Board of Chosen Freeholders v. State Bank

1. New Jersey does not possess the crown’s common law prerogative to have its debts paid in preference to the debts of other creditors. 2. On the appointment of a receiver of an insolvent corporation, its title to its property is divested by force of law. Note.—That the state is a preferred creditor, has been elsewhere decided upon two distinct gi’ounds: (1) By virtue of her sovereignty, and (2) by virtue of the maxim that general words in a statute do not include the state unless expressly named, and hence debts due to the state are not affected by proceedings in bankruptcy, insolvency or assignments for the benefit of creditors. The preference given to debts due the United States is solely statutory, and “does not stand upon any sovereign prerogative” (United States v. Slate Bank, 6 Pet. 29, 35, Story J.); while that of the several states is a branch of the common law of England, adopted as such, or by statutes declaratory thereof. State of Maryland v. Bank of Maryland, 6 Gill efe J. 205; Jones v. Jones, 1 Bland {Md.) 444, 445 ; Green's Case, 4 Md. Ch. 349, 356; Com. v. Lewis, 6 Binn. {Pa.) 266, 271; Robinson v. Bank of Darien, 18 Ga. 65. Statutes recognizing and asserting the priority of the state’s claims, were passed among the earliest colonial laws. In Maryland in 1650, Ibid. 222 ; in Pennsylvania in 1705, Brackenridge’s Mise. 117. The priority of the state, in addition to the oases cited in the opinion of the vice-chancellor, has been recognized by other cases in the following states : Maryland, South Carolina, Georgia, Pennsylvania, Kentucky and North Carolina. Maryland.—In the distribution of an intestate’s estate, between the claim of the state on a bond assigned by the intestate and a claim of a bond-debtor of the intestate, who had begun an action on his bond, which was then pending. State v. Rogers, 2 liar. & Mcll. 198. So, under nearly the same facts, in Murray v. Ridley, 3 Har. & MJ1. 171. After the sale of an insolvent decedent’s lands for the payment of his debts, deducting from the proceeds the claim of his widow for dower and the claims of his judgment creditors, the state was allowed a preference over other unsecured creditors on her claim against the decedent as a defaulting tax collector. Smith v. State, 5 Gill 45. Upon two judgments rendered on the same day against a county clerk, one for the state, the other for a citizen, that of the state standing first on the docket, is entitled to priority. Green's Case. 4 Md. Ch. 349; see Hodges Y. Mullikin, 1 Bland (Md.) 503; Davidson v. Glayland, 1 Har. & Johns. 546. A county clerk made an assignment to secure the sureties on his bond. Both the state and the city of Baltimore presented claims under the assignment for sums due them, respectively,, for defaults of the clerk.—-Held, that those of the state must be first paid. State v. Baltimore, 10 Md. 504. South Carolina.—In an action against the sureties on an administration bo»d, they may show that the intestate owed a debt to the state for which the latter held his mortgage, and that the administrator, notwithstanding the mortgage, is entitled to retain the amount of the debt due to the state to the exclusion of other creditors. Ijenoir v. Winn, 4 Desauss. 65. Georgia.—Here the preference of the state is placed upon her sovereign right at common law, which was included in a general act of the legislature adopting the common law. Robinson v. Bank of Darien, 18 Ga. 65. Pennsylvania.—It was held that the state “always took preference to individuals until the act of April, 1794, which directs that debts due to the state from deceased persons shall be last paid.” Com. v. Lewis, 6 Binn. 266, 271, Tilghman, C. L. See Mitchell's Estate, 2 Watts 87; Brackenridge's Mise. 117. “ Even yet she takes a preference with regard to the estates of living debtors, for an account settled by the accounting officers of the commonwealth becomes a lien on all the real estate of the debtor.” Ibid.; Forney v. Com., 10 Pa. St. 405; see Com. Appeal, 4 Pa. St. 164; Arnold’s Estate, 46 Pa. St. 277. Massachusetts.