Section 28, Art. XX, of the Georgia Banking Act declares
that
"every insolvency of a bank shall be deemed fraudulent, and the
president and directors shall be severally punished by imprisonment
and labor in the penitentiary . . . provided that the defendant . .
. may repel the presumption of fraud by showing that the affairs of
the bank have been fairly and legally administered, and generally
with the same care and diligence, that agents receiving a
commission for their services are required and bound by law to
observe. . . ."
The Act elsewhere declares that a bank is to be deemed insolvent
when it cannot meet its liabilities as they become due in the
regular course of business, or when the cash market value of its
assets is insufficient to pay its liabilities, or when its reserve
falls under a required amount and is not made good within the time
prescribed.
Held that the presumption created by § 28 is
unreasonable and arbitrary, and conflicts with the due process
clause of the Fourteenth Amendment. P.
279 U. S. 5.
166 Ga. 563 reversed.
Appeal from a judgment of the Supreme Court of Georgia affirming
a conviction of the appellant of an alleged violation of the state
banking law.
Page 279 U. S. 3
MR. JUSTICE BUTLER delivered the opinion of the Court.
Appellant was convicted in the Superior Court of Fulton County,
Georgia, of a violation of § 28, Art. XX, of the State Banking Act
of 1919 (Acts Ga.1919, p. 219). The judgment was affirmed in the
highest court of the state. 166 Ga. 563. Appellant challenged the
validity of that section on the ground, among others, that the
presumption created by it is so unreasonable and arbitrary as to
amount to a denial of due process of law in violation of the
Fourteenth Amendment. His contentions were overruled by both
courts, and that question is here for decision. Section 237(a),
Judicial Code.
The questioned section follows:
"Every insolvency of a bank shall be deemed fraudulent, and the
president and
Page 279 U. S. 4
directors shall be severally punished by imprisonment and labor
in the penitentiary for not less than one (1) year nor longer than
ten (10) years; provided, that the defendant, in a case arising
under this section, may repel the presumption of fraud by showing
that the affairs of the bank have been fairly and legally
administered, and generally, with the same care and diligence that
agents receiving a commission for their services are required and
bound by law to observe, and, upon such showing, the jury shall
acquit the prisoner."
This section is in words substantially the same as one first
found in the Georgia Penal Code of 1833. But its meaning has been
changed by a recent statutory definition of insolvency. Section 5,
Art. I, Banking Act of 1919, declares:
"A bank shall be deemed to be insolvent, first, when it cannot
meet its liabilities as they become due in the regular course of
business; second, when the actual cash market value of its assets
is insufficient to pay its liabilities to depositors and other
creditors; third, when its reserve shall fall under the amount
herein required and it shall fail to make good such reserve within
thirty (30) days after being required to do so by the
superintendent of banks."
Prior to its enactment, none of the conditions specified was
deemed insolvency.
Griffin v. State, 142 Ga. 636, 642
et seq.
Construing § 28 after this enlargement of the meaning of
insolvency, the state court, in
Snead v. State, 165 Ga.
44, held that, upon proof of insolvency, it is presumed to be
fraudulent, and an accused president or director is presumed to be
guilty. The court said at (p. 53), that this
"is but an application to a criminal case of the doctrine of
res ipsa loquitur, often applied in civil proceedings. . .
. The state is only required to prove that the bank was under the
management and control of the accused, and that it became insolvent
while it was within the management and control of the defendant,
either by
Page 279 U. S. 5
himself alone or conjointly with associates in its
management."
The indictment in the case at bar merely alleges that, at a time
and place specified, appellant, being president of a bank named and
he and two others being directors of said bank, "and the said
accused being by law then and there charged with the fair and legal
administration of the business and affairs of the said" bank, "then
and there pending and during the said official charge and
responsibility of the said accused, the said" bank "did become
fraudulently insolvent, contrary," etc.
