Opinion
May 25, 1928.
1. INFORMATION: Director of Bank: Loan without Recorded Consent of Board. An information charging that defendant, a director of a bank located in a city having less than seven thousand population, borrowed a sum of money in excess of ten per cent, but less than twenty-five per cent, of its capital and surplus, without the consent of a majority of the directors, other than the defendant, first having been obtained at a meeting of the board of directors and recorded on its minutes, does not state a crime under the statutes. The statutes, when all are considered together, do not make it a felony for such a bank to loan less than twenty-five per cent of its capital and surplus to an individual, partnership or corporation, without such consent entered upon its records.
2. LOANS BY BANK: Inclusion of One Statute by Another. Subdivision 8 of Section 11740, Revised Statutes 1919, forbidding a director to borrow money of a bank in excess of ten per cent of its capital and surplus, without the consent of a majority of its directors, made a matter of record before the loan is made, is not comprehended by Section 3420-5, Laws 1925, page 190, making it a felony for any director to make a loan to any individual, partnership or corporation, in excess of the amounts set out in Section 11740 and Section 11807, Revised Statutes 1919. Section 3420-5 interdicts an excess loan, but the term "excess" in connection with the "loan" as therein used cannot logically or reasonably allude to Subdivision 8, the pith of which is the failure to record the consent of the majority of the directors, given in a meeting of the board, to the borrowing by a director, before a loan in excess of ten per cent is made.
3. ____: ____: The Whole of Section 11740. The language of Section 3420-5, Laws 1925, page 190, does not include the whole of Section 11740, Revised Statutes 1919, but the excess loan interdicted by Section 3420-5 refers to Subdivision 1 of Section 11740 — the subdivision which alludes to and prohibits loans to an individual, partnership or corporation in excess of a named per cent of the capital stock and surplus, the per cent depending on the population of the city in which the bank is located.
4. ____: ____: Population: Judicial Notice. This court takes judicial notice that Dunklin County does not contain a city having a population of seven thousand.
5. ____: ____: Adopting Statute: Amount of Loan. Only so much of Section 11740, Revised Statutes 1919, was adopted by Section 3420-5, Laws 1925, page 190, as particularly relates to the subject of Section 3420-5, and the subject to which Section 3420-5 particularly relates is the excess loans proscribed by Section 11740, and Subdivision 1 of Section 11740 is the only portion thereof that proscribes excess loans. The material substance of the prohibition of Subdivision 8 of Section 11740 was not the proscription of excess loans, but the borrowing of money by a director of a bank without the consent of a majority of the directors, other than the borrower, first having been obtained at a meeting of the board, entered as a matter of record before the loan is made, and that subdivision was not adopted by Section 3420-5.
6. ____: Criminal Statute: Strict Construction. Section 3420-5, Laws 1925, page 190, making it a felony for a director or officer of a bank to make or concur in making a loan to any individual, partnership or corporation, in excess of the amounts set out in Sections 11740 and 11807, Revised Statutes 1919, is a criminal statute, and as such must be construed strictly against the State and liberally in favor of the accused, and cannot be extended and enlarged by judicial interpretation to embrace persons not specifically included within its terms.
Corpus Juris-Cyc. References: Banks and Banking, 7 C.J., Section 202, p. 579, n. 18. Criminal Law, 16 C.J., Section 955, p. 516, n. 25. Statutes, 36 Cyc., p. 1152, n. 65; p. 1186, n. 49.
Appeal from Stoddard Circuit Court. — Hon. E.M. Dearing, Judge.
AFFIRMED.
North T. Gentry, Attorney-General, and David P. James, Assistant Attorney-General, for appellant; James V. Billings of counsel.
(1) The information plainly shows that Subdivision 8 of Section 11740 is referred to therein, and clearly charges the offense. This subdivision is, by Section 3420-5, made the standard and measure by which loans to bank officers are regulated. It sets the amount above which loans to officers of the bank cannot be made, unless the consent of the directors is a matter of record, without committing a felony. The statutes are full of instances where, by reference, one section is incorporated within another. "Every presumption is to be indulged in favor of the validity of an act enacted by the General Assembly, and that presumption is to continue until invalidity is made apparent beyond a doubt." State ex rel. McCaffrey v. Aloe, 152 Mo. 466; State v. Distilling Co., 236 Mo. 244; Kusnetzky v. Security Insurance Co., 281 S.W. 47; State ex rel. Sekyra v. Schmoll, 282 S.W. 702. (2) Respondent's contention that Subdivision 8 of Section 11740 was repealed and a new subdivision enacted, making this proceeding in the trial court void, is without merit. The indictment was filed in December, 1926, the prosecution was instituted before the Act of 1927 was passed, and was pending when said act became effective. Secs. 3709, 7064, 7065, R.S. 1919. (3) The defendant, in effect, claims that the provisions of Subdivision 8 of Section 11740, requiring loans to bank officials in excess of ten per cent of the capital and surplus of the bank be made a matter of record, is but directory and not mandatory. This machinery was created as a protection to the bank and its creditors and not for the benefit and use of the borrower and his brother officers. Not only is the consent of the majority of the board of directors necessary, but a record of such consent is required. The making of this record was a statutory duty of the defendant and his associates. Sec. 11740, par. 8, R.S. 1919; Secs. 3420-5, Laws 1925, p. 190; People v. Knapp, 99 N.E. (N.Y.) 841.
