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Timestamp: 2019-04-22 14:38:01+00:00

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LOWELL CO-OPERATIVE BANK & others vs. THE CO-OPERATIVE CENTRAL BANK & others.
Present: CROSBY, PIERCE, DONAHUE, & LUMMUS, JJ.
All rational presumptions are to be made in favor of the validity of every enactment of the General Court.
In considering the validity of an enactment of the General Court, the courts are concerned only with the power of the General Court to make the enactment; the expediency thereof and the policy upon which it is based are matters solely within the discretion of the General Court.
Cooperative banks are "banks" within the ordinary meaning of that word, and as such are subject, like other banks, to proper control by the Commonwealth.
St. 1934, c. 73, directing The Co-operative Central Bank to establish a fund for the insurance of shares in cooperative banks and for that purpose empowering it to levy certain assessments on member cooperative banks, does not deny to certain member banks the equal protection of the law by reason of the circumstances that it applies equally to all cooperative banks irrespective of their financial condition and that at the time of its enactment and thereafter certain other member banks were operating under restrictions imposed by the commissioner of banks under St. 1933, c. 59, s. 2; or by reason of the circumstance that, shortly after the enactment of said c. 73 and under its powers, The Co-operative Central Bank took possession of a certain cooperative bank upon certificate from the commissioner of banks and with intent to use the insurance fund for the benefit of that bank and its shareholders.
Said c. 73 does not violate art. 30 of the Declaration of Rights in that it makes no provision for a judicial review of the action of the commissioner of banks in certifying to The Co-operative Central Bank that it shall take over the control of a member bank.
Said c. 73 is not an arbitrary, confiscatory, nor unreasonable exercise of the police power, and is not in violation of the Fourteenth Amendment to the Constitution of the United States or of any other provision thereof, or of any provision of the Constitution of this Commonwealth.
BILL IN EQUITY, filed in the Supreme Judicial Court for the county of Suffolk on March 10, 1934, described in the opinion.
The defendants demurred. The demurrers were heard by Field, J., by whose order an interlocutory decree sustaining them was entered. The single justice thereupon reported the questions raised by the demurrers for determination by the full court.
Co-operative Bank was substantially the same on said March 6, 1934, that it was on said March 26, 1934."
F. M. Qua, for the plaintiffs.
P. A. Hendrick, (A. S. Gerstein with him,) for The Cooperative Central Bank and others.
C. F. Lovejoy, Assistant Attorney General, for the Commissioner of Banks.
CROSBY, J. This bill in equity is brought by eight cooperative banks, established and doing business in this Commonwealth under G. L. c. 170, against The Co-operative Central Bank, organized and doing business under St. 1932, c. 45, its officers and directors, and the commissioner of banks. The plaintiffs seek to enjoin and restrain the defendants from making assessments, and from taking any measures to enforce the collection of assessments for the establishment of a fund for the insurance of shares in cooperative banks in accordance with the provisions of St. 1934, c. 73, on the ground that the statute violates both the Constitution of the United States and the Constitution of this Commonwealth. The case is reported by a single justice of this court after the entry of an interlocutory decree sustaining two demurrers to the bill, one filed by the commissioner of banks, and the other by all the other defendants.
commissioner and to the bank, take possession and control of the property and business and operate such bank subject to such rules and regulations as the commissioner may impose, until the bank shall resume business or until its affairs are liquidated. The corporation, while so in control, may pay to such bank out of the share insurance fund such sums as the corporation's directors deem necessary for the protection of the bank's shareholders, and may order the same to be repaid when no longer required for that purpose. The fund will be used in the event of final liquidation of a member bank if the assets of the bank are insufficient to pay its shareholders in full.
tors shall determine, the payments to be made within five years from discontinuance and at such times and in such instalments as the directors with the approval of the commissioner shall determine. For such purpose the corporation shall use, in addition to the assets of the bank, such sums as may be required from the share insurance fund. Certain other provisions of the act provide for the liquidation of the bank. For the purpose of carrying out the provisions of the act the corporation may exercise all the powers, rights and franchises of any bank, the control and operation of which have been taken over by it under the act. Upon the enactment of legislation by the General Court authorizing cooperative banks to join in any Federal plan of guaranty of shares, the corporation may, by a vote of four fifths of all the members of the corporation, dissolve the fund prior to the termination of the life of the corporation as provided in s. 1 of c. 45; and if it be so voted to dissolve, the corporation shall proceed to liquidate the share insurance fund and to distribute the proceeds to the member banks.
