Lankford v. Platte Iron Works Company

• Citation: 35 S.Ct. 173,59 L.Ed. 316,235 U.S. 461
• Decision Date: 05 January 1915
• Docket Number: No. 381,381
• Parties: J. D. LANKFORD, John J. Gerlach, W. F. Barber, and A. D. Kennedy, Composing the State Banking Board of the State of Oklahoma, Appts., v. PLATTE IRON WORKS COMPANY
• Court: U.S. Supreme Court

235 U.S. 461

35 S.Ct. 173

59 L.Ed. 316

J. D. LANKFORD, John J. Gerlach, W. F. Barber, and A. D. Kennedy, Composing the State Banking Board of the State of Oklahoma, Appts.,

v PLATTE IRON WORKS COMPANY.

No. 381.

Argued October 14 and 15, 1914.

Decided January 5, 1915.

Mr. Charles West, Attorney General of Oklahoma, and Messrs. W. A. Ledbetter and Joseph L. Hull for appellants.

[Argument of Counsel from pages 461-463 intentionally omitted] Messrs. Charles A. Loomis, Allen McReynolds, Howard Gray, and John W. Halliburton for appellee.

Mr. Justice McKenna delivered the opinion of the court:

Suit in equity brought by appellee against appellants, constituting the Oklahoma State Banking Board. The Platte Iron Works Company, appellee, is a Maine corporation and a citizen of that state, and became the holder of two certain time certificates of deposit issued by the Farmers' & Merchants' Bank of Sapulpa. Appellants are members of the state banking board, and the appellant J. D. Lankford is the state bank commissioner.

On September 10, 1912, the bank commissioner took charge of the Farmers' & Merchants' Bank and of all its assets, and proceeded to wind up its affairs. Demand for the payment of the certificates was made upon the banking board and the commissioner out of the depositors' guaranty fund of the state, but payment was refused.

A decree was prayed adjudging appellee owner of the deposits and certificates of deposit, and that it was entitled to have the same paid out of the depositors' guaranty fund created under and by virtue of the laws of the state. If there should be not sufficient funds available therefor, that the banking board be required to issue to appellee certificates of indebtedness for the amount of the deposit, to be known as 'depositors' guaranty fund warrants of the state of Oklahoma,' bearing 6 per cent interest as provided by § 3, article 2, chapter 31, Session Laws of Oklahoma, 1911, as amended by Senate Bill No. 231, passed at the last session of the state legislature, and that the banking board be required to levy an assessment against the capital stock of each and every bank and trust company organized and existing under the laws of Oklahoma for the purpose of increasing such depositors' guaranty fund, and pay the deposits and the 'depositors' guaranty fund warrants of the state of Oklahoma.' General relief was also prayed.

[Argument of Counsel from pages 463-469 intentionally omitted] Defendants in the suit, appellants here, moved to dismiss the bill on the ground that the court had no jurisdiction of the action or of the persons of the defendants, the suit being one against the state of Oklahoma without its consent, in violation of the provisions of the 11th Amendment to the Constitution of the United States.

The motion was denied and defendants were given thirty days to answer. No answer appears in the record, but the decree recites that one was filed. The court entered a decree as prayed for in the bill and this appeal was then prosecuted.

The assignments of error in this court are: (1) The suit is an original action in mandamus and the district court had no jurisdiction, the same not being ancillary to any judgment theretofore obtained; (2) the suit is one against the state, 'the defendants [appellants] having no personal interest therein and being sued in their official capacity as agents' of the state; (3) the amended bill upon its face states no cause of action for relief.

Is the suit one against the state? The appellee earnestly contends that the answer should be in the negative. 'An action,' counsel say, 'against a state officer to compel him to perform duties prescribed by law is not an action against the state. An officer who refuses to obey the laws does not stand for the state, within the meaning of the Federal Constitution.'

These contentions depend upon the meaning of the law; they assume its commands are disobeyed by the officers of the state; in other words, that the default of the officers is personal, in opposition—not in conformity—to the law of the state. But another and seemingly broader contention is made. It is asserted that the depositors' guaranty fund is not under the executive and legislative control of the state, and cannot be used by either for any purpose whatever, but 'can be used solely for the purpose of paying depositors of failed banks.' Two questions therefore, are presented, one of power and one of interpretation.

