The last example is the one referred to in the opinion of Attorney-General Parsons, dated December 22, 1914, and expresses the only state of facts on which his opinion was based so far as it referred to assumed bonds. The circumstances referred to in the first and second subdivisions of this statement of facts not having been called to his attention. OPINION Bonds of the Chicago & Northwestern Railroad were first legalized as investments for savings banks in 1899 by chapter 386 of that year which expressly names such bonds as lawful investments. The substance of the statute of 1899 is now contained in section 239, subdivision 7 (b) of the present Banking Law: "A savings bank may invest its moneys in: 7. The following bonds of railroad corporations: (b) The mortgage bonds of the following railroad corporations: the Chicago and Northwestern Railroad Company; Chicago, Burlington and Quincy Railroad Company, Michigan Central Railroad Company, Illinois Central Railroad Company, Pennsylvania Railroad Company, Delaware and Hudson Company, Delaware, Lackawanna and Western Railroad Company, New York, New Haven and Hartford Railroad Company, Boston and Maine Railroad Company, Maine Central Railroad Company, the Chicago and Alton Railroad Company, Morris and Essex Railroad Company, Central Railroad of New Jersey, United New Jersey Railroad and Canal Company, also in the mortgage bonds of railroad companies whose lines are leased or operated or controlled by any railroad company specified in this paragraph if said bonds be guaranteed both as to principal and interest by the railroad company to which said lines are leased or by which they are operated or controlled. Provided that at the time of making investments authorized by this paragraph the said railroad corporations issuing such bonds shall have earned and paid regular dividends of not less than four per centum. per annum in cash on all their issues of capital stock for the ten years next preceding such investment, and provided the capital stock of any said railroad corporations shall equal or exceed in amount one-third of the par value of all its bonded indebtedness; and further provided that all bonds authorized for investment by this paragraph shall be secured by a mortgage which is a first mortgage on either the whole or some part of the railroad and railroad property of the company issuing such bonds, or that such bonds shall be mortgage bonds of an issue to retire all prior mortgage debts of such railroad company; provided, further, that the mortgage which secures the bonds authorized by this paragraph is dated, executed and recorded prior to January first, nineteen hundred and five.” It would be well to observe that the Chicago & Northwestern Railroad was in 1899 financing its system through small companies which built lines of roads, mortgaged the same, and subsequently conveyed the property subject to the mortgage, to the Chicago & Northwestern Company, which by the instrument conveying these properties assumed and agreed to pay their bonds. There were in 1899 fifteen of such roads whose bonds had been assumed by the Northwestern as against five bond issues actually signed by the Chicago & Northwestern. Superintendent of Banks Kilburn immediately after the passage of the statute listed both kinds of bonds as lawful investments, and the language of the statute of 1899 would seem to have justified that course, for it provided: "that all bonds hereby authorized or investments shall be secured by a first mortgage of the whole or a part of the railroad and railroad property actually in the possession of and operated by such company." All the railroad property of the smaller companies was actually in the possession of and operated as a part of the Chicago & Northwestern, and the assumed bonds were a first mortgage on the whole or a part of the railroad property so in the possession of the Northwestern. For that reason and for reasons hereafter stated, I think the statute meant to legalize at that time the assumed bonds which were issued by the smaller companies. The same may be said of assumed bonds of the Chicago, Milwaukee & St. Paul Railroad under subdivision 7 (c), enacted by chapter 440 of the laws of 1902 where the requirement is similar, that the mortgage must be " a first mortgage on either the whole or some part of the rail road or railroad property actually in the possession of and operated by said company." Added to the administrative construction of the statute by Superintendent of Banks Kilburn, which has gone unchallenged for sixteen years, we have in the language of the present Banking Law apparently a legislative construction approving the administrative interpretation by the Superintendent of Banks in 1899. With reference to Chicago & Northwestern bonds and bonds of all other railroads named in 7 (b), the legislature in 1902 by chapter 440, inserted a provision authorizing an investment “in the mortgage bonds of railroad companies whose lines are leased or operated or controlled by any railroad company specified in this paragraph if said bonds be guaranteed both as to principal and interest by the railroad company to which said lines are leased or by which they are operated or controlled." If guaranteed bonds were thought a safe investment, it must have been on the assumption that the statute also covered assumed bonds which are, if anything, a stronger obligation of the companies named in the act. Further evidence that the legislature had assumed bonds