13

in the Appendix of this book, contains a section providing that officers and agents of trust companies shall keep secret and confidential, the affairs of all persons whose business is entrusted to their respective companies, except as they may be compelled by law to disclose them, under penalty of a fine of one hundred dollars for each offense. This is not a radically novel suggestion. It is a specific application to trust companies of the laws. against divulging contents of telegraphic or telephonic messages, disclosing or personally using lists of customers surreptitiously taken from an employer, etc.,15 and laws providing that no stenographer shall disclose any matter received from an employer, except when "called as a witness and directed to testify by a proper court as to matters within his employment.

14

9916

The California trust company law contains a provision against disclosures by trust companies. No doubt this includes each and every officer, employe and agent of the company. The practical difference between this and the form suggested in the model law is the absence from the California act of any penalty for its violation. It reads as follows:

"Except as herein otherwise provided, any trust company exercising the powers and performing the duties provided for in this act, shall keep inviolate all communications confidentially made to it touching the existence, condition, management and administration of any trusts confided to it; and no creditor or stockholder of any such trust company shall be entitled to disclosure

13. See page 277.

14. New York Penal Law, Sec. 552; California Penal Code, Sec. 619.

15. New York Penal Law, Sec. 553.

16. Ohi Statutes, 1908, p. 20.

of

any such communication provided, however, that the president, manager and secretary of such trust company shall be entitled to knowledge of such communication; and provided, further, that in any suit, or proceeding touching the existence, condition, management or administration of such trust, the court wherein the same is pending may require disclosure of any such communication.'

9917

§ 150. Competency of Trust Company Officers, Employes and Stockholders to act as Notaries and Witnesses. An acknowledgment taken before a notary who is a party in interest is void. Whether a person is a competent witness to a will depends upon whether he will take a benefit under it. How far are the officers, employes and stockholders identified with a trust company, so as to disable them from acting as notaries with respect to instruments running to the company, or as witnesses to wills appointing the company as executor or trustee? It has been held, in the absence of disabling legislation, that an officer who is not a stockholder may so act18 and a Porto Rican case" holds that a deed of sale of real property executed in favor of a bank before a notary who is a stockholder is not void on that account. Indiana has provided by statute that: "No person, being an officer in any corporation or association, or in any bank possessed of any banking powers, shall act as a notary public in the business of such bank, corporation

20

17. Statutes and Amendments to the Codes, California, 1909, Chap. 76, Sec. 103.

18. Florida Savings Bank v. Rivers, 36 Fla. 575, 18 So. 850; Horbach v. Tyrell, 48 Neb. 514, 67 N. W. 485, 37 L. R. A. 434.

599.

19. Suarez v. El Banco Territorial Y Agricola (1919), 16 Porto Rico

20. Burns' Annotated Indiana Statutes, Sec. 9539.

or association." Pennsylvania" provides: "That no director or officer in any bank, banking institution, or trust company shall do or perform any act or acts as notary public for such bank, banking institution, or trust company in which he or she may be a director or officer." According to the Ohio Code:22 "No banker, broker, cashier, director, teller, or clerk of a bank, banker, broker, or other person holding an official relation to a bank, banker, or broker, shall be competent to act as notary public in any matter in which such bank, banker, or broker is interested."

It

The competency of a stockholder in a trust company to act as a witness to a will appointing the trust company executor was directly in issue in an Illinois case.23 appears that one of the subscribing witnesses to the will in question was a director and a stockholder of the trust company. It was held, that though the trust company was appointed it could not act as executor. In identifying the witness's interest with that of the company, the Court said: "Every dollar and every piece of property that comes to a corporation comes directly to the stockholders and increases the value of their stock. In substance, the stockholders, collectively, represented by the artificial corporate entity, were executors of the will."

21. Purdon's Digest, Supplement 1905-1910, p. 5807.

22. General Code of Ohio, 1910, Sec. 121.

23. Scott v. Gouch (1915), 111 N. E. 273.

CHAPTER XX

Visitation and Supervision-Reports-Insolvency—

Preferences

§ 151. Visitation — - Supervision- Reports. An implied duty of the State to see to the continuing solvency of trust companies has been mentioned.' The legal machinery through which this is accomplished is the placing of trust companies under the control of state banking departments, superintendents of banks, and the requirement of examinations and reports. The legislative power to provide for such supervision and the vesting of authority in commissioners to revoke a company's charter on non-fulfillment of the requirements cannot be doubted. And though these requirements are termed "banking" regulation, trust companies which perform no banking functions are subject to them." Their

1. Chapter IV., Sec. 13.

2. State v. Northwestern Trust Co. (1904), 72 Neb. 497, 101 N. W. 14; Carnegie Trust Co. v. Kress, 215 N. Y. 706, 109 N. E. 1068; Roseville Trust Co. v. Mott (1915), 96 Atl. 402.

3. In re McKinley-Lanning Loan & Trust Co. (1892), 1 Pa. Dist. R. 551; People v. Mutual Trust Co. (1884), 96 N. Y. 10; Sargent v. Oregon Savings & Loan Co. (1914), Ore. 144 Pac. 455. That a trust company doing no trust business is not entitled to a return of bonds deposited with the state, because it might resume trust business at any time. See Spalding v. Roberts (1915), Calif. 149 Pac. 41.

5

primary object is to compel the operators of trust companies to observe the restrictions imposed by law upon them to the end that their solvency may be maintained. Their secondary object is to provide prompt and efficient means for taking charge when insolvency threatens or appears. When possession is taken by state officials it is either for the purpose of maintaining the status quo until the threatening conditions are removed, or to collect the moneys due the company, including the double liability of stockholders* and to liquidate its affairs, but not for the purpose of administering the trusts that have been confided to the trust company. Thus it was stated by the Supreme Court of Wisconsin: "While the statute (section 2022, subsec. 2) contemplates that the corporation, whose property and business has been taken possession of by the Commissioner of Banking, may be permitted to resume business, it nowhere contemplates that the Commissioner of Banking shall carry it on or continue it longer than reasonably necessary to effect liquidation. Some of the trusts set out in the complaint will, by their terms, continue for many years and call for duties wholly foreign to that of the Commissioner of Banking.

Of course, upon taking possession the Commissioner of Banking holds all the property and business of the corporation, including trust property for a reasonable time until new trustees can be appointed to take charge of and execute the various trusts. And, while he so

4. Van Tuyl v. Scharmann (1913), 208 N. Y. 53, 101 N. E. 779. 5. That such means are exclusive of individual right of creditors or stockholders, to institute a suit for a receiver and to wind up a trust company, appears in Craughwell v. Monsam River Trust Co. (1915), Me. 95 Atl. 222. This is to prevent needless alarm and the public injurv which would result from unfounded individual action. See also Koch v. Missouri-Lincoln Trust Co. (1915), 181 S. W. 44.

52. Sullivan v. Kuolt (1914), 156 Wis. 72, 145 N. W. 210.