Title: Aetna Cas. & Sur. Co. v. Woods

State: tennessee

Issuer: Tennessee Supreme Court

Document:

565 S.W.2d 861 (1978) AETNA CASUALTY AND SURETY COMPANY, Appellant, v. Jayne Ann WOODS, Commissioner of Revenue, State of Tenn. and Henry T. Vance, Jr., Appellees. Supreme Court of Tennessee. May 8, 1978. *863 Phillip North, Nashville, for appellant; Howell & Fisher, Nashville, of counsel. Davis S. Weed, Asst. Atty. Gen., Nashville, for appellees; Brooks McLemore, Jr., Atty. Gen., Nashville, of counsel. BROCK, Justice. This is an action to recover sales taxes and franchise and excise taxes paid under protest by the plaintiff to the defendant Commissioner of Revenue. The Chancery Court heard the case on the merits and rendered a decision in favor of the Commissioner from which the plaintiff appeals. The disputed taxes were paid by the plaintiff in its capacity as surety on a bond required by T.C.A., § 57-158(3), to be posted by applicants for licenses to sell liquor by the drink. The principals were Andrew Johnson Properties, Inc., and its president, Henry T. Vance, Jr. The corporation owned and operated the Andrew Johnson Hotel in Knoxville and the bond in question was executed when it was decided to open a cocktail lounge in a portion of the hotel premises. Within a few months after the bond was posted, the corporation bankrupted and went out of the hotel business, including operation of the lounge. The issue presented is not whether the disputed taxes were duly owing and payable by the taxpayer but whether the bond obligation assumed by the plaintiff-surety included payment of sales taxes and franchise and excise taxes incurred by the taxpayer, not in connection with the operation of the lounge, but in connection with its other business activities, such as renting the rooms in the hotel. The record indicates that the receipts from the lounge amounted to approximately 10 percent of the total receipts of the hotel corporation and that the taxes incurred in the sale of alcoholic beverages for consumption on the premises amounted to a total of $1,203.44 while the taxes incurred in connection with the other hotel operations amounted to $6,222.72, sales tax, and $1,411.70, franchise and excise tax. The bond was drafted by the Commissioner or her predecessor, and is entitled: It provides, in pertinent part, as follows: The proper construction of a contractual document is not dependent on any name given to the instrument by the parties, or on any single provision of it, but upon the entire body of the contract and the legal effect of it as a whole. Arbuckle v. Kirkpatrick,, 98 Tenn. 221, 39 S.W. 3 (1897). The whole contract must be considered in determining the meaning of any or all of its parts. Crouch v. Shepard, 44 Tenn. 383 (1867); Associated Press v. WGNS, Inc., 48 Tenn. App. 407, 348 S.W.2d 507 (1961); Restatement of Contracts § 235(c). "The principal apparent purpose of the parties is given great weight in determining the meaning to be given to manifestations of intention of any part thereof." Restatement of Contracts § 236(b). The bond here in question was authorized and required by Section 3 of Chapter 211 of the Public Acts of 1967, now codified as T.C.A., § 57-158. We may assume, therefore, that the purpose of the parties in executing this bond was to comply with the requirements of that statute, nothing more and nothing less. Although a bond is nonetheless a contract because it is required by a statute, statutory bonds are construed in the light of the statute creating the obligation secured and the purposes for which the bond is required, as disclosed in the statute. The statute which provides for the giving of a bond becomes a part of the bond and imports into the bond any conditions prescribed by the statute which are not in fact included in the bond as written. Although the obligor and his surety may assume a greater obligation than that required by the statute,[1] it is presumed that the intention of the parties was to execute such a bond as the law required. State ex rel. County Court of Pleasants County v. Anderson, 140 W. Va. 827, 87 S.E.2d 249 (1955). The obligations under a bond required by statute are to be measured by the particular statute requiring the bond, together with other applicable statutes. Giese v. Engelhardt, N.D., 175 N.W.2d 578 (1970). And, if a statutory bond contains conditions that are not prescribed by the statute, such conditions may be eliminated as surplusage. American Casualty Company v. Irvin, 426 F.2d 647 (5th Cir.1970); Stevens v. Farmers Elevator Mutual Ins. Co., 197 Kan. 74, 415 P.2d 236 (1966); *865 Monte Rico Mill and Mining Co. v. USF&G Co., 35 N.M. 616, 5 P.2d 195 (1930); Western Casualty & Guaranty Ins. Co. v. Muskogee County, 60 Okl. 140, 159 P. 655 (1916). Therefore, we turn to the statute which authorized and required the execution of this bond in order to ascertain the scope