This court, in Noble State Bank v. Haskell, 219 U. S. 104, 55 L. ed. 112, 32 L.R.A.(N.S.) 1062, 31 Sup. Ct. Rep. 186, Ann. Cas. 1912A, 487, sustained the constitutionality of the act as an exercise of the police power of the state. The law in its general purpose was there presented and passed on. The relation of the state to the fund did not come up for consideration, but necessarily this is but a detail in administration, not one affecting legality of the law. The creation of the fund was said to be justified by its purpose, and the power of the state was declared adequate to accomplish it. 'The purpose of the fund,' it was said, 'is shown by its name. It is to secure the full repayment of deposits.'

Where the state should vest the title to the fund for the purpose of its administration was immaterial to the essence of the power to create the fund. Whether the state should commit it to the mere ministerial administration of the bank commissioner and banking board, and subject them to controversies with depositors, or draw around them the circle of its immunity, was a matter within its competency to determine, and we are brought to the question of interpretation—which has the state done?

By the statute, the banking board is composed of the bank commissioner and three other persons, to be appointed by the governor; and it is provided that the 'board shall have supervision and control of the depositors' guaranty fund, and shall have power to adopt all necessary rules and regulations not inconsistent with law for the management and administration of said fund.' The fund is created by levying 'against the capital stock of each and every bank organized and existing under the laws' of the 'state an annual assessment equal to 1/5 of 1 per cent, and no more, of its average daily deposits during its continuance as a banking corporation,' the fund to be 'used solely for the pur- pose of liquidating deposits of failed banks and retiring warrants provided for' in the act. If at any time the fund be insufficient for such purpose or to pay 'other indebtedness properly chargeable against the same, the banking board shall have authority to issue certificates of indebtedness to be known as 'depositors' guaranty fund warrants of the state of Oklahoma,' in order to liquidate the deposits' or such other indebtedness. It is provided that the depositors shall be paid in full, and when the cash available, or that can be made immediately available, is not sufficient to discharge the obligations of the bank or trust company, 'the banking board shall draw from the depositors' guaranty fund and from additional assessments, if required, as provided in § 300, the amount necessary to make up the deficiency; and the state shall have, for the benefit of the depositors' guaranty fund, a first lien upon the assets of said bank or trust company, and all liabilities against the stockholders, officers, and directors of said bank or trust company, and against all other persons, corporations, or firms. Such liabilities may be enforced by the state for the benefit of the depositors' guaranty fund.'

The contention of appellee is that the law has created a fund for the payment of depositors, and directs that they shall be paid in full from the fund or 'from additional assessments.' If the fund be insufficient for such purpose, it is further contended, the board is required to issue guaranty fund warrants in order to liquidate the deposits. Such, it is insisted, are the plain commands of the statute to which obedience is imposed and is necessary to fulfil the purpose of the law, which is to secure the full repayment to depositors. And, therefore, a suit by depositors is not a suit against the state, but a suit to compel submission by the officers of the state to the laws of the state, accomplishing at once the policy of the law and its specific purpose.

There is strength in the contentions and we are not insensible to it, but there may be more complexity in fulfilling the scheme of the statute than the language of counsel exhibits, and it may be embarrassed if not defeated by subjecting the banking board to incessant judicial inquiries of its administration. We certainly cannot assume that it will not do its duty and provide the ultimate payment of all depositors. To this result the state makes itself an active agent. It is given a lien upon the assets of insolvent banks and upon all liabilities against their stockholders, officers, directors, and against other persons, which may be enforced by the state for the benefit of the fund which its law has created.

In Murray v. Wilson Distilling Co. 213 U. S. 151, 53 L. ed. 742, 29 Sup. Ct. Rep. 458, there is analogy to the case at bar. The state of South Carolina in the year 1892 assumed the exclusive management of all traffic in liquor. It subsequently abandoned the scheme and passed an act called 'the state dispensary act' to provide for the disposition of all property of the instrumentality it had created and to wind up its affairs. A commission was appointed for that purpose. A part of the duties of the commission was to dispose of the property, collect all debts due, and pay 'from the proceeds thereof all just liabilities at the earliest date practicable.' Any surplus was to be paid to the state treasury. A duty, therefore, was imposed upon the commission to collect the assets of the dispensary and pay its debts, and it was as directly expressed as was the duty imposed upon the banking board in the pending...