Opinion
No. 29563.
November 9, 1931.
1. SUBROGATION.
One having definite managerial responsibility, who makes payment of enforceable demands against estate being administered, may be entitled to subrogation.
2. SUBROGATION. Superintendent of banks advancing amount of stockholder's statutory liability, for purpose of paying insolvent bank's depositors without delay, held subrogated to depositors' rights ( Code 1930, section 3792).
The superintendent of banks should be allowed subrogation to the claims of the depositors against stockholders' statutory liability, inasmuch as superintendent is under managerial duty to collect assets of insolvent bank as speedily as possible, including statutory stockholders' liability, when other assets are insufficient, and since it is also his duty to pay depositors pro rata as rapidly as good management will permit and to draw on depositors' guaranty fund if necessary under Code 1930, section 3792.
3. SUBROGATION.
That superintendent of banks may have violated law in paying depositors of insolvent bank from guaranty fund, should not prevent reimbursement (Code 1930, section 3792).
4. EQUITY.
Officer's suit for reimbursement of public fund should not be defeated because of unclean hands, where delinquencies had no injurious consequences.
5. EQUITY.
In suit by superintendent of banks against stockholders, objection that money advanced to pay bank's depositors was taken illegally must be raised by special demurrer (Code 1930, section 3792).
APPEAL from chancery court of Adams county; HON. R.W. CUTRER, Chancellor.
F.W. Bradshaw and Flowers, Brown Hester, all of Jackson, and Brandon Brandon, of Natchez, for appellant.
The right to collect the double liability of stockholders of failed banks, under section 3815 of the Code of 1930, accrues when it becomes reasonably apparent that the assets of the failed bank will be insufficient to pay the depositors in full, and the liability under this statute is primary and not secondary.
Pate v. Bank of Newton, 116 Miss. 666, 77 So. 601; Bank Examiners v. Grenada Bank, 136 Miss. 142, 99 So. 903; Kent v. Love, 141 Miss. 523, 106 So. 772; Abbey v. Delta Bank Trust Co., 139 Miss. 36, 103 So. 801.
Whenever the superintendent shall have paid any dividend to the depositors of any failed bank out of the bank depositors guaranty fund, then all claims and rights of action of such depositors so paid shall revert to the superintendent for the benefit of said bank depositors' guaranty fund, until such fund shall have been fully reimbursed for payments made on account of such failed bank, with interest at four per cent per annum.
Sec. 3792, Code 1930.
The State Banking Department, upon making payment to city after failure of municipal depository, was subrogated to the rights of the city against the depository bond and sureties.
Perkins v. State, 130 Miss. 512, 94 So. 460.
The doctrine of subrogation is the offspring of natural justice, and courts should rather incline to extend than to restrict the operation of a principle so elevated and pure. It applies, in general, wherever any person, other than a mere volunteer pays a debt or demand which in equity or in good conscience should have been satisfied by another, or where a liability of one person is discharged out of the fund belonging to another, and where one person is compelled for his own protection, or that of some interest which he represents, to pay a debt for which another is primarily liable, or wherever a denial of the right would be contrary to equity and good conscience. And "whenever a party has such an interest in property as makes it incumbent on him to get in an outstanding claim or equity for its protection, good conscience dictates that he shall have all the rights which the holder of the equity had."
Staples v. Fox, 45 Miss. 667; Robinson v. Sullivan, 102 Miss. 581, 59 So. 846; Prestridge v. Lazar, 132 Miss. 168, 95 So. 837; Grenada Bank v. Young, 139 Miss. 448, 104 So. 146.
The Superintendent of Banks, in making the fifty thousand dollars advancement to pay the depositors of the Bank of Commerce, was not a volunteer. He was not a volunteer, but was officially in charge of the liquidation of the affairs of the bank, charged with the duty under the banking laws to liquidate the affairs of the bank so as to pay the depositors thereof in full, if possible, and save any balance for the benefit of the stockholders. On principles of natural right and equity, since he has discharged an obligation to the depositors which would otherwise have had to be discharged by the appellees, should not the Superintendent of Banks be subrogated to the rights of the depositors as against the stockholders.
Jones Stockett, of Woodville, for appellees.
Two separate funds are created, the first being a maintenance fund and to be used solely for the maintenance of the State Banking Department, and the second, being a guaranty fund and maintained solely for the benefit of depositors of failed, guaranteed banks. Over neither of these funds has the appellant the exclusive charge and control; each of these funds shall be deposited in and held by the state treasury, and no money can be paid out of either except in the manner and for the purposes authorized by the statute.
Sections 3783, 3791, Code 1930.
