I N T H E SUPR EM E C O UR T O F M I SS I SS I PPI NO. 2 0 0 8 - CA- 0 1 9 3 1 - S CT FI DELI TY & GUARANTY I NSURA NCE COM P AN Y
v. J OSEPH L. BLOUNT, I N THE OFFICI

AL C A P A C I T Y A SC OMMI

S S ION ER OF T HE M I S S I S S I P P I S T AT E T AX COM M I S S ION
D A T E O F JU D G M E N T : 10/ 21/ 2008 TR I A L J U D G E: H O N . PA TR I CI A D . W I SE COURT F ROM W HI CH APP EAL ED: HI NDS COUNTY CHANCERY COURT AT T OR NE YS F OR AP P E L L ANT : L I S A ANDE RS ON R E P P E T O M AR K D . HER BERT K EV I N A LA N CR O FT AT T OR NE YS F OR AP P E L L E E : M I S S I S S I P P I DE P AR T M E NT OF RE VE NUE BY : J AM ES L. POW ELL KEN I TTA FRA NK LI N TO OLE NA TUR E OF THE C ASE: CI VI L - STATE BO AR DS A ND AG ENC I ES D I SPO SI T I O N : A FFIRM E D - 03/ 24/ 2011 M OT I ON F OR RE HE AR I NG F I L E D: M ANDAT E I S S UE D:
CO NSOLI DATED W I TH NO. 2 0 0 9 - CA- 0 1 2 4 8 - S CT S T. PAUL FI

RE & M ARI NE I NSURA NCE COM P AN Y, T RA VEL ER SCA S UA L T Y A ND S URETY C OM

PANY OF AM

ERICA, FI

DELI TY & GUA RA NT Y I

NS URAN CE COM

P AN Y A ND UN I TED STATES FI

DELI TY & GU

ARA NTY COM PANY
v.

### 2

ED M OR GA N, CH

AI RM AN , M I SS I SS I PPI STATE T AX COM M I S S ION D A T E O F JU D G M E N T : 07/ 07/ 2009 TRI AL J UDG E: HON
. W I LL I AM H. S I NGLET ARY COURT F ROM W HI CH APP EAL ED: HI NDS COUNTY CHANCERY COURT ATTO RN EYS FOR A PP ELLAN T: LI SA A ND ERSON REPP ETO M AR K D . HER BERT K EV I N A LA N CR O FT AT T OR NE YS F OR AP P E L L E E : M I S S I S S I P P I DE P AR T M E NT OF RE VE NUE BY : J AM ES L. POW ELL KEN I TTA FRA NK LI N TO OLE NA TUR E OF THE C ASE: STATE BO AR DS A ND AG ENC I ES D I SPO SI T I O N : A FFIRM E D - 03/ 24/ 2011 M OT I ON F OR RE HE AR I NG F I L E D: M ANDAT E I S S UE D:
EN BA NC. PI ERCE, J UST I CE, FOR TH E COU RT: ¶ 1
. O n a c o n so lid a ted a p p e a l, F id e lity a n d G u a ra n ty In s u ra n c e C o m p a n y (“ F & G ” ), S t. P a u l F ire a n d M a rin e In su ra n c e C o m p a n y (“ S t. P a u l”) , T ra v e ler s C a su a lty a n d S u re ty C om pany of

A m er i ca ( “Tra vel er s ”) a nd the U ni t ed St at es Fi del i ty and G uar anty C om pany ( “U SFG ”) , col l ect i vel y r ef err ed t o as “s ur et i es , ” ar e cha l l engi ng the cons t i tut i onal i ty of
cert ai n pr act i ces of

the M i s s i s s i ppi St at e Tax C om m i ss i on ( “Tax C om m i s s i on”) as r el at ed to c e rt a in c o n tr a c to r p a y m e n t a n d p e rf o rm a n c e b o n d s a s re q u ir e d b y la w . ¶2. O n June 26, 2002, F & G , a s ur ety company l i cens ed and ope r at i ng i n M i s s i s s i ppi , f i l ed
su it i n th e C h a n c e ry C o u rt o f H in d s C o u n ty c h a llen g in g th e T a x C o m m iss io n ’s r ig h t to thr eat en t o s ei ze F& G ’ s M i s s i s s i ppi as s et s w i thi n t en days i f i tdi d notpay t he sum thatthe T ax C om m i s s i on cl ai m ed w as ow ed by F& G ’ s pr i nci pal , A ai m Construct i on, I nc. ( “A ai m ”)

### 3

f orunpai d t axes , penal t i es and ac crued i nt er es t . A f t erdi s covery w as compl et ed, the Tax C o m m issi o n m o v ed for su m m ary ju d g m e n t; F & G fi led a cro ss-m o ti o n for su m m ary j udgm ent . O n O ct ober21, 2008, the t r i al courtdeni ed F& G ’ s m ot i on and gr ant ed the Tax C o m m is s io n ’s m o tio n fo r s u m m a ry ju d g m e n t. ¶3. O n February 13, 2009, St
. Paul, T ravel ers , F & G , an d U SFG f i l ed an a ct i on i n the
s ame cour ton si m i l arfa ct s and i s s ues butw i th di f f er entsur et i es and bonded pr i nci pal s . T he T ax C om m i s s i on f

i l ed i t s m ot i on t o di s m i s s on M ar ch 17, 2009, and af t erbr i ef i ng and or al
a rg u m e n ts , th e tr ia l c o u rt a g a in ru le d in fa v o r o f t h e T a x C o m m is s io n . ¶4
. T he t r i al cour tconcl uded t ha ta s ur e ty i s no ta t a xp a ye ra s cont empl at ed under M issi ssipp i sales-tax l aw , i s no t en ti tl ed t o no ti ce prior t o a t ax asse ssm en t o r aud it , an d is lia b le fo r t h e e n tir e a m o u n t o f u n p a id ta x e s , in c lu d in g d a m a g e s , p e n a lt ie s , a n d in te re s t. A ti m ely n o ti ce o f ap p ea l w as fi led, a n d u p o n join t m o ti o n o f all pa rt ies, the a b o v e c ase s w ere
c o n so lid a ted fo r a p p e a l. S TATEM ENT OF FACTS ¶5 . T he appel l ant s he r e i n a r e a l l r e l a t e d s ur e ty c ompa ni e s a utho r i z e d t o d o a nd doi ng bus i nes s as s ur et i es f

orcons truct i on compani es i n the s t at e of M i s s i s s i ppi
. B efor e a
c o n stru c tio n c o m p a n y m a y b e g in b u sin e ss , it m u st, b y la w , e ith e r p a y th e c o n tra c to r’s tax in advance or m ustexecut e and f i l e w i th the Tax C om m i s s i on a bond w i th a s ur ety company
a u th o riz e d to d o b u s in e ss in M iss iss ip p i. T h is is to e n su re th a t all ta x e s o w e d to th e S tate
w i l l be pai d w hen due. W i th thi s r equi r ementi n pl ace , the Tax C om m i s s i on has a f or m t ax
r i derthathas been a ppr oved by the comm i s s i onerand i s comm onl y used b y sure t i es and p ri n c ip a ls a lik e w h e n c o m p ly in g w ith th is re q u ir e m e n t.

### Mis s. Code Ann. § 27-65- 21 (Re v. 2010)
. 1 

### Mis s. Code Ann. § 27-65- 39 (Re v. 2010)
. 2
3 

### www.dor .m s. gov/doc s/ sa le s_72440. pdr (La st vis it ed 3/23/2011)
. 4 ¶6
. In a d d it ion to the b o n d ing req u ir em en t, e n ti ti es e n g ag ed in co n stru cti o n ac ti v it ies are
r equi r ed t o pa y c ontr act or ’ s t ax i n the amount of thr ee and one- hal f

pe r centof

t he tot al contr actpr i ce orcompensa t i on r ece i ved. Fai l ur e t o t i m el y pa y a contr act or ’ s t ax w hen due 1
can r es ul ti n an as s es s m entand pena l t i es r angi ng f r om t en per centt o fi f

ty per centof

the t ot al d e fic ien c y o r d e lin q u e n c y o r in ter e st o n th e d e fic ien c y a t th e ra te o f o n e p e rc e n t p e r m o n th
orboth. 2 ¶7. T hes e r i der s expr es s l y guar ant ee the paym ent of “al l t axes , damages , i nt er es t and penal t i es , w hi ch may accrue t o the St at e of M i s s i s s i ppi
. ” Seven r i der s , i n t ot al , ar e the 3
s u b je c t o f t h is d is p u te . ¶8
. M i s s i s s i ppi s t a tut or y l aw aut hor i zes t he Tax C om m i s s i on t o adoptrul es and
r egul at i ons neces s ary t o i m pl ementt he dut i es ass i gned t o i tby l aw . Pur s uantt o thi s gr ant of author i ty, the Tax C om m i s s i on dul y conduct ed mul t i pl e s al es - t ax audi t s on the bonded pr i nci pal s w hos e s ur et i es a r e i nvol ved i n thi s appea l
. T hes e audi t s r es ul t ed i n an as s es s m ent of unpai d t axes , pl us damages and pena l t i es and i nt er es tcomm ens ur at e w i th the t axes ow ed,
w hi ch the s ur et i es var i ous l y cont es tors eek t o avoi d payi ng. A ai m B onds ¶9. A ai m appl i ed f

orand w as gi ven a s t at e t ax i dent i f i cat i on num beri n 1988. A ai m w as bonded by F& G t o ens ur e the paymentof t axes . I n 1991, A ai m w as audi t ed by the Tax C om m i s s i on w i th no addi t i onal s al es t axes a s s es s ed. I n 1994, A ai m w as a udi t ed aga i n and

