Blaker v. Hood & Kincaids
24 L.R.A. 854
Kan.
1894
Check Treatment

The opinion of the court was delivered by

JohnstON, J.:

The firm of Hood & Kincaids engaged in the general banking business, at Pleasanton, in 1883, and continued in that business without state regulation until September, 1891, when, in pursuance of the banking law of 1891, the firm transmitted to the bank commissioner the verified statement and report required by that act. The commissioner, finding that the bank had complied with the provisions of law, issued a certificate to Hood & Kincaids, authorizing them to do a banking business at Pleasanton, and they continued to transact business finder the supervision of the commissioner until July, 1893, when the bank commissioner, upon examination, found the bank to be insolvent. He at once took possession of the property, assets and books of the bank, and on July 19 the attorney general began an action in the district court, and secured the appointment of O. E. Morse as receiver. The firm of Hood & Kincaids appeared, and admitted the insolvency as alleged, and consented to the appointment. Soon after the appointment of the receiver, a number of the creditors of the firm of Hood & Kincaids caused attachments to be levied upon the property in the hands of the receiver. Motions to discharge the attachments were made by the receiver, and the attaching creditors also filed motions asking that the order appointing the receiver be set aside, the receiver discharged, and the property in his hands turned over to the sheriff, to be held by him under the attachments. The motions to discharge the *507attachments were sustained, and those made to set aside the order appointing the receiver were overruled. The attaching creditors complain of these rulings and bring them here for review.

law — regulation of banks. The validity of the banking law of 1891, in pursuance of which the receiver was placed in charge of the insolvent bank, is the principal question to be settled here. It is contended that the act is objectionable on several constitutional grounds, but the main one is that it authorises an undue interference with private business. It provides for the organization of corporate banks, and for the regulation of all banking business, except that which is done by national banks, whether conducted by corporations, partnerships, or individuals. It creates the office of bank commissioner, and provides that all those engaged in the banking business shall make reports to him of their resources and liabilities, requires them to submit to inspection and investigation in order to ascertain their financial condition, and prescribes methods of business intended to protect the depositors and patrons of such banks. (Laws of 1891, ch. 43.) An examination of the provisions of this act shows that no one is prohibited from engaging in the business of banking. No special privileges or immunities are conferred, and no distinction is made between corporate, partnership or individual banks. All are permitted to engage in the business, and all are subject to the same control, and to like penalties for violation of its provisions. There is no room for the contention that article 13 of the constitution withholds from the legislature power to regulate and control banks or discount and deposit. It # * was held, in Pape v. Capitol Bank, 20 Kas. 440, that this article of the constitution applies only to banks of issue, and does not prohibit the legislature from creating banks of deposit and discount. The provision of the constitution authorizing the organization and control of banks of circulation is not the end of the legislative power. Its power is supreme, except where it is restrained by the funda*508mental law, and the constitutional limitations as to banks of issue do not operate to prohibit the legislature from organizing and regulating banks of deposit and discount, and providing for the safe-keeping or loaning of money by such banks. The right to organize and control corporate banks is conceded, but it is contended that the banking business is'not a franchise, but belongs to all individual citizens as a common right, the exercise of which cannot be denied or subjected to police regulation. The argument and authorities cited by counsel for plaintiffs in error are mainly directed to the contention that the legislature cannot withhold from individuals the right to engage in banking, and confer the privilege alone upon incorporated companies. This contention is not a matter of concern at this time, as our statute does not pretend to limit the business to incorporated companies, nor to discriminate between corporations and individuals. The question with us is whether the banking business is of such a character as to warrant the legislature, in the exercise of the state’s police power, to impose reasonable regulations upon the means and methods by which it is conducted. There are many occupations and lines of private business which the legislature, in the exercise of the internal police power, may rightfully regulate. Tiedeman, in his work on Limitations of Police Power, p. 194, says :

“ It will probably not be disputed that everyone has a right to pursue in a lawful manner any lawful calling which he may select. The state can neither compel him to pursue any particular calling, nor prohibit him from engaging in any lawful business, provided he does so in a lawful manner. It is equally recognized as beyond dispute, that the state, in the exercise of its police power, is, as a general proposition, authorized to subject all occupations to a reasonable regulation, wherever regulation is required for the protection of public interests or for the public welfare.”

