United States Fidelity & G. Co. v. Ft. Misery Highway Dist.

• Decision Date: 31 October 1927
• Docket Number: No. 5158.,5158.
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. FT. MISERY HIGHWAY DIST.
• Court: U.S. Court of Appeals — Ninth Circuit

22 F.2d 369 (1927)

UNITED STATES FIDELITY & GUARANTY CO. v. FT. MISERY HIGHWAY DIST.

No. 5158.

Circuit Court of Appeals, Ninth Circuit.

October 31, 1927.

F. H. Graves, W. G. Graves, B. H. Kizer, and Graves, Kizer & Graves, all of Spokane, Wash., for appellant.

James F. Ailshie, of Cœur d'Alene, Idaho, and A. S. Hardy, of Grangeville, Idaho, for appellee.

Before GILBERT, HUNT, and RUDKIN, Circuit Judges.

HUNT, Circuit Judge.

This is an appeal from a judgment of dismissal of a suit by appellant guaranty company, a Maryland corporation, to enjoin the enforcement of a judgment against it and in favor of the highway district, rendered by a court of the state of Idaho. The judgment originated in this way:

The highway district is a taxing district organized under the laws of Idaho. In 1921 moneys of the district then in possession of its treasurer were unlawfully taken possession of and placed on general deposit by the Kamiah State Bank, which was then insolvent. Section 5291, Comp. St. Idaho. In April, 1921, the bank closed its doors, and the banking commissioner of the state, assuming to act under the Banking Act of Idaho, took charge of the affairs of the bank and of its assets and business. By that act the bank commissioner is given control of the affairs and assets of an insolvent bank, subject to the right of review by the courts in respect to certain matters. Provision is made for the presentation of claims by creditors, to be allowed in various ranks of priority. All claims must be presented to the commissioner, whose duty it is to pass upon their allowance and to classify them when allowed, with the right accorded to a dissatisfied claimant to have reviewed in the courts the commissioner's decision as to allowance or classification.

The laws of Idaho did not permit a general deposit in a bank of public funds of a highway district. To make such deposit was prohibited and made a felony. The district presented its claim for the moneys as preferred trust funds. The commissioner allowed the claim as to the amount, but classified it as one for general deposit, thus putting it in an inferior class. Thereafter the district sued the bank and the commissioner and his agent in charge of the bank, alleging that the moneys were public funds wrongfully in the hands of the bank, and that they constituted a trust fund held by the bank and its agent for the benefit of the district; that the title was in the district; that the moneys were not the assets of the bank, and did not come into the hands of the commissioner of the assets, but were taken possession of by him illegally. The prayer was that the moneys be decreed to be a trust fund in the hands of defendants; that defendants be required to pay the sums over, together with interest; that the moneys be held to be prior to the claims of all depositors and general creditors, and prior to the expenses of administration; but that, if such priority could not be adjudged, then that the claim be adjudged to have priority as provided in class 2, section 13, chapter 42, Laws Idaho 1921. The answer joined issue on the preferred order of payment demanded by the district.

The district recovered judgment that the moneys constituted a trust fund in the hands of the defendant commissioner for the special use and benefit of the plaintiff; that "plaintiff have and recover from defendants the sums, * * * with interest * * * until paid, and that defendant, as commissioner of finance, and Scott, his agent, do pay and deliver to the plaintiff the sum of $26,823.80, together with interest, * * * and the further sum of $1,332.01, together with interest, * * * until paid, and that the said sums are hereby adjudged and decreed to be special trust funds in the hands of defendants for the use and benefit of plaintiff, and that the same be paid out of any money, funds, or property in the hands of the defendant commissioner of finance or his agent, and received by them or either of them from defendant bank, or by reason of the closing of the same, and this judgment is declared to be a prior claim and lien upon any and all funds in the hands of the defendants, and is prior and superior to all other claims or demands or costs or expenses of administration, except as to any trust fund or claim which may be established of the same grade, class, character, and rank as this judgment. Plaintiff will also recover its costs herein against defendants, taxed in the sum of $93.46."

The bank and the commissioner appealed to the Supreme Court of Idaho. To stay execution of the judgment, the guaranty company, appellant herein, executed the supersedeas bond hereinafter referred to. Section 7155, Comp. St. Idaho. The bond made reference to sections 7154 and 7155, supra, and was in a form recognized as sufficient by section 7236 Idaho Statutes.

The Supreme Court confined its examination to the judgment roll, found no error therein, and dismissed the appeal. Ft. Misery Highway District v. Bank, 41 Idaho, 491, 239 P. 277. This was in effect an affirmance of the judgment of the District Court. Section 7169, Comp. Stat. Idaho. Remittitur went down, and on motion judgment was entered in favor of the district and against the surety guaranty company for the full amount of the claim. More than 90 days thereafter the district demanded payment, which was refused. This suit was then brought to enjoin the enforcement of the judgment, on the ground that the undertaking was not required by the statute of Idaho, that it was without consideration, and that the District Court had no power to enter a summary judgment on it.

Section 7155, Comp. St. Idaho, supra, provides that, if an appeal be from a judgment or order directing the payment of money, it does not stay the execution of the judgment or order, unless a written undertaking be executed on the part of the appellant by two or more sureties, to the effect that they are bound, in double the amount named in the judgment, that if the judgment or order appealed from, or any part thereof, be affirmed, or the appeal be dismissed, appellant will pay the amount directed to be paid by the judgment or order, or the part thereof as to which the judgment or order is affirmed, if affirmed only in part, and all damages and costs which may be awarded against the appellant upon the appeal, and that if appellant does not make such payment within 30 days after the filing of the remittitur from the Supreme Court in the court from which the appeal is taken, judgment may be entered, on motion of the respondent in his favor, against the sureties, for such amount, together with the interest, that may be due thereon, and the damages and costs which may be awarded against the appellant upon the appeal.

Appellant's position is that the judgment against the bank and the commissioner is not one directing the payment of money, within the meaning of the Idaho statute cited, that as a consequence the summary judgment rendered against the guaranty company on the bond executed by it was a nullity, that the present suit is a direct attack upon the judgment, and that the federal court will enjoin enforcement.

The theory upon which the case was tried in the state court was that the moneys never became assets of the bank; hence that the provisions of the State Banking Act had no applicability. That theory is sustained by the findings that the moneys of the highway district were wrongfully in the hands of the bank; that the moneys augmented the assets of the bank and passed into the hands of the defendant commissioner, and were held by him as a trust fund and bailment; that title was always in the district; that the moneys were wrongfully and illegally taken possession of when defendant, under claim as commissioner, took possession of the assets of the bank. The fact that in its complaint the district pleaded that it had presented its claim to the commissioner for the moneys involved is not inconsistent with the position that the commissioner represented the bank and held the funds in special trust for the use and benefit of the district. The prayer, too, was in...