### Pursuant t o Mis si ss ippiCode Se ction 27- 65-39, theTax Commi ss ion m ay a dd a 4 

### pena lt y of t en pe rc ent

to t he t ota l de fi ci enc y af

te r a first off ens e, fi ft ee n perce nt f

or the se cond of

fe nse , twenty-f

ive p ercent for

thethird of

fe nse , and fi fty perce nt f or any sub sequ ent o ffense. SeeMis s. Code Ann. § 27-65- 39. 5 f ound t o be i n arr ear s i n the amountof $16, 205. 23 i n unpai d t axes and $2, 877. 70 i n penal t i es and i nt er es t . T he Tax C om m i s s i on audi t ed A ai m a thi r d t i m e i n 1998 and as s es s ed addi t i onal t axes due and i nt er es tand penal t i es atf i f t een pe r cent , t ot al i ng $81, 654. I n 2001, A ai m w as 4 aud i t ed a fou rth ti m e. T he T ax C om m i ssi on ass essed addit i on al t axes of $1 16 , 47 9, i nter est
o f $ 2 0 , 7 7 0 , a n d p e n a l t i e s o f $ 2 9 , 1 2 0 , o rtwe n ty - f

i v e p e r c e n to f

th e u n p a i d t a x e s . Th e t i me p e ri o d b e tw e e n th e 1 9 9 8 a u d it a n d th e 2 0 0 1 a u d it is c o n te s te d
. ¶10. O n J une 21 , 20 01, A ai m r eques t ed a hear i ng by the B oar d of R evi ew . T he hea r i ng
w as gr ant ed, and F& G w as gi ven no not i ce of A ai m ’ s def

aul tor the hear i ng. A tthe hea r i ng, A ai m i nf or m ed the Tax C om m i s s i on thati tw as f i nanci al l y unabl e t o pa y the money ow ed. In th e m inu tes o f th e h ea ri n g , the T ax C o m m issi o n a ck n o w ledg ed tha t i t w as a w are o f F & G ’s
s ur etys hi p w i th A ai m and thati ti nt ended t o col l ectf r om F & G if

the t ax coul d notbe col l ect ed f

r om the t axpaye r . The Com mi s s i on f ur theracknow l edged thatF& G ’ s addr es s w as pr i nt ed on the f

ace of the bond, butmade no att empt t o c ont actF& G orgi ve i tnot i ce of the hear i ng hel d on A ugus t2, 2001, w i th A ai m . F & G f i r s tr ece i ved not i ce of

the as s es s m entby
a d e m a n d le tte r o n N o v e m b e r 8 , 2 0 0 1
. ¶ 1 1
. T h e lette r d e m a n d e d p a y m e n t o f $ 1 3 1 ,8 8 0 o w e d b y A a im , w h ich in c lu d e d u n p a id t axes , penal t i es , and i nt er es t . T he l ett eri nform ed F& G thatA ai m , the t axpaye r , had bee n gi ven due pr oces s of

l aw r egar di ng the audi t s and i nf or m ed F& G thata t ax w arr antand l i en
wo u l d b e f

i l e d i f i td i d n o tpa y w i t h i n t e n d a y s . Th e l e t t e rd a t e d No v e mb e r8 , 2 0 0 1 , c a me

### 6

s om e thr ee mont hs af

t erthe hea r i ng and s om e s even year s aft erthe Tax C om m i s s i on had become a w ar e thatther e w as a pr obl em w i th A ai m . O n D ece m ber18, 2001, F& G pai d t he
s um underpr ot es tand on J une 26, 2006, f i l ed s ui ti n the C hance ry C our tof H i nds C ounty. P r yorand Fr az i erB onds ¶12. O n or abo ut M ay 31, 2002, St
. Paul pr ovi ded a per f or m ance and payment bond f or P ry o r a n d F ra z ier C o n stru c tio n , In c ., in re g a rd to a p rojec t at th e Ja m ie W h itt e n D e lta S tate R es ear ch C ent er . A t t ache d t o the bond w as the Tax C om m i s s i on’ s f or m t ax r i derdat ed J une 5, 2002. S even y ear s l at er , and w i thoutany pr i ornot i ce, on J anuary 8, 2009, the Tax C om m i s s i on s entS t . P aul a dem and l ett erdem andi ng paym entw i thi n t en days of $772, 022, i ncl udi ng $368, 450 i n unpai d t axes , $184, 226 i n penal t i es , and $219, 346 i n i nt er es t , al l ow ed to the sta te b y P ry o r an d F ra z ier
. S t. P a u l’s fa ilu re to p a y risk e d se izu re o f it s a s s e ts in M i s s i s s i ppi
. Som et i m e betw een the dat e of the as s es s m ent s of

the unpai d t axes and the d e m a n d le tte r, P ry o r a n d F ra z ie r c e a s e d d o in g b u s in e s s . Fr az i erand W

i l l i am s B onds ¶ 1 3
. T ra v e ler s iss u e d p e rfo rm a n c e b o n d s to F ra z ier a n d W ill iam s fo r v a rio u s p rojec ts in T upel o, M i s s i ss i ppi
. I n conj unct i on w i th thes e bonds , T r avel er s i s s ued the Tax C om m i s s i on’ s f

or m t ax r i dera s r equi r ed by s t atut e. O n ora boutO ct ober27, 2008, the Tax C om m i ssi on forw arded t o T ravel ers a dem and that i tpay w i thin t en day s $2 00 , 92 1 in t axes, penal t i es , and i nt er es tow ed the St at e of M i s s i s s i ppi
. T r avel er s ’ f ai l ur e t o pay r i s ked the
s ei zur e of

i t s as s et s l ocat ed i n M i s s i s s i ppi
. T hen, on ora boutD ece m ber29, 2008, the Tax C om m i s s i on f

orw ar ded a dec r eas ed “corr ect ed cl ai m ” t o T r avel er s and dem anded thati tpay

### Sureties h ave no obli gation t o pay on bonds that we reneve r e xec ute d. I f F&G 5 

### cont es ts theexe cution of

thi s bond, that is c ertainly an i ss ue for a tri alc ourt

t o s ettl e be twe en these p arties. It is no t, ho wev er, an issu e that w as raised inthis ap peal. 7 $ 8 7 ,6 5 6 .6 0 , co n sis tin g o f $ 6 7 ,1 6 0 .6 0 in u n p a id tax e s, $ 2 ,3 0 5 in p e n a lti e s, a n d $ 1 8 ,1 9 1 in in te re s t, w ith in te n d a y s o r r is k s e iz u re o f i ts a s s e ts in th e s ta te . ¶14
. B o th these cl ai m s accrued pri or t o T ravel ers recei ving any no t i ce of i t s pri ncipa l’ s del i nquency a nd i t s l i abi l i ty pur s uantt o the t ax r i der
. S om et i m e betw een the dat e of t he ori ginal asses sm ent and the fi rs tdem and l et t er, Frazi er and W i l l i am s ceased do i ng bu si ness. C obb Land D eve l opm ent B onds ¶15. I n O ct ober2000, F& G i s s ued a pe r f or m ance bond and f

or m t ax r i derpr ovi ded by the T ax C om m i s s i on f

orthe Tuni ca A i rpor tSi t e Prepar at i on f ori t s pr i nci pal C obb L and D evel opm ent( C obb)
. I n February 2001, F & G i s s ued a pe r f or m ance bond and t ax r i derf or Co b b f o rth e J e n n i n g s Bi o z o n e Ha z a r d M i t i g a t i o n P r o j e c t . I n a d d i t i o n t o i s s u i n g th e s e two bonds , the Tax C om m i s s i on cl ai m s t hatF & G al s o i s s ued a t ax r i derforC obb i n J ul y 2000 for the N ew N o x u b ee H igh S ch o o l S it e D ev elop m en t P ac k ag e; ho w ev er, F& G h as n o rec o rd thats uch bond orr i derw as everi s s ued, and t he T ax C om m i s s i on has notoff er ed an e xecut ed
co p y o f th e ride r th u s far. 5 ¶1 6. I n J ul y 20 04 , the Tax Com mi s s i on s e nt a de mand l e t t e r r e qu i r i ng F& G , w i t hi n t en days , t o pay $398, 074, w i th t axes of $328, 071, i nt er es tof

