State ex rel. Sparks v. State Bank & Trust Co.

Per Cxtriam:

The appeal is from a judgment of the district court declaring that it was unsafe for the defendant The State Bank and Trust Company to continue business, ordering the bank into liquidation, enjoining its directors from transacting any of its business, appointing a receiver, and directing the bank examiner to deliver to the receiver all property of the bank. We have presented for consideration the constitutionality of an act entitled "An act creating a board of bank commissioners, defining their duties, providing for the appointment of a bank examiner, prescribing his duties, fixing his compensation, providing penalties for the violation of the provisions of this act, and other matters relating thereto? approved March 26, 1907 (Stats. 1907, p. 229, c. 119).

Among other things this statute provides that the governor, secretary of state, and state treasurer shall constitute a board of bank commissioners, and this board shall appoint a thoroughly expert bank examiner, and it shall be his duty to examine the accounts and report the condition of all banks throughout the state; to prepare and furnish to every bank, banking firm, corporation, and company doing a banking business a license in the form prescribed by him, authorizing the transaction of a banking business; to furnish on demand to all banks blank forms of statements as may by law be required of them, twice in each year, and as much of tener as in his judgment it may be deemed necessary, and without previous notice to visit and make full examination of all banking corporations. Section 7 provides a penalty for the failure of the bank examiner to report to the bank commissioners the insolvency or unsafe condition of any banking corporation. Section 8 provides that no corporation, firm, or individual shall transact a banking business without the requisite license, and section 9 directs that banking corporations, including banks in liquidation or insolvency, whenever required by the bank examiner, shall make a report showing their exact financial condition.

The principal attacks made by the imposing array of counsel are directed against the title, as designated above, and section 10, which provides: "* * * If it shall appear to said examiner that it is unsafe for any such corporation to continue to transact business, it shall be the duty of such examiner to immediately report the condition of such corporation to the bank commissioners; and if the bank commissioners, either from the report of the bank examiner, or from their own knowledge, decide that it is unsafe for any such corporation to continue to transact business they shall authorize the bank examiner to take such control of such corporation, and of the property and effects thereof, as may be by them deemed necessary to prevent waste, or diversion of the assets, and to hold possession of the same until the order of court hereinafter mentioned, and it is hereby made the duty of the attorney-general, upon being notified by the bank commissioners, to immediately commence suit in the proper court against such corporation and the directors and trustees thereof to enjoin and prohibit them from the transaction of any further business. If upon the hearing of the case the court shall find that such corporation is solvent, and may safely continue business, it may dismiss the action, and order that the corporation be restored to the possession of the property. But if the court shall find that it is unsafe for such corporation to continue business, or that such corporation is insolvent, said court shall by its decree order such corporation into involuntary liquidation, and shall issue the injunction prayed for, and shall cause the same to be served according to law, and shall order the bank examiner to surrender the property of the corporation in his possession to a receiver appointed by the court for the purpose of liquidation. * * *”

It is claimed that this act is in violation of section 17, article IV, of our State Constitution, in that the subject of the act is not expressed in the title; that the statute is invalid because it embraces more than one subject; that the provisions of section 10 are .in violation of section 20, article TV, of the Constitution, which forbids the passage by the legislature of local or special laws regulating the practice of courts of justice; that because the action is brought in the name of the state, on the relation of the bank commissioners, there is no- proper party plaintiff; that section 10 of the statute is voidj in that it attempts to delegate to an executive board judicial functions, in violation of section 1, article III, of the Constitution; and that this section of the act denies appellants equal protection of the laws, and is therefore in conflict with section 1 of the fourteenth amendment to the Constitution of the United States.

The main principles controlling these questions have been well-nigh settled by this and other courts. That section 17, article IV, of the Constitution, providing that "each law enacted by the legislature shall embrace but one subject and matters properly connected therewith” is mandatory must be conceded. In regard to this objection we need only determine whether this action and the decree of the district court relate to matters germane to the subject expressed in the title of the act, or to what is properly connected therewith. It appears to be admitted that if the title had simply specified that the act was one regulating or relating to banking, the statute might be sustained, although it is urged, in another division of the brief, that the act is void because it relates to more than one subject. If it does so relate, the part properly connected with the title would not be void, while the remainder might be open to rejection. If the different provisions of this statute could be deemed sufficiently connected under a title simply designating it as "An act relating to banking” we see no reason why they may not be considered so with a title which designates one or more of the matters to which the others are properly connected. Under the language of the Constitution no necessity appears for requiring separate acts, or even separate designations in the title, for all the different provisions in this statute.

