Henrys v. Raboin

• Decision Date: 18 November 1946
• Docket Number: No. 29345.,29345.
• Citation: 69 N.E.2d 491,395 Ill. 118
• Parties: HENRYS et al. v. RABOIN et al.
• Court: Illinois Supreme Court

395 Ill. 118

69 N.E.2d 491

HENRYS et al.

v.RABOIN et al.

No. 29345.

Supreme Court of Illinois.

Sept. 18, 1946.

Rehearing Denied Nov. 18, 1946.

Appeal from Circuit Court, Livingston County; Ray Sesler, judge.

Suit by Henry Henrys and others against Howard D. Raboin and others involving the liability of the estate of Richard R. Meents, deceased, to pay the stockholders' constitutional superadded liability on stock issued by the Farmers' State Bank of Cullom. From an adverse decree, Christie H. Meents, administrator, appeals.

Affirmed.

Charles LeRoy Brown and Franklin J. Stransky, both of Chicago, and Bruce A. Campbell, of East St. Louis, for defendant-appellant.

C. J. Ahern, of Dwight, Tuesburg & Armstrong, all of Pontiac, and Cassidy, Sloan & Crutcher, of Peoria, for plaintiffs-appellees.

MURPHY, Justice.

This is an appeal from a decree of the circuit court of Livingston county. The constitutional questions raised give this court jurisdiction by direct appeal.

The controversy is as to the liability of the estate of Richard R. Meents, deceased, to pay the stockholders' constitutional superadded liability on nine shares of stock held by the estate, which were issued by the Farmers' State Bank of Cullom. The bank was organized in 1917 and closed by the Auditor of Public Accounts April 2, 1943. When closed, its total deposit liability was $478,801.57. Its deposits were insured in the Federal Deposit Insurance Corporation and of its total deposit liability the insurance company paid $406,446.92. Each depositor who received payment of all or a part of his deposits from the insurance company assigned to the company, to the extent of the amount paid, all claim he had against any stockholder of the bank arising out of the superadded liability imposed by section 6 of article XI of the constitution, Smith-Hurd Stats. Thereafter the company, pursuant to congressionalrequirement (U.S.C.A. Title 12, section 264(l)(7) waived all rights, causes of action and claims it had against all stockholders by reason of the several assignments from the depositors and by right of subrogation. It was stipulated that, to give full force and effect to the waiver, if any judgment should be entered against the stockholders, such judgment should either be abated before entry or satisfied after entry in the proportion that the sum of $406,446.92 bears to the sum of $478,801.57. There is no complaint that the judgment of $136.08 entered against the estate of Richard R. Meents is not in accord with the stipulation.

The administrator, appellant here, contends the constitutional provision (section 6 of article XI) which imposes a superadded liability on stockholders of banks is void and has been since its adoption in 1870. The second proposition advanced for the reversal of the decree is, that if it is to be held that the constitutional provision was valid when adopted, it has by reason of certain Federal legislation enacted in recent years become invalid. All the contentions made center on these two general propositions. They will be considered in the order stated.

In the seventy-five years that section 6 has been a part of the fundamental law of the State, the General Assembly, the State's administrative officers, and the courts have always treated it as being valid and enforcible against stockholders of State banks. As far as we can determine, the attack now made on its validity has never been previously asserted. Such long and uninterrupted application clothes it with a strong presumption of validity.

Section 6 of article XI of the constitution provides: ‘Every stockholder in a banking corporation or institution shall be individually responsible and liable to its creditors, over and above the amount of stock by him or her held, to an amount equal to his or her respective shares so held, for all its liabilities accruing while he or she remains such stockholder.’

Both contentions urged by appellant for reversal recognize the well established doctrine that ours is a dual form of government, that in every State there are two governments, the State and the United States; that they are each sovereign with respect to the objects committed to it and neither sovereign with respects to the objects committed to the other. With this principle as a basis, the proposition is advanced that the language of section 6 ‘every stockholder in a banking corporation or institution’ is all inclusive and brings within its provisions stockholders of banks organized under Federal laws as well as stockholders of banks organized pursuant to State statute. It is argued that the unauthorized assumption of jurisdiction over national banks is so interwoven with the authority the State might exercise over State banks that the valid cannot be separated from the invalid and that thereby section 6 is void for all purposes.

