Abie State Bank v. Weaver

• Decision Date: 25 February 1931
• Docket Number: No. 63,63
• Citation: 282 U.S. 765,75 L.Ed. 690,51 S.Ct. 252
• Parties: ABIE STATE BANK v. WEAVER, Governor of Nebraska, et al
• Court: U.S. Supreme Court

282 U.S. 765

51 S.Ct. 252

75 L.Ed. 690

ABIE STATE BANK

v WEAVER, Governor of Nebraska, et al.

No. 63.

Argued Jan. 30, 1931.

Decided Feb. 25, 1931.

[Syllabus from pages 765-767 intentionally omitted] Messrs. Leonard A. Flansburg, of Lincoln, Neb., and Frank H. Gaines, of Omaha, Neb., for appellant.

Messrs. C. A. Sorensen, of Lincoln, Neb., and Charles E. Abbott, of Fremont, Neb., for appellees Bryan, Governor, et al.

Mr. Wm. J. Hotz, of Omaha, Neb., for intervening appellees Mary E. Gandy et al.

Mr. Chief Justice HUGHES delivered the opinion of the Court.

This suit was brought in December, 1928, in the district court of Lancaster county, Neb., by the Abie State Bank on its own behalf and that of several hundred other banks, all chartered under the laws of Nebraska, to enjoin the defendants from collecting special assessments under the Bank Guaranty Law of that state. The plaintiffs challenged the constitutionality of the statute authorizing the levy of such special assessments, upon the ground that their collection constituted the taking of the plaintiffs' property without due process of law, in violation of the Fourteenth Amendment of the Constitution of the United States. A number of depositors in the state banks were permitted to intervene. The district court entered a decree in April, 1929, in favor of the complainants, sustaining the contention that the statute providing for such special assessments was, under the facts shown unreasonable and confiscatory, and hence repugnant to the Fourteenth Amendment. The decree, which gave a permanent injunction, was reversed by the Supreme Court of Nebraska; the injunction was dissolved and the action dismissed. 119 Neb. 153, 227 N. W. 922. The plaintiffs appeal to this court.

The Bank Guaranty Law of Nebraska was originally enacted in the year 1909. Laws of Nebraska, 1909, c. 10, p. 87; Compiled Statutes of Nebraska 1922, § 8024 et seq. Its purpose was declared to be to provide a guaranty fund for the protection of depositors in banks, and every corporation engaged in the business of banking under the laws of the state was declared to be subject to assessment to be levied and applied in the manner stated. Banks were required to report semiannually to the state banking board, succeeded by the department of trade and commerce, their average daily deposits, and it was made the duty of that department twice each year to levy upon each bank an assessment (after certain prescribed initial payments) in the amount of one-twentieth of 1 per cent. of the average daily deposits reported. By section 8028, as amended in 1923 (Laws of 1923, c. 191, p. 452), it was provided that, if the depositors' guaranty fund should be reduced from any cause to any amount less than 1 per cent. of the average daily deposits, the department of trade and commerce should levy, against the capital stock of the corporations concerned, a special assessment not exceeding one-half of 1 per cent. of said average daily deposits in any one year. In case of noncompliance with the provisions of the statute, the Attorney General was to obtain the appointment of a receiver; and, by an amendment in 1925 (Laws of 1925, c. 30, p. 22) , the department of trade and commerce, if its order was not obeyed, was authorized forthwith to take possession of the property and business of the bank and place it in charge of the guar- antee fund commission, established in 1923 for the purpose of assisting in conserving and administering the guaranty fund (Laws of 1923, c. 191). It was further provided that, in case a bank failed, and its assets were insufficient to meet the claims of depositors, the court should determine the amount of the deficiency and direct the department of trade and commerce to draw against the guaranty fund in the amount required to make up the deficiency. Claims of depositors were to be paid according to priority of adjudication.

Acting under the authority of the statute, the department of trade and commerce for several years made an additional semiannual assessment against the complaining banks of one-fourth of 1 per cent. of the average daily deposits. The result was that the total assessment against each of these banks had become an annual charge in the amount of six-tenths of 1 per cent. of their total average daily deposits.

