Opinion
No. 6,813.
Submitted October 8, 1931.
Decided October 30, 1931.
Mandamus — Banks — Inspection of Books by Stockholders — Statute — Constitutional Law — Special and Discriminatory Laws — National Banks — Internal Affairs Subject to Control by Congress — Common Law — Pleading — Motion to Quash in Effect Demurrer. Mandamus — Motion to Quash in Effect Demurrer. 1. A motion to quash an alternative writ of mandate operates as a demurrer and, therefore, admits the truth of all facts alleged in the application; hence can raise no question of fact. Same — Facts Constituting Defense — Pleading. 2. The rule that essential facts constituting a defense in mandamus proceedings and raising questions triable by jury or court must be pleaded by answer, applies only when such facts are not disclosed upon the face of the petition or affidavit. Same — When Petition Demurrable. 3. Where the petition or affidavit for writ of mandate discloses facts on its face which defeat petitioner's alleged right, the pleading is subject to demurrer. Same — When Writ Lies. 4. Mandamus lies only to compel the performance of a clear legal duty. Same — Banks and Banking — Stockholders — Inspection of Books — Contents of Petition for Writ. 5. A stockholder in a state bank who seeks to compel officers of the bank to permit inspection of the bank's books and records, proceeding under section 108 of Chapter 89, Laws of 1927, which grants such right as to the general statement book showing the bank's general assets and liabilities, excluding others, must in his petition for a writ of mandate allege that the books and records enumerated in his demand do not contain information proscribed by the Act. Same — Inspection of Bank-books — Motion to Quash — Court may Interrogate Officer of Bank as to Nature of Books. 6. In a mandamus proceeding of the character of the above, the trial court may properly, on motion to quash the alternative writ, where it is in doubt as to the nature of the records sought to be
5. Stockholder's right to inspect books and records of corporation, see note in 59 A.L.R. 1373. inspected by petitioner, interrogate an officer of the bank with respect thereto. Statutes — Constitutionality — Presumption. 7. The constitutionality of a statute will be presumed unless the contrary is made to appear beyond a reasonable doubt, and its validity will not be determined unless it is called in question. Same — Constitutionality — Failure to Raise Question at Earliest Opportunity — Waiver. 8. Obiter: Failure of a person affected by an Act invading his constitutional rights, to raise the question of its invalidity at the earliest opportunity may constitute a waiver of the right to raise it. Mandamus — Inspection of Bank-books — Rule That on Mandamus Court will not Determine Constitutionality Held Inapplicable in Instant Case. 9. Held, that if the rule declared by some courts that, since the granting of a writ of mandate is largely a matter of discretion, the remedy may be denied where it involves determination of the constitutionality of a statute, is sound, it is inapplicable (for reasons stated) in a case where the writ is sought to compel permission to inspect books and records of a state bank by a stockholder under section 108, Chapter 89, Laws of 1927. Constitutional Law — "Special Law" — Definition. 10. A "special law" prohibited by section 26, Article V of the Constitution, is one which relates to particular persons or things of a class, or one made for individual cases and for less than a class, or one which relates and applies to particular members of a class, either particularized by express terms of the Act or separated by any method of selection from the whole class to which the law might, but for such limitation, be applicable; the prohibition does not extend to a reasonable classification of persons or corporations for regulatory purposes. Banks and Banking — Regulation Under Police Power — Statutes — Corporations — Classification of Banks in Separate Class Proper. 11. The business of banking is a proper subject for regulation under the police power of the state, and a classification which separates it from the general law applicable to corporations is usually sustained. Same — Inspection of Books by Stockholders — Constitution — Statute Permitting Inspection not Special Statute. 12. Section 108, Chapter 89, Laws of 1927, which, by denying to a stockholder in a state bank, the right to inspect certain of its books, in effect prohibits bank officials from divulging semi-confidential information they receive as to the financial standing of the bank's customers, held not a special law (sec. 26, Art. V, Const.), nor one making an unreasonable classification in making the Act applicable only to state banks. Constitutional Law — Discriminatory Statute — Who Only may Raise Question. 13. The question whether a statute is void as discriminatory can be raised only by a person belonging to the class discriminated against. National Banks — Internal Affairs not Subject to State Control. 14. While state statutes enacted under the police and certain other powers may incidentally operate upon the general business of national banks, such banks are not citizens of the state in the sense that the state may regulate their internal affairs; they are instrumentalities of the federal government, created for a public purpose and subject to control by Congress. Same — Inspection by Stockholders — Rules of Common Law Controlling. 15. Rules of the common law, when acquiesced in for ages, and not abrogated by statute, have the force and effect of statutory law, and though there is no common law of the United States, in the sense of a national customary law, it is controlling with respect to the right of a stockholder in a national bank, in the absence of an Act of Congress on the subject, to inspect its books. Banks and Banking — Statute Permitting Stockholders of State Banks to Inspect Books Held not Discriminatory — Reasons. 16. Since Congress alone has the power to regulate the internal affairs of national banks, and by its failure to declare upon the right of a stockholder in such a bank to inspect its books and records, left the common law on that subject in force, section 108, Chapter 89, Laws of 1927, limiting the right of inspection to stockholders in state banks, may not be held unconstitutional as discriminatory because not extending the same right to stockholders in all banks doing business in the state.
