Gilmore v. Walker

• Decision Date: 11 April 1928
• Docket Number: (No. 286.)
• Citation: 142 S.E. 579
• Court: North Carolina Supreme Court
• Parties: GILMORE, Clerk. v. WALKER et al.

142 S.E. 579

(195 N.C. 460)

GILMORE, Clerk.

v.WALKER et al.

(No. 286.)

Supreme Court of North Carolina.

April 11, 1928.

Appeal from Superior Court, Cumberland County; Devin, Judge.

Action by the State, on the relation of J. C. Gilmore, Clerk of the Superior Court, against Lola V. Walker, executrix of the last will and testament of W. M. Walker, and the United States Fidelity & Guaranty Company. From judgment for plaintiff in accordance with findings of referee, defendant United States Fidelity & Guaranty Company appeals. Affirmed.

The plaintiff is the clerk of the superior court of Cumberland county, and the defendant Lola V. Walker is executrix of the last will and testament of W. M. Walker, former clerk of the superior court of said county, and the defendant United States Fidelity & Guaranty Company executed the official bonds given by said Walker. The question was referred to a referee, who heard all of the evidence and filed report setting forth his findings of fact and conclusions of law. The plaintiff and the defendant United States Fidelity & Guaranty Company filed exceptions to the report. All of the exceptions were overruled, and judgment entered in accordance with the findings of the referee, from which judgment the United States Fidelity & Guaranty Company appealed.

Connor & Hill, of Wilson, for appellant.

Dye & Clark, Averitt & Blackwell, and Rose & Lyon, all of Fayetteville, J. W. Currie, of Raeford, and S. C. McPhail, J. O. Tally, Cook & Cook, Robinson, Downing & Downing, Oates & Herring, and Nimocks & Nimocks, all of Fayetteville, for appellee.

BROGDEN, J. A. A. McKethan, clerk of the superior court of Cumberland county, died, and on February 5, 1915, W. M. Walker was duly appointed and qualified as clerk of said court. He held office under this appointment until December 4, 1919, when he was duly elected for the remainder of the McKethan term, which expired December 2, 1918. On December 2, 1918, by virtue of his election Walker entered into a full term of four years, expiring December, 1922. On December 4, 1922, by virtue of his election he entered upon another full term, expiring the first Monday in December, 1926. He died in office July 31, 1926, and the plaintiff was duly appointed clerk in his stead, and thereafter was duly elected for the full term from December, 1926, to December, 1930. Walker, the deceased clerk, in compliance with the law, gave four official bonds of $10,000 each, with the defendant United States Fidelity & Guaranty Company as surety on each of said bonds. These bonds cover the following periods, to wit: First bond, from February 5, 1915, to December 4, 1916; second bond, from December 4, 1916, to December 2, 1918; third bond, from December 2, 1918, to December 4, 1922; fourth bond, from December 4, 1922, to December —, 1926.

The referee finds: (1) That from February 5, 1915, to December 4, 1916, Walker, as clerk, had received, by virtue of and under color of his office, for the use of various persons named in the referee's report, various sums of money aggregating $3,957.19; (2) that from December 4, 1916, to December 2, 1918, the said clerk received as aforesaid sums of money aggregating $7,517.78; (3) that from December 2, 1918, to December 4, 1922, said clerk had received as aforesaid sums of money aggregating $13,374.27; (4) that from December 4, 1922, to July 31, 1926, the date of his death, said clerk has received as aforesaid sums of money aggregating $44,045.63.

On December 22, 1926, the plaintiff made demand upon the executrix of the estate of said deceased clerk and the defendant bondsman for the sum of $68,894.87; same being the total of the foregoing items. In response to said demand the executrix paid to the plaintiff the sum of $5,585, of which sum $3,828.57 has been paid out and applied under specific directions of the executrix, and the sum of $1,756.43 is still in the hands of plaintiff for general and pro rata distribution. During December, 1922, at the request of the board of county commissioners, Walker submitted to the auditor and clerk of the board an "annual report of the condition of the office of the clerk of the superior court." This report showed "liabilities" to various parties in various amounts; the total of such aggregating $32,748.48. Under the heading "Assets of C. S. C. Office" in said report appeared certain specifically designated items, and the following indefinite items: "Notes and securities held by C. S. C, $31,062.71." The report concludes as follows:

