The questions presented for decision arise out of the winding up of the affairs of the Columbia Bank Trust Company by the Bank Commissioner of the state. Hereafter the Columbia Bank
Trust Company will be referred to as the bank, and the United States Fidelity Guaranty Company as the surety company. On the 29th day of September, 1909, the Bank Commissioner took possession of the bank and its assets under and by virtue of the authority conferred upon him by the laws of the state in relation to insolvent banks and trust companies, for the purpose of paying the depositors and other creditors of the bank. Thereafter the Bank Commissioner made application to the district court of Oklahoma county for an order authorizing him to sell certain promissory notes, bonds, and other securities of the bank. The application of the Bank Commissioner alleged, in substance, that he had taken possession of the bank, and that it was necessary to convert certain securities in order to pay off the depositors. The prayer consisted of a request
for an order of sale, "and that the court make such other orders, in connection with the administration of the affairs of said bank, as may from time to time be necessary and proper, and that the said A. M. Young, as such Bank Commissioner, together with any and all creditors and depositors of said bank, be given and awarded by the court and the judge thereof all relief to which they may be entitled."
Thereafter the surety company filed its petition in intervention, wherein it alleged, in substance, that on the 18th day of May, 1909, it signed, as surety for said bank, a bond to the state of Oklahoma, for the sum of $50,000, to protect the state of Oklahoma against loss by reason of a deposit made in said bank of the funds coming into the possession of the commissioners of the land office of said state by virtue of their duties under the law; that ever since the Bank Commissioner had taken charge of the assets of said bank he had acted under the direction and control of the state banking board, composed of the Governor, State Auditor, President of the Board of Agriculture, Secretary of State, and Superintendent of Public Instruction, so that the Governor, State Auditor, and President of the Board of Agriculture comprised a majority and quorum of both the state banking board and commissioners of the land office; that immediately after said Bank Commissioner had taken charge of said bank the secretary of the school land board, acting under the direction and control of the Governor, State Auditor and President of the Board of Agriculture, made what they claimed was a demand for the money secured by said bond upon said Bank Commissioner, and said Bank Commissioner, acting under the authority and control of the Governor, State Auditor and President of the Board of Agriculture, comprising a majority of the banking board, refused the demand made by the secretary of the school land board; that thereupon said majority of the commissioners of the land office demanded of said surety company the sum of $50,000, the penalty of said bond executed by said surety, said commissioners claiming that they had on deposit with said bank at the time of its failure a large sum of money, in excess of the penalty of said bond; that the Bank Commissioner, under
the direction of said majority of the board of land commissioners, comprising also a majority of the state banking board, had been paying the claims of other depositors in full without in any way protecting the said deposit made by the board of land commissioners; that, in the administration of the affairs of said bank, said Bank Commissioner had used in whole or in part, in paying off other depositors and creditors of said bank, approximately a half million dollars obtained from the depositors' guaranty fund; that it was the purpose and intent of said Bank Commissioner to pay off other creditors in full, to the exclusion of the deposit of the state of Oklahoma and the commissioners of the land office, secured by said bond of said surety company, and that the effect of said payments would be to unjustly and wrongfully prefer creditors who were being paid to the exclusion of the commissioners of the land office of the state of Oklahoma and to the detriment of the said surety company; that said surety company, at the time said Bank Commissioner took possession of said bank and its assets, was liable on said bond, and still remained liable thereon to the full amount, unless discharged by the wrongful and improper conduct of said Bank Commissioner and said banking board; that it was the purpose of said Bank Commissioner not only to pay off all other depositors of said bank to the exclusion of the state and the commissioners of the land office, but it was also the purpose of said Bank Commissioner to repay to said state banking board the depositors' guaranty fund which had been advanced by it in preference to the deposit secured by said bond of said surety company. The surety company prayed that said Bank Commissioner be enjoined from paying out any of the assets remaining in his hands to other creditors of said bank in preference to the state of Oklahoma and the commissioners of the land office, on account of the deposit secured by said bond of said surety company, and that said Bank Commissioner be restrained and enjoined from repaying to the banking board of the state of Oklahoma the guaranty fund advanced to him, or any part thereof, prior to the paying in full of the deposit secured by said bond of said surety company.
