Source: https://supreme.justia.com/cases/federal/us/188/220/
Timestamp: 2019-04-20 22:26:23+00:00

Document:
Congress, having power to create a system of national banks, is the judge as to the extent of the powers which should be conferred upon such banks, and has the sole power to regulate and control the exercise of their operations. Congress having dealt directly with the insolvency of national banks by giving control to the Secretary of the Treasury and the Comptroller of the Currency, who are authorized to suspend the operations of the banks and appoint receivers thereof when they become insolvent or when they fail to make good any impairment of capital, and full and adequate provision having been made for the protection of creditors of national banks by requiring frequent reports to be made of their condition, and by the power of visitation of federal officers, it is not competent for state legislatures to interfere, whether with hostile or friendly intentions, with national banks or their officers in the exercise of the powers bestowed upon them by the general government.
While a state has the legitimate power to define and punish crimes by general laws applicable to all persons within its jurisdiction, and it may declare, by special laws, certain acts to be criminal offences when committed by officers and agents of its own banks and institutions, it is without lawful power to make such special laws applicable to banks organized and operated under the laws of the United States.
tried, and found guilty, and sentenced to imprisonment in the Penitentiary of Iowa at hard labor for a term of five years under the provisions of a statute of that state for the offense of having received, as president of the First National Bank of Decorah, Iowa, a deposit of one hundred dollars in money in said bank at a time when the bank was insolvent, and when such insolvency was known to the defendant.
At the trial, it was contended on behalf of the defendant that the statute of Iowa upon which the indictment was found did not, and was not intended to, apply to national banks organized and doing business under the National Bank Acts of the United States, or to the officers and agents of such banks, and that, if the state statute should be construed and held to apply to national banks and their officers, the statute was void insofar as made applicable to national banks and their officers. Both these contentions were overruled by the trial court, and thereupon an appeal was taken to the Supreme Court of the State of Iowa, and by that court, on April 12, 1901, the judgment of the district court was affirmed. The cause was then brought to this Court by a writ of error allowed by the Chief Justice of the Supreme Court of Iowa.
MR. JUSTICE Shiras delivered the opinion of the Court.
"SEC. 1884. No bank, banking house, exchange broker, deposit office, firm, company, corporation, or person engaged in the banking, brokerage, exchange, or deposit business shall, when insolvent, accept or receive on deposit, with or without interest, any money, bank bills or notes, United States Treasury notes or currency, or other notes, bills, checks, or drafts, or renew any certificate of deposit."
"SEC. 1885. If any such bank, banking house, exchange broker, deposit office, firm, company, corporation, or person shall receive or accept on deposit any such deposits as aforesaid when insolvent, any owner, officer, director, cashier, manager, member, or person knowing of such insolvency, who shall knowingly receive or accept, be accessory, or permit, or connive at receiving or accepting on deposit therein, or thereby, any such deposits, or renew any certificate of deposit, as aforesaid, shall be guilty of a felony, and, upon conviction, shall be punished by a fine not exceeding ten thousand dollars, or by imprisonment in the penitentiary for a term of not more than ten years, or by imprisonment in the county jail not more than one year, or by both fine and imprisonment."
bank the sum of $100 in lawful paper money and of the value of $100, from one John French, the bank being then and there insolvent, and the defendant then and there well knowing that the said bank was insolvent.
It will be observed that national banks or banking associations are not specifically named in the statute, and it was, hence, argued on behalf of the defendant that such institutions are not within the enactment. As, however, the state courts, following a previous decision of the Supreme Court of Iowa in the case of State v. Field, 98 Ia. 748, held that the statute was applicable to all banks, whether organized under the laws of the state or the acts of Congress, we must accept that construction as correct, and confine our consideration to the question whether, as so construed, the act is within the jurisdiction of the state.
It is obvious that the two sections of the statute above quoted must be read together as one enactment. If section 1884, regarded as applicable to national banks, is a valid exercise of power by the state, then the penalties declared in section 1885 can be properly enforced; but if section 1884 must be held invalid as an attempt to control and regulate the business operations of national banks, then the penal provisions of section 1885 cannot be enforced against their officers. In other words, the validity of the mandatory and of the penal parts of the statute must stand or fall together.
