less than four hundred thousand dollars if it transacts a com- mercial, savings and trust business. (e) In any city in which the population exceeds two where population 1 1 1 I 1 1 1 1 111 exceeds 200,000. hundred thousand persons, not less than three hundred thousand dollars if it transacts both a commercial and savings business, or not less than five hundred thousand dollars if it transacts both a commercial and trust busi- ness, or not less than five hundred thousand dollars if it [41] § 23 BLYTH, WITTER & CO. transacts both a savings and trust business, and not less than five hundred thousand dollars if it transacts a com- mercial, savings and trust business. Foregoing ciassifica- The foregoing classification shall not apply to any tion not applicable -i y ■• % . . i-ii • ^ r i to existing bank, or bank already m existence which has received from the bank included by . , rii -r i ii- annexation in larger Superintendent Of banks a certihcate to do a banking business; nor to any bank the location of which shall have been included by annexation or consolidation within the limits of a city of a class requiring a larger capitaliza- tion, but no bank thus excepted shall be permitted to establish any new branch office as provided in section nine of this act or to remove its place of business from the original limits of the city or township wherein it was located prior to such annexation or consolidation until it shall have the capital required of banks in such city not within said exception. Such excepted banks may not in any case decrease their capital stock but may increase the same in the manner provided by law to an amount either greater or less than that required of banks in such city not within said exception. The capital stock referred to herein shall be increased from time to time and to the same extent as provided for in section nineteen of this act. Population, for pur- For the purposes of this act, the population shown and poses of Act — hew determined, determined by the last preceding federal census, or any subsequent census compiled and certified under any law of this state, shall be deemed to be the population of any city in which any such bank is to be organized. If the principal place of business of any bank so organized is located outside of the corporate limits of any city, then the population of that portion of the judicial township in which said bank is to have its principal place of business, which is not included within the boundaries of any municipal corporation, as such population is shown and determined by such federal or subsequent official census, [421 GENERAL PROVISIONS § 24-25 shall be the basis for classification under the provisions of this act. Section 24. Every bank, before it commences to do Bank before com- mencing business or business or before it opens a new department and com- opening new depart- ment shall obtain mences to transact business in or under such new depart- certificate of supt., etc. ment, shall obtain the certificate of the superintendent of banks for the opening of each of the departments speci- fied. Each certificate herein provided for shall be given when the superintendent shall, by the examination re- quired by this act, have satisfied himself that the proper amount of cash has been paid in as capital and the pro- visions of this act complied with. The applicant shall pay for the certificate for each department a fee of fifty dollars. Section 25. Every bank shall maintain for each de- Bank to maintai* , , . 1 • 1 separate, specified partment total reserves equal in amount to that required total reserves. by this act for the respective business conducted, and shall keep separate and distinct the total reserves of any department from that of any other department; and all deposits made with other banks, whether temporary or otherwise, shall be assets of the respective departments by w^hich they were made, and shall be so carried on the books of such other banks, and shall be repaid only upon the order of the department to whose credit they stand. No department shall receive deposits from any other de- Deposits by depart- (. I . I ment with other partment or the same corporation; except that a trust banks— how treated. department, in proper cases, may make deposits of trust or any other funds under its control with the savings de- partment of the same corporation and may, upon order, previously obtained, of any court having jurisdiction of any trust or fund, make deposits of moneys belonging thereto with the commercial department of the same cor- poration; provided, however, that any bank having de- Bonds, etc., may be - i«i II 1 e ^o\A and transferred partments shall have the right to sell and transfer any from one department , , to another. bonds, securities or loams from one department to another upon receipt of the actual value thereof, if such bonds, [43] § 26-28 BLYTH, WITTER & CO. securities or loans are, under the provisions of this act, a legal investment for the department purchasing the same. ke*e?slpafatrbolks Section 26. Every bank having different departments and be governed by 1^ jj j^ separate books of account for each depart- provisions of Act. i- r- i- ment of its business, and shall be governed as to all de- posits, reserves, investments and transactions relating to each department by the provisions of this act specifically provided for the respective kind of business. It shall keep all investments relating to the savings department entirely separate and apart from the invest- ments of its other department or departments. Every bank shall conduct the business of all its depart- ments in one building, or in adjoining buildings, and shall Mingling of cash, keep entirely separate and apart in each department the securities, etc., for- bidden, cash, securities and property belonging to such depart- ment, and shall not mingle the cash, securities and prop- erty of one department with that of another. Moneys and assets Section 2 7. All moncy and assets belonging to each of each department w ^ held for repayment department, whether on hand or with other banks, and of its depositors, etc. the investments made, shall be held solely for the repay- ment of the depositors and other claimants of each such department, as herein provided, until all depositors and other claimants of each such department shall have been paid, and the overplus then remaining shall be applied to any other liabilities of such bank. Every bank must on Section 28. Every bank in this state must, on all its signs, advertising, •' signs, advertising etc., specify i1 business — "savings. etc., specify its window signs and in advertising, and on letterheads and "trust" or "commer- other Stationery on which its business is transacted, use the w^ord "savings'* if it conducts a savings business, or the word "trust" if it conducts a trust business, and the word "commercial" if it conducts a commercial business. Eranth bank re- Every bank which maintains a branch office, must on all (juirements. ^ ' window signs and in advertising, and on letterheads and other stationery on which the business of said branch [441 GENERAL PROVISIONS § 28-29 office is transacted, use in letters and type, equal in prominence to that used in its corporate name, the word "branch" and the name of the place where its principal business is located. [Note by Publishers, re Section 28: The purpose of this section, amended in 1917, dealing with the matter of how branch offices shall present their relationship to the public, is that there shall be no possible confusion as to the identity of a branch office as such, or suppression of the fact that it is a branch and not a principal place of business.] Section 29. Every corporation heretofore created Bank without capi- . 1 1 • 1 • **^ stock may convert under the law^s or this state, doing a banking business into stock company. therein, and which has no capital stock, may elect to have a capital stock, and may issue certificates of stock therefor, in the same manner as corporations formed under the provisions of Part IV, Title I, Chapter I, Article I, of the Civil Code, relating to the formation of corpora- tions; provided, that no such corporation shall use or convert any moneys or funds theretofore belonging to it, or under its control, into capital stock; but such funds or moneys must be held and managed only for the purposes and in the manner for which they were created. Before Prerequisites to such conversion. such change is made, a majority of the members of such corporation present at a meeting called for the purpose of considering the proposition whether it is best to have a capital stock, its amount, and the number of shares into which it shall be divided, must vote in favor of having a capital stock, fix the amount thereof, and the number of shares into which it shall be divided. Notice of the time and place of holding such meeting, and its object, must be given by the president of such corporation by mailing notice of such meeting to each member of such corporation at his last known post-office address at least ten days prior to the day fixed for such meeting, and by publication in some newspaper printed and published in the county, or city and county, in which the principal place of business of the corporation is situated, at least once a week for three successive weeks prior to the hold- proceedings^'etc^., ing of the meeting. A copy of the proceedings of this *:t^ar/l,f sute fnd meeting, giving the number of persons present, the votes county clerk. 1451 5 29-3 1 BLYTH, WITTER & CO. taken, the notice calling the meeting, the proof of its publication, the amount of capital actually subscribed, and by whom, all duly certified by the president and secretary of the corporation, must be filed in the office of the secretary of state and clerk of the county where the Effect of proceed- articles of incorporation are filed. Thereafter such cor- poration is possessed of all the rights and powers, and is subject to all the obligations, restrictions, and limita- tions, as if it had been originally created with a capital stock. Safe deposit de- Section 30. Any bank may conduct a safe deposit partment. •' ■' '^ department, but shall not invest more than one-tenth of its capital and surplus in such safe deposit department. Business of bank Section 31. Any bank may sell the whole of its or of department "^ "^ may be sold to business or the whole of the business of any of its de- other bank. -^ partments to any other bank which may purchase such business after obtaining the consent of the stockholders of the selling and of the purchasing banks holding of record at least two-thirds of the issued capital stock of each of such corporations; such consent to be expressed either in writing executed and acknowledged by such stockholders and attached to the instrument of sale, or to a copy thereof, or by vote at a stockholders' meeting of IS must enter each of such banks called for that purpose. The selling agreement of * » a Banks into agreement sale containingr and purchasing banks must for such purposes enter into specified provisions. » ^ an agreement of sale and purchase, which agreement shall contain all the terms and conditions connected with such sale and purchase. Such agreement shall contain proper provision for the payment of liabilities of the selling bank or of the department sold, and in this par- ticular shall be subject to the approval of the superin- tendent of banks; and shall not be valid until such ap- proval is obtained. Such agreement may contain pro- visions for the transfer of all deposits to the purchasing bank, subject, however, to the right of every depositor of the selling bank to withdraw his deposit in full on de- [46] GENERAL PROVISIONS § 3 1 mand after such transfer, irrespective of the terms under which it was deposited with the selling bank. The rights of creditors of the selling bank shall not in any manner be impaired by any such sale, nor shall any liability or obligation for the payment of any money due or to be- come due, or any claim or demand, in any manner, or for any cause existing against such selling bank or against any stockholder thereof, be in any manner released or impaired, and all the rights, obligations and relations of all the parties, creditors, depositors, trustees and bene- ficiaries of trusts shall remain unimpaired by the sale, but such bank to which the other shall sell all its business or purchasing bank all the business of any of its departments, shall succeeed anTobifgatio'ns of to all such relations, obligations, trusts and liabilities and ^^ '°^ be held liable to pay and discharge all such debts and lia- bilities and to perform all such trusts of the selling bank in the same manner as if such bank to which the other had sold had itself incurred the obligation or liability or as- sumed the relation of trust, and the stockholders of the stockholders remain I liable. respective corporations so entering into such agreement shall continue subject to all the liabilities, claims and de- mands existing against them as such at or before such sale. Immediately after the execution of such agreement of sale and purchase notice thereof shall be published for at Notice of sale to be least four successive weeks in a newspaper in each of the ^" counties of the state in which either of such banks shall have its principal place of business; provided, however, that no action can be brought against such selling bank Limitation of actions. or any of its stockholders on account of any deposits so transferred after the expiration of one year from the last day of publication herein required. An affidavit showing such publication shall be filed in the office of the superintendent of banks within ten days after the last publication thereof. The affairs of such selling bank, or selling department of a bank, shall re- main subject to the provisions of this act. [47] §3 la BLYTH. WITTER & CO. state banks may Section 31a. Any bank incorporated under the laws consolidate, upon •' '^ approval of Supt. q{ \}^\^ state mav consolidate with one or more banks and ratification of stockholders as incorporated under the laws of this state, its capital specified. stock, properties, trusts, claims, demands, contracts, agreements, obligations, debts, liabilities and assets of every kind and description, upon such terms and in such manner as may be agreed upon by their respective boards of directors, a copy of which agreement must be filed in the office of the superintendent of banks; provided, that such agreement shall be subject to the approval of the superintendent of banks and shall not be valid until such approval be obtained; provided, further, that no such consolidation shall take effect until such agreement shall have been ratified and confirmed in writing by the stock- holders of the respective banks holding of record at least two-thirds of the issued capital stock of their respective banks, or such agreement may be submitted to the stock- holders of each of such corporations at a meeting thereof to be called upon notice specifying the time, place and object thereof, addressed to each stockholder at his last known post-office address and deposited in the post- office, postage prepaid, at least two weeks prior to the date fixed for said meeting, and published for at least two successive weeks, prior to the date of said meeting, in a new^spaper in each of the counties of the state in which any of such banks shall have its principal place of business, and if such agreement shall be approved at each of such meetings of the respective stockholders separately by the vote or ballot of the stockholders own- ing at least two-thirds of the stock of each such bank, the same shall be the agreement of such banks. In case of such consolidation "articles of incorporation and con- solidation" must be prepared, setting forth: Contents of articiei: pj^gj — "7^^ name of the new corporation; consolidation. Second — The purpose for which it is formed; [481 GENERAL PROVISIONS §31) Third — The place where its principal business is to be transacted ; Fourth — The term for which it is to exist, which shall not exceed fifty years; Fifth — The number of its directors (which shall not be less than three) and the names and residences of the persons appointed to act as such until their successors are elected and qualified; Sixth — The amount of its capital stock and the num- ber of shares into which it is divided; Seventh — The amount of stock actually subscribed, and by whom; Eighth — The names of the constituent corporations. Said articles of incorporation and consolidation must Articles to be exe- , . , , -111 • 1 1 cuted as specified. be signed and countersigned by the president and secre- tary of each constituent corporation and sealed with their corporate seals. There must be annexed thereto the approval of the superintendent of banks and memo- randa of the ratification and confirmation thereof by the stockholders of each constituent corporation, which must be respectively signed and acknowledged by stockholders representing at least two-thirds of the capital stock of their respective corporations. When completed as afore- Articles with whom said said articles must be filed in the office of the county *° ^ ®"^" clerk of the county in which is located the principal place of business of the new corporation, and a copy of the articles of incorporation and consolidation certified by such county clerk must be filed in the office of the secre- tary of state, who must issue, over the great seal of the state, a certificate that a copy of the articles of in- corporation and consolidation containing the required statement of facts has been filed in his office. The secre- tary of state must file in his office a duplicate of the certificate hereinbefore provided for and copies thereof, [491 § 31a BLYTH, WITTER & CO. duly certified by the secretary of state, shall have the same force and effect in evidence as the original. A copy of the articles of incorporation and consolidation, certified by said secretary of state, must be filed in the office of the superintendent of banks, and also in the office of the county clerk of any county in which were filed the original articles of incorporation of either of the Effect of Supt. issu- constituent corporations. When the superintendent of ing certificate, ii. i .n t y • • -iir banks issues the certihcate or authorization provided tor by section one hundred twenty-eight of this act the new^ or consolidated corporation shall be a body politic and corporate by the name stated in the certificate, and for the term of fifty years, unless it is, in the articles of in- corporation and consolidation, otherw^ise stated and thereupon each constituent corporation named in the articles of incorporation and consolidation must be deemed and held to have become extinct in all courts and places, and said new corporation must be deemed and held in all courts and places to have succeeded to all their several capital stocks, properties, trusts, claims, de- mands, contracts, agreements, assets, choses and rights in action of every kind and description, both at law and in equity, and to be entitled to possess, enjoy, and en- force the same and every thereof, as fully and completely as either and every of its constituents might have done had no consolidation taken place. Said consolidated or new corporation must also, in all courts and places, be deemed and held to have become subrogated to its sev- eral constituents and each thereof, in respect to all their contracts and agreements with other parties, and all their debts, obligations, and liabilities, of every kind and nature, to any persons, corporations, or bodies politic, whomsoever, or whatsoever, and said new corporation must sue and be sued in its own name in any and every case in which any or either of its constituents might have sued or might have been sued at law or in equity had no such consolidation been made. Nothing in this section [50] GENERAL PROVISIONS § 31; contained shall be construed to impair the obligation of any contract to which any of such constituents were par- ties at the date of such consolidation. All such contracts may be enforced by action or suit, as the case may be, against the consolidated corporation, and satisfaction ob- tained out of the property which, at the date of the con- solidation, belonged to the constituent which was a party to the contract in action or suit, as well as out of any other property belonging to the consolidated corporation, and the stockholders of each constituent corporation so enter- ing into such agreement shall continue subject to all the liabilities, claims and demands existing against them at or before such consolidation to the same extent as if the same had not been made. The right of said new cor- t»„k*. „<-„<>^ ^«, ° Kignt of new cor- poration to increase or decrease its capital stock, to po>^ation to effect *^ I- » organic changes. change the number of its directors, to amend its articles of incorporation, to change its principal place of business, or its name, or to effect any other organic change shall be governed by the general corporation laws of this state and by the bank act, and the procedure to effect any such change shall be that defined by the general corpora- tion laws and the bank act. The superintendent of banks shall transmit to the sec- Supt. to transmit to , ... . , . _ ft- Secy, of State dup- retary or state a duplicate or the certificate or authoriza- iicate of certificate. tion hereinbefore referred to and the secretary of state shall file the same in his office. The superintendent of banks shall also file a duplicate of such certificate in his own office. [Note by Publishers, re Section 31a, amended in 1917, dealing with the creation of corporations through merging: Under the provisions of the Act as they previously stood, there was an interim between the time of completion of the organization and the time at which the merged corporation might receive its certificate from the Superintendent of Banks. Under the general law governing corporations, a corporation is formed, completely equipped to perform its service, in the office of the Secretary of State; but a merged banking corporation, being composed of two or more constituent corporations, could not effectively be completed at that point, because upon merger the two constituent corporations disappear, and the new corporation can not receive a certificate from the Superintendent of Banks until the new corporation is completed. This amendment makes it plain that the organiza- tion of the new corporation is not complete until the certified articles of incorporation are filed with the Superintendent of Banks and his certificate issued, so that there shall be no interim between the forming of the new and the expir- ing of an old corporation.] [511 I 32-36 BLYTH. WITTER & CO. Bank not to mingle Section 32. Any bank receiving trust funds in accord- trust funds with other assets, ance with the provisions of this act relating to trust com- panies must not mingle such trust funds with the other assets of the corporation, except as otherwise provided in section twenty-five of this act, and such funds shall not be carried or counted as any part of the total reserves Violation of pro- provided for in this act. The officers of any bank who vision, felony. • i • i i • i • r i • knowmgly violate or consent to the violation or this pro- vision shall be guilty of a felony. (Section 33. Repealed 1913.) No bank to purchase, Section 34. No bank shall purchase or invest its capi- invest or lend upon its capital stock, tal or surplus Or money of its depositors, or any part of nnless to prevent _ _ ' loss on debt, either, in shares of its own capital stock; nor loan its capital or surplus or money of its depositors, or any part of either, on shares of its own capital stock, unless such purchase or loan shall be necessary to prevent loss to such bank on debts previously contracted in good faith. Penalty. Every person or corporation violating any provision of this section shall forfeit to the people of the state twice the nominal amount of such stock. Liniitations upon Section 35. No bank shall purchase any contract aris- purchase of realty note or bond by in- ing from the salc of real estate or any note or bond in terested officers, etc. which contract, or note, or bond any director, officer, employee, or controlling stockholder of such bank is personally or financially interested, directly or indirectly, for his own account, for himself, or as the partner or agent of others, without the previous consent in writing of the superintendent of banks. Commercial bank Scctlon 36. No Commercial bank receiving deposits receiving deposits i ii i not to purchase bond of moncy shali purchasc or agree to purchase any bond issue in excess of , , e r r • 5% of assets, except issue ui cxcess of five per centum or its assets, except bonds of the United States, of the State of California, of the counties, cities and counties, cities or school districts of this state, or bonds of any irrigation district such as are legal for investment by savings banks. [52] GENERAL PROVISIONS § 37 Section 37. No bank shall, except as otherwise pro- i^estriction on pur- '^ chasing or investing vided in this act, purchase or invest its capital or surplus '° capital stock of ■^ _ _ any corporation, or money of its depositors, or any part of either, in the capital stock of any corporation unless the purchase or acquisition of such capital stock shall be necessary to pre- vent loss to the bank on an obligation owned or on a debt previously contracted in good faith. Any capital Capital stock so • 1 1 n 1 111 L purchased to be sold. stock so purchased or acquired shall be sold by such bank within six months thereafter if it can be sold for the amount of the claim of such bank against it; and all capital stock thus purchased or acquired must be sold for the best price obtainable by said bank within three years after such purchase or acquisition unless the superintend- ent of banks shall extend the time of its sale for a period not to exceed two years. Any bank, with the previous written consent of the Bank after consent of . ^ , . r 1 1 1 ... Supt., may acquire supermtendent or banks, may purchase or otherwise ac- capital stock of one quire and hold the whole or any part of the capital stock company. of not more than one trust company organized and exist- ing under the laws of this state, and doing business in the same city in which the principal place of business of such bank is located; provided, however, that not more than Limitation on such 1^ r 1 • 1 purchase. to twenty-hve per centum or the capital and surplus of any such bank may be at any one time invested in the capital stock of such trust company or such other corporation; and provided, further, that no such trust company shall engage in or combine the busi- ness of a commercial bank or a savings bank or a title insurance company. Any bank, with the previous written consent of the Bank, with consent 1 f 1 1 1 , . of Supt., may pur- superintendent or banks, may purchase or otherwise chase, etc., stock of ,,,,, ,, (.1 .1 one safe-deposit cor- acquire and hold, the whole or any part or the capital poration in same city. stock of not more than one corporation authorized and empowered to conduct a safe deposit business, which such corporation is organized and existing under the laws of this state and doing business in the same city in which [53] § 37-38 BLYTH. WITTER & CO. the principal place of business of such bank is located; Limitation on such provided, however, that not more than an amount equal investment. ^ ' ' t to ten per centum of the capital and surplus of any such bank may be at any one time invested in the capital stock of such safe deposit corporation. [Note by Publishers, re Section 37, amended 1919: This amendment affects Section 27 in two vital relationships: First, the amendment permits any bank, with the previous written consent of the Superin- tendent of Banks, to purchase or otherwise acquire and hold the whole or any part of the capital stock of not more than one trust company organized and existing: under the laws of this State, if that purchase shall not exceed 25 per cent, of the capital and surplus of any such bank, and also permits any bank, with the previ- ous consent of the Superintendent of Banks, to purchase the whole or any part of the capital stock of not more than one corporation authorized and empowered to conduct a safe deposit business. The first change is intended to permit a strength- ening of the trust companies in this State and also to indulge smaller banks in a desire to participate in the profits of those companies; and the second is an inci- dent necessary and familiar in the conduct of the banking business, but which may not be within the reach of the smaller capitalized institutions. Care is taken, however, to prevent any commercial or savings bank from engaging in a title insurance company business. The amendment is a desirable one because of its concentration of banking energy and for the permission granted to smaller institutions to participate in the prosperity which follows the operations of larger corporations.] Director, agent, etc., Section 38. A director, officer, agent or employee of of bank making or concurring in false any bank who, entry or report, or in omitting to make ly- • i • l • if f full and true entries, t irst — Rnowingly receives or possesses himselr or any etc., guilty of felony. . . , . , . r • i or its property otherwise than m payment ror a just de- mand, 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. Second — Concurs in omitting to make any material entry thereof; or. Third — Knowingly concurs in making or publishing any written report, exhibit or statement of its affairs or pecuniary condition containing any material statement which is false; or, Fourth — Having the custody or control of its books, wilfully refuses or neglects to make any proper entry in the books of such corporation as required by law, or to exhibit or allow the same to be inspected and extracts to be taken therefrom by the superintendent of banks, his chief deputy or any of his examiners, shall be guilty of a felony. [54] GENERAL PROVISIONS §39-41 Section 39. Any officer, director, agent, teller, clerk Bank director or em- • I , . , ployee overdrawing or employee or any bank who either, accounts or receiving commissions on loan TT- . ir • ^ J 1 • ..-..LI guilty of felony. rirst — rLnowmgly overdraws his account with such bank, and thereby obtains the money, notes or funds of any such bank; or Second — Asks or receives or consents or agrees to receive any commission, emolument, gratuity or reward, or any money, property or thing of value, for his own personal benefit, or of personal advantage, for procur- ing or endeavoring to procure for any person, firm or corporation any loan from, or the purchase or discount of any paper, note, draft, check or bill of exchange, by such bank, or for permitting any person, firm or cor- poration to overdraw any account with such bank, is guilty of a felony. Section 40. No bank mentioned in this act shall make Contract of bank to . , 111 waive stockholder's any contract w^ith any of its depositors w^hereby the liability, void. stockholders' liability provided for by the constitution of this state is in any manner waived, and if any such con- tract shall be so made, such contract shall be void. Section 4 1 . No officer, director, agent or other em- ^° ^^^^ °fl^"'"' ^^■ rector, employee, ployee of any bank shall directly or indirectly, for his ftc, to purchase or be interested in pur- own personal benefit, purchase, or be interested in the ^hase of banks ob- _ ligations or assets purchase of any of such banks obligations or assets for under face value. a less sum than shall appear upon the face of any such obligations or assets to be the value thereof except w^ith the previous consent of all the directors of said bank, such consent to be evidenced by a resolution adopted by said directors. A certified copy of said resolution shall immediately be transmitted to the superintendent of banks. Every person violating any provision of this Penalty. section, shall for each offense forfeit to the people of the state, twice the face value of any such obligations or assets so purchased. [Note by Publishers, re Section 41, amended 1917: Under the law as it stood previous to 1917, even though a bank asset might not be worth, and might well be known not to be worth, more than 50 per cent, [551 § 42-44 BLYTH, WITTER & CO. of. or less than, its value appearing on its face, nevertheless it could not be transferred to or purchased by anybody interested as a stockholder, for less than its full worth. The amendment has made such a transaction possible, upon obtain- ing consent of the directors as indicated.] Section 42. No officer, director, agent or other em- ployee of any bank, shall directly or indirectly, for his own personal benefit, purchase, or be interested in the purchase of any of the assets of said bank for a less sum Penalty, than the current market value thereof. Every person violating any provision of this section, shall for each offense, forfeit to the people of the state, twice the nomi- nal amount of any such assets so purchased. No bank to dennsH Section 43. No bank shall deposit any of its funds funds in other bank except Federal Re- in any Other bank, except a federal reserve bank, unless serve bank, unless as specified, such Other bank has been nominated as a depositary for its funds by the vote of a majority of the directors or trustees of the bank making the deposit, and such other bank has been designated by the superintendent of banks as such depositary. The superintendent of banks may in his discretion re- voke such a designation. [Note by Publishers, re Section 43, amended 1919: The only change in the section as it stood previous to the amendment is the insertion of the phrase, "excepting a federal reserve bank." This amendment is a minor one, designed simply to except a Federal Reserve bank from the neces- sity of being either nominated or designated by the Superintendent of Banks as a reserve depositary for funds of any bank in the State system. It is assumed that the Federal Reserve bank of the district in which any of the banks of California may be located does not require such a designation as is demanded for other banking institutions.] Limitation and re- Section 44. No bank shall hereafter make a loan itrictions upon loan secured by stock of secured by the stock of another bank, if by making such another bank. •' ^ j a loan the total stock of such other bank held by such loan- ing bank as collateral will exceed in the aggregate twenty- five per centum of the capital stock of such other bank; provided, that no loan upon the capital stock of any bank shall be made unless such bank has been in existence at least two years and has earned and paid a dividend upon its capital stock; and provided, further, that no bank may loan more than five per centum of its assets upon the capital stock of any corporation whatsoever as collateral security. [56] GENERAL PROVISIONS § 45-47 Section 45. Interest unpaid, although due or accrued, Y^p^'"^. ^"*®I?^* °°* ^ = "v-v^, dggmed profits pre- on debts owing to any bank, shall not be included in ^°"^ *° dividend. calculation of its profits previous to a dividend; nor shall any bank, except with the previous written consent of the ^° valuation of as- sets above cost superintendent of banks, enter or at any time carry on its without consent of books any of its assets at a valuation exceeding its actual cost to such bank. [Publisher's Note: This section as it now stands was amended in 1917, by the addition, after the first clause, ending with the word "dividend" of the clause forbidding book valuation of assets exceeding actual cost, without consent of the Superintendent of Banks. Under the law as it stood prior to 1917, the writing up of any of the assets of a bank was legally impossible. Sometimes it occurs that there is a very material increase in the value of certain assets, and some- times it is desirable, and it should be permitted, that assets be written up; but it is not desirable, of course, that that could be done under any and all circum- stances. This amendment was designed to permit such writing up whenever it is advisable that it should be done, and of course, will prohibit the process when it should not be allowed.] Section 46. No commercicJ bank shall invest or loan ^o bank to loan or invest more than 5% more than five per centum of its assets in any one bond of assets in any one bond issue, except issue, except bonds of the United States, of the State of governmental bonds, as specified. California, of the counties, cities and counties, cities or school districts of this state, or bonds of any irrigation district such as are legal for investment by savings banks. Section 47. No commercial bank shall, except for the No commercial bank, •^ except to facilitate purpose of facilitating the sale of property owned by the ^^le of property '^ '^ "=> ^ ^ •' •/ owned to make loan bank, make any loan on the security of real estate, unless o" "^^^^ estate, un- less first lien and it is a first lien and is either for specified period and per centum of value. ( 1 ) Made for a period of time not exceeding six months and upon security worth at least fifteen per centum more than the amount loaned; or (2) Made for a period of time exceeding six months and not exceeding ten years and does not exceed sixty per centum of the market value of the real estate taken as security. No commercial bank shall loan in the aggregate more than thirty-five per centum of its assets on real estate loans of the character specified in subdivision two of this gages'and d^ds of section. These provisions, however, shall not prevent any bank from taking another and immediately subse- [57] trust. § 47-48a BLYTH. WITTER & CO. quent mortgage or deed of trust thereon when it already holds a first mortgage or deed of trust on such real estate, nor from accepting a second lien on real estate to secure the repayment of a debt previously contracted in good faith; nor shall it prevent subsequent liens of any kind from being taken to secure the payment of a debt previously contracted in good faith when, in the judg- ment of the directors of such bank, such subsequent liens are necessary further to secure the payment of any debts and save such bank from loss. National bank other Section 48. Any national bank, in this state, other than Federal Reserve bank receiving State than a federal reservc bank, receiving the deposits of any bank deposits, must, at request of supt., bank Organized and conducting business under this act, submit to examina- tion, must, at the request of the superintendent of banks, sub- mit to an examination by him, or his duly appointed ex- aminers, should the superintendent of banks in his dis- cretion deem it necessary or desirable that such examina- tion be made; and the expense of such examination shall be paid by such depositary bank; and if any such bank Effect of refusal, shall refuse to permit such examination to be made by, or under the direction of, the superintendent of banks, then the superintendent of banks shall notify in writing every bank depositing its funds with such bank, to with- draw its deposits therefrom, and all such banks shall comply with such order. Natl. Banking Assn Section 48a. Any national banking association, whose with principal place •' =" ' of business in State, principal place of business is in this state, is hereby authorized to act in "^ "^ '^ ■> j fiduciary capacities, authorized to act in fiduciary capacities in all respects as as provided by r ed. "^ •^ Reserve Act. provided by the acts of congress, approved December 23, 1913, and amendments thereof, commonly known as the federal reserve act, and all acts herein provided to be performed by the state treasurer, the superintendent of banks or other public officials for or in respect of trust companies, shall be performed for such national bank- a^twized^n^sec"', '"§ association equally with trust companies. Every may act i°^fiduc.mj-y ^^^}^ national banking association which shall be author- [58] GENERAL PROVISIONS § 48t ized to exercise said fiduciary powers, and which has quaUfied by making the deposit of securities required by the law of this state, may act, or may be appointed by any court to act in any such capacity in Hke manner as an individual. The superintendent of banks shall inspect Supt. shall examina I -111 11 fl books, assets, etc., and examme the books, records and assets or the trust of trust dept. of department of each national banking association which conducts a trust department in this state to the same extent that the said superintendent of banks exercises visitorial supervision over trust companies organized and existing under the law^s of this state. The charge by the state banking department for all services rendered to any national banking association by the superintendent of banks, in accordance with the pro- visions of this section, shall be paid by the national bank- ing association requiring such services. Such charge for charges and cost for iiii 1. • ^ l_ l}- • 1. 1 .. C services rendered by services shall be determined by the superintendent or state Banking Dept. banks, and shall be no higher than the charge for a similar service to trust companies organized under the laws of this state. The cost of all regular and ordinary service shall be calculated upon the amount of the securities deposited by each such national bank with the treasurer of the state for the due execution and faithful performance of its court and private trusts at the same ratio as is applied to the capital and surplus of trust companies organized under the laws of this state in determining the cost to them for such services. The cost of all special and extraordinary services shall be the same as that provided for in section one hundred twenty-four of this act. [Note by Publishers, re Section 48a, a new section: This is an enabling section putting into legal operation in California the pro- visions of the Phelan Act recently enacted by the Congress of the United States, which gives to National banking associations the right to conduct a trust depart- ment in connection with their commercial banking business. The federal law places upon the State in which the National association desires to function in that regard the burden of making operative the provisions of the national statute. Hence the provisions of the above Section 48a, that the Superintendent of Banks shall have authority to perform for National associations which are authorized to [59] § 49-5 1 BLYTH. WITTER & CO. conduct a trust department in this State such service as is required by the Bank Act in the case of a State trust company; the expense of this service to be determined by the Superintendent of Banks and to be paid by the National asso- ciation receiving such service. Outline of necessary procedure for any National Bank formed in this State contemplating the establishment of a trust department, under the terms of this Section is given in a letter written by the State Banking Department and con- tained in the Appendix of this volume. ^iLgs"\ank by com! Section 49. It shall not be lawful for any commer- merciai ^^^j^^'^*^j' cial bank, individual, trust company, association, firm, stock company, copartnership or corporation, to adver- tise or put forth a sign as a savings bank, or either directly or indirectly or in any way to solicit or receive deposits or to transact business in the way or manner of a savings bank, or to advertise that he or it is receiving or accepting savings, or in any way which might lead the public to believe that such deposits are received or in- vested under the same conditions or in the same manner as deposits in savings banks, except in the case of sav- ings banks or banks having savings departments, subject Penalty, to the provisions of this act. Any commercial bank, in- dividual, trust company, association, firm, stock com- pany, copartnership or corporation, violating any pro- vision of this section shall forfeit to this state one hundred dollars a day for every day during which such violation continues. ^'t7post ^"st certifi^ Section 50. Every bank shall post in a conspicuous cate from Supt. place in its banking room or branch office the last cer- tificate obtained from the superintendent of banks under the provisions of either section nine or one hundred twenty-seven of this act. Court may, under Section 5 1 . Any court having appointed and having conditions specified, .... . . . authorize executor, jurisdiction of any executor, administrator, guardian, as- administrator, guard- ian, receiver, signce, receiver, depositary or trustee, upon the applica- trustee, etc., to de- . r i i • • posit money in State tion of such executor, administrator, guardian, assignee, bank. . , . , ,. . receiver, depositary or trustee, or upon the application of any person having an interest in the estate adminis- tered upon by such officer or trustee, after notice to other parties in interest as the court may direct, and after a hearing upon such application, may authorize such officer [60] GENERAL PROVISIONS § 51-53 or trustee to deposit any money then in his hands as such officer or trustee or which may thereafter come into his hands, and until the further order of the court, in any bank organized under the laws of the State of California; and upon such deposit being made, the officer or trustee so depositing the same shall thereafter and while such moneys remain on deposit in such bank, be relieved and discharged from all liability and responsibility therefor, and the bond required of such officer or trustee given upon his appointment shall be thereupon by said court reduced to such an amount as the court may deem reason- able; such deposit shall be repaid only upon the orders Sucii deposit payable only on court order. of said court, and shall be a preferred claim against such bank and be paid in full before any other depositor of such bank shall have been paid. Section 52. Whenever a check drawn on any bank Certified check must ■^ be immediately is certified by any officer or employee of such bank, the charged. amount thereof shall be immediately charged against the account of the person, firm or corporation drawing the same. It shall be unlawful for any officer or employee of any bank to certify any check drawn upon such bank unless the person, firm or corporation drawing the check has on deposit with the bank at the time such check is certi- fied, an amount of money subject to the payment of such check, equal to the amount specified in such check. Any officer or employee of any bank who shall wil- Bank officer or em- , , r 1 . . 