Source: https://supreme.justia.com/cases/federal/us/298/544/
Timestamp: 2019-04-23 16:02:21+00:00

Document:
1. A surety company which, by court order upon its own petition, had been placed in the hands of a statutory liquidator in the state of its incorporation, was "insolvent" within the meaning of R.S. § 3466, giving priority to debts due to the United States whenever a person so indebted is insolvent. P. 298 U. S. 547.
2. U.S.Code, Title 6, §§ 1-11, prescribing the conditions under which a surety company may write certain surety bonds in favor of the United States, was not intended to exclude from the operation of R.S. § 3466, liabilities arising upon such bonds. P. 298 U. S. 547.
3. A claim of the United States upon judgments recovered against a surety company on estreated bail bonds held entitled to priority under R.S. § 3466. P. 298 U. S. 548.
4. This Court accepts as conclusive a decision of the state supreme court construing a statute of the State. P. 298 U. S. 548.
5. An inchoate lien is not enough to defeat the priority of the United States under R.S. § 3466. P. 298 U. S. 549.
6. The interest of persons who may become entitled to the proceeds of a deposit made with the State Treasurer pursuant to Compiled General Laws of Florida, §§ 6302, 6303, either as unsatisfied judgment creditors or as Florida creditors at the time when insolvency supervenes, lacks the characteristics of a specific perfected lien which alone would bar the priority of the United States. Pp. 298 U. S. 550-551.
7. The judgment of the state court denying priority prejudiced the rights of the United States. P. 298 U. S. 551.
8. The judgment of the state supreme court here under review, denying the claim of the United States to priority, was a final judgment under the rules governing the jurisdiction of this Court. That the order of the lower court from which appeal was taken to the supreme court of the State may not, under the state practice, have been a final order is here immaterial. P. 551.
9. The Florida courts had jurisdiction to award priority to the claim of the United States out of the proceeds of the deposit, even though the general assets were being liquidated in New Jersey. P. 298 U. S. 552.
120 Fla. 580, 163 So. 64, reversed.
Certiorari, 297 U.S. 700, to review a judgment which denied the United States a claim of priority under R.S. § 3466. The state supreme court had affirmed, with some modification, an order of the trial court. Sub nom. Kelly v. Knott.
prior to its insolvency; but no unsatisfied judgment against it was outstanding there when the New Jersey liquidation proceeding was begun.
"distribute the proceeds of the sale of said securities proportionally among all of the Florida creditors who may make proof of their claims, . . . the surplus, if any, to be disposed of by proper order of such court."
Thereupon, a Florida creditor brought suit under the amendment; that suit was consolidated with the one which Kelly had instituted, and a receiver was appointed who took possession of the securities and sold them.
should be transmitted to the domiciliary liquidator. The United States appealed on the ground that it has been denied priority, the New Jersey commissioner on the ground that the domiciliary liquidator was entitled to the residue remaining after satisfying the claims of creditors reduced to judgment prior to the institution of the proceedings in New Jersey. The order of the trial court was affirmed by the Supreme Court, with some modification. Kelly v. Knott, 120 Fla. 580, 163 So. 64. We granted certiorari because of the importance of the question involved.
Trust Co., 271 U. S. 236; United States v. Guaranty Trust Co., 280 U. S. 478. We are of opinion that the claim presented is, in its nature, one entitled to priority.
Second. The main question for decision is whether the Florida statute divested the company's title to the deposited securities or created a perfected lien thereon, so as to give the Florida creditors precedence over the United States.
"And whenever such company ceases to do business in this State, and has settled up all claims against it, as hereinafter provided, and has been released from all the bonds upon which they have been taken as sureties said bonds [securities] shall be delivered up to the proper party on presentation of the Treasurer's receipt for said bonds."
"Whenever a final judgment has been rendered against any surety company on a fidelity, appearance, supersedeas, or surety bond, the surety on said bond shall pay the same within thirty days. Upon notice of failure to pay the amount due under said bond within said time, the State Treasurer shall retain the bonds or securities deposited with him by said surety company . . . to cover said judgment and costs, subject to the order of the Court trying any suit that may be brought upon said bond."