This alleged advance of fifty thousand dollars could not have been advanced legally, either from the maintenance fund or the guaranty fund.
Depositors in failed banks should be paid out of the guaranty fund in order of liquidation; and if the guaranty fund should not be sufficient to pay all guaranteed deposits then the Superintendent of Banks should pay depositors pro rata in order of liquidation.
Sec. 3792, Code of 1930.
Section 3815, Code 1930, is in derogation of the common law, it is in effect a penal statute and must be strictly construed.
Mellott v. Love, 152 Miss. 860, 119 So. 913.
The depositors have been paid in full, the state cares everything that the salutary principles of public policy embodied in the banking laws of the State shall be faithfully and fearlessly carried out, so as to prevent graft of every sort, misapplication of the funds of the banking department, diversion of the guaranty fund, or undue preference of some depositors and creditors, and is keenly interested in securing the honest, faithful, legal and clean administration of the affairs of the banking department and of failed banks of the State.
Noxubee County Hardware Co. v. City of Macon, 90 Miss. 636.
He who seeks equity must do equity, and, also, he who comes into equity must come with clean hands. The latter maxim is much stronger and much more efficient in its operation. It says that "Whenever a party, who, as actor, seeks to set the judicial machinery in motion and obtain some remedy, has violated conscience or good faith or other equitable principles in its prior conduct, then the doors of the court will be shut against him in limine; the court will refuse to interfere in his behalf to acknowledge his right or to award him any remedy."
Moss v. Miss. Livestock Sanitary Board, 154 Miss. 765, 783.
The maxim that he who comes into equity must come with clean hands is one of general application and equity will not lend its aid in securing to the litigant rights, where the litigant complainant has not performed or discharged the duties required by law, but would leave the litigant as it finds her.
4 A.L.R. 1 to 44; Mullins v. Taylor, 132 Miss. 551, 97 So. 5.
Subrogation applies whenever any person, other than a mere volunteer, pays a debt or demand which in equity or good conscience should have been satisfied by another, or when one person finds it necessary for his own protection to pay a debt for which he is not primarily liable, or where one has such an interest in property as makes it necessary for him to get in an outstanding claim or equity for its protection, or when one discharges an encumbrance of another at the latter's request.
Grenada Bank v. Young, 139 Miss. 448, 104 So. 146.
Appellant acted as a pure volunteer in this matter.
The Bank of Commerce of Natchez, a duly admitted state bank, with a capital stock of fifty thousand dollars, was on March 8, 1929, found to be insolvent, and on that day, in pursuance of a resolution of the board of directors, appellant as superintendent of banks took charge of said bank for the purpose of its liquidation. As soon as appellant had come thus in charge of said bank and had been able to make a correct appraisal of its assets, he discovered, and it was officially so adjudged by him, that it would require all the collectible assets of the bank plus the sum of fifty thousand dollars to pay all the depositors; in other words, that it would require all the bank's assets plus the entire amount of the stockholders' statutory liability to pay the depositors in full. Instead of awaiting the ordinarily slow process of the collection of the stockholders' liability, appellant advanced the amount thereof, to-wit, the sum of fifty thousand dollars, and by a further arrangement accomplished by him to that end, he succeeded in paying off all the depositors, without serious delay. Appellant thereafter called upon the stockholders to pay in to him the amounts of their respective statutory stockholders' liability, and while the majority of the stockholders promptly paid, appellees have declined, and appellant has filed a bill against them seeking relief by way of subrogation. A demurrer was sustained to the bill on the ground that appellant was a volunteer and is entitled to no relief.
The broad general principles governing the doctrine of subrogation are well settled and are liberally upheld in this jurisdiction; but in all the statements of the doctrine there is the exception that a mere volunteer is never entitled to relief. Grenada Bank v. Young, 139 Miss. 448, 454, 104 So. 166; Prestridge v. Lazar, 132 Miss. 168, 95 So. 837; Robinson v. Sullivan, 102 Miss. 581, 59 So. 846. The problem, therefore, in many cases, is to determine whether the person claiming the benefit of subrogation is or is not a volunteer. There is no difficulty in excluding as a volunteer one who is an intermeddler, who has nothing to do with the transaction, or who officiously intrudes himself without public or private invitation into a matter which, to use a common expression, is none of his business. But to say that one who has nothing to do with the transaction is a volunteer, and that, on the other hand, one who has some legitimate concern therein is not a volunteer, still does not fully cover the question, for the latter statement in the converse would be no accurate summary of the rule. This may be illustrated by the cases which hold that a tax collector, although he has to do with the collection of taxes, is a volunteer when without request of the taxpayer the taxes are paid by the collector; the sufficient reason being that in so doing he cuts off the privilege or option, of which the taxpayer may have wished to avail, to allow the property to sell and take the two years' time to redeem, whereas, if without the taxpayer's invitation or consent the tax collector pays the taxes and if thereupon the right of subrogation in the tax lien should be allowed in behalf of the tax collector, the lien would be at once exigible, thereby shortening the time which otherwise the taxpayer would have had the privilege to take.
