Collier v. Gormley

• Decision Date: 29 December 1933
• Docket Number: 9686,10019.
• Citation: 172 S.E. 340,178 Ga. 142
• Parties: COLLIER, Sheriff, et al. v. GORMLEY, Superintendent of Banks. CITY OF ATLANTA et al. v. GORMLEY, Superintendent of Banks, et al.
• Court: Georgia Supreme Court

172 S.E. 340

178 Ga. 142

COLLIER, Sheriff, et al. v. GORMLEY, Superintendent of Banks.

CITY OF ATLANTA et al. v. GORMLEY, Superintendent of Banks, et al.

Nos. 9686, 10019.

Supreme Court of Georgia

December 29, 1933

Syllabus by the Court.

Statute giving debts due depositors preference over debts for taxes in distribution of insolvent bank's assets, held not to affect priority of tax lien on property conveyed to bank as security (Laws 1919, p. 159, art. 7, § 19, as amended by Laws 1927, p. 199, § 5; Civ. Code 1910, §§ 1018, 3333; Laws 1913, pp. 123, 127).

Bank superintendent, in charge of insolvent bank, could enjoin enforcement of tax execution against property conveyed to bank as security, only where execution was levied after bank or superintendent took possession of property (Laws 1919, p 155, art. 7, §§ 3, 5; p. 158, art. 7, § 13; p. 158, art. 7, § 15, as amended by Laws 1927, p. 198, § 4; Laws 1922, pp. 63 66; Civ. Code 1910, § 1141).

1. Section 19 of article 7 of the Banking Act of 1919, as amended by the act of 1927 (Ga. L. 1927, p. 199), merely prescribed the order of paying debts due by an insolvent bank, and was not intended to affect the validity or priority of a lien against property conveyed by the owner and lienee to the bank as security.

2. Where property conveyed to a bank as security for a debt became subject to a valid and superior tax lien against the bank's debtor, the fact that the bank was thereafter seized by the superintendent of banks as an insolvent institution would not prevent the enforcement of the tax execution by a levy and sale of the property thereunder where possession of the property was not taken by the bank or the superintendent of banks before the levy of the execution. In case No. 9686 the allegations of the petition were insufficient to state a cause of action, and the court erred in not sustaining the general demurrer. In case No. 10019 the petition sufficiently alleged possession by the superintendent, and was not subject to general demurrer; but the evidence failed to support the allegations as to a part of the property, and with respect to such property the court erred in granting an injunction.

Error from Superior Court, Meriwether County; L. B. Wyatt, Judge.

Error from Superior Court, Fulton County; G. H. Howard, Judge.

Petitions for injunction by R. E. Gormley, as State Superintendent of Banks, against C. H. Collier, Sheriff, and another, and against the City of Atlanta and others. To review adverse judgments, defendants bring error.

Judgment reversed in Collier v. Gormley, and judgment affirmed in part and reversed in part in City of Atlanta v. Gormley.

G. A. Huddleston, R. A. McGraw, and N. F. Culpepper, all of Greenville, for plaintiffs in error Collier and others.

J. L. Mayson, C. S. Winn, and J. C. Savage, all of Atlanta, for plaintiffs in error City of Atlanta and others.

M. U. Mooty and R. W. Martin, both of La Grange, for defendant in error Gormley.

Howell, Heyman & Bolding and W. P. Bloodworth, all of Atlanta, for defendants in error Gormley and others.

RUSSELL Chief Justice.

R. E. Gormley, as state superintendent of banks, filed a suit for injunction against C. H. Collier, sheriff, and H. L. Culpepper, tax collector, of Meriwether county, to enjoin the enforcement of an execution issued by the tax collector against Mrs. George Crosley, and levied upon land the title to which had been conveyed by Mrs. Crosley to La Grange Banking & Trust Company, whose assets were at the time of the levy in the hands of the superintendent of banks for the purposes of liquidation. At an interlocutory hearing the judge of the superior court overruled a general demurrer and granted an interlocutory injunction, and the defendants excepted. The facts alleged in the petition were substantially as follows: Mrs. Crosley executed a deed conveying the land to La Grange Banking & Trust Company on December 29, 1927, to secure an indebtedness of $1,700. The amount of this debt is now in excess of the value of the land. The bank failed and went into liquidation on April 29, 1931. On or about January 1, 1933, the sheriff of Meriwether county levied upon the land under a tax execution issued against Mrs. Crosley for state, county, and school taxes for the year 1931. The land so levied on is now the property of the superintendent of banks as statutory receiver for the use of La Grange Banking & Trust Company, and the levy is illegal for the reason that the property is "in custodia legis." Since the Act of August 25, 1927 (Laws 1927, p. 195) amending the Banking Act of 1919, the claims of depositors have priority and preference over state and county taxes. Unless the court should issue an order restraining the sheriff and tax collector from selling the property, the same "will be taken from the possession, custody, and control of petitioner." The plaintiff has no adequate remedy at law. The prayers were for injunction, for a "decree that the debts due to depositors have a priority over taxes as to the property levied on," and for general relief.

