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Federal Reserve Bank of St. Louis

GENERAL No. 28303

IN THE

Supreme Court of Nebraska
HUBBELL BANK, HUBBELL, NEBRASKA, ET AL.,
Appellants
VS.
CHARLES W. BRYAN, AS GOVERNOR OF THE STATE
OF NEBRASKA AND EX OFFICIO SECRETARY
OF THE DEPARTMENT OF TRADE AND
COMMERCE OF NEBRASKA, ET AL.,
Appellees.

APPEAL FROM THE DISTRICT COURT OF LANCASTER COUNTY,
NEBRASKA

HON. E. B. CHAPPELL, Judge Presiding

SUPPLEMENTAL BRIEF OF APPELLANTS.

PETERSON & DEVOE,
Attorneys for Appellants.


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Federal Reserve Bank of St. Louis

GENERAL No. 28303

In the Supreme Court of Nebraska
HUBBELL BANK, HUBBELL, NEBRASKA, ET AL.,
Appellants
VS.
CHARLES W. BRYAN, AS GOVERNOR OF THE STATE
OF NEBRASKA AND EX OFFICIO SECRETARY
OF THE DEPARTMENT OF TRADE AND
COMMERCE OF NEBRASKA, ET AL.,
Appellees.
APPEAL FROM THE DISTRICT COURT OF LANCASTER COUNTY,
NEBRASKA
HON. E. B. CHAPPELL, Judge Presiding
PETERSON & DEVOE,
Attorneys for Appellants.
Supplemental Brief of Appellants
Since the original argument in this case two important
elements have intervened which seem to justify the filing
of a supplemental brief. First, is the decision of this court
in Bliss VS. Bryan (Superior Bank case) which decision was
rendered since the original argument, and second, the progressively devastating effect of the economic forces discussed in the original brief during the intervening period as
disclosed by public records of which the court takes judicial
notice.


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Recognizing the difficulties incident to an adequate presentation of these matters in oral argument, we beg leave
to file this supplemental brief.

THE SUPERIOR BANK CASE.
This case is so recent and the issues so definite that a
restatement seems unnecessary. The effect of that decision,
however, on the issues in the case at bar and the necessary
implications resulting from the principles therein enunciated
deserve careful analysis.
The gist of the decision in the Superior Bank case is that
the "assets" of the guaranty fund remain subject to the lien
of judgment rendered in favor of depositors of failed banks
notwithstanding the legislative act of the special session in
1930, and that until these judgments are satisfied the legislature is without constitutional power to transfer those
assets to another fund sought to be created by legislative
decree and designated Depositors Final Settlement Fund.
In view of the fact, universally recognized, that the outstanding judgments exceed by many millions of dollars the
most liberal estimate of the "assets" of the guaranty fund,
the decision in the Superior Bank case is, in effect, that
whatever assets belonged to the guaranty fund when the
guaranty fund act was repealed in April, 1930, remain in
that fund to be distributed in the manner and for the purposes provided by the guaranty fund act.
The purpose of the litigation in the Superior case was to
enjoin a proposed transfer of the "assets" from the guaranty
fund to the depositors final settlement fund. By the decision
of this court, that injunction is allowed. Neither the issues
in the Superior Bank case nor the decision of this court in


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3
that case involve a determination of the question of what
those assets consist of. The actual assets in possession of
the guaranty fund in 1930, and at the present time, are certain items in insolvent banks taken over as a part of the
guaranty fund after the payment of depositors. In the brief
for rehearing in the Superior Bank case the Attorney General stated these assets to be $160,000. (See page 5 Appellees Brief for rehearing). In the same brief it is stated
(p. 10) that $278,775.60 has been disbursed out of said
fund since said date, the difference representing sums realized from stockholders' liabilities.
In the case at bar there is no attempt by the state governmental agencies to collect any funds from the defendant
banks for the benefit of the guaranty fund. The demand
for payment here is for the benefit, not of the guaranty fund,
but of the final settlement fund. The perfectly obvious reason for this position is that the guaranty fund act was repealed by the special session in 1930 and no authority exists at the present time, nor at any time after the passage
of said act, for the collection of any assessments for the
guaranty fund. The legislative decision in the special session of 1930 was expressly against the collection of any unpaid assessments for the guaranty fund. As to the guaranty fund the situation is exactly as it would have been had
the act of the special session of 1930 consisted solely in a
repeal of the Guaranty Fund Act.
On March 18, 1930, the amount claimed to be due the
guaranty fund from banks which were then going concerns
was approximately $2,250,000.00. Of this sum approximately $1,350,000.00 is now held as a reserve in banks
which have remained solvent and approximately $900,000.00 is held by receivers of banks suspended since March
•
18, 1930, and in reorganized banks.


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Federal Reserve Bank of St. Louis

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If the old assessments were to be collected and distributed
under the decision of the Superior Bank case there would be
taken from depositors in the banks which have failed since
March 18, 1930, approximately $900,000.00 and from
banks which have remained solvent about $1,350,000.00 for
the exclusive benefit of depositors in banks whose judgments
have priority under the Superior Bank decision and have
already received a distribution of the entire assets of the
bank, in some cases upwards of 90% of the total deposits.
It requires no gift of prophecy to foretell that if this collection were to be made, the ratio of the above figures would
change radically and there would be more of the contingent
liability fund found in the hands of receivers than in going
banks.
II
THE PRESENT STATUS OF STATE BANKS
The Final Settlement Fund Act became effective March
18, 1930. Since then 157 banks have closed. Of this number 32 have reopened on some plan of reorganization. The
total amount set up in the 125 failed banks (not reopened)
as a contingent liability for the Depositors Final Settlement Fund is $680,394.21 and of the reopened banks,
$226,052.82.
The banks not reopened, with date of closing, amount of
deposits and amounts in contingent fund, are as follows:
Date
4-7-1930
4-15-30
4-15-30
4-15-30
4-17-30
6-27-30

Name of Bank
Farmers State
Nebr. State Savings
State Bank of
F. & M.
Citizens State
Ponca Valley Bank

Location
Newport
Wahoo
Touhy
Weston
Wahoo
Monowi

Contingent
Deposits Vt
ment Fund $ 45,097.20 $1,345.98
244,507.91 4,391.61
38,539.56
560.09
167,033.61 3,337.17
363,546.10 6,926.05
84,992.56 1,112.72


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Federal Reserve Bank of St. Louis

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Date
7-3-30
9-8-30
10-4-30
10-7-30
10-7-30
10-13-30
11-22-30
12-1-30
12-30-30
12-13-30
12-16-30
1-13-31
1-13-31
1-21-31
2-9-31
2-12-31
4-6-31
4-6-31
5-22-31
5-22-31
5-23-31
6-1-31
6-1-31
6-5-31
6-5-31
6-8-31
7-18-31
7-29-31
8-3-31
8-10-31
8-14-31
8-17-31
8-17-31
8-17-31
8-17-31
8-17-31
8-17-31
8-26-31

Name of Bank

Location

Deposits

Contingent
liability for
Final Settlement Fund

Denton
Denton State
62,254.97 1,498.91
Washington Co. Bank Ft. Calhoun 131,701.65 2,385.92
Wabash
Farmers State
517.50
511.44
Verdigre
254,688.43 5,141.19
Knox Co. Bank
Pierce
106,719.41 4,966.06
Citizens State
Battle Creek Valley Bk.Battle Creek 297,219.79 9,151.38
Bank of Orleans
Orleans
170,693.57 3,881.18
Citizens Bank
Stuart
310,449.44 8,557.33
Farmers State
Platte Cent'r 129,600.84 4,660.44
Nebraska State
West Point 261,073.68 8,489.63
State Bank of
Niobrara
178,936.49 5,180.94
State Bank of
Madison
158,057.22 5,631.50
Tecumseh State
Tecumseh 124,519.19 4,287.71
Farmers State
Nelson
120,117.52 3,238.38
Home Savings
Columbus
76,185.74 2,108.92
Columbus State
Columbus 430,973.11 13,262.85
State Bank
Bassett
25,204.03
887.76
F. & M. Bank
Exeter
76,395.95 2,133.81
State Bank of
149,796.53 4,881.13
Bee
142,089.32 3,582.14
German Bank of
Millard
68,612.43 3,394.36
Nebraska State
Long Pine
Verdigre
176,720.96 5,253.95
State Bank of
Creston
188,550.73 5,472.71
Citizens State
Farmers State
Mason City 112,252.69 2,803.93
St. Edward 189,378.36 3,797.60
First State
Bloomfield 273,176.18 4,978.69
Nebraska State
Lynch
Bank of
182,807.09 3,843.82
Bk. of Lincoln Co. Hershey
161,158.63 4,312.86
Sutherland 104,005.38 3,349.66
Farmers State
Omaha
State Bank of
2,855,176.30 85,100.41
Omaha
So. Omaha State
1,079,203.44 22,299.51
Pleasant D'e 140,114.21 3,221.81
First State
Dwight
Dwight State
178,816.51 5,142.05
Brainard State
Brainard
267,607.40 3,456.40
State Bank
Bruno
135,171.40 4,439.74
Butler Co. State
David City 168,400.66 6,940.70
State Bank
Leigh
188,442.54 7,020.87
Farmers State
Inland
77,756.34 1,748.66


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Federal Reserve Bank of St. Louis

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6
Date

Name of Bank

9-4-31 Bank of Gretna
9-5-31 State Bank
9-8-31 Farmers State
9-15-31 Page State
9-21-31 Bank of
9-25-31 Cedar Co. Bank
9-25-31 F. & M.
9-28-31 Farmers State
9-29-31 State Bank
9-30-31 State Bank of
10-1-31 Peoples State
10-5-31 State Bank
10-5-31 State Bank
10-5-31 Citizens State
10-6-31 State Bank
10-7-31 Commercial Bank
10-8-31 Farmers State
10-8-31 Clay Center State
10-13-31 First State
10-13-31 State Bank of
10-13-31 American State
10-13-31 Farmers State
10-13-31 Bank of
10-14-31 State Bank
10-15-31 Weston Bank
10-15-31 Franklin Exchange
10-16-31 State Bank
10-16-31 Peoples Bank
10-16-31 Upland Banking Co.
10-16-31 Bank of
10-20-31 State Bank of
10-20-31 State Bank of
10-24-31 Far. & Mer.
10-22-31 Commercial State
10-30-31 Ger. Am. State
11-2-31 State Bank
11-2-31 State Bank
11-6-31 Farmers State

contingent

Location

Deposits

RilltYEarlement Fund

Gretna
236,128.00 7,216.15
Shelby
123,562.45 4,585.95
Wynot
126,857.13 4,164.53
Page
80,369.12 2,935.73
Ragan
110,734.74 2,706.10
Hartington 198,654.09 5,770.72
Benkelman 441,019.92 4,598.76
Napier
46,162.29 1,471.71
Fordyce
341,689.37 7,209.26
Ravenna
199,981.49 6,757.45
Gd. Island 218,963.04 8,307.64
Harrison
224,924.55 4,975.03
Venango
68,481.94 2,747.00
Orchard
129,262.35 5,244.41
Riverton
111,015.20 3,396.69
Grant
51,656.67
816.32
Glenvil
203,916.31 5,597.03
Clay Center 118,991.50 3,530.12
Holstein
64,782.87 2,807.99
Orleans
170,693.57 3,137.90
Springfield 173,503.89 4,810.76
Hemingford 181,531.12 7,127.04
Otoe
131,024.65 3,612.14
Naponee
110,693.63 3,839.46
Weston
272,074.66 7,344.23
Franklin
140,199.86 4,023.45
North Loup 172,886.28 3,777.00
117,779.13 3,417.10
Upland
169,928.12 4,579.32
Upland
Campbell 118,736.78 4,654.67
161,845.63 5,456.47
Ord
Swedeburg 47,803.05 3,005.70
McCook
288,862.40 11,446.81
Crawford 542,482.65 13,373.73
Chalco
98,420.30 1,904.30
Marsland
26,952.10
780.25
AnseImo
98,703.56 3,377.71
Crookston 104,019.09 2,699.51

ii


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Contingent

Date

Name of Bank

Location

Deposits V;`,I'lit
'
s:Z._
meet Fund

11-7-31
11-16-31
11-24-31
11-25-31
11-27-31
11-3-31
11-30-31
11-30-31
11-20-31
11-2-31
12-7-31
12-10-31
12-15-31
12-15-31
12-17-31
12-19-31
12-21-31
12-24-31
12-29-31
12-30-31
1-2-32
1-23-32
1-23-32
1-23-32
2-15-32
2-22-32
2-23-32
3-7-32
3-8-32
3-18-32
4-2-32
4-7-32
5-16-32
5-17-32
6-1-32
6-17-32
6-24-32

Ravenna
Sec. State
87,123.99 1,959.41
Wisner
State Bank
297,274.59 8,348.79
Holbrook
Bank of
189,772.09 6,086.92
Wauneta
Peoples Bank
108,885.83 2,483.05
Elm Creek 66,864.97 3,043.83
City Bank
Norfolk Savings
Norfolk
161,018.68 4,399.80
Bank
Hoskins
State
209,801.67 6,972.73
Bank of
Syracuse
122,265:09 3,268.02
Mason City B'king Co. Mason City 103,239.32 3,584.50
Farmers State
Wood River 336,136.38 8,572.34
Security State
Neligh
281,175.11 8,011.21
Merchants State
252,970.12 6,966.94
Winside
Liberty State
Sidney
338,467.79 11,121.54
F. & M.
Lindsey
97,048.80 4,144.84
Citizens State
Beaver Cr'ng 87,047.90 2,904.66
F. & M.
Ceresco (vNeortshinipRyex_ 6,796.17
(Not in Recei- 5,038.87
F. & M.
Elgin
vership yet)
Farmers State
Cortland
115,967.17 3,963.48
F. & M.
137,875.19 3,130.36
Sumner
Farmers State
Stapleton
94,319.77 2,849.75
F. & M.
225,327.68 8,446.72
Deshler
State Bank
Sargent
122,187.09 4,442.59
State Bank
Pauline
26,674.97
767.69
Farmers State
Lynch
47,753.44 3,244.34
Brewster State
Brewster
42,029.98 1,312.04
State Bank
Waltgp
26,935.95 1,696.85
Plateau State
Herman
251,645.29 10,160.28
Concord
Farmers State
159,150.78 4,940.35
Horace
State Bank
31,474.40 1,186.66
(
F.svdmt.)
0
Benkelman
Bank of
3,342.43
Bank of
Graf
63,232.16 1,597.51
Security State
Spalding
222,134.17 9,134.94
Oakland State
Oakland
217,900.01 6,053.99
Macon State
Macon
24,698.82
907.48
Firth Bank
Firth
140,624.39 5,174.85
State Bank
Ruskin (Still pending) 3,689.09
State Bank of
Irvington
25,780.63 1,576.56


