Royal Indem. Co. v. Knott

• Decision Date: 10 March 1931
• Citation: 101 Fla. 1495,136 So. 474
• Parties: ROYAL INDEMNITY CO. v. KNOTT, State Treasurer, et al.
• Court: Florida Supreme Court

136 So. 474

101 Fla. 1495

ROYAL INDEMNITY CO. v. KNOTT, State Treasurer, et al.

Florida Supreme Court

March 10, 1931

On Rehearing July 23, 1931.

Commissioners' Decision.

Suit by W. V. Knott, as Treasurer of the State of Florida, and others, against G. I. Singleton and others. From an order overruling its demurrer to the amended bill of complaint, the defendant Royal Indemnity Company appeals.

Affirmed and cause remanded.

See also, 133 So. 71.

On Rehearing.

Syllabus by the Court.

SYLLABUS

The practice of this state strictly preserves the demarcation between courts of equity and of law and the respective fields of operation of such courts.

A bond conditioned: 'Now Therefore, if the said principal shall well and faithfully perform all and singular the duties incumbent upon him by reason of his election or appointment as said bond trustee and honestly account for all moneys coming into his hands as said bond trustee, according to law then this obligation shall be null and void; it is otherwise to be and remain in full force and virtue,' is an indemnity bond.

A court of equity cannot enforce the penalty of an indemnity bond unless the bond is accompanied by some extraneous circumstance which would inject into the cause a matter of equitable cognizance to which the recovery upon the bond would be incidental.

Where a court of equity has jurisdiction of a bill for an accounting against the principal, who has given an official bond conditioned that the principal will perform his official duties and account, the sureties can properly be made parties for the purpose of the accounting, but no decree for payment may be made therein against them.

Where a bill of complaint seeks an accounting and discovery against trustees and their surety, and sets forth the complicated character of the accounts, the need of discovery, and the existence of a fiduciary or trust relationship, such bill contains grounds upon which equitable jurisdiction may rest.

Whenever there is a fiduciary relation such as that of trustee, agent executor, etc., the right to an accounting in equity is undoubted. The right in such cases is based upon the substantive equity of trusts which jurisdiction equity always had.

Where a court of equity has jurisdiction to compel an accounting from a fiduciary, the sureties on the fiduciary's bond may not only be made parties defendant to such suit, but their liability upon such bond may be enforced in the same suit.

Where there are executions against principals and sureties, or an execution against a principal and surety or sureties, it is the duty of the sheriff or other officer to make the money out of the property of the principal unless he be insolvent or has no property, in which case, the execution may proceed against the property of the surety.

A trustee's bond, by the terms of which the principal and surety jointly and severally obligate themselves, among other things, that the trustee will faithfully perform all and singular the duties incumbent upon him by reason of his election or appointment as such trustee and account for all moneys coming into his hands as such trustee according to law, is not an indemnity bond according to the strict literal meaning of the term, as it is not given to protect the promisee against loss or damage arising through liability to a third person, but for loss occasioned by reason of the principal's failing to properly account or perform his duties.

The essential distinction between an indemnity contract and a contract of guaranty or suretyship is that the promisor in an indemnity contract undertakes to protect the promisee against loss or damage through a liability on the part of latter to a third person, while the undertaking of a guarantor or surety is to protect the promisee against loss or damage through the failure of a third person to carry out his obligation to the promisee. Appeal from Circuit Court, Citrus County; Fred L. Stringer, judge.

COUNSEL

Knight, Adair, Cooper & Osborne, of Jacksonville, for appellant.

Whitaker, Himes & Whitaker, of Tampa, and Fred H. Davis, Atty. Gen., for appellees.

OPINION

MATHEWS C.

This is a suit in equity for an accounting and for recovery against bond trustees and their sureties.

The suit was brought by W. V. Knott, as treasurer of the state of Florida; Citrus county, Fla.; J. K. Kelley, as chairman, and J. A. Perryman, L. C. Yeomans, W. R. Levins, and Burton Gilbert, as the remaining members of, and together constituting, the board of county commissioners of Citrus county, Fla.; against G. I. Singleton, W. H. Edwards, and I. O. Fender, individually and as trustees; also against Royal Indemnity Company, a corporation, certain named banks and bank receivers, and against Ernest Amos, as comptroller of the state of Florida.

