United States Fidelity & Guaranty Co. v. Rathbun

• Decision Date: 18 July 1924
• Docket Number: 24,011
• Citation: 199 N.W. 561,160 Minn. 176
• Parties: UNITED STATES FIDELITY & GUARANTY COMPANY v. RUSSELL D. RATHBUN AND ANOTHER
• Court: Minnesota Supreme Court

199 N.W. 561

160 Minn. 176

UNITED STATES FIDELITY & GUARANTY COMPANY v. RUSSELL D. RATHBUN AND ANOTHER

No. 24,011

Supreme Court of Minnesota

July 18, 1924

Action in the district court for Ramsey county to have plaintiff's claim of $6,571.84 adjudged preferred against defendantNorthern State Bank of Minneapolis and that defendant Rathbun, as state superintendent of banks, be ordered to pay the claim with interest before paying the general debts of the bank.Plaintiff's motion for judgment on the pleadings was granted by Boerner, J., who pursuant to two stipulations of the parties, made findings of fact and conclusions of law.From an order denying their motion for a new trial, defendants appealed.Affirmed.

SYLLABUS

Bond of depository of state funds continuing obligation.

1.The bond, executed by plaintiff to the state upon its principal a state bank, being designated as a depository of state funds, was a continuing obligation, and not one renewed each time the promised annual premium was paid.

Surety's right of subrogation not affected by subsequent legislation.

2.The right of plaintiff to be subrogated to the preference given the state, in case of insolvency of the depository, attached when the bond was given and the relation of surety was assumed, and cannot be affected by subsequent legislation enacted prior to a termination of the bond.

F. B. Wright, Special Attorney, Clifford L. Hilton, Attorney General, and Rollin L. Smith, Assistant Attorney General, for appellants.

Denegre, McDermott, Stearns & Weeks, for respondent.

OPINION

HOLT, J.

Defendants appeal from the order denying their motion for a new trial.The facts were stipulated, hence the appeal challenges only the legal conclusion directing judgment for plaintiff.

The facts necessary to be stated are these: The defendant bank was designated a depository for state funds in December, 1919, and plaintiff executed its bond to the state conditioned that its principal, the bank, should pay over to the state treasurer, whenever demanded, all moneys belonging to the state which theretofore had been or thereafter might be deposited with the bank.In the written application for the bond the bank represented to plaintiff that a deposit by the state created a preferred lien against its assets, and that the date of the termination of the bond was indefinite.The bank also therein agreed, among other things, to pay the premium annually in advance thereafter "until said company shall, in the manner provided by law, be discharged or released from any and all responsibility under said bond and all matters arising therefrom, and proper legal evidence of such discharge or release be served on said company."In March, 1922, the bank became insolvent and the superintendent of banks took charge, at which time the state had on deposit $6,571.84.Thereafter the state treasurer, unable to obtain payment from the depository, demanded and received the amount from plaintiff which filed a claim therefor with the defendant Rathbun, asking that it be allowed as a preferred claim against the assets of the bank.It was allowed as a general claim only, and this action was instituted to have it adjudged preferred.Plaintiff prevailed.

Appellants contend that the bond was not a continuing contract, but one renewed each year as the stipulated annual premium was paid; and hence, at the time the last premium was paid, in November, 1921, chapter 518, p. 973,Laws 1921, imported into the terms of the bond the provision that where the state receives the amount of its claim against an insolvent depository from the surety "the latter shall not, by reason thereof, be subrogated to the claim of the state against the assets of the insolvent depository as a preferred creditor."Prior to the enactment of the provision quoted, the surety, paying the state's claim against such a depository, was held subrogated to the preference the then existing statutes gave the state.State v. Bell,64 Minn. 400, 67 N.W. 212;American Surety Co. v. Pearson,146 Minn. 342, 178 N.W. 817.Therefore, it is necessary for appellants to establish that there was a new contract or a renewal of the bond in November, 1921, when the annual premium was paid, so that the provision of said chapter 518, which took effect the previous April, may be read into and form a part of the contract.We think the facts do not so permit.

The bank applied in writing for a continuing bond.The one given is not for any definite period.In the application the bank promised and agreed to pay premiums annually, but the nonpayment does not terminate the bond.Neither in the application nor in the bond is there any provision at all similar to the one contained in the policy involved in Steele v. Great Eastern...