The creation and specification of the duties of the board of bank commissioners, and the definition of their powers, is properly connected with the appointment and duties of the bank examiner, who is appointed by, and reports .to, this board, and the same may be deemed true of the suit which the board is authorized to have brought through the attorney-general against any bank which is not solvent or in a safe condition to do business, and of the appointment of the receiver to whom the bank examiner is directed to surrender the property. We are unable to see that the suit and the appointment of a receiver are not connected with the duties of the board and the bank examiner and their duties in instituting the suit and surrendering the property to the receiver. Under the argument presented it could be claimed that, if the title of the act further provided that it was for the bringing of actions, and of the appointment of receivers against insolvent or unsafe banks, the title related to three or more matters not properly connected; or, if the title simply stated that it was an act providing for the regulation and liquidation of insolvent or unsafe banks, the creation of the bank commission and the appointment of the bank examiner were matters relating to officers, and not germane to any provisions authorizing suit against the bank. Instead of allowing the legislature to provide for all these matters so interwoven in one act, which seems most convenient and unobjectionable, the appellant’s contention, if sustained, would require one or more statutes relating to this board, one or more relating to the bank examiner, one or more relating to the attorney-general, and one or more relating to the action and power of the court.

The act in California, containing provisions substantially the same as those to which objections are taken here, is entitled " An act creating a board of bank commissioners and prescribing their duties and powers” approved March 24,1903 (Stats. 1903, p. 365, c. 266). It will be perceived that this title is not as comprehensive as, and contains only a part of, the reference embraced in our statute, and yet the court there held that the provisions of the act related to, or were properly connected with, the subject embraced in the title, and that it was not unconstitutional for other reasons, and in People v. Bank of San Luis Obispo, 97 Pac. (Cal.) 307, said: "It is claimed that the act is unconstitutional in so far as it purports to give any authority to the attorney-general to bring or prosecute this action, for the reason that 'the title of the act does not mention duties, authority, or power of the attorney-general, ’ and section 24, article IV, of the Constitution provides that every act shall embrace but one subject, which shall be expressed in its title, and that any act shall be void as to any subject embraced therein which is not expressed in its title. The title of the act of March 24, 1903, is the same as that of March 30, 1878 (Stats. 1877-78, p. 740, c. 481). In People v. Superior Court, 100 Cal. 105, 34 Pac. 492, section 11 of the act of 1878, corresponding to section 10 of the act of 1903, providing for such an action by the attorney-general, was assailed on various grounds; one being that the title did not sufficiently express the subject-matter of said section. The court said: 'We think that the title of the act sufficiently expresses the subject of the act, and is sufficiently general in its scope. It is not necessary that the title to the act should embrace an abstract of its contents. (Abeel v. Clark, 84 Cal. 226, 24 Pac. 383; Ex Parte Liddell, 93 Cal. 633, 29 Pac. 251.)’ We see no reason to doubt the correctness of this ruling. * * * As we have seen the act in terms provides that the court in such an action brought' to enjoin and prohibit them from the transaction of any further business, ’ if it finds that the corporation is insolvent, 'shall order the commissioners to surrender the property * * * to a receiver appointed by the court for the purpose of liquidation in such proceeding,’ etc. This authorized the court to appoint the receiver as a part of the relief sought by the action, in the event of a finding of insolvency, without any allegation of the nececessity therefor in the complaint. The appointment of a receiver for purposes of liquidation was a part of the method provided by the act for the Avinding up of the affairs of the corporation, and, under the terms of the act, necessarily followed the adjudication of insolvency;’