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Contingent

Date

Name of Bank

Location

Deposits Itf,Trssettlement Fund

7-18-32
7-30-32
8-11-32
8-15-32
8-15-32
9-12-32

Nebraska State
State Bank
State Bank
Fidelity State
Farmers State
State Bank

Beatrice
Winslow
Chester
Aurora
Hampton
Hooper

120,622.71 5,752.54
257,601.67 8,980.98
(Not in Re3,957.99
ceivership)
(Not in Re12,774.11
ceivership)
(Not in Re3,310.05
ceivership)
(Not in Re8,400.85
ceivership)

The banks closed which have since reopened on some
plan of reorganization with the amount held by them as a
contingent liability for the Final Settlement Fund are as follows:
Date
Failed
4-1-30
4-16-30
4-16-30
5-9-30
6-16-30
6-19-30
7-23-30
8-22-30
9-1-30
9-22-30
10-20-30
12-5-30
8-10-31
8-15-31
10-10-31
10-16-31
10-19-31
10-19-31
10-21-31
10-22-31
10-22-31
11-9-31
11-12-31
11-17-31

Vafffra,
Date
Bank
Location
Reopened :tail?ITCitizens State
Thedford
5-7-30 1,173.01
State Bank
Colon
7-3-30 4,748.65
Oak Creek Valley
Valparaiso
7-26-30 4,976.31
Bank of Florence
Omaha
6-21-30 7,215.06
State Bank
Arnold
9-15-30 6,128.58
Security State
Arnold
9-15-30 2,059.21
Norfolk (Not shown) 30,420.41
Nebr. State
Plymouth (Not shown) 4,234.74
Farmers State
Alexandria
State Bank
11-3-30 7,227.07
Creighton
Bk. of Creighton
12-24-30 12,653.96
Center
Center State
2-16-31 2,612.99
State Bank
2-12-31 5,117.04
Guide Rock
4-30-32
F. & M.
. 14,513.86
Omaha
11-16-31 33,536.73
Union State
Omaha
11-6-31 1,443.87
State Bank
Huntley
11-17-31 3,241.93
Farmers State
Wallace
12-7-31 6,340.65
Franklin Co. Bank
Hildreth
1-28-32 2,823.34
State Bank
Bloomington
1-2-32 4,855.62
State Bank
Crawford
12-15-31 5,433.18
Clay Co. State
Edgar
12-15-31 5,722.22
State Bank of
Edgar
Security State
Broken Bow 12-23-31 6,170.11
2-9-32 6,463.86
State Bank
Arapahoe
Bank of
1-14-32 2,575.81
Miller

9
Date
Failed
11-20-31
11-20-31
11-6-31
1-5-32
1-11-32
2-1-32
3-9-32
1-8-32

Bank
State Bank
First State
State Bank
Bank of
Farmers State
Farmers State
Nebraska State
State Bank

Date
Fil:121rnftor
Final
Location
Reopened bent
FSUZle
Elba
4-19-32 2,729.66
Beaver City
5-10-32 7,892.20
Dalton
9-8-32 3,208.32
Morse Bluffs
8-4-32 5,949.56
Rising City
7-11-32 11,468.79
Sargent
9-3-32 9,471.05
Bristow
6-18-32 2,193.26
Tryon
(Not shown) 1,451.77

Under the decision in the Superior Bank case all assets of
the guaranty fund will be distributed in the order of priority of judgments.
The amounts of the unpaid claims of depositors in the
first twelve banks to be certified, after the depositors had
been paid in full in the last bank to Lle paid out, are more
than sufficient to absorb all of the assets of the old Guaranty Fund.
The unpaid claims in the twelve banks holding priority
under the decision in the Superior Bank case are listed in
the following table:

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Royal, Royal State
Bazille Mills, First State
Rosalie, Farmers State
Ansley, Farmers State
Elba, Farmers State
Silver Creek, State Bank
Superior, State Bank
Lakeside, State Bank
Angora, State Bank
Harvard, Nebr. State
Bridgeport
North Platte, State Bank

Date of
Failure
10-9-25
1-7-26
4-24-25
7-9-25
6-1-26
2-27-25
3-23-27
6-3-27
3-27-25
5-9-27
5-18-25
1-14-27

Date
Claims
Certified
12-9-27
12-10-27
12-16-27
12-21-27
12-22-27
12-22-27
1-20-28
1-25-28
2-9-28
2-14-28
2-28-28
3-14-28

Total unpaid claims in these twelve banks

Total
Liabilities
120,762.59
361,313.26
163,554.13
202,619.78
165,651.99
344,778.85
730,926.62
58,296.82
68,496.45
410,109.24
409,691.27
926,961.14

Amount
Paid
45,265.45
355,885.05
53,329.96
43,408.60
29,047.90
206,538.84
166,011.03
38,363.19
63,436.45
132,447.30
68,300.24
300,959.74

Unpaid
Claims
77,497.14
5,428.21
110,224.17
159,211.18
136,604.09
138,240.01
564,915.59
19,933.63
5,060.00
277,661.94
341,391.03
626,001.40
$2,462,168.39


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Federal Reserve Bank of St. Louis

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If collection is made from receivers in the 125 banks
which have failed since March 18, 1930, and not reopened
and from reorganized banks as well as from banks which
have remained solvent the depositors in eleven banks would
be paid in full and a part of those in the twelfth. If the
assessments are collected only from solvent banks the first
ten will get it all.
Appellants urge now, as in the original brief and original
argument, that under the facts alleged which stand admitted by the demurrer the assessments sought to be collected are confiscatory and in violation of the constitutional
rights of appellants. Every argument presented in support
of appellants position has been strengthened by the events
of the intervening months. The struggle to maintain the
financial integrity of our institutions has steadily become
more intense. Every agency possible has been marshalled
to avoid a total collapse. Distress in Nebraska has been
aggravated in very large part by the failure of banks not
only because of actual losses but also, and to a greater degree, by fear causing solvent institutions to withhold legitimate credit in order to be prepared for withdrawals.
It is only repeating common knowledge to say that no
single factor in our present situation transcends in its importance the proper solution of this litigation. A failure
to give recognition to the confiscatory character of the burdens sought to be imposed spells nothing short of disaster.
On the contrary a recognition thereof is destined to stabilize
the economic structure in Nebraska vastly beyond the sums
involved.
On the face of it we find ourselves in a situation where
the legislative decision of 1930 cannot be carried out, first


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Federal Reserve Bank of St. Louis

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because the burden imposed is confiscatory and second because, under the decision in the Superior Bank case, the legislature lacked constitutional power to effect a transfer of
assets. A collection of assessments for the benefit of less
than a dozen banks is violative of the legislative mandate
and a collection of assessments for the benefit of the other
group determined by the so-called step-up plan is violative
of the judicial mandate.
A recognition of the confiscatory character of the assessments conforms to the constitutional guarantees on which,
in the last analysis, the perpetuity of our institutions must
rest.
PETERSON & DEVOE,
Attorneys for Appellants.


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Federal Reserve Bank of St. Louis

28303
In The
Supreme Court of Nebraska
HUBBELL BANK, HUBBELL, NEBRASKA, ET AL.,
APPELLANTS,

VS.

CHARLES W. BRYAN, AS GOVERNOR OF THE
STATE OF NEBRASKA, ET AL., APPELLEES.

APPEAL FROM THE DISTRICT COURT OF LANCASTER COUNTY
HON. E. B. CHAPPELL, Judge

BRIEF OF APPELLEES

C. A. SORENSEN, Attorney General, and
L. Ross NEWKIRK,, Assistant Attorney General,
A ttorneys fnr Appellees.

RIGHTER'S, LAW

Fivizr

PAINTERS, 130 North Fourteenth Street, Lincoln, Nebr.


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INDEX
Page
STATEMENT OF CASE

1

Nature
Plaintiffs' Case
Defendants' Case
Stipulations

6

The Judgment of the Trial Court

6

PROPOSITIONS RELIED UPON FOR
AFFIRMANCE

7

PROPOSITIONS OF LAW

8

ARGUMENT
Depositors' Final Settlement Fund Law is
Constitutional

13

13

(a) Appellants' Premise and Theory Erroneous 13
(b) Depositors' Final Settlement Fund Law a
valid exercise of the police power
17

(c)

The same police power exercised by the
legislature in the origination and execution
of the guaranty system is exercised in its
modification
19

(d) The Depositors' Final Settlement Fund
Law is not class legislation

27

(1) Section 18 of Article III of Nebraska
Constitution not applicable
27


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INDEX—Continued
Page
(2) "Equal protection" of claimants
against fund does not concern appellants as a matter of constitutional
right
30
(3) The law concerns all state banks
alike and is not class legislation
30
(e) Depositors' Final Settlement Fund Law
does not divert the five (two regular and
three special) assessments accrued under
the Guaranty Fund Law to a private purpose 32
The assessments here involved are not confiscatory. 34
The decision of the Supreme Court of the United
States in the Able State Bank case is res adjudicata of the issues here presented
50
Section 8-179, Compiled Statutes of Nebraska,
1929, is constitutional and valid
57
Conflict between Sections 8-178, 8-179 and 8-180

62

Section 8-179 does not violate Section 14, Article
III of the Constitution of Nebraska
64
CONCLUSION

65


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General Number 28303

In The

Supreme Court of Nebraska
HUBBELL BANK, HUBBELL, NEBRASKA, ET AL.,
APPELLANTS,
VS.
CHARLES W. BRYAN, AS GOVERNOR OF THE
STATE OF NEBRASKA, ET AL., APPELLEES.

APPEAL FROM THE DISTRICT COURT OF LANCASTER COUNTY
Horst. E. B. CHAPPELL, Judge

BRIEF OF APPELLEES
C. A. SORENSEN, Attorney General, and
L. Ross NEWKIRK, Assistant Attorney General,
Attorneys for Appellees.

STATEMENT OF CASE
NATURE
This suit was instituted in the district court of Lancaster county, Nebraska, by the plaintiff banking corporations to enjoin the collection of two "regular" and
three "special" assessments levied under the provisions


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of the Depositors Guaranty Fund Law; and also to
enjoin the assessments levied and to be levied under
the provisions of the law passed by the Special Session
of the Legislature of Nebraska in March, 1930, pertaining to the "Depositors' Final Settlement Fund." By
cross-petition the defendants prayed for individual judgments against the plaintiff banks, respectively, in the
amounts of said assessments which were levied and
unpaid with interest thereon.
The brief of appellants herein, plaintiffs below (Appellants' Brief, pp. 6-41), sets out the pleadings in the
trial court in considerable detail. We will, therefore,
confine ourselves to a short statement of the issues.
PLAINTIFFS' CASE
I. Plaintiffs' first cause of action attacks the Depositors' Final Settlement Fund Law, and especially the
sections thereof now compiled as sections 8-171, 8-172,
8-176, Compiled Statutes of Nebraska, 1929, and the
assessments provided for therein, on the grounds that
they
(a) Violate the "due process" and "equal protection"
clauses of the federal constitution (14th Amendment)
and the "due process" clause of the Constitution of Nebraska (Sec. 3, Art I).
(b) Violate Section 18, Article III of the Nebraska
Constitution as class legislation.
Plaintiffs attack Section 8-179 of the law, first, as
violative of the "equal protection" and "due process"

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clauses of the federal constitution; second, as violative
of the due process clause of the Nebraska Constitution;
third, as violative of Article II of the Nebraska Constitution as an attempt to invade the functions of the
judiciary; fourth, as violative of Section 14, Article III
of the Nebraska Constitution, the title to the act not
being broad enough to cover subject matter in the body
of the act.
II. Plaintiffs' second cause of action attacks the Depositors' Final Settlement Fund Law and especially
those sections thereof now compiled as Sections 8-171,
8-174, 8-175, 8-176, 8-177 and 8-181, which provide for the
collection and distribution of two unpaid "regular" assessments and three unpaid "special" assessments levied
against the plaintiff banks under the Depositors' Guarantee Fund Law (Secs. 8024, 8025, 8026, 8027, Comp.
St. Neb., 1922, and Section 8028 as amended by Sec. 26,
Ch. 91, Laws of 1923). The grounds for plaintiffs'
attack are that said sections and the collection and disbursement of said assessments:
(a) Violate the "due process" and "equal protection"
clauses of the federal constitution.
(b) Violate the "due process" clause of the Nebraska
Constitution.
(c) Violate Section 18 of Article III of the Nebraska
Constitution as class legislation.
Plaintiffs attack Section 8-179 on the constitutional
grounds: first, that it invades the functions of the judiciary, in violation of Article II of the Nebraska Con-