$37, 195, and pena l t i es of $32, 808 f orthe N oxubee Count y H i gh School , J enni ngs B i ozone M i t i gat i on Pr oj ect , and the Tuni ca A irp o rt P rojec t. F & G ’s f a ilu re to p a y w ith in ten d a y s ris k e d s e izu re o f its a ss e ts in th e sta te of M i s s i s s i ppi
. A s w i th the otherbonds and t ax r i der s i s s ued, thi s w as the fi rs tnot i ce that F & G had of i t s l i abil i ty o n the bon ds. F& G r equ est ed a heari ng t o con t estthese assess m ents ,

### 8

butthe Tax C om m i s s i on r ef us ed on the bas i s thatF& G w as notent i t l ed t o any not i ce or cop i es of an y au dit s or heari ng s i n regard t o it s pri ncipal s. B y ag reem ent of the p art i es, col l ect i on ef

f or t s on thes e bonds w er e hel d i n abeya nce unt i l the tr i al courtr eac hed a d e c isio n in th e o ri g in a l A a im lit ig a tio n . In M a rc h 2 0 0 6 , the T a x C o m m iss io n a d ju ste d its
or i gi nal as s es s m entagai ns tthe C obb bonds f r om $398, 074 dow nw ar d t o $273, 380 – a
re d u c tio n o f $ 1 2 4 ,6 9 4 fr o m its o ri g in a l a s s e s s m e n t. ¶1 7. O n N ovember 28, 2008, af t ert he t r i al cour thad r eac he d a d e c i s i on, t he T ax C om m i ssi on i ssued ano ther, “corr ect ed” dem and l et t er t o F & G dem and i ng , w i thin t en d ays, the p ay m en t of $ 6 4 7 , 4 0 7 – $ 3 7 4 , 0 2 7 m o re tha n it s o ri g inal asse ssm e n t. A g ain, F & G ’s fa ilu re to p a y w o u ld h a v e risk e d se izu re o f it s a ss e ts a n d p ro p e rty in M iss iss ip p i. T h e n , o n ly fiv e d a y s la ter , o n D e c e m b e r 2 , 2 0 0 8 , T h e T a x C o m m iss io n iss u e d a th ird , “c o rre c ted ,” c laim t o F& G f or$383, 838 – $263, 569 l es s than i t s N ovember28, 2008, demand. T w o da ys l at er on D ece m ber2, 2008, the T ax C om m i s s i on i s s ued a f our th, “ corr ect ed, ” cl ai m i n the amount of $270, 277 – $113, 561 l es s t han i t s D ece m ber2, 2008, ass es s m ent . F& G pai d t he sum of $270, 277 unde rpr ot es t . Som et i m e betw een the dat e of the f i r s tas s es s m entand the J ul y 29, 2 0 0 4 , d e m a n d o n F & G , C o b b c e a s e d d o in g b u s in e s s . C o b b L a n d

D ev elop m en t B o n d

s (I I) ¶18. A r ound O ct ober2000, F & G i s s ued a t ax r i derforthe Tuni ca A i rpor t s i t e- pr epar at i on contr actand r el at ed per f or m ance bond f

orC obb. T hen, i n February 2001, F& G i s s ued
a n o th e rt a x r i d e ro n b e h a l f o f C o b b f o rth e J e n n i n g s B i o z o n e Ha z a r d M i t i g a t i o n P r o j e c t . At
s om e poi ntaf

t erthes e bonds w er e i s s ued, the Tax C om m i s s i on com pl et ed an i ni t i al audi ton C obb and i t s bonded proj ect s . A f t ert hi s i ni t i al ass es s m ent , t he Tax C om m i s s i on conduct ed

### 9

anothers epar at e and i ndepende ntas s es s m enton C obb f orunpai d cont r act or ’ s t axes and the
r el at ed pena l t i es and i nt er es tthatacc rued ther ew i th. ¶1 9. I n J anuary 2009, m or e tha n e i gh t ye a r s a f t e r the or i gi na l bo nd w a s i s s ue d, the Tax C o m m iss io n m a d e a d e m a n d u p o n F & G fo r $ 4 ,4 5 1 , w ith $ 2 ,8 8 1 in ta x e s, $ 1 ,2 8 2 in in ter e st, and $ 28 8 i n penal t i es . T he demand l ett ergave F& G t en days t o pay i n f ul l the demanded
su m re late d to th e Je n n in g s B io z o n e H a z a rd M iti g a tio n p rojec t o r fa c e se izu re o f its a ss e ts in th e S ta te . ¶20. F& G demanded a hea r i ng t o cont es tthe as s es s m ent , butthe Tax C om m i s s i on r ef us ed t o gr antthe hea r i ng, s t at i ng thatF& G w as note nt i t l ed t o a ny not i ce of the del i nquency of

any ta x e s o r c o p ie s o f a n y a u d its
. H ow el l ’s N

urs er y & Landsc ape Bonds ¶21. O n m or e than one oc casi on , F & G is sued bo nd s and acco m panyi ng t ax r i der s f or
v ariou s p rojec ts un d ertak en b y it s p ri n cipa l, H o w ell ’s N u rsery & L an d sca p e, Inc . (H o w ell ’s N u rsery ). In D ec em b er 2 0 0 6 , the T ax C o m m issi o n m ad e a d em an d u p o n F & G w ith reg ard t o thes e bonds f

or$43, 109. 05, w i th $31, 542. 05 i n unpa i d t axes , $3, 154. 21 i n pe nal t i es , and $8 , 41 2. 79 i n int eres tas ass essed againstH ow el l ’s N ursery. A s i n the ot her dem and l et t ers , itg av e F & G ten d ay s to p ay the a m o u n t i n full o r ri sk seizu re o f i ts assets in the stat e. In
r es pons e, F& G agai n de m anded a hear i ng be f or e the R evi ew Boar d a nd r eques t ed a c opy of the audi t or ’ s compl et e f i l e of the as s es s m ent so i tcoul d i nves t i gat e the as s es s m ent i nd epen den t l y. T he T ax C om m i ssi on ref used b oth the requ estfora heari ng and the requ est f orcopi es , s ayi ng t hatF & G w as nota “t axpaye r ” i n r el at i on t o the under l yi ng l i abi l i ty and th u s , w a s n o t e n title d to h e a ri n g o n th e a s s e s s m e n t.

### 10

¶ 2 2
. P u rsu a n t to a n a g re e m e n t b e tw e e n th e p a rties in v o lv e d , co llec tio n e ffo rts o n th is
m a tter w e re h e ld in a b e y a n c e p e n d in g th e o u tco m e in th e A a im lit ig a tio n . In th e in ter im , in N ovember2008, the T ax C om m i s s i on r eas s es s ed C obb a nd s ubm i t t ed a “cor r ect ed”
as s es s m ent , i ncr eas i ng the s um t o $51, 940. 82 and i nf or m i ng F& G thatf

ai l ur e t o pay r i s ked
s ei zur e of

i t s a s s et s i n the s t at e. I n D ece m ber2008, F& G pa i d the f ul l $5 1, 94 0. 82 under pr ot es t . Som et i m e betw een the dat e of the ass es s m entagai ns tH ow el l ’ s N ur s ery and the d e m a n d le tte r o n F & G , H o w e ll’ s N u rs e ry c e a s e d d o in g b u s in e s s . A vant G ar de Bond ¶23. I n Sept ember 2000, U SFG pr ovi ded a per f or m ance bond and t ax r i der on behal f of A v an t G ard e C o n tr ac tors, Inc . (A v an t G ard e) w ith reg ard to the co n stru cti o n o f C athe ri n e’s R e tail S to re , M e tro C e n ter M a ll, in Ja c k so n , M iss iss ip p i. A p p ro x im a tely fo u r y e a rs la ter , in A ugus t2004, the Tax C om m i s s i on forw ar ded a dem and l ett ert o U SFG demandi ng payment in fu ll, w ith in ten d a y s, o f $ 8 ,2 0 1 .8 2 , co n sis tin g o f $ 5 ,1 7 4 .6 5 in u n p a id tax e s, $ 5 1 7 .4 6 in penal t i es , and $2, 509. 71 i n i nt er es t . Fai l ur e t o pay r i s ked s ei zur e of U SFG ’ s as s et s i n t he
s t at e. U pon agr eementof the par t i es , col l ect i on ef f or t s w er e hel d i n abeya nce unt i l a dec i s i on
w a s re a c h e d in th e A a im litig a tio n . I s s ues on A ppeal ¶24. T he part i es agr eed attr i al thatther e w er e no i s s ues of f actt o be tr i ed i n thi s cas e. T he
s ur et i es compl ai n that : (1) t he tr i al courterr ed i n appl yi ng M i s s i s s i ppi contr actl aw , ( 2) the tr i al courterr ed i n f

i ndi ng thatthei rcons t i tut i onal r i ghtt o s ubs t ant i ve and pr ocedur al due pr oces s w as notvi ol at ed by t he T ax C om m i s s i on w hen i tf ai l ed t o gi ve not i ce of

the t axMiss. S tate Tax C om m ’n v. Mask, 667 So. 2d 1313, 1314- 1315 ( M i s s . 1995) 6 (c ita tio n s o m itte d ). Id
. ( ci t i ng Mis s . State Tax Com m ’n v. D yerInv. C o. , I

nc ., 507 So. 2d 1287, 1289 7 (M is s . 1 9 8 7 ))
. Mask , 6 6 7 S o . 2 d a t 1 3 1 5 . 8 

