220 S.C. 414 (1951)

68 S.E.2d 334


Supreme Court of South Carolina.

December 3, 1951.

Attorney(s) appearing for the Case

Messrs. Schwartz & Schwartz, of Sumter, and J.A. Weinberg, of Manning, for Appellants.

Messrs. T.C. Callison, Attorney General, and James S. Verner, Assistant Attorney General, of Columbia, for Respondents.

The order of Judge Lide, in part, requested to be reported follows:

The petition alleges that Code Section 7829-2 is unconstitutional, and the prayer of the petition in the outset seeks judgment that the same be declared null and void because in violation of the 14th Amendment to the Federal Constitution, and Article I, Sections 5, 14 and 15, and Article III, Section 1, and Article V, Section 6, of our State Constitution. The constitutional objections relate primarily to the "equal rights" and "due process" clauses, referring also to the separation of the departments of the government and matters of that general character.

While the petitioners make no reference to Code Section 7829 in their prayer for relief, there are several allegations throughout the petition which may reasonably be construed to question its constitutional validity with regard to the provision therein contained relating to the appointment of the members of the Board of Bank Control.

In view of the fact that the petitioners have sought the approval of the Board of Bank Control, and have thus availed themselves of the rights and privileges accorded by the sections under attack, it might follow that they should be estopped to raise any constitutional objection. 11 Am. Jur. 767-770.

Assuming, however, that the determination of this question upon the bare allegations of the pleadings might be of doubtful propriety, it is my judgment that the constitutional questions should be considered on this hearing, especially because if Code Section 7829-2 is unconstitutional and therefore null and void, the previous proceedings thereunder are wholly ineffectual. This section is set forth in full as follows for convenience of reference:

"No bank or building and loan association hereafter incorporated shall be granted a charter by the secretary of state, unless and until the board has approved such application in writing; or shall any branch bank be established without the approval in writing by the board. Before any such application for the incorporation of a bank or building and loan association, or the establishment of a branch bank shall be approved, the board shall make an investigation to determine whether or not the applicants have complied with all the provisions of law and whether in the discretion of the board, they are qualified to operate such institution and whether the establishment of such bank or building and loan association or of such branch bank would serve the public interest, taking into consideration local circumstances and conditions at the place where such bank or building and loan association or branch bank, proposes to do business."

As I have already stated, this section is a part of the general banking law enacted in 1936. And it may be observed that the petitioners recognize the right of the General Assembly to regulate the conduct of banking institutions in order to protect the depositors therein; but apparently they would limit governmental control to that extent. Indeed, they allege that they have an inherent right and privilege to engage in the banking business. But the banking business "is of a pre-eminently public nature, and is therefore universally recognized as a proper subject of legislative regulation under the police power of the state." 7 Am. Jur. 30.

Moreover, our own State Constitution in Section 9 of Article IX made proper provision with reference to banks in the following language: "The General Assembly shall have no power to grant any special charter for banking purposes, but corporations or associations may be formed for such purposes, under general laws, with such privileges, powers and limitations, not inconsistent with this Constitution, as it may deem proper. The General Assembly shall provide by law for the thorough examination and inspection of all banking and fiscal corporations of this State."

Furthermore, it seems quite apparent that the regulation of the conduct of business by banking institutions without any regulation or control of their establishment might prove wholly ineffective, which I believe is a statement strongly confirmed by the history of banking, and I am unable to find anything in the provisions of the Code Section now under consideration depriving the petitioners or anyone else in like situation of any of their constitutional rights or privileges.

This particular section of the banking law does not seem to have ever come before our Supreme Court. But it is of interest to observe that certain other parts of the same banking law have been before the Court and have been approved. In the case of Zimmerman v. State Board of Bank Control, 194 S.C. 518, 8 S.E.2d 359, there was involved the liquidation of an insolvent bank under the supervision of the State Board of Bank Control, and the constitutional right of the Board to supervise such liquidation was approved and confirmed. And it was held in the case of Ex parte Miller, 191 S.C. 260, 1 S.E.2d 512, relating to a building and loan association, that the State Board of Bank Control is a special administrative body of limited jurisdiction; but I think it may be properly added, of important jurisdiction.

We are fortunate to have before us a leading opinion delivered by the illustrious Mr. Justice Holmes in the case of Noble State Bank v. Haskell, 219 U.S. 104, 31 S.Ct. 186, 187, 55 L.Ed. 112, decided January 3, 1911, wherein it was held (quoting from the syllabus): "The police power of a state extends to the regulation of the banking business, and even to its prohibition except on such conditions as the state may prescribe." And the syllabus is correctly based upon the following excerpt from the opinion of the Court: "We cannot say that the public interests to which we have adverted, and others, are not sufficient to warrant the state in taking the whole business of banking under its control. On the contrary, we are of opinion that it may go on from regulation to prohibition except upon such conditions as it may prescribe."