—Under a statute providing that the warden of the state prison was not, in effect, an agent of the state, and that consequently moneys received and deposited by him in a bank were not state funds, nor held in trust for the state,—Held, therefore, that such money could not be set off against a demand of the bank upon the state. Com. v. Phoenix Bank, 1] Mete. 129. See, also, Swartwout v. Mechanics Bank, 5 Denio [N. Y.) 555 ; Miller v. Receiver, 1 Paige (N. Y.) 444. Following the Massachusetts case, the United States circuit court for Wisconsin (E. D.), decided, under a similar statute, that such -warden was not to be considered a representative of the state of Wisconsin so far as to entitle him to claim, in distributing assets, a preference for the sum deposited by him in a bank which afterwards became insolvent. Corn Exchange Bank Case, 15 Nat. Bank. Reg. 431, Drummond J. [2V. B. Under the Bankrupt Act the state is preferred.] See, also, Brand’s Case, 3 Nat. Bank. Reg. 324. North Carolina.—After a fraudulent conveyance of lands and a sale under execution against the vendor, the fraudulent vendee, before the delivery of the sheriff’s deed, entered into recognizance to the state.— Held, that as the fraudulent vendee had no valid title to the lands at the time of giving the recognizance, the state could thereby derive no preference over the execution purchaser, the sheriff’s deed relating back to the time of his sale. Hoke v. Henderson, 3 Dev. 12. The preference of the state is confined to its own claims, and does not embrace those of corporations of which the state is owner in vrhole or in part {Bank of South Carolina v. Gibbs, 3 McCord {S. C.) 377; Fields v. 'Wheatley, 1 Sneed {Term.) 351. See Bank of Alabama v. Gibson, 6 Ala. 814; Turnpike Co. v. Wallace, 8 Watts 316; Éoore v. Wabash Canal Co., 7 2nd. 462 ; Seymour v. Milford Turnpike Co., 10 Ohio 476 ; State Bank v. Brown, 1 Scam,. {III.) 106; Governor• v. Woodworth, 63 III. 254); unless expressly included by statute. Central Bank v. Little, 11 Ga. 346; Bobinson v. Bank of Darien, 18 Ga. 65 ; State v. Dickson, 38 Ga. 171; Mahone v. Central Bank, 17 Ga. Ill ; Tilford v. Bank of Ky., 2 Dana 115, 121. Kentucky.—It is only over debtors of the same degree; hence, an individual debtor by specialty is preferred to the state by simple contract. Com. v. Logan, 1 Bibb (lly.) 529; Smith v. State, 5 Gill 45. So an individual judgment debt is preferred to an unsecured claim of the state. Hollingsworth v. Patten, 3 Har. & McH. {Md.) 125 ; State v. Cleary, 2 Hill {S. C.) 600 ; Brackenridge's Mise. 142. Maryland.—It has been held that the lien of the state begins when suit is instituted. Hodges v. MulliUn, 1 Bland 503 ; Jones v. Jones, 1 Bland 443 ; Davidson v. Clayland, 1 Har. & Johns. 546. Georgia.—That the state is not entitled to the writ of protection nor the extent in chief or in aid. Robinson v. Bank of Darien, 18 Ga. 65 ; but see Jones v. Jones, 1 Bland (Md.) 443; Birchfield v. Brown, Id. 446, notes. The following cases are examples of the rule that proceedings in bankruptcy do not apply to or affect a state: In People v. Duncan, 41 Cal. 509, a franchise to construct a turnpike was held to be not assignable to a bankrupt assignee, without the consent of the granting power. See Stewart v. Hargrove, 23 Ala. 429. In Stokes v. Georgia, 46 Ga. 412, a sale of a bankrupt’s land by his assignee was held not to divest the lien of the state thereon for taxes, although it was sold by the assignee free from encumbrance. See, also, Doane v. Chittenden, 25 Ga. 103; Missouri v. Rowse, 49 Mo. 586; Brand’s Case, 3 Nat. Bk. Reg. 324; Dunlap v. Gallatin Co. 15 III. 7. In Com. v. Hutchinson, 10 Pa. St. 466, to an action brought by the state for taxes on fees received by the defendant, from his successor, after the defendant’s removal from the office of prothonotary, the defendant pleaded his discharge in bankruptcy.—Held, that such discharge did not bind the state. In Saunders v. Cam. 10 Oratt. 494, a similar plea to an information by the attorney-general against an inspector of a public warehouse and his sureties, for the amount of dues owing to the state by the inspector, was overruled on the same ground. In People v. Spalding, 10 Paige 284, a defendant in chancery had been committed for contempt for not paying a fine.—Held, that his discharge in bankruptcy would not release him from its payment or from the confinement. [This case was afterwards affirmed in the New York court for the correction of errors, 7 Hill 301, and, again, in the United States supreme court. 