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and repay depositors with or without interest. And under section 3617 of the Political Code such deposits are made an interest in the property of the corporation and taxable as such to the corporation. (Security Sav. Soc. v. Hinton, 97 Cal. 222. To same effect: City of Los Angeles v. Loan etc. Co., 109 Cal. 396.)

Construction of Section-Powers to “Invest," "Loan,” etc.- The power given to savings and loan corporations in section 571, Civil Code, to “invest” their funds includes the power to put out money 80 as to produce a revenue, either by way of loan upon interest or by the purchase of stocks, securities, notes and mortgages, or any income producing property. (Savings Bank v. Barrett, 126 Cal. 413, 58 l'ac. 914.)

Under this section the corporation is expressly empowered to receive deposits of money, to loan, invest and collect the same. (Winchester v. Howard, 136 Cal. 442, 89 Am. St. Rep. 153, 64 Pac. 692, 69 Pac. 77. To same effect: Security Sav. Soc. v. Hinton, 97 Cal. 222. 32 Pae. 3.)

If a loan and trust company, which assumes to be a savings bank, in obtaining deposits has not complied with the statutes in loaning or investing funds, as required of savings and loan corporations, it is estopped to deny that it is a savings and loan corporation for the purpose of taxation upon the deposits so received. (City of Los Angeles v. State Loan & Trust Co., 109 Cal. 396, 42 Pac. 149.)

The provisions of this section are solely for the protection of the depositor. (City of Los Angeles v. Loan etc. Co., 109 Cal. 404, 42 Pae. 149.)

Power of Attorney General over Insolvent Bank.- Under the provision of the act of March 30, 1878 (Stats. 1877-78, p. 744), the attorney general, upon report of bank commissioner, can commence an act against the bank alone for the sole purpose of winding up its business, but no injunction or order can issue in said action until after a hearing and an opportunity for the bank to contest the allegations.

The attorney general is not empowered to maintain an action in behalf of the individual stockholders or creditors against the directors to prohibit them from transacting any further business of the corporation, and ex parte orders by the judge upon the filing of such complaint granting an injunction and appointing a receiver are unauthorized and void, and a writ of prohibition will be granted to stay proceedings thereunder. (People's Home Savings Bank v. Superior Court, 103 Cal. 27, 36 Pac. 1015. To same effect: Crane v. Pacific Bank, 106 Cal. 72, 39 Pac. 215; Fischer v. Superior Court, 110 Cal. 140, 42 Pac. 561.)

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CAPITAL STOCK, AND RIGHTS AND PRIVILEGES THEREOF.

Sec. 572, C. C. When savings and loan corporations have a capital stock specified in their articles of incorporation, certificates of the ownership of shares may be issued; and the rights and privileges to be accorded to, and the obligations to he imposed upon, such capital stock, as distinct from those of depositors, must be fixed and defined, either in the articles of incorporation or in the by-laws. En. March 21, 1872.

Increase of capital stock: See post, Appendix, title “Banks and Banking."

Legislative History.

Section 17 of the savings and loan act of 1862, page 203, is the basis of this section.

Section Cited

Mitchell v. Beckman, 64 Cal. 123, 28 Pac. 110; Los Angeles v. Loan etc. Co., 109 Cal. 401, 42 Pac. 149; Wells v. Black, 117 Cal. 160, 59 Am. St. Rep. 162, 48 Pac. 1090.

Annotation.

Stockholders' Liability.-The provisions of the Constitution and statute making stockholders liable for debts of the corporation apply to stockholders in savings banks. (Mitchell v. Beckman, 64 Cal. 117, 28 Pac. 110. To same effect: McGowan v. McDonald, 111 Cal. 67, 52 Am. St. Rep. 155, 43 Pac. 418.)

A savings and loan corporation may be formed with or without capital stock. (Los Angeles v. Loan etc. Co., 109 Cal. 401, 42 Pao. 149.)

Corporations may make only such by-laws as are consistent with the Constitution and laws of this state, and a by-law of a savings bank asserting that the stockholders were not held to their constitutional liability is void, and has no binding force upon the depositors. (Wells v. Black, 117 Cal. 157, 59 Am. St. Rep. 162, 48 Pac. 1090.)

A deposit in a savings bank having a capital stock is a debt against the corporation, when not otherwise agreed between the parties; and each stockholder in such corporation is liable to the depositors for his proportion of the debt, saving as that liability may have been modified or waived by contract of the parties. (Wells v. Black, 117 Cal. 157, 59 Am. St. Rep. 162, 48 Pac. 1090.)

The statute of limitations commences to run against the liability of the stockholders of a savings bank from the time when the debt was created and the liability incurred, upon the acceptance of each deposit; and, at the expiration of three years thereafter, the right to enforce the stockholders' liability is at an end. (Wells v. Black, 117 Cal. 157, 59 Am. St. Rep. 162, 48 Pac. 1090.)

The unconstitutional exemption of stockholders of savings banks from liability under the act of 1862 was an independent provision, and did not affect or annul the provision declaring a preference in favor of nonstockholding creditors in the distribution of the assets. (Murphy v. Pacific Bank, 110 Cal. 334, 51 Pac. 317.)

Rights of Depositors and Stockholders.—When depositors in a savings bank pay in their deposits on account of an unconditional subscription to the capital stock of the bank, such depositors becomo stockholders and are not entitled to share in the bank's dividends as depositors. (Dallemand v. Odd Fellows' Sav. Bank, 74 Cal. 598, 16 Pac. 497.)

