1. National banks are subject to state laws that do not
interfere with the purposes of their creation, tend to destroy or
impair their efficiency as federal agencies, or conflict with the
laws of the United States. P. 656.
2. National banks can exercise only the powers expressly granted
by federal statutes and such incidental powers as are necessary to
the conduct of the business for which they are established.
Id.
Page 263 U. S. 641
3. Under the National Bank Law, power to establish branches is
withheld. P.
263 U.S. 657.
Rev.Stats. §§ 5134, 5190, 5138.
4. The power cannot be sustained as an incidental power, under
Rev.Stats., § 5136, for the mere multiplication of places where the
powers of a bank may be exercised is not a necessary incident of
the banking business, and, moreover, a power which the statute, by
fair construction, denies, cannot exist incidentally. P.
263 U.S. 659.
5. A state statute prohibiting branch banks is valid in
application to a national bank, for it does not frustrate the
purpose for which the bank was created, or interfere with the
discharge of its duties to the government, or impair its efficiency
as a federal agency.
Id.
6. The prohibition may be enforced by the state by such form of
procedure as the state may deem appropriate -- in this case, by an
information in the nature of
quo warranto. P.
263 U. S.
660.
297 Mo. 397 affirmed.
Error to a judgment of the Supreme Court of Missouri ousting the
plaintiff in error from operating a branch bank in a proceeding in
the nature of
quo warranto instituted by the state at the
information of her Attorney General. For the order restoring the
case to the docket for reargument,
see 262 U.S. 732.
Page 263 U. S. 655
MR. JUSTICE SUTHERLAND delivered the opinion of the Court.
The State of Missouri brought this proceeding in the nature of
quo warranto in the state supreme court against the
plaintiff in error to determine its authority to establish and
conduct a branch bank in the City of St. Louis. The information
avers that the bank was organized under the laws of the United
States and was and is engaged in a general banking business in that
city at a banking house, the location of which is given; that, in
contravention of its charter and of the act of Congress under which
it was incorporated, it has illegally opened and is operating a
branch bank for doing a general banking business in a separate
building several blocks from its banking house, and proposes to
open additional branch banks at various other locations, and that
this is in violation of a statute of the state expressly
prohibiting the establishment of branch banks. The prayer is that,
upon final hearing, the bank be ousted from the privilege of
operating this branch bank or any other. A demurrer to the
information was interposed, and the cause thereupon submitted. The
contention of the state was upheld, and judgment rendered in
accordance with the prayer. 297 Mo. 397.
The correctness of the judgment is challenged under numerous
specifications of error presenting federal questions, which, for
the purposes of the case, may be considered under two heads: (1)
whether the state statute is valid as applied to national banks,
and (2) whether a proceeding to call a national bank to account for
acts of the kind here alleged may be maintained by the state, and
whether the form of remedy pursued is sustainable.
First. The Missouri statute (§ 11737, R.S.Mo. 1919) provides
"that no bank shall maintain in this state a branch bank or receive
deposits or pay checks except in its own banking house." That the
facts alleged in the information
Page 263 U. S. 656
bring the case within that part of the statute which prohibits
the maintenance of branch banks and that the statute applies to
national banks is conclusively established by the decision of the
state court, and we confine ourselves to the inquiry whether, as
thus applied, the statute is valid.
National banks are brought into existence under federal
legislation, are instrumentalities of the federal government, and
are necessarily subject to the paramount authority of the United
States. Nevertheless, national banks are subject to the laws of a
state in respect of their affairs, unless such laws interfere with
the purposes of their creation, tend to impair or destroy their
efficiency as federal agencies, or conflict with the paramount law
of the United States.
National Bank v.
Commonwealth, 9 Wall. 353,
76 U. S. 362;
Davis v. Elmira Savings Bank, 161 U.
