Fidelity-Phenix Fire Ins. Co. of New York v. Jackson

• Decision Date: 10 June 1944
• Citation: 181 S.W.2d 625,181 Tenn. 453
• Parties: FIDELITY-PHENIX FIRE INS. CO. OF NEW YORK v. JACKSON et al.
• Court: Tennessee Supreme Court

181 S.W.2d 625

181 Tenn. 453

FIDELITY-PHENIX FIRE INS. CO. OF NEW YORK v. JACKSON et al.

Supreme Court of Tennessee.

June 10, 1944

Appeal from Chancery Court, Davidson County; Thos. A. Shriver Chancellor.

Suit by the Fidelity-Phenix Fire Insurance Company of New York against R. F. Jackson, Sr., and others to recover on a bond executed by defendants as sureties. A decree for complainant against defendant Mrs. Mannie B. Jackson was affirmed by the Court of Appeals and the Supreme Court granted certiorari.

Modified and as modified, affirmed. Walker & Hooker, of Nashville, for defendant-appellant.

CHAMBLISS Justice.

This is a suit to recover from the sureties on a bond executed by Jackson Insurance Agency, Incorporated, as principal, to complainant. The question presented on this appeal is two fold: whether or not the decree adjudging liability against the sureties is justified by (1) the language of the bond when properly construed and (2) the case for relief made by the bill.

The bill, filed in 1932, alleged that the Agency had breached the bond 'in that it failed to properly account for, pay over and apply all sums of money received by it, as agent, and the sum unaccounted for is $5434.83. The penalty for breach fixed in the bond was $5000.'

In their answer defendants specifically deny that 'said Agency breached the terms of any bond signed by either of these defendants, and deny that said Agency failed to pay over promptly to complainant all sums received by it, as agent, and further deny that said agency received the sum set forth in the bill,' etc.

On December 1, 1939, a decree was entered by then Chancellor, R B. C. Howell, which (1) dismissed the bill as to R. F. Jackson, Sr., a leading member of the Nashville bar, a defendant surety, who had died since the bringing of the suit; and (2) striking the answer of R. F. Jackson, Jr., who had been the president and manager of the incorporated Agency, on the ground that he had not been made a party defendant, leaving as the sole defendant surety Mrs. Mannie B. Jackson, widow of R. F. Jackson, Sr., who had been a cosurety with her deceased husband on the bond. The decree thereupon proceeds as follows:

'Whereupon the cause came on for further hearing upon the original bill and exhibits, the answer of defendant, Mannie B. Jackson, as amended, and exhibits, the evidence in the cause, exhibits thereto, and upon the entire record, and from all of which it not clearly appearing to the Court the amount or amounts of premiums collected by the Jackson Insurance Agency during the period October 1st, 1931 and March 1st, 1932, due to the complainant, and which were not remitted to the complainant by said agency:

'It is, therefore, ordered, adjudged and decreed that the cause be and same is referred to the Clerk and Master to report, from the proof and exhibits on file, and any other evidence which may be presented to the Clerk and Master by the parties:

'(1) The amount of premiums due to the complainant, Fidelity-Phenix Fire Insurance Company, on business written by the Jackson Insurance Agency, Inc., for said Insurance Company, during the period October 1st, 1931 to March 1st, 1932, which were collected by said Jackson Insurance Agency, Inc., and not remitted by it to the complainant.'

We have italicised certain language, the pertinency of which emphasis will later appear. This decree of Chancellor Howell was signed as evidencing approval, by Cornelius, McKinney & Gilbert as solicitors for complainant, who apparently had succeeded solicitors Hume & Armistead, who had filed the bill, in the representation of the complainant.

In March following the Master filed his report, pursuant to the order of reference, showing $518.62 to be 'The amount of premiums due to the complainant, Fidelity-Phenix Fire Insurance Company, on business written by the Jackson Insurance Agency, Inc., for said Insurance Company during the period October 1st, 1931 to March 1st, 1932, which were collected by said Jackson Insurance Agency, Inc., and not remitted by it to the complainant.'