### 11 a u d its a t issu e , an d (3 ) th e trial c o u rt e rre d in fin d in g th a t th e su re ties lac k e d sta n d in g to d is p u te th is la c k o f n o tic e . ¶ 2 5 . In o th e r w o rd s , th e q u e stio n to b e a n sw e re d is w h e th e r F & G a n d o th e r su re ties in si m i l ar s i tuati on s should hav e been given noti ce by t he T ax C om m i ssi on of theirpri ncipal s’ d e f a u l t s a n d t a x a u d i t s a n d s u b s e q u e n ts t a tu s r e s u l t i n g f r o m s u c h a u d i t s . Ad d i t i o n a l l y , we
m us tdet erm i ne w hether , af t ers uch as s es s m entt akes pl ace , a sur ety i s l i abl e f orthe t ot al s um
o f th e u n p a id tax e s, d a m a g e s, p e n a lti e s a n d in ter e st a ss e ss e d o r m e re ly th e su m o f u n p a id t axes, si nce iti s not the suret i es’ ow n d efaul tthat r esul t ed in pen al asses sm ents . S TANDA RD O F REVI EW ¶2 6
. T h is C o u rtg en e ra lly h a s a c c o rd e d g re a t d e fe re n ce to an ad m inistrati v e ag en cy ’s
cons truct i on of

i t s ow n rul es and r egul at i ons and t he st atut es underw hi ch i toper at es . W hen 6
r evi ew i ng or der s of

a s t at e age ncy, the tr i al courtand thi s C our tar e l i m i t ed by the arbi tr aryand- capr i ci ous s t andar d. A n appea l of an age ncy dec i s i on shoul d be t o det erm i ne w hether 7
ornotthe or derof

the admi ni s tr at i ve agenc y “ ( 1) w as s uppor t ed by s ubs t ant i al evi dence , ( 2)
w as arbi tr ary orc apr i ci ous , ( 3) w as be yond the pow erof the admi ni s tr at i ve agenc y t o m ake,
o r ( 4 ) v io la te d s o m e s ta tu to ry o r c o n s titu tio n a l r ig h t o f t h e c o m p la in in g p a rt y .” 8 A N A L Y S IS

### Mis s. Code Ann. § 27-65- 21 (Re v. 2010)
. 9 

### Bish op v. Cu rrie , 133 Mi ss . 517, 97 So. 886, 888 (1923)
. 10 

### See Sta te for U

se an d B enefit o

f Brazeale v. L ewis , 49 8 S o. 2 d 3 21 , 32 4 (M iss. 11 

### 1986). Id. at

324. 12 

### 12 I . Th e t r i a l c o u r t d i d n o t e r r i n a p p l y i n g M i s s i s s i p p i c o n t r a c t l a w, t hereby hol di ng t he s uret i es l i abl e f or t he t axes , penal t i es , dam ages and i nt ere s t wh i ch ac crued t o t he St at e of M i s s i s s i ppi by vi rt ue of th e p rin cip a ls’ d efa u lt s . ¶2 7. T he s ur et i es i nvol ve d i n thi s a pp e a l c on t e nd tha t , a s a matt erof s ubs t ant i ve and p ro c e d u ra l d u e p ro c e ss , th e y are en tit led to n o tice w h e n the ir b o n d e d p rin c ip a l is su b jec t to an audi tby the Tax C om m i s s i on. B as ed on M i s s i s s i ppi contr actl aw and the M i s s i s s i ppi C o d e , th is c o n te n tio n is m is p la c e d
. ¶28. M i s s i s s i ppi C ode Sect i on 27- 65- 21 r equi r es thatany per s on ent er i ng i nt o any contr act
o f $ 7 5 ,0 0 0 o r m o re m u st, b e fo re b e g in n in g th e p e rfo rm a n c e o f su c h c o n tra c t, ex e c u te a n d file
w i th the Tax C om m i s s i on a good and va l i d bond i n a s ur ety company author i zed t o do bus i nes s i n the St at e of

M i s s i s s i ppi w i th the condi t i on thata l l t axes w hi ch may accrue t o the
s t at e be pa i d w hen due; orpay the contr act or ’ s t ax i n advanc e. 9 ¶2 9
. It is w e ll se ttl ed that issua n ce o f a su rety b o n d cre ates a co n tr ac tua l re latio n sh ip b e tw e e n th e su re ty a n d its p rin c ip a l. T h e co n tra c t of su re ty sh ip b in d s th e su re ty a b so lu tely and uncondi t i onal l y. Fundam ent al t o the s ur ety’ s obl i gat i on i s thati tr es t s on t he 10 p r i n c i p a l ’ s v a l i d o b l i g a t i o n t o a c r e d i t o r . Th e s u r e ty ’ s l i a b i l i ty a n d o b l i g a t i o n a r e th e s a me 11
a s th e p rin c ip a l’s, a n d th e su re ty is liab le o n ly if th e p rin c ip a l is liab le. E q u a lly 12 f undament al i s thatthe s ur ety’ s agr eementand the pr i nci pal ’ s agr eement , bei ng or i gi nal and

### Seegene rally Hart ford Acci dent & Indem. Co. v

. He wes , 190 Mis s. 225, 199 So. 13 

### 93 (1940)
. Morgan v

. U. S. Fi d. & Guar

. Co. , 222 So. 2d 820, 830 ( Mis s. 1969). 14 

### U.S. Fid. & Guar. Co. v . Par sons , 12 2 S o. 5 44 , 54 9 (M iss. 19 29 ). 15 

### Id. 16

### Id
. 17

### Morgan , 222 So. 2d at

830. 18 

### J. R. Wa tkin s Co. v. R un nels , 252 Mis s. 87, 172 So. 2d 567 (1965) and American 19 

### Olean Ti le Co. v. Mo rton , 247 Mi ss . 886, 157 So. 2d 788 ( 1963); 8 Missi ss ippi Prac tice Series, Ency clopedia of Mi ss issi ppi Law , §6 9:3 8 M i ss. P ract i ce S eri es, E ncyc l opedi a of Mis s . Law § 6 9 :9
. 20 

### Fir st Bapti st Church of Oxf

ord v . Hendricks , 65 So. 244, 245 ( Mis s. 1914). 21 

### 13 in ter tw ined , are co n stru ed t o g ethe r. W h il e the princ ipal an d th e su rety are b o u n d in 13
con tract , the co ntr actis o f a fi du ci ary na ture as b et w een the surety and p ri ncipal
. B ecause 14 of the f i duci ary overt ones of

the s ur ety’ s c ontr act , a s ur ety i s r egar ded as i n pr i vi ty w i t h t he pr i nci pal and gene r al l y i s bound by t he pr i nci pal ’ s act i ons . T he negat i ve i s al s o true: w hat 15 the pr i nci pal coul d notdo, nei thercan the s ur ety. I f the pr i nci pal w ai ves a know n r i ght , or 16 by act s orr epr es ent at i ons i s bound by es t oppel , s o i s the s ur ety. H ow ever , the s ur ety has 17
every r i ghtt o be prot ect ed by t he pr i nci pal
. A ccor di ngl y, t he sur etys hi p r el at i ons hi p, bei ng 18
c o n tr a c tu a l i n n a tu r e , i s g o v e r n e d g e n e r a l l y b y th e f a mi l i a rru l e s o f

c o n tr a c tl a w. 19 ¶3 0. G ener al l y, t he s ur e ty r e c ov e r s thr ou gh r e i mbur s e mentf r om the pr i nci pal
. T he 20 pr i nci pal ’ s def

aul torb re ach of

the under l yi ng contr actdoes notdi s char ge the s ur ety, but gener al l y put s the s ur ety’ s obl i gat i on i n m ot i on. T he s ur ety becomes the credi t orof t he 21

### 8 Mis s. Pra ctic e Se ri es, Enc yc lope dia of

Miss. Law §69:19. 22 

### Fid . & D epo sit Co. of M

aryla nd v. Dep osit Gua r. Ba nk

& T rust, 144 So. 700, 702 23 

### (Mi ss . 1932)
. Miss . Fa rm B u re a u In s. Co . v. B ritt , 8 2 6 S o . 2 d 1 2 6 1 , 1 2 6 6 (M iss. 2 0 0 2 ). 24 

