Rowley v. Pogue

• Court: Supreme Court of Indiana
• Citation: 185 N.E. 273,203 Ind. 655
• Docket Number: 25,994
• Parties: Rowley v. Pogue
• Decision Date: 28 March 1933

185 N.E. 273

203 Ind. 655

Rowley
v.
Pogue

No. 25,994

Supreme Court of Indiana

March 28, 1933

203 Ind. 655 at 669.

Original Opinion of November 24, 1931, Reported at: 203 Ind. 655.

OPINION

[203 Ind. 669] On Petition for Rehearing.

Myers, J.

I do not approve the prevailing opinion in this case.

The important and major questions in the instant case were made to rest upon the reasoning and conclusions reached in the case of Gaiser v. Buck (1932), 203 Ind. 9; 179 N.E. 1. The complaint in that case proceeded upon the theory of a double liability of a stockholder in a bank of discount and deposit, under the mandate of the Constitution of Indiana, Art. XI, § 6, and also pursuant to the statute, § 3858 Burns 1926. The language of that opinion, when read in connection with the allegations of the complaint by a creditor to enforce payment by a shareholder of his proportion of the "debts or liabilities" of a bank of discount and deposit, leads to the inevitable result of declaring a "responsibility" of one hundred per cent under the Constitution, and a "liability" of one hundred per cent imposed by statute. The opinion in the instant case refers to the trust company statute (§ 3944 Burns 1926) which defines the shareholder's stock liability, the legal effect of which is the same as § 3858, supra, which applies to banks of discount and deposit. The rule announced in the case of Gaiser v. Buck is followed in the present case and its meaning clarified by the statement that the Constitution, § 6, Art. XI, is the authority for enforcing double liability for the payment of "debts or liabilities" of a bank or banking company, and the statute alone creates the liability and furnishes the remedy for the collection of an assessment for the restoration of the capital stock. The sole premise for declaring liability under [203 Ind. 670] the Constitution is the flat statement that § 6, Art. XI, is self-executing. I take the position, first, that § 6 is only self-executing when applied to the systems of banking described in the Constitution, or if § 2 may be so construed as not to be controlled by § 3 as to what the general banking law shall contain, then § 6 is an inhibition on the General Assembly limiting its power over shareholders of banks or banking companies engaged in a different system to the responsibility restricted by this section. Second, the General Assembly having passed a general banking law under which banks and trust companies have been established, and a new class of banks thereby authorized, we must look to the general law for determining the rights and liabilities of the shareholders in such new institutions and enforce [185 N.E. 274] them accordingly, unless they are violative of some provision of the Federal or State Constitutions.

In passing, I may say, the prevailing opinion seems to derive comfort and consider important the statement that "the subject of Art. XI is corporations." It will be observed that Art. XI consists of fourteen sections, twelve of which have to do with two systems of banking, and the other two sections, 13 and 14, together consisting of nearly five lines, are devoted to corporations other than banking. I will not take the space for further comment.

Art. XI, supra, includes all of the constitutional provisions in this state on the subject of banking. They express the powers as well as the inhibitions, within their limits, on the General Assembly when engaged in establishing and incorporating banks or banking companies. None of these provisions refer to banks of discount and deposit, although the words "discount and deposit" then in use must have been known to the framers of the Constitution. They must have been cognizant of Art. X, Constitution of 1816, wherein the General Assembly [203 Ind. 671] was prohibited from establishing or incorporating "in this State, any bank or banking company, or moneyed institution, for the purpose of issuing bills of credit, or bills payable to order or bearer." "A state bank and branches," however, was permitted. This Article, under certain conditions and limitations, was practically readopted in Art. XI, §§ 1 and 3 of the new Constitution. In January, 1834 (Acts 1834, p. 12), a State Bank with ten branches was established. It was a bank of issue and circulation and was to continue in existence until January 1, 1859. A bank of this character was also permitted under the new Constitution. The last legislation on this subject, prior to the Constitutional Convention of 1851, was in January, 1849 (Acts 1849, p. 18), wherein it was provided that no branch banks were to be established after the expiration of the year 1851. The words "discount and deposit," as I am at present advised, came into use in February, 1837 (Local Laws, 1837, p. 169), when the General Assembly established or chartered the Evansville Trust Company, with authority to engage in many activities. It was "made an office of discount and deposit" with permission to receive cash and other valuable things upon deposit, make loans, discount promissory notes, etc., but it was denied the right to "engage in the business of banking otherwise than in the purchase and sale of bank stock," and providing that all deposits received by it "shall be refunded on demand in specie, or its equivalent," except special deposits. Again, in January, 1849 (Local Laws 1849, p. 439), the Ohio Insurance Company, located in the city of New Albany, was made "an office of discount and deposit," and given a wide business range, including the right to receive cash on deposit and to loan the same, but it was required to refund such deposits on demand in specie or its equivalent, except special deposits. In compliance with the [203 Ind. 672] Constitution of 1816, Art. X, supra, both of the above companies were forbidden to issue bills of credit or bills payable as a circulation medium.

With the foregoing state of facts present, with knowledge of the common law, the mischief to be remedied, and like matters, the Constitution was adopted February 10, 1851, and took effect November 1, 1851. Its provisions with reference to "banks or banking companies" were evidently, from the debates, the decided limit of constitutional control of that subject, and were deemed sufficient to meet contingencies that might thereafter arise justifying constitutional restraint. It will hardly be denied that self-executing provisions of Constitutions are the exception and not the rule. At that time the state had two systems of banking -- one requiring collateral security for the redemption of its issue, and the other, a bank with branches without collateral security. Wright v. Defrees (1856), 8 Ind. 298, 305.

Conceding that Constitutions, Federal or State, are adopted for future uses based upon past experiences, then we must assume that our Constitution makers, in 1851, in the preparation of our present Constitution pertaining to the subject of banking, had in mind the banking history as also the banking systems in this State then in operation, as well as the service they were furnishing, their probable success or failure, as considerations for their final action. Their final conclusion on the subject, at present important, may be epitomized as follows: Sec. 1. The General Assembly is prohibited from incorporating a bank or banking company or moneyed institution of issue and circulation. Sec. 2. "No banks shall be established otherwise than under a general banking law, except as provided in the fourth section of this article." Sec. 3. "If the general assembly shall enact a general banking law, such law shall provide" that certain things shall be done and the procedure [203 Ind. 673] to be followed essential to a bank of issue. Aside from the general banking law to which the General Assembly is limited by §§ 2 and 3, it may charter a bank with branches (§ 4), which branches, under § 5, are made mutually responsible for each other's liabilities on all paper credit issued as money. Sec. 6. "The stockholders in every bank or banking company shall be individually responsible to an amount, over and above their stock, equal to their respective shares of stock, for all debts or liabilities of said bank or banking company." Sec. 10. "Every bank or banking company shall be required to cease all banking operations within twenty years from the time of its organization, and promptly thereafter to close its business," and Sec. 12 [185 N.E. 275] prohibits the State from becoming a "stockholder in any bank after the expiration of the present bank charter," or lending its credit to any banking enterprise.

In view of these constitutional limitations, the business of banking was confined to individual capital and control. The object of § 6, as evidenced by its relation to the sections which precede and follow it, becomes apparent. Only two systems of banking were constitutionally recognized, one under the general banking law and the other established by a General Assembly charter. Both were banks of issue and free to incur debts or liabilities in addition to those incurred...