The bill alleges that the directors of The Co-operative Central Bank are about to make an assessment on member banks, and if the plaintiffs refuse to pay it, the commissioner will institute proceedings for the removal of their officers and directors under and by virtue of G. L. (Ter. Ed.) c. 167, s. 5, and that the confidence of the plaintiffs' shareholders will be so impaired that a serious and possibly irreparable injury will be caused the plaintiffs.
The constitutional questions raised relate to art. 1, s. 10, of, and to the Fourteenth Amendment to, the Federal Constitution, and to arts. 1, 10, 11, 12, 15 and 30 of the Declaration of Rights of the Constitution of this Commonwealth.
said by Mr. Justice Hughes in Chicago, Burlington & Quincy Railroad v. McGuire, 219 U. S. 549, at page 569: "The scope of judicial inquiry in deciding the question of power is not to be confused with the scope of legislative considerations in dealing with the matter of policy. Whether the enactment is wise or unwise, whether it is based on sound economic theory, whether it is the best means to achieve the desired result, whether, in short, the legislative discretion within its prescribed limits should be exercised in a particular manner, are matters for the judgment of the legislature, and the earnest conflict of serious opinion does not suffice to bring them within the range of judicial cognizance." If the statute in question is to be upheld, it must be on the ground that it is a legitimate exercise of the police power of the States. That term, although frequently used, and often made the basis of important and far reaching decisions, is impossible of exact definition. It was defined by Chief Justice Shaw in Commonwealth v. Alger, 7 Cush. 53, at page 85, to be "the power vested in the legislature by the constitution, to make, ordain and establish all manner of wholesome and reasonable laws, statutes and ordinances, either with penalties or without, not repugnant to the constitution, as they shall judge to be for the good and welfare of the commonwealth, and.of the subjects of the same."
ings banks for the purpose of the proposed legal action. In Opinion of the Justices, 9 Cush. 604, an opinion was rendered on the question whether a savings bank chartered in 1816 was subject to the general laws of the Commonwealth passed since the granting of the charter. In stating the reasons why the bank should be so subject, language was used which would seem to be applicable to cooperative banks. It was said at page 609: "To provide for the safety and well being of institutions for savings, is surely a most appropriate exercise of the superintending power of the legislature. These institutions are established wholly for public purposes, are intrusted with large amounts of money belonging to persons who can ill afford to lose it, and who are in no condition to be able to judge of, or provide for, its security. . . . The usefulness of the Institutions of Savings must depend on their possessing the public confidence, and the public confidence must very much depend upon their being under the wholesome inspection and control of the government." It is a matter of common knowledge that cooperative banks are largely dealt with by persons of small or moderate means as a method of accumulating savings. Although they may not be public to the same extent as savings banks, in that the depositors are members of the corporation and loans are made only to shareholders except of surplus funds (G. L. [Ter. Ed.] c. 170, s. 6, 7, 21, 23), they invite the public to become shareholders and deposit their monthly instalments on their shares in the bank. It is plain that, both on principle and authority, cooperative banks are "banks" as that word is ordinarily defined, and understood, and that no special characteristics distinguish them from other banks in respect to the legislation in question.
used to pay in full depositors of any insolvent bank. It was held that the statute was within the police power of the State, and did not deprive banks assessed of their property without due process of law or deny to them equal protection of the law, nor did it impair the obligation of the charter contracts. See also Engel v. O'Malley, 219 U. S. 128. Two other cases with almost identical facts follow the decision in Noble State Bank v. Haskell, supra. See Shallenberger v. First State Bank of Holstein, 219 U. S. 114; Assaria State Bank v. Dolley, 219 U. S. 121. The Nebraska guaranty fund statute previously upheld in Shallenberger v. First State Bank of Holstein, supra, was again considered, in the light of changed conditions and certain modifications, in Able State Bank v. Bryan, 282 U. S. 765, and was again upheld. It was there said at page 784 by Mr. Chief Justice Hughes speaking for the court: "Considering the reduction in the extent of the obligation as to future assessments, we are unable to say that the statute in this modified form is confiscatory, or other than a reasonable method of liquidating the guaranty plan. In this view, the judgment of the Supreme Court of the State denying an injunction should be affirmed." The decisions of the Supreme Court of the United States above cited hold that the statutes there considered are not violations of the Fourteenth Amendment to the Constitution of the United States, or of s. 10 of art. 1 of the Federal Constitution as impairing the obligation of contracts. Those decisions are binding on this court as interpretations of the Federal Constitution. Opinion of the Justices, 278 Mass. 607, 612.