1 11 ployee violating Sec. rully violate the provisions or this section, or shall resort guilty of felony. to any device, or receive any fictitious obligations, directly or indirectly, in order to evade the provisions hereof, or who shall certify checks before the amount thereof shall have been regularly entered to the credit of the drawer, shall be guilty of a felony. ^ . r o •T-'i • 1 ^ r 111- P*'' 'alue of capital Section J J. 1 he capital stock or any bank having a stock $ioo and paid capital stock shall have a par value of one hundred dol- certificate. [611 § 53-54 BLYTH. WITTER & CO. lars per share, and the paid-up value shall be endorsed upon the face of each certificate issued, which paid-up value shall be the same on all certificates issued. No bank shall have preferred stock; provided, however, that Proviso as to non- no bank whose capital stock, on January 1, 1915, failed compliance prior to *^ ' ^ j i i Jan. 1, 1915. to Comply with any of the requirements of this section, shall be compelled to change its capital stock in compli- ance herewith. Real estate acquired Section 54. All real estate purchased by any bank at Dy bank and not '' •' necessary in its busi- sales Under pledges, mortgages or deeds of trust for its ness, must be sold or » =. c c exchanged, as speci- benefit for money loaned and such as may be conveyed fled. to it by borrowers in satisfaction and discharge of loans made thereon and all other real estate ow^ned or held by it, w^hich is not necessary for carrying on its business, must be sold or exchanged for other real estate by such bank within five years after title thereto shall have vested in it by purchase or otherwise; provided, how^ever, that no exchange of such real estate for other real estate shall be made unless and until written consent thereto shall first be given by the superintendent of banks; and pro- vided, further, that any real estate so taken in exchange may be held for such period of time as the superintendent Parcels not sold or of banks may fix but not to exceed five years. Parcels exchanged within -, , ,, , i'i--i said time purchas- of such real estate not sold or exchanged within said able by any person; . i i i i • i procedure outlined, time may be purchased by any person wanting the same upon the conditions and proceedings following: The intending purchaser may file a petition in the superior court in and for the county v/herein said real estate or any portion thereof is situated ; upon the filing of such petition a citation shall be issued out of said court directed to the bank owning such real estate requiring such bank to show cause on a day certain which shall be not earlier than ten days after the service of such citation, why com- missioners should not be appointed by said court for the purpose of appraising the value of the real estate de- scribed in the petition and of selling the same at public auction under the provisions of this section. If there (62] GENERAL PROVISIONS § 54 shall be any liens or encumbrances of record against such real estate the person or persons holding such liens or encumbrances shall likewise be cited and the court shall in its final decree distribute the proceeds of such sale, if a sale thereof shall be made, according to the equities of the parties. If it shall appear at the hearing Court to appoint . . , , , , . , , commissioners to of such petition that the real estate therein sought to be appraise and sell , i-iiii 11 1- •!• CL '"®*^ estate held by purchased is held by such bank m violation or the pro- bank in violation of visions of this section or of the constitution of this state, the court shall appoint three commissioners to appraise the value thereof and sell the same at public auction at the county seat of the county wherein said real estate or any part thereof is located. Notice of which said sale Procedure governing shall be given to the bank owning said real estate and to any other persons interested therein as shown by the records of such county at least ten days before the date of such sale and shall be published once a week for three successive weeks in some newspaper published in the county where such real estate or any part thereof may be located, or if no newspaper shall be published in such county then in a newspaper published in some neighbor- ing county. Such notice shall state the time and place of such sale and shall describe the real estate to be sold with common certainty and state the value thereof as fixed by the appraisement of such commissioners and state that no bid less than such appraised value will be re- ceived therefor. No sale shall be made for an amount less than the appraised value of such real estate fixed by said commissioners, and in the event that no bid is re- if no bid equals , . , • 1 1 appraised value, ceived at such sale at least equal to said appraised value proceedings not . . , , . , . I . . renewable within of said real estate no intending purchaser can institute one year. the proceedings provided for in this section within one year thereafter. In case of any sale made under the provisions of this section and of the refusal of any bank owning such real estate or of any lienholder or encum- brancer to execute the conveyances or releases necessary or proper to vest the title of such bank, lienholder or en- 163] § 54-55 BLYTH. WITTER & CO. cumbrancer in the purchaser thereof the court shall have power in such proceedings to direct said commissioners to execute such deeds, conveyances or releases upon the payment to them of the purchase price therefor. The Fees and costs; how fees of such Commissioners and cost of sale shall be fixed limited and borne. by the court, upon making such appointment, but the entire expense thereof shall not exceed one hundred dol- lars. The cost of any such proceedings shall be borne by the intending purchaser if no sale shall be made, but if a sale shall be made the costs of such proceedings shall be borne by the purchaser of the property and the person who filed the petition and advanced the costs of such proceedings shall be reimbursed in case he shall not be- come such purchaser. All sales hereunder shall be re- turned to the court having jurisdiction of the matter in the same manner as in the case of sales, by commissioners, Power of Supt. to of real estate on foreclosure of mortgages. Nothing in write down bank .. . •iiiiii i rr i realty not affected this section contamed shall be deemed to afreet the power of the superintendent of banks to require the w^riting down of the value of real estate held by any bank, at any time, when such writing down shall be proper. [Note by Publishers, re Section 54, amended 1917: Under this section, as it formerly stood, banks were not permitted to exchange real estate. They were authorized, of course, to sell any real estate of which they might have become possessed, but were not allowed, even where it might appear decidedly advantageous to do so, to transfer any real estate and receive in lieu thereof other real estate. This amendment makes such exchange of real estate possible.] Receiving deposits, Section 55. Receiving deposits, issuing certificates of etc.. not creation of • i i i i -ii r i i i i-l • l_ debt within mean- deposit, checks and DilIs ot exchange, and the like, m the ing of Civil Code. . . r i i transaction or the ordinary business or a bank, must not be construed to be the creation of debt within the mean- ing of the phrase "create debt" in section three hundred nine of the Civil Code, nor of indebtedness within the meaning of the phrase "the capital stock can not be diminished to an amount less than the indebtedness of the corporation" in section three hundred fifty-nine of the Restriction on re- Civil Codc, cxccpt that no bank shall reduce its capital duction of capital stock, stock to an amount less than is required by this act to be [64] GENERAL PROVISIONS §55-56 maintained by such bank, or less than any indebtedness of such bank other than such deposits. The terms "real estate," or "real property," or "per- "Real estate," 1 "1 1 • L- 1_ n L 1 "real property," sonal property, when used in this act shall have the "personal property," ^ r ^ • iiiii !• 1 — ^°^ defined. meaning denned in, and shall be construed in accordance with the provisions of Title I of Part I of division second of the Civil Code. Section 56. Any bank is hereby authorized and em- Any bank may be- come member of powered to become a member of a federal reserve bank. Federal Reserve ^ bank. Nothing in this act shall prohibit any such bank from becoming a member of a federal reserve bank, in the manner provided in the federal reserve act, nor from investing any part of its capital or surplus or reserve fund Member bank may 111. invest part of capi- in the capital stock of such federal reserve bank, in ac- tai, surplus, or re- serve fund in capital cordance w^ith the terms and provisions of such federal stock of Federal . 1 11 • Reserve bank, as reserve act; provided, that such investment shall in no specified. case exceed the minimum amount required to join or as- sociate itself with or maintain membership in such federal reserve bank; provided, also, that such investment may be carried in either the commercial, savings, or trust department, or may be apportioned to any two or all three of such departments of any departmental state bank member. Any bank joining or associating itself with such federal conflicrwith state 1 , , ,1 I 1 • 11 I. • laws, conferred upon reserve bank shall have and exercise all powers, not in member bank. conflict with the laws of this state, which are conferred upon any member bank in any such federal reserve bank, by the provisions of the federal reserve act and the regu- lations of the federal reserve board. Such member bank and its directors, officers and stockholders shall continue to be subject, however, to all liabilities and duties im- posed upon them by the bank act and by any other law of this state. , U f Member bank sub- Any bank which shall have become a member or a j^^^ ^^ federal ex- federal reserve bank shall be subject to the examina- ^■"'"ations. [65] § 56-56a BLYTH, WITTER & CO. Supt. may accept jjons required under the terms of the federal reserve act, such examination in ^ lieu of one under ^j^j j-j^g superintendent of banks may, in his discretion, Act; may furnish to '^ "^ federal bank infor- accept such examination in lieu of the examination re- mation. ^ quired under the provisions of this act, and he, his agents and employees, may furnish to the federal reserve board, the federal reserve bank, or to examiners duly appointed by the federal reserve board or the federal reserve bank, copies of all examinations made, and may disclose to such federal reserve board, federal reserve bank, or ex- aminer, any information with reference to the condition of affairs of state bank members. [Note by Publishers, re Section 56, amended 1919: Section 56 as amended makes more explicit the statement of conditions under which banks in the State system may enter the Federal system as members of a Federal Reserve bank. Such State banks remain, as now, fully within the gov- ernment cf State lav/, but they are permitted to contribute the capital required for membership in the Federal Reserve Bank, from any of their three depart- ments, commercial, savings or trust. The Superintendent of Banks is by the amendment permitted to supply to the Federal Reserve Board of the Federal Re- serve Bank, or members appointed by eitlier, copies of all examinations made by the Superintendent of Banks, and he may disclose to the authorities named any information with reference to the condition of affairs of State-bank members. He may also accept the examination required by the terms of the Federal Re- serve bank in lieu of the examination required under the provisions of the Bank Act. Section 56, it will be noted, is one of a series of sections amended at the 1919 Session of the Legislature, which have in view the bringing about of a closer relationship between our State banks and the banks of the Federal system. The other sections of the series are Sections 20 and 68. (See also in this connec- tion Section 67, providing that a State-member bank may exercise the principal privilege accorded to a member of a Federal Reserve bank — namely, the privilege of rediscount.) As regards the provisions of these sections, reference is made thereto and to the notes accompanying the same. Briefly, the series of amendments referred to provide for the entrance of State banks into the Federal Reserve system as member banks, though still within the jurisdiction and control of the State banking Department, for the exercise of all rights and privileges enjoyed by member banks in the Federal Reserve system, and for the general acceptance of the Federal Reserve system and its practical application as expressed in the form of securities in which a member bank may invest. It has been the recent policy of the California State Banking Department to establish cordial working relations between that Department and the Federal Reserve Bank, on the one hand, and the National Bank authorities on the other hand, to the end that there may be cordial co-operation, and that the information of each shall be common to all. In carrying out this policy, the Department has met cordial response from both sources, and an additional element of safety has thus been created for the situation.] Any bank may con- Section 56a. Nothing in this act shall prevent or pro- vert into Natl. Banking Ass'n, hibit any bank from converting into a national banking under federal or _ . . r . ^ , state law. association under the provisions of section five thousand one hundred fifty-four of the United States revised stat- utes, or section eight of the federal reserve act, or any other federal or state law; provided, however, that no [66] GENERAL PROVISIONS § 56c savings bank and no departmental bank having a savings department, organized and existing under the laws of the State of California, shall convert into a national banking association except upon the following conditions: 1. Coincident with its application to the comptroller Condition for con- ^ '^ ^ version by State of the currency, any such savings or departmental bank ^^^'"fs bank or •' •' or bank having sav- shall file with the superintendent of banks formal notice ^"^^ department. of intention to convert into a national banking associa- tion. 2. Prior to conversion, any such savings or depart- mental bank shall place in the hands of the superintend- ent of banks, (a) A constructive notice for newspaper advertise- ment, directed to its savings depositors, of the fact of conversion; (b) Actual notice addressed to each and every sav- ings depositor, at his or her last known address, enclosed in stamped and addressed envelopes ready for mailing, this notice to be as follows: "You are hereby notified that the undersigned, for- merly the , now the , has converted from a banking corporation existing under the laws of California into a national banking association; and has therefore ceased to be under the jurisdiction and direc- tion of the California state banking department and the bank act of California, and is now under the jurisdiction and control of the federal reserve act and the national act." No other matter may be enclosed with this notice unless by permission of the superintendent of banks. 3. Upon conversion said bank shall file with the sup- upon conversion bank to file with erintendent of banks a copy of its authorization as a Supt. certified copy of its authorization national banking association, certified by the comptroller and surrender state r 1 1 1 II 1 1 -1 license. or the currency; and shall surrender to the superintend- ent of banks its license as a state banking corporation. [67] § 56a-57 BLYTH, WITTER & CO. Immediately foi- 4 Immediately following the conversion of a state lowing conversion, -^ ^ Supt. shall publish bank, the superintendent of banks shall cause the pub- notice of fact of ^ ^ conversion, as speci- lication of the notice provided in subdivision (a) of fled. paragraph two of this section; same to be at least once a week for four successive w^eeks in a newspaper of gen- eral circulation, printed and published in every town where said bank transacts its business and if there be no such paper in any such town or towns, then in the county where such bank transacts its business, and the superin- tendent of banks shall cause to be mailed the notices provided in subdivision (b) of paragraph two of this section. The advertisement shall be at the expense of the converting bank, prepaid to the department. [Note by Publisher to Section 56a, a new section enacted in 1919: This sec- tion provides for one of the important changes in the Bank Act. It is introduced to insure the right of every bank in the State system to convert into a National association if it so desires but such conversion in the case of a savings bank or of a departmental bank having a savings department can be accomplished only under such conditions as will advise every depositor in the savings bank or in the bank having a savings department of the character of the change which takes place by conversion. This section provides that, coincident with the application of a State bank to convert, notice of such intention shall be given to the Super- intendent of Banks. Before such conversion is effected such savings bank or departmental bank having a savings department shall place in the hands of the Superintendent of Banks a constructive notice, for newspaper publication, directed to its savings depositors, of the fact of conversion, and, (an actual notice,) ad- dressed to each and every stockholder at his or her last known address, enclosed in stamped and addressed envelope ready for mailing, a written notice which advises said depositor that the bank has ceased to be under the jurisdiction and direction of the California State Banking Department and is now under the jurisdiction and control of the Federal Reserve Act and the National Bank Act. Both of these notices are to be made effective after the conversion; one by publication and the other by mailing by the Superintendent of Banks. Such a provision is made pos- sible by an amendment to Section 5154 of the Revised Statutes of the United States, which in its new expression becomes Section 8 of the Federal Reserve Act, and provides that the conversion of a State bank into a National association shall not be in contravention of the State law. Prior to this amendment to the Federal statute, any State bank, without any authority whatever from the State government, could convert, and its savings deposits would be carried by operation of law into a National association. Section 56a in effect gives to every savings depositor in the State system the right of determining whether or not he shall remain as a depositor under State jurisdiction or become a depositor under national law.] m^ent°o°r^^o"dTe'v?ed" Section 5 7. Whcncver in this act it is required that or issued by State Jog,ns or investments shall be secisr ed by a first lien on real or subdivision there- •' staiimeiit th^eoTnot ^state, the lien of any tax, assessment or bond levied or delinquent, not iggued by this statc or by any county, city and county, deemed prior en- cumbrance as re- city, town, municipality, school district, reclamation dis- gards requirement "" ' ' ^ j t of first-lien real- estate security. J" trict, irrigation district or any other political or govern- mental subdivision of this state (not including bonds given pursuant to any law authorizing the same by any [68] GENERAL PROVISIONS § 57-58 person or corporation in lieu of pajmfient of any tax or assessment levied against any particular real property) and the lien cf any assessment levied to pay such bonds shall not be deemed to be a prior encumbrance or lien on such real property unless an installment or call of such tax, assessment or bond shall be due and delinquent; and any bonds given pursuant to any law authorizing the Tnt to faw "by"Iny same by any person or corporation in lieu of payment of tion°in°[ieu?f°pay- any tax or assessment levied against any particular real s^s^ment^upon'^reai property and any lien given to secure the payment of securing payment assessments or subscriptions to meet the requirements of subsMTpUems^iiTre- any law of the United States in respect to any irrigation ^pecttou. s. irriga- •' r J a tion project in tnis project of the United States in this state which may be f*^*®; "^^'f- f *^ ^^ *^ ' •' levied, under law of levied, made or received by any corporation or associa- Y' ^ — when not ' rf ^ r deemed prior en- tion formed to carry out the objects and requirements of cumbr^nce or lien. any such law of the United States shall not be deemed to be a prior encumbrance or lien on such real property if the lien given to secure such assessments and subscrip- tions taken with the loan or investment so secured shedl amount to not more them sixty per centum of the market value of the land securing the same. Section 58. Any bank possessing a capital and sur- E*°^„'^'*? •^ ^ =• ^ _ _ $1,000,000 or more plus of one million dollars or more may file application capital and surplus may apply to Supt. with the superintendent of banks for permission to exer- to exercise powers as follows: cise, upon such conditions and under such regulations as he may prescribe, either or both of the following powers: First — To establish branches in foreign countries or in ^- '^° establish foreign branches, dependencies or insular possessions of the United States and/or for the furtherance of the foreign commerce of this state and of the United States, Second — To invest an amount not exceeding in the ^j To invest in stock banks or corpora- aggregate ten per centum of its paid-in capital stock and i^lw engaged^^n^n- surplus in the stock of one or more banks or corporations temationai or for- ^ ^ eign banking, as chartered or incorporated under the laws of the State of specified. California, and principally engaged in international or foreign banking or banking in a dependency or insular [69] § 58 BLYTH. WITTER & CO. possession of the United States either directly or through the agency, ownership or control of local institutions in foreign countries, or in such dependencies or insular pos- sessions. Such application shall specify the name and capital of the bank filing it, the powers applied for and the place or places where the banking operations proposed are to or^piecTllZ^^tZl be carried on. The superintendent of banks shall have in whole or part, p^^gj. jq approvc or to reject such application in whole or in part if for any reason the granting of such application is deemed inexpedient, and shall also have power from time to time to increase or decrease the number of places where such banking operations may be carried on. ^"di™n^'of foreig"n Evcry bank operating foreign branches shall be re- branches, etc., to he quii-ed to furnish information concerning the condition of furnished Supt. on ^ =" demand, such branches to the superintendent of banks upon de- mand, and every bank investing in the capital stock of banks or corporations described under subparagraph two of the first paragraph of this section shall be required to furnish information concerning the condition of such banks or corporations to the superintendent of banks upon demand, and the superintendent of banks may order special examinations of the said branches, banks or corporations at such time or times as he may deem best. The cost of such special examinations shall be paid by said branches, banks or corporations. Before any bank shall be permitted to purchase stock in any such corporation the said corporation shall enter into an agreement or undertaking with the superin- tendent of banks to restrict its operations or conduct its business in such manner or under such limitations and restrictions as the said superintendent of banks may pre- scribe for the place or places w^herein such business is to Supt'^not'compHed ^^ Conducted. If at any time the superintendent of banks with, he may insti- gj^all ascertain that the regulations by him are not being tute investigation. [70] GENERAL PROVISIONS § 58 complied with, said superintendent of banks shall be authorized and shall have power to institute an investiga- tion of the matter and to send for persons and papers, subpoena witnesses and administer oaths in order to satisfy himself as to the actual nature of the transactions referred to. Should such investigation result in establish- ing the failure of the corporation in question, or of the bank or banks which may be stockholders therein, to comply w^ith the regulations laid down by the said super- intendent of banks, such banks may be required to dis- pose of stockholdings in the said corporation upon thirty days' notice, and in the event of their noncompliance with such order the superintendent of banks may institute proceedings for forfeiture of license. Every such bank shall conduct the accounts of each Such bank to con- r • \ 1-1 iiri ri ^"'^* accounts of foreign branch independently of the accounts of other each foreign branch foreign branches established by it and of its home office, and shall at the end of each fiscal period transfer to its general ledger the profit or loss accruing to each branch as a separate item. [Note by Publishers to Section 58, a new section enacted in 1919: Of the two principal problems that pressed for consideration in the redrafting: of the Bank Act, one was the problem of the Federal Reserve bank as it applied to the State banks of California. The other problem was the financial relations of the California banks with the world at large, and especially as they apply to American commercial expansion in the Orient and South America. Section 58, a new section, is, we believe, the first comprehensive handling of this situation. Briefly, it provides that any California bank with a capital and surplus of $1,000,000 or more may establish foreign branches or branches in the dependencies or insular possessions of the United States for the furtherance of the foreign commerce of this State and of the United States. Further, it may invest an amount not exceeding in the aggregate 10 per cent, of its paid-in capital and surplus in the stock of one of more banks or corporations chartered or incorporated under the laws of the State of California, principally engaged in the international or foreign banking business in a dependency or insular posses- sion of the United States. Every bank operating foreign branches within the limitations of this amendment is required to furnish information concerning the condition of such branches to the Superintendent of Banks upon demand, and shall be subject to the examination and jurisdiction of the State Banking Department. The general purpose and effect of this new section are apparent: It permits commercially organized corporations to have branches in any part of the world. It will permit such corporations to own stock in foreign banks and it will grant to them a privilege in foreign and domestic exchange that would be utterly be- yond their reach without the introduction of this enabling statute.] independently. [71] § 60 BLYTH, WITTER & CO. ARTICLE II. SAVINGS BANKS. Capital re-iuired of Section 60. Eveiv savinsfs bank hereafter organized savings Danks. j must have paid up in cash a capital stock not less than Popu^iat^on^notover (^^ Twenty-five thousand dollars if its principal place of business is located in any locality the population of which does not exceed five thousand persons; popuiatr^ao'or (b) Fifty thousand dollars if its principal place of business is located in any city the population of which is more than five thousand persons, but does not exceed twenty-five thousand persons; po^uSr-^iZoo" (-) One hundred thousand dollars if its principal place of business is located in any city the population of which is more than twenty-five thousand persons but does not exceed one hundred thousand persons; If 100,000 to 200,000 f ^\ -r U J J ^L J J II •£ -i • • 1 popuiation-$2oo,ooo. K^) ^ ^o hundred thousand dollars if its principal place of business is located in any city the population of which is more than one hundred thousand persons but does not exceed two hundred thousand persons; If more than 200 000 (g) Three hundred thousand dollars if its principal population — $300,000. ^ ' i- r- • place of business is located in any city the population of which is more than tw^o hundred thousand persons. Reserve fund of sav- \T ,.• i.\- ,. • 1_ 1 -1 •■.!_ «. ings bank without bxceptmg that any savings bank organized without capi a s oc . (.j^pjj.^] gtock must have a reserve fund of at least one million dollars. No certificate to be Until the Capital stock or reserve fund hereinbefore issued until such ^ capital stock or re- required shall be actually paid in, the superintendent of serve fund is paid in. ^ ./ i- > x banks shall refuse to issue the certificate required by this Classification not to act. The foregoing classification shall not apply to any apply to certain . i i i i • • 1 • l l_ -J banks, savings bank already in existence w^hich has received its certificate to do a banking business from the superin- tendent of banks; nor to any bank the location of which [721 SAVINGS BANKS §60-61 shall have been included by annexation or consolidation legal ^test^^^ within the limits of a city of a class requiring a larger ^ents. capitalization, but no bank thus excepted shall be per- mitted to establish any new branch office as provided in section nine of this act or to remove its place of business from the original limits of the city or township wherein it was located prior to such annexation or consolidation until it shall have the capital required of banks in such city not w^ithin said exception. Such excepted banks may not in any case decrease their capital stock but may in- crease the same in the m^anner provided by law to an amount either greater or less than that required of banks in such city not w^ithin said exception; provided, that nothing herein shall be construed to affect the provisions Nothing herein af- fc I . I . I . fects provisions of section nineteen or this act relative to the proportion seo. 19 or of See. fill 1 . c . 23 of Act, capital and surplus to deposits or or section tw^enty- three of this act relative to the capital stock required of banks doing a departmental business. The provisions of section tw^enty-three of this act, as to population, shall apply to any bank organized under the provisions of this section. Section 61. Any savings bank may purchase, hold Property which "^ "^ savings bank may and convey real or personal property as follows: purchase, hold and ■^ ^ tr t. J convey. 1 . The lot and building in which the business of the ^^"i^ premises, fur- niture, fixtures, etc., bank is carried on; furniture and fixtures, vaults and safe two-thirds vote of directors necessary deposit vaults and boxes necessary or proper to carry on for purchase or construction. its banking business; such lot and building, furniture and fixtures, vaults and safe deposit vaults and boxes shall not, in the aggregate, be carried on the books of such bank as an asset to an amount exceeding its paid-up capital and surplus; and hereafter, the authority of a two-thirds vote of all of the directors shall be necessary to authorize the purchase of such lot and building, or the construction of such building. 2. Such as may have been mortgaged, pledged or Property mortgaged, pledged or conveyed conveyed to it in trust for its benefit in good faith, for as security for loans, 173] § 6 1 BLYTH, WITTER & CO. BONDS WHICH ARE monev loaned in pursuance of the regular business of the LEGAL INVEST- . MENTS — Continued, corporation. 3. Such as may have been purchased at any sales Property purchased under pledge, mortgage or deed of trust made for its at sales under pledge, •, r r iiii l mortgage, etc. beneht for money so loaned and such as may be con- veyed to it by borrowers in satisfaction and discharge of loans made thereon. "'"''efty ravings bank No savings bank shall purchase, own, or sell personal may purchase^ own pj-Qperty, except such as may be requisite for its imme- diate accommodation for the convenient transaction of its business, notes or bonds secured by trust deeds or mortgages on real estate, bonds, securities or evidences of indebtedness, public or private, gold or silver bullion and United States mint certificates of ascertained value, and evidences of debt issued by the United States. ^fel^etc^! sl^vings ^^ savings bank shall purchase, own, hold or convey banks may purchase, bonds, securlties or evidences of indebtedness, public or own or sell. ' ' "^ private, except as follows: Bonds or interest- (a) Bonds or interest-bearing notes or obligations of bearing notes or ob- ligations of u. 3., the United States, or those for which the faith and credit etc. ^ ' of the United States are pledged for the pajmient of principal and interest, or those issued under authority of the United States; ^iTn^d Franc°e^ c"n- i^^) Bonds or interest-bearing notes or obligations of ada, etc.. when ap- proved by Supt. Engleuid or the United Kingdom of Great Britain and Ireland, or France, or the Dominion of Canada, or those for which the faith and credit of any one or more of said countries are pledged for the payment of principal and interest; or bonds or interest-bearing notes or obligations of any other foreign country or government, which bonds or interest-bearing notes or obligations shall have first been approved by the superintendent of banks in writing; [Publishers' Note 1, Section 61, amended 1919: The above clause "(aa)" was added in 1919.] Bonds of this State (b) Bonds of this state, or those for which the faith or its subdivisions. and credit of the State of Cedifornia are pledged for the [74] SAVINGS BANKS § 6 1 payment of principal and interest, or those of any county, bonds which are 1 1 1- • r 1 • LEGAL INVEST- city and county, city or school district of this state; menxs— continued. (c) Bonds or stocks or notes of any state in the United States that has not, within five years previous to making Bonds, stocks, etc., ' ■' 1 1 • i_ of any State in U. S. such investment by such bank, defaulted in the payment or any county, city . .... , - and county, city or of any part of either principal or interest, or those of any town, in any foreign , 1 . • r L state of U. S., of county, city and county, city or town, in any state of the more than 20,000 _y.,_, , , 10 i-z-i IT • • J population, with United States other than the State of California, issued bonded indebtedness .... , , e y . L !•! 1 within specified limit, under authority of any law of such state, which county, which bonds, etc, - •■ . 11 1 1 .1 f 1 'lave not defaulted, City and county, city or town, had, as shown by the fed- etc. eral or state census next preceding such investment, a population of more than twenty thousand inhabitants; provided, however, that the entire bonded indebtedness of such county, city and county, city or town, including such issue of bonds or stocks or notes, does not exceed fifteen per centum of the value of the taxable property therein as shown by its last equalized assessment roll ; and provided, further, that such county, city and county, city or town, or the state in which it is located has not de- faulted in payment of any part of either principal or interest due upon any legally authorized bond or stock or note issue within five years next preceding such invest- ment; ( d ) Bonds of any district organized under the laws Bonds of any dis- f .1 oi^ n <• /-• !•<■ • !_• I • 1 1 L \ trlct organized under of the State of California which are required to be and laws of state ap- . , , , , , . proved by commis- are investigated and approved by a commission now or sion under state law. hereafter authorized by a law of this state to conduct such investigation and give such approval and by author- ity of which approval said bonds are declared to be legal investments for savings banks; (e) Bonds of any district orgzmized under the laws Bonds of any dis- <■ 1 o e r^ ye • i • • i i /• • ^''''^* "°* otherwise of the State of Csdifornia not otherwise provided for in provided for in sec, ... , . of any mutual this section; or those of any mutual water company or- water company, etc., --., r ■% ' 1 • 111 under State law. gemized under the laws of this state emd operating wholly within this state; provided, that all bonds specified in this paragraph shall first be certified by the superintend- [75] § 6 1 BLYTH, WITTER & CO. BONDS WHICH ARE ent of banks after an investigation in manner and form LEGAL INVEST- . -iiri ^- 'i fxL* i. J MENTs— Continued, as IS provided for by section sixly-one-a or this act; ana provided, further, that no bonds of any mutual water company shall be certified by the superintendent of this par. to be first banks unless the company issuing said bonds shall have aneVinveEtTga"tf n, been in continuous operation for a period of five years next preceding the application for said certificate and thall have served not less than seventy- five per centum of the lands entitled to service by said mutual water company for a period of not less than three years next preceding the application for said certificate; Bonds of intrastate (f) (1) Bonds of any railroad corporation incorpor- ccnforming to speci- r^ted Under the laws of the State of California and oper- fied requirements. . i-ii- -ii'i i-i ating exclusively therein; provided, said corporation has had net earnings for the period herein fixed amounting to at least one and one-fourth times the interest on all its outstanding mortgage indebtedness; or, [Publishers' Note 2. Section 61, amended 1919: The phrase "the period herein fixed" is defined in the second paragraph fol- lowing paragraph "(k)" of this section.] Bonds of R. R. (2) Bonds of any railroad corporation incorporated corporation under i« r •iwT'io law of any State in under the laws of any state m the United Stales, operat- U. S., with mileage , i/-iii»ir ii i and net earnings as mg at least five hundred miles of standard gauge track exclusive of sidings; provided, said corporation has had net earnings for the period herein fixed amounting to at least one and one-half times the interest on all its out- standing mortgage indebtedness; or. Bonds of any R. R. ( 3 ) Bonds of any railroad corporation, the payment of corporation payment of which guaranteed which has been guaranteed, both as to principal and by R. R. corporation, . ^ ^ , -i i ^- i- .i meeting specified re mterest, by a railroad corporation meeting the require- Quirements as to net r-i ii--- /i\ /«>\ r i/r\ earnings, ments of either subdivision (1) or (2) of pauragraph (f) of this section; provided, that such guaranteeing corpora- tion has had for the period herein fixed net earnings amounting to at least one and one-half times the interest on all its outstanding mortgage indebtedness and, in ad- dition thereto, sufficient, taken with the earnings of all corporations whose bonds it has guaranteed, to qualify [76] SAVINGS BANKS § 6 I as investments for savings banks, as in this section pro- vided, all such guaranteed bonds; provided, that the excess of income of any corporation whose bonds have been so guaranteed, over the amount required by this section for such corporation, shall not apply to or be in- cluded in determining the income so required; (provided, further, that the guarantee of such bonds hereafter guar- anteed must establish a lien upon all the operating prop- erties of the guaranteeing corporation, which lien must take precedence over any subsequent issues of mortgage obligations by said guaranteeing corporation). [Publishers' Note 3, Section 61, amended 1919: The last proviso, enclosed in brackets, at the end of subdivision "(3)" of paragraph "(f)" was added in 1919.] In determining the income of emy corporation specified in paragraph (f ) of subdivision three of this section, there shall be included the income of any corporation or cor- porations out of which it shall have been formed through consolidation or merger, and of any corporation or cor- porations, the entire business and income producing property of which the corporation issuing such bonds has wholly acquired. BONDS WHICH ARE LEGAL INVEST- MENTS— Continued. Effect of consolida- tion on determination of income. Nature of security required for bonds All bonds authorized for investment by paragraph (f ) of subdivision three of this section must be secured by a (ff'of'TuMl'v'^ !"' mortgage or deed of trust which is, at the time of making such investment, either I. A closed first mortgage or deed of trust; or, or°deeYo7\rTst!