The fact that the act of 1853 for the incorporating of savings banks did not postpone the claims of stockholding depositors, as was provided in the subsequent act of 1862, does not render the latter act unconstitutional, and its general and uniforme operation is not affected because it authorizes corporation to adopt or reject the provision for such postponement. (Murphy v. Pacific Bank, 119 Cal. 334, 51 Pac. 317.)

NO DIVIDENDS EXCEPT FROM SURPLUS PROFITS-TO CON

TRACT NO LIABILITY, EXCEPT FOR DEPOSITS. Sec. 573, C. C. The directors of savings and loan corporations may, at such times and in such manner as the by-laws prescribe, declare and pay dividends of so much of the profits of the corporation, and of the interest arising from the capital stock and deposits, as may be appropriated for that purpose under the by-laws or under their agreements with depositors. The directors must not contract any debt or liability against the corporation for any purpose whatever, except for deposits. The capital stock and the assets of the corporation are a security to depositors and stockholders, depositors having the priority of security over the stockholders, but the by-laws may provide that the same security shall extend to deposits made luy stockholders. En. March 21, 1872. Aet prohibiting dividing or withdrawing of capital stock: See post, Statutes at Large, title “Banks and Banking."'.

Legislative History

Sections 10 and 22 of the savings and loan act of 1862, page 199, as amended 1870, page 130, are the basis of this section. (Murphy 1. Pacific Bank, 119 Cal. 343, 51 Pac. 317.)

Section Cited

Mitchell v. Beckman, 64 Cal. 123, 28 Pac. 110; City of Los Angeles v. Loan etc. Co., 109 Cal. 401, 42 Pac. 149; Wells v. Black, 117 Cal. 160, 59 Am. St. Rep. 162, 48 Pac. 1090; Murphy v. Pacific Bank, 119 Cal. 343, 51 Pac, 317.

Annotation.

Dividends from Profits. - Savings bank corporation organized under act of April 11, 1862, from which this section comes, is not authorized to appropriate and pay, as a dividend to its stockholders and depositors on the profits arising in its business, any portion of the interest upon its loans or investments that may have accrued or matured, but which have not actually been collected and received in money, notwithstanding such interest is amply secured and certain to be eventually paid. (People ex rel. v. San Francisco Sav. Union, 72 Cal. 199, 13 Pac. 198.)

Provision for the payment of surplus profits to stockholders may be made by by-laws. (Wells v. Black, 117 Cal. 160, 59 Am. St. Rep. 162, 48 Pac, 1090.)

That the directors may agree with depositors as to interest is clear under this section. (Los Angeles v. Loan etc. Co., 109 Cal. 401, 42 Pac. 149.)

PROPERTY WHICH MAY BE OWNED BY CORPORATIONS-RE

STRICTIONS IN PURCHASES AS PROVIDED ABOVE. Sec. 574, C. C. Savings and loan corporations may purchase, hold and convey real and personal property as follows:

1. The lot and building in which the business of the corporation is carried on, the cost of which must not exceed one hundred thousand dollars; except, on a vote of two-thirds of the stockholders the corporation may increase the sum to an amount not exceeding two hundred and fifty thousand dollars;

2. Such as may have been mortgaged, pledged or conveyed to it in trust, for its benefit in good faith, for money loaned in pursuance of the regular business of the corporation;

3. Such as may have been purchased at sales under pledges, mortgages or deeds of trust made for its benefit, for money so leaned, and such as may be conveyed to it by borrowers in satisfaction and discharge of loans made thereon;

4. No such corporation must purchase, hold or convey real estate in any other case or for any other purpose; and all real estate described in subdivision three of this section must be sold by the corporation within ten years after the title thereto is vested in it by purchase or otherwise;

5. No such corporation must purchase, own, or sell personal property, except such as may be requisite for its immediate accommodation for the convenient transaction of its business, mortgages on real estate, bonds, securities or evidence of indebtedness, public or private, gold and silver bullion and United States mint certificates of ascertained value and evidences of debt issued by the United States;

6. No such corporation must purchase, hold or convey bonds, securities or evidences of indebtedness, public or private, except bonds of the United States, of the state of California, and of the counties, cities, or cities and counties, or towns, or school districts of the state of California, or bonds of railroad or street railroad corporations owning property and having their principal place of business in the state of California, unless such corporation has a capital stock or reserve fund paid in of not less than one hundred thousand dollars. En. March 21, 1872. Amd. 1873-74, 273; 1900-01, 659. .

Legislative History.

Section 13 of the savings and loan act of 1862, page 199, as amended in 1864, page 158, and 1865-66, page 626, is the basis of this section.

The section as amended in 1873-74 had “five' instead of “ten" in subdivision 4, and had “three hundred thousand" instead of “one hundred thousand" in subdivision 6, and had not the provisions as to the purchase of school district and street railroad bonds.

The original section did not have the last clause of the third subdivision, commencing with the words “and such as may be conveyed to it." In the last subdivision after “fund” it had the words "or both capital stock and reserved fund," otherwise it is the same as the amended section of 1873-74.

Section Cited

Mitchell v. Beckman, 64 Cal. 123, 28 Pac. 110; City of Los Angeles v. Loan etc. Co., 109 Cal. 401, 42 Pac. 149; Savings Bank v. Barrett, 126 Cal. 416, 58 Pac. 914; People ex rel. v. Stockton etc. Soc., 133 (al. 611, 85 Am. St. Rep. 225, 65 Pac. 1078; Wells v. Black, 117 Cal. 160, 59 Am. St. Rep. 162, 48 Pac. 1090; Winchester v. Howard, 136 Cal. 442.

Corporation Laws-27

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