### Id. 25 

### 14 pr i nci pal af

t eri thas pai d t he pr i nci pal ’ s debti n f ul l ori n part , f

oral l purpo ses. W her e a 22 pr i nci pal i s know n t o be i ns ol vent , a f t erthe debtha s be come due, the s ur ety ha s an i m m edi at e r i ghtt o s ue t o compel the pr i nci pal t o pay so t he sur ety’ s pos i t i on i s notf ur ther harm ed. 23 ¶31. B as ed on the l ong- s t andi ng contr act l aw di s cus s ed above, i t i s cl ear that the s ur et i es i nvol ved i n t hi s appea l w i l l i ngl y f or m ed a c ontr actual r el at i ons hi p w i th the pr i nci pal s t hey b o n d e d . A c c o rd in g ly , th is a p p e a l is n o th in g m o re th a n a c o n tr a c tu a l d is p u te . ¶32. I ti s w el l sett l ed t hatcour t s ar e bound t o enf or ce contr actl anguage as w r i t t en and gi ve it i ts p lain a n d o rd in a ry m e a n in g if it is c lea r a n d u n a m b ig u o u s. A n in su ra n c e c o n tra c t is 24
am biguou s w hen the p oli cy can be int erpr et ed as ha ving t w o o r m ore r easona ble m eanings. 25 E ach o f the b on ds i n q uest i on con t ai ns t he fol l ow i ng l ang uag e i n ri ders: W H E R E A S , underthe pr ovi s i ons of Sect i on 27- 65- 21, M i s s i s s i ppi C ode of 1972, a s a m ended, the s ai d Pr i nci pal i s r equi r ed t o a nd ha s f urni s hed t he att ache d bond guar ant eei ng paym ent of al ltaxes , dam ages , inter es tand p e n a ltie s w h ich m a

y a c c ru e to th e S ta te o f Miss iss ip

p i . . . on acc ountof e n ter in g in to sa id c o n tra c t. N O W T H E R E FO R E , i n addi t i on t o the obl i gat i ons set forth i n the att ache d bond, ther e i s her eby i m pos ed the addi t i onal obl i gat i on by thi s R i derthatthe C on tract or shall

prom ptl y m a ke pa

ym ent w hen du e of al ltaxes, da m ag es, in ter e st a n d

p e n a lti e s w h ich m a

y a c c r u e to th e S ta te o f Miss iss ip

p i under Sect i on 27- 65- 1 ets eq. , and Sect i on 27- 67- 1 ets eq. , and Sect i on 27- 7- 1 et s eq. , and Sect i on 27- 13- 1 ets eq. , and Sect i on 27- 7- 301 ets eq. , and Sect i on 27-

### See S tow ell v. Clark , 118 So. 370, 372 ( M i s s . 1928)


### . 26 

### Sto well, 118 So. at

372. 27

### Id. 28 I d. a t 3 7 2
. 29 

### 15 55- 313, M i s s i s s i ppi Code of 1972, a nd a m endment s ther et o, on acc ountof the e x e c u tio n o f t h e a fo re s a id c o n tr a c t. T he l anguage “guar ant eei ng paym entof al l t axes , dam ages , i nt er es tand pena l t i es w hi ch may
a c c ru e to th e S tate o f M iss iss ip p i” is c lea r an d u n a m b ig u o u s a n d sh o u ld b e g iv e n its p la in
a n d o rd in a ry m e a n in g . Ju st a s th is C o u rt h a s e n fo rc e d c lea r a n d u n a m b ig u o u s b o n d c o n tra c ts contai ning pr ovi s i ons f orthe paymentof

att orneys ’ f

ees , s o s houl d thi s C our tenf or ce the pl ai n and cl earm eani ng of the bondi ng contr act s and r i der s ati s s ue. 26 ¶33. I n S tow ell

v. Clark , a s ur ety compl ai ned a s ubcontr act or on a r oad pr oj ect s houl d not be abl e t o enf

or ce the pl ai n l anguage of the agr eement , w hi ch guar ant eed a t t orneys ’ f ees i ncurr ed duri ng t he enf or cementof

the agr eement , beca us e thatpr ovi s i on w as notf ort he
s ubcontr act or s ’ benef

i t . W e f

ound thatthe bond w as f orthe bene f

i tof s ubcontr act or s and 27
o th e rs s u p p ly in g lab o r a n d m a ter ials th a t w e n t in to th e ro a d w o rk , as w e ll as fo r th e b e n e fit of C l ai borne C ounty, w her e the r oad w as bei ng bui l t . W e f ound thatthe purpos e of t he 28 b o n d w a s to m a k e th o se p a rties w h o le; a n d in o rd e r to d o so , the b o n d p ro v id e d th a t all
e x p e n se s a n d c o sts a n d a tto rn e y s ’ f e e s in c u rre d b y th e m in th e e n fo rc e m e n t o f th e ir rig h ts
s houl d be pai d by the obl i gor s of the bond. J us ta s the purpos e of the S to w e ll

b o n d w a s to 29
m ake w hol e the s uppl i er s and s ubcontr act or s i nvol ved, s o i s the purpos e of the r i der s ati s s ue t o m ake the S tat e o f M issi ssi pp i w ho l e – incl ud i ng the p aym ent of al l t axes, dam ages,

### Stat e v . Moody , 189 So. 2d 586 (Mi ss . 1967)
. 30 

### Id
. at591- 592. 31 

### 16 i nt er es t , and pena l t i es thatm ay be due
. A ppl yi ng the pl ai n and or di nary m eani ng of t he
r el evantl anguage i n the r i der s l eads t o the conc l us i on thatthe s ur et i es ar e l i abl e f orthe paymentof

al l t axes , damages , i nt er es t , and pena l t i es w hi ch ac crued t o the St at e of M is s is s ip p i, a s e x p re s s ly p ro v id e d in e a c h ri d e r. ¶34. T he s ur et i es ’ r el i ance upon State v. Moody fo r th e p ro p o sitio n th a t a su re ty is liab le 30 onl y f ori nt er es tthatacc rues a f t erde m and on the s ur ety, i s m i s pl ace d. T he rul e of l aw t o be t a k e n f r o m Moody , an d th a t th e su re ties re ly u p o n , is e ss e n tially th a t
a s ur ety i s char geabl e w i th i nt er es tonl y w hen i thas f ai l ed t o m ake good a f

t er th e d e fa lc a tio n h a s b e e n c a lled to its a tten tio n . . . . N e v e rth e les s, in ter e st in exce s s of the maxi m um penal ty of the undert aki ng m ay bec om e due f r om the s ur ety, butonl y be caus e of the s ur ety’ s ow n de f

aul t . N othi ng i s due f

r om the su re ty u n til h e is n o tified o f h is p rin c ip a l’s d e lin q u e n c y ; if h e th e n u n ju stly w ith h o ld s p a y m e n t, he is liab le f o r in ter e st b e c a u se o f h is u n ju stifia b le det ent i on of

the money. H e is notr equi r ed t o t ake the i ni t i at i ve i n m aki ng payment , and s t ands onl y as s ecur i ty unt i l a cl ai m antm akes actual demand; then onl y does i nt er es tbegi n t o acc rue. 31 ¶35. H ow ever , the Tax C om m i s s i on as s ert s thatthi s rul e s t ands m er el y f orthe pr opos i t i on that i n terest b ey o n d th e p en al sum can be co ll ec ted from a sure ty on ac co u n t of th e su rety’s def aul tonl y af

t ernot i ce t o the s ur ety; notthati nt er es tcan ne verbe i ncl uded i n the pena l
sum , especi al l y w here the surety specif ical l y h as contr act ed to pay i nter estand pen al t i es. A ccor di ng t o the R e sta tem e n t (T h ird ) o f Su re tys h ip a n d

G u a ra n ty , “ [w ]he n the sec o n d ary obl i gat i on i s a l egal l y mandat ed bond, thatobl i gat i on does noti ncl ude any pe nal t i es i m pos ed
o n the p ri n cipa l ob li g o r for fa il u re to fu lf il l th e u n d erlying o b li g ati o n u n less the s ec o n d aryR e sta tem e n t (T h ird ) o f Su re tys h ip a n d

G u a ra n ty § 73 ( 1996) 

### . 32 R e sta tem e n t (T

h ird ) o f Su re tys h ip a n d

G u a ra n ty § 7 3 , c m t. ( a ). 33 

### 17 o b li g ati o n so p rov ides
. ” In o ther w o rds (an d a s co n fi rm ed b y the O ffi cial C o m m en t ( a)) 32 “unl es s the s econda r y obl i gat i on i s hel d t o pr ovi de thatany s uch penal ty a s s es s ed i s i ncl uded
as partof the under l yi ng obl i gat i on, the s econda ry obl i gat i on does noti ncl ude any pe nal t i es beyond the l os s es s uf

f er ed as a r es ul tof

the pr i nci pal obl i go r’ s br eac h of the under l yi ng obl i gat i on. ” H er e, the s ur et i es c ontr act ed thr ough the t ax r i der s t o guar ant ee the “pa ym ent

