Case Name: STATE v. PEOPLE'S SAVINGS BANK & TRUST CO.; RYAN v. AMERICAN SURETY CO. OF NEW YORK
Court: Supreme Court of New Mexico
Jurisdiction: New Mexico
Decision Date: 1917-08-29
Citations: 23 N.M. 282
Docket Number: No. 2042
Parties: STATE v. PEOPLE’S SAVINGS BANK & TRUST CO. RYAN v. AMERICAN SURETY CO. OF NEW YORK
Judges: HANNA, C. J., and ROBERTS, J., concur.
Reporter: New Mexico Reports
Volume: 23
Pages: 282–290

Head Matter:
[No. 2042.
Aug. 29, 1917.]
STATE v. PEOPLE’S SAVINGS BANK & TRUST CO. RYAN v. AMERICAN SURETY CO. OF NEW YORK
SYLLABUS BY THE COUURT.
1. Upon the appointment of a receiver of an insolvent banking corporation, having on deposit state funds,, the state loses such priority as comes to it from the common law as a sovereign right, by reason of the divestiture of title which takes place upon the appointment of such receiver. take place upon the appointment of such receiver. P. 286
2. Laws 1915, c. 67, providing for the organization of savings banks, etc., and by section 8-5, providing that the bank examiner, taking charge of any bank, shall ascertain its actual condition and make a return to the Attorney General, who, if satisfied that it cannot liquidate its indebtedness, shall institute proper proceedings to have a r'eceiver appointed to wind up its affairs for the benefit of its depositors, creditors, and stockholders, such proceedings to be governed by the provisions of the general incorporation laws for the winding up of insolvent corporations, construed with Code 1915, § 959, divesting the bank’s title to its property on the appointment of a receiver, vests title in a bank receiver, vests him with the powers of a r'eceiver enumerated by section 957; as the word "proceedings” in section 85 include all of the steps and all of the acts done by the court, and the receiver in the cause instituted by the Attorney General. P. 287
Appeal from the District Court, Grant count}'; Neblett, Judge.
Proceedings by the State of New Mexico, filed by the Attorney General, to wind up the affairs of the People’s Savings Bank & Trust Company, an insolvent corporation, with claim against the receiver by the American Surety Company of New York. From a judgment of the district court, dismissing exceptions of the surety company to the referee’s decision and sustaining his decision, the surety company appeals.
Affirmed.
Francis C. Wilson, of Santa Fe, for appellant.
State has common lawi right of preference, incident to sovereignty, in assets of bank in hands of receiver to extent of State’s deposits therein. 1 Bl. Com. 240; 5 Enc. P. & P. 151; Browning v. Est. of (Browning, 3 N. M. 659, 9 Pac. 677; State v. Armijo, 140 Pac. (N. M.) 1123; Gurule v. Duran, 149 Pac. (N. M.) 303; American Bonding Co. v. Be]rnolds, 203 Fed. 356; In re Carnegie Trust Co., 206 N. Y. 390, 99 N. E. 1096, 46 L. B. A. (N. S.) 260; Be Neiderstein, 154 App. Div. 138, 138 N. Y. Sup. 952; Booth v. Miller, 237 Pa. 2S¡7, 85 Atl. 457; IJ. S'. 'Fid. & G. Co. v. Bainey, 120 Tenn. 357, 113 S. W. 397; Orem v. Wrightson, 51 Md. 34, 34 Am. Eep,. 286; State of Maryland v. Bank of Maryland, 6 G. & J. 205, 26 Am. Eep. 561; Seay v. Bank of Borne, 66 Ga. 615; Booth v. State, 141 Ga. 750, 63 S. E. 502; (wherein the court held tha ta statute giving such right of priority to the state was declaratory of the common law); Bobinson v. Bank of Darien, 18 Ga. 65; State v. Foster, 5 Wyo. 199, 29 L. E. A. 226; Giles v. Grover, 9 Bing. 128.
Of the two or three states wherein the courts have held contrary to the above, New Jersey seems to have the leading case.
Freeholders of Middlesex County vs. State Bank of Brunswick, 29 N. J. E. 268.
The appointment of a areceiver did not divest banking-corporation of title so as to defeat priority.
Sec. 86, C. 67, Laws 1915; Sec. 85 Id.
The sovereignty is not bound by provisions of insolvency act unless specifically mentioned therein.
Guarantee Title & T' Co. vs. Title Guaranty & S. Co., 224 IT. S. 153, 56 L. Ed. 706; Dollar Sav. Bk. v. U. S. 19 Wall. 239, 22 L. Ed. 82; United States v. Herron, 20 Wall. 251, 260, 22 L. Ed. 275, 278; LeLwis v. United States, 92 U. S. 618, 23 L. Ed. 513; Commonwealth v. Baldwin, 1 Watts, 54, 26 Am. Dec. 33.
Wilson & Walton, of Silver City, for appellee.
Whether states in American Union have preference right to payment of their debts is in conflict.