Appeal from District Court, Fergus County; John C. Huntoon, Judge.
Messrs. Freeman, Thelen Freeman, for Appellant, submitted a brief; Mr. Ernest E. Abel, of Counsel, argued the cause orally.
Messrs Belden DeKalb, for Respondents, submitted a brief; Mr. O.M. Belden argued the cause orally.
Since the motion to quash and demurrer in a mandamus proceeding admit all material facts alleged in the affidavit, and only question its sufficiency in law, the practice with respect thereto must be the same as on a general demurrer in an ordinary civil action. We have searched diligently to find, if possible, where any court has ever permitted a party to introduce testimony at a hearing on a demurrer as was done here, but have found none. (See State ex rel. State Pub. Co. v. Hogan, 22 Mont. 384, 56 P. 818; State ex rel. Beach v. District Court, 29 Mont. 265, 74 P. 498; State ex rel. Duggan v. District Court, 65 Mont. 197, 210 P. 1062; State ex rel. Lease v. Wilkinson, 55 Mont. 340, 177 P. 401; Foster v. Wilson, 5 Mont. 53, 2 P. 310; Lauer v. Clark, 84 Okla. 206, 202 P. 1035; Kendall v. Porter, City Treasurer, 120 Cal. 106, 45 P. 333, 52 P. 143; Foster v. Stewart, 113 Kan. 402, 214 P. 429.)
The trial court no doubt sustained the motion to quash and demurrer for the reason that the testimony admitted at the hearing purported to show that every one of the books, an inspection of which was requested, showed transactions of the bank with its customers, and therefore the relatrix was not entitled to an inspection for the reason that section 108, Chapter 89, Session Laws of 1927, denies the right of inspection to stockholders of a bank "incorporated under the laws of this state" when such stockholder is not a director. This section of the session laws is in conflict with the provisions of sections 6008 and 6009, Revised Codes of 1921.
There cannot be any question that the stockholder of a corporation other than a banking corporation organized under the laws of this state, has the right to inspect the books of a corporation. Therefore section 108, Chapter 89, above, places the stockholders of a bank incorporated under the laws of this state, in a class separate and distinct from stockholders of nonbanking corporations. Furthermore, there are a number of national banks doing business in the state, who, for all practical purposes are deemed to be citizens of Montana ( Guthrie v. Harkness, 199 U.S. 148, 50 L.Ed. 130, 26 Sup. Ct. Rep. 4). The right of a stockholder of a national bank to inspect the books of a corporation is recognized in 6 Thompson on Corporations, 420, section 4541, and in the following cases: Large v. Consolidated Nat. Bank, 137 Fed. 168; Harkness v. Guthrie, 27 Utah, 248, 107 Am. St. Rep. 664, 1 Ann. Cas. 129, 75 P. 624; Murray v. Walker, 156 Ky. 536, Ann. Cas. 1915C, 363, 161 S.W. 512; Tuttle v. Iron Nat. Bank, 170 N.Y. 9, 62 N.E. 761; Winter v. Baldwin, 89 Ala. 483, 7 So. 734.
Since section 108 does not mention national banks doing business in the state of Montana, but pertains only to banks incorporated under the laws of this state, there can be no question that a stockholder of a national bank doing business in this state, could compel an inspection of its books under the rule laid down by the foregoing authorities. The section confers a privilege on stockholders of a state bank which is not accorded to stockholders of other banks doing business within the state.
