James Easton v. State of Iowa

• Decision Date: 02 February 1903
• Docket Number: No. 92,92
• Citation: 188 U.S. 220,23 S.Ct. 288,47 L.Ed. 452
• Parties: JAMES H. EASTON, Plff. in Err. , v. STATE OF IOWA
• Court: U.S. Supreme Court

188 U.S. 220

23 S.Ct. 288

47 L.Ed. 452

JAMES H. EASTON, Plff. in Err.,

v STATE OF IOWA.

No. 92.

Argued January 14, 15, 1903.

Decided February 2, 1903.

In 1898, in the district court of Winneshiek county, state of Iowa, James H. Easton was indicted tried, and found guilty, and sentenced to imprisonment in the penitentiary of Iowa at hard labor for a term of five years, under the provisions of a statute of that state, for the offense of having received, as president of the First National Bank of Decorah, Iowa, a deposit of $100 in money in said bank, at a time when the bank was insolvent, and when such insolvency was known to the defendant.

At the trial it was contended, on behalf of the defendant, that the statute of Iowa, upon which the indictment was found, did not, and was not intended to, apply to national banks, organized and doing business under the national bank acts of the United States, or to the officers and agents of such banks; and that, if the state statute should be construed and held to apply to national banks and their officers, the statute was void in so far as made applicable to national banks and their officers. Both these contentions were overruled by the trial court, and thereupon an appeal was taken to the supreme court of the state of Iowa, and by that court, on April 12, 1901, the judgment of the district court was affirmed. The cause was then brought to this court by a writ of error allowed by the Chief Justice of the supreme court of Iowa.

Messrs. H. T. Reed, Charles F. Brown, C. W. Reed, and John J. Crawford for plaintiff in error.

[Argument of Counsel from pages 221-224 intentionally omitted] Mr. Charles W. Mullan for defendant in error.

[Argument of Counsel from pages 224-227 intentionally omitted] Mr. Justice Shiras delivered the opinion of the court:

Those portions of the Iowa statute whose validity is the question in this case consist of §§ 1884 and 1885 of the Code of that state, and are in the following terms:

'Sec. 1884. No bank, banking house, exchange broker, deposit office, firm, company, corporation, or person engaged in the banking, brokerage, exchange, or deposit business, shall, when insolvent, accept or receive on deposit, with or without interest, any money, bank bills or notes, United States Treasury notes or currency, or other notes, bills, checks, or drafts, or renew any certificate of deposit.

'Sec. 1885. If any such bank, banking house, exchange broker, deposit office, firm, company, corporation, or person shall receive or accept on deposit any such deposits, as aforesaid, when insolvent, any owner, officer, director, cashier, manager, member, or person knowing of such insolvency, who shall knowingly receive or accept, be accessory, or permit, or connive at receiving or accepting on deposit therein, or thereby, any such deposits, or renew any certificate of deposit, as aforesaid, shall be guilty of a felony, and, upon conviction, shall be punished by a fine not exceeding ten thousand dollars, or by imprisonment in the penitentiary for a term of not more than ten years, or by imprisonment in the county jail not more than one year, or by both fine and imprisonment.'

At the trial evidence was adduced tending to show, and the jury found, that the defendant, being engaged in the banking business, as an officer, to wit, president of the First National Bank of Decorah, on the 21st day of August, A. D. 1896, did, as president of said bank, receive and accept on deposit in said bank the sum of $100 in lawful paper money and of the value of $100, from one John French, the bank being then and there insolvent, and the defendant then and there well knowing that the said bank was insolvent.

It will be observed that national banks or banking associations are not specifically named in the statute; and it was, hence, argued, on behalf of the defendant, that such institutions are not within the enactment. As, however, the state courts, following a previous decision of the supreme court of Iowa, in the case of State v. Field, 98 Iowa, 748, 62 N. W. 653, held that the statute was applicable to all banks, whether organized under the laws of the state or the acts of Congress, we must accept that construction as correct, and confine our consideration to the question whether, as so construed, the act is within the jurisdiction of the state.

