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Construction of Section.-Subdivision 6 of this section should be read in connection with 571 of the Civil Code, which it qualifies. (Winchester v. Howard, 136 Cal. 442, 89 Am. St. Rep. 153, 64 Pac. 692, 69 Pac. 77.)
Subdivision 5 construed with subdivision 4 of section 354 of the Civil Code gives the implied power to purchase mortgages on real estate. (Savings Bank v. Barrett, 126 Cal. 413, 58 Pac. 914.)
Holding Real Estate. This section is a legislative construction of section 9 of article XII of the Constitution, and the provision of the Constitution that a corporation shall not hold certain classes of real estate longer than five years contemplates that such property held shall be sold within the five years. (People ex rel. v. Stockton etc. Society, 133 Cal. 611, 85 Am. St. Rep. 225, 65 Pac. 1078.)
If the corporation does not sell lands which it cannot hold more than five years, penalties may be provided by the legislature for its failure to do so; or, possibly, somre judicial procedure might be invoked to compel a sale of the land or a forfeiture of its franchise. (People ex rel. v. Stockton etc. Society, 133 Cal. 611, 85 Am. St. Rep. 225, 65 Pac. 1078.)
An action cannot be maintained to escheat to the state lands held by a savings and loan corporation, on the ground that more than five years have elapsed since it acquired the lands by purchase, under deeds of trust for money loaned, and that it has not sold them. (People ex rel. v. Stockton etc. Society, 133 Cal. 611, 85 Am. St. Rep. 225, 65 Pac. 1078.)
Purchase of Personal Property Mortgages, etc.—The question whether the purchase of a particular note and mortgage by a savings and loan corporation was “such as the purpose of the corporation required” is to be determined by its board of directors, and is not open to investigation at the instance of the mortgagor. (Savings Bank v. Barrett, 126 Cal. 413, 58 Pac. 914.)
Under subdivision 4 of section 354, Civil Code, construed with subdivision 5 of this section, savings and loan corporations have the implied power to purchase mortgages on real estate and the obligations secured thereby. (Savings Bank v. Barrett, 126 Cal. 413, 58 Pac. 914.)
A mortgage to a savings bank, executed in consideration of the surrender and return to the mortgagor of a prior note and mortgage executed to a third party, and purchased by the bank, which the bank as owner could enforce against the mortgagor, is supported by a sufficient consideration. (Savings Bank v. Barrett, 126 Cal. 413, 58 Pac. 914.)
MARRIED WOMEN AND MINORS MAY OWN STOCK IN THEIR
OWN RIGHT. Sec. 575, C. C. Married women and minors may, in their own right, make and draw deposits and draw dividends, and give valid receipts therefor. En. March 21, 1872.
Sections 14 and 15 of the savings and loan act of 1862, page 199, as amended 1864, page 158, and 1870, page 132, are the bases of this section.
Beckman, 64 Cal. 123, 28 Pac. 110; Wells v. Black, 117 Cal. 160, 59 Am. St. Rep. 162, 48 Pac. 1090; Rowe v. Hibernia S. & L. Soc., 134 Cal. 405, 66 Pac. 569.
Construction of Section. This section simply provides that married women and minors might do certain things in their own right which ordinarily they would be disqualified from doing, but it does not even imply a repeal of section 164 of the Civil Code, concerning the community property of husband and wife. (Rowe v. Hibernia S. & L. Soc., 134 Cal. 403, 66 Pac. 569.)
MAY ISSUE TRANSFERABLE CERTIFICATES OF DEPOSIT
SPECIAL CERTIFICATES. Sec. 576, C. C. Savings and loan corporations may issue general certificates of deposit, which are transferable, as in other cases, by indorsement and delivery; may issue, when requested 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 or the books of the corporation; payment thereafter made by the corporation to the depositor named in such certificate, or to his assignee named upon the books of the corporation, or, in case of death, to the legal representative of such person, of the sum for which such special certificate was issued, discharges the corporation from all further liability on account of the money so paid. En. March 21, 1872.
Section 1 of the act of 1867-68, page 459, supplemental to the savings and loan act of 1862, is the basis of this section.
Mitchell v. Beckman, 64 Cal. 123, 28 Pac. 110; Los Angeles v. Loan etc. Co., 109 Cal. 403, 42 Pac. 149; Wells v. Black, 117 Cal. 160, 59 Am. St. Rep. 162, 48 Pac. 1090; Murphy v. Pacific Bank, 119 Cal. 341, 51 Pac. 317; Abbott v. Jack, 136 Cal. 512, 69 Pac. 257.
Method of Doing Business.-Savings banks are not restricted by statute or any principle of law to a particular method of business which must be pursued as between the bank and the depositor. This section does not confine the mode to pass-books, but admits of the issuance of general or special certificates of deposit, which are transferable by indorsement and delivery. (Los Angeles v. Loan etc. Co., 109 Cal. 403, 42 Pac. 149.)