This wise and farseeing decision was rendered long before 1933 when tragic financial conditions culminated in the historic bank holiday, resulting in the restoration of confidence, because the banking institutions of the country were placed upon a firm foundation by reason of legislative action providing, among other things, for the control of the banking business in its inception as well as its subsequent operation. Consequently some of the banks were not allowed to reopen. See also Pue v. Hood, Commissioner of Banks, 222 N.C. 310, 22 S.E.2d 896.

My conclusion therefore is that all constitutional objections raised to Code Section 7829-2 should be, and they are hereby, overruled, and this section is hereby declared to be constitutional and effective in all respects.

The objections raised by the petitioners to the constitutionality of Code Section 7829 relate to the matter of the appointment of members of the State Board of Bank Control. This section provides that the Board shall be composed of five members, one of whom shall be the State Treasurer, as an ex-officio member, who shall be Chairman. It is also provided that the remaining four members "shall be appointed by the Governor, two of whom shall be engaged in commercial banking and recommended by the state bankers' association, one shall be engaged in building and loan association business and recommended by the said associations and one shall be in the cash depositories business and recommended by the representatives of the cash depositories affiliated with the state bankers' association."

The general rule of law in connection with this matter is stated as follows in 42 Am. Jur. 953: "Where the legislature creates an office, it may, when not restricted by the Constitution, confer the power of appointment thereto upon public officers or boards, as, for example, upon a judicial officer or upon associations, corporations, or persons. This does not constitute an illegal delegation of legislative powers, since the power of appointment to office is not legislative."

In the case of Ashmore v. Greater Greenville Sewer District, 211 S.C. 77, 44 S.E.2d 88, 96, 173 A.L.R. 397, the Court had before it an act providing that in the selection of the Board of Trustees of the defendant Sewer District there should be certain members thereof, respectively representing and chosen by certain social service organizations, such as Rotary, Kiwanis, and the like, the American Legion Post, and other local bodies; and the Court held that in this respect the act was an invalid delegation of legislative power. But it should be observed that in the careful and discriminating unanimous opinion delivered by Mr. Justice Stukes this holding was limited as follows: "The rule which we approve goes no further than to invalidate attempted delegation by the legislature of the appointive or elective power to unofficial persons or bodies where the latter are without rational and substantial relation to the law to be administered by the appointees or electees, or, we add, to the public institution to be governed."

We are unable to conceive of a case where there is a more rational and substantial relation to the law to be administered by the appointees than that involved in the statute before us. In other words, the State Bankers' Association is obviously an organization especially qualified for the selection of men to be appointed on the Board of Bank Control.

I am therefore of opinion that the constitutional objections raised by the petitioners to Code Section 7829 should be, and they are hereby, overruled; and this section is declared to be constitutional and effective in all respects.

December 3, 1951.

HENDERSON, Acting Associate Justice.

The petitioners, now the appellants, desired to organize a bank, to be known as the Bank of Manning. Their application to the Secretary of State for a charter was refused, for the reason that the Board of Bank Control had not given its unconditional approval. In this action the petitioners prayed that the Court order the Secretary of State to issue the charter. They also asked that section 7829-2 of the Code of 1942 be declared unconstitutional and void, and that the acts of the Board of Bank Control, on petitioners' application for a charter, be declared to be arbitrary and beyond their power and authority.

Pursuant to the petition, a rule was issued by Hon. G. D. Bellinger, requiring the respondents to show cause why they should not make discovery of their acts and doings, together with all documents and papers relating to the organization of the bank and the Board's conditional approval of the application, or why a writ of certiorari should not be granted. On June 14, 1950, a hearing was had on the rule before Hon. L.D. Lide, then presiding in the Court of Common Pleas for Richland County. By his order dated July 18, 1950, he ruled that section 7829-2 was constitutional and valid in all respects. He refused the petitioners' prayer for a discovery, but ordered the issuance of a writ of certiorari, directing the respondents to certify to the court all the records relating to the application for the charter, except certain stated matters of a confidential nature.

The petitioners have appealed to this Court from the order, the principal point raised by the exceptions being that the Circuit Judge was in error in passing upon the constitutionality of section 7829-2 at that time, the appellants claiming that such question was not then before him for determination, that they were deprived of their day in court without due process of law, and that no opportunity was given to them to present argument and evidence on that point.

Section 7829-2 of the Code provides in part that no bank shall be granted a charter by the Secretary of State unless and until the Board of Bank Control has approved the application in writing, and that before such application shall be approved the Board shall make an investigation to determine whether or not the applicants have complied with the law, whether in the discretion of the Board they are qualified to operate the institution, and whether the establishment of such bank will serve the public interest. In the present case the Board of Bank Control approved the application of the petitioners, with certain conditions which are set forth in full in the circuit order. These conditions, among other things, called for a larger capital stock, required that the proposed bank obtain membership in the Federal Deposit Insurance Corporation, that no part of the paid-in capital be invested in real estate, and that an experienced cashier, acceptable to the Board and to the Federal Deposit Insurance Corporation, be secured. The appellants contend that the Board had no legal authority to impose the conditions.