The cause was submitted to the court below upon the pleadings, whereupon a decree was rendered restraining the Bank Commissioner from repaying to the banking board of the state of Oklahoma, or any other person or persons or officers, any part of the depositors' guaranty fund of the state of Oklahoma, which had been used, or was on hand, or available for use at the time that the commissioners of the land office made demand upon said surety company for $50,000, and said Bank Commissioner was ordered and directed to treat the amount due the commissioners of the land office as a deposit in said bank, and pay over to said depositors their pro rata share of the assets of said bank, and to further pay to said depositors the deficit, if any there might be, after said distribution out of the guaranty fund which had been used, or which was on hand or available for use, on the respective dates on which demand was made by said depositors upon said surety company. Exceptions to the rulings of the court were reserved by the Bank Commissioner and said surety company, and the case is now here for review upon their petition in error and cross-petition in error.
The questions presented by the petition in error of the Bank Commissioner and the cross-petition of the surety company are: (1) Did the surety company have a right to maintain its petition of intervention without having previously paid the penalty of its bond? (2) Is the deposit of the commissioners of the land office entitled to participate pro rata in the distribution of the assets of the bank? (3) After exhausting the assets of the bank, shall the deficit be paid by the guaranty fund, or by the surety company, or shall this deficit be prorated between the surety company and the guaranty fund?
The first question must be answered in the affirmative. By the terms of the bond the bank is called the principal, the surety company the surety, and the state of Oklahoma the obligee. This must be the legal relation of these parties in determining their rights and liabilities. Section 3606, Comp. Laws 1909, provides that "a surety may compel his principal to perform the obligations when due," and section 6055 provides that "a surety may maintain an action against his principal, to compel him to discharge
the debt or liability for which the surety is bound, after the same has become due." It is a well-settled principle that a surety may resort to equity to compel the principal to pay the debt from his assets, if he has any, or to have his assets applied to the debt before paying any part of it. Walton et al.v. Williams et al., 5 Okla. 642, 49 P. 1022; Pomeroy's Eq. Jur. sec. 1417; Stearns on Suretyship, p. 544; Frost on Guaranty Insurance, sec. 304; 32 Cyc. p. 248; Barbour v.National Exchange Bank, 45 Ohio St. 133, 12 N.E. 5. Under our system of procedure, the distinctions between actions at law and suits in equity are abolished, leaving but one form of action, called a "civil action." It has been held, however, that "while the Legislature has abolished the distinction between actions at law and suits in equity, yet the Legislature has not intended thereby to change the nature of the remedies which generally obtain in those jurisdictions where courts of law and chancery are separated." Olson v. Thompson, 6 Okla. 74,48 P. 184, affirmed on rehearing 6 Okla. 576, 52 P. 388;Aylesbury Mercantile Co. v. Fitch, 22 Okla. 475, 99 P. 1089, 23 L. R. A. (N. S.) 573. The prayer of the Bank Commissioner to the pleading instituting this proceeding is that "any and all of the creditors and depositors of said bank be given and awarded by the court and the judge thereof all relief to which they may be entitled." We know of no good reason why the surety company, who responded to this invitation, may not maintain its petition of intervention, and have its rights, if it has any, in relation to the bank guaranty fund, determined without having previously paid the penalty of its bond.