The title "An act to provide for the incorporation of mutual fire insurance companies, and defining their powers and duties)’ Avas held sufficient to embrace, Avithout particular mention, provisions for Avinding them up and for the appointment of a receiver. (Wardle v. Townsend, 75 Mich. 385, 42 N. W. 950, 4 L. R. A. 514.) Under the clause of the Kentucky Constitution, providing "no laAV enacted by the general assembly shall relate to more than one subject, and that shall be expressed in the title” (Constitution of Kentucky, art. II, sec. 37), the Supreme Court of the United States held that a provision directing the issuance of new bonds Avas germane to, and properly included in, an act authorizing counties’ "to compromise and settle with the holders” of certain indebtedness. (Carter County v. Sinton, 120 U. S. 517, 7 Sup. Ct. 650, 30 L. Ed. 701; Montdair v. Ramsdell, 107 U S. 155, 2 Sup. Ct. 391, 27 L. Ed. 431.) Other cases may be found in the note in 1 L. R. A. 362, and also in People v. Bank, 53 App. Div. 298, 65 N. Y. Supp. 766.

In Ex Parte Pittman, 31 Nev. 43, decided the early part of this year after mature consideration, we held that the prosperity of the country is largely influenced by public confidence in its banking institutions, that the banking business is in a class by itself, that it may be regulated, and that it is of the highest importance to the public that it be regulated, by wise legislation. Our views regarding the propriety of the legislature passing laws limited to the banking business are so fully expressed, and are supported by citations from so many other courts, that little further need be said in this connection. After referring to cases in our own and other states sustaining our conclusions, we quoted with approval from Judge Cooley: "The legislature may also deem it desirable to prescribe peculiar rules for the several occupations, and to establish distinction in the rights, obligations, duties, and capacities of citizens. The business of common carriers, for instance, or of bankers may require special statutory regulations for the general benefit, and it may be a matter of public policy to give laborers in one business a specific lien for their wages when it would be impracticable or impolitic to do the same for persons engaged in some other employments. If the laws be otherwise unobjectionable, all that can be required in these cases is that they be general in their application to the class or locality to which they apply, and they are then public in character, and of their propriety and policy the legislature must judge.”

In State v. Exchange Bank of Milligan, 34 Neb. 201, 51 N. W. 766, the court said: "The power of the legislature to prescribe the terms and conditions upon which a corporation or an individual may transact a banking business within this state will not be seriously controverted. The purpose of the act, viz., to protect depositors and insure solvent banking institutions, is not only within the constitutional powers of the legislature, but is certainly a judicious exercise of such power. The legislature has by this act not only prescribed the conditions upon Avhich any corporation, firm, or individual may engage in the business of banking, but has provided that, in case of a violation of its provisions by a failure to comply with the conditions or terms imposed, the state may interfere by means of the agencies provided by law in order to protect those interested, and to prevent a diversion of the funds from the purpose to which they should be applied. Whether the application for a receiver to impound the funds of an insolvent bank is addressed to this court or the district court, the effect is the same. It is an exercise of the sovereign power of the state for a purpose and in a manner plainly provided by law. It is suggested by counsel that the statute does not provide that the proceeding shall be in the name of the state. True, it is not in express terms provided that the State of Nebraska shall be the plaintiff, or that the application shall be on the relation of the state. The omission, however, is in our judgment unimportant. Whatever may be the form of the proceedings or the title adopted, it is the action of the state. The attorney-general in making the application is obeying an imperative command of the statute. He is manifestly the representative of the state as effectually for all purposes as in a civil action to recover money due the state.”

