Sargent Cnty. v. State

CourtUnited States State Supreme Court of North Dakota
Citation47 N.D. 561,182 N.W. 270
PartiesSARGENT COUNTY v. STATE, Doing Business as BANK OF NORTH DAKOTA.
Decision Date04 April 1921
OPINION TEXT STARTS HERE
Syllabus by the Court.

Pursuant to constitutional and statutory enactments, the Bank of North Dakota, as an agency of the sovereign power, engaged in the banking business, has a distinct status separate and apart from that of the state itself. This status permits it to function as a distinct and separate agency of the sovereign power.

(a) A “garnishment” proceeding is an action; it creates no specific lien; it seeks to hold the garnishee to a personal liability, and judgment, dependent upon his liability to the defendant. It is a remedy separate and distinct from attachment or execution.

(b) Section 8177, C. L. 1913, which relates to executions against the state, has neither reference nor application to a direct garnishment proceeding, ancillary to suit against the Bank of North Dakota.

(c) Where a county has instituted action to recover deposits made in the Bank of North Dakota, and also garnishment proceedings against various state and national banks by reason of redeposits made by the Bank of North Dakota in such banks, it is held, pursuant to the express provisions of section 22, c. 147, Laws 1919 (Bank of North Dakota Act), that such garnishment proceedings are proper.

Appeal from District Court, Sargent County; McKenna, Judge.

Proceedings in garnishment by Sargent County against the State, doing business as the Bank of North Dakota. From an order refusing to vacate garnishment proceedings, defendant appeals. Affirmed.

Grace, J., dissenting.

Wm. Lemke, Atty. Gen., W. A. Anderson, Asst. Atty. Gen. (Simpson & Mackoff, of Dickinson, of counsel), for appellant.

S. A. Sweetman, State's Atty., of Forman, and Engerud, Divet, Holt & Frame, of Fargo, for respondent.

Statement.

BRONSON, J.

The defendant has appealed from an order overruling a motion to vacate a garnishment. Sargent county has instituted an action against the defendant to recover a judgment of, approximately, $125,000, upon deposits of money made in the Bank of North Dakota, both upon open account and otherwise. At the same time, the county instituted a garnishment proceeding against some 17 national and state banks, wherein it appears that the Bank of North Dakota has deposited funds. To the garnishment proceedings, the defendant interposed an answer alleging that the garnishment affidavits were false and untrue; that the garnishment summons was issued in plain violation of section 8177, C. L. 1913, and is illegal and void; and that all of the property held by the garnishees belonging to the defendant is absolutely exempt from execution. The defendant thereupon moved to dismiss such garnishment proceedings upon the grounds set forth in the answer. The trial court overruled the motion.

At the general election, in November, 1918, the people ratified a constitutional amendment which provides, in part, that the state may make internal improvements and may engage in any industry, enterprise, or business excepting the manufacture, sale, and disposition of intoxicating liquors. Article 32 Amend. N. D. Const.

Pursuant thereto, the Legislative Assembly, in February, 1919, established the Bank of North Dakota (chapter 147, Laws 1919). The act declares the purpose of the state of North Dakota to engage in the banking business and establish a system of banking under the name of the Bank of North Dakota, owned, controlled, and operated by the state under the name of the “Bank of North Dakota.” The act further provides that the Industrial Commission (consisting of the Governor, the Attorney General, and the Commissioner of Agriculture and Labor) shall operate, manage, and control the bank; that the bank shall be opened and shall proceed to business whenever there shall be delivered to the Industrial Commission bonds in the sum of $2,000,000 issued by the state; that the fund procured by the sale of such bonds shall be designated and known as the capital of such bank (section 6). All state, county, township, municipal, and school district funds, and funds of all penal, educational, and industrial institutions, and all public funds, were required to be deposited in such bank within three months after the passage and approval of the act, subject to certain exceptions (section 7). The bank was authorized to receive deposits from any source including the United States government and any foreign or domestic individual corporation, municipality, or bank, and to deposit funds to the credit of the bank in any bank or agency approved by the Industrial Commission (section 9). The act further provides that all deposits in the bank are hereby guaranteed by the state, and such deposits shall be exempt from all state, county, and municipal taxes at any and all times (section 10). Furthermore, that funds deposited by state banks in such Bank of North Dakota shall be deemed available funds pursuant to section 5170, C. L. 1913 (relating to reserve funds of a state bank); that the Bank of North Dakota might perform the functions and render the service of a clearing house with reference to banks that make the Bank of North Dakota a reserve depositary (section 11); that all business of the bank may be conducted under the name of the “Bank of North Dakota”; that title to property pertaining to the operation of the bank shall be obtained and conveyed in the name of the State of North Dakota, doing business as the Bank of North Dakota” (section 21).

