Union Joint Stock Land Bank v. Kissane

Plaintiff on appeal denies the applicability of Act No. 98, Pub. Acts 1933, as amended (the moratorium act), to proceedings brought to foreclose a mortgage given to and owned by a joint stock land bank organized under the Federal farm loan act.^* Plaintiff claims that it is a Federal instrumentality organized under a law designed to relieve the financial distress of farmers and that additional relief may not be extended to them by moratorium legislation. We accept plaintiff's contention that the State has no power to obstruct or interfere with the proper functions and legitimate operations of a bank organized under a national banking act. Davis v. Elmira Savings Bank, 161 U.S. 275 (16 Sup. Ct. 502); Owensboro National Bank v. Owensboro,173 U.S. 664 (19 Sup. Ct. 537); Easton v. Iowa, 188 U.S. 220 (23 Sup. Ct. 288). The moratorium law, however, does not seek to regulate, obstruct or interfere with the proper functions and legitimate operations of national banks. In loaning money on mortgages, such banks subject themselves to the laws of the State which prescribe and regulate the remedy in foreclosure proceedings. That remedy may be altered, provided no substantial rights are taken away or contract obligations impaired.⁸²²⁴ Following the decision in Home Building Loan Ass'n. v. Blaisdell, 290 U.S. 398 (54 Sup. Ct. 231, 88 A.L.R. 1481), in which the Minnesota moratorium act was upheld, we held inRussell v. Battle Creek Lumber Co., 265 Mich. 649, that the act did not impair the obligation of a contract, but merely granted an extension of time upon proper showing and equitable terms.

Our attention is called to the cases of Leuthold v. DesMoines Joint Stock Land Bank of Des Moines, Iowa, 197 Minn. 132 (266 N.W. 450), and Dallas Joint Stock Land Bank of Dallas v. Ballard (Tex.Civ.App.),74 S.W.2d 297 (affirmed on other grounds in Ballard v. Dallas JointStock Land Bank of Dallas, 124 Tex. 113 (76 S.W. [2d] 1042). In each of these cases, however, the moratorium acts contained express provisions excluding Federal agencies from their operation. The Michigan moratorium act makes no such exception.

In McClellan v. Chipman, 164 U.S. 347 (17 Sup. Ct. 85), in discussing whether a Massachusetts statute invalidating preferences made by insolvent debtors applied to a national bank, the court stated the following rule which is applicable to the instant case:

"National banks 'are subject to the laws of the State, and are governed in their daily course of business far more by the laws of the State than of the nation. All their contracts are governed and construed by State laws. Their acquisition and transfer of property, their right to collect their debts, and their liability to be sued for debts, are all based on State law. It is only when the State law incapacitates the banks from discharging their duties to the government that it becomes unconstitutional.' * * *

"No function of such banks is destroyed or hampered by allowing the banks to exercise the power to take real estate, provided only they do so under the same conditions and restrictions to which all the other citizens of the State are subjected, one of which limitations arises from the provisions of the State law which in case of insolvency seeks to forbid preferences between creditors."

Again in First National Bank in St. Louis v. State ofMissouri, 263 U.S. 640 (44 Sup. Ct. 213), where the State statute forbade banks from establishing branch banks, it was held that this statute also was applicable to a national bank, the court again stating:

"Clearly, the State statute, by prohibiting branches, does not frustrate the purpose for which the bank was created or interfere with the discharge of its duties to the government or impair its efficiency as a Federal agency."

The decree of the lower court is affirmed, but without costs, the question being a public one.

NORTH, C.J., and FEAD, WIEST, BUSHNELL, SHARPE and TOY, JJ., concurred. POTTER, J., did not sit.

^* See 12 USCA, § 811 et seq. — REPORTER.

⁸²²⁴ See U.S. Const. art. 1, § 10; Mich. Const, 1908, art. 2, § 9.