161 Mich. 691 | Mich. | 1910
Lead Opinion
(after stating the facts). In determining the obligation of a surety, the rules of interpretation and of construction employed are not different from those employed in the interpretation and construction of other written agreements. In the case presented there is a bond which refers to a contract between the principal and the obligee in the bond. These instruments may be considered together. It appears that the treasurer of the State, the obligee in the bond, agreed with the Chelsea Savings Bank, the principal in the bond, to make it a depository of a part of the surplus funds of the State and that the bank agreed to accept and safely keep, account for and pay over on demand “ to the amount of the funds so deposited,” and to pay interest upon “ all such surplus
The condition of the bond is that if the said bank shall, in accordance with said contract, safely keep and reimburse and pay over upon demand all moneys belonging to the said State of Michigan, deposited with it by said State treasurer in accordance with said contract, etc., “then this obligation to be void, otherwise, to remain in full force and effect.”
The language employed is not ambiguous; the ordinary meaning thereof is not doubtful. In terms the liability of the surety is that of the principal, limited only by the penalty of the bond and by provision for paying no more than such proportion of the total loss sustained by the treasurer of the State as the penalty of this bond bears to the total of the penalties of all bonds furnished by said bank as principal in favor of said State treasurer. It is said that the express obligation of the surety denoted by the terms of the contract and bond is modified and restricted by the statute; that there was, in effect, an agreement that for all moneys of the State deposited in the bank security would be taken; that this is recognized and is indeed contracted for in the term “as authorized bylaw,” employed in the agreement of the State treasurer and the bank. It is not to be supposed that the State, in accepting security, however ample, released the right to rely, also, upon the property of the bank. Assuming the legislature to have intended that the good and ample security required should be distinct and separate from and in addition to the credit and security afforded by the assets of the bank and the liability of its stockholders, it is a provision exclusively for the protection of the interests of the State. If otherwise construed, if it is held that the statute qualifies the contract of every surety and amounts to an agreement between the State and those furnishing security pursuant to the statute, that there will be no breach of the official duty to require “good and ample security,” the whole purpose of the law is liable to be defeated by a careless or wilful
The debt due to the State from the bank is the sum of all deposits. The bank, the principal in the bond, has not paid the debt and upon its failure so to do the surety became at once liable to pay the amount which it had agreed to pay. The surety has paid. It paid the entire penalty of the bond because the debt due to the State from the bank exceeded in amount the aggregate of the penalties of all bonds. The debt of the State has not been paid. The State is proceeding, as a creditor of the bank, to secure and it has accepted, as they have been divided by the receiver, such proportion of the assets of the bank as its debt bears to the total of debts of the bank allowed by the court. It appears that this proportion of the assets will not pay the State or any other creditor in full. The contention of the surety that there has been no loss to the State as to that part of the deposit which it secured, that so much of the deposit as it secured was a separate and distinct deposit and debt, that therefore it has paid the debt in full and is entitled, to that extent at least, to
If the State is of right entitled to a preference and to have debts due to it paid to the exclusion of other creditors, the assets of the bank would have paid the demand substantially in full. Neither in the Constitution nor in the statutes of the State is the right of the State to a preference and priority over other creditors distinctly asserted. If the right exists it is as a prerogative of sovereignty. Successive Constitutions of the State have declared, generally, that the common law shall remain in force, and it is not doubted that by the common law of England it was
The decisions of State courts are not uniform.