The only reason that suggests itself why transactions between a bank and its customers should not be inquired into, is that the customers of the bank might not wish their affairs to be known to any more persons than necessary. If such a reason justifies the denial of the right of inspection of the books of a state bank, certainly it must be a valid reason for also denying such a right to stockholders of a national banking institution, and if there is any justification whatever for denying stockholders of a state bank or any bank the right to inspect the books of the corporation, then the denial of this right to the stockholders of a state bank certainly is a discrimination against them, since it creates a burden not borne by the stockholders of a national banking association doing business within the state.
Although the wording of section 1 of the Fourteenth Amendment to the federal Constitution and section 26 of Article V of the state Constitution is not at all alike, still both were adopted to prohibit unreasonable and arbitrary classifications or discrimination in state statutes, and under both the state and federal Constitutions the same rules are applied as to the validity of classifications made in any legislative enactments. (12 C.J. 1128, sec. 855; City of Memphis v. State, 133 Tenn. 83, Ann. Cas. 1917C, 1056, L.R.A. 1916B, 1151, 179 S.W. 631.) The substance of numerous cases dealing with the constitutionality of so-called "class" and "special" legislation, is that any classification which is unreasonable, capricious or arbitrary is in contravention of constitutional guaranties as to the equal protection of the law. (12 C.J. 1128; 6 R.C.L. 373-386; State ex rel. Redman v. Meyers, 65 Mont. 124, 210 P. 1064; Connolly v. Union Sewer Pipe Co., 184 U.S. 540, 46 L.Ed. 679, 22 Sup. Ct. Rep. 431; Fountain Park Co. v. Hensler et al., 199 Ind. 95, 58 A.L.R. 1518, 155 N.E. 465; Crom v. Frahm, 33 Idaho, 314, 193 P. 1013.)
We respectfully submit that section 108 of Chapter 89 of the Laws of 1927 is unconstitutional, and that the writ of mandate should have issued to compel an inspection of the books of the State Bank of Moore.
By the alternative writ of mandate issued by the lower court, the respondents were commanded to permit relatrix to inspect "the liability ledger, the records of notes receivable, the loan and discount records, the general ledger and the ledger of the meetings of the board of directors of said State Bank of Moore," or show cause, at a specified time, why the bank had not done so. The motion to quash, in part specifies, as a ground of motion "that it appears that relatrix is not a director of respondent bank and is only a stockholder therein; that she is not entitled, under section 108, Chapter 89, Laws of the Twentieth Legislative Assembly of the State of Montana, to have the inspection demanded by her." A demurrer was also filed.
Undoubtedly, it is the plain duty of appellant to present, if the statute above is valid, a case showing that the records sought were not proscribed records. In other words, it was incumbent upon her to show her clear right to see the records. In view of the statute, it was necessary that relatrix negative that the books sought did not contain the proscribed information. ( Gormley v. Day, 114 Ill. 185, 28 N.E. 693; Martin v. Ingham, 38 Kan. 641, 17 P. 162.) The rule just adverted to only exemplifies the rule that mandamus lies only to compel the performance of a clear legal duty. ( State ex rel. Donlan v. Commissioners, 49 Mont. 517, 143 P. 984.) Since there was a private, as distinguished from a public, right involved in the controversy, a demand was necessary as a condition precedent. (16 Cal. Jur. 771, sec. 10.)
Relatrix can have no quarrel with the court hearing testimony to supply information she, herself, was under duty to supply to the court in her pleading. The meaning of words and phrases used in a pleading, when material, may be ascertained in any available manner. If the words and phrases used by her were not defined by a dictionary, and the court considered it material to find out what they meant, it was proper for the court to inform itself from any available source and, to that end, and for that purpose, especially in the absence of performance of duty on the part of appellant to make her pleading clear, the court did find out what those records contained, and that they did, each of them, contain information proscribed by the statute. If it was error for the court to do what was done here, it would be error for a court to consult a dictionary. There is no royal road to the ascertainment of the meaning of words.
Chapter 89 constitutes an exception to sections 6008 and 6009, Revised Codes 1921. The rule is generally stated in 49 C.J. 153: "Where a party relies on a statute which contains an exception in the enacting clause, or clause creating and defining the right or liability asserted, such exception must be negatived in the initial pleading. * * *" The court would have been correct in sustaining a motion to quash, even without hearing this testimony. Mandamus can be brought only for the enforcement of a clear legal duty. ( State ex rel. Duggan v. District Court, 65 Mont. 197, 210 P. 1062; 38 C.J. 582.)
The fact that a motion to quash and a demurrer admit the allegations of the affidavit, spells nothing in this case, because it is only admitted that refusal to permit inspection of proscribed records was made.