S. 275,
161 U. S. 283.
These two cases are cited and followed in the later case of
McClellan v. Chipman, 164 U. S. 347,
164 U. S. 357,
and the principle which they establish is said to contain a rule
and an exception --
"the rule being the operation of general state laws upon the
dealings and contracts of national banks; the exception being the
cessation of the operation of such laws whenever they expressly
conflict with the laws of the United States or frustrate the
purpose for which the national banks were created, or impair their
efficiency to discharge the duties imposed upon them by the law of
the United States."
See also Waite v. Dowley, 94 U. S.
527,
94 U. S. 533.
The question is whether the Missouri statute falls within the rule
or within the exception.
Does it conflict with the laws of the United States? In our
opinion, it does not. The extent of the powers of national banks is
to be measured by the terms of the federal statutes relating to
such associations, and they can rightfully exercise only such as
are expressly granted or such incidental powers as are necessary to
carry on the business for which they are established.
Bullard v.
Bank, 18
Page 263 U. S. 657
Wall. 589,
85 U. S. 593;
Logan County Bank v. Townsend, 139 U. S.
67,
139 U. S. 73;
California Bank v. Kennedy, 167 U.
S. 362,
167 U. S. 366.
Among other things, the federal law (Rev.Stat. § 5134) provides
that the organization certificate of the association shall
specifically state
"the place where its operations of discount and deposit are to
be carried on, designating the state, territory, or district, and
the particular county and city, town, or village."
By another provision (Rev.Stat. § 5190), it is required that
"the usual business of each national banking association shall
be transacted at an office or banking house located in the place
specified in its organization certificate."
Strictly, the latter provision, employing, as it does, the
article "an" to qualify words in the singular number, would confine
the association to one office or banking house. We are asked,
however, to construe it otherwise in view of the rule that "words
importing the singular number may extend and be applied to several
persons or things." Rev.Stat. § 1. But obviously this rule is not
one to be applied except where it is necessary to carry out the
evident intent of the statute.
See Garrigus v. Board of
Commissioners, 39 Ind. 66, 70;
Moynahan v. City of New
York, 205 N.Y. 181, 186. Here there is not only nothing in the
context or in the subject matter to require the construction
contended for, but other provisions of the national banking laws
are persuasively to the contrary. By § 5138, Rev.Stat., the minimum
amount of capital is fixed in proportion to the population of the
place where the bank is located. If it had been intended to allow
the establishment by an association of not one bank only, but, in
addition, as many branch banks as it saw fit, it is remarkable, to
say the least, that there should have been no provision for
adjusting the capital to the latter contingency or for determining
how or under what circumstances such branch banks might be
established or for regulating them. Section 5155, Rev.Stat.,
provides that it shall be lawful for a state
Page 263 U. S. 658
bank
"having branches, the capital being joint and assigned to and
used by the mother bank and branches in definite proportions, to
become a national banking association . . . and to retain and keep
in operation its branches, . . . the amount of the circulation . .
. to be regulated by the amount of capital assigned to and used by
each."
This provision, confined by its terms, as it is, to existing
state institutions, may be fairly considered as constituting an
exception to the general rule, and the presence of safeguarding
limitations in the excepted case, with their entire absence from
the statute otherwise, goes far in the direction of confirming the
conclusion that the general rule does not contemplate the
establishment of branch banks. This apparently was the
interpretation of Congress itself, since, in two instances at
least, special legislation was deemed necessary to allow the
establishment of branch banks,
viz., at the Chicago
Exposition, in 1892, c. 71, 27 Stat. 33, and at the St. Louis
Exposition, in 1901, c. 864, 31 Stat. 1444, § 21, the existence of
the branch bank in each instance being expressly limited to the
period of two years.
The construction of the executive officers charged with the
administration of the law has been, with substantial uniformity, to
the same effect, and in this view the Department of Justice, in a
well considered opinion rendered May 11, 1911, concurred. Lowry
National Bank-Establishment of Branches, 29 Op.Atty.Gen. 81.
*
This interpretation of the statute by the legislative department
and by the executive officers of the government would go far to
remove doubt as to its meaning if any existed.
