Board of Com'rs of San Miguel County v. McFerson

• Citation: 90 Colo. 408,9 P.2d 614
• Decision Date: 07 March 1932
• Docket Number: 12822.
• Court: Supreme Court of Colorado
• Parties: BOARD OF COUNTY COM'RS OF SAN MIGUEL et al. v. McFERSON, State Bank Com'r.

9 P.2d 614

90 Colo. 408

BOARD OF COUNTY COM'RS OF SAN MIGUEL et al. v. McFERSON, State Bank Com'r.

No. 12822.

Supreme Court of Colorado

March 7, 1932

Rehearing Denied April 4, 1932.

In Department.

Error to District Court, San Miguel County; George W. Bruce, Judge.

Action by the Board of County Commissioners of County of San Miguel and Charles L. Spillman, County Treasurer, against Grant McFerson, as State Bank Commissioner of state of Colorado. To review judgment for defendant, plaintiffs bring error.

Affirmed.

Stivers & Strang, of Montrose, for plaintiffs in error.

Moynihan Hughes & Knous, of Montrose, for defendant in error.

ADAMS C.J.

The board of county commissioners of San Miguel county and the treasurer of that county brought an action against McFerson as state bank commissioner, to establish a preferential claim to certain funds in the hands of the commissioner. The trial court sustained a demurrer to the complaint; the board and county treasurer elected to stand on their complaint, and judgment for defendant was rendered accordingly. The complainants bring the case here for review on writ of error. We shall refer to plaintiffs in error in the singular as the board, to defendant in error as the bank commissioner, or the commissioner, and to the Bank of Telluride as the bank.

The substance of the complaint, in so far as it pertains to this decision, is as follows: The bank became insolvent and the bank commissioner took possession and control of all of its assets for the purpose of, and is now engaged in, liquidating its affairs. The county treasurer and his predecessor in office had a total sum of $74,385.75 on deposit with the bank when the commissioner took charge. The assets of the bank are insufficient to pay all claims against it in full. The only security held by the board is a bond in the sum of $40,000 signed by a former county treasurer and his bondsmen, but they are all insolvent, and the board will not be able to realize in excess of $1,000 on the bond. The board filed a claim with the bank commissioner, claiming a preference for the amount due, but the commissioner disallowed the said claim.

The district court sustained the commissioner's demurrer to the above complaint, but the court expressly provided that its judgment should be without prejudice to the right of the board to apply for, and to have allowed, in accordance with law, any claim that the board may have as a common claim, but not as a preference. The sole question involved is whether the general deposits of the funds of the county in the insolvent bank are entitled to priority over the claims of other creditors. Counsel for the board argue that its claim should be so preferred under the provisions of the common law; that such right was a sovereign prerogative for the protection of public revenues; that the county is an arm of the sovereign state, and as such is entitled to a preference. In opposition, counsel for the bank commissioner contend that the common law does not control, first, because it never applied to a case of this kind, and second, for the reason that if it ever had any force with respect to such a matter, it has been impliedly abrogated by statute.

1. We have heretofore indicated that such an alleged preferential right in the distribution of the assets of an insolvent bank did not exist, even under the common law, there being no analogy, since England's extensive banking system had its inception long after the year 1607. United States Fidelity & Guaranty Co. v. McFerson, 78 Colo. 338, 241 P. 728. Our further investigations confirm our understanding that the case is not supported by the common law. The question has been the subject of much controversy. 'But, as applied to insolvent banks in which deposits of public money have been properly made, the better rule seems to be that in the absence of statute or a showing of facts sufficient to create a trust, a claim for public money has no preference over the claims of the general creditors of a bank, but stands on the same footing with them.' 3 R.C.L., page 644, § 273. 'And an author, quite as eminent as a jurist as any name that ever adorned the American bench, has stated, that the right of preference of a state, in this country, does not rest upon the common law, but exists only where given by statue. 1 Kent's Com. 248, note (c)'--Board of Chosen Freeholders of Middlesex County v. State Bank, 29 N.J.Eq. 268, 272; Commonwealth v. Commissioner of Banks, 240 Mass. 244, 133 N.E. 625. In the case of United States F. & G. Co. v. McFerson, we recognize the fact that the authorities are not all in harmony. See, also, 7 C. J., page 749 (§ 543); Michie on Banks and Banking, vol. 3, page 231 § 170, and same, page 278, § 196, put we have followed that which we believe to be the 'better rule,' as above quoted.

Counsel for the board rely upon the case of City and County of Denver v. Stenger (C.C.A.) 295 F. 809, wherein it is held that a municipality is entitled to a priority on the theory that the debt is due the sovereign. But as later said in AEtna Casualty & Surety Co. v. Bramwell (D. C.) 12 F. (2d) 307, 310, City and County of Denver v. Stenger 'This case is now shorn of application, by reason of the fact that Colorado has, since the decision of that case, denied the common-law prerogative right to the state. United States Fidelity & Guaranty Co. v. McFerson 241 P. 728.'

2. Aside from the common law, we have no statute that warrants such preference. On the contrary, section 1, chapter 83 pages 280-283, Laws 1927, makes provision for the protection of public moneys in the hands of county treasurers. It provides, in substance, as follows: The treasurer shall deposit all funds that come into his possession, by virtue of his office, in one or more responsible banks located in this state. Such bank or banks shall pay interest on the average daily balances at such rates as may be agreed upon, not less than 2 per cent. per annum, less clearing house charges. Before making such deposits, the county treasurer may take from such bank or banks a good and sufficient bond, provided, however, that the bank may tender to the treasurer, United States bonds or other securities of a...