State ex rel. Sharpe v. Smith
Decision Date | 30 January 1931 |
Docket Number | No. 6980.,6980. |
Citation | 234 N.W. 764,58 S.D. 22 |
Parties | STATE ex rel. SHARPE, Atty. Gen., et al. v. SMITH, State Superintendent of Banks, et al. (BANK OF GANN VALLEY, Intervener). |
Court | South Dakota Supreme Court |
OPINION TEXT STARTS HERE
Original proceeding in mandamus by the State, on the relation of M. Q. Sharpe, Attorney General, and others, and an ancillary proceeding by M. Q. Sharpe, Attorney General, on behalf of the State, against F. R. Smith, as Superintendent of Banks within and for the State, and as a member of, and the chairman and treasurer of, the Depositors' Guaranty Fund Commission, in which the Bank of Gann Valley intervened.
Writ of mandamus denied.
Crawford & Crawford and Charles P. Warren, all of Huron, Paul M. Young, of Mitchell, M. Q. Sharpe, Atty. Gen., and R. F. Drewry, Asst. Atty. Gen., for petitioners.Herbert E. Hitchcock, of Mitchell, T. B. Thorson and O'Keeffe & Stephens, both of Pierre, for defendants.
Roy E. Willy, of Sioux Falls, and Churchill & Benson, of Huron, for intervener.
This case involves the determination of the present situation in this state with reference to the law relating to the guaranty of deposits in banks operated under the control and supervision of the state of South Dakota. The nature of the present proceeding is an original application in this court for mandamus, as will be more fully stated hereinafter. Any intelligent consideration of the problems here presented necessarily requires, as all parties to this proceeding point out in their briefs, a consideration of the history of the Bank Guaranty Law in this state and of operations thereunder, and the present status of conditions pertaining to such law. It requires also some contemplation of the political, economic, and historical background whence the Bank Guaranty Law emerged. We will therefore attempt to deal somewhat with these matters before undertaking to state the exact issues involved in the present proceeding.
Perhaps the earliest movement in the United States for the guaranty of bank deposits, as pointed out in several of the briefs filed herein, was in the state of New York in 1829, when there was inaugurated the so-called “Safety Fund Banking System.” In those days the principal form of circulating bank credit was not, as it is to-day, checks, drafts, etc., representative of a deposit credit, but consisted of bank notes. The object and intention of the New York law was to provide adequate security for circulating bank credit in the form of bank note issues. The law was sufficiently broad in its terms, however, to embrace within its guaranty provisions, not only the note issues of banks, but all debts of banks. Numerous bank failures occurred in New York as a result of the panic of 1837, and the debts of the failed banks (as contradistinguished from their outstanding note issues) were so great that the safety fund system completely broke down and collapsed under the strain. Similar experiments were inaugurated at about the same time in Michigan and in Vermont, but none of these early experiments were successful or continued long in operation.
The movement which resulted in the enactment of the South Dakota law for the guaranty of bank deposits, however, is of comparatively recent origin. Perhaps no one has made a more careful, comprehensive, and sympathetic study of the bank guaranty movement than Professor Thomas Bruce Robb of the Department of Economics of the University of Missouri, later of the University of Nebraska. In his book “The Guaranty of Bank Deposits” (Boston, Houghton Mifflin Co., 1921) he says (page 20):
Again, in 2 Encyclopaedia Social Sciences (MacMillan Co., New York, 1930), Mr. Robb epitomizes the general situation as follows:
With this survey of the larger picture of which bank guaranty in South Dakota forms a part, we turn to the particular situation in this state.
The first law in South Dakota relating to the guaranty of bank deposits was chapter 299, Laws 1909, which was a scheme entirely voluntary in nature so far as the banks were concerned. The act was not to be effective until such time as one hundred existing state banks, with an aggregate capital of at least $1,000,000 should establish their eligibility to membership in a voluntary guaranty association, pay their membership fees, premiums, etc., and take the necessary steps to form and inaugurate the association. This condition was never fulfilled. The association never came into being, and the law was never availed of. Public clamor for guaranty of bank deposits continued, however, and in 1915 there was enacted in this state our first real law for guaranty of bank deposits as article 3 (sections 1 to 28) of chapter 102, Laws 1915.
The guaranty fund law of 1915 became a part of the South Dakota Revised Code of 1919 (sections 9005 to 9031, inclusive) without any intervening change, excepting that by chapter 143, Laws 1917, sections 6, 16, and 26 of the original act, which became respectively sections 9010, 9020, and 9029, Rev. Code 1919, were amended so as to bring within the protection of the law (which in its original form was designed...
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