National Surety Co. v. Morris

• Decision Date: 21 December 1925
• Docket Number: 1307,1319
• Parties: NATIONAL SURETY CO. v. MORRIS [*] ; UNITED STATES FIDELITY & GUARANTY CO. v. ELLIOTT
• Court: Wyoming Supreme Court

241 P. 1063

34 Wyo. 134

NATIONAL SURETY CO. v. MORRIS ^[*] ;

UNITED STATES FIDELITY & GUARANTY CO. v. ELLIOTT

Nos. 1307, 1319

Supreme Court of Wyoming

December 21, 1925

Appeals taken in two cases, but the decision covers both. They are, case numbered 1307 appealed from District Court Sheridan County; James H. Burgess, Judge, and case numbered 1319 appealed from District Court, Platte County; William A Riner, Judge.

The action in 1307 was by National Surety Company against T. A Morris, as Receiver of Citizens State Bank of Sheridan; the action in 1319 was by the United States Fidelity and Guaranty Company against J. A. Elliott, as Receiver of the Platte County State Bank. There were judgments for defendants and both plaintiffs appeal.

Affirmed.

R. G Diefenderfer, and Kinkead, Ellery & Henderson for appellant in case numbered 1307.

A Receiver of a bank under 5152 C. S. is the same as the Receiver in Chancery. The state has a prerogatory preference right over a creditor which is not destroyed by the depository law; Chap. 183 C. S. State vs. Foster, 5 Wyo. 199; decided however, upon the principle that title vests in assignee under general assignment; supported by Marshall vs. N. Y. 65 L. ed. 315; Aetna Co. v. Miller, (Mont.) 170 P. 760; F. & D. Co. vs. McClintock, (Mont.) 218 P. 652; City of Denver vs. Stenger, 295 F. 809; Re Carnegie Trust, 99 N.E. 1096; U. S. F. & G. Co. vs. Bramwell, (Ore.) 217 P. 332; Am. Bonding Co. vs. Reynolds, 293 F. 356; Booth vs. State, 63 S.E. 502; F. & G. Co. vs. Rainey (Tenn.) 113 S.W. 397; Woodyard vs. Sayre (W. Va.) 110 S.E. 689; State vs. Bank (N. M.) 167 P. 3; State vs. Bank of Maryland, 26 Am. Dec. 561; but three states have denied the doctrine; New Jersey, South Carolina and Mississippi. Depository Laws are sometimes held to be a waiver; State vs. Loudermilk (Ariz.) 205 P. 915; Surety vs. Pixton, (Utah) 208 P. 878; it is denied in Washington on the ground that title passed to liquidator of insolvent bank before it was asserted; Aetna C. & S. Co. vs. More (Wash.) 181 P. 40; in Iowa it is sustained under a statute; Buena Vista County vs. Bank, 196 N.W. 729; with the above exceptions or qualifications, the doctrine is supported by the clear weight of authority. A surety paying the debt of its principal to a state, is subrogated to the states right; U. S. F. & G. Co. vs. Trust Co., 121 S.E. 430; Casualty Co. vs. McConnell (Tenn.) 257 S.W. 410; U. S. F. & G. vs. Bank (N. Y.) 107 N.E. 1086; U. S. F. & G. Co. vs. Bramwell, 217 P. 333; Aetna A. & L. Co. v. Miller (Mont.) 170 P. 760; Am. Bonding Co. vs. Reynolds, supra; a statutory bank receiver is an arm of the court; 5152 C. S. Kilpatrick vs. Horton, 15 Wyo. 501; Riordan vs. Horton, Supra; his possession is that of the court; Casualty vs. McConnell, supra; State vs. Bank, 219 P. 652; Ry. Co. vs. Humphrey, 36 L. ed. 632; High on Receivers, Section 134, p. 153; Bowling vs. Ins. Co., 103 S.E. 285; Stewart, Rec. vs. Bank, 63 L. ed. 135; and cases cited; 5152 C. S. does not vest title in such receivers. The depository act does not repeal the prerogative adopted from common law; 2950-2957 C. S.; U. S. F. & G. vs. Bramwell, supra; in re Carnegie Trust Co., supra; the general rule is that the prerogative stands unless expressly repealed; U. S. vs. Herron, 22 L. ed. 275; Bank vs. U. S. 22 L. ed. 80; repeals by implication are not favored; Woodyard vs. Sayre, 110 S.E. 689; Cattle Co. vs. Baird, 8 Wyo. 144; the order vesting the bank's assets in the receiver is void since the statute places the property in custodia legis; Clark vs. Co. (Mo.) 209 S.W. 307; Irrigation Co. vs. Co. (Utah) 174 P. 852; Sharp vs. McColm (Kans.), 101 P. 659; the important point seems to be whether the enactment of the depository law repealed the common law principle of sovereign prerogative, and the weight of authority seems to be that it did not, since it contains no express waiver.