Then follows the amendment of 1933 authorizing institution of the suit.
to be held by him for the protection and benefit of all Florida claimants entitled to seek satisfaction thereout, regardless of the continued solvency of the depositing corporation, or its voluntary cessation of business in the state of Florida;"
and that, in enacting the legislation requiring such deposit, Florida did so with the intention of protecting those whom it had the power and duty to protect. It held that the deposit with the state treasurer constituted a trust fund for the benefit of Florida, its political subdivisions, citizens, and residents; that they were entitled to be paid first out of it, and that the United States was not a beneficiary of such trust fund. Insofar as the decision of the Supreme Court is a construction of the statute of the state, we accept it as conclusive.
"The United States are to be first satisfied; but then it must be out of the debtor's estate. If, therefore, before the right of preference has accrued to the United States, the debtor has made a bona fide conveyance of his estate to a third person, or has mortgaged the same to secure a debt, or if his property has been seized under a fi. fa., the property is devested out of the debtor, and cannot be made liable to the United States."
of Florida effected, at least as early as the date of insolvency, either a transfer of title from the company or a specific perfected lien in favor of the Florida creditors, the United States is entitled to priority.
"The correct interpretation of the statute is that the securities in the hands of the State Treasurer, so held in trust by him for the account of the depositing company, are merely segregated assets of the surety company which, while capable of being specifically applied to the satisfaction of such final judgments against the surety company on fidelity and surety bonds as shall remain unpaid for thirty days, do not become impressed with the judgment lien until after the notice pursuant to which they may be expressly subjected thereto by the order of the court rendering a judgment on a bond executed by the depositing surety company."
when insolvency supervenes. Such an interest lacks the characteristics of a specific perfected lien which alone bars the priority of the United States.
Fourth. The Florida officials construe the opinion of its Supreme Court as holding that the United States is entitled to be paid in this proceeding from the surplus remaining after payment of the Florida creditors. They urge that, from the report of the receiver, it appears that such surplus will be adequate to satisfy the claim of the United States; they contend that hence, the United States is not adversely affected by the judgment under review, and they ask that the judgment be affirmed, or the certiorari be dismissed, on this ground. But no order has been entered in either of the Florida courts directing payment of the surplus to the United States, and, moreover, it is not clear that the surplus, if so applied, would satisfy its claim. As the debt due the United States remains unpaid, the judgment denying its priority prejudices its right.
Fifth. Finally, the Florida officials contend that this Court lacks jurisdiction, because the order of the trial court (that of May 28, 1934) which gave the local creditors priority over the United States constituted the final order in the case and disposed of the right which the United States is here asserting; that this order was not appealed from, and that the later order of the trial court (that of October 27, 1934) from which an appeal was taken to the Supreme Court of Florida, was not a final order. We have no occasion to enquire into these matters, which are of local concern. The judgment here under review is that of the Supreme Court. It denied to the United States the priority claimed under Section 3466. That denial is a final judgment under the rules governing our jurisdiction. In re Tiffany, 252 U. S. 32, 252 U. S. 36.
claims of the local creditors must be transmitted to New Jersey, and that the Florida courts are without jurisdiction to award priority to the United States. It is true that the priority statute is not applicable unless insolvency has been manifested by some proceeding equivalent to an assignment of all of the debtor's property, United States v. Oklahoma, 261 U. S. 253, 261 U. S. 262; United States v. Hooe, 3 Cranch 73. The priority could not have been asserted in Florida or elsewhere if there had been no such assignment. But this requirement of the statute was satisfied by the liquidation suit in New Jersey. United States v. Butterworth-Judson Corp., 269 U. S. 504. The United States properly intervened in Florida in order to prevent the assets there from being applied in payment of local claims believed to be subordinate to its own. No rule of law precludes it from asserting its priority by an appropriate proceeding in any jurisdiction in which property of the insolvent is being administered. The Florida court did not lack power to entertain its application, and the fact that the claim originated in Florida and was reduced to judgment there made it appropriate that the United States should seek there satisfaction from funds deposited to assure payment of judgments entered on surety bonds given there by the company. No good reason has been suggested why the United States should be denied the right to secure in this proceeding payment of its debt.

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