The bill of complaint as amended, among other things, in substance sets forth that under and by virtue of chapter 11451, Extraordinary Session, Laws of Florida 1925, Citrus county, Fla., on or about November, 1926, issued and sold its negotiable bonds in the principal amount of $771,000, for the purpose of constructing hard-surfaced highways and bridges in Citrus county; that after the issuance by Citrus county of its bonds, its county commissioners appointed G. I. Singleton, W. H. Edwards, and I. O. Fender, trustees for such bonds; that each of said trustees executed a bond in the sum of $25,000; that Royal Indemnity Company executed each of said bonds as surety; that the bonds executed by the trustees and Royal Indemnity Company were approved by the board of county commissioners of Citrus county; that each of the bonds executed by the trustees and the surety were conditioned as follows:

'Now, therefore, if the said Principal shall well and faithfully perform all and singular the duties incumbent upon him by reason of his election or appointment as said Bond Trustee except as hereinafter limited, and honestly account for all moneys coming into his hands as said Bond Trustee according to law, then this obligation shall be null and void; it is otherwise to be and remain in full force and virtue.'

And contained the following limitation:

'The Surety shall not be liable to said Board of County Commissioners, Citrus County, Fla., by reason of any public moneys being now on general or special deposit or hereafter placed on general or special deposit by or on behalf of said Principal with any bank, depository or depositories, or by reason of the allowance to or acceptance by said Principal of any interest thereon, any Law, Decision or Statute of the State of Florida or Ordinance of the said City of Inverness to the contrary notwithstanding.'

It is alleged that part of the proceeds from the sale of bonds, and moneys furnished to provide for payment of interest and a sinking fund, which were received by trustees, are unaccounted for, have not been lawfully paid out, and have been lost, in part by conversion by some one or more trustees, in part by being misappropriated by the trustees, and in part by the negligence of defendant trustees in handling of said fund.

The bill prays for an accounting of the moneys received and disbursed by the said trustees and for a decree against the surety for so much of the moneys found due upon accounting as the Royal Indemnity Company, the surety, may be liable for upon the bonds executed by it.

The Royal Indemnity Company demurred to the bill as amended and urged in support thereof that it was not a proper party to this proceeding; that the complainants have a full, adequate, and complete remedy at law against it; and that it is entitled to a jury trial as to its liability on the surety bonds.

The demurrer of Royal Indemnity Company was overruled, and from that order this appeal was taken.

Section 5, chapter 11451, Laws of Florida, Extraordinary Session, 1925, provided:

'Trustees shall be appointed for said bonds and they shall exercise the powers and perform the duties in regard thereto as are prescribed in Sections 1544 to 1549, both inclusive, of the General Statutes of Florida.'

Section 1544, Revised General Statutes of Florida 1920, now section 2322, Compiled General Laws of Florida, 1927, provides:

'When the county commissioners shall have issued bonds * * * they shall appoint by resolution of their board, to be recorded in the minutes, a financial committee of three persons, who shall be resident free holders of the county, to be styled trustees of county bonds, who shall each give bond running to the chairman of the board of county commissioners and his successors in office, with sufficient securities, in such sums as may be required by the county commissioners, conditioned that the said trustee shall faithfully discharge the trust confided to him, and shall pay over and duly account for all such sums of money as may come into his hands by virtue of such trust, which said bonds shall be approved as to the form and the sufficiency of sureties by the board of county commissioners. * * *'

The practice of this state strictly preserves the demarcation between courts of equity and of law and the respective fields of operation of such courts. Fidelity & Casualty Co. v. Morrison Construction Co., 99 Fla. 309, 126 So. 151.

A bond conditioned: 'Now Therefore, if the said Principal shall well and faithfully perform all and singular the duties incumbent upon him by reason of his election or appointment as said Bond Trustee * * * and honestly account for all monies coming into his hands as said Bond Trustee, according to law, then this obligation shall be null and void; it is otherwise to be and remain in full force and virtue,' is an indemnity bond. American Surety Co v. Smith (Fla.) 130 So. 440; Wolthausen v. Trimpert, 93...