State v. Title Guaranty & Surety Co. of Scranton, Pennsylvania

• Decision Date: 02 October 1915
• Citation: 27 Idaho 752,152 P. 189
• Parties: STATE, to and for the Use and Benefit of O. W. ALLEN et al., Respondents, v. TITLE GUARANTY AND SURETY COMPANY OF SCRANTON, PENNSYLVANIA, a Corporation, and VERNON W. PLATT, Appellants
• Court: Idaho Supreme Court

152 P. 189

27 Idaho 752

STATE, to and for the Use and Benefit of O. W. ALLEN et al., Respondents, v. TITLE GUARANTY AND SURETY COMPANY OF SCRANTON, PENNSYLVANIA, a Corporation, and VERNON W. PLATT, Appellants

Supreme Court of Idaho

October 2, 1915

JURISDICTION-AMOUNT IN CONTROVERSY-PARTIES-CAUSES OF ACTION-MISJOINDER-PUBLIC OFFICERS-POWERS AND DUTIES-DISCRETIONARY POWERS - CONSTITUTIONAL LAW - ACTION PREMATURELY BROUGHT-INTEREST.

1. Where a state, as trustee of an express trust, sues to recover sums which, in the aggregate, exceed $3,000 exclusive of interest and costs, for and on behalf of certain depositors in a bank whose deposits have been lost as a result of the failure of the bank commissioner to perform his official duty and where the claim of no individual depositor amounts to $3,000, although diversity of citizenship exists between the parties to the action, a petition for removal to the federal court was properly denied.

2. In such case the state was plaintiff for the use and benefit of the depositors, and properly united the several causes of action stated in the complaint, since they arose out of contracts, and the causes of action so united affect all parties to the suit and did not require different places of trial. The demurrer to the complaint upon the ground of misjoinder of parties plaintiff and misjoinder of causes of action was properly overruled.

3. Where power is given by statute to a public officer in permissive language-as that he may do a certain thing,-the language used will be regarded as peremptory if the public interest or individual rights require that it should be so regarded.

4. The law invests a bank commissioner with discretion while he is making his investigation and up to the point where he reaches the conclusion and becomes satisfied that the bank has unlawfully refused to pay its depositors and has become insolvent, but at this point his discretion ends and it becomes his mandatory duty to close it, a duty the failure to perform which renders him and the surety upon his official bond liable to depositors who lose their money as a direct result thereof.

5. The provisions of secs. 73 and 74, chap. 124, Sess. Laws 1911 held, not to be in contravention of the 14th amendment of the con- stitution of the United States nor of sec. 13, art. 1, nor secs. 2 and 13, art. 5, of the constitution of Idaho.

6. The contention that an action has been prematurely brought cannot be successfully made for the first time upon appeal, but must be made first in the trial court.

7. In cases of this kind, where the amount claimed is definite and certain or can be readily ascertained-of a character not wholly unliquidated-in the absence of a stipulation in the bond to the contrary and in the absence of a controlling statutory provision, interest begins to accumulate as against the surety on the bond at the same time as against the principal obligor. If a breach in the conditions of the bond creates a debt on the part of the principal, it becomes the debt of the surety as well, and if it is unnecessary to make demand upon the one in order to start the interest period none need be made upon the other.

8. Where a statute imposes a duty upon one for the protection and benefit of others, and does not invest him with discretionary power in the matter, if he neglects to perform the duty, he is liable to those for whose protection the statute is enacted for any damage resulting proximately from his neglect, whether he be actuated by malice, a corrupt motive or otherwise.

APPEAL from the District Court of the Third Judicial District for Ada County. Hon. Charles P. McCarthy, Judge.

Action on official bond. Judgment for plaintiff. Affirmed.

Judgment of the trial court affirmed. Costs awarded to the respondents.

John F Nugent, S. H. Hays and P. B. Carter, for Appellant.

Petition for removal to the United States court should have been granted.

"When several plaintiffs unite to enforce a single title or right in which they have a common and undivided interest, it is enough if their interests collectively equal the jurisdictional amount." (Troy Bank v. G. A. Whitehead & Co., 222 U.S. 39, 32 S.Ct. 9, 56 L.Ed. 81; Cowell v. City Water Supply Co., 121 F. 53, 55, 57 C. C. A. 393; Shields v. Thomas, 17 How. 93, 15 L.Ed. 53; Marshall v. Holmes, 141 U.S. 589, 12 S.Ct. 62, 35 L.Ed. 870; Davies v. Corbin, 112 U.S. 36, 5 S.Ct. 4, 28 L.Ed. 627.)

The mere presence on the record of the state as a party plaintiff will not defeat the jurisdiction of the federal court if it appears that the state had no real interest in the controversy. (Ex parte Nebraska, 209 U.S. 436, 28 S.Ct. 581, 52 L.Ed. 876.)

There is no warrant whatever in the statute or in the practice for making the state a party in a suit of this character. ( United States v. Shoup, 2 Idaho 493, 21 P. 656; Baker v. Bartol, 7 Cal. 551; Mendocino Co. v. Lamar, 30 Cal. 628; Mendocino Co. v. Morris, 32 Cal. 145; Heisen v. Smith, 138 Cal. 216, 94 Am. St. 39, 71 P. 180.)