Orville Zimmerman, L.R. Jones, Ely Ely and B.A. McKay for respondent.
(1) If Subdivision 8 of Section 11740, R.S. 1919, be held to become by reference a part of Section 3420-5 of the Laws of 1925, the section upon which the information is based, then Section 3420-5 is unconstitutional and violative of Section 28 of Article 11 of the Constitution, because the title to the act (Laws 1925, p. 190) refers to "Providing Punishment for Officers and Employees of Banks and Trust Companies Making Excessive Loans," while Subdivision 8 of Section 11740, places a limitation upon excessive borrowing by bank officers, each dealing with an entirely different subject. (a) If it be necessary to read into Section 3420-5. Subsection 8 of Section 11740, which prohibits bank officers from borrowing in excess of certain amounts, then that part of the act is not embraced within the subject of the act, providing punishment for officers and employees of banks making excessive loans, and the act is unconstitutional. State v. Sloan, 258 Mo. 305; State v. Fulks, 207 Mo. 38; State v. Rawlings, 232 Mo. 556; State v. Coffee Tea Co., 171 Mo. 634; St. Louis v. Wortman, 213 Mo. 131; State v. Persinger, 76 Mo. 346; St. Louis v. Weitzel, 130 Mo. 616; State v. Burgdoerfer, 107 Mo. 19. (b) Subsection 8 of Section 11740 is an inhibition against borrowing in excess of certain amounts, while Section 3420-5, Laws 1925, prohibits officers from making excessive loans. "Lend" is synonymous with the term "to make a loan," but not with "borrow." (2) Respondent contends that the trial court did not err in sustaining his motion to quash the information, because the information failed to charge respondent with any offense under the laws of this State. (a) Section 3420-5, sets out every element of the offense against which the statute is directed, except the amounts, for which reference is made to Section 11740. (b) The gravamen of the offense designated in Section 3420-5 is in the making or concurring in the making a loan to any individual, partnership or corporation in excess of the amounts limited by law in Subsection 1 of Section 11740, and a comparison of the language used in Section 3420-5 with the almost identical language used in Subsection 1 of Section 11740 shows that the amounts referred to in Section 3420-5 must refer to the amounts set out in said Subsection 1, which prohibits a bank from making a loan to individuals, partnerships or corporations, the same classes mentioned in Section 3420-5. The city of Kennett having a population of less than five thousand, twenty-five per cent was the limit the bank could loan. State v. Kruger, 134 Mo. 362; State v. Schuchman, 133 Mo. 117; Loan Trust Co. v. Swimmer, 208 Mo. App. 503; Tucker v. Railroad, 208 Mo. 51; State v. Jaeger, 63 Mo. 403. (c) If it be held that the amount be set out in Subsection 8 of Section 11740 (which does not impose a restriction upon making loans, but places an inhibition against borrowing) is incorporated in Section 3420-5, then only the amount set forth therein can be considered, and not the whole statute. By no rule of construction can that part of the statute, "without the consent of a majority of the directors of the bank, other than the borrower, first having been obtained in a meeting of the board, said consent to be made a matter of record before the loan is made," be read into and made a part of Section 3420-5 by mere reference to the amount alone. A criminal offense cannot be created in such a vague and uncertain manner. State v. Jaeger, 63 Mo. 409; State v. Reed, 125 Mo. 48; State v. Bartley, 263 S.W. 96; State v. Kelsey, 89 Mo. 623; State v. Butler, 178 Mo. 320; State v. Bellerton, 295 S.W. 545; State v. Owens, 268 Mo. 484; Lock v. Reis, 274 S.W. 832; Castilo v. Highway Commission, 279 S.W. 676; Bradley v. State, 10 A.L.R. 1131; 25 R.C.L. 1081, sec. 301; 36 Cyc. 1152, 1186; Southerland on Stat. Const. (Ed. 1891) sec. 257, p. 337; Jones v. Dexter, 8 Fla. 270; Matthews v. Sands, 29 Ala. 136; State v. Davis, 22 La. Ann. 77. (d) The amounts referred to in Section 3420-5 must refer to the amounts set out in Subsection 1 of Section 11740 (the only part of the section limiting the amount a bank can lend to any individual, partnership or corporation), or each of the nine subsections of 11740, and each subdivision of said subsection, containing a stated amount, would become adopted by reference into Section 3420-5, which would manifestly be contrary to the intent of the Legislature, create a multitude of offenses by slight implication and lead to absurd results. State v. Bartley, 263 S.W. 96; State v. Butler, 178 Mo. 320; State v. Owens, 268 Mo. 484; 25 R.C.L. 1081, sec. 301; 36 Cyc. 1152 (V); 1185-6. (e) That the Legislature intended to make it a crime to lend to any director, who is classed as an individual in Section 3420-5, more than twenty-five per cent of capital and surplus of the bank (Kennett having less than five thousand people), is made clear by its subsequent action in repealing Subsection 8 of Section 11740 and by enacting a new section, Laws 1927, p. 216, and Subsection 8 at page 226, in placing the "director" in the same class as the "individual." Laws 1927, pp. 216, 226; 36 Cyc. 1147 (11). Respondent concedes that the repeal of Subsection 8 of Section 11740 does not alone render the information void, if otherwise good.