See Tiger v.
Western Investment Co., 221 U.S.
Page 263 U. S. 659
286,
221 U. S. 309;
United States v. Hermanos y Compania, 209 U.
S. 337,
209 U. S.
339.
But it is said that the establishment of a branch bank is the
exercise of an incidental power conferred by § 5136, Rev.Stat., by
which national banking associations are vested with "all such
incidental powers as shall be necessary to carry on the business of
banking." The mere multiplication of places where the powers of a
bank may be exercised is not, in our opinion, a necessary incident
of a banking business, within the meaning of this provision.
Moreover, the reasons adduced against the existence of the power
substantively are conclusive against its existence incidentally,
for it is wholly illogical to say that a power which by fair
construction of the statutes is found to be denied nevertheless
exists as an incidental power. Certainly, an incidental power can
avail neither to create powers which, expressly or by reasonable
implication, are withheld nor to enlarge powers given, but only to
carry into effect those which are granted.
Clearly, the state statute, by prohibiting branches, does not
frustrate the purpose for which the bank was created or interfere
with the discharge of its duties to the government or impair its
efficiency as a federal agency. This conclusion would seem to be
self-evident, but, if warrant for it be needed, it sufficiently
lies in the fact that national banking associations have gone on
for more than half a century without branches, and upon the theory
of an absence of authority to establish them. If the nonexistence
of such branches or the absence of power to create them has
operated or is calculated to operate to the detriment of the
government, or in such manner as to interfere with the efficiency
of such associations as federal agencies, or to frustrate their
purposes, it is inconceivable that the fact would not long since
have been discovered and steps taken by Congress to remedy the
omission.
Second. The state statute as applied to national banks is
therefore valid, and the corollary that it is obligatory
Page 263 U. S. 660
and enforceable necessarily results, unless some controlling
reason forbids; and, since the sanction behind it is that of the
state, and not that of the national government, the power of
enforcement must rest with the former, and not with the latter. To
demonstrate the binding quality of a statute, but deny the power of
enforcement, involves a fallacy made apparent by the mere statement
of the proposition, for such power is essentially inherent in the
very conception of law. It is insisted with great earnestness that
the United States alone may inquire by
quo warranto
whether a national bank is acting in excess of its charter powers,
and that the state is wholly without authority to do so. This
contention will be conceded, since it is plainly correct, but the
attempt to apply it here proceeds upon a complete misconception of
what the state is seeking to do, a misconception which arises from
confounding the relief sought with the circumstances relied upon to
justify it. The state is neither seeking to enforce a law of the
United States nor endeavoring to call the bank to account for an
act in excess of its charter powers. What the state is seeking to
do is to vindicate and enforce its own law, and the ultimate
inquiry which it propounds is whether the bank is violating that
law, not whether it is complying with the charter or law of its
creation. The latter inquiry is preliminary and collateral, made
only for the purpose of determining whether the state law is free
to act in the premises or whether its operation is precluded in the
particular case by paramount law. Having determined that the power
sought to be exercised by the bank finds no justification in any
law or authority of the United States, the way is open for the
enforcement of the state statute. In other words, the national
statutes are interrogated for the sole purpose of ascertaining
whether anything they contain constitutes an impediment to the
enforcement of the state statute, and, the answer being in the
negative, they may be laid aside as of no further concern.
Page 263 U. S. 661
The application of the state statute to the present case and the
power of the state to enforce it being established, the nature of
the remedy to be employed is a question for state determination,
and the judgment of the state court that the one here employed was
appropriate is conclusive, unless it involves a denial of due
process of law, which plainly it does not. We are not concerned
with the question whether an information in the nature of
quo
warranto, according to the general principles of the law, is
in fact appropriate. It is enough that the supreme court of the
state has so held.
