State v. Cooper

• Decision Date: 25 November 1925
• Docket Number: 274.
• Parties: STATE v. COOPER.
• Court: North Carolina Supreme Court

130 S.E. 180

190 N.C. 528

STATE v. COOPER.

No. 274.

Supreme Court of North Carolina

November 25, 1925

Appeal from Superior Court, New Hanover County; Grady, Judge.

Thomas E. Cooper was convicted of violation of the State Banking Laws, and he appeals. No error.

At September term, 1923, of said court, two bills of indictment charging defendant and another with violations of the banking law of this state were returned as true bills. In one, it was charged that Joseph C. Rourk and Thomas E. Cooper, officers of the Liberty Savings Bank, a corporation engaged in the banking business under the laws of this state, at Wilmington N. C., did on ______ day of January, 1923, unlawfully and willfully make loans or discounts for and on behalf of said bank, when the reserve was below the amount required to be maintained by law, against the form of the statute, etc.; in the other, it was charged that Joseph C. Rourk, cashier and director, and Thomas E. Cooper, president and director, of said Liberty Savings Bank, both being also members of the finance committee of its board of directors, did on ______ day of January, 1923, unlawfully and willfully make, obtain or procure from said bank, loans in excess of 25 per cent. of the capital stock and permanent surplus of said bank (1) to C. W. Lassiter, (2) to Thomas E. Cooper, and (3) to C. E Wendlenger, against the form of the statute, etc. The violations of the statute with respect to each loan alleged in the latter indictment were charged in separate counts. Both defendants entered pleas of not guilty.

These indictments came on for trial at November term, 1924, upon said pleas. They were consolidated and tried together. There was a verdict of guilty upon both indictments as to Thomas E Cooper. From the judgments upon the verdict, defendant appealed. The appeal was heard at the close of the spring term of this court, and was then continued, upon an adversari, to this term.

Indictments for making loans contrary to banking laws properly consolidated and tried together when offenses of same class.

Herbert McClammy and W. F. Jones, both of Wilmington, for appellant.

Dennis G. Brummitt, Atty. Gen., and Frank Nash, Asst. Atty. Gen., for the State.

CONNOR J.

Defendant excepted to the order of the court consolidating the two indictments, in accordance with which they were tried together. This exception is the basis of the first assignment of error.

Each indictment charges violations of the banking laws of North Carolina--one, that defendant, an officer of the Liberty Savings Bank, unlawfully and willfully made loans for said bank when its reserve was below the statutory requirement (Public Laws 1921, c. 4, § 71; C. S. vol. 3, § 222 [[i]); the other, that defendant, as president, director, and member of the finance committee, unlawfully and willfully made loans for said bank to persons named therein, the total amount loaned to each of said persons being in excess of the maximum percentage of the capital stock and permanent surplus of said bank, fixed by statute as the limitation of the total direct and indirect liabilities of any person, firm, or corporation for money borrowed from a bank (Public Laws 1921, c. 4, § 29; C. S. vol. 3, § 220 [d]).

The acts alleged in both indictments are forbidden and made unlawful by the same statute. If such acts constitute crimes or criminal offenses, then they are crimes of the same class--that is, misdemeanors, with the same maximum punishment prescribed by law. Public Laws 1921, Extra Session, c. 56, § 4. There is express statutory authority for the order made by the court, and for the trial of the two indictments together, pursuant to said order. C. S. § 4622; State v. Jarrett, 189 N.C. 516, 127 S.E. 590; State v. Malpass, 189 N.C. 349, 127 S.E. 248; State v. Mills, 181 N.C. 530, 106 S.E. 677. There was no error in the order of consolidation. The first assignment of error cannot be sustained.

Defendant, by exceptions duly taken during the progress of the trial, presents to this court his contention that the acts alleged in the indictments herein do not constitute crimes or criminal offenses, under the laws of this state, at least do not constitute crimes or criminal offenses for which defendant, as an officer or director of the bank may be convicted and punished. This contention must be sustained, unless such acts, when committed by the bank or by its officers or directors are made crimes by statute. They are not crimes at common law.

The General Assembly of North Carolina has provided by statute for the regulation of banks, conducted under the laws of this state, and for a thorough supervision of those engaged in the business of conducting them. The term "bank" shall be construed to mean any corporation, partnership, or individual engaged in the business of receiving, soliciting, or accepting money or its equivalent on deposit. Penalties are prescribed by the statute to secure compliance with its provisions, in some instances to be imposed upon the bank, in others upon its officers or directors, upon failure to comply therewith. Public Laws 1921, c. 4 and amendments; C. S. vol. 3, c. 5.

It is therein provided that every bank shall at all times have on hand or on deposit, with approved depositories, instantly available funds in an amount equal to at least 15 per cent. of the aggregate amount of its demand deposits, and 5 per cent. of the aggregate amount of its time deposits. "Demand deposits" are defined as all deposits, the payment of which can be legally required within 30 days; "time deposits," as all deposits, the payment of which cannot be legally required within 30 days. Public Laws 1921, c. 4, § 1; C. S. vol. 3, § 216 (a). The reserve required shall consist of cash on hand, and balances payable on demand, due from other approved solvent banks which have been designated as depositories (section 32, C. S. vol. 3, § 220 [g]) by resolution of the board of directors and approved by the corporation commission (section 55, C. S. vol. 3, § 221 [g]). When the reserve falls below the statutory requirement, the bank shall not make new loans or discounts, other than by discounting or purchasing bills of exchange payable at sight or on demand. The corporation commission shall require any bank, whose reserve has fallen below the statutory requirement, immediately to make good such reserve, and, upon failure of the bank within 30 days to make such reserve good, the commission may forthwith take possession of the property and business of said bank. Section 71, C. S. vol. 3, § 222 (i).

It is further provided by said statute that the total direct and indirect liabilities of any person, firm, or corporation for money borrowed from any bank, including in the liabilities of a firm the liabilities of the several members thereof, shall at no time exceed 25 per cent. of the capital stock and permanent surplus of any bank having a paid-in capital stock of $250,000 or less; this limitation upon loans does not apply to loans or extensions and renewals thereof existing at the date of the ratification of the act. Section 29, C. S. vol. 3, § 220 (d). The limitation applies only to new loans made after the ratification of the act of 1921. No specific power is conferred upon the corporation commission with reference to the enforcement of this provision, nor is there any specific penalty prescribed for its violation by the bank, or by its officers and directors. For amendment of this section, not material, however, to the decision of the questions presented by this appeal, see Public Laws 1925, c. 119.

The foregoing are the only provisions of the act of 1921, as ratified on February 18, 1921, relative to loans by a bank when its reserve is below the statutory requirement, or relative to limitations upon the amount which may be loaned by a bank to any person, firm, or corporation. It will be noted, however, that loans in violation of either provision are forbidden by the statute. The making of such loans is unlawful. The wisdom of these two provisions is manifest; banks, whose business is conducted in strict compliance with these two provisions seldom become insolvent, and thus bring loss and disaster upon depositors and stockholders, and usually, also, upon others who may have no direct interest in the insolvent bank, but who nevertheless suffer by reason of the loss sustained by those who do have such interest. These provisions, although arbitrary as to details, are supported in principle by the lessons taught in the school of experience --said to be the best of teachers.

Doubtless the General Assembly, at the regular session of 1921, thought that the inclusion of these two provisions in the general banking laws of the state, as regulations to be observed by banks and their officers and...