What, then, is the character of a state law which forbids national banks, when insolvent, from accepting or receiving on deposit, with or without interest, any money, bank bills or notes, United States Treasury notes or currency, or other notes, bills, checks, or drafts, or renewing any certificate of deposit?
statute is in the nature of a police regulation, having for its object the protection of the public from the fraudulent acts of bank officers. The mere fact that, in violating the law of the state, the defendant performed an act pertaining to his duty as an officer of the bank does not in any manner interfere with the proper discharge of any duty he owes to any power, state or federal. Surely it was not intended by any act of Congress that officers of a national bank should be clothed with the power to cheat and defraud its patrons. National banks are organized and their business prosecuted for private gain, and we can conceive of no reason why the officers of such banks should be exempt from the penalties prescribed for fraudulent banking."
We think that this view of the subject is not based on a correct conception of the federal legislation creating and regulating national banks. That legislation has in view the erection of a system extending throughout the country, and independent, so far as powers conferred are concerned, of state legislation which, if permitted to be applicable, might impose limitations and restrictions as various and as numerous as the states. Having due regard to the national character and purposes of that system, we cannot concur in the suggestions that national banks, in respect to the powers conferred upon them, are to be viewed as solely organized and operated for private gain. The principles enunciated in McCullough v. Maryland, 4 Wheat. 425, and in Osborn v. Bank of United States, 9 Wheat. 738, though expressed in respect to banks incorporated directly by acts of Congress, are yet applicable to the later and present system of national banks.
"The bank is not considered as a private corporation whose principal object is individual trade and individual profit, but as a public corporation created for public and national purposes. That the mere business of banking is, in its own nature, a private business, and may be carried on by individuals or companies having no political connection with the government, is admitted, but the bank is not such an individual or company. It was not created for its own sake or for private purposes. It has never been supposed that Congress could create such a corporation.
The whole opinion of the Court in the case of McCullough v. Maryland is founded on and sustained by the idea that the bank is an instrument which is 'necessary and proper for carrying into effect the powers vested in the government of the United States.'"
"National banks organized under the act are instruments designed to be used to aid the government in the administration of an important branch of the public service. They are means appropriate to that end."
with the Treasurer of the United States, as security for their circulating notes, United States bonds in an amount not less than one-fourth of its capital; to report to the Treasurer of the United States twice each year the average amount of its deposits, and to pay to said Treasurer each half-year a tax upon such deposits, and to make to the Comptroller of the Currency not less than five reports during each year (and special reports as often as he may require), according to such form as he may require, verified by the oath or affirmation of the president or cashier, which reports shall exhibit in detail the resources and liabilities of the association. The Comptroller is directed to appoint suitable persons to make examination of the affairs of every banking association, who shall have power to make a thorough examination into all the affairs of the association, and in doing so to examine any of the officers or agents thereof, and to make a full and detailed report of the condition to the Comptroller. Whenever the Comptroller becomes satisfied of the insolvency of such bank he may, after due examination of its affairs, appoint a receiver, who shall take possession of the assets of the association, wind up its affairs, and make ratable distribution of its assets. And severe penalties are imposed upon any officer or agent of such association who violates any of the provisions of the National Bank Act.
It thus appears that Congress has provided a symmetrical and complete scheme for the banks to be organized under the provisions of the statute.
"the effect of the statute of Iowa is to require of the officers of all banks within the state a higher degree of diligence in the discharge of their duties. It gives to the general public greater confidence in the stability and solvency of national banks, and in the honesty and integrity of their managing officers. In enables them better to accomplish the purposes and designs of the general government, and is an aid, rather than impediment, to their utility and efficiency as agents and instrumentalities of the United States."
and stability of national banks by direct legislation. If they had such power, it would have to be exercised and limited by their own discretion, and confusion would necessarily result from control possessed and exercised by two independent authorities.