During the October term, 1926, the grand jury of Dunklin County returned an indictment charging defendant, a director of the Citizens Savings Bank, on or about December 29, 1925, with making a loan of the funds of said bank to defendant in excess of ten per centum of the capital and surplus of said bank without the consent of a majority of the directors of said bank, other than the borrower, first having been obtained in a meeting of said board of directors and recorded upon the minutes of said board. Upon the indictment being held insufficient by the court, the prosecuting attorney substituted and filed an information. To an amended information filed in the Stoddard Circuit Court on change of venue, the defendant lodged a motion to quash, which the court sustained, the State appealing from the judgment entered thereon.
Omitting caption and signatures, the amended information reads:
"James V. Billings. Prosecuting Attorney within and for the County of Dunklin, and State of Missouri, upon his oath of office as such prosecuting attorney, and upon his hereto appended oath, and upon his knowledge, information and belief, informs the court and charges that M.W. Lloyd, T. Paul King and W.S. Jones, late of the county aforesaid, on or about the 29th day of December, A.D. 1925, and at divers times since, at the County of Dunklin, State aforesaid, being directors of the Citizens Savings Bank, a corporation duly organized and existing under the laws of the State of Missouri, the same being a banking institution doing business in said County and State, the same being a banking institution then and there with a capital of $50,000, and a surplus of $9500, then and there well knowing that said M.W. Lloyd was then and there a director and an officer of said Bank as aforesaid, did then and there on or about December 29, 1925, wilfully, knowingly, unlawfully, and feloniously make a loan of the funds of the said Citizens Savings Bank, a banking institution, to the said M.W. Lloyd, the same being a certain written instrument whereby a certain obligation of indebtedness was created, to-wit: A promissory note for the payment of money, to-wit: One promissory note dated December 29, 1925, in favor of the said Citizens Savings Bank, for the sum of $10,000, due December 1, 1926, made, executed and delivered to the said Citizens Savings Bank of the said M.W. Lloyd and M.C. Lloyd, and being for the payment to the said Citizens Savings Bank of a certain sum of money on said note, to-wit: the sum of $10,000 as evidenced by the said instrument of indebtedness created and heretofore mentioned and described as aforesaid, the same being a total amount of indebtedness aggregating the sum of $4402.62, directly and indirectly to the said M.W. Lloyd, a director of said Citizens Savings Bank as aforesaid, in excess of ten per centum of the capital and surplus of said Citizens Savings Bank, without the consent then and there of a majority of said directors of the said Citizens Savings Bank, other than the borrower, said M.W. Lloyd, director as aforesaid, first having been obtained in a meeting of the said Board of Directors and made a matter of record upon the minutes of said board, which said consent had to be first obtained and made a matter of record upon the minutes of said Board of Directors of said Citizens Savings Bank before such loan aforesaid was made, and which said consent thereto had not been obtained and made a matter of record upon the minutes of said Board of Directors of the said Bank as aforesaid before the foregoing loan was made to the said M.W. Lloyd, director as aforesaid, a more particular description of which said note is to this Prosecutor unknown, said note being lost, misplaced, returned, filed for suit, held by the Commissioner of Finance, or St. Louis Banks collateral security or pledge for loan made to the said Citizens Savings Bank, but a copy of the said note is hereto attached, and filed herewith, when he, the said M.W. Lloyd was then and there indebted, directly and indirectly, to the said Citizens Savings Bank, said banking institution as aforesaid, doing business in said County and State aforesaid, in a sum, namely, $352.62, which was almost, or nearly one-fifteenth of ten per centum of the capital and surplus of the said Citizens