In view of the provisions of section 9848, Revised Codes 1921, that a writ of mandate may be issued only to compel the performance of an act "which the law specially enjoins as a duty resulting from an office, trust or station," the constitutionality of this statute is not a legitimate subject of inquiry in this case, although we think we can demonstrate, beyond any doubt, that it is constitutional. In cases of this character, this court has said in State ex rel. Bankers Trust v. Walker, 70 Mont. 484, 226 P. 894: "The constitutionality of the statute is presumed." "The relator cannot have a mandamus to compel the granting of a license under the law, for a reason which, if valid, shows the law to be void." ( People v. Supervisors, 20 Cal. 591; Mueller Furnace Co. v. Crockett, 63 Utah, 479, 227 P. 270; Wright v. Kelley, 4 Idaho, 624, 43 P. 565.)
That this statute is a valid exercise of police power, we think, cannot be successfully denied. The following corporations have been singled out for special regulation and have not been permitted to contend that because all other corporations were not legislated against in the same manner, there was violation of the Constitution, to-wit: Common carriers (Fletcher's Encyclopedia of Corporations, sec. 4407); railroad companies (sec. 4408); mining companies (sec. 4409); insurance companies (sec. 4410); telegraph companies (sec. 4411); building and loan companies (sec. 4413), and regulation of banks (sec. 4412). Since this applies to all the contentions made by relatrix, viz., violation of rights guaranteed by the Fourteenth Amendment, and rights guaranteed by our special legislation constitutional provision, we need not specifically notice those particular contentions.
Learned counsel argue that since the right of inspection is a recognized fundamental right and that state courts have the power to compel national banks to submit records to its stockholders, and our statute singles out state banks, alone, the Act is special legislation. It is easy to demonstrate that this reasoning is faulty. If it be sound, then Montana, which cannot legislate at all concerning the internal management of national banks, is precluded from legislating concerning state banks in every respect where Congress may have granted different rights to national banks. To state the proposition is to demonstrate its absurdity.
The principle of decision of Harkness v. Guthrie, 27 Utah, 248, 1 Ann. Cas. 129, 75 P. 624, is that a state court has the power and jurisdiction to enforce private rights of national banks, where such jurisdiction has not been taken away by congressional Act. (7 C.J. 836; Van Reed v. People's Nat. Bank, 198 U.S. 554, 49 L.Ed. 1161, 25 Sup. Ct. Rep. 775; Guthrie v. Harkness, 199 U.S. 148, 50 L.Ed. 130, 26 Sup. Ct. Rep. 4.) Congress is restrained by the national Constitution, as state legislatures are restrained by Constitution, in the matter of equal protection of law, yet the federal court has held that congressional Acts concerning corporations created by Congress, which perforce cannot also apply to state created corporations, cannot be challenged. ( Abilene Nat. Bank v. Dooley, 179 Fed. 461, 32 L.R.A. (n.s.) 1065, 102 C.C.A. 607, 218 U.S. 673, 54 L.Ed. 1205, 31 Sup Ct. Rep. 223; Nobel State Bank v. Haskell, 219 U.S. 104, 55 L.Ed. 341, 31 Sup. Ct. Rep. 186; Shallenberger v. First State Bank, 219 U.S. 114, 55 L.Ed. 117, 31 Sup. Ct. Rep. 189.)
The only two things decided in Harkness v. Guthrie, 27 Utah, 248, 107 Am. St. Rep. 664, 1 Ann. Cas. 129, 75 P. 624, are that mandamus from a state court against a national bank will lie, a rule that has long obtained and is well recognized. The second point decided was that stockholders of a national bank have the common-law right of inspection of the books. Anyone would be obliged to concede that point, if there were no statute prohibiting it.
Carrie E. Powell, owner of ten shares of the capital stock of the State Bank of Moore, made written demand upon H.E. Strong, president, and R.L. Hunter, cashier, for permission to inspect certain enumerated books and records of the bank and, on their refusal, filed her affidavit for a writ of mandate to compel compliance with her demand. To an alternative writ issued, the respondents interposed a demurrer and motion to quash, on the ground that section 108 of Chapter 89, Laws of 1927, prohibited the inspection demanded.
When the motion to quash came on for hearing, the court declared that, in order intelligently to pass on the question presented, some showing as to the nature of the records in dispute should be made, and thereupon, over the objection of relatrix, Hunter was permitted to inform the court as to their general nature. Thereupon the court sustained the motion and entered judgment of dismissal, from which judgment relatrix has appealed.
