Woodyard v. Sayre.

• Decision Date: 14 February 1922
• Citation: 90 W.Va. 295
• Court: West Virginia Supreme Court
• Parties: William Woodyard, Adm'r v. Lizzie Sayre et al.

90 W.Va. 295

William Woodyard, Adm'r

v.Lizzie Sayre et al.

Supreme Court of Appeals of West Virginia.

Submitted February 7, 1922.

Decided February 14, 1922.

1. States State at Common Law Had Priority Over General Creditors of Insolvent Debtor.

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, (p. 296).

2. Same State's Prior Right at Common Law Over Other Creditors of Insolvent Not Repealed or Taken Away.

This prerogative right to such preference and priority has not been repealed, changed or abrogated by any statute of this State, but preserved by Section 21, Article VIII of the Constitution until expressly taken away by appropriate legislation. Sections 25 and 26 of chapter 85 of the Code, relating to the 'distribution of estates of insolvent debtors, does not expressly nor by Implication repeal or take away such common-law right. (p. 297).

3. Subrogation Bonding Company Satisfying State Held Entitled to Subrogation to State's Prior Rights in Defaulting Officer's Insolvent Estate.

The surety on the bond of a 'defaulting sheriff having paid and satisfied to the State the amount of the defalcation in discharge of the conditions in his bond, is entitled to be subrogated to all the rights of the State, county or other municipal authority, including the priority and preference over general creditors, in the distribution of the estate of such insolvent and defaulting officer, (p. 301).

Appeal from Circuit Court, Wirt County.

Proceeding by William Woodyard, administrator, against Lizzie Sayre and others, and from a decree therein the defendant United States Fidelity & Guaranty Company appeals.

Reversed in part; remanded. J. A McCullough, J. W. Martin and W. H. Wolfe, for appellant.

T. A. Brown and C. M. Hanna, for appellee.

Miller, Judge:

Two questions are presented by this appeal: The first is whether the State by prerogative right, if not by statute, is entitled to preference and priority over general creditors, not lien creditors, for state, county and other taxes collected and not accounted for, out of the estate of a deceased defaulting sheriff. And if so, second, whether the surety on the official bond of such sheriff, on discharging his liability to the State on such bond, is entitled by subrogation to the rights of the State, and to be paid according to such priority out of the estate of such officer when insolvent.

On the first proposition, it is a concessum that at common law the crown, by prerogative right and independently of any statute was entitled to priority of payment over general creditors for all debts, taxes and other demands against the estates of insolvent debtors. This proposition seems to have been recognized and followed in this country by a long line of decisions, state and federal, with but one or two exceptions, since the government of the United States was established; and to this right the State of West Virginia has succeeded, unless it has been taken away by constitution or statute. The decisions on the question, carefully collated and cited by counsel for the appellant are as follows: United States v. Knight, 14 Pet. 301, 315, United Stales v. H err on, 20 Wall. 251; Dollar Savings Bank v. United States, 19 Wall. 227; Guaranty Co. v. Title Guaranty Co., 224 U. S. 152; Marshall v. People of the State of New York, 254 II. S. 380; U. S. Fid. & Guar. Co. v. Union Bank & Trust Co., 228 Fed. 448; U. S. Fid. & Guar. Co., v. Carnegie Trust Co., 146 N. Y. S. 801, affirmed 213 N. Y. 629; In re Niederstein, 138 N. Y. S., 952; In re Carnegie Trust Co., 206 N. Y. 390; U. S. Fid. & Guar. Co. v. Rainey, 120 Tenn. 357; State of New Mexico v. First State Bank, 167 P. 3; State of Wyoming v. Foster, 29 L. 11. A. 226; Bibbins v. Clark, (Iowa), 29 L. R. A. 278; Aetna, Accident & Liability Co. v. Miller, (Mont.), 170 P. 760. It seems to us unnecessary to enter upon any extended review of these decisions, which so well establish the proposition for which they are cited. This prerogative right will be enforced in the United States, says the court in Marshall v. New York, whether it be regarded as a prerogative right or a mere rule of administrative local law, binding on the federal courts.