33
o f a ll ta x e s , d a m a g e s , in te re s t a n d p e n a ltie s w h ic h m a y a c c ru e to th e S ta te o f M is s is s ip p i.” T hi s pl ai n l anguage expr es s l y i ncl udes al l t axes , penal t i es , and int eres tw hi ch may accrue. T hi s i s the l anguage t o w hi ch the s ur et i es agr eed, and i ti s the l anguage by w hi ch the s ur et i es
a re b o u n d
. II. T h e tri al court d i d n ot err i n fi n d i n g tha t t h e sureti es’ cons t i t ut i onal ri ght t o s ubst ant i ve and p roce dural due proces s w as not vi ol at e d when t he Tax Com m i s s i on f ai l e d t o gi ve not i c e of

t he t ax audi t s at i s s ue. ¶36
. T he s ur et i es compl ai n thatthe Tax C om m i ssi on dep ri ved them of theirs ubs t ant i ve and pr ocedur al due- pr oces s r i ght s w hen i tfa i l ed t o gi ve not i ce of the t ax audi t s , r es ul t i ng i n t he addi t i onal t axes , penal t i es , dam ages , and i nt er es tow ed t o the St at e. T he appl i cabl e s ect i on of the M i s s i s s i ppi C ode makes evi dentthatthe sur et i es ar e notby l aw ent i t l ed t o not i ce of
s u c h a u d its a n d a s s e s s m e n ts . ¶ 3 7 . M iss iss ip p i C o d e S e c tio n 2 7 -6 5 -3 7 sta tes in p e rtin e n t p a rt: I f adeq uate r ecor ds of

the gr os s i ncome orgr os s pr ocee ds of s al es ar e not m ai nt ai ned .
. . or i f an a ud i tof the r ecor ds of

a t axpaye r. . . di s cl os es that t axes are due a nd unp ai d, the co m m i ssi on er s hall m ake assessm ents of t axes, d a ma g e s , a n d i n t e r e s tf r o m a n y i n f

o r ma t i o n a v a i l a b l e , wh i c h s h a l l b e p r i ma

### Mis s. Code Ann. § 27-65- 37 (Re v. 2010)
. 34 

### Per son m eans and inc lude s any individual , f ir m, copartner ship, j oint

vent ure , 35 

### as soc iat i on , c or

po r at i on , p r om ot e r

o f a t e mpo r ary e ve nt , e s t at e , tr us t o r o the r gr oup or com binati on ac ting as a uni t . . . .”Mis s. Code Ann. § 27-65- 3(c ) ( Rev. 2010). Mis s. Code Ann. § 27-65- 3(e ) ( Rev. 2010). 36 

### Id
. 37 

### 18 f aci e corr ect . T he com m i ssi on ers hal l gi ve not i ce t o the taxpaye rof s uch a ss e ss m e n ts a n d d e m a n d th e p a y m e n t o f th e tax , d a m a g e s a n d in ter e st w ith in thi r ty ( 30) days f

r om the dat e of

del i very of

the not i ce. 34 ¶38. T he w or d “t axpaye r ” as us ed i n thi s st at ute i s defi ned as “any per s on l i abl e f oror 35 h a v in g p a id a n y t a x t o th e S ta te o f M is s is s ip p i u n d e r t h e p ro v is io n s o f t h is c h a p te r.” A 36 t axpaye ri s r equi r ed t o obt ai n a s al es t ax perm i tunderM i s s i s s i ppi C ode S ect i on 27- 65- 27 bef or e enga gi ng i n bus i nes s i n t hi s s t at e. A ppl yi ng the pl ai n l anguage of the s t atut e t o t he 37
cas e ath and , i ti s cl eart hatthe onl y i ndi vi dual orent i ty ent i t l ed t o not i ce unde rt he
as s es s m ents t atut e i s the a c tu a l ta x p a y e r, as d efine d b y M issi ssipp i C o d e S ec ti o n 2 7 -65 -3(e ). C o n cu rren tl y , the su reti es are no t the tax p ay ers as co n tem p lat ed by th e L eg isl ature an d are
no tenti t l ed to noti ce of an au ditor defaul tby theirpri ncipal s. ¶39. Fur ther , the actual bonds i n ques t i on do not author i ze the r el eas e of s uch i nf or m at i on bef or e the Tax C om m i s s i on m akes a cl ai m t o the s urety. E ach of the bonds cont ai n t he f ol l ow i ng l anguage : N O T W IT H S T A N D IN G th e tax in fo rm a tio n a n d re tu rn c o n fid e n tiality pr ovi s i ons cont ai ned i n S ect i on s 27- 65- 1 ets eq. , 27- 67- 1 ets eq. , 27- 7- 1 et s eq. , 27- 13- 1 ets eq. , 27- 7- 301 ets eq. , and 27- 55- 301 ets eq. , M i s s i s s i ppi C ode of 1972, and amendm ent s ther et o, pr i nci pal her eby aut hor i zes the St at e Tax C om m i ssi on t o rel ease t o surety any inf orm at i on rel at i ng t o an y clai m against s ai d s ur ety m ade by the St at e T ax C om m i s s i on w hi ch i s cover ed by t hi s bond.

### Mis s. Code Ann. § 27- 3- 73 

### (1) (Re v. 2010) (e mpha si s a dded)
. 38 

### Mis s. Code Ann. § 27- 65- 81 

### (1) (R ev. 2 01 0) (emp hasis ad ded ). 39 

### Mis s. Code Ann. § 27-3- 73(4) (Re v. 2010)
. 40 

### 19 T he bonds cont ai n no expr es s ori m pl i ed pr ovi s i on r equi r i ng the C om m i s s i on t o pr ovi de any i nf or m at i on t o a sur ety re l at i ng t o a cl ai m unt i l t he actual cl ai m i s m ade. I f the C om m i s s i on had, i n f act , r el eas ed s uch i nf

or m at i on, i tw oul d have bee n i n cl earvi ol at i on of M i s s i s s i ppi C o d e S e c tio n s 2 7 -3 -7 3 a n d 2 7 -6 5 -8 1 . S e c tio n 2 7 -3 -7 3 (1 ) sta tes in p e rtin e n t p a rt: (1 ) E x c e p t in a c c o rd a n c e w ith p ro p e r ju d ic ia l o rd e r . . . i ts hal lbe unlaw f ulf or the C om m is s i onerof

Revenue , orany de

put y, age nt , cl erk orotherof

f i ceror em pl oyee of

the D epar tm ent

of R eve nue, t o divul

ge orm ake know n i n any m annerthe am ountof

i ncom e orany par t i culars s et f or th ordis cl os ed i n any r epor torr etur n r equi r ed on any taxes col l ected by r epor t s r ece i ved by the D epa r tm ent

of R eve nue . . . T h e term “p rop er jud ici al ord er” as u sed in th is se c tio n . . . sh a ll in c lu d e o n ly th o se o rd e rs e n ter e d b y a c o u rt o f re c o rd in th is s t at e af t erf urni s hi ng not i ce a nd a hea r i ng t o the taxpaye rand t he D epart m ent of R evenue . T he cour tshal l notaut hor i ze the f urni s hi ng of s uch i nf

or m at i on unl es s i ti s s at i s f

i ed thatthe i nf

or m at i on i s needed t o pur s ue pendi ng l i t i gat i on w her ei n t he r eturn i t s el f i s i n i s s ue, orthe j udge i s s at i s f i ed thatthe nee d f

or f urni s hi ng the i nf

or m at i on outw ei ghs thatr i ght s of the t axpaye rt o have s uch i nf or m at i on s ecr et ed. 38 S e c tio n 2 7 -6 5 -8 1 (1 ) ( R e v . 2 0 1 0 ) s ta te s , in p e rt in e n t p a rt , th a t. [I] t sh a ll b e u n law fu l fo r th e C o m m iss io n e r o f R e v e n u e o r a n y d e p u ty , ag e n t, c le rk o r o th e r o ff

ic e r o r e m p lo y e e o f t h e D e p a rt m e n t o f R e v e n u e . . . t o di vul ge ormake kno wn i n an

y manne rthe a m ou nt

o f i nc ome o ra ny p ar t i c ulars s et f or th ordis cl os ed on any appl i cat i on, r epor torr etur n r equi r ed. 39 A n y p erso n fou n d in v iolati o n o f th e p rov isi o n s o f S ec ti o n 2 7 -3-7 3 is g u ilty o f a
m i s demeanor , and on convi ct i on ther eof , s hal l be f

i ned notm or e than $ 1, 000 or i m pr i s onm entof

notm or e than s i x m onths i n the county j ai l , orboth. C l ear l y, the Tax 40

