Fidelity & Deposit Co., of Maryland v. Cowan

• Court: Arkansas Supreme Court
• Writing for the Court: HART, C. J.
• Citation: Fidelity & Deposit Co., of Maryland v. Cowan, 41 S.W.2d 748, 184 Ark. 75 (Ark. 1931)
• Decision Date: 06 July 1931
• Docket Number: 77
• Parties: FIDELITY & DEPOSIT COMPANY OF MARYLAND v. COWAN

41 S.W.2d 748

184 Ark. 75

FIDELITY & DEPOSIT COMPANY OF MARYLAND v. COWAN

No. 77

Supreme Court of Arkansas

July 6, 1931

Appeal from Mississippi Chancery Court, Chickasawba District; J. M Futrell, Chancellor; reversed in part.

STATEMENT BY THE COURT.

The issues raised by this appeal arose in several cases which were originally brought in the circuit court, but which were consolidated for the purpose of trial and transferred to the chancery court and tried there. Several drainage districts road districts, and a levee district brought suit against John J. Cowan, as circuit clerk of Mississippi County, and the Fidelity & Deposit Company of Maryland as surety on his bond to recover judgment against him for certain money belonging to these improvement districts which he had in his hands as circuit clerk. John J. Cowan in turn brought suit against H. E. Montague, his deputy clerk, and the Fidelity & Deposit Company of Maryland, as surety on his bond, to recover public funds alleged to have been misappropriated by him. The Fidelity & Deposit Company of Maryland filed a bill of interpleader in the chancery court and paid into the registry of the court the sum of $ 9,845.01, which, together with certain other judgments paid by it for Cowan, would amount to $ 10,000. It alleged that this was the full amount of its liability on Cowan's official bond, and asked that this sum be prorated among the various claimants who had brought suit against Cowan. The Fidelity & Deposit Company admitted that it had signed the official bond of Montague as deputy clerk to Cowan, but asked that it be subrogated to the rights of Cowan to a set-off against Montague in the settlement of the indebtedness between Cowan and Montague.

The record shows that the aggregate amounts of the claims of the drainage districts, road districts, and the levee district against John J. Cowan, as circuit clerk of Mississippi County, amounted to $ 12,349.82. The record also shows that the Fidelity & Deposit Company of Maryland had paid a judgment by H. Highfill against Cowan, as said clerk, for $ 339.75 and costs, and one by Mary J. Borah against him for $ 166.29 and costs. John J. Cowan, as said clerk, had on deposit in a bank which became insolvent the sum of $ 5,532.76, belonging to said improvement district, and the amount so deposited became almost a complete loss on account of the insolvency of the bank. Cowan recovered judgment against Montague in the sum of $ 11,609.52 for public funds misappropriated by him, and the court held that the Fidelity & Deposit Company of Maryland was liable for $ 5,000 of this amount, being the amount of Montague's shortage for the year 1925.

The record shows that Montague entered into a bond with Cowan for $ 5,000. This bond was dated Little Rock, Arkansas, on the 31st day of March, 1923. It recited that H. E. Montague was on the first day of January, 1923, appointed to the office of deputy circuit and chancery clerk of Mississippi County Arkansas. It was conditioned that Montague should faithfully perform the duties of his office, and, at the expiration of his term of office, render a correct account of all sums of money and other property which had come into his custody as such deputy circuit and chancery clerk. The bond contained a further covenant that he should pay and deliver to his successor, or to any other person authorized to receive the same, all sums of money and other property which should be in his hands as such officer.

John J Cowan was re-elected to the office of circuit clerk and applied for and obtained what he thought was a new bond from H. E. Montague, as deputy clerk, in the sum of $ 5,000. He paid the premium which was $ 25. This bond is called by the Fidelity & Deposit Company of Maryland, which signed it as surety, a continuation certificate. It provides that in consideration of the premium of $ 25, said bond company continues in force the bond which Montague had executed on the first day of January, 1923, in the sum of $ 5,000, and that it is hereby continued in force for the period of time beginning on the first day of January, 1925, and ending on the 31st day of December, 1925.

Judgment was rendered in favor of the plaintiffs against Cowan in the aggregate amount as above stated, and there is no dispute about the correctness of the judgment for this amount. It was also decreed that Cowan should recover of Montague the sum of $ 11,609.52, and that appellant bonding company was liable on the bond executed for Cowan in the sum of $ 10,000, and on the bond executed for Montague in the sum of $ 5,000, and that both these amounts were to be subject to the satisfaction of the claims of the various claimants in the action. The Fidelity & Deposit Company of Maryland has appealed, and Cowan has taken a cross-appeal.

Decree affirmed and on cross-appeal reversed.

Sam Costen and Wils Davis, for appellant.

Nelson & Crawford, Roy E. Nelson and Harrison, Smith & Taylor, for appellees.

OPINION

HART, C. J., (after stating the facts).

Appellant contends that $ 10,000, the amount which it paid into court as surety for Cowan, is the full amount of its liability, and that the court erred in holding that the $ 5,000, the proceeds of the Montague bond, was subject to the claims of the various plaintiffs superior to the right of appellant to offset its judgment against Cowan against it. Cowan contends that he should have judgment against appellant, to the extent of Montague's shortage during the years 1923 and 1924, which is shown by the master's report to be $ 3,250.61, and also for the full amount of the shortage of 1925, which exceeds the amount of the bond for which appellant would be liable as surety for Montague.

The record shows that Montague was appointed deputy clerk by Cowan when he first assumed the office of clerk in 1923, and continued as such deputy throughout the first term. Appellant signed his bond...