The demurrer to the complaint should have been sustained upon the ground of a misjoinder of parties plaintiff and of causes of action. (Pomeroy's Code Remedies, sec. 377; Creer v. Bancroft L. & Irr. Co., 13 Idaho 407, 90 P. 228; Benson v. Battey, 70 Kan. 288, 78 P. 844, 3 Ann. Cas. 283.)

Administrative officers, such as bank commissioners, exercising quasi-judicial functions, cannot be questioned as to their judgments in matters which by the statute they are called upon to decide. (Mechem on Public Officers, sec. 640; 29 Cyc. 1444; 2 Cooley on Torts, P. 797; Throop on Public Officers, secs. 720, 721.)

The surety was liable for interest only from the time of the making of the demand. (City of Dickinson v. White, 25 N.D. 523, 143 N.W. 754, 49 L. R. A., N. S., 362, and cases there cited.)

Under plaintiffs' construction of the statute, no notice or hearing on the question of insolvency is provided for. This is not due process of law. (Chicago, Milwaukee & St. Paul Ry. Co. v. State of Minnesota, 134 U.S. 418, 10 S.Ct. 462, 33 L.Ed. 970; 28 Harvard Law Review, 198.)

The action is prematurely brought. There can be no recovery until the amount of the loss is ascertained. (People v. Supervisors of Livingston County, 17 N.Y. 486.)

J. H. Peterson, Atty. Genl., and Martin & Cameron, for Respondent.

In order for a case to be removable on the grounds of diversity of citizenship, the controversy must be between citizens of different states. A state is not a citizen within the meaning of the removal acts. (Stone v. South Carolina, 117 U.S. 430, 6 S.Ct. 799, 29 L.Ed. 962; Buxton v. Pennsylvania Lumber Co., 221 F. 718.)

This bond was given for the benefit and protection of bank depositors. (State v. American Surety Co., 26 Idaho 652, 145 P. 1097.)

The state is the trustee of an express trust within the meaning of sec. 4092, Rev. Codes, and the suit was properly brought in the name of the state. (People v. Stacy, 74 Cal. 373, 16 P. 192.)

This court has heretofore said in Bellevue State Bank v. Coffin, 22 Idaho 210, 125 P. 816, that it is a fraud upon depositors for a bank known to be insolvent to continue running and receiving depositors' money.

By the Session Laws of 1911, chap. 124, sec. 36, p. 398, and sec. 71, p. 407, every officer of a bank is liable civilly to every depositor who suffers damage, when such officers accept depositor knowing that the bank is insolvent. Moreover, by sec. 71, any owner or officer of a bank who shall receive deposits knowing that a bank is insolvent shall be deemed guilty of a felony. This law in effect makes it the absolute, imperative, mandatory duty of the owners and officers of a bank to close a bank and stop receiving deposits when they know the bank is insolvent. Can it be argued in the face of such provisions that it is discretionary with a bank commissioner to allow a bank which he knows and is satisfied is insolvent to continue running? (Nathan v. Uhlman, 101 A.D. 388, 92 N.Y.S. 13; Cassidy v. Uhlmann, 170 N.Y. 505, 63 N.E. 554; State v. Beach, 147 Ind. 74, 43 N.E. 949, 46 N.E. 145, 36 L. R. A. 179; State v. Cadwell, 79 Iowa 432, 44 N.W. 700; Parrish v. Commonwealth, 136 Ky. 77, 123 S.W. 339; State v. Cramer, 20 Idaho 639, 119 P. 30; Baxter v. Coughlan, 70 Minn. 1, 72 N.W. 797.)

"Where power is given to public officers, whenever public or individual right calls for its exercise, the language used, though permissive in form, is in fact peremptory. In all such cases it is held that the intent of the legislature was not to devolve a mere discretion, but to impose a positive and absolute duty." (State v. American Surety Co., supra; Supervisors v. United States, 4 Wall. 435, 18 L.Ed. 419; Hayes v. Los Angeles Co., 99 Cal. 74, 80, 33 P. 766; State v. Kent, 4 N.D. 577, 591, 62 N.W. 631, 635, 27 L. R. A. 686; United States ex rel. Siegel v. Thoman, 156 U.S. 353, 15 S.Ct. 378, 39 L.Ed. 450; Woolridge v. McKenna, 8 F. 650, 662; United States v. De Visser, 10 F. 645; Ralston v. Crittenden, 13 F. 508, 512, 3 McCrary, 344.)

After the bank commissioner became satisfied that the bank was insolvent it became mandatory upon him to perform the ministerial act of taking charge of the bank. (Flournoy v. City of Jeffersonville, 17 Ind. 169, 79 Am. Dec. 468.) Sureties on official bonds are liable for negligence or malfeasance of their principal in the performance of acts which are done virtute officii. (29 Cyc. 1455; Throop on Public Officers, secs. 724--726; Myers v. Colquitt (Tex. Civ. App.), 173 S.W. 993.)

After the performance of a discretionary duty an officer may then be called upon, in the same statute, to perform a ministerial duty. (29 Cyc. 1443; Speer v. Stephenson, 16 Idaho 707, 102 P. 365; Grider v. Tally, 77 Ala. 422, 54 Am. Rep. 65; State v. Chase, 5...