State v. Hays

• Decision Date: 16 October 1897
• Citation: 42 S.W. 266,99 Tenn. 542
• Parties: STATE, to Use of ANDERSON COUNTY, v. HAYS, County Trustee, et al.
• Court: Tennessee Supreme Court

42 S.W. 266

99 Tenn. 542

STATE, to Use of ANDERSON COUNTY, v. HAYS, County Trustee, et al.

Supreme Court of Tennessee.

October 16, 1897

Appeal from chancery court, Anderson county; Joseph W. Sneed Special Chancellor.

Bill by Anderson county against W. W. Hays, trustee of said county and the sureties on his official bonds. From a decree in favor of complainant, which was affirmed by the court of chancery appeals, the sureties appeal. Affirmed.

Snodgrass J., dissenting.

J. A. Fowler, C.J. Sawyer, and Lucky, Sanford & Tyson, for appellants.

G. McHenderson, John B. Holloway, and X. Z. Hicks, for appellee.

WILKES J.

This is an action against defendant Hays and the sureties upon his several bonds as trustee of Anderson county. These bonds were intended to cover the county revenues and taxes for the terms 1890-91 and 1892-93, school revenue for the same terms, a special county tax for the years 1890-91, and moneys received for the sale of railroad stocks during the year 1893. The bill charges a deficit of over $20,000 upon the several bonds, but that the exact amount cannot be stated, and prays for proper references and accounts, and that the liabilities of each set of sureties be ascertained, and for all proper decrees. The several bonds are exhibited with the bill. The sureties answered, and denied that there was any default; and Hays, the principal, denied all the allegations of the bill. An order of reference was made to the master to report (1) the amount of county taxes due to Anderson county from the trustee for the year 1890-91, including interest, penalties, and coats; (2) the same for the year 1892-93; (3) the amount of school funds due from the trustee for 1890-91, including interest, penalties, and costs; (4) the same for the year 1892-93; (5) the amount due from the trustee on account of railroad stock sold; (6) whether the trustee should be charged or credited with any other items than those shown on the book of accounts. And it was agreed that all the records of Anderson county that either party might desire might be read as evidence, subject to exceptions. The master reported as directed, taking the settlements with the chairman of the county court as the basis of his statements. Complainant filed no exceptions, but defendants filed quite a number, all of which were overruled; and the master's report was confirmed and judgments were rendered, and defendant sureties appealed and assigned errors. Hays, the principal, did not appeal.

The result of this account was to find the trustee due the county as follows: For the year 1890, including interest and penalties, $8,231.58; for 1891, $1,588.70; for the term 1890-91, $9,820.28. For the year 1892, $6,061.20; for 1893, $432.34; total for term 1892-93, $6,483.54. Due for school fund for 1890, $1,901.68; 1891, $4,299.20; total for term 1890-91, $6,180.88. Overpaid in 1892, $987.56; in 1893, $822.67; total overpaid term 1892-93, $1,810.23, which deducted from the deficit for 1890-91 left a balance of $4,320.65. The master reported that upon account of railroad stock nothing was due, and that all charges, credits, and calculations had been corrected in making this statement. On appeal the court of chancery appeals treated the case as one falling under the rule as to the concurrent finding of the master and chancellor, and with the exception of some small items of additional credit allowed the sureties, affirmed the decree of the chancellor; and the sureties have appealed to this court and assigned errors.