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stitution; aecond, that it violates the "due process" and
"equal protection" clauses of the federal constitution
and the "due process" clause of the Nebraska Constitution; and third, that it violates Section 14, Article III
of the Nebraska Constitution, the subject matter in the
body of the section being broader than its title.
III. Plaintiffs in their answer to the defendants'
cross-petition attack Sections 8024, 8025, 8026 and 8027,
Compiled Statutes of Nebraska, 1922, and Section 8028,
Compiled Statutes of Nebraska, 1922, as amended by
Section 26, Chapter 191, Laws of Nebraska, 1923, being
that part of the Depositors' Guarantee Fund Law under
which the regular and special assessments involved in
this ease were levied, and plaintiffs also attack said
assessments—all on the grounds that said assessments
at the respective times of levy were and now are confiscatory and in violation of the "due process" clauses
of the federal and state constitutions.
DEFENDANTS' CASE
I. The defendants assert and rely upon the constitutionality and validity of the Depositors' Guarantee
Fund Law under which the "regular" and "special"
assessments in question were levied, the constitutionality
and validity of the Depositors' Final Settlement Fund
Law under which the assessment of January 1, 1931, was
levied, and the constitutionality and validity of said
assessments in question.
II. The defendants, as to each of plaintiffs' two
causes of action, assert that all contentions made by

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plaintiffs, except their claim of the right of set-off of
payments made to the Bankers' Conservation fund
against the five regular and special assessments in question, were and are res adjudicata in the case of Abie
State Bank v. Weaver, 119 Neb. 153, 227 N. W. 922,
282 U. S. 765, 51 Sup. Ct. 252, 75 U. S. (L. Ed.) 690.
• III. (a) The defendants, by cross-petition, prayed
for individual judgments against the plaintiff banks, respectively, in the amounts of the assessments, duly
levied under the Guarantee Fund Law and unpaid by
the plaintiff banks, as follows:
(1) Special assessment of one-fourth of one per cent
of average daily deposits, levied December 15, 1928.
(2) Special assessment of one-half of one per cent
of average daily deposits, levied April 17, 1929.
(3) Regular assessment of one-twentieth of one per
cent of average daily deposits, levied July 1, 1929.
(4) Regular assessment of one-twentieth of one per
cent of average daily deposits, levied January 1, 1930;
and
(5) Special assessment of one-half of one per cent
of average daily deposits, levied January 2, 1930.
(b) The defendants in their cross-petition also prayed
for individual judgments against the plaintiff banks,
respectively, in the amount of the assessment levied on
January 1, 1931, under the provisions of the Depositors'
Final Settlement Fund Law, and especially under the


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provisions of Section 8-172, Compiled Statutes of Nebraska, 1929.
STIPULATIONS
The parties tiled in the trial court several stipulations of facts which, by reference, were made a part of
the pleadings, and, therefore, form an integral part of
the case for all purposes of the defendants' demurrer to
(a) plaintiffs' reply to defendants' answer and to (b)
plaintiffs' answer to defendants' cross-petition. These
stipulations are found in the Transcript on pages 13
to 26, 43 to 50, 50 to 52, 76 to 85 (including Exhibits
A, B,(1, D and E, and Exhibits 2, 3, 4, 5, 6, 7 and 8),
and 87.
THE JUDGMENT OF THE TRIAL COURT
The trial court sustained the defendants' demurrer
(Tr. pp. 86, 94), and the plaintiffs having refused to
plead further and having elected to stand on their pleadings as amended or supplemented by stipulations of the
parties, the trial court entered judgment against the
plaintiffs, dismissed their amended petition and entered
judgments for the defendants upon their cross-petition
against the plaintiff banks, respectively, in the aggregate
amount of the five regular and special assessments levied
under the Depositors' Guarantee Fund Law and the
amount of the assessment of January 1, 1931, under the
Depositors' Final Settlement Fund Law (Tr., p. 102,
consisting of 20 sheets). Correctness of computation
of these judgments is stipulated on page 100 of the

transcript.

1

7
This is an appeal from that judgment prosecuted by
the plaintiff banks.

PROPOSITIONS RELIED UPON FOR
AFFIRMANCE
1. The Depositors' Final Settlement Fund Law and
the assessments levied thereunder are constitutional
and valid.


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2. The Depositors' Guaranty Fund Law as modified
by the Depositors' Final Settlement Fund Law is constitutional.
3. Each and all of the two "regular" assessments of
July 1, 1929, and January 1, 1930, the three special
assessments of December 15, 1928, April 17, 1929, and
January 2, 1930, and the Depositors' Final Settlement
Fund assessment of' January 1, 1931, were, when levied,
and now are constitutional and valid.
4. All matters relied upon by plaintiff banks in this
case, except their claim of the right of set-off of payments to the Bankers' Conservation Fund and their
adjudicated claims on deposits in other state banks
against assessments for the Depositors' Guaranty Fund
(now Depositors' Final Settlement Fund), were and
are res adjudicata in the case of Abie State Bank v.
Weaver, 119 Neb. 153, 227 N. W. 922, 282 U. S. 765,
51 Sup. Ct. 252, 75 L. Ed. 690.
5. Section 8-179, Compiled Statutes, 1929, being that
part of the Depositors' Final Settlement Fund Law
which conditionally repeals the Depositors' Guaranty
Fund Law, is constitutional and valid.


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6. Section 8-179, Compiled Statutes, 1929, is not
nullified by Section 8-180, Compiled Statutes, 1929.
7. The plaintiff banks are not entitled to set-off adjudicated claims for deposits in failed banks or payments
made to Bankers' Conservation Fund against the five
"regular" and "special" assessments levied under the
Depositors' Guaranty Fund Law and carried forward
into the Depositors' Final Settlement Fund Law.
8. The several judgments rendered by the trial court
in favor of the defendants and against the plaintiff
banks, respectively, in the aggregate amounts of the
assessments involved herein are right and should be
affirmed.

PROPOSITIONS OF LAW
1. "It is a firmly established principle of law that
the constitutionality of a statute may not be attacked
by one whose rights are not affected by the operation
of the statute."
12 C. J. 760.
State, ex rel. Rid yell v. Hall, 99 Neb. 89,. 96,
156 N. W. 16.
Cram v. C. B. & Q. Ry. Co., 85 Neb. 586, 123
N. W. 1045.
Ericson v. Nine Mile Irrigation District, 109
Neb. 189, 195, 190 N. W. 573.
Urbach v. City of Omaha, 101 Neb. 314, 163
N. W. 307.
Ruwe v. School District No. 85 of Dodge County,
120 Neb. 668, 234 N. W. 789.

.9
Assaria State Bank v. Dotley, 219 U. S. 121.
Arizona Copper Co. v. Hammer, 250 U. S. 429.
Cooley, Const. Lim., Vol. I (8th Ed.), pp. 339341.
West Digest System, "Constitutional Law"
("Key Number") 42.
• 2. "It is elementary that it is not within the province
of the courts to annul a legislative act unless its provisions so clearly contravene a provision of the fundamental law, or it is so clearly against public policy, that
no other resort remains."
Abie State Bank v. Weaver, 119 Neb. 153, 227
N. W. 922.
Weaver v. Koehn, 120 Neb. 114, 231 N. W. 703.
3. The "assessment, creation and administration" of
the Depositors' Guaranty Fund, "from whatever standpoint considered, are made pursuant to a legislative
policy, which may be changed at will."


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Wirtz v. Nestos, 51 N. D. 603, 200 N. W. 524.
Abie State Bank v. Bryan, 282 U. S. 765, 51
Sup. Ct. 252, 75 U. S. (L. Ed.) 690.
Assaria State Bank v. Dolley, 219 U. S. 121.
Noble State Bank v. Haskell, 219 U. S. 104.
Shatienberger v. First State Bank,219 U. 5. 114.
City of Jackson v. Deposit Guaranty Bank &
Trust Co., 133 So. (Miss.) 195.
Love v. Mangum, 135 So. (Miss.) 135.


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State ex rel. Sharpe v. Smith, 234 N. W. (S. D.)
764.
State v. Bone, 120 Kan. 620, 244 Pac. 852.
Spokane Eastern Trust Co. v. Hart, 127 Wash.
541, 221 Pac. 615.
Lacy v. State Banking Board, 118 Tex. 91, 11
S. W. (2d) 496.
4. The constitutionality of Depositors' Final Settlement Fund Law (Ch. 6, Laws of Nebraska, 1930) as a
modification of the Depositors' Guaranty Fund plan
(Secs. 8024, 8025, 8026, 8027, Comp. St., 1922, and
Section 8028, as amended by Section 26, Ch. 191,
Laws of 1923) is res adjudicata.
Abie State Bank v. Weaver, 119 Neb. 153, 227
N. W. 922.
Abie State Bank v. Bryan, 282 U. S. 765, 75
L. Ed. 690, 51 S. Ct. 252.
5. Section 18, Article III, of the Nebraska Constitution is not applicable to this case. It is "not a restriction upon the power of the legislature over the subject
involved, but rather a limitation with respect to the
manner of exercise of such power."
Smiley v. McDonald, 42 Neb. 5, 60 N. W. 355.
State v. Gering Irrigation Dist., 114 Neb. 329,
207 N. W. 525.
City of Jackson v. Deposit Guaranty Bank &
Trust Co., 133 So. (Miss.) 105.
Baird v. Rash, 234 N. W. (N. D.) 651, 653, 654.
6. "'The banking business, carried on pursuant to
a. state charter, is quasi-public and, for protection of


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the public and its interests, is subject to reasonable
regulations by the state.'"
Abie State Bank v. Bryan, 119 Neb. 153, 227
N. W. 922, 282 U. S. 765.
Citizens State Bank v. Strayer, 114 Neb. 567.
State v. Smith, 234 N. W. (S. D.) 764, 778.
Noble State Bank v. Haskell, 219 U. S. 104.
Shallenberger v. First State Bank, 219 U. S. 114.
Assaria State Bank v. Dailey, 219 U. S. 121.
7. "The legislative intent is the cardinal rule in the
construction of statutes."
"The great fundamental rule in construing statutes
is to ascertain and give effect to the intention of the
legislature."
King of Trails Bridge Co. V. Plattsmouth Auto
& 1Vagon Bridge Co., 114 Neb. 734, 209 N. W.
497.
State v. School District, 99 Neb. 338, 156 N. W.
641.
36 Cyc. 1106.
8. Whether or not the assessments imposed under
the Depositors' Final Settlement Fund Law are so burdensome as to be legally confiscatory can only be determined by their effect on banks during normal business
times; confiscation cannot be predicated upon the experience of banks in abnormal years.
Kings County Lighting Co. v. Lewis, 180 N. Y.
Sup. 570.
Darnell v. Edwards, 244 U. S. 564, 34 Sup. Ct.
701.


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9.
such
gard
may

The legislature has the general power "to make
regulations and conditions as it pleases with reto the taking effect or operation of laws. They
be absolute, or conditional or contingent; and if the
latter, they may take effect on the happening of any event
which is future and uncertain."
Cooley on Constitutional Limitations, Vol. 1
(8th Ed.), pp. 241, 242.
Smith V. Janesville, 26 Wis. 291.
State v. Liedtke, 9 Neb. 490.
Barto v. Hintrod, 8 N. Y. 490.
The Cargo of the Brig Aurora v. United States,
Cranch. 382.
Ex Parte Wall, 48 Cal. 279.
See: 36 Cyc. 1099.
25 U. ('. L., pp. 908-909, 913, 914.
10. "When one section of a statute treats specially
and solely of a matter, that section prevails in reference
to that matter over other sections in which only incidental reference is made thereto; not because one section has more force as a legislative enactment than
another, but because the legislative mind, having been
in the one section directed to the particular matter,
must be presumed to have there expressed its intention
thereon rather than in other sections where its attention was turned to other things."
25 It C. L. 1011.
State v. Nolan., 71 Neb. 136, 98 N. W. 657.
Kountze V. City of Omaha, 63 Neb. 52, 88 N. W.
117.

13
11. It is a well recognized rule of statutory construction that "the several parts of an act are to be
construed together in order to ascertain the intention
of the legislature."
Follmer v. Nuckolls County, 6 Neb. 204.
City of Lincoln V. Janesch,63 Neb. 707, 89 N. W.
280.
12. "When the title of an act fairly gives expression
to the general subject-matter contained in the act, such
act will not be held invalid as being broader than its
title."
AIehrens v. Bauman, 120 Neb. 110.

ARGUMENT
DEPOSITORS' FINAL SETTLEMENT FUND LAW IS
CONSTITUTIONAL
(a) Appellants' Premise and Theory Erroneous.
At the outset we must say that the contentions of
the plaintiff banks, appellants herein, concerning the
nature and purpose of the Depositors' Final Settlement Fund Law as passed by the Special Session of the
Nebraska Legislature in March, 1930, are based upon
an entirely false premise, to-wit, that this law is an
entirely new plan, unrelated to the old guaranty fund
system. Consequently their argument on the constitutional questions involved is for the most part beside the
point.
Counsel for the banks utterly ignore the true situation that faced the Legislature in March, 1930, when
called in special session by the Governor to enact proper


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and necessary legislation pertaining to the business of
banking in this state. The Depositors' Guaranty Fund
had become hopelessly involved due to the ever-mounting
claims of depositors outstanding and unpaid. The banks
were refusing to pay the five accrued assessments levied
by the Department of Trade and Commerce under the
law, and were demanding relief from these and all
future assessments. Holders of adjudicated claims
against the fund were clamoring for relief. Depositors
of going banks and the public generally were nervous
and distrustful of the soundness of the banking system.
In fact, the entire situation called for quick and efficient
legislative action.
The Legislature in that special session responded by
adopting a "middle-ground" policy. The law passed by
that session, now under attack in this case, was and is
necessarily a compromise measure. "Final settlement"
was the purpose of the legislature in adopting the law
and final settlement is the result and effect of the law
thus passed.
The repeal of the guaranty fund sections so eagerly
seized upon by appellants in this case to show a break
or lack of continuity between the guaranty fund and
the final settlement fund, was no more than a necessary
incident to the winding-up process contemplated and
effected by the Legislature in the final settlement of all
rights and liabilities as between banks, depositors and
claimants. Treating the outstanding and unpaid assessments as valid and subsisting obligations and charges

15
against the banks as a fund proper for collection and
distribution among claimants so far as the fund would
reach, the legislature added thereto, not as a levy "to
pay for a dead horse", as counsel would have the court
believe, but as a reduction of the heavy load theretofore
carried, a nominal charge, payable over a ten-year period,
to meet an insignificant part of the outstanding claims
against the guaranty fund. With this adjustment and
final settlement, the guaranty fund plan will come to an
end—the banks to have no further liability regardless
of the size of the deficit in the guaranty fund and the
claimants to have the dividends thus available as a full
discharge of their claims.