^or^^ II. A first mortgage or deed of trust containing pro- rirst mortgage or , , _ 1 •! (ieed of trust with Visions restricting the issuance of further bonds until restrictions on issu- ,, ,. , 'iiii '"^ further bonds, as such tune as the income of said corporation shall have spe. ified; or been at least sufficient, during the twelve months next preceding the issuance of any additional bonds, to meet the earning requirements specified in the respective sub- divisions of this paragraph applicable to such corpora- tion after including the additional bonds then proposed to be issued; or, [77] § 6 1 BL.YTH, WITTER & CO. ^^^lIg'JlTnves^:^ ^^'* ^ refunding mortgage or deed of trust providing MENTS— Continued, ^qj. jjjg retirement of all prior lien mortgage debts of said corporation, and restricting the issuance of further bonds Refunding mt-e or **^*^ such time as the iucome of said corporation shall deed of trust, pro- hayg bccn at Icsst Sufficient, during the twelve months vidmg for retirement ' ^ of prior lien mtge. ^ext preceding the issuance of any additional bonds, to debts and restricting «- => ^ issuance of further meet the earning requirements specified in the respective bonas, as specified ; ^ -« « or subdivisions of this paragraph applicable to such corpor- ation after including the additional bonds then proposed to be issued; or, Underlying or di- visional, closed mtge. IV. An underlying or divisional closed mortgage or or deed of trust prop- deed of trust of property which forms a part of the oper- erty forming part of r- t- j k- r the operating system ating system of the Corporation then owning said prop- of corporation then ^ •' » o m » owning said property, erty. In the casc of bonds secured by an underlying or divisional closed mortgage or deed of trust, the net in- come required by this section shall be based exclusively upon the income, maintenance charges, operating ex- penses, taxes, and mortgage indebtedness of or against the property covered by such underlying or divisional closed mortgage or deed of trust, or, if such income, maintenance charges or operating expenses can not be definitely ascertzuned, on the proper proportionate share of such property in the general income, maintenance charges, operating expenses, and taxes of the corpora- tion then owning such property and on the mortgage in- debtedness of or against the property covered by such underlying or divisional closed mortgage or deed of trust; provided, however, that if the pajrmenl of the bonds secured by such underlying or divisional closed mortgage or deed of trust shall be guaranteed or assumed by the corporation then owning the property securing the same, such bonds shall be legal investments for savings banks, if the net income of such corporation from all sources shall equal the amount herein required, notwith- standing any insufficiency of the income derived from the property covered by such underlying or divisional [78] SAVINGS BANKS § 6 I closed mortgage or deed of trust to meet the require- legal ravEsr-''''^^ ments of this section. MENTs-continued. on pur- railroad No savings bank shall purchase the bonds of any rail- fifase'of^aii road corporation deriving less than twenty per centum ^on^s. of its gross receipts from passenger revenues. The term, "railroad corporation," when used in para- 'Railroad coipora- ' "^ ' "^ tion defined. graph (f) of subdivision three of this section, shall have the meaning defined in the "public utilities act." (g) Bonds of any street railroad corporation; or of Bonds of any street railroad corporation, any gas; water; pipe line; light; power; light and power; etc., or other pubUc ^ _ 11 utility" of this State gas, light and power; electric£d; telephone; telegraph; or meeting designated . requirements: — telephone and telegraph corporation or of any other "public utility" incorporated under the laws of the State of California; euid (1) Operating exclusively in the State of California, operating exclusively ^ ^ r^ => J va. State, with net provided said corporation has had, for the period herein earnings, asspecmed; fixed, net earnings amounting to one and one-half times the interest on all its outstanding mortgage indebtedness; or, (2) Operating its property in part within the State of ""^'v^^^-^^^ITXiiy. California, provided said corporation has had, for each specified earnings; of its two fiscal years next preceding such investment, net earnings amounting to one and one-half times the interest on all its outstanding mortgage indebtedness; or, (3) The payment of which is guaranteed, both as to The payment. of , ... . which is guaranteed principal and interest, by a public utility corporation by public utility -,... /<\ meeting specified re- meeting the requirements of either subdivision ( 1 ) or quirements and ... -Ill 1 establishing lien as (2) of paragraph (g) of this section, provided that such indicated. guaranteeing corporation has had for the period required in the respective subdivisions of this paragraph relating thereto, net earnings amounting to at least one and one- half times the interest on all of said guaranteeing cor- poration's outstanding mortgage indebtedness, and, in addition thereto, sufficient, taken with the earnings of [79] § 61 BLYTH, WITTER 6c CO. ^^^leoalTnves^:^ ^^^ corporations whose bonds it has guaranteed, to qual- MENTS— Continued, jfy ^g investments for savings banks, as in this section provided, all such guaranteed bonds; provided, that the excess of income of any corporation whose bonds have been so guaranteed, over the amount required by this section for such corporation, shall not apply to or be in- cluded in determining the income so required; (provided, further, that the guarantee of such bonds hereafter guar- anteed must establish a lien upon all the operating prop- erties of the guaranteeing corporation which lien must take precedence over any subsequent issues of mortgage obligations by said guaranteeing corporation). [Publishers' Note 4, Section 61, amended 1919: The last proviso, enclosed in brackets, at the end of the above subdivision "(3)", was added in 1919.] Income of merged jjj determining the income of any corporation specified corporation — what in- = j k- tr eluded, jn paragraph (g) of subdivision three of this section, there shall be included the income of any corporation or corporations out of which it shall have been formed through consolidation or merger, and of any corporation the entire business and income producing property of which the corporation issuing such bonds has wholly acquired. /iiijoads author- p^ bonds authorized for investment by paragraph (g) ized by par.(g) must •' '^ ^ '^ n s> ' be secured by mtge. Qf subdivision three of this section must be secured by a or deed of trust "^ which is, mortgage or deed of trust which is at the time of making such investment; either ^'°'deed"f t'^uft; or I- A closed first mortgage or deed of trust; or, First mtge, or deed H, A first mortgage or deed of trust containing pro- of trust with rc?tnc- , , ... tions on issuing fur- visions restricting the issuance of further bonds until such ther bonds, as speci- fied; or time as the income of said corporation shall have been at least sufficient, during the twelve months next preceding the issuance of any additional bonds, to meet the earn- ing requirements specified in the respective subdivisions of this paragraph applicable to such corporation after in- cluding the additional bonds then proposed to be issued; or, [80] SAVINGS BANKS § 6 1 III. A refunding mortgage or deed of trust providing l^^^l ^vest-^^^ for the retirement of all prior lien mortgage debts of said MENTs-continued. corporation and restricting the issuance of further bonds until such time as the income of said corporation shall Refunding mtge. or have been at least sufficient, during the twelve months t:f,f,',i:^^X^'J:^% next preceding the issuance of any additional bonds, to ^^i^ts andrTsfr'tin^ meet the earning requirements of such corporation after b'^^^'^s^specified! or including the additioned bonds then proposed to be issued; or, IV. An underlying or divisional closed mortgage or underlying or di- visional closed mtge. deed of trust of property which forms a part of the oper- or deed of trust of ^ ... property forming ating system of the corporation then owning said prop- part of the operating ... system of corporation erty. In the case of bonds secured by an underlying or di- then owning said , , 1 i- 1 • property, with in- visional closed mortgage or deed of trust, the net income come requirements, - _ , _ as specified. required by this section shall be based exclusively upon the income, maintenance charges, operating expenses, taxes and mortgage indebtedness of or against the prop- erty covered by such underlying or divisional closed mortgage or deed of trust or, if such income, maintenance charges or operating expenses cam not be definitely ascer- tained, on the proper proportionate share of such prop- erty in the genersJ income, maintenance charges, operat- ing expenses and taxes of the corporation then owning such property and on the mortgage indebtedness of or against the property covered by such underlying or divi- sional closed mortgage or deed of trust; provided, how- ever, that if the pajrment of the bonds secured by such underlying or divisional closed mortgage or deed of trust shall be guaranteed or assumed by the corporation then owning the property securing the same, such bonds shall be legal investments for savings banks, if the net income of such corporation from all sources shall equal the amount herein required, notwithstanding any insufficiency of the income derived from the property covered by such underlying or divisional closed mortgage or deed of trust to meet the requirements of this section. [81] § 6 1 BLYTH, WITTER & CO. ^°^lI&alTnves^:?- "^^ terms, "street railroad corporation," "pipe line MENTS— Continued, corporation," "gas corporation," "electrical corpora- tion," "telephone corporation," "telegraph corporation," street railroad **^^^®''" Corporation," and "public utility," wiien used ^"'tMms'd^efine" *"* paragraph (g) of subdivision three of this section, shall have the meaning defined in the "public utilities act," curfd" by°fir^srmort- ^^^ Notes or bonds secured by first mortgage or deed gage or deed of trust ©f trust or Other first Hen upon real estate, imoroved or or other 1st lien on r 7 . real estate etc. with unlmproved ; provided, that the entire note or bond issue specified limitations. *^ ^ ' shall not exceed sixty per centum of the market value of such real estate, or such real estate with improvements, taken as security; and provided, further, in case the said note or bond issue is created for a building loan on real estate, that at no time shall the entire outstanding note or bond issue exceed sixty per centum of the market value of the real estate and the actual cost of the improvements thereon taken as security. eT^!!"on"sts^of^on '" determining the market value of any real estate °' ?lmber"\anr the ^^^^^ ^^^ provisious of paragraph (h), subdivision three included ^^"S^rng o^ *^*s section, where such resJ estate, improved or un- market value, improved, consists of oil or other mineral or timber land, the value represented by such oil or other mineral or timber shall not be included in fixing such market value. Redwood timber may Nothing herein contained shall prevent savings banks be included in fixing market value, from making loans secured by mortgage or deed of trust upon lands wherein redwood timber is included in fixing the market value thereof. Collateral trust bonds (J) Collateral trust bonds or notes when secured by or notes secured by — either : autho°rt\d^forin' (1) Deposit of bonds authorized for investment by vestment by Sec. of {j^jg section of a market veJue at least fifteen per centum specified market »^ ^ ^v ^^^"®' i^ excess of the par value of the collateral trust bonds or Deposit of bonds so *^ authorized by this notes issued ; or, Sec, and other se- ' ' curities, of rombinc-d ^ , , . market value and of ( 2 ) Deposit of bonds authorized for investment by par value, as spoci- , ,, i.-i fied. thss section and other securities of a combined market [821 SAVINGS BANKS § 6 1 veJue at least twenty per centum in excess of the par value bonds which are » 1 1 • I'll I-EGAL INVEST- of the collateral trust bonds or notes issued; provided, ments— Continued. that the par value of said collateral trust bonds or notes shall in no case exceed the market vzdue of that portion of the security represented by bonds authorized for in- vestment by this section. ( 3 ) Deposit of any notes or bonds authorized for in- Deposit of any notes , II ' ' c °^ bonds authorized vestment by this section and other securities of a com- for investment by iri 1* • ^®'^' ^°*^ other securi- bined market value of at least thirty per centum m ex- ties of a combined ., iriii 1 11 market value, as cess or the par value or the coiiaterai trust bonds or notes specified. issued; provided, that the par vedue of such collateral trust bonds or notes issued shall in no case exceed the market value of that portion of the security represented by notes or bonds authorized for investment by this section; provided, further, that the collateral pledged consist of bonds authorized for investment by this sec- tion of the market value of at least seventy-five per centum of the par value of such collateral trust bonds or notes issued. (j) Bonds legal for investment by savings banks in Bonds legal for sav- • i-ikt-iT-i KA 1 -111 '°^^ bank investment the states of New York or Massachusetts; provided, how- in n. y. or Mass., ever, that as to bonds of the character specified in para- graph (c) of subdivision three of this section, such bonds shzJl also conform to the requirements of such paragraph. (k) Notes or bonds secured by mortgage or deed of Notes or bonds se- ^ ' ^ => o cured by mtge. or trust, payment of which is guaranteed by a policy of ^eed of trust, pay- ' "^ •' = J IT J ment guaranteed by mortgage insurance, and mortgage participation certi- mortgage insurance = =• ' => o «- r ^nd mortgage par- ficates, issued by a mortgage insurance company in ac- ticipation certs. cordance with the provisions of chapter eight of title two of part four of division first of the Civil Code. "Net earnings" as used in this section shall be deemed '^^^ earnings" de- to mean the amount remaining after deducting from the gross earnings all taxes, maintenance charges and oper- ating expenses except depreciation charges, sinking fund charges and interest on indebtedness. 183] ? 6 1 BLYTH. WITTER & CO. BONDS WHICH ARE Unlcss herein otherwise expressly provided the period LEGAL INVEST- , , . . . in. • ,t r MENTs— Continued, for which any corporation must have net ezu-nings suf- ficient to qualify its bonds as an investment for savings banks under this section sheJl be either the fiscal year of Period for which any , i«i» i« corporation must such Corporation next precedmg the mvestment therem have "net earnings," • i s . i .• ^.i • .1 etc., under Sec. by any savuigs bank or twelve consecutive months in the fourteen months next preceding such investment. No notes, bonds, or j^Jq notes, bonds, or other securities shall be deemed other securities ' ' deemed to conform fo come within or couform to the requirements of either to requirements of ^ paragraphs (f), (g), ©f paragraphs (f), (g), (h), or (i) of subdivision three (h), or (i) of subd. .. v/»v&/»v/> \ / 3 of Bee, unless as of this section, unless such notes, bonds or other securi- specified. , , ties shall, in the manner provided in this act, have been certified by the superintendent of banks to come within and fully conform to the requirements of one or the other of said peu'agraphs; provided, however, that any bemk may, without such certification by the superintendent of beuiks, purchase £iny note or bond or issue of notes or bonds provided for in said paragraph (h), whenever such purchase constitutes the entire amount of notes or bonds executed by the makers thereof and secured by the same real estate; (provided, also, that no savings bank shall hold any such notes or bonds unless such holding consti- tutes the entire issue thereof at any time outstanding; and provided, also, that nothing in this paragraph shall be construed to permit savings banks to invest in notes or certificates evidencing participation in any mortgage on real estate unless in this act specifically authorized or in or on any form of obligation secured by any undivided interest in real estate designed to distribute the obliga- tion so secured). [Publishers' Note 5, Section 61, amended 1919: The last two provisos of the above paragraph, enclosed in brackets, beginning, respectively, "p»'ovided also" "and provided also" were added in 1919. The purpose sought to be covered by said provisos is to pro- tect savings banks in investments in notes or bonds secured by real estate, where the entire issue is purchased by a single bank; but it prevents any savings banks from purchasing any part of such an issue unless the whole issue has been certified by the [84] SAVINGS BANKS §^ Superintendent of Banks as provided in Section 61a of the Act. ^°^°^ WHICH ABE The amendment also prohibits investment by savings banks in meuts Continued. notes secured by undivided interests in real estate, unless such issue of notes is first certified by the Superintendent of Banks.] The legeJity of investments heretofore lawfully made Legality of invest- . . .1 • • e .!_• •• £ 1 ments lawful when pursuemt to the provisions or this section, or or any law made, not affected of thb state as it existed on and subsequent to July 1, changed'^by amwid- 1909, shall not be affected by any amendments to this '^®'**^- section or this act; nor shall any such amendments re- quire the changing of investments once lawfully made under this act. Any bonds authorized by this section as a legal invest- Bond authorized by ,, .- iiir ^^'^' *^ investment — ment for savings banks may be carried on the books of how carried on books said bank at their investment value, based on their mar- ket value at the time they were originally bought, unless the superintendent of banks shall require any or all of the bonds which may thereafter have a market value less than the origineJ investment value to be written down to such new market value which shall be done gradually if practicable and in such manner as he may determine; or he may, by a plan of amortization to be determined by him, require such gradual extinction of premium as will bring such bonds to peu* at maturity. (When it shall be necessary to prevent loss to any sav- Bonds of intrastate • II II*.' 1 II. .,R. R. corp'n not mgs bank on an obligation owned or on a debt previously conforming to Sec, , . 1 • ■% r •.! •. •.! ai • •! when purchasable — contracted m good faith, it may, with the previous writ- ten consent of the superintendent of bemks, purchase or acquire bonds of any railroad corporation incorporated under the laws of the state of California and operated exclusively therein, notwithstanding such bonds do not conform to the requirements in this section contained; provided, any bonds so purchased or acquired must be sold for the best price obtainable by any bank within five years after such purchase or acqubition ) . [Publishers' Note 6, Section 61, amended 1919: The above paragraph, enclosed in brackets, was added in 1919.] No savings bank shall hereafter purchase or loan classes of bonds ia- ° ^ ^ ^ sued by public money upon any bond, note or other evidence of indebt- utility," in which •f *^ '' ' savings bank may invest, etc. [85] § 6 1 BLYTH, WITTER & CO. ^°Tegal^intesi^ edness, i&sued by any "public utility," subject to the jur- MENTS— Continued, isdiction, regulation or control of the railroad commission of this state under the provisions of the "public utilities act," approved December 23, 1911, and acts amendatory thereof or supplemental thereto, unless each such bond, note or other evidence of indebtedness was either: (a) Issued prior to the taking effect of the "public utilities act"; or, (b) Issued under authority of the railroad commission, in accordance with the provisions of said act; or, (c) A note issued for a period not exceeding twelve months, in accordance with the provisions of subdivision (b) of section fifty-two of said act. state not to be liaWa jsJq provision of this act, and no act or deed, done or for payment of, or to "^ ' ' gTiarantee regularity performed Under or in connection therewith, and no find- of securities certined *^ ' by supt. ing made or certificate issued under any provision thereof, shall be held or construed to obligate the state of Cali- fornia to pay, or be liable for the payment of, or to guarantee in any manner whatsoever, the regularity or the validity of the issuance of any stock or bond certifi- cate, or bond, note, or other evidence of indebtedness certified under any provision of this act, by the superin- tendent of bemks. Advertising bonds as Jj shall not bc lawful for any individual, firm, associa- legal investment for •' ' ' savings banks— un- tion, bank, trust company, stock company, copartner- lawful unless under ^ ' ' ^ . . conditions specified, ship or Corporation to advertise by newspaper or circu- lar or in any other nuanner that any securities are legal investments for savings banks in this state or to use any advertisement v/hich might lead the public to believe that any securities conform to the requirements of law relating to investments by savings bemks unless such securities are such as are specified in paragraphs (a), (aa), (b), (c), (d), (e), (j), or (k) of subdivision three of this section or shall, in the manner provided in this act, have been certified by the superintendent of banks to [86] SAVINGS BANKS § 61-61; come within and fully conform to the requirements of one ^egal invest-^^^ or the other of paragraphs (f), (g), (h), or (i) of sub- MENTs-continued. division three of this section or unless such advertise- ment shall have been approved in writing by the superin- tendent of banks prior to publishing, circulating or other- wise issuing the same. Any individual, firm, association, Penalty. bank, trust company, stock company, copartnership or corporation who shall advertise any securities in viola- tion of the provisions of this paragraph shall be guilty of a misdemeanor and shall be punishable by a fine not ex- ceeding one thousand dollars or by imprisonment in a county jail not exceeding one year or by both such fine and imprisonment. [Publishers' General Note to Section 61, amended 1919: The specific amendments or changes in this section have been pointed out at the points where they occur, in the body of the section. Speaking generally, it may be said that this section is the governing section of the Bank Act as regards savings bank investments. It is one of the most critically established laws in any State of the Union, and the changes that have been made are designed to fortify, in such particulars as suggest the necessity, the regulations governing the investment by savings banks in the securities designated by Section 61. By the amendments, it will be observed, banks are given the further privilege to invest in bonds or interest-bearing notes or obligations of England or the United Kingdom of Great Britain and Ireland or France or the Dominion of Canada or those for which the faith and credit of any one or more of said countries are pledged for the payment of principal and interest, and also bonds or interest-bearing notes or obligations of any other foreign country or government which shall first have been approved by the Superintendent of Banks in writing. The law governing investments by savings banks in notes or bonds secured by real estate is also strengthened to prevent any of the changes which may follow locality optimism or the specu- lative indulgence of real estate promoters.] Section 61a. The superintendent of banks shall have supt may investigate power, when any issue of bonds or securities is presented ^Q^f^^^fto^i^'^f ^''^^ to him for that purpose, to investigate and ascertain whether such bonds or securities come within and fully conform to all the requirements of paragraphs (f), (g), (h), or (i) of subdivision three of section sixty-one of this act, or of either of said paragraphs. He may also investigate and ascertain for what period of time, and [87] § 61a BLYTH. WITTER & CO. ^°*^legalTnvesI^ "PO»> whet conditions, any franchise granted to or held MENTS— Continued, jjy j^^y corporation issuing any such bonds or securities will remain in force, and any other facts or conditions bearing upon the value or sufficiency of such bonds. The On questions concern- superintendent of banks may accept and act upon the ing securities, Supt. *^ j r »- ^ may act on legal ©pinions and appraisements of any attorneys, engineers, praisements present- ©j. appraisers which may be presented by such person or corporation, so applying, and the reports of any of the executive officers of the corporation issuing such bonds or securities, on any question of fact concerning or affect- ing such bonds or securities, the security thereof, the fran- chise conditions herein mentioned, or the financial condi- tion of the corporation issuing the same. In lieu of or in Supt. may select at- addition to such opinions, appraisements and reports, the torneys, appraisers ' . i . e i t •<• i l I and accountants, at Superintendent of banks may, ir he deems proper, have expense of applicant. n i .. i i .t i . i • any or all siEch n^atters passed upon and certified to him by attorneys, engineers, appraisers or accountants of his own selection at the expense of the applicant. If the If Supt. finds bonds superintendent of banks shall find from such investiga- or securities conform .,,•• .. , •■• to Sec. 61, he shall tion that the bonds or securities so presented come within 80 certify; otherwise irii r iii • r e • i certificate refused, and f uliy conform to ail the requirements or any of said paragraphs of subdivision three of section sixty-one of this act, and is satisfied from such investigation as to such franchise conditions, he shall so certify unless for any reason he shall be of the opinion that such bonds are not a safe or proper investment for savings banks, and in such event or if such bonds shall fail to meet the require- ments of this act such certificate must be refused. The Supt. rriay investigate superintendent of banks also shall have power to inves- and certify as to ~ sufficiency of bonds tjgate and asccrtain the status and sufficiency as invest- specified in par. (e), = of subd. 3, Sec. 61. ments for savings banks of any bonds specified in para- graph (e) of subdivision three of section sixty-one of this act. If upon such investigation it shall be determined in the opinion of the superintendent of banks that any bond specified in said paragraph (e) of subdivision three of section sixty-one of this act constitutes a proper invest- ment for savings banks he shall so certify. [88] SAVINGS BANKS § 61a-62 Any certificate issued by the superintendent of banks IHH ^^^^^^.""^^ under authority of the provisions of this section may be ments— continued. revoked at any time in his discretion. Any certificate issued in relation to notes or bonds specified in para- g^p^. may revoke graphs (f), (g) or (i) of subdivbion three of section certificate. sixty-one of this act shall expire not later than three months after the end of the then current fiscal year of the corporation issuing such notes or bonds. Any such certificate so expiring may be renewed or Expiring certificate extended by the superintendent of banks without appli- cation therefor from such corporation or other interested parties if he shall be satisfied that the notes or bonds re- ferred to in said certificate are in conformity with the then requirements of section sixty-one of this act. The actual expense of investigating any issue of bonds Expense of investi- gating issues, by or securities so presented shall be paid by the person, whom paid. district or corporation presenting the same for investiga- tion, and the superintendent of banks, before making such investigation, may require a cash deposit of such amount as he may deem necessary to cover such expense. The superintendent of banks shall keep an official list of official list of securities. all bonds and securities certified by him. [Publishers' Note, re Section 61a, amended 1919: In this section, providing for the certification of savings bank investments by the Superintendent of Banks, the amendment con- sists of an added paragraph to give to the Superintendent of Banks power to extend or renew his certificate of eligibility of bonds of savings banks without requiring an application from any corpora- tion issuing the bonds or of any person interested in them. This change is required because of the fact that as soon as the bonds are certified and have become investments in savings banks, the issuing corporation loses all interest in the bond by operation of law and ceases to be eligible. The amendment is intended to pro- tect the savings bank in the continued holding of such bonds.] Section 62. No savings bank shall, directly or indi- J-J;^f/^/;;;,°;. rectly, deal or trade in real or personal property in any and^contracting of other case or for any other purpose than is authorized by this act, and shall not contract any debt or liability for [89] § 62 BLYTH, WITTER & CO. any purpose whatever other than for deposits, except as in this section provided. Savings banks may Savings banks may pay regular depositors, Vv^hen re- on request pay de- i i i ^ i e i • 1 • I'l. positors by draft, quested by them, by drart upon deposits to their credit and charge exchange .,,.11 11 r 1 therefor, with their banks, and charge current rate or exchange for such drafts. Savings bank not to fsJo savings bank shall borrow money, or pledge or borrow money ex- _ ^ . cept to meet demands hypothecate any or its securities, except to meet the im- of depositors. 1 . , 1 r i • i 1 1 • mediate demands or its own depositors, and then only m pursuance of a resolution adopted by a vote of a majority of its board of directors, duly entered upon their min- utes, wherein shall be recorded the ayes and nays upon each vote; also with the written approval of the super- intendent of banks, and he shall have the authority to fix the amount to be borrowed, the amount and char- acter of the securities to be pledged or hypothecated, Savings banks may, and the term and rate of interest thereon ; provided, that to extent of capital • 1 1 r 1 r c • • and surplus or re- any savings bank may, for the purpose of performing its serve, rediscount . . . , . 1 • 1 1 eligible assets with mnctioHs and transacting its business as authorized by Federal Reserve , . .. • 1 • 1 i bank, this act, rediscount, with or without guarantee or endorse- ment, with the federal reserve bank, its acceptances, notes or any other securities, available for rediscount with a federal reserve bank, in any amount up to but not exceeding its capital and surplus or reserve w^ithout con- sent of the superintendent of banks, and shall not be considered as borrowed money within the meaning of Savings bank may this section ; provided, also, that savings banks may, in borrow and receive on deposit public moneys, the manner authorized by law, and without the previous federal and state, as 1 r i • 1 specified, approval of the superintendent of banks, borrow the public moneys of the United States, the State of Cali- fornia, the counties, cities and counties, and towns of said State of California and receive such public moneys on deposit; provided, also, that savings banks may, in the manner authorized by law, and without the previous approval of the superintendent of banks, borrow postal savings moneys of the United States, and receive such [90] SAVINGS BANKS § 62-63 postal savings moneys on deposit; and provided, fur- '^l^riZnnt'fof' ther, savings banks may borrow any amount, in addition p" '^^^'"g® lH"^^ ^^^^ to the amounts authorized to be borrowed in this section, other federal securi- ' ties, in manner for the purpose of buying from the United Slates, United specified. States bonds. United States treasury certificates, or notes or obligations of the United States, but only in pursu- ance of a resolution of a majority of its board of direc- tors, duly entered upon their minutes, and without the previous approval of the superintendent of banks, but the fact of such transaction shall forthwith be reported in writing to the superintendent of banks. No excess Excess loan to sav- loan made to any savings bank with or without pledge '"^^ of assets shall be invalid or illegal as to the lender. [Publishers' Note, re Section 62, amended 1919: This section, which governs, restricts and guards the borrowing by savings banks, is liberalized to permit savings banks, to the extent of their capital and surplus, to rediscount such assets as they may possess with a Federal Reserve bank, such assets necessarily to be eligible for such rediscount; and also to bor- row in any amount for the purpose of buying from the United States, United States bonds. United States treasury certificates, or notes or obligations of the United States. The first named amendment is designed to make absolutely liquid the secondary reserve of the savings bank, and the second offers a suggestion of assistance to the federal government without impairing the character of the savings bank.] Section 63. Savings banks may issue general certifi- Savings bank may ./ c issue certificates gen- cates of deposit, which are transferable, as in other cases, ^rai and special, of deposits on conditions by indorsement and delivery; may issue, when requested specified. by the depositor, special certificates, acknowledging the deposit by the person therein named of a specified sum of money, and expressly providing on the face of such certificate that the sum so deposited and therein named may be transferred only on the books of the bank; pay- ment thereafter made by the bank to the depositor named in such certificate, or to his assignee named upon the books of the bank, or in case of death, to the legal rep- resentative of such person, of the sum for which such special certificate w^as issued, shall discharge the bank from all further liability on account of the money so paid. • 1,. .f f ■, . . II . Time certificates of AH time certihcates or deposit, issued by a savings deposit subject to bank, shall be subject to the same limitations and condi- other deposits, etc. [91] § 63-65 BLYTH. WITTER & CO. tions as applied to other deposits, and notice thereof shall be given by the words "Subject to conditions of agreement with depositors" printed on the face of the certificate issued. Savings bank to pre- Section 64. Each savings bank must prescribe by its scribe by its by-laws o r -• or by contract, time by.Jaws, or by Contract with its depositors, the time and tnd conditions of re- •' ' -^ '^ payment to depositor, conditions on which repayment is to be made to deposi- tors, except as in this act otherwise provided. In all cases the by-laws or contracts shall provide that notice of at least thirty days may, at the option of any such bank, be required to be given of intention to withdraw any deposit or part thereof, but whenever there is any call by depositors for repayment of a greater amount than the bank may have disposable for that purpose, the Savings bank without directors or officers thereof must not make any new loan capital stock shall carry at least one- qj. investment of the funds of the depositors or of earn- tenth profits to reserve, i^gs thereof Until such excess of call has ceased. The directors of any such bank having no capital stock shall, before the declaration of any dividend, carry at least one-tenth part of the net profits of such bank, for the preceding half year, or for the period covered by said dividend, to its reserve fund. Subject to the provisions of section nineteen of this act, any losses sustained by any such bank may be charged to and paid out of its reserve fund. A larger reserve fund may be created and nothing herein contained shall be construed as prohibi- tory thereof. The assets of any such bank are a security to its depositors. Any such bank organized without cap- ital stock, may provide by its by-laws for the disposal of any amount in its reserve fund in excess of the amount required by section nineteen of- this act and may also provide for final disposal upon the dissolution of the bank of its reserve fund or the balance thereof remain- ing after payment of any losses of such bank. Sayings bank shall Section 65. No loan shall be made, for himself or as not loan to any oi- rector or officer, or ^gent or partner of another, directly or indirectly, to any [92] SAVINGS BANKS § 65 director or officer of any savings bank by such bank, or S.^eL'l'tx^pt on the endorsement, surety or guaranty of any such offi- l°\"„7„^jt„^tn* cer or director, except that loans may be made to any ^^j'^r hlids^minority corporation in which any director or officer of such sav- stock. ings bank may own or hold a minority number of shares of stock, upon authorization of a majority of all the directors of such savings bank and the affirmative vote of all directors of such savings bank present at the meet- ing authorizing such loan; provided, however, that such loan shall in all other respects conform to and comply with all other provisions of this act. Such interested interested director , ,, ... not to act on such director or officer shall not vote or participate m any man- loan. ner in the action of the board on such loan; provided, also, that by and with the consent of the superintendent on loan by one of banks previously obtained in writing, all directors may dfr°ectors^raay"ote, vote upon such a loan made by one bank to another bank specified.""^ where the entire capital stock of one is owned by or held in trust for the stockholders of the other bank and where all or a majority of the board of directors of each of said banks are composed of the same persons. Such author- ization shall be entered upon the records or minutes of such savings bank. The fact of making such loan, the Facts concerning such loan to be re- names of the directors authorizing such loan, the cor- ported to Supt. porate name of the borrower, the name of each director or officer of such bank who is a member, stockholder, officer, or director of the corporation to which such loan is made, the amount of stock held by him in such borrow- ing corporation, the amount of such loan, the rate of interest thereon, the time when the loan will become due, the amount, character and value of security given therefor and the fact of final payment, when made, shall be forthwith reported in writing by the cashier or secretary of such savings bank to the superintendent of banks. No Loan to corporation " where majority of loan may be made to any corporation, a majority of the ^^^^^ ^^^y^^^^o^ mo,, stock of which is owned or controlled by any one or more ^^1"^^^^ " °®"" of the directors or officers of such savings bank, except with the previous consent of the superintendent of banks. [93] § 65 BLYTH, WITTER & CO. Sevingrs bank may ^ loan may be made to any agent or employee, other loan to agent or •' jo r j ' employee, than an officer or director, of any savings bank by such bank upon authorization of a majority of all the direc- tors of such savings bank and an affirmative vote of all directors of such savings bank present at the meeting authorizing such loan; provided, hov/ever, that such loan shall in all respects conform to and comply with all other provisions of this act. Such authorization shall be en- tered upon the records or minutes of such savings bank. ^ManToXfrl The fact of making such loan, the names of the directors ported to Supt. authorizing such loan, the name of the borrower, the nature of his employment, the amount of such loan, the rate of interest thereon, the time when the loan will be- come due, the amount, character and value of the secur- ity given therefor, and the fact of final payment, when made, shall be forthwith reported in writing by the cash- ier or secretary of such savings bank to the superintendent of banks. Any officer or director of any savings bank, who knowingly procures a loan from such savings bank, contrary to the provisions of this section, shall be guilty „. , ,. , of a felony. In case of the neglect or failure of the sec- Violations of -^ section, retary or cashier of any such bank to report to the super- intendent of banks, as herein provided, any of the facts so required to be reported, or in case of the neglect or failure of the secretary or cashier of any such bank to report to the superintendent of banks any loan made Penalties, contrary to the provisions of this section, the bank shall be liable therefor and shall forfeit to the people of the State of California twenty-five dollars per day for each day, or part thereof, during which such neglect or failure continues. Loans to banks and This section shall not apply to any loan made to a religious corpora- tion-, religious corporation, club, or other membership corpor- ation of which one or more directors, officers, agents or employees of such savings bank may be members or officers, but in which they have no financial interest. [94] SAVINGS BANKS § 65-66 Loans may be made to any director, other than an ^"eciroSer than officer, directly or indirectly, or to any agent or employee °f g^ ' i" ee of I°* of a savings bank on the security of United States bonds, savings bank on =" •' security of IT. S. United States treasury certificates, or interest-bearing "2°'°-^^ °J',.°^'V^.'' ■' ^ U. S. obligations notes, or obligations of the United States, or those for ^s specified. which the faith and credit of the United States are pledged for repayment of principal or interest, or those issued under authority of the United States, notwithstand- ing anything in this section contained, and such loans may be made in the usual manner of making loans in which no director of such bank is interested. [Publishers' Note, re Section 65, amended 1919: The amendment to this section, which establishes the limits upon any rela- tionship as between the bank, its officers, directors, agents or employees, pro- vides that by and with the consent of the Superintendent of Banks, previously obtained in writing, all directors may vote upon a loan made by one bank to another bank where the entire capital stock of one is owned by or is held in trust for the stockholders of the other bank, and where all or a majority of the board of directors of each of said banks are composed of the same persons. This amend- ment is designed to obviate unnecessary obstacles which the section in itself and without need raised, as against certain transactions which may be of benefit to both of the banks concerned. Another amendment to the section also makes it possible for a bank to loan to any director, other than an officer, directly or indirectly, and to an agent or employee of a savings bank, upon the security of United States bonds. United States Treasury Cer- tificates, or interest-bearing notes or obligations of the United States or those for which the faith and credit of the United States are pledged for repayment of principal or interest or those issued under authority of the United States. Borrowing by officers, di- rectors, agents, or employees in savings banks is strictly restricted and very carefully supervised, but the liberalization of the section in no way creates an injurious influence in the bank, as the security for the loan is beyond question of the first value.] banks not oans to Section 66. No savings bank shall hereafter make any ^0^^°!^ j loans to any person, firm, copartnership or corporation any person, etc., •^ "^ ' ' exceeding 80' r paid- to an amount exceeding fifty per centum of the actual "p capital and surplus. paid-up capital stock and surplus of such bank, or in the case of a bank organized without capital stock, to an amount exceeding fifty per centum of the reserve fund of such bank; provided, however, that any savings bank having a paid-up capital and surplus of less than fifty ^^^^^^^^1,°"^ ^^ thousand dollars, but not less than twenty-five thousand dollars, may make any such loan on real estate security to an amount not exceeding twenty-five thousand dol- lars; and provided, further, that any savings bank having [95] § 66-67 BLYTH. WITTER & CO. a paid-up capital and surplus of less than twenty-five thousand dollars may make any such loan on real estate security to an amount not exceeding its paid-up capital and surplus, if each such loan in all other respects con- Renewai or extension foj-ms to the provisions of this act. The renewal or ex- or loan nereaiter ^ ^^-lol^n hwe^after tension of any loan heretofore legally made by any sav- made." jj^gg bank shall not be construed to be a "loan hereafter made" within the meaning of the provisions of this sec- tion. The legality of investments heretofore lawfully made pursuant to the provisions of this act as it existed on and subsequent to July 1, 1909, shall not be affected Endorser deemed Jjy tJie provisions of this section. For the purposes of borrower. iiiiil this section an endorser or guarantor shall be deemed to be a borrower. No savings bank Section 67. I. No savings bank shall loan money shall loan except on adequate security, except on adequate security of real or personal property, for limited period. and no such loan shall be made for a period longer than ten years. No such loan shall be made on unsecured notes; provided, that a savings bank may discount or Savings bank may purchase bankers' or trade acceptances, notes, drafts and discount or purchase ^ , , bankers' or trade \yi[\s of exchangc of the kind and chzuracter and maturities acceptances, notes, ^ ^ _ •ii>ii etc, eligible for re- defined and made eligible for rediscount with a federal discount with Fed. • i i Keservebank, and reserve bank; provided, also, that the same are accepted complying with i«i i-/-«i specified require- or endorsed without qualification by a bank or trust company, which bank or trust company has a paid-in capiteJ of at least one million dollars ; and provided, also, that a savings bank may discount or purchzise a bill which must comply with the following requirements: 3iii issued by (a) It must be a bill issued by a solvent individueJ or solvent individual, firm or corporation firm or corporation engaged in mercantile or manufac- in mercantile or ^ ^ ^ , mfg. business in turiug business in the United States that makes statements V. S., making state- ^ •/> i i ments of condition ^f jfg condition duly ascertained and certified to by a certified by public •/• i accountant. pubHc accountsuit. Copy of such a certmed statement shall be on file in the office of the savings bank dbcount- ing or purchasing such bill in a file maintained for such purpose. Szud statement shall have been issued within 1961 SAVINGS BANKS § 67 the preceding fourteen months and shall be the latest issued by said individual or firm or corporation. Said ff°such"tat°ement' statement shall consist of a balance sheet showing quick assets, slow assets, permanent or fixed assets, current lia- bilities and accounts, short term loans, long term loans, capital and surplus. Accompanying said balance sheet shall be a copy of a statement from the borrower or pub- lic accountsunt concerning the following: ( 1 ) The nature of the business. (2) All contingent liabilities such as endorsements or guarantees. (3) Particulars respecting amy mortgage debts and whether there is any lien on current assets. (4) The maximum and minimum liabilities of the in- dividual, firm or corporation during the twelve months previous to the date of audit. (b) It must be issued by an individual, firm or cor- f^^^^J by individual. poration whose net worth is not less than two times the ^'"^°'' corporation ~ meeting specified amount of its outstanding liabilities, including any con- requirements as to ^ ' ^ . assets and liabili- tingent liabilities arising from the rediscount of bills re- t'^'- ceivable or other accommodation endorsements, nor less than three hundred thousand dollars. The quick assets of said individual, firm or corporation, consisting of mer- chandise, finished, raw, and in the process of manufacture, accounts receivable, bills receivable, bonds or obligations of the government of the United States at the then market value of said bonds or obligations and cash, shall not be less than two times its outstanding quick liabilities includ- ing any contingent liabilities arising from the rediscount of bills receivable or other accommodation endorsements, as shown by said statement. (c) It must have a maturity of not more than six Maturity Tnot inrknfVi« more than 6 months. [97] § 67 BLYTH, WITTER & CO. Bill must have ( jj ) jj must havc ariscii out of actual commercial trans- arisen out of actual commercial transac- actioHS ', that is, be a bill which has been issued or drawn tions, etc. for industrial or commercial purposes or the proceeds of which have been or are to be used for such purposes. Bills not eligible ; f^Q jjjjj shall be eligible for discount or purchase by a savings bank, the proceeds of v/hich have been used or are to be used for any of the following purposes : (1) For speculative ( 1 ) For investments of a merely speculative character investments, etc. . . whether made in goods or otherwise. (2) For dealing in ( 2 ) Must not have been issued for carrying or trading stocks, bonds or, jii i» other investment m stocKS, bonds or Other investment securities, except SGCuritiGs Gxcctit V. s. bonds; must not bonds of the government of the United States, and must cover investments. not cover merely investments. (3) Must not be bill (3) Must not be a bill of any individual, firm or cor- of individual, etc., , i • i i i i ^ i .i .