The fact that a certificate of deposit was issued to a stockholder of a savings bank doing a commercial business does not determine the character of the business transacted by the bank. Such certificates are usual with commercial banks, and, under this section, may be issued by savings and loan corporations. (Murphy v. Pacific Bank, 119 Cal, 334, 51 Pac. 317.)
The power conferred upon savings banks to issue certificates of de posit by this section does not curtail the implied power of commercial banks to issue like certificates. (Abbott v. Jack, 136 Cal. 510, 69 Pac. 257.)
TO PROVIDE FOR RESERVE FUND FOR THE PAYMENT OF
LOSSES. Sec. 577, C. C. Savings and loan corporations may prescribe by their by-laws the time and conditions on which repayment is to be made to depositors; but whenever there is any call by depositors for repayment of a greater amount than the corporation may have disposable for that purpose, the directors or officers thereof must not make any new loans or investments cł the funds of the depositors, or of the earnings thereof, until such excess of call has ceased. The directors of any such corporation having no capital stock must retain, on each dividend day, at least five per cent of the net profits of the corporation, to constitute a reserve fund, which must be invested in the same manner as other funds of the corporation, and must be used toward paying any losses which the corporation may sustain in pursuing its lawful business. The corporation may provide by its by-laws for the disposal of any excess in the reserve fund over one hundred thousand dollars, and the final disposal, upon the dissolution of the corporation, of the reserve fund, or of the remainder thereof, after payment of losses. En. March 21, 1872.
Section 11 of the savings and loan act of 1862, as amended 1870, page 523, is the basis of this section.
Burke v. Badlam, 57 Cal. 602; 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.
Relation of Bank and Depositor.-In the case of savings banks, it has been declared that all moneys deposited with them shall be assessed to the bank, and not to the depositors. These moneys are held in trust by the bank for the depositors. Between such banks and the depositor the ordinary relation of debtor and creditor does Dot exist. (Burke v. Badlam, 57 Cal. 602.)
The provisions of this section requiring the formation of a reserve fund apply to that class of savings banks which possess no capital stock. (Los Angeles v. Loan etc. Co., 109 Cal. 401, 42 Pac. 149.)
PROHIBITION ON DIRECTOR AND OFFICER, AND WHAT
VACATES OFFICE. Sec. 578, C. C. No director or officer of any savings and loan corporation must, directly or indirectly, for himself or as the partner or agent of others, borrow any of the deposits or other funds of such corporation, nor must he become an indorser or surety for loans to others, nor in any manner be an obligor for moneys borrowed of or loaned by such corporation. The office of any director or officer who acts in contravention of the provisions of this section immediately thereupon becomes vacant. En. March 21, 1872.
Overdrawing of his account by officer, a misdemeanor: Pen. Code, sec. 561.
Mitchell v. Beckman, 64 Cal. 123, 28 Pac. 110; Savings Bank v. Burns, 104 Cal. 476, 480, 38 Pac. 102; Wells v. Black, 117 Cal. 160, 59 Am. St. Rep. 162, 48 Pac. 1090; Brittan v. Oakland Bank of Savings, 124 Cal. 291, 71 Am. St. Rep. 585, 7 Pac. 84; State Loan etc. Co. v. Cochran, 130 Cal. 257, 62 Pac. 466, 600.
Construction of Section-Borrowing by Directors.— The obvious purpose of this section is to protect savings banks and their depositors. To deny, therefore, that, if the deposits or funds of the bank should be borrowed by any of its officers, directly or indirectly, no action could be maintained by bank to recover such funds, would defeat the purpose of the section. (Savings Bank v. Burns, 104 Cal. 480, 38 Pac. 102. To same effect: Brittan v. Oakland Bank of Sar. ings, 124 Cal. 291, 71 Am. St. Rep. 58, 5 Pac. 84.)
The provisions of this section cannot be availed of to defeat a pledge made by a director for money borrowed from the bank, especially after the transaction is executed. The violation of the provi. sion can only be availed of by the sovereign power. The bank may sue to recover the money loaned, and can hold the pledged stock, or its proceeds, in a suit for the recovery of the same, until the money lent on faith of the pledge is repaid. (Brittan v. Oakland Bank of Savings, 124 Cal. 282, 71 Am. St. Rep. 58, 57 Pac. 84.)
Like trustees, directors must not deal with the subject of the trust for their own advantage or be interested adversely in any trust transaction, nor can they undertake another trust adverse in its nature to the interests of their beneficiary. For any violation of their trust they are liable. (Winchester v. Howard, 136 Cal. 442, 89 Am. St. Rep. 153, 64 Pac. 692, 69 Pac. 77.)
DEFINITION OF PHRASE "CREATE DEBTS."
Sec. 579, C. c. Receiving deposits, issuing certificates of deposit, checks and hills of exchange, and the like, in the transaction of the business of savings and loan corporations, must not be construed to be the creation of debts within the meaning of the phrase "create debts,” in section 309. En. March 21, 1872.
See act of February 21, 1872, relative to corporations for the accumulation and investment of funds and savings, Statutes at Large, title “Banks and Banking."