U.S. Fidelity & Guaranty Co. v. Bramwell

• Decision Date: 10 July 1923
• Citation: 108 Or. 261,217 P. 332
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. BRAMWELL, STATE SUPERINTENDENT OF BANKS.
• Court: Oregon Supreme Court

217 P. 332

108 Or. 261

UNITED STATES FIDELITY & GUARANTY CO. v. BRAMWELL, STATE SUPERINTENDENT OF BANKS.

Supreme Court of Oregon, En Banc.

July 10, 1923

Appeal from Circuit Court, Crook County; T. E. J. Duffy, Judge.

Suit by the United States Fidelity & Guaranty Company, a corporation against Frank C. Bramwell, State Superintendent of Banks. Decree for defendant on general demurrer, and plaintiff appeals. Reversed and remanded, with directions.

G. L. Buland, of Portland (Dey, Hampson & Nelson, of Portland, on the brief), for appellant.

Willard H. Wirtz, Dist. Atty., of Prineville, and J P. Kavanaugh, of Portland (Bowerman & Kavanaugh, of Portland on the brief), for respondent.

RAND J.

The plaintiff, the United States Fidelity & Guaranty Company, appeals from a decree sustaining a general demurrer to its complaint and dismissing its suit. The complaint alleges, among others, the following facts: That the State Treasurer, pursuant to the provisions of chapter 3, tit. 24, Or. L., deposited $4,005.92 of funds belonging to the state in the Crook County Bank of Prineville, Or., a state bank. The plaintiff, under the provisions of section 2739, Or. L., executed, as surety, its bond to secure the repayment to the state of the funds so deposited. The bond was conditioned that in the event of the bank's default in the repayment of the money so deposited the surety would pay the same. The bank became insolvent and the defendant, the superintendent of banks for the state of Oregon, took possession of its assets, property, and business, and now has possession thereof, and is engaged in liquidating the indebtedness of the bank, in accordance with the provisions of chapter 5, tit. 35, Or. L. The plaintiff, as surety, paid to the state the amount of its deposit and thereupon demanded that the defendant repay plaintiff the amount so paid before paying the claims of general creditors. It appears that the assets of the bank are insufficient to pay all claims in full. The complaint also alleges that the state was entitled to a priority of payment as against all depositors and creditors of said bank not having an antecedent lien, and that by reason of the payment by plaintiff of the bank's debt to the state, the plaintiff is entitled to be subrogated to the right of the state to priority in payment over general creditors of the bank. This suit was brought for the purpose of having its claim so allowed and paid.

The lower court sustained a general demurrer to the complaint on the assumption that the common law has not been adopted in this state by any constitutional or statutory provision, and therefore before the common-law prerogative right of the British Crown to priority in payment of debts due it from an insolvent debtor, as against creditors not having a specific lien, can exist in favor of the state, it must rest upon statute, and there being no statute conferring the right the state is not entitled to priority, and this is one of the questions we are called upon to decide.

The common law of England, modified and amended by English statutes, as it existed at the time of the American Revolution, as far as it was general and not local in its nature and applicable to the conditions of the people and not incompatible with the nature of our political institutions or in conflict with the Constitution and laws of the United States or of this state, except as modified, changed, or repealed by our own statutes, has been adopted and is in force in this state. Peery v. Fletcher, 93 Or. 43, 182 P. 143.

By section 2, art. 1, of the organic law of the provisional government of Oregon, adopted by the vote of the people on July 26, 1845, it was declared that:

"The inhabitants of said territory shall always be entitled to the benefits of the writ of habeas corpus and trial by jury, of a proportionate representation of the people in the Legislature, and of judicial proceedings, according to the course of common law."

See General Laws of Oregon, 1845-1864, compiled and annotated by M. P. Deady, p. 59.

In recognition of the laws in force under the provisional government, Congress, in establishing the territorial government of Oregon, on August 14, 1848, enacted:

"That all suits, process and proceedings, civil and criminal, at law and in chancery, * * * which shall be pending and undetermined in the courts established by authority of the provisional government of Oregon, within the limits of said territory, when this act shall take effect, shall be transferred to be heard, tried, prosecuted and determined in the district courts hereby established, * * * All bonds, recognizances, and obligations of every kind whatsoever, valid under the existing laws within the limits of said territory, shall be valid under this act; * * * and all * * * actions and causes of action, may be recovered under this act, in like manner as they would have been under the laws in force within the limits composing said territory at the time this act shall go into operation," etc. Gen. Laws of Or. of 1845-1864, by M. P. Deady, p. 77, § 17.