Far from inaugurating a
"New Plan", as appellants' counsel contend, the Legislature was bringing an old plan to a fair and equitable
conclusion.
In Abie State Bank v. Bryan, 282 U. S. 765, 51 Sup.
Ct. 252, 75 L. Ed. 690, a case to which we will have
occasion to refer later, the Supreme Court of the United
States thoroughly appreciated, construed and adjudicated
the objects and purposes of this Depositors' Final Settlement Fund Law. The court in that case, speaking
through Mr. Chief Justice Hughes, clearly recognized
the law for just what it is, not a new plan or scheme of
bank guaranty, but a winding-up process, a liquidation
of the old plan. The court, therefore, refers to the new
law as "modifying legislation which has restricted in an
important degree their (the banks') liability to assessments", which "has provided for what is, in substance,
a liquidation of the guaranty scheme": based upon the


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"freedom in the legislature to modify its regulation"
(guaranty fund law) "when the public welfare was
deemed to require a change'. Further exerpts from that
opinion are along the same line:
"We see no reason to doubt the power of the legislature to extricate the banks and administration of the
guaranty fund from the serious plight in which they
were found under the operation of the old plan and to
exercise a reasonable discretion in seeking this result.
44*

For the future, there is a limitation of the
obligation to a total assessment of two-tenths of one
per cent of average daily deposits instead of assessments aggregating six-tenths, as were made possible by
the previous law. The future assessments, to this restricted amount, are limited to a period of ten years.
*

*

"Considering the reduction in the extent of the obligation as to future assessments, we are unable to say that
the statute in this moddfled form is confiscatory, or
other than a reasonable method of liquidating the guaranty plan."
Defendants, therefore, base their case upon the premise thus announced and adjudicated by the highest
court in the land.

The plaintiffs' case is utterly un-

sound in its very foundation.
Since, therefore, the defendants, appellees herein, base
their defense and cross-action upon an entirely different premise from that mistakenly adopted by the
plaintiff banks, a considerable part of the argument
made by the plaintiffs on constitutional questions becomes academic and of no application in this suit.

17
(b) Depositors' Final Settlement Fund Law a valid
exercise of the police power.
With the abstract Propositions of Law, Numbers I,
II, III and IV of appellants' brief, we are in hearty
accord.
Both this court and the Supreme Court of the United
States have clearly held the guaranty fund plan to
rest for its constitutional support on the police power
of the state exercised by its legislature. Abie State
Bank v. Weaver, 119 Neb. 153, 227 N. W. 922, 282 U. S.
765; Noble State Bank v. Haskell, 219 U. S. 104; Shallenberger v. First State Bank, 219 U. S. 114. There can
be no serious question that the police power, thus exercised, must not be arbitrarily exercised and that its
exercise must bear a reasonable relation to some public
purpose.
We agree with counsel for the plaintiffs that if the
Depositors' Final Settlement Law had been passed as
an entirely new measure, unrelated to the creation, administration and distribution of the Depositors' Guaranty Fund, there would be little doubt of its unconstitutionality on the ground, so well stated by this court
in Weaver v. Koehn, 120 Neb. 114, 231 N. W. 703, that it
would
"Constitute the taking of money belonging to one
class to pay the claims of those of another class."
When, however, the law is considered in its true aspects, so well recognized by the Supreme Court of the
United States in the Abie State Bank case, as a "liqui-


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dation of the guaranty scheme" and a "limitation of
the obligation" with which the banks were theretofore
burdened and with which they, but for this legislation,
were faced in the future, its public purpose is evident.
To have wholly absolved the banks not only from any
further obligation to mitigate the distressed condition
of the guaranty fund by assessments of comparatively
small proportions, but also from their accrued obligation
to pay the five assessments they already owed but had
refused to pay, would not only have been a harsh and
unconscionable disregard of the adjudicated claims of
the thousands of depositors who, equally with the banks,
had been a part and parcel of the guaranty fund plan,
but would have had a most deleterious effect upon the
banking system.
The standing and good will of banks is a matter of
vital public concern. The attitude of the public generally toward the banks through which a large part of
the commercial transactions of the state is handled is
of great importance in the economic life of all the people.
If the legislature had made no effort to work out an
equitable plan of winding up the guaranty fund system
in a spirit of compromise but, by a sweeping, blanket
release to the banks, had relieved them of all further
liability for assessments, including those already levied
and long past due, can it be doubted that the banks
themselves would have greatly suffered in prestige and
in the confidence and respect of a large body of the
citizenry, with consequent injury to the structure of our
credit system? The debtor's frank acknowledgment
and prompt payment of a just obligation is a distinct

19
pecuniary advantage to the debtor himself, if he would
continue in affairs of commerce and trade. This is
especially true of banks. The Legislature in enacting
the Depositors' Final Settlement Fund Law exercised
its police power to "extricate the banks and the administration of the guaranty fund from the serious plight
in which they were found under the operation of the
old plan." Abie State Bank v. Bryan, supra. The
"public purpose" intended and effected by the measure
is beyond question.
(c) The same police power exercised by the legislature in the origination and execution of the guaranty
system is exercised in its modification.
In their brief, counsel for appellants go far afield to
seek analogies in order to show that the Depositors'
Final Settlement Fund Law is unconstitutional. The
authorities they cite, however, have no bearing or applicability to the issue at hand. The whole structure built
up by counsel in their argument fails because of its
false foundation.
So far as we have been able to find the courts which
have been called upon to pass upon the constitutionality
of similar statutes have unanimously upheld the legislation as a constitutional and valid exercise of the police
power.
In Abie State Bank v. Bryan, 282 U. S. 765, 782, 783,
the court, speaking of the identical law here under attack, said:
"The Bank Guaranty Law provided for a fund to be
raised by assessments upon all the state banks, and while


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this was regarded as an important safeguard for all
depositors, it was but a police regulation, the sanction
of which lay in the constitutional power of the state
and not in contract. And this is the view that has been
taken by state courts which have had occasion to consider this question in connection with legislation by
which relief has been sought from the difficulties encountered in the continued operation of bank guaranty
plans. Wirtz v. Nestos, 51 N. D. 603, 616, 621; 200
N. W. 524, 529, 531; Standard Oil Co. v. Engel, 55
N. D. 163, 170, 174; 212 N. W. 822, 824, 826; South
Dakota ex rel. Sharpe v. Smith, 234 N. W. 525. * * *
"The origin of rights under the Bank Guaranty Law
was wholly statutory.—an act of grace by the legislature, so far as depositors were concerned, with the purpose of promoting the public welfare and with freedom
in the legislature to modify its regulation when the public
welfare was deemed to require a change."
In City of Jackson v. Deposit Guaranty Bank ct Trust
Co., 133 So. 195, the Supreme Court of Mississippi had
under consideration a statute passed by the legislature
of that state in 1930. There was then a large deficit
in the guaranty fund of that state. The law of 1930
(Ch. 22, Laws of Miss., 1930) provided that until all
claims certified against the fund and due to be issued,
up to the date of the passage of the act, were paid, the
guaranty features of previous acts should be suspended,
and no further guaranty certificates issued. For the
retirement and liquidation of said outstanding certificates, the 1930 law further provided that assessments
not to exceed five in one year, of one-twentieth of one
per centum of the average unsecured deposits of the
bank, less capital and surplus, should be made and col-

21
lected. It will be seen that the situation in Mississippi
was quite similar in its general nature to that involved
in the case at bar.
While the precise point herein raised was not directly
at issue in the City of Jackson case, the following statement of the court is most significant:
"The general power of the legislature to enact legislation of this sort is sustained by the Supreme Court of
the United States in the recent case, Abie State Bank v.
Weaver, 51 S. Ct. 252, 75 L. Ed. 690 (decided Feb. 24th,
1931."
In the later case of Love v. Mangum, 135 So. 135, the
Mississippi Supreme Court passed squarely upon the
constitutionality of the 1930 law above mentioned. The
particular point in issue was the claim asserted by a depositor to vested rights under the old guaranty law
which authorized interest-bearing certificates, whereas
the new law provided for non-interest bearing certificates. Citing and following the Abie State Bank case,
supra, and State v. Smith, infra, the court held that
the claimant had "neither a contract right, nor a vested
right, under the suspended guaranty statute." The court
further said:
"Both the old and the new bank guaranty statutes are
mere police regulations."
State. ex rel. Sharpe, Atty. Genl. V. Smith, 234 N. W.
(S. D.) 764, contains a complete and powerful exposition of the whole subject of guaranty fund legislation.
In 1927 the legislature of South Dakota repealed the
Depositors' Guaranty Fund Law of that state which had


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been in effect since 1915. In lieu thereof the Legislature
by repealing some old sections and amending others
established a new guaranty fund system with like assessments of one-fourth of one per cent of average daily
deposits, payable into the state treasury in cash or securities, but for the protection only of depositors in the
individual banks, respectively. This fund is to thus -accumulate as to each contributing bank until it reaches
the amount of such bank's capital stock, to be administered, in case of such bank's failure, by the guaranty
fund commission. While the new (1927) law in South
Dakota differs from the Depositors' Final Settlement
Fund Law of this state in that no provision was made
for any further assessments to pay off outstanding claims
against the old guaranty fund, the court's discussion of
the change in the law as a proper exercise of the police
power is most valuable in its application to the situation
now existing in this state. The following is one of the
many powerful statements of the court in its lengthy
exposition of the police power in this connection:
"It seems plain that a duty arising from operation of
law is not a contract in any such sense as is defined in
Sections 803 and 804 (defining 'obligations'), supra, and
there is no necessity for using the language of contract
concerning- it. So in the instant case the plain truth is
that the duty to pay assessments and the other duties
imposed upon the banks of this state by the guaranty
fund law are no more and no less than duties imposed by
operation of law by the legislature of this state in the
valid exercise of its police power."
In Wirtz v. Nesto.s, 51 N. D. 603, 200 N. W. 524, one
of the leading eases on the subject of Depositors' Guar-

23
anty Fund Laws and the nature of the same as police
measures, the court said:
"The assessment, creation, and administration of the
fund, from whatever standpoint considered, are made
pursuant to a legislative policy, which may be changed
at will; the payment of the assessment is compulsory
(failure to pay it is followed by results substantially
identical with those that follow when special assessments against property are not paid, the property —
here the right to do a banking business — may be taken),
does not rest upon contract in any respect, and the
legislative wisdom which dictated the adoption of that
policy may likewise alter or abandon it." (Italics ours.)
Texas repealed its Bank Deposit Guaranty Law (Vernon's Ann. Civ. St., 1925, Arts. 437-489) in 1927 (Gen.
& Sp. Acts 40th Leg., 1927, Ch. 12). At the time of
this repeal, all bank members of the system had paid
the assessments levied against them for the fund. The
guaranty law allowed emergency assessments of not
exceeding two per cent of average daily deposits of each
member bank, in one year. The repealing statute of
1927 provided that
"the passage of this act shall not affect the liability of
state banks for assessments to the guaranty fund as such
liability existed at the time this act takes effect."
In construing this provision, with reference to the
continuing obligation of the banks to pay the two per
cent assessments, the Commission of Appeals of Texas,
in the case of Lacy v. State Banking Board, 118 Tex.
91, 31 S. W. (2d) 496, said:


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"Tested by these rules, we think the provision in
question contemplated that banks which were members


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of the system on February 11, 1927, at the time the repealing act took effect, would be liable for the two per
cent assessment for the current year" (ending November 1, 1927; "that it was only intended to give the
banking board power to assess such banks for the
liability which had accrued at that time, and did not
contemplate a contingent liability of future assessments
so as to authorize assessments over an unlimited number
of years."
See also companion cases: First Natl. Bank V. State
Banking Board, 118 Tex. 168, 11 S. W. (2d) 505; Lydick
V. State Banking Board, 11 S. W. (2d) 505; 12 S. W.
(2d) 954; Smythe v. ('ochran, 14 S. W. (2d) 821.
It is significant that the Texas court regarded an
assessment of two per cent after the effective date of the
repealing law as a very fair method of winding up the
system. This two per cent is the same as the entire
assessment chargeable, over a period of ten years, to
Nebraska banks under the Depositors' Final Settlement
Fund Law.
The Texas cases are also important in their holding,
without express provision of the repealing law, that no
preferences should be allowed as between unpaid claims
of depositors, notwithstanding the time of failure of the
bank. The equitable principles of the "step-up" plan,
so called, in the Depositors' Final Settlement Fund Law
(Sec. 8-177, Comp. St. Neb., 1929) are thus recognized
and enforced by the Texas courts in the absence of
statute.
Kansas repealed its guaranty fund law in 1929 (Laws
of 1929, Ch. 89). The system in that state was volun-

