State v. American Surety Co. of New York

• Decision Date: 31 December 1914
• Citation: 145 P. 1097,26 Idaho 652
• Parties: STATE, to and for the Use and Benefit of CLARA MILLS et al., Respondent, v. AMERICAN SURETY COMPANY OF NEW YORK, Appellant
• Court: Idaho Supreme Court

145 P. 1097

26 Idaho 652

STATE, to and for the Use and Benefit of CLARA MILLS et al., Respondent, v. AMERICAN SURETY COMPANY OF NEW YORK, Appellant

Supreme Court of Idaho

December 31, 1914

OFFICIAL BOND-ACTION ON-DEFAULT-JURISDICTION-REMOVAL OF CAUSE-VACATION OF DEFAULT-COMPLAINT-SUFFICIENCY OF COMPLAINT-STATUTORY CONSTRUCTION-PUBLIC OFFICER-BREACH OF DUTY-LIABILITY OF SURETY-PARTIES TO ACTION.

1. Where a defendant has been sued in a state court and summons has been served upon him, and, prior to the expiration of the term within which he is required to answer under the statute and without appearing or answering, he files a petition for a removal to the federal court, and an order denying the removal is made by the state court, and the record is thereafter transferred by the defendant to the federal court when on motion in the latter court the cause is remanded to the state court for want of jurisdiction in the federal court, and the clerk of the district court enters the default of the defendant for failure to appear and answer; held, that the action of the clerk in entering the default of the defendant is regular and valid, and within the authority and direction of secs. 4140 and 4360, Rev. Codes, and that such default is not void for want of jurisdiction.

2. Where the default has been entered by the clerk against the defendant, as was done in this case, the court has jurisdiction to hear the proofs submitted by the plaintiff and to enter judgment thereon.

3. Under the above facts, where the defendant moves to have the default vacated on the ground of inadvertence, surprise or excusable neglect, held, that under the excuse presented and the facts of this case, as shown by the record, the trial court did not err in refusing to set aside said default.

4. Sec 4140, Rev. Codes, fixes the time within which a defendant shall appear and answer, and the fact that prior to the expiration of that time the defendant undertook to have the cause removed to the federal court and it was thereafter remanded, such action on the part of the defendant to change the forum will not serve to extend the time for answer in the state court and will not relieve the defendant from a default which it thus allows to be entered against it.

5. The filing of a petition and bond for a removal to the federal court is not an appearance in the state court, under the provisions of the Revised Codes of Idaho.

6. When a defendant attempts to remove an action which he is not entitled to remove, and the state court refuses to surrender its jurisdiction, the state court may proceed with the cause and its subsequent proceedings are valid.

7. Held, under the facts of this case, that the default was not prematurely entered.

8. The legislature in enacting sec. 3001, Rev. Codes, making it the duty of the bank commissioner to make an examination of state banks, imposed such duty for the benefit and protection of the depositors as well as the public.

9. A bank commissioner in the exercise of discretionary duties is not responsible to anyone receiving an injury through a breach of his official duty, unless he acts maliciously and wilfully wrong, or clearly abuses his discretion to the extent of acting unfaithfully and in bad faith.

10. In an action by an injured party against the surety on the bond of the bank commissioner executed under sec. 191, Rev. Codes for failure of said commissioner to faithfully perform his duty, it is not necessary to first proceed and have the damages of the injured party adjudged against the commissioner.

11. Under a joint and several bond executed pursuant to sec. 191 Rev. Codes, it is not necessary to sue jointly the principal and surety, but suit may be maintained against either severally.

12. Held, that the complaint herein states a cause of action.

APPEAL from the District Court of the Fourth Judicial District for Blaine County. Hon. Edward A. Walters, Judge.

Action by the state to recover on a surety company's bond. Judgment for the plaintiff. Judgment affirmed.

Richards & Haga and McKeen F. Morrow, for Appellant.

When a citizen of another state files a petition and bond in due form and gives the required notice for the removal of a cause to the federal court on the ground of diversity of citizenship, the time within which defendant must plead further is governed by federal law. (Sec. 29, The Judicial Code.)

The attempt of state courts to exercise jurisdiction over causes after the federal court assumed jurisdiction, or while the federal court has the question of its jurisdiction under consideration, has been condemned repeatedly by the higher courts. (Ches. & Ohio Ry. Co. v. McCabe, 213 U.S 207, 29 S.Ct. 430, 53 L.Ed. 766; Cocur d' Alene Ry. & Nav. Co. v. Spalding, 6 Idaho 97, 53 P. 107; Dillon, Removal of Causes, 5th ed., p. 158.)

The petition for removal and the accompanying motion or application for an order of removal constitute appearance and pleading within the meaning and intent of the state law governing the authority of the clerk to enter default, and no default can be entered by the clerk until the petition has been finally denied or overruled. (Mattoon v. Hinkley, 33 Ill. 208; State v. Gittings, 35 Md. 169; Osprey v. Jenkins, 9 Mo. 643; Atchison T. & S. F. Ry. Co. v. Lambert, 31 Okla. 300, Ann. Cas. 1913E, 329, 121 P. 654; 6 Ency. Pl. & Pr. 93; 23 Cyc. 757.)

