U.S. Fidelity & Guaranty Co. v. Rainey

• Decision Date: 07 March 1908
• Citation: 113 S.W. 397,120 Tenn. 357
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. RAINEY et al.
• Court: Tennessee Supreme Court

113 S.W. 397

120 Tenn. 357

UNITED STATES FIDELITY & GUARANTY CO. v. RAINEY et al.

Supreme Court of Tennessee.

March 7, 1908

Appeal from Chancery Court, Davidson County; John Allison Chancellor.

Bill in the nature of a creditor's bill, by the United States Fidelity & Guaranty Company against Walter S. Rainey and certain of his creditors as representatives of all his creditors to ascertain complainant's liability as surety on the named defendant's official bonds. There was a decree sustaining the bill as a general creditor's bill ordering publication of notice to creditors to file their claims, and referring the matter to the clerk and master to take proof and report the sums due. Exceptions to the report were overruled by the clerk, but on appeal the decree of the chancellor modified the report giving priority to certain creditors. At a term after the decree was rendered, but before distribution of the fund one of the creditors presented a petition setting up a claim, and was denied the right to file it. Various creditors appeal, and bring error. Reversed and remanded for the statement of another account.

Clarence T. Boyd and E. L. McNeilly, for appellant.

P. D. Maddin, Sam. N. Harwood, McAllister & Smith, Brown & Akers, P. M. Estes, and Thos. B. Johnson, for appellees.

McALISTER J.

The present litigation was evolved from the defalcation of Walter S. Rainey, clerk of the First and Second circuit courts of Davidson county.

It appears from the record that, when Walter S. Rainey entered upon his duties as clerk of the First and Second circuit courts, he executed three official bonds, one for $5,000 known as the "revenue bond," a second for $10,000, known as the "official bond," and a third for $5,000, known as the "special" or "receiver's" bond, conditioned to cover property or funds which might at any time come to the hands of such clerk as special commissioner and receiver by appointment of the court.

The United States Fidelity & Guaranty Company became surety on each of these official bonds. About January 5, 1901, and before the expiration of his term, the said Rainey was removed from office, and it was ascertained that the liabilities of the office were from $15,000 to $25,000 in excess of the assets, which indebtedness fell upon his surety the guaranty company.

The present bill was filed April 5, 1901, by the United States Fidelity & Guaranty Company against Walter S. Rainey and 27 creditors for the purpose of ascertaining the company's liability as surety on said official bonds.

The suit is in the nature of a creditors' bill, and was brought against various creditors of Rainey who might be interested in any fund or funds which may have been paid into the hands of said Rainey as clerk, and for which he was liable on his official bond.

It appears that a few creditors were named as defendants for the purpose of representing all other creditors similarly situated; all the creditors amounting probably to 659 and being too numerous to bring before the court.

It is shown that Rainey was indebted to these various creditors in sums ranging from 10 cents up to $6,000, and it is said that, in order to avoid bringing this large number of persons before the court, 27 individuals were selected, and made parties defendant to represent all the other classes.

Complainant states that it is ready and willing to pay whatever sum may be necessary under said bonds as soon as the proper amount of each bond can be determined, and asked for a complete account of the office and the exact amount due from complainant by reason of said suretyship.

The prayer of the bill is: That complainant be allowed to file this bill as a general creditors' bill in behalf of itself and all other creditors of the said Walter S. Rainey, clerk of the said two circuit courts.

That a general reference to the clerk and master be ordered to take proof and report the cash balance due from each and every case in the circuit courts when said Rainey was removed from office, the source from which the fund arose, and the bond under which he and his surety were to be liable therefor.

That all other liabilities of the office be ascertained and the bond under which he and his sureties would be liable therefor.

That all parties be restrained by injunction from prosecuting suits to recover any amount due from complainant as surety, except in this case, and that all parties having suits pending against said office be required to file their claims and prosecute the same herein.

That all necessary references be had to ascertain the total liabilities of defendant Rainey's office, the total assets, the names of the parties entitled to participation in the assets, the amount of their claims, the proper pro rata to be paid on claims, and all other necessary matters.