This suit was begun immediately after the levy, on December 15, 1928, of a special assessment of one-fourth of 1 per cent. of the average daily deposits of the complaining banks, and the plaintiffs asked for an injunction restraining the collection of that special assessment and of any future special assessment called for by section 8028. The contention of the plaintiffs was that the Bank Guaranty Law no longer bore a rational relation to any public purpose, as the collection of the assessments in question took away from the security of present depositors in going banks in order to pay the depositors in failed banks, and was without hope or tendency of furnishing protection to present depositors. It was insisted that, instead of the challenged assessment creating a fund for the safeguarding of depositors in going banks, as was its purpose, it directly defeated that object, and that its imposition constituted an unconstitutional burden because of its confiscatory character.

The district court reviewed the results of the operations of the banks in Nebraska under the Bank Guaranty Law. It appeared that there were 1,012 banks in the state in November, 1920, and that the number had been reduced to 726 in December, 1928; that these banks had a total capital of $19,001,000 and a total capital and surplus of $24,958,557.62; that for the period of eighteen months preceding June 30, 1928, 570 banks had net earnings and 156 had net deficits; that the total net earnings of both groups for that period amounted to.$1,935,519.40, or 7.9 per cent. of the total capital and surplus; that, during the same period, these banks had paid into the depositors' guaranty fund $2,412,324.78. It also appeared from the testimony of the secretary of the guarantee fund commission (as stated by the Supreme Court of the state) that up to December 31, 1928, 269 state banks had been closed by the state and placed in the hands of the commission, and that the total amount of the adjudicated claims was $10,536,518.59, exclusive of interest; and that in 72 state banks, then being operated as going concerns, the amount due depositors was $13,726,441.26, and the total amount due depositors in banks which were in receiverships, but whose claims were not yet adjudicated, was $2,133,627.54. The total claims, including both claims adjudicated and those not adjudicated, or the then existing liabilities against the guaranty fund, amounted to $26,400,282.76, and the total amount of assets to be realized would be.$10,451,932.65, leaving a deficit of.$15,948,350.11. The court concluded that 'fully two-thirds of the banks under the existing financial conditions are unable, after paying assessments amounting to 8 per cent. of their capital, to pay compensatory dividends,' and that the Bank Guaranty Law, as originally conceived, was 'no longer serving its purposes.'

Reversing the decree of the district court in favorof the plaintiffs, the Supreme Court of the state sustained the validity of the continued operation of the Bank Guaranty Law and entered judgment stating that 'the levy of a special assessment upon the state banks,' pursuant to the provisions of the applicable statute, 'does not constitute the taking of private property without due process of law.' The grounds of the decision of the Supreme Court of the state, in reversing the judgment of the district court, were thus stated in the syllabus of the opinion:

'1. 'The banking business, carried on pursuant to a state charter, is quasi public, and, for protection of the public and in its interests, is subject to reasonable regulation by the state.' Citizens' State Bank v. Strayer, 114 Neb. 567, 208 N. W. 662.

'2. It is elementary that it is not within the province of the courts to annul a legislative act unless its provisions so clearly contravene a provision of the fundamental law, or it is so clearly against public policy, that no other resort remains.

'3. Where a state bank has accepted the benefits arising from the deposits of money pursuant to the terms of the bank depositors' guaranty law, such bank should not be heard, in a proper case, to make complaint of a special assessment upon such deposits which has been levied for the benefit of the depositors' guaranty fund.

'4. Where a special assessment has been levied upon the state banks pursuant to the provisions of section 8028, Comp. St. 1922, as amended by section 26, c. 191, Laws 1923, such assessment does not constitute the taking of private property without due process.'

In answer to the jurisdictional statement filed by the appellants, the appellees asserted the want of jurisdiction in this court, upon two grounds: (1) That this court conclusively adjudicated the validity of the Nebraska law against appellant in the suit heretofore brought on its behalf (Shallenberger v. First State Bank of Holstein 219 U. S. 114, 31 S. Ct. 189, 55 L. Ed. 117); and (2) that the decision of the Supreme Court of the state, in its ruling with respect to the question of estoppel, rested upon an independent nonfederal ground. The question of jurisdiction was postponed to the hearing on the merits.

As to the first objection, it is sufficient to say that the Bank Guaranty Law was sustained by this court as a police regulation (Shallenberger v. First State Bank of Holstein, supra; Noble State Bank v. Haskell, 219 U. S. 104, 31 S. Ct. 186, 55 L. Ed. 112, 32 L. R. A. (N. S.) 1062, Ann. Cas. 1912A, 487; Id., 219 U. S. 575, 31 S. Ct. 299, 55 L. Ed. 341), and that a police regulation, although valid when made, may become, by reason of later events, arbitrary and confiscatory in operation (Smith v. Illinois Bell...