Louis J. O'Marr for respondent.

It may be conceded as a general rule that many of the decisions, unaffected by statute, support the claim of a state to a preference over general creditors of an insolvent bank, but the following cases hold to the contrary; Com. vs. Bank (Mich.) 175 N.W. 424; State vs. Bank (N. M.) 167 P. 3; Central Trust Co. vs. Ry. Co., 186 F. 292; Potter vs. Co. (Miss.) 58 So. 713; Brown vs. Roadway Co., 210 F. 844; Middlesex Co. vs. Bank, 29 N. J. Eq. 268; State vs. Bank, 26 Am. Dec. 561; Kies vs. Wilkinson (Wash.) 172 P. 351; holding that the right does not exist unless created by statute; a surety discharging a bank's obligation to a state, is subrogated to the rights of the state; a reasonable interpretation of 5152 C. S. is, that a receiver takes title to the assets; the courts have power to dissolve corporations; 5438 C. S. and vest title to assets in a receiver; 5442 C. S. this dissolution is a statutory power; 14a C. J. 1087-1088, not inherent in equity courts; title being vested in a receiver, a subsequent claim of preference by the state is not effective; State vs. Foster, 5 Wyo. 199; and cases cited; though an assignment was involved there, a receivership has the same effect; State vs. Bank, (N. M.) 168 P. 526; Com. vs. Bank (Mich.) 125 N.W. 424; Surety Co. vs. Pixton (Utah) 208 P. 878; State vs. Williams (Md.) 61 A. 297; Aetna vs. Moore, (Wash.) 181 P. 40; the state waived any right of preference by taking security under Chapter 183 C. S.; this is the rule in Arizona and Utah; see cases, supra; whether the title is vested in a receiver by statute, or by court decree is immaterial; the trial court held that the enactment of the depository law was an implied repeal of the common law doctrine of preference of the sovereign, and that title to the bank's assets having passed to the receiver, appellant lost any preference it might otherwise have had; this doctrine is apparently sound and should be affirmed.

Gillette & Clark and Roy J. Williams (O. O. Natwick of counsel) for appellant in case 1319.