25
tary on the part of the banks which on becoming members were required to deposit bonds with the state bank
commissioner to secure the payment of assessments to
be levied under the law. The law also allowed the banks
to withdraw voluntarily from the system on six months'
notice, the bonds deposited to be returned to such withdrawing members "when the affairs of all failed banks
in liquidation at the expiration of said six months shall
have closed up and the bank shall have paid its assessments on account of same".
In Smith v. lioeneke, 128 Kan. 805, 280 P. 767, certain banks sought to compel the bank commissioner, by
mandamus, to return to them the bonds deposited under
the old law, the banks contending that since they had
paid assessments levied up to the time of the repeal of
the guaranty law, for the commissioner to use the bonds
for the purpose of liquidating claims on the guaranty
fund after such payment by the banks of the required
assessments would be a different use from that for
which the bonds were pledged. While the case is not
strictly in point due to the voluntary nature of the
Kansas plan and the specific pledge of bonds to secure
payment of assessments, the case is significant in its
holding that the repeal of the law did not effect the
validity of the pledge of bonds for a specific purpose—
that the repeal of the guaranty law was valid except
"insofar as it attempted to authorize the return of the
bonds in question".
In State v. Bowe, 120 Kan. 620, 244 P. 852, the court,
speaking of the guaranty fund law of that state, said:
"The statute is hardly contractual in its nature anyway. It was originally enacted, and the auccessive


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26
changes from. time to time have been made in it, under
and by virtue of the police power of the state. Noble
State Bank v. Haskell, 31 S. Ct. 186, 219 U. S. 104, 55
L. Ed. 112, 32 L. R. A. (N.S.) 1062, Ann. Cas. 1912 A
487; Assaria State Bank v. Daley, 31 S. Ct. 189, 219
U. S. 121, 55 L. Ed. 123; Spokane & Eastern T. Co. v.
Hart, 221 Pac. 615, 127 Wash. 541; Wirtz v. Nestos
(N. D.) 200 N. W. 524."
The Legislature of the state of Washington passed a
guaranty fund act in 1917, membership in the system
on the part of the banks being voluntary. Banks could
withdraw from the system on six months' notice and
upon doing certain other things provided for. In 1921
certain amendments were made and certain changes were
adopted with reference to assessments and their amounts.
In Spokane & Eastern Trust Co. v. Hart, 127 Wash. 541,
221 Pac. 615, the Supreme Court of Washington had
occasion to pass upon the validity of these amendments
as they affected a member bank who had given notice of
withdrawal less than 6 months before the amendatory
provisions of 1921 went into effect. The constitutional
question was much more complicated than that in the
ease at bar because of the voluntary nature of the membership of banks in the guaranty system. This naturally
raised the question of proper classification in the amendatory laws of 1921 of member banks as distinguished from
non-member banks, a complication from which the case
at bar is entirely free. After holding that if the amendatory act be construed as applying only to member banks
and if the law be given a compulsory effect, it would be
unconstitutional as class legislation, the court went on
to hold that, since the new assessments were not substantially increased and no new burdens were added,

27
the amendatory act was valid. The court refutes the
bank's contention that it was relieved from further
assessments after the passage of the amendatory law,
in the following language:
"It has been the position of the respondent, ever since
the amendatory act was passed, that it was relieved
from all obligations, because the state was seeking to
enforce certain provisions which were not contained in
the original act under which it voluntarily became a
member of the system. We are not convinced that the
rule which the respondent invokes is applicable to the
present situation. The state, in passing this law and
creating the guaranty fund, was not acting in a private
or proprietary capacity. It was attempting to do something which it could only do in the exercise of the police
power. It is true that in a sense the arrangement under
which a bank becomes a member of the association is in
effect an agreement between it and the guaranty fund
board, but, notwithstanding this fact, we are of the
opinion that the strict doctrine of the rescission of contracts between individuals, where one party refuses to
perform unless new terms are consented to by the other,
should not be applied in a case of this kind."
The foregoing citations are ample authority to sustain defendants' contention that the Depositors' Final
Settlement Fund Law is a proper exercise of the police
power and bears a reasonable relation to a public purpose.
(d) The Depositors Final Settlement Fund Law is
not class legislation.
(1) Section 18 of Article III of Nebraska Constitution not applicable.
Appellants' argument that the law is invalid as class
legislation is groundless. Strangely enough they rely


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oil Section 18 of Article III of the Constitution of Nebraska, which provides, in part, that
"The legislature shall not pass any local or special
laws in any of the following cases, that is to say:
* * * Granting to any corporation, association or
individual any special or exclusive privileges, immunity
or franchise whatever."
This section of the constitution has nothing whatsoever to do with the substantive right of equal protection
of the laws. It pertains to form of legislation, that is
to say, it strikes at local or special legislation on special
or local subject matter, as distinguished from general
laws. This is illustrated in a citation on page 83 of
appellants' brief from the case of State V. Gering Irrigation Dist., 114 Neb. 329, 207 N. W. 525, as follows:
"The classification is arbitrary and limits its application as clearly as though it had by name designated the
district to which it was to apply. A general law could
have been framed applicable to the future if the legislature had desired to do 80."
The true intent and scope of this section of the Nebraska constitution is set out in Smiley v. MacDonald,
42 Neb. 5, 60 N. W. 355, wherein this court held this
section
"Not a restriction upon the power of the legislature
over the subject involved, but rather as a limitation with
respect to the manner of the exercise of such power."
In City of Jackson v. Deposit Guaranty Bank & Trust
Co., 133 So. 195, above discussed in another connection,
the Mississippi Supreme Court squarely answered the
objection raised by appellants here. Speaking of a

EMI

7

29
similar section of the Mississippi constitution (Sec. 87)
which also forbade suspension of general laws by special
laws, as applied to the law suspending the operation of
the guaranty fund law, the court said:
"A law is general in the sense of a constitutional
provision when it applies to and operates uniformly on
all members of any class of persons, places, or things
requiring legislation peculiar to the particular class dealt
with by the law."
In the syllabi, the court held:
(Syl. 2) "General law may be suspended by another
general law.
(Syl. 3) "Statute suspending operation of bank guaranty law until bank guaranty certificates are paid is
general, and not prohibited by constitution."
In Baird v. Rash, 234 N. W. (N. D.) 651, 653, 654,
the court said:
"Legislation dealing alone with insolvency of state
banks is, in our opinion, no more to be regarded as a
special law than legislation which would deal with their
organization or regulation in other respects." Citing
State v. First State Bank of Jud, 52 N. D. 231, 250; 202
N. W. 399; 12 C. J. 1128."
Counsel for appellants surely will not contend that
the law under attack is not "general" as distinguished
from "special", within the meaning of Section 18 of
Article III of the Constitution of Nebraska. They have
simply confused the "equal protection" clause of the
14th amendment to the federal constitution with this
section.


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(2) "Equal protection" of claimants against fund
does not concern appellants as a matter of constitutional right.
Appellants' argument wanders to a complaint that,
under the law, holders of claims against state banks
failing after March 18, 1930, the effective date of the
act, are subjected to an unconstitutional discrimination—
that the law is, therefore, invalid as class legislation.
That complaint is not within the scope of appellants'
constitutional rights. That complaint, even if valid,
would be available only to the claimants themselves.
"It is a. firmly established principle of law that the
constitutionality of a statute may not be attacked by
one whose rights are not affected by the operation of
the statute." 12 C. J. 760. See other authorities cited
under Propositions of Law No. I. supra.
(3) The law concerns all state banks alike and is
not class legislation.
Appellants make no attempt to show that banks as a
class are not subject to proper police regulation. That
they are a proper and reasonable class for particular
police regulation is clearly established.
In State v. Smith, 234 N. W. (S. D.) 764, 778, the
court said:
"It is further true that, when operating in the field
of the police power, a considerable amount of discretion
is necessarily vested in the Legislature. The courts
will determine whether or not the field is a proper one
for the exercise of the police power, that is, whether or
not the subject-matter of the legislation is so affected

31
with a public interest as to justify the exercise of the
police power with relation thereto. If an act of the
police power operates, as it customarily does, upon one
class of citizens, and not upon all citizens, the courts
will determine whether the classification is a reasonable
one, bearing in mind the particular and relating to
public health, morals, or welfare which the act is intended to accomplish. But, if the classification is reasonable, and if the field is a proper one for the exercise of
the police power, what the Legislature sees fit to do in
that field in the nature of police regulation is very largely
in its discretion. It might very well be argued, and it
is argued by the defendants in this case, that the same
discretion in the exercise of the police power, which
in 1915 authorized the Legislature to enact the old
Guaranty Law because the Legislature deemed it to be
for the public welfare, and notwithstanding the fact
that it meant taking the money of one bank to pay
the debts of another, was equally sufficient in 1927 to
authorize the Legislature, when it deemed the repeal of
the old Guaranty Law to be for the public welfare, to
accomplish the repeal, notwithstanding the fact that it
meant depriving the petitioners of certain theretofore
existing rights."
In Abie State Bank v. Bryan, 119 Neb. 153, 227 N. W.
922, this court, quoting from Citizens State Bank v.
Strayer, 114 Neb. 567, held:
"'The banking business, carried on pursuant to a state
charter, is quasi-public and, for protection of the public
and its interests, is subject to reasonable regulations by
the state.'"
See other cases cited under Proposition of Law No.
6, supra.


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(e) Depositors' Final Settlement Fund Law does
not divert the five (two regular and three special)
assessments accrued under the Guaranty Fund Law to
a private purpose.
Appellants attack the Depositors' Final Settlement
Fund Law (Chapter 6, Laws 1930) on the ground that
the Legislature having wholly done away with the Guaranty Fund Law, the entire public purpose contained
therein wholly vanished and the retention in the new
law of the five accrued assessments levied under the
Guaranty Fund Law becomes a diversion of these assessments to a purely private purpose (Appellants' Brief,
pp. 84-93).
Appellants' argument is necessarily founded on two
main premises: first. that the five assessments in question were levied for a public purpose, and second, that
under the 1930 law they are diverted from this purpose.
The first premise is sound. The second is false. Much
of our above argument in reviewing the objects and
purposes underlying this legislation applies to this
point and will, therefore, not be repeated. Appellants'
contention here is still founded on the idea, persistently
stated, that the Depositors' Final Settlement Fund Law
has wiped out the entire guaranty principle—that all
rights and obligations under the old plan were wholly
done away with. As we have above shown, this theory
is wholly erroneous.
As stated by Mr. Chief Justice Hughes in the Abie
State Bank ease, supra,
"Under the modifying act of 1930, only three of these
special assessments and two regular assessments remain
effective."

33
Again, in the sylabus of that opinion, the Depositors'
Final Settlement Fund Law is referred to and construed
as "retaining in force the assessments immediately complained of."
Far from being a diversion of the proceeds of these
five assessments, the law kept them alive for the identical
purpose to which they were devoted under the Guaranty Fund Law. True, certain adjustments were made
as between the holders of claims against the fund, but
these adjustments were made only to provide for a more
just and equitable distribution of the fund—to obviate
some of the glaring injustices that had arisen as between the direct beneficiaries of the guaranty fund.
The situation in Nebraska in 1930 was practically
identical to that existing in the other states which had
adopted the guaranty plan. The law as originally
enacted did not contemplate insolvency of the guaranty
fund and, therefore, was silent as to priorities and
preferences in the event of such insolvency. Consequently, the holders of adjudicated claims arising from deposits in banks failing first had been paid in full. Such
payments wholly depleted the fund so that the depositors
in banks failing after that condition arose were without
recourse. The Legislature, therefore, having in mind the
basic purpose behind the guaranty scheme, to-wit, that
all depositors should be treated without preference or
discrimination, applied to the situation the equitable
principle obtaining in the general law of insolvent estates, to-wit, pro rata distribution among claimants, so
that in so far as possible each depositor would eventually receive the same proportion of his original deposit.


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This is the so-called "step-up" plan now appearing in
Section 8-177, Compiled Statutes of Nebraska, 1929, an
integral and vital part of the Depositors' Final Settlement Fund Law. As already pointed out in this brief,
the Texas courts have approved such pro rata distribution in winding up the administration of the guaranty
fund of that state in the absence of statute.
It should be said here also that the appellants are
in no position to complain of the unconstitutionality of
the law on the ground under discussion (See Proposition of Law No. 1, supra).
THE ASSESSMENTS HERE INVOLVED ARE NOT
CONFISCATORY
Appellants attack both the Guaranty Fund Law
(Secs. 8024, 8025, 8026 and 8027, Comp. St., 1922, and
Sec. 8028, Comp. St., 1922, as amended by Sec. 26,
Ch. 191, Laws of Neb., 1923) under which the two
"regular" and three "special" assessments were levied,
and also the assessments thus levied, on the ground that
the same are violative of the due process clauses of the
federal and state constitutions, in that said assessments,
when levied, were and are confiscatory. The same contention is made as to the assessment of January 1, 1931,
levied under the provisions of Section 8-172, Compiled
Statutes of Nebraska, 1929, a part of the Depositors'
Final Settlement Fund Law.
To meet the defendants' contention that these questions were res adjudicata, a contention more fully discussed later in this brief, the appellants assert that
"changed conditions" have rendered the assessments

35
confiscatory. Plaintiffs are in error in stating that the
demurrer admits the existence of the changed conditions
asserted by the plaintiffs in their pleadings. The demurrer searches the whole record and the pleadings, it
must be remembered, are supplemented by a considerable part of the record in the Abie State Bank case,
which in itself furnishes substantial refutation, in fact
and in law, of the "changed conditions" set out in the
plaintiffs' pleadings.
We have no fault to find with the abstract proposition
of law that changed conditions may cause a law constitutional when enacted to become unconstitutional when
viewed in the light of the experience under such changed
conditions. The application of that principle, however,
has no place in this suit. In considering this matter of
"changed conditions" as effecting unconstitutionality
where constitutionality formerly existed, several outstanding weaknesses in appellants' position at once present themselves. Counsel seek to show confiscation because of alleged changed conditions by comparative
statements of the condition of the plaintiff banks as of
January 1, 1928, December 15, 1928 (the date of the first
special assessment involved herein), and January 1,
1931 (the date of the 2-10 of 1 per cent assessment under
the Final Settlement Fund Law). (Appellants' Brief,
pp. 101-103). On page 100 of their brief, appellants
state that