Statutes regulating insurance and other lines of business have often been sustained. In Ivy v. Western Union Tel. Co. (C. C.) 165 Fed. 372, decided last November, considering the objection that because the act applied only to telegraph companies, and not to other corporations, it was class legislation, and violative of the provisions of the fourteenth amendment, the court said: "These objections are clearly untenable, in view of the numerous decisions of the courts. Whatever doubt might have existed at one time on this question has been removed by a uniform line of decisions of all courts, and especially the Supreme Court of the United States. Cases directly in point are: Atchison, Topeka & Santa Fe Railway Co. v. Matthews, 174 U. S. 96, 19 Sup. Ct. 609, 43 L. Ed. 909; St. Louis, I. M. & S. R. Co. v. Paul, 173 U. S. 404, 19 Sup. Ct. 419, 43 L. Ed. 746; Fidelity Association v. Mettler, 185 U. S. 308, 22 Sup. Ct. 662, 46 L. Ed. 922; Farmers’ & Merchants’ Ins. Co. v. Dobney, 189 U. S. 301, 23 Sup. Ct. 565, 47 L. Ed. 821; Missouri Railway Co. v. May, 194 U. S. 267, 24 Sup. Ct. 638, 48 L. Ed. 971; Northwestern Life Ins. Co. v. Riggs, 203 U. S. 243, 27 Sup. Ct. 126, 51 L. Ed. 168; Bachtel v. Wilson, 204 U. S. 36, 27 Sup. Ct. 243, 51 L. Ed. 357; Bacon v. Walker, 204 U. S. 311, 27 Sup. Ct. 289, 51 L. Ed. 499; Ozan Lumber Co. v. Union County Bank, 207 U. S. 251, 28 Sup. Ct. 89, 52 L. Ed. 195; Heath & Milligan Co. v. Worst, 207 U. S. 338, 28 Sup. Ct. 114, 52 L. Ed. 236; Muller v. Oregon, 208 U. S. 412, 28 Sup. Ct. 324, 52 L. Ed. 551; Seaboard Air Line Ry. Co. v. Seegers, 207 U. S. 73, 28 Sup. Ct. 28, 52 L. Ed. 108; and the following late decisions of the Supreme Court of the State of Arkansas: Union Sawmill Co. v. Felsenthal, 85 Ark. 346, 108 S. W. 217; Arkansas Insurance Company v. McManus (Ark.) 110 S. W. 797; Ozan Lamber Co. v. Biddie (November 2, 1908), 113 S. W. 796.”

It is apparent that the contention that the state is not a proper party plaintiff, and that it has no grievance to be remedied, no property to be recovered, and no beneficial interest in the result of the action, cannot be sustained. The authorities cited, and what we have already stated, indicate that the requirement that the banking business be safely conducted is so essential to the prosperity of the people that it may be regulated, and actions for that purpose may be maintained by, and in the name of, the state.

It is claimed that by section 10 of the act the legislature has attempted to authorize the courts to appoint receivers of banking corporations by special enactments not applicable to other corporations or citizens. This contention is met also by the fact that, as banks are to such a degree connected with, and responsible for, the financial welfare of the state, they are subject to regulation, and therefore laws may be passed pertaining to them which are not applicable to other corporations or citizens generally. It is not necessary that the commissioners and examiner be authorized to investigate the affairs of all others doing business before banks may be examined or regulated. When the proceedings authorized against an insolvent or unsound bank have progressed to the institution of suit, and a showing is made that a receiver is necessary, no good reason appears why one may not be appointed in a special suit to settle and liquidate the affairs of the bank similarly and with the same results as if appointed under the section of the statute relating to the appointment of receivers generally.

As to the claim that the act attempts to confer judicial powers upon an executive board, and authorizes it to proceed ex parte without a hearing, the reply is that the appeal is from a decree made by the court after the parties affected had an opportunity to be heard and present their evidence. The taking over of the assets of the bank by the examiner to preserve them until the parties can appear and the court determine the controversy is only a temporary holding in the nature of an attachment, and for the preservation of the property until the court can adjust the rights of the parties in interest. Appellants had an opportunity to present their defense upon the trial, to make their showing, and ask for relief under that part of section 10 which provides: " If upon the hearing of the case the court shall find that such corporation is solvent and can safely continue business, it may dismiss the action, and order that the corporation be restored to the possession of the property.” Statutes regulating the banking business are of such public concern, and so generally upheld and enforced in different states, that the power of the legislature to enact these laws can hardly be questioned longer. We do not find that the provisions of the statute assailed are in conflict in any way with the State or Federal Constitution.

Holding these views, it is unnecessary to consider the motion to dismiss the appeal of some of the appellants, or the motion to dismiss the motion to dismiss.

The decree of the district court is affirmed.