Since McCulloch v. Maryland, 4 Wheat. 316, 4 L.Ed. 579, there has been no question as to the power of Congress to enact laws for the organization and operation of banks. It is firmly established that banks organized pursuant to acts of Congress are under the exclusive jurisdiction of the Federal government and any State law which undertakes to limit or control such banks is void. Maricopa County v. Valley National Bank, 318 U.S. 357, 63 S.Ct. 587, 87 L.Ed. 834;Easton v. Iowa, 188 U.S. 220, 23 S.Ct. 288, 47 L.Ed. 452. The power to determine whether stockholders of national banks are to be subjected to a double liability is vested exclusively in Congress. Seabury v. Green, 294 U.S. 165, 55 S.Ct. 373, 79 L.Ed. 834, 96 A.L.R. 1463;Christopher v. Norvell, 201 U.S. 216, 26 S.Ct. 502, 50 L.Ed. 732, 5 Ann.Cas. 740. It makes no difference whether the State attempts to control national banks by means of a constitutional or statutory provision, for in either event the State enactment must give way to the superior authority of the national government.

When our present constitution was adopted in 1870, a considerable portion of the banking business of the State was transacted through private banks. However, there were corporate banks some of which had been organized under State laws and others under the act of Congress. It will be observed that section 6 is not by express language limited in its application to stockholders of State banks and, conversely, it is not worded so as to expressly include stockholders of national banks.

Reference to the Debates and Proceedings of the Constitutional Convention fail to disclose that the members of the convention had in mind any specific purpose for which section 6 was to be adopted other than to give depositors in State banks more security than the mere corporate liability. The theme of the debates shows a comparison of the liability of a stockholder of a bank with the liability imposed by law upon those engaged in operating private banks and the debates indicate that the primary purpose for adopting section 6 was to meet this condition. We do not find anything in the debates which indicates that the members of the convention were distinguishing between the liability of stockholders of State banks and the liability of stockholders of banks organized under Federal enactment. Debates & Proceedings, Const.Conv. p. 1686.

Section 6 was first introduced to the convention in a report of the committee on banking and currency. Such report contained eight sections, and the present constitutional provision, section 6, was section 3 in the report. Section 7 of the report directed that those engaged in private banking should be taked on the capital actually used in such business. The proceedings show there was prolonged debate in regard to this matter, in which reference was made to national banks, the service they performed, the governmental favors bestowed on them, and the difficulty other banks had in competing with them. Hon. William H. Underwood said: ‘Our supreme court has decided that national banks organized under act of Congress, are subject to our state laws of taxation. That decision was taken to the supreme court of the United States, and reversed, because we had to conform to the national law in reference to banks of that class. An extra session of the legislature was required to amend our law for taxing such banks.’ Debates & Proceedings, Const. Conv., p. 1686. The title of the case referred to by member Underwood was not given, but evidently it was People v. Bradley, 39 Ill. 130, decided in 1866 and reversed in People v. Bradley, 4 Wall. 459, 18 L.Ed. 433. Thus it will be noted that at the same session of the convention at which section 3 of the committee's report was adopted to become section 6 of article XI of the constitution, there was discussion emphasizing the lack of power of the State to exercise any jurisdiction over national banks.

Courts will adopt every reasonable intendment to sustain a law. Liberty Foundries Co. v. Industrial Com., 373 Ill. 146, 25 N.E.2d 790;People ex rel. Sellers v. Brady, 262 Ill. 578, 105 N.E. 1. The constitutional provision in question might have been more explicit and by its terms expressly limited to stockholders of State banks. But where there is neither an express limitation restricting its application to that class of stockholders over which the State had jurisdiction, nor language showing an express inclusion of stockholders of national banks over which the State had no jurisdiction, the courts will apply that intendment which will sustain the law. If it should be said that section 6 was intended to include stockholders of national banks, then it is the equivalent of saying the makers of the constitution intended an application that would render it void. Such a conclusion would be contrary to well-recognized principles of law.

There is a rule of statutory construction which has been applied to statutes and is equally applicable to this constitutional provision. It is that where a statute comprehends within its general terms two or more subjects or classes, some of which...