Blaker v. Hood & Kincaids

1. Constitutional Law — Regulation of Banks. The provisions of the constitution authorizing the organization and control of banks of circulation do not limit the legislative power, nor operate to prohibit the enactment of laws imposing reasonable regulations upon banks of deposit and discount. 2. - Valid Statute. The act providing for the organization and regulation of banks, (Laws of 1891, ch. 43,) is held to be within the scope of the police power of the state, and not an unconstitutional infringement of private rights. 3. - Title of Act. The act does not contravene the constitutional provision which requires that “No bill shall contain more than one subject, which shall be dearly expressed in its title.”

Error from IAnn District Court. Attachments by Alfred Blaker and others against Hood & Kincaids, and O. E. Morse, as receiver of the firm of Hood & Kincaids. From an order discharging the attachments, made at the October term, 1893, plaintiffs bring error. The material facts appear in the opinion herein, filed June 9, 1894. 1. The act (chapter 43, Laws of 1891) is broader than the title and contains more than one subject. The State v. Barrett, 27 Kas. 213; Weyand v. Stover, 35 id. 551; Comm’rs of Cherokee Co. v. The State, ex rel., 36 id. 339; Wilkinson v. Savings Banh, 52 id. 718; Cooley, Const. Lim. 176, 178. 2. The constitution of the state of Kansas gives to the legislature no power to regulate or control banks of discount and deposit. Pape v. Capitol Bank, 20 Kas. 440. Article 13 of the constitution is the expression of the ultimate sovereignty of the state upon the subject of banking. The people, by the grant of the power expressed in that article, reserved all other power upon that subject to themselves. Without the grant of such power, no power to regulate or control such banks is possessed by the legislature, except they be corporations organized under a general law providing for such organizations. Bill of Rights, §20; Leavenworth Co. v. Miller, 7 Kas. 489, 491; The State, ex rel., v. Nemaha Co., 7 id. 554. 3. Under article 12 of the constitution, the legislature has power to create corporations to transact banking business, except issuing notes as a circulating medium, and to regulate the same; but individuals and partnerships are expressly excluded from the grant of legislative power conferred by article 12. Const., art. 12, § 6. 4. The business of banking is not a franchise, nor does it fall within the police powers of the state. The State v. Seougal, 51 N. W. Rep. 858; same case, Lawyers’ Rep. Annot., book 15, 477, and cases cited in opinion and in briefs for defendant; Morse, Banks, § 13; Cooley, Const. Lim., 4th ed., 746; Tied. Lim. of Police Powers, § 102; Bank of Augusta v. Earle, 13 Pet. 595; Curtis v. Leavitt, 15 N. Y. 60, 79; In re Jacobs, 98 id. 98; Butchers’ Union etc. Co. v. Crescent City etc. Co., Ill U. S. 746; Civil Rights Cases, 109 id. 3; People v. Gillson, 109 N. Y. 398; People v. Marx, 99 id. 377; Slaughter-House Cases, 16 Wall. 36; People, ex rel., v. Otis, 90 N. Y. 52; The State v. Goodwill, 33 W. Va. 179; same case, Lawyers’ Rep. Annot., book 6, 622, and cases cited in opinion and notes to case; Mugler v. The State of Kansas, 123 U. S. 623. 5. The right to carry on the business of banking, at common law, belonged to the individual as a right, and might be carried on by an individual ora partnership in all its various relations, even to the extent of issuing notes as a circulating medium to be used as money, as any other trade or occupation or business. N. Y F. Ins. Co. v. Fly, 2 Cow. 678-710; Curtis v. Leavitt, 15 N. Y. 9, 60, 80; Bank of Augusta v. Earle, 13 Pet. 519 — 595; Attorney General v. Utica Ins. Co., 2 Johns. Ch. 371,377; Morse, Banks, p. 1; People v. Doty, 80 N. Y. 225. 6. This case of People v. Dot'y, supra, draws a clear distinction between “individual bankers,” which words formed a phrase which in the law of New York had a technical meaning, and private bankers, such as Hood & Kincaids were, and holds distinctly that the laws of New York did not extend to private bankers or private banks. The failure to observe this distinction has probably led to the citation of New York cases in support of the view of the defendants in these eases. Pyan v. Pay, 4 N. E. Rep. (Ind.) 214, which is also relied upon to support the same view, is a case involving a law providing for the creation of corporations, in which there is no reference to private banks or private bankers. The North Dakota case, The State v. Woodmanse, 46 N. W. Rep. 970, is at war with all authority, so far as it relates to the business of private banking which does not undertake to issue notes for circulation as money. Governmental control of banks has extended only to corporations created by the government of the nation or state, and to banks of issue. Until the