United States Fid. &. Guar. Co v. Carter
| Citation | 170 S.E. 746 |
| Court | Supreme Court of Virginia |
| Decision Date | 21 September 1933 |
| Parties | UNITED STATES FIDELITY &. GUARANTY CO. v. CARTER et al. |
Appeal from Circuit Court, Pittsylvania County.
Suit by the United States Fidelity & Guaranty Company, assignee, against William H. Carter and another, receivers. From an adverse decree, plaintiff appeals.
Affirmed.
Argued before CAMPBELL, C. J., and HOLT, EPES, HUDGINS, GREGORY, and BROWNING, JJ.
Funkhouser, Apperson & Whittle, of Roanoke, Roger B. Copinger, of Baltimore, Md., R. L. Savage, Jr., of Raleigh, N. C, R. E. Booker, of Richmond, and Fred B. Gentry, of Roanoke, for appellant.
John W. Carter, Jr., and R. C. Clement, both of Danville, E. C. Hurt, Jr., of Chatham, and George E. Allen, of Richmond, for appellees.
On December 31, 1930, the Chatham Savings Bank, a bank of deposit, created and existing under the laws of the state of Virginia (hereinafter referred to as the bank), suspended payment and closed its doors. Thereafter the State Corporation Commission of Virginia filed in the circuit court of Pittsylvania county its bill in chancery against the bank for the purpose of having itsaffairs wound up and its assets distributed among its creditors. At the time the bank closed its doors, W. E. Ramsey, the treasurer for Pittsylvania county, Va. (hereinafter referred to as the treasurer), had on deposit in this bank on checking account $26,078.95. All the funds which had gone to make up this deposit had been received by the treasurer in the performance of his official duties as treasurer from the collection of state taxes and county levies; but the record does not show separately the amounts thereof which had come from the collection of state taxes and county levies, respectively.
The bank, with United States Fidelity & Guaranty Company of P>altimore, Md. (hereinafter called the appellant), as its surety, had executed "to W. E. Ramsey, treasurer of Pittsylvania county, Virginia, " a bond in the penalty of $75,000 conditioned as follows: "The condition of this obligation is such that if the Principal shall during the term of this bond faithfully account for and pay on legal demand all moneys deposited with it by or on behalf of said Obligee, and shall not suspend payment during the term hereof, this obligation shall be null and void, otherwise to remain in full force and effect."
After the bank failed, Ramsey brought his action at law against the receivers of the bank and the appellant on this bond to recover the amount he had on deposit therein as treasurer. On September 30, 1930, judgment was rendered in his favor against the receivers and the appellant for $26,078.95, with interest from December 1, 19">0, and costs. On October 7, 1931, Ramsey filed his petition in the chancery cause in which be alleged that he had recovered this judgment against the receivers of the bank and the appellant, and that it was for money which he had on deposit in the bank which had come from the collection of state taxes and county levies: and prayed that the court would decree that he was on that account entitled to have bis judgment paid from the assets of the bank in the hands of the receivers before any payment was made to the general creditors.
On November 21, 3931, the appellant paid to Ramsey, as county treasurer, the full amount of this judgment. At the time the judgment was paid, Ramsey assigned to appellant "any and all rights and claims either at law or in equity which the undersigned Treasurer of said County and/or the County of Pittsylvania and/or the Commonwealth of Virginia may have against said Bank or its said Receivers to a preferred claim against the assets of said Bank to be paid all of said deposits and the interest thereon from December 1st, 1930, * * * before any amount is paid to the unsecured or unpreferred creditors of said Bank from the assets thereof, to the end that said United States Fidelity & Guaranty Company, a Corporation, its successors and assigns may become substituted and subrogated to any and all rights of every kind and character which the undersigned Treasurer and/or the County of Pittsylvania and/or the Commonwealth of Virginia may now or hereafter have to recover the said tax monies so deposited and the interest thereon including the right of said United States Fidelity & Guaranty Company, its successors or assigns to be substituted as the claimant or petitioner in the proceedings which the undersigned is now conducting against said Bank and its said Receivers in the Circuit Court of Pittsylvania County, Virginia, in the Chancery Cause therein pending of State Corporation Commission of Virginia against Chatham Savings Bank. * * * "
The appellant then filed its petition in the chancery cause in which it asserted that the commonwealth of Virginia and Pittsylvania county, and/or the treasurer were entitled to a preferred claim against the assets of the bank in the hands of the receivers for all tax moneys of the commonwealth of Virginia and/or Pittsylvania county which the treasurer had on deposit in the bank at the time it failed; and that the appellant had succeeded to and become entitled to be subrogated to all the rights of the commonwealth, Pittsylvania county and the treasurer to a preferred claim against the assets of the bank. The petition prayed that the court would decree that the appellant was entitled to be paid the sum of $26,07S.95, with interest from December 1, 1930, before the claims of any other unsecured or unpreferred creditors should be paid.
