Court Opinion

ID: 3870587
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:04:58.556136+00
Date Added: 2024-06-11T07:41:40.368787
License: Public Domain

I am unable to agree with much of the reasoning or with the conclusion in the opinion of the court in this proceeding. I concur, however, with the statement therein to the effect that the petition of the Citizens Savings Bank is based on its right to recover in an independent action at law, against the Guaranty Loan Company and its receivers, for taxes assessed against the company but paid by the bank. That action was tried at the same time and before the same justice of the superior court as this proceeding and resulted in a decision for the defendants, in arriving at which the trial justice stated in his rescript that he would not consider in that case the items of taxes and interest thereon but was disposing of them in this proceeding in equity.
Herein he disposed of those items by finding that the bank was entitled to have the claim, which it had filed in the receivership suit, approved and enforced, so far as based on the taxes paid and interest thereon; and by finding that its claim, as so limited, was entitled to a preference in payment over the ordinary claims against the corporation. These findings he based on the doctrine of subrogation. *Page 482 
In the opinion of the court in the instant proceeding the decision for the respondents is based mainly on the reasoning that a decree was entered in the receivership suit limiting the time within which the bank could bring a suit to establish its claim, previously disallowed by the receivers; that the bank had brought the action at law in accordance with that decree; that the bank's petition, which is the foundation of the instant proceeding, was based entirely upon such recovery as the bank might obtain in its action at law; that the bank failed to obtain any recovery in that action; and that therefore its petition should be denied.
I am inclined to agree with this reasoning, except that to my mind one necessary link in the chain is entirely missing, because, as stated in my dissenting opinion in the law case, I am convinced that the exception of the plaintiff bank to the decision of the trial justice in that case should have been sustained by this court and that the case should now be remitted to the superior court with a direction to enter a judgment for the plaintiff for the amount that it had paid for the taxes and interest on that amount.
Therefore, because of that conviction, I am also convinced that the final decision and decree of the trial justice in the instant proceeding should be affirmed, unless that decree should be reversed on some other ground not based on the decision in the law action in favor of the defendants. In discussing the other grounds of reversal relied on in the opinion of the court in the instant proceeding, I shall do so, as I think I properly may under the circumstances, on the assumption that the bank established in the law case its claim against the insolvent company and its receivers for the taxes paid by it and interest thereon; and that the only question in the instant proceeding is whether the bank is entitled to a preference in payment, over the general creditors of the insolvent company.
Most of the other grounds relied on in the opinion of the court have been already discussed in the dissenting opinion *Page 483 
in the law case and need no further discussion here. But some of these other grounds should be taken up briefly.
In the first place I can see no good reason why it should be contended that the bank's petition for priority of payment of its claim for money paid for taxes was filed too late. In my judgment that petition raised a question which could properly be taken up in the receivership suit at any time before distribution of the net assets of the company among its creditors. Indeed I do not believe that the contention to the contrary is taken very seriously either by the majority of the court or by the counsel for the receivers and the company.
Nor can I see any good reason for sustaining a contention that in order for the bank to be subrogated to the right of the city to file in the receivership suit a preferred claim for the taxes assessed by the city against the company and not paid by the company, such a claim must have been filed by the city as a preferred claim. An investigation of the matter has convinced me that such a contention is inconsistent with the doctrine of subrogation and, so far as I have been able to ascertain, is not supported by any authority. See Equitable Trust Co. v.Kelsey, 209 Mass. 416, cited in the opinion of the majority.
Nor can I see any merit in the contention that because some minor items were included in the original claim filed by the bank, besides items for taxes paid, for which priority of payment was claimed, the bank's right to such priority by subrogation should be denied.
Near the end of the opinion there is some reasoning which to my mind is neither clear nor convincing. It seems to be based partly on the proposition that if a person is having real estate sold, under proceedings in equity, for the satisfaction of two liens thereon, one of which is for a debt otherwise secured while the other is not, and the proceeds of the sale of the property is not sufficient to satisfy both liens, he must apply those proceeds first to the satisfaction *Page 484 
of the former debt. I know of no such rule; and what seems to me the correct rule which has been adopted in this state, and which is stated and discussed in the dissenting opinion in CitizensSavings Bank v. Guaranty Loan Company, above referred to, is to the contrary.
The reasoning above mentioned seems also to be based on the idea that the equitable doctrine of marshalling applies to the present proceeding; but I cannot see that that doctrine has any such application. On both these lines of reasoning see cases cited in the opinion of this court in Willits v. Jencks Mfg.Co., which is cited in the opinion of the majority in the instant proceeding, and especially First National Bank ofBoston v. Proctor, 40 F.2d 841.
Finally the majority of the court seem to rely strongly on certain language quoted from the opinion in the Willits case, from which they properly enough infer that the doctrine of subrogation should not be applied where its application would be oppressive or inequitable.
But the court there found nothing oppressive or inequitable in the application of the doctrine in that case, though the considerations involved were, in my judgment substantially the same as in the instant case, and the claim based on the payment of city taxes was given priority over the claims of the general creditors of an insolvent corporation in receivership. Here we have not only the statutory right of priority for city taxes, but also the fact that all of the taxes after those for the year 1930 were expenses of the receivership and entitled to such priority for that reason.
The receivers, during the period when these taxes were assessed and for considerably more than a year afterwards, chose to hold on to the mortgaged property and kept the bank under an injunction against foreclosure of the mortgage, doubtless believing that the equity of redemption would prove to be a valuable asset of the receivership. Under these circumstances, I can see nothing oppressive or inequitable in sustaining the bank's contention that its *Page 485 
claim based on the payment of taxes is entitled to priority. In my judgment an opposite conclusion is contrary to the opinion of this court in the Willits case. Indeed, I believe this to be a stronger and clearer case for the application of the doctrine of subrogation than that case.
My conclusion is that the result reached by the trial justice was correct, though I do not agree with some of the grounds and some of the reasoning on which it was based by him, and that the decree appealed from should be substantially affirmed.