4 How. 2Í.] In Jones v. State, 28 Ark. 119, it was held that a discharge in bankruptcy was a good plea by a surety on a recognizance on an indictment. Bankrupt acts do not include the king (Anonymous, 1 Atk. 262; Rex v. Pixley, Bunb. 202; Russel’s Case, 19 Ves. 164, 165; Temple’s Case, 2 Ves. & Beam. 391 ; Cranford, v. Att'y-Qen. 7 Price 1) ; nor, the United States (United States v. Rob Roy, 1 Woods 42; United States v. Herron, 20 Wall. 251; Lewis v. United States, 2 Otto 618, 622). The same rule applies to proceedings in insolvency. In People v. Rossiter, 4 Cow. 143, a judgment was obtained by the state against an attorney for fees due the state, and under a ca. sa. issued thereon he was imprisoned,—Held, that a subsequent insolvent discharge would not release him. In People v. Herkimer, 4 Cow. 345, to an action of assumpsit for fees due the state, the defendant pleaded that after the promises etc., he had obtained his discharge as an insolvent, and such plea, on general demurrer, was overruled. See, also, State v. Baltimore, 10 Md. 504, ubi supra: Smith v. Randall, 1 Allen 456,460 ; Att'y-Qen. v. Baker, 9 Rich. iS. C.) Eq. 520. In Columbian Ins. Co. Case, 3 Keyes 123, after an assessment for taxes on the personalty of the company and a demand for payment, a receiver was, at the instance of a stockholder, appointed and qualified on the same day on which the marshal issued a warrant to collect the taxes.— Held, that the claim of the state took precedence over that of any creditor of the corporation. In State v. Walsh, 2 Gill & J. (Md.) 406, the defendant obtained his insolvent discharge after the state had recovered judgment against him as surety on a delinquent tax-collector’s bond. Subsequently he was arrested on a ca. sa. thereon.—Held, that he could plead his discharge in bar. In State v. Harris, 2 Bailey 598, the state was held to be entitled to no preference over any other creditor, in the distribution of an insolvent’s assets. In Scott’s Case, 19 Ohio St. 581, it was held that a statute authorizing parties imprisoned for the non-payment of fines to be discharged upon .taking the benefit of the insolvent laws, was constitutional. An insolvent discharge ’does not bar the United States (United States v. Wilson, 8 Wheat. 253; Glenn v. Humphreys, 4 Wash. C. G. 424; United States v. Iiewes, Crabbe 307). In Sessions v. Stevenson, 11 Rich. (S. G.) Eq. 282, it was held that if the United States came in under a bill to marshal assets, it stood on the same footing as other creditors. See Mitchell's Estate, 2 Waits 87. Assignments for the benefit of creditors do not affect a state. In Missouri v. Rowse, 49 Mo. 586, a corporation, after neglecting for several years to pay their taxes, finally made an assignment. After-wards the tax-collector seized their personal property, on which it was admitted he had no lien before (at common law, there is no lien on personalty for taxes, Bailey v. Fuqua, 24 Miss. 497), and it was bid in, at the sale, by the assignees, who then sued the collector on his official bond.—Held, that the claim of the state was not affected by the assignment. Compare State v. Grover, 8 Vr. 174 ; Cones v. Wilson, 14 Ind. 465; Frierson v. Branch, 30 Ark. 453. See Anderson v. Mississippi, 23 Miss. 459; Murray v. Rottenham, 6 Johns. Oh. 52. In State of Maryland v. Bank of Maryland, 6 Gill & Johns. 205, funds of the state were deposited in a bank which afterwards made an assignment.—Held, that the priority of the state was thereby destroyed. The following opinions, possessing some historical as well as legal interest in connection with this subject, are here inserted: The prerogative right to royal mines was formerly asserted in New Jersey, as appears by the opinions of Sir Robert Raymond, attorney-general, and Sir Philip Yorke, solicitor-general, upon the application of Gov. Bur-net, December 12th, 1722 (Forsyth’s Opinions 158). “ The right to fines, forfeitures and escheats in New Jersey, belongs to the king, and not to the proprietors of the soil, by virtue of the grant to the Duke of York.”—Sir Edward Northey, attorney-gen eral, Á.D. 1705 (Forsyth's Opinions 157).—Rep.

On appeal from a decree of the vice-chancellor, reported in Board of Chosen Freeholders of Middlesex Co. v. State Bank at New Brunswick, 2 Stew. 268. A statement of the facts in this case will be found on page 331.