It is first urged that the court erred in receiving testimony, [1-3] as the motion operated only as a demurrer, admitted the truth of all facts alleged, and, consequently, raised no question of fact. Counsel's position as to the nature and effect of the motion is unassailable. ( State ex rel. Lease v. Wilkinson, 55 Mont. 340, 177 P. 401; State ex rel. Duggan v. District Court, 65 Mont. 197, 210 P. 1062.) Essential facts, constituting a defense in mandamus proceedings and raising questions which may be tried to a jury (sec. 9853, Rev. Codes 1921) or by the court ( Chumasero v. Potts, 2 Mont. 242; Bailey v. Edwards, 47 Mont. 363, 133 P. 1095), must be pleaded by answer as in civil actions. (Sec. 9852, Id.) However, the rule invoked applies only when such facts are "not disclosed upon the face of the petition" or affidavit. ( Lauer v. Clark, 84 Okla. 206, 202 P. 1035, 1036; Foster v. Stewart, 113 Kan. 402, 214 P. 429.) As in civil actions, if a pleading discloses facts on its face which defeat the pleader's alleged right, the pleading is subject to demurrer.
Chapter 89, Laws of 1927, is a codification of our banking laws; section 108 thereof declares: "No stockholder of any bank incorporated under the laws of this State who is not a director shall have the right to inspect the books and records of such bank showing its transactions with any of its customers, but any such stockholder shall have the right to inspect during business hours the general statement book showing the general assets and liabilities of such bank."
Mandamus lies only to compel the performance of a clear duty [4-6] ( State ex rel. Donlan v. Commissioners, 49 Mont. 517, 143 P. 984), and, consequently, in order to bring herself within her statutory right, as defined in the above statute, relatrix should have alleged in her affidavit that the books and records enumerated in her demand did not contain the proscribed information. (49 C.J. 153; Rosenfeld v. Jakways, 67 Mont. 558, 216 P. 776; Gormley v. Day, 114 Ill. 185, 28 N.E. 693; Martin v. Ingham, 38 Kan. 641, 17 P. 162.) It is apparent to anyone that such records as "records of notes receivable" and "loan and discount records," mentioned in the demand for inspection, show transactions with customers, while others may or may not contain such transactions, depending upon bank bookkeeping. The "general statement book" excluded from proscription was not mentioned in the demand. It was, therefore, necessary for the trial judge to ascertain, in some manner, the nature of the records enumerated in order to determine whether or not relatrix was, under the statute, entitled to partial relief, and, on his invitation to supply this information, the only objection interposed was that "there is no issue of fact before the court."
The facts on which respondents relied in support of their motion were disclosed on the face of the affidavit, but they required elucidation and the method adopted by the court for determining the sufficiency of the affidavit is no more objectionable than reference to a standard dictionary to determine the meaning of obscure words used in a complaint or petition.
There is no intimation in the record that, on the hearing, the [7] relatrix challenged, or the trial court considered, the constitutionality of section 108 above. A statute will be presumed constitutional unless the contrary is made to appear beyond a reasonable doubt ( State ex rel. Pierce v. Gowdy, 62 Mont. 119, 203 P. 1115; State ex rel. Bankers' Trust Co. v. Walker, 70 Mont. 484, 226 P. 894), and its validity will not be determined unless the question of its constitutionality is raised. ( Potter v. Furnish, 46 Mont. 391, 128 P. 542.) If the question was not raised, no error was committed by the court in adopting the method it did for determining whether or not the desired inspection came within the prohibition of the statute, or, on finding that it did, in sustaining the motion to quash.
Where it is contended that an Act invades constitutional [8] rights, a person affected should raise the question of the invalidity of the Act at the earliest opportunity, and failing to do so may constitute a waiver of the right. (6 R.C.L. 95.) However, as the question of waiver is not raised it will be reserved. Relatrix now challenges the constitutionality of section 108 above.
Respondents assert that this question cannot be determined in [9] mandamus proceedings, which assertion is supported by People v. Supervisors, 20 Cal. 591; Wright v. Kelley, 4 Idaho, 624, 43 P. 565; and a long line of authorities cited in L.J. Mueller Furnace Co. v. Crockett, 63 Utah, 479, 227 P. 270, 272, under the statement that, "as the granting of the writ is largely a matter of discretion, many courts deny the remedy where it involves the determination as to whether or not a statute is unconstitutional."
