The department was asked whether an individual serving as a fiduciary under a will or trust instrument may open a checking account at a State-chartered savings bank or savings and loan association. The department was also asked whether an individual may open a checking account in the form of a “totten trust”.

The department responded that an individual fiduciary for an individual beneficiary could maintain a demand deposit at a mutual institution, if such trust is not for a business purpose and subject to compliance with Banking Law Section 237.1. The department also replied that demand deposits could be maintained in the form of totten trusts.

Section 237.2 of the Banking Law, as recently amended, prohibits a savings bank from accepting “any deposit for credit to a municipal corporation or for credit to any partnership, corporation, association or other organization for profit, or any demand deposit for credit to any depositor except a natural person”. Section 380.13 of the Banking Law, as amended, imposes a similar restriction upon savings and loan associations.

The quoted language would cleraly prohibit a corporate fiduciary from opening a checking account at a mutual institution. It would also prohibit an individual who serves as trustee for a corporate account from opening a checking account, since the corporation would be the beneficial owner of the funds. The issue, therefore, is whether the language quoted would permit an individual serving as a fiduciary for another individual to open a checking account at a mutual institution. This, in turn, depends upon the Legislature's intent when it adopted Sections 237.2 and 380.13 of the Banking Law. Sections 237.2 and 380.13 were enacted by Chapter 225 of the Laws of 1976. The language of the two sections was derived, in large measure, from the language contained in A. 11147/S. 8626, which was a Banking Department bill which included checking as well as personal loan powers. During the Legislature's consideration of A. 11147 and of A. 12452-A, which was subsequently enacted as Chapter 225 of the Laws of 1976, the Banking Department repeatedly emphasized that the bills would not affect the commercial banks' monopoly on commercial checking accounts and that the bills were not intended to permit mutual institutions to offer checking accounts for business or commercial uses. The department also stated that checking account powers would further the restructuring of the thrift industry and would be the first of the steps necessary toward the transformation of thrift institutions into family banking centers.

An examination of relevant provisions of law suggests that certain trusts do not constitute business instruments and that the trustees of those trusts may open a checking account with a mutual institution without violating the purpose of Section 237.2, as understood by the Legislature. More specifically:

1. A checking account in the name of the trustee for a non-business trust is compatible with—and furthers—the concept of the mutual institution as a family banking center.

2. As indicated above, Section 237.2 of the Banking Law prohibits savings banks from accepting deposits from municipal corporations, partnerships, corporations and other organizations for profit and, in the case of demand deposits, from any person other than a natural person. The section does not include trusts or trustees within its language. Construing “natural person” in such a way as to include individuals who serve as fiduciaries for non-business trusts would be consistent with such other subdivisions of Section 237, as subdivision (1).

Former subdivision 1 of Section 237, repealed in 1971, set a ceiling on the amount of deposit which a savings bank could accept from “any person”. The statute excluded certain sums from such deposits, including

“(b) All amounts credited to him as trustee under a voluntary trust, unless the aggregate of all such amounts, exclusive of dividends or interest, is in excess of twenty-five thousand dollars in which event not more than twenty-five thousand dollars may be excluded.

(c) All amounts standing to his credit as executor, administrator, trustee, committee or guardian, named in a will or appointed by a court of competent jurisdiction.”

At the time former subdivision 1 was repealed, subdivision 2 of Section 237 was renumbered subdivision 1. The renumbered subdivision 1 specifically permits certain kinds of trustees to open an account in the name of the trustee. The subdivision reads as follows:

Presumably, the current version of subdivision 1 of Section 237 was retained to insure that trust funds be counted separately, as provided in former subdivision 1 of Section 237.

3. Subdivision 4 of Section 237 permits a savings bank to accept deposits of moneys paid as security for the performance of a lease regardless of the fact that the person depositing such moneys may be deemed to be a trustee of trust funds. While one might argue, on the basis of the existence of subdivision 4, that acceptance of any deposit from a trustee requires specific authorization, a close reading of subdivision 4 indicates that it was added to the law in order to permit lessors to deposit the security deposits they received with a savings institution, regardless of whether the lessor or the lessee is a corporation, partnership, association or other organization for profit. Stated otherwise, Section 237.4 creates an exception to Section 237.2 and permits a mutual institution to accept a deposit from a corporate or other entity if the deposit is a security deposit.

4. As noted earlier, Section 237.1 requires any individual who serves as trustee and who wishes to deposit funds with a savings bank to file a certified copy of the instrument appointing the depositor as fiduciary. This requirement would have to be met by any fiduciary who seeks to open a checking account. An examination of the instrument filed may reveal the purpose of the trust. If not, the bank should require a sworn statement from the fiduciary to the effect that the trust was not established for a business purpose.

5. Section 27 of the General Construction Law defines “person” to include a corporation, a joint-stock association and, under certain circumstances, a state, government or country. The use of the term “natural person” in Section 237.2 makes it clear that the reference is to a human being rather than a legal entity. Although the definition of “person” does not refer to a fiduciary, this was not done to disqualify fiduciaries from the benefits otherwise available to “persons” under the law. Instead, the reference to trustees and other fiduciaries in Section 237 and the absence of other special mention of fiduciaries indicates that the Legislature contemplated that fiduciaries would be considered “persons” but would be subject to certain special requirements. In view of the foregoing, the department concluded that an individual serving as fiduciary for an individual beneficiary may open a demand deposit account at a mutual institution, subject, however, to compliance with Section 237.1 (made applicable to savings and loan associations by Section 380.18). The department further concluded that demand deposits could be opened and maintained in the form of totten trusts.

DATED: November 1976