The charter of a corporation which is subject to the usual
reserved powers to alter or repeal is not impaired unless the
subsequent statute deprives it of property without due process of
law.
The broad words of the Fourteenth Amendment are not to be pushed
to a drily logical extreme, and the courts will be slow to strike
down as unconstitutional legislation of the states enacted under
the police power.
Where the mutual advantage is a sufficient compensation, an
ulterior public advantage may justify a comparatively insignificant
taking of private property for what in its immediate purpose is a
private use. The police power extends to all the great public
needs,
Canfield v. United States, 167 U.
S. 518, and includes the enforcement of commercial
Page 219 U. S. 105
conditions such as the protection of bank deposits and checks
drawn against them by compelling cooperation so as to prevent
failure and panic.
The dividing line between what is and what is not constitutional
under the police power of the state is pricked out by gradual
approach and contact of decisions on opposing sides, and while the
use of public credit to aid individuals on a large scale is
unconstitutional, a statute compelling banks to contribute to a
guarantee fund to protect deposits, such as that of Oklahoma under
consideration in this case, is constitutional.
The Fourteenth Amendment does not prohibit states from
forbidding a man to do things simply because he might do them at
common law, and so
held that, where public interests so
demand, that Amendment does not prohibit a state's placing the
banking business under legislative control and prohibiting it
except under prescribed conditions.
The Acts of December 17, 1907, and March 11, 1909, of Oklahoma,
subjecting state banks to assessments for a Depositors' Guaranty
Fund are within the police power of the state, and do not deprive
banks assessed of their property without due process of law or deny
to them the equal protection of the law, nor do they impair the
obligation of the charter contracts.
22 Okl. 48 affirmed.
The facts, which involve the constitutionality of the Oklahoma
Bank Depositors' Guaranty Fund Acts, are stated in the opinion.
Page 219 U. S. 109
MR. JUSTICE HOLMES delivered the opinion of the Court.
This is a proceeding against the Governor of the State of
Oklahoma and other officials who constitute the State Banking Board
to prevent them from levying and collecting an assessment from the
plaintiff under an act approved December 17, 1907. This act creates
the Board and directs it to levy upon every bank existing under the
laws of the state an assessment of one percent of the bank's
average daily deposits, with certain deductions, for the purpose of
creating a Depositors' Guaranty Fund. There are provisos for
keeping up the fund, and by an act passed March 11, 1909, since the
suit was begun, the assessment is to be five percent. The purpose
of the fund is shown by its name. It is to secure the full
repayment of deposits. When a bank becomes insolvent and goes into
the hands of the Bank Commissioner, if its cash immediately
available is not enough to pay depositors in full, the Banking
Board is to draw from the Depositors' Guaranty Fund (and from
additional assessments if required) the amount needed to make up
the deficiency. A lien is reserved upon the assets of the failing
bank to make good the sum thus taken from the fund. The plaintiff
says that it is solvent and does not want the help of the guaranty
fund, and that it cannot be called upon to contribute toward
securing or paying the depositors in other banks, consistently with
Article I, § 10, and the Fourteenth Amendment of the Constitution
of the United States. The petition was dismissed on demurrer by the
supreme court of the state. 22 Okl. 48.
The reference to Article I, § 10, does not strengthen the
Page 219 U. S. 110
plaintiff's bill. The only contract that it relies upon is its
charter. That is subject to alteration or repeal, as usual, so that
the obligation hardly could be said to be impaired by the Act of
1907 before us, unless that statute deprives the plaintiff of
liberty or property without due process of law.
See Sherman v.
Smith, 1 Black 587. Whether it does so or not is
the only question in the case.
In answering that question, we must be cautious about pressing
the broad words of the Fourteenth Amendment to a drily logical
extreme. Many laws which it would be vain to ask the court to
overthrow could be shown, easily enough, to transgress a scholastic
interpretation of one or another of the great guaranties in the
Bill of Rights. They more or less limit the liberty of the
individual, or they diminish property to a certain extent. We have
few scientifically certain criteria of legislation, and as it often
is difficult to mark the line where what is called the police power
of the states is limited by the Constitution of the United States,
judges should be slow to read into the latter a
nolumus
mutare as against the lawmaking power.
The substance of the plaintiff's argument is that the assessment
takes private property for private use without compensation. And
while we should assume that the plaintiff would retain a
reversionary interest in its contribution to the fund, so as to be
entitled to a return of what remained of it if the purpose were
given up (
see Receiver of Danby Bank v. State Treasurer,
39 Vt. 92, 98), still there is no denying that, by this law, a
portion of its property might be taken without return to pay debts
of a failing rival in business. Nevertheless, notwithstanding the
logical form of the objection, there are more powerful
considerations on the other side. In the first place, it is
established by a series of cases that an ulterior public advantage
may justify a comparatively insignificant taking of private
property for what, in its immediate purpose, is a private use.