The respondents urge that it is highly desirable that the question of the constitutionality of the act should be decided at the earliest possible time. The petitioners having vigorously attacked the statute as being unconstitutional it is manifest that if it is thus invalid the Board would have no power to control the proposed bank, nor to place conditions upon the incorporators; and consequently the case would terminate in favor of the appellants.

Judge Lide in his order states that "while the merits of the cause are not before me, there are certain preliminary questions which must be determined before it can be adjudged as to whether or not the petitioners are entitled to an order of discovery or an order for the issuance of a writ of certiorari. And it may be said in this connection that the petition attacks the constitutionality of certain parts of the general banking law of this State comprised in Code sections 7829-7829-11, originally enacted in 1936." He further states that "it is my judgment that the constitutional questions should be considered on this hearing, especially because if Code section 7829-2 is unconstitutional and therefore null and void, the previous proceedings thereunder are wholly ineffectual."

We think that ordinarily the constitutionality of an act should not be determined on an application for a discovery or for the issuance of a writ of certiorari. Because of deference to the legislative department the courts will not pass upon the constitutionality of a statute unless it becomes necessary to do so in order to decide the case. Wallace v. Sumter County, 189 S.C. 395, 1 S.E.2d 345. And generally, courts will not anticipate the necessity of determining the constitutionality of a statute, although perhaps they should have greater freedom if their conclusion is favorable to the constitutionality of the act. 16 C.J.S., Constitutional Law, § 94, p. 215. It follows that, although it may seem desirable that the constitutional question should be decided at the earliest possible stage of the case, the courts should not on such preliminary motions pass upon the constitutionality of a statute, because in many instances it may turn out thereafter that the case can be decided on its merits on other grounds without going into the constitutional issue at all. 16 C.J.S., Constitutional Law, § 95, p. 216.

In Hutchison v. York County, 86 S.C. 396, 68 S. 10, 11 E. 577, it was held that in the exercise of discretion on a motion for a temporary injunction the Circuit Judge may pass upon the constitutionality of a statute. And the issuance of a writ of certiorari is discretionary also. State v. Senft, 2 Hill 367, 2 S.C.L. 367; 14 C.J.S., Certiorari, § 10, p. 137. However, we think that the cases are different, in that on the injunction hearing there is some evidence, in the shape of affidavits, while here we have the pleadings only; and the consequences of stopping the county from building a highway are more far-reaching, and the need for an early determination of constitutionality more urgent, than upon an order requiring a party to gather up his records and file them with the clerk of court. Many other motions preliminary to a trial on the merits rest in discretion, yet we have seen what is the general rule.

It is also of course true, as argued by the appellants, that a Circuit Judge has no authority, on his own motion, to make an order on a subject affecting the rights of the parties without notice to them and without giving them an opportunity to be heard.

In the present case the learned Circuit Judge did not pass upon the constitutionality of section 7829-2 without notice to the appellants, or without giving them a hearing, and only did so with their apparent approval. It is stated in the order of Judge Lide that extended oral argument was heard by him, and that much of this oral argument in behalf of the petitioners related to the constitutional objections interposed by them. While it is true that it is said in the agreed statement of facts, in the transcript of record, that neither the petitioners nor the respondents asked for an adjudication on the constitutionality of this section, yet it clearly appears that the petitioners did in fact argue such issue at length before the Circuit Judge. There was no occasion whatsoever for them to have argued the question, if they regarded it as having no bearing on the motion. Their action in making extended argument on this point was an implied invitation that it should be considered in passing upon the motion. We do not think that a party may contend for a certain point and thereafter claim error on the part of the Court in giving it consideration. One may not on review complain of a ruling which he has invited or induced the trial court to make. 5 C.J.S., Appeal and Error, §§ 1501, 1505, pp. 173 and 187. The question before the Circuit Judge was whether or not in his discretion to grant the writ of certiorari; the petitioners energetically attacked the constitutionality of the statute; and their extended argument on that feature of the case was well calculated to lead the Circuit Judge to believe that they desired him to consider it as one factor in the exercise of his discretion.

It should be noted that the ruling of Judge Lide relates only to the constitutionality of the act as it is written. Under his order the appellants have the full right to go into what they claim are the unlawful acts and doings of the Board and its members. The Circuit order in no manner deprives them of the right to show any alleged usurpation of power and authority on the part of the Board, or that it acted capriciously or arbitrarily, or in disregard of law, or that it imposed conditions beyond those permitted by law, or otherwise unlawfully acted as the appellants assert. Feldman v. South Carolina Tax Commission, 203 S.C. 49, 26 S.E.2d 22.

We think that the order of the Circuit Court correctly decides the constitutional questions. Let so much of it as relates to that phase of the case be reported.

The exceptions are overruled, and the order appealed from is affirmed.

BAKER, C.J., TAYLOR and OXNER, JJ., and G. BADGER BAKER, A.A.J., concur.


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