Missouri ex rel. Burnes National Bank of St. Joseph v. Duncan/Opinion of the Court

The ralator, the Burnes National Bank of St. Joseph, was appointed executor by a citizen of Missouri who died on November 22, 1922, leaving a will. The Bank applied to the proper Probate Court for letters testamentary, but was denied appointment on the ground that by the laws of Missouri national banks were not authorized to act as executors. Thereupon it applied to the Supreme Court of the State for a writ of mandamus to the Judge of the Probate Court and an alternative writ was issued. The respondent demurred, the demurrer was sustained and the peremptory writ was denied. 257 S. W. 784. A writ of error was allowed by the Chief Justice of the State Court. The Bank claims the capacity to fill the office under the statutes of the United States.

By the Act of September 26, 1918, c. 177, § 2, 40 Stat. 967, 968, amending section 11(k) of the Federal Reserve Act (Comp. St. Ann. Supp. 1919, § 9794), the Federal Reserve Board was empowered:

'To grant by special permit to national banks applying     therefor, when not in contravention of State or local law,      the right to act as trustee, executor, administrator, *  *  *      or in any other fiduciary capacity in which state banks,      trust companies, or other corporations which come into      competition with national banks are permitted to act under      the laws of the State in which the national bank is located.'

If the section stopped there the decision of the state court might be final, but it adds the following paragraph:

'Whenever the laws of such State authorize or permit the     exercise of any or all of the foregoing powers by state      banks, trust companies, or other corporations which compete      with national banks, the granting to and the exercise of such      powers by national banks shall not be deemed to be in      contravention of State or local law within the meaning of      this Act.'

This says in a roundabout and polite but unmistakable way that whatever may be the State law, national banks having the permit of the Federal Reserve Board may act as executors if trust companies competing with them have that power. The relator has the permit, competing trust companies can act as executors in Missouri, the importance of the powers to the sustaining of competition in the banking business is so well known and has been explained so fully heretofore that it does not need to be emphasized, and thus the naked question presented is whether Congress had the power to do what it tried to do.

The question is pretty nearly answered by the decision and fully answered by the reasoning in First National Bank of Bay City v. Fellows, 244 U.S. 416, 37 Sup. Ct. 734, 61 L. Ed. 1233, L. R. A. 1918C, 283, Ann. Cas. 1918D, 1169. That case was decided before the amendment to the Federal Reserve Act that we have quoted and came here on the single issue of the power of Congress when the state law was not contravened. It was held that the power 'was to be tested by the right to create the bank and the authority to attach to it that which was relevant in the judgment of Congress to make the business of the bank successful.' 244 U.S. 420, 37 Sup. Ct. 735. The power was asserted and it was added that:

'This excluded the power of the State in such case, although     it might possess in a general sense authority to regulate      such business, to use that authority to prohibit such      business from being united by Congress with the banking      function.' 244 U.S. 425, 37 Sup. Ct. 737.

Now that Congress has expressed its paramount will this language is more apposite than ever. The States cannot use their most characteristic powers to reach unconstitutional results. Western Union Telegraph Co. v. Kansas, 216 U.S. 1, 30 Sup. Ct. 190, 54 L. Ed. 355; Pullman Co. v. Kansas, 216 U.S. 56, 30 Sup. Ct. 232, 54 L. Ed. 378; Western Union Telegraph Co. v. Foster, 247 U.S. 105, 114, 38 Sup. Ct. 438, 62 L. Ed. 1006, 1 A. L. R. 1278. There is nothing over which a State has more exclusive authority than the jurisdiction of its courts, but it cannot escape its constitutional obligations by the device of denying jurisdiction to courts otherwise competent. Kenney v. Supreme Lodge of the World, 252 U.S. 411, 415, 40 Sup. Ct. 371, 64 L. Ed. 638, 10 A. L. R. 716. So here-the State cannot lay hold of its general control of administration to deprive national banks of their power to compete that Congress is authorized to sustain.