Counsel for the Bank Commissioner concedes that this view of the law might be correct, if it were not for section 1569, Comp. Laws 1909, which provides that "the rule of the common law requiring a strict construction of the obligations of a surety shall have no application to the obligations of a surety or guarantor or indemnitor for hire, but all such obligations shall be liberally construed in accordance with the rules of the general law applicable to policies of insurance." This section does not change in any way the general rule applicable to the questions necessary
to a decision in the case at bar. Under the old rule, a surety was a favorite of the law, his obligation was voluntarily assumed as an act of friendship, without reward, and therefore the courts were astute to relieve him of liability, and the rule applied to the construction of his obligation wasstrictissimi juris. On account of the rise of surety companies making it a business to assume these obligations for hire, the reason for the old rule passed away, and many of the courts, in dealing with the obligation of a surety for hire, have, in the absence of a statute requiring it, adopted the rule of liberal construction. The statute under consideration prescribed a new rule of construction to guide the courts of this state in construing contracts of suretyship, but does not affect the rights of a surety, where there is no ambiguity in the contract. "Written language has the same significance, and its meaning is to be ascertained by the same rules of law, where it is found in the contract of a surety as when it appears in other agreements." American Bonding Co. v. Pueblo InvestmentCo., 150 Fed. 17, 80 C. C. A. 97, 9 L. R. A. (N. S.) 557, 10 Ann. Cas. 357. One of the rights of a surety is to compel his principal to pay the debt before the surety himself has paid it. This is the right the surety company is seeking to enforce.
Admitting the existence of the right, the question arises: What is the extent of the relief the surety company is entitled to? It contends that the deposit of the commissioners of the land office ought to be treated as all other deposits, and that the commissioners ought to participate pro rata in the distribution of the assets of the bank; that after the assets of the bank are exhausted, if there be a deficit, it ought to be paid out of the guaranty fund; that until the guaranty fund is exhausted, it ought not to be called upon to meet the obligations of its bond. We cannot agree with this contention. Section 323, Comp. Laws 1909, upon which it is based, reads as follows:
"In the event that the Bank Commissioner shall take possession of any bank or trust company which is subject to the provisions of this act, the depositors of said bank or trust company shall be paid in full, and when the cash available or that can be made immediately available of said bank or trust company
is insufficient to discharge its obligations to depositors, the said banking board shall draw from the depositors' guaranty fund and from additional assessments, if required, as provided in section two (320), the amount necessary to make up the deficiency, and the state shall have for the benefit of the depositors' guaranty fund a first lien upon the assets of said bank or trust company and all other liabilities against the stockholders, officers, and directors of said bank or trust company and against all other persons, corporations, or firms. Such liabilities may be enforced by the state for the benefit of the depositors' guaranty fund."
That the money deposited in the bank by the commissioners of the land office was a deposit in a broad sense is probably true; but it is clear to our minds that the commissioners of the land office are not such depositors and the funds which the law permits them to deposit in pursuance of their official duties are not such deposits as fall within the purview of section 323, supra. This was a special statutory deposit, with strict legislative bounds within which the depositor is required to act. The primary direction in relation to the disposition of such fund is that it shall be invested in first mortgages upon good and improved farm lands within the state of Oklahoma, Oklahoma state bonds, county bonds of this state, school district bonds of the school districts of this state, and United States bonds. Section 7942, Comp. Laws 1909.
Section 7943, Comp. Laws 1909, provides:
"Until such time as said funds may be safely and advantageously invested in the securities mentioned in the preceding section, said commissioners of the land office shall be and they are hereby authorized and empowered to deposit said sums in such banks or trust companies as they may select, but shall in every case take as security for such deposits the following classes of securities and no others: Bonds of the state of Oklahoma, bonds of the counties, school districts, cities and towns of this state, state and county warrants and approved state, county and municipal bonds of other states, bonds of the United States, first mortgages on real estate, warrants or other legal evidence of indebtedness authorized by law to be issued by municipalities in payment of paving, sewer, waterworks, electric light, or other public indebtedness and for which a special tax is authorized to be levied and collected for the payment thereof, and surety
company bonds, and as additional security on any deposit which said board may make the said commissioners of the land office shall have authority to accept surety companies or trust companies as sureties, but in each case said board of land commissioners shall accurately investigate the value of securities offered for such deposits, provided, however, such surety company or trust company shall neither be in any manner interested directly or indirectly in any bank or trust company for which it becomes additional surety; nor shall any surety, bonding or trust company be accepted as additional surety that has more than one-fourth of said capital invested in bank stock. The said board of land commissioners may, whenever they deem it advisable, require additional securities after a deposit is made as they deem necessary to secure the safety of the deposit."