The petition for removal is a plea to the jurisdiction of the court, and in overruling a petition or motion for the removal of a cause the rule of respondent ouster obtains, and the order should be that defendant plead further within the time fixed by the court, and until the expiration of such time no default can be entered against defendant. (Kelly v. Van Austin, 17 Cal. 564; Reinhart v. Lugo, 86 Cal. 395, 21 Am. St. 52, 24 P. 1089; 6 Ency. Pl. & Pr. 80; 1 Black on Judgments, 2d ed., sec. 13; 1 Freeman on Judgments, 4th ed., sec. 7; Trow v. Messer, 32 N.H. 361; Cooke v. Crawford, 1 Tex. 9, 46 Am. Dec. 93; Robb v. Parker, 4 Heisk. (Tenn.) 58; Kamp v. Bartlett, 164 Ill.App. 338.)

A simple default should be vacated in furtherance of justice and on such terms as may be proper. (McFarlane v. McFarlane, 45 Ore. 360, 77 P. 837; Hall v. McCan, 62 Ore. 556, 126 P. 5; Cutler v. Haycock, 32 Utah 354, 90 P. 897; Melde v. Reynolds, 129 Cal. 308, 61 P. 932; Greene v. Montana Brewing Co., 32 Mont. 102, 79 P. 693; Staley v. O'Day, 22 Cal.App. 149, 133 P. 620; Douglas v. Badger State Mine, 41 Wash. 266, 83 P. 178, 4 L. R. A., N. S., 196.)

The application for vacating the default entered against defendant shows both mistake, inadvertence, surprise and excusable neglect, and the trial court erroneously assumed it had no discretion in the matter. Statutes should be liberally construed with the view to determining causes on the merits. (Rev. Codes, secs. 4, 4225, 4226, 4228, 4229 and 4231; Shreve v. Cheesman, 69 F. 785, 16 C. C. A. 413; Flagg v. Puterbaugh, 98 Cal. 134, 32 P. 863; Smith v. Whittier, 95 Cal. 279, 30 P. 529; Wallace v. Okolona Savings' Inst. Co., 49 Miss. 616, 620.)

The cause was removable to the federal court, and an order should have been made transferring it. (Ex parte Nebraska, 209 U.S. 436, 28 S.Ct. 581, 52 L.Ed. 876; Troy Bank v. Whitehead & Co., 222 U.S. 39, 32 S.Ct. 9, 56 L.Ed. 81; Illinois Central R. Co. v. Adams, 180 U.S. 28, 21 S.Ct. 251, 45 L.Ed. 410.)

The liability of the surety on this bond does not extend to the general public depositing money in the banks of the state. (Idaho Rev. Codes, secs. 191, 194, 3000, 3001, 3003, 3005 and 3004.) Sec. 191, Rev. Codes, requires all damages against the bank commissioner to be adjudged against such bank commissioner before the surety of such commissioner can be held liable. (Umbreit v. American Bonding Co., 144 Wis. 611, 129 N.W. 789; Western Assurance Co. v. Klein, 48 Neb. 904, 67 N.W. 873; Blaufus v. People, 69 N.Y. 107, 25 Am. Rep. 148; Webb v. Bidwell, 15 Minn. 484; United States v. Irwin, 127 U.S. 125, 8 S.Ct. 1033, 32 L.Ed. 99; Sans v. City of New York, 31 Misc. 559, 64 N.Y.S. 681; New Orleans Nat. Banking Assn. v. Adams, 3 Woods, 21, F. Cas. No. 10,184; Brownell v. Greenwich, 44 Hun (N. Y.), 611, 8 N.Y.S. 6; Wirt v. Peck, 184 F. 54, 107 C. C. A. 16; Tyler Min. Co. v. Last Chance Min. Co., 90 F. 15, 32 C. C. A. 498; Browning v. Porter, 12 F. 460, 2 McCrary, 581.) Sec. 3005 imposes unusually severe penalties on the commissioner if he proceeds against a bank without reasonable cause. In view of such penalties a very strong showing should be required before any court would be justified in holding the commissioner liable for an abuse of discretion in failing to close a bank. (Reed v. Conway, 20 Mo. 22; Jenkins v. Waldron, 11 Johns. (N. Y.) 114, 6 Am. Dec. 359.)

On official bonds there can be no liability and no recovery without malice alleged and proved. (Wheeler v. Patterson, 1 N.H. 88, 8 Am. Dec. 41; Wearer v. Devendorf, 3 Denio (N. Y.), 120; Wilson v. Mayor, 1 Denio (N. Y.), 599, 43 Am. Dec. 719; Venderheyden v. Young, 11 Johns. (N. Y.) 160; State v. Chadwick, 10 Ore. 465.)

The duties of the bank commissioner under sec. 3005, Rev. Codes, are not ministerial. They are of a highly discretionary character. (State ex rel. Irvine v. Brooks, 14 Wyo. 393, 84 P. 488, 7 Ann. Cas. 1108, 6 L. R. A., N. S., 750.)

The official is not liable in damages for either error of judgment, incompetency or mistakes of law or fact. (Hoke v. Henderson, 15 N.C. 1, 25 Am. Dec, 677; Edwards v United States, 103 U.S. 471, 26 L.Ed. 314; United States v. McClane, 74 F. 153; Gould v. Hammond, 10 F. Cas. No. 5636; Pratt v. Gardner, 2 Cush. (Mass.) 63, 48 Am. Dec. 652; Stone v. Graves, 8 Mo. 148, 40 Am. Dec. 131; Rains v. Simpson, 50 Tex. 495, 32 Am. Rep. 609; Spalding v. Vilas, 161 U.S. 483, 16 S.Ct. 631, ...