Northwest Bancorporation v. Benson, 2747.

• Decision Date: 05 April 1934
• Docket Number: No. 2747.,2747.
• Citation: 6 F. Supp. 704
• Parties: NORTHWEST BANCORPORATION v. BENSON, Commissioner of Banks, et al.
• Court: U.S. District Court — District of Minnesota

6 F. Supp. 704

NORTHWEST BANCORPORATION v. BENSON, Commissioner of Banks, et al.

No. 2747.

District Court, D. Minnesota, Fourth Division.

April 5, 1934.

COPYRIGHT MATERIAL OMITTED

Claude G. Krause, J. B. Faegre, F. H. Stinchfield, and G. A. Youngquist, all of Minneapolis, Minn., for plaintiff.

Harry Peterson, Atty. Gen., and Matthias N. Orfield and Roger S. Rutchick, Asst. Attys. Gen., for defendants.

Before WOODROUGH, Circuit Judge, and NORDBYE and JOYCE, District Judges.

Findings of Fact and Conclusions of Law.

The above-entitled cause duly coming on to be heard before the undersigned sitting and acting under and pursuant to section 266 of the Judicial Code of the United States (28 USCA § 380), at Minneapolis, Minn., on February 20 and 21, 1934, upon motion by plaintiff for a temporary injunction to restrain defendants and all persons acting under them from taking any further proceedings under certain orders theretofore issued by them as the department of commerce of the state of Minnesota and hereinafter fully set forth, Messrs. Claude G. Krause, J. B. Faegre, F. H. Stinchfield, and G. A. Youngquist appearing as solicitors on behalf of plaintiff, and Hon. Harry Peterson, Attorney General of the state of Minnesota, Matthias N. Orfield, Assistant Attorney General, and Roger S. Rutchick, Assistant Attorney General, appearing as attorneys on behalf of the defendants, and the matter having been fully argued and submitted upon the verified bill and answer, and the answering and reply affidavits, and the court being fully advised in the premises, does hereby make the following

Findings of Fact.

I. Plaintiff was on January 24, 1929, organized and now is a corporation under the laws of the state of Delaware, is a citizen and resident of said state, and at all times herein mentioned has been and now is qualified to do business in the state of Minnesota.

II. Defendant Benson is the duly qualified and acting commissioner of banks, defendant Skahen is the duly qualified and acting commissioner of securities, and defendant Brown is the duly qualified and acting commissioner of insurance of the state of Minnesota. Defendants in said capacities are all the members of and constitute collectively the department of commerce of said state, and in respect of the matters hereinafter set forth have acted and do now act as the securities division of said department, and in all matters herein mentioned were and are acting in their official capacities as such commissioners. Each of the defendants is a citizen and resident of Minnesota, and defendant Skahen resides within the Fourth division of the district of Minnesota.

III. The amount in controversy exceeds $3,000, exclusive of interest and costs.

IV. Plaintiff's business and assets consist in large measure of the ownership and supervision of stock in 125 banking and financial institutions located and doing business in Minnesota and seven other states in the Northwest.

V. On November 21, 1933, there was on the statute books of the state of Minnesota a statute commonly called the State Securities Act (sections 3996-1 to 3996-31, inclusive), which had been the law of the state during all the times herein mentioned, but has been amended as to certain matters in the years 1927, 1931, and 1933.

VI. That on February 20, 1929, there were registered for sale with the defendant commissioners or their predecessors in office, 600,000 shares of the common capital stock of plaintiff company. That on August 6, 1929, there was an additional registration with the same officials of 595,000 shares of said stock.

That on September 11, 1929, the stock of the plaintiff company was listed on the Chicago Stock Exchange, and that on said date, 1,041,206 shares were admitted to trading on said exchange; that said last amount was the amount of stock then outstanding. That on November 8, 1929, an additional 524,632 shares were admitted to trading on said Chicago Stock Exchange as of November 15, 1929, that being as nearly as might be then calculated the exact amount of additional stock to be then outstanding.

That thereafter and from time to time additional shares of said stock were sold or exchanged and at frequent convenient intervals in accordance with the rules of said exchange, notification of such sales or exchanges was given to said Chicago Stock Exchange and such additional shares were admitted to trading on said exchange; from time to time thereafter there was admitted to trading on said exchange on similar notification the same amount of stock as was outstanding so far as the calculations could readily be made at convenient periods of a few days or a week. That said stock has been listed on said exchange ever since said date of September 11, 1929, and is still so listed. That the stock has been continuously sold and traded in in the state of Minnesota among a great number of people from the date of issuance to the present time.

