Department of Banking v. Foe

• Decision Date: 02 June 1939
• Docket Number: 30611.
• Citation: 286 N.W. 264,136 Neb. 422
• Parties: DEPARTMENT OF BANKING v. FOE ET AL.
• Court: Nebraska Supreme Court

286 N.W. 264

136 Neb. 422

DEPARTMENT OF BANKING v. FOE ET AL.

No. 30611.

Supreme Court of Nebraska.

June 2, 1939

Syllabus by the Court.

1. " The department of banking, created by legislative enactment (Laws 1933, ch. 18; Laws 1935, ch. 16), is a legal entity, and by section 8-1,130, Comp.St.Supp.1937, as receiver and liquidating agent of an insolvent bank, has full right and lawful authority forthwith, by a proceeding in court, to prosecute an action to collect constitutional stockholders' liability for benefit of creditors." Department of Banking v. Hedges, Neb., 286 N.W. 277.

2. The repeal of a constitutional provision, imposing double liability on corporate stockholders of an insolvent bank, not containing a saving clause, does not affect the obligation of such stockholders as to liabilities incurred by the banking institution prior to such repeal.

3. Where private rights of parties have vested by judgment of a court, they cannot, by subsequent legislation, be taken away but must be thereafter enforced by the court, regardless of such legislation.

4. " Where a legislative act, though complete in itself refers to another act for the procedure to be taken, the latter act, pro tanto, becomes a part of the former to the same extent as though actually incorporated therein." Richardson v. Kildow, 116 Neb. 648, 218 N.W. 429.

5. The legislature has power to determine public policy in respect to subjecting the salaries of public officers and employees within its control to garnishee process.

6. A statute, providing for garnishment of salaries of officers and employees of the state, or any county, township municipal or municipally owned corporation, or school district, held not violative of section 19, art. III of the Constitution of Nebraska, prohibiting increase or diminution of compensation of public officers during their terms of office .

7. The salary of an officer, whose qualifications, tenure and emoluments of office are contained within the Constitution, subject to regulation by the legislature within constitutional restriction, may be garnished under a law passed by the legislature, subjecting such salary to garnishee process.

8. An act, subjecting the salaries of all officers and employees of the state, city, county, municipal or municipally owned corporation, township or school district, to garnishee process, operating uniformly and alike on every member of the class designated, is not unreasonable or arbitrary class legislation and does not violate the Fourteenth Amendment to the Constitution of the United States, U.S.C.A.

Appeal from District Court, Lancaster County; Broady, Judge.

Action by the Department of Banking of the State of Nebraska, receiver and liquidating agent of the Cowles State Bank, Cowles, Neb., against E. T. Foe and others, impleaded with F. A. Good, to enforce stockholders' double liability, wherein garnishment proceedings were instituted against the Continental National Bank and the State Auditor. From an order directing the garnishees to pay certain sums of money into court, the defendant F. A. Good appeals.

Affirmed.

J. C. McReynolds, of Lincoln, for appellant.

Robert H. Downing, C. J. Aldrich, F. C. Radke, and Harold Johnson, all of Lincoln, for appellees.

Heard before SIMMONS, C. J., and ROSE, EBERLY, PAINE, CARTER, MESSMORE, and JOHNSEN, JJ.

MESSMORE, Justice.

This is an appeal in a garnishment proceeding from an order of the district court for Lancaster county, entered October 12, 1938, the court ordering the garnishee, Continental National Bank, to pay into court the sum of $44.24, and the state auditor to pay into court the sum of $125, constituting 10 per cent. of the third quarterly salary due the defendant, a state railway commissioner. The motion of defendant Good for exemptions as head of a family was sustained. Motion for a new trial was overruled. Defendant Good appeals.

Counsel in their briefs detail the history of previous litigation as between the parties. Only such part thereof as may be necessary to assist in a determination of this appeal will be set out.

On November 22, 1937, the department of banking of the state of Nebraska, receiver and liquidating agent of the Cowles State Bank, Cowles, Nebraska, obtained a judgment in the district court for Webster county against the defendant Good (hereinafter referred to as defendant) in the sum of $1,000 and costs, on stockholders' double liability as a stockholder in the Cowles State Bank. Defendant appeared, presented his defense, and did not appeal from the judgment. This appeal is from the order made in the garnishment proceedings as above stated.

