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The foregoing shows that the actual cost of the department to the State is $4,755.58.

RESERVE CITIES.

In accordance with the provisions of sections 24 and 27 of the banking law, I have designated for the year 1905 the following as reserve cities, viz.: Detroit, Grand Rapids, Bay City, Saginaw, Kalamazoo, Jackson, Port Huron, Adrian, Benton Harbor, Muskegon, Ann Arbor, Marquette, New York, Boston, Philadelphia, Baltimore, Buffalo, Cleveland, Cincinnati, St. Louis, Chicago and Milwaukee.

REPORTS OF RECEIVERS.

The following reports from the receivers of the several insolvent banks in Michigan were received during December, 1904:

People's Savings Bank, Lansing. G. W. Jewett, receiver, under date of December 29, 1904, reports as follows:

Liability to depositors at date of suspension, July 15, 1896.... $138,540 20 Other liabilities.

111,603 63

---Total....

$250,143 83

Total assets at date of, and received since suspension...
Amount collected by receiver to date....

411,965 11 169,201 60

Dispositions of collections:

Loans paid...
Dividends paid.
Legal expenses paid.
Receiver's salary to date..
All other expenses...
Balance in hands of receiver.

$67,784 69
59,061 87
8,386 41
9,416 66
20,520 37
4,031 60

169,201 60

City Savings Bank, Detroit. Union Trust Company, Detroit, receiver, under date of December 1, 1904, reports as follows:

Liability to depositors at date of suspension, February 10, 1902 $3,378,121 20 Other liabilities.

662,937 50

Total....

$4,041,058 70

Total assets at date of, and received since suspension.

4,363,291 63

Disposition of collections:

Loans paid and other disbursements,
Dividends paid.
Legal expenses..
All other expenses
Receiver's salary paid to date...
Deposits and collections returned.
Balance in hands of receiver..

$64,434 76 1,247,647 31

32,487 14 81,059 89 50,000 00 56,418 38 705,967 33

-$2,238,014 81

State Bank of Fenton, Fenton. Clarence Tinker, receiver, under date of December 1, 1904, reports as follows:

Liability to depositors at date of suspension, June 14, 1897....
Other liabilities..

$88,703 19
14,141 30

Total.....

$102,844 49

Total assets at date of, and received since suspension.
Amount collected by receiver to date.

111,757 18
72,775 19

Disposition of collections:

Loans paid....
Dividends paid.
Legal expenses paid..
Receiver's salary to date.
All other expenses....
Balance in hands of receiver.

$16,960 65
42,293 62
1,619 42
6,000 00
5,401 50

500 00

72,775 19

The Tawas State Savings Bank, East Tawas. N. C. Hartingh, receiver, under date of December 20, 1904, reports as follows:

Liability to depositors at date of, and received since suspension $11,040 63
Other liabilities.

28,039 42

Total...

$39,080 05

1

Total assets at date of, and received since suspension..
Amount collected by receiver to date....

80,581 26
9,086 16

Disposition of collections:

Dividends paid....
Legal expenses...
Receiver's salary to date.
All other expenses...
Balance in hands of receiver.

$6,828 53

513 06
895 00
796 80
52 77

People's Savings Bank, Jt. Pleasant. Charles T. Russell, receiver, under date of December 1, 1904, reports as follows:

Liability to depositors at date of suspension, August 20, 1897..
Other liabilities.

$65,491 SO 16,896 90

Total.....

$82,388 70

Total assets at date of, and received since suspension.
Amount collected by receiver to date...

236,876 78 123,520 43

Disposition of collections:

Loans paid...
Dividends paid.
Legal expenses.
Receiver's salary to date.
All other expenses..

S80,522 70
30,043 02
1,772 69
8,216 15
2,965 87

123,520 43

State Bank of White Pigeon. J. Murray Benjamin, receiver, under date of December 10, 1904, reports as follows:

Liability to depositors at date of suspension, July 30, 1904.... $126,366 89 Other liabilities...

1,178 45

Total...

$127,545 34

Total assets at date of, and received since suspension.
Amount collected by receiver to date...

140,680 17 61,619 73

Disposition of collections:

Dividends paid
Legal expenses paid..
Receiver's salary to date.
All other expenses..
Balance in hands of State Treasurer.
Balance in hands of receiver...

$53,642 37

250 00 300 00

450 78 5,903 39 1,073 19

$61,619 73

OPINION OF ATTORNEY GENERAL.

On account of the importance of the subject of excessive loans I deem it advisable to again publish the construction of section 52 of the banking law in this regard as submitted to this Department by the Attorney General in the year 1903:

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Lansing, Mich., May 23, 1903. Hon. George W. Moore, Commissioner of Banking, Lansing, Michigan:

Dear Sir-I am in receipt of your communication of the 19th inst. referring to the General Banking Law of this state, and requesting my opinion upon the following questions:

“First, How much money may the directors of a bank loan to any person or company, or corporation, or firm, by a two-thirds vote of its board of directors?