Clark v. Nash, 198 U. S. 361;
Strickley
Page 219 U. S. 111
v. Highland Boy Mining Co., 200 U.
S. 527,
200 U. S. 531;
Offield v. New York, New Haven & Hartford R. Co.,
203 U. S. 372;
Bacon v. Walker, 204 U. S. 311,
204 U. S. 315.
And in the next, it would seem that there may be other cases beside
the everyday one of taxation in which the share of each party in
the benefit of a scheme of mutual protection is sufficient
compensation for the correlative burden that it is compelled to
assume.
See Ohio Oil Co. v. Indiana, 177 U.
S. 190. At least, if we have a case within the
reasonable exercise of the police power as above explained, no more
need be said.
It may be said in a general way that the police power extends to
all the great public needs.
Canfield v. United States,
167 U. S. 518. It
may be put forth in aid of what is sanctioned by usage, or held by
the prevailing morality or strong and preponderant opinion to be
greatly and immediately necessary to the public welfare. Among
matters of that sort, probably few would doubt that both usage and
preponderant opinion give their sanction to enforcing the primary
conditions of successful commerce. One of those conditions at the
present time is the possibility of payment by checks drawn against
bank deposits, to such an extent do checks replace currency in
daily business. If, then, the legislature of the state thinks that
the public welfare requires the measure under consideration,
analogy and principle are in favor of the power to enact it. Even
the primary object of the required assessment is not a private
benefit, as it was in the cases above cited of a ditch for
irrigation or a railway to a mine, but it is to make the currency
of checks secure, and by the same stroke to make safe the almost
compulsory resort of depositors to banks as the only available
means for keeping money on hand. The priority of claim given to
depositors is incidental to the same object, and is justified in
the same way. The power to restrict liberty by fixing a minimum of
capital required of those who would engage in banking is not
Page 219 U. S. 112
denied. The power to restrict investments to securities regarded
as relatively safe seems equally plain. It has been held, we do not
doubt rightly, that inspections may be required and the cost thrown
on the bank.
See Charlotte, Columbia & Augusta R. Co. v.
Gibbes, 142 U. S. 386. The
power to compel, beforehand, cooperation, and thus, it is believed,
to make a failure unlikely and a general panic almost impossible,
must be recognized, if government is to do its proper work, unless
we can say that the means have no reasonable relation to the end.
Gundling v. Chicago, 177 U. S. 183,
177 U. S. 188.
So far is that from being the case that the device is a familiar
one. It was adopted by some states the better part of a century
ago, and seems never to have been questioned until now.
Receiver of Danby Bank v. State Treasurer, 39 Vt. 92;
People v. Walker, 17 N.Y. 502. Recent cases going not less
far are
Lemieux v. Young, 211 U.
S. 489,
211 U. S. 496;
Kidd, Dater and Price Co. v. Musselman Grocer Co.,
217 U. S. 461.
It is asked whether the state could require all corporations or
all grocers to help to guarantee each other's solvency, and where
we are going to draw the line. But the last is a futile question,
and we will answer the others when they arise. With regard to the
police power, as elsewhere in the law, lines are pricked out by the
gradual approach and contact of decisions on the opposing sides.
Hudson County Water Co. v. McCarter, 209 U.
S. 349,
209 U. S. 355.
It will serve as a datum on this side that, in our opinion, the
statute before us is well within the state's constitutional power,
while the use of the public credit on a large scale to help
individuals in business has been held to be beyond the line.
Loan Association v.
Topeka, 20 Wall. 655;
Lowell v. Boston,
111 Mass. 454.
The question that we have decided is not much helped by
propounding the further one whether the right to engage in banking
is or can be made a franchise. But as the latter question has some
bearing on the former, and as it
Page 219 U. S. 113
will have to be considered in the following cases, if not here,
we will dispose of it now. It is not answered by citing authorities
for the existence of the right at common law. There are many things
that a man might do at common law that the states may forbid. He
might embezzle until a statute cut down his liberty. We cannot say
that the public interests to which we have adverted, and others,
are not sufficient to warrant the state in taking the whole
business of banking under its control. On the contrary, we are of
opinion that it may go on from regulation to prohibition except
upon such conditions as it may prescribe. In short, when the
Oklahoma Legislature declares by implication that free banking is a
public danger, and that incorporation, inspection, and the
above-described cooperation are necessary safeguards, this Court
certainly cannot say that it is wrong.
North Dakota v.
Woodmansee, 1 N.D. 246;
Brady v. Mattern, 125 Ia.
158;
Weed v. Bergh, 141 Wis. 569;
Commonwealth v.
Vrooman, 164 Pa. 306;
Myers v. Irwin, 2 S. & R.
368;
Myers v. Manhattan Bank, 20 Ohio 283, 302;
Attorney General v. Utica Insurance Co., 2 Johns.Ch. 371,
377. Some further details might be mentioned, but we deem them
unnecessary. Of course, objections under the state constitution are
not open here.
Judgment affirmed.