Defendant assigns as error: The department of banking is not an entity and has no capacity to sue, and the judgment herein is void ab initio.

This court held in Department of Banking v. Hedges, 286 N.W. 277:" The department of banking, created by legislative enactment (Laws 1933, ch. 18; Laws 1935, ch. 16), is a legal entity, and by section 8-1,130, Comp.St.Supp.1937, as receiver and liquidating agent of an insolvent bank, has full right and lawful authority forthwith, by a proceeding in court, to prosecute an action to collect constitutional stockholders' liability for benefit of creditors."

Defendant next assigns as error the fact that, at the general election of November 8, 1938, section 7, art. XII of the Constitution of Nebraska, (see Laws 1937, c. 18), establishing double liability of stockholders, was, by vote of the people, repealed, and such repeal vacated the judgment herein against the defendant and rendered all proceedings thereunder since the 8th day of November, 1938, null and void, including the garnishment proceedings hereunder, for the reason that such repeal was without a saving clause.

In Luikart v. Paine, 126 Neb. 251, at page 253, 253 N.W. 86, at page 87, it was said: " Stockholders' double liability in banking corporations is contractual obligation and by construction constitutional provisions in effect at the time of purchase of corporate stock are material parts thereof." Practically all courts which have had occasion to pass upon the liability of stockholders in banks regard this liability as being contractual. 7 Am.Jur., 81, sec. 98. See Luikart v. Higgins, 130 Neb. 395, 264 N.W. 903.This has been the rule uniformly followed. Such a contractual right ought to be enforceable, inasmuch as the nature of it and the methods of enforcing it depend upon constitutional and statutory provisions creating it, and which entered into the implied con tract at the time the stock was purchased. We must look to these provisions as they existed prior to the repeal to ascertain the extent of the liability and the manner of enforcing it. The question presented, with reference to the repeal of section 7, art. XII of the Constitution of Nebraska, is that the repeal of such constitutional provision is complete and is not protected by any saving clause.

In Kaliski v. Gossett, Tex.Civ.App., 109 S.W.2d 340, it was held:

" The repeal of the constitutional provision for stock assessments against bank stockholders without any saving clause does not abate a suit on a liability which had fully accrued before such repeal." In the body of the opinion the court said (109 S.W.2d at page 343):" This conclusion is fully justified by Pierce Coombes, Petitioner, v. Milton E. Getz, 285 U.S. 434-452, 52 S.Ct. 435, 436, 76 L.Ed. 866 [the leading case on the question]. * * * ‘ The right of this petitioner to enforce respondent's liability had become fully perfected and vested prior to the repeal of the liability provision. His cause of action was not purely statutory. It did not arise upon the constitutional rule of law, but upon the contractual liability created in pursuance of the rule. Although the latter derived its being from the former, it immediately acquired an independent existence competent to survive the destruction of the provision which gave it birth. The repeal put an end to the rule for the future, but it did not and could not destroy or impair the previously vested right of the creditor (which in every sense was a property right * * *) to enforce his cause of action upon the contract.' [Coombes v. Getz, supra.]

" Thus we take it that neither the repeal of the constitutional provision nor the statutes relating to shareholders' liability does not abate or otherwise affect the cause before us, but, on the contrary, we must pass upon same as though there had not been any repeal of either the statutory or the constitutional provisions." See, also, Henry v. Alexander, 186 S.C. 17, 194 S.E. 649.

Defendant attempts to distinguish the case at bar from Coombes v. Getz, supra, on the ground that the court was dealing with officers and directors of a corporation who had embezzled funds, and the action was by the plaintiff, acting directly in his own interests, while in the case at bar the plaintiff had no direct interest in the funds and was acting for the benefit of another class of persons,--depositors in state banks. The principle of law is the same. The plaintiff was acting in a designated capacity for the benefit of the creditors of this particular bank.

The provision of the Constitution of the United States " declares that no state shall pass any law impairing the obligation of contracts. * * * Any enactment, regardless of its source, to which a state gives the force of law is a law within the meaning of this provision, and this includes * * state Constitutions and constitutional amendments. * * * The repeal of a law which constitutes a contract is an impairment of its obligation." 12 Am.Jur. 24, sec. 396.

" The repeal of a constitutional provision imposing a double liability on corporate stockholders does not affect the obligation of stockholders...