UNITED STATES FIDELITY & GUARANTY CO.
FROHMILLER et al
Judgment reversed with direction to dismiss complaint.
Shimmel, Hill & Hill, Phoenix, for appellant.
Stahl & Murphy, Charles L. Strouss and T. G. McKesson, Phoenix, for appellees.
Udall, Chief Justice. Stanford, Phelps, De Concini and La Prade, JJ., concur.
Udall, Chief Justice.
[71 Ariz. 378] This appeal involves simply a matter of statutory construction. The question presented
is whether attorneys' fees are included within the term "all damages" as used in Section 12-503, A.C.A. 1939, a statute first enacted half a century ago, R.S. 1901, Secs. 277, 278.
Since the instant case grows out of a prior action in which the same parties were involved, we deem it essential to set forth the background giving rise to this appeal. Under the terms of Section 12-503, supra, one John S. Crozier, a Winslow taxpayer, instituted an action against various state officers and their sureties to recover state moneys which he alleged had been illegally paid out by them. Pursuant to the terms of the statute, Crozier executed and filed a bond payable to the officers in the sum of $ 2,000. Defendant-appellant, United States Fidelity and Guaranty Company, a corporation, hereafter called defendant, was surety thereon. This court affirmed the judgment of [71 Ariz. 379] the superior court dismissing Crozier's complaint in that action upon the basis that a constitutional appropriation justified the questioned expenditure of the public funds involved, Crozier v. Frohmiller, 65 Ariz. 296, 179 P.2d 445.
Thereafter the present suit was filed by two of the state officers and all of the sureties, plaintiffs-appellees, against Crozier and defendant company. Plaintiffs claimed that they had suffered damages to the extent of $ 2,850 for attorneys' fees incurred in the defense of the prior action and that such damages were recoverable from defendant on his bond given under the terms of Section 12-503, supra.
In the present action Crozier failed to answer. The defendant company moved to dismiss the complaint on the ground that it failed to state a claim upon which relief could be granted. The motion was denied; defendant elected to stand on its motion and judgment was rendered against both Crozier and defendant surety for the full amount of the bond. The present appeal is from that judgment.
Section 12-503, supra, provides: "If the attorney-general shall for sixty (60) days after request made by any taxpayer of the state in writing, fail to institute such action (for the recovery of illegally paid state money), then any taxpayer of the state may institute such action in his own name and at his own cost, with the same effect as if brought by the attorney-general; provided, the person instituting such action shall execute a bond payable to the defendant in such action, conditioned that if the plaintiff shall fail to prosecute such action with diligence and to effect, that the plaintiff will pay all damages sustained by the defendant by reason of such action and all costs incurred therein. If any such taxpayer shall prevail the court shall allow him costs and reasonable attorney's fees, not to exceed forty (40) per cent of the amount recovered or saved to the state, as the case may be." (Emphasis supplied.)
On the one hand plaintiffs contend that attorneys' fees incurred in the successful defense of such an action are included within the words "all damages sustained by the defendant by reason of such action" and hence are recoverable in a subsequent action. On the other hand defendant contends that attorneys' fees are not ...