                -------------------------------------------------------------------------------
                |Recapitulation of liabilities:                                       |       |
                |---------------------------------------------------------------------|-------|
                |Receivership accout                                                  |$ 4,   |
                |                                                                     |819 03 |
                |---------------------------------------------------------------------|-------|
                |Trust acct., fines, forfeitures, costs, Jury tax, and pension account|32, 748|
                |                                                                     |48     |
                |---------------------------------------------------------------------|-------|
                |Total                                                                |$37,567|
                |                                                                     |61     |
                |---------------------------------------------------------------------|-------|
                |Assets:                                                              |       |
                |---------------------------------------------------------------------|-------|
                |Deposits in banks, paid to Treas., fines & forfeitures, Pd. to.      |$37,567|
                |Confed. soldiers & widows, & notes and securities held by C. S. C.   |51     |
                -------------------------------------------------------------------------------
                

The referee found that the foregoing report was never "formally accepted or officially passed upon by said board nor by its chairman, nor by any committee of said board, but same was silently accepted by said board as a compliance with the statutory requirement and request of said board that said clerk file with said board the report annually required of him by law." The referee also found that the clerk, at the time of his death, was in default as to all amounts hereinbefore set out, and that such default occurred at the time of the receipt of the respective funds.

The finding of fact that default occurred upon receipt of the funds was based entirely and solely upon the presumption of law arising from the failure of defendant to pay over and account for such fund upon demand. There was no actual evidence that any sum had been misappropriated or misapplied by the clerk, except that upon demand none of the funds were found and paid over, save the sum of $5,585 heretofore referred to. Thereupon the referee found that the defendant surety company was liable for the following amounts, to wit: (1) $3,957.19, plus the claim of J. T. Williston for $117.12, upon the first bond; (2) $7,517.78 upon the second bond; (3) penal sum of the third bond; (4) penal sum of the fourth bond. It was stipulated by consent of all parties that any final judgment rendered against the United States Fidelity & Guaranty Company should bear interest from the February term, 1927, Cumberland superior court.

The plaintiff and the defendant surety company filed exceptions to the report of the referee. These exceptions were overruled by the trial judge and judgment entered against the defendant executrix for the sum of $67,255.56, and against the defendant surety company for the respective amounts found by the referee to be properly chargeable against the respective bonds as hereinbefore set out.

Three questions of law are thus presented upon the record:

(1) When did the defalcations occur?

(2) What is the legal effect of the report filed by the clerk in December, 1922.

(3) What is the legal status of the claim of J. T. Williston?

Bearing in mind that there was no evidence as to when any of the funds were misappropriated by the clerk and that he had been receiving money in his official capacity through a term of years, the question that necessarily stands at the threshold of this inquiry is: Did the default occur upon receipt of the money by the clerk or upon demand and refusal on December 22, 1926? Discussing the question in Furman v. Timberlake, 93 N. C. 66, this court said:

"When he receives money in his official capacity, it is his duty to hold it, but not to withhold it, and he cannot be said to withhold it unless he is put in default by refusing to pay it to the party to whom it is due, and that necessarily implies a demand."

If the clerk has misappropriated or converted the money, then no demand is necessary, and the statute runs from the time of the conversion; but, if no conversion is shown, the statute runs from the refusal to pay on demand. Again, in Morgan v. Smith, 95 N. C. 396, the law is thus stated:

"The governing principle is this: The obligation to hold and pay over the money to the party entitled to it when called on is incurred when the money is received, and if not so paidover, without other proof, the bond then in force is responsible. It is matter of defense and excuse that it has been paid over to the successor, and this the defendant ought to show. The failure of the clerk to pay over when the fund is demanded is cogent evidence of a devastavit committed at some previous stage, and to shift the liability from one term to another, and from the bond formerly liable to another, proof ought to come from the delinquent, or from his sureties."

Under the law the clerk is an insurer of funds properly and legally paid into his hands by virtue of his office and under color thereof. His liability is founded upon public policy, as well as upon the language of the official bond. Smith v. Patton, 131 N. C. 396, 42 S. E. 849, 92 Am. St Rep. 783; Marshall v. Kemp, ...