North Dakota case suggested that the business of a private bank (not a bank of issue) was within the misty realm of the police power of the state, no one had ever supposed that it was. Hence the court could well say there never was any question raised in regard to it. That court might waste fully as much diligence in searching for authority denying the axiom, “Things which are equal to the same thing are equal to each other,” and with the same result. The cases of The State v. Commercial Bank, 44 N. W. Rep. (Neb.) 998, and Stone v. Dodge, 56 N. W. Rep. (Mich.) 75, both relate to corporations organized under the statute, and each decision is the construction of the statute of the respective state. The Nebraska case decides a question of the jurisdiction of the supreme court and a question of pleading, and that the property of a corporation which has ceased to do business is a trust fund for the creditors, and that the rights of the general creditors to that fund are superior to the rights of the stockholders of the corporation. The Michigan case decides the question, under the statute of that state, whether a stockholder can set off a certificate of deposit, purchased by him after the appointment of receiver, against his liability as a stockholder. We do not just see how these decisions shed light upon the vital question in this case, which is one of legislative power to put under the surveillance of the state the private business of a citizen, which business is not injurious to the health, morals or safety of the public. 1. The main if not the only contention in this case is, that the bank act of Kansas is unconstitutional. In considering this question, it is very necessary to bear in mind that a state legislature is, theoretically and in fact, clothed practically with unlimited power, except such limitations as appear in the state or federal constitution. The constitution of the United States contains no limitation, nor does our state constitution, except as to banks of issue, as declared in Pape v. Capitol Bank, 20 Kas. 440. Hence the legislature had full power to enact any law which would not infringe upon any natural personal right, and especially could it enact any law which embodied a proper exercise of the police power. Even many things which at first blush appear to be natural personal rights are held and generally assented to as properly within the police power, and it is probably safe to say that the rule as to police power is that it may be exercised to control or prohibit any wrong, whether to persou or property. If, then, it be conceded, as it must be, that the business of banking is so far within the police power as that such business may be regulated by affixing penalties for usury, or for receiving money upon deposit while insolvent, why may not the general public, by virtue of this same police power, be further protected by such regulations as the lawmaking power may see fit to enact? Banking is in a sense a public business, and so much has it come to be so considered that people look for it to be regulated by law, and their rights and interests to be protected by law. New York has had a bank act regulating the banking business for a great many years, which, from People v. Doty, 80 N. Y. 230, and Leavitt v. Blatchford, 17 id. 526, and cases cited, has been repeatedly sustained, and this in part because the individual had accepted the law and voluntarily acted under it, as was true of Hood & Kincaids in this case. See, also, a well-considered case in Michigan, Bissell v. Heath, 57 N. W. Rep. 585. See, also, Ryan v. Ray, 4 N. E. Rep. (Ind.) 214. Very recently some cases have been decided in the Dakotas covering the questions at issue here, and with respect to laws similar to ours. In North Dakota, the law prohibits private individuals from doing a banking business, and confines that privilege to corporations organized under that act. In The State v.Woodmanse, 46 N. W. Rep. 970, the defendant was • arrested for the offense of carrying on a banking business as an individual in violation of that law, and brought a habeas corpus, raising the question of the constitutionality of the law, upon the ground that it deprived him of a natural personal right. The court very thoroughly discusses the question, and, on page 971, says: “ It is true that it has been held that the provisions relative to personal liberty found in our constitution might be violated by the enactment of a statute which operated to deprive a citizen of the right to pursue a lawful trade or avocation. In re Jacobs, 98 N. Y. 98; People v. Marx, 99 id. 377; 2 N. E. Rep. 29. But, on the other hand, it is conceded that the business of banking, by reason of its very intimate relations to the fiscal affairs of the people and the revenues of the state, is and has ever been considered a proper subject of legislative control, and