We see no good reason why a court, having jurisdiction to determine constitutional questions, should refuse to do so merely because of discretion; but, even if the decisions relied upon are based on sound reason, the rule is not applicable here for two reasons:
First. The courts are open to redress wrongs, and the present application is the only method by which relatrix could safely present the question to the court. An action for damages, which would seem to be the only other method by which the question could be presented otherwise, would be wholly inadequate to accomplish the desired result; if successful in such an action, relatrix would then be compelled to resort to mandamus to secure an inspection. During the interim great loss or irreparable damage might result and the reason for desiring an inspection no longer exists. (See Cockburn v. Union Bank, 13 La. Ann. 289.)
Secondly. If section 108, above, did not exist, the right of relatrix would fall within sections 6008 and 6009, Revised Codes 1921. The right of inspection existed at common law and still so exists in the absence of statute. The common-law right was enforceable by mandamus, but the writ did not issue as a matter of right; on application the court could make a careful examination of the reasonableness of the demand, the propriety of the purpose and effect upon the orderly transaction of business of the corporation if inspection was ordered, and, exercising its discretion, would grant or refuse the writ in furtherance of substantial justice.
Where, as here, the common-law right is supplanted by statute and the right of inspection is granted without limitation or exception, there is no room for the inquiry made by the court under the common-law rule, and it would seem that the right is mandatory and the issuance of the writ may be demanded as a matter of right. (See Cook on Corporations, 7th ed., secs. 511-514, and cases cited.) Therefore, under such a statute, the reason for the rule announced in the foregoing cases fails and the rule is not applicable.
The position taken on behalf of relatrix is that section 108, above, is invalid as violative of section 1 of the Fourteenth Amendment to the Constitution of the United States, and section 26, Article V, of our Constitution, in that it is a special law on a subject covered by a general law (secs. 6008, 6009, above) which "can be made applicable," and constitutes an arbitrary and unwarranted classification in that it applies only to state banks, while national banks are not differently situated.
A "special law" which falls within the prohibition of section [10] 26, Article V, above, is defined as one which relates to particular persons or things of a class, or one made for individual cases and for less than a class, or one which relates and applies to particular members of a class, either particularized by express terms of the Act or separated by any method of selection from the whole class to which the law might, but for such limitation, be applicable. ( State ex rel. Redman v. Meyers, 65 Mont. 124, 210 P. 1064.) The prohibition does not extend to a reasonable classification of persons or corporations for regulatory purposes. ( State ex rel. Bray v. Long, 21 Mont. 26, 52 P. 645; State v. Hammond Packing Co., 45 Mont. 343, 123 P. 407.)
The business of banking is a proper subject for regulation [11] under the police power of the state, because of its nature and the relation which it bears to the fiscal affairs of the people and the revenues of the state (7 C.J. 480), and, as its business is so different from that of other corporations, a classification which segregates it from the general law applicable to corporations is usually sustained. (Fletcher on Corporations, secs. 4406 and 4412.)
The "customers" of a bank are in an entirely different situation from those of the ordinary business corporation; their financial standing and affairs may be at the mercy of malicious or designing persons, if the statutory right accorded the stockholders of corporations generally is permitted to be exercised without restriction.
Section 108 prohibits bank officials from divulging the [12] semi-confidential information they receive as to the financial standing of the bank's customers. The classification is reasonable and the Act is not a prohibited "special law" within the meaning of section 26, Article V, of the state Constitution.
But, say counsel, "section 108, supra, confers a privilege on stockholders of a state bank which is not accorded to stockholders of other banks doing business within the state of Montana," which discrimination is condemned in this state. ( Hill v. Rae, 52 Mont. 378, Ann. Cas. 1917E, 210, L.R.A. 1917A, 495, 158 P. 826.)
If the above charge was sustainable and was the only [13] constitutional attack which could be made on the legislation, counsel would be without standing in this court, as, in order to raise the question, relatrix must belong to the class discriminated against. ( Spratt v. Helena Power Transmission Co., 37 Mont. 60, 94 P. 631.) However, the challenge to the constitutionality of the Act does present the question as to whether or not a discrimination against the stockholders "of any bank incorporated under the laws of this state" compels decision invalidating the Act.
It is said that: "Statutes applicable only to certain kinds of banks are usually upheld upon the theory that there is a valid basis for the discrimination. For instance, regulations may apply, in a proper case, to state banks and not to national banks." (Fletcher on Corporations, sec. 4412.) But there seems to be no valid reason why an Act for the protection of customers of state banks should not apply equally to national banks; their position is the same; and, therefore, that the Act cannot be upheld on the theory of "reasonable classification," if it could have been made applicable to national banks.
