ASSARIA STATE BANK
v.
DOLLEY, BANK COMMISSIONER OF THE STATE OF KANSAS

U.S. | 1911-01-03
No. 617
219 U.S. 121 Supreme Court of the United States (1911) Positive Treatment
Also reported at: 55 L. Ed. 123 · 31 S. Ct. 189 · 1911 U.S. LEXIS 1624 · SCDB 1910-054
Cited by 16 cases

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Synopsis

Kansas state banks challenged a law creating a Bank Depositors' Guaranty Fund that required contributions from participating banks and gave certain preferences to depositors over other creditors, arguing the law violated their constitutional rights and would force them out of business. The Supreme Court affirmed the lower court's dismissal, holding that the guaranty fund law was a valid exercise of the state's police power to protect the currency and that the banks had not demonstrated a constitutional violation, as they could choose to contribute to the fund, withdraw their credits, or continue operating under less favorable conditions. The Court established that states may encourage desired conduct through incentives and disadvantages rather than absolute mandates in pursuit of legitimate regulatory objectives.

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Opinion of the Court
Mr. Justice Holmes

Mr. Justice Holmes delivered the opinion of the court.

This is a bill in equity brought by many state banks of Kansas to prevent the enforcement of the Kansas law providing for a Bank Depositors’ Guaranty Fund. The defendants demurred. The Circuit Court, while holding the act unconstitutional, dismissed the bill on the ground that the appellants did not show that their rights under the Constitution were infringed, and therefore did not state a case within the jurisdiction of the court. 175 Fed. Rep. 365, 375, 381, 382; The ground of complaint was that the law imposed certain conditions upon sharing the benefits and burdens of contributors to the Guaranty Fund, that the appellants would not or could not contribute, and that unless they did the effect of the law would be to drive them out of business. It was complained also that whereas theretofore the plaintiffs would have" been entitled to share pro rata in the assets of an insolvent bank to which they had given credit, now depositors with such of their debtors as should go into the guaranty system would be preferred. Again, various conditions of the scheme not affecting the plaintiffs were pointed out as unreasonable and arbitrary, and the whole act was alleged to be unconstitutional and void. There was added a charge that the act required taxation to meet the expenses of carrying out the scheme. To all this the court replied that so far as the plaintiffs were concerned; it did not appear that they could not change their condition so as to enable themselves to contribute, and that the possible preference of other creditors was put as a pure speculation, it not being averred that any guaranteed bank indebted to any of the plaintiffs had failed, to which it might be added that the plaintiffs are free to withdraw their .credits and collect their debts now. The charge as to taxation did not state a case under the Constitution, and violation of constitutional rights was the only ground for coming into the Circuit Court.

The case of Noble State Bank v. Haskell, just decided, ante, p. 104, cuts the root of the plaintiffs’ case, except so far as the Kansas law shows certain minor differences from that of Oklahoma. The most important of these is that contribution to the fund is not absolutely required. On this ground it is said, and was thought by the Circuit Judge, that the law could not be justified under the police power. We cannot agree to such a limitation. If, as we have decided, the law .might compel the contribution on the grounds that we have stated, it may try to bring about the same result by the creation of motives less compulsory than command and of disadvantages in holding aloof less peremptory than an immediate stop. We shall not go through the details of minuté criticism urged by the appellants, in most if not all of which they are in no way concerned. Perhaps the most striking of these subordinate matters is the preference of ordinary depositors over other creditors, a preference that seems to be overstated by the appellants. This, obviously, is in aid of what we have-assumed to be the one of the chief objects and justifications of such laws, securing the currency of checks. The ordinary deposits are those that are drawn against in that way. Another discrimination complained of is that against, unincorporated, banks and banks not having a surplus of ten per cent; But if the State might require incorporation it may give advantages to incorporated companies. It might provide that no banking business should be done except by corporations and that corporations should not be formed or continue with less than a surplus of ten per cent, both provisions being for the purpose of assuring safety. If instead of that it allows the plaintiffs to keep on without incorporation and with a smaller surplus they cannot complain that the safer banks will outstrip them as the result of the law. We think it unnecessary to discuss the case more at length.

Decree affirmed.

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Citator

Cited By

  • Gray v. Cent. Fla. Lumber Co., 104 Fla. 446 (Fla. 1932)
    …Constitution of Florida, because it required appellee to file annual reports while corporations paying a filing fee of One Thousand Dollars are exempt from making any reports whatever. In Assaria State Bank vs. Dolley, 219 U. S. 121, 55 L. Ed. 123, 31 Sup. Ct. Rep. 189, the Supreme Court upheld a classification predicated solely on volume of surplus as required between incorporated and unincorporated banks. The same court has frequently upheld statutes directed at an evil as it actually exists in the contemplation…
    1 / 2
  • Frost v. Corp. Comm'n of Okla., 278 U.S. 515 (U.S. 1929)
    …the issuance of franchises for the carrying on of such callings. Noble State Bank v. Haskell, 219 U. S. 104, 112-113. Shallenberger v. First State Bank, 219 U. S. 114; Dillingham v. McLaughlin, 264 U. S. 370. Compare Assaria State Bank v. Dolley, 219 U. S. 121; German Alliance Ins. Co. v. Kansas, 233 U. S. 389, 416. Bank of Augusta v. Earle, 13 Pet. 519, 595; People’s Railroad v. Memphis Railroad, 10 Wall. 38, 51; California v. Pacific Railroad Co., 127 U. S. 1, 40-41; Denver v. New York Trust Co., 229 U…
  • Chicago v. State of Iowa, 233 U.S. 334 (U.S. 1914)

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