Boone County Bank v. Byrum

• Decision Date: 31 March 1900
• Citation: 56 S.W. 532,68 Ark. 71
• Parties: BOONE COUNTY BANK v. BYRUM
• Court: Arkansas Supreme Court

56 S.W. 532

68 Ark. 71

BOONE COUNTY BANK v. BYRUM

Supreme Court of Arkansas

March 31, 1900

Appeal from Boone Circuit Court in Chancery, BRICE B. HUDGINS Judge.

Decree affirmed.

Watkins & Walker, for appellants, Watkins, Parker and Crump.

The decree was erroneous in awarding to appellees the part of the fund due by the bank, and in giving the state any part of the fund. "Equality is equity" is the foundation of the doctrine of subrogation. 3 Pom. Eq. § 1418; 1 id. § 406; 31 Ark. 42; 34 Ark. 580. The chancellor erred in refusing appellant's subrogation. Sheld. Sub. § 141. The state had the right of recovery of the trust fund from the bank, and, having received satisfaction, the fund is no longer a trust fund. 2 Perry, Tr. (3 Ed.), § 841, 104 U.S. 54; Wait. Fraud. Conv. § 44. The sureties are not volunteers. 34 Ark. 580.

G. J Crump, for appellant, Boone County Bank.

Appellees seek to apply the rules of subrogation, and their rights together with those of appellants, are to be determined according to equity. 2 Brandt, Sur. & Guar. § 305; Sheld. Sub. § 411; 31 Ark. 42; 1 Pom. Eq. 406, 407. The debt must be fully paid before a surety can claim subrogation. 34 Ark. 113; 40 Ark. 132; 121 Ind. 241; Sheld. Sub. § 127. A surety who pays the debt of his principal when there is no legal obligation resting on him to do so, is a mere volunteer and not entitled to subrogation. 83 Ky. 49; 3 Allen, 524; 3 Rand. 490; 3 Metc. 327; 15 B. Mon. 134; 21 La.Ann. 722. The office of collector became vacant upon the failure to file the bond in time. Sand. & H. Dig., §§ 6560-3; 37 Ark. 386; 42 Ark. 114; ib. 117; 42 Ark. 394; 63 Ark. 337. This being true, the sureties were under no legal obligation to pay the debt.

J. W. Story and W. S. & F. L. McCain, for appellees:

The regulations as to the time for filing the collector's bond are intended for the protection of the state only; and the sureties can not plead such a defense. 22 Ark. 237; 28 Ark. 306. The liability of the sureties is all discharged. The sureties who declined to become parties are not entitled to any relief now. 61 Ark. 189; 24 Ill. 517; 102 Ind. 581; 88 Ind. 359-361; 51 Ala. 301; 49 Barb. 444; 54 N.Y. 675.

OPINION

BATTLE, J.

The statutes of this state provide that the sheriff of each county shall be ex-officio collector of all taxes of his county, and, before entering upon his duties as such collector, "shall give bond and security to the state;" that such bond 'shall be conditioned for the faithful performance of the duties of his office, and for well and truly accounting for and paying over all moneys collected by him" in his official capacity; and that, "should he fail to give such bond before the first Monday in December of each year, the clerk of the county court shall immediately notify the governor, and some competent person having the requisite qualifications shall be appointed by the governor to perform the duties of collector."Sand. & H. Dig., §§ 6558, 6560, 6563.

In this case the sheriff filed his bond as collector of the taxes of 1895 on the first Monday in December, 1895. No notice of his failure to file his bond in time was given to the governor, and no one was appointed collector in his stead. His bond was approved by the county court, and he collected the taxes of 1895, and failed to pay a large portion of the same, and the sureties upon his bond made good the deficit. In doing so, they were not volunteers or strangers. He was at least de facto collector, and they were estopped from denying their liability on his bond. Having enabled him to get possession of the public moneys, they were responsible for the payment of the same to the proper officers, and, upon payment of the amount due the state on account of the default of their principal, became entitled to be subrogated to the right the state had to the sum in controversy. People v. Beach, 77 Ill. 52; Jones v. Scanland, 25 Tenn. 195, 6 Hum. 195; Dunphy v. Whipple, 25 Mich. 10; People v. Jenkins, 17 Cal. 500; Jones v. Gallatine County, 78 Ky. 491; Inhabitants of Trescott v. Moan, 50 Me. 347; Inhabitants of Wendell v. Fleming, 74 Mass. 613, 8 Gray 613; Byrne v. State, 50 Miss. 688.

Wood v. State, 63 Ark. 337, 40 S.W. 87, is unlike this case. In that case a county treasurer and his sureties executed a bond for the faithful performance of the duties of his office. The bond was approved by the county judge in vacation, and was afterwards rejected by the circuit court. He was ordered by the court to file a new bond within fifteen days. He failed to file the bond within the time allowed, and the office by virtue of the statute became vacant. Sand & H. Dig., § 5399. This court held that the sureties on the rejected bond were not liable for moneys received by their principal after the expiration of the fifteen days. The office was then vacant, and the bond was no longer of any force and effect.

The collector in this case, when he was collecting the revenue, deposited in the Boone County Bank $ 3,178 of the taxes of 1895 collected by him for the state. The bank, having notice at the time that the amount so deposited belonged to the state, appropriated it to the part payment of the indebtedness of the collector in his individual capacity, and refused to pay it to the state or to the sureties on the collector's bond. He collected other taxes of 1895 for the state, and appropriated them to his own use. The sureties paid to the state the amount of the taxes which he collected and misappropriated, but failed to pay the interest and penalty which accrued to the state on account of the default of the collector. The bank insists that the sureties are not entitled to be subrogated to the state's right to the $ 3,178 in its hands until they pay this interest and penalty. But this is not true. As against it or the collector, the sureties are entitled to be subrogated; it is only the state who can interpose any objection. Sheldon on Subrogation (2 Ed.) § 128. And it has released the collector and his sureties from the payment of the interest and penalty.

There were twenty-three sureties on the collector's bond. Twenty-one paid to the state the amount for which he was defaulter, and they were liable. Eleven of them brought this action against the collector, the bank, and the ten others who contributed to the payment of the amount misappropriated by their principal; and the plaintiffs asked to be subrogated to the right of the state to the $ 3,178. Only one of the sureties made defendant asked for any relief against the...