First National Bank of Bay City v. Grant Fellows On the Relation of Union Trust Company

• Decision Date: 11 June 1917
• Docket Number: No. 764,764
• Citation: 244 U.S. 416,61 L.Ed. 1233,37 S.Ct. 734
• Parties: FIRST NATIONAL BANK OF BAY CITY, Plff. in Err., v. GRANT FELLOWS, Attorney General of the State of Michigan, ON THE RELATION OF UNION TRUST COMPANY et al
• Court: U.S. Supreme Court

244 U.S. 416

37 S.Ct. 734

61 L.Ed. 1233

FIRST NATIONAL BANK OF BAY CITY, Plff. in Err.,

v GRANT FELLOWS, Attorney General of the State of Michigan, ON THE RELATION OF UNION TRUST COMPANY et al.

No. 764.

Argued March 22 and 23, 1917.

Decided June 11, 1917.

[Syllabus from pages 416-417 intentionally omitted] Messrs. Edward S. Clark and H. M. Gillett for plaintiff in error.

Messrs. Henry M. Campbell and John G. Johnson for defendant in error.

Solicitor General Davis and Messrs. Milton C. Elliott and Joseph P. Cotton as amici curiae, for the United States, by leave of court.

Mr. Chief Justice White delivered the opinion of the court:

We are of opinion that the procedure resorted to was appropriate and that the state court was competent to administer relief, but we postpone stating our reasons on the subject until the merits have been passed upon.

The court below held that an act of Congress conferring on national banks additional powers was in excess of the authority of Congress, and was hence repugnant to the Constitution. ——Mich. , 159 N. W. 335. The correctness of this conclusion is in substance the sole question for decision on the merits.

Although the powers given were new, the principles involved in the right to confer them were long since considered and defined in adjudged cases. We shall first consider the leading of such cases and then, after stating this case, determine whether they are controlling, causing the subject not to be open for original consideration.

In M'Culloch v. Maryland, 4 Wheat. 316, 4 L. ed. 579, the bank had been incorporated by Congress with powers to transact business of both a governmental and of a private character. The question which was decided was the authority of Congress to grant such charter. Without undertaking to restate the opinion of Mr. Chief Justice Marshall, it suffices for the purpose of the matter now before us to say that it was held that although Congress was not expressly given the power to confer the charter, authority to do so was to be implied as appropriate to carry out the powers expressly given. In reaching this conclusion it was further decided that to recognize the existence of the implied power was not at all in conflict with article I., § 8, clause 18 of the Constitution, providing that Congress should have power 'to make all laws which shall be necessary and proper for carrying into execution the foregoing powers,' since that provision did not confine the implied authority to things which were indispensably necessary, but, on the contrary, gave legislative power to adopt every appropriate means to give effect to the powers expressly given. In terms it was pointed out that this broad authority was not stereotyped as of any particular time, but endured, thus furnishing a perpetual and living sanction to the legislative authority within the limits of a just discretion, enabling it to take into consideration the changing wants and demands of society and to adopt provisions appropriate to meet every situation which it was deemed required to be provided for. In fact, the rulings which we have stated were all summed up in the following passage, which ever since has been one of the principal tests by which to determine the scope of the implied power of Congress over subjects committed to its legislative authority:

'We admit, as all must admit, that the powers of the government are limited, and that its limits are not to be transcended. But we think the sound construction of the Constitution must allow to the national legislature that discretion, with respect to the means by which the powers it confers are to be carried into execution, which will enable that body to perform the high duties assigned to it, in the manner most beneficial to the people. Let the end be legitimate, let it be within the scope of the Constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the Constitution, are constitutional.' p. 421.