### 20

C om m i s s i on m ay notdi vul ge any pa r t i cul ar s r egar di ng the pr i nci pal s ’ f i nanci al s t atus ; and i f the Tax C om m i s s i on di d s o, i tw oul d f ace pot ent i al cr i m i nal l i abi l i ty. ¶4 0
. M o re p ra c tica lly , tho u g h , th e su reti es h av e an i m p li e d o b lig a tio n to k n o w th e ir pr i nci pal s . T he s ur et i es ar e i n t he bes tpos i t i on t o m oni t orthei rpr i nci pal s ’ per f or m ance f

or th e d u ra tio n o f th e b o n d s. S h o u ld th e su re ties c h o o s e n o t to b e w e ll-ad v ise d o f th e ir pri ncipal s’ fi nan ci al st atus, they ri sk and m ay suff er the co nsequ ences. ¶41. I n addi t i on t o a s ur ety’ s i m pl i ed obl i gat i on of know i ng i t s pr i nci pal , a s ur ety has t he
co n tr ac tual ab il ity p eriod icall y to req u ir e the p ri n cipa l to ke ep itap p ri sed o f th e p ri n cipa l’ s f i nanci al s t atus , pr oof

of per f or m ance , and conf

or m i ty t o t ax l aw s . I tm ay r equi r e the pr i nci pal t o pr ovi de w ai ver s orpow er s of att orney t o al l ow i tt o com m un i cat e w i th t he C om m i s s i on r el at i ve t o t ax i s s ues on bonded pr oj ect s . The s ur et i es cl ai m thatthey run t he ri sk of i nter fer i ng i f they att em p tt o st ay ab reas tof theirpri ncipal s’ fi nan ci al st atuses. H ow ever, incl udi ng s uch a c l aus e i n the or i gi nal bondi ng contr actnotonl y w oul d avoi d a
c la im o f i n te rf

e re n c e , b u t it a ls o w o u ld a v o id th is s o rt o f d is p u te a lto g e th e r. ¶42. I n conj unct i on w i th the above anal ys i s , the s t atut e w hi ch contr ol s w i th r egar d t o t he
s ur et i es ’ due- pr oces s a r gum ent s a nd the C om m i s s i on’ s de m and f ort axes pl us penal t i es and interest i s M issi ssipp i C o d e S ec ti o n 2 7 -65 -57 (i n p erti n en t part): U pon fa i l ur e t o pay t he t axes i m pos ed undert hi s chapt erby any t axpaye rw ho has exec ut ed any s urety bond underthe pr ovi s i ons of thi s chapt er , the co m m issi o n er shall

give not i ce of s uch f

ailure t o the suret i es of

s uch bond and demand paym entof

the t ax, da m ages a nd i nt er es tw i thi n t en ( 10) days
. I f the s ur et i es on the t axpaye r ’ s bond s hal l fai l o r r ef us e t o pay the pena l s um demanded w i thi n the t en ( 10) days al l ow ed, the comm i s s i oners hal l f i l e a not i ce of t a x l i e n wi th the c i r c ui tc l e r k o f the c ou nty i n whi c h the s ur e t i es r es i de orow n pr operty w hi ch s hal l be enr ol l ed upon t he j udgm entrol l , and t he

### Mis s. Code Ann. § 27-65- 57 (Re v. 2010) (e mpha si s a dded)
. 41 Mis s . P ub. S er v. C om m ’n v. Mun. E ner gy A gency , 46 3 S o. 2d 10 56 , 10 58 (M i ss. 42 1985) ( ci t i ng A tw o o dCh evrolet -O lds, Inc. v. A berdee n Mu n . S ch . D ist. , 431 So. 2d 926, 9 2 8 (M is s . 1 9 8 3 ) ( c ita tio n o m itte d ))
. 

### SeeMis s. Code Ann. § 27- 65- 21( 3) 

### (Re v. 2010)
. 43 B ritt , 8 2 6 S o . 2 d a t 1 2 6 6
. 44 

### 21 comm i s s i onerm ay pr ocee d t o c ol l ectf r om the s ur et i es as her ei naf t erpr ovi ded for c o ll ec ti n g from an y jud g m en t deb tor. 41 ¶4 3. N otonl y does Sect i on 27-65- 57 i nd i c a t e tha tno t i c e may n otbe gi ve n u nt i l af t er def aul t , butt he r el evantst atut e as a w hol e al s o i ndi cat es t he sa m e. T hi s C our thas s ai d t hat
s t atut es deal i ng w i th t he sa m e orsi m i l arsubj ectm att erm us tbe r ead in p a ri m a ter ia a n d to the ext entpos s i bl e, eac h s ect i on of t he C ode m us tbe gi ven ef f ectso t hatthe l egi s l at i ve i nt ent
c a n b e d e ter m in e d .” R e a d in g th e c o n fid e n tiality a n d a ss e ss m e n t sta tu tes to g e th e r w ith th is 42
rul e of l aw , i ti s e vi dentthatthe L egi s l atur e i nt ended thata s ur ety’ s r i ghtt o not i ce does not
a rise u n til a fte r its p rin c ip a l’s d e fa u lt. B a se d o n th is in p a ri m a ter ia r eadi ng, the Tax C om m i s s i on has no dut y ( and, abs entcons entf r om the pr i nci pal , no author i ty) t o not i f y t he
s ur ety bef

or e the t axpaye rf

ai l s t o pay a f

i nal as s es s m ent . I n addi t i on t o the Tax C om m i s s i on’ s l ack of

aut hor i ty t o gi ve not i ce, t he m er e f actthatM i s s i s s i ppi C ode Sect i on 27- 65- 21 r ef

er s onl y t o “t ax” i s notcontr ol l i ng w hen the Legi s l atur e’ s br oad i nt entr equi r es 43 the Tax C om m i s s i on t o h ave a guar ant ee of paymentof

“t axes , damages , i nt er es tand p e n a ltie s ” a s s p e c if

ic a lly s e t f

o rt h in th e le g a lly m a n d a te d ta x ri d e rs . ¶ 4 4
. M o re o v e r, th is a lso c irc les b a c k to th e p re m ise th a t c lea r a n d u n a m b ig u o u s c o n tra c ts
m us tbe gi ven thei rpl ai n m eani ng. T he pla i n m eani ng of the t ax r i der s cl ear l y i ncl udes 44

### 22

t axes , damages , penal t i es , and i nt er es t . W hati s m or e, the facttha tSect i on 27- 65- 21 us es
o n ly th e w o rd “ tax ,” a s o p p o se d to “ tax e s, d a m a g e s , p e n a lti e s, a n d in ter e st,” is o f litt le
cons equence t o the s ur et i es . T he us e of the w or d “t ax” a l one does notactas a l i m i t at i on pr event i ng the Tax C om m i s s i on fr om col l ect i ng t axes , damages , penal t i es , and i nt er es ti n t he penal s um . R ather , appl yi ng the br oad i nt entof the L egi s l atur e, i ti s l i kel y thatthe us e of t he
w or d “t ax” i ncl udes d am ages, p enal t i es and i nt er es t . O n t op of a s t atut ory r eadi ng i n p ari
m a ter ia , thi s agai n r el at es back t o the pl ai n- l anguage appl i cat i on of t he t ax r i der s i n i s s ue,
w hi ch i ncl ude the paym entof “t axes , dam ages , penal t i es , and i nt er es t . ” T hi s i s the l anguage by w hi ch the s ur et i es obl i gat ed themsel ves , a nd thi s i s the l anguage by w hi ch they s houl d be b o u n d u n d e r M is s is s ip p i c o n tr a c t la w . ¶45. Fur therm or e, as not ed by the chanc el l or , the s ur et i es w er e and ar e i n the bus i nes s of i s s u i n g s u c h b o n d s f

o ra f e e o rp r e mi u m; t h e s e b o n d s we r e i s s u e d wi l l i n g l y a n d f o rth e i ro wn
m onet ary benef

i t . I ti s w el l s ett l ed that , w hen a s ur ety pa ys the debtof anotherby vi r tue of a bondi ng contr act , the s ur et y i s enti t l ed t o r ei m bur s ementf r om the pr i nci pal debt or . T he suret i es ar e l ar ge f

i nanci al i ns t i tut i ons w i th ext ens i ve know l edge r egar di ng the t erm s and enf or cementof bonds and shoul d be pr es um ed t o under s t and the conf i dent i al i ty pol i cy and ter m s c o n tain e d in th e tax rid e rs a t issu e . W h ile s u p p ly in g n o tice to th e su re ties p rio r to demand w oul d nothave bur dened the Tax C om m i s s i on i n any w ay, the Tax C om m i s s i on
n o n e th e les s fu lfill e d it s sta tu to ry d u e -p ro c e ss o b lig a tio n s b y n o tify in g th e p rin c ip a ls o f th e ir t ax s t atus . Fu rther m or e, notonl y di d i tf ul f i l l i t s due- pr oces s obl i gat i ons , the Tax C om m i s s i on w as and i s s t atut or i l y pr ohi bi t ed f r om pr ovi di ng the s ur et i es w i th not i ce of the
a u d it, a ss e ss m e n t, an d h e a rin g s. M iss iss ip p i C o d e S e c tio n 2 7 -3 -7 3 p ro v id e s in p a rt th a t:

### Mis s. Code Ann. § 27-3- 73(1) (Re v. 2010)
. 45 

### Mis s. Code Ann. § 27-65- 3(e ) ( Rev. 2010). 46 

### Id. 47 

### 23 [ e] xcepti n acc or dance w i th pr operj udi ci al o rder
. . . i ts hal l be unl aw f ul f or the C om m i s s i onerof

R evenue , orany deputy, agent , cl erk orotherof f i ceror empl oyee of

the D epart m entof

R evenue , t o di vul ge orm ake know n i n any m annerthe amountof

i ncome orany part i cul ar s s etf or th ordi s cl os ed i n any r eportorr eturn r equi r ed on any t axes col l ect ed by r eport s r ece i ved by the D epart m entof