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"The computations therein are based upon the proposition that the net result of operations is reflected by
the change in the net worth of the banks in question as
between the beginning of the period and the end of the
period, taking into account factors tending to increase


ti.
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or decrease the net worth which have no relation to current operations."
Just how any computation as of January 1, 1931,
which also contemplates and calculates losses in real
estate account as of June 1st, 1931 (See Appellants'
Brief, bottom of p. 100) can have any bearing on the
confiscatory character of assessments made on the several dates, December 15, 1928, April 17, 1929, July 1,
1929, January 1, 1930, and January 2, 1930, there is no
attempt to explain. "Statement Number 2" on page
103 of appellants' brief is, even if it were accurate, a
purely academic manipulation of figures.
In order to he certain to arrive at a "net loss from
operations from December 15, 1928, to January 1, 1931",
appellants, in said Statement No. 2, with one bold stroke
deduct a 60 per cent loss on real estate account as of
June 1, 1931, whereas they struck only a 40 per cent
loss from the hook value of real estate carried on December 15, 1928. The defendants' demurrer admits only
facts well pleaded. Therefore, we may also look to the
statements and proof made by the appellants in the
Abie State Bank case which are also, by stipulation and
reference, a part of the pleadings in this case. For
example, on page 21 in Exhibit 6 (reply brief of these
appellants in the Abie State Bank case in the Supreme
Court of the United States), the real estate carried on
the bank's hooks in December, 1928, "had a realizable
value of 43 per cent". (See also p. 23 of Exhibit 6.)
Instead, therefore, of the 40 per cent shrinkage of such
value as of said date as alleged in the appellants' pleadings in this case, the pro ren facts show a 57 per cent

37
shrinkage as of December, 1928. This item alone throws
appellants' "Statement No. 1" and "Statement No. 2"
on pages 102 and 103 of their brief all out of line and
renders the comparison attempted worthless.
Again, said "Statement No. 2" shows "dividends paid"
in the sum of $1,222,122.78. Presumably and without
refutation, so far as this record goes, those dividends
were legally paid, that is to say, that they were paid
only after (a) all earnings and surplus funds, in turn,
had been charged with losses, and (b) after the surplus
thus diminished by losses had been restored from earnings, and that the dividends then paid did not exceed
one-half of net earnings "until said surplus fund shall
be fully restored to its former amount, or an amount
equal to twenty per cent" of paid up capital. Sec. 8-144,
Comp. St., 1929, effective since 1923.
Another interesting test of the accuracy and weight
of appellants' "Statement No. 2" is to compare that
statement of "net worth" of appellant banks on December 15, 1928, showing surplus of $4,101,685.89 and undivided profits of $2,361,387.63 with their statement
made in said Exhibit 6 (reply brief in Abie State Bank
case), wherein on page 22 it was said, as of December,
1928, that
"If the banks were compelled to cash in real estate as
the law requires, and to clean the note cases of doubtful
and worthless notes, it would practically wipe out their
entire surplus and undivided profits. *
*"
What competent proof, we ask, is there in the comparison sought to be made in appellants' said "Statement No. 2" in the light of the foregoing facts and the
statement just quoted from?


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One important item, as of January 1, 1931, in "State
ment No. 2" shows a distinctly improved appearance
as compared with the same item as of December 15,
1928. That item is "real estate"—carried at $3,864,025.41 on January 1, 1931, as against $5,927,734.24 on
December 15, 1928—a decrease of over two million dollars for the period! Aside from the requirements of the
banking statutes strictly limiting real estate holding
by state banks (See Sec. 8-145), it is a matter of common knowledge that a large real estate account means
"frozen assets" and is a danger signal in the life of any
commercial bank. In fact, as shown by the record in
the Abie State Bank case (See Exh. 4, Brief of Appellants in the Supreme Court of the United States, pp. 20
to 24), the burden of excessive real estate accounts and
losses therein was an outstanding phase of the difficulties experienced by the banks in the year 1928. The
item "Other Real Estate" alone aggregated, in the 726
banks existing in December, 1928, when the Abie State
Bank ease was started, the sum of $9,872,647.21. They
also carried "Real Estate" (bank buildings) at $6,174,432.86, which item, added to the "Other Real Estate"
item above, built up a staggering total of $16,047,080.07
(Exh. 4, p. 22), considerably over three-fourths of the
combined capital stock of the banks! The capital stock
of all going banks in 1928 was $19,100,000.00 (Exh. 6,
Reply Brief in Abie State Bank case, p. 22). It would
therefore appear from the face of the record that the
appellants can find little support for their theory of confiscation from the real estate account in any of its
phases.

39
Another comparison attempted to be made by appellants is found on page 104 of their brief wherein they
refer to the Lancaster county district court's finding in
the Abie State Bank case that the going banks made an
"operating return to invested capital of 7.9 per cent for
a period of 18 months preceding June 30, 1928." Counsel then, still using their Statement No. 2 above discussed, point to confiscation by "changed conditions" by
comparing that return to the "net operating loss of
$23,576.09" in said "Statement No. 2". Let us now turn
to the appellants' own analysis of the situation as found
in their Reply Brief in the Abie State Bank case, Exhibit 6. On page 21 of that brief they insist that the
"actual net earnings of all the banks for the year 1927
and the first half of 1928 did not exceed 3 per cent upon
invested capital." For further purposes of analyzing
the comparison attempted to be made by appellants let
us now apply to their "Statement No. 2" the 57 per cent
shrinkage in Real Estate, as of December 15, 1928, the
proven shrinkage, as above shown, instead of the 40 per
cent used in their statement. Taking the rest of their
calculations as correct, we have the following distinctly
different aspect.


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STATEMENT NO. 2 (REVISED VERSION)
Period December 15, 1928, to January 1, 1931
Net Worth December 15, 1928
Total Capital Stock
Surplus
Undivided Profits

$12,451,500.00
4,101,685.89
2,361,387.63
$18,914,573.52


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40
Less: Loss on Real Estate 57% of
$5,927,734.24

3,378,808.59

Total Net Worth December 15, 1928....$15,535,765.00
Yet Worth January 1, 1931
Total Capital Stock
Surplus
Undivided Profits

.$12,180,500.00
4,099,274.51
1,488,427.16
$17,768,201.67

Less: Loss on Real Estate 60% of
$3,864,025.47

2,318,415.28
$15,449,786.39

Results froni Operations December 15, 1928, to
January 1, 1931
Net Worth December 15, 1928
Net Worth January 1, 1931
Reduction in Net Worth
Add:
Stockholders Assessment Paid In
Operating Losses

$15,535,765.00
15,449,786.39
$

85,978.61

$ 1,217,202.52
$ 1,303,181.13

$1,222,122.78
Dividends Paid
Guarantee Fund Assessments
794,197.08
Charged Against Profits
271,000.00
Decrease in Capital Stock

Deduct Operating Losses
Gain

$ 2,287,319.86
1,303,181.13
$

984,138.73

41
Instead of a net operating loss of $23,576.09, we have
for the period a net operating gain of $984,138.73. There
is a total lack of showing of such changed conditions as
to warrant any finding of confiscation.
In connection with this question of confiscation it
needs to be remembered that when a law is enacted in
the exercise of the police power, as was the Bank Guaranty Fund Law, and has for its object the advancement
of the public good, public safety, or public welfare, there
may be an incidental destruction of the value of private
property without violation of the fifth or fourteenth
amendments to the constitution of the United States, for
it is not taken for public use without compensation or
without due process of law, since it is not taken by the
public at all, and the court will consider and determine
only whether or not the law as enacted has any rational
relation to the public good with every possible presumption indulged in the law's favor. Powell v. Pennsylvania, 127 U. S. 678; Mugler v. Kansas, 123 U. S.
623; Lochner v. New York, 198 U S. 45, 25 Sup. Ct. Rep.
539; State v. Drayton, 82 Neb. 254, 117 N. W. 768; State
V. Withnell, 91 Neb. 101, 135 N. W. 376, 6. R. C. L.,
See. 230, page 243.
The distinction between rate and taxation cases and
the case at bar is that the Guaranty Fund Law is not
a revenue nor rate regulation measure, but an act
passed under the state's police power to stabilize banking conditions generally and in particular to protect
deposits in state banks, creating thereby intangible public
benefits which cannot be judicially measured, and the
payment of the Guaranty Fund assessment being a con-


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42
dition precedent to the operating of a state bank regardless of the earnings of the bank.
In the case of First State Bank of Claremont V.
Smith, 49 S. D. 518, 207 N. W. 467, the court said:
"So far as the banking corporations are concerned,
the assessment sought to be prohibited is not a tax or
involuntary taking of their property, but a part of the
consideration exacted by the state for the corporate
franchise. So, also, is the law a part of the privileges
and conditions
under which the unincorporated banks
.
were organized and have been doing business."
In Noble State Bank v. Haskell, 219 U. S. 104, the
third paragraph of the syllabus is as follows:
"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."
The question of changed conditions was squarely before the court in First &ate Bank of Claremont V. Smith,
supra. On that question the court said:
"They contend that, even though it may have been
constitutional when enacted, changed conditions now
render the act violative of the constitution. They reason
from railroad rate cases which have at one time been
held constitutional because the rates fixed by statute are
reasonable and not confiscatory, and later under changed
conditions such, rates became unconstitutional. But
there does not appear to be any analogy between those
cases and this. It is well known that in trade and commerce prices are subject to fluctuation and what is a
reasonable charge for a service today may not be tomorrow, because not in just proportion to other prices
and charges. In this case the objection is not to the

43
amount of the charge, but to the purpose for which it
is made. Changed conditions have not changed the
purpose. If the purpose of the law was legitimate, and
the act therefore constitutional at the time of its enactment, perforce it must remain so, although because
of changed conditions its purpose is no longer useful
or desirable. Its uselessness may be a cogent reason
for its repeal by the lawmakers, but it can have no
weight with the court, in construing it. If the law was
constitutional when enacted it now is, and all that portion of the complaint pertaining to changed conditions
is immaterial in the inquiry now before us." (Italics
ours.)
Even if we were to assume that the rule in rate and
taxation cases is applicable the position of the appellants
is not sustained. The effect upon the banks of the assessments during abnormal times cannot be the test of
whether or not there is confiscation. In Municipal Gas
Company v. Public Service Commission, 225 N. Y. 89, 98,
121 N. E. 772, 774, Judge Cardozo, now a member of
the United States Supreme Court, in a gas rate case
said in terse language:


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"For more than nine years the statutory rate was
adequate. Abnormal conditions brought about a change,
and now, when the rate is figured upon the value of
the property, the outcome is said to be a deficit. * * *
It will seldom be important that rates have been inadequate for a day or week or a month. Fleeting losses
may be suffered, and yet the balance sheet may show a
profit. * * * It is by the average of the year that
business commonly reckons its losses and its gains. On
the other hand, there may be times when the average
must be distributed over periods still longer."


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44
Confiscation or lack thereof may not be predicated
upon the operation of banks during the abnormal years
of 1929, 1930, 1931, and 1932. In Kings County Lighting Company v. Lewis. 180 N. Y. Sup. 570, 593, the court
said:
'Rates fixed by law for a public utility are not necessarily 'confiscatory', because for an abnormal year its
income is to be reduced below what would ordinarily be
deemed an adequate rate on the investment."
In Darnell v. Edwards, 244 U. S. 564, 37 Sup. Ct. 701,
61 L. Ed. 1317, the court affirmed a decree dismissing
the bill on the ground that the "evidence for complainant, tending to show they were non-remunerative, while
based upon actual experience in the operation of the
road, yet relates to only a brief period when conditions
were abnormal."
In Village of Saratoga Springs v. Saratogo Gas, Electric Light & Power Co., 83 N. E. 693, at page 701, 18
L. R. A. (N. S.) 713, Chief Judge Cullen, speaking for
the court, said:
"We have no difficulty in upholding the provision that
the rate shall remain as established for the term of three
years. It is urged that circumstances might so alter
that before the expiration of three years a rate which
was reasonable at the time it was established would become unreasonable. This is possible; nevertheless, we
think the Legislature was justified in enacting some
period of repose during which the rate should remain
stable. In answer to this objection we cannot do better
than quote the reply made by Chief Justice Holmes to
a similar objection in the Massachusetts case cited
(Matter of Janvrin). He said: 'But supposing a party
aggrieved should obtain an injunction, obviously the

46
decree would be drawn so as to bind the defendant for
a reasonable time, or if it were drawn in •the common
form, subject to review on a change of circumstances,
the court would not be likely to grant leave to file a
bill of review until a reasonable time had elapsed, and
if the Legislature should say that in these cases five
years was a reasonable time, we could not say that it was
wrong."
The allegation that the assessments are confiscatory
is a mere conclusion. Even if the rule in the rate and
taxation cases were applicable to the case at bar as contended by appellants, which we deny, appellants would
have to allege and prove the volume of business available
to the several banks that have failed to make compensatory earnings, the facilities of such banks for handling
the business offered, the efficiency and economy of the
operation of such banks, that the economic conditions
complained of are not unusual or merely temporary,
and to exclude all causes other than the effect of assessments paid. Mere proof of loss or difficulty of operation for a period of a few years is not sufficient to show
confiscation. City of Grand Island v. Postal Telegraph
Co., 92 Neb. 253, 138 N. W. 169; City of Fremont V.
Postal Telegraph Co., 103 Neb. 476, 172 N. W. 525, affirmed in 255 U. S. 124; Powell v. Pennsylvania, 127
U. S. 678; Ohio River and W. Ry. Co. v. Dittey, 203
Fed. 537; Western Union Telegraph Co. v. Borough of
New Hope, 187 U. S. 419; Aetna Insurance Co. V. Hyde,
47 S. Ct. Rep. 113, 72 U. S. (L. Ed.) 357.
The reasonableness of a license fee or tax cannot be
determined by the profit that some individuals make in
their business. The fact that they are unable to conduct