The real contention first made is that the trustee was delinquent for a previous term, terminating on the 1st of September, 1890, and that amounts collected on the taxes of 1890 were improperly applied as credits upon this default of the previous term. As bearing upon this contention, it is said that the order of reference in the court below was not broad enough to show the liabilities of the several sets of sureties inter sese, and that it should have specially directed that the liability of each set should be ascertained and reported, and that all questions as to how the liability should be distributed among the sureties was by the order of reference expressly reserved. The order of reference directed the account to be taken with the trustee, and the master was directed to report the amounts due from him by terms, and, if practicable, separately by each year. This was designed to show the liability by the terms, and the liability of the several sets of bondsmen was thus put in issue under the terms of the reference. Defendants made no exception to the terms of the reference, and the exceptions filed by them to the master's report show that they were fully cognizant that the purpose and scheme of the account were to show separately the liability for each term commensurate with the bonds for such term. It is said that the liability of the principal maybe different from that of the sureties, and hence the account should have been to ascertain the sureties' liability, and not that of the principal. It is conceded that the liability of the surety may be different from that of the principal. Still the fact remains that the account must be stated with the principal, and not with the surety. It is the principal's default for which the surety is liable, and the surety is not liable direct to the state or county, but only through his principal. Still, in stating the account with the principal, it was proper and necessary to so shape it as to show the liability for each term separately, in order that the liabilities of the sureties under their bonds, and inter sese, might appear, and this was done in this case.

It is claimed that a large amount of the taxes of 1890 were misappropriated to obtaining credits upon the account of the previous term. The court of chancery appeals find that the settlements made by the chairman of the county court which were made the basis of the master's reports purport to be for the fiscal year ending on the 1st of September each year and the presumption, in the absence of proof to the contrary, is that they were properly made, and they are prima facie correct. That court says: "The books purport on their face to be settlements for the several fiscal years, and although their settlements are continued from time to time, and finally stated and closed some months thereafter, there being nothing to show when the payments were made, the presumption is they were reported to the chairman, and claimed as credits for the fiscal years for which they were allowed, and in the absence of proof to the contrary the presumption would be that they were properly so allowed. A settlement might well be made on January 3, 1890, of transactions all of which occurred prior to September 1, 1889." Hays, the trustee, states that the chairman, in stating his account for 1889, did allow him credits which ought to have been allowed on the account for 1890. But, as said, what amounts he thus paid out of the 1890 taxes are not shown, nor attempted to be shown. Not a single date appears, showing when the payments were made for which credits were entered upon the settlement book after August 20, 1890. And again they say in their original findings that while some of the warrants credited on the 1889 account appear to have been issued after October 1, 1890, and hence it may be inferred they were paid after that time, still the date of payment is not shown, and, what is still more important, it is not shown out of what funds they were paid,-whether those of 1889 or those of 1890; and how this was ought to have been shown by the trustee and sureties, under the order of reference to the master. In the case of State v. Smith, 72 Am. Dec. 206, it was held that: "If, after an officer is properly chargeable with money for a term, he makes a payment, it may be presumed that it was on account of the indebtedness for that term; yet it may be shown to be otherwise, and the circumstances under which it was made may indicate the source whence the money was obtained. Still, if the officer makes a misappropriation, and the money is received in good faith, such misappropriation cannot be avoided, and it will be binding on the sureties for the term during which it was collected. The law will not presume that all the revenue received after the date of the last bond was received under that bond, and appropriate it accordingly." While we do not feel disposed to go to the full extent laid down in this holding, that funds may be misappropriated and the surety have no remedy, yet we do hold that the surety must show the misappropriation by dates, items, and amounts, and that specific items were improperly credited, before he can raise an equity to be relieved or credited by such items. Again, it is insisted that this case is governed by the rules laid down in Gray v. State, 95 Tenn. 317, 32 S.W. 201, which is in accord with U.S. v. Irving, 1 How. 250; U.S. v. January, 7 Cranch, 572; Jones v. U.S., 7 How. 688; Myers v. U.S., 1 McLean, 493, Fed. Cas. No. 9,996. In the Gray Case it was said by this court: "We can see no ground upon which the sureties can be held liable for taxes which the trustee has collected during a previous term, and for which he appears to have been delinquent when he entered upon this last term, in September, 1892, and gave the bonds now in question. They [the sureties] are only liable for such funds as the trustee received or should have received after the giving of such bonds and the trustee's induction into office thereunder, less such amounts as may have been paid out of the taxes so collected, and the accounts should have been thus stated." It is perhaps proper to say that this case does not hold, as has been assumed, that the sureties upon the second bond, where the...