136 N.Y.S. 466 | N.Y. App. Div. | 1912
■ This appeal presents but the single question whether or not the State, being a depositor in and creditor of an insolvent bank or trust company, is entitled to a preference.in payment over unsecured general creditors. There is no dispute as to the facts. The Carnegie Trust Company of New York city,
There is no doubt that at common law the sovereign was entitled to a preference in the payment of debts due to him by an insolvent. “It is perfectly clear that at common law the King has very peculiar prerogatives, much beyond the common right of a subject for the collection of his debts. Of these (not to mention others which are not to the present purpose) one was that where one was indebted to the King and likewise to other persons, the King’s debt was to be preferred in payment, that is, the King was to be paid before any other creditor of the party, and consequently to be preferred in an execution (Mad. Exch. 183, Chap. C 23 s 7). The general rule is, and this has been acknowledged in all cases, that when the right of the King and that of his subject concurred, that of the King shall prevail.” (Giles v. Grover, 9 Bing. 128, 183.) That this prerogative preferential right of payment existed at common law on April 19, 1775, is indisputable and undisputed. By the first Constitution of this State, adopted in 1777, it was provided “That such parts of the common law of England, and.of the
A similar provision is to be found in many other State Constitutions. “In adopting the common law of England the people of this State took over such of its rules as were applicable to and consistent with their condition and circumstances. It became and is the "law of the State and the basis of its jurisprudence, except so far as its principles and rules of action have been modified by Constitution, statutes or usages; or were inapplicable to our situation.” (Fulton L., H. & P. Co. v. State of New York, 200 N. Y. 400, 412.)
Among other consequences of this adoption of the common law of England as the fundamental basis of our jurisprudence was the devolution upon the people of the State of the prerogatives of the English sovereign, held and enjoyed by him for the public benefit. The preferential right of the State to be paid taxes due it has been frequently recognized and enforced and is traceable directly to the devolution upon the State of the prerogative of the English sovereign. In Central Trust Company v. New York City & N. R. R. Co. (110 N. Y. 250) it was said: “We reiterate the statement of Porter, J., in In re
In the present case the State makes no claim to be preferred over creditors holding specific prior liens: We think that it may safely be said, so far as concerns the collection of taxes, that “ the weight of authority, even in the absence of a statutory lien or preference, seems to support the right of the State to a preference where the effect of the allowance thereof will
If the right of the State to a priority of payment over unsecured creditors is acknowledged as to taxes, as it must be in this State, it is not easy to see how, upon any logical ground that right can be denied as to indebtedness arising out of the loss of the State funds after they have been collected. They both rest upon the same footing. The claim of the State in either case rests upon no private right, but upon the right of all the people. The money is necessary and vital to the existence of the government and the carrying on of the governmental functions, and as the right of the public is always paramount to that of the individual, so its right to collect and to recover public funds must be held to be paramount. The fund on deposit in the trust company was one created and maintained by unequivocal acts of sovereignty. It was established by act of the people, and is emphatically a fund belonging to the people in their sovereign capacity. (State v. Shelton, 47 Conn. 400.) The government of the State is established for the good of the whole, and can be supported and carried on only by means of its revenues, which revenues the general good requires shall be protected. Consequently a priority in the payment of debts due to it is necessary for the general good to the end and that its governmental function may be properly performed. (State v. Bank of Maryland, supra.)
It is suggested by the respondent that because the Banking Law (Consol. Laws, chap. 2 [Laws of 1909, chap. 10], as amd.) fails to provide that the State shall be entitled to priority of payment, the State should be deemed to have relinquished its prerogative right. What is more to the point is that the Banking Law has not declared that the State shall not have priority. Repeals by implication are not favored (People ex rel. Brown v. Metz, 119 App. Div. 271, 276; Grimmer v. Tenement House Department, 204 N. Y. 370, 378), and especially
We are unable to see any significance, so far as concerns the question now under discussion, in the fact that the State took security for its deposit in the form of bonds of fidelity companies. That seems to have been a mere precaution for greater certainty. We are, therefore, of the opinion that the State was entitled to be paid the balance of the canal fund on deposit in preference to any other creditor holding no specific lien upon the assets of the trust company. All the facts are before the court in the referee’s report, and they cannot be changed. We are, therefore, in a position to make the order which the Special Term should have made, and to enter an order directing payment in accordance with this opinion.
Ingraham, P. J., McLaughlin, Clarice and Dowling, JJ., concurred.
Order reversed and order entered as stated in opinion. Order to be settled on notice.