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—


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46
their business in such a way as to realize a profit which
would warrant the amount of the license tax is no argument as to the reasonableness or unreaisonableness
thereof.
Inethciency in management, peculiar local trade conditions, temporary business depression and in fact numerous similar matters may affect the ability of one or a
limited number of the banks to operate at a profit. Under the rule that "Every possible presumption is in favor
of the validity of a statute, and this continues until the
contrary is shown beyond a reasonable doubt," Powell
v. Pennsylvania, 127 U. S. 678, the burden is upon the
banks as to every one of these issues to allege facts showing that a condition exists which would beyond question make the further operation of the banks impractical
and to negative every possible state of facts consistent
with the constitutionality of the law and the assessments. The plaintiffs have not met this test.
Proof that a few individual banks are operating at a
loss is not proof of the unreasonableness of the special
assessment levied. In City of Fremont v. Postal Telegraph Cable Co., 103 Neb. 476, affirmed*by this court in
255 U. S. 124, the Nebraska Supreme Court said:
"The proof in support of these allegations shows that
during the years 1914 and 1915 defendant's Fremont
office was operated at a loss, and that a payment of the
tax for these two years would occasion deficits on defendant's intrastate business at Fremont of $143.73 and
$128.45, respectively. No figures are offered for any of
the preceding years. But, even if the evidence at hand
is sufficient to warrant ice in assuming antecedent and
prospective losses in the operation of defendant's busi-

47
netts at Fremont, we do not regard this as a satisfactory
test of the reasonableness or unreasonableness of the tax
involved. Defendant's losses may be due to conditions
for which it is itself responsible."
Western Union Telegraph Co. v. New Hope, 187 U. S.
419:
"And 'that the courts will not declare such ordinance
void because of the alleged unreasonableness of the fee
charged, unless the unreasonableness be so clearly apparent as to demonstrate an abuse of discretion on the part
of the municipal authorities."
The special and regular assessments for 1928, 1929,
and 1930, in question are a fixed liability. Whether to
pay them now will be burdensome is a moot question;
the Supreme Court of the United States affirmed the
holding of this court that under the circumstances they
were not confiscatory. The lawsuit as to them is ended.
Under the March, 1930, Depositors' Final Settlement
Fund statute (Sec. 8-175, C. S. for 1929) the Department of Trade and Commerce may, as called attention
to by Chief Justice Hughes, grant any bank an extension of three years from March, 1930, within which to
pay these assessments. If any further extension is necessary an appeal for such relief can be made to the Legislature which convenes next January, one year and three
months before the three-year period of grace expires.
By that time wheat may be 75 cents per bushel, corn 60
cents, hogs 8 cents per pound, eggs 30 cents per dozen,
real estate 20 per cent higher, and Brazilian and German
bonds on the road to par. If so, the payment of these
old assessments, a certain proportion each year, will
work no substantial hardship.


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48
As a matter of fact it is fair to assume that nearly
all of the banks are now ready and able to pay these
assessments and will do so at once, in order to stop the
running of interest, if the judgments entered against
them in the district court are sustained.
Of course the banks do not want to pay until compelled to do so. Why should they? Nothing to lose
and $3,000,000 to gain. For that much money any one
could afford to take a chance in court. Victory will
mean enlarged reserves for the banks having difficulty
and big dividends for the stockholders of the strong
banks. And it should not be forgotten that the overwhelming majority of the banks which have survived
the economic storm are sound. If they weren't their
doors would not now be open. Bank failures in this
state are very much fewer than a year ago.
Assuming that there will be no further radical reduction in prices, a bank today which takes a mortgage on
4,000 bushels of wheat to secure a loan of $1,000 cannot
lose by the transaction. The future for the surviving
banks is bright. The grief of the banks has not been
due to the relatively insignificant guaranty fund assessments but to the violent reduction in farm prices with
its resulting impairment of the financial worth of the
borrowers. Added to this is the huge loss of many
banks in bond investments, the aggregate amount of
whichi is probably more than the total amount of all
the assessments.
The remaining assessment of two-tenths of one per
cent per annum may be irritating but cannot with a

49
straight face be said to be confiscatory. The assessments
which the banks paid for many years were 300 per cent
higher, regular assessment of one-tenth plus special
of five-tenths. During the time that the banks were
paying six-tenths of one per cent per annum assessments
these payments to the guaranty fund constituted only
10.06 cents of each dollar of gross earnings (Exhibit
.No. 38, U. S. Supreme Court Record, pp. 437, 438).
Out of each dollar of disbursements by the banks of
Nebraska from July 1, 1925, to June 30, 1926, when
the assessments were six-tenths per annum, an average
of only 9.08 cents went to the guaranty fund (Exhibit
No. 39, U. S. Supreme Court Record, pp. 494, 495).
The banks now will only pay one-third of that amount
to the Depositors' Final Settlement Fund, approximately
three pennies out of each dollar of expenditures. It is
unfair to the court to suggest that this small assessment
is confiscatory.
For a bank with unsecured deposits of $100,000 it
means an assessment annually of $200.00, or $16.66 per
month, or 54 cents per day. Assuming eleven stockholders with equal number of shares in the bank, the
loss in earnings to each one will be five cents per day.
Instead of going to the United States Supreme Court
these stockholders could get quicker relief by every
second day foregoing the smoking of a ten-cent cigar
and placing the unspent dime in the bank to the credit
• of the Depositors' Final Settlement Fund. We suggest
that this method would be cheaper (no contingent fees),
beneficial to their health, and improve the standing of
banks generally in the eyes of the depositors in failed
banks.


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THE DECISION OF THE SUPREME COURT OF THE
UNITED STATES IN THE ABIE STATE BANK
CASE IS RES ADJUDICATA OF THE
ISSUES HERE PRESENTED
In the foregoing discussion we have dealt with the
several issues on the merits. In addition to the support
for defendants' position in this case found in the foregoing argument, defendants rely on the decision of this
court and of the Supreme Court of the United States
in the case of Abie State Bank v. Bryan, supra, as a
final adjudication of all the main issues raised in this
case, except the claim on the part of the plaintiff banks
to set-off against the five regular and special guaranty
fund assessments involved herein the payments made by
the banks for the Bankers' Conservation Fund and the
adjudicated claims of the banks against the guaranty
fund arising out of deposits made by the plaintiff banks
in other banks which have failed. Since the plaintiffs
(appellants) do not assign as error or discuss in their
brief their claim of the right of set-off, we take it that
the judgment of the trial court denying such claim is
not appealed from or otherwise contested in this court,
and we, therefore, will not discuss that point.
Appellants assume a very large assignment when they
undertake to show that the Supreme Court of the United
States in the Abie State Bank case did not have jurisdiction to pass upon the validity of the Depositors' Final
Settlement Fund act of March 18, 1930. That decision
speaks for itself.
In the opinion the whole law is set out in detail. With
reference to it Chief Justice Hughes says:
"This court will take judicial notice of this legislation."

51
As to that court's jurisdiction in the premises, we
know of no better or higher authority than the holding
of the court in the case itself.
Here again counsel for the banks start with the false
premise that this act was legislation unrelated to the
Guaranty Fund Law. As we have already pointed out
in this brief, the Supreme Court of the United States
took judicial notice of this act as legislation modifying
the guaranty fund plan and as a "reasonable method of
liquidating" that plan. Necessarily, in that view of the
law, the argument of counsel becomes largely academic.
As we understand appellants' contention, the main
point relied on to show that the law of March 18, 1930,
was not passed upon and could not lawfully be passed
upon by the Supreme Court of the United States in the
Abie State Bank case, as to the issues herein presented,
is that the lower courts had not passed upon the issues
of law and fact herein raised, as counsel would have this
court to understand, for the first time.
It would unduly lengthen this brief to attempt to
review the issues in the Abie State Bank case as originally framed and as they broadened out as the case advanced. Exhibits 2, 3, 4, 5, 6, 7 and 8, being a part
of the stipulation of facts herein (see Tr., pp. 76, 80),
are parts of the record in that case on appeal to the
Supreme Court of the United States. They show, without question, that each and all of the issues herein,
except the matter of set-off above mentioned, were presented and insisted upon by these appellants in that
cause. A few excerpts from those exhibits will demon.


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52
strate the truth of this statement. Page references are
to the exhibits.
Exhibit 2 (Transcript of Record, United States Supreme Court):
p. 6, Original Petition. "Wherefore, your petitioners
pray * * * that the defendants and each of them
be further enjoined from levying or attempting to levy
any of the special assessments called for in Section 8028,
as amended."
pp. 40-41, Decree of District Court of Lancaster
County. "Wherefore, it is considered, ordered, adjudged and decreed that the injunctive order heretofore
issued shall be made permanent and the said defendants,
and each of them, be and the same hereby are enjoined
from collecting or taking any further steps to collect
the said special assessment on December 15, 1928, under
the provisions of said Section 8028, Compiled Statutes,
1922, and all other and subsequent special assessments
under the provisions of said law."
Exhibit 4 (Appellants' Brief, United States Supreme
Court):
p. 11. "These changed conditions were the gist of our
action."
p. 18. "Though it is outside the record, there were 77
failures in 1929 and 26 in the first six months of 1930.
By reason of the large number of banks that have failed
since the commencement of the suit, the deficit has been
very largely increased."
Exhibit 6 (Appellants' Reply Brief, United States Supreme Court):
pp. 9, 11, 12. "In their brief counsel for defendant
called attention to the act of the Nebraska Legislature,


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53
1930, with the statement that this court will take judicial
notice of the modification of the Guaranty Fund Law by
the Nebraska Legislature in March, 1930. With that
statement we agree. * * *" (Italics ours.)
"It will be observed that Section 8028, under which
the tax involved herein was levied, has been repealed,
and the tax involved herein, with the subsequent tax for
the year 1929 and January 1, 1930, together with the
regular assessments of July 1, 1929, and January 1, 1930,
are to go into a Depositors' Final Settlement Fund to be
distributed only to depositors in banks which have failed
prior to March, 1930, so that the only purpose of the
emergency tax is to take assets from going banks to give
to depositors in banks that have failed. The legislative
Act of March, 1930, did not change the status of the
banks with respect to the payment, because under the
law in force in Nebraska at the time, every penny of the
tax levied against the banks or the guaranty fund was
to go to depositors of banks that had failed, in the order
of priority of adjudicated claims, and hence such payment was directly taking the property of the banks and
the security of their depositors to give to depositors of
failed banks.
"The legislative Act of 1930, however, changed the
rule of priority and attempts to distribute such assess.ments among all the depositors of banks which failed
prior to the passage of the Act. * * *
"It can hardly be questioned, accordingly, that under
present conditions the levy of the emergency tax against
going banks to pay depositors in failed banks violates
the Fourteenth Amendment."
p. 34. "The appellees declare in their brief, in their
heading on page three, that the appellants question only
the special assessments and do not attack the other sections of the Guaranty Fund Law.


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54
"In that statement the appellees are mistaken. At the
commencement of this suit the only assessments at that
particular time sought to be collected were the special
assessments. The suit was brought, enjoining collection
of those assessments, they being the only ones whose collection was immediately threatened.
"It is our view that this case tests the validity of the
entire operation of the law, both as to regular and special
assessments, since it tests the principle which determines
not only whether excessive collections can be made, but
whether any collections whatsoever can be made against
these banks, when such collections are no longer justified
as having any rational relation to any public purpose. If
the assessments admittedly defeat the object of the law,
and no reciprocal benefits exist, but injury to banking
alone results, then the amount of the tax becomes immaterial, for no tax would then be justified and supported
in its operation as tending towards the accomplishment
of a public purpose." (Italics ours.)
The decision of the Supreme Court of the United States
summarizes its decision in the Abie State Bank case in
the 7th syllabus of the opinion (282 U. S. 765, 766) as
follows:
"The present suit was to enjoin collection of a special
assessment, recently made, and any other such in the
future, on the ground that, through failure of the guaranty scheme such assessments became confiscatory. After
the appeal here, a statute was passed for the liquidation
of the scheme; only three special assessments and two
regular assessments were retained by it, and the future
assessments were restricted to 2/10 of 1% of average
daily deposits annually, limited to a period of ten years.
Held, that, since the law in its modified form can not be
regarded as confiscatory, or other than a reasonable

55
method of liquidating the guaranty plan, a decree of the
state court denying an injunction to restrain collection
of assessments should be affirmed." (Italics ours.)
After this decision, the appellants in that case, who
are the appellants herein, filed a petition for rehearing,
a complete copy of which appears in this record as Exhibit 7, a part of the stipulation on pages 76 to 80, inclusive, of the transcript herein. In that petition for
rehearing the appellants presented every objection raised
in this case against the law of March 18, 1930, both as
to the five accrued assessments carried forward in the
act and the assessments for the ten-year period therein
provided for. The entire document (Exhibit 7) is replete with the identical arguments set forth in this
case, both in the trial court and on this appeal.
On page 17 of this Exhibit 7, appellants, referring to
the decision in the Abie State Bank case, and as to
which a rehearing was prayed for, said:


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"This Decision will be Cited as Res Adjudicata
as to the Assessments Complained
of.
"The decision of this court will be cited as res adjudicata upon that question and upon all questions pertaining to the validity of the assessments complained of, and
without our having had opportunity to make a showing
of fact in that regard. In fact that is being publicly
Asserted by the state now.
"This court in its opinion declares that in this case the
court has power to grant appropriate relief, that the
assessments complained of are before it here for adjudication, and in view of that declaration it is positively