*5092. valia statute, *508We have frequent instances of the exercise of the police power to prevent imposition and extortion, and of the regulation of employments, and also of business of a quasi-public *509nature. By virtue of the police power, regulations have been imposed on the practice of law, medicine, and dentistry, as well as upon bakers, millers, and wharfingers; and it has been accepted as a proper exercise of the police power to regulate pawnbrokers, junk shops, and loan offices. Inspection laws, and those regulating the weighing of commodities offered for sale, are generally regarded as suitable and valid regulations of police. (18 Am. & Eng. Encyc. of Law, 747-759.) The right to regulate and control the business of insurance, as well as that conducted by mills and warehouses, is no longer doubted. Enactments controlling the loaning of money and regulating the rate of interest upon the same have been sanctioned from the earliest times, and the nature of the business done by banks in dealing in money, receiving deposits for safekeeping, discounting paper and loaning money is such, and is so affected with a public interest, as to justify reasonable regulation for the protection of the people. The confidential and trust relations which exist between the bank and its patrons, and the difficulty that depositors and those dealing with the bank necessarily encounter in detecting irregular practices, and in ascertaining the real financial condition of banks, are sufficient to justify inspection and control. Those engaged in the business invite all in the community to deposit their funds with them, which, when obtained, are largely used for their profit. The numerous instances where the earnings and funds of people so deposited are dissipated and lost show the necessity for measures to protect the people from imposition, extortion, and fraud. For this reason, most of the states have enacted laws recognizing banking as a quasi-public business, and regulating the same to a greater or less extent. A well-known author, in his treatise on banking, uses the following language: “At common law, the right of banking pertains equally to every member of the community. Its very exercise can be restricted only by legislative enactment, but that it legally can be thus restricted has never been questioned.” (1 Morse, *510Banks, § 13.) The same subject was considered in the recent case of The State v.Woodmanse, 46 N. W. Rep. (N. D.) 970, where it was said 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 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 police power, to regulate, restrain and govern the business of banking.” See, also, People v. Insurance Co., 15 Johns. 358; The People v. Barton, 6 Cow. 290; Curtis v. Leavitt, 15 N. Y. 9; The State v. Williams, 8 Tex. 255; Nance v. Hemphill, 1 Ala. 551; The People v. Brewster, 4 Wend. 498.

The authority principally relied upon by counsel for the plaintiffs in error is The State v. Scougal, 51 N. W. Rep. 858, found also in 15 L. R. A. 477. The latter case is in conflict with The State v. Woodmanse, supra, in holding that the legislature may prohibit private banking, and may inaugurate a system for the state in which the business is made an exclusively corporate franchise, to be carried on only by those who become incorporated, and are willing to subject their business to the restraints and safeguards deemed to be necessary. In The State v. Scougal, supra, it was decided that the business of banking was not a franchise at common law, and was not made such by the constitution, and, further, that it belonged to the citizens of the country generally by common right, and the legislature could not, under the police power of the state, prohibit an individual from engaging in the business, nor confer the privilege exclusively upon corporations. As no exclusive franchise has been conferred, and no discrimination made against individuals or private banks in our statutes, we are not required to determine which of the conflicting theories should prevail. Even in the Seougal case, which holds strictly against any discrimination in favor of corporate banks, it is held that, where the law applies to individuals *511and corporations alike, reasonable regulations may be imposed. In the course of the decision the court remarked:

“But, assuming that the business of banking we are now considering is clothed with such a public use that it may be controlled by the state — and' we think it is so affected with a public interest — still it does not follow that the citizen may be deprived of the right to carry on the business. This, like any other business, may be subjected to reasonable regulations which shall alike apply to ail citizens and corporations.”

We readily conclude that the regulation of the banking business is clearly within the legislative power, and that the act passed cannot be regarded as an unconstitutional interference with individual rights.

3. Title otact. Another objection is that the title of the act contains more than one subject, and contravenes § 16, article 2, of the state constitution. The title is, “An act provividi’ng for the organization and regulation of banks, and prescribing penalties for violations of the provisions of this act.” In a broad sense it is an enactment .concerning the business of banking, and all of the provisions are fairly comprehended within this general subject. As has been held, this constitutional provision is not to be construed in any narrow or technical sense, but liberálly 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 embarasss or restrict needed legislation. (The State v. Barrett, 27 Kas. 213; The State v. Curtis, 29 id. 384; Comm’rs of Cherokee Co. v. The State, 36 id. 337; The State, ex rel., v. Comm’rs of Haskell Co., 40 id. 65; The State, ex rel., v. Sanders, 42 id. 228; The State, ex rel., v. Kansas City, 50 id. 521.

Having determined that the act is valid, it follows that the rulings of the court sustaining the motions to discharge the attachmints and overruling the motions to discharge the re-ceivin' will be affirmed.

All the Justices concurring.