Solicitors for defendant thereupon filed exceptions which were overruled by the Master and an appeal taken to the Chancellor. The details of this report and the exceptions thereto are immaterial to the determinative issues now before us. It is pertinent, however, to note that both the report and the exceptions are clearly limited and restricted to consideration and determination of the amount which had 'been collected by Jackson Insurance Agency, Inc., and not remitted by it to complainant,' to quote from the exceptions filed by solicitors for complainant.

The next step taken in the cause was the filing of an opinion, on July 23, 1942 (ten years after the suit was brought) by Chancellor Thomas A. Shriver, who had succeeded to the office upon the elevation of Chancellor Howell to the Court of Appeals.

The opinion overrules the exceptions to the report of the Master and confirms that report, which fixed at $518.62 the balance which had been collected and not remitted by the Agency. The Chancellor then presents for the first time, and so far as appears upon his own motion, the question of the liability of the sureties upon the bond for any and all indebtedness of the agency to complainant, without limitation to such sums as had been collected and not remitted, a limitation, as has been seen, contained in the original bill, recognized in the answer and in the decree of reference, the report of the Master and the exceptions of complainant thereto. The Chancellor says, 'the Court is not now (emphasis ours) of the opinion that the measure of liability in this cause is to be determined by the matters contained in said reference and report'. He might properly have added, 'charged as a liability in the bill.' The opinion proceeds:

'After a full and careful examination of this entire record, and a re-examination of several parts of it, the Court is fully convinced that the only matter for determination is an interpretation of the bond (Exhibit 'A' to the original bill) and the extent of the liability of Mrs. Mannie B. Jackson thereunder.

'There is no serious dispute in the record that the Jackson Insurance Agency, Inc., is indebted to the complainant, Fidelity Fire Insurance Company, in an amount of more than $5,000.00 ($5,362.19, to be exact) and the court so finds. The face of the bond is $5,000.00.

'It is therefore the contention of the complainant that the liability under the terms of the bond is $5,000.00 and that judgment for that amount should be rendered.'

The opinion then sets out the contentions of the defendant surety that (1) liability on the bond is only for sums collected for and not remitted to the Insurance Company, and (2) that the surety is not liable for the balance reported of $518.62,--this upon the theory that this sum was collected by a selected representative of complainant and other insurance companies whom the Agency had represented, who was placed in charge of the business by agreement of the parties. This second contention was first disposed of by the Chancellor who reviewed an agreement, under which this selected representative had conducted the agency business for a time, and decreed adversely to the contention of the defendant, and we see no error in his holding, affirmed by the Court of Appeals, in this regard.

The learned Chancellor then discusses and disposes of what he conceived to be the determinative question, 'What liability of the insurance agency is covered by the terms of the bond so as to render the sureties thereon liable?' After quoting from the bond he comments as follows:

'The Court approached the determination of this cause with the inclination to limit the liability of Mrs. Jackson, the surety on the aforesaid bond, to the net amount owing complainant by reason of premiums collected and unaccounted for, from October 1931 to March 1932, but, after careful consideration, is of the opinion that the language of the bond is susceptible of no other interpretation than that the sureties thereon are liable for 'all amounts due or that may become due it (the complainant), from time to time for premiums--and/or balances of accounts * * * and for all other amounts whatsoever that may be due and payable to the company * * * or claims and demands due or owing at any time by him to said company.'

'It therefore follows that complainant will be awarded a judgment against the surety on the aforementioned bond for the full face thereof, and a decree in accordance with the above will be entered.'

The Court of Appeals affirmed, Judge Howell not participating. We granted certiorari and able argument has been heard.

We consider, first, the effect of the limitation of liability of the sureties on the bond as stated in the bill, to which liability the answer is directed and the decree of reference of the Chancellor to the Master is confined. The fundamental question whether or not the final decree of the Chancellor is within the scope of the pleadings is not discussed, either in the opinion of the Chancellor or in that of the Court of Appeals. The petition stresses first, the express limitation in the allegation in the original bill of liability of the surety on the bond sued to such sums as had been collected by the Agency and not remitted to complainant, the insistence of petitioner being, first, that (1) the language of the bond supports the insistence that liability of the surety is thus limited, and (2) that if the terms of the bond are not clearly so limited, the language is so ambiguous as to call for application of the well-settled rule that when the contract has been prepared by one party, the other is entitled to the benefit of the doubt, and (3) that ...