United States Fidelity & Guaranty Co. v. Felder

Cook, J., delivered the opinion of the court. Appellee was assignee receiver of the People’s Bank of Magnolia, and as such he was required to give a bond for one hundred thousand, two hundred and fifty dollars, and procured appellant to execute this bond as his surety. In consideration of appellant’s suretyship, appellee contracted to pay appellant annually a premium of five hundred and one dollars and twenty-five cents. The first premium was paid, but appellee refused to pay the second premium when it fell due under the contract, whereupon appellant instituted this action to recover the second premium. Before the premium sued for was due, appellee filed his petition in the court of which he was receiver, tendering another bond for sixty thousand, two hundred and fifty dollars as a substitute for the bond executed by appellant, whereupon the chancellor entered an order authorizing the’ substitution of the sec292 oncl bond for the first, and discharging appellant from future liability on the first bond. Appellant was not a party to this proceeding. The declaration in this case sets out the execution of the bond, the proceedings in the chancery court whereby the chancellor undertook to reduce the penalty of the receiver’s bond and discharge appellant from future liability, and the refusal of appellee to pay the second premium, and demands judgment for the amount thereof. To this declaration appellee interposed a demurrer, assigning several grounds therefor, to wit: “ (1) The declaration fails to state any cause of action against the defendant, upon which a judgment could be predicated against him. (2) The declaration shows on its face that the bond for which the premium is sued for herein was canceled by the chancery court of Pike county, Miss., which court had jurisdiction in said cause, and the plaintiff discharged by an order of said chancery court of Pike county, Miss., from any further liability under said bond, and that no premium accrued to plaintiff under said bond for which it has not been paid. (3) The declaration shows on its face that there is a failure of consideration for the amount herein sued for. (4) The premium sued for in this cause has not accrued to plaintiff. And for other causes to be made known at the hearing of this demurrer.” The demurrer was sustained; hence this appeal. It will be noted that the suit was against appellee personally, and not against him as assignee receiver. The question to be decided is this: Did the order of the chancery court upon the ex parte petition of the assignee receiver discharge the surety company from future liability on its bond? If it did, the demurrer was properly sustained; if it did not, appellant was entitled to recover the amount demanded, and the case must be reversed. It is contended by appellant that the chancery court, in the absence of statutory authority, was without power [293] to discharge the bond, and that no snch statute exists. If appellant is right, it follows, of course, that it is still liable on the bond, and appellee is liable for the premium. When an assignee becomes a receiver of the chancery-court, he is required to execute a bond in the manner prescribed by section 121, Code of 1906. This section is as follows: £ ‘ The assignee or trustee must file a bond with his petition, to be approved by the clerk, in a penalty equal to the value of all the property assigned and two hundred and fifty dollars additional, payable to the state, with at least two sufficient sureties, conditioned for the faithful administration of his trust. Any judgment or decree that may be rendered in said cause or proceeding against the principal in this bond may be rendered against the sureties therein.” Upon the filing and approval of the bond prescribed by the statute, the assignee is then a receiver of the chancery court. Looking to the power of the chancery court to require its receivers to give new bonds, we can find but one section of the Code dealing with the subject — section 634, which reads thus: “When it shall be alleged that the security on an injunction or receiver’s bonds, or any bond taken upon any proceeding in the chancery court is insufficient, the chancellor shall have power to hear and determine the same in vacation, as well as in term time, and may order the injunction to be dissolved, or the receiver to be suspended or removed, or may make such other order as may be just and' equitable in the case, unless a new bond with sufficient sureties be given within twenty days, or such time as he shall appoint; but if done in vacation, at least five days’ notice of the time and place of making the application shall be given to the opposite party.” It is to be observed that this statute gives to the court the power to suspend or remove a receiver, or make any other proper order in the case, when it shall be alleged that the security on the receiver’s bond “is insufficient,” [294] unless a new bond with sufficient sureties be executed within the prescribed time. This section of the Code contemplates some proceeding instituted by some party in interest adverse to the receiver, and does not, in terms, at least, contemplate a procedure of the sort resorted to in the present case. In fact, the statute quoted does not confer upon,the court the power to discharge the sureties on the original bond. It is unnecessary to decide that the court could, or could not, sua sponte, require a receiver to strengthen his bond, which the court might deem insufficient, as that is not the point we are now considering. Granting the inherent power of the chancery court to make any and all orders necessary or proper to the preservation of estates being administered by the court, does it follow that it can, without statutory authority, discharge sureties upon bonds of receivers, at the request of the receiver? To discharge an unfaithful or incompetent trustee, or to require an additional bond, is one thing; while to discharge a solvent surety upon a bond given to indemnify parties in interest against a failure of the trustee to faithfully perform the duties imposed upon him by the law is another and different thing. In the present case it is urged that the receiver had already administered and distributed the assets coming into his hands to such an extent as to authorize a reduction of the amount of his bond. If there was a statute ‘authorizing the court to hear and determine this assumed condition, the contention of appellee would be sound; but inasmuch as the statute fixes the amount of the bond to be given before the assignee receiver could qualify, and because there is no statute which empowers the chancery court to scale the original bond, answers, we think, the contention of appellee. It must be remembered that the parties interested in the estate in course of administration were not made parties to this application of the receiver, and as there is no statute requiring this to be [295] clone, we may safely conclude that the legislature intended to do only what they actually did; that is to say, provide for a bond sufficient to protect the interests involved, which should stand until the trust had been fully administered, or until it was shown that the surety was insolvent. In 2 Brandt on Suretyship, sec. 705, it is stated that strict compliance with the statutory requirements is necessary to release the surety. In Clark v. American Surety Co., 171 Ill. 235, 49 N. E. 481, a probate court had undertaken to discharge the surety on an administrator’s bond, on the application of the administrator, the surety consenting in writing thereto, and the court said: “The proceeding to release sureties is statutory and of a summary character, requiring no notice to the parties ultimately entitled to the fund and the statute cannot be extended, by construction, to authorize the dis-' charge of a surety on the application of the principal in the bond, in the absence of any provision in the statute authorizing it. Hickerson v. Price, 2 Heisk., Tenn. 623.” In Faust v. Murphy, 71 Miss. 129, 13 So. 864, the hoard of supervisors of Noxubee county undertook to authorize a substitution of sureties on a chancery clerk’s bond, and the supreme court of Mississippi said: “It is not pretended that any of the sureties on the bond had removed or become, insolvent, nor had, cmy one of them petitioned for release from the bond, and it is only under such circumstances that authority exists for the board to require or receive substituted sureties.” In the last-named case we are of opinion that this court is committed to the doctrine that the power to release sureties is purely statutory, and that the reasons for such discharge prescribed by the statute must be shown to have existed when the power is exercised. Appellant is still a surety, despite the order of the chancery court ordering its discharge. This being true, N is entitled to recover the premium due. Reversed and remanded.