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incumbent upon us to raise the additional questions presented in this brief and ask for their determination.
"In this case only can appropriate relief be given. The
questions we are raising are proper to be raised here, and
since they are proper we must raise them and have them
passed upon, or this decision may be held a bar to raising
them at any other time. The decision may be a bar not
only to questions which are actually raised, but those
which should properly be raised.
"Let us forcibly call to the court's attention the position in which the banks will be left if relief is not given.
The court has before it the assessments under the old law.
The new law provides that if it is held unconstitutional
the old law shall remain in effect, and this court alone, if
the new law is held unconstitutional, is able to grant
relief as against the old assessments. In another suit this
decision would be urged as a bar against us, in such
event, from bringing another suit against the assessments
under the old law."
On March 23, 1931, the Supreme Court of the United
States, in said case, entered its order (Exhibit 8):
"7'he petition for rehearing in this rause is denied."
Scarcely had the ink dried upon the pen of the Chief
Justice of the United States denying this petition for
rehearing when the present suit was instituted. In fact,
before the mandate had been handed down from this
court to the district court of Lancaster county, in response to the mandate of the Supreme Court of the
United States in the Abie State Bank case, this action
was under way. It is inconceivable to us that the doctrine of "changed conditions" as employed in construing

111^...miMMMINIMEM&-


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-1

57
and applying the "due process" clauses of our state and
federal constitutions will be carried to the lengths contended for by appellants in this cause. To do so would
open up to the banks in this state the right to litigate
their liabilities under the laws in question throughout
the years, each suit in turn being based on some claim
of "changed conditions" since the last preceding suit
was started—and so on ad infinitum.
We contend and the record shows that the Supreme
Court of the United States intended to and did dispose
of the issues here presented. If there ever was a case
calling for an "end to litigation" this is such a case.
By the very accumulation of unpaid assessments and
the accruing of interest thereon, the banks have brought
upon themselves burdens that prompt payment would
have avoided. They should not be permitted now to
plead their own default in defense. The accumulation
of their liabilities is of their own choosing.
SECTION 8-179, COMPILED STATUTES OF NEBRASKA,
1929, IS CONSTITUTIONAL AND VALID
Appellants complain of the provisions in Section
8-179, which section is as follows:
"The inducement for the passage of Section 18 of this
act, (8-179), which repeals various sections of the statutes
relating to the bank depositors guarantee fund and
assessments therefor, is the passage of sections 1 to 5,
inclusive, of this act (8-171, 8-172, 8-174, 8-175, 8-176),
and if any one or more of said sections 1 to 5, inclusive
of this act, shall for any reason be held unconstitutional
or invalid, in whole or in part, then and in that event
said Section 16 of this act shall be invalid and of no

Id


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force or effect and the sections of the statutes sought to
be repealed by said Section 16 shall be in full force and
effect."
Their contention, reduced to its simplest terms, is that
the Legislature is without power to pass a statute which
repeals a former statute conditionally. Counsel cite no
constitutional provisions denying this power in the
Legislature. They merely urge that this conditional
repeal is an encroachment upon the powers and functions
of the judiciary. No one will deny that the Legislature
may not deprive the judiciary of its function of construing and declaring the legal effect of laws passed by
the Legislature. It is an altogether different matter,
however, to contend that the Legislature may not make
the effectiveness of its own acts contingent upon the
happening of a future event. That is purely a legislative
function. Again, the very power and function of construction of legislative acts which is vested in the judiciary is interpretive in its nature. That is to say, the
court's function in construing statutes is to arrive at the
intent of the Legislature—not to revise or in any sense
modify or overrule that intent.
"7'he legislative intent is the cardinal rule in the construction of statutes." King of Trails Bridge Co. v.
Plattsmouth Auto
Wagon Bridge Co., 114 Neb. 734,
209 N. W.497; State v. School District, 99 Neb. 338, 156
N. W. 641.
"The great fundamental rule in construing statutes is
to ascertain and give effect to the intention of the legislature." 36 Cyc. 1106.


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We have no fault to find with the rules laid down
in the cases cited in appellants' brief. These cases, however, are not in point. This is not a case where the
Legislature has attempted to give binding effect to its
declaration that if one section of the statute be held
invalid, such holding shall not affect remaining sections
of the act. As the cases cited by plaintiffs show, the
courts are continually finding that their holding one or
more sections or parts of an act invalid so interferes
with the validity or effectiveness of the remaining parts
or sections that the whole structure must fall with the
invalid part; and it therefore becomes the function and
duty of the court to strike down the act in its entirety.
In this instance, however, the Legislature has clearly
expressed its purpose and intention, not to attempt to
dictate in any way to the judiciary as to how any section shall be construed in the event of the holding of
another section invalid, but to strike, under its own
legislative power, all such other sections. In other
words, it has plainly made the passage of the new sections contingent upon the court's holding each and every
of such sections valid.
In Cooley on Constitutional Limitations, Vol. 1
(8th Ed.), pp. 241, 242, quoting from Smith v. Janesville, 26 Wis. 291, it is said:
"No one doubts the general power of the legislature
to make such regulations and conditions as it pleases with
regard to the taking effect or operation of laws. They
may be absolute, or conditional or contingent; and if the
latter, they may take effect on the happening of any event
which is future and uncertain."


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The Special Session of the Legislature of 1930 was
faced with the grave responsibility of meeting and
handling the situation in which the banking system of
this state then found itself. The economic welfare of
all of the people of the state was most vitally concerned
in the entire problem. It was most important that a
unified plan should be devised and enacted which would
provide an equitable and fair compromise and settlement
of the then existing obligation of banks as to the accumulated claims against the guaranty fund and thereby to
accomplish a great public service. It was realized that
the liquidation plan should be contingent upon its
standing in its entirety—that if it failed in any of its
parts it was worthless. At the same time there was no
desire to repeal the Guaranty Fund Law if the new
plan should not become entirely effective. The liquidation plan, therefore, was made contingent upon such
entire effectiveness, with the old law automatically retained in full force and effect if the liquidation plan
went down.
That was a matter solely within the sphere of the
Legislature. There was no power except itself which
could retain the old plan in the event of the failure of
the new law to stand as a whole, as the Legislature intended it should stand.
It is simply absurd to contend that the repealing
clause in Section 8-178 will be given effect by the court
and that Section 8-179 will be struck down. Such a
repeal was attempted and got nowhere. It is likewise
folly to urge that the provisions of the Depositors' Final
Settlement Fund Law should be separated into parts in


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order to allow one part to stand and another to fall, as
contended for by counsel. (Appellants' Brief, pp. 145146). If the court should hold that the assessment provisions of the Depositors' Final Settlement Fund portion of the new law were invalid and that the repealing
clause of Section 8-178 was effective, it would be judicial
legislation, pure and simple, and not only that, but judicial legislation contrary to the solemn and plain declaration of the Legislature itself.
As so well stated in 36 Cyc. 1099, the rule is:
"Where an act expressly repealing another act and
providing a substitute therefor is found to be invalid, the
repealing clause must also be held to be invalid, unless it
shall appear that the legislature would have passed the
repealing clause even if it had not provided a substitute
for the act repealed."
Accord: 25 R. C. L., pp. 913, 914, Sec. 166.
The power here exercised by the Legislature is akin
to its power to suspend the operation of a statute for
a time. As stated in 36 Cyc. 1099,
"The power of suspending laws cannot be exercised
except by the legislature."
The same rule is applicable to revival of statutes,
depending upon some future event.
"The legislature may make the revival of an act depend upon a future event, and direct that event to be
made known by proclamation." 36 Cyc. 1099, 25 R.C. L.
908-909, Sec. 161.


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In State v. Liedtke, 9 Neb. 490, the following item of
an appropriation act was under consideration: "J. W.
Pearman, for military services, $3,000.00. (That said
$3,000.00 remain in the treasury of the state, and not to
be paid or drawn out until the general government shall
reimburse the said amount to this state.)" In holding
the clause valid, the court said:
"It was competent for the legislature to pass an act
depending for its execution, either in whole or in part.
upon the happening of such contingency, and such an
act is not to be confounded with those acts of legislation
which have generally been held void by reason of their
being made to depend for their vitality upon their ratification by the voters at a popular election."
Quoting from Bairto v. Himrod, 8 N. Y. 489, 490, the
court continued:
"The event or change of circumstances on which a
law may be made to take effect must be such as, in the
judgment of the legislature, affects the question of the
expediency of the law, an event on which the expediency
of the law, in the opinion of the lawmakers, depends.
On this question of expediency the legislature must exercise its own judgment definitely and finally. * * *'
That case, while not strictly in point, is certainly
authority for the principle we are asserting. If positive legislation may be made effective upon a contingency named by the Legislature, certainly a repeal may
be made thus conditional.
CONFLICT BETWEEN SECTIONS 8-178, 8-179
AND 8-190
It is true that there is a conflict between these sections as to the inducement for the passage of 8-178, the


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clause (original section 16) repealing the guaranty fund
provisions. However, it is also plain from a careful
reading of these sections, that the mention in Section
8-180 of Section 16 (8-178) was a pure inadvertence.
Section 8-179 (original section 17) is full and complete
in its recital of the legislative intent as to section 16.
The court must certainly construe Section 8-180, in view
of the explicit requirements of Section 8-179, as though
it read:
"If any one or more of Sections 6 to 15, inclusive, of
this act, for any reason, be held unconstitutional, such
decision shall not affect. the validity of any other section
of this act," etc.
It is a well recognized rule of statutory construction
that "the several parts of an act are to be construed
together in order to ascertain the intention of the Legislature."
Follmer v. Nuckolls County, 6 Neb. 204.
City of Lincoln V. Janesch, 63 Neb. 707, 89
N. W. 280.
It is also established that in case of conflict between
sections of this act, specific provisions govern over general provision. State v. Nolan, 71 Neb. 136, 98 N. W.
657. Kountze V. City of Omaha, 63 Neb. 52, 88 N. W.
117.
As stated in 25 R. C. L. 1011:
"When one section of a statute treats specially and
solely of a matter, that section prevails in reference to
that matter over other sections in which only incidental
reference is made thereto; not because one section has


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more force as a legislative enactment than another, but
because the legislative mind, having been in the one section directed to the particular matter, must be presumed
to have there expressed its intention thereon rather than
in other sections where its attention was turned to other
things."
SECTION 8-179 DOES NOT VIOLATE SECTION 14,
ARTICLE III OF THE CONSTITUTION OF
NEBRASKA
Appellants contend that this section contains matter
not expressed in the title of the act and therefore violates Section 14 of Article III of the Constitution of
Nebraska.
The point raised is without merit. The title is clear
and explicit. Not only the general subject of "banks
and banking" is mentioned, but the intent and purpose
of the entire legislation as a means of liquidation of
the guaranty fund is set out in a fair and concise
manner.
As stated in Mehrens v. Bauman, 120 Neb. 110:
"When the title of an act fairly gives expression to
the general subject-matter contained in the act, such
act will not be held invalid as being broader than its
title."
Appellants' contention would give to the constitutional
provision in question a hyper-technical construction and
application altogether unwarranted by the holdings of
this court.


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CONCLUSION
We hope it will not be considered improper if we call
attention to the moral claims of the depositors in this
matter. After all the net result of a lawsuit should be
the triumph of equity and justice.
Under the stipulations between the parties the record
in the former case is before this court. It shows that:
(1) The Guaranty Fund Law was the moving cause
for not less than one hundred million of new deposits
in the state banks of Nebraska (Geo. W. Woods, Bank
Commissioner).
(2) Although disliking the law, the state banks by
full-page advertisements, signs on windows, statements
on checks and certificates of deposit, and by resolutions
at bankers' meetings, glorified and extolled the Guaranty Fund Law as furnishing absolute protection to.
depositors.
(3) Thousands of persons, particularly laborers, retired farmers, old people, widows, guardians and administrators of estates, and school teachers, relied on these
representations of the banks and on the strength thereof
became depositors in state banks which later failed.
What about them?
They have rights. They were not responsible for the
1921 depression. It is not their fault that corn is selling for forty cents per bushel, wheat thirty-three, hogs
three cents per pound, and eggs eight cents per dozen.
They cannot help that the foreign bonds bought by the


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bankers have shrunk in value to a small fraction of the
price paid.
Why then load the bankers' grief on to them? They
too have suffered because of the economic collapse, many
of them much more than the banks. Why then ask
them to also absorb the losses of the banks? By the
handling of the money of these depositors the banks
profited immensely. Let them now live up at least in
part to their agreement to pay assessments. The Legislature has been exceedingly kind to the banks in this
matter. That body was generous with the money belonging to the depositors. It would be grossly unfair
to them to still further relieve the banks of their liability.
If the banks may ask to be relieved of a statutory
assessment levied for a public purpose because the payment thereof is inconvenient or burdensome, why may
.not all taxpayers without net income or who have suffered losses during the last few years make the same
request? Hundreds of distress tax warrants have been
served in Nebraska during the last two years on persons receiving aid from charity. To wage earners out
of work and to farmers whose crops have been taken by
drought or grasshoppers, taxes for the payment of our
salaries and other expenses of government are in fact
confiscatory. They cannot enjoin collection of their
taxes. Why then in equity should the banks be able
to do so?
The equities are not with the plaintiffs. Resting their
case largely on allegations of unconstitutionality, the
petition of the plaintiffs, in face of the decision of the


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Supreme Court of the United States in the Able State
Bank case and the stipulation of the parties, was vulnerable to demurrer.
The trial court held with the defendants on all points,
dismissed the plaintiffs' amended petition and rendered
individual judgments against the banks, respectively,
for the assessments in question. That judgment is right
and should be affirmed.
Respectfully submitted,
C. A. SORENSEN,
Attorney General, and
L Ross NEWKIRK,
Assistant Attorney General,
Attorneys for Appellees.
Lincoln, Nebraska,
March 24, 1932.

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