At the time this petition was filed and the decree appealed from was rendered, the assets of the bank in the hands of the receivers, subject to no liens or other priority, were amply sufficient to pay the amount of Ramsey's judgment which had been paid by the appellant.
The court entered a decree adjudging that appellant was entitled to share as a general creditor in the distribution of the assets of the bank, but was not entitled to any preference or priority. From this decree the appellant has appealed.
The contention of the appellant that the court erred in holding that it is not entitled to a preference is predicated upon the following legal premises which it asserts are true:
(1) By the common law of England, the king, or crown, had the right by prerogative to have all debts due by an insolvent debtor to him, or it, paid in preference to a debt due by his, or its, debtor to any other creditor who did not have an antecedent lien.
(2) By its adoption of the common law of England, the commonwealth of Virginia succeeded to the right of the king, or crown, to be preferred in the payment of his, or its, debts, and therefore the commonwealth is entitled to have all debts of whatever kind due to it by an insolvent debtor paid in preference to a debt due by its debtor to any other creditor, who has not acquired an antecedent lien.
(3)A county is entitled at common law to the same rights of priority to which the commonwealth is entitled.
(4)There is no statute in Virginia which authorizes a county treasurer to deposit public funds in bank; and by virtue of § 3621 of the Tax Code of Virginia (Acts 1928, c. 45, p. 206) a county treasurer is prohibited from making a general deposit with a bank of public moneys. If he does deposit public funds in a bank, the bank is to be deemed to have received such funds in trust for the commonwealth and/or the county; and, by virtue of its common-law right of priority, the commonwealth or the county is entitled, if the bank becomes insolvent, to have the amount of its funds so deposited paid to it in preference to the claims of the bank's general depositors and other unsecured creditors, notwithstanding the fact that the funds so deposited cannot be traced into the hands of the receivers.
(5) The right of the commonwealth or the county to be preferred in its claim for public funds deposited by it or its officers in a bank, is not waived or abrogated by section 50, 2 c. 507, Acts 1928, p. 1325 (section 4149 (49), Michie's Code, Va. 1930), or any other statute. On the contrary, any statute which purported to authorize the deposit of public funds in a bank by the commonwealth, or a county, or by any officer or agent thereof, without such deposit being given priority, would be unconstitutional by reason of the provision of section 1853 of the Constitution of Virginia.
(6) A county treasurer who has made deposits of public moneys in a bank in his name as treasurer is entitled to assert for the commonwealth and/or the county their rights of priority in proceedings brought by him to recover from the bank the public funds deposited therein by him.
(7) If the bank has given a bond with surety to secure the public moneys deposited by him therein, and the surety, upon the bank's becoming insolvent, pays to the treasurer the amount of public money which he then has on deposit therein, the surety is entitled both under the common law and by the provisions of section 5777, Code Va. 1919, as amended by Acts 1926, c. 501, pp. 851, 855, to be subrogated to the rights of priority which the commonwealth and/or the county had for the recovery of the funds so deposited.
The appellant's major premise, upon which its whole contention rests, is that, by virtue of the adoption by Virginia of the common law of England, the commonwealth became entitled, in the absence of any statutory provision to the contrary, to have a debt due to it from an insolvent bank, which has arisen from the deposit of public funds therein for or by it, paid in preference to the general depositors and other general creditors of the bank. If this be not true, there is no basis for the preference to which it contends the county and county treasurer are entitled.
To determine whether this primary contention of the appellant is well made, it is necessary to consider tw;o questions: (1) What was the common law of England, as understood at the time of the American Revolution, with reference to the right of the king,...
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