Browning v. Est. of Browning, 3 N. M. 659; Freeholders of Middlesex County v. State Bank, 29 N. J. E. 268, 30 N. J. E. 311; State v. Harris, (S. C.) 2 Bail. L. 598; Potter v. Fidelity & D. Co. 101 Miss 823, 58 So. 713; and Commissioner of Banking v. Chelsea Savings Bank, 161 Mich. 691, 125 N. W. 524.
See also the notes to case‘State v. Foster (Wjo.) 29 L. R. A. 226, and In re Carnegie Trust Co. (N. Y.) 46 L. R. A. 260.
Even in those States where priority of the State is recognized it is uniformly held to be defeated by a general assignments for the benefit of creditors or any other divestiture of title, as in the case of the passing of title to a receiver.
36 Cyc. 871; State v. Williams, 101 Md. 529, 61 Atlantic 297; Freeholders of Middlesex Co. v. State Bank of Brunswick, supra.
Appellant’s reply brief.
Under our statute tbe appointment of a receiver does not give greater powers than those conferred upon an ordinary chancery receiver.
American Bonding Co. v. Reynolds, 203 Red. 358.
For additional authorities that the statute does not bind the state without express mention, see:
Swearingen v. U. S., 11 Gill, and J. 373; Commonwealth v. Bialdwin, 1 Watts, 54; U. S. v. Hoar, 2 Mason, 314; Savings Bank v. U. S., 19 Wall. 239; State v. Kine, 41 N. H. 238; People v. Herkimer, 4 Cowen, 345; Mayihofer v. Board of Education, 89 Cal. 110, 23 Am. St. R. 451; Board of Improvements v. School District, 56 Ark. 354, 35 Am. St. R. 108.

Opinion:
OPINION OP THE COURT.
PARKER, J.
The People's Savings Bank & Trust Companjr, of Silver City, N M., closed its doors on June 26, 1915, liavingj on deposit $9,929.08 of state funds. The deposit was secured by a depository bond in the sum of $30,000, with the American Surety Company as surety on the bond. Upon the closing of the bank the state of New Mexico made demand on the surety company for the payment of the amount of state funds on deposit in the bank at the time when it was closed, and the company paid the amount on July 27, 1915. Upon the payment of this amount, the state treasurer, in behalf of the state, receipted and assigned its demand against the People's Savings Bank & Trust Company to the surety company.' Thereafter the attorney general filed a proceeding to wind up the affairs of the bank under the provisions of section 954 et seq., Code 1915, for the winding up of insolvent corporations, and the surety company filed! with the receiver proof of claim, in which it is set up that the state had a common-law priority in the assets of the bank to the full extent of its deposits, and that by virtue of its payment of the sum representing these deposits the surety company became subrogated to that priority, and therefore entitled to the payment of the claim before any other creditors whose claims were not secured by lien upon such assets. The question .of priority raised by the surety company was decided adversely to the company by the referee. Upon exceptions filed by the surety company to the referee's report, the matter was brought before the district court, which overruled the exceptions and sustained the referee's decision, and thereupon this appeal was taken.
The case may be disposed of quite summarily upon a single point. It is conceded that if the state had priority over other creditors of the insolvent corporation, then the surety company, under the facts existing in this case, would become subrogated to the rights of the state. The question, then, which is decisive of the case is whether the state, under the circumstances existing in this case, had a priority over other creditors of the insolvent corporation. We have recently had occasion to examine this question in the case of the State of New Mexico v. First State Bank of Las Cruces, 22 N. M. 661, 167 Pac. 3, not yet officially' reported. In that ease the state itself asserted the priority. After a thorough consideration of many cases the court concluded in that case that the right of priority of the state, even if it existed in this jurisdiction in all of its common-law force and effect the same as it formerly existed in the sovereign in Great Britain, was lost whenever the title to the property of an insolvent corporation was divested out of the corporation and invested in a receiver under the provisions of the statute. Counsel for appellant in this case has cited several cases not referred to in the opinion in the former case, all of which we have examined, but we find nothing in them to change our view of the question as heretofore announced. Counsel for appellant relies much upon the case of American Bonding Co. v. Reynolds, (D. C.) 203 Fed. 356. In that case the commonlaw right of priority was recognized to exist in Montana as a sovereign right of the state. It is held, however, in that ease that the appointment of a receiver of an insolvent banking corporation under the laws of Montana does not so divest title as to cut off the right of priority of the state. In this particular the laws of Montana differ from those of this jurisdiction. As we held in the former case and as is plainly pointed out in our statutes, the appointment of a receiver of an insolvent corporation divests the title of the corporation and vests the same in the receiver. Counsel also cites In re Carnegie Trust Co., 206 N. Y. 390, 99 N. E. 1096, 46 L. R. A. (N. S.) 260, and State v. Foster, 5 Wyo. 199, 38 Pac. 926, 29 L. R. A. 226, 6 3Am. St. Rep. 47, where valuable notes are appended to the cases. These two cases and the notes accompanying the same present no new features which have not been considered in our former opinion.
It follows that the judgment of the court below ivas correct and should be affirmed; and it is so ordered.
HANNA, C. J., and ROBERTS, J., concur.