State v. Langer

Decision Date24 October 1919
Docket Number1915
Citation177 N.W. 408,46 N.D. 462
CourtNorth Dakota Supreme Court

Original application to prohibit and restrain the respondents from usurping the powers and duties of the state examiner and from wrongfully continuing its appointee as receiver of the Scandinavian American Bank of Fargo.

Writ granted directing the state examiner to continue in charge of said bank, with full power to release possession of such bank to its officers when he deems fit, and restraining the respondents from further continuance of their wrongful acts.

Judgment for costs and disbursements ordered in favor of the relators and against the respondents.

Temporary restraining order issued against the respondents made permanent.

Wm Langer, Attorney General, Albert E. Sheets, Assistant Attorney General (S. L. Nuchols and W. S. Lauder, of counsel), for respondents.

Lemke, Paddock, & Day, for relators.

BRONSON, J. ROBINSON and GRACE, JJ., concur. BIRDZELL, J., CHRISTIANSON, Ch. J., (dissenting).




This is an original application to prohibit and restrain the respondents from interfering with the duties of the state examiner, and from continuing their alleged wrongful acts in determining the Scandinavian American Bank of Fargo to be insolvent, and in appointing thereover, a receiver.

On October 2, 1919, this court issued its preliminary order, temporarily restraining the respondents and placing in charge of such bank the state examiner upon petition, which alleges, among other things, that the respondents are usurping the powers and duties of the state examiner; that arbitrarily, illegally, and wrongfully they had occasioned advance information to be given that such bank was to be closed and had caused a run to be made on such bank; that illegally and wrongfully, without the consent of the state examiner, they caused such bank to be closed and a temporary receiver to be appointed; that such respondents are attempting arbitrarily to invalidate large amounts of collateral of such bank, are failing to make due collections thereof, and are about to sell great quantities thereof; that their arbitrary and illegal action, unless restrained, will financially wreck such institution; that public moneys are on deposit in such bank and the state bank guaranty fund are involved, as well as the powers and duties of the state examiner. Such petition seeks to invoke the exercise of the original jurisdiction of this court.

On the return day, October 15, 1919, the respondents filed a motion to dismiss upon jurisdictional grounds, and also their return and answer. On this day, the cause was orally argued and submitted. Pursuant to the order of this court, the parties have been granted until October 23, 1919, to make up and complete the record in this matter.

Record Facts.--Substantially, the facts, as disclosed by the record, are as follows:

For many years, the relator bank has been engaged in the general banking business as a state bank at Fargo, North Dakota. On September 17, 1919, this bank was examined by department of the state examiner through one of its deputies, the respondent Halldorson, and report thereof filed with the department. This report had been considered by the state examiner, conferences were held with the officers of the bank, and the recommendations made by the state examiner were being carried out as the evidence of the state examiner discloses.

On September 25, 1919, the state banking board, of which the respondents Langer and Hall constitute a majority, passed a resolution which reads as follows:


"Whereas, an investigation of one of the banks or associations doing business in the city of Fargo, under the supervision of the state banking board, leads the banking board to believe that an attempt is being made to defraud some of the stockholders, and

"Whereas, this institution is in close relation to the other banking institutions in Fargo,

"Be it resolved, that the attorney general or his assistants, together with one or more bank examiners he may choose, proceed to Fargo immediately and conduct a thorough examination of any and all banking institutions doing business in the city of Fargo, North Dakota, under the laws of this state; that said examination shall disclose the value of all stock of every nature and description, the amount of good and bad notes, together with all collateral, and any or all other things which, in the judgment of the attorney general, his assistants, or the men making the investigation, may be necessary to give the board complete information as to the value of the notes, the value of the loans, the value of the stock, and the value of the collateral within these various institutions, and that particular investigation be made to determine whether or not any crime has been committed on the part of any officers of the banks or institutions, and that the attorney general be given full power to act to protect any depositor, any stockholder, or the guarantee fund of the state."

The state examiner certifies to this resolution as secretary of the state banking board. On the same date he issued a letter to the respondent Halldorson, one of his deputy examiners, which reads as follows.

Mr. P. E. Halldorson, Deputy Examiner,

Fargo, North Dakota.

Dear Mr. Halldorson:--

You are hereby authorized to act under the direction of Attorney General William Langer in the examination of the Northwestern Savings & Loan Association of Fargo, and such other institutions in Fargo as he may deem necessary, with a view to ascertaining the truth of the charges made that this concern is attempting to freeze out some of its stockholders. You may also select any deputy examiner or examiners that you desire to assist you in this examination.

Yours truly,

O. E. Lofthus, State Examiner.

On September 26, 1919, the respondent Sheets proceeded to Fargo, under the direction of the attorney general, possessed of the records and reports of the Northwestern Mutual Savings & Loan Association, a letter of authority to him and Attorney Lauder to fully act in the place and stead of said attorney general (which letters of instruction did not state upon what matter they should possess such authority), together with the letter from the state examiner to said Halldorson.

On September 27, 1919, Sheets in company with Attorney Lauder went to the bank, and, in accordance with the testimony of Sheets, proceeded to go over the loans of the bank and check them. Attorney Lauder, in his affidavit, states that he is not a bookkeeper or accountant, and that he was not there for the purpose of making an examination himself, but to give advice upon any question of law that might arise. On September 28, 1919, the respondent Halldorson started to examine the bank, and on September 29, 1919, another deputy named Engemoen started to assist him.

Pursuant to this examination, Sheets, Halldorson, and Engemoen made and signed a report on October 1, 1919, covering a period of examination from September 27, 1919, to October 1, 1919, at 5 P. M., wherein they list various loans aggregating something over $ 734,000 as excessive loans, stating their general character to be extremely unsatisfactory, and the security in almost every case entirely inadequate. For many of these so-termed excessive loans the collateral or security is stated to the farmers' liabilities, represented by notes and postdated checks. For instance, there are four different loans described in such excessive loans list; namely: the Consumers United Stores Company, the National Nonpartisan League, the League Exchange, and the Publishers National Service Bureau list. These aggregate in round numbers, $ 443,000. The farmers' paper, which stands as collateral for such loans, amounts to over $ 970,000; there being some additional security amounting to over $ 29,000. The report estimates such farmers' notes to be not worth in excess of 50 per cent of their par value. As to the postdated checks it is their opinion that they are not collateral at all. That they are without validity or substantial value. There was also listed an itemized statement of bad debts amounting, in round figures, to $ 46,500, reported as of no value whatever. This report lists the resources and liabilities of such bank, showing that it had in loans and discounts (round figures given) $ 1,203,486; in deposits, private, $ 869,855; due to banks, $ 616,565, total deposits, $ 1,486,420; its capital, $ 50,000; surplus, $ 10,000; its cash on hand, $ 26,249; its amount due from banks, including collections in transit, $ 227,275; its excess expenses over undivided profits, $ 3,114. There is listed $ 169,973 past-due paper. The conclusion is reached that the bank is heavily overloaned, that its reserve is below the requirements of law, and, if figured in strict accordance with law, would be several hundred thousand dollars less than no reserve, and finally, somewhat rhetorically, it is stated...

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