The fact that Missouri has regulations to secure the safety of trust funds in the hands of its trust companies does not affect the case. The power given by the Act of Congress purports to be general and independent of that circumstance and the Act provides its own safeguards. The authority of Congress is equally independent, as otherwise the State could make it nugatory. Since the decision in First National Bank of Bay City v. Fellows, 244 U.S. 416, 37 Sup. Ct. 734, 61 L. Ed. 1233, L. R. A. 1918C, 283, it generally has been recognized that the law now is as the relator contends. In re Turner's Estate, 277 Pa. 110, 116, 120 Atl. 701; Estate of Stanchfield, 171 Wis. 553, 178 N. W. 310; Hamilton v. State, 94 Conn. 648, 110 Atl. 54; People v. Russel, 283 Ill. 520, 524, 119 N. E. 617; In re Mollineaux, 109 Misc. Rep. 75, 179 N. Y. Supp. 90. Fidelity National Bank & Trust Co. v. Enright (D. C.) 264 Fed. 236.

Judgment reversed.

Mr. Justice SUTHERLAND (dissenting).

The real question here, as I understand it, is not whether Congress may safeguard national banks against ordinary state legislation of a discriminative character; but whether Congress may intrude upon and prohibit the exercise of the governmental powers of a state to the extent that such exercise discriminates against such banks in favor of competing state corporations. The authority of the Fellows Case, I think, is pressed too far. The statute there under review simply made national banks competent to act as executors, etc., 'when not in contravention of state or local law.' The statute did not attempt to override the will of the state in that respect, but expressly recognized its control and authority. The state Supreme Court conceded that the powers thus conditionally conferred by the federal statute, in fact, would not be in contravention of the state law, but held that Congress was without constitutional authority, because the functions sought to be given to such banks were subject of state regulation. That view of the matter was rejected; but, putting aside some expressions not necessary to the decision, I do not think the case can be regarded as authority for the conclusion, apparently now reached, that Congress may so limit the power of a state, against its expressly declared will to the contrary, that it may confer the right to act as executors and administrators upon state corporations which compete with national banks, only upon condition that the same right be conferred upon the latter. Certainly that precise question was not there presented for decision.

It is fundamental, under our dual system of government, that the nation and the state are supreme and independent, each within its own sphere of action, and that each is exempt from the interference or control of the other in respect of its governmental powers, and the means employed in their exercise. Bank of Commerce v. Comrs. of Taxes and Assessments, 2 Black, 620, 634, 17 L. Ed. 451; South Carolina v. United States, 199 U.S. 437, 452, et seq., 26 Sup. Ct. 110, 50 L. Ed. 261, 4 Ann. Cas. 737; Farrington v. Tennessee, 95 U.S. 679, 685 (24 L. Ed. 558). '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.' Tarble's Case, 13 Wall. 397, 407, 408, 20 L. Ed. 597. Except as otherwise provided by the Constitution, the sovereignty of the states 'can be more invaded by the action of the general government, than the action of the state governments can arrest or obstruct the course of the national power.' Worcester v. Georgia, 6 Pet. 515, 570 (8 L. Ed. 483).

In Bank of Commerce v. Comrs. of Taxes and Assessments, supra, pages 633, 634, a tax case, this court said:

'That government whose powers, executive, legislative or     judicial, *  *  * are subject to the control of another      distinct government, cannot be sovereign or supreme, but      subordinate and inferior to the other. This is so palpable a     truth that argument would be superfluous. Its functions and     means essential to the administration of the government, and      the employment of them, are liable to constant interruption      and possible annihilation. * *  * But of what avail is the      function or the means if another government may tax it at      discretion? It is apparent that the power, function, or     means, however important and vital, are at the mercy of that      government. And it must be always remembered, if the right to impose a tax at all exists on the     part of the other government, 'it is a right which in its      nature acknowledges no limits.' And the principle is equally      true in respect to every other power or function of a      government subject to the control of another.'