It is apparent that section 7943, supra, imposes many limitations upon the deposit of the permanent school fund not applicable to the ordinary deposit. Sections 323 and 7943,supra, were enacted at the same session of the Legislature. The first section unquestionably was passed by virtue of the police power of the state, and of course must be general in its scope, and apply to all who are entitled to that sort of protection; the second section specifically relates to the funds of the state itself, and the particular subject embraced within its purview is the temporary deposit and protection of the permanent school fund until it can be invested in the manner prescribed by law. It is well settled that specific provisions relating to a particular subject must govern in respect to that subject, as against general provisions in other parts of the law, which might otherwise be broad enough to include it. 2 Lewis' Sutherland, Stat. Const. sec. 491.
In construing the foregoing sections as a starting point, it must be presumed that the legislative department, in its wisdom, by the enactment of the depositor's guaranty law, provided an adequate system to protect those entitled to its benefits against loss of deposits in state banks. This court has held the bank guaranty law to be sound in principle and free from constitutional objections. Noble State Bank v.Haskell et al., 22 Okla. 48, 97 P. 590, which decision has been affirmed by the Supreme Court of the United States inNoble State Bank v. Haskell et al., 219 U.S. 104, 31 Sup. Ct. 186, 55 L.Ed. 112, 32 L. R. A. (N. S.) 1062, Ann. Cas. 1912A, 487. If the bank guaranty law provides complete protection to those entitled to its benefits, why should the Legislature throw additional safeguards around the deposits of the commissioners of the land office, by the passage of section 7943, Comp. Laws 1909? In one of the briefs before us, counsel for another surety company, in a case involving the same propositions involved herein, anticipate this question, and answer it as follows:
"The Legislature knew that its offspring was not very strong at its birth. It knew that it would be attacked from every quarter, and it knew not how soon some federal court or state court might declare it absolutely void. It was an experiment, and, like all new ventures and experiments, it must necessarily be amended, added to, and subtracted from, in order to get it in good working shape."
Counsel in the instant case say that it is clearly required by the statute (section 323), and they argue, that the permanent school fund is such a sacred trust that the Legislature must be presumed to have deemed it of more consequence than the savings of all the people, and therefore entitled to additional protection during the time any portion of it may be temporarily deposited. Neither answer appeals to us. The first is unsatisfactory, because the conclusion reached by the court that the Legislature, in enacting the bank guaranty law, intended to, and did, provide an adequate system for the protection of the class of depositors entitled to its benefits as a police regulation, uninfluenced by unfounded fears, and by the enactment of section 7943, supra, it intended to and did accomplish the same purpose for deposits of any part of the permanent school fund, seems more reasonable and more in harmony with the spirit and the letter of the sections of the statute under consideration, and more nearly to advance the beneficial purposes within the contemplation of the Legislature at the time of their enactment. The second is unsatisfactory for the same reason, and for the further reason that it imputes to the Legislature either a lack of honesty or of intelligence. If it is correct, the liability of the bonding company would not accrue until the banking system of
the state collapsed and every state bank within its borders was in bankruptcy. We cannot conceive such a condition of financial chaos. From our viewpoint, to concur with the latter contention would be tantamount to holding that the Legislature required the state banks in which any of the permanent school fund may be deposited to procure and pay for surety company bonds upon which the surety will never become liable. We are not willing to attribute such folly to the legislative department, when, without violating the canons of construction, it is not necessary to do so.
"Statutes will be construed in the most beneficial way which their language will permit to prevent absurdity, hardship, or injustice, to favor public convenience, and to oppose all prejudice to public interest. 'In construing an act of the General Assembly, such a construction will be placed upon it as will tend to advance the beneficial purposes manifestly within the contemplation of the General Assembly at the time of its passage; and courts will hesitate to place such a construction upon its terms as will lead to manifestly absurd consequences, and impute to the General Assembly total ignorance of the subject with which it undertook to deal.'" (2 Lewis' Sutherland, Stat. Const. [2d Ed.] sec. 490.)