On June 4, 1904, a decree was pronounced by the chancellor sustaining the bill as a general creditor's bill, and ordering publication for creditors to file their respective claims against said Rainey, clerk, on or before the expiration of 60 days from the date of this decree.

Publication was accordingly made in pursuance of the direction of said decree. Answers were filed by the state, county, and city by Len K. Hart and W. B. Clark, county trustees, averring that said Rainey was indebted to said authorities for a large amount of state, county, and municipal taxes which he had failed to pay over.

It appears that several other persons filed answers setting up claims against said Rainey, but most of the defendants named in the bill failed to answer, and orders pro confesso were taken at the rules against 15 out of the 27 creditors named as defendants named. Other creditors from time to time filed petitions presenting claims which they asked to be allowed.

In obedience to the order of reference the clerk and master took proof, and on April 6, 1905, filed his report, in which he set out the official bonds of said Rainey, and also schedules showing all obligations of the office.

The total liabilities of the circuit court aggregated $25,000, summarized as follows:

(1) State tax on litigation $ 118 19

(2) County tax on litigation 118 38

(3) State taxes for redemption of property 2,845 24

(4) County and school taxes for redemption of property 3,262 10

(Davidson county)

(5) City tax (due Nashville) 8,762 01

(6) Due sundry persons 948 59

(7) Due sundry persons, tax paid twice 23 24

(8) Due David Crutchfield, fees 284 05

(9) Due Len K. Hart, trustee, fees 1,238 68

(10) Due W. B. Clark, trustee, fees 104 28

(11) Due sundry officers, costs 335 53

(12) Due sundry witnesses, costs 323 78

(13) Due sundry judgments, etc 6,636 16 .... ----

Total $25,000 23

The clerk and master also reported a claim in favor of Nolen and Slemons for the sum of $35, which was a deposit paid into the circuit court in the case of Lewis Peel v. Nashville Railway & Light Company.

The master also reported a deposit in the case of Mayor and City Council of Nashville v. Louisville Property Company for the sum of $6,100.

The master also reported the conditions of the several official bonds as follows:

Bond No. 1 for $5,000, known as the "revenue bond," was conditioned as follows:

"Now, therefore, should the above bound Walter S. Rainey truly and faithfully perform all the duties of the office of circuit court clerk for the term of his office according to the requirements of law, and shall faithfully collect and pay over within the time and in the manner prescribed by law, to the Treasurer of the state of Tennessee, or to the proper officer designated by the laws of Tennessee to receive the same, all state taxes by him collected, or that ought to be collected, and also all fines and forfeitures which may or ought to be collected by him, during the said term of office, then this obligation to be void, otherwise to remain in full force and effect."

Bond No. 2, for $10,000 as clerk of the circuit court, was conditioned as follows:

"To be void on condition, the said Walter S. Rainey this day inducted into the office of circuit court clerk of Davidson county, safely kept and preserved the records of said court, and faithfully discharged the duties of his office."

Bond No. 3, for $5,000, known as the "receiver's bond," was conditioned as follows:

"To be void on condition that Walter S. Rainey, this day inducted into the office of circuit court clerk of Davidson county, Tennessee, does account for all the property or funds which may at any time come into his hands as special commissioner and receiver by appointment of the court or judge thereof."

Exceptions were filed on behalf of the mayor and city council of Nashville to the report of the master, for the reason that the state was given priority over the city in the satisfaction of its claim for taxes on said official bonds, and claiming that the city was entitled to share equally with the state and county in the penalties of said bonds for the collection of its taxes, and other claims.

Other exceptions were filed on behalf of the city which it is not material to notice.

Exceptions were also filed on behalf of the county of Davidson, which raised substantially the same questions as to priority made by the mayor and city council of Nashville.

Exceptions were also filed by the United States Fidelity & Guaranty Company, and by P. M. Estis and Len K. Hart.

These exceptions were all overruled by the clerk, but on appeal the chancellor modified the clerk's report as follows:

"As to the revenue bond, the court held that items 1, 2, and 3 of the report, including state and county taxes on litigation, and state taxes for the redemption of property, aggregating $3,081.82, should be paid out of bond No. 1, which should then be

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