The sole question for determination, then, is as to the power of a state to regulate the internal affairs and operation of national banks. In support of this power counsel for relatrix assert that national banks doing business in the state are, "for all practical purposes," citizens of the state, citing Guthrie v. Harkness, 199 U.S. 148, 4 Ann. Cas. 433, 50 L.Ed. 130, 26 Sup. Ct. Rep. 4, 5, and that such regulation as is found in sections 6008 and 6009 may be enforced as to national banks by mandamus, citing 6 Thompson on Corporations, 420; Harkness v. Guthrie, 27 Utah, 248, 107 Am. St. Rep. 664, 1 Ann. Cas. 129, 75 P. 624, and cases therein cited; Large v. Consolidated Nat. Bank, (C.C.) 137 Fed. 168; Murray v. Walker, 156 Ky. 536, Ann. Cas. 1915C, 363, 161 S.W. 512.
All of the authorities cited, with the possible exception of Guthrie v. Harkness and Winter v. Baldwin, 89 Ala. 483, 7 So. 734, cited in the Harkness Case, refer and apply strictly to the enforcement of rights under the common law and federal statutes. The decision in the Harkness Case is grounded on the common-law right, which the court declares applies "unless restricted by statute," and the finding that the statute of Utah, similar to our sections 6008 and 6009, "does not restrict the common-law right but is in harmony therewith." The decision, therefore, does not justify the assertion that an Act such as we have under consideration, which restricts — almost to the point of elimination — the common-law right, can be made to apply to national banks.
That the Harkness decision but upheld the common-law right is made clear by the federal decision, which declared that the state court "held that it was the common-law right of the shareholder * * * and that the same had not been cut down by the Act of Congress regulating the business of national banks."
Winter v. Baldwin more nearly supports counsel's position, but even there the court declared that the statute considered "is but a slight modification of the rule of the common law," and Justice Clopton dissented on the ground that the statute could not apply to national banks, as such right was not a proper subject of state legislation.
As to the assertion that "for all practical purposes" a national bank is deemed a citizen of the state in which it does business, the federal case cited ( 199 U.S. 148, 4 Ann. Cas. 433, 50 L.Ed. 130, 26 Sup. Ct. Rep. 4, 5) does not so hold, but merely that "Congress has provided that, for actions against them at law or in equity, they shall be deemed citizens. * * * 25 Stat. 433." Here the rule, "expressio unius est exclusio alterius," applies; citizenship extends no further than that expressly granted by Congress.
"The national banks owe their existence to the laws of the United States, and in respect to things which pertain to supervision and control by the sovereignty which created them they are as much beyond the jurisdiction of Kansas [or Montana] as though they were domiciled in Maine or California" ( Dolley v. Abilene Nat. Bank, 179 Fed. 461, 463, 32 L.R.A. (n.s.) 1065 (C.C.A. 8th Cir.), and are as "independent of state legislation or state interference as the army and navy, and the mint, and the judicial tribunals of the United States" ( Pittsburg v. National Bank, 55 Pa. 45).
"The sovereignty of a state extends to everything which exists by its own authority, or is introduced by its permission," but does not extend to those means which are employed by Congress to carry into execution powers conferred on that body by the whole people of the United States. ( State v. Thomas Cruse Sav. Bank, 21 Mont. 50, 45 L.R.A. 760, 52 P. 733, 734.)
Statutes enacted pursuant to the police power, and certain [14] other powers, of the state, may operate incidentally upon the general business of a national bank, such as those applying to the construction of contracts, the transfer of property, the collection of debts and liability to suit, and the relation of such banks to the community in which they do business, as such banks are subject to state laws which do not run counter to the laws of Congress or the prohibitions of the federal Constitution. (See 7 C.J. 760; 3 Michie on Banks Banking, 1782.)
National banks, however, are not citizens of the state, in the sense that the state may regulate their internal operations or control them or their officers in the conduct of their business, except as permitted by Congress. "Congress, having power to create a system of national banks, is the judge as to the extent of the powers which should be conferred upon such banks, and has the sole power to regulate and control the exercise of their operations; * * * it must be obvious that their operations cannot be limited or controlled by state legislation." ( Easton v. Iowa, 188 U.S. 220, 47 L.Ed. 452, 23 Sup. Ct. Rep. 288, 293.)