Standard Oil Co. v. Missouri,
224 U. S. 270,
224 U. S. 287;
Twining v. New Jersey, 211 U. S. 78,
211 U. S.
110-111. In
Iowa Central Ry. Co. v. Iowa,
160 U. S. 389,
160 U. S. 393,
this Court said:
"But it is clear that the Fourteenth Amendment in no way
undertakes to control the power of a state to determine by what
process legal rights may be asserted or legal obligations be
enforced, provided the method of procedure adopted for these
purposes gives reasonable notice and affords fair opportunity to be
heard before the issues are decided. This being the case, it was
obviously not a right, privilege, or immunity of a citizen of the
United States to have a controversy in the state court prosecuted
or determined by one form of action instead of by another. . . .
Whether the court of last resort of the State of Iowa properly
construed its own Constitution and laws in determining that the
summary process under those laws was applicable to the matter which
it adjudged was purely the decision of a question of state law,
binding upon this Court."
See also Louisville & Nashville R. Co. v. Schmidt,
177 U. S. 230,
177 U. S. 236;
Hooker v. Los Angeles, 188 U. S. 314,
188 U. S. 318;
Rogers v. Peck, 199 U. S. 425,
199 U. S.
435.
The judgment of the Supreme Court of Missouri is therefore
Affirmed.
Page 263 U. S. 662
* Our attention is directed to a later opinion of the Attorney
General, dated October 3, 1923, which, although in terms affirming
the earlier opinion, announces a limited rule, which does not seem
to be in precise agreement with it. To the extent of the
disagreement, however, we accept the view of the earlier
opinion.
MR. JUSTICE VANDEVANTER, dissenting:
I am constrained to dissent from the opinion and judgment just
announced.
National banks are corporate instrumentalities of the United
States created under its laws for public purposes essentially
national in character and scope. Their powers are derived from the
United States, are to be exercised under its supervision, and can
be neither enlarged nor restricted by state laws. The decisions
uniformly have been to this effect and have proceeded on principles
which were settled a century ago in the days of the Bank of the
United States.
In
McCulloch v.
Maryland, 4 Wheat. 316, where the status of that
bank was drawn in question and elaborately discussed, this Court
reached the conclusion that the Constitution invests the United
States with authority to provide, independently of state laws, for
the creation of banking institutions, and their maintenance at
suitable points within the states, as a means of carrying into
execution its fiscal and other powers. Chief Justice Marshall there
dealt with the respective relations of the United States and the
states to such an instrumentality in a very plain and convincing
way. Among the other things, he said:
"After the most deliberate consideration, it is the unanimous
and decided opinion of this Court that the act to incorporate the
Bank of the United States is a law made in pursuance of the
Constitution, and is a part of the supreme law of the land."
P.
17 U. S.
424.
"It is of the very essence of supremacy to remove all obstacles
to its action within its own sphere, and so to modify every power
vested in subordinate governments, as to exempt its own operations
from their own influence. This effect need not be stated in terms.
It is so involved in the declaration of supremacy, so necessarily
implied in it, that the expression of it could not make it more
certain."
P.
17 U. S.
427.
Page 263 U. S. 663
"The sovereignty of a state extends to everything which exists
by its own authority or is introduced by its permission, but does
it extend to those means which are employed by Congress to carry
into execution powers conferred on that body by the people of the
United States? We think it demonstrable that it does not. Those
powers are not given by the people of a single state. They are
given by the people of the United States to a government whose
laws, made in pursuance of the Constitution, are declared to be
supreme."
P.
17 U. S.
429.
In
Osborn v. Bank of the United
States, 9 Wheat. 738, there was drawn in question
the validity of a state statute which, after reciting that the bank
had been pursuing its operations contrary to a law of the state,
provided that, if the operations were continued the bank should be
liable to specified exactions, called a tax. The statute was held
invalid, the Court saying:
"The bank is not considered as a private corporation, whose
principal object is individual trade and individual profit, but as
a public corporation, created for public and national purposes.