Savings Bank, and which said ten per centum was then and there under the circumstances stated aforesaid the limit of his borrowing power directly or indirectly from said bank in which he was a director as aforesaid, after they, the said M.W. Lloyd, T. Paul King, and W.S. Jones, directors as aforesaid, had knowledge of such fact and well knew that said M.W. Lloyd, a director of said Citizens Savings Bank, was then and there indebted to the said Citizens Savings Bank in the sum of $352.62, and that the said existing indebtedness of the said M.W. Lloyd, director as aforesaid, was nearly one-fifteenth of ten per centum of the capital and surplus of said Citizens Savings Bank, and, after they, the said M.W. Lloyd, T. Paul King, and W.S. Jones, directors as aforesaid of the said Citizens Savings Bank, had knowledge of the fact and well knew that the foregoing loan taken, made, and evidenced by the said promissory as aforesaid and obligation as aforesaid for the payment of money to the said Citizens Savings Bank, by the said M.W. Lloyd, director as aforesaid, would increase the indebtedness of the said M.W. Lloyd, director of said Bank, to the said Citizens Savings Bank in a sum, to-wit: $10,352.62, far in excess of ten per centum of the capital and surplus of said Citizens Savings Bank, and, after they, the said M.W. Lloyd, T. Paul King, and W.S. Jones, directors of the said Citizens Savings Bank as aforesaid, had knowledge of the fact and well knew that the foregoing loan on said promissory note for the sum of $10,000, to the said M.W. Lloyd, director of said Bank as aforesaid, by the said Citizens Savings Bank would in itself creates an excess indebtedness of the said M.W. Lloyd, director of said Bank, in a sum, to-wit: $10,352.62, far in excess of ten per centum of the capital and surplus of said Citizens Savings Bank, against the peace and dignity of the State."
The amended information is grounded upon Section 3420-5, page 190, Laws 1925, and Section 11740, Subdivision 8, Revised Statutes 1919. Section 3420-5, page 190, Laws 1925, reads:
"Any officer, director, agent, clerk or employee of any bank or trust company who willfully and knowingly makes or concurs in making any loan, either directly or indirectly to any individual, partnership or corporation or by means of letters of credit, by acceptance of drafts or by discount or purchase of notes, bills of exchange or other obligation of any person, partnership or corporation in excess of the amounts set out in Section 11740 and Section 11807, of Chapter 108, of the Revised Statutes of 1919, shall be deemed guilty of a felony and upon conviction shall be punished by imprisonment in the penitentiary for not less than two (2) years nor more than ten (10) years or by imprisonment in the county jail for not exceeding one (1) year or by a fine not exceeding five hundred dollars ($500), or by both such fine and imprisonment."
Section 11740, subdivision 8, Revised Statutes 1919, reads:
"8. No director, officer, clerk or employee of a bank of this State shall be permitted to borrow any of the money of the bank in which he is a director, officer, clerk or employee in excess of ten per centum of the capital and surplus fund without the consent of a majority of the directors of the bank, other than the borrower, first having been obtained in a meeting of the board, said consent to be made a matter of record before the loan is made: Provided, if any such officer, director, clerk or employee shall own or control a majority of the stock of any other corporation a loan to that corporation shall be considered for the purpose of this subdivision as a loan to him. Every bank or officer thereof knowingly violating the provisions of this subdivision shall, for each offense, forfeit to the State the amount lent."
Section 11740, subdivision 1, Revised Statutes 1919, which is germane to the issues raised, reads:
"A bank subject to the provisions of this article:
"I. Shall not directly or indirectly lend to any individual, partnership, corporation, or body politic, either by means of letters of credit, by acceptance of drafts or by discount or purchase of notes, bills of exchange or other obligations of such individual, partnership, corporation or body politic an amount or amounts in the aggregate which will exceed fifteen (15) per centum of the capital stock actually paid in and surplus fund of such bank if located in a city having a population of one hundred thousand or over; twenty (20) per centum of the capital stock actually paid in and surplus fund of such bank if located in a city having a population of less than one hundred thousand and over seven thousand; and twenty-five (25) per centum of the capital stock actually paid in and surplus fund of such bank if located elsewhere in the State, with the following exceptions."