1. One question raised by the record is whether the tax execution issued against Mrs. Crosley for taxes accruing in the year 1931 constituted a lien superior to the security deed executed by Mrs. Crosley to the bank on December 29, 1927, the bank having become insolvent and gone into the hands of the superintendent of banks for liquidation on April 29, 1931. This question should be answered in the affirmative. The taxes were assessed against Mrs. Crosley, the owner of the equity of redemption and the person in possession. Although the legal title had been conveyed to the bank as security for an indebtedness, the complete title was nevertheless subject to taxation as a whole, and a sale made in pursuance of a proper assessment and execution would have divested both the equity of redemption held by Mrs. Crosley and the legal title which had been conveyed to the bank as security. Real Estate Loan Co. v. Union City, 177 Ga. --(2), 169 S.E. 301. The banking company, the grantee in the security deed, did not come into the possession of the superintendent of banks for liquidation until April 29, 1931; whereas the lien for the taxes for the year 1931 had attached as a lien upon the property as of January 1 of that year. Civil Code 1910, § 3333; Ga. L. 1913, pp. 123, 127, Park's Code, § 1116(l). If the bank had not failed and come into the possession of the superintendent of banks as an insolvent institution, the bank itself could not have rightly claimed that the lien for taxes was not superior to the security deed. The assets of the bank having gone into the possession of the superintendent of banks after the tax lien had become fastened upon this property, has the priority of the tax lien been lost or destroyed by reason of this fact, and is it now inferior to the claims of depositors? Section 19 of article 7 of the Banking Act of 1919 (Ga. L. 1919, pp. 135, 159), as amended by the act of 1927 (Ga. L. 1927, pp. 195, 199): "Sec. 19. Order of paying debts. After the payment of the expenses of liquidation, including compensation of agents and attorneys, and after the payment of unremitted collections, the order of paying off debts due by insolvent banks shall be as follows: (1) Debts due depositors. (2) Debts due for taxes, State and Federal. (3) Judgments. (4) Contractual obligations. (5) Unliquidated claims for damages and the like. Provided, that nothing herein contained shall affect the validity of any security or lien held by any person or corporation."

This statute purports to declare certain priorities to be observed by the superintendent, but it is apparent from the specific language used that it was intended to deal only with the order of paying "debts due by insolvent banks." The taxes involved in this case were assessed against the real estate as the property of Mrs. Crosley, and the execution was issued against her, and as between her and the bank she was the person primarily liable for the tax. Civil Code 1910, § 1018; Bank of the University v. Athens Savings Bank, 107 Ga. 246, 33 S.E. 34. The taxes did not constitute a debt due by the insolvent bank, but the liability rested upon Mrs Crosley, notwithstanding the execution was a prior lien against the property and was even superior to the security deed held by the banking company. In view of the plain terms of the statute, it was held in Baggett v. Mobley, 171 Ga. 268, 155 S.E. 334, that debts due to depositors were superior to an indebtedness due by the bank for taxes which accrued before the seizure of the bank by the superintendent as an insolvent institution. The same was held in Felton v. McArthur, 173 Ga. 465, 160 S.E. 419. In each of those cases, however, the indebtedness for taxes was an indebtedness which had accrued directly against the bank, and executions were issued accordingly. In the instant case the facts were different, in that the taxes were assessed and execution issued therefor against a third person who was merely a debtor of the bank and had conveyed property to the bank as security. The Baggett and Felton Cases are not authority for the contention made in behalf of the superintendent of banks in the present case. When the superintendent took possession of the assets of this bank, he thereafter held the security deed upon the same terms and conditions as to priority that existed before the bank failed. The title to the property was in the bank as security, but it was incumbered with a prior lien for taxes. The failure of the bank did not impair this priority. The priority is as to debts due by the bank, and not as to debts due by some other person, such as taxes due by a third person to the state and the county. If Mrs. Crosley had executed a mortgage to some other...