United States Fid. & Guar. Co v. Cent. Trust Co

• Decision Date: 29 January 1924
• Docket Number: (C. C. No. 255.)
• Citation: 121 S.E. 430
• Court: West Virginia Supreme Court
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. CENTRAL TRUST CO.

121 S.E. 430

UNITED STATES FIDELITY & GUARANTY CO.

v.CENTRAL TRUST CO.

(C. C. No. 255.)

Supreme Court of Appeals of West Virginia.

Jan. 29, 1924.

(Syllabus by the Court.)

Case Certified from Circuit Court, Kanawha County.

Suit by the United States Fidelity & Guaranty Company against the Central Trust Company, receiver. A demurrer to the bill was overruled, and questions certified. Ruling affirmed.

Poffenbarger, Blue & Dayton, of Charleston, for plaintiff.

Brown, Jackson & Knight, of Charleston, for defendant.

MILLER, J. Plaintiff, surety oh bonds of the Day & Night Bank to secure the State of West Virginia, by this suit seeks to be subrogated to the prerogative right of the State as a preferred creditor of the bank. The circuit court overruled defendant's demurrer to the bill, and has certified to us for decision the questions presented by the demurrer.

On July 21, 1919, the state commissioner of banking found the Day & Night Bank of Charleston, West Virginia, to be in an insolvent condition, and, pursuant to statute, appointed the defendant Central Trust Company receiver for said bank. At the time the State had on deposit in the bank state funds amounting to about $87,000.00. By letter of August 14, 1910, the plaintiff gave notice to defendant that it took the position that funds of the State on deposit in said bank constituted a preferred or preferential claim in favor of the State, and that the State should be paid in full before the claims of any other depositor. Later plaintiff paid to the State in full the amount of its liability on the bonds, and took from the treasurer of the State an assignment of all the rights, claims and demands it had or held in any way against the bank, but without recourse against the State. Since the receiver took charge of the bank, it has paid to plaintiff $30,171.71 out of the assets of the said bank. It is further alleged that the receiver has in its hands enough money of the assets of the bank to pay the State's claim in full but not sufficient to satisfy the claims of all other depositors. Plaintiff alleges that it has demanded of defendant the payment of its claim in full out of the bank's assets, but thai defendant, has refused, assigning as reason for refusal that it is advised that the state is without such preferential rights as claimed by plaintiff.

The grounds of demurrer assigned are: (1) That suit cannot be maintained without the consent of the state commissioner of banking; (2) that all other creditors of the bank must be made parties; (3) that the State is not entitled to priority, because there is no trust or fiduciary relation between it and the bank; (4) that by the appointment of the receiver title to the property passed to it, and the bank was thereby divested of all title and interest therein, and neither the State nor any one in its right could claim priority in the distribution of the assets; (5) that the prerogative right of the State to priority is peculiar to it, and cannot be exercised by plaintiff.

The first and second points of demurrer assigned are answered by our decision in Alleman v. Sayre, 79 W. Va. 763, 91 S. E. 805, L. R. A. 1917D, 1002, where we held that "the general creditors of an insolvent bank are not necessary parties to a suit against the receiver thereof, having for its purposes the establishment of a right of preference in payment out of the assets of the bank in his hands;" and that "leave of the commissioner of banking, to sue a receiver of an insolvent bank, * * * is not essential to the institution or maintenance of a suit against him."

In the case of Woodyard v. Sayre, 90 W. Va. 295, 110 S. E. 689, 24 A. L. K. 1497, we held that at common law the State had the prerogative right independently of statute to preference and priority of payment over all general creditors, for all debts, taxes or other demands, in the distribution of the estate of an insolvent debtor, and that such prerogative right has not been repealed, changed or abrogated by statute in this State, and that the surety on the bond of a defaulting sheriff, who has paid and satisfied to the State the amount of the defalcation in discharge of the conditions of the bond, is entitled to be subrogated to all the rights of the State, including the State's priority and preference over general creditors. It is insisted by counsel for defendant here, that the Woodyard Case is different from the one under consideration; that in this case there is no such relation of trust between the debtor and creditor as in the former case, and that the bank does not stand in a fiduciary capacity as does a sheriff. An examination of the cases cited and relied on as authority in the opinion in the Woodyard Case, will reveal the fact that our decision there was not based on the particular trust or fiduciary relation existing between the State and the sheriff, but was based on the relationship of debtor and creditor, when the State is the creditor. It is true that the claim of the State in that case was for taxes collected and in the hands of the sheriff at the time of his default; and it was urged by defendant in that case that taxes are not debts. An examination of the Woodyard Case will show-that our decision there was predicated on the general doctrine of subrogation when a surety...