Nor can we concede that, by such legislation of a state as was attempted in this instance, the affairs of a national bank, or the security of its creditors, would be advantageously affected. The provision of the state statute is express that it is the duty of the officers of the bank, when they know it is insolvent, to at once suspend its active operations, for it is obvious that to refuse to accept deposits would be equivalent to a cessation of business. Whether a bank is or is not actually insolvent may be often a question hard to answer. There may be good reason to believe that, though temporarily embarrassed, the bank's affairs may take a fortunate turn. Some of the assets that cannot at once be converted into money may be of a character to justify the expectation that, if actual and open insolvency be avoided, they may be ultimately collectible, and thus the ruin of the bank and its creditors be prevented. McDonald v. Chemical Nat. Bank, 174 U. S. 610. But, under the state statute, no such conservative action can be followed by the officers of the bank except at the risk of the penalties of fine and imprisonment. In such a case, the provisions of the federal statute would permit the Comptroller to withhold closing the bank, and to give an opportunity to escape final insolvency. It would seem that such an exercise of discretion on the part of the Comptroller would, in many cases, be better for all concerned than the unyielding course of action prescribed by the state law. However, it is not our province to vindicate the policy of the federal statute, but to declare that it cannot be overridden by the policy of the state.
Similar legislation to that of the State of Iowa has been considered and disapproved by the supreme courts of several of the other states.
"We are spared further comment upon these acts for the reason that they have no application to national banks. Neither of them refers to national banks in terms, and we must presume that, when the legislature used the words 'any bank,' that it referred to banks created under and by virtue of the laws of Pennsylvania. The national banks are the creatures of another sovereignty. They were created and are now regulated by the acts of Congress. When our acts of 1860 and 1861 were passed, there were no national banks, nor even a law to authorize their creation. When the act of 1878 was passed, Congress had already defined and punished the offense of embezzlement by the officers of such banks. There was therefore no reason why the state, even if it had the power, should legislate upon the subject. Such legislation could only produce uncertainty and confusion, as well as a conflict of jurisdiction. In addition, there would be the possible danger of subjecting an offender to double punishment, an enormity which no court would permit if it had the power to prevent it. An act of assembly prescribing the manner in which the business of all banks shall be conducted, or limiting the number of the directors thereof, could not by implication be extended to national banks for the reason that the affairs of such banks are exclusively under the control of Congress. Much less can we, by mere implication, extend penal statutes like those of 1861 and 1878 to such institutions. The offense for which the relator is held is not indictable either at common law or under the statutes of Pennsylvania. We therefore order him to be discharged."
"The National Banking Act and its supplements create a complete system for the government of those institutions. Conceding the power of Congress to create this system, I am unable to see how it can be regulated or interfered with by state legislation. The act of 1860, if applied to national banks, imposes a disqualification upon cashiers of such institutions where none has been imposed by act of Congress. If the state may impose one qualification upon the cashiers, why not another? If upon the cashier, why not upon the president or other officer? Nay, further, suppose the legislature should declare that no person should be a bank director unless he has arrived at fifty years of age, or should be the owner of one hundred shares of stock, could we apply such an act to national banks? If so, such institutions would have a precarious existence. They would be liable to be interfered with at every step, and it might not be long before the whole national banking system would have to be thrown aside as so much worthless lumber."
"The jurisdiction vested in the courts of the United States in the cases and proceedings hereinafter mentioned shall be exclusive of the courts of the several states: first, of all crimes and offenses cognizable under the authority of the United States"
"In judicial matters, the concurrent jurisdiction of the state tribunals depends altogether upon the pleasure of Congress, and may be revoked and extinguished whenever they think proper, in every case in which the subject matter can constitutionally be made cognizable in the federal courts, and that, without an express provision to the contrary, the state courts will retain a concurrent jurisdiction in all cases where they had jurisdiction originally over the subject matter;"
and accordingly the judgment of the trial court was reversed and the prisoner discharged.
"The difficulty in the way of holding the defendant upon the present indictment is that the act of Congress has taken the crime of the principal out of our jurisdiction. Our courts cannot deal with him upon that charge."
A law of the State of Kansas provided that no bank should receive deposits when it was insolvent, and prescribed a punishment for a violation of that provision by any officer or agent of such bank; but it was held by the Supreme Court of that state that the provisions of the state law had no application to national banks, and that the penalties prescribed were not operative as against officers of national banks. State v. Menke, 56 Kan. 77.
legitimate means, to preserve its active existence, and thereby accomplish the objects for which it was created."