• e having under pledge poration which has undcr pledge or hypothecation any or any personal . , assets, its personal assets. Bill defined. j]^^ ^^^^ "bill," when used in this section, shall be construed to include notes, drafts, or bills of exchange, and the word "goods" shall be construed to include goods, wares or merchandise. Savings bank pur- Any savings bank purchasing or discounting such paper chasing or discount- in. « ri • i • i r .i » n ing such paper shall Shall have in a hie maintained for the purpose, letters have file showing rii t i> .'i .!• credit of parties trom banks and merchants or mercantile reports bearing mid°e7d^iscount. upon the credit and standing of the person, firm, copart- nership or corporation whose paper is under discount. Combined total No savings bank shall at any time acquire or hold, di- of bankers' and trade rectly or indirectly, by discount or purchase, a combined acceptances, drafts, rii»ii ir bills of exchange total amount of bankers and trade acceptances, drafts ter defined by Sec, and bills of exchange and bills of the character defined shall not be greater . . , , . . i than 20'v of bank s and limited by this section, greater than twenty per cen- tum of the deposits of such bank, nor shall any savings Amount of bills of bank at any time acquire or hold, directly or indirectly, '^%\1.'sh^au"no^t be by discount or purchase, an amount of bills, of the char- Tflank^s'Sti £cter denned and limited by this section, greater than [98] SAVINGS BANKS § 67 Such bankers' or trade acceptances, drafts and bills of exchange from any one acceptor shall not exceed 5% of capital and surplus or reserve of bank. twelve and one-half per centum of the deposits of such bank. No savings bank shall at any time acquire or hold, directly or indirectly, by discount or purchase, any such bankers' or trade acceptances, drafts and bills of exchange from any one acceptor in an amount which shall exceed five per centum of the capital and surplus or reserve of such savings bank nor shall any savings bank at any time acquire or hold, directly or indirectly, by discount or pur- chase, any such bills of any one person, firm, copartner- ship or corporation in an amount which shall exceed five per centum of the capital and surplus or reserve of such savings bank. 2. No savings bank shall invest or loan an amount No savings bank ^ • 1 • 1 shall invest or loan greater than fifty per centum of its actual paid-up capital more than specified • /• 1 1 percentages of its and surplus on any one note or bond issue of the class paid-up capital and , ii\ I ... f J surplus, or of its specified in paragraph (h), or on the securities issued by assets, on bond is- ^ . sues or securities any one mortgage insurance company of the class speci- of specified classes. fied in paragraph (k) of subdivision three of section sixty- of the us. and of the If r ' State or designated one of this act, nor more than five per centum or its assets subdivisions thereof, on any one bond issue of any other class, except bonds of the United States, or interest-bearing notes or obligations of the United States, or bonds of the State of California, bonds for which the faith and credit of the United States or of the State of California are pledged, or bonds of any county, city and county, city or school district in this state, or bonds of any irrigation district such as are legal for investment by savings banks. 3. No savings bank shall loan money: fo°an mS!""'' '" (a) On bonds of the character specified in paragraphs (a), (aa), (b), (c) and (d) of subdivision three of sec- °,"„rat nl^of tion sixty-one of this act, or on bonds of the character specified in paragraph (e) of subdivision three of section sixty-one of this act the principal and interest of which , , , , ,, . ill I'J market values of are to be paid in whole or m part by taxes levied upon specified percentages the property in the district issuing such bonds, unless such loaned thereon. [99] the character and requisites specified in certain para- graphs in Sec. 61, and in this section, — unless same have § 67 BLYTH. WITTER & CO. bonds shall have a market value at least ten per centum in excess of the amount loaned thereon; or, (b) On bonds of the character specified in paragraphs (f), and (g) or on bonds or notes of the character spe- cified in paragraph (i) of subdivision three of section sixty-one of this act, when eligible as investments for sav- ings banks pursuant to said section, or on bonds of the character specified in paragraph (e) of subdivision three of section sixty-one of this act other than those specified in the preceding paragraph of this section, unless such bonds or notes shsdl have a market value at least fifteen per centum in excess of the amount loaned thereon; or, in°estnufnVrn N ^Y ^^^ ^^ bonds legal for investment by savings banks or Mass., unless J,, jjjg states of New York or Massachusetts, unless such market value 15% ' above amt. loaned fconds shall have a market value at least fifteen per thereon. centum in excess of the amount loaned thereon; or. On notes or bonds or ( jj ) Qjj notes or bonds of the character specified in on securities of char- acter speciaed in paragraph (h) of subdivision three of section sixty-one designated para- . , graphs of subd. 3 of of this act when certified as legal investments for savings Sec. 61, when certi- . . . , . fied er eligible for banks undcr the provisions of section sixty-one-a or on ment, unless market securities of the character specified in paragraph (k) of Vfl-lllfl H.t lPA.fit 1 ^"^d above amt. loaned, subdivisiou three of Said section eligible for investment by savings banks, unless such bonds, notes or securities shall have a meu°ket value at least ten per centum in excess of the zunount loaned thereon; or, On personal property, ( e ) On personal property unless such personeJ prop- unless same has iiii i i i /•/• market value at erty shall have a market value at least fifty per centum least 50% above amt. . i i i loaned, ui excess of the amount loaned thereon; or. On other bonds, or on (f) On Other bonds, or on capital stock of any cor- capital stock of cor- , , »ii «.iLlil_ li. poration, unless same poration, uniess such Donds or stocK Shall nave a market have market value , i./»i>. •• i-ii. ». at least 50% above value at least fifty per centum m excess or the amount amount loaned. Re- , , . 'ill «.!_ «. l l_ ll striction on loan on loaned thcrcon ; provided, however, that no loan shall 8 oc . j^^ niade upon the capital stock of any bank unless such bank has been in existence at least two years and has earned and paid a dividend on its capital stock. [100] SAVINGS BANKS § 67 4. No savings bank shall make any loan on security of Savings bank not to ^ •" •' make loan on real real estate, except it be a first lien, and in no event to estate, except it be first hen, not exceed- exceed sixty per centum of the market value of any real '°^ 60% of market value. Exception. estate taken as security except for the purpose of facilitat- ing the sale of property owned by such savings bank; provided, that a second lien may be accepted to secure Provisos, permitting the repayment of a debt previously contracted in good *ilnTunder specified faith; and provided, also, that any savings bank holding lo^ns norex"eding a first mortgage or deed of trust on real estate may take of flrstVien! retr or purchase and hold or loan upon another and immedi- and^eo^^of^mlrket ately subsequent mortgage or deed of trust thereon, but mortgageX^*^ all such loans shall not exceed in the aggregate sixty per centum of the market value of the real estate securing the same; provided, further, that a savings bank may loan not to exceed ninety per centum of the face value of a mortgage which constitutes a first lien upon real estate, but in no event shall any such loan exceed ninety per centum of sixty per centum of the market value of the real estate covered by said mortgage or deed of trust. 5. No savings bank shall loan to any one borrower Capitai-stock loans to any one borrower on the security of the capital stock of any corporation an not to exceed io%, and total loans on amount exceeding ten per centum of the capital stock stock of any one 1 1 r I • 11 -111 111 corporation not to and surplus or such savings bank; provided, that all loans exceed 259^, of . , I, bank's capital and on the capital stock of any one corporation shall not surplus. exceed in the aggregate twenty-five per centum of the capital stock and surplus of such savings bank. 6. No savings bank shall purchase, invest or loan its Savings bank not to , . purchase, invest or capital, surplus or the money or its depositors, or any loan any capital, ...... J y . surplus or deposits part or either, in mining shares or stock and any presi- in mining shares. dent or managing officer who knowingly consents to a violation of any provision of this paragraph shall be guilty of a felony. [Publishers' note, re Section 67, amended 1919: This is one of the most important amendments to the Bank Act. California was the first of the American States to permit its savings banks to invest a certain proportion of their assets in liquid form, namely, in bankers' acceptances and commercial paper of a grade that is considered by leading financial experts [lOll Violation a felony. § 67-68 BLYTH. WITTER & CO. and bankers of the United States to be such that it is practically equal to cash. The amendment which made possible this invest- ment was adopted in 1917 and restricted the savings banks to a limit of 10 per cent, of their deposits in these liquid investments. Five per cent, of this limit was to be in bankers' acceptances and the other five per cent, in commercial paper. With the advent of the Federal Reserve system and its mobilization of reserves which are intended to protect the banks in the system from panics and from general financial distress, the need of a greater liquid in- vestment, which becomes an actual secondary reserve, w^as ap- parent, and the amendment increases this percentage of invest- ments, liquid assets, to 20 per cent, of the deposit liability. Ail of this 20 per cent, may be invested in bankers' acceptances which bear a low rate of interest; but no more than 12^2 per cent, may be invested in commercial paper. The character of this commer- cial paper has the endorsement of the Federal Reserve system itself, and is introduced in our system in order to give to the banks opportunity to avail themselves of the actual mobilization of their reserves in the Federal Reserve system and its mobiliza- tion of assets by banks in California. The leading authorities in the financial world consider that such a modification of the sec- tion is of vital moment in protecting savings banks from danger, if not from disaster. Three of the conservative and powerful states of the Union, New York, Connecticut and Massachusetts, have followed the lead of California in this direction. Section 67 is also amended to harmonize its provisions with the changes contemplated in the amendment to Section 61 of the Bank Act relating to loaning and investment by savings banks.] Amount and char- Section 68. Evcry savings bank or savings depart- acter of total 13- r i i i ii ii • • • l serves of savings ment of a bank shall at all times maintain total reserves bank or savings bank t r department, equivalent to five per centum or the aggregate amount of its deposits, exclusive of United States, postal savings bank, state, county and municipal, and other public money deposits, which are secured as is required by law; at least two and one-half per centum of such deposits May be maintained shall be maintained as reserves on hand, which shall con- as reserves on hand, or as reserves on de- sist of gold bulHon, or any form of money or currency posit with reserve depositary, as speci- authorized by the laws of the United States, and two and one-half per centum of such deposits may be main- tained as reserves on hand, which shall consist of bonds, or interest bearing obligations of the United States, of gold bullion, or any form of money or currency author- ized by the laws of the United States or may be main- tained as reserves on deposit subject to call with any reserve depositary provided for in sections twenty and forty-three of this act; provided, however, that all or [102] SAVINGS BANKS § 68 any part of the reserves may be deposited, subject to call, with a federal reserve bank in the district in which such bank is located; provided, also, that no savings Savings bank or bi . I . 1111 •!. • dept. not required to ank or savings department shall be required to main- maintain reserves on , . I 1. r (■ I 11,1 1 hand in excess of tain reserves on hand in excess or rour hundred thousand 5400,000. when dll 11 1 111. It same reach that ollars, and when such reserves on hand reach that amt., balance of the amount, the balance of total reserves necessary to make rese^es on deposit, up the five per centum may be kept as reserves on de- posit, subject to call, with any reserve depositary pro- vided for in sections twenty and forty-three of this act. If any bank shall have become a member of a federal Amount and charac- ter of reserves re- reserve bank, it shall at all times maintain the reserves quired of bank be- coming member of required by the federal reserve act for time deposits, and Federal Reserve bank. in addition thereto shall be required to maintain a re- serve of at least two per centum of its aggregate deposits, exclusive of United States, postal savings, state, county and municipal, and other public money deposits, which are secured as is required by law, which two per centum shall consist of gold bullion, or any form of money or currency authorized by the laws of the United States. If any savings bank shall fail to maintain its total re- Penalty. serves in the manner authorized by this section, it shall be subject to the penalty provided for in section twenty of this act for commercial banks. No new loan shall be made during any deficiency in No new loan while , , T-\ • • 1 -111 total reserves de- the total reserves. Deposits with any commercial bank, acient. or commercial department of a bank, on open account, as provided in this section, shall be permitted and shall not be construed as loans. Not more than five per centum Consent of Supt. .,, . . . 1111111 •! required for savings or the deposits of any savings bank shall be deposited banks deposits of , 1 • , '11 r 1 more than 5'}'c With any one bank, except with the consent of the super- with any one bank , fii M 1 rr or 15' ; with com- intendent or banks. INot more than hrteen per centum merciai banks. of the deposits of any savings bank shall be deposited with all commercial banks, except with the consent of the superintendent of banks. No savings bank or savings department shall receive deposits of other banks other [103] § 68-70 BLYTH. WITTER & CO. No savings bank or {1^^^ savings deposits and such deposits shall not be dept. to receive or x- other than savings treated or Considered as a part of the reserves on de- deposits of other ^ banks; same shall posit of such depositing bank, provided, the sum so de- not be treated as "^ j- o > i- part of reserves on posited shall not exceed thirty per centum of the paid-in deposit of deposit- ing bank. Limita- capital and surplus of the depositing bank nor more than tion upon sum so deposited, fifteen per centum of the paid-in capital and surplus of the depositary bank. ^"^H'/.^w'^lnlft Section 68 Kz- Where a decedent, at the time of his may allow deposit ' ^ ' of decedent to remain qj. j^gj, Jeath, left moneys on deposit with a savings bank, in savings bank > ./ r- o » where deposited, and jj g\^g^\\ ^^ lawful f Or any pubUc administrator, who shall may deposit estate -' ^ moneys therein, become the administrator of the estate, to allow such deposit to remain in said savings bank, and also, it shall _ be lawful for him to deposit therein to the account of said decedent, any and all moneys of said estate not required for the current expenses of administration. Effect of such de- Such deposit, whether made by the decedent or a public administrator, shall relieve the public administrator from depositing the same with the county treasurer. Moneys so deposited, whether by the decedent or by a public Method o^^th- administrator, may be drawn upon demand without notice, upon the order of said administrator, counter- signed by a judge of a superior court, when required for the purpose of administration or otherwise. [Publishers' Note, re Section 68, amended 1919: In this section, relating to the reserves which must be maintained by savingrs banks, the changes made by the amendment are those made necessary to permit the full admission of banks in the State of California into the Federal Reserve system. All savings banks may place their reserves, or any part of their re- serves, in a Federal Reserve bank in the district in which the savings bank is located, and member banks, while not being permitted to carry reserves de- manded by the Federal Reserve bank in lieu of those required by the State Bank Act, must carry those required by the Federal system, and, in addition thereto, two per cent, of their deposit liability, on hand.] ^*nf°fm^*'Act° Section 69. Every savings bank, and the business of every savings department of every other bank, must be conducted under and in accordance with the provisions of this act. Savings bank may Ssction 70. Evcry savinEfs bank shall have power to receive as depositary, j z3 »- etc.. Liberty bonds reccive as depositary, or as bailee for safe keeping and or other TJ. S. bonds. r J 7 r ^ storage, Liberty bonds or other bonds or securities issued [104] COMMERCIAL BANKS § 80 by the United States government for vfar purposes or otherwise. [Publishers' Note, re Section 70, a new section added in 1919: The enormous acquisition of Liberty Bonds by the public has created a real situation as to their safe-keeping, and steps are being taken in every state to afford some protection as against theft and loss. This new section allow^s every savings bank in the State to take such bonds on deposit or as bailee for safe-keeping, and to arrange with the owner for the collection and crediting of the interest due on them, and to provide for their payment or return to their proper ow^ners.] ARTICLE III. COMMERCIAL BANKS. Section 80. No commercial bank shall make any Commercial banks not to loan to any loans, directly or indirectly, to any person, firm, co- borrowers in amount . which, (including partnership or corporation, in an amount which, includ- extensions of credit . • r !• 1 r ^^ specified), shall ing therein any extension or credit to such person, firm, exceed following I . . I - , f. percentages of copartnership or corporation, by means or letters or capital and surplus: credit, or by acceptance of drafts for, or the discount or purchase of the notes, bills of exchange or other obliga- tions of, such person, firm, copartnership or corporation, shall exceed the following percentage of its capital and surplus: 1 . Ten per centum without security, except where (D loor without such capital stock and surplus is not more than twenty- (Note exceptions) five thousand dollars, in which event an amount not to exceed twenty per centum of such capital stock and sur- plus may be loaned without security, and where such capital stock and surplus is greater than twenty-five thous- and dollars and does not exceed fifty thousand dollars, a sum not exceeding five thousand dollars may be loaned without security. Nothing herein shall prohibit any com- fe^curit^TorVot^e"^ mercial bank from taking or receiving any kind, char- under this* su'bd. ^ acter or amount of security whatsoever, either real or personal, for the protection of any loan made under the provisions of this subdivision, but no such loan or any part thereof shall be considered or construed as a secured [105] § 80 BLYTH, WITTER & CO. But no such loan to Iq^^ unless the wholc thereof is loaned upon security oe considered se- cured loan, unless -worth at least fifteen per centum more than the amount upon security at least i5'; more than amt. of guch loan; Or, of loan, (2) (In addition to 2. Fifteen per centum, in addition to the amount that amt. loaned under , , , .. ,.,,... subd. 1) 15' r upon may be loaned under the provisions or subdivision one security worth at , , . . .. .i ^ i . rr. least 15^; more than of this section, upon secunty worth at least ntteen per loan secured. , . c 1_ 1 J (Note provisos) centum more than the amount or such loan so secured; provided, the total amount which can be loaned under subdivisions one and two hereof can not exceed twenty- five per centum in all; provided, however, that a separate note or notes shall be taken for the unsecured loans and a separate note or notes shall be taken for the secured loans, and the secured and unsecured loans shall not be combined in any way within one note, or notes; or, (3) 25^'r upon se- 3, Twenty-five per centum upon security v/orth at curity exceeding , . loan secured at least least fifteen per centum more than the amount of its (Note proviso) loans SO Secured; provided, however, that when secured loans to this amount or any amount in excess of fifteen per centum are made, then no unsecured loans shall be permitted in addition to such secured loans; or, 40%, if loan on com- ^ Forty per centum, provided such loans are upon mercial paper, j tr ^ r owned by negotiator, commercial or business paper actually owned by the endorsed without '■ '■ limitation, pgrson negotiating the same to such bank, and are en- (Note provisos) ^ » » dorsed by such person without limitation; provided, how- ever, that in addition to the amounts permitted to be —re combinations }oaned by Subdivisions one, two or three of this section, loans under susd. •' 4 and subd. 1, 2, or 3. ^^ amount may be loaned on the securities fixed by sub- division four of this section, which taken with the amounts so permitted by said subdivisions one, two or three will —restrictions of Sec. ^ exceed forty per centum; provided, also that the re- not applicable to ■' ^ ^ T?"';„!i,^„'; ^}}} strictions under this section shall not apply to bills of exchange or drafts, with bills of lading attached, drawn in good faith against actual existing values; provided, further, that any commercial bank, having first obtained in writing the consent of the superintendent of banks so to do and under such conditions and regulations as [1061 E/Ls attached, etc. COMMERCIAL BANKS § 80 may be prescribed by him, may accept drafts or bills of ~ecified^characte°/ exchansre drawn upon it running for a period of not 5°'" p^""^ not longer =" ^ ^ 1 than SIX montns, lonerer than six months, but no commercial bank shall iitn^^^ed in aggregate =• amt., and to drawers accept such drafts or bills of exchange in an amount ^" specified busi- ^ ^ ness, etc. greater at any time in the outstanding aggregate than one- half of its capital and surplus; but such acceptance or acceptances must be drawn by a person, firm, copartner- ship or corporation engaged in agricultural, industrial or commercial business directly connected with the produc- tion, manufacture, purchase, sale or consignment of the goods involved in the transaction in which the accept- ance originated ; provided, however, that no such accept- —re limit in amount ^ of acceptances to ance or acceptances to any one person, rirm, copartner- any one person, firm, , . • 1 11 1 f 1 corporation, etc. snip or corporation shall exceed ten per centum or the capital and surplus of such bank. None of the Hnsitations or restrictions contained in the ^° limitations in previous suods. previous subdivisions of this section shall apply to loans, ^pp^y *° ^''^J'.?' «*° • ■^ . . secured by Liberty discotsnts or other extensions of credit secured by Liberty bonds, or other u. s. bonds, etc. bonds or by other bonds or securities issued by the United States government, if the market vsJue of siich Liberty bonds or other securities exceeds by ten per centum the amount of any such loan, discount or other extension of credit. Loans which are made upon security available for i-oans by commercial bank on security for loans in a savings bank may be made in a commercial savings-bank loans, deemed secured bank upon the same margin of security as is permitted loans under sec. to savings banks anything in this section to the contrary notwithstanding, and all such loans shall be deemed to be secured loans within the meaning of this section. In computing the total liabilities of any person to a Total liabilities of any person to com- commercial bank there shall be included all liabilities to merciai bank,— how computed, the bank of any copartnership or unincorporated associa- tion of which he is a member, and any loans made for his benefit or for the benefit of such copartnership or un- incorporated association; of any firm, copartnership or unincorporated association to a commercial bank there [107] § 80-8 ! BLYTH. WITTER & CO. shall be included all liabilities of its individual members and all loans made for the benefit of such copartnership or unincorporated association or any member thereof; and of any corporation to a commercial bank there shall be included all loans made for the benefit of the cor- poration. [Publishers' Note, re Section 80, amended 1919: This section is the governing section for loans made by com- mercial banks. The only change in the section is to permit loans to any director, other than an officer, directly or Indirectly, or to any agent or employee of a commercial bank, on the security of United States bonds, United States Treasury Certificates, or in- terest-bearing notes or obligations of the United States or those for which the faith and credit of the United States are pledged for repayment of principal and interest or those issued under author- ity of the United States. The amendment vfas made upon the theory that the security offered by the interest-bearing obligations of the United States offers no hazard to the banks accepting them.] Loans upon corporate Section 8 1 . No loan shall be made by any commer- securities, payment of v?hich undertaken, cial bank upon the securities of one or more corpora- severally, by two or more persons, firms, tions, the payment of which is undertaken, in Avhole or or corporations,— . n i . . , , • t forbidden, if made m part. Severally, but not jomtly, by two or more mdi- under conditions . i i r specified, viduals, hrms, or corporations: (a) If the borrowers or underwriters be obligated absolutely or contingently to purchase the securities, or any of them, collateral to such loan, unless the bor- rowers or underwriters shall have paid on account of the purchase of such securities an amount in cash, or its equivalent, equal to at least twenty-five per centum of the several amounts for which they remain obligated in completing the purchase of such securities; (b) If the commercial bank making such loan be liable, directly or indirectly, or contingently, for the re- payment of such loan or any part thereof; (c) If its term, including any renewal thereof by agree- ment, express or implied, exceed the period of one year; (d) Or to an amount under any circumstances in ex- cess of twenty-five per centum of the capital and surplus of the commercial bank making such loan. [108] COMMERCIAL BANKS § 82 Section 82. Every commercial bank hereafter organ- fe^'^i^ements*-^^ ized must have paid up in cash a capital stock of not less than, (a) Twenty-five thousand dollars if its principal place Population not over , . . i-i i-r 5,000— $25,000. of business is located in any locality the population of which does not exceed five thousand persons; (b) Fifty thousand dollars if its principal place of 5,000 to 25,000 . • 1 ^ 1 • -^ ,-U 1 ^- C W U PoPulation-$50,000. Dusmess is located m any city the population or which is more than five thousand persons but does not exceed twenty-five thousand persons; (c) One hundred thousand dollars if its principal 25,000 to 100,000 ^ ' _ ^ , 1 • r population— ?100> 000. place of business is located in any city the population of which is more than twenty-five thousand persons but does not exceed one hundred thousand persons; (d) Two hundred thousand dollars if its principal 100,000 to 200,000 .. ,. r population— $200,000. place of business is located in any city the population of which is more than one hundred thousand persons but does not exceed two hundred thousand persons; (e) Three hundred thousand dollars if its principal Iq^qq^'^soTooo'"^ place of business is located in any city the population of which is more than two hundred thousand persons. The foregoing classification shall not apply to any Foregoing ciassiEca- tion not retrospec- commercial bank already in existence which has received tive nor applicable .to banks included its certificate to do a banking business from the superin- by annexation, etc., tendent of banks; nor to any bank the location of which shall have been included by annexation or consolidation within the limits of a city of a class requiring a larger capitalization, but no bank thus excepted shall be per- But no excepted bank may open new mitted to establish any new branch office as provided in branch, nor remove place of business section nine of this act or to remove its place of business from pre-annexation 1.1. location until it from the original limits of the city or township w^herein have capital required . of unexcepted banks. it was located prior to such annexation or consolidation until it shall have the capital required of banks in such city not within said exception. Such excepted banks [109] § 82-83 BLYTH, WITTER & CO. Decrease and increase ^ay not in any case decrease their capital stock but may excepted banks, increase the same in the manner provided by law to an amount either greater or less than that required of banks in such city not within said exception; provided, that nothing herein shall be construed to affect the provisions Provisions of Sec. of section nineteen of this act relative to the proportion 19 re proportion of _ capital and surplus of Capital and surplus to deposits or of section twenty- to deposits, etc., r i • i • i • i i -if not affected by Sec. three ot this act relative to the capital stock required or Population provisions banks doing a departmental business. The provisions of applicable to banks . r ^ • i • i 11 organized under Sec. section tw^enty-three of this act, as to population, shall apply to any bank organized under the provisions of this section. Commi bank not to Section 83. No loan shall be made for himself or as loan to or on endorse- ment of an oflacer— agent or partner of another, directly or indirectly, to any but may loan to cor- • 1 i 1 i 111 1 poration of which omcer ot any commercial bank by such bank or on the officer is minority r 1 rr stockholder, director, endorsement, surety, or guaranty or any such ofncer; etc. ; and to director • 1 i 1 i 1 1 • r other than officer, or provided, that a loan may be made to a corporation or firm, corp'n, etc., 1 . 1 rr c -ill of which such direc- w^hich any othccr or a commercial bank, proposing to tor is member, etc.; | |i . .. iiii t rr and loan and extend make such loan, IS a minority stockholder, director, orn- credit to member, 1 • . 1 . , cer, agent or employee. Loans to any director, agent or employee other than an officer, or to any firm, copartner- ^^th whi"h such ship or corporation of which any director, agent or em- member is connected. 1 il^l ai • 1 ilLlJ ployee other than an omcer is a member, stockholder, director, officer, agent or other employee, or to any person, firm, copartnership or corporation on the en- dorsement, surety, or guaranty of any such director other than an officer, agent or other employee, can be made by any commercial bank; and provided, further, that a loan may be made or a line of credit may be given to any member of an advisory board or body of a commer- cial bank, not otherwise an officer of such bank, or a loan Conditions govern- n^ay \^q rnade to any firm, copartnership or corporation ing above loans. •' ./ i 1 » of which any member of such advisory board or body is a member, stockholder, director, officer, agent or other employee, or to any person, firm, copartnership, or cor- poration on the endorsement, surety, or guaranty of any such member of such advisory board or body upon such 1110] not officer, of ad- visory board of comm'l bank, or firm, corp'n, etc.. COMMERCIAL BANKS § 83 conditions as are herein fixed for a loan, directly or in- directly, or a line of credit and the report thereof to any director of such bank. Loans herein authorized can be made only on authorization of or confirmation within thirty days after making such loan, by a majority Conditions govern- iirr • ^"° above loans. of all the directors of such bank and the arhrmative vote (Cont'd.) of all directors of such bank present at the meeting authorizing or confirming such loan. Such interested director shall not vote or participate in any manner in the action of the board on such loan; provided, that by and with the consent of the superintendent of banks pre- viously obtained in writing, all directors may vote upon such a loan made by one bank to another bank where the entire capital stock of one is owned by or held in trust for the stockholders of the other bank and v/here all or a majority of the board of directors of each of said banks are composed of the same persons. The board of directors of any such bank may fix the total amount of credit that may at any one time during the twelve months next succeeding be given to any director, agent, or other employee, other than an officer, or to any firm, copartnership, or corporation in which any director, agent, or other employee other than an officer is a mem- ber, stockholder, director, officer, agent or other em- ployee or to any corporation of which any officer of a commercial bank, proposing to fix such total amount of credit, is a minority stockholder, director, officer, agent or employee, and any or all loans made within or up to the total amount of such authorized credit may at any time during said twelve months be renewed from time to time, in whole or in part, by the officers of the bank without any further vote or action on the part of the board of directors. Each such authorization shall be entered upon the records or minutes of said bank. No director shall vote or participate in anj' manner in such action of the board fixing the total amount of credit that may at any one time be given to himself or to any firm, [111] § 83 BLYTH. WITTER & CO. copartnership or corporation in which he is a member, stockholder, director, officer, agent or other employee. Facts concerning The fact of making such loan, the name of the director such loans to be re- , . . • -i > r I !• ported to Supt. authorizing such loan, the name or the director, agent or employee, obtaining such loan, or the name of the firm, copartnership or corporation in which such director, agent or employee is interested, or the name of the cor- poration, of which any officer of a commercial bank is a minority stockholder, director, officer, agent or employee, obtaining such loan, the amount of such loan, the rate of interest thereon, the time when the loan will become due, the amount, character and value of security given therefor, if any, and the fact of final payment when made shall forthwith be reported in writing by the cashier or secretary of such bank to the superintendent of banks. In case a loan is made to a corporation there shall be re- ported in the same manner the name of each director and officer of such bank who is a member, stockholder, director, officer or employee of such borrowing corpora- tion and the amount of stock held by him in such borrow- Provisions of Sec. jng corporation. All the provisions of this section relating as to reports apply . in to granting of credit, to rcports shall apply to the granting or credit and all etc. loans made under any credit given and payments made thereon shall also be reported immediately after the same Report to be made js made. In case of a loan made without the previous of loan without pre- ... rii- ir ri- vious authorization, authorization of the directors, the fact of making such loan shall forthwith be reported and the action of the board of directors, in confirming or refusing to confirm such loan within thirty days thereafter, and the fact of final payment when made shall be reported in the same manner as herein required for loans made under previous Procuring loan con- authorization. Any officer, director, agent, or employee trary to section, . -iiiii-i i felony, of a Commercial bank, who knowingly procures a loan from such commercial bank, contrary to the provisions of Penalty for failure ^]y[^ section, shall be guilty of a felony. In case of the to report. ^ ^ neglect or failure of the secretary or cashier of any such bank to report to the superintendent of banks, as herein [1121 COMMERCIAL BANKS § 83-84 provided, any of the facts so required to be reported, or in case of the neglect or failure of the secretary or cashier of any such bank to report to the superintendent of banks any loan made contrary to the provisions of this section, the bank shall be liable therefor and shall forfeit to the people of the state of California twenty-five dollars per day for each day, or part thereof, during which such neglect or failure continues. This section shall not apply to any loan made to a Loans to religious ... . II- corporations, etc., religious corporation, club, or other membership cor- when section not ap- - I . I .. ^, plicable thereto. poration or v/hich one or more directors, officers, agents or employees of such commercial bank may be members or officers but in which they have no financial interest. No loan may be made to any corporation, a majority Loans to corporation, where majority of the stock of which is owned or controlled by any one ^tock owned, etc., by directors, etc., of or more of the directors or officers of such commercial tank— restricted. bank, except with the previous consent of the superin- tendent of banks. Loeuis may be made to any director, other than an ^"^^ ™ay he made to director (not officer, directly or indirectly, or to any agent or em- officer) or agent or employee of comm 1 ployee of a commercial bank, on the security of United tank, on security of "^ U.S. bonds or oh- States bonds. United States treasury certificates, or in- ideations. terest-bearing notes, or obligations of the United States, or those for which the faith and credit of the United States are pledger! for repayment of principal or in- terest, or those issued under authority of the United States, notwithstanding anything in this section con- tained, and such loans may be made in the usual man- ner of making locuis in which no director of such bank is interested. [Publishers' Note, re Section 83, amended 1919: The amendment of this section occurs in the last paragraph, and is identical in phrasing with one of the amendments made to Section 65 of the Bank Act; the application here is to commercial banks, while that of Section 65 is to savings banks. The amendment removes the limitation made upon loans granted to directors, agents or employees of a commercial bank on the security of certain obligations of, or issued under the authority of, the United States, as specified in the last paragraph of the section.] Section 84. No commercial bank shall invest an Limited investment permitted in bank amount exceeding its paid-up capital and surplus in the premises. [113] §84-90 BLYTH. WITTER & CO. lot and building in which the business of the bank is car- ried on, furniture and fixtures, vaults and safe deposit vaults and boxes necessary or proper to carry on its banking business; and hereafter the authority of a two- thirds vote of all the directors shall be necessary to authorize the purchase of such lot and building or the construction of such building. Supt may limit de- Section 85. The superintendent of banks shall have posits with other t«i rrii ii commercial bank power to limit the amount or funds that may be de- posited by any commercial bank with any other com- mercial bank. ARTICLE IV. TRUST COMPANIES. VTTiat constitutes a Section 90. Any corporation w^hich has been or shall trust company. ,. iiii ri- i-i- be incorporated under the laws or this state, which is authorized by its articles of incorporation to act as exe- cutor, administrator, guardian of estates, assignee, re- ceiver, depositary or trustee, under appointment of any court or by authority of any law of this state, or as trustee for any purpose permitted by law, which has its principal place of business in a city in which the popula- tion does not exceed one hundred thousand persons and As to trust company w^hich has a Capital of not less than one hundred thousand piac*rf"busin"s's^rn dollars actually paid in, in cash, assigned to or available city of population r .1 £ 1 i." L • • L not over 100^000 and lor the purpose ot Conducting business in any such ^*' notTe^'s^than Capacity, or trust business of any character permitted by to trust b^usinws. l^w, and which has made with the state treasurer the deposit of money or securities of the character and in the amount required by the terms of section ninety-six of this act, and w^hich has received from the superintend- ent of banks the certificate of authority required by the terms of section one hundred twenty-seven of this act, to transact such business, and any corporation which has been or shall be incorporated under the laws of this state, which is authorized by its articles of incorporation [114] TRUST COMPANIES § 90 to act as executor, administrator, guardian of estates, as- signee, receiver, depositary or trustee, under appointment of any court or by authority of any law of this state, or as trustee for any purpose permitted by law, which has As to trust company . ••11 f V • • •.. • U • U iL having principal its principal place or business in a city m which the popu- place of business in |. J UJJi-L J JL^L "*y °^ population lation exceeds one hundred thousand persons and which exceeding 100,000 and has a capital of at least two hundred thousand dollars aUeast'$*2^ooVo 11 •J • • U • J J. •I 1_1 f iU assigned to trust actually paid in, m cash, assigned to or available ror the business. purpose of conducting business in any such capacity, or trust business of any character permitted by law^, and which has made with the state treasurer the deposit of money or securities of the character and in the amount required by the terms of section ninety-six of this act, and which has received from the superintendent of banks the certificate of authority required by the terms of sec- tion one hundred twenty-seven of this act, to transact such business, may act, or may be appointed by any court to act, in any such capacity in like manner as an individual and when so qualified shall be known as a trust company. Any such trust company may, as pro- Powers conferred on . 