The six exceptions to subdivision 1, lettered a, b, c, d, e, and f, respectively, are impertinent to the issues involved, resulting that it is unnecessary to set them forth.
I. The determinative question involves the scope of Section 3420-5, page 190, Laws 1925, in its relation to Section 11740, Revised Statutes 1919. The State bases the Inclusion of amended information on Subdivision 8 of Section Subdivision 8. 11740, asserting that the mentioned subdivision is comprehended by Section 3420-5. The defendant takes the converse view, denying its inclusion. The gist of Section 3420-5 is the making or concurrence in the making of an excess loan to any individual, partnership or corporation by a director or other officer of a bank. The pith of Subdivision 8, Section 11740, is the failure to record the consent of a majority of the directors of the bank, given in a meeting of the board, to the borrowing by a director, before the loan in excess of ten per centum is made. Section 3420-5 interdicts the making of an excess loan to any individual, partnership or corporation. On the other hand, Subdivision 8 does not interdict a loan in excess of ten per centum, but merely prescribes that, if such a loan is made without recording the consent of the directors as provided therein, a certain forfeit accrues. It is the making of an excess loan that Section 3420-5 proscribes. It is the failure to record the consent of the directors to the loan that Subdivision 8, Section 11740, penalizes. The term "excess" in connection with "loan," as used in Section 3420-5, does not and cannot logically or reasonably allude to the pith of Subdivision 8, Section 11740, that of the failure to record the consent of the directors to the loan. Their context develops a lack of relativity.
II. The State contends, however, that the language of Section 3420-5 includes the whole of Section 11740. But it is evident that the excess loan interdicted by Section 3420-5 refers to Subdivision 1 of Section 11740, for that subdivision alludes to and prohibits loans to any individual, Includes Only partnership, corporation or body politic, which Subdivision 1. will exceed a certain per centum of capital stock actually paid in and the surplus fund of a bank, the per centum depending upon the population of the city in which the bank is located. As the bank in this case was located in Dunklin County, we take judicial notice that the county does not contain a city having a population of seven thousand, thereby authorizing the bank to loan to any individual twenty-five per cent of the capital and surplus fund.
It is evident that the Legislature did not intend that Section 3420-5 should include Section 11740 as a whole. If it had intended to include Subdivision 8, it would explicitly, by appropriate language, have extended the scope of Section 3420-5, so as to include within its terms the failure to record the consent of directors to a loan to a bank officer in excess of ten per cent. Relative to the intent of the law-making body, 36 Cyc., page 1152, says: "So a statute may adopt a part or all of another statute by a specific and descriptive reference thereto, and the effect is the same as if the statute or part thereof adopted had been written into the adopting statute. Where, however, the adopted statute is referred to merely by words describing its general character, only those parts of it which are of a general nature, or particularly relate to the subject of the adopting statute, will be construed as incorporated into the latter in the absence of a clear intention to adopt the whole act." Here the adopting statute particularly related to excess loans proscribed by Section 11740. Subdivision 1 of Section 11740 is the only portion thereof that proscribes excess loans. The gravamen of the prohibition of Subdivision 8 is not the proscription of excess loans, but it is the failure to record the minutes of a directors' meeting, showing that a majority thereof consented to a loan to a director in excess of ten per cent of the capital and surplus of the bank.
III. Section 3420-5 is a criminal statute. It is to be construed strictly against the State and liberally in favor of the accused. [State v. Krueger, 134 Mo. 262, 35 S.W. Criminal 604.] Such statutes may not be extended or enlarged by Statute. judicial interpretation so as to embrace persons not specifically brought within its terms. No one may be made subject to its provisions by implication.
The amended information is based on Section 3420-5, Laws 1925, and Subdivision 8, Section 11740, Revised Statutes 1919. It specifically charged defendant, as director of the Citizens Savings Bank, with feloniously making a loan to himself in excess of ten per centum of the capital and surplus of said bank, without first having obtained the consent of a majority of the directors, recorded before the loan was made. The charge had no legislative basis, and it is the Legislature, not the courts, that must define an offense and fix the punishment therefor. It is evident that the amended information fails to charge an offense, and consequently it is insufficient.
In view of the premises, the judgment should be and is affirmed. Higbee and Henwood, CC., concur.
The foregoing opinion by DAVIS, C., is adopted as the opinion of the court. All of the judges concur.