It is settled beyond controversy, that the right of a state to pass laws, to administer them through courts of justice, and to employ agencies for the legitimate purpose of state government cannot be taxed (Veazie Bank v. Fenno, 8 Wall. 533, 547, 19 L. Ed. 482); and that rule is but an application of the general and broader rule, which forbids any interference by the federal government with the governmental powers of a state. The settlement of successions to property on death is a subject within the exclusive control of the states and entirely beyond the sphere of national authority. See Tilt v. Kelsey, 207 U.S. 43, 55, 56, 28 Sup. Ct. 1, 52 L. Ed. 95; Plummer v. Coler, 178 U.S. 115, 137, 20 Sup. Ct. 829, 44 L. Ed. 998. Upon the death of the owner his property passes under the control of the state, and remains there until all just charges against it can be determined and paid and those who are entitled to become its new owners can be ascertained. The duty and power of the state to provide a tribunal for the accomplishment of these ends (Tilt v. Kelsey, supra), it follows, cannot be abridged by federal legislation.

The right of the owner to direct the descent of this property by will or permit it under statute, as well as the right of a legatee, devisee or heir to receive the property, are rights exclusively derived from and regulated by the state. Plummer v. Coler, supra, page 137. During the process of administration the estate, in contemplation of law, is in the custody of the court exercising probate powers, and to this court the executor or administrator is an officer. Yonley v. Lavender, 21 Wall. 276, 280 (22 L. Ed. 536). 'An administrator appointed by a state court is an officer of that court; his possession of the decedent's property is a possession taken in obedience to the orders of that court; it is the possession of the court. * *  * ' Byers v. McAuley, 149 U.S. 608, 615, 13 Sup. Ct. 906, 37 L. Ed. 867.

In the present case the state Legislature as conclusively determined by the state Supreme Court, has excluded not only national banks but state banks from assuming the functions of executors and administrators, which functions, for reasons satisfactory to itself, it has allowed trust companies to exercise. This determination of the state to grant the right to one and not the other, when it might have excluded both, is plainly the assertion of a governmental policy upon a matter within its exclusive control, with which the federal government has no authority to meddle. Congress may, of course, confer upon national banks the capacity to act as administrators and executors; but I do not think it is within the constitutional authority of that body to make such legislation binding upon the state against its will. The decision just rendered perhaps does not go that far; but it does uphold the power of Congress to impose its will upon the state in this respect if the state, in the exercise of its exclusive authority over the devolution of estates of deceased persons, permits any corporation which competes with national banks to exercise the powers mentioned. This contingency seems to me a slender distinction upon which to found a denial of the state's power. It may be conceded that a state is precluded from enforcing legislation which discriminates against national banks, in respect of private banking or business operations; but a very different situation is presented when the discrimination arises in respect of the governmental operations of the state. A state, for example, cannot be sued in its own courts without its consent; but is it powerless to consent to such suits by financial corporations of its own creation except upon condition that it extends a similar privilege to competing national banks? Legislation requiring all residents of a state to deposit their funds only in state institutions would undoubtedly be bad against federal legislation to the contrary; but is it beyond the power of the state Legislature to subject public moneys-state, county or municipal-to such a restriction? A state may not unconditionally require private debts to be paid only in gold and silver; but, in the exercise of its sovereign power of taxation, it may limit the payment of taxes to gold and silver, if it sees fit, in spite of a federal law making currency a legal tender, and, as this court has said:

'It is not easy to see upon what principle the national     Legislature can interfere with the exercise, *  *  * of this      power.' Lane County v. Oregon, 7 Wall. 71, 77 (19 L. Ed.     101).

In my opinion, the exercise of the powers conferred upon trust companies by the legislation here under review, is governmental in its nature; and the fact that the statute discriminates in that matter against national banks (as also it does against state banks) is a negligible incident, which does not affect the validity of the statutory limitation.

The probate courts of a state have only such powers as the state Legislature gives them. They are wholly beyond the jurisdiction of Congress, and it does not seem to me to be within the competency of that body, on any pretext, to compel such courts to appoint as executor or administrator one whom the state law has declared shall not be appointed.

The particular invasion here sanctioned may not be of great moment; but it is a precedent which, if carried to the logical extreme, would go far toward reducing the states of the Union to the status of mere geographical subdivisions. The case is one, to use the phrase of Mr. Justice Brewer in Fairbank v. United States, 181 U.S. 283, 291, 292, 21 Sup. Ct. 648, 45 L. Ed. 862, for the application of the maxim, 'obsta principiis, not de minimis non curat lex.'

I am authorized to say that Mr. Justice McREYNOLDS concurs in this dissent.