1 I . I . . 1 • f trust company. vided m this act, accept or receive any deposit or money or personal property authorized, directed or permitted to be made with any such corporation by any court or law of this state, and may accept and execute any trust pro- vided for in this act, or permitted by any law of this state, to be taken, accepted or executed by an individual. Any such trust company, if located in a city the popula- Trust company in city of population tion of which does not exceed one hundred thousand per- not over 100,000 to segregate and appor- sons must segregate that portion of its capital and surplus tion capital and _ , surplus as security assigned to or available for its trust business and must for performance of 1111c P^'^'^ts and court apportion and set aside at least fifty thousand dollars or trusts, respectively, . r 1 f . -t r 1 t *s specified. such paid-up capital as security for the taithtui pertorm- ance and execution of all private trusts accepted by it and must also apportion and set aside at least fifty thousand dollars of such paid-up capital as security for the faithful performance and execution of all court trusts accepted by it and whenever such trust company shall, [115] § 84-90 BLYTH, WITTER & CO. When such trust yjjjgj. jhe provision of sections ninety-six and ninety- company under Sees. 96 and 98 makes eight of this act, be required to make the first additional first additional de- ° • ^ posit of securities deposit of Securities with the state treasurer, such trust with State Treasurer, it must set aside ad- company must also apportion and set aside an additional ditional amounts of paid-up capital, as fifty thousand dollars of paid-up capital as security for specified, as addi- j r . t f ■• r i . rii- tionai security for the faithful performance and execution of all private performance of l l • l i • i private and court trusts accepted by it and must also apportion and set aside an additional fifty thousand dollars of paid-up capital as security for the faithful performance and exe- cution of all court trusts accepted by it, and any such Any such trust com- trust Company, if located in a city, the population of pany, if located in,., ijl^i j city of population which exceeds one hundred thousand persons, must exceeding 100,000, . , . • i i i • i must segrregate that segregate that portion or its capital and surplus assigned portion of capital -i i i r • 1 • l and surplus assigned to or available tor its trust business and must apportion to its trust business, , ., , iiii iiii f and must apportion and Set aside at least one hundred thousand dollars or at least $100,000 , ., ., .- if-iri r thereof as security such paid-up Capital as secunty ror the raithrul perrorm- for the performance , . , ■, . 1 ii i of its private trusts, ance and execution or such private trusts, nor shall it be prohibited from so doing; and provided, further, that the Amounts of capital respective amounts of capital or capital and surplus so or capital and surplus . , , -iiiii i-ii so apportioned to be apportioned and set aside shall be treated in all respects treated as separate , . , • i i i /• i capital or capital as the separate capital or capital and surplus or each and surplus of each -i-i i r ^ • i ii respective class of respective Kind or class or business, as though the same business, etc. J..J1 ,. JJ-i*.. were conducted by separate and distinct corporations, and each shall be kept, held, used and disposed of wholly for the exclusive benefit, protection and security of the respective classes of trust business to which the same Where executor, ad- w^erc respectively so apportioned and set aside. In all ministrator, etc., to .,.|.. -ii !•• qualify by taking cases in which it IS required that an executor, adminis- oath, etc., or where ^^ r • • i • affidavit required, it trator, guardian of estates, assignee, receiver, depositary shall be sufficient if iii i-ri i- i i -i- same be taken or or trustee, shall quality by taking and subscribing an subscribed by presi- , . i-i rr i • • •i-iiii dent, etc. ; such offi- oath, or in which an amdavit is required, it shall be a cer to be liable for rr • i-r-l i ••fi ii failure of trust com- surhcient qualihcation by such corporation ir such oath be pany to perform , i i -i i t n- i • ^ i i i duties required by taken and subscnbed or such amdavit be made by the law, .,..-, -f, president, vice president, secretary, manager, trust offi- cer, assistant trust officer or regularly employed attorney thereof, and such officer or employee shall be liable for the failure of such trust company to perform any of the [116] TRUST COMPANIES § 90 duties required by law to be performed by an individual acting in like capacity and subject to like penalties; pro- vided, any such appointment as guardian shall apply to the estate only, and not to the person. Any trust company upon becoming a member of a Trust company be- c t -I 11* i-ii 1 coming member of rederal reserve bank is authorized and empowered : Federal Reserve bank authorized to i-r- • 1 . . . I . continue to adminis- lo continue to administer, execute, enjoy and exercise ter, execute and en- all court and private trusts as defined in the bank act, rights, privileges, . 1, ••! i.i r 1 • I.- etc.; also to take, powers, rights, privileges, and other hduciary relations, execute, etc., all . . . 11- -t 1 .1 I* f new court and private appointments and business it may have at the time or trusts as defined in 1_ • Lti 1 lliil -Act, and other pow- becoming such trust company member, and also to take. . ll'-j. 11 i 1'i.it requirements and execute and administer all new^ court and private trusts ers, etc., subject to requirements and limitations imposed as defined in said bank act, including the right to the under^Actr*^^"^ ""^ appointment of all fiduciary capacities in which it may be named in wills theretofore and thereafter executed and probated, and other appointments, powers, priv- ileges and business, of every kind and nature, as may be then or thereafter permitted to, but subject to the same requirements and limitations as may be imposed upon any corporation under all of the provisions of the bank act. To hold, administer, execute, and in all respects gen- erally handle, manage and dispose of, without charge, restriction, limitation or impairment of any nature, all of its investments, rights, interests, titles to property, con- tractual, legal and other rights, obligations or liabilities, of every kind or nature, court and private trusts as de- fined in the bank act, and other powers which it may be then permitted to exercise by law. A foreign corporation may be authorized to act in this Foreign corporation ., , , » .irii • authorized to deliver state as trustee for the roUowuig purposes : bonds and receive payment or bonds in /■i\»¥'il' 11 1 • . .t e exchange; to regis- ( 1 ) 1 o deliver bonds, and receive pajntnent therefor, ter, redeem and cancel bonds; to pay /n\ T- 1 1* .II- 1 e interest on coupon {Z) lo deliver permanent bonds in exchange for bonds and cancel . . - , . interest coupons, and temporary bonds of the same issue. [117] §90-91 BLYTH. WITTER & CO. under mortgag^ (^) '^^ deliver refunding bonds in exchange for those deed of trust, etc ^f ^ prior issue or issues. securing notes or "^ bonds issued by any corporauon^— as ^^^ y^ register bonds, or to exchange registered bonds for coupon bonds, or coupon bonds for registered bonds. (5) To pay interest on such bonds, and to take up and cancel coupons representing such interest payments. (6) To redeem and cancel bonds when called for re- demption, or to pay and cancel bonds when due. (7) The certification of registered bonds for the pur- pose of exchemging registered bonds for coupon bonds. (8) To act as trustee under any mortgage, deed of trust, or other instrument securing notes or bonds issued by any corporation. [Publishers' Note, re Section 90, amended 1919; This amendment, contained in the three paragrraphs preceding the final para- graphs relating to foreign corporations acting as trustees, seeks to preserve the continuity of the trust relationships established by existing trust companies when they enter the Federal Reserve system. The amendment is one of precaution, and by common consent is considered to be necessary.] Court may authorize Section 9 1 . Any court having jurisdiction of any trustee or other , . . . fiduciary to deposit executor, administrator, guardian, assignee, receiver, de- trust fund -with trust company, subject to positary or trustec, upon the application of any such court order. omcer or trustee, or upon the application or any person having an interest in the estate or property administered by such officer or trustee, after such notice to the other parties in interest as the court may direct, and after a hearing upon such application, may authorize such officer or trustee to deposit any moneys then in his hands, or which may come into his hands thereafter, until the fur- ther order of said court, with any such trust company, and upon deposit of such money, and its receipt and ac- ceptance by such trust company, the said officer or trustee shall be discharged from further care or responsibility therefor. Such deposit shall be paid out only upon the order of said court. [118] TRUST COMPANIES § 92-93 Section 92. Any public administrator may deposit ^ay dgpo^ttstate*''^ any or all moneys of any estate upon which he is ad- fo^euVrent'^expenfes, ministering, not required for the current expenses of such with such trust =>' ^ ' company. administration, with any such trust company having its principal place of business in the county, or city and county in which he is acting as such administrator. Any Court may direct such administrator court having jurisdiction of an estate being administered to make deposit ■with such trust by a public administrator, may direct such administrator company. to deposit all or any part of the moneys of said estate with any such trust company. Such deposit shall relieve the public administrator from depositing with the county treasurer the moneys so deposited with such trust com- pany. Moneys so deposited by a public administrator may be drav/n, upon the order of such administrator. How such deposit ... . , may be withdrawn. countersigned by a judge of the superior court, when re- quired for the purposes of administration, or otherwise. Section 93. Any court having jurisdiction of any Court may, under specified conditions, estate in process of administration, or any other proceed- order executor, ad- . ministrator, guard- ing, may, on application of any person interested therein, ian, trustee, etc., to deposit trust funds, or the person who has been selected by said court, or a etc., with any such , . . I . trust company. judge thereof as executor, administrator, guardian, as- signee, receiver, depositary or trustee, after such notice to the parties in interest as the court shall direct, or with- out notice if all parties in interest consent thereto, and a hearing on such application, order any executor, adminis- trator, guardian, assignee, receiver, depositary or trustee so selected or appointed, whether such person has duly qualified or not to deposit with any such trust company, for safe-keeping, such portion or all of the personal assets of said estate as the court shall deem proper, and upon Effect of such such deposit being made, the court shall by an order of record reduce the bond to be given or theretofore given by such officer or trustee, so as to cover only the estate remaining in the hands of said officer or trustee; and the property so deposited shall thereupon be held by such trust company, under the order and direction of said court. [1191 § 94-96 BLYTH. WITTER & CO. Trust company not Scctioii 94. Such trust companv shall not be required required to give ' •' Vui. J.Q give any bond or security in case of any appointment or deposit of moneys or other personal assets hereinbe- fore provided for, except as provided in this act, but shall Trust company re- be responsible for all investments which shall be made by sponsible for invest- .,,,,,.. ■, ■, . r . ments. it Or the runcis which may be entrusted to it ror invest- ment by such court, and shall be liable to the same ex- tent as an individual, and as hereinafter provided. Trust company to Section 95. Such trust company shall pay interest pay interest on trust . , . , . , deposits, upon all moneys so deposited w^ith it at such rate as may be agreed upon at the time of its acceptance of any such deposit, or as shall be provided by the order of court and agreed to by such trust company. Trust company, if Scction 96. Any such trust Company, if its principal principal place of r i • • • i • • i i • r business in city of placc ot busincss IS Situated in a city the population or population not ex- i i i i i ceeding 100,000, be- which does not exceed one hundred thousand persons, fore accepting ap- _ _ i • l ii pointment, etc., to before accepting any such appointment or deposit, shall make specified de- , . . . i • . • i i posits with State deposit With the state treasurer, as herein provided, at Trpfl-Siirsr to SGCur© performance of its least fifty thousand dollars as security for the faithful court trusts and i • r ii i private trusts, performance and execution ot all court trusts accepted by it, and shall also deposit with the state treasurer at least fifty thousand dollars as security for the faithful performance and execution of all private trusts accepted As to making first by it; and whenever any such trust company shall under additional deposit, i . . <• . • i • L ^ £ iL • i. 1_ under Sec. 98. the provisions OF section nmety-eight or this act be re- quired to make the first additional deposit of securities w^ith the state treasurer such trust company must also deposit with the state treasurer an additional fifty thou- sand dollars as security for the faithful performance and execution of all private trusts accepted by it; and any Trust company, if trust Company if its principal place of business is situated principal place of. . . ri-i i ill business in city of in a City the population ot which exceeds one hundred population exceeding . , . . , . 100,000, to make thousand persons, berore accepting any such appoint- specified deposits ^ . i ii i • • i i with State Treasurer ment or dcposit, shall dcposit With the State treasurer, as to secure perform- , . • i i i i i i i i i ii ance of its court herein provided, at least one hundred thousand dollars, trusts and private -rir-iri r i • r trusts, as security ror the raithrul perrormance and execution or [120] TRUST COMPANIES § 96 all court trusts accepted by it, and shall also deposit with the state treasurer at least one hundred thousand dollars as security for the faithful performance and execution of all private trusts accepted by it. Any such deposit Deposit to consist of may be made either in lawful money of the United States, ^assTs°o'f^s°Jcuriufs: or in securities of either or any of the following classes: (a) Bonds issued by the United States or by this state fa) Bonds issued by . "^ . -^ . . U. S. or by State, or or by any county, city and county, city or school district specified subdivisions of this state, or bonds of any irrigation district such as are legal for investment by savings banks; (b) Bonds for the payment of which the faith and (t) Bonds for pay- ^ •' ment of which credit credit of the United States or of this state are pledged ; °^ \- p »/ °f state ^ '^ ' IS pledged. (c) Notes or bonds secured by mortgage or deed of ^'^^ Notes or bonds •^ ^ ^ secured by mortgage trust constituting a first lien on improved and productive °° improved cai. real estate in the State of California; such improved real estate being worth at least double the amount of such lien; (d) Notes or bonds secured by mortgage or deed of (d) Notes or bonds . . .11 !• e secured by mortgage trust, payment or which is guaranteed by a policy or or deed of trust, .. • .. .•/• payment of which mortgage msurance, and mortgage participation certin- guaranteed by , . _ , , , mortgage-insurance cates, issued by a mortgage msurance company m accord- policy and mortgage- ance with the provisions of Chapter VIII of Title II of ficate issued pursuant Part IV of division first of the Civil Code; provided, that such notes or bonds shall constitute, and such mort- gage participation certificates shall evidence the owner- ship of, or participation in, notes or bonds which con- stitute, a first lien on improved and productive real estate in the State of California, such improved real estate being worth at least double the amount of such lien. Such money or securities shall be first approved by the sect'riTy "rbrfirst superintendent of banks and, upon his written order, de- '^pp-^°'«'1 ^^ supt. posited with the state treasurer for the respective pur- poses herein specified, and said treasurer shall give his receipt therefor, and thereafter, subject to the provisions [121] § 96-97 BLYTH. WITTER & CO. and disposal of pro ceeds, only on court order, etc. State Treasurer to ^f tjjjs get, shall hold such dcposits of money or securities rateiy, for benefit of separately, each for the sole benefit of the beneficiaries beneficiaries, etc, "^ •^' ^ ri • i and State to be re- ©f the class of Irust busuiess, f or the security and protec- sponsible for deposits. ^ ,,.,, i ..i i«j. tion of which the same was deposited, and said treasurer shall give his receipt therefor and the state shall be re- sponsible for the custody and safe return of any money Securities may. with Or securities SO deposited. Said securities or money so be wuhdrawn^or^'ex. deposited may with the approval of the superintendent changed, ^j jjj^^ks, be withdra%vn or exchanged from time to time for other like securities, or lawful money, receivable as Trust company to re aforesaid, and so long as the trust company so deposit- divtdlndfon's'ecuH*^ ing said money or securities shall continue solvent, it shall ties deposited, j^^^^ ^^ ^j^j^j ^^^ gj^^lj y^^ permitted by the state treas- urer to receive the interest and dividends on any securities so deposited. Said securities and money shall be subject Said securities and to Sale and transfer, and to the disposal of the proceeds strand wsfVr! by Said state treasurer, only on the order of a court of competent jurisdiction and for the benefit respectively of the beneficiaries of that class of trust business for the security and protection of which the same were deposited. [Publishers' Note, re Section 96: This section remains unchanged. With reference to the "Notes or bonds secured by mortgage or deed of trust payment of which is guaranteed by a policy of mortgage insurance, and mortgage participation certificates, issued by a mortgage insurance company" in accordance with specified provisions of the Civil Code, see Appendix for provisions of the Civil Code referred to.] Trust company hav- Section 97. Any such trust company, having a capital ing capital and sur- . i i i i i i ii plus of $200,000 or and surplus or two hundred thousand dollars or more more apportioned as . , , . , • r il_ £ -i,!. £ 1 security for perform- apportioned and Set asidc as security tor the taithtul ance of court trusts . , . rii ±. ,. ±. tJ and wholly or in part perrormance and execution or all court trusts accepted invested in its busi- , . -ii-l- j. 11_-L' Lll ness premises, may by it, as provided m this act, and which is wholly or in Supt.^t"m'orrgage part invested in the lot and building in which its business same to state Treas- . ., i -.tiitl • ,. ^ l C urer, as part of de- IS Carried on, may be permitted by the superintendent ot ^°^' banks to mortgage such lot and building to the state treasurer for such sum, up to its full market value, as the superintendent of banks may determine, and such mort- gage may be deposited with said treasurer, and when so deposited it shall be included in the amount of securities herein required to be deposited with said treasurer as [122] TRUST COMPANIES § 93 security for the faithful performance of all such court trusts. Section 98. Whenever any trust company, the prin- when trust company , ^ ];^ ,. whose principal cipal place of business of which Is located in a city the p^^ce of business is . , , . in city of population population of which does not exceed one hundred thou- no* exceeding 100,000 . ^ receives from court sand persons, receives from court trusts accepted by it, trusts trust . f f 1 funds, in amounts trust funds, as herein defined, to the amount of five hun- as specified, respec- dred thousand dollars, it shall forthwith notify in writing in each case to the superintendent of banks of such fact, and within thereafter to deposit ., , 1111 ''ii additional security thirty days thereafter shall deposit with the state treasurer with state Treasurer, additioneJ money or securities of the character mentioned sole benefit of the • . • r .1 • . 1 beneficiaries, as and defined in section nmety-six of this act, approved as specified. therein provided, in the amount of fifty thousand dollars ; and whenever any trust company receives from court trusts such funds to the amount of one million dollars it shall further notify in writing the superintendent of banks of such fact and within thirty days thereafter shall de- posit with the state treasurer additional money or securi- ties of the character mentioned and defined in section ninety-six of this act, approved as therein provided, in the amount of fifty thousand dollars; and for each addi- tional five hundred thousand dollars of such trust funds thereafter received by any trust company from court trusts a similar notification in writing shall forthwith be given to the superintendent of banks, and a further de- posit in the amount of twenty-five thousand dollars of such money or securities, or of securities provided for in section ninety-seven of this act likewise approved, shall be made, within thirty days thereafter, by such trust company with said state treasurer, until five hundred thousand dollars of such securities have been so de- posited. The treasurer shall give his receipt for any money or securities so deposited and each and all of such deposits of money or securities, shall be held by said state treasurer for the sole benefit of the beneficiaries of the class of business for the security and protection of which [123] § 98 BLYTH, WITTER & CO. state to be respon- same wcre deposited. The state shall be responsible for sible for such de- *^ '^ posits, the custody and safe return of any money or securities so deposited with said state treasurer. The term "trust "Trust funds" funds" when used in this section shall be deemed to mean and shall mean personal property and cash, whether re- ceived with the original trust property or as rent, income or proceeds thereof, or otherwise, in connection with the trust, and shall not be deemed to include and shall not Trust company fail- include real property. Any trust company failing to com- ing: to comply with . .. . . . Sec. to forfeit to ply with the provisions of this section shall forfeit to the state $100 a day. . . State of California one hundred dollars a day for each day during which such failure or default shall continue. Upon making a request in writing to the superintendent of banks, any such trust company shall be entitled to Trust company en- withdraw f rom the state treasurer, from time to time, a from state Treasurer Sufficient amount of such securities so that at all times the amount of securities . r i •■• i •• i » ii r • in excess of require- amount ot such securities SO deposited stiail conform to ' the requirements of this act, and so that at no time shall such trust company be required to have on deposit with the state treasurer an amount of securities in excess of the requirements of this act. Upon receiving such re- quest in writing, and satisfactory proof of the facts war- ranting such withdrawal, it shall be the duty of the sup- erintendent of banks to forthwith deliver to the state treasurer a written order directing the withdrawed of said securities so as to conform with the provisions of this section, and it shall be the duty of the state treasurer to Validity of acts or comply with such written order. The validity or legality proceedings by trust ^ i- i i i i company in adminis- or any act Or proceeding done or taken by any such tration of trusts not , . . . -ill affected or impaired trust Company, relating to or m connection with the ad- by neglect or failure ... f . ill i o mortgage, etc., sama panied by a registrar of titles' certificates as to the con- to be accompanied '^ -^ ^ ty pol:cy of mort- dition of the title if the notes or bonds are secured by &age insurance, or abstract of title, mortgages covering property which has been brought etc. under the operation of the land title law, commonly called the Torrens title law, or a policy of mortgage in- surance, or a complete abstract of title or an unlimited certificate of title or a policy of title insurance prepared or issued by a person, company or corporation desig- nated or approved by the superintendent of banks and authorized by law or otherwise found by the superin- tendent of banks to be competent to issue such evidence Abstracts and poli- cies to be examined of title, which shall be examined and approved by or and approved under direction of Supt. under the direction of said superintendent of banks. The fees for an examination of such evidence of title by council to be paid by the trust company making the de- posit shall not exceed twenty dollars for each title ex- Fees. amined, and the fee for each appraiser not exceeding two, shall not exceed five dollars for each mortgage or deed of trust. (Section 100. Repealed 1913.) Section 101. For the purposes of this act, all trusts classification of ■^ '^ trusts. permitted to be accepted or executed by any such trust company, under any provision of this act are hereby clas- sified and defined as either: (a) Court trusts; or (b) Private trusts. A court trust is one in which any such trust company |j'f^°„"J^ *''"^*" acts under appointment, order or decree of any court, [125] § 101 BLYTH. WITTER & CO. as executor, administrator, guardian, assignee, receiver, depositary or trustee, or in which it receives on deposit from a pubHc administrator, under any provision of this act, or from any executor, administrator, guardian, as- signee, receiver, depositary or trustee, under any order or decree of any court, money or property. "Privat^trusr* Any Other trust is a private trust; provided, that the creator of any private trust of which a trust company Private trust may be shall be made, or at any time come to be, the trustee, subjected to pro- l • r i • r i visions of Bank Act may, at the time or the creation or such trust or the relating to court . , . , . . , trusts— by the per- Creator ot any such private trust, or his successors m in- sons, and under the i l i r • • i r • i conditions, specified tercst, and the benehciaries thereof may, at any time, by their joint consent, direct that such trust shall be subject to and entitled to the benefit of all of the provisions of this act relating to court trusts and thereafter such trust shall for all the purposes of this act be deemed to be a court trust and wherever in this act the words "court trust" are used they shall be deemed to include private trusts which are subject to supervision except in so far as any of the provisions of this act relating to court trusts may, by their nature, be inapplicable to such private trust. Such direction shall be in writing addressed to the trustee and a copy thereof, certified by the trustee, de- livered to the superintendent of banks. In case such direction shall be made after the accept- ance of the trust, the trustee shall have the right to resign as such and a new trustee shall be appointed as provided Inspection and super- jn the trust instrument or by law. The inspection and vision by Supt. _ covers court trusts, supervision of the superintendent of banks shall extend also private trusts when subjected to only to court trusts as herein defined and to private trusts Act. subjected to the provisions of this act relating to court trusts as above provided. Private trusts, ex- Private trusts, except as in this section provided, shall cept as in Sec. pro- » x- f » vided, not subject to not be subject to the inspection or supervision of the supervision of Supt. ■* t- t- superintendent of banks, his attorneys, examiners or other assistants. [126] TRUST COMPANIES § 101-103 In making the reports to the superintendent of banks Trust company in <=> •^ » making reports to required by this act, every trust company shall, in addi- Supt., to furnish ^ •' -^ ' "^ specified informa- tion to the other facts to be reported by it, furnish only tion as to its court trusts and private a list and brief description of the court trusts and private trusts subject to supervision. trusts, which are subject to supervision, held by it, the source of appointment thereto, the authority by which the appointment or deposit was made, and the amount of real or personal property held by such trust company by virtue thereof. Nothing in this act contained shall make it unlawful for when person or cor- _ _ _ , poration, not a trust any person or corporation not subject to the supervision company, may hold money in escrow or of the superintendent of banks to engage in the business act as trustee. of receiving and holding in escrow money or its equiva- lent pending investment in real estate or securities for or on account of his or its principal, or of acting as trustee under deeds of trust given solely for the purpose of securing obligations for the repayment of money, other than corporation bonds. Section 1 02. Any corporation which desires to with- ^g°,Vdesfr?s"o" draw from and discontinue doing a trust business shall tuTineli""furnLMng furnish to the superintendent of banks satisfactory evi- ^nd ^"scharge'from dence of its release and discharge from all the obligations tr!.s°t^s'su*pt"shTu and trusts hereinbefore provided for, and thereupon the of7u4o"ty^^o^d°o superintendent of banks shall revoke his certificate of gutl Tr'easurer"'^ authority to do a trust business theretofore issued to such ^haii return deposits, ■' etc. corporation, and the state treasurer shall return to said corporation all the securities deposited by such corpora- tion and shall cancel any mortgage made by such cor- poration to said state treasurer as a part of such securities, and thereafter such corporation shall not be permitted to use and shall not use the word "trust" in its corporate name or in connection with its business. Section 103. Any trust company exercising the pow- ers and performing the duties provided for in this act, shall, except as herein otherwise provided, keep inviolate all communications and writings made to or by said [127] Private trusts con- confidential. § 103-106 BLYTH. WITTER & CO. trustee touching the existence, condition, management and administration of any private trust confided to it; and no creditor or stockholder of any such trust company shall be entitled to disclosure or knowledge of any such Who entitled to communication or writing; provided, however, that the knowledge of writ- • i . • • i . . , /t~ ings, etc. president, vice-president, manager, trust orhcer, secretary or regularly employed attorney of any such trust coin- pany shall be entitled to knowledge of any such com- munication or writing; and provided further, that in any suit or proceeding touching the existence, condition, man- agement or administration of any such trust, the court wherein the same is pending may require disclosure of any such communication or writing. (Section 104. Repealed 1913.) Investment of capi- Section 105. Evcry trusl coiTipany shall, except as tal, surplus and , , -^ , . . , trust funds by trust otherwise providcd by law, invest its capital and surplus company. ^ ,^ ..,. and any trust funds received by it in connection with its trust business, in accordance with the laws relative to the investment or loan of funds deposited with savings banks, unless a specific agreement to the contrary is made be- tween the trust company and the party creating the trust, or unless it is otherwise ordered by the court, in connec- tion with any court trust. ^Xdr^r'tme^n'tli Section 1 06. Any such trust company desiring to do, business also must or doing, a Commercial banking business or a savings have capital specified by Sec. 23. bank business, or both, in addition to its trust business shall have actually paid up, in cash, the amount of capital provided in section twenty-three of this act. Title insurance com- Any title insurance company authorized by its articles pany authorized to . . • l i- do, or doing, trust of incorporation to do, or doing a trust business, in addi- business, shall com- _ ..j. ,. in i -in ply with specified tion to its title insurance business, shall comply w^ith all requirements. • . ^ i the requirements of any law governing trust companies, and shall have a capital stock actually paid in, in cash, of not less than two hundred thousand dollars, and in ad- dition thereto, the capital stock required by law for doing [1281 TRUST COMPANIES § 106-107 a title insurance business. Such capital for each such de- partment or class of business shall be increased from time to time in the same manner and to the same extent as though each such department or class of business was conducted by a separate bank, trust company or title insurance company, instead of as separate departments or classes of business. Any trust company and any title Trust company and . . ^ 1 1 • title insurance com- msurance company domg a departmental business as pany doing depart- . . -ll •• r 1 • niental business to above provided shall comply with the provisions of this comply with depart- mental provisions act governing each of such departments and w^ith the of Act, etc. provisions of any law^ governing each such class of busi- ness as to its deposits, reserve, surplus, investments and loans. Section 107. Any corporation doing a departmental ^"rther provisions affecting last-men- business as a title insurance company and as a trust com- tioned company. pany, shall, as to its trust department, be subject to the supervision and inspection of the superintendent of banks, and as to its trust department must make all re- ports to the superintendent of banks required to be made by trust companies by the provisions of this act, and as to its trust department such corporation shall also be subject to, and shall have the benefit of all other pro- visions and requirements of this act applicable to trust companies, and shall also be subject to and shall have the benefit of all of the banking laws and rules and regu- lations of the banking department of this state applicable Proportionate part . . , of State banking to trust companies. The proportionate part of the state fund payable by ii-fi -iifi • 111 1 ^""^^ corporation, banking fund provided for by section one hundred and etc. twenty-three of this act, that shall be payable by such corporation, shall be based on the amount of capital and surplus of such corporation apportioned to its trust de- partment. [129] § 120-121 BLYTH, WITTER & CO. ARTICLE V. STATE BANKING DEPARTMENT. state Banking De- Section 120. There is hereby created a state banking partment created. i . r rr- Superintendents department. The chief officer of such department shall appointment, tenure, . salary, oath and be the Superintendent thereof, and be known as the sup- bond. erintendent of banks. He shall be appointed by the governor, and shall hold office at the pleasure of the governor. He shall not, either directly or indirectly, be interested in any commercial bank, savings bank or trust company, or as an individual banker. He shall receive an annual salary of ten thousand dollars, to be paid monthly out of the state treasury on a warrant of the controller. He shall, within fifteen days from the time of notice of his appointment, take and subscribe to 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 penal sum of fifty thousand dollars, with corporate surety or two or more sureties to be ap- proved by the governor of the state, conditioned for the faithful discharge of the duties of his office. Superintendent to Section 121. The Superintendent of banks shall em- ploy a chief deputy, attorney and such examiners and other assistants as he may need to discharge in a proper manner the duties imposed upon him by law, none of which examiners or assistants or attorney shall be in- terested in any bank in this state as director, stockholder, officer or employee, and they shall perform such duties as he shall assign to them. He shall fix the compensa- tion of the chief deputy, attorney, examiners and other assistants, which compensation shall be paid monthly on his certificate and on the warrant of the controller out of tion^of chief deputy, the State treasury. The chief deputy shall within fifteen days from the time of his appointment take and subscribe to the constitutional oath of office and file the same in [130] employ assistants: Their qualification, duties and compensa- tion. STATE B ANK ING DEPARTMENT § 121-123 the office of the secretary of state. No person shall be appointed a chief deputy who has not had at least three years' active banking experience, either as an executive officer or employee of some bank in this state. In case During absence or . , , . , .,. • 1 re inability of Super- ot the absence or mability to act, or vacancy m the omce intendent, chief -, ., riiri- • deputy to act, upon or the supermtendent or banks tor thirty consecutive giving bond. days, the chief deputy shall execute to the people of the state a bond in the penal sunr of fifty thousand dollars, with corporate surety or two sureties to be approved by the controller and treasurer of the state, conditioned for the faithful discharge of the duties of the superintendent while such deputy acts as superintendent, and upon filing such bond such deputy shall have all the power and duties of superintendent of banks, until the inability of the superintendent shall be removed, or until a new sup- erintendent of banks shall have been appointed by the governor. No superintendent of banks, chief deputy, Superintendent, • 111! 1111 'ILJ chief deputy or or bank examiner, shall be or shall become indebted, examiner not to be . , , obligated to any directly or indirectly, either as borrower, endorser, bank. surety, or guarantor, to any bank under his supervision or subject to his examination. Section 122. The superintendent of banks shall have ^^^^^tln^^^^tran- his principal office in the city of San Francisco, and may "^=° »° i after order of final banks for six months after the order for final distribution distribution, shall be by him deposited w^ith the state treasurer in the same manner and subject to the same disposition as pro- vided for in section one thousand tw^o hundred thirty- four of the Code of Civil Procedure. The superintend- ent of banks may pay over the moneys so held by him to the persons respectively entitled thereto upon being furnished satisfactory evidence of their right to the same. In cases of doubt or conflicting claims he may require an order of the superior court authorizing and directing the payment thereof. [Publishers' Note to Section 136: This section remains unchanged. In con- nection with the general subject of liquidation of Banks, see, in addition to the following sections, the extract in the Appendix at the end of this Act, Chapter 496, Statutes 1917, General Laws.] [152] STATE BANKING DEPARTMENT § 136a- 136b Section 136a. Any bank which has ceased to do a Bank ceasing busi- •' ness shall immedi- banking business whether through voluntary action on its ^^^^^ liquidate. part or through expiration of its corporate existence, shall immediately liquidate its affairs and any unclaimed de- posits or dividends shall be paid into the state treasury in the manner and for the purposes provided in section one hundred thirty-six of this act within six months after the date such bank ceased to conduct a banking business, and in case the superintendent of banks shall have rea- if liquidation un- son to conclude that the liquidation of such bank is not sup^t.^ma" t"ake pos- 1 • r 1 i'i-1 itit ii session and liquidate. being sarely or expeditiously conducted, he may take possession of the property of such bank and liquidate its affairs in the same manner as provided in section one hundred thirty-six of this act. Whenever any bank of Bank deeming itself whose property the superintendent of banks has taken vention of Supt. r -J J -,. ^C • J 1.L I- may apply for in- possession as aroresaid, deems itselr aggrieved thereby, junction. it may within the time and in like manner and effect as provided in section one hundred thirty-six of this act apply to the superior court to enjoin further proceedings. Section 136b. In any action or proceeding brought Jurisdiction vested 1 . . f 1 • 1 • . . I . . in superior court of under any provision or this act, exclusive original juris- county where prin- ... 1 11 1 1 • 1 • r I cipal place of diction shall be vested in the superior court or the county business of bank is in w^hich is located the principal place of business of the bank affected thereby, and all proceedings relating to the same matter, under any provision of this act, including proceedings for liquidation of the affairs of any such bank, shall be filed with and treated as a part of the record in such original proceedings, and all papers relat- ing to any such action or proceeding, including the copy of certificate of appointment of any special deputy and the inventories required to be filed in the matter of any such liquidation, shall be filed with and made a part of the record of such original proceeding, without the pay- ment of any additional fees therefor, and in any such action no damage may be awarded, but the action other- wise shall be tried and determined according to the pro- visions of the Code of Civil Procedure. [153] §137 BLYTH, WITTER & CO. Voluntary dissoiu- Section 137. 1. Any bank shall have the right, on tion may be had under provisions of application of the stockholders or members to apply to Code of Civil Pro- ^^ _ _ ^ /^ cedure. tJ^g superior court of the county wherein its principal place of business is situated, to dissolve said bank in the manner provided for in title six, part three of the Code of Civil Procedure. Payment to county 2. At the expiration of four months after the settle- treasurer of specified r i r i r l • f 11 funds by receiver ment of the hnai account or the receiver or any bank. appointed prior to _ , t i i i r>r»r» i- • i i i l July 1, 1909. appointed prior to July I, IVUV, any dividends due de- positors, or other creditors, or stockholders of such bank and remaining unpaid or uncalled for and in the hands of such receiver may be paid by him into the treasury of the county in which such bank is situated which money shall be held in the treasury of said county, and at the same tinae it shall be the duty of such receiver to furnish to the county treasury of said county a list of names of all de- positors or other persons to whom such money belongs or who are entitled thereto and thereupon such receiver shall be entitled to his discharge. Said funds to be paid 3 'Yhe moneys referred to in subdivision two of this out on court order, section shall be paid out on the order of the court ap- pointing such receiver. When such funds 4, /^\\ rnoneys paid under subdivision two of this sec- escheat to State. 1 r tion, uncalled for within five years after being paid in, shall by operation of law, and without action had, escheat to the state. All moneys held by any county treasurer under subdivision two of this section, when such moneys have escheated to the state as hereinbefore provided, shall be paid by the county treasurer into the state treas- ury, and thereafter only be drawn out in such manner as may be provided for by law for the estates of de- ceased persons escheated to this state. Investment of such 5_ The State board of control must invest such moneys funds. in the same manner that the state school land fund is invested as provided by law. But any claimant shall be 1154] STATE BANKING DEPARTMENT § 138-139 entitled to recover as herein provided only the principal so paid into the state treasury. Section 138. If any bank shall fail to make any re- Penalty for bank , , . . . . Ill ff^ilii^S to make port required by the provisions or section one hundred report as required i. 1111- r ^ • •!