205 P. 915 | Ariz. | 1922
From the stipulation of facts it appears the Central Bank of Willcox was, on Janu
On October 29, 1921, the Attorney General, in behalf of the state, filed a petition in the lower court praying that the receiver be restrained from distributing the available assets of the bank as dividends pending a hearing thereon as to whether or not the state was entitled to its deposit in said bank before any distribution of the assets thereof was made by the receiver. The receiver answered petition admitting all the allegations therein, but demurred on the ground that the facts stated did not constitute a cause of action. Upon a hearing the court sustained the demurrer and dismissed the state’s petition and prayer for preference in the distribution of the bank’s assets.
The sole question on this appeal is:
■ “Whether or not the state of Arizona is a preferred creditor and as such entitled to have its claim paid in preference to the depositors and other creditors.”
Title XLIY, Civil Code of 1913, paragraphs 4642-4653, inclusive, contains the provisions of the law
“It shall be the duty of the state treasurer, upon the receipt of such bond, ... to forthwith deposit with the bank or banks, executing the same, the public. moneys then in his possession. ...” Section 4647.
The depositaries are active or inactive according to designation by the Governor, the treasurer, and the auditor. The difference between these depositaries is that the active one’s account shall at all times be subject to draft for the purposes of meeting current expenses of the state and shall pay interest on the daily balances at not less than two per cent; whereas, the inactive depositary shall not be subject to daily draft and shall pay interest at a
The learned Attorney General plants the right of the state to a preference squarely upon the rule of the common law that gave to the King of England a preference of payment, over other creditors, out of an insolvent.debtor’s estate. It is the claim that this royal prerogative enjoyed by the rulers of the mother country has descended to the various states in their sovereign capacity. The United States has never claimed a preference right to collect its debts from an insolvent or failing debtor by reason of any succession to the prerogative right exercised by the ruler under the common law, but has always provided for such preference by statute. As was said in United States v. Bank of North Carolina, 6 Pet. 29, 8 L. Ed. 308:
“The claim of the United States, however, does not stand upon any sovereign prerogative, but is exclusively founded upon the actual provisions of their own statutes.”
Some of the states of the Union claim to have succeeded to the sovereign prerogative and exercise it under the common law without any legislation in aid of the right. Others deny the state’s right to the preference under the common law as being antagonistic to the cardinal objects of a free government. Many of the cases, those denying the right and those sustaining the right to preference, are to be found in the following
In some of the states, as in the case of the United States, the preference is statutory. Bent v. Hubbardston, 138 Mass. 99; Baxter v. Baxter, 23 S. C. 114; State v. Dickson, 38 Ga. 171.
In those jurisdictions where the succession to the prerogative right is recognized it is accepted with all the limitations of the common law. The preference must be exercised while the debtor’s property is still in his hands, and it cannot be exercised against prior liens. State v. Williams, supra; State v. First State Bank, supra.
The right to exercise a preference out of the assets of an insolvent debtor, whether founded upon the written or unwritten law, is not so much for any personal advantage to the sovereign, as upon motives of public policy in order to secure an adequate revenue to sustain the public burdens and discharge the public debts. United States v. Bank of North Carolina, supra. In other words, the necessities of the government are the only justification for preferring the state over all other creditors.
Bearing in mind that the object of such preference is to secure the state in its revenues, if the legislature has adopted other means to-attain the purpose, then the reason for applying the common-law rule of
As was well said in Smith v. Arnold, 165 Ky. 214, 176 S. W. 933:
“In the instant case, the statute not only authorizes but requires the master commissioner and receiver of the court to deposit the funds held by him, as such, in the bank designated by order of the court; and a bond is provided for the purpose of securing such deposits. The law and a sound public policy*580 will not favor preferences in the liquidation of an insolvent bank; and, in the absence of statutory provisions to the contrary, we see no reason why the funds deposited in the designated depository by the master commissioner and receiver, in obedience to the statute should stand on any higher ground than the funds of the other depositors. It was to protect the funds so deposited that the bond was required of the bank; and we will not countenance an effort to relieve this bond by an attempt to obtain a priority in the disbursements of the bank’s assets, to the prejudice of the-other depositors.”
It should be borne in mind that the state’s relation to its selected and qualified depositaries is that of creditor and debtor. Its deposit is a general one, not special. From the very terms upon which the deposit is made it is in contemplation of everybody concerned that the money shall be loaned out and handled by the bank in the same manner as the moneys of any other depositor. Indeed, the bank .would have to use the money to enable it to pay the interest agreed upon and fixed by law.
“As a rule, when money is deposited in a bank, title to such money passes to the bank. The bank becomes the debtor of the depositor to the extent of the deposit, and, to that extent, the depositor becomes the creditor of the bank. Allibone v. Ames, 8 S. D. 74, 33 L. R. A. 585, 68 N. W. 165. Such deposit then constitutes a part of the assets of the bank, and, in case of insolvency, belongs to the creditors of the bank in proportion to the amount of their respective claims. Exceptions to this rule are: First, where money or other thing is deposited with the understanding that that particular money or thing is to be returned to the depositor; second, where the money or thing deposited is to be used for a specifically designated purpose; and, third, where the deposit itself was wrongful or unlawful.” City of Sturgis v. Meade County Bank, 38 S. D. 317, 161 N. W. 327.
After a somewhat careful examination of the cases, we think the following statement in Kies v. Wilkerson, 101 Wash. 340, 172 Pac. 351, is not far from the mark:
“There is a conflict of opinion among authorities as to whether, in the absence of statute, there exists in any political subdivision a common-law right to have its debts paid to it in preference to other creditors when the debtor is insolvent. But, as applied to insolvent banks in which deposits of public money have been made, the better rule seems to be that, in the absence of statute or a showing of facts sufficient to create a trust, a claim for public money has no preference over the claims of the general creditors of the bank, but stands on the same footing with them. 3 R. C. L., § 182; note to Page County v. Rose, 8 Ann. Cas. 116, and cases there cited.”
In addition to being favored over other creditor? and depositors by requiring security of a depositary approved by the Governor, treasurer, and auditor, the state is endowed by the statute, paragraphs 28A-305, Civil Code, with visitorial powers through the state superintendent of banks. This officer is authorized to visit and investigate state banks as often as he may choose, and such banks are compelled to report to him at least three times a year their financial condition. With this double opportunity to keep advised of the responsibility and financial condition of its depositaries, it would seem a very harsh', if not intolerable, rule to permit the state under a claim of preference, when such institution becomes embarrassed or insolvent, to reach its sovereign hand into the fund, that ordinarily is distributed equally among all the creditors, and take it all.
We conclude that the ample provisions of the statute law in requiring security of the state’s de
The order and judgment of the lower court is affirmed.
McALISTER and FLANIOAN, JJ., concur.