To our minds it is quite clear that the Legislature, in enacting those two sections, had in mind (1) those ordinarily entitled to protection under the police power of the state; and (2) the protection of the permanent school fund. By the first section the state in its sovereign capacity was exerting its power in behalf of its people and their interests, and not in its own behalf, and by the second it dealt with the temporary deposit and protection of the permanent school fund belonging to the state as a sovereign. As a sovereign the state must not be presumed to have exercised its police power in its own behalf to the detriment of its citizens, for whose benefit it is ordinarily exercised, unless the language of the statute itself clearly leads to that conclusion. This power cannot be exercised, except to promote the public convenience, the general prosperity, the public health, the public morals, or the public safety. C., B. Q. Ry. Co. v. State of Illinois,200 U.S. 561, 26 Sup. Ct. 341, 50 L.Ed. 596, 4 Ann. Cas. 1175;C., R.I. P. Ry. Co. v. State, 23 Okla. 94, 99 P. 901. It must have been obvious that, after the passage of section
7943, supra, large sums of the permanent school fund would necessarily be deposited in banks generally, and, in case of the failure of a state bank having such a deposit, payment out of the guaranty fund would place an additional strain upon it that might jeopardize the claims of the people for whose protection it was primarily intended. To obviate this, the Legislature, upon permitting such funds to be deposited in banks, provided a system whereby they would be completely protected against loss without impairing the usefulness of the bank guaranty fund as a police regulation. Moreover, section 7943, supra, authorizes the commissioners of the land office to deposit moneys not invested as required by law belonging to the permanent school fund in "such banks or trust companies as they may select," and there is no limitation upon the power of the commissioners as to where they shall make the deposit or the class of banks they shall select. In that respect they have the same freedom as the general depositor. But in the case of the permanent school fund, no matter where the deposit is made, the same class of securities is required. As it is not difficult to think of situations that would make it convenient, if not necessary, to deposit part of the permanent school fund in national banks within the state, or state or national banks outside its borders, it seems but reasonable, in view of such situations, that the Legislature would provide a system of protection amply sufficient to protect the permanent school fund against loss, wherever any part of it might be deposited, without regard to the bank guaranty fund.
Thus this wise provision of the state for protecting its permanent school fund, in case any of the banks wherein any part of it may be temporarily deposited becomes insolvent, will constitute a prop for the guaranty fund, and not a burden upon it. It must be borne in mind that the foregoing sections form a part of the bond herein involved as fully as if specifically made so by its terms. In view of that, and the conclusion we have reached as to their construction, it follows that, with the exception of the first lien of the state upon the assets, etc., of insolvent state banks, created by section 323,supra, for the benefit of the depositors' guaranty fund, the rights and liabilities of the surety
company are the same as they would have been if the bond was executed to secure the deposit of a part of the permanent school fund in any bank or trust company within or without the state, not governed by the bank guaranty law.
One of the conditions of the bond is that, in the event of the default on the part of the principal, the surety shall be liable hereunder for only such proportion of the total loss sustained by the obligee as the penalty of this bond shall bear to the total penalty of all bonds and securities furnished to the obligee, and in no event shall the surety be liable hereunder in excess of the penalty of this bond. The manifest purpose of this condition is to make the surety company liable pro rata with all other surety companies securing the same deposit and with all other securities furnished the commissioners of the land office, under section 7943,supra. It does not contemplate participation in the guaranty fund by contribution or otherwise. Indeed, the doctrine of contribution or subrogation is not applicable to any phase of this case. The purpose of this proceeding is to compel the Bank Commissioner, acting for the principal, to pay the debt out of the depositors' fund. If this is done, the surety would be discharged and released from liability.
As, under our views of the law, the surety company was not entitled to the relief prayed for and granted by the court below, the cause must be reversed and remanded, with directions to dissolve the injunction and dismiss the petition of the surety company.
Justices WILLIAMS and HAYES being disqualified, Judge STILWELL H. RUSSELL, of the district court of the Eighth district, and Judge C. A. GALBRAITH were appointed by the Governor to sit in their stead.
TURNER, C. J., and GALBRAITH and DUNN, JJ., concur. RUSSELL, J., files a separate opinion, concurring in the conclusion reached and in the reasoning of the court on the principal question involved.