Fidelity & Deposit Co. of Maryland v. State Bank of Portland

• Decision Date: 19 January 1926
• Citation: 117 Or. 1,242 P. 823
• Parties: FIDELITY & DEPOSIT CO. OF MARYLAND v. STATE BANK OF PORTLAND ET AL.
• Court: Oregon Supreme Court

242 P. 823

117 Or. 1

FIDELITY & DEPOSIT CO. OF MARYLAND v. STATE BANK OF PORTLAND ET AL.

Supreme Court of Oregon

January 19, 1926

Department 1.

Appeal from Circuit Court, Multnomah County; George Tazwell, Judge.

Action by the Fidelity & Deposit Company of Maryland against the State Bank of Portland and Frank C. Bramwell, Superintendent of Banks. From a decree for plaintiff, defendant Frank C Bramwell appeals. Affirmed.

Jay Bowerman, of Portland (Bowerman & Kavanaugh, of Portland, on the brief), for appellant.

W. Lair Thompson and H. Borden Wood, both of Portland (McCamant & Thompson, of Portland, on the brief), for respondent.

Dey Hampson & Nelson, of Portland (George L. Buland, of Portland on the brief), amicus curiæ.

RAND J.

On February 16, 1922, the State Bank of Portland, a banking corporation organized under the laws of this state, had become insolvent, and the defendant F. C. Bramwell, as state superintendent of banks, took charge of its assets for the purpose of liquidation.

At that time, the state of Oregon had on deposit therein various sums of money, which, with interest thereon, amounted to the total sum of $151,783.35. In order to secure the state for the repayment of these sums, that bank as principal executed four bonds to the state, on three of which this plaintiff was surety, and on the other the Hartford Accident & Indemnity Company was surety. Under these bonds, the ratio of plaintiff's liability to that of Hartford Accident & Indemnity Company, was as 5 to 2. Subsequently certain payments were made to the state, which reduced the bank's liability to the state, to the sum of $77,055.41, of which sum this plaintiff paid to the state the sum of $55,040.65, and the Hartford Accident & Indemnity Company paid the remaining $22,014.36, thereby paying the state's claim in full. Thereupon this plaintiff and the Hartford Accident & Indemnity Company, presented their respective claims to the state superintendent of banks, and demanded of him that they be given the same priority or preference that the state would have possessed, if its claim had not been satisfied. Upon his refusal to allow said claims as preferred claims, they each commenced a separate suit, praying that their claims be paid in full out of the assets of the insolvent bank, before paying the claims of the depositors and general creditors of the bank.

The defendant Bramwell filed an answer to the complaint, containing in addition to admissions, denials, and affirmative allegations, three separate affirmative defenses. By these affirmative defenses, he alleged in effect: (1) That plaintiff was a paid surety, and is not entitled to be subrogated to the rights of the state, either as against the depositors or unsecured creditors of the bank; (2) that, under the statute, depositors of an insolvent bank are given a preference, which when satisfied, in this case, will leave nothing with which to pay the claim of the sureties; and (3) that, plaintiff's claim having been denied for more than six months prior to the time when the suit was commenced, its right is lost. To these three affirmative defenses, plaintiff interposed a general demurrer, which was sustained. Defendants declining to plead further, a reply was filed, and, from a decree entered in the cause in favor of plaintiff, defendant Bramwell has appealed.

With but one exception, every question presented upon this appeal is settled by the decision of this court, in the case of United States Fidelity & Guaranty Co. v. Bramwell, 108 Or. 261, 217 P. 332, 32 A. L. R. 829. In that case we held that the people of this state have succeeded to all of the incidental prerogative rights of the British crown, which are essential to the efficient exercise of the powers inherent in the nature of civil government; that among the prerogative rights thus preserved is the right of the state, as against all persons not having an antecedent lien, to priority in payment of a debt due it, out of the assets of an insolvent debtor; that this right should be preserved, because it is adapted to the necessities of the people, and because its preservation is essential in order to sustain the public burdens, and discharge the public debts. We also pointed out that, so far as we could ascertain from the decisions of the courts, but three states denied the possession by the state of its common-law priority right and that, in every case arising in other states than the three mentioned, where the question had been passed upon by the courts, the right was held to exist, either through some legislative enactment, or by judicial decision, and that, where there was no statute declaring the right, it existed in such state, by virtue of the common law, and without the aid of statute. Defendant criticizes our ruling upon this question, but he advances no argument or reason why such right is not essential to the welfare of the people of the state, or upon what theory this court has power to waive or abrogate such right. It is our understanding that we are as much bound by the applicable rules of the common law, where such rules have not been modified or abrogated by statute, as we are by the statutes themselves. Section 6220, subd. H, Or. L., provides:

"In the event of the insolvency or bankruptcy of any state bank doing business within the meaning of this act, depositors of such bank shall have a first and prior lien on all the assets of such bank; and in the distribution of such assets or the proceeds thereof, the same shall be first applied to satisfy the amount due such depositors after the payment of expenses of liquidation of any such bank. Provided, however, that this section shall not apply to assets pledged as collateral security for money borrowed."

It is contended that because of these provisions depositors have an antecedent lien, which deprives the state of its priority right. The effect of the statute was considered, although not expressly referred to in the United States Fidelity & Guaranty Co. v. Bramwell, supra. This particular subdivision of the statute was construed in Upham v. Bramwell, 105 Or. 597, 613, 209 P. 100, 105, 25 A. L. R. 919, where it was held:

"The statute does not create a lien in favor of depositors, in the sense that it gives a vested right or interest in such assets, but rather provides rules of distribution and priority among creditors respecting the assets of insolvent banks."

Whether the effect of this statute is merely to provide rules of distribution and priority among creditors, or whether it gives a specific lien and security to the depositors over other creditors, the state was one of such depositors, and under the statute was equally entitled to the benefit of the lien.

The right of the state...