Referring to the language of the section, the court in this case
declared that the affairs of a bank are "fairly and legally"
administered when they are administered "honestly" and "in
accordance with law." And it said (p. 578) that the presumption
that the insolvency is fraudulent
"places upon these officers the burden of showing that they
administered the affairs of the bank with the same care and
diligence that agents receiving a commission for their services are
required and bound by law to observe. . . . In addition, this
statute . . . permits the accused to rebut the presumption against
him . . . by showing other facts, such as that the insolvency was
caused by an unexpected panic in the country, or by the speculation
of some officer or agent for which the accused was in no way
responsible, or by any other facts rebutting the presumption of
fraudulent conduct on his part."
The proviso permits the presumption that a crime has been
committed to be repelled by the showing specified therein; and,
under the decisions of the court, the accused may show any facts
that tend to rebut the presumption that he is guilty of the offense
charged.
State legislation declaring that proof of one fact or a group of
facts shall constitute
prima facie evidence of the main or
ultimate fact in issue is valid if there is a rational connection
between what is proved and what is to be inferred.
Page 279 U. S. 6
If the presumption is not unreasonable and is not made
conclusive of the rights of the person against whom raised, it does
not constitute a denial of due process of law.
Mobile, J. &
K. C. R. Co. v. Turnipseed, 219 U. S. 35,
219 U. S. 43. A
prima facie presumption casts upon the person against whom
it is applied the duty of going forward with his evidence on the
particular point to which the presumption relates. A statute
creating a presumption that is arbitrary or that operates to deny a
fair opportunity to repel it violates the due process clause of the
Fourteenth Amendment.
Bailey v. Alabama, 219 U.
S. 219,
219 U. S. 233
et seq. Mere legislative flat may not take the place of
fact in the determination of issues involving life, liberty or
property. "It is not within the province of a legislature to
declare an individual guilty or presumptively guilty of a crime."
McFarland v. American Sugar Co., 241 U. S.
79,
241 U. S.
86.
The presumption here involved does not rest upon any definite
basis. It is raised upon proof of any one or more of the conditions
described as insolvency, and without regard to the facts from which
such condition resulted. The statute does not specify the elements
of the offense, and so the inference is not restricted to any
particular point or specific issue. The facts so to be presumed are
as uncertain and vague as the terms "fraudulent" and "fraud"
contrasted with "fairly," "legally," "honestly," and "in accordance
with law," when used to describe the management of a bank.
Connally v. General Construction Co., 269 U.
S. 385,
269 U. S. 391.
Cline v. Frink Dairy Co., 274 U.
S. 445,
274 U. S. 454.
Nor is the generality of the presumption aided by the allegations
of the accusation. The indictment merely follows the general words
of the statute without specifying facts to disclose the nature or
circumstances of the charge.
Snead v. State, supra, 165
Ga. 54.
And see United States v. Cruikshank, 92 U. S.
542,
92 U. S. 562.
And as to guilt, also, the presumption is sweeping. It extends
Page 279 U. S. 7
to all directors. There may be from 3 to 25. The president is
required to be a director.
The presumption extends to the
corpus delicti, as well
as to the responsibility of the president or director accused. The
proof which makes a
prima facie case points to no specific
transaction, matter, or thing as the cause of the fraudulent
insolvency, or to any act or omission of the accused tending to
show his responsibility. He is to be convicted unless he negatives
every fact, whether act or omission in the management of the bank,
from which fraudulent insolvency might result, or shows that he is
in no way responsible for the condition of the bank.
Inference of crime and guilt may not reasonably be drawn from
mere inability to pay demand deposits and other debts as they
mature. In Georgia, banks are permitted to lend up to 85 percent of
their deposits. Unforeseen demands in excess of the reserves
required do not tend to show that the crime created by § 28 has
been committed. The same may be said as to the other conditions
defined as insolvency. The connection between the fact proved and
that presumed is not sufficient. Reasoning does not lead from one
to the other.
Hawes v. Georgia, 258 U. S.
1,
258 U. S. 4. The
presumption created by § 28 is unreasonable and arbitrary.
Bailey v. Alabama, supra; McFarland v. American Sugar Co.,
supra.
Judgment reversed.