National banks are a part of the general government's financial system, and state statutes relating to banks cannot control them ( Lucas County v. Jamison, (C.C.) 170 Fed. 338); they are "instrumentalities of the federal government, created for a public purpose, and as such necessarily subject to the paramount authority of the United States. It follows that an attempt by a state to define their duties or control the conduct of their affairs is absolutely void, wherever such attempted exercise of authority expressly conflicts with the laws of the United States and either frustrates the purpose of the national legislation or impairs the efficiency of these agencies of the federal government to discharge the duties, for the performance of which they were created." ( Davis v. Elmira Sav. Bank, 161 U.S. 275, 40 L.Ed. 700, 16 Sup. Ct. Rep. 502, 503.)
Under these positive declarations of the highest court of the land it is held that, as conflicting with the paramount law, an Act requiring all banks of a state, having received deposits from a savings bank and then becoming insolvent, to prefer such savings bank as a creditor, is void as to national banks ( Davis v. Elmira Sav. Bank, above); as is an Act prescribing a penalty for receiving deposits after a bank has become insolvent ( Easton v. Iowa, above). Again, Congress having prescribed the rate of interest which may be charged by a national bank and fixed the penalty for violation as the recovery of double the amount, the remedy is held exclusive, and, although Congress has not spoken on the subject of punishment for usury, state authorities are powerless to punish citizens of the state for a violation of the statute against usury when such violators are officers of a national bank ( Farmers' M. Nat. Bank v. Dearing, 91 U.S. 29, 23 L.Ed. 196; Haseltine v. Central Nat. Bank of Springfield, 183 U.S. 132, 46 L.Ed. 118, 22 Sup. Ct. Rep. 50; Reese v. Colquitt Bank, 12 Ga. App. 472, 77 S.E. 320; Pauls Valley Bank v. Mitchell, 55 Okla. 170, 154 P. 1188); and the fact that a penalty may be recovered in a civil action against a national bank, and not against a state bank, does not render the Act obnoxious to the constitutional requirement of uniformity. ( Ingraham v. Merchants' Nat. Bank, 153 Iowa, 408, 132 N.W. 869.)
Now, while the National Banking Act does not expressly provide [15, 16] for inspection of the books and records of a national bank by a stockholder, as shown above, the common-law right is not abrogated by the federal Act and is recognized by the federal courts as a part of the national regulation of such banks and, in the Harkness Case, above, the right of a state court to enforce the common-law right by mandamus was upheld because that right has "not been cut down by the Act of Congress regulating the business of national banks."
While there is no common law of the United States, in the sense of a national customary law, the courts of the United States enforce the law as they find it in the several states and apply the common law, as a national institution, in the interpretation of the Constitution. ( Smith v. Alabama, 124 U.S. 465, 31 L.Ed. 508, 8 Sup. Ct. Rep. 564, 569; United States v. Wong Kim Ark, 169 U.S. 649, 42 L.Ed. 890, 18 Sup. Ct. Rep. 456.) As state and federal courts administer the law with respect to national banks in their operation under the law, and it is held that the common-law right of inspection exists as to national banks, it seems clear that Congress, instead of declaring the rule with respect to national banks, was content to leave the common law, in this respect, applicable as it found it. Had Congress desired to declare any other rule, it would have done so in the National Banking Act, which constitutes "by itself a complete system for the establishment and government of national banks" ( Cook County Nat. Bank v. United States, 107 U.S. 445, 27 L.Ed. 537, 2 Sup. Ct. Rep. 561, 564), but, as recognized by the federal courts, until the rule is changed by Act of Congress, the common-law right is, in effect, a substantive part of the federal law on the subject. When the rules of the common law have been "acquiesced in for ages, their force and effect cannot be distinguished from statutory law." ( Saul v. His Creditors, 5 Mart. (n.s.) (La.) 569, 16 Am. Dec. 212.)
Had our legislature, then, in 1927, made section 108 applicable to all banks doing business in the state, it would undoubtedly have been void as to national banks as an invasion of the power of Congress to alone regulate these instrumentalities of government and as conflicting with the uniform laws of the national government on the subject.
Having, therefore, included in the operation of the Act the total of the class to which the Act could apply, section 108 above is not violative of the constitutional provisions cited (see Des Moines Nat. Bank v. Fairweather, 263 U.S. 103, 68 L.Ed. 191, 44 Sup. Ct. Rep. 23), and the court did not err in holding that, thereunder, relatrix was not entitled to the relief sought.
Judgment affirmed.
MR. CHIEF JUSTICE CALLAWAY and ASSOCIATE JUSTICES GALEN, FORD and ANGSTMAN concur.