R evenue . 45 A ccor di ngl y, the pr i nci pal s , the part i es w ho engage d i n the conduc tthatpr eci pi t at ed the p e n a lty , co n tin u e to b e liab le f o r th e e n tire s u m o f th e tax , p e n a ltie s , an d in ter e st, b u t th e ir
o b lig a tio n n o w lie s w ith th e irs u re tie s ra th e r t h a n th e T a x C o m m is s io n . I I I . T he t ri al court di d not e rr i n f i ndi ng t hat t he s uret i es l acke d s ta n d in g to c o n te s t t h e a lle g e d la c k o f n o ti c e . ¶4 6. T he s ur et i es cont end t ha tthe y s t a nd i n the s ho e s o f the p r i nc i pal s and ar e t hus
c o n sid e re d tax p a y e rs e n title d to n o tice a n d a h e a rin g w h e n th e ir p rin c ip a ls d e fa u lt. T h is
c o n te n tio n a ls o is u n s o u n d
. ¶ 4 7 . T h e su re ties a re n o t “ tax p a y e rs” a s c o n tem p late d b y th e L e g isla tu re a n d in re g a rd to the under l yi ng t ax l i abi l i t i es ati s s ue. A s di s cus s ed pr evi ous l y, the s t atut ory d efi ni t i on of “t axpaye r ” f

ound i n M i s s i s s i ppi C ode Sect i on 27- 65- 3 pr ovi des thata t axpaye ri s “any per s on l i abl e f

ororhavi ng pai d any t ax t o the St at e of M i s s i s s i ppi underthe pr ovi s i ons of thi s chapt er . ” I n addi t i on t o thi s cl as s i f i cat i on, the st atut e al s o r equi r es thats uch per s on 46 obt ai n a s al es t ax perm i tbef or e enga gi ng i n bus i nes s i n the s t at e. 47 ¶4 8. T he s ur et i es ar e undoubt edl y t axpay e r s i n the i ro w n i ndi vi dual r i ght s f or t he bu s i ne s s e s tha tthe y o pe r a t e , a nd the y p r ob a bl y d o p a y v a r i ou s t a xe s t o the t a xi ng

### 8 Mis s. Pra ctic e Se ri es, Enc yc lope dia of

Miss. Law§69:2. 48 

### Pars ons , 122 So. at

549. 49

### Id. 50 

### Seegene rally Hart

ford Accident & I

ndem. Co. v

. He wes , 190 Mis s. 225, 199 So. 51 

### 93 (1940)
. 8 M iss. Practice S eries, Ency clopedia of Mi ss . Law §69:19. 52 

### Fid. & Depos it

Co. of Md. , 144 So. at

702. 53 

### 24 j ur i s di ct i ons i n w hi ch they do bus i nes s . H ow ever , they a r e notthe t axpaye r s on the t ax l i abi l i ty thatthe pr i nci pal s i ncurr ed as a r es ul tof thei rcons truct i on bus i nes s es . O nce the
s ur ety and pr i nci pal ent eri nt o an agr eement , t hei rdut i es become i nt ertw i ned and mustbe
cons trued t ogether
. T he agr eementput s both part i es i n pri vity w i t h each other , ther eby 48 b i n d i n g th e s u r e ty t o th e p r i n c i p a l ’ s a c t i o n s . Ac c o r d i n g l y , i f th e p r i n c i p a l wa i v e s a k n o wn 49
r i ght , orby act s orr epr es ent at i ons i s b ou nd by es t oppel , then s o i s the s ur ety bound by est op pel as w ell
. W ith thi s i n m i nd , i ti s cl ear that s uret i es ar e bo un d b y the pri ncipal s’ 50 in itia l a c tio n s w h e n th e y w e re fi rs t n o tif ie d o f t h e ird e fa u lt. ¶4 9. L as t l y, t he ar gum entt hatt he s ur et i es , nott he pr i nci pal s , s houl d r ece i ve a
r ei m bur s ement , s houl d one be gi ven, i s unfounde d as w el l
. O nce a gai n, i ti s w el l
- s ett l ed l aw th a t a s u re ty h a s a n im m e d iate rig h t to re c o v e ry fro m it s p ri n c ip a l u p o n p a y m e n t o n its b e h a lf. T h e su re ty b e c o m e s th e p rin c ip a l’s c re d ito r a fte r it h a s p a id th e p rin c ip a l’s d e b t in

51 f ul l ori n part , f

oral l purpos es . M or eover , w her e a pr i nci pal i s know n t o be i ns ol vent , af t er 52 th e d e b t h a s b e c o m e d u e , the su re ty h a s a n im m e d iate rig h t to su e to c o m p e l th e p rin c ip a l to p a y in o rd e r th a t th e su re ty ’s p o sitio n n o t b e fu rth e r h a rm e d
. It fo llo w s th a t if the su re ty 53

### 25

i s ent i t l ed t o a r ei m bu rs em ent , then thatr ei m bur s ementm us tcome f r om the pr i nci pal , not fro m th e o ri g in a l cr e d ito r. C o n se q u e n tly , in th e in sta n c e th a t a r e im b u rse m e n t ac tu a lly is of f er ed by the or i gi nal cr edi t or , i tgoes t o the pr i nci pal , and the s ur ety has an aut om at i c r i ght to s u e to c o m p e l th e p ri n c ip a l to p a y th e a m o u n t th a t w a s re im b u rs e d
. C oncl usi on ¶50. A ta l l r el evantt i m es w i th r egar d t o thi s c ons ol i dat ed appea l , the pr i nci pal s w er e the t axpaye r s ent i t l ed t o the f ul l pr ot ect i on of

s ubs t ant i ve and pr ocedur al due pr oces s . T he
r ecor d r ef

l ect s thatthe C om m i s s i on af f or ded t he pr i nci pal s due proc es s re qui r ed by l aw , and the s u reti es w ere n o t entit led to d u e-p roc ess righ ts, w h ich w ere inten d ed for the taxp ay er. A ddi t i onal l y, w i thoutt axpaye rs t atus , the s ur et i es ar e not i n a pr operpos i t i on t o chal l enge th e s e a lle g e d is s u e s o f d u e p ro c e s s in th e e v e n t it a c tu a lly w a s v io la te d
. ¶51. A s demonstr at ed above, thi s m att er hi nges on M i s s i s s i ppi contr act l aw . T he s ur et i es enter ed int o co ntr act s w i th the pri ncipal s on vari ou s bon ds, i n w hich the p aym ent of t axes, damages , pe nal t i es , a nd i nt er es tw er e expr es s l y i ncl uded
. A qui ck r eadi ng of the l anguage cont ai ned i n the bonds a nd r i der s ati s s ue cl ear l y i ndi cat es thi s contr actual r el at i ons hi p and l i abi l i ty. A s the i ns ur er s , the s ur et i es had the abi l i ty, r es our ces , and pot ent i al l y even t he
re sp o n sib ili ty to in v e stig a te th e ir p rin c ip a ls a n d p ro c e e d ac c o rd in g ly
. F a ilu re to d o so re su lts in c o n s e q u e n c e s s u c h a s th e s e . ¶5 2. N otonl y w er e the s ur e t i e s n ote nt i t l e d t o no t i c e o f the a udi t s , as s es s m ent s , and hear i ngs af

f or ded the t axpaye r s , the C om m i s s i on had no author i ty t o di s cl os e any in fo rm a tio n re g a rd in g a n y p a rt ic u la rs o f t h e p ri n c ip a ls ’ i n c o m e s o r f in a n c ia l s ta tu s e s .

### 26

¶53. I n eac h i ns t ance i ncl uded i n thi s cons ol i dat ed appea l , the pr i nci pal def aul t ed on a t ax l i abi l i ty thatw as ow ed t o the s t at e. U pon pr opernot i ce of s uch def aul t , the Tax C om m i s s i on l ooked t o the s ur et i es of eac h pr i nci pal f

orpayment , as provided by st atut e. B as ed on the contr actual agr eement s betw een the pr i nci pal s and the s ur et i es, as expr es s l y s t at ed i n the
s ubj ectbonds and r i der s , the s ur et i es w er e contr actual l y obl i gat ed t o pay the f ul l t ax l i abi l i ty, in te re s t, a n d p e n a ltie s fo r w h ic h d e m a n d w a s m a d e . ¶ 5 4
. AF F I RM ED . W AL LE R, C. J . , CARL S ON, P . J . , RANDOL P H, KI TC HENS AND C H A N D L E R , JJ . , C O N C U R . D IC K IN S O N , P . J. , C O N C U R S IN P A R T A N D IN RE S UL T W I T H S E P AR AT E W RI T T E N OP I NI ON J OI NE D B Y L AMAR , J . KI NG , J . , NO T P AR T I CI P AT I NG . D IC K IN S O N , P R E S ID IN G J U S T IC E , C O N C U R R IN G IN P A R T A N D IN RES ULT: ¶55. I agr ee onl y w i th s o m uch of the ma j ori ty as hol ds that“thi s m att erhi nges on M i s s i s s i ppi contr actl aw . ” S o any r i ghtt o not i ce f r om the t axpaye r s m us tf l ow f r om t he
c o n tr ac ts; the T ax C o m m issi o n – w h ich h ad n o co n tr ac t w ith the s u reti es – h ad n o d u ty to p ro v id e n o tice to th e s u re ties ; an d th e su re ties ’ u lti m a te lia b ili ty o n th e b o n d s is a m a tter th a t, i f notagreed b y the part i es, m ustbe est abli shed in the co urt s. L AMAR , J . , J OI NS T HI S OP I NI ON
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