That the mere business of banking is, in its own nature, a private
business, and may be carried on by individuals or companies having
no political connection with the government is admitted, but the
bank is not such an individual or company. It was not created for
its own sake, or for private purposes. . . . It is an instrument
which is 'necessary and proper' for carrying on the fiscal
operations of government."
Pp.
22 U. S.
860-861.
The later legislation of Congress under which national banks are
created and maintained stands on the same constitutional plane.
When its validity has been assailed, or its operative force in a
state questioned, the cases just mentioned have been regarded as
settling the principles to be applied.
In
Farmers' & Mechanics' National Bank v. Dearing,
91 U. S. 29,
91 U. S. 31, the
Court referred to those cases, pronounced
Page 263 U. S. 664
their reasoning applicable to the later legislation, and
said:
"The national banks organized under the act are instruments
designed to be used to aid the government in the administration of
an important branch of the public service. They are means
appropriate to that end. . . . Being such means, brought into
existence for this purpose, and intended to be so employed, the
states can exercise no control over them, nor in any wise affect
their operation, except insofar as Congress may see proper to
permit. Anything beyond this is 'an abuse, because it is the
usurpation of power which a single state cannot give.'"
Pp.
91 U. S.
33-34.
To the same effect are
Easton v. Iowa, 188 U.
S. 220,
188 U. S. 230,
188 U. S. 237;
Van Reed v. People's National Bank, 198 U.
S. 554,
198 U. S. 557;
First National Bank v. Union Trust Co., 244 U.
S. 416,
244 U. S. 425,
and
First National Bank v. California, 262 U.
S. 366,
262 U. S. 369.
Of special pertinence are the following excerpts from
Easton v.
Iowa:
"That legislation has in view the erection of a system extending
throughout the country, and independent, so far as powers conferred
are concerned, of state legislation which, if permitted to be
applicable, might impose limitations and restrictions as various
and as numerous as the states."
P.
188 U. S.
229.
"It thus appears that Congress has provided a symmetrical and
complete scheme for the banks to be organized under the provisions
of the statute."
"It is argued by the learned Attorney General on behalf of the
State of Iowa that 'the effect of the statute of Iowa is to require
of the officers of all banks within the state a higher degree of
diligence in the discharge of their duties. It gives to the general
public greater confidence in the stability and solvency of national
banks, and in the honesty and integrity of their managing officers.
It enables them better to accomplish the purposes and designs
Page 263 U. S. 665
of the general government, and is an aid, rather than
impediment, to their utility and efficiency as agents and
instrumentalities of the United States.'"
"But we are unable to perceive that Congress intended to leave
the field open for the states to attempt to promote the welfare and
stability of national banks by direct legislation. If they had such
power it would have to be exercised and limited by their own
discretion, and confusion would necessarily result from control
possessed and exercised by two independent authorities."
P.
188 U. S.
231-232.
It must be admitted that, insofar as the legislation of Congress
does not provide otherwise, the general laws of a state have the
same application to the ordinary transactions of a national bank --
such as incurring and discharging obligations to depositors,
presenting drafts for acceptance or payment and giving notice of
their dishonor, taking pledges for the repayment of money loaned,
and receiving or making conveyances of real property -- that they
have to like transactions of others. But not so of questions of
corporate power. As explained in
Easton v. Iowa and other
cases, their solution must turn on the laws of the United States
under which the bank is created.
National banks, like other corporations, have such powers as
their creator confers on them, expressly or by fair implication,
and none other.
Thomas v. West Jersey R. Co., 101 U. S.
71,
101 U. S. 82;
Logan County National Bank v. Townsend, 139 U. S.
67,
139 U. S. 73.
Powers not so conferred are in effect denied; a prohibition is
implied from the failure to grant them.
First National. Bank v.
National Exchange Bank, 92 U. S. 122,
92 U. S. 128;
California National Bank v. Kennedy, 167 U.
S. 362,
167 U. S. 367.
In short, all the powers of a national bank, like its right to
exist at all, have their source in the laws of the United States.
