Johnson v. Lankford, 245 U.S. 541 (1918)

Johnson v. Lankford

No. 96

Submitted December 18, 1917
Decided January 28, 1918
245 U.S. 541

ERROR TO THE DISTRICT COURT OF THE UNITED STATES

FOR THE WESTERN DISTRICT OF OKLAHOMA

Syllabus

An action against the Bank Commissioner of Oklahoma personally and his surety to recover damages for the loss of plaintiff’s bank deposit, alleged to have been due to the Commissioner’s failure to safeguard the business and assets of the bank, and his arbitrary, capricious, and discriminating refusal to pay the claim or allow it as valid against the State Guaranty Fund, all in continuous, negligent, or willful disregard of his duties under the state law, held not an action against the state, but within the jurisdiction of the district court, there being diversity of citizenship. Lankford v. Platte Iron Works Co., 235 U.S. 461, distinguished.

Allegations to the effect that the enforcement of the state laws in the matters complained of was solely through the Commissioner, and that he so arbitrarily and capriciously exercised his powers as to deprive plaintiff of the equal protection of the laws and deprive plaintiff of his property without due process, etc., held not to change the complexion of the action, no relief being prayed against the Guaranty Fund.

Reversed.

Action for the sum of $5,235.60, with interest, for the failure of defendant in error Lankford to perform his duty as Bank Commissioner of Oklahoma, in consequence of which plaintiff in error sustained loss in the amount stated. Southwestern Surety Insurance Company, an Oklahoma corporation, was surety on the official bond of Lankford.

Defendants, defendants in error here, moved to dismiss the action on the ground of want of jurisdiction in the court, the action being "one against the State of Oklahoma without its consent, in violation of the Eleventh Amendment of the Constitution of the United States."

The court granted the motion, reciting that it was upon the ground stated, and that the question of jurisdiction was alone involved in its decision, and subsequently allowed a writ of error to review that question only.

Plaintiff in error (we shall refer to him as plaintiff) is a citizen of the State of Massachusetts. The defendants in error are citizens of the State of Oklahoma.

The petition of plaintiff is, in outline, as follows:

Lankford, in March, 1911, then being Bank Commissioner of Oklahoma, and again in March, 1915, entered into official bonds with the insurance company as surety in the sum of $25,000 for the faithful performance of his duties as required by law.

On October 11, 1913, the Farmers’ & Merchants’ Bank of Mountain View, Oklahoma, a domestic banking corporation under the control and supervision of Lankford as Bank Commissioner, for value received, executed and delivered to plaintiff a certificate of deposit for the sum of $5,066.66, with interest at 3%.

February 20, 1915, Lankford, as Bank Commissioner, took possession of the bank, and of its assets because of its insolvency. Thereupon plaintiff indorsed the certificate to one Martin for collection, who presented the same to Lankford for payment. Payment being refused, Martin reindorsed the same to plaintiff. Under the terms of the bonds given by Lankford, it was his duty as commissioner to pay the certificate of deposit at the time it was presented to him. By refusal to so pay it, and his refusal afterward to pay upon the demand of plaintiff, he, Lankford, grossly and entirely failed to perform his duty, and, being informed of the conditions of the bank and having means of knowledge, he allowed the persons in charge of it to squander its assets so as to damage plaintiff in his right to compel payment from the bank. He, Lankford, also failed to exercise proper care and supervision in that, before the making of the certificate of deposit and thence continuously up to the time he took possession of the bank, with full knowledge of the situation, he permitted the persons in charge of it to conduct it while its reserve was less than that required by law, and failed to take possession of it for the purpose of enforcing the law, or to do anything else adequate and requisite in the premises. He also permitted it, while insolvent, to make excessive loans and overdrafts in violation of law. And, knowing that it was in the hands of incompetent and inefficient persons, he allowed it to be controlled and managed by them inefficiently and incompetently and without economy, to the great damage of its assets, and plaintiff thereby was deprived of all opportunity of recovering the amount of his certificate out of its property.

Lankford failed to make the visits to the bank which the law of the state required him to make, or exact the reports which the law required him to exact. He permitted it to reduce the funds which the law required it to have, and failed to notify it of the deficiencies or to require it to repair them.

It was his duty to have taken possession of the bank, but he delayed to do so until February, 1915, when its assets were so squandered and depleted as to be insufficient to pay plaintiff’s claim. He knew of the violations of law by its officers, and of its insolvency.

It was his duty, after he took possession, to pay plaintiff’s claim, but he arbitrarily and capriciously refused, in violation of law and his bonds, and there was no cause whatever for him to have questioned the certificate as a valid claim against the guaranty fund of the state, which was available under the law of the state for the payment of claims against the bank.

The laws of the state have been so interpreted and enforced by him as to deny plaintiff the equal protection of the laws in violation of the Fourteenth Amendment of the Constitution of the United States, and he has exercised this power so arbitrarily and capriciously that other depositors of the same class and condition of plaintiff have been paid out of the available cash resources of the bank and the guaranty fund, and because the state is immune from suit, plaintiff has no remedy by judicial review, and Lankford, acting for the state as Bank Commissioner, has deprived plaintiff of his property without due process of law in violation of the Fourteenth Amendment of the Constitution of the United States by illegally preferring other depositors to plaintiff, thereby breaching the obligation of his bonds.

By failure to perform the promises made for the benefit of plaintiff in the bonds, he has been damaged by defendants in the sum of $5,235.60, on February 20, 1915, together with 6% interest thereon, amounting, August 20, 1915, to the sum of $5,392.67.

Plaintiff was without knowledge of the delinquencies of Lankford and the condition of the bank, and, without fault on his part, allowed the moneys represented by the certificate to remain in the bank after the same became due.

Judgment was prayed for the amounts above specified.