In Osborn v. Bank of United States, 9 Wheat. 738, 6 L. ed. 204, where substantially the subject was presented in the same form in which it had been passed upon in M'Culloch v. Maryland, Yielding to the request of counsel, the whole subject was reexamined M'Culloch v. Maryland, yielding to the request and upheld. Considering more fully, however, the question of the possession by the corporation of private powers associated with its public authority, and meeting the contention that the two were separable, and the one, the public power, should be treated as within, and the other, the private, as without, the implied power of Congress, it was expressly held that the authority of Congress was to be ascertained by considering the bank as an entity possessing the rights and powers conferred upon it, and that the lawful power to create the bank and give it the attributes which were deemed essential could not be rendered unavailing by detaching particular powers and considering them isolatedly, and thus destroy the efficacy of the bank as a national instrument. The ruling in effect was that although a particular character of business might not be, when isolatedly considered, within the implied power of Congress, if such business was appropriate or relevant to the banking business, the implied power was to be tested by the right to create the bank and the authority to attach to it that which was relevant, in the judgment of Congress, to make the business of the bank successful. It was said: 'Congress was of opinion that these faculties were necessary, to enable the bank to perform the services which are exacted from it, and for which it was created. This was certainly a question proper for the consideration of the national legislature.' p. 864.

As the doctrines thus announced have been reiterated in a multitude of judicial decisions, and have been undeviatingly applied in legislative, and enforced in administrative, action, we come at once to state the case before us to see whether such doctrines dispose, without more, as a mere question of authority, of the subject under consideration.

Section 11(k) of the Act of Congress approved December 23, 1913, establishing the Federal Reserve Board (38 Stat. at L. 251, 262, chap. 6, Comp. Stat. 1916, §§ 9785, 9794), gives to that board authority 'to grant by special permit to national banks applying therefor, when not in contravention of state or local law, the right to act as trustee, executor, administrator, or registrar of stocks and bonds under such rules and regulations as the said board may prescribe.'

The First National Bank of Bay City, having obtained the certificate required, began the exercise of the powers stated. Thereupon certain trust companies which, under the laws of Michigan, had the authority to do the same character of business, petitioned the attorney general of the state to test the right of the national bank to use the functions, on the ground that its doing so was contrary to the laws of the state of Michigan, and that the action of the Federal Reserve Board, purporting to give authority, was in contravention of the Constitution of the United States. The attorney general then, on the relation of the trust companies, commenced in the supreme court of the state a proceeding in the nature of quo warranto to test the right of the corporation to exercise the functions. The bank, in defense, fully stated its Federal charter, the rights given by the act of Congress, and the action of the Federal Reserve Board taken thereunder. The attorney general demurred to this defense, first, because Congress had no power to confer the authority which was called in question; second, because if it had the power, it was without right to delegate to the Reserve Board the deter- mination of when it should be used; and third, because the exercise of the powers was in contravention of the laws and authority of the state, and the Reserve Board, therefore, under the act, had no power to grant the certificate.

The case was heard by the full court. In an opinion of one judge, which, it would seem, was written before the opinion of the court was prepared, it was elaborately reasoned that the exercise by a national bank of the functions enumerated in the section of the act of Congress under consideration would be contrary to the laws of the state, and therefore the Reserve Board, under the terms of the act of Congress, had no power to authorize their exertion. The opinion of the court, however, fully examining the grounds thus stated and disagreeing with them, expressly decided that corporations were authorized by the state law to perform the functions in question, and that the mere fact that national banks were Federal corporations did not render them unfit to assume and perform such duties under the state law, because the mere difference existing between the general administrative rules governing national banks and state corporations afforded no ground for saying that it would be contrary to state law for national banks to exert the powers under consideration. The authority conferred by the act of Congress and the rights arising from the certificate from such point of view were therefore upheld. Looking at the subject, however, from a consideration of the legislative power of Congress in the light of the decisions in M'Culloch v. Maryland and Osborn v. Bank of United States, and recognizing that it had been settled beyond dispute that Congress had power to organize banks and endow them with functions both of a public and private character, and in the assumed further light of the rule that every reasonable intendment must be indulged in in favor of the constitutionality of a legislative power exercised, it was yet decided that Congress had no authority to confer the powers embraced in the section of the act under consideration, and hence that the section was void. The court, following its reference to...