Floyd v. Thornton

• Decision Date: 03 December 1951
• Docket Number: No. 16567,16567
• Citation: 220 S.C. 414,68 S.E.2d 334
• Parties: FLOYD et al. v. THORNTON, Secretary of State, et al.
• Court: South Carolina Supreme Court

Page 334

68 S.E.2d 334

220 S.C. 414

FLOYD et al. v. THORNTON, Secretary of State, et al.

No. 16567.

Supreme Court of South Carolina.

Dec. 3, 1951.

The order of Judge LIDE, in part, requested to be reported follows:

The petition alleges that Code Section 7829-2 is unconstitutional, and the prayer of the petition in the outset seeks judgment that the same be declared null and void because in violation of the 14th Amendment to the Federal Constitution, and Article I, Sections 5, 14 and 15, and Article III, Section 1, and Article V, Section 6, of our State Constitution. The constitutional objections relate primarily to the 'equal rights' and 'due process' clauses, referring also to the separation of the departments of the government and matters of that general character.

While the petitioners make no reference to Code Section 7829 in their prayer for relief, there are several allegations throughout the petition which may reasonably be construed to question its constitutional validity with regard to the provision therein contained relating to the appointment of the members of the Board of Bank Control.

In view of the fact that the petitioners have sought the approval of the Board of Bank Control, and have thus availed themselves of the rights and privileges accorded by the sections under attack, it might follow that they should be estopped to raise any constitutional objection. 11 Am.Jur. 767-770.

Assuming, however, that the determination of this question upon the bare allegations of the pleadings might be of doubtful propriety, it is my judgment that the constitutional questions should be considered on this hearing, especially because if Code Section 7829-2 is unconstitutional and therefore null and void, the previous proceedings thereunder are wholly ineffectual. This section is set forth in full as follows for convenience of reference:

'No bank or building and loan association hereafter incorporated shall be granted a charter by the secretary of state, unless and until the board has approved such application in writing; or shall any branch bank be established without the approval in writing by the board. Before any such application for the incorporation of a bank or building and loan association, or the establishment of a branch bank shall be approved, the board shall make an investigation to determine whether or not the applicants have complied with all the provisions of law and whether in the discretion of the board, they are qualified to operate such institution and whether the establishment of such bank or building and loan association or of such branch bank would serve the public interest, taking into consideration local circumstances and conditions at the place where such bank or building and loan association or branch bank, proposes to do business.'

As I have already stated, this section is a part of the general banking law enacted in 1936. And it may be observed that the petitioners recognize the right of the General Assembly to regulate the conduct of banking institutions in order to protect the depositors therein; but apparently they would limit governmental control to that extent. Indeed, they allege that they have an inherent right and privilege to engage in the banking business. But the banking business 'is of a pre-eminently public nature, and is therefore universally recognized as a proper subject of legislative regulation under the police power of the state.' 7 Am.Jur. 30.

Moreover, our own State Constitution in Section 9 of Article IX made proper provision with reference to banks in the following language: 'The General Assembly shall have no power to grant any special charter for banking purposes, but corporations or associations may be formed for such purposes, under general laws, with such privileges, powers and limitations, not inconsistent with this Constitution, as it may deem proper. The General Assembly shall provide by law for the thorough examination and inspection of all banking and fiscal corporations of this State.'

Furthermore, it seems quite apparent that the regulation of the conduct of business by banking institutions without any regulation or control of their establishment might prove wholly ineffective, which I believe is a statement strongly confirmed by the history of banking, and I am unable to find anything in the provisions of the Code Section now under consideration depriving the petitioners or anyone else in like situation of any of their constitutional rights or privileges.

This particular section of the banking law does not seem to have ever come before our Supreme Court. But it is of interest to observe that certain other parts of the same banking law have been before the Court and have been approved. In the case of Zimmerman v. State Board of Bank Control, 194 S.C. 518, 8 S.E.2d 359, there was involved the liquidation of an insolvent bank under the supervision of the State Board of Bank Control, and the constitutional right of the Board to supervise such liquidation was approved and confirmed. And it was held in the case of Ex parte Miller, 191 S.C. 260, 1 S.E.2d 512, relating to a building and loan association, that the State Board of Bank Control is a special administrative body of limited jurisdiction but I think it may be properly added, of important jurisdiction.

We are fortunate to have before us a leading opinion delivered by the illustrious Mr. Justice Holmes in the case of Noble State Bank v. Haskell, 219 U.S. 104, 31 S.Ct. 186, 187, 55 L.Ed. 112, decided January 3, 1911, wherein it was held (quoting from the syllabus): 'The police power of a state extends to the regulation of the banking business, and even to its prohibition except on such conditions as the state may prescribe.' And the syllabus is correctly based upon the following excerpt from the opinion of the Court: 'We cannot say that the public interests to which we have adverted, and others, are not sufficient to warrant the state in taking the whole business of banking under its control. On the contrary, we are of opinion that it may go on from regulation to prohibition except upon such conditions as it may prescribe.'

This wise and farseeing decision was rendered long before 1933 when tragic financial conditions culminated in the historic bank holiday, resulting in the restoration of confidence, because the banking institutions of the country were placed upon a firm foundation by reason of legislative action providing, among other things, for the control of the banking business in its inception as well as its subsequent operation. Consequently some of the banks were not allowed to reopen. See also Pue v. Hood, Commissioner of Banks, 222 N.C. 310, 22 S.E.2d 896.

My conclusion therefore is that all constitutional objections raised to Code Section 7829-2 should be, and they are hereby, overruled, and this section is hereby declared to be constitutional and effective in all respects.

The objections raised by the petitioners to the constitutionality of Code Section 7829 relate to the matter of the appointment of members of the State Board of Bank Control. This section provides that the Board shall be composed of five members, one of whom shall be the State Treasurer, as an ex-officio member, who shall be Chairman. It is also provided that the remaining four members 'shall be appointed by the Governor, two of whom shall be engaged in commercial banking and recommended by the state bankers' association, one shall be engaged in building and loan association business and recommended by the said associations and one shall be in the cash depositories business and recommended by the representatives of the cash depositories affiliated with the state bankers' association.'

The general rule of law in connection with this matter is stated as follows in 42 Am.Jur. 953: 'Where the legislature creates an office, it may, when not restricted by the Constitution, confer the power of appointment thereto upon public officers or boards, as, for example, upon a judicial officer or upon associations, corporations, or persons. This does not constitute an illegal delegation of legislative powers, since the power of appointment to office is not legislative.'

In the case of Ashmore v. Greater Greenville Sewer District, 211 S.C. 77, 44 S.E.2d 88, 96, 173 A.L.R. 397, the Court had before it an act providing that in the selection of the Board of Trustees of the defendant Sewer District there should be certain members thereof, respectively representing and chosen by certain social service organizations, such as Rotary, Kiwanis, and the like, the American Legion Post, and other local bodies; and the Court held that in this respect the act was invalid delegation of legislative power. But it should be observed that in the careful and discriminating unanimous opinion delivered by Mr. Justice Stukes this holding was limited as follows: 'The rule which we approve goes no further than to invalidate attempted delegation by the legislature of the appointive or elective power to unofficial persons or bodies where the latter are without rational and substantial relation to the law to be administered by the appointees or electees or, we add, to the public institution to be governed.'

We are unable to conceive of a...