panies," the same being Act No. 240. of the Public Acts of 1907, having power under the provisions of Section 9: "To receive on deposit, in trust, any personal property deposited with it by individuals, partnerships or corporations, as collateral security for the payment of bonds, or other obligations issued by such individuals, partnerships or corporations, and to enter into and execute any instruments in writing necessary and proper to carry such trusts into effect." Section 11 places every corporation organized under the act and engaging in this branch of the business under the supervision of the Commissioner of the Banking Department. These acts were passed by the same legislature; are in pari materia and must be construed together. Thus construed, the collateral deposit companies organized under the laws of this state referred to in the amendment to the General Banking Law must be held to refer to collateral deposit companies organized under the provisions of Act 240 of the Public Acts of 1907. I am informed that at this time there are no collateral deposit companies organized in this state under that act. Consequently, I am of opinion that savings banks have no authority to invest their funds in notes and securities under subdivision (i) of Section 27 of the General Banking Law where the security for the same is deposited with a trust company. Respectfully yours, STATE BANKS ORGANIZED BY STOCKHOLDERS OF NATIONAL BANKS. June 10, 1909. Hon. Henry M. Zimmermann, Commissioner of, the Banking Department, Capitol, Lansing: Dear Sir-I am in receipt of your communications of the 29th ultimo requesting an opinion upon the question of whether or not a State bank. may legally be organized in this State by the stockholders of a National Bank under a plan substantially as follows: The stockholders of the national bank enter into an agreement with the officers of the national bank by the terms of which the stockholders agree that the officers may take necessary steps to organize a State bank with a prescribed capital, the shares of which may be subscribed for in the first instance by such persons as may be selected by the officers, but when paid for shall be held in the names of such persons as from time to time shall be the officers of the national bank, as trustees, which said trustees may exercise during the life of the trust all the rights and powers of absolute owners of the stock except to the extent that they may be ordered otherwise by express directions in writing signed by a majority of at least two-thirds in interest of the persons beneficially ceived by the trustees and paid by them to the national bank for distribution among the stockholders of the national bank pro rata according to their ownership of record of shares of stock in the national bank, the trust to continue as long as the national bank shall continue to do business unless sooner terminated by a request in writing of a majority of at least two-thirds in interest of the capital stock of said bank. The necessary capital for the state bank is to be furnished by a special or extra dividend declared by the national bank. It is provided that the stock in the State bank shall be held by the trustees and that no person shall have the right to transfer his interest therein otherwise than by the transfer of the ownership of stock in the national bank upon the books of the latter. The only evidence of the beneficial interest of any person in the stock of the State bank is that given by an endorsement on the back of the certificates of stock of the national bank to the effect that the owner of the shares represented by that certificate is beneficially interested in common with all other stockholders of the national bank in a pro rata amount of the capital stock of the State bank and that said beneficial interest cannot be sold or transferred otherwise than by the transfer of the shares of stock represented by the certificate upon the books of the national bank, and that the beneficial interest in the stock of the State bank shall pass with the transfer of the shares of the national bank represented by the certificate. It is further provided that no person shall be eligible to the office of director of the State bank who is not a director of the national bank. For reply to your inquiry I would say that the General Banking Law of this State contains no provision that would prohibit the stockholders in a national bank from organizing a State bank upon compliance with the provisions of the General Banking Law. Neither is there in that law any provision expressingly prohibiting the stockholders in a State bank from entering into an agreement in substantially the form indicated above. The agreement is not between the national bank and the State bank, but is between the stockholders in those banks. As between the State bank and the State, any agreement of this character between the stockholders of the bank would be wholly ineffectual to prevent the State from exercising a supervisory control over the affairs of the bank, or enforcing the liability of the stockholders, in accordance with the provisions of the General Banking Law. It is true that there are cases holding that agreements between stockholders in corporations imposing a permanent restraint upon the alienation of their shares of stock are invalid, but under the terms of this agreement a stockholder may transfer his shares of stock in the State bank provided he also transfers his shares of stock in the national bank. It does not seem that there is in that case such a restraint upon the alienation of the shares as would render the agreement invalid. Upon due consideration of the matter I am of opinion that, so far as the State is concerned, the plan outlined for the organization of a State bank is, in its general features, valid under the General Banking Law of the State. I express no opinion, however, upon the validity of the details of any particular plan for such organization, leaving those ques this plan and the details of the proposed plan of organization are before Hon. Henry M. Zimmermann, Commissioner of Banking Department, Capitol, Lansing: Dear Sir I am in receipt of your letter of June 17th in which you submit the amendment to Section 38 of the Banking Law relative to the salaries of examiners, and request the opinion of this department as to whether the examiners who have already been employed by the Banking Department for three years will be entitled to the increase in their salaries when the amendment becomes