It is manifest that reasons for the protection of the public welfare are at least as great for the exercise of the police power in the case at bar as in those cases decided by the Supreme Court of the United States above referred to. If the statute here involved be considered as a greater exercise of the police power than was considered in Opinion of the Justices in 278 Mass. 607 and 278 Mass. 613, we are of opinion that it is not arbitrary nor confiscatory, and is not a violation of the Federal Constitution.
It is alleged in the fifth paragraph of the bill that when the statute in question was enacted, and at the present time, certain restrictions imposed by the commissioner of banks under and by virtue of St. 1933, c. 59, s. 2, upon certain member banks were and are in effect. It is argued that because St. 1934, c. 73, applies equally to all cooperative banks, irrespective of financial condition, the plaintiffs are denied the "equal protection of the laws." It is manifest that this argument cannot prevail. It is beyond the realm of possibility that all cooperative banks should have been in precisely the same financial condition at the moment the statute became effective. It is doubtless true that some of them were stronger financially than others. The allegation that some were operating under restrictions was admitted for the purposes of the case by the demurrers, but that does not necessarily mean that they were insolvent or in danger of becoming insolvent and unable to pay their shareholders in full. The fact that their activities were restricted may well have made them better "insurable risks" than some other banks not so restricted. No denial of the equal protection of the laws for this reason has been shown.
The allegations in the amendment to the bill which is allowed, if proved, would not affect the constitutionality of the statute for the reasons hereinbefore stated.
by the plaintiffs, or that the manifest purpose of the act would not be accomplished.
Constitution of the Commonwealth. It was further stated in Cosmopolitan Trust Co. v. Mitchell, 242 Mass. 95, at page 115, that "These decisions of the Federal Supreme Court are strongly persuasive as to the constitutionality of the act here attacked." There is no provision in the Federal Constitution precisely like art. 30 of the Declaration of Rights in our Constitution. "In substance and effect, however, the Federal Constitution as it has been interpreted does not differ materially from that article." See Kilbourn v. Thompson, 103 U. S. 168, 190, 191; Ocampo v. United States, 234 U. S. 91, 99-101. The case of Bushnell v. Leland, 164 U. S. 684, is apposite. By Federal statute a comptroller of the currency was authorized to take possession of the assets of a national bank for certain specified reasons. It was contended that under the national banking law the comptroller was without power to appoint a receiver to a defaulting or insolvent national bank, or to call for a ratable assessment upon the stockholders, without a previous judicial ascertainment of the necessity for the appointment of the receiver, and of the existence of liabilities of the bank, and that the lodgment of authority in the comptroller, empowering him either to appoint a receiver or to make a ratable call upon the stockholders, was tantamount to vesting that officer with judicial power in violation of the Constitution. It was held by the Supreme Court, however, that the question whether the comptroller was vested with judicial power in violation of the Constitution' had been long since settled in favor of the validity of the statutes, citing Kennedy v. Gibson, 8 Wall. 498, Casey v. Galli, 94 U. S. 673, United States v. Knox, 102 U. S. 422. The case was followed in In re Chetwood, 165 U. S. 443, 458.
when accepted and confirmed by the court shall be final and conclusive presents no constitutional barrier. The court will determine for itself whether the report is extravagant or unreasonable or based upon any error of law and would reject it for such cause. But the court will not revise the judgment of the commissioners or substitute its view of expediency for those of the commissioners. Weymouth, petitioner, 251 Mass. 359, 361. The circumstance that the landowner is given no right to trial by jury as to the betterment does not render the proposed bill unconstitutional. Chapin v. Worcester, 124 Mass. 464, 468."
It is manifest that the commissioner of banks is 'not exercising a judicial function in determining the fitness of a bank to continue business under its own management, and that the questions for his determination are those of fact. It will be presumed that he must exercise his best judgment in the matter, and will not arbitrarily certify banks to be taken over by The Co-operative Central Bank.
It results that St. 1934, c. 73, is not invalid because contrary to any provision of the Constitution of the United States or the Constitution of this Commonwealth.
What has been said disposes of all the questions argued in behalf of the plaintiffs.

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