That the amount of stock now outstanding of said corporation is 1,679,501 shares, and that 1,670,259 shares were issued and outstanding as early as November 19, 1930.

VII. All shares of plaintiff's capital stock which have been issued and sold by plaintiff in Minnesota were at the time of sale and issuance either registered under and pursuant to the laws of Minnesota or had been listed in the Chicago Stock Exchange pursuant to official authorization of said exchange. After the said listing of plaintiff's stock on the Chicago Stock Exchange, said stock was exempt from registration under the statutes of the state of Minnesota.

VIII. The registration of plaintiff's stock by the State Commerce Commission was canceled and terminated on March 11, 1930, because of the registration and listing of such stock on the Chicago Stock Exchange.

IX. On November 21, 1933, defendants caused to be executed and issued an order suspending the exempt status of the common capital stock of plaintiff, copy of which is set forth on pp. 17-20 of the printed record and designated Exhibit C.

X. On November 21, 1933, defendants caused to be executed and issued an order for the investigation of the sale of the common capital stock of plaintiff, a copy of which is set forth on pp. 13-17 of the printed record and designated Exhibit B.

XI. On January 17, 1934, plaintiff, acting through its officers, executed and delivered to and filed with defendants an instrument, printed on pp. 12, 13 of the printed record herein and designated Exhibit A, by which instrument plaintiff requested and demanded the revocation of the exempt status of plaintiff's stock.

XII. Under and by virtue of said order for investigation and said order suspending exempt status, defendants have issued subpœnas directed to certain officers and directors of plaintiff and certain other persons. Copies of said subpœnas marked Exhibits D, E, F, G, H, I, J, K, and L are set forth on pp. 20-31 of the printed record.

XIII. Public hearings have been held pursuant to defendants' said order for investigation and order suspending exempt status on December 4, 11, and 20, 1933, and January 9, 1934. On January 9, 1934, by order of defendants at the request of plaintiff, said public hearings were adjourned to January 19, 1934, during which interim the restraining order in this proceeding was issued on January 18, 1934.

XIV. That at the time when defendants issued their order for investigation and their order suspending the exempt status of plaintiff's stock and their order suspending license to sell stock and at all times thereafter, defendants had information in their possession as the State Commerce Commission, from which they had reasonable grounds to believe that the plaintiff within three years prior to November 21, 1933, had sold its securities in a fraudulent manner, or that such sales within the meaning of the Securities Act within said three-year period have worked a fraud on the purchasers thereof and that divers persons and dealers have engaged and will engage in the sale and purchase of said securities in the future within the state of Minnesota within the meaning of the said Securities Act, including probable transfers by plaintiff of its treasury shares of stock and shares otherwise acquired, all in pursuance to previous binding agreements and in consummation of the original purpose and plan of the plaintiff.

XV. In conducting the investigation instituted by the orders issued on November 21, 1933, defendants interfered with plaintiff's business, books, papers, accounts, records, and rights of privacy no further than was necessary in order to carry on said investigation.

XVI. There is no sufficient evidence to show that defendants or their servants, agents, or attorneys, in the past, have used, or in the future, intend to use any information acquired by them in the course of the investigation carried on under defendants' orders of November 21, 1933, in any manner except to carry out their legal duties as officers and servants of the state.

Conclusions of Law.

I. The petition presents a controversy arising under the Constitution of the United States, the state is not a party and the court has jurisdiction over all controversies presented upon the issues in the case. The plaintiff is without adequate remedy at law.

II. The State Securities Act, as amended, and particularly section 19 thereof, with respect to all issues involved in this proceeding, does not in any respect violate any provision of the Constitution of the state of Minnesota or the Constitution of the United States. Specifically, it is constitutional as against each of the following objections:

1. That its title is insufficient.

2. That it violates the Fourteenth Amendment to the Constitution of the United States and section 7 of article 1 of the Constitution of the state of Minnesota by depriving plaintiff of rights and privileges without due process of law.

3. That it violates section 2 of article 1 of the Constitution of Minnesota in that it...