Court Opinion

ID: 3837761
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:06:44.429306+00
Date Added: 2024-06-11T13:51:09.734906
License: Public Domain

I concur in the conclusion reached in the majority opinion to the effect that the limit of liability of the surety on the bond in question is the sum of $5,000, and that each individual having a valid claim should share *Page 245 pro rata in the division of the $5,000 to be paid by the surety, in the event that the total of the claims exceeds the penalty named in the bond.
To enunciate, however, the doctrine that the amount of the bond should be prorated among those having just claims, without some qualification or limitation, is merely to invite further litigation and to render practically worthless the protection intended to be afforded by the bond to those who have been defrauded by the financially irresponsible promoter or dealer.
When and in what manner it is to be determined who are entitled to share in the fund created by the bond should be pointed out with some particularity. Take the instant case: Suppose no other action had been instituted or other claim made against either the principal or surety on the bond until after the entry in the circuit court of the mandate in the Hyde case, would the surety on the bond have been protected had it paid the judgment in full before it had knowledge of any other claim? And if protected to the extent of the amount paid, what would become of the doctrine that all bona fide claimants are to share pro rata? On the other hand, if such payment should not extinguish pro tanto the surety's liability on the bond, could the surety by some equitable proceeding have execution on the judgment deferred until all possibility of the assertion of any other claim ceased to exist?
There are countless instances in which bonds have been given to protect the general public or certain designated classes of individuals, and the opinion of the majority of the court herein is almost certain to lead to confusion. If it be made possible for the surety to contest its liability to the limit and, if unsuccessful, force the judgment creditor into a court of *Page 246 
equity to litigate again the amount of his recovery, as is here attempted, it will discourage any one from ever seeking to recover for the loss he has suffered. The fact that if successful he would be entitled to his attorney's fees and costs would be poor recompense for the risks he would be subject to and the expense incurred.
The recent enactment of a statute allowing the plaintiff in an action on a surety bond, if successful, a reasonable attorney's fee does not confer upon a court of equity any greater jurisdiction or power in litigation like this than would be the case if no attorney's fee were allowed.
According to the opinion of the majority of the court, the surety company can litigate the claims filed against it until the amount of the penalty provided in its bond has been reached or exceeded, then pay the amount of the bond into court and interplead all the claimants who have obtained judgments and those claimants who have not done so, and let them scramble among themselves for the fund. The surety company would not longer be concerned in whether or not the demands of those who had not had their claims reduced to judgment were exorbitant. Some one would have to contest claims which had not been liquidated, or those claimants would profit at the expense of the judgment creditors, both as to amount to which they would be entitled and as to expense incurred.
In my opinion we should, in the absence of legislative enactment, provide some method whereby the giving of a surety bond would mean more than an invitation to prolonged litigation. Recently in the case of Logan v. Equitable Trust Company,145 Or. 684 (29 P.2d 511), we held that a trustee of certain funds when *Page 247 
sued in an action at law for alleged fraudulent representations could enjoin the prosecution of the action and cause all those situated as the plaintiff in the law action to litigate their claims or demands in equity, and this without admission on the part of the trustee of any liability.
There is no reason why a surety should not be compelled to follow a like procedure when it has knowledge that more than one claim may be asserted against it, if it wants to limit its liability to the penalty named in the bond. If, however, it denies all liability and litigates the matter to a finality, it ought not then to be afforded equitable relief in avoiding the payment of a judgment rendered against it.
Then, again, a surety should not be permitted to defer the payment of a judgment against it on the supposition that other claims may be presented. If the surety in good faith and without knowledge of other bona fide claims pays a judgment, such judgment, exclusive of costs, attorney's fees and interest on the judgment, should pro tanto extinguish the surety's liability.
If the proceeding here adopted by the plaintiffs is in the nature of an interpleader or accomplishes the same purpose, then it comes too late to have any effect on the judgment recovered by the defendants Hyde against the principal and surety on the bond:Yarborough v. Thompson, 11 Miss. 291 (41 Am. Dec. 626);McKinney v. Kuhn, 59 Miss. 186; Union Bank v. Kerr, 2 Md.Ch. 460; Haseltine  Walton v. Brickley, 57 Va. 116; DeZouche v.Garrison, 140 Pa. 430 (21 A. 450).
In my opinion, the declaratory judgment act was never intended to be an aid in avoiding, modifying or *Page 248 
nullifying a judgment entered on the merits of a controversy.
For the reasons hereinabove stated, I can not concur in the majority opinion to the effect that the Hydes are entitled only to their pro rata share of the $5,000, exclusive of attorney's fees, costs and interest. When the surety company elected to contest its liability in the law action it ought to be bound by the judgment therein rendered.