of liability required by the statute of one who executes such a bond. In construing the statute, we seek to ascertain the intention of the legislature as it is expressed in the words of the statute and for this purpose we look to the entire statute, including its caption, policy statement, if any, and recitals which provide the purpose, objective and spirit behind the legislation. Dorrier v. Dark, Tenn., 537 S.W.2d 888 (1976); Harrell v. Hamblen County Quarterly Court, Tenn. App., 526 S.W.2d 505 (1975). The statutory provisions for the bond as well as the taxes here involved were constituent parts of Chapter 211 of the Public Acts of 1967, now codified as T.C.A., §§ 57-152 57-164, which authorized the sale of intoxicating liquors by the drink for consumption on the premises, imposed taxes upon such sales and provided for the collection thereof. In order that the bond provisions may be seen in context, we quote pertinent portions of that Act, as now codified, which appear both before and after the bond provision: Admittedly, if subparagraph 3 of § 57-158, above quoted, were lifted totally out of context and considered alone, the condition of the bond required could be construed as requiring proper payment of all taxes of whatever nature, whether arising from the sale of alcoholic beverages for consumption on the premises or not. But, as indicated by the authorities above referred to, it is our duty to construe the statutory provision respecting the bond as an integral part of the whole statute rather than as an isolated provision lifted out of context from the remainder of the statute. When one considers the obvious purpose of the statute to provide for the authorization and regulation of the sale of intoxicating liquors by the drink for consumption on the premises of the sellers and to levy taxes upon such sales and provide for the collection thereof, we think the conclusion is inescapable that the intent of the legislature was to require a bond whose obligation is limited to payment of all state taxes which are incurred by the sale licensee by reason of his sale of alcoholic beverages for consumption on the premises. In our opinion, the legislature did not intend that such a bond should cover taxes incurred by a sale licensee by reason of activities other than the sale of intoxicating liquors for consumption on the premises. We assume that the Commissioner in drafting the bond intended to exact from the obligor and surety the obligation required by the statute and no more, since that was the extent of the Commissioner's duty in this respect under the statute; and, considering the disadvantageous bargaining position of the taxpayer and his surety, we cannot ascribe to them, on the basis of the evidence in this record, an intention to assume an obligation greater than the one required by the statute. Moreover, we deem it of considerable significance that the penal sum of the bond is measured by a multiple of "the average monthly liability of all taxes applicable to sales of alcoholic beverages ..." The Commissioner argues that the words, disclose an intention to include within the obligation of the bond taxes in addition to those applicable to sales of alcoholic beverages. However, considering the context in which these words appear and considering the obvious overall purpose of the statute, we are unable to agree with that conclusion. We think it also of considerable significance that the statutes which levy the sales taxes and franchise and excise taxes which the Commissioner contends are covered by the obligation of this bond do not specifically require the posting of an indemnity bond as does the sale of alcohol by the drink statute. We are not aware that such statutes contain any bond requirement or authorization other than those found in T.C.A., §§ 67-3020(c) and 67-3033, which deal with sales taxpayers who have become delinquent. These provisions do not apply to the parties or the situation disclosed by this record. In summary, we hold that the bond in question is limited in its obligation to the payment of only those taxes levied by the State of Tennessee and incurred by the sale licensee in connection with the sale of alcoholic beverages for consumption on the premises; and that the plaintiff surety is entitled to recover from the defendant Commissioner all taxes paid under protest, *867 with interest, which were not incurred by the taxpayer in connection with the sale of liquor by the drink for consumption on the premises. The decree of the trial court is reversed and the case is remanded to that court for appropriate proceedings consistent with this opinion. Costs are taxed against the Commissioner. HENRY, C.J., and FONES, COOPER and HARBISON, JJ., concur. [1] See Varner Construction Co. v. Mid-South Specialties, Tenn., 547 S.W.2d 569, 571 (1977); City of Knoxville v. Burgess, 180 Tenn. 412, 175 S.W.2d 548 (1948).