Potter v. Fidelity & Deposit Co. of Maryland

• Decision Date: 04 June 1912
• Docket Number: 15460
• Citation: 101 Miss. 823,58 So. 713
• Parties: W. H. POTTER ET AL. v. FIDELITY & DEPOSIT CO. OF MARYLAND
• Court: Mississippi Supreme Court

58 So. 713

101 Miss. 823

W. H. POTTER ET AL. v. FIDELITY & DEPOSIT CO. OF MARYLAND

No. 15460

Supreme Court of Mississippi

June 4, 1912

APPEAL from the chancery court of Hinds county, HON. G. G. LYELL Chancellor.

Suit by the Fidelity & Deposit Company of Maryland against W. H Potter and another, receiver of the Mississippi Bank & Trust Company. From a judgment for plaintiff, defendant appeals.

The facts are fully stated in the opinion of the court.

Reversed and dismissed. Suggestion of error filed and overruled.

Green &amp Green and F. M. West and W. R. Harper and Willing & Davis and Harris & Potter, for appellant.

Watkins & Watkins, for appellee.

Counsel on both sides filed very able and extended briefs but too long for publication.

OPINION

MAYES, C. J.

This controversy arises under the state depository law, and the question involved is easily stated. In 1908 the legislature enacted a law providing for the establishment of state depositories. See Ch. 96, p. 77, Laws of 1908. Sec. 2, Ch. 96, of the Laws of 1908, was amended by Ch. 224, p. 223, of the Laws of 1910; but the amendment made has no bearing on the questions involved here. We shall not set out the legislative act in this opinion, since it will be easily accessible to the reader. This law creating state depositories was new in our jurisprudence at the time of the passage of the act, and by it a new method of dealing with public funds was initiated.

The record in this case discloses that the Mississippi Bank & Trust Company was selected as a state depository in accordance with every requirement of the law, and tendered as its security the surety bond of the Fidelity & Deposit Company in the sum of something over twenty thousand dollars. The surety company authorizing the use of its surety bond by the Mississippi Bank & Trust Company fulfilled all the requirements of the law as to its right to become surety to a selected depository. It may not be amiss to state at this juncture that no question is raised as to any irregularity in any of the procedure leading up to the selection and establishment of the Mississippi Bank & Trust Company as a state depository, nor is any point made by appellee as to the liability incurred by it to the state on the bond which it gave as surety for the deposits placed by the state in the Mississippi Bank & Trust Company. The whole question in this case is upon the right of the appellee to be subrogated to an alleged priority which it claims that the state has in the assets of the bank over the general creditors.

It appears that some time in July, 1911, the Mississippi Bank & Trust Company became insolvent while it was acting as a depository and while appellee's surety bond was in full force, and, upon the application of creditors, was placed in the hands of a receiver. At the time this was done it was indebted to the state some twenty thousand dollars. The appellee, the Fidelity & Deposit Company, paid the full amount of the state's claim and filed a petition in the chancery court, seeking to be subrogated to an alleged priority which it claims the state has on the assets of the bank over all general creditors. The chancellor sustained the contention and allowed the claim as a preference claim, and from this judgment the receivers prosecute an appeal.

The contention is that the state's debt constituted a trust fund, and because the appellee company paid the state's claim it has the right to be subrogated to the state's right. In discussing this case we may state that, if the state has any priority over the general creditors, it must obtain it by virtue of some statute of the state or constitutional provision. In the absence of statutory or constitutional authority, the state, as sovereign, has no preferential rights in this state. This was settled as the law of this state when the case of Shields v. Thomas, 71 Miss. 260, 14 So. 84, 42 Am. St. Rep. 458, was decided. But if the court had not already set at rest this question, we would have no hesitancy in now declaring this to be the law. Some courts have held the reverse of this (see Booth v. State of Georgia, 131 Ga. 750, 63 S.E. 502, and note in 36 Cyc. p. 871), but we adopt the authorities which deny the state priority on any idea of sovereignty. For a discussion of this subject, see text and authorities cited thereto in 36 Cyc. 871.

Since the state has no sovereign right to priority, if it has any such right under the laws of this state, it must obtain that right under Sec. 3485 of the Code of 1906, or by virtue of the depository law of 1908, for these are the only two places in the law of the state where the method of dealing with the public funds is regulated. We will discuss these statutes separately.

Sec. 3485 of the Code of 1906 is as follows: "All money deposited in bank, or with any other depository, by or for a tax collector, or other officer having the custody of public funds, state, county, municipal, or levee board, whether the same be deposited in the name of the officer as an individual or as any officer, or in the name of any other person, is prima facie public money and a trust fund, and is not liable to be taken by the general creditors of the officer or by the creditors of the depository." If this section has any control over the law of this case, and if the state has any priority by virtue of this or any other statute of the state, then under the cases of Fogg v. Bank, 80 Miss. 750, 32 So. 285, Metcalfe v. Bank, 89 Miss. 649, 41 So. 377, Bank v. Hardy, 97 Miss. 755, 53 So. 395, and Green v. Cole, 98 Miss. 67, 54 So. 65, the right of appellee to be subrogated to that priority is beyond question.

But the question in this case at this point is whether or not Sec. 3485 of the Code has any bearing on the question involved. In construing this statute, let us consider for a moment the rules of construction that are to be applied. When the state's sovereignty is involved in any statute, statutes in derogation thereof are to be strictly construed in favor of the state; that is to say, the state's sovereignty is to be broadened and upheld, and not narrowed or destroyed, when the courts are called upon to construe a statute infringing upon sovereign power. But we have held that the state's sovereignty is not involved where the question is one of priority merely. The state stands in the same position, in questions of this character, as does the humblest citizen, unless the Constitution or laws give it a priority over general...