Section 7, art. 18, of the Constitution, adopted by the people on September 18, 1857, provides that--

"All laws in force in the territory of Oregon when the constitution takes effect, and consistent therewith, shall continue in force until altered or repealed."

In the determination of causes, the courts of this state have, in the absence of statute, always followed and applied the general rules of the common law in so far as those rules were found to be applicable to existing conditions and suitable to the needs and necessities of the people. Of necessity this is so, as otherwise, in the absence of statute, there would have been no rule of decision, and the decisions rendered would have had no authority to sustain them. In fact, in nearly every reported decision of this court, up to the time Oregon was admitted as a state in 1859, we find the court, in the absence of statute, determining and enforcing the rights, interests, and estates of the parties, construing statutes and interpreting written instruments according to the rules of the common law as announced by the common-law courts and text-writers of England and of this country. In the entire volume of the first Oregon Reports covering said period, there is hardly a decision where the rules of the common law in some respects were not applied and followed by those distinguished jurists, George H. Williams, C.J., Matthew P. Deady, J., and Reuben P. Boise, J., whose wide and extensive knowledge of the common law made them so justly eminent in their profession.

Speaking of common law in Oregon, Mr. Justice Gray, in Shively v. Bowlby, 152 U.S. 1, 14 S.Ct. 548, 38 L.Ed. 331, said:

"The settlers of Oregon, like the colonists of the Atlantic states, coming from a country in which the common law prevailed to one that had no organized government, took with them, as their birthright, the principles of the common law, so far as suited to their condition in their new home. The jurisprudence of Oregon, therefore, is based on the common law."

It is therefore too late to now contend that the common law of England, within the limitations laid down in Peery v. Fletcher, supra, has not been adopted as a part of the law of the state.

"The term 'common law of England' refers to that general system of law which prevails in England, and in most of the United States by derivation from England, as distinguished from the Roman or civil law system." 12 C.J. 177, § 2.

"The principles of equity are part of our common law. It is the very essence of common or customary law that it consists of those principles and forms which grow out of the customs and habits of the people. It is therefore involved in its very nature that only so much of the English law as is adapted to our circumstances and customs is properly recognized as part of our common law." Lowrie, J., in Pennock's Estate, 20 Pa. 268, 59 Am. Dec. 718.

"In New Hampshire," said the court in Wells v Pierce, 27 N.H. 503, 512, "equity, as a great branch of the law of their native country, was brought over by the colonists, and has always existed as a part of the common law, in its broadest sense."

"Equity was brought over to this country by the English colonists together with the common law as one of their established institutions." 21 C.J. 31, § 7.

"At common law," said Mr. Justice Brandeis, in Marshall v. New York, 254 U.S. 380, 41 S.Ct. 143, 65 L.Ed. 315, "the crown of Great Britain, by virtue of a prerogative right, had priority over all subjects for the payment out of a debtor's property of all debts due it. The priority was effective alike whether the property remained in the hands of the debtor, or had been placed in the possession of a third person, or was in custodia legis. The priority could be defeated or postponed only through the passing of title to the debtor's property, absolutely or by way of lien, before the sovereign sought to enforce his right."

"As to the third protection cum clausula volumus, the king by his prerogative regularly is to be preferred in payment of his duty or debt by his debtor before any subject, although the king's debt or duty be the latter; and the reason hereof is, for that thesaurus regis est fundamentum belli, et firmanentum pacis. (1) And thereupon the law gave the king remedy by writ of protection to protect his debtor, that he should not be sued or attached until he paid the king's debt. But hereof grew some inconvenience, for to delay other men of their suits, the king's debts were the more slowly paid. And for remedy thereof, it is enacted by the statute of 25 E. 3, that the other creditors may have their actions against the king's debtor, and proceed to judgment, but not to execution, unless he

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