• ^y ^^'^^ ^^'^ °^ ^®'^' thirty or one hundred thirty a or this act, withm ten i30a— to forfeit 1 r 111- ifi 1-1 r ^^•"' P" "^^y- ^*'=- days rrom the day designated ror the making thereor by the superintendent of banks, or to include therein any matter required by the provisions of either of said sections, it shall forfeit to the people of the state the sum of one hundred dollars for each day that any such report shall be so delayed or withheld by the failure or neglect of such bank. In the event of the failure of any such bank to make i" event of such •^ failure Supt. may any such report required from it, the superintendent of "1^^® examination ■f ^ ^ ' r at bank s expense. banks may, in his discretion, immediately cause the books, papers and affairs of such bank to be examined at the expense of such bank. Section I 39. It shall be the duty of the board of direc- Pill'lff^v", wni"" •^ bank aiiairs, loans, tors of every bank to examine fully, or to cause a com- ^'scounts, etc. mittee of at least three of its members, none of whom shall be an officer of the bank, to examine fully into the books, papers and affairs of the bank of which they are directors, and particularly into the loans and discounts thereof, with a special view to ascertaining the value and security thereof, and of the collateral security, if any given, in connection therewith, and into such other mat- ters as the superintendent of banks may require; such examination to be made at least once a year, but no such subsequent yearly examinations shall be made within three months of the next preceding examination. Such pi^'^'^^^Jf^t'^^yi^' directors shall have power to employ such assistance in making examination. making such examinations as they may deem necessary. Within thirty days after the completion of such exami- f,X"/t?be*mlde'' .1 r !._ U tU^ J:_„« and filed with records nation, a report in writing thereof, sworn to by the direc- ^^ ^ank. tors making the same, shall be made by the board of [155] n39 BLYTH. WITTER & CO. directors of such bank, and placed on file with the records of said bank, and shall be subject to examina- tion by the superintendent of banks. What such report Such report shall particularly contain a statement of shall contain. -^ the assets and liabilities of the bank examined, as shown by its books, together with any deductions from the assets, or additions to liabilities, w^hich such directors or committee, after such examination, may determine to make. It shall also contain a statement, in detail, of loans, if any, which in their opinion are worthless or doubtful, together w^ith their reasons for so regarding them; also a statement of loans made on collateral se- curity, 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 soundness of the bank. miifs^ct^xf^Li". If the directors of such bank shall fail to make such m°ay make°extra"ex- examination or fail to cause it to be made, or shall fail animation at hank's j.^ ^jg g^ch report of such examination in the manner and within the time specified, the superintendent of banks shall have authority to make or cause to be made an extra examination of such bank, at the expense of such bank. Whenever the board of directors of any bank may de- termine by resolution, duly entered in its minutes, that a special examination shall be made or caused to be made by the superintendent of banks in lieu of the examina- tion herein required to be made by the board of direc- tors of such bank, a certified copy of such resolution shall be transmitted to the superintendent of banks, [156] STATE BANKING DEPARTMENT § 140 whereupon it shall be the duty of the superintendent of banks to make or cause to be made a special examina- tion of the affairs of such bank in lieu of the examina- tion of such bank by the board of directors thereof. Such special examination shall be made at such time as the superintendent of banks may determine but in any event such examination shall be made within sixty days after the receipt by the superintendent of banks of the resolu- tion hereinbefore referred to. The cost of making such examination shall be a charge against the bank for which such examination is made. Upon the completion of such examination the superin- tendent of banks shall cause a report thereof in writing to be prepared and delivered to the board of directors of such bank at such time as may be fixed by the super- intendent of banks, but not later than thirty days after the completion of such examination. Section 1 40. The superintendent of banks shall report Supt. shall make .Tnnual report to during the month of October of each year, to the gov- Governor. ernor, for submission to the next ensuing session of the legislature: 1 . A summary of the state and condition of every Such annual report II . I I . If 1 • I shall contain: bank required to report to him, and from which reports have been received the preceding year, with an abstract of the whole amount of capital returned by them, the Summary of general conditions; whole amount of their debts and liabilities, and the total amount of means and resources, specifying the amount of specie held by them at the time of the last report to him, and such other information in relation to such banks as, in his judgment, may be useful. 2. A statement of all banks authorized by him to do statement of new business during the previous year, with their names and *" ^' locations and dates of incorporation, and particularly designating such as have commenced business during the year. [157] § 140-141 BLYTH. WITTER & CO. statement of closed 3 ^ statement of the banks whose business has been banks ; closed during the year. Desirable amend- 4. Any amendments to the banking law, which, in his ments to Bank Act; . . 1 1 • 1 1 judgment, may be desirable. Names and compen- 5 The names and compensation of all persons em- sation of employees; ^ ^ ployed by him, and the whole amount of the receipts and expenses of the department during the year. Data concerning 6. The namcs of banks placed in his hands in process banks in liquidation. of liquidation, and the amount of dividends paid thereon. Number of copies of Such report, and the usual number of copies for the report printed. use of the legislature, shall be printed and in readiness for distribution by the state printer, and one thousand copies shall be printed for the use of the department, the expense of which shall be charged among the gen- eral expenses of the department. Weekly bulletin to Section 141. 1 . The superintendent of banks shall be publicly posted in Supt.'s office, l^eep in his office, in a place accessible to the general pub- lic, a bulletin board upon which he shall cause to be posted at noon on Friday of each week a detailed state- ment, signed by him or, in case of his absence from San Francisco or inability to act, by the deputy superintend- ent in charge, giving the following items of general in- Contents of bulletin: formation with regard to the work of the department since the preceding statement: (a) The name of every bank that has filed in the Applications flw, ^j^j^i^jng department an application for authorization to commence business, its location and the date of filing such application. New banks author- (]-,) The name and location of every bank authorized ized. by the superintendent of banks to commence business, its capital, surplus, and the date of authorization. [158] STATE BANKING DEPARTMENT § 141-142 (c) The name of every bank to which a certificate of certificates refused. authorization has been refused by the superintendent of banks, and the date of notice of refusal. (d) The name and residence of every person ap- New employees, etc. pointed by the superintendent of banks as a deputy, ex- aminer or employee in the banking department, the title of the office to which appointed, the compensation paid, and the date of appointment, (e) The date on which a call for a report by banks Data concerning 111 • 1 f 1 1 111 called reports. was issued by the superintendent or banks, and the day designated as the day with reference to which such re- port should be made. banks tors are aid and whose ockholders have called meeting, etc. (f) The name and location of every bank whose Concerning ^ ' •' whose credi creditors or depositors have been paid in full by the p^ superintendent of banks and a meeting of whose stock holders shall have been called, together with date of notice of meeting and date of meeting. (g) The name and location of every bank subject to Banks liquidated ^^' •' ' or liquidating. the banking law whose affairs and business shall have been finally liquidated, or in course of liquidation. (h) The name and location of every bank which has Proposed changes in name. applied for approval of a change of name, and the name proposed. 2. Every such bulletin, after having been posted as Bulletins after being posted to be kept in aforesaid for one week, shall be placed on a file for such office. statements, to be kept in the office of the superintendent of banks. All such statements shall be public documents, and at all reasonable times shall be open to public in- spection during usual banking hours. Section 1 42. None of the records of the state banking Records of state Banking Dept. not department shall be deemed to be public documents nor deemed public docu- ^ . . r 1 mcnts. or open to shall any of such records be open to the inspection of the public inspection. public. Every official report made by the superintend- [159] § 142-145 BLYTH, WITTER & CO. Supt.'s reports, etc., gj^j- of banks and every report duly verified of an ex- to be prima facie evidence in court, amination made, shall be prima facie evidence of the etc. facts therein stated, for all purposes in any action or pro- ceedings wherein the superintendent of banks is a party. [Publishers' Note, re Section 142, amended 1919: This amendment, providing that none of the records of the State Banking Department shall be deemed to be public documents, or be open to the inspection of the public, affords a protection that has become very necessary, because of the endeavors of ill-advised or evilly-disposed persons to obtain information from the State Banking Department as to the condition of banks. The relationship between the Department and the banks is essentially a confidential one, and all the records should be confidential records. The amendment, of course, in no way restricts or attem.pts to limit the right of the courts to exercise such control over the banks in evidentiary matters as they now possess.] (Section 143. Repealed 1913.) Penalties and for- Section 1 44. Whenever by the terms of this act a feitures imposed by r r . • 11 1_ 11 L Act— how recovered, penalty or forfeiture IS imposed, the same shall be recov- ered in an action brought at the request of the super- intendent of banks by the attorney general, in the name of the people of the state, and the sum recovered shall be paid into the state banking fund and used in pay- ment of claims against the said fund. Any fine or pe- when fine or penalty cuniary penalty, which may be incurred by any bank on may be compromised . r .1 • 1 .^' C • • _£ *.U:„ „«4- ,.^^„ with Supt. account of the violation of any provision ot this act, may be compromised and a less amount than that prescribed by this act accepted by the superintendent of banks at any time prior to the institution of action to recover the same. Powers, duties, etc., Section 145. The powers, privileges, duties and re- of corporations doing business under laws strictions Conferred and imposed upon any corporation of this State, abridged, enlarged, qj. individual existing and doing busines under the laws etc., to conform to ^^r ^ '^=*' of this state are hereby abridged, enlarged or modified as each particular case may require to conform to the provisions of this act, notwithstanding anything to the contrary in their respective articles of incorporation or Act applies equally •' r i • i 11 1 • U to all corporations charters. All the provisions of this act shall apply v/ith now or hereafter do- ' • 1 • 1 jng banking business equal force and effect to all corporations which are now in this State unless " 1 i 1 • 1 • • excepted herein, and doing or w^hich may hereafter do a banking business in to other persons, ^ firms, etc., violating ^^{^ State, except where express exception or exemption Act and subject to its penalties, may be made herein, and to such other persons, associa- [1601 STATE BANKING DEPARTMENT § 145-147 tions, copartnerships or corporations who shall, by violat- ing any of its provisions, become subject to the penalties provided herein. The Jegality of Investments heretofore Leg^aiity of prior - , , I r • 1 bank investments or made, or title to property heretofore acquired or con- title not affected by veyed through tramsactions heretofore had by any bank ing investments made . , , . prior to July 1, 1909, pursuant to any provision or law m rorce when such in- to be gradually . •iiiii.^T changed and written vestments were made or transactions had, shall not be cir to conform to i^ct etc* affected by the provisions of this act, except that any such investments made prior to July 1, 1909, when not complying with the provisions hereof, shall be changed to conform hereto; but such change shall be made grad- ually and in such manner as to prevent loss or embar- rassment in the business of such bank, or unnecessary loss or injury to the borrowers on such security; pro- vided, that the legality of any investments heretofore lawfully made, pursuant to the provisions of this act as it existed on and subsequent to July 1, 1909, shall not be affected by the provisions of this section. Section 146. All acts, or parts of acts, in conflict with this act are hereby repealed. Tir 1 r\r\r\ '^'^ conflicting acts, Section 147. This act shall take effect July first, 1 909. etc., repealed. [161] Statutes of 1909: Chapter 76, Approved March I. In effect July 1, 1909. Amended by Statutes of 1911: Chapter 1 1 , Approved Feb. 6. In effect Feb. 6, 1911. Chapter 488, Approved Apr. 21. In effect June 20, 1911. Chapter 494, Approved Apr. 21. In effect June 20, 1911. Chapter 495, Approved Apr. 21. In effect June 20, 1911. Amended by Statutes of 1911 (Special Session): Chapter 2, Approved Dec. 18. In effect Feb. 16,1912. Chapter 24, Approved Dec. 24. In effect Feb. 22, 1912. Amended by Statutes of 1913: Chapter 104, Approved May 6. In effect Aug. 1 0, 1 9 1 3. Chapter 192, Approved May 31. In effect Aug. 10,1913. Amended by Statutes of 1915: < Chapter 140, Approved Apr. 28. In effect Aug. 7,1915. Chapter 608, Approved June 3. In effect Aug. 7,1915. Chapter 6 1 1, Approved June 3. In effect Aug. 7,1915. Chapter 612, Approved June 3. In effect Aug. 7,1915. Amended by Statutes of 1917: Chapter 500, Approved May 17. In effect July 27,1917. Chapter 501, Approved May 17. In effect July 27,1917. Chapter 504, Approved May 17. In effect July 27,1917. Amended by Statutes of 1919: Chapter 140, Approved May 3. In effect July 22,1919. Chapter 33 7, Approved May 15. In effect July 22,1919. [163] INDEX TO APPENDIX Extracts from Section 290a of the Civil Code. Elxtracts from Section 290a of the Civil Code, relating to (a) Affidavit mentioned in Sec. 8 of Bank Act; (b) Approval of Superintendent of Banks to certificate of incorporation of banking company, referred to in Sec. 127 of the Bank Act. Section 1273 of the Code of Civil Procedure. Section 12 73 of the Code of Civil Procedure, referred to in Sec. 1 5 of the Bank Act relating to procedure by which un- claimed deposits escheat to the State. Section 1454 of the Code of Civil Procedure Section 1454 of the Code of Civil Procedure, granting to certain surviving heirs of a deceased depositor the privilege of with- drawing a sum not greater than $1,000 if that sum is ag- gregate of all decedent's deposits said section being re- ferred to in the note to Sec. 16 repealed 1919. Section 1278 of the Code of Civil Procedure. Section 12 78 of the Code of Civil Procedure, relating to change of name of a banking corporation, referred to in Sec. 127 of the Bank Act. Portions of the "Public Utilities Act." Extracts from Section 2 of Public Utilities Act of California, as amended 19 !9, containing definitions referred to in Section 61 of the Bank Act (under paragraphs (f) (3) IV, (g) and (k) of subdivision 3 of said Section 61). Elxtracts from Chapter VIII of Title II of Part IV of Division First of the Civil Code. Elxtracts from Chapter VIII of Title II of Part IV of Division First of the Civil Code, referred to in Sections 61, 96 and 99 of the Bank Act, relating to mortgage insurance and mortgage- participation certificates. Penal Code Sections 561, 561a, 561b, 561c, 561d and 563a and 563b. Penal Code Sections 561, 561a, 56Ib, 561c, 561d and 563a and 563b, relating to frauds in the management of banks. General Laws, Chapter 496, Statutes 1917. General Laws, Chapter 496, Statutes 1917, relating to the liquida- tion of banks, — referred to in note to Sec. 136 of Bank Act. "Bulletin No. 1," referred to in note to Section 5, stating regula- tions ;^:overning banks desiring to establish insurance agency, as provided in Section 5 of the Bank Act. Letter from State Banking Department referred to in note to Sec- tion 48a stating requirements imposed on Banks desiring to assume trust-company functions under Section 48a of Bank Act. [165] § 290a BLYTH, WITTER & CO. APPENDIX Extracts from Section 290a of the Civil Code. Extracts from Section 290a of the Civil Code, relating to — (a) Affidavit mentioned in Sec. 8 of Bank Act; (b) Approval of Superintendent of Banks to certificate of incorporation of banking company, referred to in Sec. 127 of the Bank Act. Before corporation Section 290a. Before any corporation, authorized in authorized to con- _ _ _ i i i • r duct business as its articles of incorporation to conduct the business or executor, trustee, ... ,. r etc., or engage in acting as executor, administrator, guardian or estates, business of banking, . i . i . etc., may file with assignee, receiver, depositary, or trustee under appomt- Secy. of State copy i • r i r i • of articles of incor- ment of any court or by authority or any law or this state, poration. etc., cer- •ill tificate of approval or as trustee for any purpose permitted by lavvr, or to en- of Supt. to be • 1 1 • r 1 1 • r • • il_ attached, gage m the business or banking, or or receiving the money of others on deposit, may file with the secretary of state a certified copy of its articles of incorporation, or of a certificate of extension of its term of existence, or of a certificate increasing or decreasing the number of its directors, or of a certificate increasing or decreasing its capital stock, or of its amended articles of incorporation, or of its articles of incorporation and consolidation, there must be attached thereto the certificate of approval of the superintendent of banks; provided, that this section This section not ap- shall not apply to any corporation authorized to engage plicable to corpora- .ii. r • • llll- tion authorized to in the business ot receiving and holding in escrow money engage in business . ., ,. . . li... of holding escrows, or its equivalent, pending investment in real estate or or acting as trustee . . f iC-^'-l t ^ under deeds of trust securities tor or on account or its principal, or to act as " "monTyret^c. trustee Under deeds of trust given solely for the purpose of securing obligations for the repayment of money other than corporation bonds, nor shall such corporations be subject to the supervision of the superintendent of banks. 1166] APPENDIX § 1273 Section 1273 of the Cede of Civil Procedure. Section 1273 of the Code of Civil Procedure, referred to in Sec, 1 5 of the Bank Act relating to procedure by which un- claimed deposits escheat to the State. 1273. All amounts of money heretofore or hereafter Bank deposits not , -I'l 11 I i-ri • L drawn on or claimed deposited with any bank to the credit or depositors who for more than 20 have not made a deposit on said account or withdrawn dence of depositor 1 f 1 . 11-11111 or claimant not any part thereof or the interest and which shall have re- filed with bank, 1 1 • 1 r .1 . . ft il_ escheat to State. mamed unclaimed for more than twenty years arter the date of such deposit, or withdrawal of any part of prin- cipal or interest, and where neither the depositor or any claimant has filed any notice with such bank showing his or her present residence, shall, with the increase and proceeds thereof, escheat to the state. Whenever the Attorney General to . r 1 r 1 1 • 1 commence action attorney general shall be informed of such deposits, he against depositary . bank and depositors shall commence an action or actions in the name of the to obtain judgment . ^ cf escheat to State of California, in the superior court for the county of state. Sacramento, in which shall be joined as parties the bank or banks in which the moneys are deposited and the names of all such depositors. All or any number of de- positors or banks may be included in one action. Service of process in such action or actions shall be made by de- livery of a copy of the complaint and summons to the president, cashier or managing officer of each defendant bank, and by publication of a copy of such summons in a newspaper of general circulation published in said county for a period of four weeks. Upon the trial the court must hear all parties who have appeared therein and if it be determined that the moneys deposited in any defendant bank or banks are unclaimed as hereinabove stated, then the court must render judgment in favor of the state declaring that said moneys have escheated to the state and commanding said bank or banks to forth- with deposit all such moneys with the state treasurer, to be received, invested, accounted for and paid out in the same manner and by the same officers as is provided in the case of other escheated property. [1671 §1454 BLYTH. WITTER & CO. Section 1454 of the Code of Civil Procedure Section 1454 of the Code of Civil Procedure, granting to certain surviving heirs of a deceased depositor the privilege of with- drawing a sum not greater than $1,000 if that sum is ag- gregate of all decedent's deposits said section being re- ferred to in the note to Sec. 16 repealed 1919. Certain surviving The Surviving husband or wife or the guardian of the heirs of deceased depositor may, with- estate of anv insane or incompetent husband or wife, of out administration, collect of bank, de- any deceased person, or if no husband or wife is living, posits of dscedent not exceeding $1000. then the children, or the guardian of tne estates of any minor or insane or incompetent children of said deceased, or, if no children are living, then the father or mother or guardian of the estate of any insane or incompetent father or mother of such decedent, and if neither the father nor mother is living, then the brothers and sisters or the guardian of the estates of any minor or insane or incompetent brothers and sisters of such decedent, may, without procuring letters of administration, collect of any bank any sum which said deceased may have left on de- posit in such bank at the time of his or her death; pro- vided, such deposits shall not exceed the sum of one thousand dollars. Bank upon receiving Any bank, upon receiving an affidavit stating that said affidavit stating . . , , , , ^ . , . . , certain specified depositor IS dead, and that amant is the surviving hus- facts, may pay such ^ ^ ,. , i-ri r • deposits, band or wire or the guardian or the estate or an insane or incompetent surviving husband or v/ife, as the case may be, of said decedent, or stating that decedent left no husband or wife, and that affiant is the child, or that affiants are the children, or the guardians of the estates of the minor, insane or incompetent children, as the case may be, of said decedent, or stating that decedent left neither husband, wife nor children, and that affiant is the father or mother, or the guardian of the estate of the in- sane or incompetent father or mother, as the case may be, of said decedent, or stating that the decedent left neither husband, wife, children, father nor mother, and that affiants are the brothers and sisters, or the guardians of the estates of the minor, insane or incompetent brothers [168] APPENDIX § 1454 and sisters, as the case may be, of said decedent, and that T'^oie amount left •' by decedent in any the whole amount that said decedent left on deposit in »" this act, includes every corporation or person, their lessees, trustees, receivers or trustees appointed by any court w^hatsoever, engaged in or transacting the business of transporting any freight, merchandise or other prop- erty for compensation on the line of any common carrier or stage or auto stage line within this State. "Common carrier." (1) The term "common carrier," w^hen used in this act, includes every railroad corporation; street railroad corporation; express corporation; dispatch, sleeping car, dining car, drawing room car, freight, freight line, re- frigerator, oil, stock, fruit, car loaning, car renting, car loading and every other car corporation or person, their lessees, trustees, receivers or trustees appointed by any court whatsoever, operating for compensation within this State; and every corporation or person, their lessees, trustees, receivers or trustees appointed by any court whatsoever, owning, controlling, operating or managing any vessel engaged in the transportation of persons or property for compensation between points upon the in- land waters of this State or regularly engaged in the transportation of persons or property for compensation upon the high seas, on regular routes between points v/ithin this State. The term "inland waters" as used in this subsection includes all navigable waters within the State of California other than the high seas. "Pipeline." (m) The term "pipe line," w^hen used in this act, in- cludes all real estate, fixtures and personal property, owned, controlled, operated or managed in connection with or to facilitate the transmission, storage, distribution or delivery of crude oil or other fluid substances except water through pipe lines. "Pipe line corpora- (n) The term "pipe line corporation," v/hen used in tion." , . • 1 1 • 1-1 this act, includes every corporation or person, their les- [172] APPENDIX Public Utilities Act sees, trustees, receivers or trustees appointed by any court whatsoever, owning, controlling, operating or man- aging any pipe line for compensation within this State. (o) The term "gas plant," when used in this act, "Gas plant." includes all real estate, fixtures and personal property, owned, controlled, operated or managed in connection with or to facilitate the production, generation, trans- mission, delivery or furnishing of gas (natural or manu- factured) for light, heat or power. (p) The term "gas corporation," when used in this "Gas corporation." act, includes every corporation or person, their lessees, trustees, receivers or trustees appointed by any court whatsoever, owning, controlling, operating or managing any gas plant for compensation within this State, except where gas is made or produced on and distributed by the maker or producer through private property alone solely for his ow^n use or the use of his tenants and not for sale to others. (q) The term "electric plant," when used in this act, "Electric plant" includes all real estate, fixtures and personal property owned, controlled, operated or managed in connection with or to facilitate the production, generation, trans- mission, delivery or furnishing of electricity for light, heat or power, and all conduits, ducts or other devices, materials, apparatus or property for containing, holding or carrying conductors used or to be used for the trans- mission of electricity for light, heat or power. (r) The term "electrical corporation," when used in "Electrical cor- poration. this act, includes every corporation or person, their les- sees, trustees, receivers or trustees appointed by any court whatsoever, owning, controlling, operating or man- aging any electric plant for compensation within this State, except where electricity is generated on or dis- tributed by the producer through private property alone solely for his own use or the use of his tenants and not for sale to others. [173] Public Utilities Act BLYTH. WITTER & CO. "Telephone line." (^g) The term "telephone line," when used in this act, includes all conduits, ducts, poles, wires, cables, instru- ments and appliances, and all other real estate, fixtures and personal property owned, controlled, operated or managed in connection with or to facilitate communica- tion by telephone, whether such communication is had w^ith or without the use of transmission w^ires. "Telephone corpora- (t) The term "telephone corporation," when used in tion." this act, includes every corporation or person, their les- sees, trustees, receivers or trustees appointed by any court whatsoever, owning, controlling, operating or managing any telephone line for compensation within this State. "Telegraph line." (y) yj^^g term "telegraph line," when used in this act, includes all conduits, ducts, poles, wires, cables, in- struments and appliances, and all other real estate, fix- tures and personal property owned, controlled, operat- ed or managed in connection with or to facilitate com- munication by telegraph, whether such communication is had with or without the use of transmission wires. "Telegraph corpora- (y) yj-jg term "telegraph corporation," when used in this act, includes every corporation or person, their les- sees, trustees, receivers or trustees appointed by any court whatsoever, owning, controlling, operating or man- aging any telegraph line for compensation within this State. "Water system." (w) The term "w^ater system," when used in this act, includes all reservoirs, tunnels, shafts, dams, dikes, head- gates, pipes, flumes, canals, structures and appliances, and all other real estate, fixtures and personal property, owned, controlled, operated or managed in connection with or to facilitate the diversion, development, storage, supply, distribution, sale, furnishing, carriage, apportion- ment or measurement of water for power, irrigation, reclamation or manufacturing, or for municipal, domestic or other beneficial use. [174] APPENDIX Public Utilities Act (x) The term "water corporation," when used in this "Water corpora- act, includes every corporation or person, their lessees, trustees, receivers or trustees appointed by any court whatsoever, owning, controlling, operating or managing any water system for compensation within this State. (y) The term "vessel," when used in this act, includes "Vessel. " every species of v/ater craft, by whatsoever power oper- ated, which is owned, controlled, operated or managed for public use in the transportation of persons or prop- erty, except rowboats, sailing boats and barges under twenty tons dead w^eight carrying capacity, and vessels propelled by steam, gas, fluid naphtha, electricity, or other motive power under the burden of five tons net register. (z) The term "wharfinger," when used in this act, "Wharfinger." includes every corporation or person, their lessees, trus- tees, receivers or trustees, appointed by any court what- soever, owning, controlling, operating or managing any dock, w^harf or structure used by vessels in connection with or to facilitate the receipt or discharge of freight or passengers for compensation within this State. (aa) The term "warehouseman," when used in this "Warehouseman." act, includes every corporation or persons, their lessees, trustees, receivers or trustees appointed by any court whatsoever, owning, controlling, operating or managing any building or structure in which property is regularly stored for compensation within this State, in connection with or to facilitate the transportation of property by a common carrier or vessel, or the loading or unloading of the same, other than a dock, wharf or structure, owned, operated, controlled or managed by a wharfinger. * J? * * * * (dd) The term "public utility," when used in this act, "Public utility." includes every common carrier, pipe line corporation, gas corporation, electrical corporation, telephone cor- [175] Public Utilities Act BLYTH, WITTER & CO. •'Pubiicutiiity'^-pQj.^j.jQj^ j.gjggj.^p|^ corporation, water corporation, wharfinger, warehouseman and heat corporation, where the service is performed for or the commodity delivered to the pubHc or any portion thereof. The term "public or any portion thereof," as herein used means the public generally, or any limited portion of the public including a person, private corporation, municipality or other political subdivision of the State, for w^hich the service is performed or to which the commodity is delivered, and whenever any common carrier, pipe line corporation, gas corporation, electrical corporation, telephone corpor- ation, telegraph corporation, water corporation, wharf- inger, warehouseman or heat corporation performs a service or delivers a commodity to the public or any por- tion thereof for which any compensation or payment whatsoever is received, such common carrier, pipe line corporation, gas corporation, electrical corporation, telephone corporation, telegraph corporation, water corporation, wharfinger, warehouseman or heat corpora- tion is hereby declared to be a public utility subject to the jurisdiction, control and regulation of the commission and the provisions of this act. Furthermore, when any per- son or corporation performs any service or delivers any commodity to any person or persons, private corpora- tion or corporations, municipality or other political sub- division of the State, which in turn either directly or in- directly, mediately or immediately, perform such service or deliver such commodity to or for the public or some portion thereof, such person or persons, private corpora- tion or corporations and each thereof is hereby declared to be a public utility and to be subject to the jurisdiction, control and regulation of the commission and to the provisions of this act. [176] APPENDIX Mortgage Insurance MORTGAGE INSURANCE. Extracts from Chapter VIII of Title II of Part IV of "Mortgage insur- Division First of the Civil Code of California as revised and amended; Approved June 12, 1915. Referred to in paragraph (k) of Subdivision 3 of Sec- tion 61, also in Subdivision (d) of Sec. 96, and in Sec. 99 of the Bank Act. CHAPTER VIII. MORTGAGE INSURANCE. Sec. 453aa. Mortgage insurance companies subject to insurance laws and the authority of insurance commis- sioner. 453bb. Mortgage insurance company defined. The term "security" as used in this chapter defined. Policy of mortgage insurance defined. Mortgage par- ticipation certificate defined. Entire mortgage guaranty defined. 453cc. Requisite capital stock of mortgage insurance com- pany; certificate of authority required. Kind and amount of securities that may be guaran- teed. Policies of mortgage insurance do not constitute "debts" or "indebtedness" of issuing company. Can not invest in, hold or own capi- tal stock of another corporation, except as pro- vided herein. 453dd. Must accumulate a surplus. Restriction on making of dividends. 453ee. Investments permitted. 453ff. Mortgage participation certificates and guaranteed securities made legal investments for trust funds, insurance companies and others. 453gg. Quarterly reports to insurance commissioner. 45 3aa. Everv mortgasre insurance company shall be MortKage insurance ■^ . . companies subject subiect to and shall comply with all the requirements of to innnance laws ■* 111- ^"^ authority of the laws of this state made applicable to msurance com- insurance commis- 1 • /: U " sioner. panies generally and the rules and regulations ot the m- surance department of this state, excepting in so far as said laws, rules or regulations may be inconsistent with the other provisions in this chapter contained; and the insurance commissioner shall have the same power and authority over such company that he may exercise m [177] Mortg age Insurance BLYTH, WITTER & CO. relation to other insurance companies, including the right to examine and inspect the financial condition and affairs of such company relating to the business of such com- pany, and to compel compliance with the provisions of law governing any such company. Definitions: "Mort- 453bb. The term "mortgage insurance Company" shall gage insurance company." include every association, corporation, firm or person v/ho shall engage as a business in making and issuing policies of mortgage insurance. "Security." The term "security" wherever used in this chapter, w^ithout a different meaning being specified or made ap- parent, shall be construed to refer to and include within its meaning a note or notes, or bond or bonds, together with the mortgage or deed of trust securing the same which evidence a debt secured by a first lien on a market- able title in fee to real estate, or to real estate with im- provements thereon. "Policy of mort- gage insurance." Any contract made and issued by a mortgage insurance company which purports to guarantee or insure against loss on, or to guarantee the payment of, w^ithin a specified time, the whole, or any part, of the principal, interest or other sums agreed to be paid under the terms of any security, or other sums secured under the terms of any security, shall be deemed, and is hereby designated, a "policy of mortgage insurance." '^"tion^erttfica^te^' ^ policy of mortgage insurance w^hich evidences the ownership by the insured of an undivided or other par- tial share or interest, or the right to participate to a speci- fied extent, in a security, or in a group consisting of sev- eral securities, and purports to guarantee the payment of such securities, or the payment of such undivided or other partial share or interest therein, or the amount of such participation, may be referred to as, and is hereby designated, a "mortgage participation certificate." "Entire mortgage A T £ i. • i-U i.U t. guaranty." A policy ot mortgage msurance, otrier trian a mort- [178] APPENDIX Mortgage Insurance gage participation certificate, which covers and refers to the entire indebtedness evidenced by a security, may be referred to as, and is hereby designated, an "entire mort- gage guaranty." 453ff. Mortgage participation certificates, also securi- Mortgage participa- . . . ^ tion certificates, and ties guaranteed by pohcies or mortgage insurance issued certificates guaran- - . -ii •• ri'l 1_111 ^^^^ ^y policies of in conrormity with the provisions or this chapter shall be mortgage insurance, . ,. - ,, riiiil legal investment legal investments for all trust funds held by any executor, for trust funds and ... , . I 111- funds of banks, administrator, guardian, trustee or other person holding trust companies, trust funds, also for the funds of insurance companies, banks, banking institutions and trust companies, and shall be accepted by the State of California, its officers and officials, as securities comprising any part of any fund or deposit required by law to be made with the State of California, or any officer or official thereof, by any trust company or insurance company doing business in the State of California, and all premiums required to be paid according to the terms of any such mortgage participation certificate, or other policy of mortgage insurance, may be charged to or paid out of the income from the note or notes or bond or bonds covered thereby; provided, that f;'s7c°'app^yTniy'^ the foregoing provisions of this section, in so far as they *° '^^'^p^^'^uif**' refer to mortgage participation certificates, shall apply ^^^^^^^ require- only to such mortgage participation certificates as evi- dence the ownership of shares or interests in, or participa- tion in, securities which shall have been assigned to a trust company organized and doing business under the laws of and within this state and shall be held by such trust company for the common and equal benefit of the holders of all mortgage participation certificates issued or to be issued evidencing the ownership of shares or in- terests in, or participation in, any particular security or group of securities so assigned and such trust, and the administration thereof, shall at all times be and hereby is expressly made subject to the inspection, supervision and [179] Mortgage Insurance BLYTH. WITTER & CO. control of the superintendent of banks as fully and com- pletely as if the same constituted a court trust under the Each certificate provisions of the Bank Act; provided also, that each must have there- , ... .^ i i with certificates and such mortgage participation certihcate must bear the specified. Certificate of such trust company to the effect that the aggregate amount of mortgage participation certificates then outstanding, including both the one being certified and all others based on the same security or group of securities, does not exceed the amount of the unpaid principal of the debt or debts evidenced by such particu- lar security or group of securities; provided also, that each security so assigned shall be accompanied by a copy of the appraisement and of the certificate of the directors filed or to be filed with the insurance commissioner as required by the provisions of this chapter; provided also. Copy of appraise- that a copy of each such appraisement and accompany- ment, certificate, r i i- i ii i l etc., to be trans- ing Certificate or the directors shall be promptly, upon mitted to Supt. , . c i i • • i 1_ the assignment or each such security, transmitted to the superintendent of banks, and that each such copy of ap- praisement so transmitted shall bear an endorsement or certificate executed by the trust company to which each such security is so assigned reciting and setting forth the amount of the unpaid principal named in the security which covers the property described in such appraise- First-lien require- ment; provided also, that if any such mortgage participa- ments, as to certifi- . . _ . . l !_ !• • £ cates covered by this tion Certificates, or securities guaranteed by policies or chapter, if used as . • ^ • c • m. •tL tl- part of fund or de- mortgage msurance issued m conrormity with the provi- posit with trust-corn- . r i • i . i • l' ' ' pany, with State sions of this chapter, are used as securities comprising any Treasurer. ^^^^ ^j; ^^^^ j^^j ^^ deposit required by law to be made with the state treasurer by a trust company, the securities so guaranteed or the ownership of, or participation in, which is evidenced by such participation certificates must constitute a first lien on improved and productive real es- tate in the State of California, such improved real estate being worth at least double the amount of such lien; and also that the real estate and improvements which are cov- ered by the lien of any security so guaranteed or the own- [180] APPENDIX Mortgage Insurance ership of, or participation in, which is evidenced by mort- gage participation certificates which are so used shall be reappraised at least once every two years and in the manner in this chapter provided for appraisements, and a copy of each such reappraisement shall be filed with the trust company to which such security shall have been assigned and the original of each such reappraisement bearing the endorsement or certificate of such trust com- pany as to the amount of the unpaid principal named in such security shall be filed with the superintendent of Legality of prior certificates which banks; provided, further, that the legality or validity of were valid when issued, not impaired entire mortgage guaranties and mortgage participitation by this chapter. certificates heretofore issued which fully conform to and comply with the law in force at date of issuance shall not be affected or impaired by the provisions of this chapter and such entire mortgage guaranties and mortgage par- ticipation certificates shall continue to be legal invest- ments and recognized for all purposes to the extent and in the manner provided by the law in force at date of such issuance. A mortgage insurance company which issues mort- fec^u^Hits'on which gage participation certificates in accordance with the ^^tttafed^cond^" provisions of this section may at any time and from time *'°"^ governing. to time substitute for any security or securities comprising or constituting a part or parts of a group of securities, the ownership of, or participation in, which is evidenced in whole or in part by any such participation certificates, other securities similarly guaranteed by it and withdraw from the trust company the security or securities for which such substitution shall be made; provided, how- ever, that at all times the amount of the unpaid principal of the debts evidenced by the particular group of securi- ties held by such trust company and affected by any such substitution shall not be less than the aggregate amount of the participation certificates theretofore issued then outstanding and evidencing the ownership of undivided or other partial shares or interests, or participation, in [181] Mortgage Insurance BLYTH, WITTER & CO. Substitution in guch grouD of Securities; and provided further, that the securities on which ^ m. participation certifi- right of Substitution hereinbefore provided and the exer- cates based — condi- tions governing— cise thereof shall not alter or affect the status of such Continued, participation certificates as legal investments for trust funds, insurance companies, banks, banking institutions and trust companies as hereinbefore provided, or as securities acceptable by the State of California, its officers and officials, as comprising or constituting any fund or deposit, or any part thereof, required by law to be made with the State of California, or any officer or official thereof, by any trust company or insurance company doing business in the State of California. ^p> ^p ^f* 'Tt* ^r ^P ^m^ [182] APPENDIX Penal Code PENAL CODE. RELATING TO FRAUDS IN THE MANAGEMENT OF BANKS. Penal Code Sections 561, 5Sla, 561b, 561c, 561d and 563a and 563b. Section 561. An officer, director, agent, teller, clerk Bank officer, direc- . , tor, etc., over- or employee of any bank, who, either drawing or permit- ting overdraft, or 1. Knowingly overdraws his account with such bank sionTn"p^roc"r^'^ and thereby obtains the money, notes or funds of any l^an, etc!] guilty" 111 of felony such bank; or • 2. Asks for, receives, or consents or agrees to receive, any commission, emolument, gratuity or reward, or any promise of any commission, emolument, gratuity or re- ward, or any money, property or thing of value or of personal advantage for procuring or endeavoring to pro- cure for any person, firm or corporation, any loan from, or the purchase or discount of any paper, note, draft, check or bill of exchange by any such bank, or for per- mitting any person, firm or corporation to withdraw any account with such bank, is guilty of a felony. Section 561a. Any officer, director, trustee, employee Misappropriation, etc., by bank direc- or aeent of any bank in this state, who abstracts or wil- tor, employee, etc. o -^ — felony, fully misapplies any of the money, funds or property of such bank, or wilfully misapplies its credit, is guilty of a felony. Nothing in this section shall be deemed or con- strued to repeal, amend or impair any existing provision of law prescribing a punishment for any such offense. Section 561b. Every director of a bank in this state Fraudulent insoi- ■' vancy oi Dank — L participation "'*'" • therein, by director .,., — misdemeanor. 