Section 22 of the act provides as follows:

“Civil actions may be brought against the state of North Dakota on account of causes of action claimed to have arisen out of transactions connected with the operation of the Bank of North Dakota, upon condition that the provisions in this section are complied with. In such actions the state shall be designated as the State of North Dakota, doing business as the Bank of North Dakota,’ and the service of process therein shall be made upon the Manager of said bank. Such actions may be brought in the same manner and shall be subject to the same provisions of law as other civil actions brought pursuant to the provisions of the Code of Civil Procedure. Such actions shall be brought, however, in the county where the Bank of North Dakota shall have its principal place of business, except as provided in sections 7415, 7416 and 7418, Compiled Laws of North Dakota 1913. The provisions of sections 375 and 657 of the Compiled Laws of 1913 shall not apply to claims against the state, affected by the provisions of this section.”

Section 23 provides for the examination of such bank at least twice annually by the state examiner.

Pursuant to this act, the Bank of North Dakota opened for business in July, 1919. It became the depositary of the public funds of municipal subdivisions of the state as well as of the state and its institutions. In August, 1920, after being in operation approximately one year, in this bank, pursuant to its statement of which judicial notice is taken, there were public deposits of over $15,000,000,deposits due depositary banks of about $1,700,000 and individual deposits of approximately $100,000. At that time the bank, pursuant to its statement, claimed a capital of $2,000,000, a surplus of $40,000, and a reserve of $30,000, and net profits for the year 1920 of over $171,000.

In a statement of the bank, under date of February 15, 1921, the public deposits, in round numbers, are listed as follows:

+-----------------------------------------------------------------------------+
                ¦Sinking funds                                                     ¦$3,700,000¦
                +------------------------------------------------------------------+----------¦
                ¦General and other funds, state treasury                           ¦2,400,000 ¦
                +------------------------------------------------------------------+----------¦
                ¦General and other funds, county, city, township, and school       ¦3,800,000 ¦
                ¦treasury                                                          ¦          ¦
                +------------------------------------------------------------------+----------¦
                ¦The capital is stated to be                                       ¦2,000,000 ¦
                +------------------------------------------------------------------+----------¦
                ¦Surplus                                                           ¦40,000    ¦
                +------------------------------------------------------------------+----------¦
                ¦Reserve items                                                     ¦34,000    ¦
                +------------------------------------------------------------------+----------¦
                ¦Net profits for 1920                                              ¦121,000   ¦
                +------------------------------------------------------------------+----------¦
                ¦Net profits for 1921                                              ¦8,000     ¦
                +------------------------------------------------------------------+----------¦
                ¦Individual deposits are listed at                                 ¦245,000   ¦
                +-----------------------------------------------------------------------------+
                

At the general election held on November 2, 1920, an initiative act was submitted to and adopted by the voters, which permits municipal subdivisions of the state to deposit their public funds in depositaries of their own choice.

The complaint in this action alleges that pursuant to this initiative act the county determined to discontinue further deposits of its funds in the Bank of North Dakota; that thereupon it drew checks upon its account wherein there were moneys therein to its credit, and such checks were dishonored in large numbers.

Section 8177, C. L. 1913, provides:

“No execution shall issue against the state on any judgment, but whenever a final judgment against the state shall have been obtained in any action the clerk shall make and furnish to the state auditor a duly certified copy of such judgment...

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