Aetna Accident & Liability Co. v. Miller
| Decision Date | 24 January 1918 |
| Docket Number | 4094. |
| Citation | 170 P. 760,54 Mont. 377 |
| Parties | AETNA ACCIDENT & LIABILITY CO. v. MILLER. |
| Court | Montana Supreme Court |
Appeal from District Court, Carbon County; A. C. Spencer, Judge.
Action by the AEtna Accident & Liability Company against H. B Miller, as receiver of the Farmers' State Bank of Bridger, Mont. Judgment for the receiver and plaintiff appeals. Reversed and remanded.
Frank & Gaines, of Butte, for appellant.
Nichols & Wilson, of Billings, for respondent.
On May 8, 1915, the affairs of the Farmers' State Bank of Bridger were in such condition that the district court of Carbon county, upon the complaint of the Attorney General filed pursuant to sections 59 and 60 of chapter 89, Laws of 1915, appointed the respondent H. B. Miller as its receiver. There was at the time on deposit with the bank, subject to check, $10,000 of state funds "theretofore raised by levies of taxes, assessments and collections" secured by a bond in said amount, upon which bond the appellant, AEtna Accident & Liability Company, stood as surety. Thereafter the surety, by and because of the conditions of such bond, was compelled to and did pay to the state the amount of the penalty of the bond, to wit, $10,000. In consequence of these circumstances, as well as of an assignment to it of the state's claim, the surety brought this action seeking an adjudication that it is entitled to the payment of said sum in preference to the claims of general creditors, and an order directing the receiver to make such payment; he having in his hands funds sufficient for that purpose. Judgment for the receiver followed an order sustaining his general demurrer to the complaint, and this appeal is from that judgment.
The fundamental question presented is: Did the state have the preference right asserted? If it did, there does not seem much room for doubt that, unless in some way lost, such right passed by subrogation to the appellant. Rev. Codes, §§ 5691, 5692; note, 99 Am. St. Rep. 488; United States F. & G Co. v. Carnegie Trust, 161 A.D. 429, 146 N.Y.S. 804 affirmed 213 N.Y. 629, 107 N.E. 1087.
Whether the state was entitled to a preference over all the unsecured general creditors of the insolvent bank cannot be determined by resort to any express statute or constitutional provision for confessedly none such exist; hence the question is one to be resolved according to the common law. Rev. Codes, §§ 3552, 8060. Just what is meant by the "common law" in this connection, however, is a matter open to definition. Broadly speaking, it means, of course, the common law of England; but it means that body of jurisprudence as applied and modified by the courts of this country up to the time it became a rule of decision in this commonwealth. State ex rel. Metcalf v. District Court, 52 Mont. 46, 50, 155 P. 278, L. R. A. 1916F, 132. The distinction is noted here because the common law as administered in England without a doubt commands the recognition of the sovereign as entitled to the preference (1 Coke upon Littleton, 131B; 8 Bacon's Abr. 91); whereas the respondent insists that the common law as recognized and applied in the United States is otherwise.
At the time the territory of Montana was organized and first formally adopted the common law as our rule of decision in the absence of statute (Bannack, Stat. p. 356), there existed a vast number of decided cases from almost all of the states holding that divers and sundry prerogatives ascribed to the king at common law had passed to the states; those only being denied which had attached to the king in his personal character rather than as parens patriae or personification of the sovereignty. Among these cases, which are illuminative collaterally, were thirteen directly bearing upon the question here involved, to wit: Eight from Maryland ( State v. Bank of Maryland, 6 Gill & J. 205, 26 Am. Dec. 561; State v. Mayor of Baltimore, 10 Md. 504; Jones v. Jones, 1 Bland, 443, 18 Am. Dec. 327; Smith v. State, 5 Gill, 45; Contee v. Chew, 1 Har. & J. 417; State v. Rogers, 2 Har. & McH. 198; Murray v. Ridley, 3 Har. & McH. 171), one from Georgia (Robinson v. Bank of Darien, 18 Ga. 65), one from North Carolina (Hoke v. Henderson, 14 N.C. 20, 24), two from South Carolina (State v. Harris, 2 Bailey, 598; Klinck v. Keckley, 2 Hill's Eq. 250, 256), and one from the Supreme Court of the United States (United States v. Bank of North Carolina, 6 Pet. 29, 8 L.Ed. 308). Of these, only the two opinions from South Carolina deny the right to preference as a surviving prerogative, and they do this without serious attempt to soberly reason the matter. There was an earlier decision in that state referred to in the Klinck Case which seems to hold that the right, if it exists, cannot prevail over mortgages, judgments, and other liens-a proposition which, so far as we know, no American court has ever disputed.