1. In case of the fraudulent insolvency of such bank, shall have participated in such fraud; or 2. Wilfully does any act as such director which is expressly forbidden by law or wilfully omits to perform any duty imposed upon him as such director by law, is guilty of a misdemeanor. [183] Penal Code BLYTH. WITTER & CO. The insolvency of a bank is deemed fraudulent unless its affairs appear upon investigation to have been admin- istered clearly, legally and with the same care and dili- gence that agents receiving a compensation for their ser- vices are bound, by law, to observe. Guaranty or en- Section 5 6 1 c. An officer or agent of any bank in this dorsement, for oank, by offieer or agent, state, who makes or delivers any guaranty or endorse- misdemeanor. ^ ^ ment on behalf of such bank, whereby it may become liable upon any of its discounted notes, bills or obliga- tions, in a sum beyond the amount of loans and dis- counts which such bank may legally make, is guilty of a misdemeanor. Director concurring Section 56 Id. A director of a bank, organized under m vote for illegal ° bank loan or dis- the laws of this State, who concurs in any vote or act of count; or _ •' 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 corporation, or upon paper upon which any such director is liable or responsible to an amount exceeding the amount allowed by the statutes; or Director, officer, ^^y director, trustee, officer or employee of any such employee making i- j j or attempting illegal bank who makcs or maintains, or attempts to make or deposit of bank '^ funds; or maintain, a deposit of such bank's funds with any other corporation on condition, or with the understanding, ex- press or implied, that the corporation receiving such de- posit make a loan or advance, directly or indirectly, to any director, trustee, officer or employee of the corpora- tion so making or maintaining or attempting to make or maintain such deposit; or conc^aHn'L'liTSnTs ^^y o^^cr Or employee of any such bank who inten- vuJchlseorllu of t'o^^^^V conceols ffom the directors or trustees of such t^weM^meTtin'' = \^r ^^"'^'^ '^^y dkcounts or loans made by it between the failing to report regular meetmgs of its board of directors or tmstees, or same when so re- ^ ' quired by la^v— {J^e purchase of any securities or the sale of its securities guilty of misde- meanor, during the same period, or Itnowingly fails to report to the board of directors or trustees when required to do so [184] APPENDIX Penal Code hy law, all discounts or loans made by it and all securi- ties purchased or sold by it between the regular meet- ings of its board of directors or trustees, is guilty of a misdemeanor. Nothing in this section shall render any loan made by the directors of any bank, in violation thereof, invalid. Section 563a. Any officer, director, trustee, employee officer, director, cniDlo VCG ©tc • or agent of any bank organized under the laws of this making false entry . . . ^ , or omitting to make state, who makes a false or untrue entry m any book or required entry, .... ^ . guilty of felony. any report, tag or statement, of the business, artairs or condition, in w^hole or in part, of such corporation, with intent to deceive any officer, director or trustee thereof, or any agent or examiner, private or official, employed or lawfully appointed to examine into its condition or into any of its affairs, or any public officer, office or board to w^hich such bank is required by law to report, or w^hich has authority by law to examine into its affairs, or into any of its affairs, or who, w^ith like intent, wil- fully omits to make a new entry of any matter particu- larly pertaining to the business, property, affairs, assets or accounts of such bank in any book, report, statement, or tag of such bank made, w^ritten or kept, or required to be made, written or kept by him or under his direc- tion, is guilty of a felony. Section 563b. Any person w^ho wilfully and know- Making or circulat- ing untrue, deroga- ingly makes, circulates or transmits to another or others tory statement as to financial condition any statement or rumor, written, printed or by word of of bank, misdemeanor. mouth, w^hich is untrue in facts and is directly or by in- ference derogatory to the financial condition or affects the solvency or financial standing of any bank, doing business in this state, or who knowingly counsels, aids, procures or induces another to start, transmit or circu- late any such statement or rumor, is guilty of a misde- meanor punishable by a fine of not more than one thou- sand dollars or by imprisonment for not more than one year, or both. [185] General Laws BLYTH, WITTER & CO. GENERAL LAWS. Chapter 496, Statutes 1917. Liquidation of General Lawrs, Chapter 496, Statutes 1917, relating to the liqulda- banks. tion of banks, — referred to in note to Sec. 136 of Bank Act. An act relating to the liquidation of banks by the superintendent of banks; empowering him to levy assessments against the members and stockholders of any bank in process of liqui- dation by him to an amount which he may determine to be necessary to promptly pay the creditors of such bank in full; to enforce such assessments by suit and empowering the superior court to determine the equities of the members and stockholders of any such bank to any surplus which may remain after the payment of the creditors of such bank in full and to award and distribute the same accordingly. (Approved May 17,1917. In effect July 27, 1917.) The people of the State of California do enact as follows: Supt., taking posses- Section 1. Whenever the superintendent of banks sion of bank busi- , . ^ • r l l • l ness in liquidation, shall hereafter take possession of the business and prop- to determine as to iii-i- •!_• £L assessment of stock- erty of any bank doing business m this state tor the pur- holders, etc., to pay ri.-i- • rr • -iiil L claims, pose of liquidating its arrairs, as provided by law, he may at any time during the process of such liquidation determine whether it shall be necessary to assess the members or stockholders of such bank in order to promptly pay the claims of the creditors of such bank in full and he shall make such assessments as he may deter- mine to be necessary for that purpose. Determination to Section 2. Such determination shall be evidenced by make assessment . . • ii c i 1 l evidenced by filing a Complaint or petition against all of the members and court petition. ,,ii r iiiriii i • i f stockholders of such bank hied by the superintendent or banks in the superior court of the county where the prin- cipal place of business of such bank is or was located at the time of the taking of such possession. First assessment Section 3. If such assessment, first made, shall prove proving inadequate, . n r .1 "i- ^ £ U L 1 • £ 11 Supt. may make fur- inadequate to pay all or the creditors or such bank m tull ther assessments. , . , r i i i f l the superintendent or banks may make further assess- [186] APPENDIX General L aw3 ment or assessments by filing supplemental complaints or petitions in the same proceeding. Section 4. In any such proceeding such assessment Collection and application of pro- shall be enforced and collected and the proceeds thereof ^eeds of assess- ni6iits* shall be added to the funds of such bank and applied by the superintendent of banks for the payment of just claims against the same. Section 5. If after the payment of all just claims Disposition of sur- f 1 • • 1 . P'"^ ^^*^"^ payment against such bank and the cost or liquidation any sur- of claims, etc. plus shall remain said court shall determine the equities of the respective members and stockholders of such bank thereto and direct the payment thereof by the superin- tendent of banks accordingly. Section 6. The superintendent of banks shall have supt. has power to I maintain action to power to maintain an action in any other state or coun- enforce assess- f 1 11 t 1 . • ment in other state try to enrorce and collect such assessments against any or country. of such members or stockholders and the proceeds thereof shall become a part of the fund and be subject to the same disposition as if collected in the proceedings provided for in this act. Section 7. This act shall not affect any action or pro- Act not to affect ,... Ill • 1 ril • proceeding instituted ceeding instituted by the superintendent or banks prior prior to enactment. to its enactment. Section 8. If any section, subsection, sentence, clause or phrase of this act is for any reason held to be un- constitutional, such decision shall not affect the validity of the remaining portion of this act. The legislature hereby declares that it would have passed this act, and each section, subsection, sentence, clause or phrase thereof, irrespective of the fact that any one or more other sections, subsections, sentences, clauses or phrases be declared unconstitutional or its operation or applica- tion is or may be limited or controlled by any constitu- tional provision. [1871 Bulletin BLYTH. WITTER & CO. BULLETIN No. 1. "Bulletin No. I," referred to in note to Section 5, stating regula- tions governing banks desiring to establish insurance agency, as provided in Section 5 of the Bank Act. Regulations govern- Gentlemen : icg banks desiring: to establish insiir- 1 am pleased to advise you that an amendment to ance agency under . fiii i-ii/t ir Sec. 5 of Banii Act— section hve ot the bank act which 1 ottered tor enact- ment has been passed by the legislature, signed by Gov- ernor Stephens, and is operative as of this date. Under authority of this change in the law, banks lo- cated and doing business in any place, the population of which does not exceed five thousand persons, may act as agents for a fire, life or other insurance company. My purpose in suggesting this new function of state banks in small communities was to permit the indulgence of an activity which will be of public convenience and advantage and which will place those banks that consti- tute the smaller units in the state system upon a com- petitive equality with similar institutions controlled by national regulation. In this connection, I recall federal legislation which gives to national associations the privilege now granted to state banks, and I am gratified to announce the ac- complishment in this regard of a policy of establishing state institutions upon a parity with those of national organization in securing profitable and safe exercise of their desire to meet the demands of their contributory communities. In what follows, please observe and strictly adhere to the various locality and corporate requirements neces- sary to engage in the agencies designated. A bank operating under the authority of state laws and desiring to avail itself of the provisions of the "bank act" as amended and operative as of date July 22, 1919, relative to acting as agent for an insurance company, must be located in a place the population of which does [1881 APPENDIX Bulletin not exceed five thousand, as shown by the last preceding i^eguiations govem- •' '^ ° ing banks desiring decennial census or any subsequent official census. ^° establish insur- ' ence agency under The insurance company for which the bank acts as !!continu^d?'' ^"^ agent must have been authorized by the Insurance Com- missioner of California to do business in this state. The activities of the bank as such agent must be re- stricted to the soliciting and selling of insurance and the collection of premiums on policies issued by the insurance company. The bank may receive for services so rendered such lawful fees or commissions as may be agreed upon be- tw^een the bank and the insurance company for which it may act as agent. The bank is prohibited from assuming or guarantee- ing the payment of any premium on insurance policies issued, through its agency, by its principal. The bank is prohibited from guaranteeing the truth of any statement made by an assured in filing his appli- cation for insurance. The powers conferred are to be exercised under such regulations as may be prescribed by the Superintendent of Banks. In pursuance of the foregoing amendment the follow- ing regulations are hereby prescribed for banks which may undertake to act as agents for insurance companies: 1 . Each contract of agency must be formally ac- cepted by the board of directors of the agent bank by a resolution spread upon the minutes in the following form: "Be it resolved that the contract of agency entered into on , 19 , between the insurance company and the bank of , by , president (or vice president) and , cashier, or secretary, a copy of v/hich is on file in this bank, is hereby ratified and approved." [189] Bulletin BLYTH. WITTER & CO. Regulations govern- 2. A Certified copv of such resolution, attested by the ing banks desiring ^-^ •' to establish insur- president or vice president and by the cashier, or sec- ance agency under ^ '■ Sec. 5 of Bank Act. retary, and by a majority of the directors of the bank, Continued. ■' ■' i j must be forwarded to this office. 3. There should be on file in the bank, available for inspection by examiners of this department, the follow- ing documents: (a) An authoritative statement showing the popula- tion of the town according to the last preceding decennial census or any subsequent official census. (b) A proper certificate from the Insurance Commis- sioner of California showing as to each insurance com- pany for v/hich the bank is acting as agent that such com- pany has received authority from the said Insurance Com- missioner to transact business in this state. (c) A proper certificate or other writing of each in- surance company for which the bank acts authorizing the bank to act as its agent, setting forth that the bank does not guarantee the payment of any premium on insurance policies issued through its agency by its principal, and stating that the bank is not to be held responsible for the truth of any statement made by an assured in filing his application for insurance. (d) Copies of all reports made by the agent bank to each insurance company which it represents. 4. The bank will be required to keep a record as to each company for which it acts as agent showing: (a) For fire insurance: The amount of each policy, the rate and premium, date of commencement, term, and date of expiration, as well as a description of property insured, with name of assured, and to whom loss is pay- able. (b) As to life insurance: Amount and date of pol- icy, with premium, and a statement as to under what form the insurance is written, giving also name of as- sured and beneficiary. [190] APPENDIX Bulletin (c) As to any and all other forms of insurance: The Reflations govern- ing banks desiring fullest possible particulars as to amounts, dates, rates, *° establish insur- ance agency under premiums, and what is insured by the policy, and of col- ^^''^ ^ °^ ^^"^ ^'^^ . . . r .' — Continued. lection or all premiums collected for account of the com- pany, refunds made, the proportion of premium credited to the profits of the bank under its agreement with the company, the proportion due the company, the amounts and dates of all remittances made to the insurance com- pany on account of premiums collected, and the balance, if any, due from the bank to the insurance company. 5. The bank will be required to carry on its general ledger an account which will, at all times, show the amount due to insurance companies for which it is act- ing as agent, on account of premiums collected but not remitted, and this liability must be shown in reports of condition and in the published statements of the bank under the heading "Other liabilities — on account of in- surance premiums collected and not remitted," unless specifically provided for in the report. 6. The bank should also keep such records as may be required by each insurance company in the manner and under the forms prescribed by the various companies; all of which should be available for inspection by the exam- iner on request. 7. The agent bank must not assume any responsibility or liability for either the adjustment, settlement, or pay- ment of losses under any policy issued by or through its agency. 8. The records of all profits derived from the insur- ance agency should be carried in a separate account on the books of the bank, and the records should be so kept as to enable the examiner readily to trace to the source all items of profit derived in this connection. Yours very truly, CHARLES F. STERN, Superintendent of Banks. [191] Letter BLYTH. WITTER & CO. PROCEDURE IN ASSUMING TRUST-COMPANY FUNCTIONS. Form of letter from State Banking Department referred to in note to Section 48a stating requirements imposed on Banks de- siring to assume trust-company functions under Section 48a of Bank Act. Requirements im- In connection with your desire to assume trust com- posed on Banks -. . .. ., ii-i- assuming trust pany tunctions in association with your banking busi- f unctions under .ii -i .i-^ .1 1 Sec. 48a, Bank Act ness, wc wish herewith to outhne to you the procedure necessary for you to observe as incident to our duty of visitation and supervision of your trust company func- tions. As you are aware, the legislature of California adopted at its recent session enabling acts to permit this department to authorize for deposit with the State Treas- urer of California such securities as are required by the national act which permits you to undertake a trust com- pany business. These enabling statutes of California will be operative as of date July 22, 1919, and on and after that date we shall be glad to entertain from you any application for the authorization of securities which is necessary under both state and national law. If we may be of any service to you in expediting your assump- tion legally of trust company powers, we shall be very glad to have you command us. Incident to any application that you may make to this department for the authorization of a deposit of secur- ities v/ith the State Treasurer of California, we will thank you to submit to us the following: ( 1 ) A duly certified copy of a resolution of your board of directors determining upon the conduct of a trust company business and authorizing the steps required by law to be taken to the accom- plishment of that end. We shall require a copy of this resolution certified by the secretary of your bank and under your corporate seal. (2) A duly certified copy of permission of the Fed- eral Reserve Board granting you authority to en- gage in a trust company business. [192] APPENDIX Lett er (3) You must segregate and assign to the State ^^i"'"'"^"*^ '^i- -r £ 1 c r /^ ^ r posed on Banks 1 reasurer or the otate or California securities in assuming trust func- f • -1 •r.^rti, . *^°°' under Sec. 48a, contormity with section 96 of the bank act in the Bank Act— Continued. sum of $ I 00,000 for the faithful performance and due execution of your private trust business, and $100,000 for the faithful performance and due execution of your court trust business. Care should be taken that the securities chosen shall be of the character established by section 96 of the bank act. In presenting these securities, please accompany them with the following: (a) A resolution of the board of directors segregat- ing, depositing and assigning the designated se- curities to the State Treasurer of California for the purposes indicated, setting forth a description of the securities in detail and authorizing and di- recting the officers of the corporation to execute the necessary assignments. (b) An assignment of the securities as above indicated executed by the officers of the corporation. (c) In the case of mortgages secured by real estate, it should be borne in mind that the amount of the mortgage can not exceed 50% of the fair market value of the property and that the prop- erty must be productive and income bearing. We shall require the following documents concerning such a mortgage: 1 . The mortgage showing recordation. 2. The notes secured by such mortgage. 3. An abstract of title or a policy of title insur- ance showing that the mortgage and the notes secured thereby are a first lien upon the prop- erty in question. 4. An appraisal of the property covered by the mortgage or deed of trust made by two dis- [1931 Letl er BLYTH. WITTER & CO. Requirements im- posed on Banks assuming trust func- tions under Sec. 48a, Bank Act. — Continued, interested appraisers not affiliated with the bank, setting forth the fair market value of the property, indicating the value of the real estate and of the improvements separately, and indicating also that the property is pro- ductive and income bearing. 5. Policies of fire insurance covering the im- provements, if any, upon the property under the lien of the mortgage or deed of trust. (d) If any of the securities offered for deposit with the State Treasurer of California are bonds, these bonds should be accompanied by an authorita- tive opinion running to their character and legality. If all of the documents and securities are in form, w^e will so advise the State Treasurer of California by issuing our authorization to him to accept such securities on de- posit for purposes indicated. We will then, upon the acceptance by the State Treasurer of California, inform you of your complete qualification as far as is required by the law^ of this state. We desire that all of the above described documents in connection with this deposit of securities by you, ex- cept the policies of fire insurance, should they be a part of your deposit, should be submitted to this department in duplicate, one to be forwarded to the State Treasurer with the deposit, and the other to be retained in this department for our record. In bringing forward cer- tificates of title, if such are used, the certificate should show the assignment to the State Treasurer of California. If you deposit bonds, we will thank you to send them di- rectly to the Treasurer of California to be held by him for your credit until he receives from this department the authorization to accept them on deposit as is required by law. [194] APPENDIX Letter For your information, we are enclosing you the fol- ^o^g'^Jdon^Bankl'" lowing I .- assuming trust ° * "~ functions under Sec. 48a, Bank Act ( 1 ) Form of resolution to be adopted by your board —Continued. of directors authorizing certain of your officers to assign certain certificates for the faithful perform- ance and due execution of your court trust busi- ness and for the faithful performance and due execution of your private trust business. (2) Form of assignment of the securities which your board of directors shall authorize to be placed on deposit with the State Treasurer. If there be any other question incidental to your pur- pose to install a trust department, we shall be glad to be at your command for its consideration. Yours very truly, CHARLES F. STERN, Superintendent of Banks. fl95] BANK ACT OF CALIFORNIA. INDEX Section Acceptances, bankers', when eligible for savings banks 67 By commercial banks, how limited 80 Relation to loans in commercial banks 80 Trade, when eligible for savings banks 67 Act, applicable to certain corporations 1 Applicable to violators of provisions of 1, 145 Bank, repeals all acts in conflict 146 Effective when _ 147 Title of 1 Action, against bank for escheated deposits 15 Against superintendent of banks 134, 136, 142 Brought under bank act, jurisdiction in 136b For sale of real estate, when 54 May be maintained by superintendent of banks to dissolve bank 135a Reports are prima facie evidence in, when 142 To recover penalties by attorney general 144 Adjustment of investments made prior to this act 145 Administrator, deposits by 51 May deposit with trust company 91,92,93 Trust company may act as 90 Trust company, oath required 90 Advertisement, building and loan associations not to advertise as savings bank 12 Capital, must show amount paid up '4 For deposits, prohibited when '2 Liabilities must show separate '^ Of banks, how regulated 28 Of branch offices, how regulated 28 Of conversion, state bank into national bank 56a Of merger ^ '® Of notes, bonds or securities, limited when 61 Of sale of bank 31 Of unauthorized banking prohibited '2a Of unauthorized trust company prohibited '2a Resources must show separate '* Savings, shall not be advertised by whom 49 Surplus must show separate '^ Undivided profits must show separate '^ Advisory board, loan to member of *'•' [197] BLYTH. WITTER & CO. BANK ACT OF CALIFORNIA— Continued Section Affidavit, reports of banks 130, 130a Reports of trust companies 101 Agent, liability for fraud 38 Of commercial bank, loan to 83 Of foreign bank, must take oath 1 1 Of savings bank, may borrow funds 65 Overdraft of, prohibited 39 Prohibited loans to, must be reported 65, 83 Purchase of assets or obligations of bank, by 41, 42 Restriction on purchase of assets or obligations of bank by 41, 42 Sale of note, bond or contract to bank by 35 Special deputy superintendent of banks in liquidating bank 136 Superintendent of banks for service in foreign bank 7 When commercial bank may act for insurance company 5 Agreement of consolidation must be filed 3 la Of consolidation must have approval 31a Sale and purchase 31 Amendment of articles of incorporation must be filed 8 Of articles of incorporation, see Sec. 290a, Civil Code. Amortization of bonds by savings banks 61 Annexation, as affecting powers of banks and branch offices 23, 60, 82 Annual Report, copies for distribution 140 Of superintendent of banks to contain what 140 Appeal from order of superintendent of banks 134, 136 From seizure of bank property 134, 136 Applications to do banking business, investigation of 127, 128 To establish foreign branch office 58 Appointment of appraisers 61a, 99, 124 Of special deputy superintendent of banks 136 Of superintendent of banks 120 Apportionment of capital and surplus to court trust business 90 Of capital and surplus to departments 23, 60, 90 Of capital and surplus to private trust business 90 Appraisal of property mortgaged to state treasurer by trust company 99 Of securities 61a, 99, 124 Appraisers, appointment of 6 la, 99, 124 Articles of Incorporation, amendments must be filed 8 As affected by bank act 8, 145 May provide for departmental banking 22 Must be certified by secretary of state 8 Must be filed with superintendent of banks 8 Not effective until filed " Of trust company 9U [198] INDEX BANK ACT OF CALIFORNIA— Continued ARTICLES OF INCORPORATION— Continued Section On consolidation or merger 31a Violation of, by banks 134, 135a, 136 When filed by banks 128 Assessment, effect on first lien on real estate 57 Failure of bank to pay 123 Of banks, how calculated 123 Of banks, for state banking fund 123 Refusal of stockholder to pay 133 Stockholders must be notified 133 When capital stock impaired '33 Assets, commercial bank may pledge for "borrowed money" to what extent.. 2 la How may be reached in merger 31a Invested in bonds 36, 46 May not be carried in excess of actual cost, except 45 Of banks, relation of loans thereto 44 Of departments held for depositors 27 Of departments may be transferred, when 25 Of departments to be kept separate 2o Overdrafts limited to ninety days 2 1a Purchased by directors, officers and employees 41,42 Relation of to investments 36, 46 Relation of, to loans by savings banks "7 Sale and purchase -^ ' Shall not be mingled with trust funds 32 Shall not be pledged to give preference 21a Assignee, deposits by ^'' "'' "^ Assistants of state banking department ' -^ ' Attorney, designation of superintendent of banks by foreign corporations 7 May be employed in liquidating 121 Of state banking department Attorney General, actions brought by, to recover penalties '44 Duty in action for escheated deposits Auditor, superintendent of banks shall provide Authorization, certificate for branch office Certificate for commercial bank '27, 128 Certificate for foreign bank Certificate to representative of foreign bank or trust company 12c 17 7 128 Certificate for savings bank ' ■" • Certificate for trust company '•''' Of consolidation Of loans to directors, members of advisory boards, agents and employees in commercial banks [199] BLYTH. WITTER & CO. BANK ACT OF CALIFORNIA— Continued ATTTHORIZATION — Continued Section Refusal of by superintendent of banks 128 Refusal of by superintendent of banks for branch office 9 Bad Debts, compounding of 136 What are 21a Bailee, savings bank may act as, for United States bonds 70 Balance, sale of stock for assessment 133 Unclaimed deposits 1 5 Bank, annual report of superintendent of banks 140 Application to do business 127, 128 Articles of incorporation must be filed 128 As a borrower 21a As member of federal reserve bank, subject to state laws 56 Assessed for state banking fund 123 Banking corporation, how organized 3 Bond investment limited 36, 46 Branch office 9 Capital impaired 1 33 Ceasing business, must take what action 136a Classified as to capital by population 23 Commercial, purposes of 5 Conducting business in unsound manner 134, 135a Connection ■with, by superintendent of banks prohibited 120 Considered insolvent, when 20 Definition of 2 Departmental, separate books to be kept 26 Departmental, shall make reports separately 129 Departn^ental, shall publish statements separately 129 Deposit with, does not create debt, when 55 ' Dissolution of, by process of law 135a Dissolved, funds of 137 Distribution of funds of insolvent 136 Escheat of unclaimed deposits 15 Examination of, before issuance of certificate 127 Examination of, by court 136 Examination of, by directors 139 Examination of, once a year 124 Examination of, when failing to report 138 Examiner, failure to report insolvent condition 126 Examiner, must file oath 125 Examiner, shall not act as receiver, when 125 Expiration of corporate existence 136a Extra examination, expense of 124 Failure to make report, penalty 138 [2001 INDEX BANK ACT OF CALIFORNIA— Continued BANK — Continued Section Failure to pay assessment 123 Federal reserve, exempt from examination 48 Fines, may be compromised before action instituted 144 Foreign, inspection of 124 Foreign, see Corporations, Foreign. Forfeitures, how recovered 144 Forfeitures, may be compromised before action instituted 144 Funds, when deposited with other banks 43, 68, 85 Impairment of capital 133, 136 In liquidation, names posted 141 Insolvent condition of, failure to report 126 Inspection of, by superintendent of banks 124 In unsafe condition '36 Investment In bonds limited 3S, 46 Investments, changed to conform to act 145 Investments in ow^n stock prohibited - 34 License to foreign corporation ' Limited time to repair capital 133 Limited time to report 138 Limited to investment in safe deposit 30, 3 7 Liquidation of, by superintendent of banks 136 Loans on own stock prohibited 34 May acquire stock in safe deposit corporation, when 3 7 May acquire stock in trust company, when 3 7 May apply to court to dissolve '3/ May be cited to show cause '^^ May conduct safe deposit department 30 May consolidate, how 3 1a May engage in foreign banking, how 5o May go into voluntary liquidation 136a, 137 May join federal reserve bank -'6 May purchase real estate, when 61,84, 105 May resume business, when '-'" Must carry assets at actual cost, when ^-' Must have certificate of superintendent of banks ^4 Must liquidate, when Must not purchase real estate contract, note or bond, when 3 5 Must report loans made to directors, etc Must sell or exchange other real estate, when Mutual, may have capital stock Name, change of, see Sec. 1278, Code of Civil Procedure. 17 7 Names of, not to be similar National, examination of [2011 a BLYTH. WITTER & CO. BANK ACT OF CALIFORNIA— Continued BANK — Continued Section New, information of, to be posted 141 Obligations or assets of, when purchased by officers, directors and em- ployees 4 1 , 42 Organization of, previous consent of superintendent required 127 Penalties imposed, how recovered 144 Penalties pecuniary, may be compromised before action instituted 144 Publication of report of 132 Publication of unclaimed deposits 1 5 Purchase of 3 1 Refusal to observe order of superintendent of banks 136 Refusal to submit books 135a, 136 Report of, to superintendent of banks 130 Rights of creditors in merger 31a Sale of 3 I Savings, purposes of 4 Shall not own stock of corporations, except 37 Shall not transact business without certificate 127 Signs must show business conducted 28 Stationery must show business conducted 28 Stock, as collateral, limited 44 Stock, minimum par value, except 53 Suspending payment of obligations 135a Trust company, purposes of 6 Use of term restricted 1 2 Violation of articles of incorporation 134, 13ja, 136 When unsafe to continue business 135a Bank Acceptances, how limited 67, 80 Bank Act, annual report of superintendent of banks, as to 1 40 Applicable to all violators of provisions of 1, 145 Effective when 1 47 In relation to prior investments 145 Jurisdiction in actions brought under 136b Repeals all acts in conflict 146 Short title of 1 What applicable to 1. 145 Banking Business, conducted in unsafe manner 134, 135a Certificate to be posted 50 Banking, defined 2 Departmental 22 Regulation of 7,9, 12. 12a, 13,90 Unlawful unless duly authorized 2 When advertised must have certificate 12a Banking Corporations, see Corporations, Banking. [202] INDEX BANK ACT OF CALIFORNIA— Continued Section Banking Department, see State Banking Department. Bank Premises, departments to be in same or adjoining buildings 26 Investment in, by commercial banks 84 Investment in, by savings banks 6 1 Investment in, by trust company 105 Trust company may mortgage to state treasurer, when 97 Bills of Exchange, commercial bank may accept, when 80 Commercial banks may buy or discount 80 Not construed to create debt, when 55 Relation to loans in commercial bank 80 When eligible for savings banks 67 Bond of deputy superintendent of banks 1 2 1 Of special deputy superintendent of banks 136 Of superintendent of banks '20 Bonds, advertisement of, limited, when 61 Available for deposit by trust company 96 Certified, official list to be kept 61a Commercial banks limited in investing in 36, 46 Corporate, foreign corporation may act as trustee 90 Cost of investigation of 61a For deposits by court order, not required 94 Foreign corporations may buy and sell, when 12c Guaranteed by mortgage insurance as investments, when 61, 105, 106 Guaranteed by mortgage insurance, available for deposit by trust com- panies, when -.96, 99 Legal as investment for savings banks 61 Must be certified, when 61, 61a Penalty for illegal advertisements of 61 Power of superintendent of banks to investigate 61a Savings banks limited in investing in 67 Savings banks may acquire for debt 61 Savings banks may loan on 67 United States, loans on by commercial banks 65, 80, 83 Books, audit of, by request ' ^^ Examination of, by directors "3" Inspection of, by superintendent of banks J" Must show actual cost of assets, when ^^ Of departments to be kept separate 26 Refusal of bank to submit '35a. 136 Borrowed Money, by commercial banks to purchase United States securities... 21a By savings banks must be approved, when "^ Commercial banks may pledge assets for, to what extent 21 Excess loan to savings bank not invalid as to lender 62 a 1203] BLYTH, WITTER & CO. BANK ACT OF CALIFORNIA— Continued BOEEOWED MONEY— Continued . . Section Limit on amount borrowed 21a Rediscounts by savings banks excepted, when 62 Savings bank may borrow any amount to purchase United States securi- ties 62 Savings bank must report, w^hen 62 Superintendent of banks may extend limit 2 la Borrower, endorser and guarantor, deemed to be 66 Branch Office, capital required 9 Capital required to establish foreign branch 58 Certificate necessary to open 9 Effect of consolidation of cities on 23, 60, 82 Permission to establish foreign branch, how obtained 58 Regulations governing advertising and stationery 28 Right to establish, in foreign country, a dependency or possession of United States 58 Shall not be permitted to close, when 9 Shall not be permitted to open, when 23 Signs of, must show what 28 Building and Loan Association, advertising, how restricted 12, 12a Bulletin, information to general public 141 To be filed as public document 141 To be posted by superintendent of banks 141 Business, authorization to commence 9, 127 Ceased by trust company 102 Closing of 1 37 Examination of 1 24 Merger of 3 la Reports of 130, 1 30a Sale of 3 1 Winding up affairs of 136 By-Laws, amendments must be filed 8 Must be filed with superintendent of banks 8 Not effective until filed 8 Of savings banks must prescribe what 64 Call for reports from banks, hov/ often 131 Called Report, failure of bank to make, penalty 138 From bank, how often 131 Of bank, publication of 132 Time limited for bank to make 138 To coincide with call of comptroller of currency, when 131 To contain what 130, 130a Capital, advertising of, must show what 14 Apportioned to departments 23, 60, 90 [204] INDEX BANK ACT OF CALIFORNIA— Continued CAPITAL — Continued Section Assigned by foreign corporation 7 Impairment of 133, 136 Increase or decrease of 8, 23 Increase or decrease of, see Sec. 290a, Civil Code. Invested in bank premises, furniture and fixtures and safe deposit vaults 6 1,84, 1 05 May be increase by surplus 21 Must be paid up before issuance of certificate 127 Necessary to open branch office 9, 58 Not required against public deposits or postal savings when secured 19 Of commercial bank, relation to deposits 19 Of foreign corporation to be separate 7 Of savings bank, in what invested 61 Of savings bank, relation to deposits 19 Of trust company, how invested 105 Of trust company, in what invested 105 Paid up and surplus must equal what 19 Reapportionment to departments 23 Relation of surplus to 21 Restriction as to loans oo, 80 Capital Stock, as collateral, limited 44 Assessed when ' ^^ Banks shall not invest in their own 34 Banks shall not loan on their own 34 Commercial bank, amount required 82 Directors of domestic bank must hold '0 May be sold for assessment '^^ Mutual banks may issue, how ^" Of corporations engaged in foreign banking, banks may purchase, when.. 58 Of safe deposit corporation, when may be invested in 3 7 Of title insurance company doing trust business 106 Of trust company, when may be invested in 3 7 Reduction of Required according to classification 23, 60, 82 Required by trust company • 5 3 Requirements pertaining to Savings bank, amount required Certificate, mortgage participation, legality of for savings banks 61 Mortgage participation, when available for deposit by trust company 96, 99 Necessary before transaction of business , 24 Necessary for new department Of deposit, not construed to create debt, when 5 3 Of deposit, savings bank may issue [205] BLYTH. V/ITTER & CO. BANK ACT OF CALIFORNIA— Continued CERTIFICATE— Continued Section Of special deputy superintendent of banks to be filed 136 Of superintendent of banks, filing 31a, 128 Of superintendent of banks, in merger 3 la Of superintendent of banks, shall be issued, when 128 Of superintendent of banks to be posted 50 Of superintendent of banks to be withheld, w^hen 7, 9, 12c, 127 Of superintendent of banks, to state what 127 Of trust company, w^hen revoked 98 Requisite fee 24 Revoked, when trust business ceases 102 To open branch office 9 Certificate of Deposit, bank can not make partial payments on 2 la Certification of bonds by superintendent of banks 61, 61a Of public utility bonds, expiration of 61a Of superintendent of banks, not to obligate the state 61 Certified Checks, issuance unlaw^ful, when 52 Must be immediately charged 52 Checks, certified, must be charged 52 Certified, when unlawful 52 Chief Deputy, failure to report insolvent condition of bank 126 Citation, issued by superintendent of banks 134 City, assessment by, effect on first lien 57 Bonds of, available for deposit by trust company 96 Legality of bonds of 61 Claims against bank in liquidation 136 Objection to, liquidation 136 Classification, as applied to banks previously organized 23, 60 Of banks 2 Of cities, governed by federal census 23, 60 Of cities in relation to capital and surplus 23, 60, 82 Of trusts 1 1 Club, loans to, exemptions in favor of 65, 83 Collateral, commercial bank may pledge assets to w^hat extent 21a Directors to receive report on 139 Collateral Trust, bonds, when legal for savings banks 61, 61a Commercial Bank, advertising, how regulated 28 Bond investments limited 36, 46 Capital and surplus, their relation to deposits 19 Capital required 82 Classified as to capital by population 23 Definition of 5 Deposit with another commercial bank, regulated 85 How organized to conduct 3 [206] INDEX BANK ACT OF CALIFORNIA— Continued COMMERCIAL BANK— Continued Section Investment in bank premises 84 Loans of, limited 80, 81 Loans on securities of United States Government, how may be made 80 Loans to affiliated bank 83 Loans to corporations 80, 83 Loans to director, agent or employee on United States securities per- mitted 83 Loans to directors and employees 83 Loans to members of advisory board 83 Loans to officers prohibited 83 May accept drafts or bills of exchange, when 80 May act as agent for fire, life or other insurance company, v^rhen 5 May borrow money to what extent 21a May pledge assets to what extent 2 la May rediscount with federal reserve bank 21a May be duly authorized 2 Overdrafts limited to ninety days as assets 21a Overdue interest, how limited 2 la Purposes of ^ Real estate loans restricted 47 Reserve required 20 Shall not assume or guarantee insurance premium 5 Commercial paper, commercial banks may buy or discount 80 Loans on, by commercial banks, how governed 80 Savings bank may discount or purchase, when 67 Commission to officers, directors and employees prohibited 39 Condition, must be published '32 Consolidation, approval of stockholders 3 1 Approval of superintendent of banks required 3 I Articles of incorporation and consolidation 3 1 How assets of merged banks may be reached 3 1 Liability of banks in ^'^ Of banks 31a Of cities, effect on branch offices 23, 60, 82 Rights of creditors in Construction, all preceding or conflicting acts repealed 146 Create debt ^^ Contract, real estate, not to be purchased by bank, when 3 5 With officers, directors or employees 41,4- With savings depositor Conversion of state bank into national banking association 56a Notice to depositor of savings bank -'"^ ^orpora a Corporate Existence, obligations of bank after expiration 136a [207] BLYTH. WITTER & CO. BANK ACT OF CALIFORNIA— Continued Section Corporations, club, exemptions in favor of loaning 65, 83 Consolidated 31a Doing title insurance and trust business 107 For banking, how organized 3 Loans of, when officers, directors or employees of bank interested 65, 83 May deal in exchange or letters of credit, when 13 Membership, exemptions in favor of loaning 65, 83 Mortgage insurance, securities of, as deposit by trust company 96, 99 Mutual, nnay issue capital stock 29 Powers and privileges must conform to act 145 Prohibited loans to, must be reported 65, 83 Religious, exemptions in favor of loaning 65, 83 Sale and purchase 31 Shall not use word "savings" when 12, 12a, 12c, 49 Shall not use word "trust" when 12, 12a, 12b, 12c, 102 Stock of, as collateral, limited 44, 67 Stock of, banks shall not own 37 Corporations, Banking, may do departmental business, when 22 Must file certain papers 8 Organization of 1 27 Corporations, Foreign, acceptance of deposits prohibited 7 As fiscal agents 90 Banking functions limited 7 Loans based on total capitalization, v^hen 7 May act as executor, when 7 May act as trustee in this state for what purpose 7, 90 May buy and sell bonds, when 12c May lend certain moneys not assigned to this state 7 May lend money in this state 7, 12c Must execute pow^er of attorney to superintendent of banks 7 Powers permitted to foreign trust companies 7, 90 Representative of, may maintain office, when 12c Service of papers 7 Service of process 7 Shall report to state banking department 130 Subject to state laws 7 Costs, in liquidation 136 In sale of certain real estate 54 Counsel, compensation, liquidating delinquent banks 136 County, assessment by, effect on first lien 57 Bonds of, available for deposit by trust company 96 Legality of bonds of 61 County Clerk, articles of incorporation and consolidation must be filed with 31a [208] INDEX BANK ACT OF CALIFORNIA— Continued Section County Deposits in savings banks 62 Reserve against, not required 20, 68 When secured, bank not required to maintain capital against 19 Court may authorize deposit with trust company 91 May order deposit with trust company 93 May require knowledge of private trusts 103 Court Trust, definition of 101 To be separately secured 96 When deemed to include private trust 101 Create Debt, meaning of, restricted 55 Creditors, rights of, against banks sold 3 1 Rights of, against merged bank 31a Rights of, in liquidation 136 Debt, savings banks shall not contract, except 62 Deceased Depositors, amount due to, must be reported I 5 When moneys due to, escheat 15 Deeds of Trust, legal for deposit by trust companies 96 Definition of bank 2 Of commercial bank 5 Of commercial paper eligible for savings banks 67 Of "electrical corporation" 61 Of "gas corporation" 61 Of "net earnings" 61 Of "pipe line corporation" 61 Of "public utility" 61 Of "railroad corporation" 61 Of "reserve depositary" 20 Of "reserves on deposit" •^^ Of "reserves on hand" ■^^ Of savings bank ^ Of "street railroad corporation" o' Of "telegraph corporation" "' Of "telephone corporation" "' Of "total reserves" 20 Of trust company " Of "water corporation" " ' Departmental Bank, application for permission to conduct 23 Apportionment of capital and surplus 23, 60, 90 Assets to be held for depositors, how 2/ 26 Assets to be kept separate Books of account to be kept separate ■'" Classified as to capital by population ^^ Conducted by trust company [209] BLYTH, WITTER & CO. BANK ACT OF CALIFORNIA— Continued DEPARTMENTAL BANK— Continued Section Conversion into national bank 56a Corporation may transact business of 22 Departments to be in same or adjoining building 26 Deposits, conditions of repayment 27 Investments, hov^ held 27 May transfer assets, when 25 New department must have certificate 24 Reapportionment of capital and surplus 23 Relation of departments 26 Shall make separate reports of departments 129 Shall publish statements of departments separately 129 Statement of segregation of capital and surplus 23 Total reserves required 25 Departmental Business, by title insurance companies 107 Deposit, by administrator 51 By assignee 5 1 By executor 5 I By guardian 5 1 By order of court 5 I By receiver 5 1 By trust department v^rith commercial department of same corporation 25 By trust department with savings department of same corporation 25 By trustees 5 1 Certificate of, savings bank may issue 63 In federal reserve bank, by state bank 48 In national bank, by state bank 48 Of postal savings in savings banlcs 62 Of trust companies with state treasurer to be increased when 98 Of trust companies with state treasurer to consist of what 96 Trust companies may mortgage premises to state treasurer, when 97 Depositary, designation by superintendent of banks 43 Federal reserve bank, for state bank 48 Federal reserve bank may act as 43 Federal reserve bank need not be designated by superintendent of banks 43 National bank acting as 48 Reserve, how nominated and designated 20 Savings bank as bailee for United States bonds 70 Depositor, contract with, in savings bank 64 Deceased 1 5 Of savings bank converted into national bank, notice to 56a Repayment to, by savings banks 64 Savings, may be paid by draft 62 Unknown 1 5 [210] INDEX BANK ACT OF CALIFORNIA— Continued Section Deposits, additional to be made by trust company, when 98 Advertising for, prohibited when 12 By trust department with other departments of same bank 25 Escheat of 1 5 Must not be increased, when 19 Not construed to create debt, when 55 Of a commercial bank with another commercial bank, regulated 85 Of banks 43 Of foreign corporation to be separate 7 Of other banks with savings banks 68 Of savings banks with other banks 68 Of trust company, may be withdrawn from state treasury 98 Of trust company, securities may be exchanged. 