The common law of England is the rule of decision in Wyoming, and the common law accords to the state a preference as a creditor against insolvents; this preference is not waived by the depository law; title to assets did not pass to the receiver so as to prevent the right of priority attaching the right of priority was not waived by failure to assert it in filing the claim; the bank was not dissolved; 4547 C. S. In re Thornton's Est. (Miller vs. State) 21 Wyo. 430; State vs. Foster, 5 Wyo. 199; Campbell vs. C. C. & I. C., 9 Colo. 60; Jobbers Ass'n vs. People, 21 Colo.App. 326; as to the crown prerogative; 3 Holdworth's History of England 459; Halsbury's Laws of England, Vol. 6, 493; 8 Bacon Abr. 91; 1 Coke on Littleton, 131b; 1 Cooley's Blackstone (3rd ed.) 239; in re Henley & Co., 9 Ch. Div. 469; preference of the sovereign exists in Wyoming; State vs. Foster, supra; People vs. Tool, 35 Colo. 225; Denver vs. Stenger, 295 F. 809; it is recognized in a large number of states; Aetna A. & L. Co. vs. Miller (Mont), 170 P. 760; where the right of subrogation passes to a surety. The law of Montana relating to insolvent banks is similar to that of Wyoming; see State vs. Bank, 218 P. 652; the existence of the doctrine of state preference is denied in only three states, New Jersey, South Carolina and Mississippi; it exists in West Virginia; Woodward vs. Sayre, 90 W.Va. 295; U. S. F. & G. vs. Trust Co., 121 S.E. 430; in New York in re Carnegie Trust Co., 99 N.E. 1096; same vs. Carnegie Trust Co., 107 N.E. 1087; same vs. Bank, 107 N.E. 1086; Marshall vs. New York, 254 U.S. 380; 65 L. ed. 315; and in Oregon U. S. F. & G. vs. Bramwell, 217 P. 332; in Pennsylvania; Booth & Flynn vs. Miller, 237 Pa. 297; in Tennessee; U. S. F. & G. vs. Rainey, 120 Tenn. 357; and cases cited; Maryland Co. vs. McConnell, 148 Tenn. 656; in North Carolina; Hoke vs. Henderson, 14 N.C. 12; in Virginia; Watts vs. Kinney, 3 Leigh (Va.) 272; in Minnesota; State vs. Bell, 64 Minn. 400, 67 N.W. 212; Surety Co. vs. Pearson, 178 N.W. 817; in Maryland; State vs. Williams, 101 Md. 529, 61 A. 297; in Georgia; Robinson vs. Bank, 18 Ga. 96, and cases cited; Booth vs. State, 63 S.E. 502; in Iowa; in re Bank (Iowa), 200 N.W. 199; cases contra are: Freeholders vs. Bank, 29 N. J. Eq. 268; State vs. Harris, 2 S.C. 600; Potter vs. F. & D. Co., 101 Miss. 823, 58 So. 713; Zimmerman vs. Bank (Mich.), 127 N.W. 351; in re Bank (Ariz.), 205 P. 915; it was held that the right existed but was waived by a depository law; also Utah in the case of Surety Co. vs. Pixton, 208 P. 878; the enactment of a depository law held not to waive the preference in; Marshall vs. New York, 254 U.S. 380; Campbell vs. C. C. & I., 9 Colo. 60; Allen vs. McFerson (Colo.), 235 P. 347; the right cannot be destroyed by a receivership; Co. vs. Englewood, 62 Colo. 229; Freeport Co. vs. Freeport, 180 U.S. 587, 45 L. ed. 679; it was not repealed in Wyoming by implication; Cattle Co. vs. Baird, 8 Wyo. 144; repeal must be express; State vs. Madison (Mont.), 218 P. 652; Co. vs. Co., 224 U.S. 152; Henley vs. Company, supra; Aetna vs. Miller (Mont.), 170 P. 760; Marshall vs. N. Y., supra; Woodward vs. Sayre, supra; the sovereign is not bound by the general language of insolvency laws unless mentioned; G. T. & T. Co. vs. Co., 224 U.S. 152; and cases cited; nor by mere inference; U. S. vs. Herron, supra; in re Carnegie Trust Co., 136 N.Y.S. 466; receivership did not pass title to the receiver so as to prevent bank priority; in re Bank vs. Norton, 15 Wyo. 501; Riordan vs. Horton, 16 Wyo. 362; Aetna A. & L. Co. vs. Miller, 54 Mont. 377; and cases cited; Co. vs. Reynolds (Mont), 203 F. 356; City of Denver vs. Stenger (Colo.), 295 F. 809; State vs. Bank (Mont), 218 P. 652; Marshall vs. New York, supra; Casualty Co. vs. McConnell (Tenn.), 257 S.W. 410; 5183 C. S. indicates legal status of...