It is obvious that the two sections of the statute, above quoted, must be read together as one enactment. If § 1884, regarded as applicable to national banks, is a valid exercise of power by the state, then the penalties declared in § 1885 can be properly enforced; but if § 1884 must be held invalid as an attempt to control and regulate the business operations of national banks, then the penal provisions of § 1885 cannot be enforced against their officers. In other words, the validity of the mandatory and of the penal parts of the statute must stand or fall together.

What, then, is the character of a state law which forbids national banks, when insolvent, from accepting or receiving on deposit, with or without interest, any money, bank bills or notes, United States Treasury notes or currency, or other notes, bills, checks, or drafts, or renewing any certificate of deposit?

The answer given by the supreme court of Iowa to this question is as follows:

'The acts of Congress provide no penalty for the fraudulent receiving of deposits, and the statute under consideration operates upon the person who commits the crime. And it is not a material question to determine whether it will be necessary to investigate the financial condition of the bank to prove that the bank was insolvent when the deposit was received. This statute is in the nature of a police regulation, having for its object the protection of the public from the fraudulent acts of bank officers. The mere fact that in violating the law of the state the defendant performed an act pertaining to his duty as an officer of the bank does not in any manner interfere with the proper discharge of any duty he owes to any power, state or Federal. Surely, it was not intended by any act of Congress that officers of a national bank should be clothed with the power to cheat and defraud its patrons. National banks are organized and their business prosecuted for private gain, and we can conceive of no reason why the officers of such banks should be exempt from the penalties prescribed for fraudulent banking.'

We think that this view of the subject is not based on a correct conception of the Federal legislation creating and regulating national banks. That legislation has in view the erection of a system extending throughout the country, and independent, so far as powers conferred are concerned, of state legislation which, if permitted to be applicable, might impose limitations and restrictions as various and as numerous as the states. Having due regard to the national character and purposes of that system, we cannot concur in the suggestions that national banks, in respect to the powers conferred upon them, are to be viewed as solely organized and operated for private gain. The principles enunciated in M'Cullough v. Maryland, 4 Wheat. 425, 4 L. ed. 606, and in Osborn v. Bank of United States, 9 Wheat. 738, 6 L. ed. 204, though expressed in respect to banks incorporated directly by acts of Congress, are yet applicable to the later and present system of national banks.

In the latter case it was said by Chief Justice Marshall:

'The bank is not considered as a private corporation whose principal object is individual trade and individual profit, but as a public corporation created for public and national purposes. That the mere business of banking is, in its own nature, a private business, and may be carried on by individuals or companies having no political connection with the government, is admitted; but the bank is not such an individual or company. It was not created for its own sake or for private purposes. It has never been supposed that Congress could create such a cor- poration. The whole opinion of the court in the case of M'Cullough v. Maryland is founded on, and sustained by, the idea that the bank is an instrument which is 'necessary and proper for carrying into effect the powers vested in the government of the United States."

A similar view of the nature of banks organized under the national bank laws has been frequently expressed by this court. Thus, in Farmers' & M. Nat. Bank v. Dearing, 91 U. S. 29, 23 L. ed. 196, it was said:

'National banks organized under the act are instruments designed to be used to aid the government in the administration of an important branch of the public service. They are means appropriate to that end.'

Such being the nature of these national institutions, it must be obvious that their operations cannot be limited or controlled by state legislation, and the supreme court of Iowa was in error when it held that national banks are organized and their business prosecuted for private gain, and that there is no reason why the officers of such banks should be exempt from the penalties prescribed for fraudulent banking. Nor is it altogether true, as asserted by that court, that there is no act of Congress prohibiting the receipt of deposits by national banks or their officers, when a bank is insolvent. It is true that there is no express prohibition contained in the Federal statutes, but there are apt provisions, sanctioned by severe penalties, which are intended to protect the depositors and other creditors of national banks from fraudulent banking. It is not necessary to quote at length those provisions, but it will be sufficient to say that banks organized under the national bank act are authorized to make contracts; to prescribe, by its board of directors, by-laws regulating the manner in which their general business shall be conducted, and the privileges agranted by law exercised and enjoyed; to exercise by its board of directors, or duly authorized...