"The question which marks the limit of the state jurisdiction is whether the person sought to be called to account was acting under the authority of the United States when the acts complained of were done, in and about a subject matter within federal jurisdiction, . . . for the criminal statutes of the state are not applicable to acts done within the plane of federal jurisdiction and under the authority of the United States. Whenever it is made to appear in a criminal case pending in the state court that the acts charged in the indictment were done by the defendant as an officer or agent of the United States in and about a matter within federal control, . . . then it is made to appear that the state court is asked to assume a jurisdiction which it cannot rightfully exercise, and if that court entertains the case and proceeds to adjudicate on the question of the extent of the authority possessed by the officers of the United States, . . . testing the same by the provisions of state statutes, . . . it proceeds at the peril of having its jurisdiction questioned and denied."
So, in In re Thomas, 82 F. 304, it was held by the Circuit Court of the United States for the Southern District of Ohio that the governor of the soldiers' home at Dayton, Ohio, in serving to the inmates, as food, oleomargarine furnished by the government, is not subject to the law of the state prescribing the manner in which oleomargarine shall be used in eating houses, because his act is that of the government of the United States within its constitutional powers, and wholly beyond the control or regulation of the legislature of the state.
This judgment was affirmed by this Court in Ohio v. Thomas, 173 U. S. 276.
"If Congress have a constitutional power to regulate a particular subject, and they do actually regulate it in a given manner and in a certain form, it cannot be that the state legislatures have a right to interfere, and, as it were, by way of complement to the legislation of Congress, to prescribe additional regulations, and what they may deem auxiliary provisions for the same purpose. In such a case, the legislation of Congress, in what it does prescribe, manifestly indicates that it does not intend that there shall be any further legislation to act upon the subject matter. Its silence as to what it does not do is as expressive of what its intention is as the direct provisions made by it."
"The states can exercise no control over them [national banks], nor in anywise affect their operation, except insofar as Congress may see proper to permit. Everything beyond this is 'an abuse, because it is the usurpation of power which a single state cannot give.' . . . Against the national will,"
"[t]he states have no power, by taxation or otherwise, to retard, impede, burden, or in any manner control, the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the general government."
"National banks are instrumentalities of the federal government, created for a public purpose, and as such necessarily subject to the paramount authority of the United States. It follows that an attempt by a state to define their duties or control the conduct of their affairs is absolutely void wherever such attempted exercise of authority expressly conflicts with the laws of the United States, and either frustrates the purpose of the national legislation or impairs the efficiency of these agencies of the federal government to discharge the duties for the performance of which they were enacted. These principles are axiomatic, and are sustained by the repeated adjudications of this Court."
Our conclusions, upon principle and authority, are that Congress, having power to create a system of national banks, is the judge as to the extent of the powers which should be conferred upon such banks, and has the sole power to regulate and control the exercise of their operations; that Congress has directly dealt with the subject of insolvency of such banks by giving control to the Secretary of the Treasury and the Comptroller of the Currency, who are authorized to suspend the operations of the banks and appoint receivers thereof when they become insolvent, or when they fail to make good any impairment of capital; that full and adequate provisions have been made for the protection of creditors of such institutions by requiring frequent reports to be made of their condition, and by the power of visitation by federal officers; that it is not competent for state legislatures to interfere, whether with hostile or friendly intentions, with national banks or their officers in the exercise of the powers bestowed upon them by the general government.
and made payable to or at a national bank, was a distinct and separate offense, indictable under the laws of the state.
Undoubtedly a state has the legitimate power to define and punish crimes by general laws applicable to all persons within its jurisdiction. So, likewise, it may declare, by special laws, certain acts to be criminal offenses when committed by officers or agents of its own banks and institutions. But it is without lawful power to make such special laws applicable to banks organized and operating under the laws of the United States.
It was by failing to observe the distinction between the two classes of cases that, we think, the courts below fell into error.
The judgment of the Supreme Court of Iowa is reversed, and the cause is remanded to that court to take further action not inconsistent with the opinion of this Court.

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