Without going further or undertaking to define the line of demarkation, it is sufficient for the purposes of this case to refer to the subsidiary principle, which the distinct trend of the reported cases has established, that one who has an active interest or concern in the nature of a definite managerial responsibility in respect to the payment of enforceable demands against an estate in hand, and who, although under no legal or moral obligation personally to pay, nevertheless in the actual and beneficial interest of the estate being administered does so pay, and thereby takes care of obligations which rest upon another or others, the said payer may be entitled to the benefit of subrogation, provided no option or privilege of the person primarily or actually liable is thereby intercepted, or abridged or substantially altered. The above subsidiary principle is illustrated by the holdings, upon which the courts are generally agreed, that an administrator or executor or active trustee in an express trust who personally pays the incontestible debts against the trust estate may be subrogated so as to stand in the rights of the creditors whose debts or securities were thus paid. In such cases the manager-trustee does not officiously intrude himself as an intermeddler. On the contrary, he has acted toward the ends which his official duties require ultimately to be accomplished through his management, and in thus advancing the interests of the estate, he does nothing which adversely affects the rights or privileges of those in respect to whom he has acted.
That, as we see it, is the essence of the case we have here in hand. It is the managerial duty of the superintendent of banks, not only to collect, as speedily as possible consistent with good judgment, all the assets of an insolvent bank lawfully put under his charge for liquidation, these collections to include the statutory stockholders' liability whenever it is ascertained that the other assets of the bank will be insufficient to pay depositors in full, but it is also the duty of said superintendent, out of these assets including said stockholders' liabilities, to pay the depositors pro rata as rapidly as good management will permit and finally in full, and if, in order to do so, it be necessary to draw on the depositors' guaranty fund, he must do that, if that fund be in available condition, and this latter may and must be done in anticipation, under certain circumstances mentioned in the statute, in force at the time this bank failure occurred. Section 3792, Code 1930, and previous statutes noted thereunder. It is not necessary to make a further elaboration or statement to disclose that this case falls within the established subsidiary principle which protects administrators, executors, and active trustees who have done as the superintendent has done here.
We are unable to follow the further argument of appellees that the inference to be drawn from the bill is that the superintendent took the sum advanced, out of the depositors' guaranty fund, and that there was in some way a violation of the law in doing this, wherefore appellant being a wrongdoer can have no relief. If appellant personally advanced this money to himself as superintendent of banks out of his own private funds, then he is none the less entitled to recover the same as superintendent and thereupon to reimburse himself, as an individual, and no wrong is or has been done therein or thereby; there being no intimation or suggestion anywhere that by the arrangement or any part thereof, appellant was to receive any sort of personal reward or pecuniary benefit. And if he advanced it out of the depositors' guaranty fund, he is under duty to recover it so as to reimburse that fund, even if in the handling of that fund in the manner mentioned there was some official misconduct therein or mismanagement thereof, under the letter of the law — as to which latter we express no opinion or any intimation thereof. If the bank depositors' guaranty fund is to be regarded as a general public fund belonging to the entire state, then the state has done no wrong in respect to it, for the state can do no wrong. If that fund is to be regarded as a quasi-public fund belonging in trust to that large class of the public who are bank depositors, the result would be the same, for that large class of the public to which it belongs has done no wrong in regard to it. We think it may be laid down as a sound rule that the reimbursement of public or quasi-public funds is not to be defeated by the private defense of the want of clean hands, on account of any official delinquencies or mismanagement of that fund, and as to which there has been no injurious consequences, beyond those that are fanciful or illusory, to those raising that defense. The tacit, but nevertheless actual, recognition of that rule is found in the entire general course of the vast amount of litigation that has gone through the courts of this state in cases involving public or quasi-public funds during a long series of past years. Besides, the objection aforesaid must be raised by a special demurrer, not one which contains general grounds as in this case. Grif. Chan. Prac., sec. 295. This is true, because even if the superintendent of banks were barred out of this suit, the Attorney General would not be, in so far as the public or quasi-public fund is concerned, thus illustrating that a procedural point is not to be allowed to foreclose the entire case on its merits, as would be under a general demurrer.
Reversed and remanded.