State v. Williams

⁵³⁰ Pearce, J., delivered the opinion of the Court. As a result of the great fire in the city of Baltimore on February 7th and 8th, 1904, the Home Fire Insurance Company of Baltimore became insolvent, and upon a bill filed in Circuit Court No. 2, of Baltimore City, by Bernard Wiesenfeld, a stockholder, and Lloyd Wilkinson, State Insurance Commissioner of Maryland, G. Harlan Williams was, with the consent of said company, appointed receiver to settle and close up its business. Subsequently, the State of Maryland by its Attorney-General, Hon. William S. Bryan, Jr., filed a petition in that cause showing that on April 4th, 1902, said insurance company issued a policy of insurance to the State of Maryland insuring certain public buildings described in said policy, Jn the amounts specified therein, from noon of April 9th, 1902, to noon of April 9th, 1907, in consideration of a premium of $1,052.80 paid by said State to said company; that among the public buildings so insured were three of the State Tobacco Warehouses all of which were destroyed in said fire, and upon .which the aggregate insurance under said policy was $17,500; that the State had furnished due proof of loss to said receiver, who had accepted the same; that upon the appointment of said receiver, on the ground of admitted insolvency, all the outstanding policies of insurance issued by said company were rescinded and annulled, and the State ofMaryland became entitled to the return to it by said receiver of the unearned premium paid by it upon the policy upon said State Tobacco Warehouses, and that the amount of said unearned premium was the sum of $661.10; that there vras due the State of Maryland from the said company, in addition to the above unearned premium, the sum of $17,500, being the amount insured, aggregating $18,161.10, with interest until paid,-for which amount the State was entitled to a preference over any and all creditors of said company; and the prayer of the petition was that the receiver be ordered to pay the same out of the first funds coming into his hands as such receiver.

The receiver answered this petition admitting all the alie ⁵³¹ gations of fact therein, except that he alleged the correct amount of the unearned premium was $747.63, but did not admit that the indebtedness carried interest until paid, or that the State was entitled to a preference over any creditor of said company, but submitted these questions to the Court. The Court, upon consideration, dismissed this petition with costs, and this "appeal is taken from that order. An auditor’s account was subsequently stated, in which the State was allowed only a pro rata dividend on this claim with other creditors, to the ratification of which account the State excepted, and said account was ratified except as to this dividend allowed the State, the question of the State’s priority being reserved by the order of ratification, and the receiver having in his hands sufficient funds to pay said claim in full, if finally allowed as a preferred claim. Two questions arise upon this appeal; 1st.

Is the State entitled to the preference claimed? 2nd. If not so entitled, was it error to award costs against the State ? We think the case of the State v. The Bank of Maryland, 6 G. & J. 206 , is decisive against the preference of the State. In that case the general principles upon which the preference or priority of the State over other creditors, as against the property of a common debtor, were very carefully considered in an elaborate opinion by Chief Justice Buchanan.

The Bank of Maryland, being insolvent, conveyed all its property; funds, rights and credits to trustees for the benefit of its creditors. Before, and on the date of this conveyance, the treasurer of the Western Shore of the State of Maryland had on deposit in said bank the sum of $50,089.96 of the public moneys of the State, and after the date of said conveyance filed a bill in equity against the bank and its said trustees, claiming to be preferred in payment of said sum out of the funds in the trustees hands, but this preference was denied and the bill was dismissed. The Court said: “In State v. Rogers and wife, 2 H. & McH. 198 ; Murray and Samson v. Ridley, 3 H. & McH. 171 , and Contee v. Chew's Adms., 1 H. & J. 417 , it was held that at common law the State had a preference, and a right to ⁵³² be first paid out of the estates of deceased persons, where no liens stood in the way. These cases were decided in the late general Court and were not appealed from, but acquiesced in by the parties contesting the right.

And in the State v. Buchanan, 5 H. & J. 317 , and Dashiel v. The Attorney-General, 5 H. & J. 392 , it was decided by this Court that the common law was adopted by the Third Article of the Bill of Rights ‘so far at least as it was not, inconsistent with the principles of that instrument and the nature of our political institutions.’ It is too late therefore, at this day, to deny the State.’s right at common law, to have its debt first paid out of the property of its debtor remaining in his hands, and no lien standing in the way. For notwithstanding all that has been said in disparagement of this right of priority, it is not perceived to be inconsistent with the principles or spirit of our political institutions. It' does not indeed exist here with all the incidents to the royal prerogative right in England. We have not the writ of protection, nor the extent in chief, or in aid.

And the priority of the State is a rule only in the distribution of the property of the debtor, requiring the debt due to the State to be first paid, where the individual creditor has no antecedent lien overreaching it.” Judge Buchanan then proceeded to inquire whether that was a case in which the State’s priority attached, or whether it had been