Fidelity & Deposit Co. v. Sholtz Ex Rel. Duval County

This is an action at law by defendant in error, as plaintiff below, to recover on the official bond of Frank Brown as Clerk of the Circuit Court of Duval County. The defendant was surety on said bond and the funds sought to be recovered are alleged to have been paid to Brown as Clerk of the Circuit Court and as Clerk of the Board of County Commissioners, and retained by him illegally. This is the second appearance of this cause here. Carlton v. Fidelity Deposit Co. of Maryland, 113 Fla. 63, 151 So. 291. In the latter case we held that Brown's compensation as Clerk of the Board of County Commissioners was a part of the maximum compensation allowed him under the law. When the mandate went down in the last cited cause the defendant applied for leave to file additional pleas. This application was denied and the case went to trial on pleas numbered One and Fifteen to the amended declaration. An agreed stipulation of facts was offered in evidence which admitted the allegations of the declaration traversed by pleas One and Fifteen. The trial court then directed a verdict for the plaintiff in the sum of $4096.40. A motion in arrest of judgment and a motion for a new trial were made and denied to which the instant writ of error was prosecuted. The record discloses these salient facts. Both the State of Florida and the County of Duval have a claim against Frank Brown, now deceased, for breach of his duty as Clerk of the Circuit Court. The bond sued on is an official *Page 839 bond for faithful performance of his duty, was executed by the defendant, and is made payable to Doyle E. Carlton as Governor of the State of Florida and his successors in office. The present action was instituted in behalf of Duval County and it is shown that the State of Florida had instituted an equity suit in the same court to recover tax monies collected by and not accounted for by Brown. The limit of liability of the defendant on the bond is $5,000.00 and the amount claimed by the State is greater than this liability, as is also the amount claimed by the county. Under such a state of facts has the State of Florida a prior right to the payment of tax monies collected and not reported from the proceeds of the bond, or should the demand of Duval County for fees collected and not reported be paid first, or should the state and county share the proceeds of the bond proportionally, it being shown that the liability on the bond is not adequate to pay the claims of both. In Flood v. State, ex rel. Board County Commissioners, 100 Fla. 70, 129 So. 861, this Court held that fees collected by its officers represent the charge the state makes for services rendered by it and constitutes a fund subject to the control of the State, to be applied as the Legislature may direct. The Act involved in this case directed the disposition of all funds collected by county officers. Under the rule of the common law, the state enjoyed the sovereign prerogative right to priority in the payment of its claims out of the proceeds of the bond of a defaulting public officer or the effects of an insolvent debtor. Where, as in this case, the claim of the State is for revenue or taxes collected we have found no exception to this rule. United States Fidelity Guaranty Co. v. Rainey, 120 Tenn. 357, 113 S.W. 397; United States F. G. Co. v. Bramwell, *Page 840 108 Or. 261, 217, Pac. 332; In re Carnegie Trust Co., 206 N.Y. 390,99 N.E. 1096; North Carolina Corporation Commissioners v. Citizens Bank Trust Co., 193 N.C. 513, 137 S.E. 587; 51 A.L.R. 1355; State v. Liberty Bank Trust Co., 165 Tenn. 40, 52 S.W. (2) 150. There have been occasional departures from this rule, as in New Jersey, South Carolina, and Mississippi, but they have generally been controlled by statute or the lack of a statute expressing a legislative intent to waive the preferential right of the state or they were cases in which a simple contract debt was involved. Fidelity Deposit Co. of Maryland v. Brucker, 205 Ind. 275,183 N.E. 668; 90 A.L.R. 166; Fry v. Equitable Trust Co., 264 Mich. 165, 249 N.W. 619; 90 A.L.R. 175. These cases recognize and approve the common law rule which, not having been modified by the statute, we approve as the rule in this state. The case of United States F. G. v. Bramwell, supra, recites all the cases supporting and contrary to the rule as here announced. Examination of them shows that in all the states where the question has been adjudicated, except New Jersey, South Carolina, and Mississippi, the priority of the state has been upheld, such priority being independent of statute and based on the common law. As effecting the government of the United States the rule is different. Before such a rule can be invoked in favor of the United States it must rest exclusively on a Federal statute. United States v. State Bank of North Carolina, 31 U.S. 19, 6 Pet. (U.S.) 29, 8 L. Ed. 308. The reason for the rule as applied to the Federal government is that there is no common law of the United States in the sense of a national customary law, distinct from the common law of England as adopted by the several states each for itself applied as its local law. Smith v. Alabama, *Page 841 124 U.S. 465, 8 Sup. Ct. 564, 31 L. Ed. 508; United States Fidelity Guaranty Co. v. Borough Bank of Brooklyn, 161 App. Div. (N.Y.) 479, 146 N.Y.S. 870. Said the Supreme Court in Marshall v. New York, 254 U.S. 380, 41 Sup. Ct. 143, 65 L. Ed. 315, the crown of Great Britain, by virtue of a prerogative right, had priority over all subjects for the payment out of a debtor's property of all debts due it. The priority was effective alike whether the property remained in the hands of the debtor, or had been placed in the possession of a third party, or was in custodia legis. The priority could be defeated or postponed only through the passing of title to the debtor's property, absolutely or by way of lien, before the sovereign sought to enforce his right. This rule of the common law was carried into the law of this state by virtue of Section 71, Revised General Statutes of 1920, Section 87, Compiled General Laws of 1927. The policy of it was further carried in Section 3738, Revised General Statutes of 1920, Section 5610, Compiled General Laws of 1927, relating to the payment of the debts of a decedent. Much has been said in the briefs of both parties as to its effect on this case of Lake Worth Inlet Dist. v. First Amr. Bank Trust Co., et al., 97 Fla. 174, 120 So. 316. In that case Lake Worth Inlet District attempted to assert a preferential right to payment of a claim held by it against an insolvent bank out of the funds of said bank because of the prerogative right of the crown under the common law to be preferred over general creditors in the payment of its claim from an insolvent estate. In the absence of statute so providing counties and municipalities do not enjoy the prerogative right of the state to priority over other creditors of the payment of its claims *Page 842 against an insolvent estate. United States Fidelity Guaranty Co. v. Rainey, supra. We have no such statute in this state. Lake Worth Inlet District v. First American Bank Trust Company, supra, involved the distribution of the proceeds of an insolvent bank in which the Lake Worth Inlet District was a common creditor like all others. The question of the priority of the State to be paid from the proceeds of the bank was not involved or considered. The right of a public or municipal corporation to priority was involved and we held that it must participate along with and on the same basis as other creditors. That case was not in point with and in no way controls the case at bar. The second and only other question argued is whether or not the defendant should have been permitted to show by plea the amount of the state's claim against it for taxes collected and not accounted for by Brown as Clerk of the Circuit Court. Since we hold that the State is entitled to priority of payment of its claim out of the proceeds of the bond and it is shown or alleged that the State's claim exceeds the penalty of the bond it would if true be a complete bar to the action for recovery by the county. It was error, therefore, to deny the defendant the right to show the amount of the State's claim, otherwise if the county enforced its claim prior to the enforcement of the State's claim the defendant would be subject to the liability of having to pay twice the penalty of the bond. If it should develop that the State's claim should not absorb all the proceeds of the bond any residue may be allocated to the payment of the county's claim. The judgment below is accordingly reversed. Reversed. ELLIS, P.J., and BUFORD, J., concur. *Page 843 WHITFIELD, C.J., and BROWN, J., concur in the opinion and judgment. DAVIS, J., disqualified. ON PETITION FOR REHEARING