strictly within the domain of the internal police power of every state. As a matter of fact, we have been unable to find an authority, and we have searched diligently, which has ever questioned the right of the legislature, in the exercise of the police power, to regulate, restrain and govern the business of banking.” South Dakota also has a similar law, and in The State v. Seougal, 51 N. W. Rep. 860, the court, in a very labored, and, it might álmost be said, illogical decision, hold the law unconstitutional, but make a declaration or admission which would have forced them to an opposite conclusion, had our law been before that court Thus it will be noticed that, had the South Dakota law provided, as does our law — §17, ch. 43, Laws of 1891 — simply “reasonable regulations,” applying to individuals, firms and corporations alike, that court would have sustained the constitutionality of their law; so that even that case clearly upholds our law, and is an authority in favor of the rule that the banking business, in any and all of its phases, is within the police power of the state. 2. An examination of our bank act will disclose that, so far as it affects third parties, it is merely a special-assignment act for banks. It requires certain reports from bankers — requires those engaged in banking to submit to certain inspections and examinations — and this to afford information as to their solvency. This portion of the law is not before the court in this case, though really it is the portion which is assailed as unconstitutional. The question raised here is as to the right of the legislature to provide by law for the disposition and application of the property of insolvent bankers, which is really a phase of insolvency proceedings. 3. There is another principle upon which this bank act can be sustained as to these attachment creditors. This law was passed in 1891. The record shows that Hood & Kincaids, by a public declaration as. provided in that law, accepted it, and have since then constantly proceeded and acted under it. All of these attachment creditors except one since that date created the liabilities sued upon, while that one accepted interest payments and extended the time of payment. Thus all, with full knowledge, have made and brought these liabilities within this law. What is meant is, that the only respect in which complaint could be made against this law would be the possible extent to which it would affect the obligation of contracts, and that could only be as to then existing contracts, and if any one then a creditor questioned the application of this law to his case, he would be obliged to attack it within a reasonable time, or be estopped by his acquiescence. This doctrine is declared by the supreme court of the United States in Denny v. Bennet, 128 U. S. 489, with reference to the Minnesota assignment law, which dissolves all attachments within a limited time where an assignment is made, and held that all parties dealing with a citizen of Minnesota after the time of the enactment of that law would be held bound by it, though citizens of another state, and that attachments in his favor should be dissolved, or that the officers acting thereunder would be liable in trespass. See, also, The State v. Commercial Bank, 44 N. W. Rep. (Neb.) 998, and Stone v. Dodge, 56 N. W. Rep. (Mich.) 75, both sustaining the validity of similar bank acts. 4. Counsel for plaintiffs in error1 claim that the act is broader than the title, and that it contains more thau one subject. , The act is very similar to the national-banking act, and from the statements in reported cases seems quite similar to the laws in most of the states. In The State v. Woodmanse, 46 N. W. Rep. 970, and Bissell v. Heath, 57 id. 585, the same question was raised, and the title and act held good. This court, too, has several times passed upon this question, and in The State v. Barrett, 27 Kas. 213; The State v. Curtis, 29 id. 384, and Comm’rs of Cherokee Co. v. The State, ex rel., 36 id. 337, declared the rule to be, that this “provision must not be enforced or construed in any narrow or technical way, but must be construed liberally on one side, so as to guard against the abuse intended to be prevented by it, and liberally on the other side, so as not to embarrass or obstruct needed legislation;” 27 Kas. 214; and that, “in determining whether an act of the legislature is constitutional, it is the duty of the courts to give such a construction to it, if possible, as will uphold the act.” 36 Kas. 337. If the receiver was rightfully appointed, then the property of Hood & Kincaids upon which the attachments were levied was in the custody of the law at the time of the levy of the attachments, and not subject to levy. Davis v. Gray, 16 Wall. 218; Booth v. Glarh, 17 How. U. S. 321; 20 Am. & Eng. Encyc. of Law, p. 14; High, Rec., §348.