operative. In reply thereto will say that Section 3 of Articles XVI of the revised constitution provides, in part: "Salaries of public officers, except circuit judges, shall not be increased, nor shall the salary of any public officer be decreased, after election or appointment." In determining the question submitted it is important to ascertain first whether a bank examiner is a public officer within the meaning of this section of the revised constitution. Mechem detines a public office to be: The right, authority and duty, created and conferred by law, by which for a given period, either fixed by law or enduring at the pleasure of the creating power, an individual is invested with some portion of the sovereign functions of the government, to be exercised by him for the benefit of the public." (Mechem on Public Officers, Sec. 1.) And he points out two essentials: First, The delegation of sovereign functions; Second, Powers created and conferred by law. (Sec. 4 & 5). In Section 9 he states: "Any man is a public officer who hath any duty concerning the public, and he is not the less a public officer where his authority is confined to narrow limits; for it is the duty of his office and the nature of that duty which make him an officer, and not the extent of his authority." Section 38 of the Banking Law provides for the appointment of bank examiners, fixes their salaries and requires them to file a bond of ten thousand dollars. Section 39 authorizes the examiners to examine banks and to examine the officers, agents, clerks, customers or depositors upon oath, and makes false swearing before such examiner perjury. Section information obtained in the course of his examinations. Section 41 authorizes the commissioner to ask for the appointment of a receiver in case of a refusal of a bank to submit to an examination by an examiner. True, the statute, in Section 38, states that the commissioner shall "employ from time to time such examiners," but the fact that the appointment of a bank examiner is designated as an employment does not change the nature of the duties prescribed by law. Clearly, the statute in question delegates sovereign functions to the examiner and the powers are created and conferred by law, the two essentials to the creation of an office as pointed out by Prof. Mechem. See also the language of Justice Cooley in: Throop v. Langdon, 40 Mich. 673, 682. The amendment to Section 38 submitted by you reads as follows: "Salaries of the examiners shall be the sum of seventeen hundred dollars per annum during the first year of their employment as such, and shall be increased one hundred dollars each year of such employment until the full sum of two thousand dollars is reached, which sum shall be their annual salary thereafter." A bank examiner being a public officer as we have heretofore shown, the constitutional provision above quoted would apply. The language of the constitution is plain that the salaries "shall not be increased, nor shall the salary of any public officer be decreased, after election or appointment." There are cases holding, as in the case of bank examiners, where the tenure of the office is at the pleasure of the appointing power that a constitutional provision, that the compensation shall not be increased or diminished during the term for which the officer is elected or appointed, does not apply to officers who have no fixed term. "But an examination of these cases shows that the decisions turn upon the proposition that the constitutional provision could not apply to an officer who had no fixed term. The language of our constitutional provision makes no reference to the term, but prohibits the increase or the decrease of the salary after election or appointment. I am therefore of the opinion that the amendment to Section 38 of the Banking Law, made by Senate Enrolled Act 42, is void in so far as it provides for an increase of the salaries of bank examiners now in the employ of the department, or who may be in its employ when the amendment takes effect. In this connection I call your attention to the fact that the provisions of the statute cannot be evaded by an examiner resigning before the E taking effect of the amendment and accepting an appointment after the amendment is in force. CAPITAL STOCK REQUIREMENTS OF BANKS AFFECTED BY EXTENSION OF COR PORATE LIMITS. Nov. 12, 1909. Hon. Henry M. Zimmermann, Commissioner of Banking, Capitol, Lansing: Dear Sir-Replying to your letter of the 19th ult., in which you request our opinion as to whether the... ... Bank which was located in the village of..........recently annexed to the city of...... may increase its capital stock from twenty thousand dollars to fifty thousand dollars, will say that we held, in an opinion to you under date of May 9, 1909, that this bank could not be deprived of its right to do business under its original incorporation with a capital stock of twenty thousand dollars, by the fact of annexation of the village of.... to the city of ........ We reached that conclusion by reason of the fact that the bank was lawfully incorporated with a capital of twenty thousand dollars to do business in ; that the annexation of ..... placed the bank in the city of .. without its consent, and that it could not be thus deprived of its right to do business under its original incorporation. Now, however, this bank proposes, by its own voluntary act, to increase its capital stock, thus, in a measure, effecting a re-organization. The whole aim and purpose of the statute, Section 1 of the General Banking Law is to provide a minimum capital for banks graded according to the population of the city or village in which they are situ ated. In order to prevent a reduction of the capital below the minimum, it is provided in Section 10 that "no reduction shall be made to a less amount than is required in Section 1 for capital." To permit this bank to substantially reorganize by increasing its capital, without increasing its capital stock to at least the minimum amount required for the city of........, would, in my judgment, do violence to the intent of the legis lature, as expressed in Sections 1 and 10 of the Banking Law, to which I have referred. The bank is now a corporation of the city of The law relating to the amount of capital stock in than in ... . . . is different While I do not think the bank could be deprived of its rights to continue during the period of its corporate existence, with a capital of twenty thousand dollars, by the annexation, I am constrained to hold |