in mind within the terms of subdivisions (a), (b) and (c) is found in the enactment of subdivisions (e), (f) and (g) in 1905, at which time there was an effort to draft a general clause to define the requirements of bonds of any railroad not falling within the provisions of the then existing paragraphs (a), (b) and (c) of the subdivision. Paragraph (g) provides that: A savings bank may invest its moneys in: "(g) The mortgage bonds of a railroad corporation described in the foregoing paragraph (e) or (f) or the mortgage bonds of a railroad owned by such corporation, assumed or guaranteed by it by endorsement on said bonds, provided said bonds are prior to and are to be refunded by a general mortgage of said corporation the bonds secured by which are made a legal investment under the provisions of said paragraph (e) or (f); and provided, further, that said general mortgage covers all the real property upon which the mortgage securing said underlying bonds is a lien." In the above section are legalized the assumed or guaranteed bonds of companies complying with (e), a general paragraph, as we have mentioned, covering all railroads except those already legislated for in the earlier statutes. There could have been no appreciable reason for authorizing assumed bonds under (e) if assumed bonds under (a), (b), (c) were not legal. In fact if there were to be a discrimination we should expect it in favor of assumed bonds of companies specifically named in (b) and (c), whose other bonds for some years under the permission of the statute had been listed as lawful investments, and whose financial record was available, and not in favor of unknown companies which might comply with the law and have their bonds listed as lawful investments at some later date. It would seem to follow in the legalizing of assumed bonds of companies under (e), the legislature must have supposed that assumed bonds under (a), (b) and (c) had theretofore been and were lawful investments for savings banks within the purport of those paragraphs. The enactment of paragraph (g) was therefore a legislative confirmation of the intent of paragraphs (a), (b), (c) to include assumed bonds of the companies falling thereunder. With respect to bonds assumed by companies coming under paragraph (a), this further observation is pertinent. The Buffalo, Rochester & Pittsburgh Railroad is a reorganization of the old Rochester & Pittsburgh Railroad. The bonds assumed by the Buffalo, Rochester & Pittsburgh are the first mortgage bonds of the old Rochester & Pittsburgh Railroad, which of course underlie all securities on these properties issued subsequently by the Buffalo, Rochester & Pittsburgh. These later securities are legal investments. Now under paragraph (i), enacted with the other general paragraphs in 1905, there are legalized for investment" the first mortgage bonds of a railroad the entire capital stock of which, except shares necessary to qualify directors, is owned by, and which is operated by a railroad whose last issued refunding bonds are a legal investment under the provisions of paragraphs (a), (e) or (f) of this subdivision, provided the payment of principal and interest of said bonds is guaranteed by endorsement thereon by the company so owning and operating said road." Therefore if (i) legalizes guaranteed bonds of a company whose stock is owned (except shares necessary to qualify directors), it would seem to be clear that the Legislature intended under (a) that bonds which are assumed and the property they cover owned by the assuming company, would be legal investments; in any event if it so happens that the assumed bonds underlie bonds which are legal investments, because we ought not to adduce a construction which would legalize bonds of a second or third mortgage, but illegalize bonds under a mortgage which is a first lien on the identical properties. Part III of the inquiry refers in particular to the Ohio River Railroad Company's first mortgage bonds assumed by the Baltimore & Ohio Railroad Company. The Baltimore & Ohio Railroad Company is subject to paragraph (e). These assumed bonds are not lawful investments if for no other reason than that there are no bonds of the Baltimore & Ohio refunding them which are legal investments, a condition precedent required by paragraph (g). As In conclusion, assumed bonds of the Chicago & Northwestern Railroad, a company named in paragraph (b), and assumed bonds of companies named in paragraph (c), are legal investments. sumed bonds of the Buffalo, Rochester & Pittsburgh Railroad, a company complying with paragraph (a) are legal investments. Assumed bonds of the Baltimore & Ohio Railroad, a company falling under paragraph (e) are not lawful investments, since that company has not complied with the further provisions of paragraph (g). Dated, March 12, 1915. E. E. WOODBURY, Attorney-General. To Hon. EUGENE LAMB RICHARDS, Superintendent of Banks, Albany, N. Y. INVESTMENTS FOR SAVINGS BANKS - BONDS OF THE FONDA, JOHNSTOWN & BANKING LAW, SECTION 239, SUB GLOVERSVILLE RAILROAD COMPANY Bonds of the Fonda, Johnstown & Gloversville Railroad Company are legal investments for savings banks although the company has recently ceased to pay 4 per cent. on its capital stock. INQUIRY Before making up his annual list of legal investments for savings banks, the Superintendent of Banks submits this question: Under the provisions of the Banking Law are the bonds of the Fonda, Johnstown & Gloversville Railroad Company legal invest |