When our state Constitution was adopted and the Compiled Statutes of 1887 (including section 201, div. 5) were continued in force, the decided cases bearing upon the particular claim here asserted had been increased by eight , of which one, the New Jersey case, denied the right "as an actual prerogative of government," chiefly because it had not been exerted or recognized in that state for over a hundred years and "a prerogative which has remained so long practically useless can hardly be said to exist."
Since the adoption of our state Constitution and up to the present time, a considerable addition has been made to the decisions, notably: Booth v. State, 131 Ga. 750, 63 S.E. 502; In re Carnegie Trust Co., 151 A.D. 606, 136 N.Y.S. 466, affirmed, 206 N.Y. 390, 99 N.E. 1096, 46 L. R. A. (N. S.) 260; United States F. & G. Co. v. Carnegie Trust Co., 161 A.D. 429, 146 N.Y.S. 804, affirmed 213 N.Y. 629, 107 N.E. 1087; Central Bank v. State, 139 Ga. 54, 76 S.E. 587; United States F. & G. Co. v. Rainey, 120 Tenn. 357, 113 S.W. 397; American Bonding Co. v. Reynolds (D. C.) 203 F. 356, reversed Brown v. American Bonding Co., 210 F. 844, 127 C. C. A. 406; State v. Foster, 5 Wyo. 199, 38 P. 926, 29 L. R. A. 226, 63 Am. St. Rep. 47; State v. Bank (N. M.) 167 P. 3; Central Trust Co. v. Third Ave. Ry. Co., 186 F. 292, 110 C. C. A. 1; Potter et al. v. Fidelity Deposit Co., 101 Miss. 823, 58 So. 713; Commissioner v. Bank, 161 Mich. 691, 125 N.W. 424, 127 N.W. 351. The last five are usually cited as opposed to the right here claimed, while the others vigorously uphold it; but the five referred to are not entitled to be classed as authoritative voices in opposition. The Wyoming and New Mexico cases, for instance, actually recognize the right, but deny its application to the particular instance; the federal opinion is squarely in the teeth of a prior declaration to the contrary by the Court of Appeals of New York, viz., In re Carnegie Trust, 206 N.Y. 390, 99 N.E. 1096, 46 L. R. A. (N. S.) 260; the Michigan decision consists of two utterances, one discussing the preference as a prerogative right, but saying, "The question is not presented," the other seeming to hold that explicit legislation is necessary to put the right into effect; the Mississippi case is squarely against the right, but assigns no reason except Shields v. Thomas, 71 Miss. 260, 14 So. 84, 42 Am. St. Rep. 488, which, so far as we can see, has not the remotest bearing upon the question.
Special notice must, however, be taken of American Bonding Co. v Reynolds, supra, and Brown v. American Bonding Co., supra, because the case, which had its issue in these opinions, arose in this state and represents an effort to settle the law of this state upon the identical questions now before us. Ordinarily, these utterances would be entitled to very respectful consideration, although in a matter of this sort the voice of the state tribunals is supreme. But the case presents a singular situation. The district court held that the state of Montana has a preference over general creditors to payment from an insolvent debtor; that the right is not discretionary in the officers of the state, but is of a prerogative character; and that it may pass by subrogation to the debtor's surety compelled to make such payment. This was reversed and its standing as authority destroyed on appeal; yet the opinion on appeal is not persuasive for these reasons: It assumes the domestic law of New York to be as stated by the Second Circuit Court of Appeals (Central Trust Co. v. Third Ave. Ry. Co., supra) against the claim to such prerogative right, notwithstanding the declaration of the highest court of that state in favor of the claim (In re Carnegie Trust Co., supra); it suggests that since the United States asserts its preference under specific statute, and not upon prerogative, this state may not possess any prerogative preference because "no state can have any greater sovereign right than the general government of the entire country," notwithstanding that the federal Constitution is a grant of power and, under Amendment 10, states can and do have sovereign rights which the general government does not possess; it raises the question whether, if the prerogative right exists, such right can pass to a private party by subrogation, without actually deciding whether such right does exist or can so pass; and it determines the appeal upon a proposition which we cannot accept, viz....
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