American Bonding Co. of Baltimore, Md., v. Reynolds

• Decision Date: 11 February 1913
• Docket Number: 236.
• Citation: 203 F. 356
• Parties: AMERICAN BONDING CO. OF BALTIMORE, MD., v. REYNOLDS.
• Court: U.S. District Court — District of Montana

203 F. 356

AMERICAN BONDING CO. OF BALTIMORE, MD., v. REYNOLDS.

No. 236.

United States District Court, D. Montana.

February 11, 1913

Walsh &amp Nolan, of Helena, Mont., for complainant.

Hathhorn & Brown, of Billings, Mont., for defendant.

BOURQUIN District Judge.

Complainant seeks to recover a debt due the state of Montana from an insolvent bank of which defendant is receiver by virtue of appointment by a competent court on petition by said state by statutory authority, the debt being for public funds deposited in said bank by the state treasurer, for which complainant was surety, all by statutory authority, and which debt it paid. The funds of said bank are insufficient to pay all creditors. Complainant contends that public debts are entitled to priority, in that the state, having adopted the common law of England, succeeds to or is vested with a like prerogative of the crown.

Defendant contends that (1) the state has no such priority; (2) if it has, it cannot be asserted after the debtor's property has passed to a receiver. This prerogative of the crown or king of England is one of many attributes of sovereignty wherever it resides. The king, being the repository of sovereign power and authority, the supreme executory power and duty, is vested with these prerogatives. They consist of certain rights, powers, and privileges essential to the dignity of royalty, or necessary to the general welfare of the entire community, and which are denied to individuals. The first are direct; the second incidental. They are dictated by expediency, necessity, and public policy. That here involved and like are justified, in that, where the rights and interests of all the people meet those of one of them, the former is of more importance and must prevail. The crown's priority over subjects in payment of debts is to secure and conserve the revenues-- the life blood of the state, that the latter may be maintained in peace and war and its obligations discharged. It is of the incidental prerogatives and belongs to the king, not as an individual but parens patriae, or as universal trustee for the people. It is, in fact, a reservation or exception to the general course of law in favor of the public or for its good. From its nature its origin may be said to be higher than, superior to, and to antedate the common law-- of the fundamentals of all government. Its existence is suggested in Magna Charta. Coke notes that Littleton twice refers to it as the law. Blackstone says it is out of the course of the common law and, while as a principle it enters into the British Constitution, in Halsbury's Laws of England it is said that it is created and limited by the common law. But whether it is of those prerogatives that necessarily enter into the political being of every state and so as much into ours as into that of England, or is of and created by the common law it would seem to be of the law of Montana. The statutes of the latter provide that, where they declare the law, there is no common law. Otherwise, if not repugnant to, inconsistent or in conflict with the Constitution or statutes of the state or United States, and if of a general nature and applicable, the common law of England is, and shall be, the law and rule of decision. Montana R.S. Secs. 3552, 8060. And so has been the law in Montana for more than 40 years. There is no statute in this state relating to the priority of public debts. The rule of the common law in respect thereto is not objectionable in any of the particulars aforesaid. That it is of a general nature and applicable to the state's institutions and consistent with the spirit thereof cannot be gainsaid. That it is of general benefit and value is evidenced by the fact that the United States and some of the states have established it by statute, but it is not clear the fundamental law of states is not so in the beginning and apart from statute. These statutes may be taken as approval of the principle of priority of public debts, as evidence of the rule's applicability, and as largely declaratory of inherent or common law. Since this prerogative of the crown attaches to sovereign power wherever it resides (see Bank v. U.S., 19 Wall. 239, 22 L.Ed. 80, U.S. v. Hewes, Fed. Cas. No. 15,359), it must attach to Montana, a sovereign state. U.S. v. Bank of North Carolina, 6 Pet. 35, 8 L.Ed. 308, is not opposed to this conclusion. In that case there was involved a public debt of a particular class with which Congress had dealt presumably with intent to establish a complete system in respect...