The question is not presented for decision in this case unless, assuming the right to exist, the intervening surety may insist upon the exercise of the right by the State. The statute, 2 Comp. Laws, § 6144 et seq., points out the procedure when a State bank has become insolvent. The general banking law, of which the sections referred to are a part, was enacted long after the statute authorizing the deposit of State funds in banks, and it has been since its passage many times amended. The funds of a bank, the possession of which is taken under this act by an officer of the State, are required to be paid, as collected, to the State treasurer. There is no provision for retaining out of such funds moneys due to the State, excluding other creditors of such a bank. On the contrary, ratable dividends are to be made (section 6146) from time to time on all such claims as may have been proved. Without treating the action of the banking commissioner in closing the Chelsea bank as the precise legal equivalent of a fair and bona fide assignment by the bank of its assets for a valuable consideration, it is nevertheless true that the proceedings taken passed all the property of the bank beyond its power or control. This, being the result of enforcement of the State law, should have an effect equal to an assignment for benefit of all creditors. Such an assignment could not
The principle proceeded upon seems to be that the right of priority of the sovereign attaches, as does the right of any lienor, only upon seizure under or enforcement of the proper writ. We do not hesitate to say that, assuming the right of priority contended for to exist in this State, the courts, in the absence of any assertion of the right by the State, and after the debtor has been divested of all control of its property in proceedings authorized by and following the statutes of the State, should not, sua sponte, assert the right in favor of a guarantor of the debtor.
The decree is affirmed.
Rehearing
ON REHEARING.
We said in the foregoing opinion, concerning the question of the prerogative right of the State as creditor to be preferred to other creditors of the debtor:
“The question is not presented for decision in this case, unless, assuming the right to exist, the intervening surety may insist upon the exercise of the right by the State.”
We proceeded then to apply the rule that at the common law the right of the sovereign to priority over other creditors of a debtor was one which must be asserted before the assets of the debtor, had passed beyond his control. On the application for rehearing it was urged that the opinion did not meet the contention that the intervening petitioner is, as to the State, a surety of the debtor, and
In the former opinion some reference is made to authority. Further references are: The note to 1 Kent’s Commentaries, star page 248; State v. Williams, 101 Md. 529 (61 Atl. 297, 109 Am. St. Rep. 579, 4 Am. & Eng. Ann. Cas. 970, 973, and note, 1 L. R. A. [N. S.] 254, and note); In re Receivership of Columbian Insurance Co., 3 Abb. Dec. (N. Y.) 239; Central Trust Co. v. Railroad Co., 110 N. Y. 250 (18 N. E. 92, 1 L. R. A. 260); In re Grinsburg, 59 N. Y. Supp. 656. The cases arose upon the assertion in some form of the alleged right of the State. The opinions relied upon by appellant are judicial assertions that in the particular jurisdiction this prerogative right of sovereignty, as recognized by the common law, has been asserted by the very act of adopting the common law into the jurisprudence of the State, and therefore may be enforced by the courts. This is the form of the contention made by appellant, and it is this alleged right of the State which it is claimed should have been exercised in the particular case, and that the surety stands, before the law, in the position it would have occupied had the State exercised the right. A royal prerogative is an arbitrary power vested in the executive, a power or will which is discretionary and uncontrolled (2 Bouvier [Rawle’s Rev.], p. 730) and in some, if not all, of the decisions which have been examined the term “ prerogative ” is evidently employed in the sense that it is an arbitrary power of the State, as distinguished from a sovereign power, which becomes effective in exercise through legislation. It is clear that no one may complain because the sovereign has not exercised a discretionary and arbitrary
We do not doubt that the State may provide by legislation for a preference of payment of demands due to the State. The legislatures of some of the States and the congress of the United States have, to some extent, given a preference to demands due to the government. The right to do this is inherent in the State. It is exercised in this State, in a limited way, in the collection of the revenues. It has at all times been, as it now is, within the power of the legislature to make such provisions for State priority as seemed to be expedient. It has made none for cases like the one at bar. The form of our government, the undoubted power of the legislature in this behalf, furnish reasons for saying that in adopting the applicable rules of the common law as a part of the law of the State, the people did not adopt and thereby assert an arbitrary, prerogative right to priority of payment of its debts, which was recognized by the common law. In any event, the State has never asserted, and does not now assert, such a right.
We conclude that appellant has been denied no right, and the decree of the court below is affirmed.