Our next inquiry then is, has this prerogative right of the State been taken away, changed or modified by constitution or statute? Our constitution, section 21, article 8, provides that: '' Such parts of the common law, and of the laws of this State as are in force when this article goes into operation, and are not repugnant thereto, shall be and continue the law of the State until altered or repealed by the Legislature. '' It is asserted on behalf of Woodyard, Administrator, appellee, concerning the common-law right and prerogative, that it has been abrogated or taken away by the statute relating to the distribution of decedents' estates, and because of the fact that the statute gives the State no lien or priority, or method of enforcing the same against the property of the decedent, and that if not specifically repealed, this ancient right has been taken away by implication. It is argued that this right was taken away by sections 25 and 26 of chapter 85 of the Code. Section 25 provides: "Where the assets of the decedent in the hands of his personal representative, after the payment of funeral expenses and charges of administration, are not sufficient for the satisfaction of all demands against him, they shall be applied, (1) to debts due the United States; (2) taxes and levies assessed upon the decedent previous to his death; (3) debts due as personal representative, guardian or committee, where the qualification was in this State, in which debts shall be included a debt for money received by a husband acting as such fiduciary in right of his wife; (4) all other demands ratably, except those in the next class; (5) voluntary obligations." And section 26 says: "No payment shall be made to creditors of any one class, until all those of the preceding class or classes shall be fully paid." The argument is that while section 25 gives priority to debts of the United States, and of the State for taxes and levies assessed upon the decedent previous to his death, the stat- ute gives no lien for any debts or claims not falling within the description of the statute, and though not so specifically declared, the statute is a repeal, by implication at least, of the ancient prerogative right. The case of Hinchmanv. Morris, 29 W. Va. 673, involved the right of a deputy sheriff, under the Code of Virginia of 1860, to be subrogated to the rights of the State for taxes paid by John Morris for the year 1860, and to have the amount of such taxes declared a. prior lien for his benefit against said estate. The decision in that case denying the petitioner the right to such lien was predicated on the theory that taxes were not to be regarded as debts. Judge Green says: "Taxes are not debts, and therefore the equitable doctrine of subrogation or implied assignment cannot without violating the fundamental principles of equity be applied to them; and its impolicy, so far as State-taxes are concerned, seems to me obvious. For, if subrogated to the rights and remedies of the State, the sheriff would be entitled to enforce any of these rights and to resort to any of these remedies after any length of time; for subrogation being an implied assignment, it transfers not only the rights but also all the remedies, which but for such assignment the assignor would have had; and as there is no statute of limitations, which bars any of the remedies of the State except as to the time in which taxes may be distrained for, of course, the sheriff, when subrogated to the rights of the State, would be subject to no such bar. Now by the Code of 1860, chap. 130, sec. 25 and chap. 131, sec. 3, all of the assets real and personal of a decedent are to be applied to the payment of demands against him in the following order: first, debts due to the United States; second, taxes and liens assessed upon the decedent before his death; afterwards all other debts and demands in a specified order. Therefore, if the sheriff was really upon settling in full with the auditor subrogated to the rights and remedies of the State for all the taxes, he had not collected, before he so settled in full, not only could he distrain for such taxes till the expiration of two years after the 1st of July, when he received copies of the commissioners' books, but if the person, whose taxes he had advanced, should die, he could at any time after such death bring a suit to subject such person's real and personal estate to the payment of such taxes no longer due to the State, but claimed to be due by subrogation to the sheriff. When paid to the State, they cease to be taxes assessed on the decedent's estate. The State can not collect them of the taxpayer; nor can the sheriff as one subrogated to the rights of the State. If he could do so, he could do so after any length of time. This would obviously be very impolitic, if the Code of 1860 had so provided; for it would become after a time almost impossible for a decedent's representative to prove the payment of his taxes; and the burden would rest on them to prove such payment, the simple production of the tax-tickets made out by the sheriff establishing his claim, if not disproved."

Since the decision of Hinchman v. Morris and Board of Education v. Old Dominion Etc. Co., 18 W. Va. 441, and State v. B. & 0. B. R. Co., 41 W....