Court Opinion

ID: 5360577
Source: CourtListenerOpinion
Date Created: 2022-01-08 07:22:52.481214+00
Date Added: 2024-06-11T08:29:52.136401
License: Public Domain

Bliss, J. (dissenting).
Statutory authority is necessary to enable a bank to pledge its assets as security for deposits of public moneys. (State Bank of Commerce v. Stone, 261 N. Y. 175.) The plaintiff claims that such authority is to be' found in section 132 of the Charter  of the City of New Rochelle, adopted by the electors of that city in 1929 under the City Home Rule Law. The State Superintendent of Banks replies that the granting of such authority is vested in the Legislature and is not within the power of the city to confer by local law.
Section 132 of the New Rochelle Charter does not purport to give any bank power to pledge its assets as security for deposits of public moneys. It merely restricts the city treasurer to depositing city funds in such approved banks as shall have furnished either surety bonds or deposited securities in escrow as security for the protection of the city funds. By resolution the city council approved as depositaries of city funds four New Rochelle banks and one bank in New York city. The charter section does not grant directly, or by implication, authority to banks either within or without the city of New Rochelle, to pledge assets as security for deposits of city moneys.
But if we assume, for argument’s sake, that such an attempted grant of power might be found in section 132 by inference, it was not within the ability of the city to bestow. The State Constitution denies to the Legislature power to grant a special charter for banking purposes, and says that corporations or associations may be formed for such purposes under general laws. (State Const, art. 10, § 3, formerly art. 8, § 4.) It is plain from the language of this provision that the granting of banking powers to a corporation is a function of the Legislature. Section 132 of the New Rochelle City Charter does not comply with section 3 of article 10 of the State Constitution, for it is not a granting of banking powers by a general law. *404It is doubtful if even the most enthusiastic advocate would argue that the city might, by local law, grant power to banks generally throughout the State, whether located within or without the city, to pledge their assets to secure that city's deposits. Here the city of New1 Rochelle has attempted to confer upon a few banks, one of them located in New York city, a power not enjoyed by State banks generally.
The city and bank contend that the City Home Rule Law which authorizes a city to pass local laws for the transaction of its business and the care of its property is ample authority for the city, by local laws, to empower a bank to pledge a portion of its assets as security for the city's deposits. What the city may ask of a bank with which it contemplates doing business is one thing, but what the bank on its part may do toward meeting the requirements of the city is quite another. Banks are State institutions and banking is a matter of statewide concern. The depositors of the plaintiff and other banks which have been designated as city depositaries -unquestionably are not all inhabitants of the city of New Rochelle. Protection of all of the depositors of a bank is a matter of deep public interest and the maintenance of public confidence in and solvency of banking institutions is of vital concern to the entire State. It is a matter not within the power of a city to regulate by local law. The powers of banks and the manner in which they should conduct their business are essentially and constitutionally matters for State regulation rather than the concern of one city alone. It is for the Legislature to say whether the rights of the remaining depositors, both large and small, and all other persons dealing with a bank shall be jeopardized by permitting the institution to pledge part of its assets to one of its depositors to the exclusion of all others. Such action is not within the jurisdiction of a city under home rule even though it would protect the property of the city by creating a preference in its favor. It is essentially a delegation of banking powers which must be made by the State to the corporation and is not -within the language or real meaning of the City Home Rule provisions of the 1 _ institution and statutes. They contain no indication that a city may charter or broaden the corporate powers of a bank. These have been accepted as State legislative functions for many years, and the rule in this regard should not be changed without a clear mandate from the People. Nor is it necessary that this be now read by implication into the law in order to afford adequate protection of city funds, for under the very local laws here in question this bank may furnish a surety bond and thus be entitled to receive the desired profitable deposit.
*405The same contention as that now urged by the city and bank was made in the case of City of Mount Vernon v. Mount Vernon Trust Co. (270 N. Y. 400), where the city had, by a local law, amended its charter to provide that any depositary of city funds should furnish a surety bond for the deposits or pledge with the city certain security for such deposits. The Court of Appeals said that the effect of the pledge of securities covering the deposit was ultra vires as to both the city and the bank. It thus frowned upon exactly what the city of New Rochelle says it has attempted to do in the instant case.
I dissent and vote to render judgment in favor of the defendant Superintendent of Banks.
Judgment granted in favor of the plaintiff, without costs. .