“Second, How much money may any bank loan on any one line of commercial paper?

“Third, May a bank increase the first named line by the bond or personal endorsement of the officers or directors of a firm, company or corporation, or by the assignment of value as collateral?”

In considering these questions I desire to call your attention to section 6141 of the Compiled Laws, being section 52 of the General Banking Law of this State, which provides in part as follows: "The total liabilities to any bank of any person or of any company, corporation or firm for moneys advanced, including in the liabilities of the company or firm the liability of the several members thereof, except special partners, shall at no time exceed one-tenth part of the amount of the capital and surplus of such bank; but the discount of bills of exchange drawn in good faith against actually existing values and the discount of commercial or business paper actually owned by the person negotiating the same shall not be considered as money borrowed: Provided however, That the foregoing limitations shall not apply to loans on real estate or other collateral securities authorized by this act. Provided, however, That by a two-thirds vote of the directors the liabilities of any bank of any person or company or corporation or firm may be increased to a sum not exceeding one-fifth of the capital and surplus of the bank.”

It is evident that this limitation was borrowed from the National Banking Law, section 5200 of the revised statutes of the United States, providing as follows: “The total liabilities to any association, or any person, or of any company, corporation, or firm for money borrowed, including in the liabilities of the company or firm, the liabilities of the several members thereof, shall at no time exceed one-tenth part of the amount of the capital stock of such association actually paid in; but the discount of bills of exchange drawn in good faith against actually existing values, and the discount of commercial or business paper actually owned by the person negotiating the same, shall not be considered as money borrowed."

This provision, as found in our General Banking Law and also in the National Banking Law, has never been construed by the courts in so far as it relates to the particular question submitted by you.

The Supreme Court of Pennsylvania, in the case of O'Hare vs. Second National Bank of Titusville, 77 Pa. St. 102,"referring to this provision in its application to National banks makes use of the following language: "Evidently the limitation of the indebtedness to the one-tenth in the 29th section, was intended as a general rule for conducting the business of the bank; a rule laid down from experience to regulate its loans for its own best interest and those of stockholders and creditors, not a rule to regulate its cus

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these associations from splitting on the rock which has ruined so many banks, to wit, that of lending too much of their capital to one person or firm. The intention being to protect the association and its stockholders and creditors from unwise banking, we cannot suppose it was meant to injure them by forbidding recovery of the injudicious loans.”

In Vol. 29 of the Amer. & Eng. Ency. of Law, 2nd ed. p. 382, we find the following with respect to the limitation found in the National banking law: “The object of this provision of the statute was to guard National banks from the hazard of speculative loans, but it contemplated and permitted to an unlimited amount the discount of paper used and required in facilitating the transfer of property and money in the transaction of the legitimate business of the country.” Citing Oswego Second National Bank v. Burt, 93 N. Y. 244.

It was evidently the intent of the Legislature in enacting the provision above referred to, as found in the banking law of this state, to guard the banks organized thereunder from the hazard of speculative loans, and to prevent such banks from advancing or loaning too much of their money to any one person, firm or corporation, and in construing the statute with respect to the exception, it is necessary to keep constantly in mind the purpose of the limitation, and not to construe the provision relating to the exceptions therefrom in such a way as to destroy the force and effect of the limitation itself. The exceptions to which I refer relate to the discount of bills of exchange drawn in good faith against actually existing values, and the discount of commercial or business paper actually owned by the person negotiating the same, and which in my opinion should be strictly construed and should be held to apply to no transaction that did not clearly and fully come within the provisions of the statute in this particular. Black on Interpretation of Laws, 275.

I find that the questions which you submit for my consideration are quite fully considered in Pratt's Digest, pages 93-94-95, in their application to National banks, but I am unable to concur in some of the conclusions reached which do not seem to be based upon judicial decisions, and which, in my opinion, tend to defeat the very purpose of the limitation. It is an elementary proposition recognized by the courts with respect to statutory or constitutional inhibitions, that you cannot do indirectly that which you are prohibited from doing directly. In their application to commercial paper, the terms “loans” and “discounts” are synonymous. Amer. & Eng. Ency. of Law, Vol. 21, 2nd ed. 381. The question who is borrower is not always to be determined from the position of the parties as they appear on the paper. The borrower may be the maker or the endorser. Pratt's Digest, 94. Our statute provides that in the discount of commercial or business paper actually owned by the person negotiating the same, it shall not be considered as money borrowed. The application of this provision, in my opinion, relates exclusively to the person negotiating the paper. The statute contemplates that he alone shall be considered as not receiving a loan from the bank. With respect to the maker of such paper who is primarily liable, if such maker has received credit at the bank to the full limit imposed by law, the bank should not be permitted to discount such paper, as in that event the liability of the maker would exceed the liability permitted by the general banking law, and if such a transaction should be permitted, it would indirectly defeat the very purpose for which this limitation was imposed.

In determining the questions submitted by you I realize that there may

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