96 Of trust company securities, documents and appraisal 99 Reserve required for 20,68, 105 Savings, advertised 49 Savings bank, in what invested 61, 67 Savings bank, repayment of 64 State, county, municipal and postal, in savings banks 62 Trust company, in what invested 105, 106 Unclaimed 1 5 Unclaimed, when bank suspends business 136a When preferred 5 I, 62 When public deposits and postal savings may be excluded from aggregate 19 With other banks by departments 25 With trust company, authorized by court 9 I With trust company, by administrator 91,92,93 With trust company, by court order 93 Deputy of superintendent of banks, qualifications of 121 Of superintendent of banks, salary '2 I Of superintendent of banks, shall execute bond, when 1 2 1 Designation of depositary 2U, 43 Directors, committee of, examination of bank by 139 Eligibility of ' ^ Examination of bank by '■^" Increase or decrease of ^ Increase or decrease of, see Sec. 290a, Civil Code. In merger ^ '* Liability for fraud -*" List of, to be posted ' ' May authorize loans to directors, agents or employees 83 May be removed when ' ** May declare dividend, when ^ ' 1211] BLYTH. WITTER & CO. BANK ACT OF CALIFORNIA— Continued DIRECTORS — Continued Section May demand special examination of bank 139 May employ assistance in examinations 139 May sell note, bond or contract to bank, when 35 May sell stock for assessment 133 Must hold monthly meetings 1 1 Oath of 1 1 Of commercial bank, loans to 83 Of savings bank, in relation to corporation loans 65 Of savings bank, loans to prohibited 65 Of savings bank may borrow on United States securities 65 Of savings bank, shall not be endorsers 65 Overdraft of, prohibited 39 Prohibited loans to, must be reported 65, 83 Purchase of assets or obligations of bank, by 41, 42 Qualifications of 10, 11 Restriction on purchase of obligations or assets of bank, by 41, 42 Shall levy assessment, w^hen 133 Shall not receive commission 39 Discount, banks of 5 Of bills of exchange, amount of 80 Of commercial or business paper, amount of 67, 80 Relation to loans in commercial banks 80 Dissolution, banks shall have right to make application for 137 Causes for I 36 Proceedings in 136, 137 District Bonds, legal for investment by savings banks, when 61, 61a Dividends, accrued but unpaid interest not calculated 45 Directors may declare, under what conditions 21 Escheat to state, w^hen 137 From banks in liquidation 136 In receiver's hands, how^ disposed of 137 Of savings banks, how restricted 64 Of suspended banks 136a Paid out on court order 137 Trust company may receive, on securities deposited 96 When escheated to state, invested how 137 Dominion of Canada, bonds and notes of, as investments for savings banks — 61 Draft, savings depositors may be paid by 62 Commercial bank may accept 80 Earnings, disposition of 21 Electrical Corporation, definition of 61 Eligibility of directors '0 Employees, liability for fraud 38 [212] INDEX BANK ACT OF CALIFORNIA— Continued EMPLOYEES — Continued Section May sell note, bond or contract to bank, when 35 Of commercial bank, loans to 83 Of savings banks, may borrow funds 65 Of state banking department 121 Overdraft of, prohibited 39 Prohibited loans to, must be reported 65, 83 Purchase of assets or obligations of bank, by 41, 42 Restrictions on purchase of obligations or assets of bank, by 41, 42 Shall not receive commission 39 Endorser, deemed to be borrower, when 66 England, bonds and notes of, as investments for savings banks 61 Entries, penalties for false 38 Escheat of deposits, duty of attorney general in action 15 Of deposits, duty of county clerk, in action 15 Escrow-Holder, not subject to supervision of superintendent of banks acting as trustee, when '01 Examination, at expense of bank, when 58, 138, 139 By examiners of federal reserve bank, when 56 Causes for dissolution 134, 136 Federal reserve bank exempted 48 Of bank by committee of directors 139 Of banks, before issuance of certificate 127 Of banks by directors '39 Of banks, special '-^4, 139 Of banks, upon failure to report <38 Of foreign branch offices 58 Of national banks ^" Of organization documents by superintendent of banks 8, 127 Of securities for deposit by trust companies 96, 97, 98, 99 Of state bank members of federal reserve bank 56 Of trust department of national bank 48a Report of, by superintendent of banks, prima facie evidence 142 Special, per diem charged '■^* Elxaminer, failure to report insolvency '•^" May administer oath ' ^^ Must take constitutional oath '^^ Oath of, must be filed, where ' ^^ Of state banking department Shall not be appointed receiver, when ' ^^ Executor, deposits by ^'' 91, 93 Foreign corporation may act when Trust company may act as "• "^ Trust company, oath required "" [213] BLYTH. WITTER & CO. BANK ACT OF CALIFORNIA — Continued Section Existence, corporate, obligations after expiration of 136a Elxpense of state banking department 48a, 122, 123, 124 Express Company has power to receive money for transmission 1 3 Federal Farm Loan bonds legal for investment by savings banks 61 Federal Reserve Bank, exempted from examination 48 May act as depositary 20, 43, 68 Need not be designated as depositary 43 State banks may join 56 State members may apportion their investment in stock of 56 State members subject to state laws 56 Trust company member may continue to act 90 Federal Reserve Board, regulations of, on bankers' acceptances 67 Fee for appraisal of trust company securities 99 For branch office 9 For certificate for representative of foreign corporation 12c For certificate to do banking business 9, 24 For examination of documents accompanying trust company securities.. 99 For filing proceedings in liquidation 1 36b For investigating bonds 61a For services rendered trust department of national bank 48a For serving process on foreign corporation 7 For special examination '24 Filing of certificate of superintendent of banks 128 Of directors' examinations 139 Of documents preliminary to organization 8, 127 Of list of unclaimed deposits 1 5 Of proceedings in liquidation 136b Fine, bank, may be compromised before action instituted 144 First Lien on real estate, effect of certain assessments 57 Fiscal Agent, foreign corporation as 90 Foreign Banking, investment in bank 58 Regulations concerning 58 Right to establish branch for 58 Foreign Banks, inspection of 124 Foreign Branch, capital required 58 Examination of 58 Right to establish 58 Foreign Corporations, see Corporations, Foreign. Foreign Government Bonds, savings banks may invest in, what 61 Forfeitures, causes for dissolution 134, 136 Of bank, pecuniary, how may be compromised 144 Of bank, recovered how 144 [2141 INDEX BANK ACT OF CALIFORNIA— Continued FORFEITURES— Continued Section Unauthorized banking prohibited ; 12, I 2a, 49 Unlawfully opening branch office 9 France, bonds and notes of, as investments for savings banks 61 Funds, of commercial bank v^rith another commercial bank, regulated 85 Of receiver, escheat to state, when 137 Of state banking department 123 Paid into county treasury by receiver, when 137 Paid out on court order 137 When escheated to state, invested how 137 Furniture and Fixtures for offices of state banking department 122 Investment in, by commercial banks 84 Investment in, by savings banks 6 1 Investment in, by trust companies 105 Gas Corporation, definition of 6 I Government bonds available for deposit by trust company 96 Legality of bonds of 61 Governmental Lien, not prior incumbrance, w^hen 57 Governor, annual report of superintendent of banks to be made to 140 Superintendent of banks appointed by 120 Gratuities to officers prohibited 39 Guaranteed Policy on mortgage insurance, legality of, for savings banks 61 Guarantor deemed to be borrower 66 Guardian, deposits by 51, 91, 93 Trust company may be, for estate 90 Trust Company, oath required 90 Hypothecation of assets 21a Impairment of capital stock 133, 136 Incorporation, see Articles of Incorporation. Information accessible to general public 141 Bulletin posted in office of superintendent of banks 141 For public I 7 On file for stockholders 1 7 Injunction against superintendent of banks 134, 136 Restraining use of w^ords or terms 12 Insolvent bank, duties of superintendent of banks 136 Bank, failure to report 126 Upon failure to restore reserve 20 Inspection of all banks once a year '24 Special when necessary '24 Insurance, premiums shall not be assumed or guaranteed by bank 5 When commercial bank may act as agent 5 [215] BLYTH. WITTER & CO. BANK. ACT OF CALIFORNIA— Continued Section Interest, accrued but unpaid, not profits, when 45 On deposits of trust funds 95 Overdue one year, debt considered bad 21a Trust company may receive, on securities deposited 96 Inventory, liquidation of delinquent banks 136 Investigation of bonds and securities by superintendent of banks 61a Of bonds and securities, cost of Gla Of fitness of stockholders 128 Investment Certificates, building and loan associations may issue 1 2a Investments, bank shall not invest in own stock 34 By savings banks after July 1, 1909, legality of 66 Changed to conform to act, how 145 In bonds by commercial bank limited 3G, 46 In stock of bank engaged in foreign or international banking 58 In stock of corporations, prohibited, except 37 In stock of trust company or safe deposit company 37 Of departments held for depositors 27 Of each department must be separate 26 Of trust funds, how^ regulated 105 Trust company, how governed 106 Irrigation District, assessment by, effect on first lien 5 7 Bonds of, available for deposit by trust company 96 Bonds of, legality of 36, 46, 61, 96 Judgment dissolving bank, superintendent of banks may procure 135a Jurisdiction in actions brought under bank act 136b Law, banking, effective when 147 Governing banks joining federal reserve bank 56 Legality of bonds or notes for savings banks 61 Of investments prior to this act 145 Letters of Credit, relation to loans in commercial bank 80 Liabilities, advertising to be separate 14 Shall not be increased, w^hen 20 Total of one borrower, how computed 80 Liability for making false statement 38 Of directors, officers or employees for fraud 38 Of stockholders, can not be v^aived 40 Liberty Bonds, savings bank may receive as bailee 70 License, forfeiture of 7, 12c, 58, 98. 134, 136 Surrendered upon conversion 56a To banks 1 27 To begin business, fee for 24 To foreign corporations 7 To open branch offices 9, 58 [216] INDEX BANK ACT OF CALIFORNIA— Continued LICENSE — Continued Section To representative of foreign corporations, when 12c To trust companies 127 When may be refused or withheld 7,9, 12c, 127 Lien, governmental not prior, when 57 Life Insurance Companies, use of word "trust" by foreign 1 2b Limit, "borrow^ed money," amount of 21a Of amount of real estate loans 47,5 7,67, 105 Of deposit liabilities 19 Of deposit of banks in a savings bank 68 Of deposit of commercial bank with another commercial bank, regulated 85 Of deposit of savings banks in any one bank 68 Of investment in commercial paper by savings banks 67 Of investment in safe deposit department 30 Of loans by commercial banks 46, 47, 80 Of loans by savings banks 66, 67 Of loans by trust companies 105 Of loans on bank or corporation stock 44, 67 Of purchase of bonds by commercial banks 36, 46 Of time for holding real estate 54 On deferred payment of interest 21a Superintendent of banks may extend, on money borrowed 21a Liquidation, banks in, claims against 136 Banks in, names to be posted 14! Compensation of counsel in 136 Costs in ' 36 Filing of proceedings in 136b Of banks by superintendent of banks 136 Of banks, voluntary 136a, 137 Proceedings, notice to banks '36 Voluntary, superintendent of banks may take possession 136a When corporate existence expires 136a Loans, bank shall not loan on own stock 34 By banks to affiliated banks 65, 83 By commercial banks, how limited 46,47,80,81 By commercial banks on United States Government securities 80, 83 By commercial banks, to directors, agents and employees 83 By commercial banks, to officers prohibited 83 By foreign corporations By savings banks, how limited 57, 66, 67 By savings banks prohibited, when "" By savings banks, renewal of By savings banks to directors on security of United States obligations permitted [217] BLYTH, WITTER & CO. BANK ACT OF CALIFORNIA— Continued LOANS— Continued Section By savings banks, to directors or officers prohibited 65 On corporation or bank stock, limited 44, 67 On first lien on real estate, effect of certain assessments 57 Prohibited, must be reported 65, 83 Real estate 47, 5 7 Savings bank, effect of public utilities act 61 Shall not be increased, when 20 To clubs, religious or membership corporations, application of law 83 To corporations, directors or officers interested 65, 83 To directors, agents or employees 65, 83 To members of advisory board - 83 Trust company, how governed 105, 106 When savings banks must not make new 64 Location, governing capacity of commercial bank as insurance agent 5 Powers as affected by consolidation of cities 23, 60, 82 Powers of banks dependent upon 23, 60, 82 Powers of trust companies dependent upon 23, 90 Requirements when principal place of business changed 8 Losses, may be charged to surplus, when 2 1 Reserve fund may be charged with 64 Shall be written off, when 21a Manager, of foreign bank must take oath 1 I Market Value of oil, mineral or timber land, how determined 61 Of redwood timber land, for loans 61 Meeting of directors once a month 1 1 Of members of mutual bank to capitalize 29 Of stockholders, superintendent of banks may call 135 Members of bank may make application to dissolve 137 Of mutual bank may elect to capitalize 29 Membership Corporations, loans to, exemptions in favor of 65, 83 Merger, see Consolidation. Mining Stock, loans on, by savings banks, prohibited 67 Mineral Land, fixing market value of 61 Minor, trust company guardian of estate only 90 Mortgage, deposited by trust company with state treasurer 97 Of trust company deposited, title and appraisement 99 Restriction as to loans on 47, 57, 67 Sale to banks by officers, etc., permitted when 35 Mortgage Insurance, guaranteed policy of, legality of, for savings banks 61 Policy to accompany participation certificates deposited by trust com- 99 pany ^ -^ Mortgage Participation Certificates available for deposit by trust company, when 96,99 [218] INDEX BANK ACT OF CALIFORNIA— Continued MORTGAGE PARTICIPATION CERTIFICATES— Continued Section Legality of for savings banks 61 Municipal Assessment, effect of, on first lien 5 7 Municipal Deposits in savings banks 62 Reserve against, not required 20, 68 When secured, bank not required to maintain capital against 19 Mutual Bank, how reserve fund shall be increased 64 May have capital stock, when 29 Payment of losses out of reserve fund, when 64 Relation of reserve fund to deposits 64 Mutual Water Company, bonds of, legal investments, when 61, 61a Name, change of, see Sec. 12 78, Code of Civil Procedure. Restrictions on 12, 12a, 1 2b, 12c, 49, 127 National Bank, conversion of state bank into 56a Examination of as depositary 48 Examination of trust department 4oa May act in fiduciary capacity 48a Net Earnings, definition of 6 1 Notes, advertisement of, limited when 61 Guaranteed by mortgage insurance as investments, when 61, 105, lOS Guaranteed by mortgage insurance, available for deposit by trust com- panies 96, 99 Legal for savings banks, when 61 Notice, of assessment on stock '^^ Of conversion of savings bank into national bank, how given 56a Of liquidation to all banks '36 Required by savings banks from depositors 64 Oath of bank examiner '■^-' Of directors ' ' Of managers or agents of foreign bank ' ' Of office of superintendent of banks '20 Refusal of officers to be sworn, penalty for 135a, 136 Who may administer Officer, liability for fraud 38 May sell note, bond or contract to bank, when 3 5 Of bank, loans to prohibited 65,83, 105 Of commercial bank in relation to corporation loans 83 Of commercial bank shall not be endorser "' Of savings bank, in relation to corporation loans 63 Of savings bank, shall not be endorser ^■' Of trust company entitled to knowledge of private trusts 103 • • 39 Overdraft by, prohibited Prohibited loans to, must be reported "-"• °^ Purchase of assets or obligations of bank, by 41, 4Z [219] BLYTH. WITTER & CO. BANK ACT OF CALIFORNIA— Continued OFFICES — Continued Section Refusal to be examined on oath 135a, 136 Restriction on purchase of obligations or assets of bank, by 41, 42 Shall not receive commission 39 Offices of state banking department 122 Official Reports of superintendent of banks, prima facie evidence 142 Oil Land, fixing market value of 6 i Order, refusal of bank to observe 136 To show cause, issued by superintendent of banks 134 Organization of bank, examination of documents 8, 127 Of bank, previous consent of superintendent required 127 Of banking corporation, papers to be filed 8 Of trust companies 90 Overdraft, limited to ninety days as asset 21a Prohibited to officers, employees, etc 39 Participation Certificates, mortgage, legality of, for savings banks 6 1 Mortgage, when available for deposit by trust company 96, 99 Par Value of capital stock, minimum, except 53 Payment of expenses of banking department 123, 124 Suspended by bank, cause for dissolution I 35a, 136 Payment of Deposits by savings banks, notice required, when 64 Penalties for encroachment on reserves 20 For illegal advertisement of bonds 61 Pecuniary, may be compromised before action instituted 144 Recoverable hovsr I 44 To be paid into state banking fund 144 Violators of bank act subject to I, 145 Per Diem charged for special examinations 124 Personal Property, savings banks may loan on 67 Petition of stockholders for dissolution 137 Pipe Line Corporation, definition of 61 Place of Business, see Location. Pledged, stock of directors of domestic bank must not be 1 1 Policy, Guaranteed, of mortgage insurance, legality of for savings banks 61 Political Lien, not prior incumbrance, when 57 Population governing capacity of commercial bank as insurance agent 5 Governing ratio of reserve required 20 In relation to capital, governed by federal census 23 See Location. Postal Savings, commercial banks may borrow 21a Deposited in savings banks 62 Deposits, reserve against not required 20, 68 Deposits when secured, banks not required to maintain capital against — 19 Powers, building and loan associations, restrictions on 12, 12a [220] INDEX BANK ACT OF CALIFORNIA— Continued POWERS — Continued Section Of banks 2, 4. 5. 6 Or commercial banks 5 Of savings banks 4 Of trust companies 6 Preferred Claims, deposits by order of court are 5 i Deposit of banks in liquidation by superintendent of banks 136 Deposits of postal savings are 62 Deposits of public moneys are 62 Preferred Creditors, bank shall not pledge assets, except 21a Preferred Stock, unlawful for banks, except 53 President, loans to prohibited 65,83, 105 Publication of unclaimed deposits I 5 Verification of reports 130, I 30a Principal Office 26 Prior Incumbrance, political or governmental not such, when 57 Private Trust, definition of 10 I Not subject to inspection of superintendent of banks, except I I Officers entitled to knowledge of 103 Shall be deemed to be court trust, when 1 1 Subject to supervision, wrhen 101 To be separately secured 96 Trustee shall not disclose, what 103 Proceedings, in dissolution 136, 137 In liquidation, filing of 136b Reports are prima facie evidence, when 142 To enjoin superintendent of banks 134, 136 When banks are merged 3 la When bank sells assets 3 I When capital of bank is impaired '33 When reserve falls below required amount 20 Process, service on foreign corporations ' Profit and Loss, certain debts charged off to, when 2 I Profits, accrued but uncollected, interest not to be included in 45 Public, information for ''• '^' Records of state banking department not open to '42 Public Administrator, deposits of, with trust company 92 May deposit with any bank, when ■' ' May deposit with savings bank, when ""/2 Publication, deceased depositors, list of Of false statement, penalty for ^" Of notice by county clerk in escheat proceedings ' •* Of notice of agreement of sale and purchase 1-3 Of notice of assessment of stock [221] a BLYTH, WITTER & CO. BANK ACT OF CALIFORNIA— Continued PUBLICATION — Continued Section Of notice of conversion, savings bank into national bank 56a Of notice of liquidation 136 Of notice of mutual bank to capitalize 29 Of notice of sale, affidavit to be filed 3 I Of report to superintendent of banks 132 Of sale of real estate by court 54 Unknown depositors, list of 1 5 Public Deposits, reserve against, not required 20, 68 When secured, bank not required to maintain capital against 19 Public Moneys, commercial banks may borrow 2 la Deposited in savings banks 62 Public Utilities Act, effect on loans and investments by savings banks 61 Public Utility, bonds of, when legal for savings banks 61, 61a Definition of 6 1 Purchase of assets or obligations of banks by officers, directors, etc 41, 42 Of banks 3 I Of departments of banks 3 I Of obligations or assets of bank by directors, etc 41, 42 Purposes of commercial banks 5 Of savings banks 4 Of title insurance and trust company restricted 22 Of trust company 6 Railroad, bonds of, when legal for savings banks 61, 61a Railroad Corporation, definition of 61 Ratio of capital and surplus to deposit liabilities 19 Of reserve to deposit liabilities 20, 68, 105, 106 Real Estate, bonds legal for investment by savings banks, when 61, 61a Consisting of oil, mineral or timber land, how valued 61 Contract not to be bought by bank, when 35 Held longer than five years, proceedings for sale or exchange of 54 Loans on, by commercial bank 47 Loans on, by savings bank 67 Loans on, by trust company 105, 106 Loans on, effect of governmental liens 5 7 Mortgaged as deposit by trust company 96 Redwood timber land, as security for loans 61 When second mortgages on, permitted 47, 67, 80 Reapportionment of capital and surplus to departments 23 Receiver appointed prior to July I, 1909 137 Bank examiner shall not act, when 125 Deposits by 5 I Funds of, escheat to state when 137 Funds of, held in county treasury, w^hen 137 [222] INDEX BANK ACT OF CALIFORNIA— Continued RECEIVER — Continued Section Trust company, oath required 90 Reclamation District, assessment by, effect on first lien 5 7 Records of state banking department not public documents 142 Rediscounts, commercial banks with federal reserve bank 21a Not considered borrowed money, when 21a, 62 Regulations governing foreign branch office 58 Religious Corporation, loans to, exemptions in favor of 65, 83 Report, annual, of superintendent of banks to governor 140 By savings bank of money borrowed to purchase United States securities 62 Failure of bank to make, penalty 138 Loans to agents or employees of savings bank 65 Loans to directors and employees of commercial bank 83 Loans to members of advisory board 83 Of banks, called for, how often ' 3 1 Of banks, publication of 132 Of banks shall contain what 130 Of bank, time to make, limited '38 Of banks to state banking department 130 Of examination by directors '39 Of loans to copartnerships in which directors, agents or employees are interested "-' Of loans to corporations in which officers, directors or employees are interested ^5, 83 Of prohibited loans, must be made 65, 83 Of unclaimed deposits ' ■' Official, of superintendent of banks, prima facie evidence 142 Special, to superintendent of banks 130a Trust company must report, what 98, lUI Weekly bulletin by superintendent of banks '41 Reserve for departmental bank 20, 25, 68, 106 How shall be restored ^^ May be deposited in federal reserve bank 20, 68 Not to be carried against public deposits 20, 68 Of commercial banks, relation to deposits ■^O Of departments to be kept separate 2P 68 Of savings banks Of savings banks, relation to deposits '" Penalty for encroachment on, in commercial banks 20 Percentage may be kept in eastern cities, when ^" Ratio required governed by population O A Required for commercial banks. ^ Required, state members of federal reserve bank 20, 68 [223] ~ ,1 106 Trust company, how governed BLYTH. WITTER & CO. BANK ACT OF CALIFORNIA— Continued EESERVE FOR DEPARTMENTAL BANK— Continued Section Trust funds not to be carried as 32 Reserve Depositary, how nominated and designated 20 What banks may act as 20, 43, 68 Reserve Fund, mutual savings banks, amount required 60 Of mutual savings bank, may be used how 64 Resources, advertising to be separate 14 Revolving Fund, superintendent of banks may retain 123 Rulings on commercial paper by superintendent of banks 80 Safe Deposit Corporation, banks may acquire stock in, v^rhen 37 Safe Deposit Department, any bank may conduct 30 Investment in, by conimercial bank 84 Investment in, by savings bank 6 I Investment in, by trust company 105 SeSe Keeping, savings banks may receive United States bonds for 70 Safety Deposits, in insolvent bank 136 Salary of employees of state banking department 121 Of superintendent of banks 120 Sale of banks or departments 3 i Or exchange of real estate held longer than five years 54 Savings of school children 9 Shall not be advertised by whom 12, 12a, 49 Savings Bank advertising, how regulated 28 Bonds and notes, when legal for investment 61 Borrowed money, approval of 62 By-lav^s must prescribe what 64 Capital and surplus, their relation to deposits 19 Capital stock required 60 Classified as to capital by population 23 Contracts with depositors 64 Conversion into national bank 56a Corporation loans, directors or officers interested 65 County deposits in 62 Definition of 4 Department, reserve required 68 Depositors entitled to notice of conversion into national bank 56a Depositors may be paid by drafts 62 Deposits of other banks, with 68 Employees or agents may borrow funds 65 Foreign government bonds, investment in 61 How organized to conduct 3 Investment in bank premises 61 Investments, effect of public utilities act 61 Investments, legality of SI, 66 [224] INDEX BANK ACT OF CALIFORNIA— Continued SAVINGS BANK — Continued Section Loans, effect of public utilities act 61 Loans must be secured, how 67 Loans of, limited 66 Loans to affiliated bank 65 Loans to directors, agents or employees on United States securities per- mitted 65 Loans to directors and officers prohibited 65 May borrow money to purchase United States securities 62 May borrow postal savings 62 May borrow public money 62 May issue certificates of deposit 63 May purchase or discount bankers* acceptances, w^hen 67 May purchase or discount commercial paper, when 67 May receive United States bonds on deposit as bailee 70 May rediscount with federal reserve bank, what 62 Municipal deposits in 62 Must be conducted, how 69 Must be duly organized 2 Must not make nev^r loans, when 64 Mutual, reserve fund of, must be increased when 64 Mutual, reserve fund, when required 60 Only, to receive savings deposits 49 Organized without capital stock 60 Purposes of 4 Real property may be purchased or held 61 Reserve may be deposited on call with federal reserve bank 68 Reserve required "O Securities hypothecated, approval of 62 Shall not contract debt, except 62 Use of term restricted '2' l^a>'*" Without capital stock reserve fund must equal what "9 Savings Department investments to be separate •^o Savings Deposits, advertising for, prohibited when ' ^' '^ School District, assessment by, effect on first lien ■'' Bonds of, available for deposit by trust company 96 Legality of bonds of " School Savings, how deposited " Regulations concerning " Seal of superintendent of banks '^^ Second Mortgage, when bank may loan on '♦'• °' Secretary of State, see Sec. 290a of Civil Code. Must issue certificate regarding consolidation *'^ Shall certify documents when " a [225] BLYTH. WITTER & CO. BANK ACT OF CALIFORNIA— Continued Section Securities, additional deposit of, by trust company 98 Advertisement of, limited, when 61 Certified, official list to be kept 61a Cost of investigation of 61a Deposited by trust company, examination of 96, 97, 98, 99 Elxchange of, by trust companies 96 Held by banks, must conform to act 145 Hypothecated by savings bank 62 Power of superintendent of banks to investigate 61a United States, as collateral 65, 80, 83 Withdrawal of, by trust companies 98 Security percentage, for savings bank loans 67 Service of papers on foreign corporations 7 Signs of banks must show what 28 Of branch offices must show what 28 Special Deputy Superintendent of banks 136 Special Report of banks, superintendent of banks may require 130a State, assessment by, effect on first lien 57 Law of, violated by banks 134, 135a, 136 Legality of bonds of 61 Shall be responsible for securities deposited by trust company 96 State Banking Department, assistants 121 Attorney 1 2 1 Banks must report to 130 Bulletin to be filed as public document Ml Chief deputy, failure to report insolvent condition.. 126 Chief Deputy, qualifications of 121 Created '20 Examiner, failure to report insolvent condition 126 Examiner of, must file oath 125 Examiner of, shall not act as receiver when 125 Examiners 121 Fund of 123 Information to be posted in office 141 Officials of, cannot borrows from state banks 121 Provision for offices '22 Records of not public documents 142 Special report to 1 30a State Banking^Fund, amount of '23 Banks shall be assessed for '23 Method of assessing banks \Zj Salaries paid out of iZi State Deposits in savings banks 6Z [2261 INDEX • BANK ACT OF CALIFORNIA— Continued STATE DEPOSITS — Continued Section Reserve against, not required 20, 68 When secured, bank not required to maintain capital against 19 Statement of all banks, to be submitted to governor 140 State of California, bonds of, available for deposit by trust companies 96 State Treasurer, deposit v^rith, by trust company 90 Deposit with, by trust department of national bank 48a May accept mortgage on trust company premises, when 97 To receive deposits of trust company securities 96 Stationery, of banks, must show what 28 Statute of Limitations on sale of bank or department 3 1 Stock, as collateral, limited 44, 67 Impairment of 133, 136 Investment in, prohibited 37 Number of shares held by directors to be posted 1 7 Par value, minimum, except 53 Preferred, prohibited, except 53 Subscription lists of bank subject to previous consent of superintendent of banks I 27 Stockholders controlling, may sell note, bond or contract to bank, when 35 Fitness of, investigation of 128 Information for ' ' Liability of, can not be waived 40 Liability of, in sale 31 May elect receiver, when '36 May make application to dissolve 137 Meeting of, may be called by superintendent of banks 135 Must be notified of assessment 133 Must confirm consolidation 31a Names of, to be on file ' ' Refusal to pay assessment '33 Stockholders' Meeting, superintendent of banks may call 135 Street Railroad Corporation, definition of 61 Subscription Lists, for organization stock of bank, must be approved 127 Summons, service on foreign corporation ' Superintendent of Banks, action by, to procure judgment of dissolution 135a Annual report to governor '40 • Appointment of '^" Approval of capital and surplus apportioned ^3 Approval to close branch office " Approval to open branch office " 19 7 Approval to transact banking business '^' Authority to liquidate bank n J • J 120 Bond required [2271 BLYTH, WITTER & CO. BANK ACT OF CALIFORNIA— Continued SUPEEINTENDENT OF BANKS— Continued Section Bulletin to be posted in office of 141 Certificate of 9, 127, 128 Certificate of, to be posted 50 Consent necessary to do departmental business 23 Consent of, necessary to organize banking corporation 127 Copy of corporate papers to be filed with 8 Designation of depositary 20, 43 Duties relating to conversion, state bank into national bank 56a Foreign corporations subject to supervision 7 Holds office at pleasure of governor 120 Issuance of order to show cause, when 134 Liquidation by 1 36 May appoint special deputies 136 May authorize acceptance of drafts and bills of exchange by commercial banks 80 May authorize additional deposits by trust company 93 May authorize deposits by trust company S6 May authorize exchange of trust company securities 96 May authorize withdrawal of trust company deposits, when 98 May call meeting of stockholders 135 May compromise pecuniary penalties or forfeiture imposed 144 May enforce stockholders' liability 136 May examine national banks, when 48 May examine trust department of national bank 48a May limit deposit by commercial banks with other commercial banks 85 May make extra examinations 124 May require special report 130a May renew certification of bonds without application, when 61a May retain revolving fund 123 May revoke designation of depositary 43 May take possession of unsound bank 136 Must make special examination by order of directors 139 Oath of office 120 Official reports prima facie evidence 142 Official seal of 134 Powers of 1 24 Power to examine foreign corporations 124 Power to investigate bonds and securities 61a Previous consent to circulate stock lists for bank 127 Reports of banks to 130 Report to, by banks, how often 131 Report to, by bank, to be published 132 Salary 120 [228] INDEX BANK ACT OF CALIFORNIA— Continued SUPERINTENDENT OF BANKS— Continued Section Shall be appointed attorney of foreign corporations, when 7 Shall direct discontinuance of unsound practices 134 Shall employ chief deputy, attorney, examiners and other assistants 121 Shall give notice of liquidation proceedings 136 Shall not be connected with banks 120 Shall not inspect private trusts, except I I Shall provide auditor, when 124 Shall require banks to repair capital, when 133 To regulate foreign banking 58 Trust company must report, what 98 Superior Court, as to conflicting claims, liquidation of banks 136 Winding up affairs of bank 136 Surplus, advertising of, shall be separate 14 Apportioned to departments 23, 60, 90 Maximum necessary to maintain 2 I May be converted into capital 2 1 Of savings bank, in what invested 61 Of trust company, in what invested 105 One-tenth of net profits to be added before dividend 2 1 Reapportionment to departments 23 When may be used to pay losses 2 1 Taxes, effect on first lien on real estate 57 Telegraph Company, has power to receive money for transmission 13 Telegraph Corporation, definition of 61 Telephone Company, has power to receive money for transmission 13 Telephone Corporation, definition of 61 Timber Land, fixing market value 6! Redwood, loans on, by savings banks 6 I Title of act ' To accompany mortgage deposited by trust company 99 Torrens, when may be accepted -'9 Title Insurance Company, doing trust business.. 106, 107 Shall not conduct commercial or savings bank 22, 37 Trust department, application of law '0/ Trust department, assessment for state banking department 107 Trust department, must report to superintendent of banks 107 Trust department, subject to supervision '07 Torrens Title, when may be accepted Total Reserves, definition of Trust funds not to be carried as any part of ^^ Town, assessment by, effect on first lien Trade acceptances, when eligible for savings banks [229] BLYTH, WITTER & CO. BANK ACT OF CALIFORNIA— Continued , Section Transatlantic Steamship Company, has power to receive money for transmis- sion 1 3 Transfer of assets and liabilities by bank 3 I Transpacific Steamship Company, has power to receive money for transmission I 3 Trust Company, additional deposits by, to be authorized 98 Additional deposit with state treasurer, when 9S Additional powers dependent upon location 90 Additional powers of certain companies 106, 107 Additional report required 101 Advertising, how regulated •. 28 Affidavit to be made before commencing business 90 Appointment as trustee, bond not required except 94 Articles of incorporation 90 Banks may acquire stock in, when --. 37 Becoming member of federal reserve bank 90 Capital required 90 Causes for dissolution 134, 136 Certain documents to accompany mortgage deposited with state 99 Court trusts : 96, I ! Definition of 6 Departmental business I 06 Deposits by, to be authorized 96 Deposits with, authorized by court 9 I Deposits with, by court order 93 Deposits with, how secured 98 Deposits with state treasurer 96, 97, 98, 99 Exchange of securities deposited by, to be authorized 96 Foreign, may act as trustee in this state for what purposes 7, 90 Foreign, may buy and sell bonds in this state 12c Foreign, may have representative in this state, when 12c How organized to conduct 3 Interest or dividends on securities deposited 96 Investment of trust funds 94 Knowledge of private trusts confidential 103 Liquidation of ' 36 May act as executor - 6, 90 May mortgage premises to state treasurer, when 97 May resign as trustee under private trust, when 1 1 May withdraw securities from state treasurer, when 98 Must be duly organized 2 Must not be foreign corporation, except 7, 90 Notification of increase in trusts to be made 98 Oath as executor required "0 [230] __^_ INDEX BANK ACT OF CALIFORNIA— Continued TRUST COMPANY— Continued Section Powers of ^ Private trusts 95 \q\ Private trusts, confidential, except I 01, 103 Private trust shall be deemed to be court trust, when 101 Provisions for ceasing business 102 Purpose of ^ Qualifications 9O Reserve of ]06 Restriction on investments 105, lOS Revocation of certificata shall not affect trusts 98 Securities deposited may be exchanged 96 Securities deposited with treasurer to be accompanied by what 99 Shall pay interest on deposits 95 Trust funds, meaning of term 98 Trusts classified 1 1 Use of term restricted 12, 12a, 12b When national banks may act as 48a Trust Department, affairs shall be separate 90 May deposit with commercial department of same corporation, when 25 May deposit with savings department of same corporation 25 Of national bank subject to trust company regulations.. 48a Of national bank subject to inspection 48a Operated by Title Insurance Company 106, 107 Trustee, deposits by 51 Foreign corporations permitted to act as, when 7, 90 When acting as escrow holder 101 Trust Funds, deposits of 25 Interest on, as provided by court 95 Investments, how regulated 105 Meaning of term 98 Shall not be counted as reserve 32 Shall not be mingled 32 Trusts, how classified 101 Unclaimed Deposits, escheat of 15 Publication of ' 5 Report of I 5 Undivided Profits, one-tenth to be carried to surplus before dividend 21 Shall not be combined with surplus in advertising 1 4 United States, assessment by, effect on first Hen 57 Bonds accepted by savings banks as bailee 70 Bonds available for deposit by trust company 96 Deposits, reserve against not required -^0, 00 Deposits when secured, banks not required to maintain capital against.... 19 [231] BLYTH, WITTER & CO. BANK ACT OF CALIFORNIA— Continued UNITED STATES — Continued Section Legality of bonds of 61 Moneys, banks may borrow 2 la, 62 Securities, loans on by commercial banks 65, 80, 83 Unknown Depositors I 5 Unsafe Practices, penalty for 134, 136 Vacancy in office of superintendent of banks, how filled 121 Violation of act, penalty for, may be compromised 144 Of any law of state 134, 135a, 136 Of bank act by others than banking corporations I, 145 Voluntary Liquidation of banks 136a, 137 Warning to discontinue violation of law 134 Water Corporation, definition of 61 Withdrawal of savings deposits, conditions of 64 Of securities by trust company 9G, 102 [232] PRESS OP John Kitchen Jr. Co.. san francisco M^SOU^HF^-Rr^ AA ''^AL "inumtiiuiii 000 340 451 'iimiii II • - • - -^"'^"^'^^