Only where those laws bring state laws into the problem, as by
enabling national banks to act as executors, administrators, etc.,
where that is permitted by state laws, can the latter have
Page 263 U. S. 666
any bearing on the question of corporate power -- the privileges
which the bank may exercise.
First National Bank v. Union Trust
Co., 244 U. S. 416.
The proceeding now before us is an information in the nature of
quo warranto brought in the Supreme Court of Missouri,
whereby that state challenges the power of a national bank in the
City of St. Louis to conduct a branch bank established by it in
that city and asks that the bank be ousted from that privilege on
the grounds, first, that establishing and conducting the branch is
a violation of the bank's charter powers, and, secondly, that it is
prohibited by a law of the state.
It is not claimed that the laws of the United States contain any
provision whereby the privilege asserted by the bank is made to
depend on the will or legislative policy of the state; nor do they
in fact contain any such provision. Whether the bank has the
privilege which it asserts is therefore in no way dependent on or
affected by the state law, but turns exclusively on the laws of the
United States. If they grant the privilege, expressly or by fair
implication, no law of the state can abridge it or take it away.
And if they do not grant it, they in effect prohibit it, and no law
of the state can strengthen or weaken the prohibition. In either
event, nothing can turn on the state law. It simply has no bearing
on the solution of the question.
In this situation, the state is not, in my opinion, entitled to
maintain the proceeding. It has no distinctive right to protect,
nor any applicable law to vindicate or enforce. The proceeding is
one which may be maintained only in the public right. Here, the
state is not authorized to represent or to speak for the public.
The bank is not a creation and instrumentality of the state, but of
the national, government. Its presence in the state is attributable
to the national power, not to the state's permission. Whether the
bank shall be kept within its legitimate powers and made to
discontinue any departure from or abuse
Page 263 U. S. 667
of them is a matter in which the people of all the states have
the same interest, the bank being a national creation and
instrumentality. The people of Missouri merely share in the common
interest.
"In that field, it is the United States, and not the state,
which represents them as
parens patriae, when such
representation becomes appropriate, and to the former, and not to
the latter, they must look for such protective measures as flow
from that status."
Massachusetts v. Mellon, 262 U.
S. 447,
262 U. S. 486.
It therefore is apparent that the state is here mistakenly
appropriating to itself a function which belongs to the United
States.
In
Tarble's Case,
13 Wall. 397,
80 U. S. 407,
which possessed features making it particularly pertinent here,
this Court pointed out the distinct and independent character of
the national and state governments, within their respective
spheres, and, in that connection, said:
"Neither can intrude with its judicial process into the domain
of the other, except so far as such intrusion may be necessary on
the part of the national government to preserve its rightful
supremacy in cases of conflict of authority. In their laws and mode
of enforcement, neither is responsible to the other. How their
respective laws shall be enacted, how they shall be carried into
execution, and in what tribunals, or by what officers, and how much
discretion, or whether any at all shall be vested in their
officers, are matters subject to their own control, and in the
regulation of which neither can interfere with the other."
Another case apposite in principle is
Territory
v. Lockwood, 3 Wall. 236. It was a proceeding in
the nature of
quo warranto brought by the Territory of
Nebraska to test the defendant's right to hold a federal office in
the territory which he was charged with unlawfully usurping. This
Court disposed of the matter by saying:
"The right of the territory to prosecute such an information as
this would carry with it the power of amotion
Page 263 U. S. 668
without the consent of the government from which the appointment
was derived. This the territory can no more accomplish in one way
than in another. The subject is as much beyond the sphere of its
authority as it is beyond the authority of the states as to the
federal officers whose duties are to be discharged within their
respective limits. The right to institute such proceedings in
inherently in the government of the nation."
With great deference. I think the judgment below should be
reversed on the ground that the state is without capacity to bring
or maintain this proceeding, and the court below without authority
to entertain it.
THE CHIEF JUSTICE and MR. JUSTICE BUTLER authorize me to say
that they concur in this dissent.